----

----

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

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

| Common Stock, par value $0.01 per share | The NASDAQ Global Market                    |
|-----------------------------------------|---------------------------------------------|
| (Title of Each Class)                   | (Name of Each Exchange on Which Registered) |

----

----

----

| Part I   |                                                                                                                         |   |
|----------|------------------------------------------------------------------------------------------------------------------------------|--------|
|     |                                                                                                                         |   |
| Item 1.  | Business                                                                                                                     | 1      |
|     |                                                                                                                         |   |
| Item 1A. | Risk Factors                                                                                                                 | 9      |
|     |                                                                                                                         |   |
| Item 1B. | Unresolved Staff Comments                                                                                                    | 12     |
|     |                                                                                                                         |   |
| Item 2.  | Properties                                                                                                                   | 12     |
|     |                                                                                                                         |   |
| Item 3.  | Legal Proceedings                                                                                                            | 13     |
|     |                                                                                                                         |   |
| Item 4.  | (Removed and Reserved)                                                                                                       | 13     |
|     |                                                                                                                         |   |
| Part II  |                                                                                                                         |   |
|     |                                                                                                                         |   |
| Item 5.  | Market for Registrant’s Common Equity,  Related Stockholder Matters and Issuer Purchase of Equity Securities | 14     |
|     |                                                                                                                         |   |
| Item 6.  | Selected Financial Data                                                                                                      | 16     |
|     |                                                                                                                         |   |
| Item 7.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                  | 17     |
|     |                                                                                                                         |   |
| Item 7A. | Quantitative and Qualitative Disclosures about Market Risk                                                                   | 30     |
|     |                                                                                                                         |   |
| Item 8.  | Financial Statements and Supplementary Data                                                                                  | 30     |
|     |                                                                                                                         |   |
| Item 9.  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                                         | 30     |
|     |                                                                                                                         |   |
| Item 9A. | Controls and Procedures                                                                                                      | 30     |
|     |                                                                                                                         |   |
| Item 9B. | Other Information                                                                                                            | 31     |
|     |                                                                                                                         |   |
| Part III |                                                                                                                         |   |
|     |                                                                                                                         |   |
| Item 10. | Directors, Executive Officers and Corporate Governance                                                                       | 32     |
|     |                                                                                                                         |   |
| Item 11. | Executive Compensation                                                                                                       | 32     |
|     |                                                                                                                         |   |
| Item 12. | Security Ownership of Certain Beneficial Owners and Management  and Related Stockholder Matters                         | 32     |
|     |                                                                                                                         |   |
| Item 13. | Certain Relationships and Related Transactions, and Director  Independence                                              | 32     |
|     |                                                                                                                         |   |
| Item 14. | Principal Accounting Fees and Services                                                                                       | 32     |
|     |                                                                                                                         |   |
| Part IV  |                                                                                                                         |   |
|     |                                                                                                                         |   |
| Item 15. | Exhibits, Financial Statement Schedules                                                                                      | 33     |

----

ITEM 1.  Business

| ·   | High yield wells designed to efficiently recover available native groundwater from beneath the Cadiz Project area; |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | A 44-mile conveyance pipeline to connect the well field to the CRA; |
|--------------------|---------------------------------------------------------------------|

| ·   | A pumping plant to pump water through the conveyance pipeline from the CRA to the Project well-field; |
|--------------------|-------------------------------------------------------------------------------------------------------|

| ·   | An energy source to provide power to the well-field, pipeline and pumping plant; and |
|--------------------|--------------------------------------------------------------------------------------|

| ·   | Spreading basins, which are shallow settling ponds that will be configured to efficiently percolate water from the ground surface down to the water table using subsurface storage capacity for the storage of water, if an imported water storage component of the project is ultimately implemented. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (1)   | A Pipeline Right-of-Way from the Colorado River Aqueduct to the Water Project Area |
|-----------------|------------------------------------------------------------------------------------|

| (2)   | Storage and Supply Agreements with One or More Public Water Agencies or Private Water Utilities |
|-----------------|------------------------------------------------------------------------------------------------------|

| (3)   | Environmental Permits |
|-----------------|-----------------------|

| (4)   | Construction and Working Capital |
|-----------------|----------------------------------|

ITEM 1A.  Risk Factors

ITEM 1B.  Unresolved Staff Comments

ITEM 2.  Properties

ITEM 3.  Legal Proceedings

ITEM 4.  (Removed and Reserved)

ITEM 5.  Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities

|          |   | High        |                                                                   |         | Low         |   |
|---------------|--------|-------------|------------------------------------------------------------------------|--------------|-------------|--------|
| Quarter Ended |   | Sales Price |                                                                   |         | Sales Price |   |
|          |   |        |                                                                   |         |        |   |
| 2009:         |   |        |                                                                   |         |        |   |
| March 31      |   | $           |            8.20 |         |        | $      | 7.51 |   |
| June 30       |   | $           |           9.98       |         |        | $      | 9.37 |   |
| September 30  |   | $           | 11.86                                                                  |         |        | $      | 11.44 |   |
| December 31   |   | $           | 12.13                                                                  |    |        | $      | 11.92 |   |
|          |   |        |                                                                   |         |        |   |   |   |
| 2010:         |   |        |                                                                   |         |        |   |   |   |
| March 31      |   | $           |          12.80            |         |        | $      | 12.50 |   |
| June 30       |   | $           |         12.45                  |         |        | $      | 11.41 |   |
| September 30  |   | $           | 10.27                                                                  |         |        | $      | 9.71 |   |
| December 31   |   | $           | 12.50                                                                  |    |        | $      | 12.14 |   |

ITEM 6.  Selected Financial Data

|                                                               |   | Year Ended December 31, |                                                              |
|--------------------------------------------------------------------|--------|-------------------------|-------------------------------------------------------------------|
|                                                               |   | 2010                    |                                                              | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
| Statement of Operations Data:                                      |   |                    |                                                              |   |   |   |   |   |   |   |   |   |   |   |
| Total revenues                                                     |   | $                       |           1,023 |   | $ |           808 |   |   | $ | 992 |   |   | $ |          426 |   |   | $ | 614 |   |
| Net loss                                                           |   |                    | (15,899                                                           | ) |   | (14,399 | ) |   |   | (15,909 | ) |   |   | (13,633 | ) |   |   | (13,825 | ) |
| Net loss applicable to common stock                                |   | $                       | (15,899                                                           | ) | $ | (14,399 | ) |   | $ | (15,909 | ) |   | $ | (13,633 | ) |   | $ | (13,825 | ) |
| Per share:                                                         |   |                    |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss (basic and diluted)                                       |   | $                       | (1.16                                                             | ) | $ | (1.13 | ) |   | $ | (1.32 | ) |   | $ | (1.15 | ) |   | $ | (1.21 | ) |
| Weighted-average common shares outstanding                         |   |                    | 13,672                                                            |   |   | 12,722 |   |   |   | 12,014 |   |   |   |       11,845 |   |   |   |       11,381 |   |
|                                                               |   |
|                                                               |   | December 31,            |                                                              |
|                                                               |   | 2010                    |                                                              | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
| Balance Sheet Data:                                                |   |                    |                                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                       |   | $                       | 48,936                                                            |   | $ | 50,319 |   |   | $ | 47,412 |   |   | $ |      49,572 |   |   | $ | 50,326 |   |
| Long-term debt                                                     |   | $                       |      44,403                              |   | $ | 36,665 |   |   | $ | 33,975 |   |   | $ | 29,652 |   |   | $ |      25,881 |   |
|  Preferred stock, common stock and additional paid-in capital |   | $                       | 282,496                                                           |   | $ | 276,884 |   |   | $ | 263,658 |   |   | $ |    254,102 |   |   | $ | 245,322 |   |
| Accumulated deficit                                                |   | $                       | (281,550                                                          | ) | $ | (265,651 | )  |   | $ | (251,252 | ) |   | $ | (235,343 | ) |   | $ | (221,710 | ) |
|  Stockholders' equity                                         |   | $                       | 946                                                               |   | $ | 11,233 |   |   | $ | 12,406 |   |   | $ | 18,759 |   |   | $ | 23,612 |   |

ITEM 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

| (1)   |  A Pipeline Right-of-Way from the Colorado River Aqueduct to the Water Project Area |
|-----------------|------------------------------------------------------------------------------------------|

| (2)   | Storage and Supply Agreements with One or More Public Water Agencies or Private Water Utilities |
|-----------------|------------------------------------------------------------------------------------------------------|

| (3)   | Environmental Permits |
|-----------------|-----------------------|

| (4)   | Construction and Working Capital |
|-----------------|----------------------------------|

|                                |   | Year EndedDecember 31, |   |
|-------------------------------------|--------|------------------------|--------|
|                                |   | 2010                   |   |   | 2009 |   |
|                                |   |                   |   |   |   |   |
| Interest on outstanding debt        |   | $                      | 2,782  |   |   | $ | 2,356 |   |
| Amortization of debt discount       |   |                   | 1,918  |   |   |   | 1,937 |   |
| Amortization of deferred loan costs |   |                   | 42     |   |   |   | 56 |   |
| Interest income                     |   |                   | (8     | ) |   |   | (35 | ) |
|                                |   |                   |   |   |   |   |   |   |
|                                |   | $                      | 4,734  |   |   | $ | 4,314 |   |

|                                |   | Year EndedDecember 31, |   |
|-------------------------------------|--------|------------------------|--------|
|                                |   | 2009                   |   |   | 2008 |   |
|                                |   |                   |   |   |   |   |
| Interest on outstanding debt        |   | $                      | 2,356  |   |   | $ | 2,033 |   |
| Amortization of debt discount       |   |                   | 1,937  |   |   |   | 2,299 |   |
| Amortization of deferred loan costs |   |                   | 56     |   |   |   | 77 |   |
| Interest income                     |   |                   | (35    | ) |   |   | (107 | ) |
|                                |   |                   |   |   |   |   |   |   |
|                                |   | $                      | 4,314  |   |   | $ | 4,302 |   |

| ·   | $20.62 million of the existing convertible debt has been changed to allow for up to $2.5 million of this amount to be converted at any time into the Company’s common stock at the price of $13.50 per share, with the remaining amount becoming non-convertible. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | If the Second Tranche is drawn, approximately $20 million of additional existing debt would be changed to allow for up to $5 million of this amount to be converted at any time into the Company’s common stock at $12.50 per share, with the remaining amount becoming non-convertible. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The final $4.55 million of the existing debt continues to be convertible at $7 per share. |
|--------------------|-------------------------------------------------------------------------------------------|

|                       |   | Payments Due by Period |                                                                  |
|----------------------------|--------|------------------------|-----------------------------------------------------------------------|
| Contractual Obligations    |   | Total                  |                                                                  |   | Less than 1 year |   |   | 1-3 years |   |   | 4-5 years |   |   | After 5 years |   |
|                       |   |                   |                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Long term debt obligations |   | $                      | 51,432                                                                |   |   | $ | 16 |   |   | $ | 51,416 |   |   | $ | - |   |   | $ | - |   |
|                       |   |                   |                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest payable           |   |                   | 8,362                                                                 |   |   |   | 1 |   |   |   | 8,361 |   |   |   | - |   |   |   | - |   |
|                       |   |                   |                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating leases           |   |                   |            614 |   |   |   | 322 |   |   |   |        292 |   |   |   | - |   |   |   | - |   |
|                       |   | $                      | 60,408                                                                |   |   | $ | 339 |   |   | $ | 60,069 |   |   | $ | - |   |   | $ | - |   |

ITEM 7A.  Quantitative and Qualitative Disclosures about Market Risk

ITEM 8.  Financial Statements and Supplementary Data

ITEM 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

ITEM 9A.  Controls and Procedures

ITEM 9B.  Other Information

ITEM 10.  Directors, Executive Officers and Corporate Governance

ITEM 11.  Executive Compensation

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

ITEM 13.  Certain Relationships and Related Transactions, and Director Independence

ITEM 14.  Principal Accounting Fees and Services

ITEM 15.  Exhibits, Financial Statement Schedules

|   | 1. | Financial Statement.  See Index to Consolidated Financial Statements. |
|--------|----|---------------------------------------------------------------------------------|

|   | 2. | Financial Statement Schedule.  See Index to Consolidated Financial Statements. |
|--------|----|------------------------------------------------------------------------------------------|

|   | 3. | Exhibits. |
|--------|----|-----------|

|   | 3.1 | Cadiz Certificate of Incorporation, as amended(1) |
|--------|-----|---------------------------------------------------|

|   | 3.2 | Amendment to Cadiz Certificate of Incorporation dated November 8, 1996(2) |
|--------|-----|---------------------------------------------------------------------------|

|   | 3.3 | Amendment to Cadiz Certificate of Incorporation dated September 1, 1998(3) |
|--------|-----|----------------------------------------------------------------------------|

|   | 3.4 | Amendment to Cadiz Certificate of Incorporation dated December 15, 2003(4) |
|--------|-----|----------------------------------------------------------------------------|

|   | 3.5 | Certificate of Elimination of Series D Preferred Stock, Series E-1 Preferred Stock and Series E-2 Preferred Stock of Cadiz Inc. dated December 15, 2003(4) |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.6 | Certificate of Elimination of Series A Junior Participating Preferred Stock of Cadiz Inc., dated March 25, 2004(4) |
|--------|-----|--------------------------------------------------------------------------------------------------------------------|

|   | 3.7 | Amended and Restated Certificate of Designations of Series F Preferred Stock of Cadiz Inc.(5) |
|--------|-----|-----------------------------------------------------------------------------------------------|

|   | 3.8 | Cadiz Bylaws, as amended (6) |
|--------|-----|------------------------------|

|   | 3.9 | Second Amended and Restated Certificate of Designations of Series F Preferred Stock of Cadiz Inc. dated June 30, 2006, as corrected by Certificate of Correction dated March 14, 2007(14) |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3.10 | Certificate of Elimination of Series F Preferred Stock of Cadiz Inc. (as filed August 3, 2007)(16) |
|--------|------|----------------------------------------------------------------------------------------------------|

|   | 4.1 | Form of Subscription Agreement used for issuance of Units in November 2008(7) |
|--------|-----|-------------------------------------------------------------------------------|

|   | 4.2 | Form of Subscription Agreement used for issuance of Units in December 2008(7) |
|--------|-----|-------------------------------------------------------------------------------|

|   | 4.3 | Form of Warrant Agreement (Non-Callable)(7) |
|--------|-----|---------------------------------------------|

|   | 4.4 | Form of Subscription Agreement used for issuance of Units in October and November 2009(8) |
|--------|-----|-------------------------------------------------------------------------------------------|

|   | 4.5 | Form of Warrant Agreement(8) |
|--------|-----|------------------------------|

|   | 10.1 | Limited Liability Company Agreement of Cadiz Real Estate LLC dated December 11, 2003(4) |
|--------|------|-----------------------------------------------------------------------------------------|

|   | 10.2 | Amendment No. 1, dated October 29, 2004, to Limited Liability Company Agreement of Cadiz Real Estate LLC(9) |
|--------|------|-------------------------------------------------------------------------------------------------------------|

|   | 10.3 | Consulting Agreement dated August 1, 2002 by and between Richard Stoddard and Cadiz Inc., and Extension of Consulting Agreement dated January 1, 2004 by and between Richard Stoddard and Cadiz Inc.(9) |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.4 | Settlement Agreement dated as of August 11, 2005 by and between Cadiz Inc., on the one hand, and Sun World International, Inc., Sun Desert, Inc., Coachella Growers and Sun World/Rayo, on the other hand(10) |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.5 | $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(11) |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.6 | Amendment No. 1 dated September 29, 2006 to the $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(12) |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.7 | Outside Director Compensation Plan(13) |
|--------|------|----------------------------------------|

|   | 10.8 | Resolutions adopted by the Cadiz Inc. Board of Directors on March 13, 2007, increasing the monthly consulting fees paid to Richard E. Stoddard(14) |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.9 | 2007 Management Equity Incentive Plan(15) |
|--------|------|-------------------------------------------|

|   | 10.10 | Amendment No. 2 dated October 1, 2007 to Reorganization Plan and Agreement for Purchase and Sale of Assets dated as of February 18, 1998 among Cadiz Inc. and Mark A. Liggett in his capacity as successor in interest to Exploration Research Associates, Incorporated., a California corporation (“ERA”) and in his individual capacity as former sole shareholder of ERA and as the successor in interest to ERA(17) |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.11 | Longitudinal Lease Agreement dated September 17, 2008 between Arizona & California Railroad Company and Cadiz Real Estate, LLC(18) |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.12 | Amended and Restated Employment Agreement between Keith Brackpool and Cadiz Inc. dated May 22, 2009(19) |
|--------|-------|---------------------------------------------------------------------------------------------------------|

|   | 10.13 | Employment Agreement between Timothy J. Shaheen and Cadiz Inc. dated May 22, 2009(19) |
|--------|-------|---------------------------------------------------------------------------------------|

|   | 10.14 | Amendment No. 2 to the Credit Agreement among Cadiz Inc. and Cadiz Real Estate LLC, as Borrowers, the Several Lenders from time to time parties thereto, and LC Capital Master Fund Ltd., as Administrative Agent, dated as of June 4, 2009(20) |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.15 | 2009 Equity Incentive Plan(21) |
|--------|-------|--------------------------------|

|   | 10.16 | Letter of Intent with Golden State Water Company dated June 1, 2009(8) |
|--------|-------|------------------------------------------------------------------------|

|   | 10.17 | Services and Exclusivity Agreement with Layne Christensen Company dated November 2, 2009, as amended by amendments dated January 4, 2010, January 27, 2010 (22) |
|--------|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.18 | Form of Option Agreement with Santa Margarita Water District(23) |
|--------|-------|------------------------------------------------------------------|

|   | 10.19 | Form of Environmental Processing and Cost Sharing Agreement with Santa Margarita Water District(23) |
|--------|-------|-----------------------------------------------------------------------------------------------------|

|   | 10.20 | Form of Environmental Processing and Cost Sharing Agreement with Three Valleys Municipal Water District(23) |
|--------|-------|-------------------------------------------------------------------------------------------------------------|

|   | 10.21 | Option Agreement with Golden State Water Company dated June 25, 2010(24) |
|--------|-------|--------------------------------------------------------------------------|

|   | 10.22 | Option Agreement with Suburban Water Systems dated October 4, 2010(25) |
|--------|-------|------------------------------------------------------------------------|

|   | 10.23 | Amendment No. 3 to the Credit Agreement and Amendment No. 2 to the Registration Rights Agreement among Cadiz Inc. and Cadiz Real Estate LLC, as Borrowers, the Several Lenders from time to time parties thereto, and LC Capital Master Fund Ltd., as Administrative Agent, dated as of October 19, 2010 (26) |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10.24 | Amendment No. 3 to the Services and Exclusivity Agreement with Layne Christensen Company dated April 8, 2010 |
|--------|-------|--------------------------------------------------------------------------------------------------------------|

|   | 10.25 | Amendment to consulting agreement with Richard E. Stoddard dated January 1, 2011 |
|--------|-------|----------------------------------------------------------------------------------|

|   | 21.1 | Subsidiaries of the Registrant |
|--------|------|--------------------------------|

|   | 23.1 | Consent of Independent Registered Public Accounting Firm |
|--------|------|----------------------------------------------------------|

|   | 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 Timothy J. Shaheen, Chief Financial Officer and Secretary of Cadiz Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 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 Timothy J. Shaheen, 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 of Form S-1 (Registration No. 33-75642) declared effective May 16, 1994 filed on February 23, 1994 |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Previously filed as an Exhibit to our Report on Form 10-Q for the quarter ended September 30, 1996 filed on November 14, 1996 |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 1998 filed on November 13, 1998 |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | (4) | Previously filed as an Exhibit to our Annual Report on Form 10-K for the year ended December 31, 2003 filed on November 2, 2004 |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------|

|   | (5) | Previously filed as an Exhibit to our Current Report on Form 8-K dated November 30, 2004 filed on December 2, 2004 |
|--------|-----|--------------------------------------------------------------------------------------------------------------------|

|   | (6) | Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 filed on August 13, 1999 |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------|

|   | (7) | Previously filed as an Exhibit to Amendment No. 1 to our Registration Statement on Form S-3 (Registration No. 333-156502) filed on January 27, 2009 |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (8) | Previously filed as an Exhibit to our Registration Statement on Form S-3 (Registration No. 333-163321) filed on November 24, 2009 |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------|

|   | (9) | Previously filed as an Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2004 filed on March 31, 2005 |
|--------|-----|--------------------------------------------------------------------------------------------------------------------------------------|

|   | (10) | Previously filed as an Exhibit to our Report on Form 10-Q for the quarter ended September 30, 2005 filed on November 14, 2005 |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------|

|   | (11) | Previously filed as an Exhibit to our Registration Statement on Form S-3 (Registration No. 333-126117) filed on July 28, 2006 |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------|

|   | (12) | Previously filed as an Exhibit to our Current Report on Form 8-K dated October 4, 2006 and filed October 4, 2006 |
|--------|------|------------------------------------------------------------------------------------------------------------------|

|   | (13) | Previously filed as Appendix B to our definitive proxy dated October 10, 2006 and filed October 10, 2006 |
|--------|------|----------------------------------------------------------------------------------------------------------|

|   | (14) | Previously filed as an Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2006 filed on March 16, 2007 |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | (15) | Previously filed as Appendix A to our definitive proxy dated April 27, 2007 and filed April 27, 2007 |
|--------|------|------------------------------------------------------------------------------------------------------|

|   | (16) | Previously filed as an Exhibit to our Report on Form 10-Q for the quarter ended June 30, 2007 filed on August 6, 2007 |
|--------|------|-----------------------------------------------------------------------------------------------------------------------|

|   | (17) | Previously filed as an Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 filed on March 14, 2008 |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | (18) | Previously filed as an Exhibit to our Report on Form 10-Q for the quarter ended September 30, 2008 on November 10,2008 |
|--------|------|------------------------------------------------------------------------------------------------------------------------|

|   | (19) | Previously filed as an Exhibit to our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, filed on August 10, 2009 |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | (20) | Previously filed as an Exhibit to the Post-Effective Amendment No. 1 to our Registration Statement on Form S-3 (Registration No. 333-136117) filed on August 3, 2009 |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (21) | Previously filed as Appendix A to our definitive proxy dated November 3, 2009, and filed on November 5, 2009 |
|--------|------|--------------------------------------------------------------------------------------------------------------|

|   | (22) | Previously filed as an Exhibit to our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 filed on March 15, 2010 |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------|

|   | (23) | Previously filed as an Exhibit to our Current Report on Form 8-K dated June 23, 2010 and filed on June 24, 2010 |
|--------|------|-----------------------------------------------------------------------------------------------------------------|

|   | (24) | Previously filed as an Exhibit to our Current Report on Form 8-K dated June 25, 2010 and filed on June 28, 2010 |
|--------|------|-----------------------------------------------------------------------------------------------------------------|

|   | (25) | Previously filed as an Exhibit to our Current Report on Form 8-K dated October 4, 2010 and filed on October 7, 2010 |
|--------|------|---------------------------------------------------------------------------------------------------------------------|

|   | (26) | Previously filed as an Exhibit to our Current Report on Form 8-K dated October 19, 2010 and filed on October 20, 2010 |
|--------|------|-----------------------------------------------------------------------------------------------------------------------|

----

|                                                                                              | Page   |
|---------------------------------------------------------------------------------------------------|--------|
|                                                                                              |   |
| Report of Independent Registered Public Accounting Firm                                           | 39     |
|                                                                                              |   |
| Consolidated Statements of Operations for the three years ended December 31, 2010                 | 41     |
|                                                                                              |   |
| Consolidated Balance Sheets as of December 31, 2010 and 2009                                      | 42     |
|                                                                                              |   |
| Consolidated Statements of Cash Flows for the three years ended December 31, 2010            | 43     |
|                                                                                              |   |
| Consolidated Statements of Stockholders’ Equity for the three years ended December 31, 2010 | 44     |
|                                                                                              |   |
| Notes to the Consolidated Financial Statements                                                    | 45     |
|                                                                                              |   |
| Financial Statement Schedule                                                                      | 69     |
|                                                                                              |   |

Report of Independent Registered Public Accounting Firm

----

Consolidated Statements of Operations

|                                                  |   | Year Ended December 31, |       |
|-------------------------------------------------------|--------|-------------------------|------------|
| (In thousands, except per share data)                 |   | 2010                    |       |   | 2009 |   |   | 2008 |   |
|                                                  |   |                    |       |   |   |   |   |   |   |
| Total revenues                                        |   | $                       | 1,023      |   |   | $ | 808 |   |   | $ | 992 |   |
|                                                  |   |                    |       |   |   |   |   |   |   |   |   |   |
| Costs and expenses:                                   |   |                    |       |   |   |   |   |   |   |   |   |   |
| Cost of sales (exclusive of depreciation shown below) |   |                    | 927        |   |   |   | 1,102 |   |   |   |        1,098 |   |
| General and administrative                            |   |                    | 10,801     |   |   |   | 9,445 |   |   |   | 11,154 |   |
| Depreciation                                          |   |                    | 344        |   |   |   | 342 |   |   |   | 341 |   |
|                                                  |   |                    |       |   |   |   |   |   |   |   |   |   |
| Total costs and expenses                              |   |                    | 12,072     |   |   |   | 10,889 |   |   |   | 12,593 |   |
|                                                  |   |                    |       |   |   |   |   |   |   |   |   |   |
| Operating loss                                        |   |                    | (11,049    | ) |   |   |  (10,081 | ) |   |   | (11,601 | ) |
|                                                  |   |                    |       |   |   |   |   |   |   |   |   |   |
| Interest expense, net                                 |   |                    | (4,734     | ) |   |   | (4,314 | ) |   |   | (4,302 | ) |
| Other expense, net                               |   |                    |  (110 | )  |   |   |  - |   |   |   |  - |   |
|                                                  |   |                    |       |   |   |   |   |   |   |   |   |   |
| Net loss before income taxes                          |   |                    | (15,893    | ) |   |   | (14,395 | ) |   |   | (15,903 | ) |
|                                                  |   |                    |       |   |   |   |   |   |   |   |   |   |
| Income tax expense                                    |   |                    | 6          |   |   |   | 4 |   |   |   | 6 |   |
|                                                  |   |                    |       |   |   |   |   |   |   |   |   |   |
| Net loss applicable to common stock                   |   | $                       | (15,899    | ) |   | $ | (14,399 | ) |   | $ | (15,909 | ) |
|                                                  |   |                    |       |   |   |   |   |   |   |   |   |   |
| Basic and diluted net loss per share                  |   | $                       | (1.16      | ) |   | $ | (1.13 | ) |   | $ | (1.32 | ) |
|                                                  |   |                    |       |   |   |   |   |   |   |   |   |   |
| Weighted-average shares outstanding                   |   |                    | 13,672     |   |   |   | 12,722 |   |   |   | 12,014 |   |

----

Consolidated Balance Sheets

|                                                                                                                                                              |   | December 31, |                                       |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------------------------------------------|
| ($ in thousands)                                                                                                                                                  |   | 2010         |                                       |   | 2009 |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |
| ASSETS                                                                                                                                                            |   |         |                                       |   |   |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |
| Current assets:                                                                                                                                                   |   |         |                                       |   |   |   |
| Cash and cash equivalents                                                                                                                                         |   | $            | 5,911                                      |   |   | $ | 8,878 |   |
| Accounts receivable                                                                                                                                               |   |         | 277                                        |   |   |   | 175 |   |
|     Prepaid expenses and other                                                                                                                     |   | 299          |                                       |   |   | 362 |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |
| Total current assets                                                                                                                                              |   | 6,487        |                                       |   |   | 9,415 |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| Property, plant, equipment and water programs, net                                                                                                                |   |         | 38,315                                     |   |   |   | 36,613 |   |
| Goodwill                                                                                                                                                          |   |         | 3,813                                      |   |   |   | 3,813 |   |
| Other assets                                                                                                                                                      |   |         | 321                                        |   |   |   |                 478 |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| Total assets                                                                                                                                                      |   | $            | 48,936                                     |   |   | $ | 50,319 |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                              |   |         |                                       |   |   |   |   |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| Current liabilities:                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| Accounts payable                                                                                                                                                  |   | $            | 358                                        |   |   | $ | 499 |   |
| Accrued liabilities                                                                                                                                               |   |         | 1,518                                      |   |   |   |                 829 |   |
| Current portion of long term debt                                                                                                                                 |   |         | 16                                         |   |   |   | 20 |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| Total current liabilities                                                                                                                                         |   |         | 1,892                                      |   |   |   | 1,348 |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| Long-term debt                                                                                                                                                    |   |         | 44,403                                     |   |   |   | 36,665 |   |
| Derivative liabilities                                                                                                                                            |   |         | 451                                        |   |   |   | - |   |
| Tax liability                                                                                                                                                     |   |         | 321                                        |   |   |   |              321 |   |
| Other long-term liabilities                                                                                                                                       |   |         | 923                                        |   |   |   | 752 |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| Total liabilities                                                                                                                                                 |   |         | 47,990                                     |   |   |   | 39,086 |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| Commitments and contingencies (Note 12)                                                                                                                           |   |         |                                       |   |   |   |   |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| Stockholders' equity:                                                                                                                                             |   |         |                                       |   |   |   |   |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| Common stock - $0.01 par value; 70,000,000 shares Authorized; shares issued and outstanding: 13,677,772 at December 31, 2010, and 13,500,997 at December 31, 2009 |   |         | 137                                        |   |   |   |  135 |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| Additional paid-in capital                                                                                                                                        |   |         | 282,359                                    |   |   |   | 276,749 |   |
| Accumulated deficit                                                                                                                                               |   |         | (281,550                                   | ) |   |   | (265,651 | ) |
| Total stockholders' equity                                                                                                                                        |   |         | 946                                        |   |   |   | 11,233 |   |
|                                                                                                                                                              |   |         |                                       |   |   |   |   |   |
| Total liabilities and stockholders' equity                                                                                                                        |   | $            |       48,936 |   |   | $ | 50,319 |   |

----

Consolidated Statements of Cash Flows

|                                                                  |   | Year Ended December 31, |    |
|-----------------------------------------------------------------------|--------|-------------------------|---------|
| ($ in thousands)                                                      |   | 2010                    |    |   | 2009 |   |   | 2008 |   |
|                                                                  |   |                    |    |   |   |   |   |   |   |
| Cash flows from operating activities:                                 |   |                    |    |   |   |   |   |   |   |
| Net loss                                                              |   | $                       | (15,899 | ) |   | $ | (14,399 | ) |   | $ | (15,909 | ) |
| Adjustments to reconcile net loss to net cash                         |   |                    |    |   |   |   |   |   |   |   |   |   |
| Used for operating activities:                                        |   |                    |    |   |   |   |   |   |   |   |   |   |
| Depreciation                                                          |   |                    | 344     |   |   |   | 342 |   |   |   | 341 |   |
| Amortization of deferred loan costs                                   |   |                    | 42      |   |   |   | 56 |   |   |   | 77 |   |
| Amortization of debt discount                                         |   |                    | 1,918   |   |   |   | 1,937 |   |   |   | 2,299 |   |
| Interest added to loan principal                                      |   |                    | 2,782   |   |   |   | 2,356 |   |   |   |      2,033 |   |
|     Unrealized loss on derivative liability  |   |                    | 110     |   |   |   |  - |   |   |   |  - |   |
| Compensation charge for stock awards and share options                |   |                    | 4,009   |   |   |   | 2,273 |   |   |   | 4,358 |   |
| Issuance of stock for services                                        |   |                    | -       |   |   |   | 500 |   |   |   | 135 |   |
| Changes in operating assets and liabilities:                          |   |                    |    |   |   |   |   |   |   |   |   |   |
| Increase in accounts receivable                                       |   |                    | (102    | ) |   |   | (109 | ) |   |   | (46 | ) |
| Decrease (increase) in prepaid expenses and other                     |   |                    | 63      |   |   |   | 145 |   |   |   |  (291 | ) |
| Decrease in other assets                                              |   |                    | 220     |   |   |   | 194 |   |   |   | - |   |
| (Decrease) increase in accounts payable                               |   |                    | (141    | ) |   |   |    252 |   |   |   | (161 | ) |
| Increase (decrease) in accrued liabilities                            |   |                    | (107    | ) |   |   | (30 | ) |   |   | 27 |   |
| Increase in tax liability                                             |   |                    | -       |   |   |   | 105 |   |   |   | 4 |   |
|                                                                  |   |                    |    |   |   |   |   |   |   |   |   |   |
| Net cash used for operating activities                                |   |                    | (6,761  | ) |   |   | (6,378 | ) |   |   | (7,133 | ) |
|                                                                  |   |                    |    |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                 |   |                    |    |   |   |   |   |   |   |   |   |   |
| Investments in short-term deposits                                    |   |                    | -       |   |   |   |       - |   |   |   | (4,500 | ) |
| Additions to property, plant and equipment                            |   |                    | (1,184  | ) |   |   | (119 | ) |   |   | (93 | ) |
| Proceeds from sale of marketable securities                           |   |                    | -       |   |   |   | 4,500 |   |   |   | - |   |
| Other assets                                                          |   |                    | -       |   |   |   | - |   |   |   | (235 | ) |
|                                                                  |   |                    |    |   |   |   |   |   |   |   |   |   |
| Net cash (used for) provided by investing activities                  |   |                    | (1,184  | ) |   |   | 4,381 |   |   |   | (4,828 | ) |
|                                                                  |   |                    |    |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                 |   |                    |    |   |   |   |   |   |   |   |   |   |
| Net proceeds from issuance of common stock                            |   |                    | -       |   |   |   | 8,835 |   |   |   | 5,063 |   |
| Proceeds from issuance of long-term debt                              |   |                    | 5,000   |   |   |   | 46 |   |   |   | - |   |
| Principal payments on long-term debt                                  |   |                    | (22     | ) |   |   | (20 | ) |   |   | (9 | ) |
|                                                                  |   |                    |    |   |   |   |   |   |   |   |   |   |
| Net cash provided by financing activities                             |   |                    | 4,978   |   |   |   | 8,861 |   |   |   | 5,054 |   |
|                                                                  |   |                    |    |   |   |   |   |   |   |   |   |   |
| Net (decrease) increase in cash and cash equivalents                  |   |                    | (2,967  | ) |   |   | 6,864 |   |   |   | (6,907 | ) |
|                                                                  |   |                    |    |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents, beginning of period                        |   |                    | 8,878   |   |   |   | 2,014 |   |   |   | 8,921 |   |
|                                                                  |   |                    |    |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents, end of period                              |   | $                       | 5,911   |   |   | $ | 8,878 |   |   | $ | 2,014 |   |

----

 Stockholders' Equity

|                                                                        |   |   |   |         |       |   | Additional |   |   |        |   |   | Total          |   |   |
|-----------------------------------------------------------------------------|--------|--------|--------|--------------|------------|--------|------------|--------|--------|-------------|--------|--------|---------------------|--------|--------|
|                                                                        |   |   |   | Common Stock |       |   | Paid-in    |   |   | Accumulated |   |   | Stockholders’ |   |   |
|                                                                        |   |   |   | Shares       |       |   | Amount     |   |   | Capital     |   |   | Deficit             |   |   | Equity |   |   |
|                                                                        |   |   |   |         |       |   |       |   |   |        |   |   |                |   |   |   |   |   |
| Balance as of December 31, 2007                                             |   |   |   |         | 11,903,611 |   |       | $      | 119    |        |   | $      | 253,983             |   |   | $ | (235,343 | ) |   | $ | 18,759 |   |   |
|                                                                        |   |   |   |         |       |   |       |   |   |        |   |   |                |   |   |   |   |   |   |   |   |   |   |
| Issuance of shares pursuant to stock awards                                 |   |   |   |         | 54,599     |   |       |   | 1      |        |   |   | -                   |   |   |   | - |   |   |   | 1 |   |   |
| Issuance of shares pursuant to Private Placement                            |   |   |   |         | 495,000    |   |       |   | 5      |        |   |   | 5,192               |   |   |   | - |   |   |   | 5,197 |   |   |
| Stock compensation expense                                                  |   |   |   |         | -          |   |       |   | -      |        |   |   | 4,358               |   |   |   | - |   |   |   | 4,358 |   |   |
| Net loss                                                                    |   |   |   |         | -          |   |       |   | -      |        |   |   | -                   |   |   |   | (15,909 | ) |   |   | (15,909 | ) |   |
| Balance as of December 31, 2008                                             |   |   |   |         | 12,453,210 |   |       | $      | 125    |        |   | $      | 263,533             |   |   | $ | (251,252 | ) |   | $ | 12,406 |   |   |
|                                                                        |   |   |   |         |       |   |       |   |   |        |   |   |                |   |   |   |   |   |   |   |   |   |   |
| Issuance of shares pursuant to stock awards                                 |   |   |   |         | 147,026    |   |       |   | 1      |        |   |   | -                   |   |   |   | - |   |   |   | 1 |   |   |
| Issuance of shares pursuant to warrant exercises and Private Placement |   |   |   |         | 841,449    |   |       |   | 8      |        |   |   | 8,827               |   |   |   | - |   |   |   | 8,835 |   |   |
| Issuance of common stock for services                                       |   |   |   |         | 59,312     |   |       |   | 1      |        |   |   | 499                 |   |   |   | - |   |   |   | 500 |   |   |
| Convertible term loan conversion option                                     |   |   |   |         | -          |   |       |   | -      |        |   |   | 1,617               |   |   |   | - |   |   |   | 1,617 |   |   |
| Stock compensation expense                                                  |   |   |   |         | -          |   |       |   | -      |        |   |   | 2,273               |   |   |   | - |   |   |   | 2,273 |   |   |
| Net loss                                                                    |   |   |   |         | -          |   |       |   | -      |        |   |   | -                   |   |   |   | (14,399 | ) |   |   | (14,399 | ) |   |
| Balance as of December 31, 2009                                             |   |   |   |         | 13,500,997 |   |       | $      | 135    |        |   | $      | 276,749             |   |   | $ | (265,651 | ) |   | $ | 11,233 |   |   |
|                                                                        |   |   |   |         |       |   |       |   |   |        |   |   |                |   |   |   |   |   |   |   |   |   |   |
| Issuance of shares pursuant to stock awards                                 |   |   |   |         | 176,775    |   |       |   | 2      |        |   |   | -                   |   |   |   | - |   |   |   | 2 |   |   |
| Convertible term loan conversion option                                     |   |   |   |         | -          |   |       |   | -      |        |   |   | 1,603               |   |   |   | - |   |   |   | 1,603 |   |   |
| Stock compensation expense                                                  |   |   |   |         | -          |   |       |   | -      |        |   |   | 4,007               |   |   |   | - |   |   |   | 4,007 |   |   |
| Net loss                                                                    |   |   |   |         | -          |   |       |   | -      |        |   |   | -                   |   |   |   | (15,899 | ) |   |   | (15,899 | ) |   |
| Balance as of December 31, 2010                                             |   |   |   |         | 13,677,772 |   |       | $      | 137    |        |   | $      | 282,359             |   |   | $ | (281,550 | ) |   | $ | 946 |   |   |

----

Notes to the Consolidated Financial Statements

| (1)   | A Pipeline Right-of-Way from the Colorado River Aqueduct to the Water Project Area |
|-----------------|------------------------------------------------------------------------------------|

| (2)   | Storage and Supply Agreements with One or More Public Water Agencies or Private Water Utilities |
|-----------------|------------------------------------------------------------------------------------------------------|

| (3)   | Environmental Permits |
|-----------------|-----------------------|

| (4)   | Construction and Working Capital Financing |
|-----------------|--------------------------------------------|

|                         |   | Amounts        |   |
|------------------------------|--------|----------------|--------|
|                         |   | (in thousands) |   |
|                         |   |           |   |
| Balance at December 31, 2008 |   | $              | 3,813  |   |
| Adjustments                  |   |           | -      |   |
|                         |   |           |   |   |
| Balance at December 31, 2009 |   |           | 3,813  |   |
| Adjustments                  |   |           | -      |   |
|                         |   |           |   |   |
| Balance at December 31, 2010 |   | $              | 3,813  |   |

|                          |   | December 31, |   |
|-------------------------------|--------|--------------|--------|
|                          |   | 2010         |   |   | 2009 |   |
|                          |   |         |   |   |   |   |
| Land and land improvements    |   | $            | 23,680 |   |   | $ | 23,050 |   |
| Water programs                |   |         | 15,496 |   |   |   | 14,274 |   |
| Buildings                     |   |         | 1,180  |   |   |   | 1,161 |   |
| Leasehold improvements        |   |         | 570    |   |   |   | 570 |   |
| Furniture and fixtures        |   |         | 442    |   |   |   | 421 |   |
| Machinery and equipment       |   |         | 950    |   |   |   | 915 |   |
| Construction in progress      |   |         | 163    |   |   |   | 44 |   |
|                          |   |         | 42,481 |   |   |   | 40,435 |   |
| Less accumulated depreciation |   |         | (4,166 | ) |   |   | (3,822 | ) |
|                          |   |         |   |   |   |   |   |   |
|                          |   | $            | 38,315 |   |   | $ | 36,613 |   |

|                     |   | December 31, |   |
|--------------------------|--------|--------------|--------|
|                     |   | 2010         |   |   | 2009 |   |
|                     |   |         |   |   |   |   |
| Deferred loan costs, net |   | $            | 251    |   |   | $ | 188 |   |
| Prepaid rent             |   |         | -      |   |   |   | 32 |   |
| Security deposits        |   |         | 70     |   |   |   | 258 |   |
|                     |   | $            | 321    |   |   | $ | 478 |   |

|                                                    |   | December 31, |   |
|---------------------------------------------------------|--------|--------------|--------|
|                                                    |   | 2010         |   |   | 2009 |   |
|                                                    |   |         |   |   |   |   |
| Payroll, bonus, and benefits                            |   | $            | 114    |   |   | $  | 54 |   |
| Well-field, environmental studies, legal and consulting |   |         | 1,215  |   |   |   | 365 |   |
| Deferred rent                                           |   |         | 59     |   |   |   | 148 |   |
| Other accrued expenses                                  |   |         | 130    |   |   |   | 262 |   |
|                                                    |   | $            | 1,518  |   |   | $ | 829 |   |

|                                                                                                                                               |   | December 31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|
|                                                                                                                                               |   | 2010         |   |   | 2009 |   |
| Zero coupon secured convertible term loan due June 29, 2013.  Interest accruing at 5% per annum until June 29, 2009 and at 6% thereafter |   | $            | 51,412 |   |   | $ | 43,632 |   |
| Other loans                                                                                                                                        |   |         | 20     |   |   |   | 40 |   |
| Debt discount                                                                                                                                      |   |         | (7,013 | ) |   |   | (6,987 | ) |
|                                                                                                                                               |   |         | 44,419 |   |   |   | 36,685 |   |
|                                                                                                                                               |   |         |   |   |   |   |   |   |
| Less current portion                                                                                                                               |   |         | 16     |   |   |   | 20 |   |
|                                                                                                                                               |   |         |   |   |   |   |   |   |
|                                                                                                                                               |   | $            | 44,403 |   |   | $ | 36,665 |   |

| Year   |   | $      | 000’s |   |
|--------|--------|--------|-------------|--------|
|   |   |   |        |   |
| 2011   |   |   | 16          |   |
| 2012   |   |   | 4           |   |
| 2013   |   |   | 51,412      |   |
|   |   | $      | 51,432      |   |

| ·   | $20.62 million of the existing convertible debt has been changed to allow for up to $2.5 million of this amount to be converted at any time into the Company’s common stock at the price of $13.50 per share, with the remaining amount becoming non-convertible. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | If the Second Tranche is drawn, approximately $20 million of additional existing debt would be changed to allow for up to $5 million of this amount to be converted at any time into the Company’s common stock at $12.50 per share, with the remaining amount becoming non-convertible. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The final $4.55 million of the existing debt continues to be convertible at $7 per share. |
|--------------------|-------------------------------------------------------------------------------------------|

| 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%           |

|                                                                                  |   | December 31, |    |
|---------------------------------------------------------------------------------------|--------|--------------|---------|
|                                                                                  |   | 2010         |    |   | 2009 |   |
|                                                                                  |   |         |    |   |   |   |
| Deferred tax assets:                                                                  |   |         |    |   |   |   |
|      Net operating losses                                    |   | $            | 40,864  |   |   | $ | 38,573 |   |
|      Fixed asset basis difference                            |   |         | 7,213   |   |   |   | 7,262 |   |
|      Contributions carryover                                 |   |         | 1       |   |   |   | 1 |   |
|      Deferred compensation                                   |   |         | 1,700   |   |   |   | 1,260 |   |
|      Accrued liabilities                                     |   |         | 534     |   |   |   | 253 |   |
|                                                                                  |   |         |    |   |   |   |   |   |
|           Total deferred tax assets |   |         | 50,312  |   |   |   | 47,350 |   |
|                                                                                  |   |         |    |   |   |   |   |   |
|      Valuation allowance for deferred tax assets             |   |         | (50,312 | ) |   |   | (47,350 | ) |
|                                                                                  |   |         |    |   |   |   |   |   |
|           Net deferred tax asset    |   | $            | -       |   |   | $ | - |   |

|                                       |   | Year Ended December 31, |   |
|--------------------------------------------|--------|-------------------------|--------|
|                                       |   | 2010                    |   |   | 2009 |   |   | 2008 |   |
|                                       |   |                    |   |   |   |   |   |   |   |
| Expected federal income tax benefit at 34% |   | $                       | (5,405 | ) |   | $ | (4,895 | ) |   | $ | (5,379 | ) |
| Loss with no tax benefit provided          |   |                    | 4,545  |   |   |   | 3,751 |   |   |   | 4,492 |   |
| State income tax                           |   |                    | 6      |   |   |   | 4 |   |   |   | 6 |   |
| Stock Options                              |   |                    | 154    |   |   |   | 462 |   |   |   | 86 |   |
| Non-deductible expenses and other          |   |                    | 706    |   |   |   | 682 |   |   |   | 801 |   |
|                                       |   |                    |   |   |   |   |   |   |   |   |   |   |
|  Income tax expense                   |   | $                       | 6      |   |   | $ | 4 |   |   | $ | 6 |   |

| Risk free interest rate         | 3.98%     |
|---------------------------------|-----------|
| Expected life                   | 9.5 years |
| Expected volatility             | 52%       |
| Expected dividend yield         | 0.0%      |
| Weighted average vesting period | 0.9 years |

|                             |   |   |    |   | Weighted- |   |   | Average     |   |   | Aggregate      |   |
|----------------------------------|--------|--------|---------|--------|-----------|--------|--------|-------------|--------|--------|----------------|--------|
|                             |   |   |    |   | Average   |   |   | Remaining   |   |   | Intrinsic      |   |
|                             |   |   |    |   | Exercise  |   |   | Contractual |   |   | Value          |   |
| Options                          |   | Shares |    |   | Price     |   |   | Term        |   |   | ($000’s) |   |
|                             |   |   |    |   |      |   |   |        |   |   |           |   |
| Outstanding January 1, 2010      |   |   | 325,000 |   |      | $      | 12.31  |        |   |   | 4.4            |   |   | $  | 3,359 |   |
| Granted                          |   |   | 402,500 |   |      |   | 11.51  |        |   |   | 9.0            |   |   |   | 3,078 |   |
| Exercised                        |   |   | -       |   |      |   | -      |        |   |   | -              |   |   |   | - |   |
| Forfeited or expired             |   |   | -       |   |      |   | -      |        |   |   | -              |   |   |   |  - |   |
| Outstanding at December 31, 2010 |   |   | 727,500 |   |      | $      | 11.86  |        |   |   | 5.7            |   |   | $ | 6,437 |   |
| Exercisable at December 31, 2010 |   |   | 495,169 |   |      | $      | 12.07  |        |   |   | 7.0            |   |   | $ | 4,385 |   |

|                                                                                             |   |   |     |   | Weighted-      |   |
|--------------------------------------------------------------------------------------------------|--------|--------|----------|--------|----------------|--------|
|                                                                                             |   |   |     |   | Average        |   |
|                                                                                             |   | Amount |     |   | Exercise Price |   |
|                                                                                             |   |   |     |   |           |   |   |   |
| Outstanding at January 1, 2008                                                                   |   |   | 375,000  |   |           | $      | 13.06 |   |
|  Granted                                                                                    |   |   | 10,000   |   |           | $      | 18.99 |   |
|  Expired or canceled                                                                        |   |   | (20,000) |   |           | $      | 20.00 |   |
|  Exercised                                                                                  |   |   | -        |   |           | $      | - |   |
|                                                                                             |   |   |     |   |           |   |   |   |
| Outstanding at December 31, 2008                                                                 |   |   | 365,000  |   |           | $      | 12.85 |   |
|  Granted                                                                                    |   |   | -        |   |           | $      | - |   |
|  Expired or canceled                                                                        |   |   | (40,000  | )      |           | $      | 17.25 |   |
|  Exercised                                                                                  |   |   | -        |   |           |   | - |   |
|                                                                                             |   |   |     |   |           |   |   |   |
| Outstanding at December 31, 2009                                                                 |   |   | 325,000  |   |           | $      | 12.31 |   |
| Granted                                                                                          |   |   | 402,500  |   |           | $      | 11.51 |   |
| Expired or canceled                                                                              |   |   | -        |   |           |   | - |   |
| Exercised                                                                                        |   |   | -        |   |           |   | - |   |
|                                                                                             |   |   |     |   |           |   |   |   |
| Outstanding at December 31, 2010                                                                 |   |   | 727,500  | (a)    |           | $      | 11.86 |   |
|                                                                                             |   |   |     |   |           |   |   |   |
| Options exercisable at December 31, 2010                                                         |   |   | 495,169  |   |           | $      | 12.07 |   |
|                                                                                             |   |   |     |   |           |   |   |   |
| Weighted-average years of remaining contractual life of options outstanding at December 31, 2010 |   |   | 5.7      |   |           |   |   |   |

| (a)   | Exercise prices vary from $11.50 to $18.99, and expiration dates vary from May 2015 to February 2020. |
|-----------------|-------------------------------------------------------------------------------------------------------|

| -   | A 150,000 share award that vests in three equal installments on January 1, 2008, January 1, 2009 and January 1, 2010.  150,000 shares have been issued pursuant to this award as of December 31, 2010. |
|---------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| -   | 800,000 of the shares were designated as Milestone-Based Deferred Stock, none of which were ultimately issued.  The shares were allocated for issuance subject to the satisfaction of certain milestone conditions relating to the trading price of our common stock during the period commencing March 13, 2007, and ending March 12, 2009.  The milestone conditions were not satisfied by March 12, 2009, resulting in the expiration of all 800,000 shares. |
|---------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Risk free interest rate         | 4.74%          |
|---------------------------------|----------------|
| Current stock price             | $19.74         |
| Expected volatility             | 38%            |
| Expected dividend yield         | 0.0%           |
| Weighted average vesting period | 2.0 years |

|                           |   |   |     |    | Weighted-      |   |
|--------------------------------|--------|--------|----------|---------|----------------|--------|
|                           |   |   |     |    | Average        |   |
|                           |   |   |     |    | Grant-date     |   |
|                           |   | Shares |     |    | Fair Value     |   |
|                           |   |   |     |    | ($000’s) |   |
|                           |   |   |     |    |           |   |
| Nonvested at December 31, 2008 |   |   | 907,026  |    |           | $      | 8,650 |   |
|  Granted                  |   |   | 101,775  |    |           |   | 712 |   |
|  Forfeited or canceled    |   |   | (800,000 | )  |           |   | (6,556 | )  |
|  Vested                   |   |   | (147,026 | )       |           |   | (1,706 | ) |
|                           |   |   |     |    |           |   |   |   |
| Nonvested at December 31, 2009 |   |   | 61,775   |    |           | $      | 1,100 |   |
|  Granted                  |   |   | 124,582  |    |           |   | 892 |   |
|  Forfeited or canceled    |   |   | -        |    |           |   | - |   |
|  Vested                   |   |   | (176,775 | )       |           |   | (1,876 | ) |
|                           |   |   |     |    |           |   |   |   |
| Nonvested at December 31, 2010 |   |   | 9,582    |    |           | $      | 116 |   |

| Year   |   | $      | 000’s |   |
|--------|--------|--------|-------------|--------|
|   |   |   |        |   |
| 2011   |   |   | 322         |   |
| 2012   |   |   | 270         |   |
| 2013   |   |   | 22          |   |
|   |   | $      | 614         |   |

| (in thousands except per share data)             |   |          |   |
|--------------------------------------------------|--------|---------------|--------|
|                                             |   | Quarter Ended |   |
|                                             |   | March 31,     |   |   | June 30, |   |   | September 30, |   |   | December 31, |   |
|                                             |   | 2010          |   |   | 2010 |   |   | 2010 |   |   | 2010 |   |
|                                             |   |          |   |   |   |   |   |   |   |   |   |   |
| Revenues                                         |   | $             | 3      |   |   | $ | 4 |   |   | $ | 274 |   |   | $ | 742 |   |
| Operating loss                                   |   |          | (4,173 | ) |   |   | (2,094 | ) |   |   | (2,086 | ) |   |   | (2,696 | ) |
| Net loss applicable to common stock              |   |          | (5,207 | ) |   |   | (3,144 | ) |   |   | (3,179 | ) |   |   | (4,369 | ) |
| Basic and diluted net loss per common share      |   | $             | (0.38  | ) |   | $ | (0.23 | ) |   | $ | (0.23 | ) |   | $ | (0.32 | ) |
|                                             |   |
|                                             |   | Quarter Ended |   |
|                                             |   | March 31,     |   |   | June 30, |   |   | September 30, |   |   | December 31, |   |
|                                             |   | 2009          |   |   | 2009 |   |   | 2009 |   |   | 2009 |   |
|                                             |   |          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues                                         |   | $             | 29     |   |   | $ | 19 |   |   | $ | 138 |   |   | $ | 622 |   |
| Operating loss                                   |   |          | (2,210 | ) |   |   | (3,245 | ) |   |   | (2,157 | ) |   |   | (2,469 | ) |
| Net loss applicable to common stock              |   |          | (3,395 | ) |   |   | (4,386 | ) |   |   | (3,134 | ) |   |   | (3,484 | ) |
| Basic and diluted net loss per common share |   | $             | (0.27  | ) |   | $ | (0.35 | ) |   | $ | (0.25 | ) |   | $ | (0.26 | ) |
|                                             |   |

|                                            |   | Investments at Fair Value as of December 31, 2010 |   |
|-------------------------------------------------|--------|---------------------------------------------------|--------|
| (in thousands)                                  |   | Level 1                                           |   |   | Level 2 |   |   | Level 3 |   |   | Total |   |
|                                            |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Assets                                          |   |                                              |   |   |   |   |   |   |   |   |   |   |
|                                            |   |                                              |   |   |   |   |   |   |   |   |   |   |
| Certificates of Deposit                         |   | $                                                 | 5,500  |   |   | $ | - |   |   | $ | - |   |   | $ | 5,500 |   |
|                                            |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total Assets      |   | $                                                 | 5,500  |   |   | $ | - |   |   | $ | - |   |   | $ | 5,500 |   |
|                                            |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                                     |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                            |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Derivative                                      |   | $                                                 | -      |   |   | $ | (451 | )  |   | $ | - |   |   | $ | (451 | ) |
|                                            |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Total Liabilities |   | $                                                 | -      |   |   | $ | (451 | )  |   | $ | - |   |   | $ | (451 | ) |
|  Net Total Assets and (Liabilities)        |   | $                                                 | 5,500  |   |   | $ | (451 | )  |   | $ | - |   |   | $ | 5,049 |   |

|                            | Investments at Fair Value as of December 31, 2009 |   |
|---------------------------------|---------------------------------------------------|--------|
| (in thousands)                  | Level 1                                           |   | Level 2 |   |   | Level 3 |   |   | Total |   |
|                            |                                              |   |   |   |   |   |   |   |   |   |
| Certificates of Deposit         |                                              | $      | 6,400 |   |   | $ | - |   |   | $ | - |   |   | $ | 6,400 |   |
|                            |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total investments at fair value |                                              | $      | 6,400 |   |   | $ | - |   |   | $ | - |   |   | $ | 6,400 |   |
|                            |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

Schedule 

| For the years ended December 31, 2010, 2009 and 2008 ($ in thousands) |   |
|-----------------------------------------------------------------------|--------|
|                                                                  |   |
|                                                                  |   | Balance at |   |   | Additions Charged to |   |   |   |   |   | Balance |   |
| Year ended                                                            |   | Beginning |   |   | Costs and |   |   | Other |   |   |   |   |   | at End |   |
| December 31, 2010                                                     |   | of Period |   |   | Expenses |   |   | Accounts |   |   | Deductions |   |   | of Period |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Tax valuation allowance                                         |   | $ | 47,350 |   |   | $ | 2,962 |   |   | $ | - |   |   | $ | - |   |   | $ | 50,312 |   |
|                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year ended                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Tax valuation allowance                                         |   | $ | 46,400 |   |   | $ | 950 |   |   | $ | - |   |   | $ | - |   |   | $ | 47,350 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Year ended                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2008                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Tax valuation allowance                                         |   | $ | 42,180 |   |   | $ | 4,220 |   |   | $ | - |   |   | $ | - |   |   | $ | 46,400 |   |
|                                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| CADIZ INC. |
|------------|
|       |
| By:        |  /s/ Keith Brackpool  |
|       | Keith Brackpool, |
|       | Chairman and Chief Executive Officer |
|       |   |
| Date:      | March 16, 2011 |

| Name and Position                                                                                                                                                                                                                                                                                                                                                   | Date           |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------|
|                                                                                                                                                                                                                                                                                                                                                                |           |
| /s/ Keith Brackpool                                                                                  | March 16, 2011 |
| Keith Brackpool, Chairman and                                                                                                                                                                                                                                                                                                                                       |           |
| Chief Executive Officer                                                                                                                                                                                                                                                                                                                                             |           |
|  (Principal Executive Officer)                                                                                                                                                                                                                                                                                                                                 |           |
|                                                                                                                                                                                                                                                                                                                                                                |           |
| /s/ Timothy J. Shaheen                                                                                                             | March 16, 2011 |
| Timothy J. Shaheen, Chief Financial Officer                                                                                                                                                                                                                                                                                                                         |           |
|  (Principal Financial and Accounting Officer)                                                                                                                                                                                                                                                                                                                  |           |
|                                                                                                                                                                                                                                                                                                                                                                |           |
| /s/ Stephen J. Duffy                                                                                      | March 16, 2011 |
| Stephen J. Duffy, Director                                                                                                                                                                                                                                                                                                                                          |           |
|                                                                                                                                                                                                                                                                                                                                                                |           |
| /s/ Geoffrey Grant                                                          | March 16, 2011 |
| Geoffrey Grant, Director                                                                                                                                                                                                                                                                                                                                            |           |
|                                                                                                                                                                                                                                                                                                                                                                |           |
| /s/ Winston H. Hickox                                                                                                         | March 16, 2011 |
| Winston H. Hickox, Director                                                                                                                                                                                                                                                                                                                                         |           |
|                                                                                                                                                                                                                                                                                                                                                                |           |
| /s/ Murray H. Hutchison                                                                                                                                | March 16, 2011 |
| Murray H. Hutchison, Director                                                                                                                                                                                                                                                                                                                                       |           |
|                                                                                                                                                                                                                                                                                                                                                                |           |
| /s/ Raymond J. Pacini                                                                                                    | March 16, 2011 |
| Raymond J. Pacini, Director                                                                                                                                                                                                                                                                                                                                         |           |
|                                                                                                                                                                                                                                                                                                                                                                |           |
| /s/ Stephen E. Courter                                                                                                             | March 16, 2011 |
| Stephen E. Courter, Director                                                                                                                                                                                                                                                                                                                                        |           |