Accounting Policies, by Policy (Policies) |
12 Months Ended | ||||||||||
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Dec. 31, 2022 | |||||||||||
| Accounting Policies [Abstract] | |||||||||||
| Basis of Presentation | Basis of Presentation – The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and U.S. Securities and Exchange Commission regulations. The consolidated financial statements comprise the financial statements of the Company, its wholly-owned subsidiaries, and subsidiaries that it controls due to ownership of a majority voting interest. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Company. All significant intercompany balances and transactions are eliminated upon consolidation.
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| Business Combinations | Business Combinations – The Company accounts for business combinations under the acquisition method of accounting. Under this method, acquired assets, including separately identifiable intangible assets, and any assumed liabilities are recorded at their acquisition date estimated fair value. Determining the fair value of assets acquired and liabilities assumed involves the use of significant estimates and assumptions. The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents the goodwill amount resulting from the acquisition.
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| Use of Estimates | Use of Estimates – The preparation of financial statements in conformity with GAAP 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 period. Significant items subject to such estimates and assumptions include the (i) impairment of long-lived assets and goodwill, (ii) valuation allowances for deferred income tax assets and (iii) estimates of accrued liabilities. Actual results could differ from those estimates.
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| Revenue Recognition | Revenue Recognition – Post-harvest and midstream services revenue is typically determined based on volumes processed at agreed-upon contractual prices and is recognized at the point in time when performance obligations under the terms of a contract with our customers are satisfied. This occurs when control of the product is transferred to our customers upon completion of our processing.
Rental revenue is recognized based on the contractual cash rental payments for the period.
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| Cash | Cash – The Company maintains its deposits of cash in financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses related to amounts in excess of FDIC limits.
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| Inventories | Inventories – Inventories consist of processed hemp product and are stated at the lower of cost or net realizable value. Cost, which includes the cost of raw materials, labor and overhead, is determined using the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable cost of completion, disposal and transportation.
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| Property and Equipment | Property and Equipment – Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of assets. Upon disposition, the cost and accumulated depreciation are removed and any gain or loss on the disposal is reflected in the statements of operations. The cost of maintenance and repairs is charged to income as incurred; significant renewals and improvements are capitalized.
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| Leases | Leases – The Company’s lease arrangements are operating leases which are capitalized on the balance sheet as right-of-use (“ROU”) assets and obligations. Right of use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. These are recognized at the lease commencement date based on the present value of payments over the lease term. If leases do not provide for an implicit rate, we use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term as the lease payments. Lease expense is recognized on a straight-line basis over the lease term.
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| Intangible Assets | Intangible Assets – Finite-lived intangible assets are amortized and are tested for impairment when an event occurs or circumstances change that indicate it is more likely than not that an impairment exists. Intangible assets consist of customer relationships and non-compete agreements acquired in the acquisition of certain assets of Halcyon.
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| Impairment of Long-Lived Assets | Impairment of Long-Lived Assets – We review long-lived assets for potential impairment when events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. In this assessment, future pre-tax cash flows (undiscounted) resulting from the use of the asset and its eventual disposal are estimated. If the undiscounted future cash flows are less than the carrying amount of the asset, an impairment loss is recognized for the difference between its carrying value and estimated fair value.
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| Noncontrolling Interests Policy Text Block | Noncontrolling Interest – Noncontrolling interests represent the portion of net assets in consolidated entities that are not owned by the Company. As of December 31, 2022 and 2021, minority investors owned approximately 6% of EHR.
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| Stock-based Compensation | Stock-based Compensation – We account for stock-based compensation using the fair value method. Compensation cost for equity incentive awards is based on the fair value of the equity instrument generally on the date of grant and is recognized over the requisite service period. Forfeitures are recognized as they occur.
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| Income Taxes | Income Taxes – Income taxes are accounted for using a balance sheet approach. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax asset (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. A valuation allowance for deferred tax assets is recorded when it is more likely than not that the benefit from the deferred tax asset will not be realized.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which a change in judgment occurs. The Company had no material uncertain tax positions as of December 31, 2022 or 2021. Income tax returns we file may be routinely examined by tax authorities. The statute of limitations is currently open for tax returns filed after 2018.
The Company is subject to the Texas margin tax; however, tax expense was zero for the years ended December 31, 2022 and 2021.
Discontinued Operations – In connection with the Transaction, management determined to fully divest of EHR’s oil and gas activities. As such, these activities are presented as discontinued operations for each of the periods presented.
The Company follows the successful efforts method of accounting for its oil and gas properties. Costs to acquire mineral interests in oil and gas properties and to drill and equip new development wells and related asset retirement costs are capitalized. In 2019, the Company’s oil and gas properties became fully impaired and the carrying amount of the properties was expensed to the market decline and the Company’s determination to exit the oil and gas business. The oil & gas properties have limited production and operations for which the Company recognizes its share as a non-operating working interest owner. Oil & gas revenue is recognized for discontinued operations based on delivered quantities in the amount of the consideration to which the Company is entitled.
The Company records a liability for the plugging, abandonment and remediation of its properties at the end of their productive lives. The Company computes the liability for asset retirement obligations by calculating the present value of estimated future cash flows related to each property. This requires the Company to use significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive lives of wells and its risk-adjusted interest rate. Changes in any of these assumptions can result in significant revisions to the estimated asset retirement obligations.
Asset retirement obligations are recorded as a liability at their estimated present value at the asset’s inception, with an offsetting increase to producing properties in the accompanying balance sheet which is amortized to expense on a unit-of-production basis. Periodic accretion of the discount on asset retirement obligations is recorded as expense.
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| Fair Value Measurement | Fair Value Measurements – Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels related to fair value measurements are as follows:
The estimated fair values of cash, accounts receivable, accounts payable and indebtedness approximate their carrying amounts due to the relatively short maturity of these instruments.
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| Earnings (loss) per Share | Earnings (loss) per Share – Basic earnings (loss) per share amounts are calculated by dividing income available to common shareholders, after deducting preferred stock dividends, by the weighted average number of shares of common stock outstanding. Diluted earnings per share amounts are calculated by dividing net income by the weighted average number of shares of common stock and common stock equivalents outstanding. Common stock equivalents represent shares issuable upon the assumed conversion of preferred stock, outstanding convertible notes and the assumed exercise of common stock options and warrants outstanding.
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| Major Customer and Concentration of Credit Risk | Major Customer and Concentration of Credit Risk – We estimate an allowance for doubtful accounts based on an analysis of specific customers, taking into consideration the age of past due accounts and an assessment of the customer’s ability to pay. An allowance for doubtful accounts was not needed as of December 31, 2022 or 2021.
During 2022, one customer accounted for approximately 96% of our post-harvest and midstream services revenue. Amounts due from this customer represented all of our accounts receivable at December 31, 2022. During 2021, one customer accounted for approximately 91% of our post-harvest and midstream services revenue. No amounts were due from this customer at December 31, 2021.
Our rental revenue is derived from a single lessee on a commercial warehouse owned by the Company. There were no amounts due from this customer at December 31, 2022 or 2021.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements – In December 2019, the FASB issued ASU 2019-12, Income Taxes, which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. We adopted this standard in the first quarter of 2021. Adoption of this ASU did not have a significant impact on our consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). The new standard reduces the number of accounting models for convertible debt instruments and convertible preferred stock and amends the guidance for the derivatives scope exception for contracts in an entity’s own equity. The standard also amends and makes targeted improvements to the related earnings per share guidance. The ASU is effective for fiscal years beginning after December 15, 2021. The standard allows for either modified or full retrospective transition methods. The Company adopted this standard on January 1, 2022. The adoption of this ASU did not have a significant impact on our consolidated financial statements.
There are no other new accounting pronouncements that are expected to have a material impact on the consolidated financial statements. |