Note 10 - Stock-Based Compensation Plans And Warrants

12 Months Ended

Dec. 31, 2011

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

NOTE 10 – STOCK-BASED COMPENSATION PLANS AND WARRANTS

The Company has issued options and has granted stock awards pursuant to its 2003 Management Equity Incentive Plan, 2007 Management Equity Incentive Plan, and 2009 Equity Incentive Plan.  The Company also has granted stock awards pursuant to its 2009 Equity Incentive Plan and Outside Director Compensation Plan, as described below.

2003 Management Equity Incentive Plan

In December 2003, concurrently with the completion of the Company’s then current financing arrangements with ING, the Company’s board of directors authorized the adoption of a Management Equity Incentive Plan.  As of December 31, 2011, a total of 315,000 common stock options remain outstanding under this plan.

Outside Director Compensation Plan

The Cadiz Inc. Outside Director Compensation Plan was approved by the Company's stockholders in November 2006.  Under the plan, each outside director receives $30,000 of cash compensation and receives a deferred stock award consisting of shares of the Company’s common stock with a value equal to $20,000 on June 30th of each year.  The award accrues on a quarterly basis, with $7,500 of cash compensation and $5,000 of stock earned for each fiscal quarter in which a director serves.  The deferred stock award vests automatically on the January 31st which first follows the award date.

2007 Management Equity Incentive Plan

The 2007 Management Equity Incentive Plan was approved by stockholders at the 2007 Annual Meeting.  As of December 31, 2011, a total 10,000 common stock options remain outstanding under this plan.

2009 Equity Incentive Plan

The 2009 Equity Incentive Plan was approved by stockholders at the 2009 Annual Meeting.  The plan provides for the grant and issuance of up to 850,000 shares and options to the Company’s employees and consultants.  The plan became effective when the Company filed a registration statement on Form S-8 on December 18, 2009.  All options issued under the 2009 Equity Incentive Plan have a ten year term with vesting periods ranging from issuance date to 24 months.  To date, 537,500 common stock purchase options have been issued under this plan and all remained outstanding as of December 31, 2011.

All options that have been issued under the above plans have been issued to officers, employees and consultants of the Company.  In total, options to purchase 862,500 shares were unexercised and outstanding on December 31, 2011, under the three equity incentive plans.

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

For officers and employees of the Company, the fair value of each option granted under the plans was estimated on the date of grant using the Black Scholes option pricing model based on the following weighted-average assumptions:

Risk free interest rate	3.90%
Expected life	9.4 years
Expected volatility	52%
Expected dividend yield	0.0%
Weighted average vesting period	0.9 years

The risk free interest rate is assumed to be equal to the yield of a U.S. Treasury bond of comparable maturity, as published in the Federal Reserve Statistical Release for the relevant date.  The expected life estimate is based on an analysis of the employees receiving option grants and the expected behavior of each employee.  The expected volatility is derived from an analysis of the historical volatility of the trading price per share of the Company’s common stock on the NASDAQ Global Market.  The Company does not anticipate that it will pay dividends to common stockholders in the future, and the weighted average vesting period is based on the option vesting schedule, assuming no options are forfeit prior to the initial vesting date.

The Company recognized stock option related compensation costs of $1,245,000, $2,561,000, and $0 in fiscal 2011, 2010 and 2009, respectively, relating to these options.  No stock options were exercised during fiscal 2011.

A summary of option activity under the plans as of December 31, 2011, and changes during the current fiscal year are presented below:

			Weighted-		Average		Aggregate
			Average		Remaining		Intrinsic
			Exercise		Contractual		Value
Options	Shares		Price		Term		($000’s)
Outstanding January 1, 2011		727,500	$	11.86		6.0	$	6,437
Granted		135,000		11.87		8.7		1,079
Exercised		-		-		-		-
Forfeited or expired		-		-		-		-
Outstanding at December 31, 2011		862,500	$	11.92		6.5	$	7,516
Exercisable at December 31, 2011		636,671	$	11.97		5.7	$	5,761

The weighted-average grant-date fair value of options granted during the years ended December 31, 2011 and 2010 were $7.28 and $7.65 per share, respectively.  No options were granted in 2009. The following table summarizes stock option activity for the periods noted.

				Weighted-
				Average
	Amount			Exercise Price
Outstanding at January 1, 2009		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		$	11.86
Granted		135,000		$	11.87
Expired or canceled		-			-
Exercised		-			-
Outstanding at December 31, 2011		862,500	(a)	$	11.92
Options exercisable at December 31, 2011		636,671		$	11.97
Weighted-average years of remaining contractual life of options outstanding at December 31, 2011		6.5

(a)   Exercise prices vary from $9.88 to $18.99, and expiration dates vary from May 2015 to December 2021.

Stock Awards to Directors, Officers, Consultants and Employees

The Company has granted stock awards pursuant to its 2007 Management Equity Incentive Plan, 2009 Equity Incentive Plan and Outside Director Compensation Plan.

250,000 shares were issued under the 2007 Management Equity Incentive Plan.  A 150,000 share award was issued that vested in three equal installments on January 1, 2008, January 1, 2009 and January 1, 2010.  Of the remaining 100,000 shares reserved under the 2007 Management Equity Incentive Plan, 10,000 were issued as options as described above, and 90,000 were issued as shares that vested in May 2009 consistent with the terms of the agreements pursuant to which those executives provide services to the Company.

Of the total 850,000 shares reserved under the 2009 Equity Incentive Plan, a grant of 115,000 restricted shares of common stock became effective on January 14, 2010, a grant of 140,000 restricted shares of common stock became effective on January 10, 2011, consistent with the terms of the agreements pursuant to which those executives provide services to the Company and which contemplate that such executives will participate in the Company’s long-term incentive plans.  The recipients of these restricted shares have a contractual agreement not to sell any of these shares for a period of three years following the effective date.  Of the remaining 595,000 shares reserved under the 2009 Equity Incentive Plan, 8,987 shares of common stock were issued to directors, 537,500 were issued as options as described above and 48,513 are available for future distribution.

Under the Outside Director Compensation Plan, 58,987 shares have been awarded for the plan years ended June 30, 2006, through June 30, 2011.  Of the 58,987 shares awarded, 11,304 shares were awarded for service during the plan year ended June 30, 2011, became effective on that date and vested on January 31, 2012.

The accompanying consolidated statements include approximately $1,130,000, $1,388,000 and $2,273,000 of stock based compensation expense related to stock awards in the years ended December 31, 2011, 2010 and 2009, respectively.

A summary of stock awards activity under the plans during the fiscal year ended December 31, 2011 and 2010 is presented below:

				Weighted-
				Average
				Grant-date
	Shares			Fair Value
				($000’s)
Nonvested at December 31, 2009		61,775		$	820
Granted		124,582			725
Forfeited or canceled		-			-
Vested		(176,775	)		(792	)
Nonvested at December 31, 2010		9,582		$	116
Granted		151,304			951
Forfeited or canceled		-			-
Vested		(151,466	)		(949	)
Nonvested at December 31, 2011		9,420		$	102

As of December 31, 2011, the total unrecognized compensation costs related to unvested share-based awards under the plans totaled $351,000, and is expected to be recognized over a weighted-average period of one year.

Stock Purchase Warrants Issued to Non-Employees

The Company accounts for equity securities issued to non-employees in accordance with the provisions of ASC 718 and ASC 505.

In October 2009, the Company raised $7.1 million with a private placement of 226,200 Units at $31.50 per Unit.  This includes 20,880 Units purchased by the Lenders of the Term Loan pursuant to the Lenders’ Participation Rights under the Term Loan.  Each Unit consists of three (3) shares of the Company’s common stock and one (1) stock purchase warrant.  The warrant entitles the holder to purchase one (1) share of common stock at an exercise price of $15 per share.  The warrant has a term of three (3) years, but is callable by the Company at any time following November 1, 2010 if the closing market price of the Company’s common stock exceeds $22.50 for 10 consecutive trading days.

On November 30, 2011, the Company raised $6 million with a private placement of 666,667 shares of Common Stock at a price of $9 per share.  For every three (3) shares of Common Stock issued, the Company issued (1) Common Stock purchase warrant (collectively, the “Warrants”) entitling the holder to purchase, commencing 90 days from the date of the issuance and prior to December 8, 2014, one (1) share of Common Stock at an exercise price of $13 per share.

448,422 warrants remain outstanding as of December 31, 2011.