Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
May 31, 2016 | Jul. 06, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | PURE CYCLE CORP | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --08-31 | |
Amendment Flag | false | |
Entity Central Index Key | 276,720 | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 23,754,098 | |
Document Period End Date | May 31, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | May 31, 2016 | Aug. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 5,114,663 | $ 37,089,041 |
Short-term investments | 23,148,458 | 0 |
Trade accounts receivable | 151,194 | 399,925 |
Sky Ranch receivable | 0 | 148,415 |
Prepaid expenses | 373,912 | 228,086 |
Assets of discontinued operations | 801,565 | 1,715,472 |
Total current assets | 29,589,792 | 39,580,939 |
Long-term investments | 7,034,100 | 0 |
Investments in water and water systems, net | 27,969,211 | 27,708,595 |
Land and mineral interests | 5,271,313 | 5,091,668 |
Notes receivable - related parties, including accrued interest | 788,624 | 591,223 |
Other assets | 470,218 | 88,488 |
Total assets | 71,123,258 | 73,060,913 |
Current liabilities: | ||
Accounts payable | 99,731 | 172,634 |
Accrued liabilities | 86,542 | 499,808 |
Income taxes | 0 | 292,729 |
Deferred revenues | 55,800 | 55,800 |
Deferred oil and gas lease payment | 24,000 | 360,765 |
Liabilities of discontinued operations | 3,602 | 117,329 |
Total current liabilities | 269,675 | 1,499,065 |
Deferred revenues, less current portion | 1,069,441 | 1,111,293 |
Deferred oil and gas lease payment, less current portion | 1,000 | 19,000 |
Participating Interests in Export Water Supply | 344,378 | 346,007 |
Total liabilities | 1,684,494 | 2,975,365 |
Commitments and contingencies | 0 | |
Preferred stock: | ||
Series B - par value $.001 per share, 25 million shares authorized; 432,513 shares issued and outstanding (liquidation preference of $432,513) | 433 | 433 |
Common stock: | ||
Par value 1/3 of $.01 per share, 40 million shares authorized; 23,754,098 and 24,054,098 shares outstanding, respectively | 79,185 | 80,185 |
Collateral stock | 0 | (1,407,000) |
Additional paid-in capital | 171,145,416 | 172,384,355 |
Accumulated other comprehensive income (loss) | (23,335) | 0 |
Accumulated deficit | (101,762,935) | (100,972,425) |
Total shareholders' equity | 69,438,764 | 70,085,548 |
Total liabilities and shareholders' equity | $ 71,123,258 | $ 73,060,913 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | May 31, 2016 | Aug. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Preferred stock; Series B- par value | $ .001 | $ .001 |
Preferred stock; Series B- shares authorized | 25,000,000 | 25,000,000 |
Preferred stock; Series B- shares issued | 432,513 | 432,513 |
Preferred stock; Series B- shares outstanding | 432,513 | 432,513 |
Preferred stock; Series B- liquidation preference | $ 432,513 | $ 432,513 |
Common stock, par value | $ 0.003333 | $ 0.003333 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares outstanding | 24,054,098 | 24,054,098 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
May 31, 2016 | May 31, 2015 | May 31, 2016 | May 31, 2015 | |
Revenues: | ||||
Metered water usage | $ 35,659 | $ 73,477 | $ 119,832 | $ 893,746 |
Wastewater treatment fees | 10,537 | 12,293 | 31,540 | 37,224 |
Special facility funding recognized | 10,377 | 10,377 | 31,131 | 31,131 |
Water tap fees recognized | 3,574 | 3,574 | 10,721 | 10,721 |
Other | 40,705 | 20,639 | 109,980 | 89,490 |
Total revenues | 100,852 | 120,360 | 303,204 | 1,062,312 |
Expenses: | ||||
Water service operations | (65,184) | (73,679) | (190,976) | (303,110) |
Wastewater service operations | (7,286) | (9,265) | (20,555) | (22,075) |
Depletion and depreciation | (41,604) | (42,072) | (124,834) | (130,802) |
Other | (20,763) | (14,746) | (51,373) | (35,771) |
Total cost of revenues | (134,837) | (139,762) | (387,738) | (491,758) |
Gross loss | (33,985) | (19,402) | (84,534) | 570,554 |
General and administrative expenses | (431,737) | (384,323) | (1,294,585) | (1,167,179) |
Depreciation | (67,172) | (44,706) | (182,999) | (128,108) |
Operating loss | (532,894) | (448,431) | (1,562,118) | (724,733) |
Other income (expense): | ||||
Oil and gas lease income, net | 31,905 | 161,430 | 354,765 | 484,290 |
Oil and gas royalty income, net | 76,400 | 262,097 | 271,002 | 262,097 |
Interest income | 66,253 | 6,465 | 175,356 | 11,587 |
Other | (2,671) | 12,471 | (8,004) | 18,418 |
Net income (loss) from continuing operations | (361,007) | (5,968) | (768,999) | 51,659 |
(Loss) income from discontinued operations, net of tax | (61,263) | 36,215 | (21,511) | (97,099) |
Net income (loss) | (422,270) | 30,247 | (790,510) | (45,440) |
Unrealized holding losses | (35,517) | 0 | (23,335) | 0 |
Total comprehensive income (loss) | $ (457,787) | $ 30,247 | $ (813,845) | $ (45,440) |
Net loss from discontinuing operations per common share - basic and diluted | $ 0 | |||
Net loss from continuing operations per common share - basic and diluted | (0.02) | $ 0 | $ (0.03) | $ 0 |
Net loss per common share - basic and diluted | $ (.02) | $ 0 | $ (.03) | $ 0 |
Weighted average common shares outstanding - basic and diluted (in Shares) | 23,754,098 | 24,037,598 | 23,795,627 | 24,037,598 |
CONSOLIDATED STATEMENT OF SHARE
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY - 9 months ended May 31, 2016 - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income | Collateral Stock | Accumulated Deficit | Total |
Balance, beginning at Aug. 31, 2015 | $ 433 | $ 80,185 | $ 172,384,355 | $ 0 | $ (1,407,000) | $ (100,972,425) | $ 70,085,548 |
Balance, beginning, shares at Aug. 31, 2015 | 432,513 | 24,054,098 | |||||
Share-based compensation | 167,061 | 167,061 | |||||
Collateral stock retired | $ (1,000) | (1,406,000) | $ 1,407,000 | ||||
Collateral stock retired, shares | (300,000) | ||||||
Net loss | (790,510) | (790,510) | |||||
Unrealized holding gain on investments | (23,335) | (23,335) | |||||
Balance, ending at May. 31, 2016 | $ 433 | $ 79,185 | $ 171,145,416 | $ (23,335) | $ (101,762,935) | $ 69,438,764 | |
Balance, ending, shares at May. 31, 2016 | 432,513 | 23,754,098 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (790,510) | $ (45,440) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and depletion | 307,834 | 258,909 |
Investment in Well Enhancement Recover Systems, LLC | 8,004 | 1,565 |
Stock-based compensation expense | 167,061 | 186,296 |
Interest income and other non-cash items | (37,299) | (315) |
Interest added to receivable from related parties | (22,503) | (10,812) |
Changes in operating assets and liabilities: | ||
Trade accounts receivable | 248,731 | 1,452,996 |
Sky Ranch Receivable | 0 | (83,500) |
Prepaid expenses | (145,826) | 63,997 |
Notes receivable - related parties | (26,483) | (95,500) |
Accounts payable and accrued liabilities | (486,170) | (1,115,206) |
Income taxes | (292,729) | 0 |
Deferred revenues | (41,852) | (49,037) |
Deferred oil & gas lease payment | (354,765) | (484,290) |
Net cash provided by (used in) operating activities from continuing operations | (1,466,507) | 79,663 |
Net cash provided by (used in) operating activities from discontinued operations | 1,251,527 | (535,274) |
Net cash (used in) provided by operating activities | (214,980) | (455,611) |
Cash flows from investing activities: | ||
Purchase of short-term investments | (23,142,484) | 0 |
Purchase of long-term investments | (7,026,424) | 0 |
Investments in water, water systems, and land | (695,746) | (1,900,267) |
Purchase of property and equipment | (441,768) | (17,186) |
Net cash used in investing activities from continuing operations | (31,306,422) | (1,917,453) |
Net cash provided by (used in) investing activities from discontinued operations | (451,347) | 699,826 |
Net cash used in investing activities | (31,757,769) | (1,217,627) |
Cash flows from financing activities: | ||
Payments to contingent liability holders | (1,629) | (7,642) |
Net cash used in financing activities from continuing operations | (1,629) | (7,642) |
Net cash provided by financing activities from discontinued operations | 674,710 | |
Net cash provided by (used in) financing activities | (1,629) | 667,068 |
Net change in cash and cash equivalents | (31,974,378) | (1,006,170) |
Cash and cash equivalents - beginning of period | 37,089,041 | 1,749,558 |
Cash and cash equivalents - end of period | 5,114,663 | 743,388 |
SUPPLEMENTAL DISCLSOURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Retirement of Collateral Stock | $ 1,407,000 | |
Net reduction in Tap Participation Fee liability and HP A&M receivable collateral stock and mineral rights received as result of settlement of the Arkansas River Agreement | 1,894,203 | |
Assets acquired through WISE funding obligation | $ 1,400,000 |
1. PRESENTATION OF INTERIM INFO
1. PRESENTATION OF INTERIM INFORMATION | 9 Months Ended |
May 31, 2016 | |
Presentation Of Interim Information | |
PRESENTATION OF INTERIM INFORMATION | The May 31, 2016 consolidated balance sheet, the consolidated statements of operations and comprehensive income (loss) for the three and nine months ended May 31, 2016 and 2015, the consolidated statement of shareholders equity for the nine months ended May 31, 2016, and the consolidated statements of cash flows for the nine months ended May 31, 2016 and 2015 have been prepared by Pure Cycle Corporation (the Company) and have not been audited. The unaudited consolidated financial statements include all adjustments that are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows at May 31, 2016, and for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the fiscal year ended August 31, 2015 (the 2015 Annual Report) filed with the Securities and Exchange Commission (the SEC) on November 9, 2015. The results of operations for interim periods presented are not necessarily indicative of the operating results for the full fiscal year. The August 31, 2015 balance sheet was taken from the Companys audited financial statements and was modified to reflect the discontinued operations presentation of the Companys agricultural segment. Use of Estimates The preparation of consolidated financial statements in accordance 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid debt instruments with original maturities of three months or less. The Companys cash equivalents are comprised entirely of money market funds maintained at a reputable financial institution. At various times during the three and nine months ended May 31, 2016, the Companys main operating account exceeded federally insured limits. The Company has never suffered a loss due to such excess balance. Investments Management determines the appropriate classification of its investments in certificates of deposit and debt and equity securities at the time of purchase and reevaluates such determinations each reporting period. Certificates of deposit and debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. The Company has $7,034,100 of investments classified as held-to-maturity at May 31, 2016 which represent certificates of deposit and U.S. treasury notes with maturity dates after May 31, 2017. Debt securities for which the Company does not have the positive intent or ability to hold to maturity are classified as available-for-sale, along with any investments in equity securities. Securities classified as available-for-sale are marked-to-market at each reporting period. Changes in value on such securities are recorded as a component of Accumulated other comprehensive income (loss). Concentration of Credit Risk and Fair Value Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and investments. From time to time, the Company places its cash in money market instruments, commercial paper obligations, corporate bonds and U.S. government treasury obligations. To date, the Company has not experienced significant losses on any of these investments. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value. Cash and Cash Equivalents Trade Accounts Receivable Investments Fair Value Measurements. Accounts Payable Long-Term Financial Liabilities Water and Land Assets Water and Land Assets Long-Term Obligations and Operating Lease Participating Interests in Export Water Supply Notes Receivable Related Parties Off-Balance Sheet Instruments Long-Term Obligations and Operating Lease Participating Interests in Export Water Supply Revenue Recognition Wholesale Water and Wastewater Fees The Company recognizes wastewater treatment fees monthly based on usage. The monthly wastewater treatment fees are shown net of amounts retained by the District. The Company recognized $10,500 and $12,300 of wastewater treatment fees during the three months ended May 31, 2016 and 2015, respectively. The Company recognized $31,500 and $37,200 of wastewater treatment fees during the nine months ended May 31, 2016 and 2015, respectively. Costs of delivering water and providing wastewater services to customers are recognized as incurred. Tap and Construction Fees Long-Term Obligations and Operating Lease The Company recognized $10,400 and $31,100 of Special Facilities (defined in Part I, Item 1 of the 2015 Annual Report) funding as revenue during each of the three and nine months ended May 31, 2016 and 2015, respectively. This is the ratable portion of the Special Facilities funding proceeds received from water agreements as more fully described in Note 2 Summary of Significant Accounting Policies As of May 31, 2016, and August 31, 2015, the Company has deferred recognition of approximately $1,125,200 and $1,167,100, respectively, of water tap and construction fee revenue from the County, which will be recognized as revenue ratably over the estimated useful accounting life of the assets constructed with the construction proceeds as described above. Royalty and Other Obligations Revenues from the sale of Export Water are shown gross of royalties payable to the Land Board. Revenues from the sale of water on the Lowry Range (described in Note 4 Water and Land Assets Oil and Gas Lease Payments As further described in Note 2 Summary of Significant Accounting Policies Water and Land Assets As of May 31, 2016 and August 31, 2015, the Company has deferred recognition of $25,000 and $379,800, respectively, of income related to the O&G Lease and the Rangeview Lease. The balance as of May 31, 2016 will be recognized into income ratably through July 2017. $354,800 of the balance as of August 31, 2015 was recognized into income during the nine months ended May 31, 2016. During the three months ended February 28, 2015, two wells were drilled within the Companys mineral interest. Beginning in March 2015, both wells were placed into service and began producing oil and gas and accruing royalties to the Company. In May 2015, certain gas collection infrastructure was extended to the property to allow the collection of gas from the wells and accrual of royalties attributable to gas production. During the three months ended May 31, 2016 and 2015, the Company received $76,400 and $262,100, respectively, in royalties attributable to these two wells. During the nine months ended May 31, 2016 and 2015, the Company received $271,000 and $262,100 respectively, in royalties attributable to these two wells. Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the eventual use of the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Capitalized Costs of Water and Wastewater Systems and Depletion and Depreciation of Water Assets Costs to construct water and wastewater systems that meet the Companys capitalization criteria are capitalized as incurred, including interest, and depreciated on a straight-line basis over their estimated useful lives of up to 30 years. The Company capitalizes design and construction costs related to construction activities, and it capitalizes certain legal, engineering and permitting costs relating to the adjudication and improvement of its water assets. The Company depletes its groundwater assets that are being utilized on the basis of units produced (i.e., thousands of gallons sold) divided by the total volume of water adjudicated in the water decrees. Share-Based Compensation The Company maintains a stock option plan for the benefit of its employees and non-employee directors. The Company records share-based compensation costs as expense over the applicable vesting period of the stock award using the straight-line method. The compensation costs to be expensed are measured at the grant date based on the fair value of the award. The Company has adopted the alternative transition method for calculating the tax effects of share-based compensation, which allows for a simplified method of calculating the tax effects of employee share-based compensation. Because the Company has a full valuation allowance on its deferred tax assets, the granting and exercise of stock options has no impact on the income tax provisions. The Company recognized $58,200 and $53,700 of share-based compensation expense during the three months ended May 31, 2016 and 2015, respectively. The Company recognized $167,100 and $186,300 of share-based compensation expense during the nine months ended May 31, 2016 and 2015, respectively. Income Taxes The Company uses a more-likely-than-not threshold for the recognition and de-recognition of tax positions, including any potential interest and penalties relating to tax positions taken by the Company. The Company did not have any significant unrecognized tax benefits as of May 31, 2016. The Company files income tax returns with the Internal Revenue Service and the State of Colorado. The tax years that remain subject to examination are fiscal year 2013 through fiscal year 2015. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. The Companys policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At May 31, 2016, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the three or nine months ended May 31, 2016 or 2015. Discontinued Operations In August 2015, the Company sold its Arkansas River water and land properties. Pursuant to the terms of the purchase and sale agreement, the Company continued to manage and receive the lease income until December 31, 2015. The operating results and the assets and liabilities of the discontinued operations, which formerly comprised the agricultural segment, are presented separately in the Companys Consolidated Financial Statements. Summarized financial information for the discontinued agricultural business is shown below. Prior period balances have been reclassified to present the operations of the agricultural business as a discontinued operation. Discontinued Operations Income Statement Three Months Ended May 31, Nine Months Ended May 31, 2016 2015 2016 2015 Farm revenues $ - $ 270,582 $ 275,991 $ 818,925 Farm expenses (22,674 ) (23,131 ) (56,042 ) (70,001 ) Gross profit (22,674 ) 247,451 219,949 748,924 General and administrative expenses 48,346 140,366 287,787 617,914 Operating (loss) profit (71,020 ) 107,085 (67,838 ) 131,010 Finance charges 9,757 7,909 42,054 17,622 Gain on sale of farm assets - - 4,273 - Interest expense - (78,779 ) - (221,915 ) Interest imputed on the Tap Participation Fee payable to HP A&M - - - (23,816 ) Income (loss) from discontinued operations $ (61,263 ) $ 36,215 $ (21,511 ) $ (97,099 ) The Company anticipates continued expenses through the end of calendar 2016 related to the discontinued operation. The Company will continue to incur expenses related to the remaining agricultural land the Company continues to own and for the purpose of collecting outstanding receivables. The individual assets and liabilities of the discontinued agricultural operation are combined in the captions Assets of discontinued operation and Liabilities of discontinued operation in the consolidated Balance Sheet. The carrying amounts of the major classes of assets and liabilities included part of the discontinued business are presented in the following table: Discontinued Operations Balance Sheet May 31, 2016 August 31, 2015 Assets: Trade accounts receivable $ 351,218 $ 307,913 Escrow receivable - 1,342,250 Land held for sale (*) 450,347 - Prepaid expenses - 65,309 Total assets $ 801,565 $ 1,715,472 Liabilities: Accounts payable $ 135 $ 25,704 Accrued liabilities 3,467 90,725 Deferred revenues - 900 Total liabilities $ 3,602 $ 117,329 (*) Land Held for Sale. Income (Loss) per Common Share Income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding during each period. Common stock options and warrants aggregating 338,100 and 341,100 common share equivalents were outstanding as of May 31, 2016 and 2015, respectively, and have been included in the calculation of net income per common share but excluded from the calculation of loss per common share as their effect is anti-dilutive. Recently Issued Accounting Pronouncements The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Companys financial reporting, the Company undertakes a study to determine the consequence of the change to its consolidated financial statements and ensure that there are proper controls in place to ascertain that the Companys consolidated financial statements properly reflect the change. New pronouncements assessed by the Company recently are discussed below: In May 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. Revenue from Contracts with Customers In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing Revenue from Contracts with Customers, In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Revenue from Contracts with Customers In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity |
2. FAIR VALUE MEASUREMENTS
2. FAIR VALUE MEASUREMENTS | 9 Months Ended |
May 31, 2016 | |
Fair Value Measurements | |
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 in the principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value. Level 1 Valuations for assets and liabilities traded in active exchange markets, such as the NASDAQ Stock Market. The Company had none of these instruments as of May 31, 2016 or August 31, 2015. Level 2 Valuations for assets and liabilities obtained from readily available pricing sources via independent providers for market transactions involving similar assets or liabilities. The Company had 35 Level 2 assets as of May 31, 2016, which consist of certificates of deposit and U.S. treasury notes. The Company had no Level 2 assets or liabilities as of August 31, 2015. Level 3 Valuations for assets and liabilities that are derived from other valuation methodologies, including discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. The Company had no Level 3 liability as of May 31, 2016 or August 31, 2015. The Company maintains policies and procedures to value instruments using what management believes to be the best and most relevant data available. Level 2 Asset Available for Sale Securities. The Companys non-financial assets measured at fair value on a non-recurring basis consist entirely of its investments in water and water systems, land held for sale, and other long-lived assets. See Note 3 Water and Land Assets The following table provides information on the assets and liabilities measured at fair value on a recurring basis as of May 31, 2016: Fair Value Measurement Using: Cost / Other Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Accumulated Unrealized Gains and Fair Value Value (Level 1) (Level 2) (Level 3) (Losses) Available for sale $ 23,148,500 $ 23,171,800 $ - $ 23,148,500 $ - $ (23,300 ) |
3. WATER AND LAND ASSETS
3. WATER AND LAND ASSETS | 9 Months Ended |
May 31, 2016 | |
Investments In Water Water Systems Land And Improvements | |
WATER AND LAND ASSETS | The Companys water rights and current water and wastewater service agreements are more fully described in Note 4 Water and Land Assets The Companys Investments in Water and Water Systems consist of the following costs and accumulated depreciation and depletion at May 31, 2016 and August 31, 2015: May 31, 2016 August 31, 2015 Costs Accumulated Depreciation and Depletion Costs Accumulated Depreciation and Depletion Rangeview water supply $ 14,444,600 $ (9,000 ) $ 14,444,600 $ (8,800 ) Sky Ranch water rights and other costs 6,444,500 (268,000 ) 6,440,800 (194,600 ) Fairgrounds water and water system 2,899,900 (864,800 ) 2,899,900 (798,700 ) Rangeview water system 1,256,300 (141,400 ) 1,256,300 (110,300 ) Water supply other 4,479,000 (271,900 ) 3,973,300 (193,900 ) Totals 29,524,300 (1,555,100 ) 29,014,900 (1,306,300 ) Net investments in water and water systems $ 27,969,200 $ 27,708,600 Capitalized terms in this section not defined herein are defined in Note 4 Water and Land Assets Depletion and Depreciation. The Company recorded $108,700 and $86,300 of depreciation expense during the three months ended May 31, 2016 and 2015, respectively. The Company recorded $307,600 and $252,200 of depreciation expense during the nine months ended May 31, 2016 and 2015, respectively. |
4. LONG-TERM OBLIGATIONS AND OP
4. LONG-TERM OBLIGATIONS AND OPERATING LEASE | 9 Months Ended |
May 31, 2016 | |
Long-Term Obligations And Operating Lease | |
LONG-TERM OBLIGATIONS AND OPERATING LEASE | The Participating Interests in Export Water Supply is an obligation of the Company that has no scheduled maturity date. Therefore, maturity of this liability is not disclosed in tabular format, but is described below. Participating Interests in Export Water Supply The Company acquired its Rangeview Water Supply through various amended agreements entered into in the early 1990s. The acquisition was consummated with the signing of the CAA in 1996. Upon entering into the CAA, the Company recorded an initial liability of $11.1 million, which represented the cash the Company received from the participating interest holders that was used to purchase the Companys Export Water (described in greater detail in Note 4 Water and Land Assets The CAA obligation is non-interest bearing, and if the Export Water is not sold, the parties to the CAA have no recourse against the Company. If the Company does not sell the Export Water, the holders of the Series B Preferred Stock are also not entitled to payment of any dividend and have no contractual recourse against the Company. As the proceeds from the sale of Export Water are received and the amounts are remitted to the external CAA holders, the Company allocates a ratable percentage of this payment to the principal portion (the Participating Interests in Export Water Supply From time to time, the Company repurchased various portions of the CAA obligations, which retained their original priority. The Company did not make any CAA acquisitions during the nine months ended May 31, 2016 or 2015. As a result of the acquisitions and the sale of Export Water, as detailed in the table below, the remaining potential third-party obligation at May 31, 2016, is approximately $1 million, and the Company has the right to approximately $29.8 million in Export Water proceeds: Export Water Proceeds Received Initial Export Water Proceeds to Pure Cycle Total Potential Third-Party Obligation Paticipating Interests Liability Contingency Original balances $ $ 218,500 $ 31,807,700 $ 11,090,600 $ 20,717,100 Activity from inception until August 31, 2015: Acquisitions 30,428,900 (30,428,900 ) (10,622,100 ) (19,806,800 ) Option payments - Sky Ranch and The Hills at Sky Ranch 110,400 (42,300 ) (68,100 ) (23,800 ) (44,300 ) Arapahoe County tap fees * 533,000 (373,100 ) (159,900 ) (55,800 ) (104,100 ) Export Water sale payments 569,200 (445,800 ) (123,400 ) (42,900 ) (80,500 ) Balance at August 31, 2015 1,212,600 29,786,200 1,027,400 346,000 681,400 Fiscal 2016 activity: Export Water sale payments 39,300 (34,600 ) (4,700 ) (1,600 ) (3,100 ) Balance at May 31, 2016 $ 1,251,900 $ 29,751,600 $ 1,022,700 $ 344,400 $ 678,300 * The Arapahoe County tap fees are net of $34,522 in royalties paid to the Land Board. The CAA includes contractually established priorities that call for payments to CAA holders in order of their priority. This means the first payees receive their full payment before the next priority level receives any payment and so on until full repayment. The Company will receive approximately $6 million of the first priority payout (the remaining entire first priority payout totals approximately $6.7 million as of May 31, 2016). WISE Partnership During December 2014, the Company, through the District, consented to the waiver of all contingencies set forth in the Amended and Restated WISE Partnership Water Delivery Agreement, dated December 31, 2013 (the WISE Partnership Agreement), among the City and County of Denver acting through its Board of Water Commissioners (Denver Water), the City of Aurora acting by and through its Utility Enterprise (Aurora Water), and the South Metro WISE Authority (SMWA). The SMWA was formed by the District and nine other governmental or quasi-governmental water providers pursuant to the South Metro WISE Authority Formation and Organizational Intergovernmental Agreement, dated December 31, 2013 (the SM IGA), to enable the members of SMWA to participate in the regional water supply project known as the Water Infrastructure Supply Efficiency partnership (WISE) created by the WISE Partnership Agreement. The SM IGA specifies each members pro rata share of WISE and the members rights and obligations with respect to WISE. The WISE Partnership Agreement provides for the purchase of certain infrastructure (i.e., pipelines, water storage facilities, water treatment facilities, and other appurtenant facilities) to deliver water to and among the 10 members of the SMWA, Denver Water and Aurora Water. Certain infrastructure has been constructed, and other infrastructure will be constructed over the next several years. By consenting to the waiver of the contingencies set forth in the WISE Partnership Agreement, pursuant to the terms of the Rangeview/Pure Cycle WISE Project Financing Agreement (the WISE Financing Agreement) between the Company and the District, the Company has an agreement to fund the Districts participation in WISE effective as of December 22, 2014. The Companys cost of funding the Districts purchase of its share of existing infrastructure and future infrastructure for WISE is projected to be approximately $5.8 million over the next five years. See further discussion in Note 6 Related Party Transactions. Operating Lease Effective January 2016, the Company entered into an operating lease for approximately 2,500 square feet of office and warehouse space. The lease has a one-year term with payments of $3,000 per month. |
5. SHAREHOLDERS' EQUITY
5. SHAREHOLDERS' EQUITY | 9 Months Ended |
May 31, 2016 | |
Shareholders Equity | |
SHAREHOLDERS' EQUITY | The Company maintains the 2014 Equity Incentive Plan (the 2014 Equity Plan), which was approved by shareholders in January 2014 and became effective April 12, 2014. Executives, eligible employees, consultants and non-employee directors are eligible to receive options and stock grants pursuant to the 2014 Equity Plan. Pursuant to the 2014 Equity Plan, options to purchase shares of stock and restricted stock awards can be granted with exercise prices, vesting conditions and other performance criteria determined by the Compensation Committee of the board of directors. The Company has reserved 1.6 million shares of common stock for issuance under the 2014 Equity Plan. The Company began awarding options under the 2014 Equity Plan during January 2015. Prior to the effective date of the 2014 Equity Plan, the Company granted stock awards to eligible participants under its 2004 Incentive Plan (the 2004 Incentive Plan), which expired April 11, 2014. No additional awards may be granted pursuant to the 2004 Incentive Plan; however, awards outstanding as of April 11, 2014, will continue to vest and expire and may be exercised in accordance with the terms of the 2004 Incentive Plan. The following table summarizes the combined stock option activity for the 2004 Incentive Plan and 2014 Equity Plan for the nine months ended May 31, 2016: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Approximate Aggregate Instrinsic Value Oustanding at August 31, 2015 312,000 $ 6.61 Granted 36,000 4.26 Exercised - - Forfeited or expired (10,000 ) 13.25 Outstanding at May 31, 2016 338,000 $ 4.77 5.94 $ 185,660 Options exercisable at May 31, 2016 268,667 $ 4.70 5.42 $ 177,360 The following table summarizes the combined activity and value of non-vested options under the 2004 Equity Plan and 2014 Incentive Plan as of and for the nine months ended May 31, 2016: Number of Options Weighted-Average Grant Date Fair Value Non-vested options oustanding at August 31, 2015 59,333 $ 4.59 Granted 36,000 - Vested (26,000 ) - Forfeited - - Non-vested options outstanding at May 31, 2016 69,333 $ 5.04 All non-vested options are expected to vest. Stock-based compensation expense was $58,200 and $53,700 for the three months ended May 31, 2016 and 2015, respectively. Stock-based compensation expense was $167,100 and $186,300 for the nine months ended May 31, 2016 and 2015, respectively. At May 31, 2016, the Company had unrecognized expenses relating to non-vested options that are expected to vest totaling $104,200, which options have a weighted average life of less than three years. The Company has not recorded any excess tax benefits to additional paid-in capital. |
6. RELATED PARTY TRANSACTIONS
6. RELATED PARTY TRANSACTIONS | 9 Months Ended |
May 31, 2016 | |
Related Party Transactions | |
RELATED PARTY TRANSACTIONS | On December 16, 2009, the Company entered into a Participation Agreement with the District, whereby the Company agreed to provide funding to the District in connection with the District joining the South Metro Water Supply Authority (SMWSA). On November 10, 2014, the Company and the District entered into the WISE Financing Agreement, whereby the Company agreed to fund the Districts cost of participating in a regional water supply project known as the WISE partnership. The Company anticipates investing approximately $1.2 million per year for each of the next five years for additional payments for the water transmission line and additional facilities, water and related assets for the WISE project. In 1995, the Company extended a loan to the District, a related party. The loan provided for borrowings of up to $250,000, is unsecured, bears interest based on the prevailing prime rate plus 2% (5.25% at May 31, 2016) and the maturity date of the loan is December 31, 2020. Beginning in January 2014, the District and the Company entered into a funding agreement that allows the Company to continue to provide funding to the District for day-to-day operations and accrue the funding into a note that bears interest at a rate of 8% per annum and remains in full force and effect for so long as the 2014 Amended and Restated Lease Agreement remains in effect. The $619,200 balance of the note receivable at May 31, 2016, includes borrowings of $255,000 and accrued interest of $364,200. In November 2015, but effective as of January 1, 2014, the Company entered into a funding agreement obligating the Company to provide funding to Sky Ranch Metropolitan District No. 5, a related party, for calendar years 2014 and 2015 up to a maximum amount of $350,000. The funding was accrued into a note that bears interest at a rate of 6% per annum. No payments are due for a minimum of five years after the date of borrowing. The funding relates to costs associated with establishing and operating the district. The Company anticipates repayment of the note through future revenues from property tax assessments. The $169,400 balance of the note receivable at May 31, 2016, includes borrowings of $156,900 and accrued interest of $12,500. Upon the execution of the note, the amount was reclassified to long-term and is recorded as part of Notes Receivable related parties. |
7. SIGNIFICANT CUSTOMERS
7. SIGNIFICANT CUSTOMERS | 9 Months Ended |
May 31, 2016 | |
Significant Customers | |
SIGNIFICANT CUSTOMERS | The Company sells wholesale water and wastewater services to the District pursuant to the Rangeview Water Agreements (defined in Note 4 Water and Land Assets Revenues related to the provision of water for the oil and gas industry to one customer accounted for 46% and 83% of the Companys water and wastewater revenues for the three and nine months ended May 31, 2015, respectively. The Company had no revenues related to the provision of water for the oil and gas industry for the three or nine months ended May 31, 2016. The Company had accounts receivable from the District which accounted for 88% and 87% of the Companys wholesale water and wastewater trade receivables balances at May 31, 2016 and August 31, 2015, respectively. Accounts receivable from the Districts largest customer accounted for 73% and 76% of the Companys water and wastewater trade receivables as of May 31, 2016 and August 31, 2015, respectively. |
8. ACCRUED LIABILITIES
8. ACCRUED LIABILITIES | 9 Months Ended |
May 31, 2016 | |
Accrued Liabilities | |
ACCRUED LIABILITIES | At May 31, 2016, the Company had accrued liabilities of $86,500, of which $3,600 was for estimated property taxes, $51,400 was for professional fees, and $31,500 was for operating payables. At August 31, 2015, the Company had accrued liabilities of $499,800, of which $400,000 was for accrued compensation, $4,800 was for estimated property taxes, $52,500 was for professional fees and the remaining $42,500 was related to operating payables. |
9. LITIGATION LOSS CONTINGENCIE
9. LITIGATION LOSS CONTINGENCIES | 9 Months Ended |
May 31, 2016 | |
Litigation Loss Contingencies | |
LITIGATION LOSS CONTINGENCIES | The Company has historically been involved in various claims, litigation and other legal proceedings that arise in the ordinary course of its business. The Company records an accrual for a loss contingency when its occurrence is probable and damages can be reasonably estimated based on the anticipated most likely outcome or the minimum amount within a range of possible outcomes. The Company makes such estimates based on information known about the claims and experience in contesting, litigating and settling similar claims. Disclosures are also provided for reasonably possible losses that could have a material effect on the Companys financial position, results of operations or cash flows. |
10. SEGMENT INFORMATION
10. SEGMENT INFORMATION | 9 Months Ended |
May 31, 2016 | |
Segment Information | |
SEGMENT INFORMATION | Prior to the sale of the Companys agricultural assets and the residual operations through December 31, 2015, the Company operated primarily in two lines of business: (i) the wholesale water and wastewater business; and (ii) the agricultural farming business. The Company has discontinued its agricultural farming operations. The Company will continue to operate its wholesale water and wastewater services segment as its only line of business. The wholesale water and wastewater services business includes selling to customers using water rights owned by the Company and to develop infrastructure to divert, treat and distribute that water and collect, treat and reuse wastewater. |
1. PRESENTATION OF INTERIM IN17
1. PRESENTATION OF INTERIM INFORMATION (Policies) | 9 Months Ended |
May 31, 2016 | |
Presentation Of Interim Information Policies | |
Use of Estimates | The preparation of consolidated financial statements in accordance 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and cash equivalents include all highly liquid debt instruments with original maturities of three months or less. The Companys cash equivalents are comprised entirely of money market funds maintained at a reputable financial institution. At various times during the three and nine months ended May 31, 2016, the Companys main operating account exceeded federally insured limits. The Company has never suffered a loss due to such excess balance. |
Investments | Management determines the appropriate classification of its investments in certificates of deposit and debt and equity securities at the time of purchase and reevaluates such determinations each reporting period. Certificates of deposit and debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. The Company has $7,034,100 of investments classified as held-to-maturity at May 31, 2016 which represent certificates of deposit and U.S. treasury notes with maturity dates after May 31, 2017. Debt securities for which the Company does not have the positive intent or ability to hold to maturity are classified as available-for-sale, along with any investments in equity securities. Securities classified as available-for-sale are marked-to-market at each reporting period. Changes in value on such securities are recorded as a component of Accumulated other comprehensive income (loss). |
Concentration of Credit Risk and Fair Value | Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and investments. From time to time, the Company places its cash in money market instruments, commercial paper obligations, corporate bonds and U.S. government treasury obligations. To date, the Company has not experienced significant losses on any of these investments. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value. Cash and Cash Equivalents Trade Accounts Receivable Investments Fair Value Measurements. Accounts Payable Long-Term Financial Liabilities Water and Land Assets Water and Land Assets Long-Term Obligations and Operating Lease Participating Interests in Export Water Supply Notes Receivable Related Parties Off-Balance Sheet Instruments Long-Term Obligations and Operating Lease Participating Interests in Export Water Supply |
Revenue Recognition | Wholesale Water and Wastewater Fees The Company recognizes wastewater treatment fees monthly based on usage. The monthly wastewater treatment fees are shown net of amounts retained by the District. The Company recognized $10,500 and $12,300 of wastewater treatment fees during the three months ended May 31, 2016 and 2015, respectively. The Company recognized $31,500 and $37,200 of wastewater treatment fees during the nine months ended May 31, 2016 and 2015, respectively. Costs of delivering water and providing wastewater services to customers are recognized as incurred. Tap and Construction Fees Long-Term Obligations and Operating Lease The Company recognized $10,400 and $31,100 of Special Facilities (defined in Part I, Item 1 of the 2015 Annual Report) funding as revenue during each of the three and nine months ended May 31, 2016 and 2015, respectively. This is the ratable portion of the Special Facilities funding proceeds received from water agreements as more fully described in Note 2 Summary of Significant Accounting Policies As of May 31, 2016, and August 31, 2015, the Company has deferred recognition of approximately $1,125,200 and $1,167,100, respectively, of water tap and construction fee revenue from the County, which will be recognized as revenue ratably over the estimated useful accounting life of the assets constructed with the construction proceeds as described above. |
Royalty and Other Obligations | Revenues from the sale of Export Water are shown gross of royalties payable to the Land Board. Revenues from the sale of water on the Lowry Range (described in Note 4 Water and Land Assets |
Oil and Gas Lease Payments | As further described in Note 2 Summary of Significant Accounting Policies Water and Land Assets As of May 31, 2016 and August 31, 2015, the Company has deferred recognition of $25,000 and $379,800, respectively, of income related to the O&G Lease and the Rangeview Lease. The balance as of May 31, 2016 will be recognized into income ratably through July 2017. $354,800 of the balance as of August 31, 2015 was recognized into income during the nine months ended May 31, 2016. During the three months ended February 28, 2015, two wells were drilled within the Companys mineral interest. Beginning in March 2015, both wells were placed into service and began producing oil and gas and accruing royalties to the Company. In May 2015, certain gas collection infrastructure was extended to the property to allow the collection of gas from the wells and accrual of royalties attributable to gas production. During the three months ended May 31, 2016 and 2015, the Company received $76,400 and $262,100, respectively, in royalties attributable to these two wells. During the nine months ended May 31, 2016 and 2015, the Company received $271,000 and $262,100 respectively, in royalties attributable to these two wells. |
Long-Lived Assets | The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the eventual use of the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. |
Capitalized Costs of Water and Wastewater Systems and Depletion and Depreciation of Water Assets | Costs to construct water and wastewater systems that meet the Companys capitalization criteria are capitalized as incurred, including interest, and depreciated on a straight-line basis over their estimated useful lives of up to 30 years. The Company capitalizes design and construction costs related to construction activities, and it capitalizes certain legal, engineering and permitting costs relating to the adjudication and improvement of its water assets. The Company depletes its groundwater assets that are being utilized on the basis of units produced (i.e., thousands of gallons sold) divided by the total volume of water adjudicated in the water decrees. |
Share-based Compensation | The Company maintains a stock option plan for the benefit of its employees and non-employee directors. The Company records share-based compensation costs as expense over the applicable vesting period of the stock award using the straight-line method. The compensation costs to be expensed are measured at the grant date based on the fair value of the award. The Company has adopted the alternative transition method for calculating the tax effects of share-based compensation, which allows for a simplified method of calculating the tax effects of employee share-based compensation. Because the Company has a full valuation allowance on its deferred tax assets, the granting and exercise of stock options has no impact on the income tax provisions. The Company recognized $58,200 and $53,700 of share-based compensation expense during the three months ended May 31, 2016 and 2015, respectively. The Company recognized $167,100 and $186,300 of share-based compensation expense during the nine months ended May 31, 2016 and 2015, respectively. |
Income taxes | The Company uses a more-likely-than-not threshold for the recognition and de-recognition of tax positions, including any potential interest and penalties relating to tax positions taken by the Company. The Company did not have any significant unrecognized tax benefits as of May 31, 2016. The Company files income tax returns with the Internal Revenue Service and the State of Colorado. The tax years that remain subject to examination are fiscal year 2013 through fiscal year 2015. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. The Companys policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At May 31, 2016, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the three or nine months ended May 31, 2016 or 2015. |
Discontinued Operations | In August 2015, the Company sold its Arkansas River water and land properties. Pursuant to the terms of the purchase and sale agreement, the Company continued to manage and receive the lease income until December 31, 2015. The operating results and the assets and liabilities of the discontinued operations, which formerly comprised the agricultural segment, are presented separately in the Companys Consolidated Financial Statements. Summarized financial information for the discontinued agricultural business is shown below. Prior period balances have been reclassified to present the operations of the agricultural business as a discontinued operation. Discontinued Operations Income Statement Three Months Ended May 31, Nine Months Ended May 31, 2016 2015 2016 2015 Farm revenues $ - $ 270,582 $ 275,991 $ 818,925 Farm expenses (22,674 ) (23,131 ) (56,042 ) (70,001 ) Gross profit (22,674 ) 247,451 219,949 748,924 General and administrative expenses 48,346 140,366 287,787 617,914 Operating (loss) profit (71,020 ) 107,085 (67,838 ) 131,010 Finance charges 9,757 7,909 42,054 17,622 Gain on sale of farm assets - - 4,273 - Interest expense - (78,779 ) - (221,915 ) Interest imputed on the Tap Participation Fee payable to HP A&M - - - (23,816 ) Income (loss) from discontinued operations $ (61,263 ) $ 36,215 $ (21,511 ) $ (97,099 ) The Company anticipates continued expenses through the end of calendar 2016 related to the discontinued operations. The Company will continue to incur expenses related to the remaining agricultural land the Company continues to own and for the purpose of collecting outstanding receivables. The individual assets and liabilities of the discontinued agricultural business are combined in the captions Assets of discontinued operation and Liabilities of discontinued operation in the consolidated Balance Sheet. The carrying amounts of the major classes of assets and liabilities included part of the discontinued business are presented in the following table: Discontinued Operations Balance Sheet May 31, 2016 August 31, 2015 Assets: Trade accounts receivable $ 351,218 $ 307,913 Escrow receivable - 1,342,250 Land held for sale (*) 450,347 - Prepaid expenses - 65,309 Total assets $ 801,565 $ 1,715,472 Liabilities: Accounts payable $ 135 $ 25,704 Accrued liabilities 3,467 90,725 Deferred revenues - 900 Total liabilities $ 3,602 $ 117,329 (*) Land Held for Sale. |
Income (Loss) per Common Share | Income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding during each period. Common stock options and warrants aggregating 338,100 and 341,100 common share equivalents were outstanding as of May 31, 2016 and 2015, respectively, and have been included in the calculation of net income per common share but excluded from the calculation of loss per common share as their effect is anti-dilutive. |
Recently Issued Accounting Pronouncements | The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Companys financial reporting, the Company undertakes a study to determine the consequence of the change to its consolidated financial statements and ensure that there are proper controls in place to ascertain that the Companys consolidated financial statements properly reflect the change. New pronouncements assessed by the Company recently are discussed below: In May 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. Revenue from Contracts with Customers In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing Revenue from Contracts with Customers, In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Revenue from Contracts with Customers In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity |
1. PRESENTATION OF INTERIM IN18
1. PRESENTATION OF INTERIM INFORMATION (Tables) | 9 Months Ended |
May 31, 2016 | |
Presentation Of Interim Information Tables | |
Discontinued operations financials | Discontinued Operations Income Statement Three Months Ended May 31, Nine Months Ended May 31, 2016 2015 2016 2015 Farm revenues $ - $ 270,582 $ 275,991 $ 818,925 Farm expenses (22,674 ) (23,131 ) (56,042 ) (70,001 ) Gross profit (22,674 ) 247,451 219,949 748,924 General and administrative expenses 48,346 140,366 287,787 617,914 Operating (loss) profit (71,020 ) 107,085 (67,838 ) 131,010 Finance charges 9,757 7,909 42,054 17,622 Gain on sale of farm assets - - 4,273 - Interest expense - (78,779 ) - (221,915 ) Interest imputed on the Tap Participation Fee payable to HP A&M - - - (23,816 ) Income (loss) from discontinued operations $ (61,263 ) $ 36,215 $ (21,511 ) $ (97,099 ) Discontinued Operations Balance Sheet May 31, 2016 August 31, 2015 Assets: Trade accounts receivable $ 351,218 $ 307,913 Escrow receivable - 1,342,250 Land held for sale (*) 450,347 - Prepaid expenses - 65,309 Total assets $ 801,565 $ 1,715,472 Liabilities: Accounts payable $ 135 $ 25,704 Accrued liabilities 3,467 90,725 Deferred revenues - 900 Total liabilities $ 3,602 $ 117,329 (*) Land Held for Sale. |
2. FAIR VALUE MEASUREMENTS (Tab
2. FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
May 31, 2016 | |
Fair Value Measurements Tables | |
Schedule of fair value of assets and liabilities measured on a recurring basis | Fair Value Measurement Using: Cost / Other Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Accumulated Unrealized Gains and Fair Value Value (Level 1) (Level 2) (Level 3) (Losses) Available for sale $ 23,148,500 $ 23,171,800 $ - $ 23,148,500 $ - $ (23,300 ) |
3. WATER AND LAND ASSETS (Table
3. WATER AND LAND ASSETS (Tables) | 9 Months Ended |
May 31, 2016 | |
Investments In Water Water Systems Land And Improvements Tables | |
Schedule of water and water systems | May 31, 2016 August 31, 2015 Costs Accumulated Depreciation and Depletion Costs Accumulated Depreciation and Depletion Rangeview water supply $ 14,444,600 $ (9,000 ) $ 14,444,600 $ (8,800 ) Sky Ranch water rights and other costs 6,444,500 (268,000 ) 6,440,800 (194,600 ) Fairgrounds water and water system 2,899,900 (864,800 ) 2,899,900 (798,700 ) Rangeview water system 1,256,300 (141,400 ) 1,256,300 (110,300 ) Water supply other 4,479,000 (271,900 ) 3,973,300 (193,900 ) Totals 29,524,300 (1,555,100 ) 29,014,900 (1,306,300 ) Net investments in water and water systems $ 27,969,200 $ 27,708,600 |
4. LONG-TERM OBLIGATIONS AND 21
4. LONG-TERM OBLIGATIONS AND OPERATING LEASE (Tables) | 9 Months Ended |
May 31, 2016 | |
Long-Term Obligations And Operating Lease Tables | |
Schedule of remaining third party obligation | Export Water Proceeds Received Initial Export Water Proceeds to Pure Cycle Total Potential Third-Party Obligation Paticipating Interests Liability Contingency Original balances $ $ 218,500 $ 31,807,700 $ 11,090,600 $ 20,717,100 Activity from inception until August 31, 2015: Acquisitions 30,428,900 (30,428,900 ) (10,622,100 ) (19,806,800 ) Option payments - Sky Ranch and The Hills at Sky Ranch 110,400 (42,300 ) (68,100 ) (23,800 ) (44,300 ) Arapahoe County tap fees * 533,000 (373,100 ) (159,900 ) (55,800 ) (104,100 ) Export Water sale payments 569,200 (445,800 ) (123,400 ) (42,900 ) (80,500 ) Balance at August 31, 2015 1,212,600 29,786,200 1,027,400 346,000 681,400 Fiscal 2016 activity: Export Water sale payments 39,300 (34,600 ) (4,700 ) (1,600 ) (3,100 ) Balance at May 31, 2016 $ 1,251,900 $ 29,751,600 $ 1,022,700 $ 344,400 $ 678,300 |
5. SHAREHOLDERS' EQUITY (Tables
5. SHAREHOLDERS' EQUITY (Tables) | 9 Months Ended |
May 31, 2016 | |
Shareholders Equity Tables | |
Schedule of stock option activity | Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Approximate Aggregate Instrinsic Value Oustanding at August 31, 2015 312,000 $ 6.61 Granted 36,000 4.26 Exercised - - Forfeited or expired (10,000 ) 13.25 Outstanding at May 31, 2016 338,000 $ 4.77 5.94 $ 185,660 Options exercisable at May 31, 2016 268,667 $ 4.70 5.42 $ 177,360 |
Schedule of activity and value of non-vested options | Number of Options Weighted-Average Grant Date Fair Value Non-vested options oustanding at August 31, 2015 59,333 $ 4.59 Granted 36,000 - Vested (26,000 ) - Forfeited - - Non-vested options outstanding at May 31, 2016 69,333 $ 5.04 |
1. PRESENTATION OF INTERIM IN23
1. PRESENTATION OF INTERIM INFORMATION (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
May 31, 2016 | May 31, 2015 | May 31, 2016 | May 31, 2015 | |
Presentation Of Interim Information Details | ||||
Farm revenues | $ 0 | $ 270,582 | $ 275,991 | $ 818,925 |
Farm expenses | (22,674) | (23,131) | (56,042) | (70,001) |
Gross Profit | (22,674) | 247,451 | 219,949 | 748,924 |
General and administrative expenses | 48,346 | 140,366 | 287,787 | 617,914 |
Operating (loss) profit | (71,020) | 107,085 | (67,838) | 131,010 |
Finance charges | 9,757 | 7,909 | 42,054 | 17,622 |
Gain on sale of farm assets | 0 | 0 | 4,273 | 0 |
Interest expense | 0 | (78,779) | 0 | (221,915) |
Interest imputed on the Tap Participation Fee payable to HP A&M | 0 | 0 | 0 | (23,816) |
Income (loss) from discontinued operations | $ (61,263) | $ 36,215 | $ (21,511) | $ (97,099) |
1. PRESENTATION OF INTERIM IN24
1. PRESENTATION OF INTERIM INFORMATION (Details 1) - USD ($) | May 31, 2016 | Aug. 31, 2015 |
Assets: | ||
Trade accounts receivable, net | $ 351,218 | $ 307,913 |
Escrow receivable | 0 | 1,342,250 |
Land held for sale | 450,347 | 0 |
Prepaid expenses | 0 | 65,309 |
Total assets | 801,565 | 1,715,472 |
Liabilities: | ||
Accounts payable | 135 | 25,704 |
Accrued liabilities | 3,467 | 90,725 |
Deferred revenues | 0 | 900 |
Total liabilities | $ 3,602 | $ 117,329 |
1. PRESENTATION OF INTERIM IN25
1. PRESENTATION OF INTERIM INFORMATION (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
May 31, 2016 | May 31, 2015 | May 31, 2016 | May 31, 2015 | |
Related Party Transactions Details Narrative | ||||
Water tap fees recognized | $ 3,574 | $ 3,574 | $ 10,721 | $ 10,721 |
Special facility (deferred construction) funding recognized | $ 10,377 | $ 10,377 | $ 31,131 | $ 31,131 |
2. FAIR VALUE MEASUREMENTS (Det
2. FAIR VALUE MEASUREMENTS (Details) | 9 Months Ended |
May 31, 2016USD ($) | |
Available for sale | $ 23,148,500 |
Accumulated Unrealized Gains and (Losses) | (23,300) |
Available for sale | 23,171,800 |
Level 1 | |
Available for sale | 0 |
Level 2 | |
Available for sale | 23,148,500 |
Level 3 | |
Available for sale | $ 0 |
3. WATER AND LAND ASSETS (Detai
3. WATER AND LAND ASSETS (Details) - USD ($) | May 31, 2016 | Aug. 31, 2015 |
Costs | $ 29,524,300 | $ 29,014,900 |
Accumulated Depreciation and Depletion | (1,555,100) | (1,306,300) |
Net investments in water and water systems | 27,969,211 | 27,708,595 |
Rangeview Water Supply | ||
Costs | 14,444,600 | 14,444,600 |
Accumulated Depreciation and Depletion | (9,000) | (8,800) |
Sky Ranch Water Rights And Other Costs | ||
Costs | 6,444,500 | 6,440,800 |
Accumulated Depreciation and Depletion | (268,000) | (194,600) |
Fairgrounds Water And Water System | ||
Costs | 2,899,900 | 2,899,900 |
Accumulated Depreciation and Depletion | (864,800) | (798,700) |
Rangeview Water System | ||
Costs | 1,256,300 | 1,256,300 |
Accumulated Depreciation and Depletion | (141,400) | (110,300) |
Water Supply Other | ||
Costs | 4,479,000 | 3,973,300 |
Accumulated Depreciation and Depletion | $ (271,900) | $ (193,900) |
3. WATER AND LAND ASSETS (Det28
3. WATER AND LAND ASSETS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
May 31, 2016 | May 31, 2015 | May 31, 2016 | May 31, 2015 | |
Investments In Water Water Systems Land And Improvements Detail Narrative | ||||
Depletion | $ 100 | $ 500 | $ 200 | $ 6,700 |
Depreciation | $ 108,700 | $ 86,300 | $ 307,600 | $ 252,200 |
4. LONG-TERM OBLIGATIONS AND 29
4. LONG-TERM OBLIGATIONS AND OPERATING LEASE (Details) - USD ($) | 9 Months Ended | 233 Months Ended | |
May 31, 2016 | Aug. 31, 2015 | ||
Export Water Proceeds Received | |||
Remaining Third Party Obligation: | |||
Balance, original | $ 0 | ||
Balance, beginning | $ 1,212,600 | ||
Acquisitions | 0 | ||
Relinquishment | 0 | ||
Option payments | 110,400 | ||
Arapahoe Tap fees | [1] | 533,000 | |
Export Water Sale Payments | 39,300 | 569,200 | |
Balance, ending | 1,251,900 | 1,212,600 | |
Initial Export Water Proceeds To Pure Cycle | |||
Remaining Third Party Obligation: | |||
Balance, original | 218,500 | ||
Balance, beginning | 29,786,200 | ||
Acquisitions | 28,042,500 | ||
Relinquishment | 2,386,400 | ||
Option payments | (42,300) | ||
Arapahoe Tap fees | [1] | (373,100) | |
Export Water Sale Payments | (34,600) | (445,800) | |
Balance, ending | 29,751,600 | 29,786,200 | |
Total Potential Third Party Obligation | |||
Remaining Third Party Obligation: | |||
Balance, original | 31,807,700 | ||
Balance, beginning | 1,027,400 | ||
Acquisitions | (28,042,500) | ||
Relinquishment | (2,386,400) | ||
Option payments | (68,100) | ||
Arapahoe Tap fees | [1] | (159,900) | |
Export Water Sale Payments | (4,700) | (123,400) | |
Balance, ending | 1,022,700 | 1,027,400 | |
Participating Interests Liability | |||
Remaining Third Party Obligation: | |||
Balance, original | 11,090,600 | ||
Balance, beginning | 346,000 | ||
Acquisitions | (9,790,000) | ||
Relinquishment | (832,100) | ||
Option payments | (23,800) | ||
Arapahoe Tap fees | [1] | (55,800) | |
Export Water Sale Payments | (1,600) | (42,900) | |
Balance, ending | 344,400 | 346,000 | |
Contingency | |||
Remaining Third Party Obligation: | |||
Balance, original | 20,717,100 | ||
Balance, beginning | 681,400 | ||
Acquisitions | (18,252,500) | ||
Relinquishment | (1,554,300) | ||
Option payments | (44,300) | ||
Arapahoe Tap fees | [1] | (104,100) | |
Export Water Sale Payments | (3,100) | (80,500) | |
Balance, ending | $ 678,300 | $ 681,400 | |
[1] | The Arapahoe County tap fees are net of $34,522 in royalties paid to the Land Board. |
5. SHAREHOLDERS' EQUITY (Detail
5. SHAREHOLDERS' EQUITY (Details) | 9 Months Ended |
May 31, 2016USD ($)$ / sharesshares | |
Number of options | |
Outstanding, beginning | shares | 312,000 |
Granted | shares | 36,000 |
Exercised | shares | 0 |
Forfeited or expired | shares | (10,000) |
Outstanding, ending | shares | 338,000 |
Exercisable | shares | 268,667 |
Weighted average exercise price | |
Outstanding, beginning | $ / shares | $ 6.61 |
Granted | $ / shares | 4.26 |
Exercised | $ / shares | 0 |
Forfeited or expired | $ / shares | 13.25 |
Outstanding, ending | $ / shares | 4.77 |
Exercisable | $ / shares | $ 4.70 |
Weighted average remaining contractual term | |
Outstanding, ending | 5 years 11 months 8 days |
Exercisable | 5 years 5 months 18 days |
Approximate aggregate intrinsic value | |
Outstanding, ending | $ | $ 185,660 |
Exercisable | $ | $ 177,360 |
5. SHAREHOLDERS' EQUITY (Deta31
5. SHAREHOLDERS' EQUITY (Details 1) | 9 Months Ended |
May 31, 2016$ / sharesshares | |
Number of options | |
Outstanding, beginning | shares | 59,333 |
Granted | shares | 36,000 |
Vested | shares | (26,000) |
Forfeited | shares | 0 |
Outstanding, ending | shares | 69,333 |
Weighted average grant date fair value | |
Outstanding, beginning | $ / shares | $ 4.59 |
Granted | $ / shares | 0 |
Vested | $ / shares | 0 |
Forfeited | $ / shares | 0 |
Outstanding, ending | $ / shares | $ 5.04 |
5. SHAREHOLDERS' EQUITY (Deta32
5. SHAREHOLDERS' EQUITY (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
May 31, 2016 | May 31, 2015 | May 31, 2016 | May 31, 2015 | |
Stock-based compensation | $ 58,200 | $ 53,700 | $ 167,100 | $ 186,300 |
Unrecognized share-based compensation cost | $ 104,200 | $ 104,200 |
7. SIGNIFICANT CUSTOMERS (Detai
7. SIGNIFICANT CUSTOMERS (Details Narrative) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
May 31, 2016 | May 31, 2015 | May 31, 2016 | May 31, 2015 | Aug. 31, 2015 | |
Sales | The District | |||||
Concentration Risk Percentage | 78.00% | 48.00% | 77.00% | 13.00% | |
Sales | The District's Significant Customer | |||||
Concentration Risk Percentage | 63.00% | 40.00% | 66.00% | 11.00% | |
Accounts Receivable | The District | |||||
Concentration Risk Percentage | 88.00% | 87.00% | |||
Accounts Receivable | The District's Significant Customer | |||||
Concentration Risk Percentage | 73.00% | 76.00% |
8. ACCRUED LIABILITIES (Details
8. ACCRUED LIABILITIES (Details Narrative) - USD ($) | May 31, 2016 | Aug. 31, 2015 |
Accrued Liabilities Detail Narrative | ||
Accrued liabilities | $ 86,542 | $ 499,808 |
Accrued compensation | 400,000 | |
Estimated property taxes | 3,600 | 4,800 |
Professional Fees | 51,400 | 52,500 |
Operating payables | $ 31,500 | $ 42,500 |