Document_And_Entity_Informatio
Document And Entity Information (USD $) | 12 Months Ended | ||
Aug. 31, 2013 | Nov. 20, 2013 | Feb. 28, 2013 | |
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 | '0000276720 | ' | ' |
Entity Current Reporting Status | 'Yes | ' | ' |
Entity Voluntary Filers | 'No | ' | ' |
Entity Well-known Seasoned Issuer | 'No | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Common Stock, Shares Outstanding | ' | 24,037,598 | ' |
Entity Public Float | ' | ' | $69,447,594 |
Document Period End Date | 31-Aug-13 | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Aug. 31, 2013 | Aug. 31, 2012 |
Current assets: | ' | ' |
Cash and cash equivalents | $2,448,363 | $1,623,517 |
Marketable securities | ' | 1,101,367 |
Trade accounts receivable, net | 584,803 | 135,458 |
Sky Ranch receivable | 57,303 | ' |
Current portion of HP A&M receivable | 6,655,156 | 4,456,857 |
Prepaid expenses | 154,345 | 279,782 |
Current portion of construction proceeds receivable | ' | 64,783 |
Total current assets | 9,899,969 | 7,661,764 |
Investments in water and water systems, net | 88,512,249 | 88,510,359 |
Land - Sky Ranch | 3,768,029 | 3,778,464 |
Land and water held for sale | 5,748,630 | 5,748,630 |
Construction proceeds receivable, less current portion | ' | 226,879 |
Note receivable - related party: | ' | ' |
Rangeview Metropolitan District, including accrued interest | 555,983 | 543,945 |
HP A&M receivable, less current portion | ' | 5,093,365 |
Other assets | 133,471 | 18,671 |
Total assets | 108,618,331 | 111,582,077 |
Current liabilities: | ' | ' |
Accounts payable | 167,775 | 261,383 |
Current portion mortgages payable, including interest payable of $122,028 | 4,668,943 | 5,340,890 |
Accrued liabilities | 264,740 | 172,630 |
Deferred revenues | 65,384 | 65,384 |
Deferred oil and gas lease payment | 235,483 | 414,480 |
Total current liabilities | 5,402,325 | 6,254,767 |
Deferred revenues, less current portion | 1,232,220 | 1,297,605 |
Deferred oil and gas lease payment, less current portion | ' | 224,510 |
Mortgages payable, less current portion | 3,211,112 | 4,209,329 |
Participating Interests in Export Water Supply | 1,192,910 | 1,208,928 |
Tap Participation Fee payable to HP A&M, net of $42.9 million and $44.8 million discount, respectively | 59,807,289 | 68,269,176 |
Total liabilities | 70,845,856 | 81,464,315 |
Commitments and contingencies | ' | ' |
SHAREHOLDERS' EQUITY: | ' | ' |
Preferred stock: Series B - par value $.001 per share; 25 million shares authorized; 432,513 shares issued and outstanding (liquidation preference of $432,513) | 433 | 433 |
Common stock: Par value 1/3 of $.01 per share; 40 million shares authorized; 24,037,598 shares issued and outstanding | 80,130 | 80,130 |
Additional paid-in capital | 115,224,946 | 103,420,870 |
Accumulated comprehensive loss | ' | -1,081 |
Accumulated deficit | -77,533,034 | -73,382,590 |
Total shareholders' equity | 37,772,475 | 30,117,762 |
Total liabilities and shareholders' equity | $108,618,331 | $111,582,077 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Aug. 31, 2013 | Aug. 31, 2012 |
Statement of Financial Position [Abstract] | ' | ' |
Interest payable | $122,028 | ' |
Discount of tap participation fee payable to HP A&M | 42,900,000 | 44,800,000 |
Preferred stock; Series B- par value | $0.00 | $0.00 |
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 | $0.00 | $0.00 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares issued | 24,037,598 | 24,037,598 |
Common stock, shares outstanding | 24,037,598 | 24,037,598 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 12 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | |
Revenues: | ' | ' | ' |
Metered water usage | $502,668 | $182,802 | $157,497 |
Wastewater treatment fees | 41,697 | 45,778 | 68,833 |
Special facility funding recognized | 41,508 | 41,508 | 41,508 |
Water tap fees recognized | 14,294 | 14,296 | 14,296 |
Farm operations | 1,241,882 | ' | ' |
Other | 15,413 | ' | ' |
Total revenues | 1,857,462 | 284,384 | 282,134 |
Expenses: | ' | ' | ' |
Water service operations | -188,309 | -78,144 | -51,882 |
Wastewater service operations | -16,958 | -19,269 | -19,224 |
Farm operations | -96,337 | ' | ' |
Other | -1,199 | -1,995 | ' |
Depletion and depreciation | -90,468 | -88,576 | -88,587 |
Total cost of revenues | -393,271 | -187,984 | -159,693 |
Gross margin | 1,464,191 | 96,400 | 122,441 |
General and administrative expenses | -2,333,126 | -2,374,106 | -2,212,026 |
Impairment of land and water rights held for sale | ' | -6,457,760 | ' |
Impairment of water assets | ' | -5,544,022 | ' |
Depreciation | -220,834 | -220,657 | -212,184 |
Operating loss | -1,089,769 | -14,500,145 | -2,301,769 |
Other income (expense): | ' | ' | ' |
Oil and gas lease income, net | 416,048 | 422,999 | 199,257 |
Farm income, net | ' | 71,101 | ' |
Interest income | 34,583 | 53,339 | 53,133 |
Interest expense | -245,503 | ' | ' |
Other | 9,574 | 3,552 | 31,887 |
Gain on sale of assets | ' | 1,016 | ' |
Interest expensed on Convertible Note - Related Party | ' | ' | -151,667 |
Interest imputed on the Tap Participation Fee payable to HP A&M | -3,275,378 | -3,470,523 | -3,847,000 |
Net loss | ($4,150,445) | ($17,418,661) | ($6,016,159) |
Net loss per common share - basic and diluted (in Dollars per share) | ($0.17) | ($0.72) | ($0.26) |
Weighted average common shares outstanding - basic and diluted (in Shares) | 24,037,596 | 24,037,596 | 23,168,450 |
Consolidated_Statements_of_Sha
Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss) (USD $) | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Comprehensive Income (loss) | Accumulated Deficit | Total |
Balance, beginning at Aug. 31, 2010 | $433 | $67,360 | $92,341,555 | ($1,580) | ($49,947,769) | $42,459,999 |
Balance, beginning shares at Aug. 31, 2010 | 432,513 | 20,206,566 | ' | ' | ' | ' |
Sale of common stock, less fees and expenses | ' | 6,163 | 5,395,442 | ' | ' | 5,401,605 |
Sale of common stock, less fees and expenses, shares | ' | 1,848,931 | ' | ' | ' | ' |
Issuance of restricted common stock upon conversion of Convertible Debt | ' | 6,607 | 5,345,060 | ' | ' | 5,351,667 |
Issuance of restricted common stock upon conversion of Convertible Debt, shares | ' | 1,982,099 | ' | ' | ' | ' |
Share-based compensation | ' | ' | 94,550 | ' | ' | 94,550 |
Unrealized loss on investments | ' | ' | ' | -1,323 | ' | -1,323 |
Net loss | ' | ' | ' | ' | -6,016,159 | -6,016,159 |
Comprehensive loss | ' | ' | ' | ' | ' | -6,017,482 |
Allocation of net revenues to TPF | ' | ' | ' | ' | ' | ' |
Balance, ending at Aug. 31, 2011 | 433 | 80,130 | 103,176,607 | -2,903 | -55,963,928 | 47,290,339 |
Balance, ending, shares at Aug. 31, 2011 | 432,513 | 24,037,596 | ' | ' | ' | ' |
Issuance of restricted common stock upon conversion of Convertible Debt | ' | ' | ' | ' | ' | ' |
Share-based compensation | ' | ' | 54,588 | ' | ' | 54,588 |
Unrealized loss on investments | ' | ' | ' | 1,822 | ' | 1,822 |
Net loss | ' | ' | ' | ' | -17,418,661 | -17,418,661 |
Comprehensive loss | ' | ' | ' | ' | ' | -17,416,839 |
Allocation of net revenues to TPF | ' | ' | 189,674 | ' | ' | 189,674 |
Balance, ending at Aug. 31, 2012 | 433 | 80,130 | 103,420,869 | -1,081 | -73,382,589 | 30,117,762 |
Balance, ending, shares at Aug. 31, 2012 | 432,513 | 24,037,596 | ' | ' | ' | ' |
Issuance of restricted common stock upon conversion of Convertible Debt | ' | ' | ' | ' | ' | ' |
Share-based compensation | ' | ' | 66,812 | ' | ' | 66,812 |
Net loss | ' | ' | ' | ' | -4,150,445 | -4,150,445 |
Comprehensive loss | ' | ' | ' | ' | ' | -4,149,364 |
Allocation of net revenues to TPF | ' | ' | ' | ' | ' | ' |
Reduction in TPF due to remedies under the Arkansas River Agreement | ' | ' | 11,737,265 | ' | ' | 11,737,265 |
Realized gain on investments | ' | ' | ' | 1,081 | ' | 1,081 |
Balance, ending at Aug. 31, 2013 | $433 | $80,130 | $115,224,946 | ' | ($77,533,034) | $37,772,475 |
Balance, ending, shares at Aug. 31, 2013 | 432,513 | 24,037,596 | ' | ' | ' | ' |
Consolidated_Statements_of_Sha1
Consolidated Statements of Shareholders' Equity and Comprehensive Income (Loss) (Parenthetical) (USD $) | 12 Months Ended |
Aug. 31, 2011 | |
Statement of Stockholders' Equity [Abstract] | ' |
Issuance fees and expenses | $142,500 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | |
Cash flows from operating activities: | ' | ' | ' |
Net loss | ($4,150,445) | ($17,418,661) | ($6,016,159) |
Adjustments to reconcile net loss to net cash used for operating activities: | ' | ' | ' |
Share-based compensation expense | 66,812 | 54,588 | 94,550 |
Depreciation, depletion and other non-cash items | 313,137 | 307,507 | 297,212 |
Imputed interest on Tap Participation Fee payable to HP A&M | 3,275,378 | 3,470,523 | 3,847,000 |
Impairment of water assets | ' | 5,544,022 | ' |
Impairment of land and water rights held for sale | ' | 6,457,760 | ' |
Interest expensed on Convertible Note - Related Party | ' | ' | 151,667 |
Interest added to note receivable from Rangeview Metropolitan District | -12,038 | -12,072 | -12,039 |
Interest added to construction proceeds receivable | ' | -19,241 | -22,899 |
Gain on sale of assets | ' | -1,016 | ' |
Changes in operating assets and liabilities: | ' | ' | ' |
Trade accounts receivable | -449,344 | -36,974 | -27,329 |
Prepaid expenses | 125,437 | -37,782 | -5,372 |
HP A&M Receivable | -519,934 | ' | ' |
Sky Ranch Receivable | -57,303 | ' | ' |
Accounts payable and accrued liabilities | 120,527 | 246,034 | 72,457 |
Deferred revenues | -65,385 | -27,314 | -55,802 |
Deferred income- oil & gas lease | -403,507 | -414,480 | 1,053,470 |
Net cash used for operating activities | -1,756,665 | -1,887,106 | -623,245 |
Cash flows from investing activities: | ' | ' | ' |
Investments in water, water systems, and land | -378,008 | -132,221 | -6,841,255 |
Purchase of marketable securities | ' | -1,235,857 | -6,357,177 |
Sales and maturities of marketable securities | 1,101,367 | 4,724,847 | 3,202,373 |
Proceeds from sale of land | ' | 1,099 | ' |
Proceeds from sale of collateral stock | 3,415,000 | ' | ' |
Purchase of property and equipment | -40,300 | -3,894 | ' |
Net cash provided by (used for) investing activities | 4,098,059 | 3,353,974 | -9,996,059 |
Cash flows from financing activities: | ' | ' | ' |
Net proceeds from equity offering | ' | ' | 5,401,606 |
Issuance of Convertible Note - Related Party | ' | ' | 5,200,000 |
Arapahoe County construction proceeds | 291,662 | 84,854 | 82,196 |
Payments to contingent liability holders | -16,018 | ' | -4,720 |
Payments made on promissory notes payable | -1,792,192 | ' | ' |
Net cash (used for) provided by financing activities | -1,516,548 | 84,854 | 10,679,082 |
Net change in cash and cash equivalents | 824,846 | 1,551,722 | 59,778 |
Cash and cash equivalents - beginning of year | 1,623,517 | 71,795 | 12,017 |
Cash and cash equivalents - end of year | $2,448,363 | $1,623,517 | $71,795 |
ORGANIZATION
ORGANIZATION | 12 Months Ended |
Aug. 31, 2013 | |
Organization | ' |
ORGANIZATION | ' |
NOTE 1 – 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 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 is leasing its farm land in the Arkansas River Valley to area farmers. | |
The Company provides a full line of 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, 2013, the Company had $2.4 million of cash and cash equivalents, and $4.5 million of working capital. During fiscal year end 2013, the Company sold the 1.5 million shares of Pure Cycle common stock issued to High Plains A&M, LLC (“HP A&M”), which were pledged as security for certain debt obligations, in a foreclosure sale for $3.5 million or $2.35 per share. | |
The Company’s ability to generate working capital from its water and wastewater projects is dependent on its ability to successfully market its water, or in the event it is unsuccessful, to sell the underlying water assets. In the event increased sales are not achieved or the Company is unable to sell its water assets at a sufficient level, the Company may have to issue additional short or long-term debt or seek to sell additional shares of the Company’s common or preferred stock to generate sufficient working capital. There can be no assurance that the Company will be successful in marketing its water on terms that are acceptable to the Company. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | ||
Aug. 31, 2013 | |||
Accounting Policies [Abstract] | ' | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' | ||
NOTE 2 – 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, 2013 exceed federally insured limits. At various times during the year ended August 31, 2013, the Company’s main operating account exceeded federally insured limits. | |||
Marketable Securities | |||
At August 31, 2012, the Company’s marketable securities are comprised entirely of certificates of deposits maintained at various financial institutions, each of which have invested below federally insured limits and pay interest at stated rates through maturity. The certificates matured at various dates through May 2013. | |||
The amounts reported on the balance sheets for marketable securities as of August 31, 2012 represent the fair values of the underlying instruments as reported by the financial institutions where the funds are held. As of August 31, 2013, the Company is not holding any marketable securities in an effort to create liquidity while the Company is in the process of resolving the defaults by HP A&M. | |||
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 equivalents and marketable securities. The Company places its cash equivalents and investments with high quality financial institutions. At various times throughout the year ended August 31, 2013, cash deposits have exceeded federally insured limits. The Company invests 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. | |||
Mortgages Payable and HP A&M Receivable | |||
In conjunction with HP A&M defaulting on certain promissory notes in fiscal year 2012, the Company has the right to collect from HP A&M any amounts the Company spends to protect its interest from the defaulted notes. Accordingly the Company has 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 held in escrow pursuant to the asset purchase agreement (“The Arkansas River Agreement”). The receivable represents the amount of the defaulted promissory notes payable by HP A&M which were purchased by the Company and with respect to which the Company will pursue remedies under the Arkansas River agreement (as described in more detail in Note 4) over the next 12 months, plus expenses as noted above. | |||
In the fiscal year 2013 the Company began acquiring the defaulted promissory notes that are payable by HP A&M. The majority of the notes issued by the Company have a five-year term, bear interest at an annual rate of five percent (5%) and require semi-annual payments with a straight-line amortization schedule, (see Note 7 – Long term debt and operating lease). | |||
Cash Flows | |||
The Company paid $123,500 in interest during the fiscal year ended August 31, 2013. The Company did not pay any interest during the fiscal years ended August 31, 2012 and 2011, respectively. | |||
The Company did not pay any income taxes during the fiscal years ended August 31, 2013, 2012 and 2011, respectively. | |||
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 amounts of $41,100 and $20,400 as of August 31, 2013 and 2012, respectively. 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 its “Paradise Water Supply” asset (defined in Note 4 below) and land and water rights held for sale related to the Arkansas River Assets were impaired as of August 31, 2012. The Company determined that no impairment of such assets existed at August 31, 2013. There was no impairment in the carrying amounts of the remaining long-lived assets at August 31, 2013 and 2012. See further discussion in Note 4 below under sections “Paradise Water Supply” and “Arkansas River Assets”. | |||
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 thirty 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 | |||
The Tap Participation Fee liability (“TPF”), as described in Note 7 – Long Term Debt and Operating Lease, represents the discounted fair value of the amounts the Company estimates it will pay HP A&M pursuant to the Arkansas River Agreement. The Company imputes interest expense on the unpaid TPF using the effective interest imputed over the estimated development period. The company imputed interest of $3.3 million, $3.5 million and $3.8 million during the years ended August 31, 2013, 2012 and 2011, respectively. | |||
The TPF is due and payable once the Company has sold a water tap and received the consideration due for such water tap. The Company did not sell any water taps during the years ended August 31, 2013, 2012 or 2011. As of August 31, 2013, 17,194 water taps remain 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 Agricultural Farming Operations, which are described below. | |||
Wholesale Water and Wastewater business – The Company generates revenues through its wholesale water and wastewater segment predominately from three sources: (i) monthly wholesale water usage fees and wastewater service fees, (ii) one time water and wastewater tap fees, and construction fees, and (iii) consulting fees. Because these items are separately delivered, the Company accounts for each of the items separately, as described below. | |||
i) | Monthly wholesale water and wastewater service fees – Monthly wholesale water usage charges are assessed to the Company’s customers based on actual metered usage each month plus a base monthly service fee assessed per single family equivalent (“SFE”) unit served. One SFE is a customer, whether residential, commercial or industrial, that imparts a demand on the Company’s water or wastewater systems similar to the demand of a family of four persons living in a single family house on a standard sized lot. One SFE is assumed to have a water demand of approximately 0.4 acre feet per year and to contribute wastewater flows of approximately 300 gallons per day. Water usage pricing uses a tiered pricing structure. The Company recognizes wholesale water usage revenues upon delivering water to its customers or its governmental customers’ end-use customers, as applicable. The water revenues recognized by the Company are shown net of royalties to the Land Board and, when applicable, amounts retained by the Rangeview Metropolitan District (the “District”). | ||
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, 2013, 2012 and 2011, are presented in the statements of operations. Costs of delivering water and providing wastewater service to customers are recognized as incurred. | |||
The Company delivered 69.2 million, 34.2 million and 34.5 million gallons of water to customers during the fiscal years ended August 31, 2013, 2012 and 2011, respectively. | |||
ii) | Water and wastewater tap fees and construction fees – Tap fees, also called system development fees, are received in advance, are non-refundable and are typically used to fund construction of certain facilities and defray the acquisition costs of obtaining water rights. Construction fees are fees used by the Company to construct assets that are typically required to be constructed by developers or home builders. | ||
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 thirty years. Costs of construction of the assets when the Company will own the assets are capitalized and depreciated over their estimated economic lives. | |||
In August 2005, the Company entered into the Water Service Agreement (the “County Agreement”) with Arapahoe County (the “County”) to provide water service to the County’s fairgrounds (the “Fairgrounds”). Pursuant to the County Agreement, 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, 2013, 2012 and 2011, the Company recognized $14,300 of tap fee revenue. At August 31, 2013, $327,600 of these tap fees are still deferred. The Company recognized $41,500 of “Special Facilities” funding as revenue in each of the three fiscal years ended August 31, 2013, 2012, and 2011 respectively. These construction revenues also relate to the County Agreement entered into in August 2005. As of August 31, 2013, the Company has deferred recognition of $1.3 million of tap and construction fee revenue from the County, which will be recognized as revenue ratably through 2036. | |||
In addition to the tap fee revenues and the construction revenues, the Company also records interest income from the County using the effective interest method. Pursuant to the County Agreement, the County is making payments to the Company totaling $82,200 per year 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, $19,200 and $22,900 of interest income from the County during the fiscal years ended August 31, 2013, 2012 and 2011, respectively. | |||
In August 2012, the Company entered into an agreement with Front Range Pipeline which grants Front Range Pipeline easement rights for a period of three years to construct a pipeline for total consideration of $28,700. As of August 31, 2013, the Company had $18,900 in deferred revenue from Front Range Pipeline. | |||
iii) | Consulting Fees – Consulting fees are fees we receive, typically on a monthly basis, from municipalities and area water providers along the I-70 corridor, for system management and maintenance | ||
Agricultural Farming Operations – The Company leases its Arkansas River water and land to area farmers who actively farm the properties. Prior to August 3, 2012, pursuant to a property management agreement between HP A&M and the Company (the “Property Management Agreement”), HP A&M received a management fee equal to 100% of the income from the land and water leases. As a result, the Company presented its land and water lease income net of the management fees paid to HP A&M. Effective August 3, 2012, the Company terminated the Property Management Agreement due to a default by HP A&M on certain promissory notes secured by deeds of trust on the land and water purchased by the Company from HP A&M in 2006. Effective August 3, 2012, the Company manages the land and water leases and the income from the land and water leases became payable to the Company. Pursuant to the farm lease agreements, the Company bills the lessees semi-annually in March and November. The lease billings include minimum billings and adjustments based on actual water deliveries by the Fort Lyon Canal Company (“FLCC”) or are based on crop yields. Subsequent to August 3, 2012, the Company records farm lease income ratably each month based on estimated annual lease income the Company anticipates collecting from its land and water leases. The Company recorded these amounts as receivables, less an estimated allowance for uncollectible accounts. The allowance as of August 31, 2013, was determined by the Company’s specific review of all past due accounts. The Company has recorded allowances for doubtful accounts totaling $41,100 and $20,400 as of August 31, 2013 and 2012, respectively. As of August 31, 2013 the company has accrued $397,300 of farm income related to billings for future periods. The Company manages the farm lease business as a separate line of business from the wholesale water and wastewater business. | |||
Royalty and other obligations | |||
Revenues from the sale of Export Water are shown net of royalties payable to the Land Board. Revenues from the sale of water on the “Lowry Range” are shown net of the royalties to the Land Board and the amounts retained by the District. See further description of the “Lowry Range” in Note 4 – Water Assets under section “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 began recognizing the up-front payment from Anadarko as income on a straight-line basis over three years (the initial term of the O&G Lease) on March 10, 2011. During the years ended August 31, 2013, 2012 and 2011, the Company recognized $416,000, $423,000 and $199,000 respectively, of income related to the up-front payments received pursuant to the O&G Lease. | |||
As of August 31, 2013, the Company has deferred recognition of $235,500 of income related to the O&G Lease, which will be recognized into income ratably through February 2014. | |||
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, 2013 and 2012 had no impact on the income tax provisions. | |||
The Company recognized $66,800, $54,600 and $94,600 of share-based compensation expenses during the fiscal years ended August 31, 2013, 2012 and 2011, respectively. | |||
Income Taxes | |||
The Company uses a “more-likely-than-not” threshold for the recognition and de-recognition of tax positions, including any potential interest and penalties relating to tax positions taken by the Company. The Company does not have any significant unrecognized tax benefits as of August 31, 2013. | |||
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 2009 through fiscal 2012. The Company does not believe there will be any material changes in its unrecognized tax positions over the next twelve 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, 2013, 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, 2013, 2012 or 2011. | |||
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 347,600, 215,100 and 280,100 common share equivalents as of August 31, 2013, 2012 and 2011, 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. New pronouncements assessed by the Company recently are discussed below: | |||
In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220) - Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02). ASU 2013-02 finalizes Proposed ASU No. 2012-240, and seeks to improve the transparency of reporting reclassifications out of accumulated other comprehensive income. ASU 2013-02 is effective prospectively for reporting periods beginning after December 15, 2012 (September 1, 2013 for the Company). The adoption of ASU 2013-02 will not have a material impact on its results of operations, financial condition or cash flows. | |||
In 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11). ASU 2013-02 provides that an unrecognized tax benefit, or a portion, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward for reporting fiscal years beginning after December 15, 2013 (September 1, 2014 for the Company). The adoption of ASUJ 2013-11 will not have a material impact on its results of operations, financial condition or cash flows. |
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended | ||||||||||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | ' | ||||||||||||||||||||||||
NOTE 3 – 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, 2013 or 2012. | |||||||||||||||||||||||||
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 at August 31, 2013 and one Level 2 asset at August 31, 2012, its marketable securities. The Company’s principal markets for these securities are the secondary institutional markets and valuations are based on observable market data in those markets. | |||||||||||||||||||||||||
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, 2013 and 2012, the Tap Participation Fee liability, which is described in greater detail in Note 2 – Summary of Significant Accounting Policies and Note 7 – 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 entirely of its investments in water and water systems and other long-lived assets. See Note 4 for impairment of water rights and land with the associated water rights held for sale. | |||||||||||||||||||||||||
Level 2 Asset – Marketable Securities Measured on a Recurring Basis. The Company’s marketable securities were the Company’s only financial assets measured on a recurring basis. The fair values of the marketable securities are based on the values reported by the financial institutions where the funds are held. These securities included only federally insured certificates of deposit. | |||||||||||||||||||||||||
Level 3 Liability – Tap Participation Fee. The Company’s Tap Participation Fee liability is the Company’s only financial liability measured on a non-recurring basis. The Tap Participation Fee liability is valued by projecting new home development in the Company’s targeted service area over an estimated development period. Due to the long-term nature of the Tap Participation Fee, the valuation of the Tap Participation Fee is not sensitive to minor changes. See further description of the Tap Participation Fee in Note 7 – Long-Term Debt and Operating Lease. | |||||||||||||||||||||||||
The following table provides information on the assets and liabilities measured at fair value as of August 31, 2013: | |||||||||||||||||||||||||
Fair Value Measurement Using: | |||||||||||||||||||||||||
Quoted Prices in | Significant | Total | |||||||||||||||||||||||
Active Markets for | Significant Other | Unobservable | Unrealized | ||||||||||||||||||||||
Identical Assets | Observable Inputs | Inputs | Gains and | ||||||||||||||||||||||
Fair Value | Cost / Other Value | (Level 1) | (Level 2) | (Level 3) | (Losses) | ||||||||||||||||||||
Tap Participation Fee | $ | 59,807,289 | $ | 59,807,289 | $ | — | $ | — | $ | 59,807,289 | $ | — | |||||||||||||
Although not required, the Company deems the following table, which presents the changes in the Tap Participation Fee for the year ended August 31, 2013, to be helpful to the users of its financial statements: | |||||||||||||||||||||||||
Fair Value Measurement using Significant Unobservable | |||||||||||||||||||||||||
Inputs (Level 3) | |||||||||||||||||||||||||
Discount - to | |||||||||||||||||||||||||
Tap | be imputed as | ||||||||||||||||||||||||
Gross Estimated | Participation | interest | |||||||||||||||||||||||
Tap Participation | Fee Reported | expense in | |||||||||||||||||||||||
Fee Liability | Liability | future periods | |||||||||||||||||||||||
Balance at August 31, 2012 | $ | 112,958,000 | $ | 68,269,100 | $ | 44,688,900 | |||||||||||||||||||
Total gains and losses (realized and unrealized): | |||||||||||||||||||||||||
Imputed interest recorded as “Other Expense” | — | 3,275,400 | (3,275,400 | ) | |||||||||||||||||||||
Purchases, sales, issuances, payments, and settlements | (10,276,100 | ) | (11,737,200 | ) | 1,461,100 | ||||||||||||||||||||
Transfers in and/or out of Level 3 | — | — | — | ||||||||||||||||||||||
Balance at August 31, 2013 | $ | 102,681,900 | $ | 59,807,300 | $ | 42,874,600 | |||||||||||||||||||
The methodologies for estimating the fair value of financial assets and liabilities that are measured at fair value are discussed above. The methodologies for other financial assets and liabilities are discussed below. | |||||||||||||||||||||||||
Cash and Cash Equivalents: The Company’s cash and cash equivalents are reported using the values as reported by the financial institution where the funds are held. These securities primarily include balances in the Company’s operating and savings accounts. The carrying amount of cash and cash equivalents approximate fair value. | |||||||||||||||||||||||||
Accounts Receivable and Accounts Payable: The carrying amounts of accounts receivable and accounts payable approximate fair value due to the relatively short period to maturity for these instruments. | |||||||||||||||||||||||||
Long-term Financial Liabilities: The Comprehensive Amendment Agreement No. 1 the “CAA” is comprised of a recorded balance and an off-balance sheet or “contingent” obligation associated with the Company’s acquisition of its “Rangeview Water Supply” (defined in Note 4 below). The amount payable is a fixed amount but is repayable only upon the sale of “Export Water” (defined in Note 4 below). Because of the uncertainty of the sale of Export Water, the Company has determined that the contingent portion of the CAA does not have a determinable fair value. The CAA is described further in Note 5 – Participating Interests in Export Water. | |||||||||||||||||||||||||
The recorded balance of the “Tap Participation Fee” liability (as described below) is its estimated fair value determined by projecting new home development in the Company’s targeted service area over an estimated development period. | |||||||||||||||||||||||||
Notes Receivable and Construction Proceeds Receivable: The carrying amounts of the Company’s notes receivable and construction proceeds receivable approximate fair value as they bear interest at rates which are comparable to current market rates. | |||||||||||||||||||||||||
HP A&M Receivable: In conjunction with HP A&M defaulting on certain promissory notes, the Company has the right to collect from HP A&M any amounts the Company spends to cure the defaulted notes. Accordingly the Company has recorded the entire amount of the HP A&M notes as a receivable from HP A&M. Due to the fact that HP A&M is a related party the fair value of the accounts receivable is not practical to determine. | |||||||||||||||||||||||||
Mortgages Payable: During fiscal 2013, the Company began acquiring the defaulted and non-defaulted promissory notes that are payable by HP A&M. The majority of the notes issued by the Company have a five-year term, bear interest at an annual rate of five percent (5%) and require semi-annual payments with a straight-line amortization schedule. The carrying value of the notes payable approximate the fair value as the rates are comparable to market rates. | |||||||||||||||||||||||||
Off-Balance Sheet Instruments: The Company’s off-balance sheet instruments consist entirely of the contingent portion of the CAA. Because repayment of this portion of the CAA is contingent on the sale of Export Water, which is not reasonably estimable, the Company has determined that the contingent portion of the CAA does not have a determinable fair value. See further discussion in Note 5 – Participating Interests In Export Water. |
WATER_ASSETS
WATER ASSETS | 12 Months Ended | ||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||
Water Assets | ' | ||||||||||||||||
WATER ASSETS | ' | ||||||||||||||||
NOTE 4 – WATER ASSETS | |||||||||||||||||
The Company’s water and water systems consist of the following approximate costs and accumulated depreciation and depletion as of August 31: | |||||||||||||||||
31-Aug-13 | 31-Aug-12 | ||||||||||||||||
Accumulated | Accumulated | ||||||||||||||||
Depreciation | Depreciation | ||||||||||||||||
Costs | and Depletion | Costs | and Depletion | ||||||||||||||
Arkansas River assets | $ | 69,112,300 | $ | (1,487,700 | ) | $ | 69,112,300 | $ | (1,315,900 | ) | |||||||
Rangeview water supply | 14,667,000 | (7,700 | ) | 14,376,100 | (7,100 | ) | |||||||||||
Sky Ranch water rights and other costs | 3,915,100 | (79,800 | ) | 3,924,100 | (50,800 | ) | |||||||||||
Fairgrounds water and water system | 2,899,900 | (622,600 | ) | 2,899,900 | (534,500 | ) | |||||||||||
Rangeview water system | 167,700 | (72,800 | ) | 167,700 | (67,600 | ) | |||||||||||
Water supply – other | 43,200 | (22,400 | ) | 25,600 | (19,400 | ) | |||||||||||
Totals | 90,805,200 | (2,293,000 | ) | 90,505,700 | (1,995,300 | ) | |||||||||||
Net investments in water and water systems | $ | 88,512,200 | $ | 88,510,400 | |||||||||||||
Depletion and Depreciation | |||||||||||||||||
The Company recorded $500 of depletion charges during each of the three fiscal years ended August 31, 2013, 2012 and 2011, respectively. This related entirely to the Rangeview Water Supply (defined below). No depletion is taken against the Arkansas River water or Sky Ranch Water Supply (all are defined below) because the water located at these locations is not yet being utilized for their intended purpose as of August 31, 2013. | |||||||||||||||||
The Company recorded $311,300, $309,200 and $300,800 of depreciation expense in each of the fiscal years ended August 31, 2013, 2012 and 2011, respectively. These figures include depreciation for other equipment not included in the table above. | |||||||||||||||||
Arkansas River Assets | |||||||||||||||||
Arkansas River Water – The Company owns 60,000 acre feet of senior water rights in the Arkansas River and its tributaries in Southeastern Colorado. The Company anticipates that of this, 40,000 acre feet may be available for non-agricultural uses along the front range of Colorado sometime in the future. The Company acquired its Arkansas River assets from HP A&M pursuant to the Arkansas River Agreement entered into on May 10, 2006. | |||||||||||||||||
In order to utilize the Arkansas River water in the Company’s service areas, the Company will be required to convert this water to municipal and industrial uses. Change of water use must be done through the Colorado water court and several conditions must be present prior to the water court granting an application for transfer of a water right. A transfer case would be expected to include the following provisions: | |||||||||||||||||
(i) | a provision of anti-speculation in which the applicant must have contractual obligations to provide water service to customers prior to the water court ruling on the transfer of a water right, | ||||||||||||||||
(ii) | the applicant can only transfer the “consumptive use” portion of its water rights (the Company expects to face opposition to any consumptive use calculation of the historic agricultural uses of its water), | ||||||||||||||||
(iii) | applicants likely would be required to mitigate the loss of tax base in the basin of origin, | ||||||||||||||||
(iv) | applicants would likely have re-vegetation requirements to restore irrigated soils to non-irrigated, and | ||||||||||||||||
(v) | applicants would be required to meet water quality measures which would be included in the cost of transferring the water rights. | ||||||||||||||||
The value of the assets was recorded based on the determined fair value of the consideration paid at the acquisition date, 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. For a discussion of promissory notes owed by HP A&M to third parties which are secured by the Company’s Arkansas River water rights, see “Arkansas River Land” section below, Note 7 – Long Term Debt and Operating Lease, and Note 15 – Subsequent Events. | |||||||||||||||||
Fort Lyon Canal Company (“FLCC”) Shares – The Arkansas River water rights are represented by 21,782 shares of the FLCC, which is a non-profit mutual ditch company established in the late 1800’s that operates and maintains the 110 mile Fort Lyon Canal between La Junta, Colorado and Lamar, Colorado. The shares in the FLCC represent the amount of water the Company owns in the Fort Lyon Canal. | |||||||||||||||||
Pursuant to the Arkansas River Agreement, the Company pledged to HP A&M: (i) one-half of the FLCC shares purchased by the Company, (ii) all shares of FLCC hereafter issued to the Company by means of any dividend or distribution in respect of the shares pledged hereunder (together with the shares identified in (i), the “Company’s Pledged Shares”), (iii) the certificates representing the Company’s Pledged Shares, (iv) the land associated with the water represented by the Company’s Pledged Shares, and (v) all rights to money or property which the Company now has or hereafter acquires in respect of the Company’s Pledged Shares. This pledge agreement will terminate upon payment of the Tap Participation Fee. | |||||||||||||||||
Arkansas River Land – The Company owns approximately 16,700 acres of real property which is being used for agricultural purposes and was acquired from HP A&M in 2006 in connection with the water acquisition described above. The land is located in the counties of Bent, Otero and Prowers in southern Colorado. The Company also owns certain contract rights, tangible personal property, mineral rights, and other water interests related to the Arkansas River water and land. | |||||||||||||||||
The land owned by the Company is divided into 80 separate properties, each of which is being leased to area farmers. Most of the operating leases expire on December 31, 2014, while the remaining leases have a variety of expiration dates. Pursuant to a property management agreement between HP A&M and the Company (the “Property Management Agreement”), HP A&M had the right to pursue leasing of the land and Arkansas River water to interested parties with all lease income associated with leasing the land and Arkansas River water, together with all costs associated with these activities, being the sole opportunity and obligation of HP A&M. The Property Management Agreement’s initial term expired on August 31, 2011 and beginning September 1, 2011, the Property Management Agreement entered into the “Extended Term” which could extend the Property Management Agreement until September 2014 at the latest. During the Extended Term, HP A&M was to continue to manage the leases and receive all lease payments from the lessees as a management fee. Beginning September 1, 2011, until the Property Management Agreement was terminated the Company allocated 26.9% (calculated pursuant to the Property Management Agreement based on consideration paid to HP A&M since the signing of the Arkansas River Agreement) of the net revenues paid to HP A&M (which is the lease payments HP A&M retains less expenses for employees, reasonable overhead and actual expenses paid to manage the farm leases) against the Tap Participation Fee liability. Because the Company did not have the risk of loss associated with the leases (HP A&M’s management fee was equal to all lease income and contractually HP A&M had the risk of loss on the leases), the lease income and management fees are reflected on a net basis throughout the initial and Extended Terms of the Property Management Agreement until termination on August 3, 2012. | |||||||||||||||||
The Property Management Agreement was terminated on August 3, 2012 due to defaults by HP A&M on certain promissory notes secured by deeds of trust on the Company’s land and water. On July 23, 2012, the Company notified all the farm lessees that HP A&M had notified the Company that HP A&M intended to default on its obligations under the promissory notes issued by HP A&M to purchase farms and water rights in the Fort Lyon Canal system. The lessees were informed that all lease payments would be billed directly by and paid directly to the Company from the date of the notice forward. All other terms of the leases remained unchanged. Under the farm lease agreements, the farmers are billed twice a year in November and March. The Company received lease income from farm leases of approximately $1,241,900 and $71,100 (recorded as revenue for fiscal 2013 and other income for fiscal 2012) for the fiscal years ended August 31, 2013 and 2012, respectively. The allocation of 26.9% of the net revenues against the Tap Participation Fee, the termination of the Property Management and the defaults by HP A&M are described in greater detail in Note 7 – Long-Term Debt and Operating Lease. | |||||||||||||||||
Land and Water Shares Held for Sale | |||||||||||||||||
During fiscal year end 2012, management decided to sell certain farms in order to have the cash flow sufficient to acquire the notes defaulted upon by HP A&M and to meet the future obligations on the promissory notes the Company intends to issue as consideration to purchase the notes owed by HP A&M. Management is anticipating selling approximately 1,603 acres of land along with 3,397 FLCC shares associated with this land. The net book value of the assets held for sale prior to being impaired at August 31, 2012 was $12.2 million. The negotiated sale price for these assets is $5.7 million which resulted in a loss of $6.5 million, which was expensed in fiscal 2012. | |||||||||||||||||
Rangeview Water Supply and Water System | |||||||||||||||||
The “Rangeview Water Supply” consists of 25,050 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 $14.7 million on the Company’s balance sheet as of August 31, 2013, 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 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, a quasi-municipal political subdivision of the State of Colorado; | ||||||||||||||||
(iii) | The Company entered into the 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 (collectively these agreements are referred to as the “Rangeview Water Agreements”). | ||||||||||||||||
Pursuant to the Rangeview Water Agreements, the Company has the exclusive right, through 2081, to use 13,400 acre feet of the Rangeview Water Supply specifically on 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. The Company owns the rights to use the remaining 11,650 acre feet groundwater, which can be exported off the Lowry Range to serve area users (referred to as “Export Water”). The Company also has the option with the Land Board 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. | |||||||||||||||||
Services on the Lowry Range – Pursuant to the Rangeview Water Agreements, the Company designs, finances, constructs, operates and maintains the District’s water and wastewater systems to provide service to the District’s customers on the Lowry Range. The Company will operate both the water and the wastewater systems during the contract period and the District owns both systems. After 2081, ownership of the water system will revert to the Land Board, with the District retaining ownership of the wastewater system. | |||||||||||||||||
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 12% royalty on all gross revenues received from water sales to customers on the Lowry Range. The District retains 5% of the remaining gross revenues and the Company receives 95% 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 Company owns the Export Water and uses and intends to use it to provide water and wastewater services to customers off the Lowry Range. The Company will own all facilities required to extend water and wastewater services using its Export Water. The Company anticipates contracting with third parties for the construction of these facilities. If the Company sells Export Water, the Company is required to pay royalties to the Land Board ranging from 10% of gross revenues to 50% of net revenue after deducting certain costs. | |||||||||||||||||
The County Fairgrounds Water and Water System | |||||||||||||||||
The Company owns 321 acre feet of groundwater purchased pursuant to the County Agreement. 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 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, 2013 Sky Ranch Metropolitan District #5 owed The Company approximately $57,300 for various costs associated with establishing and operating the district. The Company anticipates these costs will be recovered through property tax assessments. | |||||||||||||||||
O&G Lease – On March 10, 2011, the Company entered into the O&G Lease and the Surface Use Agreement with Anadarko. Pursuant to the O&G Lease, the Company received an up-front payment of $1,243,400 from Anadarko for the purpose of exploring for, developing, producing and marketing oil and gas on 634 acres of mineral estate owned by the Company at its Sky Ranch property. The Company also received $9,000 in surface use and damage payments. | |||||||||||||||||
Paradise Water Supply | |||||||||||||||||
In 1987, the Company acquired water, water wells, and related assets from Paradise Oil, Water and Land Development, Inc., which constitute the “Paradise Water Supply.” Every six years the Paradise Water Supply is subject to a finding of reasonable diligence review by the water court and the State Engineer. For a favorable finding, the Company must demonstrate that it is diligently pursuing the development of the water rights. If the Company does not receive a favorable finding of reasonable diligence, it will lose its right to the Paradise Water Supply. The most recent diligence review was started in our fiscal 2005 and was completed in 2008, but not without objectors and not without the Company having to agree to certain stipulations to remove the objections. In order to continue to maintain the Paradise water right, by 2014 the Company must (i) select an alternative reservoir site; (ii) file an application in water court to change the place of storage; (iii) identify specific end users and places of use for the water; and (iv) identify specific source(s) of the water rights for use. Management does not intend to spend the resources needed to find an alternative reservoir site without a specific use for the water. The Company has been unable to find potential customers for this water and cannot be certain that a customer will commit to use the water within the next two years. Since the Company does not have a customer that will commit to use the water and the Company will not commit the resources necessary to move the reservoir site in the absence of a customer, the Company expects to lose these conditional water rights. Accordingly during the fourth quarter of fiscal 2012, the Company determined the Paradise Water Supply was fully impaired and an impairment charge of $5.5 million was recorded. The Company is currently in the process of disposing of the Paradise Water Supply. | |||||||||||||||||
PARTICIPATING_INTERESTS_IN_EXP
PARTICIPATING INTERESTS IN EXPORT WATER | 12 Months Ended | ||||||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||||||
Participating Interests In Export Water | ' | ||||||||||||||||||||
PARTICIPATING INTERESTS IN EXPORT WATER | ' | ||||||||||||||||||||
NOTE 5 – PARTICIPATING INTERESTS IN EXPORT WATER | |||||||||||||||||||||
The Company acquired its Rangeview Water Supply through various amended agreements entered into in the early 1990’s. The acquisition was consummated with the signing of the CAA in 1996. Upon entering into the CAA, the Company recorded an initial liability of $11.1 million, which represented the cash the Company received from the participating interest holders that was used to purchase the Company’s Export Water (described in greater detail in Note 4 – Water Assets to the 2013 Annual Report). The Company agreed to remit a total of $31.8 million of proceeds received from the sale of Export Water to the participating interest holders in return for their initial $11.1 million investments. The obligation for the $11.1 million was recorded as debt, and the remaining $20.7 million contingent liability was not reflected on the Company’s balance sheet because the obligation to pay this is contingent on the sale of Export Water, the amounts and timing of which are not reasonably determinable. | |||||||||||||||||||||
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 liability account) with the balance of the payment being charged to the contingent obligation portion. Because the original recorded liability, which was $11.1 million, was 35% of the original total liability of $31.8 million, 35% of each payment remitted to the CAA holders is allocated to the recorded liability account. The remaining portion of each payment, or 65%, is allocated to the contingent obligation, which is recorded on a net revenue basis. | |||||||||||||||||||||
From time to time the Company repurchased various portions of the CAA obligations in priority. The Company did not make any CAA acquisitions during the fiscal years ended August 31, 2013 and 2012. As a result of the acquisitions, and due to the sale of Export Water, as detailed in the table below, the remaining potential third party obligation at August 31, 2013, is $3.4 million: | |||||||||||||||||||||
Export Water | Initial Export | Total Potential | Paticipating | ||||||||||||||||||
Proceeds | Water Proceeds | Third party | Interests | ||||||||||||||||||
Received | to Pure Cycle | Obligation | Liability | Contingency | |||||||||||||||||
Original balances | $ | — | $ | 218,500 | $ | 31,807,700 | $ | 11,090,600 | $ | 20,717,100 | |||||||||||
Activity from inception until August 31, 2012: | |||||||||||||||||||||
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 | 111,300 | (77,900 | ) | (33,400 | ) | (12,100 | ) | (21,300 | ) | ||||||||||||
Balance at August 31, 2012 | 754,700 | 27,802,700 | 3,468,800 | 1,208,900 | 2,259,900 | ||||||||||||||||
Fiscal 2013 activity: | |||||||||||||||||||||
Export Water sale payments | 158,000 | (110,600 | ) | (47,400 | ) | (16,000 | ) | (31,400 | ) | ||||||||||||
Balance at August 31, 2013 | $ | 912,700 | $ | 27,692,100 | $ | 3,421,400 | $ | 1,192,900 | $ | 2,228,500 | |||||||||||
* 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 three payees receive their full payment before the next priority level receives any payment and so on until full repayment. The Company will receive $5.1 million of the first priority payout (the remaining entire first priority payout totals $7.3 million as of August 31, 2013). |
ACCRUED_LIABILITIES
ACCRUED LIABILITIES | 12 Months Ended |
Aug. 31, 2013 | |
Accrued Liabilities | ' |
ACCRUED LIABILITIES | ' |
NOTE 6 – ACCRUED LIABILITIES | |
At August 31, 2013, the Company had accrued liabilities of $264,700, of which $156,200 was for estimated property taxes on the Sky Ranch property, $56,700 was for professional fees, $30,300 for prepaid farm lease payments and the remaining $21,500 was related to operating payables. | |
At August 31, 2012, the Company had accrued liabilities of $172,600, of which $60,500 was for estimated property taxes on the Sky Ranch property, $56,800 was for professional fees, $33,500 for prepaid farm lease payments and the remaining $21,800 was related to operating payables. |
LONGTERM_DEBT_AND_OPERATING_LE
LONG-TERM DEBT AND OPERATING LEASE | 12 Months Ended | ||||
Aug. 31, 2013 | |||||
Debt Disclosure [Abstract] | ' | ||||
LONG-TERM DEBT AND OPERATING LEASE | ' | ||||
NOTE 7 – LONG-TERM DEBT AND OPERATING LEASE | |||||
As of August 31, 2013, the Company is subject to mortgages with contractual maturity dates as described below. | |||||
The Participating Interest in Export Water supply and 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 Interest in Export Water supply is described in Note 5 – Participating Interest in Export Water and the Tap Participation Fee is described below in section “Tap Participation Fee Payable to HP A&M”. | |||||
Tap Participation Fee Payable to HP A&M | |||||
The $59.8 million Tap Participation Fee liability at August 31, 2013, represents the estimated discounted fair value of the Company’s obligation to pay HP A&M 20% of the Company’s gross proceeds, or the equivalent thereof, from the sale of the next 17,194 water taps sold by the Company. | |||||
Initially the obligation was 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 reduced to 17,194 water taps 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 Tap Participation Fee percentage from 10% to 20%, and to take a corresponding 50% reduction in the number of taps subject to the Tap Participation Fee, (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, 3012 prior to termination of the Property Management Agreement, and (v) the reduction of 2,233 taps as the result of foreclosures on certain farms pursuant to the remedies outlined in the Arkansas River Agreement. | |||||
The fair value of the TPF liability is an estimate prepared by management of the Company. The fair value of the liability is 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 are 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 1980’s through the valuation date. The Company utilized data for this length of time to provide development information over many economic cycles because the Company anticipates development in its targeted service area to encompass many economic cycles over the development period. | ||||
● | New home construction patterns for large master planned housing developments along the Front Range. The Company utilized this information because these developments are deemed comparable to projects anticipated to be constructed in the Company’s targeted service area (i.e. these master planned communities were located in predominately undeveloped areas on the outskirts of the Front Range). | ||||
● | Population growth rates for Colorado and the Front Range. Population growth rates were utilized to predict anticipated growth along the Front Range, which was used to predict an estimated number of new homes necessary to house the increased population. | ||||
● | The Consumer Price Index since the 1980’s, which was utilized to project estimated future water tap fees. | ||||
Utilizing this historical information, the Company projected an estimated new home development pattern in its targeted service area sufficient to cover the sale of the water taps subject to the Tap Participation Fee at the date of the revaluation, August 31, 2013. The Company revaluated the TPF payable as of August 31, 2013 due to the reduction of taps subject to the TPF related to remedies under the Arkansas River Agreement. 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 $102.7 million, which is a decrease of $17.9 million from the previous valuation completed in fiscal 2012 ($120.6 million). The estimated payments to HP A&M are 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 is imputed as interest expense over the estimated development time using the effective interest method. The implied interest rate for the most recent valuation was 5.0%. | |||||
Actual new home development in the Company’s service area and actual future tap fees inevitably will vary significantly from the Company’s estimates, which could have a material impact on the Company’s consolidated financial statements. An important component in the Company’s estimate of the value of the TPF, which is based on historical trends, is that the Company reasonably expects water tap fees to continue to increase in the coming years. Tap fees are market based and the continued increase in tap fees reflects, among other things, the increasing costs to acquire and develop new water supplies. Tap fees thus are partially indicative of the increasing value of the Company’s water assets. The Company continues to assess the value of the TPF liability and updates its valuation analysis whenever events or circumstances indicate the assumptions used to estimate the value of the liability have changed materially. The difference between the net present value and the estimated realizable value will be imputed as interest expense using the effective interest method over the estimated development period utilized in the valuation of the TPF. | |||||
Payment of the TPF may be accelerated in the event of a merger, reorganization, sale of substantially all assets, or similar transactions and in the event of bankruptcy and insolvency events. Pursuant to the default provisions of the Company’s agreement with HP A&M. The Company reduced the discounted present value of the TPF by $11.7 million during the fiscal year-end August 31, 2013. The Company recorded the decrease in the TPF payable as an equity transaction due to the related party nature of the original transaction. Through August 31, 2013 $26.1 million of interest has been imputed since the acquisition date, recorded using the effective interest method. | |||||
Promissory Notes Payable by HP A&M in default | |||||
Approximately 60 of the 80 properties the Company originally acquired from HP A&M are subject to outstanding promissory notes payable to third parties that are secured by deeds of trust on the Company’s properties and water rights, as well as mineral interests. HP A&M has now defaulted on all of the promissory notes and informed the Company that it does not intend to pay any of the amounts owed. HP A&M owed approximately $9.6 million of principal and accrued interest as of September 1, 2012. These promissory notes are secured by approximately 14,000 acres of land and 16,882 FLCC shares representing water rights owned by the Company. | |||||
On July 2, 2012, the Company formally notified HP A&M that its failure to pay the promissory notes constituted an Event of Default under the Seller Pledge Agreement (as defined below) and a default of a material covenant under the Arkansas River Agreement. The Company informed HP A&M that unless such defaults were cured within thirty days, the Property Management Agreement would be terminated and the Company would proceed to exercise certain rights and remedies under the Arkansas River Agreement, the Seller Pledge Agreement, and the Property Management Agreement to protect its assets. The Company’s remedies at law and under the Arkansas River Agreement and related agreements include, but are not limited to, the right to (i) foreclose on 1,500,000 shares of Pure Cycle common stock issued to HP A&M and the proceeds therefrom (the “Pledged Shares”) which were pledged by HP A&M pursuant to a pledge agreement (the “Seller Pledge Agreement”) to secure the payment and performance by HP A&M of the promissory notes described above; (ii) reduce the Tap Participation Fee; (iii) terminate the Property Management Agreement; and (iv) recover damages caused by the defaults, including certain costs and expenses, including attorneys’ fees. | |||||
On August 3, 2012, the Company formally terminated the Property Management Agreement. On September 27, 2012, the Pledged Shares were sold at auction in a foreclosure sale for $2.35 per share, yielding approximately $3.42 million of proceeds to the Company (net of fees of $110,000). Pursuant to the Arkansas River Agreement, the Company is reducing the Tap Participation Fee and is entitled to recover damages caused by the defaults, including certain costs and expenses, including attorney fees. The Company is currently pursuing its remedies and will continue to pursue such remedies over the next 12 months. | |||||
To protect its land and water interests, during the fiscal ended August 31, 2013, the Company purchased approximately $7.0 million of the $9.6 million notes payable by HP A&M and is negotiating the purchase of the remaining $2.6 million with the holders. HP A&M continues to be liable for making the required payments on the notes, and the Company is pursuing remedies to recover the costs and expenses, including attorneys’ fees, incurred by the Company in protecting the rights and title to the land and water rights securing the notes payable by HP A&M, including the costs incurred in purchasing the notes defaulted on by HP A&M. The amount owed on the outstanding notes was approximately $7.9 million, including accrued interest of $122,000, and $9.6 million at August 31, 2013 and August 31, 2012, respectively. | |||||
During fiscal year 2013 four of the farms and one FLLC certificate representing water rights only went through foreclosure proceedings due to the defaults by HP A&M. The Company’s agreement with HP A&M provides for a reduction of the number of water taps subject to the TPF payable to HP A&M. The Company reduced the number of taps by 2,233 taps and the discounted present value of the Tap Participation Fee by a total of approximately $11.7 million as a result of the foreclosures. As of August 31, 2013 there were 17,194 taps subject to the Tap Participation Fee. Subsequent to the Company’s fiscal year end, an additional three farms and one FLCC certificate representing water rights only, collectively including 1,832 FLCC shares, were foreclosed resulting in a reduction of the number of taps subject to the TPF by an additional 3,364 taps (approximately $11.9 million of the TPF), leaving 13,830 taps subject to the Tap Participation Fee. | |||||
Future Maturities | |||||
Mortgage notes held and defaulted on by HP A&M | $ | 2,526,900 | |||
Mortgage notes, interest at 5%, due various dates in 2017 | 5,231,100 | ||||
Total | 7,758,000 | ||||
Less: current portion | (4,546,900 | ) | |||
Total long-term mortgage payable | $ | 3,211,100 | |||
2014 | $ | 4,546,900 | |||
Future Maturities (including $2,526,900 of HP A&M defaulted notes to third parties) | |||||
2015 | 844,500 | ||||
2016 | 887,300 | ||||
2017 | 932,200 | ||||
2018 | 534,500 | ||||
2019 | 12,600 | ||||
Total | $ | 7,758,000 | |||
Operating Lease | |||||
Effective January 2013, the Company entered into an operating lease for 1,200 square feet of office space. The lease has a two year term with payments of approximately $1,530 per month. |
SHAREHOLDERS_EQUITY
SHAREHOLDERS' EQUITY | 12 Months Ended | ||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||
Equity [Abstract] | ' | ||||||||||||||||
SHAREHOLDERS' EQUITY | ' | ||||||||||||||||
NOTE 8 – SHAREHOLDERS’ EQUITY | |||||||||||||||||
Sale of common stock and a common stock upon conversion of Convertible Note – Related Party | |||||||||||||||||
The Company issued $5.2 million convertible note on September 28, 2010. The Company’s shareholders authorized conversion of the convertible note at the January 11, 2011 annual shareholders’ meeting. Following the meeting, the note was converted into 1,982,099 unregistered shares of its common stock. From issuance until conversion, the convertible note accrued interest at rate of 10% per annum. During the fiscal year ended August 31, 2011, the Company accrued $151,700 of interest on the Convertible Note – Related Party. | |||||||||||||||||
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 2004 Incentive Plan (the “Equity Plan”), which was approved by shareholders in April 2004. Executives, eligible employees and non-employee directors are eligible to receive options and restricted stock grants pursuant to the Equity Plan. Under the Equity Plan, options to purchase shares of stock and restricted stock awards can be granted with exercise prices and vesting periods determined by the Compensation Committee of the Board. The Company initially reserved 1.6 million shares of common stock for issuance under the Equity Plan. At August 31, 2013, the Company had 1,218,311 shares that can be granted to eligible participants pursuant to the Equity 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. During fiscal year 2012, 29,500 options were forfeited by option holders and an additional 48,000 options expired. No options were forfeited during the fiscal years ended August 31, 2013 and 2011. The Company attributes the value of share-based compensation to expense using the straight-line single option method for all options granted. | |||||||||||||||||
The Company’s determination of the estimated fair value of share-based payment awards on the date of grant is affected by the following variables and assumptions: | |||||||||||||||||
● | The grant date exercise price – is the closing market price of the Company’s common stock on the date of grant; | ||||||||||||||||
● | Estimated option lives – based on historical experience with existing option holders; | ||||||||||||||||
● | Estimated dividend rates – based on historical and anticipated dividends over the life of the option; | ||||||||||||||||
● | Life of the option –based on historical experience option grants have lives 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 August 2013, the Company granted management options to purchase 100,000 shares of the Company’s common stock pursuant to the Equity Plan. The options vest one-third one year from the date of grant, one-third two years from the date of grant, and one-third three years from date of grant. The options expire ten years from 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 the grant); estimated option lives of ten years; estimated dividend rate of 0%; weighted average risk-free interest rate of 2.71%; weighted average stock price volatility 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 Equity Plan. The options vest one year from the date of grant and expire ten years from 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 the grant); estimated option lives of ten 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 is being expensed monthly over the vesting periods. | |||||||||||||||||
In January 2012, the Company granted its non-employee directors options to purchase a combined 12,500 shares of the Company’s common stock pursuant to the Equity Plan. The options vest one year from the date of grant and expire ten years from the date of grant. The Company calculated the fair value of these options at $15,400 using the Black-Scholes model with the following variables: weighted average exercise price of $1.85 (which was the closing sales price of the Company’s common stock on the date of the grant); estimated option lives of ten years; estimated dividend rate of 0%; weighted average risk-free interest rate of 1.87%; weighted average stock price volatility 73.29%; and an estimated forfeiture rate of 0%. The $15,400 of stock-based compensation is being expensed monthly over the vesting periods. | |||||||||||||||||
In January 2011, the Company granted its non-employee directors options to purchase a combined 17,500 shares of the Company’s common stock pursuant to the Equity Plan. 12,500 of the options vest one year from the date of grant and expire ten years from the date of grant. 5,000 of the options vest one-half at the first anniversary of the grant date and one-half at the second anniversary of the grant date. The Company calculated the fair value of these options at $54,500 using the Black-Scholes model with the following variables: weighted average exercise price of $3.67 (which was the closing sales price of the Company’s common stock on the date of the grant); estimated option lives of ten years; estimated dividend rate of 0%; weighted average risk-free interest rate of 3.37%; weighted average stock price volatility of 84.7%; and an estimated forfeiture rate of 0%. The $54,500 of stock-based compensation is being expensed monthly over the vesting periods. | |||||||||||||||||
No options were exercised during the fiscal years ended August 31, 2013, 2012, or 2011. | |||||||||||||||||
The following table summarizes the stock option activity for the Equity Plan for the fiscal year ended August 31, 2013: | |||||||||||||||||
Number of Options | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term | Approximate Aggregate Instrinsic Value | ||||||||||||||
Oustanding at beginning of period | 215,000 | $ | 5.88 | ||||||||||||||
Granted | 132,500 | $ | 5.21 | ||||||||||||||
Exercised | — | $ | — | ||||||||||||||
Forfeited or expired | — | $ | — | ||||||||||||||
Outstanding at August 31, 2013 | 347,500 | $ | 5.62 | $ | 6.98 | $ | 145,559 | ||||||||||
Options exercisable at August 31, 2013 | 215,000 | $ | 5.9 | $ | 4.89 | $ | 121,265 | ||||||||||
The following table summarizes the activity and value of non-vested options as of and for the fiscal year ended August 31, 2013: | |||||||||||||||||
Number of Options | Weighted- | ||||||||||||||||
Average Grant | |||||||||||||||||
Date Fair | |||||||||||||||||
Value | |||||||||||||||||
Non-vested options oustanding at beginning of period | 22,500 | $ | 1.72 | ||||||||||||||
Granted | 132,500 | 3.8 | |||||||||||||||
Vested | (22,500 | ) | 1.72 | ||||||||||||||
Forfeited | — | — | |||||||||||||||
Non-vested options outstanding at August 31, 2013 | 132,500 | $ | 3.8 | ||||||||||||||
All non-vested options are expected to vest. The total fair value of options vested during the fiscal years ended August 31, 2013, 2012 and 2011 was $48,700, $66,000 and $74,700, respectively. The weighted average grant date fair value of options granted during the fiscal years ended August 31, 2013, 2012 and 2011 was $3.80, $1.23 and $3.11, respectively. | |||||||||||||||||
Share-based compensation expense for the fiscal years ended August 31, 2013, 2012 and 2011, was $66,800, $54,600 and $94,600, respectively. | |||||||||||||||||
At August 31, 2013, the Company had unrecognized expenses relating to non-vested options that are expected to vest totaling $453,700. The weighted-average period over which these options are expected to vest is less than three years. The Company has not recorded any excess tax benefits to additional paid in capital. | |||||||||||||||||
Warrants | |||||||||||||||||
As of August 31, 2013, 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 2013, 2012 or 2011. | |||||||||||||||||
Pledged Common Stock Owned by HP A&M | |||||||||||||||||
Pursuant to the Arkansas River Agreement, HP A&M pledged, transferred, assigned and granted to the Company a security interest in and to the Pledged Shares, consisting of 1,500,000 shares of Pure Cycle common stock and the proceeds there from. Due to the HP A&M default the Pledged Shares were sold pursuant to a foreclosure sale for $3.5 million or $2.35 per share. |
SIGNIFICANT_CUSTOMER
SIGNIFICANT CUSTOMER | 12 Months Ended |
Aug. 31, 2013 | |
Significant Customer | ' |
SIGNIFICANT CUSTOMER | ' |
NOTE 9 – SIGNIFICANT CUSTOMER | |
The Company sells wholesale water and wastewater services to the District pursuant to the Rangeview Water Agreements. Sales to the District accounted for 34%, 86%, and 91% of the Company’s total revenues for the years ended August 31, 2013, 2012 and 2011, 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 28%, 53% and 60% of the Company’s total revenues for the years ended August 31, 2013, 2012 and 2011, respectively. | |
Revenues from another customer represented approximately 59% of the Company’s water and wastewater revenues for the fiscal year ended August 31, 2013. The Company had no revenues from the other customer for the fiscal years ended August 31, 2012 or 2011. | |
The Company had accounts receivable from the District which accounted for 20% and 16% of the Company’s trade receivables balances at August 31, 2013 and 2012, respectively. Accounts receivable from the District’s largest customer accounted for 17% and 13% of the Company’s trade receivables as of August 31, 2013, and 2012, respectively. |
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||||||||||
Aug. 31, 2013 | |||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||
INCOME TAXES | ' | ||||||||||||
NOTE 10 – INCOME TAXES | |||||||||||||
There is no provision for income taxes, because the Company has incurred operating losses. 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, | |||||||||||||
2013 | 2012 | ||||||||||||
Deferred tax assets: | |||||||||||||
Net operating loss carryforwards | $ | 6,080,000 | $ | 5,948,300 | |||||||||
Imputed interest on Tap Participation Fee | 10,074,200 | 8,852,500 | |||||||||||
Deferred revenue | 494,600 | 560,700 | |||||||||||
Impairment charges | — | 2,408,800 | |||||||||||
Depreciation and depletion | 4,899,800 | 2,425,700 | |||||||||||
Other | 43,600 | 45,000 | |||||||||||
Valuation allowance | (21,592,200 | ) | (20,241,000 | ) | |||||||||
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, | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Expected benefit from federal taxes at statutory rate of 34% | $ | (1,411,200 | ) | $ | (5,922,300 | ) | $ | (2,045,500 | ) | ||||
State taxes, net of federal benefit | (137,000 | ) | (574,800 | ) | (198,500 | ) | |||||||
Expiration of net operating losses | 147,400 | 90,000 | 121,000 | ||||||||||
Permanent and other differences | 27,400 | 25,800 | 37,800 | ||||||||||
Change in valuation allowance | 1,373,400 | 6,381,300 | 2,085,200 | ||||||||||
Total income tax expense / benefit | $ | — | $ | — | $ | — | |||||||
At August 31, 2013, the Company has $16.3 million of net operating loss carryforwards available for income tax purposes, which expire between fiscal 2014 and 2028. 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 $395,200, $241,200 and $324,500 expired during the fiscal years ended August 31, 2013, 2012 and 2011, respectively. |
401k_PLAN
401(k) PLAN | 12 Months Ended |
Aug. 31, 2013 | |
K Plan | ' |
401(k) PLAN | ' |
NOTE 11 – 401(k) PLAN | |
Effective July 25, 2006, the Company adopted the 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, 2013, 2012 and 2011, the Company paid fees of $3,300, $3,400 and $2,600, respectively, for the administration of the Plan. |
LITIGATION_LOSS_CONTINGENCIES
LITIGATION LOSS CONTINGENCIES | 12 Months Ended |
Aug. 31, 2013 | |
Litigation Loss Contingencies | ' |
LITIGATION LOSS CONTINGENCIES | ' |
NOTE 12 – LITIGATION LOSS CONTINGENCIES | |
The Company is 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. | |
Because each of the lawsuits below involves complex legal issues and uncertainties and are in the early stages of litigation, the Company has determined that no accruals for losses related to the lawsuits are reasonably estimable or deemed reasonably likely at this time. | |
On December 19, 2011, the Company and the District filed a lawsuit against the State of Colorado by and through the Land Board. The complaint was filed with the District Court, City and County of Denver, State of Colorado. The Company and the District are claiming that the Land Board breached, and will breach, agreements entered into by the Land Board with the Company and the District in connection with a 1996 settlement agreement. Those agreements include (i) the Amended and Restated Water Lease, dated as of April 4, 1996, between the Land Board and the District (the “Lease”) and (ii) the Service Agreement of the same date between the Company and the District. As initially reported in a Current Report on Form 8-K filed on November 29, 2011, the Land Board issued a Request for Proposal that included a draft lease agreement related to oil and gas rights at the Land Board’s Lowry Range. The Company believes the draft lease agreement did not adequately address or protect the Company’s exclusive right to provide water to the Lowry Range. The Land Board subsequently entered into an oil and gas lease for the Lowry Range, which, like the draft lease, does not protect the Company’s exclusive rights. As a result of this breach, the Company and the District are claiming damages to be proven at trial. | |
HP A&M initiated a lawsuit against the Company in District Court, City and County of Denver, State of Colorado on February 27, 2012, alleging breaches of representations made in connection with the Arkansas River Agreement. The HP A&M claims relate to the issues currently being litigated between the Company and the Land Board regarding the Company’s exclusive right to provide water service to the Land Board’s Lowry Range property. The Company believes the allegations are without merit and intends to vigorously defend against them. | |
The Land Board asserted certain counterclaims in the lawsuit described above that relate to operational disputes under the Lease. On June 14, 2013, the Company, the District and the Land Board entered into an Arbitration Agreement pursuant to which the parties have agreed to submit three counterclaims under the Lease to binding arbitration: (i) whether revenue from wastewater services are subject to royalties under the Lease and the appropriate payment for a right-of-way for a wastewater reclamation facility, (ii) whether Export Water royalties are owed on a net or gross proceeds basis, and (iii) if, and/or how water from the four aquifers under the Lowry Range should be blended for sale, as well as any related claims of the Company and the District for offset, credit or overpayment of previous royalties paid and defenses to the three claims. The counterclaims have been dismissed from the lawsuit without prejudice. An arbitrator has not yet been selected, so the timing of resolution of these claims is unknown. Because the arbitration has not proceeded past the agreement stage and the outcome is uncertain, the Company has determined that accruals for losses related to the arbitration are not reasonably estimable or deemed reasonably likely at this time. The Company and the District believe that they have been conducting their operations in accordance with the Lease and are prepared to defend their decisions in the arbitration. | |
During the fiscal year ended August 31, 2013, foreclosure proceedings were commenced against 38 of the properties acquired by the Company from HP A&M which are subject to promissory notes defaulted upon by HP A&M and secured by deeds of trust on the Company’s land and water rights. These properties represent approximately 40% of the Company’s FLLC shares and over 45% of the Company’s Arkansas River land. The proceedings were filed on various dates from January 9, 2013 through July 3, 2013, with the Public Trustees of Bent, Otero and Prowers Counties in Colorado and involve claims against HP A&M for its failure to pay the notes. Foreclosure proceedings in Colorado take at least nine months to conclude. Foreclosure sales were conducted on three of the Company’s farm properties on August 28, 2013, and on a fourth property on September 4, 2013, subsequent to fiscal year end. The Company’s wholly owned subsidiary, PCY Holding, LLC (“PCY Holdings”), was the successful bidder in the foreclosure sales. Due to statutory protections afforded to the Company as the owner of the properties and the Company’s liquidity, the Company had anticipated concluding these foreclosure proceedings on terms which would not have a material adverse effect on its financial position, results of operations or cash flows. On September 16, 2013, HP A&M filed a complaint against PCY Holdings and the Public Trustee for the County of Bent, Colorado. The lawsuit was filed in the District Court, County of Bent, Colorado. HP A&M was seeking (i) a declaratory judgment that it is entitled to redeem the four properties from the foreclosure sales by paying the amount of the outstanding debt, plus fees, which is the amount PCY Holdings bid in the sales, and (ii) preliminary and permanent injunctions against the Public Trustee preventing the Public Trustee from issuing confirmation deeds for the foreclosure sales to PCY Holdings or anyone other than HP A&M. On November 20, 2013 the Complaint was dismissed with prejudice, and judgment was entered in favor of the Public Trustee and PCY Holdings. The District Court ruled that “High Plains’ Complaint and Motion are baseless, without statutory authority, and are an attempt to obstruct the proper function of the office of the Public Trustee of Bent County, and PCY Holdings relative to the foreclosures of the four Subject Farms”. Further the District Court ruled “that High Plains’ Motion and its claims in its Verified Complaint are frivolous and groundless, and awards the Public Trustee of Bent County and PCY Holdings their attorneys’ fees and costs incurred in connection with this matter.” | |
HP A&M has 49 days from the date of the judgment in which to file an appeal if HP A&M appeals this judgment and wins on appeal, the Company could lose these properties, subject to its remedies under the Arkansas River Agreement. The Company intends to vigorously defend any appeal of this ruling. |
SEGMENT_REPORTING
SEGMENT REPORTING | 12 Months Ended | ||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||
SEGMENT REPORTING | ' | ||||||||||||||||
NOTE 13 – 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 Valley land and water to area farmers under cash leases or in certain cases crop share leases. The following tables show information by operating segment for the fiscal year ended August 31, 2013: | |||||||||||||||||
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 | — | — | — | — | |||||||||||||
As of August 31, 2012, the Company had only one operating segment. |
SUPPLEMENTAL_DISCLOSURE_OF_NON
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES | 12 Months Ended | |||||||||||||||
Aug. 31, 2013 | ||||||||||||||||
Supplemental Disclosure Of Non-Cash Activities | ' | |||||||||||||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES | ' | |||||||||||||||
NOTE 14 – SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES | ||||||||||||||||
For the Fiscal Years Ended August 31, | ||||||||||||||||
2013 | 2012 | 2011 | ||||||||||||||
Reduction in Tap Participation Fee Liability resulting from remedies under the Arkansas River Agrement | $ | 11,737,300 | $ | — | $ | — | ||||||||||
Mortgage payable and related party receivable recorded upon HP A&M default | — | 9,550,200 | — | |||||||||||||
Farm revenue allocated against the Tap Participation Fee liability and additional paid in capital thru August 3, 2012 | — | 189,700 | — | |||||||||||||
Issuance of shares of restricted common stock upon conversion of the Convertible Note - Related Party | — | — | 5,351,700 | |||||||||||||
$ | 11,737,300 | $ | 9,739,900 | $ | 5,351,700 | |||||||||||
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Aug. 31, 2013 | |
Related Party Transactions [Abstract] | ' |
RELATED PARTY TRANSACTIONS | ' |
NOTE 15 – 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 $139,500, $115,500, and $25,000 for the fiscal years ended August 31, 2013, 2012, and 2011, respectively. The funding was expensed in the general and administrative expenses line in the accompanying statements of operations for the years ended August 31, 2013, 2012, and 2011, respectively. | |
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, 2013) and matures on December 31, 2013. The $556,000 balance of the note receivable at August 31, 2013 includes borrowings of $229,300 and accrued interest of $326,700. The $543,900 balance of the note receivable at August 31, 2012 includes borrowings of $229,300 and accrued interest of $314,600. The Company extended the due date to December 31, 2014, and accordingly the note has been classified as non-current. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Aug. 31, 2013 | |
Subsequent Events [Abstract] | ' |
SUBSEQUENT EVENTS | ' |
NOTE 16 – SUBSEQUENT EVENTS | |
Subsequent to our fiscal year end an additional three farms and 1,832 FLCC shares have been obtained through the foreclosure proceedings resulting in a reduction of the number of taps subject to the TPF by 3,364 taps and a corresponding reduction to the TPF payable of $11.9 million. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | ||
Aug. 31, 2013 | |||
Summary Of Significant Accounting Policies Policies | ' | ||
Principles of Consolidation | ' | ||
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 | ' | ||
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 | |||
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, 2013 exceed federally insured limits. At various times during the year ended August 31, 2013, the Company’s main operating account exceeded federally insured limits. | |||
Marketable Securities | ' | ||
Marketable Securities | |||
At August 31, 2012, the Company’s marketable securities are comprised entirely of certificates of deposits maintained at various financial institutions, each of which have invested below federally insured limits and pay interest at stated rates through maturity. The certificates matured at various dates through May 2013. | |||
The amounts reported on the balance sheets for marketable securities as of August 31, 2012 represent the fair values of the underlying instruments as reported by the financial institutions where the funds are held. As of August 31, 2013, the Company is not holding any marketable securities in an effort to create liquidity while the Company is in the process of resolving the defaults by HP A&M. | |||
Financial Instruments - Concentration of Credit Risk and Fair Value | ' | ||
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 equivalents and marketable securities. The Company places its cash equivalents and investments with high quality financial institutions. At various times throughout the year ended August 31, 2013, cash deposits have exceeded federally insured limits. The Company invests 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. | |||
Mortgages Payables and HP A&M Receivable | ' | ||
Mortgages Payable and HP A&M Receivable | |||
In conjunction with HP A&M defaulting on certain promissory notes in fiscal year 2012, the Company has the right to collect from HP A&M any amounts the Company spends to protect its interest from the defaulted notes. Accordingly the Company has 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 held in escrow pursuant to the asset purchase agreement (“The Arkansas River Agreement”). The receivable represents the amount of the defaulted promissory notes payable by HP A&M which were purchased by the Company and with respect to which the Company will pursue remedies under the Arkansas River agreement (as described in more detail in Note 4) over the next 12 months, plus expenses as noted above. | |||
In the fiscal year 2013 the Company began acquiring the defaulted promissory notes that are payable by HP A&M. The majority of the notes issued by the Company have a five-year term, bear interest at an annual rate of five percent (5%) and require semi-annual payments with a straight-line amortization schedule, (see Note 7 – Long term debt and operating lease). | |||
Cash Flows | ' | ||
Cash Flows | |||
The Company paid $123,500 in interest during the fiscal year ended August 31, 2013. The Company did not pay any interest during the fiscal years ended August 31, 2012 and 2011, respectively. | |||
The Company did not pay any income taxes during the fiscal years ended August 31, 2013, 2012 and 2011, respectively. | |||
Trade Accounts Receivable | ' | ||
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 amounts of $41,100 and $20,400 as of August 31, 2013 and 2012, respectively. The allowance for uncollectible accounts was determined based on specific review of all past due accounts. | |||
Long-Lived Assets | ' | ||
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 its “Paradise Water Supply” asset (defined in Note 4 below) and land and water rights held for sale related to the Arkansas River Assets were impaired as of August 31, 2012. The Company determined that no impairment of such assets existed at August 31, 2013. There was no impairment in the carrying amounts of the remaining long-lived assets at August 31, 2013 and 2012. See further discussion in Note 4 below under sections “Paradise Water Supply” and “Arkansas River Assets”. | |||
Capitalized Costs of Water and Wastewater Systems and Depreciation and Depletion Charges | ' | ||
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 thirty 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 | ' | ||
Tap Participation Fee Liability and Imputed Interest Expense | |||
The Tap Participation Fee liability (“TPF”), as described in Note 7 – Long Term Debt and Operating Lease, represents the discounted fair value of the amounts the Company estimates it will pay HP A&M pursuant to the Arkansas River Agreement. The Company imputes interest expense on the unpaid TPF using the effective interest imputed over the estimated development period. The company imputed interest of $3.3 million, $3.5 million and $3.8 million during the years ended August 31, 2013, 2012 and 2011, respectively. | |||
The TPF is due and payable once the Company has sold a water tap and received the consideration due for such water tap. The Company did not sell any water taps during the years ended August 31, 2013, 2012 or 2011. As of August 31, 2013, 17,194 water taps remain subject to the TPF. | |||
Revenue Recognition | ' | ||
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 Agricultural Farming Operations, which are described below. | |||
Wholesale Water and Wastewater business – The Company generates revenues through its wholesale water and wastewater segment predominately from three sources: (i) monthly wholesale water usage fees and wastewater service fees, (ii) one time water and wastewater tap fees, and construction fees, and (iii) consulting fees. Because these items are separately delivered, the Company accounts for each of the items separately, as described below. | |||
i) | Monthly wholesale water and wastewater service fees – Monthly wholesale water usage charges are assessed to the Company’s customers based on actual metered usage each month plus a base monthly service fee assessed per single family equivalent (“SFE”) unit served. One SFE is a customer, whether residential, commercial or industrial, that imparts a demand on the Company’s water or wastewater systems similar to the demand of a family of four persons living in a single family house on a standard sized lot. One SFE is assumed to have a water demand of approximately 0.4 acre feet per year and to contribute wastewater flows of approximately 300 gallons per day. Water usage pricing uses a tiered pricing structure. The Company recognizes wholesale water usage revenues upon delivering water to its customers or its governmental customers’ end-use customers, as applicable. The water revenues recognized by the Company are shown net of royalties to the Land Board and, when applicable, amounts retained by the Rangeview Metropolitan District (the “District”). | ||
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, 2013, 2012 and 2011, are presented in the statements of operations. Costs of delivering water and providing wastewater service to customers are recognized as incurred. | |||
The Company delivered 69.2 million, 34.2 million and 34.5 million gallons of water to customers during the fiscal years ended August 31, 2013, 2012 and 2011, respectively. | |||
ii) | Water and wastewater tap fees and construction fees – Tap fees, also called system development fees, are received in advance, are non-refundable and are typically used to fund construction of certain facilities and defray the acquisition costs of obtaining water rights. Construction fees are fees used by the Company to construct assets that are typically required to be constructed by developers or home builders. | ||
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 thirty years. Costs of construction of the assets when the Company will own the assets are capitalized and depreciated over their estimated economic lives. | |||
In August 2005, the Company entered into the Water Service Agreement (the “County Agreement”) with Arapahoe County (the “County”) to provide water service to the County’s fairgrounds (the “Fairgrounds”). Pursuant to the County Agreement, 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, 2013, 2012 and 2011, the Company recognized $14,300 of tap fee revenue. At August 31, 2013, $327,600 of these tap fees are still deferred. The Company recognized $41,500 of “Special Facilities” funding as revenue in each of the three fiscal years ended August 31, 2013, 2012, and 2011 respectively. These construction revenues also relate to the County Agreement entered into in August 2005. As of August 31, 2013, the Company has deferred recognition of $1.3 million of tap and construction fee revenue from the County, which will be recognized as revenue ratably through 2036. | |||
In addition to the tap fee revenues and the construction revenues, the Company also records interest income from the County using the effective interest method. Pursuant to the County Agreement, the County is making payments to the Company totaling $82,200 per year 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, $19,200 and $22,900 of interest income from the County during the fiscal years ended August 31, 2013, 2012 and 2011, respectively. | |||
In August 2012, the Company entered into an agreement with Front Range Pipeline which grants Front Range Pipeline easement rights for a period of three years to construct a pipeline for total consideration of $28,700. As of August 31, 2013, the Company had $18,900 in deferred revenue from Front Range Pipeline. | |||
iii) | Consulting Fees – Consulting fees are fees we receive, typically on a monthly basis, from municipalities and area water providers along the I-70 corridor, for system management and maintenance | ||
Agricultural Farming Operations – The Company leases its Arkansas River water and land to area farmers who actively farm the properties. Prior to August 3, 2012, pursuant to a property management agreement between HP A&M and the Company (the “Property Management Agreement”), HP A&M received a management fee equal to 100% of the income from the land and water leases. As a result, the Company presented its land and water lease income net of the management fees paid to HP A&M. Effective August 3, 2012, the Company terminated the Property Management Agreement due to a default by HP A&M on certain promissory notes secured by deeds of trust on the land and water purchased by the Company from HP A&M in 2006. Effective August 3, 2012, the Company manages the land and water leases and the income from the land and water leases became payable to the Company. Pursuant to the farm lease agreements, the Company bills the lessees semi-annually in March and November. The lease billings include minimum billings and adjustments based on actual water deliveries by the Fort Lyon Canal Company (“FLCC”) or are based on crop yields. Subsequent to August 3, 2012, the Company records farm lease income ratably each month based on estimated annual lease income the Company anticipates collecting from its land and water leases. The Company recorded these amounts as receivables, less an estimated allowance for uncollectible accounts. The allowance as of August 31, 2013, was determined by the Company’s specific review of all past due accounts. The Company has recorded allowances for doubtful accounts totaling $41,100 and $20,400 as of August 31, 2013 and 2012, respectively. As of August 31, 2013 the company has accrued $397,300 of farm income related to billings for future periods. The Company manages the farm lease business as a separate line of business from the wholesale water and wastewater business. | |||
Royalty and Other Obligations | ' | ||
Royalty and other obligations | |||
Revenues from the sale of Export Water are shown net of royalties payable to the Land Board. Revenues from the sale of water on the “Lowry Range” are shown net of the royalties to the Land Board and the amounts retained by the District. See further description of the “Lowry Range” in Note 4 – Water Assets under section “Rangeview Water Supply and Water System”. | |||
Oil and Gas Lease Payments | ' | ||
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 began recognizing the up-front payment from Anadarko as income on a straight-line basis over three years (the initial term of the O&G Lease) on March 10, 2011. During the years ended August 31, 2013, 2012 and 2011, the Company recognized $416,000, $423,000 and $199,000 respectively, of income related to the up-front payments received pursuant to the O&G Lease. | |||
As of August 31, 2013, the Company has deferred recognition of $235,500 of income related to the O&G Lease, which will be recognized into income ratably through February 2014. | |||
Share-based Compensation | ' | ||
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, 2013 and 2012 had no impact on the income tax provisions. | |||
The Company recognized $66,800, $54,600 and $94,600 of share-based compensation expenses during the fiscal years ended August 31, 2013, 2012 and 2011, respectively. | |||
Income Taxes | ' | ||
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, 2013. | |||
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 2009 through fiscal 2012. The Company does not believe there will be any material changes in its unrecognized tax positions over the next twelve 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, 2013, 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, 2013, 2012 or 2011. | |||
Loss per Common Share | ' | ||
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 347,600, 215,100 and 280,100 common share equivalents as of August 31, 2013, 2012 and 2011, respectively, have been excluded from the calculation of loss per common share as their effect is anti-dilutive. | |||
Recently Issued Accounting Pronouncements | ' | ||
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. New pronouncements assessed by the Company recently are discussed below: | |||
In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220) - Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02). ASU 2013-02 finalizes Proposed ASU No. 2012-240, and seeks to improve the transparency of reporting reclassifications out of accumulated other comprehensive income. ASU 2013-02 is effective prospectively for reporting periods beginning after December 15, 2012 (September 1, 2013 for the Company). The adoption of ASU 2013-02 will not have a material impact on its results of operations, financial condition or cash flows. | |||
In 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11). ASU 2013-02 provides that an unrecognized tax benefit, or a portion, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward for reporting fiscal years beginning after December 15, 2013 (September 1, 2014 for the Company). The adoption of ASUJ 2013-11 will not have a material impact on its results of operations, financial condition or cash flows. |
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||||||||||
Fair Value Measurements Tables | ' | ||||||||||||||||||||||||
Schedule of fair value of assets and liabilities measured on a recurring basis | ' | ||||||||||||||||||||||||
The following table provides information on the assets and liabilities measured at fair value as of August 31, 2013: | |||||||||||||||||||||||||
Fair Value Measurement Using: | |||||||||||||||||||||||||
Quoted Prices in | Significant | Total | |||||||||||||||||||||||
Active Markets for | Significant Other | Unobservable | Unrealized | ||||||||||||||||||||||
Identical Assets | Observable Inputs | Inputs | Gains and | ||||||||||||||||||||||
Fair Value | Cost / Other Value | (Level 1) | (Level 2) | (Level 3) | (Losses) | ||||||||||||||||||||
Tap Participation Fee | $ | 59,807,289 | $ | 59,807,289 | $ | — | $ | — | $ | 59,807,289 | $ | — | |||||||||||||
Schedule of unobservable input reconciliation of fair value liabilities measured on a recurring basis | ' | ||||||||||||||||||||||||
Although not required, the Company deems the following table, which presents the changes in the Tap Participation Fee for the year ended August 31, 2013, to be helpful to the users of its financial statements: | |||||||||||||||||||||||||
Fair Value Measurement using Significant Unobservable | |||||||||||||||||||||||||
Inputs (Level 3) | |||||||||||||||||||||||||
Discount - to | |||||||||||||||||||||||||
Tap | be imputed as | ||||||||||||||||||||||||
Gross Estimated | Participation | interest | |||||||||||||||||||||||
Tap Participation | Fee Reported | expense in | |||||||||||||||||||||||
Fee Liability | Liability | future periods | |||||||||||||||||||||||
Balance at August 31, 2012 | $ | 112,958,000 | $ | 68,269,100 | $ | 44,688,900 | |||||||||||||||||||
Total gains and losses (realized and unrealized): | |||||||||||||||||||||||||
Imputed interest recorded as “Other Expense” | — | 3,275,400 | (3,275,400 | ) | |||||||||||||||||||||
Purchases, sales, issuances, payments, and settlements | (10,276,100 | ) | (11,737,200 | ) | 1,461,100 | ||||||||||||||||||||
Transfers in and/or out of Level 3 | — | — | — | ||||||||||||||||||||||
Balance at August 31, 2013 | $ | 102,681,900 | $ | 59,807,300 | $ | 42,874,600 |
WATER_ASSETS_Tables
WATER ASSETS (Tables) | 12 Months Ended | ||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||
Water Assets Tables | ' | ||||||||||||||||
Schedule of water and water systems | ' | ||||||||||||||||
The Company’s water and water systems consist of the following approximate costs and accumulated depreciation and depletion as of August 31: | |||||||||||||||||
31-Aug-13 | 31-Aug-12 | ||||||||||||||||
Accumulated | Accumulated | ||||||||||||||||
Depreciation | Depreciation | ||||||||||||||||
Costs | and Depletion | Costs | and Depletion | ||||||||||||||
Arkansas River assets | $ | 69,112,300 | $ | (1,487,700 | ) | $ | 69,112,300 | $ | (1,315,900 | ) | |||||||
Rangeview water supply | 14,667,000 | (7,700 | ) | 14,376,100 | (7,100 | ) | |||||||||||
Sky Ranch water rights and other costs | 3,915,100 | (79,800 | ) | 3,924,100 | (50,800 | ) | |||||||||||
Fairgrounds water and water system | 2,899,900 | (622,600 | ) | 2,899,900 | (534,500 | ) | |||||||||||
Rangeview water system | 167,700 | (72,800 | ) | 167,700 | (67,600 | ) | |||||||||||
Water supply – other | 43,200 | (22,400 | ) | 25,600 | (19,400 | ) | |||||||||||
Totals | 90,805,200 | (2,293,000 | ) | 90,505,700 | (1,995,300 | ) | |||||||||||
Net investments in water and water systems | $ | 88,512,200 | $ | 88,510,400 | |||||||||||||
PARTICIPATING_INTERESTS_IN_EXP1
PARTICIPATING INTERESTS IN EXPORT WATER (Tables) | 12 Months Ended | ||||||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||||||
Participating Interests In Export Water Tables | ' | ||||||||||||||||||||
Schedule of remaining third party obligation | ' | ||||||||||||||||||||
From time to time the Company repurchased various portions of the CAA obligations in priority. The Company did not make any CAA acquisitions during the fiscal years ended August 31, 2013 and 2012. As a result of the acquisitions, and due to the sale of Export Water, as detailed in the table below, the remaining potential third party obligation at August 31, 2013, is $3.4 million: | |||||||||||||||||||||
Export Water | Initial Export | Total Potential | Paticipating | ||||||||||||||||||
Proceeds | Water Proceeds | Third party | Interests | ||||||||||||||||||
Received | to Pure Cycle | Obligation | Liability | Contingency | |||||||||||||||||
Original balances | $ | — | $ | 218,500 | $ | 31,807,700 | $ | 11,090,600 | $ | 20,717,100 | |||||||||||
Activity from inception until August 31, 2012: | |||||||||||||||||||||
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 | 111,300 | (77,900 | ) | (33,400 | ) | (12,100 | ) | (21,300 | ) | ||||||||||||
Balance at August 31, 2012 | 754,700 | 27,802,700 | 3,468,800 | 1,208,900 | 2,259,900 | ||||||||||||||||
Fiscal 2013 activity: | |||||||||||||||||||||
Export Water sale payments | 158,000 | (110,600 | ) | (47,400 | ) | (16,000 | ) | (31,400 | ) | ||||||||||||
Balance at August 31, 2013 | $ | 912,700 | $ | 27,692,100 | $ | 3,421,400 | $ | 1,192,900 | $ | 2,228,500 | |||||||||||
* The Arapahoe County tap fees are less $34,522 in royalties paid to the Land Board. |
LONGTERM_DEBT_AND_OPERATING_LE1
LONG-TERM DEBT AND OPERATING LEASE (Tables) | 12 Months Ended | ||||
Aug. 31, 2013 | |||||
Long-Term Debt And Operating Lease Tables | ' | ||||
Schedule of future maturities of debt | ' | ||||
Future Maturities | |||||
Mortgage notes held and defaulted on by HP A&M | $ | 2,526,900 | |||
Mortgage notes, interest at 5%, due various dates in 2017 | 5,231,100 | ||||
Total | 7,758,000 | ||||
Less: current portion | (4,546,900 | ) | |||
Total long-term mortgage payable | $ | 3,211,100 | |||
2014 | $ | 4,546,900 | |||
Future Maturities (including $2,526,900 of HP A&M defaulted notes to third parties) | |||||
2015 | 844,500 | ||||
2016 | 887,300 | ||||
2017 | 932,200 | ||||
2018 | 534,500 | ||||
2019 | 12,600 | ||||
Total | $ | 7,758,000 |
SHAREHOLDERS_EQUITY_Tables
SHAREHOLDERS' EQUITY (Tables) | 12 Months Ended | ||||||||||||||||
Aug. 31, 2012 | |||||||||||||||||
Shareholders Equity Tables | ' | ||||||||||||||||
Schedule of stock option activity | ' | ||||||||||||||||
The following table summarizes the stock option activity for the Equity Plan for the fiscal year ended August 31, 2013: | |||||||||||||||||
Number of Options | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term | Approximate Aggregate Instrinsic Value | ||||||||||||||
Oustanding at beginning of period | 215,000 | $ | 5.88 | ||||||||||||||
Granted | 132,500 | $ | 5.21 | ||||||||||||||
Exercised | — | $ | — | ||||||||||||||
Forfeited or expired | — | $ | — | ||||||||||||||
Outstanding at August 31, 2013 | 347,500 | $ | 5.62 | $ | 6.98 | $ | 145,559 | ||||||||||
Options exercisable at August 31, 2013 | 215,000 | $ | 5.9 | $ | 4.89 | $ | 121,265 | ||||||||||
Schedule of activity and value of non-vested options | ' | ||||||||||||||||
The following table summarizes the activity and value of non-vested options as of and for the fiscal year ended August 31, 2013: | |||||||||||||||||
Number of Options | Weighted- | ||||||||||||||||
Average Grant | |||||||||||||||||
Date Fair | |||||||||||||||||
Value | |||||||||||||||||
Non-vested options oustanding at beginning of period | 22,500 | $ | 1.72 | ||||||||||||||
Granted | 132,500 | 3.8 | |||||||||||||||
Vested | (22,500 | ) | 1.72 | ||||||||||||||
Forfeited | — | — | |||||||||||||||
Non-vested options outstanding at August 31, 2013 | 132,500 | $ | 3.8 |
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | ||||||||||||
Aug. 31, 2013 | |||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||
Schedule of deferred tax assets | ' | ||||||||||||
Significant components of the Company’s deferred tax assets as of August 31 are as follows: | |||||||||||||
For the Fiscal Years Ended August 31, | |||||||||||||
2013 | 2012 | ||||||||||||
Deferred tax assets: | |||||||||||||
Net operating loss carryforwards | $ | 6,080,000 | $ | 5,948,300 | |||||||||
Imputed interest on Tap Participation Fee | 10,074,200 | 8,852,500 | |||||||||||
Deferred revenue | 494,600 | 560,700 | |||||||||||
Impairment charges | — | 2,408,800 | |||||||||||
Depreciation and depletion | 4,899,800 | 2,425,700 | |||||||||||
Other | 43,600 | 45,000 | |||||||||||
Valuation allowance | (21,592,200 | ) | (20,241,000 | ) | |||||||||
Net deferred tax asset | $ | — | $ | — | |||||||||
Schedule of income tax reconciliation | ' | ||||||||||||
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, | |||||||||||||
2013 | 2012 | 2011 | |||||||||||
Expected benefit from federal taxes at statutory rate of 34% | $ | (1,411,200 | ) | $ | (5,922,300 | ) | $ | (2,045,500 | ) | ||||
State taxes, net of federal benefit | (137,000 | ) | (574,800 | ) | (198,500 | ) | |||||||
Expiration of net operating losses | 147,400 | 90,000 | 121,000 | ||||||||||
Permanent and other differences | 27,400 | 25,800 | 37,800 | ||||||||||
Change in valuation allowance | 1,373,400 | 6,381,300 | 2,085,200 | ||||||||||
Total income tax expense / benefit | $ | — | $ | — | $ | — |
SEGMENT_REPORTING_Tables
SEGMENT REPORTING (Tables) | 12 Months Ended | ||||||||||||||||
Aug. 31, 2013 | |||||||||||||||||
Segment Reporting Tables | ' | ||||||||||||||||
Schedule of Segment Reporting | ' | ||||||||||||||||
The following tables show information by operating segment for the fiscal year ended August 31, 2013: | |||||||||||||||||
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 | — | — | — | — |
SUPPLEMENTAL_DISCLOSURE_OF_NON1
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES (Tables) | 12 Months Ended | |||||||||||||||
Aug. 31, 2013 | ||||||||||||||||
Supplemental Disclosure Of Non-Cash Activities Tables | ' | |||||||||||||||
Schedule of Supplemental Disclosure of Non-Cash Activities | ' | |||||||||||||||
For the Fiscal Years Ended August 31, | ||||||||||||||||
2013 | 2012 | 2011 | ||||||||||||||
Reduction in Tap Participation Fee Liability resulting from remedies under the Arkansas River Agrement | $ | 11,737,300 | $ | — | $ | — | ||||||||||
Mortgage payable and related party receivable recorded upon HP A&M default | — | 9,550,200 | — | |||||||||||||
Farm revenue allocated against the Tap Participation Fee liability and additional paid in capital thru August 3, 2012 | — | 189,700 | — | |||||||||||||
Issuance of shares of restricted common stock upon conversion of the Convertible Note - Related Party | — | — | 5,351,700 | |||||||||||||
$ | 11,737,300 | $ | 9,739,900 | $ | 5,351,700 | |||||||||||
ORGANIZATION_Details_Narrative
ORGANIZATION (Details Narrative) (USD $) | 12 Months Ended | |||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | Aug. 31, 2010 | |
Organization Details Narrative | ' | ' | ' | ' |
Cash and cash equivalents | $2,448,363 | $1,623,517 | $71,795 | $12,017 |
Working capital | 4,500,000 | ' | ' | ' |
Sale of common stock held as collateral | $3,420,000 | ' | ' | ' |
Shares of common stock held as collateral sold during the period | 1,500,000 | ' | ' | ' |
Sale price of shares sold | $2.35 | ' | ' | ' |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 12 Months Ended | |||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | Mar. 10, 2011 | |
gal | gal | gal | ||
acre | ||||
Interest paid during the period | $123,500 | ' | ' | ' |
Allowance for uncollectible accounts | 41,100 | 20,400 | ' | ' |
Interest Expense, Other | 3,275,378 | 3,470,523 | 3,847,000 | ' |
Number of water taps subject to tap participation fee | 17,194 | ' | ' | ' |
Single family equivalent, yearly water demand | 0.4 | ' | ' | ' |
Single family equivalent, daily wastewater flows | 300 | ' | ' | ' |
Water delivered to customers | 69,200,000 | 34,200,000 | 34,500,000 | ' |
Water tap fees recognized | 14,294 | 14,296 | 14,296 | ' |
Special facility funding recognized | 41,508 | 41,508 | 41,508 | ' |
Yearly construction revenue for Special Facilities at the Fairgrounds | 82,200 | ' | ' | ' |
Yearly construction revenue for Special Facilities at the Fairgrounds, interest rate | 6.00% | ' | ' | ' |
Interest income related to construction of Special Facilities | 5,500 | 19,200 | 22,900 | ' |
Easements granted to Front Range Pipeline | 28,700 | ' | ' | ' |
Anadarko deferred lease revenues | ' | ' | ' | 1,243,400 |
Number of acres for exploration and development | 634 | ' | ' | ' |
Lease revenue from up-front payments | 416,000 | 423,000 | 199,000 | ' |
Share-based Compensation | 66,812 | 54,588 | 94,550 | ' |
Anti-dilutive common stock options and warrants excluded from calculation of loss per common share | 247,600 | 215,100 | 280,100 | ' |
Deferred Oil and Gas Tap Fees | ' | ' | ' | ' |
Deferred Revenue | 327,600 | ' | ' | ' |
County Tap And Construction Fee Deferred Revenue | ' | ' | ' | ' |
Deferred Revenue | 1,300,000 | ' | ' | ' |
Front Range Pipeline | ' | ' | ' | ' |
Deferred Revenue | 18,900 | ' | ' | ' |
Agricultural | ' | ' | ' | ' |
Deferred Revenue | $397,300 | ' | ' | ' |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (USD $) | Aug. 31, 2013 | Aug. 31, 2012 |
Tap Participation Fee | $59,807,289 | $68,269,176 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | ' | ' |
Tap Participation Fee | ' | ' |
Significant Other Observable Inputs (Level 2) | ' | ' |
Tap Participation Fee | ' | ' |
Significant Unobservable Inputs (Level 3) | ' | ' |
Tap Participation Fee | 59,807,289 | ' |
Fair Value | ' | ' |
Tap Participation Fee | 59,807,289 | ' |
Cost/Other Value | ' | ' |
Tap Participation Fee | 59,807,289 | ' |
Total Unrealized Gains and (Losses) | ' | ' |
Tap Participation Fee | ' | ' |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details 1) (USD $) | 12 Months Ended |
Aug. 31, 2013 | |
Gross Estimated Tap Participation Fee Liability | ' |
Balance, beginning | $112,958,000 |
Total gains and losses (realized and unrealized) : Imputed interest recorded as "Other Expense" | ' |
Purchase, sales, issuances, payments, and settlements | -10,276,100 |
Transfers in and/or out of Level 3 | ' |
Balance, ending | 102,681,900 |
Tap Participation Fee Reported Liability | ' |
Balance, beginning | 68,269,200 |
Total gains and losses (realized and unrealized) : Imputed interest recorded as "Other Expense" | 3,275,400 |
Purchase, sales, issuances, payments, and settlements | -11,737,200 |
Transfers in and/or out of Level 3 | ' |
Balance, ending | 59,807,300 |
Discount To Be Imputed As Interest Expense In Future Periods | ' |
Balance, beginning | 44,688,900 |
Total gains and losses (realized and unrealized) : Imputed interest recorded as "Other Expense" | -3,275,400 |
Purchase, sales, issuances, payments, and settlements | 1,461,100 |
Transfers in and/or out of Level 3 | ' |
Balance, ending | $42,874,600 |
FAIR_VALUE_MEASUREMENTS_Detail2
FAIR VALUE MEASUREMENTS (Details Narrative) | 12 Months Ended |
Aug. 31, 2013 | |
Fair Value Measurements Details Narrative | ' |
Mortgages payable term | '5 years |
Mortgages payable interest rate | 5.00% |
WATER_ASSETS_Details
WATER ASSETS (Details) (USD $) | Aug. 31, 2013 | Aug. 31, 2012 |
Costs | $90,805,200 | $90,505,700 |
Accumulated Depreciation and Depletion | -2,293,000 | -1,995,300 |
Net investments in water and water systems | 88,512,249 | 88,510,359 |
Arkansas River Assets | ' | ' |
Costs | 69,112,300 | 69,112,300 |
Accumulated Depreciation and Depletion | -1,487,700 | -1,315,900 |
Rangeview Water Supply | ' | ' |
Costs | 14,667,000 | 14,376,100 |
Accumulated Depreciation and Depletion | -7,700 | -7,100 |
Sky Ranch Water Rights And Other Costs | ' | ' |
Costs | 3,915,100 | 3,924,100 |
Accumulated Depreciation and Depletion | -79,800 | -50,800 |
Fairgrounds Water And Water System | ' | ' |
Costs | 2,899,900 | 2,899,900 |
Accumulated Depreciation and Depletion | -622,600 | -534,500 |
Rangeview Water System | ' | ' |
Costs | 167,700 | 167,700 |
Accumulated Depreciation and Depletion | -72,800 | -67,600 |
Water Supply Other | ' | ' |
Costs | 43,200 | 25,600 |
Accumulated Depreciation and Depletion | ($22,400) | ($19,400) |
WATER_ASSETS_Detail_Narrative
WATER ASSETS (Detail Narrative) (USD $) | 12 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | |
acre | |||
Depletion charges | $500 | $500 | $500 |
Depreciation expense | 311,300 | 309,200 | 300,800 |
Farm Lease Income | 1,241,882 | ' | ' |
Farm Income | ' | 71,100 | ' |
Acres of land to be sold | 1,603 | ' | ' |
Cost of Assets | 90,805,200 | 90,505,700 | ' |
Arkansas River Water Assets | ' | ' | ' |
Number of acres owned | 60,000 | ' | ' |
Additional acres that may be available | 40,000 | ' | ' |
Number of shares issued for acquisition of assets | 3,000,000 | ' | ' |
Number of FLCC Shares | 21,782 | ' | ' |
Arkansas River Water Land | ' | ' | ' |
Number of acres owned | 16,700 | ' | ' |
Percentage of net revenues paid to HP A&M | 26.90% | ' | ' |
Rangeview Water Supply and Water System | ' | ' | ' |
Number of acres owned | 25,050 | ' | ' |
Water supply acres | 13,400 | ' | ' |
Export water acres | 11,650 | ' | ' |
Acres under option that may be exchanged for use as surface water | 165,000 | ' | ' |
Yearly number of acres which may be exchanged | 1,650 | ' | ' |
Royalty percentage due to Land Board on all sales | 12.00% | ' | ' |
Percentage of gross revenues of water sales retained by the District | 5.00% | ' | ' |
Percentage of gross revenues of water sales retained by the company | 95.00% | ' | ' |
Percentage of wastewater tap fees retained by company | 100.00% | ' | ' |
Percentage of wastewater usage fees retained by company | 90.00% | ' | ' |
Percentage of wastewater usage fees retained by District | 10.00% | ' | ' |
Rangeview Water Supply and Water System | Lower Range | ' | ' | ' |
Export Water Royalty percentage to Land board | 10.00% | ' | ' |
Rangeview Water Supply and Water System | Upper Range | ' | ' | ' |
Export Water Royalty percentage to Land board | 50.00% | ' | ' |
Fairgrounds Water And Water System | ' | ' | ' |
Number of acres owned | 321 | ' | ' |
Size of gallon water tanks and pipelines | 500,000 | ' | ' |
Cost of Assets | 2,899,900 | 2,899,900 | ' |
Sky Ranch | ' | ' | ' |
Number of acres owned | 931 | ' | ' |
Water rights owned | 820 | ' | ' |
Cost of Assets | 7,000,000 | ' | ' |
Direct costs and fees in purchase of assets | 554,100 | ' | ' |
Establishment and operating costs | 57,300 | ' | ' |
Paradise Water Supply | ' | ' | ' |
Water assets deemed impaired | ' | $5,500,000 | ' |
PARTICIPATING_INTERESTS_IN_EXP2
PARTICIPATING INTERESTS IN EXPORT WATER (Details) (USD $) | 12 Months Ended | 48 Months Ended | |
Aug. 31, 2013 | Aug. 31, 2012 | ||
Export Water Proceeds Received | ' | ' | |
Balance, original | ' | ' | |
Balance, beginning | 754,700 | ' | |
Acquisitions | ' | ' | |
Option payments | ' | 110,400 | |
Arapahoe Tap fees | ' | 533,000 | [1] |
Export Water Sale Payments | 158,000 | 111,300 | |
Balance, ending | 912,700 | 754,700 | |
Export Water Proceeds to Pure Cycle | ' | ' | |
Balance, original | ' | 218,500 | |
Balance, beginning | 27,802,700 | 28,077,500 | |
Acquisitions | ' | 28,077,500 | |
Option payments | ' | -42,300 | |
Arapahoe Tap fees | ' | -373,100 | [1] |
Export Water Sale Payments | -110,600 | -77,900 | |
Balance, ending | 27,692,100 | 27,802,700 | |
Total Potential Third Party Obligation | ' | ' | |
Balance, original | ' | 31,807,700 | |
Balance, beginning | 3,468,800 | -28,077,500 | |
Acquisitions | ' | -28,077,500 | |
Option payments | ' | -68,100 | |
Arapahoe Tap fees | ' | -159,900 | [1] |
Export Water Sale Payments | -47,400 | -33,400 | |
Balance, ending | 3,421,400 | 3,468,800 | |
Participating Interests Liability | ' | ' | |
Balance, original | ' | 11,090,600 | |
Balance, beginning | 1,208,900 | -9,790,000 | |
Acquisitions | ' | -9,790,000 | |
Option payments | ' | -23,800 | |
Arapahoe Tap fees | ' | -55,800 | [1] |
Export Water Sale Payments | -16,000 | -12,100 | |
Balance, ending | 1,192,910 | 1,208,900 | |
Contingency | ' | ' | |
Balance, original | ' | 20,717,100 | |
Balance, beginning | 2,259,900 | -18,287,500 | |
Acquisitions | ' | -18,287,500 | |
Option payments | ' | -44,300 | |
Arapahoe Tap fees | ' | -104,100 | [1] |
Export Water Sale Payments | -31,400 | -21,300 | |
Balance, ending | $2,228,500 | $2,259,900 | |
[1] | The Arapahoe County tap fees are less $34,522 in royalties paid to the Land Board. |
PARTICIPATING_INTERESTS_IN_EXP3
PARTICIPATING INTERESTS IN EXPORT WATER (Details Narrative) (USD $) | 48 Months Ended | |
Aug. 31, 2012 | Aug. 31, 2013 | |
Percentage of original total liability | ' | 35.00% |
Percentage remitted to CAA Holders | ' | 35.00% |
Percentage allocated to contingent obligation | ' | 65.00% |
Royalty fees paid | $34,522 | ' |
First Priority Payout | ' | ' |
Deferred Revenue | ' | 5,100,000 |
Remaining First Priority Payout | ' | ' |
Deferred Revenue | ' | 7,300,000 |
ACCRUED_LIABILITIES_Detail_Nar
ACCRUED LIABILITIES (Detail Narrative) (USD $) | Aug. 31, 2013 | Aug. 31, 2012 |
Accrued Liabilities Detail Narrative | ' | ' |
Accrued Liabilities, Current | $264,740 | $172,630 |
Estimated property taxes | 156,200 | 60,500 |
Professional Fees | 56,700 | 56,800 |
Farm lease prepayments | 30,300 | 33,500 |
Operating payables | $21,500 | $21,800 |
LONGTERM_DEBT_AND_OPERATING_LE2
LONG-TERM DEBT AND OPERATING LEASE (Details) (USD $) | Aug. 31, 2013 | Aug. 31, 2012 |
Long-Term Debt And Operating Lease Details | ' | ' |
Mortgage Notes held and defaulted on by HP A&M | $12,526,900 | ' |
Mortgage notes, interest at 5%, due various dates in 2017 | 5,231,100 | ' |
Total | 7,758,000 | ' |
Less: current portion | -4,668,943 | -5,340,890 |
Mortgages payable | $3,211,112 | $4,209,329 |
LONGTERM_DEBT_AND_OPERATING_LE3
LONG-TERM DEBT AND OPERATING LEASE (Details 1) (USD $) | Aug. 31, 2013 |
Future Maturities | ' |
2014 | $4,546,900 |
2015 | 844,500 |
2016 | 887,300 |
2017 | 932,200 |
2018 | 534,500 |
2019 | 12,600 |
Total | 7,758,000 |
HP defaulted notes to third parties | $12,526,900 |
LONGTERM_DEBT_AND_OPERATING_LE4
LONG-TERM DEBT AND OPERATING LEASE (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | ||
Nov. 29, 2013 | Aug. 31, 2013 | Aug. 31, 2011 | Aug. 31, 2012 | |
Taps | Taps | Taps | ||
Properties | sqft | |||
Properties | ||||
Tap Participation Fee payable to HP A&M, net of $42.9 million and $48.2 million discount, respectively | ' | $59,807,289 | ' | $68,269,176 |
Tap Participation Fee Percentage | ' | 20.00% | 10.00% | ' |
Water Taps under Tap Participation Fee | 13,830 | 17,194 | 40,000 | ' |
Reduction In Taps Percentage | ' | ' | 50.00% | ' |
Reduction in Taps as result of foreclosure | 3,364 | ' | 2,233 | ' |
Estimated proceeds from sale of water taps | ' | 102,700,000 | ' | ' |
Decrease in estimated proceeds from sales of water taps | 11,900,000 | 17,900,000 | ' | ' |
Interest rate used in valuation | ' | 5.00% | ' | ' |
Imputed Interest on TPF | ' | 26,100,000 | ' | ' |
Number of properties subject to outstanding promissory notes | ' | 60 | ' | ' |
Number of properties | ' | 80 | ' | ' |
Notes Payable outstanding | ' | 7,900,000 | ' | 9,600,000 |
The number of shares that may be foreclosed upon | ' | 1,500,000 | ' | ' |
Sale of common stock held as collateral | ' | 3,420,000 | ' | ' |
Sale price of shares sold | ' | $2.35 | ' | ' |
Stock sale fees | ' | 110,000 | ' | ' |
Purchase of notes payable | ' | 7,000,000 | ' | ' |
Notes payable in purchase negotiation | ' | 2,600,000 | ' | ' |
Accrued interest | ' | 122,028 | ' | ' |
Number of FLCC shares foreclosed upon | 1,832 | ' | ' | ' |
Monthly rent payments | ' | 1,530 | ' | ' |
Office space | ' | 1,200 | ' | ' |
Note Collateral | ' | ' | ' | ' |
Number of Acres (in Acres) | ' | 14,000 | ' | ' |
Number of FLCC Shares | ' | 16,882 | ' | ' |
Gross Estimated Tap Participation Fee Liability | ' | ' | ' | ' |
Adjustment to TPF Liability | ' | ($10,276,100) | ' | ' |
Arkansas River Water Land | ' | ' | ' | ' |
Percentage of net revenues paid to HP A&M | ' | 26.90% | ' | ' |
Number of Acres (in Acres) | ' | 16,700 | ' | ' |
SHAREHOLDERS_EQUITY_Details
SHAREHOLDERS' EQUITY (Details) (Stock Options, USD $) | 12 Months Ended |
Aug. 31, 2013 | |
Stock Options | ' |
Number of options | ' |
Outstanding, beginning | 215,000 |
Granted | 132,500 |
Exercised | ' |
Forfeited or expired | ' |
Outstanding, ending | 347,500 |
Exercisable | 215,000 |
Weighted average exercise price | ' |
Outstanding, beginning | $5.88 |
Granted | $5.21 |
Exercised | ' |
Forfeited or expired | ' |
Outstanding, ending | $5.62 |
Exercisable | $5.90 |
Weighted average remaining contractual term | ' |
Outstanding, ending | '6 years 11 months 23 days |
Exercisable | '4 years 10 months 20 days |
Approximate aggregate intrinsic value | ' |
Outstanding, ending | $145,559 |
Exercisable | $121,265 |
SHAREHOLDERS_EQUITY_Details_1
SHAREHOLDERS' EQUITY (Details 1) (USD $) | 12 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | |
Weighted average grant date fair value | ' | ' | ' |
Granted | $3.80 | $1.23 | $3.11 |
Stock Options | ' | ' | ' |
Number of options | ' | ' | ' |
Outstanding, beginning | 22,500 | ' | ' |
Granted | 132,500 | ' | ' |
Vested | -22,500 | ' | ' |
Forfeited | ' | ' | ' |
Outstanding, ending | 132,500 | ' | ' |
Weighted average grant date fair value | ' | ' | ' |
Outstanding, beginning | $1.72 | ' | ' |
Granted | $3.80 | ' | ' |
Vested | $1.72 | ' | ' |
Forfeited | ' | ' | ' |
Outstanding, ending | $3.80 | ' | ' |
SHAREHOLDERS_EQUITY_Details_Na
SHAREHOLDERS' EQUITY (Details Narrative) (USD $) | 12 Months Ended | 12 Months Ended | 1 Months Ended | |||||||||||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2013 | Aug. 31, 2011 | Sep. 28, 2010 | Aug. 31, 2013 | Jan. 31, 2013 | Jan. 31, 2012 | Jan. 31, 2011 | Jan. 31, 2011 | Jan. 31, 2011 | |
Stock Options | Stock Options | Equity Plan | Par - Related Party | Par - Related Party | Management | Directors | Directors | Directors | Directors | Directors | ||||
Convertible Notes Payable [Member] | Convertible Notes Payable [Member] | Stock Options | Stock Options | Stock Options | Stock Options | Stock Options - Tranche 1 | Stock Options - Tranche 2 | |||||||
Notes payable - related party | ' | ' | ' | ' | ' | ' | ' | $5,200,000 | ' | ' | ' | ' | ' | ' |
Interest rate | 5.00% | ' | ' | ' | ' | ' | ' | 10.00% | ' | ' | ' | ' | ' | ' |
Shares issued upon conversion | ' | ' | ' | ' | ' | ' | 1,982,099 | ' | ' | ' | ' | ' | ' | ' |
Interest accrued | ' | ' | ' | ' | ' | ' | 151,700 | ' | ' | ' | ' | ' | ' | ' |
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 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Shares reserved for issuance under the Equity Plan | ' | ' | ' | ' | ' | 1,600,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Shares available for issuance | ' | ' | ' | ' | ' | 1,218,311 | ' | ' | ' | ' | ' | ' | ' | ' |
Options forfeited | ' | ' | ' | ' | 29,500 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options expired | ' | ' | ' | ' | 48,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Options granted | ' | ' | ' | 132,500 | ' | ' | ' | ' | 100,000 | 32,500 | 12,500 | 17,500 | 12,500 | 5,000 |
Yearly vesting percentage of options, beginning one year from grant date | ' | ' | ' | ' | ' | ' | ' | ' | 33.00% | 100.00% | 100.00% | ' | 100.00% | 50.00% |
Option term | ' | ' | ' | ' | ' | ' | ' | ' | '10 years | '10 years | '10 years | '10 years | ' | ' |
Fair value method | ' | ' | ' | ' | ' | ' | ' | ' | 'Black-Scholes | 'Black-Scholes | 'Black-Scholes | 'Black-Scholes | ' | ' |
Weighted average exercise price | ' | ' | ' | $5.21 | ' | ' | ' | ' | $5.88 | $3.15 | $1.85 | $3.67 | ' | ' |
Estimated dividend rate | ' | ' | ' | ' | ' | ' | ' | ' | 0.00% | 0.00% | 0.00% | 0.00% | ' | ' |
Weighted average risk-free interest rate | ' | ' | ' | ' | ' | ' | ' | ' | 2.71% | 1.84% | 1.87% | 3.37% | ' | ' |
Weighted average stock price volatility | ' | ' | ' | ' | ' | ' | ' | ' | 63.60% | 69.20% | 73.29% | 84.70% | ' | ' |
Estimated forfeiture rate | ' | ' | ' | ' | ' | ' | ' | ' | 0.00% | 0.00% | 0.00% | 0.00% | ' | ' |
Stock-based compensation | 66,812 | 54,588 | 94,550 | ' | ' | ' | ' | ' | 427,100 | 76,800 | 15,400 | 54,500 | ' | ' |
Fair value of options vested | 48,700 | 66,000 | 74,700 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Weighted average grant date fair value of options granted | $3.80 | $1.23 | $3.11 | $3.80 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Unrecognized stock compensation cost | $453,700 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrants outstanding | 92 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Warrant exercise price | 1.8 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
SIGNIFICANT_CUSTOMER_Details_N
SIGNIFICANT CUSTOMER (Details Narrative) | 12 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | |
Sales | The District | ' | ' | ' |
Concentration percentage | 34.00% | 86.00% | 91.00% |
Sales | Ridgeview Youth Services Center | ' | ' | ' |
Concentration percentage | 28.00% | 53.00% | 60.00% |
Sales | Another Customer | ' | ' | ' |
Concentration percentage | 59.00% | ' | ' |
Accounts Receivable | The District | ' | ' | ' |
Concentration percentage | 20.00% | 16.00% | ' |
Accounts Receivable | Ridgeview Youth Services Center | ' | ' | ' |
Concentration percentage | 17.00% | 13.00% | ' |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | Aug. 31, 2013 | Aug. 31, 2012 |
Deferred tax assets: | ' | ' |
Net operating loss carryforwards | $6,080,000 | $5,948,300 |
Imputed interest on Tap Participation Fee | 10,074,200 | 8,852,500 |
Deferred revenue | 494,600 | 560,700 |
Impairment charges | ' | 2,408,800 |
Depreciation and depletion | 4,899,800 | 2,425,700 |
Other | 43,600 | 45,000 |
Valuation allowance | -21,592,200 | -20,241,000 |
Net deferred tax asset | ' | ' |
INCOME_TAXES_Details_1
INCOME TAXES (Details 1) (USD $) | 12 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | |
Effective income tax: | ' | ' | ' |
Expected benefit from federal taxes at statutory rate | ($1,411,200) | ($5,922,300) | ($2,045,500) |
State taxes, net of federal benefit | -137,000 | -574,800 | -198,500 |
Expiration of net operating losses | 147,400 | 90,000 | 121,000 |
Permanent and other differences | 27,400 | 25,800 | 37,800 |
Change in valuation allowance | 1,373,400 | 6,381,300 | 2,085,200 |
Total income tax expense/benefit | ' | ' | ' |
INCOME_TAXES_Details_Narrative
INCOME TAXES (Details Narrative) (USD $) | 12 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | |
Income Taxes Details Narrative | ' | ' | ' |
Net operating loss carryforwards | $16,300,000 | ' | ' |
Net operating loss carryforwards expired | $395,200 | $241,200 | $324,500 |
401k_PLAN_Details_Narrative
401(k) PLAN (Details Narrative) (USD $) | 12 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | |
K Plan Details Narrative | ' | ' | ' |
Administrative fees paid for plan | $3,300 | $3,400 | $2,600 |
LITIGATION_LOSS_CONTINGENCIES_
LITIGATION LOSS CONTINGENCIES (Details Narrative) | Aug. 31, 2013 |
Properties | |
Litigation Loss Contingencies Details Narrative | ' |
Number of Real Estate Properties in foreclosure | 38 |
Percent of the Company's Arkansas River Assets Represented by the Properties | 45.00% |
Percentage of FLLC shares | 40.00% |
SEGMENT_REPORTING_Details
SEGMENT REPORTING (Details) (USD $) | 12 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | |
Revenues | $1,857,462 | $284,384 | $282,134 |
Gross profit | 1,464,191 | 96,400 | 122,441 |
Depletion and depreciation | 311,300 | ' | ' |
Other significant noncash items: | ' | ' | ' |
Stock-based compensation | 66,812 | 54,588 | 94,550 |
TPF interest expense | 3,275,378 | 3,470,523 | 3,847,000 |
Segment assets | 108,618,331 | 111,582,077 | ' |
Expenditures for segment assets | ' | ' | ' |
Wholesale Water And Wastewater | ' | ' | ' |
Revenues | 544,400 | ' | ' |
Gross profit | 248,600 | ' | ' |
Depletion and depreciation | 311,300 | ' | ' |
Other significant noncash items: | ' | ' | ' |
Stock-based compensation | ' | ' | ' |
TPF interest expense | 3,275,400 | ' | ' |
Segment assets | 93,522,800 | ' | ' |
Expenditures for segment assets | ' | ' | ' |
Agricultural | ' | ' | ' |
Revenues | 1,241,900 | ' | ' |
Gross profit | 1,145,600 | ' | ' |
Depletion and depreciation | ' | ' | ' |
Other significant noncash items: | ' | ' | ' |
Stock-based compensation | ' | ' | ' |
TPF interest expense | ' | ' | ' |
Segment assets | 6,697,500 | ' | ' |
Expenditures for segment assets | ' | ' | ' |
All Other Segments | ' | ' | ' |
Revenues | 71,200 | ' | ' |
Gross profit | 70,000 | ' | ' |
Depletion and depreciation | ' | ' | ' |
Other significant noncash items: | ' | ' | ' |
Stock-based compensation | 66,800 | ' | ' |
TPF interest expense | ' | ' | ' |
Segment assets | 8,398,000 | ' | ' |
Expenditures for segment assets | ' | ' | ' |
SEGMENT_REPORTING_Details_Narr
SEGMENT REPORTING (Details Narrative) | 12 Months Ended |
Aug. 31, 2012 | |
Segment Reporting Details Narrative | ' |
Number of Operating Segments | 1 |
SUPPLEMENTAL_DISCLOSURE_OF_NON2
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES (Details) (USD $) | 12 Months Ended | ||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | |
Non-Cash Activities: | ' | ' | ' |
Reduction in Tap Participation Fee Liability resulting from remedies under the Arkansas River Agreement | $11,737,300 | ' | ' |
Mortgage payable and related party receivable recorded upon HP A&M default | ' | 9,550,200 | ' |
Farm revenue allocated against the Tap Participation Fee liability and additional paid-in capital thru August 3, 2012 | ' | 189,674 | ' |
Issuance of shares of restricted common stock upon conversion of the Convertible note - related party | ' | ' | 5,351,667 |
[custom:NoncashActivities] | $11,737,300 | $9,739,900 | $5,351,700 |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | 12 Months Ended | |||
Aug. 31, 2013 | Aug. 31, 2012 | Aug. 31, 2011 | Aug. 31, 1995 | |
Effective interest rate | 6.00% | ' | ' | ' |
The District | ' | ' | ' | ' |
Funding provided to the District | $139,500 | $115,500 | $25,000 | ' |
Loans receivable from related party | 556,000 | 543,900 | ' | 250,000 |
Variable rate basis | 'Prevailing Prime Rate | ' | ' | ' |
Spread on Variable Basis | 2.00% | ' | ' | ' |
Effective interest rate | 5.25% | ' | ' | ' |
Due from Related Parties, Principal | 229,300 | 229,300 | ' | ' |
Due from Related Parties, Interest | $326,700 | $314,600 | ' | ' |
SUBSEQUENT_EVENTS_Details_Narr
SUBSEQUENT EVENTS (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | |
Nov. 29, 2013 | Aug. 31, 2013 | Aug. 31, 2011 | |
Taps | Taps | ||
Subsequent Events Details Narrative | ' | ' | ' |
Reduction in Taps as result of foreclosure | 3,364 | ' | 2,233 |
Decrease in estimated proceeds from sales of water taps | $11,900,000 | $17,900,000 | ' |
Number of FLCC shares foreclosed upon | 1,832 | ' | ' |