Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | |
Aug. 31, 2015 | Nov. 02, 2015 | |
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 | $ 86,018,020 | |
Document Period End Date | Aug. 31, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Aug. 31, 2015 | Aug. 31, 2014 |
Current assets: | ||
Cash and cash equilvalents | $ 37,089,041 | $ 1,749,558 |
Trade accounts receivable, net | 707,838 | 1,626,090 |
Sky Ranch receivable | 148,415 | 50,915 |
Escrow receivable | 1,342,250 | 0 |
Land and water held for sale | 0 | 699,826 |
Prepaid expenses | 293,395 | 336,867 |
Total current assets | 39,580,939 | 4,463,256 |
Investments in water and water systems, net | 27,708,595 | 90,823,916 |
Land and mineral interests | 5,091,668 | 3,662,754 |
Land and water held for sale | 0 | 1,500,000 |
Note receivable - related party: | ||
Rangeview Metropolitan District, including accrued interest | 591,223 | 568,022 |
HP A&M receivable | 0 | 7,069,511 |
Other assets | 88,488 | 86,363 |
Total assets | 73,060,913 | 108,173,822 |
Current liabilities: | ||
Accounts payable | 198,338 | 1,379,647 |
Current portion mortgages payable, including interest payable of $0 and $80,847, respectively | 925,980 | |
Accrued liabilities | 590,533 | 257,893 |
Income taxes | 292,729 | 0 |
Deferred revenues | 56,700 | 65,124 |
Deferred oil and gas lease payment | 360,765 | 645,720 |
Total current liabilities | 1,499,065 | 3,274,364 |
Deferred revenues, less current portion | 1,111,293 | 1,167,095 |
Deferred oil and gas lease payment, less current portion | 19,000 | 379,765 |
Mortgages payable, less current portion | 4,032,227 | |
Participating Interests in Export Water Supply | 346,007 | 354,628 |
Tap Participation Fee payable to HP A&M net of $0 and $4.1 million discount respectively | 0 | 7,935,262 |
Total liabilities | 2,975,365 | $ 17,143,341 |
Commitments and contingencies | ||
Preferred stock: | ||
Series B - par value $.001 per share, 25 milllion shares authorized 432,513 shares issued and outstanding (liquidation perference of $432,513) | 433 | $ 433 |
Common stock: | ||
Par value 1/3 of $.01 per share, 40 million shares authorized; 24,054,098 and 24,037,598 shares issued and outstanding, respectively | 80,185 | 80,130 |
Collateral stock | (1,407,000) | 0 |
Additional paid in capital | 172,384,355 | 168,794,396 |
Accumulated deficit | (100,972,425) | (77,844,478) |
Total shareholders' equity | 70,085,548 | 91,030,481 |
Total liabilities and shareholders' equity | $ 73,060,913 | $ 108,173,822 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Aug. 31, 2015 | Aug. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Interest payable | $ 0 | $ 80,847 |
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 issued | 24,054,098 | 24,037,598 |
Common stock, shares outstanding | 24,054,098 | 24,037,598 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) | 12 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | |
Revenues: | |||
Metered water usage | $ 969,989 | $ 1,879,495 | $ 502,668 |
Wastewater treatment fees | 50,076 | 45,400 | 41,697 |
Special facility funding recognized | 41,508 | 41,508 | 41,508 |
Water tap fees recognized | 14,294 | 14,294 | 14,294 |
Farm operations | 1,127,155 | 1,068,026 | 1,241,882 |
Other income | 120,702 | 42,417 | 15,413 |
Total revenues | 2,323,724 | 3,091,140 | 1,857,462 |
Expenses: | |||
Water service operations | (464,940) | (547,562) | (188,309) |
Wastewater service operations | (66,745) | (38,426) | (16,958) |
Farm operations | (126,279) | (88,105) | (96,337) |
Other | (55,173) | (39,421) | (1,199) |
Depletion and depreciation | (172,546) | (149,757) | (90,468) |
Total cost of revenues | (885,683) | (863,271) | (393,271) |
Gross margin | 1,438,041 | 2,227,869 | 1,464,191 |
General and administrative expenses | (2,699,587) | (3,356,863) | (2,333,126) |
Impairment of land and water rights held for sale | 0 | (402,657) | 0 |
Depreciation | (174,717) | (46,807) | (220,834) |
Operating loss | (1,436,263) | (1,578,458) | (1,089,769) |
Other income (expense): | |||
Oil and gas lease income, net | 645,720 | 525,438 | 416,048 |
Oil and gas royalty income, net | 412,627 | 0 | 0 |
Interest income | 43,044 | 26,858 | 34,583 |
Interest expense | (390,505) | (239,200) | (245,503) |
Other | 22,120 | 160,004 | 9,574 |
Gain on sale of land and water assets | (22,108,145) | 1,407,326 | 0 |
Gain on extinguishment of contingent obligations and debt | 0 | 832,097 | 0 |
Interest imputed on the Tap Participation Fees payable to HP A&M | (23,816) | (1,445,509) | (3,275,378) |
Net loss before taxes | (22,835,218) | (311,444) | (4,150,445) |
Taxes | (292,700) | 0 | 0 |
Net loss | $ (23,127,947) | $ (311,444) | $ (4,150,445) |
Net loss per common share - basic and diluted | $ (0.96) | $ (0.01) | $ (0.17) |
Weighted average common shares outstanding - basic and diluted | 24,041,114 | 24,037,598 | 24,037,598 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS) - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Comprehensive Income (Loss) | Collateral Stock | Accumulated Deficit | Total |
Balance, beginning at Aug. 31, 2012 | $ 433 | $ 80,130 | $ 103,420,869 | $ (1,081) | $ 0 | $ (73,382,589) | $ 30,117,762 |
Balance, beginning shares at Aug. 31, 2012 | 432,513 | 24,037,598 | |||||
Share-based compensation | $ 0 | $ 0 | 66,812 | 0 | 0 | 0 | 66,812 |
Unrealized loss on investments | 0 | 0 | 0 | 1,081 | 0 | 0 | 1,081 |
Exercise of options | 0 | ||||||
Reduction in TPF due to remedies under the Arkansas River Agreement | 0 | 0 | 11,737,265 | 0 | 0 | 0 | 11,737,265 |
Net loss | 0 | 0 | 0 | 0 | 0 | (4,150,445) | (4,150,445) |
Comprehensive loss | (4,149,364) | ||||||
Balance, ending at Aug. 31, 2013 | $ 433 | $ 80,130 | 115,224,946 | 0 | 0 | (77,533,034) | 37,772,475 |
Balance, ending, shares at Aug. 31, 2013 | 432,513 | 24,037,598 | |||||
Share-based compensation | $ 0 | $ 0 | 251,915 | 0 | 0 | 0 | 251,915 |
Exercise of options | 0 | ||||||
Reduction in TPF due to remedies under the Arkansas River Agreement | 0 | 0 | 53,317,535 | 0 | 0 | 0 | 53,317,535 |
Net loss | 0 | 0 | 0 | 0 | 0 | (311,444) | (311,444) |
Comprehensive loss | (311,444) | ||||||
Balance, ending at Aug. 31, 2014 | $ 433 | $ 80,130 | 168,794,396 | 0 | 0 | (77,844,478) | 91,030,481 |
Balance, ending, shares at Aug. 31, 2014 | 432,513 | 24,037,598 | |||||
Share-based compensation | $ 0 | $ 0 | 239,986 | 0 | 0 | 0 | 239,986 |
Exercise of options | $ 0 | $ 55 | 48,770 | 0 | 0 | 0 | $ (48,825) |
Exercise of options, shares | 0 | 16,500 | (16,500) | ||||
Reduction in TPF due to remedies under the Arkansas River Agreement | $ 0 | $ 0 | 3,301,203 | 0 | 0 | 0 | $ 3,301,203 |
Collateral stock | 0 | 0 | 0 | 0 | (1,407,000) | 0 | (1,407,000) |
Net loss | 0 | 0 | 0 | 0 | 0 | (23,127,947) | (23,127,947) |
Comprehensive loss | (23,127,947) | ||||||
Balance, ending at Aug. 31, 2015 | $ 433 | $ 80,130 | $ 172,384,355 | $ 0 | $ (1,407,000) | $ (100,972,425) | $ 70,085,548 |
Balance, ending, shares at Aug. 31, 2015 | 432,513 | 24,037,598 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | |
Cash flows from operating activities | |||
Net loss | $ (23,127,947) | $ (311,444) | $ (4,150,445) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||
Share-based compensation expense | 239,986 | 251,915 | 66,812 |
Depreciation, depletion and other non-cash items | 347,263 | 196,564 | 313,137 |
Investment in Well Enhancement Recovery Systems, LLC | 4,577 | (37,193) | 0 |
Imputed interest on Tap Participation Fees payable to HP A&M | 23,816 | 1,445,509 | 3,275,378 |
Impairment of land and water rights held for sale | 0 | 402,657 | 0 |
(Loss) Gain on the sale of land and water rights held for sale | 22,108,145 | (1,308,392) | 0 |
Interest income and other non-cash items | (419) | (420) | 0 |
Interest added to note receivable - related party Rangeview Metropolitan District | (15,493) | (12,039) | (12,038) |
Gain on extinguishment of contingent obligations | 0 | (832,097) | 0 |
Changes in operating assets and liabilities: | |||
Trade accounts receivable | 918,252 | (1,041,288) | (449,344) |
Prepaid expenses | 43,472 | (168,795) | 125,437 |
HP A&M Receivable | (63,777) | (414,355) | (519,934) |
Sky Ranch Receivable | (97,500) | 6,388 | (57,303) |
Rangeview Metropolitan District note receivable | (7,708) | 0 | 0 |
Accounts payable and accrued liabilities | (848,669) | 1,191,298 | 120,527 |
Income taxes | 292,729 | 0 | 0 |
Interest accrued on agriculture land promissory notes | (80,847) | (41,181) | 0 |
Deferred revenue | (64,226) | (65,385) | (65,385) |
Deferred income - oil and gas lease | (645,720) | 790,002 | (403,507) |
Net cash provided by (used in) operating activities | (974,066) | 51,744 | (1,756,665) |
Cash flows from investing activities: | |||
Investments in water, water systems and land | (2,101,253) | (3,864,443) | (378,008) |
Sales and maturities of marketable securities | 0 | 0 | 1,101,367 |
Proceeds from sale of land and easments | 0 | 192,851 | 0 |
Proceeds from sale of farm land | 44,650,149 | 5,811,265 | 0 |
Proceeds from sale of collateral stock | 0 | 0 | 3,415,000 |
Purchase of property and equipment | (17,186) | (3,370) | (40,300) |
Net cash provided (used) by investing activities | 42,531,710 | 2,136,303 | 4,098,059 |
Cash flows from financing activities | |||
Arapahoe County construction proceeds | 0 | 0 | 291,662 |
Proceeds from exercise of options | 48,825 | 0 | 0 |
Payment to contingent liability holders | (8,621) | (6,185) | (16,018) |
Proceeds from borrowings on promissory notes payable | 2,670,627 | 0 | 0 |
Payments made on promissory notes payable | (8,928,992) | (2,880,667) | (1,792,192) |
Net cash (used in) provided by financing activities | (6,218,161) | (2,886,852) | (1,516,548) |
Net change in cash and cash equivalents | 35,339,483 | (698,805) | 824,846 |
Cash and cash equivalents - beginning of year | 1,749,558 | 2,448,363 | 1,623,517 |
Cash and cash equivalents - end of year | 37,089,041 | 1,749,558 | 2,448,363 |
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES | |||
Reduction in Tap Participation Fee liability resulting from remedies under the Arkansas River Agreement | 0 | $ 53,317,500 | $ 11,737,300 |
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 | 1,894,203 | ||
Assets acquired through WISE funding obligation | $ 1,381,004 |
ORGANIZATION
ORGANIZATION | 12 Months Ended |
Aug. 31, 2015 | |
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, and prior to a sale on August 18, 2015, it owned assets in Southeast Colorado. 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 leased its farm land and related water rights in Southeast Colorado to area farmers. 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. The Company believes it has sufficient working capital and financing sources to fund its operations for at least the next fiscal year. As of August 31, 2015, the Company had $37.1 million of cash and cash equivalents and $38.1 million of working capital. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Aug. 31, 2015 | |
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. 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 high quality financial institution in an account which as of August 31, 2015 exceeded federally insured limits. At various times during the year ended August 31, 2015, the Company's 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. At various times throughout the year ended August 31, 2015, cash deposits have exceeded federally insured limits. The Company historically has invested its idle cash primarily in certificates of deposit, money market instruments, commercial paper obligations, corporate bonds and US government treasury obligations. To date, the Company has not experienced significant losses on any of these investments. HP A&M Receivable In conjunction with High Plains A&M, LLC ("HP A&M"), defaulting on certain promissory notes in fiscal year 2012, the Company had the right to collect from HP A&M any amounts the Company spent to cure the defaulted notes. Accordingly, through the date of the settlement, the Company had recorded the entire amount of the HP A&M notes at default as well as expenses incurred to cure the defaults as a receivable from HP A&M less proceeds received from the sale of shares pledged by HP A&M as security. As described further in Note 12 – Litigation Loss Contingencies, . Mortgages Payable During fiscal year 2013, the Company began acquiring the defaulted and non-defaulted promissory notes that were payable by HP A&M. The Company used cash and issued notes to acquire the HP A&M notes, the majority of which had a five-year term, bore interest at an annual rate of five percent and required semi-annual payments with a straight-line amortization schedule. The carrying value of the notes payable approximated the fair value as the rates were comparable to market rates. In October 2014, the Company borrowed $4,450,000 from the First National Bank of Las Animas. The note had a 20-year term, required 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 was subject to change (no more often than annually) based on the changes in the First National Bank of Las Animas Ag/Real Estate Rate. The Company had the right to pay the note in full at any time without penalty. The carrying value of this note approximated the fair value as the rate was comparable to market rates. On August 18, 2015, in conjunction with the sale of the farm assets, the Company repaid the note in full. As described further in Note 14 – Related Party Transactions Cash Flows The Company paid $441,400, $310,400 and $123,500 in interest during the fiscal years ended August 31, 2015 2014, and 2013, respectively. The Company did not pay any income taxes during the fiscal years ended August 31, 2015, 2014 and 2013. The Company has accrued $292,700 for alternative minimum tax the Company will owe as a result of the sale of the Company's farm assets. Trade Accounts Receivable The Company records accounts receivable net of allowances for uncollectible accounts. Included in trade accounts receivable are balances due from farm operations. The Company recorded an allowance for uncollectible accounts in the amount of $26,300 for each of the periods ended August 31, 2015 and 2014. 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. Based on the Company's procedures, the Company determined that land and water rights held for sale related to the Arkansas River assets were impaired as of August 31, 2014, and the Company recorded an impairment of $402,700. The Company determined that no impairment of such assets existed at August 31, 2015, or August 31, 2013. 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 This note should be read in conjunction with Note 7 – Long-Term Debt and Operating Lease Litigation Loss Contingencies 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. The Company did not sell any water taps during the fiscal years ended August 31, 2015, 2014, or 2013. As further discussed in Note 12 – 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 was utilized in the valuation of the liability. The Company imputed interest of $23,800, $1.4 million and $3.3 million during the years ended August 31, 2015, 2014 and 2013, respectively. As a result of the Company's settlement with HP A&M, no water taps remain subject to the TPF as of August 31, 2015. As of August 31, 2014, there were 2,184 water taps subject to the TPF. Revenue Recognition The Company generates revenues through two separate lines of businesses. Its revenues are derived through its wholesale water and wastewater business and its farming operations, which are described below. Wholesale Water and Wastewater Business – i) Monthly wholesale water and wastewater service fees – The Company recognizes wastewater processing revenues monthly based on usage. The monthly wastewater service fees are shown net of amounts retained by the District. Amounts recognized for water and wastewater services during the fiscal years ended August 31, 2015, 2014 and 2013 are presented in the statements of operations. Costs of delivering water and providing wastewater service to customers are recognized as incurred. The Company delivered 97.5 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. In each of the three fiscal years ended August 31, 2015, 2014 and 2013, the Company recognized $14,300 of tap fee revenue. At August 31, 2015, In addition to the tap fee revenues and the construction revenues, the Company also recorded interest income from Arapahoe County using the effective interest method. Pursuant to the Arapahoe County agreement, the county made payments to the Company totaling $82,200 per year through 2013 for the construction of the Special Facilities at the Fairgrounds. These payments include interest at 6% per annum. In April 2013, the county paid the balance on the note. The Company recognized $5,500 of interest income from the county during the fiscal year ended August 31, 2013. iii) Consulting fees - Consulting fees are fees the Company receives, typically on a monthly basis, from municipalities and area water providers along the I-70 corridor, for contract operations services. Agricultural Farming Operations – 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 District. See further description of "Export Water" and the "Lowry Range" in Note 4 under "Rangeview Water Supply and Water System." Oil and Gas Lease Payments As further described in Note 4 below, on March 10, 2011, the Company entered into a Paid-Up Oil and Gas Lease (the "O&G Lease") and a Surface Use and Damage Agreement (the "Surface Use Agreement") with Anadarko E&P Company, L.P. ("Anadarko"), a wholly owned subsidiary of Anadarko Petroleum Company. Pursuant to the O&G Lease on March 10, 2011, 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 approximately 634 acres of mineral estate owned by the Company at its Sky Ranch property. 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, which will be recognized as income on a straight-line basis over two years (the extension term of the O&G Lease). In addition, during the fiscal years ended August 31, 2015 and 2014, the Company received up-front payments of $72,000 and $12,540, respectively, for the purpose of exploring for, developing, producing, and marketing oil and gas on 40 acres of mineral estate the Company owns adjacent to the Lowry Range (the "Rangeview Lease"). The Company recognizes the up-front payments on a straight-line basis over the terms of the respective leases. As of August 31, 2015, the Company has deferred recognition of $379,800 of income related to the O&G Lease, which will be recognized as income ratably through July 2017. 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, 2015 and 2014 had no impact on the income tax provisions. The Company recognized $240,000, $251,900, and $66,800 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, 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 2011 through fiscal 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 August 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 fiscal years ended August 31, 2015, 2014 or 2013. 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 312,100, 315,100, and 347,600 common share equivalents as of August 31, 2015, 2014 and 2013, 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. Where 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 assures that there are proper controls in place to ascertain that the Company's financials properly reflect the change. A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, the Company has not determined whether implementation of such proposed standards would be material to the Company's financial statements. During the current period, there were no new accounting pronouncements issued that will significantly impact the Company's financial reporting. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Aug. 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 New York Stock Exchange. The Company had none of these instruments at August 31, 2015 or 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 at August 31, 2015 or 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 at August 31, 2014, the Tap Participation Fee liability, which is described in greater detail in Note 2 – Summary of Significant Accounting Policies Long-Term Debt and Operating Lease The Company maintains policies and procedures to value instruments using the best and most relevant data available. The Company's non-financial assets measured at fair value on a non-recurring basis consist of its investments in water and water systems and other long-lived assets held for sale. See Note 4 – Water and Land Assets Level 3 Liability – Tap Participation Fee. Long-Term Debt and Operating Lease Cash and Cash Equivalents Accounts Receivable and Accounts Payable Long-term Financial Liabilities: Participating Interests in Export Water The recorded balance of the Tap Participation Fee liability at August 31, 2014 is its estimated fair value determined by projecting new home development in the Company's targeted service areas over an estimated development period. Notes Receivable – Related Party: Receivable from HP A&M : Litigation Loss Contingencies, . Promissory Notes Payable Off-Balance Sheet Instruments Participating Interests in Export Water |
WATER AND LAND ASSETS
WATER AND LAND ASSETS | 12 Months Ended |
Aug. 31, 2015 | |
Investments In Water Water Systems Land And Improvements | |
WATER AND LAND ASSETS | The Company's water and water systems consist of the following approximate costs and accumulated depreciation and depletion as of August 31: August 31, 2015 August 31, 2014 Costs Accumulated Depreciation and Depletion Costs Accumulated Depreciation and Depletion Arkansas River assets $ - $ - $ 67,746,400 $ (1,488,600 ) Rangeview water supply 14,444,600 (8,800 ) 14,444,600 (8,400 ) Sky Ranch water rights and other costs 6,440,800 (194,600 ) 6,004,000 (93,000 ) Fairgrounds water and water system 2,899,900 (798,700 ) 2,899,900 (710,600 ) Rangeview water system 1,256,300 (110,300 ) 1,148,200 (77,900 ) Water supply – other 3,973,300 (193,900 ) 1,050,200 (90,900 ) Totals 29,014,900 (1,306,300 ) 93,293,300 (2,469,400 ) Net investments in water and water systems $ 27,708,600 $ 90,823,900 Depletion and Depreciation The Company recorded $7,000, $4,400, and $500 of depletion charges during the fiscal years ended August 31, 2015, 2014 and 2013, respectively. During the fiscal years ended August 31, 2015 and 2014, this related to the Rangeview Water Supply (defined below) and the Sky Ranch water supply (discussed below) and during the fiscal year ended August 31, 2013 this related entirely to the Rangeview Water Supply. No depletion was taken against the Arkansas River water (discussed below) because the water located at this location was not utilized for its intended purpose. The Company recorded $340,300, $192,200 and $310,800 of depreciation expense in each of the fiscal years ended August 31, 2015, 2014 and 2013, respectively. These figures include depreciation for other equipment not included in the table above. Arkansas River Assets Arkansas River Water – The Company sold its Arkansas River assets to Arkansas River Farms, LLC pursuant to the Purchase and Sale Agreement entered into on March 11, 2015 for approximately $45.8 million, for a loss of approximately $22.1 million. The value of the assets was recorded based on the determined fair value of the consideration paid at the acquisition date in 2006, because the value of the consideration was deemed a more reliable criterion of value than the value of the acquired assets. The consideration paid was comprised of equity (3.0 million shares of the Company's common stock) and the Tap Participation Fee. Because the estimated value of the consideration paid was less than the total estimated fair value of the assets acquired by the Company, the relative values assigned to the assets were ratably reduced. Fort Lyon Canal Company ("FLCC") Shares – Arkansas River Land – The land owned by the Company was divided into separate properties, each of which is being leased to area farmers. The operating leases expire on December 31, 2015 at which time the Company intends to discontinue its farm operations. The Company received lease income from farm leases of approximately $1,127,200, $1,068,000, and $1,241,900 for the fiscal years ended August 31, 2015, 2014 and 2013, respectively. As part of the settlement with HP A&M, on January 28, 2015, HP A&M assigned its 75% mineral interests in the Arkansas River land to the Company. 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. The settlement is described in greater detail in Note 12 – Litigation Loss Contingencies. Land and Water Shares Held for Sale Beginning in fiscal year 2012 and 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 for approximately $700,000 recorded as land and water held for sale-current. Management believes that the November 2014 sale completes the sales cycle related to the land held for sale. Due to modifications of the actual acreage sold and the number of FLCC shares associated with the land sold, a gain on the transaction of approximately $1.3 million was recorded during the fourth quarter of fiscal 2014. In addition, management identified an additional 640 acres of land and 512 FLCC shares associated with the land as held for sale in order to have sufficient cash available 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 was $1.5 million based on recent sales transactions, which resulted in a loss of approximately $400,000, which was expensed in fiscal 2014. The Company sold its remaining Arkansas River assets, including the land and water shares held for sale, to Arkansas River Farms, LLC pursuant to the Purchase and Sale Agreement entered into on March 11, 2015. Rangeview Water Supply and Water System The "Rangeview Water Supply" consists of 20,450 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. The $14.4 million on the Company's balance sheet as of August 31, 2015, 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 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 District; (iii) The Company entered into the 1996 Service Agreement with the District for the provision of water service to the Lowry Range; and (iv) In 1997, the Company entered into the Wastewater Service Agreement with the District for the provision of wastewater service to the District's service area. In July 2014, the Company, the 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 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 groundwater which can be exported off the Lowry Range to serve area users (referred to as "Export Water"). The Company also has the right to exchange an aggregate gross volume of 165,000 acre feet of groundwater for 1,650 acre feet per year of adjudicated surface water and to use this surface water as Export Water. Additionally, 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 8,800 acre feet of groundwater and 3,300 acre feet of adjudicated surface water (subject to the exchange for Export 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 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 will also pay the Land Board a minimum annual water production fee, which is currently under negotiation, but estimated to be no more than $140,000, which is to be credited against future royalties. The 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 District's wastewater tap fees and 90% of the District's wastewater usage fees (the District retains the other 10%). Export Water – 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 Rights 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. Sky Ranch In 2010, the Company purchased approximately 931 acres of undeveloped land known as Sky Ranch. The property includes the rights to 820 acre feet of water. 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. At August 31, 2015, Sky Ranch Metropolitan District #5 owed the Company approximately $148,400 relating to various advances to pay for costs associated with establishing and operating the district. The Company anticipates these costs will be recovered through future revenues from property tax assessments. O&G Lease |
PARTICIPATING INTERESTS IN EXPO
PARTICIPATING INTERESTS IN EXPORT WATER | 12 Months Ended |
Aug. 31, 2015 | |
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 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 in 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. As a result of the acquisitions, the relinquishment, and due to the sale of Export Water, as detailed in the table below, the remaining potential third-party obligation at August 31, 2015, is approximately $1 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, 2013: Acquisitions – 28,077,500 (28,077,500 ) (9,790,000 ) (18,287,500 ) 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 269,300 (188,500 ) (80,800 ) (28,100 ) (52,700 ) Balance at August 31, 2013 912,700 27,692,100 3,421,400 1,192,900 2,228,500 Fiscal 2014 activity: Export Water sale payments $ 91,600 $ (73,700 ) $ (17,900 ) $ (6,200 ) $ (11,700 ) Relinquishment 2,386,400 (2,386,400 ) (832,100 ) (1,554,300 ) 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 207,900 (183,200 ) (24,700 ) (8,600 ) (16,100 ) Balance at August 31, 2015 $ 1,212,200 $ 29,821,600 $ 992,400 $ 346,000 $ 646,400 * 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. 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 August 31, 2015). |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 12 Months Ended |
Aug. 31, 2015 | |
Accrued Liabilities | |
ACCRUED LIABILITIES | At August 31, 2015, the Company had accrued liabilities of $590,500, of which $400,000 was for accrued compensation, $95,500 was for estimated property taxes, $52,500 was for professional fees and the remaining $42,500 was related to 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 for prepaid farm lease payments and the remaining $76,300 was related to operating payables. |
LONG-TERM OBLIGATIONS AND OPERA
LONG-TERM OBLIGATIONS AND OPERATING LEASE | 12 Months Ended |
Aug. 31, 2015 | |
Long-Term Obligations And Operating Lease | |
LONG-TERM OBLIGATIONS AND OPERATING LEASE | As of August 31, 2015, the Company had no debt. As of August 31, 2014, the Company was subject to mortgages with contractual maturity dates as described below. The Participating Interest in Export Water Supply and, during the fiscal year ended August 31, 2014, the Tap Participation Fee payable to HP A&M 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 is described in Note 5 – Participating Interests in Export Water Tap Participation Fee HP A&M relinquished all rights to the TPF pursuant to the settlement agreement entered into between the Company and HP A&M in January 2015. As a result, the TPF was eliminated during the period 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. For a more detailed discussion of the valuation of the TPF, see Note 7 – Long Term Debt and Operating Lease Litigation and Loss Contingencies Prior to the settlement with HP A&M, the TPF was an obligation of the Company to pay 10% of the Company's 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 agreement with HP A&M to manage the farm leasing operations (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 areas 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 Company's 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) were subject to the TPF. Promissory Notes Payable by HP A&M in Default As of August 31, 2015, the Company had no mortgages payable. Approximately 60 of the 80 properties the Company originally acquired from HP A&M were subject to outstanding promissory notes owed by HP A&M to third parties and not assumed by the Company (the "Excluded Indebtedness") that were secured by deeds of trust on the Company's properties and water rights, as well as mineral interests. HP A&M defaulted on all of the promissory notes. HP A&M owed approximately $9.6 million of principal and accrued interest as of September 1, 2012. These promissory notes were secured by approximately 14,000 acres of land and 16,882 FLCC shares owned by the Company. To protect its land and water interests, the Company purchased approximately $9.4 million of the $9.6 million notes payable by HP A&M in exchange for cash and secured promissory notes identified on the accompanying balance statement as mortgages payable. As of August 31, 2014, the amount owed by the Company on the mortgages payable was approximately $5 million, including accrued interest of $80,800. 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 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. 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 District's participation in WISE effective as of December 22, 2014. The Company's cost of funding the District's purchase of its share of existing infrastructure and future infrastructure for WISE is projected to be approximately $5.8 million over the next five years. See further discussion in Note 4 – Related Party Transactions. 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. |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 12 Months Ended |
Aug. 31, 2015 | |
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 26,000 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 operations. 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. 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 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 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. In January 2014, the Company granted its non-employee directors options to purchase a combined 32,500 shares of the Company's common stock pursuant to the 2004 Incentive 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 these options at $132,900 using the Black-Scholes model with the following variables: weighted average exercise price of $6.08 (which was the closing sales price of the Company's common stock on the date of grant); estimated option lives of 10 years; estimated dividend rate of 0%; weighted average risk-free interest rate of 1.84%; weighted average stock price volatility of 63.6%; and an estimated forfeiture rate of 0%. The $132,900 of stock-based compensation was being expensed monthly over the vesting periods. In August 2013, the Company granted management options to purchase 100,000 shares of the Company's common stock pursuant to the 2004 Incentive Plan. The options vest one-third one year after the date of grant, one-third two years after the date of grant, and one-third three years after the date of grant. The options expire 10 years after the date of grant. The Company calculated the fair value of these options at $427,100 using the Black-Scholes model with the following variables: weighted average exercise price of $5.88 (which was the closing sales price of the Company's common stock on the date of grant); estimated option lives of 10 years; estimated dividend rate of 0%; weighted average risk-free interest rate of 2.71%; weighted average stock price volatility of 63.6%; and an estimated forfeiture rate of 0%. The $427,100 of stock-based compensation is being expensed monthly over the vesting periods. In January 2013, the Company granted its non-employee directors options to purchase a combined 32,500 shares of the Company's common stock pursuant to the 2004 Incentive 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 these options at $76,800 using the Black-Scholes model with the following variables: weighted average exercise price of $3.15 (which was the closing sales price of the Company's common stock on the date of grant); estimated option lives of 10 years; estimated dividend rate of 0%; weighted average risk-free interest rate of 1.84%; weighted average stock price volatility 69.2%; and an estimated forfeiture rate of 0%. The $76,800 of stock-based compensation was expensed monthly over the one year vesting period. During the fiscal year ended August 31, 2015, 16,500 options were exercised. No options were exercised during the fiscal years ended August 31, 2014, or 2013. 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, 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 (16,500 ) $ 2.96 Forfeited or expired (12,500 ) $ 7.21 Outstanding at August 31, 2015 312,000 $ 6.61 6.18 $ 289,450 Options exercisable at August 31, 2015 252,667 $ 5.09 5.62 $ 311,030 The following table summarizes the activity and value of non-vested options as of and for the fiscal year ended August 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 (65,834 ) 4.26 Forfeited - - Non-vested options outstanding at August 31, 2015 59,333 $ 4.59 All non-vested options are expected to vest. The total fair value of options vested during the fiscal years ended August 31, 2015, 2014 and 2013 was $280,700, $219,200 and $48,700, respectively. The weighted average grant date fair value of options granted during the fiscal years ended Share-based compensation expense for the fiscal years ended August 31, 2015, 2014 and 2013, was $240,000, $251,900, and $66,800, respectively. At August 31, 2015, the Company had unrecognized expenses relating to non-vested options that are expected to vest totaling $216,900. Warrants As of August 31, 2015, 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 2015, 2014 or 2013. |
SIGNIFICANT CUSTOMERS
SIGNIFICANT CUSTOMERS | 12 Months Ended |
Aug. 31, 2015 | |
Significant Customers | |
SIGNIFICANT CUSTOMERS | The Company sells wholesale water and wastewater services to the District pursuant to the Rangeview Water Agreements. Sales to the District accounted for 19%, 9% and 34% of the Company's total revenues for the years ended August 31, 2015, 2014 and 2013, respectively. The District had one significant customer, the Ridgeview Youth Services Center. Pursuant to the Rangeview Water Agreements, the Company is providing water and wastewater services to this customer on behalf of the District. The District's significant customer accounted for 16%, 7%, and 28% of the Company's total revenues for the years ended August 31, 2015, 2014 and 2013, respectively. Revenues from another customer directly and indirectly represented approximately 75%, 88% and 59% of the Company's water and wastewater revenues for the fiscal years ended August 31, 2015, 2014 and 2013. The Company had accounts receivable from the District which accounted for 11% and 5% of the Company's trade receivables balances at August 31, 2015 and 2014, respectively. Accounts receivable from the District's largest customer accounted for 10% and 4% of the Company's trade receivables as of August 31, 2015 and 2014, respectively. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Aug. 31, 2015 | |
Income Taxes | |
INCOME TAXES | There is a provision of $292,700 for income taxes as of August 31, 2015. 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, 2015 2014 Deferred tax assets: Net operating loss carryforwards $ 1,816,200 $ 7,279,900 Imputed interest on Tap Participation Fee - 10,609,600 Deferred revenue 503,300 768,400 Impairment charges - 2,360,200 Depreciation and depletion 320,300 4,695,900 Other 34,200 26,700 Valuation allowance (2,674,000 ) (25,740,700 ) Net deferred tax asset $ - $ - The Company has recorded a valuation allowance against the deferred tax assets as the Company is unable to reasonably determine if it is more likely than not that deferred tax assets will ultimately be realized. 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, 2015 2014 2013 Expected benefit from federal taxes at statutory rate of 34% $ (7,863,500 ) $ (105,900 ) $ (1,411,200 ) State taxes, net of federal benefit (763,200 ) (10,300 ) (137,000 ) Expiration of net operating losses - 89,400 147,400 Sale of land and water assets (14,239,200 ) 4,078,800 - Permanent and other differences 91,900 96,500 27,400 Change in valuation allowance 23,066,700 (4,148,500 ) 1,373,400 Income tax expense - current $ 292,700 $ - $ - At August 31, 2015, the Company has $4.3 million of net operating loss carryforwards available for income tax purposes, which expire between fiscal 2032 and 2034. Utilization of these net operating loss carryforwards may be subject to substantial annual ownership change limitations provided by the Internal Revenue Code. Such an annual limitation could result in the expiration of the net operating loss carryforwards before utilization. Net operating loss carryforwards of nil, $239,600 and $395,200 expired during the fiscal years ended August 31, 2015, 2014 and 2013, respectively. |
401(k) PLAN
401(k) PLAN | 12 Months Ended |
Aug. 31, 2015 | |
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, 2015, 2014 and 2013, the Company paid fees of $3,800, $3,600 and $3,300, respectively, for the administration of the Plan. |
LITIGATION LOSS CONTINGENCIES
LITIGATION LOSS CONTINGENCIES | 12 Months Ended |
Aug. 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. The settlement agreement settled 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 and Release (the "Settlement Agreement") with HP A&M settling all remaining lawsuits among the parties. The Settlement Agreement settled the following four lawsuits: A lawsuit filed by the Company 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, the Property Management Agreement and other agreements entered into in connection with the Arkansas River 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. 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, on September 16, 2013, seeking (i) a declaratory judgment that HP A&M was entitled to redeem four properties from foreclosure sales in which PCY Holdings was the successful bidder, 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. A related lawsuit filed by PCY Holdings against HP A&M on December 23, 2013, in which PCY Holdings was seeking removal of lis pendens filed by HP A&M against the four properties which were the subject of the above-referenced appellate action. A lawsuit filed on July 17, 2014, against HP A&M, in which PCY Holdings was seeking judicial foreclosure of a note. In exchange for settling these lawsuits, the Settlement Agreement provided for, among otherthings, (i) HP A&M's relinquishment of the TPF, (ii) the sale of 300,000 shares of the Company's common stock owned by HP A&M, with the proceeds to be delivered to the Company, (iii) the assignment of HP A&M's 75% mineral interests in the Arkansas River land 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 elimination of the HP A&M receivable in the amount of $7,133,300 outstanding as of the date of the Settlement Agreement is reflected in the financial statements as of August 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 were recorded on the balance sheet as part of the Arkansas River Valley asset with an estimated value of $1,425,500, and (3) the TPF of $1,731,800 outstanding as of the date of settlement was reduced to nil. The balance of $2,926,100 was recorded as an equity transaction resulting in a decrease to equity. Rather than requiring the 300,000 shares of common stock to be sold, the Company retired the shares on September 30, 2015. |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Aug. 31, 2015 | |
Segment Information | |
SEGMENT REPORTING | 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 Company's agricultural business consists of the Company leasing its Arkansas River 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 fiscal years ended August 31, 2015, 2014, and 2013: Fiscal Year Ended August 31, 2015 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 1,020,100 $ 1,127,200 $ 176,500 $ 2,323,800 Gross profit 315,800 1,000,900 121,300 1,438,000 Depletion and depreciation 347,100 - - 347,100 Other significant noncash items: Stock-based compensation - - 240,000 240,000 TPF interest expense 23,800 - - 23,800 Loss on sale of land and water assets - (22,108,100 ) - (22,108,100 ) Segment assets 28,864,000 5,767,900 38,429,000 73,060,900 Expenditures for segment assets 3,496,000 3,400 - 3,499,400 Fiscal Year Ended August 31, 2014 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 1,924,900 $ 1,068,000 $ 98,200 $ 3,091,100 Gross profit 1,189,200 979,900 58,800 2,227,900 Depletion and depreciation 196,600 - - 196,600 Other significant noncash items: Stock-based compensation - - 251,900 251,900 TPF interest expense 1,445,500 - - 1,445,500 Impairment of land and water rights held for sale 402,700 - - 402,700 Gain on extinguishment of contingent obligation 832,100 - - 832,100 Gain on sale of land and water rights held for sale 1,308,600 - - 1,308,600 Segment assets 98,851,900 7,354,100 1,967,800 108,173,800 Expenditures for segment assets 3,878,100 - - 3,878,100 Fiscal Year Ended August 31, 2013 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 544,400 $ 1,241,900 $ 71,200 $ 1,857,500 Gross profit 248,600 1,145,600 70,000 1,464,200 Depletion and depreciation 311,300 - - 311,300 Other significant noncash items: Stock-based compensation - - 66,800 66,800 TPF interest expense 3,275,400 - - 3,275,400 Segment assets 93,522,800 6,697,500 8,398,000 108,618,300 Expenditures for segment assets 378,000 - - 378,000 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Aug. 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 District joining the South Metro Water Supply Authority ("SMWSA"). The Company provided funding of Through the WISE Financing Agreement, the Company made payments of $2,537,800 to purchase certain rights to use existing water transmission and related infrastructure acquired by the WISE project during the fiscal years ended August 31, 2015. The Company anticipates investing approximately $1.2 million per year for the next five years for additional payments for the water transmission line and additional facilities, water and related assets for the WISE project. The Company also funded the District's 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 the WISE Financing Agreement. The note was repaid in full during the fiscal year ended August 31, 2015. 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 August 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 Lease remains in effect. |
UNAUDITED QUARTERLY FINANCIAL D
UNAUDITED QUARTERLY FINANCIAL DATA | 12 Months Ended |
Aug. 31, 2015 | |
Unaudited Quarterly Financial Data | |
UNAUDITED QUARTERLY FINANCIAL DATA | Quarterly results of operations 2015 2014 Three months ended Three months ended 30 Nov. 28 Feb. 31 May 31 Aug. 30 Nov. 28 Feb. 31 May 31 Aug. (In thousands, except per share data) Net sales $ 834 $ 657 $ 391 $ 442 $ 578 $ 736 $ 679 $ 1,098 Gross margin 611 481 228 118 398 552 504 774 Operating loss 72 180 341 843 237 141 351 849 Net income (loss) $ 10 $ (86 ) $ 30 $ (23,082 ) $ (847 ) $ (456 ) $ (381 ) $ 1,373 Basic and diluted income (loss) per share * * * $ (0.96 ) $ (0.04 ) $ (0.02 ) $ (0.02 ) $ 0.07 * Amount is less than $.01 per share The following items had a significant impact on the Company's net income (loss): a) As discussed in Note 4 – Water and Land Assets b) As discussed in Note 4 – Water and Land Assets c) As discussed in Note 4 – Water and Land Assets d) As discussed in Note 5 – Participating Interests in Export Water |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Aug. 31, 2015 | |
Subsequent Events | |
SUBSEQUENT EVENTS | Subsequent to the end of the fiscal year the Company purchased three farms for approximately $435,000. The Company acquired a total of 465 acres. The farms were acquired in order to correct dry-up covenant issues related to water only farms in order 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 within the next fiscal year. Subsequent to the end of the fiscal year the Company retired 300,000 shares of its common stock that were held as collateral stock as a result of the settlement with HP A&M. See Note 12 – Litigation Loss Contingencies |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Aug. 31, 2015 | |
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. 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 high quality financial institution in an account which as of August 31, 2015 exceeded federally insured limits. At various times during the year ended August 31, 2015, the Company's 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. At various times throughout the year ended August 31, 2015, cash deposits have exceeded federally insured limits. The Company historically has invested its idle cash primarily in certificates of deposit, money market instruments, commercial paper obligations, corporate bonds and US government treasury obligations. To date, the Company has not experienced significant losses on any of these investments. |
HP A&M Receivable | In conjunction with High Plains A&M, LLC ("HP A&M"), defaulting on certain promissory notes in fiscal year 2012, the Company had the right to collect from HP A&M any amounts the Company spent to cure the defaulted notes. Accordingly, through the date of the settlement, the Company had recorded the entire amount of the HP A&M notes at default as well as expenses incurred to cure the defaults as a receivable from HP A&M less proceeds received from the sale of shares pledged by HP A&M as security. As described further in Note 12 – Litigation Loss Contingencies, . |
Mortgages Payable | During fiscal year 2013, the Company began acquiring the defaulted and non-defaulted promissory notes that were payable by HP A&M. The Company used cash and issued notes to acquire the HP A&M notes, the majority of which had a five-year term, bore interest at an annual rate of five percent and required semi-annual payments with a straight-line amortization schedule. The carrying value of the notes payable approximated the fair value as the rates were comparable to market rates. In October 2014, the Company borrowed $4,450,000 from the First National Bank of Las Animas. The note had a 20-year term, required 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 was subject to change (no more often than annually) based on the changes in the First National Bank of Las Animas Ag/Real Estate Rate. The Company had the right to pay the note in full at any time without penalty. The carrying value of this note approximated the fair value as the rate was comparable to market rates. On August 18, 2015, in conjunction with the sale of the farm assets, the Company repaid the note in full. As described further in Note 14 – Related Party Transactions |
Cash Flows | The Company paid $441,400, $310,400 and $123,500 in interest during the fiscal years ended August 31, 2015 2014, and 2013, respectively. The Company did not pay any income taxes during the fiscal years ended August 31, 2015, 2014 and 2013. The Company has accrued $292,700 for alternative minimum tax the Company will owe as a result of the sale of the Company's farm assets. |
Trade Accounts Receivable | The Company records accounts receivable net of allowances for uncollectible accounts. Included in trade accounts receivable are balances due from farm operations. The Company recorded an allowance for uncollectible accounts in the amount of $26,300 for each of the periods ended August 31, 2015 and 2014. 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. Based on the Company's procedures, the Company determined that land and water rights held for sale related to the Arkansas River assets were impaired as of August 31, 2014, and the Company recorded an impairment of $402,700. The Company determined that no impairment of such assets existed at August 31, 2015, or August 31, 2013. |
Capitalized Costs of Water and Wastewater Systems and Depletion and Depreciation of Water Assets | 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 | This note should be read in conjunction with Note 7 – Long-Term Debt and Operating Lease Litigation Loss Contingencies 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. The Company did not sell any water taps during the fiscal years ended August 31, 2015, 2014, or 2013. As further discussed in Note 12 – 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 was utilized in the valuation of the liability. The Company imputed interest of $23,800, $1.4 million and $3.3 million during the years ended August 31, 2015, 2014 and 2013, respectively. As a result of the Company's settlement with HP A&M, no water taps remain subject to the TPF as of August 31, 2015. As of August 31, 2014, there were 2,184 water taps subject to the TPF. |
Revenue Recognition | The Company generates revenues through two separate lines of businesses. Its revenues are derived through its wholesale water and wastewater business and its farming operations, which are described below. Wholesale Water and Wastewater Business – i) Monthly wholesale water and wastewater service fees – The Company recognizes wastewater processing revenues monthly based on usage. The monthly wastewater service fees are shown net of amounts retained by the District. Amounts recognized for water and wastewater services during the fiscal years ended August 31, 2015, 2014 and 2013 are presented in the statements of operations. Costs of delivering water and providing wastewater service to customers are recognized as incurred. The Company delivered 97.5 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. In each of the three fiscal years ended August 31, 2015, 2014 and 2013, the Company recognized $14,300 of tap fee revenue. At August 31, 2015, In addition to the tap fee revenues and the construction revenues, the Company also recorded interest income from Arapahoe County using the effective interest method. Pursuant to the Arapahoe County agreement, the county made payments to the Company totaling $82,200 per year through 2013 for the construction of the Special Facilities at the Fairgrounds. These payments include interest at 6% per annum. In April 2013, the county paid the balance on the note. The Company recognized $5,500 of interest income from the county during the fiscal year ended August 31, 2013. iii) Consulting fees Agricultural Farming Operations – |
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 District. See further description of "Export Water" and the "Lowry Range" in Note 4 under "Rangeview Water Supply and Water System." |
Oil and Gas Lease Payments | As further described in Note 4 below, on March 10, 2011, the Company entered into a Paid-Up Oil and Gas Lease (the "O&G Lease") and a Surface Use and Damage Agreement (the "Surface Use Agreement") with Anadarko E&P Company, L.P. ("Anadarko"), a wholly owned subsidiary of Anadarko Petroleum Company. Pursuant to the O&G Lease on March 10, 2011, 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 approximately 634 acres of mineral estate owned by the Company at its Sky Ranch property. 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, which will be recognized as income on a straight-line basis over two years (the extension term of the O&G Lease). In addition, during the fiscal years ended August 31, 2015 and 2014, the Company received up-front payments of $72,000 and $12,540, respectively, for the purpose of exploring for, developing, producing, and marketing oil and gas on 40 acres of mineral estate the Company owns adjacent to the Lowry Range (the "Rangeview Lease"). The Company recognizes the up-front payments on a straight-line basis over the terms of the respective leases. As of August 31, 2015, the Company has deferred recognition of $379,800 of income related to the O&G Lease, which will be recognized as income ratably through July 2017. |
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, 2015 and 2014 had no impact on the income tax provisions. The Company recognized $240,000, $251,900, and $66,800 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, 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 2011 through fiscal 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 August 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 fiscal years ended August 31, 2015, 2014 or 2013. |
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 312,100, 315,100, and 347,600 common share equivalents as of August 31, 2015, 2014 and 2013, 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. Where 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 assures that there are proper controls in place to ascertain that the Company's financials properly reflect the change. A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, the Company has not determined whether implementation of such proposed standards would be material to the Company's financial statements. During the current period, there were no new accounting pronouncements issued that will significantly impact the Company's financial reporting. |
WATER AND LAND ASSETS (Tables)
WATER AND LAND ASSETS (Tables) | 12 Months Ended |
Aug. 31, 2015 | |
Investments In Water Water Systems Land And Improvements Tables | |
Schedule of water and water systems | August 31, 2015 August 31, 2014 Costs Accumulated Depreciation and Depletion Costs Accumulated Depreciation and Depletion Arkansas River assets $ - $ - $ 67,746,400 $ (1,488,600 ) Rangeview water supply 14,444,600 (8,800 ) 14,444,600 (8,400 ) Sky Ranch water rights and other costs 6,440,800 (194,600 ) 6,004,000 (93,000 ) Fairgrounds water and water system 2,899,900 (798,700 ) 2,899,900 (710,600 ) Rangeview water system 1,256,300 (110,300 ) 1,148,200 (77,900 ) Water supply – other 3,973,300 (193,900 ) 1,050,200 (90,900 ) Totals 29,014,900 (1,306,300 ) 93,293,300 (2,469,400 ) Net investments in water and water systems $ 27,708,600 $ 90,823,900 |
PARTICIPATING INTERESTS IN EX25
PARTICIPATING INTERESTS IN EXPORT WATER (Tables) | 12 Months Ended |
Aug. 31, 2015 | |
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 Paticipating Interests Liability Contingency Original balances $ – $ 218,500 $ 31,807,700 $ 11,090,600 $ 20,717,100 Activity from inception until August 31, 2013: Acquisitions – 28,077,500 (28,077,500 ) (9,790,000 ) (18,287,500 ) 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 269,300 (188,500 ) (80,800 ) (28,100 ) (52,700 ) Balance at August 31, 2013 912,700 27,692,100 3,421,400 1,192,900 2,228,500 Fiscal 2014 activity: Export Water sale payments $ 91,600 $ (73,700 ) $ (17,900 ) $ (6,200 ) $ (11,700 ) Relinquishment 2,386,400 (2,386,400 ) (832,100 ) (1,554,300 ) 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 207,900 (183,200 ) (24,700 ) (8,600 ) (16,100 ) Balance at August 31, 2015 $ 1,212,200 $ 29,821,600 $ 992,400 $ 346,000 $ 646,400 |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 12 Months Ended |
Aug. 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 (16,500 ) $ 2.96 Forfeited or expired (12,500 ) $ 7.21 Outstanding at August 31, 2015 312,000 $ 6.61 6.18 $ 289,450 Options exercisable at August 31, 2015 252,667 $ 5.09 5.62 $ 311,030 |
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 (65,834 ) 4.26 Forfeited - - Non-vested options outstanding at August 31, 2015 59,333 $ 4.59 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Aug. 31, 2015 | |
Income Taxes Tables | |
Schedule of deferred tax assets | For the Fiscal Years Ended August 31, 2015 2014 Deferred tax assets: Net operating loss carryforwards $ 1,816,200 $ 7,279,900 Imputed interest on Tap Participation Fee - 10,609,600 Deferred revenue 503,300 768,400 Impairment charges - 2,360,200 Depreciation and depletion 320,300 4,695,900 Other 34,200 26,700 Valuation allowance (2,674,000 ) (25,740,700 ) Net deferred tax asset $ - $ - |
Schedule of income tax reconciliation | For the Fiscal Years Ended August 31, 2015 2014 2013 Expected benefit from federal taxes at statutory rate of 34% $ (7,863,500 ) $ (105,900 ) $ (1,411,200 ) State taxes, net of federal benefit (763,200 ) (10,300 ) (137,000 ) Expiration of net operating losses - 89,400 147,400 Sale of land and water assets (14,239,200 ) 4,078,800 - Permanent and other differences 91,900 96,500 27,400 Change in valuation allowance 23,066,700 (4,148,500 ) 1,373,400 Income tax expense - current $ 292,700 $ - $ - |
SEGMENT INFORMATION (Tables)
SEGMENT INFORMATION (Tables) | 12 Months Ended |
Aug. 31, 2015 | |
Segment Information Tables | |
Schedule of segment reporting | Fiscal Year Ended August 31, 2015 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 1,020,100 $ 1,127,200 $ 176,500 $ 2,323,800 Gross profit 315,800 1,000,900 121,300 1,438,000 Depletion and depreciation 347,100 - - 347,100 Other significant noncash items: Stock-based compensation - - 240,000 240,000 TPF interest expense 23,800 - - 23,800 Loss on sale of land and water assets - (22,108,100 ) - (22,108,100 ) Segment assets 28,864,000 5,767,900 38,429,000 73,060,900 Expenditures for segment assets 3,496,000 3,400 - 3,499,400 Fiscal Year Ended August 31, 2014 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 1,924,900 $ 1,068,000 $ 98,200 $ 3,091,100 Gross profit 1,189,200 979,900 58,800 2,227,900 Depletion and depreciation 196,600 - - 196,600 Other significant noncash items: Stock-based compensation - - 251,900 251,900 TPF interest expense 1,445,500 - - 1,445,500 Impairment of land and water rights held for sale 402,700 - - 402,700 Gain on extinguishment of contingent obligation 832,100 - - 832,100 Gain on sale of land and water rights held for sale 1,308,600 - - 1,308,600 Segment assets 98,851,900 7,354,100 1,967,800 108,173,800 Expenditures for segment assets 3,878,100 - - 3,878,100 Fiscal Year Ended August 31, 2013 Business segments Wholesale water and wastewater Agricultural All Other Total Revenues $ 544,400 $ 1,241,900 $ 71,200 $ 1,857,500 Gross profit 248,600 1,145,600 70,000 1,464,200 Depletion and depreciation 311,300 - - 311,300 Other significant noncash items: Stock-based compensation - - 66,800 66,800 TPF interest expense 3,275,400 - - 3,275,400 Segment assets 93,522,800 6,697,500 8,398,000 108,618,300 Expenditures for segment assets 378,000 - - 378,000 |
UNAUDITED QUARTERLY FINANCIAL29
UNAUDITED QUARTERLY FINANCIAL DATA (Tables) | 12 Months Ended |
Aug. 31, 2015 | |
Unaudited Quarterly Financial Data Tables | |
Quarterly results of operations | Quarterly results of operations 2015 2014 Three months ended Three months ended 30 Nov. 28 Feb. 31 May 31 Aug. 30 Nov. 28 Feb. 31 May 31 Aug. (In thousands, except per share data) Net sales $ 834 $ 657 $ 391 $ 442 $ 578 $ 736 $ 679 $ 1,098 Gross margin 611 481 228 118 398 552 504 774 Operating loss 72 180 341 843 237 141 351 849 Net income (loss) $ 10 $ (86 ) $ 30 $ (23,082 ) $ (847 ) $ (456 ) $ (381 ) $ 1,373 Basic and diluted income (loss) per share * * * $ (0.96 ) $ (0.04 ) $ (0.02 ) $ (0.02 ) $ 0.07 * Amount is less than $.01 per share |
ORGANIZATION (Details Narrative
ORGANIZATION (Details Narrative) - USD ($) | Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | Aug. 31, 2012 |
Organization Details Narrative | ||||
Cash and cash equivalents | $ 37,089,041 | $ 1,749,558 | $ 2,448,363 | $ 1,623,517 |
Working capital | $ 38,100,000 |
SUMMARY OF SIGNIFICANT ACCOUN31
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 12 Months Ended | ||
Aug. 31, 2015USD ($)sharesgal | Aug. 31, 2014USD ($)asharesgal | Aug. 31, 2013USD ($)sharesgal | |
Mortgage term | 5 years | ||
Interest imputed on the Tap Participation Fee payable to HP A&M | $ 23,816 | $ 1,445,509 | $ 3,275,378 |
Water delivered to customers | gal | 97,500,000 | 190,100,000 | 69,200,000 |
Water tap fees recognized | $ 14,294 | $ 14,294 | $ 14,294 |
Special facility (deferred construction) funding recognized | $ 41,508 | $ 41,508 | 41,508 |
Interest income related to construction of Special Facilities | $ 5,500 | ||
Number of acres for exploration and development | a | 634 | ||
Antidilutive securities excluded from earnings per share calculation | shares | 312,100 | 315,100 | 347,600 |
Interest | $ 245,500 | ||
Allowance for uncollectible accounts | $ 26,300 | $ 26,300 | |
Stock-based compensation expense | 239,986 | 251,915 | 66,812 |
Farm Income | |||
Deferred revenue | 361,400 | 256,500 | 397,300 |
Allowance for doubtful accounts | 26,300 | 41,100 | |
Oil And Gas Lease | |||
Deferred revenue recognizable | 379,800 | ||
Lease revenue from up-front payments | $ 645,700 | $ 525,400 | $ 416,000 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) | Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 |
Tap Participation Fee liability | $ 0 | $ 7,935,262 | $ 7,935,262 |
FAIR VALUE MEASUREMENTS (Deta33
FAIR VALUE MEASUREMENTS (Details 1) - USD ($) | 12 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | |
Imputed interest recorded as "Other Expense" | $ (23,816) | $ (1,445,509) | $ (3,275,378) |
WATER AND LAND ASSETS (Details)
WATER AND LAND ASSETS (Details) - USD ($) | Aug. 31, 2015 | Aug. 31, 2014 |
Costs | $ 29,014,900 | $ 93,887,500 |
Accumulated Depreciation and Depletion | (1,306,300) | (2,469,400) |
Net investments in water and water systems | 27,708,595 | 90,823,916 |
Arkansas River Assets | ||
Costs | 0 | 68,340,600 |
Accumulated Depreciation and Depletion | 0 | (1,488,600) |
Rangeview Water Supply | ||
Costs | 14,444,600 | 14,444,600 |
Accumulated Depreciation and Depletion | (8,800) | (8,400) |
Sky Ranch Water Rights And Other Costs | ||
Costs | 6,440,800 | 6,004,000 |
Accumulated Depreciation and Depletion | (194,600) | (93,000) |
Fairgrounds Water And Water System | ||
Costs | 2,899,900 | 2,899,900 |
Accumulated Depreciation and Depletion | (798,700) | (710,600) |
Rangeview Water System | ||
Costs | 1,256,300 | 1,148,200 |
Accumulated Depreciation and Depletion | (110,300) | (77,900) |
Water Supply Other | ||
Costs | 3,973,300 | 1,050,200 |
Accumulated Depreciation and Depletion | $ (193,900) | $ (90,900) |
WATER AND LAND ASSETS (Detail N
WATER AND LAND ASSETS (Detail Narrative) | 12 Months Ended | ||
Aug. 31, 2015USD ($) | Aug. 31, 2014USD ($)ashares | Aug. 31, 2013USD ($) | |
Depletion | $ 7,000 | $ 4,400 | $ 500 |
Depreciation | 340,300 | $ 192,200 | 310,800 |
Acres of land sold | a | 1,886 | ||
Number of FLCC shares sold | shares | 2,982 | ||
Impairment gain | $ 1,300,000 | ||
Farm Leases | |||
Lease income | $ 1,127,200 | $ 1,068,000 | $ 1,241,900 |
PARTICIPATING INTERESTS IN EX36
PARTICIPATING INTERESTS IN EXPORT WATER (Details) - USD ($) | 12 Months Ended | 48 Months Ended | |
Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | |
Export Water Proceeds Received | |||
Remaining Third Party Obligation: | |||
Balance, beginning | $ 1,004,300 | $ 912,700 | $ 0 |
Acquisitions | 0 | ||
Option payments | 110,400 | ||
Arapahoe Tap fees | 533,000 | ||
Export Water Sale Payments | 207,900 | 91,600 | 269,300 |
Balance, ending | 1,212,200 | 1,004,300 | 912,700 |
Initial Export Water Proceeds To Pure Cycle | |||
Remaining Third Party Obligation: | |||
Balance, beginning | 30,004,800 | 27,692,100 | 218,500 |
Acquisitions | 28,077,500 | ||
Option payments | (42,300) | ||
Arapahoe Tap fees | (373,100) | ||
Export Water Sale Payments | (183,200) | (73,700) | (188,500) |
Relinquishment | 2,386,400 | ||
Balance, ending | 29,821,600 | 30,004,800 | 27,692,100 |
Total Potential Third Party Obligation | |||
Remaining Third Party Obligation: | |||
Balance, beginning | 1,017,100 | 3,421,400 | 31,807,700 |
Acquisitions | (28,077,500) | ||
Option payments | (68,100) | ||
Arapahoe Tap fees | (159,900) | ||
Export Water Sale Payments | (24,700) | (17,900) | (80,800) |
Relinquishment | (2,386,400) | ||
Balance, ending | 992,400 | 1,017,100 | 3,421,400 |
Participating Interests Liability | |||
Remaining Third Party Obligation: | |||
Balance, beginning | 354,600 | 1,192,900 | 11,090,600 |
Acquisitions | (9,790,000) | ||
Option payments | (23,800) | ||
Arapahoe Tap fees | (55,800) | ||
Export Water Sale Payments | (8,600) | (6,200) | (28,100) |
Relinquishment | (832,100) | ||
Balance, ending | 346,000 | 354,600 | 1,192,900 |
Contingency | |||
Remaining Third Party Obligation: | |||
Balance, beginning | 662,500 | 2,228,500 | 20,717,100 |
Acquisitions | (18,287,500) | ||
Option payments | (44,300) | ||
Arapahoe Tap fees | (104,100) | ||
Export Water Sale Payments | (16,100) | (11,700) | (52,700) |
Relinquishment | (1,554,300) | ||
Balance, ending | $ 646,400 | $ 662,500 | $ 2,228,500 |
PARTICIPATING INTERESTS IN EX37
PARTICIPATING INTERESTS IN EXPORT WATER (Details Narrative) - USD ($) | Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 |
Recorded Portion Of Contingent Obligation | $ 346,007 | $ 354,628 | |
Tap Participation Fee liability | $ 0 | $ 7,935,262 | $ 7,935,262 |
ACCRUED LIABILITIES (Detail Nar
ACCRUED LIABILITIES (Detail Narrative) - USD ($) | Aug. 31, 2015 | Aug. 31, 2014 |
Accrued Liabilities Detail Narrative | ||
Accrued liabilities | $ 590,533 | $ 257,893 |
Accrued compensation | 400,000 | 0 |
Estimated property taxes | 95,500 | 99,700 |
Professional Fees | 52,500 | 59,500 |
Farm lease prepayments | 0 | 22,400 |
Operating payables | $ 42,500 | $ 76,300 |
LONG-TERM DEBT AND OPERATING LE
LONG-TERM DEBT AND OPERATING LEASE (Details) | Aug. 31, 2014USD ($) |
Long-Term Debt And Operating Lease Details | |
Less: current portion | $ (925,980) |
Total long-term mortgage payable | $ 4,032,227 |
LONG-TERM DEBT AND OPERATING 40
LONG-TERM DEBT AND OPERATING LEASE (Details Narrative) | 12 Months Ended | ||
Aug. 31, 2015USD ($)Taps | Aug. 31, 2014USD ($)Taps | Aug. 31, 2013USD ($) | |
LongtermDebtAndOperatingLeaseDetailsNarrativeAbstract | |||
Tap Participation Fee payable to HP A&M, net of $42.9 million and $48.2 million discount, respectively | $ 0 | $ 7,935,262 | $ 7,935,262 |
Tap Participation Fee Percentage | 20.00% | ||
Water Taps under Tap Participation Fee | Taps | 2,184 | 2,184 | |
Reduction in Taps as result of foreclosure | Taps | 1,801 | 15,010 | |
Imputed Interest on TPF | $ 27,500,000 | ||
Notes Payable outstanding | $ 7,900,000 | 4,500,000 | 7,900,000 |
Purchase of notes payable | 9,400,000 | ||
Accrued interest | $ 80,800 | $ 122,000 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) | 12 Months Ended |
Aug. 31, 2015USD ($)$ / sharesshares | |
Number of options | |
Outstanding, beginning | shares | 315,000 |
Granted | shares | 26,000 |
Exercised | shares | (16,500) |
Forfeited or expired | shares | (12,500) |
Outstanding, ending | shares | 312,000 |
Exercisable | shares | 252,667 |
Weighted average exercise price | |
Outstanding, beginning | $ 5.76 |
Granted | 4.17 |
Exercised | 2.96 |
Forfeited or expired | 7.21 |
Outstanding, ending | 6.61 |
Exercisable | $ 5.09 |
Weighted average remaining contractual term | |
Outstanding, ending | 6 years 2 months 5 days |
Exercisable | 5 years 7 months 13 days |
Approximate aggregate intrinsic value | |
Outstanding, ending | $ | $ 289,450 |
Exercisable | $ | $ 311,030 |
SHAREHOLDERS' EQUITY (Details 1
SHAREHOLDERS' EQUITY (Details 1) - $ / shares | 12 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | |
Number of options | |||
Outstanding, beginning | 99,167 | ||
Granted | 26,000 | ||
Vested | (65,834) | ||
Forfeited | 0 | ||
Outstanding, ending | 59,333 | 99,167 | |
Weighted average grant date fair value | |||
Outstanding, beginning | $ 4.85 | ||
Granted | 2.78 | $ 4.09 | $ 3.80 |
Vested | 4.26 | ||
Forfeited | 0 | ||
Outstanding, ending | $ 4.59 | $ 4.85 |
SHAREHOLDERS' EQUITY (Details N
SHAREHOLDERS' EQUITY (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | |
Fair value of options vested | $ 280,700 | $ 219,200 | $ 48,700 |
Weighted average grant date fair value of options granted | $ 2.78 | $ 4.09 | $ 3.80 |
Stock-based compensation | $ 240,000 | $ 251,900 | $ 66,800 |
Unrecognized share-based compensation cost | $ 216,900 | ||
Options expired | 65,000 | ||
Warrant outstanding | 92 | ||
Warrant exercise price | $ 1.80 | ||
Series B Preferred stock, liquidation preference per share | $ 1 | ||
Series B Preferred stock, redemption price per share | 1.00 per share less any dividends previously paid | ||
Threshold Export Water rights | $ 36,026,232 | ||
Series B Preferred stock, liquidation preference value | $ 432,513 | $ 432,513 | |
2014 Incentive Plan | |||
Number of shares authorized under plan | 1,600,000 |
SIGNIFICANT CUSTOMERS (Details
SIGNIFICANT CUSTOMERS (Details Narrative) | 12 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | |
Sales | The District | |||
Concentration Risk Percentage | 19.00% | 9.00% | 34.00% |
Sales | The District's Significant Customer | |||
Concentration Risk Percentage | 16.00% | 7.00% | 28.00% |
Sales | Oil and Gas Industry Customer | |||
Concentration Risk Percentage | 75.00% | 88.00% | 59.00% |
Accounts Receivable | The District | |||
Concentration Risk Percentage | 11.00% | 5.00% | |
Accounts Receivable | The District's Significant Customer | |||
Concentration Risk Percentage | 10.00% | 4.00% |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | Aug. 31, 2015 | Aug. 31, 2014 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 1,816,200 | $ 7,279,900 |
Imputed interest on Tap Participation Fee | 0 | 10,609,600 |
Deferred revenue | 503,300 | 768,400 |
Impairment Charges | 0 | 2,360,200 |
Depreciation and depletion | 320,300 | 4,695,900 |
Other | 34,200 | 26,700 |
Valuation allowance | (2,674,000) | (25,740,700) |
Net deferred tax asset | $ 0 | $ 0 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | |
Income Taxes Details 1 | |||
Expected benefit from federal taxes at statutory rate of 34% | $ (7,863,500) | $ (105,900) | $ (1,411,200) |
State taxes, net of federal benefit | (763,200) | (10,300) | (137,000) |
Expiration of net operating losses | 0 | 89,400 | 147,400 |
Sale of land and water assets | (14,239,200) | 4,078,800 | 0 |
Permanent and other differences | 91,900 | 96,500 | 27,400 |
Change in valuation allowance | 23,066,700 | (4,148,500) | 1,373,400 |
Total income tax expense / benefit | $ 292,700 | $ 0 | $ 0 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | |
Income Taxes Details Narrative | |||
Net operating loss carryforwards expired | $ 0 | $ 239,600 | $ 395,200 |
401(k) PLAN (Details Narrative)
401(k) PLAN (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | |
K Plan Details Narrative | |||
Administrative fees paid for plan | $ 3,800 | $ 3,600 | $ 3,300 |
SEGMENT REPORTING (Details)
SEGMENT REPORTING (Details) - USD ($) | 12 Months Ended | ||
Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 | |
Revenues | $ 2,323,724 | $ 3,091,140 | $ 1,857,462 |
Gross profit | 1,438,041 | 2,227,869 | 1,464,191 |
Depletion and depreciation | 347,263 | 196,564 | 313,137 |
Other significant noncash items: | |||
Stock-based compensation | 240,000 | 251,900 | 66,800 |
TPF interest expense | 23,816 | 1,445,509 | 3,275,378 |
Impairment of land and water rights held for sale | 402,700 | ||
Gain in extinquishment of contingent obligations | 832,100 | ||
Gain (loss) on sale of land and water rights held for sale | (22,108,100) | 1,308,400 | |
Segment assets | 73,060,913 | 108,173,822 | 108,618,300 |
Expenditures for segment assets | 3,499,400 | 3,878,100 | 378,000 |
Wholesale Water And Wasterwater | |||
Revenues | 1,020,100 | 1,924,900 | 544,400 |
Gross profit | 315,800 | 1,189,200 | 248,600 |
Depletion and depreciation | 347,100 | 196,600 | 311,300 |
Other significant noncash items: | |||
Stock-based compensation | 0 | 0 | 0 |
TPF interest expense | 23,800 | 1,445,500 | 3,275,400 |
Impairment of land and water rights held for sale | 402,700 | ||
Gain in extinquishment of contingent obligations | 832,100 | ||
Gain (loss) on sale of land and water rights held for sale | 0 | 1,308,400 | |
Segment assets | 28,864,000 | 98,851,900 | 93,522,800 |
Expenditures for segment assets | 3,496,000 | 3,878,100 | 378,000 |
Agricultural | |||
Revenues | 1,127,200 | 1,068,000 | 1,241,900 |
Gross profit | 1,000,900 | 979,900 | 1,145,600 |
Depletion and depreciation | 0 | 0 | 0 |
Other significant noncash items: | |||
Stock-based compensation | 0 | 0 | 0 |
TPF interest expense | 0 | 0 | 0 |
Impairment of land and water rights held for sale | 0 | ||
Gain in extinquishment of contingent obligations | 0 | ||
Gain (loss) on sale of land and water rights held for sale | (22,108,100) | 0 | |
Segment assets | 5,767,900 | 7,354,100 | 6,697,500 |
Expenditures for segment assets | 3,400 | 0 | 0 |
All Other | |||
Revenues | 176,500 | 98,200 | 71,200 |
Gross profit | 121,300 | 58,800 | 70,000 |
Depletion and depreciation | 0 | 0 | 0 |
Other significant noncash items: | |||
Stock-based compensation | 240,000 | 251,900 | 66,800 |
TPF interest expense | 0 | 0 | 0 |
Impairment of land and water rights held for sale | 0 | ||
Gain in extinquishment of contingent obligations | 0 | ||
Gain (loss) on sale of land and water rights held for sale | 0 | 0 | |
Segment assets | 38,429,000 | 1,967,800 | 8,398,000 |
Expenditures for segment assets | $ 0 | $ 0 | $ 0 |