Document And Entity Information
Document And Entity Information - shares | 9 Months Ended | |
May. 31, 2015 | Jul. 07, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | PURE CYCLE CORP | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --08-31 | |
Amendment Flag | false | |
Entity Central Index Key | 276,720 | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 24,037,598 | |
Document Period End Date | May 31, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q3 |
CONSOLIDATED BALANCE SHEETS (Un
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | May. 31, 2015 | Aug. 31, 2014 |
Current assets: | ||
Cash and cash equivalents | $ 743,388 | $ 1,749,558 |
Trade accounts receivable | 521,351 | 1,626,090 |
Sky Ranch receivable | 134,415 | 50,915 |
Land and water held for sale | 0 | 699,826 |
Prepaid expenses | 622,688 | 336,867 |
Total current assets | 2,021,842 | 4,463,256 |
Investments in water and water systems, net | 94,944,350 | 90,823,916 |
Land - Sky Ranch | 3,659,952 | 3,662,754 |
Land and water held for sale | 1,500,000 | 1,500,000 |
Note receivable - related party: | ||
Rangeview Metropolitan District, including accrued interest | 674,334 | 568,022 |
HP A&M receivable | 0 | 7,069,511 |
Other assets | 94,438 | 86,363 |
Total assets | 102,894,916 | 108,173,822 |
Current liabilities: | ||
Accounts payable | 551,712 | 1,379,647 |
Current portion of promissory notes payable | 848,325 | 925,980 |
WISE funding obligation | 280,000 | 0 |
Accrued liabilities | 145,696 | 257,893 |
Deferred revenues | 132,371 | 65,124 |
Deferred oil and gas lease payment | 516,195 | 645,720 |
Total current liabilities | 2,474,299 | 3,274,364 |
Deferred revenues, less current portion | 1,125,244 | 1,167,095 |
Deferred oil and gas lease payment, less current portion | 25,000 | 379,765 |
Promissory notes payable, less current portion | 4,737,847 | 4,032,227 |
WISE funding obligation, less current portion | 1,120,000 | 0 |
Participating Interests in Export Water Supply | 346,986 | 354,628 |
Tap Participation Fee payable to HP A&M, net of nil and $4.1 million discount, respectively | 0 | 7,935,262 |
Total liabilities | $ 9,829,376 | $ 17,143,341 |
Commitments and contingencies | ||
Preferred stock: | ||
Series B - par value $.001 per share, 25 million shares authorized; 432,513 shares issued and outstanding (liquidation preference of $432,513) | $ 433 | $ 433 |
Common stock: | ||
Common stock: Par value 1/3 of $.01 per share, 40 million shares authorized; 24,037,598 shares outstanding both periods presented | 80,130 | 80,130 |
Collateral stock | (1,407,000) | 0 |
Additional paid-in capital | 172,281,895 | 168,794,396 |
Accumulated deficit | (77,889,918) | (77,844,478) |
Total shareholders' equity | 93,065,540 | 91,030,481 |
Total liabilities and shareholders' equity | $ 102,894,916 | $ 108,173,822 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | May. 31, 2015 | Aug. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Discount of tap participation fee payable to HP A&M | $ 0 | $ 4,100,000 |
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 outstanding | 24,037,598 | 24,037,598 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | |||
May. 31, 2015 | May. 31, 2014 | May. 31, 2015 | May. 31, 2014 | ||
Revenues: | |||||
Metered water usage | $ 73,477 | $ 314,231 | $ 893,746 | $ 1,028,641 | |
Wastewater treatment fees | 12,293 | 11,366 | 37,224 | 33,472 | |
Special facility funding recognized | 10,377 | 10,377 | 31,131 | 31,131 | |
Water tap fees recognized | 3,574 | 3,574 | 10,721 | 10,721 | |
Farm operations | 270,582 | 328,801 | 818,925 | 855,686 | |
Other | 20,639 | 10,200 | 89,490 | 33,275 | |
Total revenues | 390,942 | 678,549 | 1,881,237 | 1,992,926 | |
Expenses: | |||||
Water service operations | (73,679) | (94,058) | (303,110) | (307,526) | |
Wastewater service operations | (9,265) | (6,442) | (22,075) | (24,680) | |
Farm operations | (23,131) | (23,020) | (70,001) | (64,418) | |
Depletion and depreciation | (42,072) | (38,345) | (130,802) | (109,052) | |
Other | (14,746) | (12,295) | (35,771) | (33,289) | |
Total cost of revenues | (162,893) | (174,160) | (561,759) | (538,965) | |
Gross margin | 228,049 | 504,389 | 1,319,478 | 1,453,961 | |
General and administrative expenses | (524,688) | (848,326) | (1,785,093) | (2,153,217) | |
Depreciation | (44,706) | (7,157) | (128,108) | (30,087) | |
Operating loss | (341,345) | (351,094) | (593,723) | (729,343) | |
Other income (expense): | |||||
Oil and gas lease income, net | 161,430 | 149,930 | 484,290 | 363,440 | |
Oil and gas royalty income, net | 262,097 | 0 | 262,097 | 0 | |
Easement income | 0 | 87,409 | 0 | 85,591 | |
Interest income | 14,374 | 17,293 | 29,209 | 24,103 | |
Other | 12,471 | 15,372 | 18,418 | 57,356 | |
Interest expense | (78,780) | (51,309) | (221,915) | (175,783) | |
Interest imputed on the Tap Participation Fee payable to HP A&M | 0 | (248,847) | (23,816) | (1,309,085) | |
Net income (loss) | $ 30,247 | $ (381,246) | $ (45,440) | $ (1,683,721) | |
Net income (loss) per common share - basic and diluted | $ 0 | $ (0.02) | $ 0 | [1] | $ (0.07) |
Weighted average common shares outstanding - basic and diluted (in Shares) | 24,037,598 | 24,037,598 | 24,037,598 | 24,037,598 | |
[1] | Amount is less than $0.01 per share |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Cash flows from operating activities: | ||
Net income (loss) | $ (45,440) | $ (1,683,721) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Imputed interest on Tap Participation Fee payable to HP A&M | 23,816 | 1,309,085 |
Depreciation and depletion | 258,909 | 139,139 |
Investment in Well Enhancement Recover Systems, LLC | 1,565 | (37,193) |
Stock-based compensation expense | 186,296 | 183,090 |
Interest income and other non-cash items | (315) | (315) |
Interest added to receivable from Rangeview Metropolitan District | (10,812) | (9,005) |
Changes in operating assets and liabilities: | ||
Trade accounts receivable | 1,104,739 | (15,595) |
Sky Ranch Receivable | (83,500) | 6,388 |
Prepaid expenses | (285,821) | (102,600) |
Receivable from HP A&M | (63,777) | (593,415) |
Note receivable - related party: Rangeview Metropolitian District | (95,500) | 0 |
Accounts payable and accrued liabilities | (940,132) | 682,131 |
Interest accrued on agriculture land promissory notes | (46,745) | (84,784) |
Deferred revenues | 25,396 | 38,517 |
Deferred oil & gas lease | (484,290) | 880,000 |
Net cash (used in) provided by operating activities | (455,611) | 711,722 |
Cash flows from investing activities: | ||
Investments in water, water systems, and land | (1,900,267) | (915,896) |
Purchase of property and equipment | (17,186) | (2,250) |
Proceeds from sale of farm land | 699,826 | 3,919,265 |
Net cash (used in) provided by investing activities | (1,217,627) | 3,001,119 |
Cash flows from financing activities: | ||
Payments to contingent liability holders | (7,642) | (4,360) |
Proceeds from borrowings on promissory notes payable | 2,311,656 | 0 |
Payments made on promissory notes payable | (1,636,946) | (3,280,729) |
Net cash provided by (used in) financing activities | 667,068 | (3,285,089) |
Net change in cash and cash equivalents | (1,006,170) | 427,752 |
Cash and cash equivalents - beginning of period | 1,749,558 | 2,448,363 |
Cash and cash equivalents - end of period | 743,388 | 2,876,115 |
SUPPLEMENTAL DISCLSOURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES | ||
Net reduction in Tap Participation Fee liability and HP A&M receivable collateral stock and mineral rights received as result of settlement of the Arkansas River Agreement | 1,894,203 | 47,953,580 |
Assets acquired through WISE funding obligation | $ 1,400,000 | $ 0 |
1. PRESENTATION OF INTERIM INFO
1. PRESENTATION OF INTERIM INFORMATION | 9 Months Ended |
May. 31, 2015 | |
Presentation Of Interim Information | |
PRESENTATION OF INTERIM INFORMATION | The May 31, 2015 consolidated balance sheet, the consolidated statements of operations for the three and nine months ended May 31, 2015 and 2014, respectively, the consolidated statement of shareholders equity for the nine months ended May 31, 2015, and the consolidated statements of cash flows for the nine months ended May 31, 2015 and 2014, respectively, have been prepared by Pure Cycle Corporation (the Company) and have not been audited. The unaudited consolidated financial statements include all adjustments that are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows at May 31, 2015, and for all periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 2014 Annual Report on Form 10-K (the 2014 Annual Report) filed with the Securities and Exchange Commission (the SEC) on November 14, 2014, as amended on November 17, 2014. The results of operations for interim periods presented are not necessarily indicative of the operating results for the full fiscal year. The August 31, 2014 balance sheet was taken from the Companys audited financial statements. Use of Estimates The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid debt instruments with original maturities of three months or less. The Companys cash equivalents are comprised entirely of money market funds maintained at a high quality financial institution. At various times during the nine months ended May 31, 2015, the Companys main operating account exceeded federally insured limits. Financial Instruments Concentration of Credit Risk and Fair Value Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash equivalents with high quality financial institutions. The Company has historically invested its idle cash primarily in certificates of deposit, money market instruments, commercial paper obligations, corporate bonds and U.S. government treasury obligations. To date, the Company has not experienced significant losses on any of these investments. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. Cash and Cash Equivalents Trade Accounts Receivable Accounts Payable Long-Term Financial Liabilities Water and Land Assets Water and Land Assets Long-Term Obligations and Operating Lease Participating Interests in Export Water Supply The recorded balance of the Tap Participation Fee liability (described below) as of August 31, 2014, is its estimated fair value determined by projecting new home development in the Companys targeted service area over an estimated development period. Notes Receivable Related Party Receivable from HP A&M Litigation Loss Contingencies, Promissory Notes Payable During October 2014, the Company borrowed $4,450,000 from the First National Bank of Las Animas. The note has a 20-year term, requires semi-annual payments, and carries a 5.27% per annum rate for the first five years. After the first five years, the interest rate on the note is subject to change (no more often than annually) based on the changes in the First National Bank of Las Animas Ag/Commercial Real Estate Rate. The Company may pay the note in full at any time without penalty. The carrying value of this note approximates the fair value as the rate is comparable to market rates. As described further in Note 4, in December 2014, the District entered into an agreement to finance approximately $1.4 million of the purchase of certain WISE (defined in Note 4 below) infrastructure. The $1.4 million is repayable in equal annual installments over the next three years and accrues interest at the rate of 3%. The carrying value of this obligation approximates the fair value as the rate is comparable to market rates. Off-Balance Sheet Instruments Long-Term Obligations and Operating Lease Participating Interests in Export Water Supply Tap Participation Fee This note should be read in conjunction with Note 4 Long-Term Obligations and Operating Lease Litigation Loss Contingencies Pursuant to the Asset Purchase Agreement dated May 10, 2006 (the Arkansas River Agreement), 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. A Tap Participation Fee (TPF) was due and payable once the Company had sold a water tap and received the consideration due for such water tap. The Company did not sell any water taps during the three or nine months ended May 31, 2015 or 2014. As further discussed in Note 9 Litigation Loss Contingencies Prior to the settlement, the Company imputed interest expense on the unpaid TPF using the effective interest method over an estimated period that is utilized in the valuation of the liability. The Company did not impute interest during the three months ended May 31, 2015. The Company imputed interest of $248,800 during the three months ended May 31, 2014. The Company imputed interest of $23,800 and $1,309,100 during the nine months ended May 31, 2015 and 2014, respectively. As a result of the Companys settlement with HP A&M, no water taps remain subject to the TPF as of May 31, 2015. As of August 31, 2014, there were 2,184 water taps subject to the TPF. Revenue Recognition Wholesale Water and Wastewater Fees The Company recognizes wastewater treatment fees monthly based on usage. The monthly wastewater treatment fees are shown net of amounts retained by the District. The Company recognized $12,300 and $11,400 of wastewater treatment fees during the three months ended May 31, 2015 and 2014, respectively. The Company recognized $37,200 and $33,500 of wastewater treatment fees during the nine months ended May 31, 2015 and 2014, respectively. Costs of delivering water and providing wastewater services to customers are recognized as incurred. Tap and Construction Fees Long-Term Obligations and Operating Lease The Company recognized $10,400 of Special Facilities (defined in Part I, Item 1 of the 2014 Annual Report) funding as revenue during each of the three months ended May 31, 2015 and 2014, respectively. The Company recognized $31,100 of Special Facilities funding as revenue during each of the nine months ended May 31, 2015 and 2014, respectively. This is the ratable portion of the Special Facilities funding proceeds received from water agreements as more fully described in Note 2 Summary of Significant Accounting Policies As of May 31, 2015, and August 31, 2014, the Company has deferred recognition of approximately $1,183,200 and $1,232,200, respectively, of water tap and construction fee revenue from the County, which will be recognized as revenue ratably over the estimated useful accounting life of the assets constructed with the construction proceeds as described above. Agriculture Farming Operations Royalty and Other Obligations Revenues from the sale of Export Water are shown net of royalties payable to the Land Board. Revenues from the sale of water on the Lowry Range (described in Note 4 Water and Land Assets Oil and Gas Lease Payments As further described in Note 2 Summary of Significant Accounting Policies Water and Land Assets As of May 31, 2015 and August 31, 2014, the Company has deferred recognition of $541,200 and $1,025,500, respectively, of income related to the O&G Lease and the Rangeview Lease, which will be recognized into income ratably through February 2016 and July 2017, respectively. During the three and nine months ended May 31, 2015, two wells were drilled within the Companys mineral interest. Beginning in March 2015 both wells were placed into service and began producing oil and gas and accruing royalties to the Company. In May 2015, certain gas collection infrastructure was extended to the property to allow the collection of gas from the wells and accrual of royalties attributable to gas production. During the three and nine months ended May 31, 2015, the Company received $262,100 in royalties attributable to these two wells. Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the eventual use of the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Based on the Companys procedures, the Company determined that land and water shares held for sale related to the Arkansas River Assets were impaired as of August 31, 2014. See further discussion in Note 3 Water and Land Assets Capitalized Costs of Water and Wastewater Systems and Depletion and Depreciation of Water Assets Costs to construct water and wastewater systems that meet the Companys capitalization criteria are capitalized as incurred, including interest, and depreciated on a straight-line basis over their estimated useful lives of up to 30 years. The Company capitalizes design and construction costs related to construction activities, and it capitalizes certain legal, engineering and permitting costs relating to the adjudication and improvement of its water assets. The Company depletes its groundwater assets that are being utilized on the basis of units produced (i.e., thousands of gallons sold) divided by the total volume of water adjudicated in the water decrees. Share-Based Compensation The Company maintains a stock option plan for the benefit of its employees and non-employee directors. The Company records share-based compensation costs as expense over the applicable vesting period of the stock award using the straight-line method. The compensation costs to be expensed are measured at the grant date based on the fair value of the award. The Company has adopted the alternative transition method for calculating the tax effects of share-based compensation, which allows for a simplified method of calculating the tax effects of employee share-based compensation. Because the Company has a full valuation allowance on its deferred tax assets, the granting and exercise of stock options has no impact on the income tax provisions. The Company recognized $53,700 and $68,800 of share-based compensation expense during the three months ended May 31, 2015 and 2014, respectively. The Company recognized $186,300 and $183,100 of share-based compensation expense during the nine months ended May 31, 2015 and 2014, respectively. Income Taxes The Company uses a "more-likely-than-not" threshold for the recognition and de-recognition of tax positions, including any potential interest and penalties relating to tax positions taken by the Company. The Company did not have any significant unrecognized tax benefits as of May 31, 2015. The Company files income tax returns with the Internal Revenue Service and the State of Colorado. The tax years that remain subject to examination are fiscal year 2012 through fiscal year 2014. 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 May 31, 2015, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the three or nine months ended May 31, 2015 or 2014. Income (Loss) per Common Share Income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding during each period. Common stock options and warrants aggregating 328,600 and 380,100 common share equivalents were outstanding as of May 31, 2015 and 2014, respectively, and have been included in the calculation of net income per common share but excluded from the calculation of loss per common share as their effect is anti-dilutive. Recently Issued Accounting Pronouncements The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Companys financial reporting, the Company undertakes a study to determine the consequence of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Companys consolidated financial statements properly reflect the change. During the current period, there were no new accounting pronouncements issued that will significantly impact the Companys financial reporting. |
2. FAIR VALUE MEASUREMENTS
2. FAIR VALUE MEASUREMENTS | 9 Months Ended |
May. 31, 2015 | |
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 one of these instruments as of May 31, 2015 and August 31, 2014. 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 no Level 2 assets or liabilities as of May 31, 2015 or August 31, 2014. 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 as of August 31, 2014, the TPF liability, which is described in greater detail in Note 4 Long-Term Obligations and Operating Lease The Company maintains policies and procedures to value instruments using what management believes to be the best and most relevant data available. The Companys non-financial assets measured at fair value on a non-recurring basis consist entirely of its investments in water and water systems and other long-lived assets. See Note 3 Water and Land Assets Level 3 Liability Tap Participation Fee. Long-Term Obligations and Operating Lease Although not required, the Company deems the following table, which presents the changes in the TPF for the nine months ended May 31, 2015, to be helpful to the users of its consolidated financial statements: Fair Value Measurement using Significant Unobservable Inputs (Level 3) Gross Estimated Tap Participation Fee Liability Tap Participation Fee Reported Liability Discount - to be imputed as interest expense in future periods Balance at August 31, 2014 $ 12,038,300 $ 7,935,300 $ 4,103,000 Total gains and losses (realized and unrealized): - - - Imputed interest recorded as "Other Expense" - 23,800 (23,800 ) Purchases, sales, issuances, payments, reductions resulting from foreclosures, and HP A&M settlement (12,038,300 ) (7,959,100 ) (4,079,200 ) Transfers in and/or out of Level 3 - - - Balance at May 31, 2015 $ - $ - $ - |
3. WATER AND LAND ASSETS
3. WATER AND LAND ASSETS | 9 Months Ended |
May. 31, 2015 | |
Investments In Water Water Systems Land And Improvements | |
WATER AND LAND ASSETS | The Companys water rights and current water and wastewater service agreements are more fully described in Note 4 Water and Land Assets The Companys Investment in Water and Water Systems consists of the following costs and accumulated depreciation and depletion at May 31, 2015 and August 31, 2014: May 31, 2015 August 31, 2014 Costs Accumulated Depreciation and Depletion Costs Accumulated Depreciation and Depletion Arkansas River Valley assets $ 68,821,400 $ (1,488,600 ) $ 67,746,400 $ (1,488,600 ) Rangeview water supply 14,444,600 (8,600 ) 14,444,600 (8,400 ) Sky Ranch water rights and other costs 6,551,400 (170,100 ) 6,004,000 (93,000 ) Fairgrounds water and water system 2,899,900 (776,700 ) 2,899,900 (710,600 ) Rangeview water system 1,270,100 (99,900 ) 1,148,200 (77,900 ) Water supply other 3,668,800 (167,900 ) 1,050,200 (90,900 ) Totals 97,656,200 (2,711,800 ) 93,293,300 (2,469,400 ) Net investments in water and water systems $ 94,944,400 $ 90,823,900 Capitalized terms in this section not defined herein are defined in Note 4 Water and Land Assets Depletion and Depreciation. The Company recorded $86,300 and $45,400 of depreciation expense during the three months ended May 31, 2015 and 2014, respectively. The Company recorded $252,200 and $138,800 of depreciation expense during the nine months ended May 31, 2015 and 2014, respectively. Land and Water Shares Held for Sale. Through August 31, 2014, the Company completed sales of approximately 1,886 acres of land and 2,982 FLCC shares associated with the land and, in November 2014, completed sales of approximately 299 acres of land along with 239 FLCC shares associated with the land. Management believes that the November 2014 sale completed the sales cycle related to the land held for sale as of August 31, 2012. In addition, management identified as of August 2014 an additional 640 acres of land and 512 FLCC shares associated with the land as held for sale in order to have sufficient liquidity to continue to meet future obligations on the promissory notes the Company issued to purchase the defaulted notes owed by HP A&M and to continue to fund water system expansions. The net book value of the assets identified as held for sale was $1.9 million prior to designation as held for sale. The anticipated sales price for these assets is $1.5 million based on recent sales transactions, which required the Company to record an impairment of approximately $400,000 in fiscal year 2014. Sale of Arkansas River Valley Assets. The Company will continue to operate the assets as held for use and will continue to lease the farms to area farmers until the sale has been completed. The assets will remain in Investments in Water and Water Systems until the terms of the agreement are satisfied at which time it will be transferred to Land and Water Held for Sale. The assets being sold have a book value of approximately $69 million, or 68% of Pure Cycles total assets as of May 31, 2015. Upon satisfaction of the terms of the agreement, the Company will record a loss, which is expected to be approximately $23 million, of the difference between the book value and the closing amount. See Exhibit 10.4 filed herewith and the Companys Current Reports on Form 8-K filed with the SEC on March 17, 2015, May 21, 2015, June 19, 2015, and June 24, 2015 and the Companys Definitive Proxy Statement on Schedule 14A filed with the SEC on March 27, 2015, for additional information. |
4. LONG-TERM OBLIGATIONS AND OP
4. LONG-TERM OBLIGATIONS AND OPERATING LEASE | 9 Months Ended |
May. 31, 2015 | |
Long-Term Obligations And Operating Lease | |
LONG-TERM OBLIGATIONS AND OPERATING LEASE | The Participating Interests in Export Water Supply is and prior to the Companys settlement, the TPF payable to HP A&M was an obligation of the Company that had no scheduled maturity date. Therefore, these liabilities are not disclosed in tabular format, but they are described below. Participating Interests in Export Water Supply The Company acquired its Rangeview Water Supply through various amended agreements entered into in the early 1990s. The acquisition was consummated with the signing of the CAA in 1996. Upon entering into the CAA, the Company recorded an initial liability of $11.1 million, which represented the cash the Company received from the participating interest holders that was used to purchase the Companys Export Water (described in greater detail in Note 4 Water and Land Assets The CAA obligation is non-interest bearing, and if the Export Water is not sold, the parties to the CAA have no recourse against the Company. If the Company does not sell the Export Water, the holders of the Series B Preferred Stock are also not entitled to payment of any dividend and have no contractual recourse against the Company. As the proceeds from the sale of Export Water are received and the amounts are remitted to the external CAA holders, the Company allocates a ratable percentage of this payment to the principal portion (the Participating Interests in Export Water Supply From time to time the Company repurchased various portions of the CAA obligations retaining their original priority. In July 2014, the Land Board relinquished its approximately $2.4 million of CAA interests to the Company as part of the settlement of the 2011 lawsuit filed by the Company and the District against the Land Board. As a result, during the fourth quarter of the fiscal year ended August 31, 2014, the Company recorded a gain on the extinguishment of participating interests of the CAA of approximately $832,100. The Company did not make any CAA acquisitions during the nine months ended May 31, 2015 or 2014. As a result of the acquisitions, the relinquishment by the Land Board, and the sale of Export Water, as detailed in the table below, the remaining potential third party obligation at May 31, 2015, is approximately $1 million, and the Company has the right to approximately $29.8 million: Export Water Proceeds Received Initial Export Water Proceeds to Pure Cycle Total Potential Third Party Obligation Paticipating Interests Liability Contingency Original balances $ $ 218,500 $ 31,807,700 $ 11,090,600 $ 20,717,100 Activity from inception until August 31, 2014: Acquisitions 28,077,500 (28,077,500 ) (9,790,000 ) (18,287,500 ) 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 * 533,000 (373,100 ) (159,900 ) (55,800 ) (104,100 ) Export Water sale payments 360,900 (262,200 ) (98,700 ) (34,300 ) (64,400 ) Balance at August 31, 2014 1,004,300 30,004,800 1,017,100 354,600 662,500 Fiscal 2015 activity: Export Water sale payments 184,200 (162,300 ) (21,900 ) (7,600 ) (14,300 ) Balance at May 31, 2015 $ 1,188,500 $ 29,842,500 $ 995,200 $ 347,000 $ 648,200 * The Arapahoe County tap fees are net of $34,522 in royalties paid to the Land Board. The CAA includes contractually established priorities that call for payments to CAA holders in order of their priority. This means the first payees receive their full payment before the next priority level receives any payment and so on until full repayment. The Company will receive approximately $6 million of the first priority payout (the remaining entire first priority payout totals approximately $6.8 million as of May 31, 2015). Arkansas River Agreement Obligations As discussed in Note 9 Litigation Loss Contingencies Initially the obligation was to pay 10% of the Companys gross proceeds, or the equivalent thereof, from the sale of 40,000 water taps sold after the date of the Arkansas River Agreement. The 40,000 water taps were eliminated as a result of (i) sales of Arkansas River Valley land in 2006 and 2009; (ii) the sale of unutilized water rights owned by the Company in the Arkansas River Valley in 2007; (iii) the election made by HP A&M, effective September 1, 2011, pursuant to the Arkansas River Agreement, to increase the TPF percentage from 10% to 20%, and to take a corresponding 50% reduction in the number of taps subject to the TPF; (iv) the allocation of 26.9% of the Net Revenues (defined as all lease and related income received from the farms less employee expenses, direct expenses for managing the leases and a reasonable overhead allocation) received by HP A&M from management of the farm leasing operations from September 1, 2011 to August 3, 2012 prior to termination of the Property Management Agreement; (v) the reduction of 19,044 taps as the result of foreclosures on certain farms pursuant to the remedies outlined in the Arkansas River Agreement (2,233 in fiscal year 2013, 15,010 in fiscal year 2014, and 1,801 in fiscal year 2015); and (vi) the settlement reached with HP A&M in January 2015. The fair value of the TPF liability through the date of the settlement was an estimate prepared by management of the Company. The fair value of the liability was based on discounted estimated cash flows subject to the TPF calculated by projecting future annual water tap sales for the number of taps subject to the TPF at the date of valuation. Future cash flows from water tap sales were estimated by utilizing the following historical information, where available: · New homes constructed in the area known as the 11-county Front Range of Colorado from the 1980s through the valuation date; · New home construction patterns for large master planned housing developments along the Front Range; · Population growth rates for Colorado and the Front Range; and · The Consumer Price Index since the 1980s to project estimated future water tap fees. Utilizing this historical information, the Company projected an estimated new home development pattern in its targeted service area sufficient to cover the sale of the water taps subject to the TPF at the date of the revaluation, August 31, 2014. The estimated proceeds generated from the sale of those water taps resulted in estimated payments to HP A&M over the life of the projected development period of $2 million. The estimated payments to HP A&M were then discounted to the current valuation date, and the difference between the amount reflected on the Companys balance sheet at the valuation date and the total estimated payments were imputed as interest expense over the estimated development time using the effective interest method. The implied interest rate for the most recent valuation was 3.4%. As of August 31, 2014, 2,184 taps (approximately $7.9 million of the TPF) remained subject to the TPF. HP A&M relinquished all rights to the TPF pursuant to the settlement agreement the Company reached during January 2015. As a result, the TPF was eliminated during the three months ended February 28, 2015. The Company recorded the decreases in the TPF payable as an equity transaction due to the related party nature of the original transaction of approximately $6.2 million in the three months ended November 30, 2014 and the remaining approximately $1.7 million upon final settlement. For a more detailed discussion of the valuation of the TPF, see Note 7 Long-Term Debt and Operating Lease Litigation and Loss Contingencies Promissory Notes Payable As a result of HP A&Ms default and the Companys settlement with HP A&M, the Company has certain notes totaling approximately $5.8 million, including accrued interest of $34,100 as of May 31, 2015 attributable to its farms. The Company borrowed $4,450,000 from the First National Bank of Las Animas in exchange for a note that has a 20 year term commencing October 27, 2014, requires semi-annual payments, and carries a 5.27% per annum interest rate for the first five years. The note is secured by a total of 3,596.8 acres, and 4,369.4 FLCC shares. After the first five years, the interest rate on the note is subject to change (no more often than annually) based on the changes in the First National Bank of Las Animas Ag/Commercial Real Estate Rate. The Company may pay the note in full at any time without penalty. Additionally, the Company has 16 mortgages for an aggregate total of approximately $1,350,000, which have five-year terms, require semi-annual payments, and carry a 5% per annum interest rate. These notes are secured by a total of 3,860.9 acres, and 4,793 FLCC shares. The amount owed on the Companys notes is approximately $5.6 million, including accrued interest of $34,100, and approximately $5 million, including accrued interest of $80,800, at May 31, 2015 and August 31, 2014, respectively. Future Maturities Mortgage notes payable, mainly bear interest at 5%, 5-year term; one note in amount of $4.45 million has 20-year term $ 5,586,200 Less: current portion (848,300 ) Total long-term mortgage payable $ 4,737,900 Future long-term maturities 2016 578,600 2017 369,000 2018 166,200 2019 157,100 2020 169,800 Post 2020 3,297,200 Total $ 4,737,900 WISE Partnership During December 2014, the Company, through the District, consented to the waiver of all contingencies set forth in the Amended and Restated WISE Partnership Water Delivery Agreement, dated December 31, 2013 (the WISE Partnership Agreement), among the City and County of Denver acting through its Board of Water Commissioners (Denver Water), the City of Aurora acting by and through its Utility Enterprise (Aurora Water), and the South Metro WISE Authority (SMWA). The SMWA was formed by the District and nine other governmental or quasi-governmental water providers pursuant to the South Metro WISE Authority Formation and Organizational Intergovernmental Agreement, dated December 31, 2013 (the SM IGA), to enable the members of SMWA to participate in the regional water supply project known as the Water Infrastructure Supply Efficiency partnership (WISE) created by the WISE Partnership Agreement. The SM IGA specifies each members pro rata share of WISE and the members rights and obligations with respect to WISE. The WISE Partnership Agreement provides for the purchase of certain infrastructure (i.e., pipelines, water storage facilities, water treatment facilities, and other appurtenant facilities) to deliver water to and among the 10 members of the SMWA, Denver Water and Aurora Water. Certain infrastructure has been constructed and other infrastructure will be constructed over the next several years. By consenting to the waiver of the contingencies set forth in the WISE Partnership Agreement, pursuant to the terms of the Rangeview/Pure Cycle WISE Project Financing Agreement (the WISE Financing Agreement) between the Company and the District, the Company has an agreement to fund the Districts participation in WISE effective as of December 22, 2014. The Companys cost of funding the Districts purchase of its share of existing infrastructure and future infrastructure for WISE is projected to be approximately $7 million over the next five years, which includes funding of approximately $1.2 million annually over the next five years and funding of the Districts obligations to repay approximately $1.4 million borrowed by the District from certain SMWA members to finance the purchase of infrastructure for WISE pursuant to an agreement dated November 19, 2014 (the Rangeview Funding Agreement). The $1.4 million is repayable in equal annual installments over the next three years and accrues interest at the rate of 3% and is recorded in WISE Funding Obligation and in Investments in Water and Water Systems on the Companys consolidated balance sheet. Operating Lease Effective January 2015, the Company entered into an operating lease for approximately 2,500 square feet of office and warehouse space. The lease has a one-year term with payments of $3,000 per month. |
5. SHAREHOLDERS' EQUITY
5. SHAREHOLDERS' EQUITY | 9 Months Ended |
May. 31, 2015 | |
Shareholders Equity | |
SHAREHOLDERS' EQUITY | The Company maintains the 2014 Incentive Plan (the 2014 Incentive 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 Incentive Plan. Pursuant to the 2014 Incentive Plan, options to purchase shares of stock and restricted stock awards can be granted with exercise prices, vesting conditions and other performance criteria determined by the Compensation Committee of the board of directors (the Board). The Company has reserved 1.6 million shares of common stock for issuance under the 2014 Incentive Plan. The Company began awarding options under the 2014 Incentive Plan during January 2015. Prior to the effective date of the 2014 Incentive Plan, the Company granted stock awards to eligible participants under its 2004 Incentive Plan (the 2004 Equity Plan), which expired April 11, 2014. No additional awards may be granted pursuant to the 2004 Equity 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 Equity Plan. The following table summarizes the combined stock option activity for the 2004 Equity Plan and 2014 Incentive Plan for the nine months ended May 31, 2015: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Approximate Aggregate Instrinsic Value Oustanding at beginning of period 315,000 $ 5.76 Granted 26,000 4.17 Exercised - - Forfeited or expired (12,500 ) 7.21 Outstanding at May 31, 2015 328,500 $ 4.99 6.42 $ 82,270 Options exercisable at May 31, 2015 235,833 $ 4.83 5.56 $ 97,117 The following table summarizes the combined activity and value of non-vested options under the 2004 Equity Plan and 2014 Incentive Plan as of and for the nine months ended May 31, 2015: Number of Options Weighted-Average Grant Date Fair Value Non-vested options oustanding at beginning of period 99,167 $ 4.85 Granted 26,000 2.78 Vested (32,500 ) 4.19 Forfeited - - Non-vested options outstanding at May 31, 2015 92,667 $ 4.29 The Company calculated the fair value of the options granted during January 2015 at approximately $72,000, using the Black Scholes option pricing model with the following variables: weighted average exercise price of $4.17 (which was the closing sale price of 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%. All non-vested options are expected to vest. The total fair value of options vested during the nine months ended May 31, 2015 and May 31, 2014 was $136,300 and $76,800, respectively. Stock-based compensation expense was $53,700 and $68,800 for the three months ended May 31, 2015 and 2014, respectively. Stock-based compensation expense was $186,300 and $183,100 for the nine months ended May 31, 2015 and 2014, respectively. At May 31, 2015, the Company had unrecognized expenses relating to non-vested options that are expected to vest totaling $220,900, which options have a weighted average life of less than three years. The Company has not recorded any excess tax benefits to additional paid-in capital. |
6. RELATED PARTY TRANSACTIONS
6. RELATED PARTY TRANSACTIONS | 9 Months Ended |
May. 31, 2015 | |
Related Party Transactions | |
RELATED PARTY TRANSACTIONS | On December 16, 2009, the Company entered into a Participation Agreement with the District, whereby the Company agreed to provide funding to the District in connection with the Districts membership in the South Metro Water Supply Authority (SMWSA). The Company provided $78,700 and $70,800 of funding to the District pursuant to the Participation Agreement during the nine months ended May 31, 2015 and 2014, respectively. These amounts were expensed as general and administrative expenses at the time of funding. On November 10, 2014, the Company entered into a WISE Financing Agreement with the District, whereby the Company agreed to fund the Districts cost of participating in a regional water supply project known as the WISE partnership. Pursuant to the WISE Financing Agreement, the Company made payments of $1,156,800 during the nine months ended May 31, 2015, to purchase certain rights to use existing water transmission and related infrastructure acquired by WISE and is recorded as Investment in Water and Water Systems on the Companys balance sheet. The Company estimates that it will be required to invest approximately $1.2 million per year over the next five years for additional payments for the water transmission line and additional facilities, water and related assets for WISE. In 1995, the Company extended a loan to the District, a related party. The loan provided for borrowings of up to $250,000, is unsecured, bears interest based on the prevailing prime rate plus 2% (5.25% at May 31, 2015) and matured on December 31, 2014. The Company extended the maturity date of the loan to December 31, 2020. Beginning in January 2014, the District and the Company entered into a funding agreement that allows the Company to continue to provide funding to the District for day-to-day operations and accrue the funding into a note that bears interest at a rate of 8% and shall remain in full force and effect for so long as the 2014 Amended and Restated Lease Agreement remains in effect. The $674,300 balance of the note receivable at May 31, 2015, includes borrowings of $324,800 and accrued interest of $349,500. |
7. SIGNIFICANT CUSTOMERS
7. SIGNIFICANT CUSTOMERS | 9 Months Ended |
May. 31, 2015 | |
Significant Customers | |
SIGNIFICANT CUSTOMERS | The Company sells wholesale water and wastewater services to the District pursuant to the Rangeview Water Agreements (defined in Note 4 Water and Land Assets Revenues related to the provision of water to one customer in the oil and gas industry accounted for 46% and 84% of the Companys water and wastewater revenues for the three months ended May 31, 2015 and 2014, respectively. Revenues related to the provision of water to one customer in the oil and gas industry accounted for 83% and 86% of the Companys water and wastewater revenues for the nine months ended May 31, 2015 and 2014, respectively. The Company had accounts receivable from the District that accounted for 10% and 5% of the Companys trade receivables balances at May 31, 2015 and August 31, 2014, respectively. Accounts receivable from the Districts largest customer accounted for 9% and 4% of the Companys trade receivables as of May 31, 2015 and August 31, 2014, respectively. Accounts receivable from industrial water sales accounted for less than 1% and 75% of the Companys trade receivable balances at May 31, 2015 and August 31, 2014, respectively. |
8. ACCRUED LIABILITIES
8. ACCRUED LIABILITIES | 9 Months Ended |
May. 31, 2015 | |
Accrued Liabilities | |
ACCRUED LIABILITIES | At May 31, 2015, the Company had accrued liabilities of $145,700, of which $59,500 was for estimated property taxes, $42,300 was for professional fees, $2,000 was for farm lease prepayments, and $41,900 was for operating payables. At August 31, 2014, the Company had accrued liabilities of $257,900, of which $99,700 was for estimated property taxes, $59,500 was for professional fees, $22,400 was for farm lease prepayments, and the remaining $76,300 was for operating payables. |
9. LITIGATION LOSS CONTINGENCIE
9. LITIGATION LOSS CONTINGENCIES | 9 Months Ended |
May. 31, 2015 | |
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. On September 29, 2014, the Company entered into a Settlement Agreement and Release with HP A&M (Settlement Agreement). The Settlement Agreement settles the lawsuit filed by HP A&M against the Company in the District Court, City and County of Denver, Colorado on February 27, 2012, alleging breaches of representations and warranties made in connection with the Arkansas River Agreement. Pursuant to the Settlement Agreement and a joint stipulated motion to dismiss filed with the court following execution of the Settlement Agreement, HP A&M released all claims asserted against the Company in its 2012 lawsuit, and the lawsuit was dismissed with prejudice. On January 29, 2015, the Company and its wholly-owned subsidiary, PCY Holdings, LLC (PCY Holdings), entered into a comprehensive settlement agreement with HP A&M settling all remaining lawsuits among the parties. The agreement settles four lawsuits, including a lawsuit filed against HP A&M in the District Court, City and County of Denver, State of Colorado on April 4, 2014, alleging HP A&M breached the Arkansas River Agreement, Seller Pledge Agreement and Property Management Agreement, among other ways, by failing to (i) pay, perform and discharge its obligations when due or otherwise pursuant to the Excluded Indebtedness, (ii) cure defaults under the Notes and Deeds of Trust applicable to the Excluded Indebtedness, and (iii) use Net Revenue, pursuant to the Property Management Agreement, to pay Excluded Indebtedness. The agreement also settles a lawsuit pending before the Colorado Court of Appeals that HP A&M filed against PCY Holdings and the Public Trustee for the County of Bent, Colorado, seeking (i) a declaratory judgment that it is entitled to redeem the four properties from foreclosure sales by paying the amount of the outstanding debt, plus fees, which is the amount PCY Holdings bid in the sales, and (ii) preliminary and permanent injunctions against the Public Trustee preventing the Public Trustee from issuing confirmation deeds for the foreclosure sales to PCY Holdings or anyone other than HP A&M, and a related lawsuit in which PCY Holdings was seeking to remove lis pendens from the four properties. In exchange for settling all lawsuits, the settlement agreement provides for (i) the relinquishment of the TPF, (ii) the sale of 300,000 shares of the Companys common stock owned by HP A&M, with the proceeds to be delivered to the Company, (iii) the assignment of HP A&Ms (75%) mineral interests to the Company, (iv) the dismissal of all claims by HP A&M, and (v) the forgiveness by the Company of the HP A&M receivable. The settlement has been executed and is reflected in the financial statements for the period ended May 31, 2015 as follows: (1) the value of the common shares to be sold on behalf of the Company pursuant to the settlement of $1,407,000 is recorded as collateral stock on the consolidated balance sheet as a contra-equity balance, (2) the mineral interests estimated to be $1,068,400 were recorded on the balance sheet as part of the Arkansas River Valley asset, (3) the TPF of $1,731,800 and the HP A&M receivable of $7,133,300 outstanding as of the date of settlement were reduced to nil and (4) the balance of $2,926,100 was recorded as an equity transaction resulting in a decrease to equity. |
10. SEGMENT INFORMATION
10. SEGMENT INFORMATION | 9 Months Ended |
May. 31, 2015 | |
Segment Information | |
SEGMENT INFORMATION | The Company operates primarily in two lines of business: (i) the wholesale water and wastewater business; and (ii) the agricultural farming business. The Company provides wholesale water and wastewater services to customers using water rights owned by the Company and develops infrastructure to divert, treat and distribute that water and collect, treat and reuse wastewater. The Companys agricultural business consists of the Company leasing its Arkansas River Valley land and water to area farmers under cash leases or in certain cases crop share leases. The following tables show information by operating segment for the three and nine months ended May 31, 2015 and 2014: Three Months Ended May 31, 2015 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 85,800 $ 270,600 $ 34,500 $ 390,900 Gross (loss) profit (39,300 ) 247,500 19,800 228,000 Depletion and depreciation 86,800 - - 86,800 Other significant noncash items: Stock-based compensation - - 53,700 53,700 TPF interest expense - - - - Segment assets 93,561,100 8,396,400 937,400 102,894,900 Expenditures for segment assets 36,200 600 - 36,800 Three Months Ended May 31, 2014 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 335,800 $ 328,800 $ 13,900 $ 678,500 Gross profit 184,700 305,800 13,900 504,400 Depletion and depreciation 7,200 - - 7,200 Other significant noncash items: Stock-based compensation - - 68,800 68,800 TPF interest expense 248,800 - - 248,800 Segment assets 96,813,900 6,571,000 3,272,700 106,657,600 Expenditures for segment assets 399,000 - - 399,000 Nine Months Ended May 31, 2015 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 931,000 $ 818,900 $ 131,300 $ 1,881,200 Gross profit 475,100 748,900 95,500 1,319,500 Depletion and depreciation 258,900 - - 258,900 Other significant noncash items: Stock-based compensation - - 186,300 186,300 TPF interest expense 23,800 - - 23,800 Segment assets 93,561,100 8,396,400 937,400 102,894,900 Expenditures for segment assets 1,904,500 3,500 - 1,908,000 Nine Months ended May 31, 2014 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 1,095,400 $ 855,700 $ 41,900 $ 1,993,000 Gross profit 620,800 791,300 41,900 1,454,000 Depletion and depreciation 30,100 - - 30,100 Other significant noncash items: Stock-based compensation - - 183,100 183,100 TPF interest expense 1,309,100 - - 1,309,100 Segment assets 96,813,900 6,571,000 3,272,700 106,657,600 Expenditures for segment assets 918,100 - - 918,100 |
11. SUBSEQUENT EVENTS
11. SUBSEQUENT EVENTS | 9 Months Ended |
May. 31, 2015 | |
Subsequent Events | |
SUBSEQUENT EVENTS | On June 19, 2015, shareholders of the Company approved the sale of the Arkansas River Valley assets to Arkansas River Farms in accordance with the Purchase and Sale Agreement. The closing of the transaction remains subject to the completion of due diligence and the satisfaction of other conditions. Effective as of July 2, 2015, the parties entered into an amendment to the Purchase and Sale Agreement that, among other things, provides for the following: · The purchase price was reduced from approximately $53 million to $45.8 million, subject to adjustment in accordance with the terms of the Purchase and Sale Agreement, as amended; · Within two business days of the Company's delivery to the title company of certain closing documents approved by Arkansas River Farms, the remaining $975,000 of earnest money deposit shall be released to the Company, which deposit shall be non-refundable (subject to certain limited circumstances) and credited against the purchase price at closing; · The Company shall retain all rents and be responsible for all water assessments and property taxes for the farm operations through calendar 2015, whereas the Purchase and Sale Agreement had previously provided that such items would be prorated between the parties based on the timing of the closing within the year; · The portion of the oil, gas, natural gas, and hydrocarbons appurtenant to the land to be retained by the Company increased from 75% to 100%; and · For purposes of any adjustments to the purchase price, the multiplier for each Dry-up Share (as defined in Section 10 of the Fourth Amendment filed herewith as Exhibit 10.4) that Arkansas River Farms does not purchase (based on a determination that there is insufficient evidence to conclude that the obligation to dry-up the property and allow the Dry-Up Shares to be used elsewhere) was increased from $1,625 to $3,250. |
1. PRESENTATION OF INTERIM IN17
1. PRESENTATION OF INTERIM INFORMATION (Policies) | 9 Months Ended |
May. 31, 2015 | |
Presentation Of Interim Information Policies | |
Use of Estimates | The preparation of consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and cash equivalents include all highly liquid debt instruments with original maturities of three months or less. The Companys cash equivalents are comprised entirely of money market funds maintained at a high quality financial institution. At various times during the nine months ended May 31, 2015, the Companys main operating account exceeded federally insured limits. |
Financial Instruments - Concentration of Credit Risk and Fair Value | Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company places its cash equivalents with high quality financial institutions. The Company has historically invested its idle cash primarily in certificates of deposit, money market instruments, commercial paper obligations, corporate bonds and U.S. government treasury obligations. To date, the Company has not experienced significant losses on any of these investments. The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value. Cash and Cash Equivalents Trade Accounts Receivable Accounts Payable Long-Term Financial Liabilities Water and Land Assets Water and Land Assets Long-Term Obligations and Operating Lease Participating Interests in Export Water Supply The recorded balance of the Tap Participation Fee liability (described below) as of August 31, 2014, is its estimated fair value determined by projecting new home development in the Companys targeted service area over an estimated development period. Notes Receivable Related Party Receivable from HP A&M Litigation Loss Contingencies, Promissory Notes Payable During October 2014, the Company borrowed $4,450,000 from the First National Bank of Las Animas. The note has a 20-year term, requires semi-annual payments, and carries a 5.27% per annum rate for the first five years. After the first five years, the interest rate on the note is subject to change (no more often than annually) based on the changes in the First National Bank of Las Animas Ag/Commercial Real Estate Rate. The Company may pay the note in full at any time without penalty. The carrying value of this note approximates the fair value as the rate is comparable to market rates. As described further in Note 4, in December 2014, the District entered into an agreement to finance approximately $1.4 million of the purchase of certain WISE (defined in Note 4 below) infrastructure. The $1.4 million is repayable in equal annual installments over the next three years and accrues interest at the rate of 3%. The carrying value of this obligation approximates the fair value as the rate is comparable to market rates. Off-Balance Sheet Instruments Long-Term Obligations and Operating Lease Participating Interests in Export Water Supply |
Tap Participation Fee | This note should be read in conjunction with Note 4 Long-Term Obligations and Operating Lease Litigation Loss Contingencies Pursuant to the Asset Purchase Agreement dated May 10, 2006 (the Arkansas River Agreement), 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. A Tap Participation Fee (TPF) was due and payable once the Company had sold a water tap and received the consideration due for such water tap. The Company did not sell any water taps during the three or nine months ended May 31, 2015 or 2014. As further discussed in Note 9 Litigation Loss Contingencies Prior to the settlement, the Company imputed interest expense on the unpaid TPF using the effective interest method over an estimated period that is utilized in the valuation of the liability. The Company did not impute interest during the three months ended May 31, 2015. The Company imputed interest of $248,800 during the three months ended May 31, 2014. The Company imputed interest of $23,800 and $1,309,100 during the nine months ended May 31, 2015 and 2014, respectively. As a result of the Companys settlement with HP A&M, no water taps remain subject to the TPF as of May 31, 2015. As of August 31, 2014, there were 2,184 water taps subject to the TPF. |
Revenue Recognition | Wholesale Water and Wastewater Fees The Company recognizes wastewater treatment fees monthly based on usage. The monthly wastewater treatment fees are shown net of amounts retained by the District. The Company recognized $12,300 and $11,400 of wastewater treatment fees during the three months ended May 31, 2015 and 2014, respectively. The Company recognized $37,200 and $33,500 of wastewater treatment fees during the nine months ended May 31, 2015 and 2014, respectively. Costs of delivering water and providing wastewater services to customers are recognized as incurred. Tap and Construction Fees Long-Term Obligations and Operating Lease The Company recognized $10,400 of Special Facilities (defined in Part I, Item 1 of the 2014 Annual Report) funding as revenue during each of the three months ended May 31, 2015 and 2014, respectively. The Company recognized $31,100 of Special Facilities funding as revenue during each of the nine months ended May 31, 2015 and 2014, respectively. This is the ratable portion of the Special Facilities funding proceeds received from water agreements as more fully described in Note 2 Summary of Significant Accounting Policies As of May 31, 2015, and August 31, 2014, the Company has deferred recognition of approximately $1,183,200 and $1,232,200, respectively, of water tap and construction fee revenue from the County, which will be recognized as revenue ratably over the estimated useful accounting life of the assets constructed with the construction proceeds as described above. Agriculture Farming Operations |
Royalty and Other Obligations | Revenues from the sale of Export Water are shown net of royalties payable to the Land Board. Revenues from the sale of water on the Lowry Range (described in Note 4 Water and Land Assets |
Oil and Gas Lease Payments | As further described in Note 2 Summary of Significant Accounting Policies Water and Land Assets As of May 31, 2015 and August 31, 2014, the Company has deferred recognition of $541,200 and $1,025,500, respectively, of income related to the O&G Lease and the Rangeview Lease, which will be recognized into income ratably through February 2016 and July 2017, respectively. During the three and nine months ended May 31, 2015, two wells were drilled within the Companys mineral interest. Beginning in March 2015 both wells were placed into service and began producing oil and gas and accruing royalties to the Company. In May 2015, certain gas collection infrastructure was extended to the property to allow the collection of gas from the wells and accrual of royalties attributable to gas production. During the three and nine months ended May 31, 2015, the Company received $262,100 in royalties attributable to these two wells. |
Long-Lived Assets | The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the eventual use of the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Based on the Companys procedures, the Company determined that land and water shares held for sale related to the Arkansas River Assets were impaired as of August 31, 2014. See further discussion in Note 3 Water and Land Assets |
Capitalized Costs of Water and Wastewater Systems and Depletion and Depreciation of Water Assets | Costs to construct water and wastewater systems that meet the Companys capitalization criteria are capitalized as incurred, including interest, and depreciated on a straight-line basis over their estimated useful lives of up to 30 years. The Company capitalizes design and construction costs related to construction activities, and it capitalizes certain legal, engineering and permitting costs relating to the adjudication and improvement of its water assets. The Company depletes its groundwater assets that are being utilized on the basis of units produced (i.e., thousands of gallons sold) divided by the total volume of water adjudicated in the water decrees. |
Share-based Compensation | The Company maintains a stock option plan for the benefit of its employees and non-employee directors. The Company records share-based compensation costs as expense over the applicable vesting period of the stock award using the straight-line method. The compensation costs to be expensed are measured at the grant date based on the fair value of the award. The Company has adopted the alternative transition method for calculating the tax effects of share-based compensation, which allows for a simplified method of calculating the tax effects of employee share-based compensation. Because the Company has a full valuation allowance on its deferred tax assets, the granting and exercise of stock options has no impact on the income tax provisions. The Company recognized $53,700 and $68,800 of share-based compensation expense during the three months ended May 31, 2015 and 2014, respectively. The Company recognized $186,300 and $183,100 of share-based compensation expense during the nine months ended May 31, 2015 and 2014, respectively. |
Income taxes | The Company uses a "more-likely-than-not" threshold for the recognition and de-recognition of tax positions, including any potential interest and penalties relating to tax positions taken by the Company. The Company did not have any significant unrecognized tax benefits as of May 31, 2015. The Company files income tax returns with the Internal Revenue Service and the State of Colorado. The tax years that remain subject to examination are fiscal year 2012 through fiscal year 2014. 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 May 31, 2015, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the three or nine months ended May 31, 2015 or 2014. |
Income (Loss) per Common Share | Income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares outstanding during each period. Common stock options and warrants aggregating 328,600 and 380,100 common share equivalents were outstanding as of May 31, 2015 and 2014, respectively, and have been included in the calculation of net income per common share but excluded from the calculation of loss per common share as their effect is anti-dilutive. |
Recently Issued Accounting Pronouncements | The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Companys financial reporting, the Company undertakes a study to determine the consequence of the change to its consolidated financial statements and assures that there are proper controls in place to ascertain that the Companys consolidated financial statements properly reflect the change. During the current period, there were no new accounting pronouncements issued that will significantly impact the Companys financial reporting. |
2. FAIR VALUE MEASUREMENTS (Tab
2. FAIR VALUE MEASUREMENTS (Tables) | 9 Months Ended |
May. 31, 2015 | |
Fair Value Measurements Tables | |
Schedule of unobservable input reconciliation of fair value liabilities measured on a recurring basis | Fair Value Measurement using Significant Unobservable Inputs (Level 3) Gross Estimated Tap Participation Fee Liability Tap Participation Fee Reported Liability Discount - to be imputed as interest expense in future periods Balance at August 31, 2014 $ 12,038,300 $ 7,935,300 $ 4,103,000 Total gains and losses (realized and unrealized): - - - Imputed interest recorded as "Other Expense" - 23,800 (23,800 ) Purchases, sales, issuances, payments, reductions resulting from foreclosures, and HP A&M settlement (12,038,300 ) (7,959,100 ) (4,079,200 ) Transfers in and/or out of Level 3 - - - Balance at May 31, 2015 $ - $ - $ - |
3. WATER AND LAND ASSETS (Table
3. WATER AND LAND ASSETS (Tables) | 9 Months Ended |
May. 31, 2015 | |
Investments In Water Water Systems Land And Improvements Tables | |
Schedule of water and water systems | May 31, 2015 August 31, 2014 Costs Accumulated Depreciation and Depletion Costs Accumulated Depreciation and Depletion Arkansas River Valley assets $ 68,821,400 $ (1,488,600 ) $ 67,746,400 $ (1,488,600 ) Rangeview water supply 14,444,600 (8,600 ) 14,444,600 (8,400 ) Sky Ranch water rights and other costs 6,551,400 (170,100 ) 6,004,000 (93,000 ) Fairgrounds water and water system 2,899,900 (776,700 ) 2,899,900 (710,600 ) Rangeview water system 1,270,100 (99,900 ) 1,148,200 (77,900 ) Water supply other 3,668,800 (167,900 ) 1,050,200 (90,900 ) Totals 97,656,200 (2,711,800 ) 93,293,300 (2,469,400 ) Net investments in water and water systems $ 94,944,400 $ 90,823,900 |
4. LONG-TERM OBLIGATIONS AND 20
4. LONG-TERM OBLIGATIONS AND OPERATING LEASE (Tables) | 9 Months Ended |
May. 31, 2015 | |
Long-Term Obligations And Operating Lease Tables | |
Schedule of remaining third party obligation | Export Water Proceeds Received Initial Export Water Proceeds to Pure Cycle Total Potential Third Party Obligation Paticipating Interests Liability Contingency Original balances $ $ 218,500 $ 31,807,700 $ 11,090,600 $ 20,717,100 Activity from inception until August 31, 2014: Acquisitions 28,077,500 (28,077,500 ) (9,790,000 ) (18,287,500 ) 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 * 533,000 (373,100 ) (159,900 ) (55,800 ) (104,100 ) Export Water sale payments 360,900 (262,200 ) (98,700 ) (34,300 ) (64,400 ) Balance at August 31, 2014 1,004,300 30,004,800 1,017,100 354,600 662,500 Fiscal 2015 activity: Export Water sale payments 184,200 (162,300 ) (21,900 ) (7,600 ) (14,300 ) Balance at May 31, 2015 $ 1,188,500 $ 29,842,500 $ 995,200 $ 347,000 $ 648,200 |
Schedule of future maturities | Mortgage notes payable, mainly bear interest at 5%, 5-year term; one note in amount of $4.45 million has 20-year term $ 5,586,200 Less: current portion (848,300 ) Total long-term mortgage payable $ 4,737,900 Future long-term maturities 2016 578,600 2017 369,000 2018 166,200 2019 157,100 2020 169,800 Post 2020 3,297,200 Total $ 4,737,900 |
5. SHAREHOLDERS' EQUITY (Tables
5. SHAREHOLDERS' EQUITY (Tables) | 9 Months Ended |
May. 31, 2015 | |
Shareholders Equity Tables | |
Schedule of stock option activity | Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Approximate Aggregate Instrinsic Value Oustanding at beginning of period 315,000 $ 5.76 Granted 26,000 4.17 Exercised - - Forfeited or expired (12,500 ) 7.21 Outstanding at May 31, 2015 328,500 $ 4.99 6.42 $ 82,270 Options exercisable at May 31, 2015 235,833 $ 4.83 5.56 $ 97,117 |
Schedule of activity and value of non-vested options | Number of Options Weighted-Average Grant Date Fair Value Non-vested options oustanding at beginning of period 99,167 $ 4.85 Granted 26,000 2.78 Vested (32,500 ) 4.19 Forfeited - - Non-vested options outstanding at May 31, 2015 92,667 $ 4.29 |
10. SEGMENT INFORMATION (Tables
10. SEGMENT INFORMATION (Tables) | 9 Months Ended |
May. 31, 2015 | |
Segment Information Tables | |
Schedule of segment reporting | Three Months Ended May 31, 2015 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 85,800 $ 270,600 $ 34,500 $ 390,900 Gross (loss) profit (39,300 ) 247,500 19,800 228,000 Depletion and depreciation 86,800 - - 86,800 Other significant noncash items: Stock-based compensation - - 53,700 53,700 TPF interest expense - - - - Segment assets 93,561,100 8,396,400 937,400 102,894,900 Expenditures for segment assets 36,200 600 - 36,800 Three Months Ended May 31, 2014 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 335,800 $ 328,800 $ 13,900 $ 678,500 Gross profit 184,700 305,800 13,900 504,400 Depletion and depreciation 7,200 - - 7,200 Other significant noncash items: Stock-based compensation - - 68,800 68,800 TPF interest expense 248,800 - - 248,800 Segment assets 96,813,900 6,571,000 3,272,700 106,657,600 Expenditures for segment assets 399,000 - - 399,000 Nine Months Ended May 31, 2015 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 931,000 $ 818,900 $ 131,300 $ 1,881,200 Gross profit 475,100 748,900 95,500 1,319,500 Depletion and depreciation 258,900 - - 258,900 Other significant noncash items: Stock-based compensation - - 186,300 186,300 TPF interest expense 23,800 - - 23,800 Segment assets 93,561,100 8,396,400 937,400 102,894,900 Expenditures for segment assets 1,904,500 3,500 - 1,908,000 Nine Months ended May 31, 2014 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 1,095,400 $ 855,700 $ 41,900 $ 1,993,000 Gross profit 620,800 791,300 41,900 1,454,000 Depletion and depreciation 30,100 - - 30,100 Other significant noncash items: Stock-based compensation - - 183,100 183,100 TPF interest expense 1,309,100 - - 1,309,100 Segment assets 96,813,900 6,571,000 3,272,700 106,657,600 Expenditures for segment assets 918,100 - - 918,100 |
1. PRESENTATION OF INTERIM IN23
1. PRESENTATION OF INTERIM INFORMATION (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
May. 31, 2015 | May. 31, 2014 | May. 31, 2015 | May. 31, 2014 | |
Interest imputed on the Tap Participation Fee payable to HP A&M | $ 0 | $ 248,847 | $ 23,816 | $ 1,309,085 |
Water tap fees recognized | 3,574 | 3,574 | 10,721 | 10,721 |
Special facility (deferred construction) funding recognized | $ 10,377 | $ 10,377 | $ 31,131 | $ 31,131 |
Antidilutive securities excluded from earnings per share calculation | 328,600 | 380,100 |
2. FAIR VALUE MEASUREMENTS (Det
2. FAIR VALUE MEASUREMENTS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
May. 31, 2015 | May. 31, 2014 | May. 31, 2015 | May. 31, 2014 | |
Imputed interest recorded as "Other Expense" | $ 0 | $ (248,847) | $ (23,816) | $ (1,309,085) |
Gross Estimated Tap Participation Fee Liability | ||||
Balance, beginning | 12,038,300 | |||
Total gains and losses (realized and unrealized) | 0 | |||
Imputed interest recorded as "Other Expense" | 0 | |||
Purchases, sales, issuances, payments, and reductions resulting from foreclosures | (12,038,300) | |||
Transfers in and/or out of Level 3 | 0 | |||
Balance, ending | 0 | 0 | ||
Tap Participation Fee Reported Liability | ||||
Balance, beginning | 7,935,300 | |||
Total gains and losses (realized and unrealized) | 0 | |||
Imputed interest recorded as "Other Expense" | 23,800 | |||
Purchases, sales, issuances, payments, and reductions resulting from foreclosures | (7,959,100) | |||
Transfers in and/or out of Level 3 | 0 | |||
Balance, ending | 0 | 0 | ||
Discount To Be Imputed As Interest Expense In Future Periods | ||||
Balance, beginning | 4,103,000 | |||
Total gains and losses (realized and unrealized) | 0 | |||
Imputed interest recorded as "Other Expense" | (23,800) | |||
Purchases, sales, issuances, payments, and reductions resulting from foreclosures | (4,079,200) | |||
Transfers in and/or out of Level 3 | 0 | |||
Balance, ending | $ 0 | $ 0 |
3. WATER AND LAND ASSETS (Detai
3. WATER AND LAND ASSETS (Details) - USD ($) | May. 31, 2015 | Aug. 31, 2014 |
Costs | $ 97,656,200 | $ 93,293,300 |
Accumulated Depreciation and Depletion | (2,711,800) | (2,469,400) |
Net investments in water and water systems | 94,944,350 | 90,823,916 |
Arkansas River Valley Assets | ||
Costs | 68,821,400 | 67,746,400 |
Accumulated Depreciation and Depletion | (1,488,600) | (1,488,600) |
Rangeview Water Supply | ||
Costs | 14,444,600 | 14,444,600 |
Accumulated Depreciation and Depletion | (8,600) | (8,400) |
Sky Ranch Water Rights And Other Costs | ||
Costs | 6,551,400 | 6,004,000 |
Accumulated Depreciation and Depletion | (170,100) | (93,000) |
Fairgrounds Water And Water System | ||
Costs | 2,899,900 | 2,899,900 |
Accumulated Depreciation and Depletion | (776,700) | (710,600) |
Rangeview Water System | ||
Costs | 1,270,100 | 1,148,200 |
Accumulated Depreciation and Depletion | (99,900) | (77,900) |
Water Supply Other | ||
Costs | 3,668,800 | 1,050,200 |
Accumulated Depreciation and Depletion | $ (167,900) | $ (90,900) |
3. WATER AND LAND ASSETS (Det26
3. WATER AND LAND ASSETS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
May. 31, 2015 | May. 31, 2014 | May. 31, 2015 | May. 31, 2014 | Aug. 31, 2014 | |
Investments In Water Water Systems Land And Improvements Detail Narrative | |||||
Depletion | $ 500 | $ 100 | $ 6,700 | $ 300 | |
Depreciation | 86,300 | $ 45,400 | 252,200 | $ 138,800 | |
Assets Held-for-sale, Long Lived | $ 1,500,000 | $ 1,500,000 | $ 1,500,000 |
4. LONG-TERM OBLIGATIONS AND 27
4. LONG-TERM OBLIGATIONS AND OPERATING LEASE (Details) - USD ($) | 9 Months Ended | 221 Months Ended |
May. 31, 2015 | Aug. 31, 2014 | |
Export Water Proceeds Received | ||
Remaining Third Party Obligation: | ||
Balance, original | ||
Balance, beginning | $ 1,004,300 | |
Acquisitions | $ 0 | |
Option payments | 110,400 | |
Arapahoe Tap fees | 533,000 | |
Export Water Sale Payments | 184,200 | 360,900 |
Balance, ending | 1,188,500 | 1,004,300 |
Initial Export Water Proceeds To Pure Cycle | ||
Remaining Third Party Obligation: | ||
Balance, original | 218,500 | |
Balance, beginning | 30,004,800 | |
Acquisitions | 28,077,500 | |
Relinquishment | 2,386,400 | |
Option payments | (42,300) | |
Arapahoe Tap fees | (373,100) | |
Export Water Sale Payments | (162,300) | (262,200) |
Balance, ending | 29,842,500 | 30,004,800 |
Total Potential Third Party Obligation | ||
Remaining Third Party Obligation: | ||
Balance, original | 31,807,700 | |
Balance, beginning | 1,017,100 | |
Acquisitions | (28,077,500) | |
Relinquishment | (2,386,400) | |
Option payments | (68,100) | |
Arapahoe Tap fees | (159,900) | |
Export Water Sale Payments | (21,900) | (98,700) |
Balance, ending | 995,200 | 1,017,100 |
Participating Interests Liability | ||
Remaining Third Party Obligation: | ||
Balance, original | 11,090,600 | |
Balance, beginning | 354,600 | |
Acquisitions | (9,790,000) | |
Relinquishment | (832,100) | |
Option payments | (23,800) | |
Arapahoe Tap fees | (55,800) | |
Export Water Sale Payments | (7,600) | (34,300) |
Balance, ending | 347,000 | 354,600 |
Contingency | ||
Remaining Third Party Obligation: | ||
Balance, original | 20,717,100 | |
Balance, beginning | 662,500 | |
Acquisitions | (18,287,500) | |
Relinquishment | (1,554,300) | |
Option payments | (44,300) | |
Arapahoe Tap fees | (104,100) | |
Export Water Sale Payments | (14,300) | (64,400) |
Balance, ending | $ 648,200 | $ 662,500 |
4. LONG-TERM OBLIGATIONS AND 28
4. LONG-TERM OBLIGATIONS AND OPERATING LEASE (Details 1) - USD ($) | May. 31, 2015 | Aug. 31, 2014 |
Long-Term Obligations And Operating Lease Tables | ||
Mortgage notes payable, mainly bear interest at 5%, 5 year term; one note in amount of $4.45 million had a 20 year term | $ 5,586,200 | |
Less: current portion | (848,325) | $ (925,980) |
Total long-term mortgage payable | 4,737,847 | 4,032,227 |
Future long-term maturities | ||
2,016 | 578,600 | |
2,017 | 369,000 | |
2,018 | 166,200 | |
2,019 | 157,100 | |
2,020 | 169,800 | |
Post 2,020 | 3,297,200 | |
Total | $ 4,737,847 | $ 4,032,227 |
5. SHAREHOLDERS' EQUITY (Detail
5. SHAREHOLDERS' EQUITY (Details) - 9 months ended May. 31, 2015 - USD ($) | Total |
Number of options | |
Outstanding, beginning | 315,000 |
Granted | 26,000 |
Exercised | 0 |
Forfeited or expired | (12,500) |
Outstanding, ending | 328,500 |
Exercisable | 235,833 |
Weighted average exercise price | |
Outstanding, beginning | $ 5.76 |
Granted | 4.17 |
Exercised | 0 |
Forfeited or expired | 7.21 |
Outstanding, ending | 4.99 |
Exercisable | $ 4.83 |
Weighted average remaining contractual term | |
Outstanding, ending | 6 years 5 months 1 day |
Exercisable | 5 years 6 months 22 days |
Approximate aggregate intrinsic value | |
Outstanding, ending | $ 82,270 |
Exercisable | $ 97,117 |
5. SHAREHOLDERS' EQUITY (Deta30
5. SHAREHOLDERS' EQUITY (Details 1) - 9 months ended May. 31, 2015 - $ / shares | Total |
Number of options | |
Outstanding, beginning | 99,167 |
Granted | 26,000 |
Vested | (32,500) |
Forfeited | 0 |
Outstanding, ending | 92,667 |
Weighted average grant date fair value | |
Outstanding, beginning | $ 4.85 |
Granted | 2.78 |
Vested | 4.19 |
Forfeited | 0 |
Outstanding, ending | $ 4.29 |
5. SHAREHOLDERS' EQUITY (Deta31
5. SHAREHOLDERS' EQUITY (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
May. 31, 2015 | May. 31, 2014 | May. 31, 2015 | May. 31, 2014 | |
Fair value of options vested | $ 136,300 | $ 76,800 | ||
Stock-based compensation | $ 53,700 | $ 68,800 | 186,300 | $ 183,100 |
Unrecognized share-based compensation cost | $ 220,900 | $ 220,900 | ||
2014 Incentive Plan | ||||
Number of shares authorized under plan | 1,600,000 | 1,600,000 |
6. RELATED PARTY TRANSACTIONS (
6. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 9 Months Ended | |
May. 31, 2015 | May. 31, 2014 | |
Related Party Transactions Details Narrative | ||
Funding provided to the District | $ 78,700 | $ 70,800 |
Due from related parties | $ 674,300 |
7. SIGNIFICANT CUSTOMERS (Detai
7. SIGNIFICANT CUSTOMERS (Details Narrative) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
May. 31, 2015 | May. 31, 2014 | May. 31, 2015 | May. 31, 2014 | Aug. 31, 2014 | Aug. 31, 2013 | |
Sales | The District | ||||||
Concentration Risk Percentage | 48.00% | 12.00% | 13.00% | 11.00% | ||
Sales | The District's Significant Customer | ||||||
Concentration Risk Percentage | 40.00% | 10.00% | 11.00% | 9.00% | ||
Sales | Oil and Gas Industry Customer | ||||||
Concentration Risk Percentage | 46.00% | 84.00% | 83.00% | 86.00% | ||
Accounts Receivable | The District | ||||||
Concentration Risk Percentage | 10.00% | 5.00% | ||||
Accounts Receivable | The District's Significant Customer | ||||||
Concentration Risk Percentage | 9.00% | 4.00% | ||||
Accounts Receivable | Oil and Gas Industry Customer | ||||||
Concentration Risk Percentage | 1.00% | 75.00% |
8. ACCRUED LIABILITIES (Details
8. ACCRUED LIABILITIES (Details Narrative) - USD ($) | May. 31, 2015 | Aug. 31, 2014 |
Accrued Liabilities Detail Narrative | ||
Accrued liabilities | $ 145,696 | $ 257,893 |
Estimated property taxes | 59,500 | 99,700 |
Professional Fees | 42,300 | 59,500 |
Farm lease prepayments | 2,000 | 22,400 |
Operating payables | $ 41,900 | $ 76,300 |
10. SEGMENT INFORMATION (Detail
10. SEGMENT INFORMATION (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
May. 31, 2015 | May. 31, 2014 | May. 31, 2015 | May. 31, 2014 | Aug. 31, 2014 | |
Revenues | $ 390,942 | $ 678,549 | $ 1,881,237 | $ 1,992,926 | |
Gross (loss) profit | 228,049 | 504,389 | 1,319,478 | 1,453,961 | |
Depletion and depreciation | 86,800 | 7,200 | 258,900 | 30,100 | |
Other significant noncash items: | |||||
Stock-based compensation | 53,700 | 68,800 | 186,300 | 183,100 | |
TPF interest expense | 0 | 248,847 | 23,816 | 1,309,085 | |
Segment assets | 102,894,916 | 106,657,600 | 102,894,916 | 106,657,600 | $ 108,173,822 |
Expenditures for segment assets | 36,800 | 399,000 | 1,908,000 | 918,100 | |
Wholesale Water And Wasterwater | |||||
Revenues | 85,800 | 335,800 | 931,000 | 1,095,400 | |
Gross (loss) profit | (39,300) | 184,700 | 475,100 | 620,800 | |
Depletion and depreciation | 86,800 | 7,200 | 258,900 | 30,100 | |
Other significant noncash items: | |||||
Stock-based compensation | 0 | 0 | 0 | 0 | |
TPF interest expense | 0 | 248,800 | 23,800 | 1,309,100 | |
Segment assets | 93,561,100 | 96,813,900 | 93,561,100 | 96,813,900 | |
Expenditures for segment assets | 36,200 | 399,000 | 1,904,500 | 918,100 | |
Agricultural | |||||
Revenues | 270,600 | 328,800 | 818,900 | 855,700 | |
Gross (loss) profit | 247,500 | 305,800 | 748,900 | 791,300 | |
Depletion and depreciation | 0 | 0 | 0 | 0 | |
Other significant noncash items: | |||||
Stock-based compensation | 0 | 0 | 0 | 0 | |
TPF interest expense | 0 | 0 | 0 | 0 | |
Segment assets | 8,396,400 | 6,571,000 | 8,396,400 | 6,571,000 | |
Expenditures for segment assets | 600 | 0 | 3,500 | 0 | |
All Other | |||||
Revenues | 34,500 | 13,900 | 131,300 | 41,900 | |
Gross (loss) profit | 19,800 | 13,900 | 95,500 | 41,900 | |
Depletion and depreciation | 0 | 0 | 0 | 0 | |
Other significant noncash items: | |||||
Stock-based compensation | 53,700 | 68,800 | 186,300 | 183,100 | |
TPF interest expense | 0 | 0 | 0 | 0 | |
Segment assets | 937,400 | 3,272,700 | 937,400 | 3,272,700 | |
Expenditures for segment assets | $ 0 | $ 0 | $ 0 | $ 0 |