UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION

                     WASHINGTON, D. C. 20549


                            FORM 10-Q


     (Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
   Exchange Act of 1934 for the quarterly period ended June 30, 2006

                               OR

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 for the transition period from .. to ...


                 Commission File Number 0-12114

                           Cadiz Inc.

       (Exact name of registrant specified in its charter)

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

777 S. FIGUEROA STREET, SUITE 4250
   LOS ANGELES, CALIFORNIA                     90017
(Address of principal executive offices)     (Zip Code)

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


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

                        YES  X    NO
                            ---      ---

Indicate by check mark whether the Registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer (as defined in Exchange Act Rule 12b-2).

     LARGE ACCELERATED FILER       ACCELERATED FILER  X
                             ---                     ---
                 NON-ACCELERATED FILER
                                       ---

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

                        YES       NO  X
                            ---      ---

As of August 3, 2006 the Registrant had 11,330,402 shares of
common stock, par value $0.01 per share, outstanding.

                            page i

                           CADIZ INC.

                             INDEX


FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2006                PAGE


PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

     CADIZ INC. CONSOLIDATED FINANCIAL STATEMENTS

     Unaudited Statements of Operations for the three months
     ended June 30, 2006 and 2005. . . . . . . . . . . . . . . . . .1

     Unaudited Statements of Operations for the six months ended
     June 30, 2006 and 2005. . . . . . . . . . . . . . . . . . . . .2

     Unaudited Balance Sheets as of June 30, 2006 and
     December 31, 2005. . . . . . . . . . . . . . . . . . . . . . . 3

     Unaudited Statements of Cash Flows for the six months ended
     June 30, 2006 and 2005. . . . . . . . . . . . . . . . . . . . .4

     Unaudited Statement of Stockholders' Equity for the six
     months ended June 30, 2006. . . . . . . . . . . . . . . . . . .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. . . . . . . . . . . . . . . . . . . . . . . . . . . 26

ITEM 4.  CONTROLS AND PROCEDURES. . . . . . . . . . . . . . . . . .26


PART II - OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . 27

                            page ii


                               CADIZ INC.

            CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

-------------------------------------------------------------------------
                                                   FOR THE THREE MONTHS
                                                       ENDED JUNE 30,
($ IN THOUSANDS EXCEPT PER SHARE DATA)                 2006      2005
-------------------------------------------------------------------------

Revenues                                            $    157   $     15
                                                    --------   --------

Costs and expenses:
 Cost of Sales                                           130          -
 General and administrative                            1,245        877
 Compensation costs from stock and option awards         529     11,249
 Depreciation and amortization                            39         67
                                                    --------   --------


Total costs and expenses                               1,943     12,193
                                                    --------   --------

Operating loss                                        (1,786)   (12,178)

Other income (expense)
 Interest expense, net                                  (496)      (496)
 Loss on early extinguishment of debt                   (868)         -
                                                    --------   --------
   Other income (expense), net                        (1,364)      (496)
                                                    --------   --------

Loss before income taxes                              (3,150)   (12,674)
Income tax provision                                       -        (49)
                                                    --------   --------

Net loss                                            $ (3,150)  $(12,625)
                                                    ========   ========

Net loss applicable to common stock                 $ (3,150)  $(12,625)
                                                    ========   ========

Basic and diluted net loss per common share         $  (0.28)  $  (1.18)
                                                    ========   ========

Basic and diluted weighted average
 shares outstanding                                   11,330     10,729
                                                    ========   ========

  See accompanying notes to the consolidated financial statements.

                            page 1


                                CADIZ INC.

            CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

-------------------------------------------------------------------------
                                                    FOR THE SIX MONTHS
                                                      ENDED JUNE 30,
($ IN THOUSANDS EXCEPT PER SHARE DATA)                2006      2005
-------------------------------------------------------------------------

Revenues                                            $    409   $     30
                                                    --------   --------

Costs and expenses:
 Cost of Sales                                           341          -
 General and administrative                            2,812      1,831
 Compensation costs from stock and option awards       1,058     11,249
 Depreciation and amortization                            79        134
                                                    --------   --------

Total costs and expenses                               4,290     13,214
                                                    --------   --------

Operating  loss                                       (3,881)   (13,184)

Other income (expense)
 Interest expense, net                                  (977)      (954)
 Loss on early extinguishment of debt                   (868)         -
 Other income                                            350          -
                                                    --------   --------
   Other income (expense), net                        (1,495)      (954)
                                                    --------   --------

Loss before income taxes                              (5,376)   (14,138)
Income tax provision                                       -         56
                                                    --------   --------

Net loss                                            $ (5,376)  $(14,194)
                                                    ========   ========

Net loss applicable to common stock                 $ (5,376)  $(14,194)
                                                    ========   ========

Basic and diluted net loss per common share         $  (0.47)  $  (1.35)
                                                    ========   ========

Basic and diluted weighted average
 shares outstanding                                   11,330     10,533
                                                    ========   ========

     See accompanying notes to the consolidated financial statements.

                            page 2


                               CADIZ INC.

           CONSOLIDATED STATEMENTS BALANCE SHEETS (UNAUDITED)

-------------------------------------------------------------------------
                                                  JUNE 30,   DECEMBER 31,
($ IN THOUSANDS)                                      2006      2005
-------------------------------------------------------------------------

ASSETS

Current assets:
 Cash and cash equivalents                          $ 12,339   $  5,302
 Accounts receivable                                       3        170
 Prepaid interest expense                                  -        740
 Prepaid expenses and other                              336         34
                                                    --------   --------

      Total current assets                            12,678      6,246

Property, plant, equipment and water programs, net    35,264     35,323
Goodwill                                               3,813      3,813
Other assets                                             408        664
                                                    --------   --------

 Total Assets                                       $ 52,163   $ 46,046
                                                    ========   ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                   $    409   $    369
 Accrued liabilities                                     695        819
 Current portion of long term debt                         8          8
                                                    --------   --------

      Total current liabilities                        1,112      1,196

Long-term debt                                        36,402     25,883
                                                    --------   --------

 Total Liabilities                                    37,514     27,079

Commitments and contingencies

Stockholders' equity:
 Series F convertible preferred stock - $.01
  par value: 100,000 shares authorized; shares
  issued and outstanding - 1,000 at June 30,
  2006 and December 31, 2005                               -          -
 Common stock - $.01 par value: 70,000,000
  shares authorized; shares issued and
  outstanding - 11,330,402 at June 30, 2006
  and 11,330,463 at December 31, 2005                    114        114
 Additional paid-in capital                          227,796    226,738
 Accumulated deficit                                (213,261)  (207,885)
                                                    --------   --------
 Total stockholders' equity                           14,649     18,967
                                                    --------   --------

 Total Liabilities and Stockholders' equity         $ 52,163   $ 46,046
                                                    ========   ========

  See accompanying notes to the consolidated financial statements.

                            page 3


                               CADIZ INC.

           CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

-------------------------------------------------------------------------
                                                     FOR THE SIX MONTHS
                                                       ENDED JUNE 30,
($ IN THOUSANDS EXCEPT PER SHARE DATA)                 2006      2005
-------------------------------------------------------------------------

Cash flows from operating activities:
 Net loss                                           $ (5,376)  $(14,194)
 Adjustments to reconcile net loss to
  net cash used for operating activities:
   Depreciation and amortization                          93        134
   Interest expense added to loan principal              786        339
   Loss on early extinguishment of debt                  868          -
   Stock issued for services                               -        469
   Compensation charge for stock awards and
    share options                                      1,058     11,249
 Changes in operating assets and liabilities:
   Decrease (increase) in accounts receivable            167          -
   Decrease (increase) in prepaid borrowing expense      522        339
   Decrease (increase) in prepaid expenses and other    (302)       (65)
   Increase (decrease) in accounts payable                40       (138)
   Increase (decrease) in accrued liabilities           (124)       (11)
                                                    --------   --------

Net cash used for operating activities                (2,268)    (1,878)
                                                    --------   --------

Cash flows from investing activities:
 Additions to property, plant and equipment              (20)        (8)
   Decrease (increase) in other assets                     1         25
                                                    --------   --------

   Net cash provided by (used by)
    investing activities                                 (19)        17
                                                    --------   --------

Cash flows from financing activities:
 Proceeds from issuance of long-term debt             36,375          -
 Debt issuance costs                                    (409)         -
 Principal payments on long-term debt                (26,642)         -
                                                    --------   --------

Net cash provided by (used by)
 financing activities                                  9,324          -
                                                    --------   --------

Net increase (decrease) in cash and
 cash equivalents                                      7,037     (1,861)

Cash and cash equivalents, beginning of period         5,302      9,031
                                                    --------   --------

Cash and cash equivalents, end of period            $ 12,339   $  7,170
                                                    ========   ========

     See accompanying notes to the consolidated financial statements.

                            page 4


                                   CADIZ INC.

           CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)

--------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2006
($ IN THOUSANDS)
--------------------------------------------------------------------------------

           PREFERRED STOCK    COMMON STOCK  ADDITIONAL                TOTAL
           ---------------    ------------   PAID-IN   ACCUMULATED STOCKHOLDERS'
           SHARES   AMOUNT  SHARES   AMOUNT  CAPITAL     DEFICIT      EQUITY
           ------   ------  ------   ------  -------     -------      ------
Balance as of
 December 31,
 2005        1,000  $  -  11,330,463  $  114  $ 226,738  $(207,885)   $  18,967

Stock
 compensation
 expense         -     -           -       -      1,058          -        1,058

Fractional
 shares
 retired         -     -         (61)      -          -          -            -

Net loss         -     -           -       -          -     (5,376)      (5,376)
           -------  ----  ----------  ------  ---------  ---------    ---------

Balance as of
 June 30,
 2006        1,000  $  -  11,330,402  $  114  $ 227,796  $(213,261)   $  14,649
           =======  ====  ==========  ======  =========  =========    =========

       See accompanying notes to the consolidated financial statements.

                            page 5


                           CADIZ INC.

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - BASIS OF PRESENTATION
------------------------------

GENERAL

     The Consolidated Financial Statements have been prepared by
Cadiz Inc., sometimes referred to as "Cadiz" or "the Company",
without audit and should be read in conjunction with the
Consolidated Financial Statements and notes thereto included in
the Company's Form 10-K for the year ended December 31, 2005.

     The foregoing Consolidated Financial Statements include the
accounts of the Company and contain all adjustments, consisting
only of normal recurring adjustments, which the Company considers
necessary for a fair presentation of the Company's financial
position, the results of its operations and its cash flows for
the periods presented and have been prepared in accordance with
generally accepted accounting principles.

     The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and the accompanying notes.  Actual
results could differ from those estimates and such differences
may be material to the financial statements. This quarterly
report on Form 10-Q should be read in conjunction with the
Company's Form 10-K for the year ended December 31, 2005.  The
results of operations for the six months ended June 30, 2006 are
not necessarily indicative of results for the entire fiscal year
ending December 31, 2006.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The financial statements of the Company have been prepared
using accounting principles applicable to a going concern, which
assumes realization of assets and settlement of liabilities in
the normal course of business.  The Company incurred losses of
$5.4 million for the six months ended June 30, 2006 and $14.2
million for the six months ended June 30, 2005.  The Company had
working capital of $11.6 million at June 30, 2006 and used cash
in operations of $2.3 million for the six months ended June 30,
2006 and $1.9 million for the six months ended June 30, 2005.
Currently, the Company's sole focus is the development of its
land and water assets.

     During the quarter ended June 30, 2006, the Company raised
$36.4 million through the private placement of a five year zero
coupon convertible term loan with Peloton Partners LLP
("Peloton"), as administrative agent, and an affiliate of Peloton
and another investor, as lenders.  The proceeds of the new term
loan were partially used to repay the Company's prior term loan
facility with ING Capital LLC ("ING").

     The Company's current resources do not provide the capital
necessary to fund a water or real estate development project
should the Company be required to do so.  There is no assurance
that additional financing (public or private) will be available
on acceptable terms or at all.  If the Company issues additional
equity or equity linked securities to raise funds, the ownership
percentage of the Company's existing stockholders would be
reduced.  New investors may demand rights, preferences or
privileges senior to those of existing holders of common stock.
If the Company cannot raise needed funds, it might be forced to
make further

                            page 6

substantial reductions in its operating expenses, which could
adversely affect its ability to implement its current business
plan and ultimately its viability as a company.  These financial
statements do not include any adjustments that might result from
these uncertainties.

PRINCIPLES OF CONSOLIDATION

     In December 2003, the Company transferred substantially all
of its assets with the exception of its office sublease, certain
office furniture and equipment and the investment in Sun World
International Inc.("Sun World") to Cadiz Real Estate LLC, a
Delaware limited liability company ("Cadiz Real Estate").  The
Company holds 100% of the equity interests of Cadiz Real Estate,
and therefore continues to hold 100% beneficial ownership of the
properties that it transferred to Cadiz Real Estate.  Because the
transfer of the Company's properties to Cadiz Real Estate has no
effect on its ultimate beneficial ownership of these properties,
the properties owned of record either by Cadiz Real Estate or by
the Company are treated as belonging to the Company.

     On January 30, 2003, Sun World and certain of its
subsidiaries filed voluntary petitions for relief under Chapter
11 of the Bankruptcy Code.  The financial statements of Sun World
were no longer consolidated with those of Cadiz due to the
Company's loss of control over the operations of Sun World on
that date.  Cadiz also wrote off its net investment in Sun World
of $195 thousand at the Chapter 11 filing date because it did not
anticipate being able to recover its investment.

     Further, in February 2005, Sun World completed the sale of
substantially all of its assets.  Sun World's consensual plan of
reorganization was confirmed by the U.S. Bankruptcy Court in
August, 2005 and became effective on September 6, 2005.  Cadiz
also reached a settlement with Sun World regarding certain tax
matters that became effective on September 6, 2005.  With the
final bankruptcy plan confirmation and settlement, Cadiz has no
further rights and obligations relating to Sun World assets or
indebtedness, and supplemental disclosure of Sun World financial
information is no longer included in Cadiz filings.

     As discussed above, subsequent to the effective date of the
plan of reorganization of Sun World, the Company's primary
activities are limited to the development of its water resource
programs and real estate assets.  From the effective date of the
plan of reorganization through June 30, 2006, the Company
incurred losses of approximately $10.6 million and used cash in
operations of approximately $3.6 million

GOODWILL

     The Company has $3.8 million of goodwill which resulted from
a merger in May 1988 between two companies, which eventually
became known as Cadiz Inc.  Goodwill is not amortized but is
tested for impairment annually in the first quarter, or earlier
if events occur which require an impairment analysis to be
performed. The Company performed an impairment test of its
goodwill in the first quarter of 2006 and determined that its
goodwill was not impaired.

                            page 7

INTANGIBLE AND OTHER LONG-LIVED ASSETS

     Property, plant and equipment, intangible and certain other
long-lived assets are amortized over their useful lives.  Useful
lives are based on management's estimates of the period that the
assets will generate revenue.  Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 2004, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards
Number 123 (revised 2004), "Share Based Payment" ("SFAS 123R").
SFAS 123R requires all share-based payments to employees,
including grants of employee stock options, to be recognized in
the financial statements based on their grant date fair values.
SFAS 123R replaces SFAS No. 123, "Accounting for Stock Based
Compensation," ("SFAS 123") and supersedes APB Opinion No. 25,
"Accounting for Stock Issued to Employees."

     In January 2006, the Company adopted the new requirements
using the modified prospective transition method in the first
quarter of fiscal 2006, and, as a result, will not retroactively
adjust the results from prior periods.  Under this transition
method, compensation expense associated with stock options
recognized in the first six months of fiscal 2006 included
$443,000 related to the remaining unvested portion of all stock
option awards granted prior to January 1, 2006, based on the
grant date fair value estimated in accordance with the original
provisions of SFAS 123.  The Company applied the Black-Scholes
valuation model in determining the fair value of share-based
payments to employees, which is then amortized on a straight-line
basis over the requisite service period.  In addition to the
$443,000 of stock option related expense due to the adoption of
SFAS 123R, the Company recognized $616,000 of expense related to
stock awards previously granted under the Management Equity
Incentive Plan.

     In June 2006, the FASB issued FSP FIN 48 which clarifies the
accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB
Statement No. 109, "Accounting for Income Taxes."  This
Interpretation prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken on a tax return.
This Interpretation also provides guidance on derecognition,
classification, interest, penalties, accounting in interim
periods, disclosure and transition.  The evaluation of a tax
position in accordance with this Interpretation will be a two-
step process.  The first step will determine if it is more likely
than not that a tax position will be sustained upon examination
and should therefore be recognized.  The second step will measure
a tax position that meets the more likely than not recognition
threshold to determine the amount of benefit to recognize in the
financial statements.  This Interpretation is effective for
fiscal years beginning after December 15, 2006.  The Company is
currently evaluating the impact of this Statement.

STOCK-BASED COMPENSATION

     Prior to the January 2006 adoption of SFAS 123R, the Company
accounts for grants of

                            page 8

options to employees to purchase its common stock using the intrinsic
value method in accordance with APB Opinion No. 25 and FIN No. 44,
"Accounting for Certain Transactions Involving Stock Compensation".
As permitted by SFAS 123 and as amended by SFAS No. 148, the Company
chose to continue to account for such option grants under APB
Opinion No. 25 and provide the expanded disclosures specified in SFAS
123, as amended by SFAS No. 148.

     Had compensation cost for the Company's option grants been
determined based on their fair value at the grant date for awards
consistent with the provisions of SFAS 123R, the Company's  net
loss per share for the three months ended June 30, 2005 would
have been the adjusted pro forma amounts indicated below (dollars
in thousands):


                                         PERIOD ENDING JUNE 30, 2005
                                         THREE MONTHS     SIX MONTHS
                                                  (UNAUDITED)
                                                  -----------
  Net loss applicable to common stock,
   as reported                            $(12,625)       $(14,194)

  Stock based employee compensation
   cost, net of tax effects, included
   in the determination of net income,
   as reported                              11,249          11,249


  Stock based employee compensation
   cost, net of tax effects, under the
   fair value method if the fair value
   method had been applied                 (11,981)        (11,981)
                                          --------        --------

  Proforma net loss if the fair value
  method had been applied                 $(13,357)       $(14,926)
                                          ========        ========


                                         PERIOD ENDING JUNE 30, 2005
                                         THREE MONTHS     SIX MONTHS
                                                  (UNAUDITED)
                                                  -----------
   Net loss applicable to common stock:
    as reported per basic and diluted
    common share                          $  (1.18)       $  (1.35)

   Stock based employee compensation
    cost, net of tax effects, included
    in the determination of net income
    as reported                               1.05            1.07

   Stock based employee compensation
    cost, net of tax effects, under the
    fair value method if the fair value
    method had been applied                  (1.12)          (1.14)
                                          --------        --------
   Proforma net loss if the fair value
     method had been applied              $  (1.25)       $  (1.42)
                                          ========        ========

                            page 9

     For purposes of computing the pro forma disclosures required
by SFAS 123, the fair value of each option granted to employees
and directors is estimated using the Black-Scholes option pricing
model.

     The Company has issued options pursuant to its 2003
Management Equity Incentive Plan.  Options issued under the
Management Equity Incentive Plan were granted during 2005 and
have a ten year term with vesting periods ranging from issuance
date to three years.  Certain of these options have strike prices
that are below the fair market value of the stock on the date of
grant.  All options have been issued to directors, officers,
consultants and employees of the Company.

     The Management Equity Incentive Plan provides for the
granting of up to 377,339 options to purchase one share of common
stock.  365,000 options were granted under the plan during 2005.
These options remain unexercised and outstanding on June 30,
2006.  There were no additional option grants during the 6 month
period ended June 30, 2006.

     In December 2004, the FASB issued SFAS No. 123R (revised
2004), "Share-Based Payment", in which requires all share-based
payments to employees, including grants of employee stock options,
be recognized in the financial statements based on their grant
date fair values.  SFAS No. 123R replaces SFAS No. 123,
"Accounting for Stock-based Compensation," ("SFAS 123") and
supercedes APB Opinion No. 25, "Accounting for Stock Issued to
Employees."  The Company adopted the new requirements using the
modified prospective transition method during the first quarter
of 2006, and as a result, will not retroactively adjust results
from prior periods.  Under this transition method, compensation
expense associated with stock options recognized in the first
quarter of fiscal 2006 will include: 1) expenses related to the
remaining unvested portion of all stock option awards granted
prior to January 1, 2006, based on the grant date fair value
estimated in accordance with the original provisions of SFAS No.
123; and 2) expenses related to all stock option awards granted
subsequent to January 1, 2006, based on the grant date fair value
estimated in accordance with the provisions of SFAS No. 123R.
The Company will apply the Black-Scholes valuation model in
determining the fair value of share-based payments to employees,
which will then be amortized on a straight-line basis over the
requisite service period.  No stock options were granted during
the first six months of 2006.

     As a result of the adoption of SFAS 123R, the Company
recorded expense in the amount of $443,000 in the first 6 months
of 2006 related to the fair value of options, all of which were
granted in 2005.  SFAS 123R also requires the Company to estimate
forfeitures in calculating the expense related to stock-based
compensation as opposed to only recognizing these forfeitures and
the corresponding reduction in expense as they occur.  The
remaining vesting periods are relatively short, and the potential
impact of forfeitures is not material.  The Company is in a tax
loss carryforward position and is not expected to realize a
benefit from any additional compensation expense recognized under
SFAS 123R.  See Note 4 - Income Taxes.

     All outstanding stock options were issued in May and October
of fiscal 2005 under the Management Equity Incentive Plan.  The
fair value of each option grant was estimated on the date of
grant using the Black-Scholes option pricing model with the
following weighted average assumptions:

                            page 10

          Risk free interest rate                 4.20%
          Expected life                           9.6 years
          Expected volatility                     46%
          Expected dividend yield                 0.0%
          Weighted average vesting period         0.7 years


     The Company recognized stock option related compensation
costs of $443,000 in the first half of fiscal 2006 relating to
these options.  At June 30, 2006, the unamortized compensation
expense related to these options amounted to $405,000.  No stock
options were exercised during fiscal 2005 and during the first
six months of fiscal 2006.

     A summary of option activity under the plan as of June 30,
2006 and changes during the current fiscal year is presented
below:

                                              WEIGHTED-
                                WEIGHTED-      AVERAGE    AGGREGATE
                                 AVERAGE      REMAINING   INTRINSIC
                                EXERCISE     CONTRACTUAL    VALUE
   OPTIONS          SHARES        PRICE         TERM       ($000'S)
   -------          ------      ---------    -----------  ---------

Outstanding
 January 1, 2006    365,000      $ 12.71         8.8       $ 3,752
Granted                   -            -           -             -
Exercised                 -            -           -             -
Forfeited
 or expired               -            -           -             -
                    -------      -------         ---       -------
Outstanding on
 June 30, 2006      365,000      $ 12.71         8.8       $ 3,752
                    =======      =======         ===       =======
Exercisable at
 June 30, 2006      238,335      $ 12.50         8.7       $ 2,405
                    =======      =======         ===       =======


     The weighted-average grant-date fair value of options
granted during the year 2005 was $10.28.

     The Company has also granted stock awards pursuant to its
Management Equity Incentive Plan and 2004 Management Bonus Plan.
The Management Equity Incentive Plan provided for the granting of
1,094,712 shares of common stock in May 2005, and the 2004
Management Bonus Plan provided for the granting of 10,000 shares
of common stock valued at $12.00 per share in December 2004.
Compensation cost for stock granted to employees is measured at
the quoted market price of the Company's stock at the date of the
grant.  For the six months ended June 30, 2006, the accompanying
consolidated statement of operations include approximately
$616,000 of stock based compensation expense related to these
stock awards.  At June 30, 2006, the unamortized compensation
expense relating to these stock awards was $513,000 and will be
fully amortized by December 31, 2006.

                            page 11

     A summary of stock awards activity under the plan as of June
30, 2006 and changes during the current quarter is presented
below:

                                                       WEIGHTED-
                                                        AVERAGE
                                                       GRANT-DATE
                                                       FAIR VALUE
                                             SHARES     ($000's)
                                             ------    ----------

   Nonvested at December 31, 2005           125,779      $ 1,950
     Granted                                      -            -
     Forfeited or canceled                        -            -
     Vested                                       -            -
                                            -------      -------

   Nonvested at June 30, 2006               125,779      $ 1,950


     See Note 2 to the Consolidated Financial Statements included
in the Company's Form 10-K for further discussion of the
Company's accounting policies.


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

     Property, plant, equipment and water programs consist of the
following (in thousands):

                                            JUNE  30,   DECEMBER 31,
                                              2006          2005

          Land and land improvements        $ 21,986      $ 21,986
          Water programs                      14,274        14,274
          Buildings                            1,191         1,191
          Machinery and equipment              2,123         2,103
                                            --------      --------

                                              39,574        39,554
          Less accumulated depreciation       (4,310)       (4,231)
                                            --------      --------

                                            $ 35,264      $ 35,323
                                            ========      ========

     Depreciation expense totaled $39 thousand and $67 thousand
during the three months ended June 30, 2006 and 2005, and $79
thousand and $134 thousand for the six months ended June 30, 2006
and 2005.


NOTE 3 - DEBT
-------------

     In June, the Company entered into a $36.4 million five year
zero coupon convertible term loan with Peloton Partners LLP, as
administrative agent for the loan, and with an affiliate of Peloton
and another investor, as lenders.  Under the terms of the loan,
interest accrues at a 5% annual rate for the first 3 years and 6%
thereafter, calculated on the basis of a 360 day year and

                            page 12

actual days elapsed.  The entire amount of accrued interest is due
at the final maturity of the loan in June, 2011.  The term loan is
secured by substantially all the assets of the Company and
contains representations, warranties and covenants that are
typical for agreements of this type, including restrictions that
would limit the Company's ability to incur additional
indebtedness, incur liens, pay dividends or make restricted
payments, dispose of assets, make investments and merge or
consolidate with another person.  However, there are no financial
maintenance covenants and no restrictions on the Company's
ability to issue additional common stock to fund future working
capital needs.

     At the lender's option, principal plus accrued interest is
convertible into the Company's $0.01 par value common stock.  The
loan is divided into two tranches: the $10 million Tranche A is
convertible at $18.15 per share, and the $26.4 million Tranche B
is convertible at $23.10 per share.   Lenders may not, unless and
until stockholder approval is received, exercise these conversion
rights to the extent that a lender would own more than 19.99% of
the Company's common stock outstanding after such conversion.  A
maximum of 2,221,909 shares are issuable pursuant to these
conversion rights, with this maximum number applicable if the
loan is converted on the final maturity date.  The Company has
more than sufficient authorized common shares available for this
purpose.

     In the event of a change in control, the conversion prices
are adjusted downward by a discount that declines over time such
that, under a change in control scenario, both the Tranche A and
Tranche B conversion prices are initially $16.50 per share and
increase in a linear manner over time to the full $18.15 Tranche
A conversion price and $23.10 Tranche B conversion price on the
final maturity date.  In no event does the maximum number of
shares issuable to lenders pursuant to these revised conversion
formulas exceed the 2,221,909 shares that would be issued to
lenders pursuant to a conversion in full on the final maturity
date in the absence of a change in control.

     In the event of a change in control, the Company must also
make a cash offer in an amount equal to the higher of the loan
principal amount plus accrued interest or an amount equal to the
amount of principal plus accrued interest divided by the adjusted
conversion prices and multiplied by the average closing price of
the Company's stock on the NASDAQ Global Market for the 5
business days immediately preceding the date that the loans are
tendered.

     The respective tranches of the loan can be prepaid if the
price of the Company's stock on the NASDAQ Global Market exceeds
the conversion price by 40% or if the Company obtains a certified
environmental impact report for the Cadiz groundwater storage and
dry year supply program, a pipeline right-of-way and permits for
pipeline construction and financing commitments sufficient to
construct the project.

     The Company has filed a registration statement on Form S-3
covering the resale of all the securities issuable upon
conversion of the loan.  The Company is required to maintain the
effectiveness of this registration statement for at least 180
days after it has been declared effective.  The Company is
subject to a 0.5% monthly penalty assessed on the initial
principal balance of the loan for each 30 day period (or portion
thereof) during which any such requirements are not satisfied.
In addition, a failure of the registration statement to be
declared effective by December 30, 2006 will result in a default
under the loan.

                            page 13

     The Company has analyzed all of the above provisions of the
convertible loan and related agreements for embedded derivatives
under FASB Statement No. 133, Accounting for Derivative
Instruments and Hedging Activities and related Emerging Issues
Task Force (EITF) interpretations and SEC rules.  The Company has
concluded that certain provisions of the convertible loan
agreement may be deemed to be derivatives for purposes of the
application of FASB Statement No. 133 and EITF 00-19, Accounting
for Derivative Financial Instruments to, and Potentially Settled
in, a Company's Own Stock.  Therefore, in accordance with FASB
Statement No. 133, these embedded instruments are bifurcated from
the host debt instrument and classified as a liability in the
Company's financial statements.  The Company has prepared
valuations for each of the deemed derivatives using a Black-
Scholes option pricing model and recorded a liability of
approximately $12 million on the June 30 loan funding date, with
an offsetting discount to the convertible term loan.  At June 30,
2006, the derivative liability is classified and recorded as part
of long term debt in the accompanying balance sheet.  The debt
discount will be amortized to  interest expense over the life
of the loan using the interest amortization method.  The
principal valuation assumptions are as follows:

          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%

     The derivative liability will be adjusted to fair value on each
future financial statement reporting date, and any change in fair
value will be reflected in the Consolidated Statement of
Operations as an "Other Income (Expense)" Item.  The fair value
of the derivative will change in response to changes in the
market price of Cadiz common stock, among other variables.  In
general, an increase in the market price of Cadiz common stock
during a reporting period will result in the recognition of an
expense during that period.

     The Company incurred $408,000 of outside legal expenses
related to the negotiation and documentation of the loan, which
will be amortized over the life of the loan using the interest
amortization method

     The proceeds of the new loan were applied to repay in full
the Company's term loan facility with ING described below.  As a
result, ING retained the $762,000 remaining balance of the
prepaid interest credit account described below, and the write-
off of this asset was reflected in the "Other Expense" caption of
the Statement of Operations during the quarter.  The write-off of
$106,000 of unamortized debt issuance costs related to the ING
loan was also reflected as "Other Expense" items.

     On November 30, 2004 the Company entered into an amendment
of its senior term loan agreement with ING whereby it repaid in
full the senior term loan portion of the facility with ING of $10
million and reduced to $25 million the outstanding principal
balance under the existing revolving portion of the loan.  The
terms and conditions of the loan facility with ING were amended
in order to extend the maturity date of the debt until March 31,
2010, with a $10 million mandatory principal repayment due on or
before March 31, 2008, and an interest rate through

                            page 14

March 31, 2008 of 4% cash plus 4% paid in kind ("PIK") increasing
to 4% cash plus 6% PIK for interest periods commencing on and after
April 1, 2008.

     As part of the private sale of common shares on November 30,
2004, the Company issued to its lender $2.4 million of units as
prepaid interest under the Company's $25 million borrowing from
ING.  The current portion of this interest was included in
Prepaid Interest Expense and the non-current portion was included
in Other Assets in the Consolidated Balance Sheet.  The total
amount of prepaid interest was $2.1 million on June 30, 2005.  No
balance was outstanding after the ING loan repayment in June,
2006.


NOTE 4 - INCOME TAXES
---------------------

     As of June 30, 2006, the Company had net operating loss
(NOL) carryforwards of approximately $62.2 million for federal
income tax purposes.  Such carryforwards expire in varying
amounts through the year 2026.  This amount reflects the
effective reduction of the NOL carryforwards as a result of
ownership change annual limitation amounts.

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

     In February 2005, our wholly owned subsidiary Sun World
completed the sale of substantially all of its assets.

     The sale generated a total gain at Sun World of
approximately $11.3 million and $45.2 million for federal and
state income tax purposes, respectively.  For regular income tax
purposes this gain is not expected to generate a tax liability,
in that Sun World and Cadiz file a consolidated tax return and
the companies have sufficient net operating loss carryovers
(NOLs) to offset the gain from Sun World.  However, because of
state apportionment factors and the Alternative Minimum Tax (AMT)
rules, Cadiz is expected to have a tax liability of approximately
$336 thousand, which amount has been accrued as of December 31,
2005 and June 30, 2006.

     On August 26, 2005, a Settlement Agreement between Cadiz, on
the one hand, and Sun World and three of Sun World's
subsidiaries, on the other hand, was approved by the U.S.
Bankruptcy Court, concurrently with the Court's confirmation of a
consensual plan of reorganization for Sun World and its debtor
affiliates.  The Settlement Agreement provides that, following
the September 6, 2005 effective date of Sun World's plan of
reorganization, Cadiz will retain the right to utilize the Sun
World NOLs.  Sun World Federal NOLs are approximately $52
million.  If, in any year from calendar year 2005 through
calendar year 2011, the utilization of such NOLs results in a
reduction of Cadiz' tax liability for such year, then Cadiz will
pay to the Sun World bankruptcy estate 25% of the amount of such
reduction and shall retain the remaining 75% for its own benefit.
There is no requirement that Cadiz utilize these NOLs during this
reimbursement period or provide any reimbursement to the Sun
World bankruptcy estate for any NOLs used by Cadiz after this
reimbursement period expires.

                            page 15

NOTE 5 - NET LOSS PER COMMON SHARE
----------------------------------

     Basic earnings per share (EPS) is computed by dividing the
net loss, after deduction for preferred dividends either accrued
or imputed, if any, by the weighted-average common shares
outstanding.  Options, deferred stock units, warrants,
convertible debt, and preferred stock that are convertible into
shares of the Company's common stock were not considered in the
computation of diluted EPS because their inclusion would have
been antidilutive.  Had these instruments been included, the
fully diluted weighted average shares outstanding would have
increased by approximately 927,000 and 1,276,000 shares for the
three months ended June 30, 2006 and 2005, respectively.  For the
six months ended June 30, 2006 and 2005, weighted average shares
outstanding would have increased by approximately 917,000 and
849,000 shares, respectively.


NOTE 6 - PREFERRED AND COMMON STOCK
-----------------------------------

     During the quarter ended March 31, 2005, we issued 27,200
shares of common stock in consideration for services valued at
$326,400.  The shares were issued at $12 per share, the price of
the November 2004 private placement at which time the issue of
the shares was authorized, the services rendered and the amounts
accrued.

     On November 30, 2004 the Company completed a private
placement of 400,000 Units at the price of $60.00 per Unit.  Each
Unit consisted of five (5) shares of the Company's common stock
and one (1) common stock purchase warrant.  Each Warrant entitles
the holder to purchase one (1) share of common stock at an
exercise price of $15.00 per share.  The warrants have a term of
three years, expiring on November 30, 2007, and may be cancelled
at the Company's option if the closing market price of the
Company's common stock exceeds $18.75 for 10 consecutive trading
days.  All 400,000 warrants remain outstanding on June 30, 2006.

                            page 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, 2005.

OVERVIEW

     The Company's primary asset consists of land holdings
located in three areas of eastern San Bernardino County,
California totaling approximately 45,000 acres.  Virtually all of
this land is underlain by high-quality groundwater resources with
demonstrated potential for various applications, including water
storage and supply programs and recreational, residential, and
agricultural development.  Two of the three properties are
located in proximity to the Colorado River Aqueduct, the major
source of imported water for southern California.  The third
property is located near the Colorado River.

     The value of these assets derives from a combination of
projected population increases and limited water supplies
throughout southern California.  In addition, most of the major
population centers in southern California are not located where
significant precipitation occurs, requiring the importation of
water from other parts of the state.  We therefore believe that a
competitive advantage exists for companies that can provide high
quality, reliable, and affordable water to major population
centers.

     In 1997 we commenced discussions with the Metropolitan Water
District of Southern California ("Metropolitan") in order to
develop a long-term agreement for a joint venture groundwater
storage and supply program on our land in the Cadiz and Fenner
Valleys of eastern San Bernardino County (the "Cadiz Project").
Under the Cadiz Project, surplus water from the Colorado River
would be stored in the aquifer system underlying our land during
wet years.  When needed, the stored water, together with
indigenous groundwater, could be returned to the Colorado River
Aqueduct for distribution to Metropolitan's member agencies
throughout six southern California counties.

     Between 1997 and 2002, Metropolitan staff and the Company
received substantially all of the various permits required to
construct and operate the project, including a federal Record of
Decision from the U.S. Department of Interior, which endorsed the
Cadiz Project and granted a right-of-way for construction of
project facilities.  The federal government also approved a Final
Environmental Impact Statement ("FEIS") in compliance with the
National Environmental Policy Act ("NEPA").

                            page 17

     Despite the significant progress made in the federal
environmental review process, in October 2002 Metropolitan's
Board refused to consider whether or not to certify the Final
Environmental Impact Report ("FEIR"), which was a necessary
action to authorize implementation of the Cadiz Project in
accordance with the California Environmental Quality Act
("CEQA").

     Regardless of the Metropolitan Board's actions in October
2002, Southern California's need for water storage and supply
programs has not abated, and the advantages of underground water
storage facilities are increasingly evident. Therefore we continue
to pursue the completion of the environmental review process for
the Cadiz Project.  To that end, the County of San Bernardino has
agreed to serve as the CEQA lead agency for the completion of the
environmental review of the Cadiz Project and issue any oustanding
permits required under California law once the review is completed.
We are also working with the U.S. Department of Interior to have
the permits that were approved during the federal environmental
review process, including the right-of-way granted in the Record
of Decision to Metropolitan, issued directly to the Company for the
benefit of any participating public agency.  Additionally, we are
in discussions with several other public agencies regarding their
interest in participating in the Cadiz Project.  All of these
agencies have access to independent sources of water that can be
stored in the Cadiz Project.

     Due to significant population growth in Southern California,
where our properties are located, we have also begun to explore
additional uses of our land assets.  To this end, we retained
an outside service firm and obtained a detailed analysis which
confirmed the future development potential of our land.  We
will continue to explore strategies to maximize the value of these
properties over the longer term.

     We expect that these alternative scenarios will have
different capital requirements and implementation periods than
those previously established for the Cadiz Project.  After
Metropolitan's actions in 2002, we first entered into a series of
agreements with our senior secured lender, ING, to reduce our
debt to ING to $25 million and extended the final maturity date.
We have recently repaid the ING debt using proceeds from a new
$36.4 million zero coupon convertible term loan with other
lenders that matures on June 29, 2011.  During 2003 and 2004, we
raised approximately $35 million of equity through private
placements.  On November 30, 2004, we completed a private
placement of 400,000 Units at the price of $60.00 per Unit.  Each
Unit consisted of five (5) shares of the Company's common stock
and one (1) common stock purchase warrant.  Each Warrant entitled
the holder to purchase one (1) share of common stock at an
exercise price of $15.00 per share.  Each Warrant has a term of
three (3) years, expiring on November 30, 2007, and is callable
by us if the closing market price of our common stock exceeds
$18.75 for 10 consecutive trading days.  Under the terms of the
new loan agreement, the Company would retain any proceeds
associated with a decision by holders to exercise the warrants.

     With the implementation of these steps, we have been able to
retain ownership of all of our land assets and assets relating to
our water programs and also to obtain the working capital needed
to continue our efforts to develop our water programs.  Because
many of our pre-existing common stockholders have participated in
the 2003 and 2004 private placements, our base of common
stockholders remains largely the same as before these placements.

                            page 18

     Further, in 2005 the U.S. Bankruptcy Court confirmed a
consensual plan of reorganization for our wholly owned subsidiary
Sun World International, Inc. ("Sun World").  The plan became
effective on September 6, 2005, and Cadiz has no further interest
in the business or operations of Sun World.  Cadiz retains the
rights to use certain Sun World net operating loss carryovers for
income tax purposes.  See Note 4 to the Consolidated Financial
Statements - Income Taxes.

     We conduct limited agricultural operations on our Cadiz
Valley properties, where there are approximately 1,060 acres of
vineyards and lemon groves.  Historically, we have leased these
crops to Sun World and other third parties.  In the fourth
quarter of 2004, the lease with Sun World expired.  We leased
approximately 800 acres of vineyards to a third party for the
2005 growing season, and the amount of acreage under lease was
reduced to 160 acres in 2006.  The remaining crop lease is
renewable on a year to year basis with annual revenues of
approximately $12,000.  We operate the remaining vineyards and
lemon groves, subcontracting the labor, harvesting and marketing
of these crops to third parties.  Agriculture related revenues
and expenses will be higher in 2006 than in prior years because
the Company is operating a larger portion of the property.

     We remain committed to our land and water assets, and we
continue to explore all opportunities for development of these
assets.  We cannot predict with certainty which, if any, of these
various opportunities will ultimately be realized.

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2006 COMPARED TO THREE MONTHS ENDED
JUNE 30, 2005
---------------------------------------------------------------

     We have not received significant revenues from our water
resource activity to date.  As a result, we have historically
incurred a net loss from operations.  We had revenues of $157
thousand for the three months ended June 30, 2006 and $15
thousand for the three months ended June 30, 2005.  The lower
loss in the 2006 period resulted primarily from lower non-cash
compensation expenses of under our Management Equity Incentive
Plan.  Lower compensation expenses were partially offset by
higher general and administrative expenses and the cost of citrus
crops sold during the 2006 period.

     Our primary expenses are our ongoing costs to develop our
real estate and water assets and to secure the remaining
entitlements needed to continue developing the Cadiz Program.
These costs consist primarily of project management, legal,
consulting, engineering and administrative expenses, which are
characterized as general and administrative expenses for
financial statement reporting purposes.  We also have expenses
related to the limited farming activities that we conduct at the
Cadiz Ranch.  Other costs include interest expense and
compensation costs resulting from the grant of options under the
Cadiz 2003 Management Equity Incentive Plan.

     REVENUES  Cadiz had revenues of $157 thousand for the three
months ended June 30, 2006 and $15 thousand for the three months
ended June 30, 2005.  Higher revenues resulted primarily from the
sale of citrus crops, as during 2006 we farmed certain lemon
groves at the Cadiz Ranch that had been leased to Sun World
during the growing season ending in early 2005 and did not
include Sun World's revenues in the consolidated financial
statements because Sun World was in bankruptcy.

                            page 19

     COST OF SALES.  Cost of Sales totaled $130 thousand during
the three months ending June 30, 2006, reflecting the production,
harvesting and sale of citrus crops at the Cadiz Ranch property.
Cadiz leased these crops to Sun World during the growing season
ending in early 2005 and did not include Sun World's cost of
sales in the consolidated financial statements because Sun World
was in bankruptcy.

     GENERAL AND ADMINISTRATIVE EXPENSES.   General and
administrative expenses during the three months ended June 30,
2006 totaled $1.2 million compared to $877 thousand for the three
months ended June 30, 2005.  The increase in expenses is
primarily due to higher legal and consulting costs related to the
ongoing Cadiz Program entitlement process and the lawsuit the
Company has filed against the Metropolitan Water District of
Southern California.  Farming related expenses were also higher
as the Company assumed responsibility for operating a larger
portion of the Cadiz ranch properties in 2006.

     COMPENSATION COSTS FROM STOCK AND OPTION AWARDS.  During the
three months ended June 30, 2006, the Company recognized $529
thousand of expenses relating to stock and options issued under
the Cadiz 2003 Management Equity Incentive Plan, compared with
$11.2 million of expenses recognized during the comparable 2005
period.  The 2006 expenses relate to the unvested portion of
stock and option awards granted during May 2005, and, to date, no
stock or option grants have been awarded in 2006.  Shares and
options issued under the Plan vest over varying periods from the
date of issue to October 2007.  These expenses include the
adoption and application of Statement of Financial Accounting
Standards No. 123(R), "Share -Based Payments" effective
January 1, 2006.

     DEPRECIATION AND AMORTIZATION.  Depreciation and
amortization expense for the three months ended June 30, 2006 and
2005 totaled $39 thousand and $67 thousand, respectively.

     INTEREST EXPENSE, NET.  Net interest expense totaled $0.5
million during the three months ended June 30, 2006, compared to
$0.5 million during the same period in 2005.  The following table
summarizes the components of net interest expense for the two
periods (in thousands):

                                            THREE MONTHS ENDED
                                                 JUNE 30,
                                                 --------
                                              2006      2005
                                              ----      ----

      Interest on outstanding debt         $    528   $    504
      Amortization of financing costs             7          7
      Interest income                           (39)       (15)
                                           --------   --------

                                           $    496   $    496
                                           ========   ========

     Higher interest on outstanding debt was offset by higher
interest income from the Company's short-term cash investments.
The higher interest on outstanding debt was due to the larger
principal amount outstanding on the ING loan in 2006,  and the
higher interest income on the Company's short-term cash
investments reflected the higher money market rates available in
2006.

                            page 20

     OTHER INCOME (EXPENSE).  The Company prepaid its existing
indebtedness with ING in June, 2006 with the proceeds of a new
five year zero coupon convertible term loan.  As a result of the
refinancing, we wrote off the $762,000 balance of a prepaid
interest account at ING that ING retained as a prepayment
penalty.  We also wrote off $106,000 of unamortized debt issuance
costs related to the ING loan, primarily legal fees.  There were
no comparable expenses in the three month period ending June 30,
2005.  In future periods we will reflect, as income or expense,
any changes to the fair value of "embedded derivatives"
associated with our current convertible term loan.  In general,
an increase in the market value of our common stock will cause an
expense to be recognized.  See Note 3 to the Consolidated
Financial Statements - Debt.

     INCOME TAXES.  In February 2005, our wholly owned subsidiary
Sun World completed the sale of substantially all of its assets.
The sale generated a total gain at Sun World of approximately
$11.3 million and $45.2 million for federal and state income tax
purposes, respectively.  For regular income tax purposes this
gain is not expected to generate a tax liability, in that Sun
World and Cadiz file a consolidated tax return and the companies
have sufficient net operating loss carryovers (NOLs) to offset
the gain from Sun World.  However, because of state apportionment
factors and the Alternative Minimum Tax (AMT) rules, Cadiz is
expected to have a tax liability of approximately $336 thousand
that has been accrued as of December 31, 2005 and June 30, 2006.
Cadiz retains the right to utilize a portion of certain Sun World
NOLS pursuant to a settlement agreement among the companies.
There was no similar taxable gain in the 2006 period.  See Note 4
of the Notes to the Consolidated Financial Statements - Income
Taxes.


SIX MONTHS ENDED JUNE 30, 2006 COMPARED TO SIX MONTHS ENDED
JUNE 30, 2005
-----------------------------------------------------------

     We had revenues of $409 thousand for the six months ended
June 30, 2006 and $30 thousand for the six months ended June 30,
2005.  Our net loss totaled $5.4 million for the six months ended
June 30, 2006 compared to $14.2 million for the six months ended
June 30, 2005.

     Our primary expenses are our ongoing costs to develop our
real estate and water assets and to secure the remaining
entitlements needed to continue developing the Cadiz Program.
These costs consist primarily of project management, legal,
consulting, engineering and administrative expenses, which are
characterized as general and administrative expenses for
financial statement reporting purposes.  We also have expenses
related to the limited farming activities that we conduct at the
Cadiz Ranch.  Other costs include interest expense and
compensation costs resulting from the grant of options under the
Cadiz 2003 Management Equity Incentive Plan.

     REVENUES  Cadiz had revenues of $409 thousand for the six
months ended June 30, 2006 and $30 thousand for the six months
ended June 30, 2005.  Higher revenues resulted primarily from the
sale of citrus crops, as during 2006 we farmed certain lemon
groves at the Cadiz Ranch that had been leased to a third party
during 2005.

     COST OF SALES.  Cost of Sales totaled $341 thousand during
the six months ended June 30, 2006, reflecting the production,
harvesting and sale of citrus crops at the Cadiz Ranch property.
Cadiz leased these crops to Sun World during the growing season
ending in early

                            page 21

2005 and did not include Sun World's cost of sales in the consolidated
financial statements because Sun World was in bankruptcy.

     GENERAL AND ADMINISTRATIVE EXPENSES.   General and
administrative expenses during the six months ended June, 2006
totaled $2.8 million compared to $1.8 million for the six months
ended June 30, 2005.  The increase in expenses is primarily due
to higher legal and consulting costs related to the ongoing Cadiz
Program entitlement process and the lawsuit the Company has filed
against the Metropolitan Water District of Southern California.
Accounting and audit expenses were higher, due to the
documentation and additional audit work required by Section 404
of the Sarbanes Oxley Act of 2002.

     COMPENSATION COSTS FROM STOCK AND OPTION AWARDS.  During the
six months ended June 30, 2006, the Company recognized $1,058
thousand of expenses relating to stock and options previously
issued under the Cadiz 2003 Management Equity Incentive Plan,
compared with $11.2 million of expenses recognized during the six
month period ending June 30, 2005.  The 2006 expenses relate to
the unvested portion of stock and option awards granted during
May 2005, and, to date, no stock or option grants have been
awarded in 2006.  Shares and options issued under the Plan vest
over varying periods from the date of issue to October 2007.
These expenses include the adoption and application of Statement
of Financial Accounting Standards No. 123(R), "Share -Based
Payments" effective January 1, 2006.

     DEPRECIATION AND AMORTIZATION.  Depreciation and
amortization expense for the six months ended June 30, 2006 and
2005 totaled $79 thousand and $134 thousand, respectively.

     INTEREST EXPENSE, NET.  Net interest expense totaled $977
thousand during the six months ended June 30, 2006, compared to
$954 thousand during the same period in 2005.  The following
table summarizes the components of net interest expense for the
two periods (in thousands):

                                             SIX MONTHS ENDED
                                                 JUNE 30,
                                                 --------
                                              2006      2005
                                              ----      ----

      Interest on outstanding debt         $  1,046   $  1,018
      Amortization of financing costs            14         14
      Interest income                           (83)       (78)
                                           --------   --------

                                           $    977   $    954
                                           ========   ========

     The increase in net interest expense is primarily due to the
larger principal amount outstanding on the ING loan in 2006, as a
portion of the interest due on the loan was periodically added to
the principal balance pursuant to the loan's 4% paid in kind
("PIK") feature.  See Notes to the Consolidated Financial
Statements: Note 3 - Debt.

     OTHER INCOME (EXPENSE).  During the six month period ended
June 30, 2006, one of our stockholders determined that it had, at
a time when it was the beneficial holder of more than 10% of our
outstanding equity securities, inadvertently engaged in trades
which resulted in automatic short swing profit liability to the
Company pursuant to Section 16(b) of the Securities Exchange Act
of 1934.  After becoming aware of the situation, the stockholder
promptly made

                            page 22

payments totaling $350,000 to the Company to settle the entire
short swing profit liability owed as a consequence of these trades.

     The Company prepaid its existing indebtedness with ING in
June, 2006 with the proceeds of a new five year zero coupon
convertible term loan.  As a result of the refinancing, we wrote
off the $762,000 balance of a prepaid interest account at ING
that ING retained as a prepayment penalty.  We also wrote off
$106,000 of unamortized debt issuance costs related to the ING
loan, primarily legal fees.  There were no comparable expenses in
the three month period ending June 30, 2005.  In future periods
we will reflect, as income or expense, any changes to the fair
value of "embedded derivatives" associated with our current
convertible term loan.  In general, an increase in the market
value of our common stock will cause an expense to be recognized.
See Notes to the Consolidated Financial Statements: Note 3 -Debt.

     INCOME TAXES.  In February 2005, our wholly owned subsidiary
Sun World completed the sale of substantially all of its assets.
The sale generated a total gain at Sun World of approximately
$11.3 million and $45.2 million for federal and state income tax
purposes, respectively.  For regular income tax purposes this
gain is not expected to generate a tax liability, in that Sun
World and Cadiz file a consolidated tax return and the companies
have sufficient net operating loss carryovers (NOLs) to offset
the gain from Sun World.  However, because of state apportionment
factors and the Alternative Minimum Tax (AMT) rules, Cadiz is
expected to have a tax liability of approximately $336 thousand
that has been accrued as of December 31, 2005 and June 30, 2006.
Cadiz retains the right to utilize a portion of certain Sun World
NOLS pursuant to a settlement agreement among the companies.
There was no similar taxable gain in the 2006 period.  See Note 4
of the Notes to the Consolidated Financial Statements - Income
Taxes.


LIQUIDITY AND CAPITAL RESOURCES

(A)  CURRENT FINANCING ARRANGEMENTS
     ------------------------------

     As we have not received significant revenues from our water
resource and real estate development activities to date, we have
been required to obtain financing to bridge the gap between the
time development expenses are incurred and the time that revenue
will commence. Historically, we have addressed these needs
primarily through secured debt financing arrangements with our
lenders, private equity placements and the exercise of
outstanding stock options.

     In June 2006 we entered into a new convertible term
loan with Peloton Partners LLP ("Peloton").  Under the terms of
this financing arrangement, Peloton (through an affiliate) and
another participating lender have invested $36.4 million in a
five year zero coupon secured convertible loan with an initial
interest rate of 5% per annum.  After three years, the interest
rate will increase to 6% per annum for the remainder of the term.
All interest payments are deferred until the final maturity date
in June 2011.  At the lenders' option, $10 million of principal
and accrued interest thereon may be converted into Cadiz common
stock at $18.15 per share, and $26.4 million of principal and
accrued interest thereon may be converted into Cadiz common stock
at $23.10 per share.  See Note 3 of the Notes to the Consolidated
Financial Statements - Debt and Exhibit 10.1 to this Report.

                            page 23

     In addition to allowing us to prepay our former credit
facility with ING, the new term loan provides us with $9.3
million of additional working capital and the total facility has
a significantly lower interest rate than the former credit
facility with ING.  In addition, the current loan, unlike the ING
facility, permits us to retain any proceeds received from the
future exercise of 400,000 warrants to purchase our common stock
for $15.00 per share.  See Note 6 of the Notes to the
Consolidated Financial Statements - Common and Preferred Stock.
However, our ability to prepay the loan is more limited than was
the case under the ING facility.

     As we continue to actively pursue our business strategy,
additional financing specifically in connection with our water
programs will be required.  As the parties anticipate this need,
the restrictive covenants in our credit facility are crafted in a
way that, in our view, should not materially limit our ability to
undertake debt or equity financing in order to finance our water
development activities.

     We have no other outstanding credit facilities of material
size or preferred stock other than the Series F preferred stock
held by ING as described in our 10-K for the year ended December
31, 2005.

     CASH USED FOR OPERATING ACTIVITIES.  Cash used for operating
activities was $2.3 million for the six months ended June 30,
2006, as compared to $1.9 million for the six months ended June
30, 2005.  The increased cash usage is primarily due to higher
general and administrative expenses, which are primarily due to
higher legal and consulting costs related to the entitlement of
the Cadiz Program and the lawsuit the Company has filed against
the Metropolitan Water District of Southern California.
Accounting expenses were also higher, as the 2005 year-end audit
included a Sarbanes-Oxley Section 404 review for the first time.

     CASH FLOW FROM INVESTING ACTIVITIES.  During the six months
ended June 30, 2006, net cash flow used in investing activities
was $19 thousand, primarily due to expenditures for the
acquisition of plant & equipment at the Cadiz Ranch.

     CASH FLOW FROM FINANCING ACTIVITIES.  During the six months
ended June 30, 2006, net cash provided by financing activities
was $9.3 million, representing the proceeds remaining from our
new $36.4 million convertible debt facility after repayment of
the ING credit facility and debt issuance costs.

OUTLOOK

     SHORT TERM OUTLOOK.  The proceeds of our new $36.4 million
convertible term loan and our 2003 and 2004 private placements, in
which we raised approximately $35 million, provide us with
sufficient funds to meet our expected working capital needs for
the next 12 months.  The Company contemplates continuing with its
historical practice of structuring its financing arrangements to
match the anticipated needs of its development activities.  See
"Long Term Outlook", below.  No assurances can be given, however, as
to the availability or terms of any new financing.

     LONG TERM OUTLOOK.  In the longer term, we will need to
raise additional capital to finance working capital needs and any
payments due under our convertible term loan at maturity.  See
"Current Financing Arrangements" above.  Payments will be due
under the convertible term loan only to the extent that lenders
elect not to exercise equity conversion

                            page 24

rights prior to the loan's final maturity.  Our future working
capital needs will depend upon the specific measures we pursue in
the entitlement and development of our real estate and water
resources.  We will evaluate the amount of cash needed, and the manner
in which such cash will be raised, on an ongoing basis.  We may meet
any future cash requirements through a variety of means, including
equity or debt placements, or the sale or other disposition of
assets. Equity placements would be undertaken only to the extent
necessary, so as to minimize the dilutive effect of any such
placements upon our existing stockholders.

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 2004, the Financial Accounting Standards Board
issued SFAS No. 123R (revised 2004), "Share-Based Payment" which
amends SFAS Statement 123 and was effective for the Company
beginning January 1, 2006.  The new standard requires the Company
to recognize compensation costs in its financial statements in an
amount equal to the fair value of share-based payments granted to
employees and directors.  The Company recognized $443,000 of
stock based compensation expense in connection with the adoption
of SFAS No. 123R.

     In June 2006, the FASB issued FSP FIN 48 which clarifies the
accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB
Statement No. 109, "Accounting for Income Taxes."  This
Interpretation prescribes a recognition threshold and measurement
attribute for the financial statement recognition and measurement
of a tax position taken or expected to be taken on a tax return.
This Interpretation also provides guidance on derecognition,
classification, interest, penalties, accounting in interim
periods, disclosure and transition.  The evaluation of a tax
position in accordance with this Interpretation will be a two-
step process.  The first step will determine if it is more likely
than not that a tax position will be sustained upon examination
and should therefore be recognized.  The second step will measure
a tax position that meets the more likely than not recognition
threshold to determine the amount of benefit to recognize in the
financial statements.  This Interpretation is effective for
fiscal years beginning after December 15, 2006.  The Company is
currently evaluating the impact of this Statement.

CERTAIN KNOWN CONTRACTUAL OBLIGATIONS
-------------------------------------

                                  PAYMENTS DUE BY PERIOD
CONTRACTUAL              1 YEAR
OBLIGATIONS    TOTAL     OR LESS   2-3 YEARS   4-5 YEARS   AFTER 5 YEARS
-----------    -----     -------   ---------   ---------   -------------

Long term debt
 obligations  $ 36,410  $      8   $     18    $ 36,384      $      -

Interest
 Expense        11,374         1          1      11,372             -

Operating
 leases            111       111          -           -             -
              --------  --------   --------    --------      --------

              $ 47,895  $    120   $     19    $ 47,756      $      -
              ========  ========   ========    ========      ========

                             page 25



ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     In June 2006, we entered into a $36.4 million five year zero
coupon convertible term loan.  We have analyzed all the
provisions of the loan and related agreements for embedded
derivatives under FASB Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities and related
Emerging Issues Task Force interpretations and SEC rules and have
concluded that certain imbedded derivatives must be bifurcated
and separately valued as assets and liabilities on the Company's
financial statements.  The Company has prepared valuations for
each of the deemed derivatives using a Black-Scholes option
pricing model and recorded a liability of approximately $12 million
on the June 30 loan funding date, with an offsetting discount to the
convertible term loan.  The deemed derivatives will be revalued
at each future financial statement reporting date.  In general,
an increase in the market value of our common stock will cause
the value of the embedded derivatives to increase and an expense
to be recognized.  Other information about market risks for the
six months ended June 30, 2006 does not differ materially from
that discussed under Item 7A of Cadiz' Annual Report on Form 10-K
for the year ended December 31, 2005.


ITEM 4.   CONTROLS AND PROCEDURES

DISCLOSURE CONTROLS AND PROCEDURES

     We have established disclosure controls and procedures to
ensure that material information related to the Company,
including its consolidated entities, is accumulated and
communicated to senior management, including the Chairman and
Chief Executive Officer (the "Principal Executive Officer") and
Chief Financial Officer (the "Principal Financial Officer") and
to our Board of Directors.  Based on their evaluation as of June
30, 2006, our Principal Executive Officer and Principal Financial
Officer have concluded that the Company's disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934) are effective to ensure that the
information required to be disclosed by the Company in the
reports that it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange
Commission rules and forms, and such information is accumulated
and communicated to management, including the principal executive
and principal financial officers as appropriate, to allow timely
decisions regarding required disclosures.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

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

                            page 26

PART  II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     See "Legal Proceedings" included in the Company's latest
Form 10-K for a complete discussion.

ITEM 1A.  RISK FACTORS

     In June 2006, the Company entered into a new $36.4 million
long-term debt facility (the "Loan") - see Part I, Item 2 above.
As a consequence, our senior secured indebtedness has increased
from approximately $25.9 million as of December 31, 2005 to
approximately $36.4 million as of June 30, 2006.  The Loan is
convertible into shares of our common stock, and an election by
lenders to convert all or a portion of the Loan will dilute the
percentage of our common stock held by current stockholders.  In
future periods we will also reflect, as income or expense, any
changes to the fair value of "embedded derivatives" associated
with the Loan.  In general, an increase in the market value of
our common stock will cause an expense to be recognized.

     In addition, pursuant to the Registration Rights Agreement
which we entered into as a condition to the Loan, we have filed a
Registration Statement with the SEC covering the resale of all
shares issuable upon conversion of the Loan.  We are also
obligated to cause such Registration Statement to be declared
effective no later than September 27, 2006, or if the
Registration Statement is reviewed by the SEC, no later than
October 27, 2006.  We are also required to maintain the
effectiveness of this Registration Statement for at least 180
days after it has been declared effective.  We must pay to the
holders of the Loan an amount in cash equal to 0.5% of the
initial principal amount of the Loan for each 30 day period (or
portion thereof) during which any such requirements are not
satisfied.  In addition, a failure of the Registration Statement
to be declared effective by December 30, 2006 will result in a
default under the Loan.

     There have been no other material changes to the factors
disclosed in Item 1A. Risk Factors in our Annual Report on Form
10-K for the year ended December 31, 2005,


ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     The information requested by this Item has been previously
provided in Form 8-K dated June 26, 2006 filed on June 30, 2006.


ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

     Not Applicable.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     Not Applicable.

                            page 27

ITEM 5.   OTHER INFORMATION

     As previously disclosed by the Company in a Form 8-K current
report dated July 31, 2006, Murray H. Hutchison resigned as a
member of the Audit Committee of the Board of Directors of the
Company effective July 31, 2006.  Mr. Hutchison tendered his
resignation solely due to his service on the audit committee of a
New York Stock Exchange listed company which prohibits members of
its audit committee from serving on more than two other audit
committees.  Mr. Hutchison remains a member of the Company's
Board of Directors and of its Compensation and Nominating &
Corporate Governance committees.

     As also previously disclosed by the Company the Form 8-K
current report dated July 31, 2006, the Board of Directors
determined that, as a result of Mr. Hutchison's resignation from
the Audit Committee, the Company is not in compliance with the
provisions of Nasdaq Rule 4350(d)(2)(A), which requires that the
Company have and continue to have an audit committee comprised of
at least three members.  With Mr. Hutchison's resignation, the
Company has two members of the Audit Committee and one vacancy on
the committee.  The Company notified Nasdaq on August 1, 2006
that (i) it was aware of the foregoing noncompliance with the
continuing listing standards of the Nasdaq rules and (ii) that it
intends to cure such noncompliance within the applicable cure
period, described below.

     Nasdaq Rule 4350(d)(4)(B) provides, in relevant part, that
if the Company fails to comply with the audit committee
composition requirement of Rule 4350(d)(2)(A) due to one vacancy
on the audit committee, then the Company will have until the
earlier of its next annual shareholder meeting or one year from
the occurrence of the event that caused the failure to comply
with Rule 4350(d)(2)(A) to fill the vacant position on the audit
committee.

     On August 7, 2006, the Company received notice from Nasdaq
that the Company is not in compliance with the audit committee
requirements of Rule 4350(d)(2)(A), as described above, and
confirming that the Company must appoint a third member of the
Audit Committee on or before July 31, 2007 or the date of the
next annual shareholder meeting, whichever is earlier.


ITEM 6.   EXHIBITS

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

     10.1   $36,375,000 Credit Agreement among Cadiz Inc.
            and Cadiz Real Estate LLC, as Borrowers, the
            Several Lenders from time to time parties thereto,
            and Peloton Partners LLP, as Administrative Agent,
            dated as of June 26, 2006(1)

     31.1   Certification of Keith Brackpool, Chairman and
            Chief Executive Officer of Cadiz Inc. pursuant to
            Section 302 of the Sarbanes-Oxley Act of 2002

     31.2   Certification of O'Donnell Iselin II, Chief
            Financial Officer and Secretary of Cadiz Inc.
            pursuant to Section 302 of the Sarbanes-Oxley Act
            of 2002

                            page 28

     32.1   Certification of Keith Brackpool, Chairman and
            Chief Executive Officer of Cadiz Inc. pursuant to 18
            U.S.C. Section 1350, as adopted pursuant to Section
            906 of the Sarbanes-Oxley Act of 2002

     32.2   Certification of O'Donnell Iselin II, Chief
            Financial Officer and Secretary of Cadiz Inc.
            pursuant to 18 U.S.C. Section 1350, as adopted
            pursuant to Section 906 of the Sarbanes-Oxley Act
            of 2002

----------------------------
(1) Previously filed as an Exhibit to our Registration Statement
    on Form S-3 (Registration No. 333-13617) filed on July 28, 2006.

                            page 29


SIGNATURE


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


CADIZ INC.



By: /s/ Keith Brackpool                   August 9, 2006
   -------------------------              -----------------
    Keith Brackpool                       Date
    Chairman of the Board and
    Chief Executive Officer
    (Principal Executive Officer)


By: /s/ O'Donnell Iselin II               August 9, 2006
   -------------------------              -----------------
    O'Donnell Iselin II,                  Date
    Chief Financial Officer and
    Secretary
    (Principal Financial Officer)

                            page 30