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Note 6 - Long-term Debt and Lease Obligation | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Debt Disclosure [Text Block] | NOTE 6 – LONG-TERM DEBT AND LEASE OBLIGATION At December 31, 2018 and 2017, the carrying amount of the Company’s outstanding debt is summarized as follows (dollars in thousands):
|  | December 31, |
|  | 201 8 |  |  | 201 7 |
Senior secured debt due May 25, 2021 |  | $ | 67,401 |  |  | $ | 62,701 |
Interest accrues at 8% per annum |  |  |  |  |  |  |  |
Convertible note instrument due March 5, 2018 |  |  | - |  |  |  | 1,371 |
Interest accrues at 7% per annum |  |  |  |  |  |  |  |
Convertible note instrument due March 5, 2020 |  |  | 73,158 |  |  |  | 69,488 |
Interest accrues at 7% per annum |  |  |  |  |  |  |  |
Lease Obligation |  |  | 14,831 |  |  |  | 13,720 |
Other loans |  |  | 104 |  |  |  | 160 |
Debt discount and debt issuance costs, net of accumulated accretion |  |  | (4,778 | ) |  |  | (8,988 | )
|  |  | 150,716 |  |  |  | 138,452 |
Less current portion |  |  | 59 |  |  |  | 1,408 |
|  | $ | 150,657 |  |  | $ | 137,044 |
The carrying value of the Company’s Senior Secured Debt approximates fair value. The fair value of the Company’s Senior Secured Debt (Level 2 ) is determined based on an estimation of discounted future cash flows of the debt at rates currently quoted or offered to the Company by its lenders for similar debt instruments of comparable maturities by its lenders. The fair value of the Company’s convertible debt exceeds its carrying value of approximately $71.0 million, which includes accreted interest, by approximately $42.2 million due to the increased value of its conversion feature. The conversion feature’s fair value increases as the Company’s common stock price increases. The fair value of the conversion feature (Level 3 ) is determined using the Black-Scholes model. Significant inputs to the model were the conversion price ( $6.75 ), the number of shares of common stock that could be acquired upon conversion as of December 31, 2018, the Company’s stock price as of December 31, 2018 of $10.30 and stock volatility of 40%, which was determined using our publicly-traded stock price over the last 1.2 years. Pursuant to the Company’s loan agreements, annual maturities of long-term debt outstanding on December 31, 2018, are as follows:
Year Ending December 31 |  | ($ in thousands) |
2019 |  | $ | 59 |
2020 |  |  | 73,189 |
2021 |  |  | 67,416 |
2022 |  |  | - |
2023+ |  |  | 14,830 |
Total |  | $ | 155,494 |
Credit Agreement On May 25, 2017 ( “Closing Date”), the Company entered into a new $60 million credit agreement with funds affiliated with Apollo that replaced and refinanced the Company’s then existing $45 million senior secured mortgage debt and provided $15 million of new senior debt to fund immediate construction related expenditures. The Senior Secured Debt will mature on the earlier of (a) March 5, 2021, or (b) the “Springing Maturity Date” that is 91 days prior to the maturity date of the 7.00% Convertible Senior Notes of Cadiz due 2020 (the “Convertible Senior Notes”), which is March 5, 2020. However, the Company has entered into option agreements with parties holding 95% of the Convertible Senior Notes that allow the Company, at its sole option, at any time prior to December 5, 2019 to extend the maturity date of the Convertible Senior Notes to September 5, 2021. ( see Note 13, “Subsequent Events”). The Springing Maturity Date is only applicable if at that time (a) there is at least $10.0 million of original, outstanding principal related to the Convertible Senior Notes, and (b) the 5 -Day VWAP, as defined in the Credit Agreement, is less than 120% of the $6.75 per share conversion rate ((a) or (b), as applicable, the “Maturity Date”). The proceeds from the Credit Agreement were used to repay the then existing senior secured mortgage debt resulting in a loss on extinguishment of $3.5 million which consisted of the write-off of unamortized debt discount, unamortized debt issuance costs and fees paid to the former lenders. In addition, the Company incurred $1.5 million in legal and finders’ fees which was recorded as additional debt discount and is being amortized through December 2019, which is the Springing Maturity Date as discussed above. Interest on the Senior Secured Debt is due quarterly on each March 31, June 30, September 30 and December 31 ( each an “Interest Date”) beginning on June 30, 2017. Interest on the Senior Secured Debt will (i) accrete to the outstanding principal amount at a rate per annum equal to 6% (the “PIK Rate”) compounded quarterly on each Interest Date and (ii) accrue on the outstanding principal amount at a rate per annum equal to 2% (the “Cash Rate”). The Company, in its discretion, may make any quarterly interest payment in cash on the applicable Interest Date at the PIK Rate, in lieu of accretion of such interest to the principal amount at the PIK Rate. The Accreted Loan Value plus the Applicable Prepayment Premium will be due and payable on the Maturity Date. “Accreted Loan Value” means, as of the date of determination, the outstanding principal amount of the applicable Loan, plus all accreted interest as of the calendar day immediately prior to such date of determination. “Applicable Prepayment Premium” means with respect to any repayment of the Senior Secured Debt (a) the Accreted Loan Value of the Senior Secured Debt being prepaid or repaid, as applicable, multiplied by (b) 3.00%. The Company may prepay the Senior Secured Debt, in whole or in part, for an amount equal to the Accreted Loan Value plus the Applicable Prepayment Premium; provided that if the Springing Maturity Date has not occurred, the Company may not prepay the Senior Secured Debt, without the prior written consent of the holders of more than 50% of the aggregate unpaid principal amount of the Senior Secured Debt, during the period commencing on the date that is 91 days prior to the maturity date of the Convertible Senior Notes and ending on the maturity date of the Convertible Senior Notes. The Company paid Apollo an upfront fee of 2.00% of the aggregate principal amount of the Senior Secured Debt funded on the Closing Date. This amount was recorded as additional debt discount and is being amortized over the remaining term of the loan. In conjunction with the closing of the Senior Secured Debt, the Company issued to Apollo a warrant to purchase an aggregate 362,500 shares of its common stock ( “2017 Warrant”). The Company recorded a debt discount at the time of the closing of the Senior Secured Debt in the amount of $2.9 million which was the fair value of the 2017 Warrant issued. The debt discount is being amortized through December 2019, which is the Springing Maturity Date as discussed above. The fair value of the 2017 Warrant derivative liability is remeasured each reporting period, and the change in fair value is recorded as an adjustment to the derivative liability with unrealized gains or losses reflected in interest expense. The warrant has a five -year term and an exercise price of $14.94 per share, subject to adjustment for corporate actions including, but not limited to, stock dividends, stock splits, reverse stock splits, corporate reorganizations and mergers. Total unrealized gains of $1.5 million for warrant liabilities accounted for as derivatives have been recorded in interest expense in the year ended December 31, 2018. Convertible Notes On April 26, 2016, the Company entered into a note purchase agreement with new and existing investors (the "Investors"), pursuant to which the Company issued approximately $10.0 million of its 7.00% Convertible Senior Notes due 2020 (“Convertible Senior Notes”) in aggregate principal and accrued interest. The proceeds from this issuance of the Convertible Senior Notes to the Investors (such Convertible Senior Notes, the "New Notes"), approximately $8.0 million before fees and expenses, were used for general working capital purposes. The Convertible Senior Notes accrue interest at 7.00% per year, with no principal or interest payments due prior to maturity on March 5, 2020. However, the Company entered into option agreements with parties holding 95% of its Convertible Senior Notes that allow the Company, at its sole option, at any time prior to December 5, 2019, to extend the maturity date of the Convertible Senior Notes to September 5, 2021 ( see Note 13, “Subsequent Events”). The Convertible Senior Notes, including original principal and accrued interest, are convertible at any time into the Company's common stock at a price of $6.75 per share, pursuant to the terms of the Indenture dated as of December 10, 2015, by and between the Company and U.S. Bank National Association (the "Indenture"), under which the New Notes were issued. As a result of this transaction, the Company recorded a debt discount in the amount of $2.0 million which was the difference between the proceeds from this transaction and the principal and accrued interest of New Notes on the day of the issuance. In addition, based on the conversion rate of $6.75 per share, the fair value of the shares receivable on conversion exceed the $8.0 million in net proceeds; therefore, a beneficial conversion feature was recorded in the amount of $1.48 million. This amount was recorded as additional debt discount with a corresponding amount recorded as additional paid-in capital. Such debt discount is accreted to the redemption value of the instrument over the remaining term of the loan. Furthermore, the Company incurred $400 thousand in placement agent fees which was recorded as additional debt discount and is being amortized over the remaining term of the loan. In connection with issuing the New Notes, the Company entered into a First Supplemental Indenture to the Indenture, dated as of April 28, 2016, by and between the Company and U.S. Bank National Association. The Company’s Senior Secured Debt and its Convertible Senior Notes contain representations, warranties and covenants that are typical for agreements of this type, including restrictions that would limit the Company’s ability to incur additional indebtedness, incur liens, pay dividends or make restricted payments, dispose of assets, make investments and merge or consolidate with another person. However, while there are affirmative covenants, there are no financial maintenance covenants and no restrictions on the Company’s ability to issue additional common stock to fund future working capital needs. The debt covenants associated with the Senior Secured Debt were negotiated by the parties with a view towards the Company’s operating and financial condition as it existed at the time the agreements were executed. At December 31, 2018, the Company was in compliance with its debt covenants. Lease Obligation In February 2016, the Company entered into a lease agreement with Fenner Valley Farms LLC (“FVF”) (the “lessee”), a subsidiary of Water Asset Management LLC, a related party, pursuant to which FVF is leasing, for a 99 -year term, 2,100 acres owned by Cadiz in San Bernardino County, California, to be used to plant, grow and harvest agricultural crops (“FVF Lease Agreement”). As consideration for the lease, FVF paid the Company a one -time payment of $12.0 million upon closing. Under the FVF Lease Agreement, the Company has a repurchase option to terminate the lease at any time during the twenty ( 20 ) year period following the effective date of the lease ("Termination Option Period") upon ( 1 ) repayment of the one -time $12 million lease payment plus a ten percent ( 10% ) compounded annual return (provided that the amount of such payment shall be not less than $14,400,000 ), ( 2 ) reimbursement of water-related infrastructure on the leased property plus 8% per annum as well as the actual costs of any farming-related infrastructure installed on the leased property and ( 3 ) reimbursement of certain pipeline-related development expenses, working in coordination with Cadiz, not to exceed $3,000,000 (such payments, the " Termination Payments "). If ( x ) Cadiz does not exercise its termination right within such 20 -year period or (y) the Agent under Cadiz's credit agreement declares an event of default under Cadiz's Senior Secured Debt and accelerates the indebtedness due and owing thereunder by Cadiz (or such indebtedness automatically accelerates under the terms of Cadiz's Senior Secured Debt), then the lessee may purchase the leased property for $1.00. The Company has recorded the one -time payment of $12 million, before legal fees, paid by FVF as a long-term lease liability. The Company's consolidated statement of operations reflects a net charge equal to a 10% finance charge compounding annually over the 20 -year Termination Option Period. The net charge to the consolidated statement of operations reflects ( 1 ) rental income associated with the use of the land by FVF over the 20 -year termination option period and ( 2 ) interest expense at a market rate reflective of a 20 -year secured loan transaction. As a result of this transaction, the Company incurred approximately $490 thousand of legal fees which was recorded as a debt discount and is being amortized over the 20 -year Termination Option Period.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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