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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2021

Accounting Policies [Abstract]

Liquidity Accounting Policy Disclosure [Policy Text Block]

Liquidity

The Condensed Consolidated 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 $25.3 million for the nine months ended September 30, 2021, compared to $29.8 million for the nine months ended September 30, 2020. The Company had working capital of $16.2 million at September 30, 2021 and used cash in its operations of $9.6 million for the nine months ended September 30, 2021. The higher loss in 2020 was primarily due to a loss on early extinguishment of debt in the amount of $12.4 million, which was a non-cash charge, reflecting the excess of the fair value of new preferred stock issued over the historical book value of the related convertible debt retired pursuant to certain conversion and exchange agreements entered into in March 2020, offset by higher compensation costs related to stock-based non-cash bonus awards to employees and an increase in interest expense in 2021.

Cash requirements during the nine months ended September 30, 2021 primarily reflect certain administrative costs related to the Company’s water project development efforts, the further development of its land and agricultural assets, including its 50% equity investment in SoCal Hemp JV LLC and fees associated with the Company’s refinancing and issuance of preferred stock. The Company’s present activities are focused on development of its assets in ways that meet growing long-term demand for access to sustainable water supplies and agricultural products.

In July 2020, the Company entered into an At Market Issuance Sales Agreement under which the Company could issue and sell shares of its common stock having an aggregate offering price of up to $30 million from time to time in an “at-the-market” offering (the “July 2020 ATM Offering”). As of July 2, 2021, the Company had sold the $30 million in common stock authorized in the July 2020 ATM Offering through the sale of 2,748,339 shares resulting in aggregate net proceeds of approximately $29.2 million.

On June 7, 2021, the Company completed the sale and issuance of 1,219,512 shares of the Company’s common stock to certain institutional investors under a placement agent agreement with B. Riley Securities, Inc. (“BRS”). The shares of common stock were sold at a purchase price of $12.30 per share, for an aggregate gross purchase price of approximately $15 million. The Company used the net proceeds from this offering together with cash on hand to fund a $19 million payment made on June 30, 2021 to complete the acquisition of a 124-mile extension of its Northern Pipeline.

On June 29, 2021, the Company entered into an Underwriting Agreement with BRS as representative of the several underwriters named therein, to issue and sell an aggregate of 2,000,000 depositary shares (the “Depositary Shares”), as well as up to 300,000 Depositary Shares that may be sold pursuant to the exercise of an option to purchase additional Depositary Shares, each representing 1/1000^th of a share of Series A Preferred Stock (“Depositary Share Offering”). The liquidation preference of each share of Series A Preferred Stock is $25,000.00 ($25.00 per Depositary Share). The Depositary Share Offering was completed on July 2, 2021 for net proceeds of approximately $54 million.

In May 2017, the Company entered into a $60 million credit agreement with funds affiliated with Apollo Global Management, LLC (“Apollo”) that replaced and refinanced its then existing $45 million senior secured mortgage debt and provided $15 million of new senior debt to fund immediate construction related expenditures (“Prior Senior Secured Debt”).  The Company entered into two further agreements with Apollo which provided it with the right, at its option, to extend the maturity of the Prior Senior Secured Debt from its then current maturity of May 25, 2021 to May 25, 2022, and to November 25, 2022, respectively. On May 18, 2021, the Company exercised its first extension option to extend the maturity date to May 25, 2022.

On July 2, 2021, the Company entered into a new $50 million senior secured credit agreement with lenders party thereto from time to time (“Lenders”) and BRS, as administrative agent for the Lenders (“Current Senior Secured Debt”) (see Note 2 – “Long-Term Debt”). The proceeds of the Current Senior Secured Debt, together with the proceeds from the Depositary Share Offering, were used (a) to repay all our outstanding obligations under the Prior Senior Secured Debt in the amount of approximately $77.5 million, (b) to deposit approximately $10.2 million into a segregated account, representing an amount sufficient to pre-fund eight quarterly dividend payments on the Series A Preferred Stock underlying the Depositary Shares issued in the Depositary Share Offering, and (c) to pay transaction related expenses. The remaining proceeds will be used for working capital needs and for general corporate purposes. At September 30, 2021, the Company was in compliance with its debt covenants.

The Company may meet its debt and working capital requirements through a variety of means, including extension, refinancing, equity placements, the sale or other disposition of assets, or reductions in operating costs. The covenants in the Current Senior Secured Debt do not prohibit the Company’s use of additional equity financing and allow the Company to retain 100% of the proceeds of any common equity financing.  The Company does not expect the loan covenants to materially limit its ability to finance its water and agricultural development activities.

Management assesses whether the Company has sufficient liquidity to fund its costs for the next twelve months from each financial statement issuance date. Management evaluates the Company’s liquidity to determine if there is a substantial doubt about the Company’s ability to continue as a going concern. In the preparation of this liquidity assessment, management applies judgement to estimate the projected cash flows of the Company including the following: (i) projected cash outflows (ii) projected cash inflows and (iii) categorization of expenditures as discretionary versus non-discretionary. The cash flow projections are based on known or planned cash requirements for operating costs as well as planned costs for project development.  

Limitations on the Company’s liquidity and ability to raise capital may adversely affect it. Sufficient liquidity is critical to meet the Company’s 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.

Cash Flow Supplemental [Policy Text Block]

Supplemental Cash Flow Information

During the nine months ended September 30, 2021, approximately $1.7 million in interest payments on the Company’s senior secured debt was paid in cash. There are no scheduled principal payments due on the Current Senior Secured Debt prior to its maturity.

On May 18, 2021, the Company exercised its first extension option to extend the maturity date of the Prior Senior Secured Debt from May 25, 2021 to May 25, 2022 (“First Option Election Notice”). At the time of the First Option Election Notice, the Company paid an extension option fee equal to 1% of the aggregate amount of the accreted loan value as of the date of such notice (“Extension Option Fee”). The Extension Option Fee was payable in cash or in shares of the Company’s common stock, at the option of the Company in its sole discretion. The Company opted to pay the Extension Option Fee in common stock, and as a result issued 64,356 shares of common stock to its lenders.

In conjunction with the closing of an assignment and assumption agreement (see Note 2 – “Long-Term Debt”), on July 2, 2021, the Company issued 299,210 shares of the Company’s common stock to Apollo related to the repayment of the Prior Senior Secured Debt.

At September 30, 2021, accruals for cash dividends payable was $1.45 million (see Note 9 – “Common and Preferred Stock”).  The cash dividends were paid on October 15, 2021.

At September 30, 2021, accruals for purchases of PP&E received was approximately $1 million, and are expected to be paid in the fourth fiscal quarter of 2021.   

The balance of cash, cash equivalents, and restricted cash as shown in the condensed consolidated statements of cash flows is comprised of the following:

Cash, Cash Equivalents and Restricted Cash		September 30, 2021				December 31, 2020				September 30, 2020
(in thousands)
Cash and Cash Equivalents		$	18,575			$	7,290			$	7,502
Restricted Cash			10,340				134				134
Cash, Cash Equivalents and Restricted Cash in the Condensed Consolidated Statement of Cash Flows		$	28,915			$	7,424			$	7,636

The restricted cash primarily represents a deposit to pre-fund eight quarterly dividend payments on the Series A Preferred Stock underlying the Depositary Shares issued in the Depositary Share Offering

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Accounting Guidance Not Yet Adopted

In June 2016, Financial Accounting Standards Board (“FASB”) issued an accounting standards update which introduces new guidance for the accounting for credit losses on certain financial instruments. This update is effective for fiscal years beginning after December 15, 2023, and for interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing this new guidance and expects this new standard will not have a material impact on the consolidated financial statements.

Accounting Guidance Adopted

In December 2019, FASB issued an accounting standards update which reduces complexity in accounting standards by removing certain exceptions to the general principles in Topic 740. This update is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years, with early adoption permitted. The adoption of this new standard on January 1, 2021 had no impact on the Company’s condensed consolidated financial statements.

In August 2020, the FASB issued an accounting standards update which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP (“ASU 2020-6”). Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. ASU 2020-06 also removes certain settlement conditions required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to be eligible for it. The ASU also simplifies the diluted earnings per share (EPS) calculation in certain areas.  ASU 2020-06 is effective for public business entities, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for annual reporting periods beginning after December 15, 2020.  The Company early adopted the provisions of ASU 2020-06 effective January 1, 2021, on the modified retrospective transition method, to take advantage of the removal of certain conditions required for equity contracts to qualify for the derivative scope exception.  Adopting ASU 2020-06 did not result in a cumulative impact of adoption during the nine months ended September 30, 2021.

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Represents the full disclosure of the accounting policy for the supplemental cash flow.

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Disclosure of accounting policy for reporting when there is a substantial doubt about an entity's ability to continue as a going concern for a reasonable period of time (generally a year from the balance sheet date). Disclose: (a) pertinent conditions and events giving rise to the assessment of substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time, (b) the possible effects of such conditions and events, (c) management's evaluation of the significance of those conditions and events and any mitigating factors, (d) possible discontinuance of operations, (e) management's plans (including relevant prospective financial information), and (f) information about the recoverability or classification of recorded asset amounts or the amounts or classification of liabilities. If management's plans alleviate the substantial doubt about the entity's ability to continue as a going concern, disclosure of the principal conditions and events that initially raised the substantial doubt about the entity's ability to continue as a going concern would be expected to be considered. Disclose whether operations for the current or prior years generated sufficient cash to cover current obligations, whether waivers were obtained from creditors relating to the company's default under the provisions of debt agreements and possible effects of such conditions and events, such as: whether there is a possible need to obtain additional financing (debt or equity) or to liquidate certain holdings to offset future cash flow deficiencies. Disclose appropriate parent company information when parent is dependent upon remittances from subsidiaries to satisfy its obligations.

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Disclosure of accounting policy pertaining to new accounting pronouncements that may impact the entity's financial reporting. Includes, but is not limited to, quantification of the expected or actual impact.

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