Note 1 - Description of Business and Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

NOTE 1 – DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 The Consolidated Financial Statements have been prepared by Cadiz Inc., also referred to as “Cadiz” or “the Company”, without audit and should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2012.

Basis of Presentation

 The foregoing Consolidated Financial Statements include the accounts of the Company and contain all adjustments, consisting only of normal recurring adjustments, which management considers necessary for a fair statement of the Company’s financial position, the results of its operations and its cash flows for the periods presented and have been prepared in accordance with generally accepted accounting principles in the United State of America (“U.S. GAAP”).

 The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes.  Actual results could differ from those estimates and such differences may be material to the financial statements. The results of operations for the nine months ended September 30, 2013, are not necessarily indicative of results for the entire fiscal year ending December 31, 2013.

Liquidity

 The financial statements of the Company have been prepared using accounting principles applicable to a going concern, which assumes realization of assets and settlement of liabilities in the normal course of business.  The Company incurred losses of $16.7 million for the nine months ended September 30, 2013, and $13.8 million for the nine months ended September 30, 2012.  The Company had working capital of $4.0 million at September 30, 2013, and used cash in operations of $12.6 million for the nine months ended September 30, 2013, and $8.2 million for the nine months ended September 30, 2012.

 Cash requirements during the nine months ended September 30, 2013, primarily reflect:  (i) certain administrative costs related to the Company’s water project development efforts; (ii) litigation costs; and (iii) a $3.3 million cash payment in March 2013 related to the lease agreement with the Arizona & California Railroad Company to use a portion of the railroad’s right-of-way to construct and operate a water conveyance pipeline.  Currently, the Company’s sole focus is the development of its land and water assets.

 In June 2006, the Company raised $36.4 million through the private placement of a five-year zero coupon convertible term loan with Peloton Partners LLP (“Peloton”), as administrative agent, and an affiliate of Peloton and another investor, as lenders (the “Term Loan”).  In April 2008, the Company was advised that Peloton’s interest in the Term Loan had been assigned to an affiliate of Lampe, Conway & Company LLC (“Lampe Conway”), and Lampe Conway subsequently replaced Peloton as administrative agent of the loan.  In June 2009, the Company completed arrangements to amend the Term Loan and extend its maturity to June of 2013.  This facility was further modified as to certain of its conversion features in October 2010, in connection with a new $10 million working capital facility with its existing lenders.  In October 2012, the Company increased the capacity of its existing Term Loan facility with an additional $5 million facility.

 On March 5, 2013, the Company completed arrangements with its senior lenders to refinance its then existing $66 million Term Loan.  Under the terms of the new arrangements, the existing lenders held $30 million of non-convertible secured debt at the time of the transaction, with the balance of the Company’s outstanding debt of approximately $36 million held in a convertible bond instrument.  Further, the Company increased the capacity of the convertible bond instrument with an additional $17.5 million to be used for working capital purposes.  See Note 2, “Long-Term Debt”.  In July 2013, the majority of the $30 million of non-convertible secured debt was acquired in a private transaction by MSD Credit Opportunity Master Fund, L.P. (“MSD Credit”).  In October 2013, the Company completed arrangements with MSD Credit to increase the secured debt facility by $10 million to fund additional working capital (“New Term Loan”).  See Note 8, “Subsequent Events”.

 On July 31, 2013, the Company filed a new shelf registration statement on Form S-3 registering the issuance of up to $40 million in shares of the Company’s common stock, preferred stock, warrants, subscription rights, units and certain debt instruments in one or more public offerings.

 The $10 million in additional working capital raised in October 2013, as discussed above, together with our existing cash resources, provides the Company with sufficient funds to meet its expected working capital needs until mid-2015.  Based upon the Company’s current and anticipated usage of cash resources, and depending on its progress toward implementation of the Cadiz Valley Water Conservation, Recovery and Storage Project (“Water Project” or “Project”), it may require additional working capital during 2015.  The Company will evaluate the amount of cash needed, and the manner in which such cash will be raised, on an ongoing basis.  The Company may meet any future cash requirements through a variety of means, including equity or debt placements, or through the sale or other disposition of assets.  Equity placements would be undertaken only to the extent necessary, so as to minimize the dilutive effect of any such placements upon our existing stockholders.  Limitations on the Company’s liquidity and ability to raise capital may adversely affect it.  Sufficient liquidity is critical to meet its resource development activities.  Although the Company currently expects its sources of capital to be sufficient to meet its near-term liquidity needs, there can be no assurance that its liquidity requirements will continue to be satisfied.  If the Company cannot raise needed funds, it might be forced to make substantial reductions in its operating expenses, which could adversely affect its ability to implement its current business plan and ultimately its viability as a company.

Principles of Consolidation

 The consolidated financial statements include the accounts of Cadiz Inc. and all subsidiaries.  All significant intercompany transactions and balances have been eliminated in consolidation.

Supplemental Cash Flow Information

 No cash payments, including interest, are due on the corporate term debt or the convertible bond prior to their maturities.

 The Company recorded non-cash additions to fixed assets of $923,000 at September 30, 2013, and $1,090,000 at December 31, 2012, which were accrued at the respective period ends, for costs directly attributable to the development of the Water Project.

Recent Accounting Pronouncements

Offsetting Assets and Liabilities

 In December 2011 and December 2012, the FASB issued accounting standards updates modifying the disclosure requirements about the nature of an entity's rights of offsetting assets and liabilities in the consolidated balance sheet under master netting agreements and related arrangements associated with financial and derivative instruments. The guidance requires increased disclosure of the gross and net recognized assets and liabilities, collateral positions and narrative descriptions of setoff rights. The adoption of this pronouncement did not have a material impact on the Company’s Consolidated Financial Statements and accompanying disclosures.

Presentation of Items Reclassified Out of Accumulated Other Comprehensive Income

 In February 2013, the FASB issued an accounting standards update which requires disclosure related to items reclassified out of accumulated other comprehensive income (AOCI). The guidance requires entities to present separately, for each component of other comprehensive income (OCI), current period reclassifications and the remainder of the current period OCI. In addition, for certain current period reclassifications, an entity is required to disclose the effect of the item reclassified out of AOCI on the respective line item of net income. The adoption of this pronouncement did not have a material impact on the Company’s Consolidated Financial Statements and accompanying disclosures.

Joint and Several Liabilities

 In February 2013, the FASB issued an accounting standard update which modifies the requirements for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date. The guidance requires companies to measure these obligations as the sum of the amount the company has agreed with co-obligors to pay and any additional amount it expects to pay on behalf of one or more co-obligors. This guidance is effective for all fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company does not expect this guidance to have a material impact on its Consolidated Financial Statements and accompanying disclosures.

Presentation of Unrecognized Tax Benefits

 In July 2013, the FASB issued an accounting standards update which will require an unrecognized tax benefit be presented on the balance sheet as a reduction of a deferred tax asset for a net operating loss ("NOL") or tax credit carryforward under certain circumstances. The guidance is effective for all fiscal years, and interim periods within those years, beginning December 15, 2013.  The Company does not expect this guidance to have a material impact on the consolidated financial statements.