Note 12 - Leases

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

NOTE 12 – LEASES

The Company has operating leases for corporate offices, vehicles and office equipment. The Company’s leases have remaining lease terms of 3 months to 11 months, some of which include options to extend or terminate the lease. However, the Company is not reasonably certain to exercise options to renew or terminate, and therefore renewal and termination options are not considered in the lease term or the right-of-use asset and lease liability balances. The Company’s current lease arrangements expire in 2021. The Company does not have any finance leases.

The Company’s lease population does not include any residual value guarantees, and therefore none were considered in the calculation of the lease balances. The Company has leases with variable payments, most commonly in the form of common area maintenance charges which are based on actual costs incurred. These variable payments were excluded from the right-of-use asset and lease liability balances since they are not fixed or in-substance fixed payments.

The Company elected to utilize the transition package of practical expedients permitted within the new standard, including the practical expedient not to reassess existing land easements, which among other things, allows the Company to carryforward the historical lease classification. The Company has lease agreements with lease and non-lease components and has elected the practical expedient to account for lease and non-lease components as a single lease component for real-estate class of leases only. For leases with terms greater than 12 months, the Company records the related asset and lease liability at the present value of lease payments over the lease term. Leases with an initial term of 12 months or less with purchase options or extension options that are not reasonably certain to be exercised are not recorded on the Consolidated Balance Sheets; the Company recognizes lease expense for these leases on a straight-line basis over the term of the lease.

Lease balances. Amounts recognized in the accompanying consolidated balance sheet as of December 31, 2020 are as follows (in thousands):

Activity	Balance Sheet Location	Balance
ROU assets	Other assets	$	15
Short-term lease liability	Other liabilities	$	15
Long-term lease liability	Other long-term liabilities	$	-

Lease cost. The Company’s operating lease cost for the year ended December 31, 2020 was $47 thousand.

Lease commitments. The table below summarizes the Company’s scheduled future minimum lease payments under operating, recorded on the balance sheet as of December 31, 2020 (in thousands):

2021		15
Total lease payments		15
Less: Imputed interest		(-	)
Present value of lease payments		15
Less: current maturities of lease obligations		(15	)
Long-term lease obligations	$	-

Most of our lease agreements do not provide a readily determinable implicit rate nor is it available to us from our lessors. Instead, we estimate the Company’s incremental borrowing rate based on information available at either the implementation date of Topic 842 or at lease commencement for leases entered into thereafter in order to discount lease payments to present value. The table below presents additional information related to our leases as of December 31, 2020:

Weighted Average Remaining Lease Term
Operating leases (years)	0.4
Weighted Average Discount Rate
Operating leases		6	%

From a lessor standpoint, in February 2016, the Company entered into a lease agreement with Fenner Valley Farms LLC (“FVF”) (the “lessee”), 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. The Company expect to receive rental income of $420 thousand annually over the next five years related to the FVF Lease Agreement.

 

On July 31, 2019, the JV entered into a lease agreement (the “Lease Agreement”) with the Company whereby the JV will cultivate industrial hemp on up to 9,600 acres at the Company’s agricultural property in eastern San Bernardino County, California (“Cadiz Ranch”). Under the terms of the Agreement, the JV initially leased 1,280 acres at the Cadiz Ranch and holds options to lease up to 8,320 additional acres by 2022. The Lease Agreement was amended in March 2020 to reduce the initially lease acreage to 242 acres and extend the options to lease the remaining acreage until 2023. The Agreement has an initial term of five years and the JV has the option to extend the term for three successive periods of five years each. In consideration for the lease arrangement, the JV will provide the Company an annual rental payment equal to $500 per acre of leased property, subject to periodic CPI adjustment. The lease commenced on March 1, 2020 when the Company completed certain activities to bring the property to the specifications required by the JV. Assuming no further options are exercised, the Company expects to receive rental income of approximately $121 thousand annually over the next five years related to the JV Lease Agreement.