” below.

Our initial focus was on the acquisition of land, the assembly of contiguous land holdings through property exchanges and to prove the quantity and quality of water resources through well drilling programs. We subsequently established agricultural operations on the properties in the Cadiz and Fenner Valleys and sought to develop the water resources underlying that site.

The focus of our water development activities has been the Cadiz Project. The Metropolitan Board’s decision in late 2002 delayed implementation of the Cadiz Project as we sought a settlement with Metropolitan before proceeding with another state agency. When it became clear that we would not be able to reach settlement and continue the Project with Metropolitan, we began to take steps to complete the environmental review process and implement the Project independently. To that end, in 2006 we began work with San Bernardino County to complete the CEQA environmental review for the Project. In the Fall of 2006, the County agreed to serve as the CEQA lead agency in the review of the Project’s existing and updated environmental documents.

At the same time we have pursued a claim against Metropolitan, seeking compensatory damages for what we believe is a breach of contractual and fiduciary obligations to us and interference with the economic advantage we would have obtained from the Cadiz Project. We filed a claim against Metropolitan in April 2003 and, when settlement negotiations failed to produce a resolution, filed a lawsuit in Los Angeles Superior Court in November 2005. Our claims for breach of fiduciary duty, breach of express contract, promissory estoppel, breach of implied contract and specific performance will all go forward to trial, which is currently scheduled for later this year.

In 2006, we refinanced our long term debt with a new $36.4 million zero coupon senior secured convertible term loan that matures on June 29, 2011 and received $1.1 million when certain holders of warrants issued in 2004 exercised their right to purchase 70,000 common shares at $15.00 per share. In 2007, we exercised our right to terminate the remaining warrants on March 2, 2007, subject to a 30 day notice period. In response, the remaining warrant holders exercised their right to purchase 335,440 shares of our common stock during the notice period, and we received an additional $5.0 million from the sale of these shares. Following this exercise, no warrants remain outstanding. These transactions are described in more detail in

Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation.”

 

The Chapter 11 Reorganization Plan of our Sun World International Inc. subsidiary became effective in 2005, and the Company has no further liabilities related to the business or operations of Sun World.

(b)   Financial Information about Industry Segments

The primary business of the Company is to acquire and develop land and water resources. Our agricultural operations are confined to limited farming activities at the Cadiz Valley property. As a result, the Company’s financial results are reported in a single segment. See Consolidated Financial Statements. See also Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

(c)   Narrative Description of Business

Our business strategy is the development of our land holdings for their highest and best uses. At present, our development activities are focused on water resource and real estate development at our San Bernardino County properties.

W ater Resource Development

 

Our portfolio of water resources, located in proximity to the Colorado River and the Colorado River Aqueduct, the principal source of imported water for Southern California, provides us with the opportunity to participate in a variety of water storage and supply programs, exchanges and conservation programs with public agencies and other partners.

The Cadiz Valley Aquifer Storage Project

The Company owns approximately 35,000 acres of land and related high-quality groundwater resources in the Cadiz and Fenner valleys of eastern San Bernardino County. The aquifer system underlying this property is naturally recharged by precipitation (both rain and snow) within a watershed of approximately 1,300 square miles. See