Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Nov. 07, 2017 | Feb. 28, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | PURE CYCLE CORP | ||
Document Type | 10-K | ||
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 | ||
Entity Public Float | $ 87,215,786 | ||
Document Period End Date | Aug. 31, 2017 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 |
Current assets: | ||
Cash and cash equilvalents | $ 5,575,823 | $ 4,697,288 |
Short-term investments | 20,055,345 | 23,176,450 |
Trade accounts receivable, net | 663,762 | 181,006 |
Sky Ranch receivable | 215,504 | 171,924 |
Prepaid expenses | 503,100 | 350,819 |
Assets of discontinued operations | 110,748 | 229,940 |
Total current assets | 27,124,282 | 28,807,427 |
Long-term investments | 187,975 | 6,853,276 |
Investments in water and water systems, net | 34,575,713 | 28,321,926 |
Land and mineral interests | 6,248,371 | 5,345,800 |
Notes receivable - related parties, including accrued interest | 776,364 | 628,446 |
Other assets | 424,226 | 472,392 |
Assets of discontinued operations held for sale | 450,641 | 450,347 |
Total assets | 69,787,572 | 70,879,614 |
Current liabilities: | ||
Accounts payable | 492,410 | 160,390 |
Accrued liabilities | 380,852 | 242,624 |
Deferred revenues | 55,800 | 55,800 |
Deferred oil and gas lease payment | 0 | 19,000 |
Liabilities of discontinued operations | 11,165 | 4,394 |
Total current liabilities | 940,227 | 482,208 |
Deferred revenues, less current portion | 999,688 | 1,055,491 |
Participating Interests in Export Water Supply | 341,558 | 343,966 |
Total liabilities | 2,281,473 | 1,881,665 |
Commitments and contingencies | ||
Preferred stock: | ||
Series B - par value $.001 per share, 25 milllion 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 23,754,098 shares issued and outstanding, respectively | 79,185 | 79,185 |
Collateral stock | 0 | 0 |
Additional paid in capital | 171,431,486 | 171,198,241 |
Accumulated other comprehensive income (loss) | (11,105) | 3,122 |
Accumulated deficit | (103,993,900) | (102,283,032) |
Total shareholders' equity | 67,506,099 | 68,997,949 |
Total liabilities and shareholders' equity | $ 69,787,572 | $ 70,879,614 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Preferred stock; Series B- par value | $ 0.001 | $ 0.001 |
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 issued | 23,754,098 | 23,754,098 |
Common stock, shares outstanding | 23,754,098 | 23,754,098 |
STATEMENTS OF COMPREHENSIVE LOS
STATEMENTS OF COMPREHENSIVE LOSS - USD ($) | 12 Months Ended | ||||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |||
Revenues: | |||||
Metered water usage | $ 825,056 | $ 220,997 | $ 969,989 | ||
Wastewater treatment fees | 45,106 | 43,712 | 50,076 | ||
Special facility funding recognized | 41,508 | 41,508 | 41,508 | ||
Water tap fees recognized | 217,515 | 14,294 | 14,294 | ||
Other income | 98,602 | 131,650 | 120,702 | ||
Total revenues | 1,227,787 | 452,161 | 1,196,569 | ||
Expenses: | |||||
Water service operations | (332,449) | (264,424) | (464,940) | ||
Wastewater service operations | (28,615) | (29,187) | (66,745) | ||
Other | (61,860) | (68,478) | (55,173) | ||
Depletion and depreciation | (380,382) | (166,670) | (172,546) | ||
Total cost of revenues | (803,306) | (528,759) | (759,404) | ||
Gross margin | 424,481 | (76,598) | 437,165 | ||
General and administrative expenses | (2,201,744) | (1,849,743) | (1,939,395) | ||
Depreciation | (353,939) | (253,434) | (174,717) | ||
Operating loss | (2,131,202) | (2,179,775) | (1,676,947) | ||
Other income (expense): | |||||
Oil and gas lease income, net | 18,765 | 360,765 | 645,720 | ||
Oil and gas royalty income, net | 186,595 | 343,620 | 412,627 | ||
Interest income | 257,488 | 241,279 | 21,334 | ||
Other | (10,489) | 3,852 | 22,120 | ||
Net (loss) income from continuing operations | (1,678,843) | (1,230,259) | (575,146) | ||
Net loss from discontinued operations, net of taxes | (32,025) | (80,348) | (22,552,801) | ||
Net loss before taxes | (1,710,868) | (1,310,607) | (23,127,947) | ||
Taxes | 0 | 0 | 0 | ||
Net loss | (1,710,868) | (1,310,607) | (23,127,947) | ||
Unrealized holding gains | (14,227) | 3,122 | 0 | ||
Total comprehensive loss | $ (1,725,095) | $ (1,307,485) | $ (23,127,947) | ||
Basic and diluted net loss per common share - | |||||
Loss from cotinuing operations | $ (0.07) | $ (0.06) | $ (0.03) | ||
Loss from discontinued operations | [1] | [1] | (0.93) | ||
Net loss | $ (0.07) | $ (0.06) | $ (0.96) | ||
Weighted average common shares outstanding - basic and diluted | 23,754,098 | 23,781,041 | 24,041,114 | ||
[1] | Amount is less than $.01 per share |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Comprehensive Income (Loss) | Collateral Stock | Accumulated Deficit | Total |
Balance, beginning at Aug. 31, 2014 | $ 433 | $ 80,130 | $ 168,794,396 | $ 0 | $ 0 | $ (77,844,478) | $ 91,030,481 |
Balance, beginning shares at Aug. 31, 2014 | 432,513 | 24,037,598 | |||||
Share-based compensation | 239,986 | 239,986 | |||||
Exercise of options | $ 55 | 48,770 | 48,825 | ||||
Exercise of options, shares | 16,500 | ||||||
Reduction in TPF due to remedies under the Arkansas River Agreement | 3,301,203 | 3,301,203 | |||||
Collateral stock | (1,407,000) | (1,407,000) | |||||
Net loss | (23,127,947) | (23,127,947) | |||||
Unrealized holding gain on investments | 0 | ||||||
Balance, ending at Aug. 31, 2015 | $ 433 | $ 80,185 | 172,384,355 | 0 | (1,407,000) | (100,972,425) | 70,085,548 |
Balance, ending, shares at Aug. 31, 2015 | 432,513 | 24,054,098 | |||||
Share-based compensation | 219,886 | 219,886 | |||||
Exercise of options | $ 0 | ||||||
Exercise of options, shares | 0 | ||||||
Collateral stock retired | $ (1,000) | (1,406,000) | 1,407,000 | $ 0 | |||
Collateral stock retired, shares | (300,000) | ||||||
Net loss | (1,310,607) | (1,310,607) | |||||
Unrealized holding gain on investments | 3,122 | 3,122 | |||||
Balance, ending at Aug. 31, 2016 | $ 433 | $ 79,185 | 171,198,241 | 3,122 | 0 | (102,283,032) | 68,997,949 |
Balance, ending, shares at Aug. 31, 2016 | 432,513 | 23,754,098 | |||||
Share-based compensation | 233,245 | 233,245 | |||||
Exercise of options | $ 0 | ||||||
Exercise of options, shares | 0 | ||||||
Net loss | (1,710,868) | $ (1,710,868) | |||||
Unrealized holding gain on investments | (14,227) | (14,227) | |||||
Balance, ending at Aug. 31, 2017 | $ 433 | $ 79,185 | $ 171,431,486 | $ (11,105) | $ 0 | $ (103,993,900) | $ 67,506,099 |
Balance, ending, shares at Aug. 31, 2017 | 432,513 | 23,754,098 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Cash flows from operating activities | |||
Net loss | $ (1,710,868) | $ (1,310,607) | $ (23,127,947) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||
Share-based compensation expense | 233,245 | 219,886 | 239,986 |
Depreciation, depletion and other non-cash items | 734,324 | 420,104 | 347,263 |
Investment in Well Enhancement Recovery Systems, LLC | 10,488 | 10,675 | 4,577 |
Interest income and other non-cash items | (14,647) | (41,114) | (419) |
Interest added to receivable from related parties | (34,755) | (29,099) | (15,493) |
Changes in operating assets and liabilities: | |||
Trade accounts receivable | (482,756) | (23,161) | 918,252 |
Prepaid expenses | (152,281) | (122,733) | 43,472 |
Note receivable - related parties | (156,743) | (31,633) | (105,208) |
Accounts payable and accrued liabilities | 477,538 | (269,428) | (848,669) |
Income taxes | 0 | (292,729) | 292,729 |
Deferred revenue | (55,803) | (55,802) | (64,226) |
Deferred income - oil and gas lease | (19,000) | (360,765) | (645,720) |
Net cash used in operating activities from continuing operations | (1,171,258) | (1,886,406) | (22,961,403) |
Net cash provided by operating activities from discontinued operations | 118,379 | 1,615,677 | 21,987,337 |
Net cash used in operating activities | (1,052,879) | (270,729) | (974,066) |
Cash flows from investing activities: | |||
Investments in water, water systems and land | (2,486,403) | (1,209,416) | (2,101,253) |
Investments in Sky Ranch pipeline | (4,368,196) | 0 | 0 |
Investments in Sky Ranch land development | (902,600) | 0 | 0 |
Sales and maturities of marketable securities | 9,786,406 | 2,840,000 | 0 |
Purchase of short-term investments | 0 | (25,970,721) | 0 |
Purchase of long-term investments | 0 | (6,855,189) | 0 |
Purchase of property and equipment | (95,385) | (472,310) | (17,186) |
Net cash provided by (used in) investing activities from continuing operations | 1,933,822 | (31,667,636) | (2,118,439) |
Net cash provided by (used in) investing activities from discontinued operations | 0 | (451,347) | 44,650,149 |
Net cash provided by (used in) investing activities | 1,933,822 | (32,118,983) | 42,531,710 |
Cash flows from financing activities | |||
Proceeds from exercise of options | 0 | 0 | 48,825 |
Payment to contingent liability holders | (2,408) | (2,041) | (8,621) |
Net cash (used in) provided by financing activities from continuing operations | (2,408) | (2,041) | 40,204 |
Net cash used in financing activities from discontinued operations | 0 | 0 | (6,258,365) |
Net cash used in financing activities | (2,408) | (2,041) | (6,218,161) |
Net change in cash and cash equivalents | 878,535 | (32,391,753) | 35,339,483 |
Cash and cash equivalents - beginning of year | 4,697,288 | 37,089,041 | 1,749,558 |
Cash and cash equivalents - end of year | 5,575,823 | 4,697,288 | 37,089,041 |
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES | |||
Retirement of collateral stock | 0 | 1,407,000 | 0 |
Reduction in Tap Participation Fee liability, HP A&M receivable, collateral stock, and mineral interests received as a result of settlement of the Arkansas River Agreement | 0 | 0 | 1,894,203 |
Assets acquired through WISE funding obligation | $ 0 | $ 0 | $ 1,381,004 |
ORGANIZATION
ORGANIZATION | 12 Months Ended |
Aug. 31, 2017 | |
Organization | |
ORGANIZATION | Pure Cycle Corporation (the “Company”) was incorporated in Delaware in 1976 and reincorporated in Colorado in 2008. The Company owns assets in the Denver, Colorado metropolitan area. The Company is currently using its water assets located in the Denver metropolitan area to provide wholesale water and wastewater services to customers located in the Denver metropolitan area. The Company provides a full line of wholesale water and wastewater services which includes designing and constructing water and wastewater systems as well as operating and maintaining such systems. The Company’s business focus is to provide wholesale water and wastewater services, predominately to local governmental entities, which provide services to their end-use customers throughout the Denver metropolitan area as well as along the Colorado Front Range. In addition to the Company’s water and wastewater operations, the Company is developing 931 acres of land owned by the Company along Denver’s I-70 corridor as a master planned community known as Sky Ranch. As of August 31, 2017, the Company had $26.2 million of working capital, which included $5.6 million of cash and cash equivalents. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Aug. 31, 2017 | |
Presentation Of Interim Information | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Principles of Consolidation The consolidated financial statements of the Company include the accounts of Pure Cycle Corporation and its majority-owned and controlled subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 reporting period. Estimates are used to account for certain items such as share-based compensation, deferred tax asset valuation, and the useful lives of assets, etc. 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 Company’s cash equivalents are comprised entirely of money market funds maintained at a reputable financial institution. At various times during the fiscal year ended August 31, 2017, the Company’s 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 treasury 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 $188,000 of investments classified as held-to-maturity at August 31, 2017, which represent certificates of deposit and U.S. treasury notes with maturity dates after August 31, 2018. Securities that the Company does not have the positive intent or ability to hold to maturity, including certificates of deposit, debt securities and any investments in equity securities, are classified as available-for-sale. 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, certificates of deposit 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 Participating Interests in Export Water Notes Receivable – Related Parties Off-Balance Sheet Instruments – Participating Interests in Export Water Cash Flows The Company did not have any debt during the fiscal years ended August 31, 2017 and 2016, and therefore did not pay any interest during the fiscal years ended August 31, 2017 and 2016. The Company paid $441,400 in interest during the fiscal year ended August 31, 2015. The Company did not pay any income taxes during the fiscal year ended August 31, 2017. In the fiscal year ended August 31, 2016, the Company paid $292,700 for alternative minimum tax the Company owed as a result of the sale of the Company’s farm assets. The Company did not pay any income taxes during the fiscal year ended August 31, 2015. Trade Accounts Receivable The Company records accounts receivable net of allowances for uncollectible accounts. Excluded from trade accounts receivable are balances due from discontinued operations. The Company has not recorded an allowance for uncollectible accounts in receivables from continuing operations for either of the periods ended August 31, 2017 or 2016. The allowance for uncollectible accounts was determined based on specific review of all past due accounts. 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 Depreciation and Depletion Charges Costs to construct water and wastewater systems that meet the Company’s 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 water 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. Tap Participation Fee Liability and Imputed Interest Expense Pursuant to the Asset Purchase Agreement dated May 10, 2006 (the "Arkansas River Agreement") between the Company and HP A&M, the Company was obligated to pay HP A&M a defined percentage of a defined number of water tap fees the Company receives after the date of the Arkansas River Agreement (the "Tap Participation Fee" or "TPF"). The Tap Participation Fee was due and payable once the Company had sold a water tap and received the consideration due for such water tap. In 2015, the Company settled its claims against HP A&M relating to certain defaults. As a result of the settlement, the TPF liability was eliminated resulting in an increase in equity of approximately $3.3 million. Revenue Recognition The Company generates revenues through one line of business. Its revenues are derived through its wholesale water and wastewater business, which is described below. The Company generates revenues through its wholesale water and wastewater business predominately from three sources: (i) monthly wholesale water usage fees and wastewater service fees, (ii) one-time water and wastewater tap fees and construction fees, and (iii) consulting fees. Because these items are separately delivered, the Company accounts for each of the items separately, as described below. i ) Monthly wholesale water and wastewater service fees – Water and Land Assets The Company recognizes wastewater processing revenues monthly based on a flat monthly fee and actual usage charges. The monthly wastewater service fees are shown net of amounts retained by the Rangeview District. Amounts recognized for water and wastewater services during the fiscal years ended August 31, 2017, 2016 and 2015 are presented in the statements of comprehensive loss. Costs of delivering water and providing wastewater service to customers are recognized as incurred. The Company delivered 94.6 ii) Water and wastewater tap fees and construction fees Proceeds from tap fees and construction fees are deferred upon receipt and recognized in income either upon completion of construction of infrastructure or ratably over time, depending on whether the Company owns the infrastructure constructed with the proceeds or a customer owns the infrastructure constructed with the proceeds. Tap and construction fees derived from agreements in which the Company will not own the assets constructed with the fees are recognized as revenue using the percentage-of-completion method. Costs of construction of the assets when the Company will not own the assets are recorded as construction costs. Tap and construction fees derived from agreements for which the Company will own the infrastructure are recognized as revenues ratably over the estimated accounting service life of the facilities constructed, starting at completion of construction, which could be in excess of 30 years. Costs of construction of the assets when the Company will own the assets are capitalized and depreciated over their estimated economic lives. From time to time, the Company enters into water service agreements to provide water service to customers. The Company owns the facilities which store, treat, and deliver the water and amortizes the cost of these facilities over their useful lives. The Company recognized $217,500 of tap fee revenue for the year ended August 31, 2017 and $14,300 of tap fee revenue in each of the two fiscal years ended August 31, 2016, and 2015. The Company recognized $41,500 of “Special Facilities” funding as revenue in each of the three fiscal years ended August 31, 2017, 2016, and 2015. As of August 31, 2017, the Company has deferred recognition of $1.1 million of tap and construction revenue from customer agreements, which will be recognized as revenue ratably through 2036. iii) Consulting fees 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 are shown net of the royalties to the Land Board and the amounts retained by the Rangeview District. Oil and Gas Lease Payments As further described in Note 4 – Water and Land Assets As of August 31, 2017, the Company recognized the remaining $19,000 of income related to the Rangeview Lease. Subsequent to August 31, 2017, the Company entered into a Paid-Up Oil and Gas Lease with Bison Oil and Gas, LLP, for the purpose of exploring for, developing, producing, and marketing oil and gas on the 40 acres of mineral estate the Company owns adjacent to the Lowry Range (the “Bison Lease”). Pursuant to the Bison Lease, on September 20, 2017, the Company received an up-front payment of $167,200, which will be recognized as income on a straight-line basis over three years (the term of the Bison Lease). During the three months ended February 28, 2015, two wells were drilled within the Company’s 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 fiscal years ended August 31, 2017, 2016 and 2015, the Company received $186,600, $343,600 and $412,600, respectively, in royalties attributable to these two wells. The Company classifies income from lease and royalty payments as Other income Share-based Compensation The Company maintains a stock option plan for the benefit of its employees and directors. The Company records share-based compensation costs which are measured at the grant date based on the fair value of the award and are recognized as expense over the applicable vesting period of the stock award using the straight-line method. 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 during the fiscal years ended August 31, 2016 and 2015 had no impact on the income tax provisions. The Company recognized $233,200, $219,900, and $240,000 of share-based compensation expenses during the fiscal 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 does not have any significant unrecognized tax benefits as of August 31, 2017. 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 2013 through fiscal 2016. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At August 31, 2017, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the fiscal years ended August 31, 2017, 2016 or 2015. Discontinued Operations In August 2015, the Company sold approximately 14,600 acres of irrigated farm land and related Arkansas River water rights for proceeds of approximately $44.7 million, which were substantially all of the assets comprising the Company’s agricultural segment. Pursuant to the terms of the purchase and sale agreement, the Company continued to manage and receive the lease income until December 31, 2015. As a consequence of the sale, the operating results and the assets and liabilities of the discontinued operations, which formerly comprised the agricultural segment, are presented separately in the Company’s 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 Statements of Operations Fiscal years ended August 31, 2017 2016 2015 Farm revenues $ 6,800 $ 267,500 $ 1,127,200 Farm expenses (1,300 ) (77,100 ) (126,300 ) Gross profit 5,500 190,400 1,000,900 General and administrative expenses (46,900 ) (313,400 ) (760,200 ) Operating (loss) profit (41,400 ) (123,000 ) 240,700 Finance charges 9,400 38,400 21,700 (Loss) gain on sale of farm assets - 4,300 (22,108,200 ) Interest expense (1) - - (390,500 ) Interest imputed on the Tap Participation Fee payable to HP A&M (2) - - (23,800 ) Taxes (292,700 ) Loss from discontinued operations, net of taxes $ (32,000 ) $ (80,300 ) $ (22,552,800 ) (1) Interest expense represents interest accrued related to notes the Company had on its farm assets prior to the sale. All notes associated with the farms have been paid off, and thus the Company no longer incurs interest on such notes. (2) Imputed interest represents an estimate of the interest accrued on the Tap Participation Fee payable to High Plains A&M, LLC (“HP A&M”), which was eliminated as a result of the settlement with HP A&M during the three months ended February 28, 2015. As a result, the Company no longer accrues interest related to the Tap Participation Fee. The Company anticipates continued expenses through the end of calendar 2018 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 operations” and “Liabilities of discontinued operations” in the consolidated balance sheets. 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 Sheets August 31, 2017 2016 Assets: Trade accounts receivable $ 110,700 $ 227,100 Land held for sale (1) 450,600 450,300 Prepaid expenses - 2,900 Total assets $ 561,300 $ 680,300 Liabilities: Accrued liabilities 11,200 4,400 Total liabilities $ 11,200 $ 4,400 (1) Land Held for Sale. Loss per Common Share Loss per common share is computed by dividing net loss by the weighted average number of shares outstanding during each period. Common stock options and warrants aggregating 465,600, 338,100, and 312,100 common share equivalents as of August 31, 2017, 2016 and 2015, respectively, have been 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 Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and ensure that there are proper controls in place to ascertain that the Company’s financial statements properly reflect the change. New pronouncements assessed by the Company recently are discussed below: In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern 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 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Aug. 31, 2017 | |
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 no Level 1 assets or liabilities as of August 31, 2017 or August 31, 2016. 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 56 and 36 Level 2 assets as of August 31, 2017 and 2016, respectively, which consist of certificates of deposit and U.S. treasury notes. 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 one Level 3 liability, the contingent portion of the CAA, as of August 31, 2017 and 2016. The Company has determined that the contingent portion of the CAA does not have a determinable fair value (see Note 5). 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 following table provides information on the assets and liabilities measured at fair value on a recurring basis as of August 31, 2017: 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) Certificates of deposit $ 12,673,700 $ 12,694,500 $ — $ 12,673,700 $ — $ (20,800 ) U.S. treasuries 7,381,700 7,372,000 — 7,381,700 — 9,700 Subtotal $ 20,055,400 $ 20,066,500 $ — $ 20,055,400 $ — $ (11,100 ) Long-term investments 188,000 188,000 — 188,000 — — Total $ 20,243,400 $ 20,254,500 $ — $ 20,243,400 $ — $ (11,100 ) The following table provides information on the assets and liabilities measured at fair value on a recurring basis as of August 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) Certificates of deposit $ 6,050,500 $ 6,054,700 $ — $ 6,050,500 $ — $ (4,200 ) U.S. treasuries 17,125,900 17,115,200 — 17,125,900 — 10,700 Subtotal $ 23,176,400 $ 23,169,900 $ — $ 23,176,400 $ — $ 6,500 Long-term investments 6,853,300 6,856,700 — 6,853,300 — (3,400 ) Total $ 30,029,700 $ 30,026,600 $ — $ 30,029,700 $ — $ 3,100 |
WATER AND LAND ASSETS
WATER AND LAND ASSETS | 12 Months Ended |
Aug. 31, 2017 | |
Investments In Water Water Systems Land And Improvements | |
WATER AND LAND ASSETS | Investment in Water and Water Systems The Company’s water and water systems consist of the following approximate costs and accumulated depreciation and depletion as of August 31: August 31, 2017 August 31, 2016 Costs Accumulated Depreciation and Depletion Costs Accumulated Depreciation and Depletion Rangeview water supply $ 14,529,600 $ (10,600 ) $ 14,444,600 $ (9,400 ) Sky Ranch water rights and other costs 6,725,000 (436,300 ) 6,607,400 (334,500 ) Fairgrounds water and water system 2,899,900 (974,800 ) 2,899,900 (886,800 ) Rangeview water system 1,639,000 (207,000 ) 1,624,800 (152,800 ) Water supply – other 4,058,900 (401,300 ) 3,703,000 (297,800 ) Wild Pointe service rights 1,631,700 (213,000 ) - - Sky Ranch pipeline 4,700,000 (39,200 ) Construction in progress 673,800 - 723,500 - Totals 36,857,900 (2,282,200 ) 30,003,200 (1,681,300 ) Net investments in water and water systems $ 34,575,700 $ 28,321,900 Depletion and Depreciation The Company recorded $1,300, $500, and $7,000 of depletion charges during the fiscal years ended August 31, 2017, 2016 and 2015, respectively. During the fiscal years ended August 31, 2017 and 2016, this related entirely to the Rangeview Water Supply (defined below). The Company recorded $733,000, $419,600, and $340,300 of depreciation expense in each of the fiscal years ended August 31, 2017, 2016 and 2015, respectively. These figures include depreciation for other equipment not included in the table above. Rangeview Water Supply and Water System The “Rangeview Water Supply” consists of 26,985 acre feet and is a combination of tributary surface water and groundwater rights along with certain storage rights associated with the Lowry Range, a 27,000-acre property owned by the Land Board located 16 miles southeast of Denver, Colorado. Approximately $14.5 million of Investments in Water and Water Systems on the Company’s balance sheet as of August 31, 2017, represents the costs of assets acquired or facilities constructed to extend water service to customers located on and off the Lowry Range. The recorded costs of the Rangeview Water Supply include payments to the sellers of the Rangeview Water Supply, design and construction costs and certain direct costs related to improvements to the asset including legal and engineering fees. The Company acquired the Rangeview Water Supply beginning in 1996 when: (i) The Rangeview District entered into the 1996 Amended and Restated Lease Agreement with the Land Board, which owns the Lowry Range; (ii) The Company entered into the Agreement for Sale of Export Water with the Rangeview District; (iii) The Company entered into the 1996 Service Agreement with the Rangeview District for the provision of water service to the Rangeview District’s customers on the Lowry Range; and (iv) In 1997, the Company entered into the Wastewater Service Agreement with the Rangeview District for the provision of wastewater service to the Rangeview District’s customers on the Lowry Range. In July 2014, the Company, the Rangeview District and the Land Board entered into the 2014 Amended and Restated Lease (the “Lease”), which superseded the original 1996 lease, and the Company and the Rangeview District entered into an Amended and Restated Service Agreement. Collectively, the foregoing agreements, as amended, are referred to as the “Rangeview Water Agreements.” Pursuant to the Rangeview Water Agreements, the Company owns 11,650 acre feet of water consisting of 10,000 acre feet of groundwater and 1,650 acre feet of average yield surface water which can be exported off the Lowry Range to serve area users (referred to as “Export Water”). The 1,650 acre feet of surface rights are subject to completion of documentation by the Land Board related to the Company’s exercise of its right to substitute an aggregate gross volume of 165,000 acre feet of its groundwater for 1,650 acre feet per year of adjudicated surface water and to use this surface water as Export Water. Additionally, assuming completion of the substitution of groundwater for surface water, the Company has the exclusive right to provide water and wastewater service, through 2081, to all water users on the Lowry Range and the right to develop an additional 13,685 acre feet of groundwater and 1,650 acre feet of adjudicated surface water to serve customers either on or off the Lowry Range. The Rangeview Water Agreements also provide for the Company to use surface reservoir storage capacity in providing water service to customers both on and off the Lowry Range. Services on the Lowry Range – Rates and charges for all water and wastewater services on the Lowry Range, including tap fees and usage or monthly fees, are governed by the terms of the Rangeview Water Agreements. Rates and charges are required to be less than the average of similar rates and charges of three surrounding municipal water and wastewater service providers, which are reassessed annually. Pursuant to the Rangeview Water Agreements the Land Board receives a royalty of 10% or 12% of gross revenues from the sale or disposition of the water depending on the nature and location of the purchaser of the water, except that the royalty on tap fees shall be 2% (other than taps sold for Sky Ranch which are exempt). The Company also is required to pay the Land Board a minimum annual water production fee, which will offset future royalty obligations. The Company and the Land Board are working cooperatively to clarify the calculation of the minimum annual production fee. Pursuant to the Company’s determination, the Company has made payments of $45,600 for each of the past two years. The Company does not anticipate any modification to the minimum fee to be material. The Rangeview District retains 2% of the remaining gross revenues and the Company receives 98% of the remaining gross revenues after the Land Board royalty. The Land Board does not receive a royalty on wastewater fees. The Company receives 100% of the Rangeview District’s wastewater tap fees and 90% of the Rangeview District’s wastewater usage fees (the Rangeview District retains the other 10%). Export Water – Water Supply - Other – The WISE Partnership Agreement (as defined below) 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. During fiscal 2017, the Company invested approximately $350,000 in infrastructure. The Arapahoe County Fairgrounds Water and Water System The Company owns 321 acre feet of groundwater purchased pursuant to its agreement with Arapahoe County. The Company plans to use this water in conjunction with its Rangeview Water Supply in providing water to areas outside the Lowry Range. The $2.9 million of capitalized costs includes the costs to construct various Wholesale and Special Facilities, including a new deep water well, a 500,000-gallon water tank and pipelines to transport water to the Arapahoe County fairgrounds. Service to Customers Not on the Lowry Range Sky Ranch - Total consideration for the land and water included the $7.0 million purchase price, plus direct costs and fees of $554,100. The Company allocated the total acquisition cost to the land and water rights based on estimates of each asset’s respective fair value. In June 2017, the Company completed and placed into service its Sky Ranch pipeline, connecting its Sky Ranch water system to Rangeview's water system for approximately $4.7 million. Wild Pointe - O&G Leases In 2011, the Company entered into the O&G Lease and the Surface Use Agreement with Anadarko. Pursuant to the O&G Lease, the Company received an up-front payment of $1,243,400 from Anadarko for the purpose of exploring for, developing, producing and marketing oil and gas on 634 acres of mineral estate owned by the Company at its Sky Ranch property. The Company also received $9,000 in surface use and damage payments. In December 2012, the O&G Lease was purchased by a wholly-owned subsidiary of ConocoPhillips Company. The Company received an additional payment of $1,243,400 during February 2014 to extend the O&G Lease an additional two years through February 2016. The O&G Lease is now held by production, entitling the Company to royalties based on production. In September 2017, subsequent to fiscal year end, the Company entered into a three-year Paid-Up Oil and Gas Lease with Bison Oil and Gas, LLP, for the purpose of exploring for, developing, producing and marketing oil and gas on 40 acres of mineral estate owned by the Company adjacent to the Lowry Range. Land and Mineral Interests As part of the 2010 Sky Ranch acquisition the Company acquired 931 acres of land which is valued at approximately $4.8 million. Additionally, in fiscal 2015, as part of the settlement with HP A&M, the Company was assigned 75% mineral interests in the Arkansas River land. Together with the 25% mineral interests the Company owned prior to the settlement, the Company now holds approximately 13,900 acres of mineral interests. The Company has valued its mineral interests at approximately $1,425,500. |
PARTICIPATING INTERESTS IN EXPO
PARTICIPATING INTERESTS IN EXPORT WATER | 12 Months Ended |
Aug. 31, 2017 | |
Participating Interests In Export Water | |
PARTICIPATING INTERESTS IN EXPORT WATER | 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 Company’s 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 fiscal years ended August 31, 2017 or 2016. In July 2014, the Land Board relinquished its approximately $2.4 million of CAA interests to the Company as part of a settlement of the 2011 lawsuit filed by the Company and the Rangeview District against the Land Board. As a result of the acquisitions and the relinquishment by the Land Board, the Company is currently allocated approximately 88% of the total proceeds from the sale of Export Water after payment of the Land Board royalty. Additionally, as a result of the acquisitions, the relinquishment by the Land Board, and the consideration from the cumulative sales of Export Water, as detailed in the table below, the remaining potential third-party obligation at August 31, 2017, is approximately $1 million: Export Water Proceeds Received Initial Export Water Proceeds to Pure Cycle Total Potential Third-party Obligation Participating Interests Liability Contingency Original balances $ - $ 218,500 $ 31,807,700 $ 11,090,600 $ 20,717,100 Activity from inception until August 31, 2014: Acquisitions - 28,042,500 (28,042,500 ) (9,790,000 ) (18,252,500 ) Relinquishment - 2,386,400 (2,386,400 ) (832,100 ) (1,554,300 ) Option payments - Sky Ranch and The Hills at Sky Ranch 110,400 (42,300 ) (68,100 ) (23,800 ) (44,300 ) Arapahoe County tap fees (1) 533,000 (373,100 ) (159,900 ) (55,800 ) (104,100 ) Export Water sale payments 410,500 (305,900 ) (104,600 ) (36,300 ) (68,300 ) Balance at August 31, 2015 1,053,900 29,926,100 1,046,200 352,600 693,600 Fiscal 2016 activity: 207,900 (183,200 ) (24,700 ) (8,600 ) (16,100 ) Balance at August 31, 2016 1,261,800 29,742,900 1,021,500 344,000 677,500 Fiscal 2017 activity: Export Water sale payments 58,100 (51,200 ) (6,900 ) (2,400 ) (4,500 ) Balance at August 31, 2017 $ 1,319,900 $ 29,691,700 $ 1,014,600 $ 341,600 $ 673,000 (1) The Arapahoe County tap fees are less $34,522 in royalties paid to the Land Board. The CAA includes contractually established priorities which 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. Of the next approximately $6.7 million of Export Water payouts, which at current levels would occur over several years, the Company will receive approximately $5.9 million of revenue. Thereafter, the Company will be entitled to all but approximately $650,000 of the proceeds from the sale of Export Water after deduction of the Land Board royalty. |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 12 Months Ended |
Aug. 31, 2017 | |
Accrued Liabilities | |
ACCRUED LIABILITIES | At August 31, 2017, the Company had accrued liabilities of $381,000, of which $265,000 was for accrued compensation, $27,000 was for estimated property taxes, $48,500 was for professional fees and the remaining $40,500 was related to operating payables. At August 31, 2016, the Company had accrued liabilities of $242,600, of which $160,000 was for accrued compensation, $5,700 was for estimated property taxes, $48,000 was for professional fees and the remaining $28,900 was related to operating payables. |
LONG-TERM DEBT AND OPERATING LE
LONG-TERM DEBT AND OPERATING LEASE | 12 Months Ended |
Aug. 31, 2017 | |
Long-Term Obligations And Operating Lease | |
LONG-TERM DEBT AND OPERATING LEASE | As of August 31, 2017 and 2016, the Company had no debt. The Participating Interests in Export Water Supply are obligations of the Company that have no scheduled maturity dates. Therefore, these liabilities are not disclosed in tabular format. However, the Participating Interests in Export Water Supply are described in Note 5 – Participating Interests in Export Water WISE Partnership During December 2014, the Company, through the Rangeview 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 Rangeview 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 member’s 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. During fiscal 2017, the Company invested approximately $350,000 in infrastructure. 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 and Service Agreement (the “WISE Financing Agreement”) between the Company and the Rangeview District, the Company has an agreement to fund the Rangeview District’s participation in WISE effective as of December 22, 2014. The Company’s cost of funding the Rangeview District’s purchase of its share of existing infrastructure and future infrastructure for WISE and funding operations and water deliveries related to WISE is projected to be approximately $5.2 million over the next five years. See further discussion in Note 14 – 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 two-year term with payments of $3,000 per month. |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 12 Months Ended |
Aug. 31, 2017 | |
Shareholders Equity | |
SHAREHOLDERS' EQUITY | Preferred Stock The Company’s non-voting Series B Preferred Stock has a preference in liquidation of $1.00 per share less any dividends previously paid. Additionally, the Series B Preferred Stock is redeemable at the discretion of the Company for $1.00 per share less any dividends previously paid. In the event that the Company’s proceeds from sale or disposition of Export Water rights exceed $36,026,232, the Series B Preferred Stock holders will receive the next $432,513 of proceeds in the form of a dividend. Equity Compensation Plan 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. The Company has reserved 1.6 million shares of common stock for issuance under the 2014 Equity Plan. Awards to purchase 62,000 shares of the Company’s common stock have been made under the 2014 Equity Plan. 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 Company estimates the fair value of share-based payment awards on the date of grant using the Black-Scholes option-pricing model (“Black-Scholes model”). Using the Black-Scholes model, the value of the portion of the award that is ultimately expected to vest is recognized as a period expense over the requisite service period in the statement of comprehensive loss. Option forfeitures are to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company does not expect any forfeiture of its option grants and therefore the compensation expense has not been reduced for estimated forfeitures. During fiscal year 2017, 15,000 options expired. During fiscal year 2016, 10,000 options expired. The Company attributes the value of share-based compensation to expense using the straight-line single option method for all options granted. The Company’s determination of the estimated fair value of share-based payment awards on the date of grant is affected by the following variables and assumptions: ● The grant date exercise price – is the closing market price of the Company’s common stock on the date of grant; ● Estimated option lives – based on historical experience with existing option holders; ● Estimated dividend rates – based on historical and anticipated dividends over the life of the option; ● Life of the option – based on historical experience, option grants have lives of between 8 and 10 years; ● Risk-free interest rates – with maturities that approximate the expected life of the options granted; ● Calculated stock price volatility – calculated over the expected life of the options granted, which is calculated based on the weekly closing price of the Company’s common stock over a period equal to the expected life of the option; and ● Option exercise behaviors – based on actual and projected employee stock option exercises and forfeitures. In January 2017, the Company granted its non-employee directors options to purchase a combined 32,500 shares of the Company’s common stock pursuant to the 2014 Equity Plan. All of the options vest one year after the date of grant, and expire 10 years after the date of grant. The Company calculated the fair value of the options granted during January 2017 at approximately $112,700, using the Black-Scholes model with the following variables: weighted average exercise price of $5.10 (which was the closing sales price of the Company’s common stock on the date of grant); estimated option lives of 10 years; weighted average risk free interest rate of 2.42%; weighted average stock price volatility of 57.56%; and an estimated forfeiture rate of 0%. The $112,700 of stock-based compensation is being expensed monthly over the vesting periods. In October 2016, the Company granted its President an option to purchase 50,000 shares of the Company’s common stock pursuant to the 2014 Equity Plan. The option vests one-third one year from the date of grant, one-third two years from the date of grant, and one-third three years from the date of grant. The option expires 10 years from the date of grant. The Company calculated the fair value of this option at approximately $188,300 using the Black-Scholes model with the following variables: weighted average exercise price of $5.61 (which was the closing sales price of the Company’s common stock on the date of grant); estimated option life of 10 years; estimated dividend rate of 0%; weighted average risk-free interest rate of 1.79%; weighted average stock price volatility of 57.85%; and an estimated forfeiture rate of 0%. The $188,300 of stock-based compensation as being expensed monthly over the vesting period. In September 2016, the Company granted employee options to purchase 60,000 shares of the Company’s common stock pursuant to the 2014 Equity Plan. The options vest one-third one year from the date of grant, one-third two years from the date of grant, and one-third three years from the date of grant. The options expire 10 years from the date of grant. The Company calculated the fair value of these options at approximately $222,500 using the Black-Scholes model with the following variables: weighted average exercise price of $5.56 (which was the closing sales price of the Company’s common stock on the date of grant); estimated option life of 10 years; estimated dividend rate of 0%; weighted average risk-free interest rate of 1.560%; weighted average stock price volatility of 57.81%; and an estimated forfeiture rate of 0%. The $222,500 of stock-based compensation as being expensed monthly over the vesting period. In January 2016, the Company granted its non-employee directors options to purchase a combined 36,000 shares of the Company’s common stock pursuant to the 2014 Equity Plan. Options for 26,000 shares vest one year after the date of grant and options for 10,000 shares vest one half one year after the date of grant and one half two years after the date of grant. All of the options expire 10 years after the date of grant. The Company calculated the fair value of the options granted during January 2016 at approximately $104,100, using the Black-Scholes model with the following variables: weighted average exercise price of $4.26 (which was the closing sales price of the Company’s common stock on the date of grant); estimated option lives of 10 years; weighted average risk free interest rate of 2.06%; weighted average stock price volatility of 58.26%; and an estimated forfeiture rate of 0%. The $104,100 of stock-based compensation is being expensed monthly over the vesting periods. In January 2015, the Company granted its non-employee directors options to purchase a combined 26,000 shares of the Company’s common stock pursuant to the 2014 Equity Plan. The options vest one year after the date of grant and expire 10 years after the date of grant. The Company calculated the fair value of the options granted during January 2015 at approximately $72,000, using the Black-Scholes model with the following variables: weighted average exercise price of $4.17 (which was the closing sales price of the Company’s common stock on the date of grant); estimated option lives of 10 years; weighted average risk free interest rate of 1.77%; weighted average stock price volatility of 57.45%; and an estimated forfeiture rate of 0%. The $72,000 of stock-based compensation is being expensed monthly over the vesting periods. During the fiscal year ended August 31, 2015, 16,500 options were exercised. No options were exercised during the fiscal year ended August 31, 2017 or 2016. The following table summarizes the stock option activity for the combined 2004 Incentive Plan and 2014 Equity Plan for the fiscal year ended August 31, 2017: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Approximate Aggregate Intrinsic Value Outstanding at August 31, 2016 338,000 $ 4.77 Granted 142,500 $ 5.47 Exercised - $ - Forfeited or expired (15,000 ) $ 7.88 Outstanding at August 31, 2017 465,500 $ 4.88 6.30 $ 1,007,740 Options exercisable at August 31, 2017 318,000 $ 4.63 4.98 $ 1,358,140 The following table summarizes the activity and value of non-vested options as of and for the fiscal year ended August 31, 2017: Number of Options Weighted-Average Grant Date Fair Value Non-vested options outstanding at August 31, 2016 36,000 $ 2.89 Granted 142,500 3.67 Vested (31,000 ) 2.92 Forfeited - - Non-vested options outstanding at August 31, 2017 147,500 $ 3.64 All non-vested options are expected to vest. The total fair value of options vested during the fiscal years ended August 31, 2017, 2016 and 2015 was $90,500 $216,900, and $280,700, respectively. The weighted average grant date fair value of options granted during the fiscal years ended August 31, 2017, 2016 and 2015 was $3.67, $2.89, and $2.78, respectively. Share-based compensation expense for the fiscal years ended August 31, 2017, 2016 and 2015, was $233,200, $219,900, and $240,000, respectively. At August 31, 2017, the Company had unrecognized expenses relating to non-vested options that are expected to vest totaling $335,800. Warrants As of August 31, 2017, the Company had outstanding warrants to purchase 92 shares of common stock at an exercise price of $1.80 per share. These warrants expire six months from the earlier of: (i) The date all of the Export Water is sold or otherwise disposed of, (ii) The date the CAA is terminated with respect to the original holder of the warrant, or (iii) The date on which the Company makes the final payment pursuant to Section 2.1(r) of the CAA. No warrants were exercised during fiscal 2017, 2016 or 2015. |
SIGNIFICANT CUSTOMERS
SIGNIFICANT CUSTOMERS | 12 Months Ended |
Aug. 31, 2017 | |
Significant Customers | |
SIGNIFICANT CUSTOMERS | Pursuant to the Rangeview Water Agreements and an Export Service Agreement entered into with the Rangeview District dated June 19, 2017, the Company provides water and wastewater services on the Rangeview District’s behalf to the Rangeview District’s customers. Sales to the Rangeview District accounted for 25%, 67% and 19% of the Company’s total water and wastewater revenues for the fiscal years ended August 31, 2017, 2016 and 2015, respectively. The Rangeview District had one significant customer, the Ridgeview Youth Services Center. The Rangeview District’s significant customer accounted for 21%, 55%, and 16% of the Company’s total water and wastewater revenues for the fiscal years ended August 31, 2017, 2016 and 2015, respectively. Revenues from two other customers directly and indirectly represented approximately 55%, 1%, and 75% of the Company’s water and wastewater revenues for the fiscal years ended August 31, 2017, 2016 and 2015, respectively. Of the two customers, one customer represented 25%, nil, and nil of the Company's water and wastewater revenues for the fiscal years ended August 31, 2017, 2016, and 2015, respectively, and the other customer represented 30%, 1%, and 75% of the Company's water and wastewater revenues for the fiscal years ended August 31, 2017, 2016, and 2015, respectively. The Company had accounts receivable from the Rangeview District which accounted for 50% and 74% of the Company’s trade receivables balances at August 31, 2017 and 2016, respectively. Of the trade receivables from the Rangeview District, approximately 50% is related to water tap sales and 50% is related to water and wastewater service sales. The Company had accounts receivable from one other customer of approximately 46% and 16% at August 31, 2017 and 2016, respectively. Accounts receivable from the Rangeview District’s largest customer accounted for 19% and 63% of the Company’s water and wastewater trade receivables as of August 31, 2017 and 2016, respectively. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Aug. 31, 2017 | |
Income Taxes | |
INCOME TAXES | Deferred income taxes reflect the tax effects of net operating loss carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets as of August 31 are as follows: For the Fiscal Years Ended August 31, 2017 2016 Deferred tax assets: Net operating loss carryforwards $ 2,893,600 $ 2,393,200 Deferred revenue 316,400 344,300 Depreciation and depletion 289,200 247,400 Other 88,000 65,600 Valuation allowance (3,587,200 ) (3,050,500 ) Net deferred tax asset $ - $ - The Company has recorded a valuation allowance against the deferred tax assets as it is more likely than not that all or some portion of specific deferred tax assets will not be realized, primarily due to the fact that the Company has generated a cumulative net loss position over the past three fiscal years. Income taxes computed using the federal statutory income tax rate differs from our effective tax rate primarily due to the following for the fiscal years ended August 31: For the Fiscal Years Ended August 31, 2017 2016 2015 Expected benefit from federal taxes at statutory rate of 34% $ (571,500 ) $ (420,300 ) $ (195,500 ) State taxes, net of federal benefit (55,500 ) (40,700 ) (19,000 ) Permanent and other differences 90,300 84,500 91,900 Change in valuation allowance 536,700 376,500 122,600 Total income tax expense / (benefit) $ - $ - $ - At August 31, 2017, the Company has $7.9 No net operating loss carryforwards expired during the fiscal years ended August 31, 2017, 2016 or 2015. |
401(k) PLAN
401(k) PLAN | 12 Months Ended |
Aug. 31, 2017 | |
K Plan | |
401(k) PLAN | The Company maintains a Pure Cycle Corporation 401(k) Profit Sharing Plan (the “Plan”), a defined contribution retirement plan for the benefit of its employees. The Plan is currently a salary deferral only plan, and at this time the Company does not match employee contributions. The Company pays the annual administrative fees of the Plan, and the Plan participants pay the investment fees. The Plan is open to all employees, age 21 or older, who have been employees of the Company for at least six months. During the fiscal years ended August 31, 2017, 2016 and 2015, the Company paid fees of $ 4,200, $5,000 and $3,800, respectively, for the administration of the Plan. |
LITIGATION LOSS CONTINGENCIES
LITIGATION LOSS CONTINGENCIES | 12 Months Ended |
Aug. 31, 2017 | |
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 Company’s financial position, results of operations or cash flows. |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Aug. 31, 2017 | |
Segment Information | |
SEGMENT REPORTING | Prior to the sale of the Company’s 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. Currently the Company operates its wholesale water and wastewater services segment as its only line of business. The wholesale water and wastewater services business includes selling water service to customers, which is then provided by the Company using water rights owned or controlled by the Company and developing infrastructure to divert, treat and distribute that water and collect, treat and reuse wastewater. As part of the Company’s Sky Ranch development, the company is entering into contracts for the sale of lots, see Note 16 - Subsequent Event for further discussion. The Company anticipates that the real estate sales will be a separate segment in fiscal 2018. As of and for the year ended August 31, 2017, there were no real estate revenues, or profit, and carrying cost of the real estate is less than 10% of the Company’s total assets. Oil and gas royalties and licenses, are a passive activity, and not an operating business activity, and therefore, are not classified as a segment. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Aug. 31, 2017 | |
Related Party Transactions | |
RELATED PARTY TRANSACTIONS | On December 16, 2009, the Company entered into a Participation Agreement with the Rangeview District, whereby the Company agreed to provide funding to the Rangeview District in connection with the Rangeview District joining the South Metro Water Supply Authority (“SMWSA”). The Company provided funding of $198,200, $113,600 and $78,600 for the fiscal years ended August 31, 2017, 2016, and 2015, respectively. Through the WISE Financing Agreement, to date the Company has made payments totaling $3,114,100 to purchase certain rights to use existing water transmission and related infrastructure acquired by the WISE project and to construct the connection to the WISE system. The amounts are included in Investments in Water and Water Systems on the Company’s balance sheet as of August 31, 2017. The Company anticipates spending the following over the next five fiscal years to fund the Rangeview District’s purchase of its share of the water transmission line and additional facilities, water and related assets for WISE and to fund operations and water deliveries related to WISE: Estimated WISE Costs For the Fiscal Years Ended August 31, 2018 2019 2020 2021 2022 Operations $ 51,800 $ 51,800 $ 51,800 $ 51,800 $ 51,800 Water Delivery 232,000 348,000 493,000 738,000 897,000 Capital 338,100 1,555,400 74,200 - - Other 23,600 86,600 23,600 68,300 83,200 $ 645,500 $ 2,041,800 $ 642,600 $ 858,100 $ 1,032,000 The Company has outstanding loans of $991,900 to the Rangeview District and Sky Ranch Districts (defined below), which are related parties, as discussed below: The Rangeview District is a quasi-municipal corporation and political subdivision of Colorado formed in 1986 for the purpose of providing water and wastewater service to the Lowry Range and other approved areas. The Rangeview District is governed by an elected board of directors. Eligible voters and persons eligible to serve as a director of Rangeview must own an interest in property within the boundaries of Rangeview. The Company owns certain rights and real property interests which encompass the current boundaries of Rangeview. Sky Ranch District Nos. 1, 3, 4 and 5 are quasi-municipal corporations and political subdivisions of Colorado formed for the purpose of providing service to the Company’s Sky Ranch property (the “Sky Ranch Districts”). The current directors of the Rangeview District and Sky Ranch Districts consist of three employees of the Company and two independent board members. The Rangeview District In 1995, the Company extended a loan to the Rangeview District. The loan provided for borrowings of up to $250,000, is unsecured, and bears interest based on the prevailing prime rate plus 2% (6.25% at August 31, 2017). The maturity date of the loan is December 31, 2020. Beginning in January 2014, the Rangeview District and the Company entered into a funding agreement that allows the Company to continue to provide funding to the Rangeview 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 Lease remains in effect. The $776,400 balance of the notes receivable at August 31, 2017, includes borrowings of $393,400 and accrued interest of $383,000. The $628,500 balance of the notes receivable at August 31, 2016, includes borrowings of $260,200 and accrued interest of $368,300. Sky Ranch Metropolitan District Nos. 1, 3, 4 and 5 The Company has been providing funding to the Sky Ranch Districts. Each year, beginning in 2012, the Company has entered into an Operation Funding Agreement with one of the Sky Ranch Districts obligating the Company to advance funding to the Sky Ranch District for the operation and maintenance expenses for the then current calendar year. All payments are subject to annual appropriations by the Sky Ranch District in its absolute discretion. The advances by the Company accrue interest at a rate of 8% per annum from the date of the advance. In November 2014, but effective as of January 1, 2014, the Company entered into a Facilities Funding and Acquisition Agreement with a Sky Ranch District obligating the Company to either finance district improvements or to construct improvements on behalf of the Sky Ranch District subject to reimbursement. Improvements subject to this agreement are determined pursuant to a mutually agreed upon budget. Each year in September, the parties are to mutually determine the improvements required for the following year and finalize a budget by the end of October. Each advance or reimbursable expense accrues interest at a rate of 8% per annum. No payments are required by the Sky Ranch Districts unless and until the Sky Ranch Districts issue bonds in an amount sufficient to reimburse the Company for all or a portion of the advances and costs incurred. The $215,500 balance of the receivable at August 31, 2017, includes advances of $195,000 and accrued interest of $20,500. Upon the Sky Ranch District’s ratification of payment, the amount was reclassified to short-term and was recorded as part of Notes receivable – related parties. Subsequent to fiscal year end, the Sky Ranch District paid the outstanding note receivable to the Company. Nelson Pipeline Constructors LLC On October 12, 2016, the Audit Committee of the Company’s board of directors approved accepting a bid submitted by Nelson Pipeline Constructors LLC to construct a pipeline connecting its Sky Ranch water system to Rangeview’s water system for approximately $4.2 million (the “Nelson Bid”). Nelson Pipeline Constructors LLC is a wholly owned subsidiary of Nelson Infrastructure Services LLC, a company in which Patrick J. Beirne owns a 50% interest. In addition, Mr. Beirne, a director of Pure Cycle, is Chairman and Chief Executive Officer of each of Nelson Pipeline Constructors LLC and Nelson Infrastructure Services LLC. Since Mr. Nelson is the 50% owner of the parent company of Nelson Pipeline Constructors LLC, Mr. Nelson’s interest in the transaction is approximately $2.1 million without taking into account any profit or loss from the Nelson Bid. Pursuant to the Company’s policies for review and approval of related party transactions, the Nelson Bid was reviewed and approved by the Audit Committee and by the board of directors, with Mr. Beirne abstaining. |
UNAUDITED QUARTERLY FINANCIAL D
UNAUDITED QUARTERLY FINANCIAL DATA | 12 Months Ended |
Aug. 31, 2017 | |
Unaudited Quarterly Financial Data | |
UNAUDITED QUARTERLY FINANCIAL DATA | Quarterly results of operations 2017 2016 Three months ended Three months ended 30 Nov 28 Feb 31 May 31 Aug 30 Nov 29 Feb 31 May 31 Aug (In thousands, except per share data) Total revenues $ 199 $ 237 $ 134 $ 658 $ 126 $ 76 $ 101 $ 149 Gross margin 54 68 (33 ) 336 (7 ) (44 ) (34 ) 8 Operating loss (464 ) (455 ) (631 ) (581 ) (472 ) (557 ) (533 ) (618 ) Discontinued operations (19 ) (3 ) (11 ) 1 (3 ) (29 ) (61 ) 13 Net loss $ (338 ) $ (317 ) $ (554 ) $ (501 ) $ (97 ) $ (271 ) $ (422 ) $ (521 ) Basic and diluted loss per share $ (0.01 ) $ (0.01 ) $ (0.02 ) $ (0.02 ) * $ (0.01 ) $ (0.02 ) $ (0.03 ) * Amount is less than $.01 per share The following item had a significant impact on the Company’s net income (loss): ● In fiscal 2017, the Company sold approximately $478,500 ($80,300, $141,500 and $256,700 in 2017 fiscal Q1, Q2 and Q4, respectively) in water related to oil and gas activities as compared to nil in fiscal 2016. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 12 Months Ended |
Aug. 31, 2017 | |
Subsequent Event | |
SUBSEQUENT EVENT | In June 2017, The Company entered into purchase and sale agreements (collectively, the “Purchase and Sale Contracts”) with three separate home builders pursuant to which the Company agreed to sell, and each builder agreed to purchase, a certain number (totaling 506) of single-family, detached residential lots at the Sky Ranch property. Each builder is required to purchase water and sewer taps for the lots from the Rangeview District. The closing of the transactions contemplated by each Purchase and Sale Contract is subject to customary closing conditions, including, among others, the builder’s completion to its satisfaction of a title review and other due diligence of the property, the accuracy of the representations and warranties made by the Company in the Purchase and Sale Contract, and a commitment by the title company to issue to the builder a title policy, subject to certain conditions. Each builder had a 60-day due diligence period during which it had the right to terminate the Purchase and Sale Contract and receive a full refund of its earnest money deposit. The initial due diligence period was extended. Subsequent to year end, on November 10, 2017, each builder completed its due diligence period and agreed to continue with its respective Purchase and Sale Contract. The Company is obligated, pursuant to the Purchase and Sale Contracts, or separate Lot Development Agreements (the “Lot Development Agreements” and, together with the Purchase and Sale Contracts, the “Builder Contracts”), to construct infrastructure and other improvements, such as roads, curbs and gutters, park amenities, sidewalks, street and traffic signs, water and sanitary sewer mains and stubs, storm water management facilities, and lot grading improvements for delivery of finished lots to each builder. Pursuant to the Builder Contracts, the Company must cause the Rangeview District to install and construct off-site infrastructure improvements (i.e., drainage and storm water retention ponds, a wastewater reclamation facility, and wholesale water facilities) for the provision of water and wastewater service to the property. In conjunction with approvals with Arapahoe County for the Sky Ranch project, The Company and/or the Rangeview District and the Sky Ranch Districts are obligated to deposit into an account the anticipated costs to install and construct substantially all the off-site infrastructure improvements (which include drainage, wholesale water and wastewater, and entry roadway), which is estimated to be approximately $10.2 million. The Company estimates that the development of the finished lots for the first phase (506 lots) of Sky Ranch will require an estimated total capital of approximately $27.8 million and estimates lot sales to home builders will generate approximately $35 million providing a projected margin on lots of approximately $7.2 million. The cost of developing lots together with the sale of finished lots are expected to occur over several quarters and the timing of cash flows will include certain milestone deliveries, including but not limited to completion of governmental approvals, installation of improvements, and completion of lot deliveries. Utility revenues are derived from tap fees (which vary depending on lot size, house size, and amount of irrigated turf) and usage fees (which are monthly water and wastewater fees). The current Sky Ranch water tap fees are $26,650 (per SFE), and wastewater taps fees are $4,659 (per SFE). |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Aug. 31, 2017 | |
Presentation Of Interim Information Policies | |
Principles of Consolidation | The consolidated financial statements of the Company include the accounts of Pure Cycle Corporation and its majority-owned and controlled subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“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 reporting period. Estimates are used to account for certain items such as share-based compensation, deferred tax asset valuation, and the useful lives of assets, etc. 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 Company’s cash equivalents are comprised entirely of money market funds maintained at a reputable financial institution. At various times during the fiscal year ended August 31, 2017, the Company’s 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 treasury 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 $188,000 of investments classified as held-to-maturity at August 31, 2017, which represent certificates of deposit and U.S. treasury notes with maturity dates after August 31, 2018. Securities that the Company does not have the positive intent or ability to hold to maturity, including certificates of deposit, debt securities and any investments in equity securities, are classified as available-for-sale. 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, certificates of deposit 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 Participating Interests in Export Water Notes Receivable – Related Parties Off-Balance Sheet Instruments – Participating Interests in Export Water |
Cash Flows | The Company did not have any debt during the fiscal years ended August 31, 2017 and 2016, and therefore did not pay any interest during the fiscal years ended August 31, 2017 and 2016. The Company paid $441,400 in interest during the fiscal year ended August 31, 2015. The Company did not pay any income taxes during the fiscal year ended August 31, 2017. In the fiscal year ended August 31, 2016, the Company paid $292,700 for alternative minimum tax the Company owed as a result of the sale of the Company’s farm assets. The Company did not pay any income taxes during the fiscal year ended August 31, 2015. |
Trade Accounts Receivable | The Company records accounts receivable net of allowances for uncollectible accounts. Excluded from trade accounts receivable are balances due from discontinued operations. The Company has not recorded an allowance for uncollectible accounts in receivables from continuing operations for either of the periods ended August 31, 2017 or 2016. The allowance for uncollectible accounts was determined based on specific review of all past due accounts. |
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 Depreciation and Depletion Charges | Costs to construct water and wastewater systems that meet the Company’s 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 water 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. |
Tap Participation Fee Liability and Imputed Interest Expense | Pursuant to the Asset Purchase Agreement dated May 10, 2006 (the "Arkansas River Agreement") between the Company and HP A&M, the Company was obligated to pay HP A&M a defined percentage of a defined number of water tap fees the Company receives after the date of the Arkansas River Agreement (the "Tap Participation Fee" or "TPF"). The Tap Participation Fee was due and payable once the Company had sold a water tap and received the consideration due for such water tap. In 2015, the Company settled its claims against HP A&M relating to certain defaults. As a result of the settlement, the TPF liability was eliminated resulting in an increase in equity of approximately $3.3 million. |
Revenue Recognition | The Company generates revenues through one line of business. Its revenues are derived through its wholesale water and wastewater business, which is described below. The Company generates revenues through its wholesale water and wastewater business predominately from three sources: (i) monthly wholesale water usage fees and wastewater service fees, (ii) one-time water and wastewater tap fees and construction fees, and (iii) consulting fees. Because these items are separately delivered, the Company accounts for each of the items separately, as described below. i ) Monthly wholesale water and wastewater service fees – Water and Land Assets The Company recognizes wastewater processing revenues monthly based on a flat monthly fee and actual usage charges. The monthly wastewater service fees are shown net of amounts retained by the Rangeview District. Amounts recognized for water and wastewater services during the fiscal years ended August 31, 2017, 2016 and 2015 are presented in the statements of comprehensive loss. Costs of delivering water and providing wastewater service to customers are recognized as incurred. The Company delivered 94.6 ii) Water and wastewater tap fees and construction fees Proceeds from tap fees and construction fees are deferred upon receipt and recognized in income either upon completion of construction of infrastructure or ratably over time, depending on whether the Company owns the infrastructure constructed with the proceeds or a customer owns the infrastructure constructed with the proceeds. Tap and construction fees derived from agreements in which the Company will not own the assets constructed with the fees are recognized as revenue using the percentage-of-completion method. Costs of construction of the assets when the Company will not own the assets are recorded as construction costs. Tap and construction fees derived from agreements for which the Company will own the infrastructure are recognized as revenues ratably over the estimated accounting service life of the facilities constructed, starting at completion of construction, which could be in excess of 30 years. Costs of construction of the assets when the Company will own the assets are capitalized and depreciated over their estimated economic lives. From time to time, the Company enters into water service agreements to provide water service to customers. The Company owns the facilities which store, treat, and deliver the water and amortizes the cost of these facilities over their useful lives. The Company recognized $217,500 of tap fee revenue for the year ended August 31, 2017 and $14,300 of tap fee revenue in each of the two fiscal years ended August 31, 2016, and 2015. The Company recognized $41,500 of “Special Facilities” funding as revenue in each of the three fiscal years ended August 31, 2017, 2016, and 2015. As of August 31, 2017, the Company has deferred recognition of $1.1 million of tap and construction revenue from customer agreements, which will be recognized as revenue ratably through 2036. iii) Consulting fees |
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 are shown net of the royalties to the Land Board and the amounts retained by the Rangeview District. |
Oil and Gas Lease Payments | As further described in Note 4 – Water and Land Assets As of August 31, 2017, the Company recognized the remaining $19,000 of income related to the Rangeview Lease. Subsequent to August 31, 2017, the Company entered into a Paid-Up Oil and Gas Lease with Bison Oil and Gas, LLP, for the purpose of exploring for, developing, producing, and marketing oil and gas on the 40 acres of mineral estate the Company owns adjacent to the Lowry Range (the “Bison Lease”). Pursuant to the Bison Lease, on September 20, 2017, the Company received an up-front payment of $167,200, which will be recognized as income on a straight-line basis over three years (the term of the Bison Lease). During the three months ended February 28, 2015, two wells were drilled within the Company’s 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 fiscal years ended August 31, 2017, 2016 and 2015, the Company received $186,600, $343,600 and $412,600, respectively, in royalties attributable to these two wells. The Company classifies income from lease and royalty payments as Other income |
Share-based Compensation | The Company maintains a stock option plan for the benefit of its employees and directors. The Company records share-based compensation costs which are measured at the grant date based on the fair value of the award and are recognized as expense over the applicable vesting period of the stock award using the straight-line method. 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 during the fiscal years ended August 31, 2016 and 2015 had no impact on the income tax provisions. The Company recognized $233,200, $219,900, and $240,000 of share-based compensation expenses during the fiscal |
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 does not have any significant unrecognized tax benefits as of August 31, 2017. 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 2013 through fiscal 2016. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At August 31, 2017, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the fiscal years ended August 31, 2017, 2016 or 2015. |
Discontinued Operations | In August 2015, the Company sold approximately 14,600 acres of irrigated farm land and related Arkansas River water rights for proceeds of approximately $44.7 million, which were substantially all of the assets comprising the Company’s agricultural segment. Pursuant to the terms of the purchase and sale agreement, the Company continued to manage and receive the lease income until December 31, 2015. As a consequence of the sale, the operating results and the assets and liabilities of the discontinued operations, which formerly comprised the agricultural segment, are presented separately in the Company’s 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 Statements of Operations Fiscal years ended August 31, 2017 2016 2015 Farm revenues $ 6,800 $ 267,500 $ 1,127,200 Farm expenses (1,300 ) (77,100 ) (126,300 ) Gross profit 5,500 190,400 1,000,900 General and administrative expenses (46,900 ) (313,400 ) (760,200 ) Operating (loss) profit (41,400 ) (123,000 ) 240,700 Finance charges 9,400 38,400 21,700 (Loss) gain on sale of farm assets - 4,300 (22,108,200 ) Interest expense (1) - - (390,500 ) Interest imputed on the Tap Participation Fee payable to HP A&M (2) - - (23,800 ) Taxes (292,700 ) Loss from discontinued operations, net of taxes $ (32,000 ) $ (80,300 ) $ (22,552,800 ) (1) Interest expense represents interest accrued related to notes the Company had on its farm assets prior to the sale. All notes associated with the farms have been paid off, and thus the Company no longer incurs interest on such notes. (2) Imputed interest represents an estimate of the interest accrued on the Tap Participation Fee payable to High Plains A&M, LLC (“HP A&M”), which was eliminated as a result of the settlement with HP A&M during the three months ended February 28, 2015. As a result, the Company no longer accrues interest related to the Tap Participation Fee. The Company anticipates continued expenses through the end of calendar 2018 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 operations” and “Liabilities of discontinued operations” in the consolidated balance sheets. 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 Sheets August 31, 2017 2016 Assets: Trade accounts receivable $ 110,700 $ 227,100 Land held for sale (1) 450,600 450,300 Prepaid expenses - 2,900 Total assets $ 561,300 $ 680,300 Liabilities: Accrued liabilities 11,200 4,400 Total liabilities $ 11,200 $ 4,400 (1) Land Held for Sale. |
Loss per Common Share | Loss per common share is computed by dividing net loss by the weighted average number of shares outstanding during each period. Common stock options and warrants aggregating 465,600, 338,100, and 312,100 common share equivalents as of August 31, 2017, 2016 and 2015, respectively, have been 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 Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its financial statements and ensure that there are proper controls in place to ascertain that the Company’s financial statements properly reflect the change. New pronouncements assessed by the Company recently are discussed below: In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern 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 |
SUMMARY OF SIGNIFICANT ACCOUN24
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Summary Of Significant Accounting Policies Tables | |
Discontinued operations | Discontinued Operations Statements of Operations Fiscal years ended August 31, 2017 2016 2015 Farm revenues $ 6,800 $ 267,500 $ 1,127,200 Farm expenses (1,300 ) (77,100 ) (126,300 ) Gross profit 5,500 190,400 1,000,900 General and administrative expenses (46,900 ) (313,400 ) (760,200 ) Operating (loss) profit (41,400 ) (123,000 ) 240,700 Finance charges 9,400 38,400 21,700 (Loss) gain on sale of farm assets - 4,300 (22,108,200 ) Interest expense (1) - - (390,500 ) Interest imputed on the Tap Participation Fee payable to HP A&M (2) - - (23,800 ) Taxes (292,700 ) Loss from discontinued operations, net of taxes $ (32,000 ) $ (80,300 ) $ (22,552,800 ) (1) Interest expense represents interest accrued related to notes the Company had on its farm assets prior to the sale. All notes associated with the farms have been paid off, and thus the Company no longer incurs interest on such notes. (2) Imputed interest represents an estimate of the interest accrued on the Tap Participation Fee payable to High Plains A&M, LLC (“HP A&M”), which was eliminated as a result of the settlement with HP A&M during the three months ended February 28, 2015. As a result, the Company no longer accrues interest related to the Tap Participation Fee. Discontinued Operations Balance Sheets August 31, 2017 2016 Assets: Trade accounts receivable $ 110,700 $ 227,100 Land held for sale (1) 450,600 450,300 Prepaid expenses - 2,900 Total assets $ 561,300 $ 680,300 Liabilities: Accrued liabilities 11,200 4,400 Total liabilities $ 11,200 $ 4,400 (1) Land Held for Sale. |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Fair Value Measurements Tables | |
Schedule of fair value of assets and liabilities measured on a recurring basis | The following table provides information on the assets and liabilities measured at fair value on a recurring basis as of August 31, 2017: 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) Certificates of deposit $ 12,673,700 $ 12,694,500 $ — $ 12,673,700 $ — $ (20,800 ) U.S. treasuries 7,381,700 7,372,000 — 7,381,700 — 9,700 Subtotal $ 20,055,400 $ 20,066,500 $ — $ 20,055,400 $ — $ (11,100 ) Long-term investments 188,000 188,000 — 188,000 — — Total $ 20,243,400 $ 20,254,500 $ — $ 20,243,400 $ — $ (11,100 ) The following table provides information on the assets and liabilities measured at fair value on a recurring basis as of August 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) Certificates of deposit $ 6,050,500 $ 6,054,700 $ — $ 6,050,500 $ — $ (4,200 ) U.S. treasuries 17,125,900 17,115,200 — 17,125,900 — 10,700 Subtotal $ 23,176,400 $ 23,169,900 $ — $ 23,176,400 $ — $ 6,500 Long-term investments 6,853,300 6,856,700 — 6,853,300 — (3,400 ) Total $ 30,029,700 $ 30,026,600 $ — $ 30,029,700 $ — $ 3,100 |
WATER AND LAND ASSETS (Tables)
WATER AND LAND ASSETS (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Investments In Water Water Systems Land And Improvements Tables | |
Schedule of water and water systems | August 31, 2017 August 31, 2016 Costs Accumulated Depreciation and Depletion Costs Accumulated Depreciation and Depletion Rangeview water supply $ 14,529,600 $ (10,600 ) $ 14,444,600 $ (9,400 ) Sky Ranch water rights and other costs 6,725,000 (436,300 ) 6,607,400 (334,500 ) Fairgrounds water and water system 2,899,900 (974,800 ) 2,899,900 (886,800 ) Rangeview water system 1,639,000 (207,000 ) 1,624,800 (152,800 ) Water supply – other 4,058,900 (401,300 ) 3,703,000 (297,800 ) Wild Pointe service rights 1,631,700 (213,000 ) - - Sky Ranch pipeline 4,700,000 (39,200 ) Construction in progress 673,800 - 723,500 - Totals 36,857,900 (2,282,200 ) 30,003,200 (1,681,300 ) Net investments in water and water systems $ 34,575,700 $ 28,321,900 |
PARTICIPATING INTERESTS IN EX27
PARTICIPATING INTERESTS IN EXPORT WATER (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Participating Interests In Export Water Tables | |
Schedule of remaining third party obligation | Export Water Proceeds Received Initial Export Water Proceeds to Pure Cycle Total Potential Third-party Obligation Participating Interests Liability Contingency Original balances $ - $ 218,500 $ 31,807,700 $ 11,090,600 $ 20,717,100 Activity from inception until August 31, 2014: Acquisitions - 28,042,500 (28,042,500 ) (9,790,000 ) (18,252,500 ) Relinquishment - 2,386,400 (2,386,400 ) (832,100 ) (1,554,300 ) Option payments - Sky Ranch and The Hills at Sky Ranch 110,400 (42,300 ) (68,100 ) (23,800 ) (44,300 ) Arapahoe County tap fees (1) 533,000 (373,100 ) (159,900 ) (55,800 ) (104,100 ) Export Water sale payments 410,500 (305,900 ) (104,600 ) (36,300 ) (68,300 ) Balance at August 31, 2015 1,053,900 29,926,100 1,046,200 352,600 693,600 Fiscal 2016 activity: 207,900 (183,200 ) (24,700 ) (8,600 ) (16,100 ) Balance at August 31, 2016 1,261,800 29,742,900 1,021,500 344,000 677,500 Fiscal 2017 activity: Export Water sale payments 58,100 (51,200 ) (6,900 ) (2,400 ) (4,500 ) Balance at August 31, 2017 $ 1,319,900 $ 29,691,700 $ 1,014,600 $ 341,600 $ 673,000 (1) The Arapahoe County tap fees are less $34,522 in royalties paid to the Land Board. |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Shareholders Equity Tables | |
Schedule of stock option activity | Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Approximate Aggregate Intrinsic Value Outstanding at August 31, 2016 338,000 $ 4.77 Granted 142,500 $ 5.47 Exercised - $ - Forfeited or expired (15,000 ) $ 7.88 Outstanding at August 31, 2017 465,500 $ 4.88 6.30 $ 1,007,740 Options exercisable at August 31, 2017 318,000 $ 4.63 4.98 $ 1,358,140 |
Schedule of activity and value of non-vested options | Number of Options Weighted-Average Grant Date Fair Value Non-vested options outstanding at August 31, 2016 36,000 $ 2.89 Granted 142,500 3.67 Vested (31,000 ) 2.92 Forfeited - - Non-vested options outstanding at August 31, 2017 147,500 $ 3.64 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Income Taxes Tables | |
Schedule of deferred tax assets | For the Fiscal Years Ended August 31, 2017 2016 Deferred tax assets: Net operating loss carryforwards $ 2,893,600 $ 2,393,200 Deferred revenue 316,400 344,300 Depreciation and depletion 289,200 247,400 Other 88,000 65,600 Valuation allowance (3,587,200 ) (3,050,500 ) Net deferred tax asset $ - $ - |
Schedule of income tax reconciliation | For the Fiscal Years Ended August 31, 2017 2016 2015 Expected benefit from federal taxes at statutory rate of 34% $ (571,500 ) $ (420,300 ) $ (195,500 ) State taxes, net of federal benefit (55,500 ) (40,700 ) (19,000 ) Permanent and other differences 90,300 84,500 91,900 Change in valuation allowance 536,700 376,500 122,600 Total income tax expense / (benefit) $ - $ - $ - |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Related Party Transactions Tables | |
Related party transactions | Estimated WISE Costs For the Fiscal Years Ended August 31, 2018 2019 2020 2021 2022 Operations $ 51,800 $ 51,800 $ 51,800 $ 51,800 $ 51,800 Water Delivery 232,000 348,000 493,000 738,000 897,000 Capital 338,100 1,555,400 74,200 - - Other 23,600 86,600 23,600 68,300 83,200 $ 645,500 $ 2,041,800 $ 642,600 $ 858,100 $ 1,032,000 |
UNAUDITED QUARTERLY FINANCIAL31
UNAUDITED QUARTERLY FINANCIAL DATA (Tables) | 12 Months Ended |
Aug. 31, 2017 | |
Unaudited Quarterly Financial Data Tables | |
Quarterly results of operations | Quarterly results of operations 2017 2016 Three months ended Three months ended 30 Nov 28 Feb 31 May 31 Aug 30 Nov 29 Feb 31 May 31 Aug (In thousands, except per share data) Total revenues $ 199 $ 237 $ 134 $ 658 $ 126 $ 76 $ 101 $ 149 Gross margin 54 68 (33 ) 336 (7 ) (44 ) (34 ) 8 Operating loss (464 ) (455 ) (631 ) (581 ) (472 ) (557 ) (533 ) (618 ) Discontinued operations (19 ) (3 ) (11 ) 1 (3 ) (29 ) (61 ) 13 Net loss $ (338 ) $ (317 ) $ (554 ) $ (501 ) $ (97 ) $ (271 ) $ (422 ) $ (521 ) Basic and diluted loss per share $ (0.01 ) $ (0.01 ) $ (0.02 ) $ (0.02 ) * $ (0.01 ) $ (0.02 ) $ (0.03 ) * Amount is less than $.01 per share |
ORGANIZATION (Details Narrative
ORGANIZATION (Details Narrative) - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 |
Organization Details Narrative | ||||
Cash and cash equivalents | $ 5,575,823 | $ 4,697,288 | $ 37,089,041 | $ 1,749,558 |
Working capital | $ 26,200,000 |
SUMMARY OF SIGNIFICANT ACCOUN33
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||||||
Aug. 31, 2017 | May 31, 2017 | Feb. 28, 2017 | Nov. 30, 2016 | Aug. 31, 2016 | May 31, 2016 | Feb. 29, 2016 | Nov. 30, 2015 | Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | ||
Summary Of Significant Accounting Policies Details | ||||||||||||
Farm revenues | $ 6,800 | $ 267,500 | $ 1,127,200 | |||||||||
Farm expenses | (1,300) | (77,100) | (126,300) | |||||||||
Gross profit | 5,500 | 190,400 | 1,000,900 | |||||||||
General and administrative expenses | (46,900) | (313,400) | (760,200) | |||||||||
Operating (loss) profit | (41,400) | (123,000) | 240,700 | |||||||||
Finance charges | 9,400 | 38,400 | 21,700 | |||||||||
(Loss) gain on sale of farm assets | 0 | 4,300 | (22,108,200) | |||||||||
Interest expense | [1] | 0 | 0 | (390,500) | ||||||||
Interest imputed on the Tap Participation Fee payable to HP A&M | [2] | 0 | 0 | (23,800) | ||||||||
Taxes | 0 | 0 | (292,700) | |||||||||
Loss from discontinued operations | $ 1 | $ (11) | $ (3) | $ (19) | $ 13 | $ (61) | $ (29) | $ (3) | (32,025) | (80,348) | $ (22,552,801) | |
Assets: | ||||||||||||
Trade accounts receivable | 110,700 | 227,100 | 110,700 | 227,100 | ||||||||
Land held for sale | [3] | 450,600 | 450,300 | 450,600 | 450,300 | |||||||
Prepaid expenses | 0 | 2,900 | 0 | 2,900 | ||||||||
Total assets | 561,300 | 680,300 | 561,300 | 680,300 | ||||||||
Liabilities: | ||||||||||||
Accrued liabilities | 11,200 | 4,400 | 11,200 | 4,400 | ||||||||
Total liabilities | $ 11,200 | $ 4,400 | $ 11,200 | $ 4,400 | ||||||||
[1] | Interest expense represents interest accrued related to notes the Company had on its farm assets prior to the sale. All notes associated with the farms have been paid off, and thus the Company no longer incurs interest on such notes. | |||||||||||
[2] | Imputed interest represents an estimate of the interest accrued on the Tap Participation Fee payable to High Plains A&M, LLC ("HP A&M"), which was eliminated as a result of the settlement with HP A&M during the three months ended February 28, 2015. As a result, the Company no longer accrues interest related to the Tap Participation Fee. | |||||||||||
[3] | Land Held for Sale. During the fiscal quarter ended November 30, 2015, the Company purchased three farms totaling 700 acres for approximately $451,000. The farms were acquired to correct dry-up covenant issues related to water only farms to obtain the release of the escrow funds related to the Company's farm sale to Arkansas River Farms, LLC. The Company intends to sell the farms in due course and has classified the farms as long-term assets. |
SUMMARY OF SIGNIFICANT ACCOUN34
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 12 Months Ended | ||
Aug. 31, 2017USD ($)sharesgal | Aug. 31, 2016USD ($)sharesgal | Aug. 31, 2015USD ($)sharesgal | |
Water delivered to customers | gal | 94,600,000 | 33,900,000 | 97,500,000 |
Water tap fees recognized | $ 217,515 | $ 14,294 | $ 14,294 |
Special facility (deferred construction) funding recognized | $ 41,508 | $ 41,508 | $ 41,508 |
Antidilutive securities excluded from earnings per share calculation | shares | 465,600 | 338,100 | 312,100 |
Interest | $ 0 | $ 0 | $ 441,400 |
Allowance for uncollectible accounts | 0 | 0 | |
Stock-based compensation expense | 233,245 | 219,886 | 239,986 |
Oil And Gas Lease | |||
Royalty revenue | 186,600 | 343,600 | 412,600 |
Lease revenue from up-front payments | $ 19,000 | $ 360,800 | $ 645,700 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 |
Long-term investments | $ 187,975 | $ 6,853,276 |
Fair Value | ||
Certificates of deposit | 12,673,700 | 6,050,500 |
U.S. treasuries | 7,381,700 | 17,125,900 |
Subtotal | 20,055,400 | 23,176,400 |
Long-term investments | 188,000 | 6,853,300 |
Total | 20,243,400 | 30,029,700 |
Cost/Other Value | ||
Certificates of deposit | 12,694,500 | 6,054,700 |
U.S. treasuries | 7,372,000 | 17,115,200 |
Subtotal | 20,066,500 | 23,169,900 |
Long-term investments | 188,000 | 6,856,700 |
Total | 20,254,500 | 30,026,600 |
Accumulated Unrealized Gains and (Losses) | ||
Certificates of deposit | (20,800) | (4,200) |
U.S. treasuries | 9,700 | 10,700 |
Subtotal | (11,100) | 6,500 |
Long-term investments | 0 | (3,400) |
Total | (11,100) | 3,100 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ||
Certificates of deposit | 0 | 0 |
U.S. treasuries | 0 | 0 |
Subtotal | 0 | 0 |
Long-term investments | 0 | 0 |
Total | 0 | 0 |
Significant Other Observable Inputs (Level 2) | ||
Certificates of deposit | 12,673,700 | 6,050,500 |
U.S. treasuries | 7,381,700 | 17,125,900 |
Subtotal | 20,055,400 | 23,176,400 |
Long-term investments | 188,000 | 6,853,300 |
Total | 20,243,400 | 30,029,700 |
Significant Unobservable Inputs (Level 3) | ||
Certificates of deposit | 0 | 0 |
U.S. treasuries | 0 | 0 |
Subtotal | 0 | 0 |
Long-term investments | 0 | 0 |
Total | $ 0 | $ 0 |
WATER AND LAND ASSETS (Details)
WATER AND LAND ASSETS (Details) - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 |
Costs | $ 36,857,900 | $ 30,003,200 |
Accumulated Depreciation and Depletion | (2,282,200) | (1,681,300) |
Net investments in water and water systems | 34,575,713 | 28,321,926 |
Rangeview Water Supply | ||
Costs | 14,529,600 | 14,444,600 |
Accumulated Depreciation and Depletion | (10,600) | (9,400) |
Sky Ranch Water Rights And Other Costs | ||
Costs | 6,725,000 | 6,607,400 |
Accumulated Depreciation and Depletion | (436,300) | (334,500) |
Fairgrounds Water And Water System | ||
Costs | 2,899,900 | 2,899,900 |
Accumulated Depreciation and Depletion | (974,800) | (886,800) |
Rangeview Water System | ||
Costs | 1,639,000 | 1,624,800 |
Accumulated Depreciation and Depletion | (207,000) | (152,800) |
Water Supply Other | ||
Costs | 4,058,900 | 3,703,000 |
Accumulated Depreciation and Depletion | (401,300) | (297,800) |
Wild Pointe Service Rights | ||
Costs | 1,631,700 | 0 |
Accumulated Depreciation and Depletion | (213,000) | 0 |
Sky Ranch Pipeline | ||
Costs | 4,700,000 | 0 |
Accumulated Depreciation and Depletion | (39,200) | 0 |
Construction in Progress | ||
Costs | 673,800 | 723,500 |
Accumulated Depreciation and Depletion | $ 0 | $ 0 |
WATER AND LAND ASSETS (Detail N
WATER AND LAND ASSETS (Detail Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Investments In Water Water Systems Land And Improvements Detail Narrative | |||
Depletion | $ 1,300 | $ 500 | $ 7,000 |
Depreciation | $ 733,000 | $ 419,600 | $ 340,300 |
PARTICIPATING INTERESTS IN EX38
PARTICIPATING INTERESTS IN EXPORT WATER (Details) - USD ($) | 12 Months Ended | 48 Months Ended | |||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2013 | ||
Export Water Proceeds Received | |||||
Remaining Third Party Obligation: | |||||
Balance, original | $ 0 | ||||
Balance, beginning | $ 1,261,800 | $ 1,053,900 | |||
Acquisitions | 0 | ||||
Relinquishment | 0 | ||||
Option payments | 110,400 | ||||
Arapahoe Tap fees | [1] | 533,000 | |||
Export Water Sale Payments | 58,100 | 207,900 | 410,500 | ||
Balance, ending | 1,319,900 | 1,261,800 | 1,053,900 | ||
Initial Export Water Proceeds To Pure Cycle | |||||
Remaining Third Party Obligation: | |||||
Balance, original | 218,500 | ||||
Balance, beginning | 29,742,900 | 29,926,100 | |||
Acquisitions | 28,042,500 | ||||
Relinquishment | 2,386,400 | ||||
Option payments | (42,300) | ||||
Arapahoe Tap fees | [1] | (373,100) | |||
Export Water Sale Payments | (51,200) | (183,200) | (305,900) | ||
Balance, ending | 29,691,700 | 29,742,900 | 29,926,100 | ||
Total Potential Third Party Obligation | |||||
Remaining Third Party Obligation: | |||||
Balance, original | $ 31,807,700 | ||||
Balance, beginning | 1,021,500 | ||||
Acquisitions | (28,042,500) | ||||
Relinquishment | (2,386,400) | ||||
Option payments | (68,100) | ||||
Arapahoe Tap fees | [1] | (159,900) | |||
Export Water Sale Payments | (6,900) | 24,700 | (104,600) | ||
Balance, ending | 1,014,600 | 1,021,500 | $ 1,046,200 | ||
Participating Interests Liability | |||||
Remaining Third Party Obligation: | |||||
Balance, original | 11,090,600 | ||||
Balance, beginning | 344,000 | 352,600 | |||
Acquisitions | (9,790,000) | ||||
Relinquishment | (832,100) | ||||
Option payments | (23,800) | ||||
Arapahoe Tap fees | [1] | (55,800) | |||
Export Water Sale Payments | (2,400) | (8,600) | (36,300) | ||
Balance, ending | 341,600 | 344,000 | 352,600 | ||
Contingency | |||||
Remaining Third Party Obligation: | |||||
Balance, original | 2,717,100 | ||||
Balance, beginning | 677,500 | 693,600 | |||
Acquisitions | (18,252,500) | ||||
Relinquishment | (1,554,300) | ||||
Option payments | (44,300) | ||||
Arapahoe Tap fees | [1] | (104,100) | |||
Export Water Sale Payments | (4,500) | (16,100) | (68,300) | ||
Balance, ending | $ 673,000 | $ 677,500 | $ 693,600 | ||
[1] | The Arapahoe County tap fees are less $34,522 in royalties paid to the Land Board. |
ACCRUED LIABILITIES (Detail Nar
ACCRUED LIABILITIES (Detail Narrative) - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 |
Accrued Liabilities Detail Narrative | ||
Accrued liabilities | $ 380,852 | $ 242,624 |
Accrued compensation | 265,000 | 160,000 |
Estimated property taxes | 27,000 | 5,700 |
Professional Fees | 48,500 | 18,000 |
Operating payables | $ 40,500 | $ 28,900 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) - USD ($) | 12 Months Ended | |
Aug. 31, 2017 | Aug. 31, 2016 | |
Number of options | ||
Outstanding, beginning | 338,000 | |
Granted | 142,500 | |
Exercised | 0 | 0 |
Forfeited or expired | (15,000) | |
Outstanding, ending | 465,500 | 338,000 |
Exercisable | 318,000 | |
Weighted average exercise price | ||
Outstanding, beginning | $ 4.77 | |
Granted | 5.47 | |
Exercised | 0 | |
Forfeited or expired | 7.88 | |
Outstanding, ending | 4.88 | $ 4.77 |
Exercisable | $ 4.63 | |
Weighted average remaining contractual term | ||
Outstanding, ending | 6 years 3 months 18 days | |
Exercisable | 4 years 11 months 23 days | |
Approximate aggregate intrinsic value | ||
Outstanding, ending | $ 1,007,740 | |
Exercisable | $ 1,358,140 |
SHAREHOLDERS' EQUITY (Details 1
SHAREHOLDERS' EQUITY (Details 1) - $ / shares | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Number of options | |||
Outstanding, beginning | 36,000 | ||
Granted | 142,500 | ||
Vested | (31,000) | ||
Forfeited | 0 | ||
Outstanding, ending | 147,500 | 36,000 | |
Weighted average grant date fair value | |||
Outstanding, beginning | $ 2.89 | ||
Granted | 3.67 | $ 2.89 | $ 2.78 |
Vested | 2.92 | ||
Forfeited | 0 | ||
Outstanding, ending | $ 3.64 | $ 2.89 |
SHAREHOLDERS' EQUITY (Details N
SHAREHOLDERS' EQUITY (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Disclosure Shareholders Equity Details Narrative Abstract | |||
Fair value of options vested | $ 90,500 | $ 216,900 | $ 280,700 |
Weighted average grant date fair value of options granted | $ 3.67 | $ 2.89 | $ 2.78 |
Stock-based compensation | $ 233,200 | $ 219,900 | $ 240,000 |
Series B Preferred stock, liquidation preference value | $ 432,513 | $ 432,513 |
SIGNIFICANT CUSTOMERS (Details
SIGNIFICANT CUSTOMERS (Details Narrative) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Sales | The District | |||
Concentration Risk Percentage | 25.00% | 67.00% | 19.00% |
Sales | The District's Significant Customer | |||
Concentration Risk Percentage | 21.00% | 55.00% | 16.00% |
Sales | Oil and Gas Industry Customer | |||
Concentration Risk Percentage | 55.00% | 1.00% | 75.00% |
Accounts Receivable | The District | |||
Concentration Risk Percentage | 50.00% | 74.00% | |
Accounts Receivable | The District's Significant Customer | |||
Concentration Risk Percentage | 19.00% | 63.00% | |
Accounts Receivable | The District's Significant Customer | |||
Concentration Risk Percentage | 46.00% | 16.00% |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | Aug. 31, 2017 | Aug. 31, 2016 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 2,893,600 | $ 2,393,200 |
Deferred revenue | 316,400 | 344,300 |
Depreciation and depletion | 289,200 | 247,400 |
Other | 88,000 | 65,600 |
Valuation allowance | (3,587,200) | (3,050,500) |
Net deferred tax asset | $ 0 | $ 0 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Income Taxes Details 1 | |||
Expected benefit from federal taxes at statutory rate of 34% | $ (571,500) | $ (420,300) | $ (195,500) |
State taxes, net of federal benefit | (55,500) | (40,700) | (19,000) |
Permanent and other differences | 90,300 | 84,500 | 91,900 |
Change in valuation allowance | 536,700 | 376,500 | 122,600 |
Total income tax expense / (benefit) | $ 0 | $ 0 | $ 0 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
Income Taxes Details Narrative | |||
Net operating loss carryforwards | $ 7,900,000 | ||
Net operating loss carryforwards expired | $ 0 | $ 0 | $ 0 |
401(k) PLAN (Details Narrative)
401(k) PLAN (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | |
K Plan Details Narrative | |||
Administrative fees paid for plan | $ 4,200 | $ 5,000 | $ 3,800 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) | Aug. 31, 2017USD ($) |
2,018 | $ 645,500 |
2,019 | 2,041,800 |
2,020 | 642,600 |
2,021 | 858,100 |
2,022 | 1,032,000 |
Operations | |
2,018 | 51,800 |
2,019 | 51,800 |
2,020 | 51,800 |
2,021 | 51,800 |
2,022 | 51,800 |
Water Delivery | |
2,018 | 232,000 |
2,019 | 348,000 |
2,020 | 493,000 |
2,021 | 738,000 |
2,022 | 897,000 |
Capital | |
2,018 | 338,100 |
2,019 | 1,555,400 |
2,020 | 74,200 |
2,021 | 0 |
2,022 | 0 |
Other | |
2,018 | 23,600 |
2,019 | 86,600 |
2,020 | 23,600 |
2,021 | 68,300 |
2,022 | $ 83,200 |
UNAUDITED QUARTERLY FINANCIAL49
UNAUDITED QUARTERLY FINANCIAL DATA (Details) - USD ($) | 3 Months Ended | 12 Months Ended | ||||||||||
Aug. 31, 2017 | May 31, 2017 | Feb. 28, 2017 | Nov. 30, 2016 | Aug. 31, 2016 | May 31, 2016 | Feb. 29, 2016 | Nov. 30, 2015 | Aug. 31, 2017 | Aug. 31, 2016 | Aug. 31, 2015 | ||
Unaudited Quarterly Financial Data Details | ||||||||||||
Total revenues | $ 658 | $ 134 | $ 237 | $ 199 | $ 149 | $ 101 | $ 76 | $ 126 | $ 1,227,787 | $ 452,161 | $ 1,196,569 | |
Gross margin | 336 | (33) | 68 | 54 | 8 | (34) | (44) | (7) | 424,481 | (76,598) | 437,165 | |
Operating loss | (581) | (631) | (455) | (464) | (618) | (533) | (557) | (472) | (2,131,202) | (2,179,775) | (1,676,947) | |
Discontinued operations | 1 | (11) | (3) | (19) | 13 | (61) | (29) | (3) | (32,025) | (80,348) | (22,552,801) | |
Net loss | $ (501) | $ (554) | $ (317) | $ (338) | $ (521) | $ (422) | $ (271) | $ (97) | $ (1,710,868) | $ (1,310,607) | $ (23,127,947) | |
Basic and diluted income (loss) per share | $ (0.02) | $ (0.02) | $ (0.01) | $ (0.01) | $ (0.03) | $ (0.02) | $ (0.01) | [1] | $ (0.07) | $ (0.06) | $ (0.96) | |
[1] | Amount is less than $.01 per share |