Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The Consolidated Financial Statements of the Company have been prepared on a going concern basis, which contemplates the continuity of operations, the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company incurred losses of

$26.3

million and

$33.9

million for the years ended

December 31, 2018

and

2017,

respectively. The Company had working capital of

$8.9

million at

December 31, 2018,

and used cash in operations of

$12.2

million for the year ended

December 31, 2018.

Cash requirements during the year ended

December 31, 2018

primarily reflect certain administrative costs related to the Company’s water project development efforts. Currently, the Company’s sole focus is the development of its land and water assets.

November 2018,

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

$25

million from time to time in an “at-the-market” offering (the

“November 2018

ATM Offering”). As of

December 31, 2018,

the Company issued

97,106

shares of common stock in the

November 2018

ATM Offering for gross proceeds of

$1.05

million and aggregate net proceeds of approximately

$0.9

million. The Company has and

may

continue to issue equity securities pursuant to the

November 2018

ATM Offering (see Note

13,

“Subsequent Events”).

March 2018,

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

$15

million from time to time in an “at the market” offering (the

“March 2018

ATM Offering”). The Company completed the offering during

May 2018,

having issued

1,159,718

shares of common stock in the

March 2018

ATM Offering for gross proceeds of

$15

million and aggregate net proceeds of approximately

$14.6

million.

May 2017,

the Company entered into a new

$60

million credit agreement (“Credit Agreement”) with funds affiliated with Apollo Global Management, LLC (“Apollo”) that replaced and refinanced its then existing

$45

million senior secured mortgage debt (“Prior Senior Secured Debt”) and provided

$15

million of new senior debt to fund immediate construction related expenditures (“Senior Secured Debt”). The Company’s Senior Secured Debt and its convertible 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

financial maintenance covenants and

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.

The Company has principal and interest payments aggregating approximately

$79.6

million coming due in

March 2020

related to its

7.00%

Convertible Senior Notes (“Convertible Senior Notes”) to the extent the noteholders, who have the right to convert at any time into the Company’s common stock at a conversion rate of

$6.75

per share, do

not

convert prior to

March 2020

or the Company does

not

exercise the option agreements it currently has 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

as further discussed in Note

13,

“Subsequent Events”. Additionally, the Company’s Senior Secured Debt of approximately

$66.1

million as of

December 31, 2018,

could also become due as early as

December 2019,

if the Company has

not

exercised the option agreements or the Convertible Senior Notes have

not

been converted by that time and the Company’s stock price is less than

120%

of the conversion rate and according to additional terms of the debt agreement. Specifically, the Springing Maturity Date is

not

applicable if less than

$10

million of original, outstanding principal related to the Convertible Senior Notes is outstanding at that time (see Note

“Long-Term Debt and Lease Obligation”). Further, the Company’s option to acquire an additional

124

-mile extension of its’ Northern Pipeline will require an

$18

million payment upon completion of certain conditions precedent under the purchase agreement with EPNG. If the acquisition of the

124

-mile segment is

not

completed, then the Company’s Northern Pipeline opportunities will be limited to the

-mile segment it already owns. 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.

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

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 impact its viability as a company.

Consolidation, Policy [Policy Text Block]

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.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In preparing these financial statements, management has made estimates with regard to goodwill and other long-lived assets, stock compensation and deferred tax assets. Actual results could differ from those estimates.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company recognizes rental income through its lease with Fenner Valley Farms LLC.

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

Stock-Based Compensation

General and administrative expenses include

$0.5

million and

$2.3

million of stock-based compensation expenses in the years ended

December 31, 2018

and

2017,

respectively.

The Company applies the Black-Scholes valuation model in determining the fair value of options granted to employees and consultants. For employees, the fair value is then charged to expense on the straight-line basis over the requisite service period. For consultants, the fair value is remeasured at each reporting period and recorded as a liability until the award is settled.

As of

December 31, 2018,

all options outstanding are fully vested; therefore, there is

potential impact of forfeitures. The Company is in a tax loss carryforward position and is

not

expected to realize a benefit from any additional compensation expense recognized under Topic

718.

See Note

“Income Taxes".

Earnings Per Share, Policy [Policy Text Block]

Net Loss Per Common Share

Basic net loss per share is computed by dividing the net loss by the weighted-average common shares outstanding. Options, deferred stock units, warrants, and the

zero

coupon term loan convertible into or exercisable for certain shares of the Company’s common stock were

not

considered in the computation of net loss per share because their inclusion would have been antidilutive. Had these instruments been included, the fully diluted weighted average shares outstanding would have increased by approximately

11,398,000

shares and

10,894,000

shares for the years ended

December 31, 2018

and

2017,

respectively.

Property, Plant and Equipment, Policy [Policy Text Block]

Property, Plant, Equipment and Water Programs

Property, plant, equipment and water programs are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets, generally

ten

forty-five

years for land improvements and buildings, and

five

fifteen

years for machinery and equipment. Leasehold improvements are amortized over the shorter of the term of the relevant lease agreement or the estimated useful life of the asset.

Water rights, storage and supply programs are stated at cost. Certain costs directly attributable to the development of such programs have been capitalized by the Company. These costs, which are expected to be recovered through future revenues, consist of direct labor, drilling costs, consulting fees for various engineering, hydrological, environmental and additional feasibility studies, and other professional and legal fees. While interest on borrowed funds is currently expensed, interest costs related to the construction of project facilities will be capitalized at the time construction of these facilities commences.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill and Other Assets

As a result of a merger in

May 1988

between

two

companies which eventually became known as Cadiz Inc., goodwill in the amount of

$7,006,000

was recorded. Approximately

$3,193,000

of this amount was amortized prior to the adoption of Accounting Standards Codification

350,

“Intangibles – Goodwill and Other” (“ASC

350”

) on

January 1, 2002.

Since the adoption of ASC

350,

there have been

goodwill impairments recorded. The Cadiz reporting unit to which

$3.8

million of goodwill is allocated had a negative carrying amount on

December 31, 2018

and

2017.

Deferred loan costs represent costs incurred to obtain debt financing. Such costs are amortized over the life of the related loan using the interest method. At

December 31, 2018,

the deferred loan fees relate to the Senior Secured Debt, as described in Note

“Long-Term Debt and Lease Obligation”.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Impairment of Goodwill and Long-Lived Assets

The Company assesses long-lived assets, excluding goodwill, for recoverability whenever events or changes in circumstances indicate that their carrying value

may

not

be recoverable through the estimated undiscounted future cash flows resulting from the use of the assets. If it is determined that the carrying value of long-lived assets

may

not

be recoverable, the potential impairment charge is measured by using the projected discounted cash-flow method.

The Company uses a

one

-step impairment test to identify potential goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any). This quantitative assessment is performed at least annually in the

fourth

quarter and compares a reporting unit’s fair value to its carrying amount to determine if there is a potential impairment. An impairment loss will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value,

not

to exceed the carrying amount of goodwill in that reporting unit.

Income Tax, Policy [Policy Text Block]

Income Taxes

Income taxes are provided for using an asset and liability approach which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial statement and tax bases of assets and liabilities at the applicable enacted tax rates. A valuation allowance is provided when it is more likely than

not

that some portion or all of the deferred tax assets will

not

be realized.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

Financial assets with carrying values approximating fair value include cash and cash equivalents and accounts receivable. Financial liabilities with carrying values approximating fair value include accounts payable and accrued liabilities due to their short-term nature. The carrying value of the Company’s secured debt approximates fair value, based on interest rates available to the Company for debt with similar terms. The fair value of the Company’s convertible debt exceeds its carrying value due to the increased value of its conversion feature, which is determined using the Black-Scholes model. See Note

“Long-Term Debt and Lease Obligation”, for discussion of fair value of debt.

Cash Flow Supplemental [Policy Text Block]

Supplemental Cash Flow Information

Under the terms of the Senior Secured Debt, the Company is required to pay

25%

of all future quarterly interest payments in cash. During the year ended

December 31, 2018,

approximately

$1.29

million in interest payments on the Senior Secured Debt was paid in cash.

other payments are due on the Senior Secured Debt or the Company’s Convertible Senior Notes prior to their maturities.

During the year ended

December 31, 2018,

approximately

$2.8

million in convertible notes were converted by certain of the Company’s lenders. As a result,

376,463

shares of common stock were issued to the lenders.

Cash payments for income taxes were

$6,000

and

$4,000

for each of the years ended

December 31, 2018

and

2017.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent Accounting Pronouncements

Accounting Guidance

Not

Yet Adopted

August 2018,

the Financial Accounting Standards Board (“FASB”) issued an accounting standards update which modifies the disclosure requirements for fair value measurements. This update is effective for fiscal years beginning after

December 15, 2019,

and for interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact this guidance will have on its consolidated financial statements.

June 2018,

the FASB issued an accounting standards update which simplifies the accounting for share-based payments granted to nonemployees for goods and services. This update is effective for fiscal years beginning after

December 15, 2018,

and for interim periods within those fiscal years. The Company is currently assessing this new guidance, and expects this new standard will

not

have a material impact on the consolidated financial statements.

July 2017,

the FASB issued an accounting standards update to provide new guidance for the classification analysis of certain equity-linked financial instruments, or embedded features, with down round features, as well as clarify existing disclosure requirements for equity-classified instruments. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature

longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The guidance is effective for fiscal years beginning after

December 15, 2019,

and interim periods within fiscal years beginning after

December 15, 2020,

with early adoption permitted. The Company is currently assessing this new guidance and cannot determine the impact of this standard at this time.

February 2016,

the Financial Accounting Standards Board (“FASB”) issued an accounting standards update related to lease accounting including enhanced disclosures. The new standard requires lessees to recognize leases on their balance sheets, and leaves lessor accounting largely unchanged. This guidance is effective for annual periods beginning after

December 15, 2018,

and interim periods within those fiscal years. The Company adopted this guidance on

January 1, 2019,

using an optional transition method with a cumulative effect adjustment to the beginning balance or retained earnings in the period of adoption without restating the

2018

and

2017

financial statement for comparable amounts.

The Company will elect to utilize the transition package of practical expedients permitted within the new standard, which among other things, allows the Company to carryforward the historical lease classification. The Company will make an accounting policy election that will keep leases with an initial term of

months or less off the Company’s Consolidated Statements of Financial Position which will result in recognizing those lease payments in the Consolidated Statements of Operations on a straight-line basis over the lease term.

The Company expects adoption of the new standard will result in the recording of additional net lease assets and lease liabilities of approximately

$151

thousand and

$100

thousand, respectively, as of

January 1, 2019.

Adoption of the standard will

not

materially impact the Company’s Consolidated Statements of Operations nor the Consolidated Statements of Cash Flows.

The Company does

not

believe the new standard will have a material impact on its liquidity and will have

impact on the Company’s debt-covenant compliance under its current agreements.

The Company is in the process of evaluating changes to its business processes, systems and controls needed to support recognition and disclosure under the new standard. Further, the Company is continuing to assess any incremental disclosures that will be required in the Company’s consolidated financial statements.

Accounting Guidance Adopted

May 2014,

the FASB issued an accounting standards update on revenue recognition including enhanced disclosures. Under the new standard, revenue is recognized when (or as) a good or service is transferred to the customer and the customer obtains control of the good or service. The Company adopted this guidance on

January 1, 2018,

and the new standard did

not

have a material impact on the Company’s condensed consolidated financial statements or financial statement disclosures.

August 2016,

the FASB issued an accounting standards update which eliminates the diversity in practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying guidance on

eight

specific cash flow issues. The Company adopted this guidance on

January 1, 2018,

and the new standard had

impact on the Company’s condensed consolidated financial statements.

November 2016,

the FASB issued an accounting standards update which requires amounts generally described as restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. The Company adopted this guidance in the

first

quarter of

2018.

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	December 31 , 2018		December 31, 2017
(in thousands)

Cash and Cash Equivalents	$	12,558	$	13,030
Restricted Cash included in Other Assets		133		133
Cash, Cash Equivalents and Restricted Cash in the Consolidated Statement of Cash Flows	$	12,691	$	13,163

The restricted cash amounts included in Other Assets primarily represent a deposit from a water project participant related to a cost-sharing agreement.

May 2017,

the FASB issued an accounting standards update which clarifies which changes to terms or conditions of a share-based payment award require an entity to apply modification accounting, in accordance with Topic

218.

This guidance is effective for annual periods beginning after

December 15, 2017,

and interim periods within those fiscal years. The Company adopted this guidance on

January 1, 2018,

and the new standard had

impact on the Company’s condensed consolidated financial statements.