Document And Entity Information
Document And Entity Information - USD ($) | 12 Months Ended | ||
Aug. 31, 2016 | Oct. 27, 2016 | Feb. 29, 2016 | |
Document And Entity Information | |||
Entity Registrant Name | PURE CYCLE CORP | ||
Document Type | 10-K | ||
Current Fiscal Year End Date | --08-31 | ||
Amendment Flag | false | ||
Entity Central Index Key | 276,720 | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Filer Category | Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 23,754,098 | ||
Entity Public Float | $ 78,578,883 | ||
Document Period End Date | Aug. 31, 2016 | ||
Document Fiscal Year Focus | 2,016 | ||
Document Fiscal Period Focus | FY |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 |
Current assets: | ||
Cash and cash equilvalents | $ 4,697,288 | $ 37,089,041 |
Short-term investments | 23,176,450 | 0 |
Trade accounts receivable, net | 181,006 | 157,845 |
Sky Ranch receivable | 0 | 148,415 |
Prepaid expenses | 350,819 | 228,086 |
Assets of discontinued operations | 680,287 | 1,957,552 |
Total current assets | 29,085,850 | 39,580,939 |
Long-term investments | 6,853,276 | 0 |
Investments in water and water systems, net | 28,321,926 | 27,708,595 |
Land and mineral interests | 5,345,800 | 5,091,668 |
Notes receivable - related parties, including accrued interest | 800,369 | 591,223 |
Other assets | 472,393 | 88,488 |
Total assets | 70,879,614 | 73,060,913 |
Current liabilities: | ||
Accounts payable | 160,390 | 172,634 |
Accrued liabilities | 242,624 | 499,808 |
Income taxes | 0 | 292,729 |
Deferred revenues | 55,800 | 55,800 |
Deferred oil and gas lease payment | 19,000 | 360,765 |
Liabilities of discontinued operations | 4,394 | 117,329 |
Total current liabilities | 482,208 | 1,499,065 |
Deferred revenues, less current portion | 1,055,491 | 1,111,293 |
Deferred oil and gas lease payment, less current portion | 0 | 19,000 |
Participating Interests in Export Water Supply | 343,966 | 346,007 |
Total liabilities | 1,881,665 | 2,975,365 |
Commitments and contingencies | ||
Preferred stock: | ||
Series B - par value $.001 per share, 25 milllion shares authorized 432,513 shares issued and outstanding (liquidation preference of $432,513) | 433 | 433 |
Common stock: | ||
Par value 1/3 of $.01 per share, 40 million shares authorized; 23,754,098 and 24,054,098 shares issued and outstanding, respectively | 79,185 | 80,185 |
Collateral stock | 0 | (1,407,000) |
Additional paid in capital | 171,198,241 | 172,384,355 |
Accumulated other comprehensive income | 3,122 | 0 |
Accumulated deficit | (102,283,032) | (100,972,425) |
Total shareholders' equity | 68,997,949 | 70,085,548 |
Total liabilities and shareholders' equity | $ 70,879,614 | $ 73,060,913 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Preferred stock; Series B- par value | $ 0.001 | $ 0.001 |
Preferred stock; Series B- shares authorized | 25,000,000 | 25,000,000 |
Preferred stock; Series B- shares issued | 432,513 | 432,513 |
Preferred stock; Series B- shares outstanding | 432,513 | 432,513 |
Preferred stock; Series B- liquidation preference | $ 432,513 | $ 432,513 |
Common stock, par value | $ 0.003333 | $ 0.003333 |
Common stock, shares authorized | 40,000,000 | 40,000,000 |
Common stock, shares issued | 23,754,098 | 24,054,098 |
Common stock, shares outstanding | 23,754,098 | 24,054,098 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) | 12 Months Ended | |||
Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | ||
Revenues: | ||||
Metered water usage | $ 220,997 | $ 969,989 | $ 1,879,495 | |
Wastewater treatment fees | 43,712 | 50,076 | 45,400 | |
Special facility funding recognized | 41,508 | 41,508 | 41,508 | |
Water tap fees recognized | 14,294 | 14,294 | 14,294 | |
Other income | 131,650 | 120,702 | 42,417 | |
Total revenues | 452,161 | 1,196,569 | 2,023,114 | |
Expenses: | ||||
Water service operations | (264,424) | (464,940) | (547,562) | |
Wastewater service operations | (29,187) | (66,745) | (38,426) | |
Other | (68,478) | (55,173) | (39,421) | |
Depletion and depreciation | (166,670) | (172,546) | (149,757) | |
Total cost of revenues | (528,759) | (759,404) | (775,166) | |
Gross margin | (76,598) | 437,165 | 1,247,948 | |
General and administrative expenses | (1,849,743) | (1,939,395) | (2,445,633) | |
Depreciation | (253,434) | (174,717) | (46,807) | |
Operating loss | (2,179,775) | (1,676,947) | (1,244,492) | |
Other income (expense): | ||||
Oil and gas lease income, net | 360,765 | 645,720 | 525,438 | |
Oil and gas royalty income, net | 343,620 | 412,627 | 0 | |
Interest income | 241,279 | 21,334 | 12,466 | |
Other | 3,852 | 22,120 | 160,004 | |
Gain on extinguishment of contingent obligations | 0 | 0 | 832,097 | |
Net (loss) income from continuing operations | (1,230,259) | (575,146) | 285,513 | |
Net loss from discontinued operations, net of taxes | (80,348) | (22,552,801) | (596,957) | |
Net loss before taxes | (1,310,607) | (23,127,947) | (311,444) | |
Taxes | 0 | 0 | 0 | |
Net loss | (1,310,607) | (23,127,947) | (311,444) | |
Unrealized holding gains | 3,122 | 0 | 0 | |
Total comprehensive loss | $ (1,307,485) | $ (23,127,947) | $ (311,444) | |
Basic and diluted net (loss) income per common share - | ||||
(Loss) income from cotinuing operations | $ (0.06) | $ (0.03) | $ .01 | |
Loss from discontinued operations | [1] | (0.93) | ||
Net loss | $ (0.06) | $ (0.96) | $ (0.01) | |
Weighted average common shares outstanding - basic and diluted | 23,781,041 | 24,041,114 | 24,037,598 | |
[1] | Amount is less than $.01 per share |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS) - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Comprehensive Income (Loss) | Collateral Stock | Accumulated Deficit | Total |
Balance, beginning at Aug. 31, 2013 | $ 433 | $ 80,130 | $ 115,224,946 | $ 0 | $ 0 | $ (77,533,034) | $ 37,772,475 |
Balance, beginning shares at Aug. 31, 2013 | 432,513 | 24,037,598 | |||||
Share-based compensation | 251,915 | 251,915 | |||||
Exercise of options | 0 | ||||||
Reduction in TPF due to remedies under the Arkansas River Agreement | 53,317,535 | 53,317,535 | |||||
Net loss | (311,444) | (311,444) | |||||
Unrealized holding gain on investments | 0 | ||||||
Balance, ending at Aug. 31, 2014 | $ 433 | $ 80,130 | 168,794,396 | 0 | 0 | (77,844,478) | 91,030,481 |
Balance, ending, shares at Aug. 31, 2014 | 432,513 | 24,037,598 | |||||
Share-based compensation | 239,986 | 239,986 | |||||
Exercise of options | $ 55 | 48,770 | 48,825 | ||||
Exercise of options, shares | 16,500 | ||||||
Reduction in TPF due to remedies under the Arkansas River Agreement | 3,301,203 | 3,301,203 | |||||
Collateral stock | (1,407,000) | (1,407,000) | |||||
Net loss | (23,127,947) | (23,127,947) | |||||
Unrealized holding gain on investments | 0 | ||||||
Balance, ending at Aug. 31, 2015 | $ 433 | $ 80,185 | 172,384,355 | 0 | (1,407,000) | (100,972,425) | 70,085,548 |
Balance, ending, shares at Aug. 31, 2015 | 432,513 | 24,054,098 | |||||
Share-based compensation | 219,886 | 219,886 | |||||
Exercise of options | $ 0 | ||||||
Exercise of options, shares | 0 | ||||||
Collateral stock retired | $ (1,000) | (1,406,000) | 1,407,000 | $ 0 | |||
Collateral stock retired, shares | (300,000) | ||||||
Net loss | (1,310,607) | (1,310,607) | |||||
Unrealized holding gain on investments | 3,122 | 3,122 | |||||
Balance, ending at Aug. 31, 2016 | $ 433 | $ 79,185 | $ 171,198,241 | $ 3,122 | $ 0 | $ (102,283,032) | $ 68,997,949 |
Balance, ending, shares at Aug. 31, 2016 | 432,513 | 23,754,098 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | ||
Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | |
Cash flows from operating activities | |||
Net loss | $ (1,310,607) | $ (23,127,947) | $ (311,444) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||
Share-based compensation expense | 219,886 | 239,986 | 251,915 |
Depreciation, depletion and other non-cash items | 420,104 | 347,263 | 196,564 |
Investment in Well Enhancement Recovery Systems, LLC | 10,675 | 4,577 | (37,193) |
Interest income and other non-cash items | (41,114) | (419) | (420) |
Interest added to receivable from related parties | (29,099) | (15,493) | (12,039) |
Gain on extinguishment of contingent obligations | 0 | 0 | (832,097) |
Changes in operating assets and liabilities: | |||
Trade accounts receivable | (23,161) | 918,252 | (1,041,288) |
Prepaid expenses | (122,733) | 43,472 | (168,795) |
Note receivable - related parties | (31,633) | (105,208) | 6,388 |
Accounts payable and accrued liabilities | (269,428) | (848,669) | 1,191,298 |
Income taxes | (292,729) | 292,729 | 0 |
Deferred revenue | (55,802) | (64,226) | (65,385) |
Deferred income - oil and gas lease | (360,765) | (645,720) | 790,002 |
Net cash used in operating activities from continuing operations | (1,886,406) | (22,961,403) | (32,494) |
Net cash provided by operating activities from discontinued operations | 1,615,677 | 21,987,337 | 84,238 |
Net cash provided by (used in) operating activities | (270,729) | (974,066) | 51,744 |
Cash flows from investing activities: | |||
Investments in water, water systems and land | (1,209,416) | (2,101,253) | (3,864,443) |
Sales and maturities of marketable securities | 2,840,000 | 0 | 0 |
Purchase of short-term investments | (25,970,721) | 0 | 0 |
Purchase of long-term investments | (6,855,189) | 0 | 0 |
Proceeds from sale of land and easments | 0 | 0 | 192,851 |
Purchase of property and equipment | (472,310) | (17,186) | (3,370) |
Net cash used in investing activities from continuing operations | (31,667,636) | (2,118,439) | (3,674,962) |
Net cash provided by (used in) investing activities from discontinued operations | (451,347) | 44,650,149 | 5,811,265 |
Net cash provided (used) by investing activities | (32,118,983) | 42,531,710 | 2,136,303 |
Cash flows from financing activities | |||
Proceeds from exercise of options | 0 | 48,825 | 0 |
Payment to contingent liability holders | (2,041) | (8,621) | (6,185) |
Net cash (used in) provided by financing activities from continuing operations | (2,041) | 40,204 | (6,185) |
Net cash used in financing activities from discontinued operations | 0 | (6,258,365) | (2,880,667) |
Net cash (used in) provided by financing activities | (2,041) | (6,218,161) | (2,886,852) |
Net change in cash and cash equivalents | (32,391,753) | 35,339,483 | (698,805) |
Cash and cash equivalents - beginning of year | 37,089,041 | 1,749,558 | 2,448,363 |
Cash and cash equivalents - end of year | 4,697,288 | 37,089,041 | 1,749,558 |
SUPPLEMENTAL DISCLOSURES OF NON-CASH ACTIVITIES | |||
Retirement of collateral stock | 1,407,000 | 0 | 0 |
Reduction in Tap Participation Fee liability resulting from remedies under the Arkansas River Agreement | 0 | 0 | 53,317,500 |
Reduction in Tap Participation Fee liability, HP A&M receivable, collateral stock, and mineral interests received as a result of settlement of the Arkansas River Agreement | 0 | 1,894,203 | 0 |
Assets acquired through WISE funding obligation | $ 0 | $ 1,381,004 | $ 0 |
ORGANIZATION
ORGANIZATION | 12 Months Ended |
Aug. 31, 2016 | |
Organization | |
ORGANIZATION | Pure Cycle Corporation (the Company) was incorporated in Delaware in 1976 and reincorporated in Colorado in 2008. The Company owns assets in the Denver, Colorado metropolitan area. The Company is currently using its water assets located in the Denver metropolitan area to provide wholesale water and wastewater services to customers located in the Denver metropolitan area. The Company provides a full line of wholesale water and wastewater services which includes designing and constructing water and wastewater systems as well as operating and maintaining such systems. The Companys 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, 2016, the Company had $4.7 million of cash and cash equivalents and $28.6 million of working capital. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Aug. 31, 2016 | |
Presentation Of Interim Information | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Principles of Consolidation The consolidated financial statements of the Company include the accounts of Pure Cycle Corporation and its majority-owned and controlled subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid debt instruments with original maturities of three months or less. The Company’s cash equivalents are comprised entirely of money market funds maintained at a reputable financial institution. At various times during the fiscal year ended August 31, 2016, the Company’s main operating account exceeded federally insured limits. The Company has never suffered a loss due to such excess balance. Investments Management determines the appropriate classification of its investments in certificates of deposit and debt and equity securities at the time of purchase and reevaluates such determinations each reporting period. Certificates of deposit and debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. The Company has $6.9 million of investments classified as held-to-maturity at August 31, 2016 which represent certificates of deposit and U.S. treasury notes with maturity dates after August 31, 2017. Debt securities for which the Company does not have the positive intent or ability to hold to maturity are classified as available-for-sale, along with any investments in equity securities. Securities classified as available-for-sale are marked-to-market at each reporting period. Changes in value on such securities are recorded as a component of Accumulated other comprehensive income (loss). Concentration of Credit Risk and Fair Value Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and investments. From time to time, the Company places its cash in money market instruments, commercial paper obligations, corporate bonds and U.S. government treasury obligations. To date, the Company has not experienced significant losses on any of these investments. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value. Cash and Cash Equivalents – Trade Accounts Receivable – Investments – Fair Value Measurements. Accounts Payable – Long-Term Financial Liabilities Water and Land Assets Water and Land Assets Participating Interests in Export Water Notes Receivable – Related Parties Off-Balance Sheet Instruments – Participating Interests in Export Water Cash Flows The Company did not pay any interest during the fiscal year ended August 31, 2016. The Company paid $441,400 and $310,400 in interest during the fiscal years ended August 31, 2015 and 2014, respectively. In the fiscal year ended August 31, 2016, the Company paid $292,700 for alternative minimum tax the Company owed as a result of the sale of the Company’s farm assets. The Company did not pay any income taxes during the fiscal years ended August 31, 2015 and 2014. Trade Accounts Receivable The Company records accounts receivable net of allowances for uncollectible accounts. Excluded in trade accounts receivable are balances due from discontinued operations. The Company has not recorded an allowance for uncollectible accounts in receivables from continuing operations for either of the periods ended August 31, 2016 or 2015. The allowance for uncollectible accounts was determined based on specific review of all past due accounts. Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the eventual use of the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Capitalized Costs of Water and Wastewater Systems and Depreciation and Depletion Charges Costs to construct water and wastewater systems that meet the Company’s capitalization criteria are capitalized as incurred, including interest, and depreciated on a straight-line basis over their estimated useful lives of up to 30 years. The Company capitalizes design and construction costs related to construction activities, and it capitalizes certain legal, engineering and permitting costs relating to the adjudication and improvement of its water assets. The Company depletes its water assets that are being utilized on the basis of units produced (i.e., thousands of gallons sold) divided by the total volume of water adjudicated in the water decrees. Revenue Recognition The Company generates revenues through one line of business. Its revenues are derived through its wholesale water and wastewater business, which is described below. The Company generates revenues through its wholesale water and wastewater business predominately from three sources: (i) monthly wholesale water usage fees and wastewater service fees, (ii) one-time water and wastewater tap fees and construction fees, and (iii) consulting fees. Because these items are separately delivered, the Company accounts for each of the items separately, as described below. i. Monthly wholesale water and wastewater service fees – Water and Land Assets The Company recognizes wastewater processing revenues monthly based on 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, 2016, 2015 and 2014 are presented in the statements of operations. Costs of delivering water and providing wastewater service to customers are recognized as incurred. The Company delivered 33.9 million, 97.5 million and 190.1 million gallons of water to customers during the fiscal years ended August 31, 2016, 2015 and 2014, respectively. ii. Water and wastewater tap fees and construction fees Proceeds from tap fees and construction fees are deferred upon receipt and recognized in income either upon completion of construction of infrastructure or ratably over time, depending on whether the Company owns the infrastructure constructed with the proceeds or a customer owns the infrastructure constructed with the proceeds. Tap and construction fees derived from agreements in which the Company will not own the assets constructed with the fees are recognized as revenue using the percentage-of-completion method. Costs of construction of the assets when the Company will not own the assets are recorded as construction costs. Tap and construction fees derived from agreements for which the Company will own the infrastructure are recognized as revenues ratably over the estimated accounting service life of the facilities constructed, starting at completion of construction, which could be in excess of 30 years. Costs of construction of the assets when the Company will own the assets are capitalized and depreciated over their estimated economic lives. From time to time, the Company enters into water service agreements to provide water service to customers. The Company owns the facilities which store, treat, and deliver the water and amortizes the cost of these facilities over their useful lives. The Company recognized $14,300 of tap fee revenue in each of the three fiscal years ended August 31, 2016, 2015 and 2014. The Company recognized $41,500 of “Special Facilities” funding as revenue in each of the three fiscal years ended August 31, 2016, 2015, and 2014. As of August 31, 2016, the Company has deferred recognition of $1.1 million of tap and construction revenue from customer agreements, which will be recognized as revenue ratably through 2036. iii. Consulting fees Royalty and Other Obligations Revenues from the sale of Export Water are shown gross of royalties payable to the Land Board. Revenues from the sale of water on the Lowry Range are shown net of the royalties to the Land Board and the amounts retained by the District. Oil and Gas Lease Payments As further described in Note 4 – Water and Land Assets As of August 31, 2016, the Company has deferred recognition of $19,000 of income related to the Rangeview Lease, which will be recognized as income ratably through June 2017. During the three months ended February 28, 2015, two wells were drilled within the Company’s mineral interest. Beginning in March 2015, both wells were placed into service and began producing oil and gas and accruing royalties to the Company. In May 2015, certain gas collection infrastructure was extended to the property to allow the collection of gas from the wells and accrual of royalties attributable to gas production. During the fiscal years ended August 31, 2016 and 2015, the Company received $343,600 and $412,600, respectively, in royalties attributable to these two wells. Share-based Compensation The Company maintains a stock option plan for the benefit of its employees and directors. The Company records share-based compensation costs which are measured at the grant date based on the fair value of the award and are recognized as expense over the applicable vesting period of the stock award using the straight-line method. The Company has adopted the alternative transition method for calculating the tax effects of share-based compensation which allows for a simplified method of calculating the tax effects of employee share-based compensation. Because the Company has a full valuation allowance on its deferred tax assets, the granting and exercise of stock options during the fiscal years ended August 31, 2016 and 2015 had no impact on the income tax provisions. The Company recognized $219,900, $240,000, and $251,900 of share-based compensation expenses during the fiscal Income Taxes The Company uses a “more-likely-than-not” threshold for the recognition and de-recognition of tax positions, including any potential interest and penalties relating to tax positions taken by the Company. The Company does not have any significant unrecognized tax benefits as of August 31, 2016. The Company files income tax returns with the Internal Revenue Service and the State of Colorado. The tax years that remain subject to examination are fiscal 2012 through fiscal 2015. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At August 31, 2016, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the fiscal years ended August 31, 2016, 2015 or 2014. Discontinued Operations In August 2015, the Company sold approximately 14,600 acres of irrigated farm land and related Arkansas River water rights, which were substantially all of the assets comprising the Company’s agricultural segment. Pursuant to the terms of the purchase and sale agreement, the Company continued to manage and receive the lease income until December 31, 2015. As a consequence of the sale, the operating results and the assets and liabilities of the discontinued operations, which formerly comprised the agricultural segment, are presented separately in the Company’s consolidated financial statements. Summarized financial information for the discontinued agricultural business is shown below. Prior period balances have been reclassified to present the operations of the agricultural business as a discontinued operation. Discontinued Operations Statements of Operations Fiscal years ended August 31, 2016 2015 2014 Farm revenues $267,472 $1,127,155 $1,068,026 Farm expenses (77,132) (126,279) (88,105) Gross profit 190,340 1,000,876 979,921 General and administrative expenses (313,389) (760,192) (911,230) Impairment of land and water rights held for sale - - (402,657) Operating (loss) profit (123,049) 240,684 (333,966) Finance charges 38,428 21,710 14,392 (Loss) gain on sale of farm assets 4,273 (22,108,145) 1,407,326 Interest expense (1) - (390,505) (239,200) Interest imputed on the Tap Participation Fee payable to HP A&M (2) - (23,816) (1,445,509) Taxes - (292,729 ) - Loss from discontinued operations, net of taxes $(80,348) $(22,552,801) $(596,957) (1) Interest expense represents interest accrued related to notes the Company had on its farm assets prior to the sale. All notes associated with the farms have been paid off, and as a result the Company no longer incurs interest on such notes. (2) Imputed interest represents an estimate of the interest accrued on the Tap Participation Fee payable to High Plains A&M, LLC (“HP A&M”), which was eliminated as a result of the settlement with HP A&M during the three months ended February 28, 2015. As a result, the Company no longer accrues interest related to the Tap Participation Fee. The Company anticipates continued expenses through the end of calendar 2016 related to the discontinued operations. The Company will continue to incur expenses related to the remaining agricultural land the Company continues to own and for the purpose of collecting outstanding receivables. The individual assets and liabilities of the discontinued agricultural business are combined in the captions “Assets of discontinued operations” and “Liabilities of discontinued operations” in the consolidated balance sheets. The carrying amounts of the major classes of assets and liabilities included part of the discontinued business are presented in the following table: Discontinued Operations Balance Sheets August 31, 2016 2015 Assets: Trade accounts receivable $227,060 $549,993 Escrow receivable - 1,342,250 Land held for sale (1) 450,347 - Prepaid expenses 2,880 65,309 Total assets $680,287 $1,957,552 Liabilities: Accounts payable $- $25,704 Accrued liabilities 4,394 90,725 Deferred revenues - 900 Total liabilities $4,394 $117,329 (1) Land Held for Sale. Loss per Common Share Loss per common share is computed by dividing net loss by the weighted average number of shares outstanding during each period. Common stock options and warrants aggregating 338,100, 312,100, and 315,100 common share equivalents as of August 31, 2016, 2015 and 2014, respectively, have been excluded from the calculation of loss per common share as their effect is anti-dilutive. Recently Issued Accounting Pronouncements The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its consolidated financial statements and ensure that there are proper controls in place to ascertain that the Company’s consolidated financial statements properly reflect the change. New pronouncements assessed by the Company recently are discussed below: In May 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. Revenue from Contracts with Customers In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing Revenue from Contracts with Customers, In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Revenue from Contracts with Customers In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 12 Months Ended |
Aug. 31, 2016 | |
Fair Value Measurements | |
FAIR VALUE MEASUREMENTS | Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine fair value. Level 1 — Valuations for assets and liabilities traded in active exchange markets, such as the NASDAQ Stock Market. The Company had one of these assets and no liabilities as of August 31, 2016. The Company had no Level 1 assets or liabilities as of August 31, 2015. Level 2 — Valuations for assets and liabilities obtained from readily available pricing sources via independent providers for market transactions involving similar assets or liabilities. The Company had 36 Level 2 assets as of August 31, 2016, which consist of certificates of deposit and U.S. treasury notes. The Company had no Level 2 assets or liabilities as of August 31, 2015. Level 3 — Valuations for assets and liabilities that are derived from other valuation methodologies, including discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. The Company had no Level 3 assets or liabilities as of August 31, 2016 or 2015. The Company maintains policies and procedures to value instruments using what management believes to be the best and most relevant data available. Level 2 Asset – Available for Sale Securities. The following table provides information on the assets and liabilities measured at fair value on a recurring basis as of August 31, 2016: Fair Value Measurement Using: Cost / Other Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Accumulated Unrealized Gains and Fair Value Value (Level 1) (Level 2) (Level 3) (Losses) Money Market $4,184,900 $4,184,900 $4,184,900 $- $- $- Available for sale $23,176,500 $23,173,400 $- $23,176,500 $- $3,100 |
WATER AND LAND ASSETS
WATER AND LAND ASSETS | 12 Months Ended |
Aug. 31, 2016 | |
Investments In Water Water Systems Land And Improvements | |
WATER AND LAND ASSETS | The Companys water and water systems consist of the following approximate costs and accumulated depreciation and depletion as of August 31: August 31, 2016 August 31, 2015 Costs Accumulated Depreciation and Depletion Costs Accumulated Depreciation and Depletion Rangeview water supply $ 14,444,600 $ (9,400 ) $ 14,444,600 $ (8,800 ) Sky Ranch water rights and other costs 6,607,400 (334,500 ) 6,440,800 (194,600 ) Fairgrounds water and water system 2,899,900 (886,800 ) 2,899,900 (798,700 ) Rangeview water system 1,624,800 (152,800 ) 1,256,300 (110,300 ) Water supply other 3,703,000 (297,800 ) 3,649,800 (193,900 ) Construction in progress 723,500 - 323,500 - Totals 30,003,200 (1,681,300 ) 29,014,900 (1,306,300 ) Net investments in water and water systems $ 28,321,900 $ 27,708,600 Depletion and Depreciation The Company recorded $500, $7,000, and $4,400 of depletion charges during the fiscal years ended August 31, 2016, 2015 and 2014, respectively. During the fiscal year ended August 31, 2016, this related entirely to the Rangeview Water Supply (defined below), and during the fiscal years ended August 31, 2015 and 2014, this related to the Rangeview Water Supply and the Sky Ranch water supply (discussed below). The Company recorded $419,600, $340,300 and $192,200 of depreciation expense in each of the fiscal years ended August 31, 2016, 2015 and 2014, respectively. These figures include depreciation for other equipment not included in the table above. Rangeview Water Supply and Water System The Rangeview Water Supply consists of 22,985 acre feet and is a combination of tributary surface water and groundwater rights along with certain storage rights associated with the Lowry Range, a 27,000-acre property owned by the Land Board located 16 miles southeast of Denver, Colorado. Approximately $14.4 million of Investments in Water and Water Systems on the Companys balance sheet as of August 31, 2016, represents the costs of assets acquired or facilities constructed to extend water service to customers located on and off the Lowry Range. The recorded costs of the Rangeview Water Supply include payments to the sellers of the Rangeview Water Supply, design and construction costs and certain direct costs related to improvements to the asset including legal and engineering fees. The Company acquired the Rangeview Water Supply beginning in 1996 when: (i) The District entered into the 1996 Amended and Restated Lease Agreement with the Land Board, which owns the Lowry Range; (ii) The Company entered into the Agreement for Sale of Export Water with the District; (iii) The Company entered into the 1996 Service Agreement with the District for the provision of water service to the Lowry Range; and (iv) In 1997, the Company entered into the Wastewater Service Agreement with the District for the provision of wastewater service to the Districts service area. In July 2014, the Company, the District and the Land Board entered into the 2014 Amended and Restated Lease (the Lease), which superseded the original 1996 lease, and the Company and the District entered into an Amended and Restated Service Agreement. Collectively, the foregoing agreements, as amended, are referred to as the Rangeview Water Agreements. Pursuant to the Rangeview Water Agreements, the Company owns 11,650 acre feet of water consisting of 10,000 acre feet of groundwater and 1,650 acre feet of average yield surface water which can be exported off the Lowry Range to serve area users (referred to as Export Water). The 1,650 acre feet of surface rights are subject to completion of documentation by the Land Board related to the Companys exercise of its right to substitute an aggregate gross volume of 165,000 acre feet of its groundwater for 1,650 acre feet per year of adjudicated surface water and to use this surface water as Export Water. Additionally, assuming completion of the substitution of groundwater for surface water, the Company has the exclusive right to provide water and wastewater service, through 2081, to all water users on the Lowry Range and the right to develop an additional 12,035 acre feet of groundwater and 1,650 acre feet of adjudicated surface water to serve customers either on or off the Lowry Range. The Rangeview Water Agreements also provide for the Company to use surface reservoir storage capacity in providing water service to customers both on and off the Lowry Range. Services on the Lowry Range Rates and charges for all water and wastewater services on the Lowry Range, including tap fees and usage or monthly fees, are governed by the terms of the Rangeview Water Agreements. Rates and charges are required to be less than the average of similar rates and charges of three surrounding municipal water and wastewater service providers, which are reassessed annually. Pursuant to the Rangeview Water Agreements the Land Board receives a royalty of 10% or 12% of gross revenues from the sale or disposition of the water depending on the purchaser of the water, except that the royalty on tap fees shall be 2% (other than taps sold for Sky Ranch which are exempt). The Company also is required to pay the Land Board a minimum annual water production fee, which will offset future royalty obligations. The Company and the Land Board are working cooperatively to clarify the calculation of the minimum annual production fee. Pursuant to the Companys determination, the Company has made payments of $45,600 for each of the past two years. The Company does not anticipate any modification to the minimum fee to be material. The District retains 2% of the remaining gross revenues and the Company receives 98% of the remaining gross revenues after the Land Board royalty. The Land Board does not receive a royalty on wastewater fees. The Company receives 100% of the Districts wastewater tap fees and 90% of the Districts wastewater usage fees (the District retains the other 10%). Export Water The Arapahoe County Fairgrounds Water and Water System The Company owns 321 acre feet of groundwater purchased pursuant to its agreement with Arapahoe County. The Company plans to use this water in conjunction with its Rangeview Water Rights in providing water to areas outside the Lowry Range. The $2.9 million of capitalized costs includes the costs to construct various Wholesale and Special Facilities, including a new deep water well, a 500,000-gallon water tank and pipelines to transport water to the Arapahoe County fairgrounds. Sky Ranch In 2010, the Company purchased approximately 931 acres of undeveloped land known as Sky Ranch. The property includes the rights to approximately 830 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 assets respective fair value. O&G Lease |
PARTICIPATING INTERESTS IN EXPO
PARTICIPATING INTERESTS IN EXPORT WATER | 12 Months Ended |
Aug. 31, 2016 | |
Participating Interests In Export Water | |
PARTICIPATING INTERESTS IN EXPORT WATER | The Company acquired its Rangeview Water Supply through various amended agreements entered into in the early 1990s. The acquisition was consummated with the signing of the CAA in 1996. Upon entering into the CAA, the Company recorded an initial liability of $11.1 million, which represented the cash the Company received from the participating interest holders that was used to purchase the Companys Export Water (described in greater detail in Note 4 Water and Land Assets The CAA obligation is non-interest bearing, and if the Export Water is not sold, the parties to the CAA have no recourse against the Company. If the Company does not sell the Export Water, the holders of the Series B Preferred Stock are also not entitled to payment of any dividend and have no contractual recourse against the Company. As the proceeds from the sale of Export Water are received and the amounts are remitted to the external CAA holders, the Company allocates a ratable percentage of this payment to the principal portion (the Participating Interests in Export Water Supply From time to time, the Company repurchased various portions of the CAA obligations, which retained their original priority. The Company did not make any CAA acquisitions during the fiscal years ended August 31, 2016 or 2015. In July 2014, the Land Board relinquished its approximately $2.4 million of CAA interests to the Company as part of a settlement of the 2011 lawsuit filed by the Company and the District against the Land Board. As a result of the acquisitions, the relinquishment by the Land Board, and the sale of Export Water, as detailed in the table below, the remaining potential third-party obligation at August 31, 2016, is approximately $1 million: Export Water Proceeds Received Initial Export Water Proceeds to Pure Cycle Total Potential Third-party Obligation Participating Interests Liability Contingency Original balances $ $ 218,500 $ 31,807,700 $ 11,090,600 $ 20,717,100 Activity from inception until August 31, 2014: Acquisitions 30,428,900 (30,428,900 ) (10,622,100 ) (19,806,800 ) Option payments - Sky Ranch and The Hills at Sky Ranch 110,400 (42,300 ) (68,100 ) (23,800 ) (44,300 ) Arapahoe County tap fees (1) 533,000 (373,100 ) (159,900 ) (55,800 ) (104,100 ) Export Water sale payments 361,500 (262,800 ) (98,700 ) (34,300 ) (64,400 ) Balance at August 31, 2014 1,004,900 29,969,200 1,052,100 354,600 697,500 Fiscal 2015 activity: Export Water sale payments 207,900 (183,200 ) (24,700 ) (8,600 ) (16,100 ) Balance at August 31, 2015 1,212,800 29,786,000 1,027,400 346,000 681,400 Fiscal 2016 activity: Export Water sale payments 49,200 (43,300 ) (5,900 ) (2,000 ) (3,900 ) Balance at August 31, 2016 $ 1,262,000 $ 29,742,700 $ 1,021,500 $ 344,000 $ 677,500 (1) The Arapahoe County tap fees are less $34,522 in royalties paid to the Land Board. The CAA includes contractually established priorities which call for payments to CAA holders in order of their priority. This means the first payees receive their full payment before the next priority level receives any payment and so on until full repayment. The Company will receive approximately $6 million of the first priority payout (the remaining entire first priority payout totals approximately $6.8 million as of August 31, 2016). |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 12 Months Ended |
Aug. 31, 2016 | |
Accrued Liabilities | |
ACCRUED LIABILITIES | At August 31, 2016, the Company had accrued liabilities of $242,600, of which $160,000 was for accrued compensation, $5,700 was for estimated property taxes, $48,000 was for professional fees and the remaining $28,900 was related to operating payables. At August 31, 2015, the Company had accrued liabilities of $499,800, of which $400,000 was for accrued compensation, $4,800 was for estimated property taxes, $52,500 was for professional fees and the remaining $42,500 was related to operating payables. |
LONG-TERM DEBT AND OPERATING LE
LONG-TERM DEBT AND OPERATING LEASE | 12 Months Ended |
Aug. 31, 2016 | |
Long-Term Obligations And Operating Lease | |
LONG-TERM DEBT AND OPERATING LEASE | As of August 31, 2016 and 2015, the Company had no debt. The Participating Interests in Export Water Supply are obligations of the Company that have no scheduled maturity dates. Therefore, these liabilities are not disclosed in tabular format. However, the Participating Interests in Export Water Supply are described in Note 5 Participating Interests in Export Water WISE Partnership During December 2014, the Company, through the District, consented to the waiver of all contingencies set forth in the Amended and Restated WISE Partnership Water Delivery Agreement, dated December 31, 2013 (the WISE Partnership Agreement), among the City and County of Denver acting through its Board of Water Commissioners (Denver Water), the City of Aurora acting by and through its Utility Enterprise (Aurora Water), and the South Metro WISE Authority (SMWA). The SMWA was formed by the District and nine other governmental or quasi-governmental water providers pursuant to the South Metro WISE Authority Formation and Organizational Intergovernmental Agreement, dated December 31, 2013 (the SM IGA), to enable the members of SMWA to participate in the regional water supply project known as the Water Infrastructure Supply Efficiency partnership (WISE) created by the WISE Partnership Agreement. The SM IGA specifies each members pro rata share of WISE and the members rights and obligations with respect to WISE. The WISE Partnership Agreement provides for the purchase of certain infrastructure (i.e., pipelines, water storage facilities, water treatment facilities, and other appurtenant facilities) to deliver water to and among the 10 members of the SMWA, Denver Water and Aurora Water. Certain infrastructure has been constructed and other infrastructure will be constructed over the next several years. By consenting to the waiver of the contingencies set forth in the WISE Partnership Agreement, pursuant to the terms of the Rangeview/Pure Cycle WISE Project Financing Agreement (the WISE Financing Agreement) between the Company and the District, the Company has an agreement to fund the Districts participation in WISE effective as of December 22, 2014. The Companys cost of funding the Districts purchase of its share of existing infrastructure and future infrastructure for WISE and funding operations and water deliveries related to WISE is projected to be approximately $5.6 million over the next five years. See further discussion in Note 14 Related Party Transactions. Operating Lease Effective January 2016, the Company entered into an operating lease for approximately 2,500 square feet of office and warehouse space. The lease has a one-year term with payments of $3,000 per month. |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 12 Months Ended |
Aug. 31, 2016 | |
Shareholders Equity | |
SHAREHOLDERS' EQUITY | Preferred Stock The Companys 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 Companys proceeds from sale or disposition of Export Water rights exceed $36,026,232, the Series B Preferred Stock holders will receive the next $432,513 of proceeds in the form of a dividend. Equity Compensation Plan The Company maintains the 2014 Equity Incentive Plan (the 2014 Equity Plan), which was approved by shareholders in January 2014 and became effective April 12, 2014. Executives, eligible employees, consultants and non-employee directors are eligible to receive options and stock grants pursuant to the 2014 Equity Plan. Pursuant to the 2014 Equity Plan, options to purchase shares of stock and restricted stock awards can be granted with exercise prices, vesting conditions and other performance criteria determined by the Compensation Committee of the Board. The Company has reserved 1.6 million shares of common stock for issuance under the 2014 Equity Plan. Awards to purchase 62,000 shares of the Companys common stock have been made under the 2014 Equity Plan. Prior to the effective date of the 2014 Equity Plan, the Company granted stock awards to eligible participants under its 2004 Incentive Plan (the 2004 Incentive Plan), which expired April 11, 2014. No additional awards may be granted pursuant to the 2004 Incentive Plan; however, awards outstanding as of April 11, 2014, will continue to vest and expire and may be exercised in accordance with the terms of the 2004 Incentive Plan. The Company estimates the fair value of share-based payment awards on the date of grant using the Black-Scholes option-pricing model (Black-Scholes model). Using the Black-Scholes model, the value of the portion of the award that is ultimately expected to vest is recognized as a period expense over the requisite service period in the statement of operations. Option forfeitures are to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company does not expect any forfeiture of its option grants and therefore the compensation expense has not been reduced for estimated forfeitures. During fiscal year 2015, 12,500 options expired and 16,500 were exercised. During fiscal year 2016, 10,000 options expired. The Company attributes the value of share-based compensation to expense using the straight-line single option method for all options granted. The Companys 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 Companys 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 Companys common stock over a period equal to the expected life of the option; and ● Option exercise behaviors based on actual and projected employee stock option exercises and forfeitures. In January 2016, the Company granted its non-employee directors options to purchase a combined 36,000 shares of the Companys common stock pursuant to the 2014 Equity Plan. Options for 26,000 shares vest one year after the date of grant, and options for 10,000 shares vest one-half one year after the date of grant and one-half two years after the date of grant. All of the options expire 10 years after the date of grant. The Company calculated the fair value of the options granted during January 2016 at approximately $104,100, using the Black Scholes model with the following variables: weighted average exercise price of $4.26 (which was the closing sales price of the Companys common stock on the date of grant); estimated option lives of 10 years; weighted average risk free interest rate of 2.06%; weighted average stock price volatility of 58.26%; and an estimated forfeiture rate of 0%. The $104,100 of stock-based compensation is being expensed monthly over the vesting periods. In January 2015, the Company granted its non-employee directors options to purchase a combined 26,000 shares of the Companys common stock pursuant to the 2014 Equity Plan. The options vest one year after the date of grant and expire 10 years after the date of grant. The Company calculated the fair value of the options granted during January 2015 at approximately $72,000, using the Black Scholes model with the following variables: weighted average exercise price of $4.17 (which was the closing sales price of the Companys common stock on the date of grant); estimated option lives of 10 years; weighted average risk free interest rate of 1.77%; weighted average stock price volatility of 57.45%; and an estimated forfeiture rate of 0%. The $72,000 of stock-based compensation is being expensed monthly over the vesting periods. In January 2014, the Company granted its non-employee directors options to purchase a combined 32,500 shares of the Companys common stock pursuant to the 2004 Incentive Plan. The options vest one year after the date of grant and expire 10 years after the date of grant. The Company calculated the fair value of these options at $132,900 using the Black-Scholes model with the following variables: weighted average exercise price of $6.08 (which was the closing sales price of the Companys common stock on the date of grant); estimated option lives of 10 years; estimated dividend rate of 0%; weighted average risk-free interest rate of 1.84%; weighted average stock price volatility of 63.6%; and an estimated forfeiture rate of 0%. The $132,900 of stock-based compensation was being expensed monthly over the vesting periods. During the fiscal year ended August 31, 2015, 16,500 options were exercised. No options were exercised during the fiscal years ended August 31, 2016 or 2014. The following table summarizes the stock option activity for the combined 2004 Incentive Plan and 2014 Equity Plan for the fiscal year ended August 31, 2016: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Approximate Aggregate Intrinsic Value Outstanding at beginning of period 312,000 $ 5.10 Granted 36,000 $ 4.26 Exercised - $ - Forfeited or expired (10,000 ) $ 13.25 Outstanding at August 31, 2016 338,000 $ 4.77 5.68 $ 248,000 Options exercisable at August 31, 2016 302,000 $ 4.83 5.36 $ 227,100 The following table summarizes the activity and value of non-vested options as of and for the fiscal year ended August 31, 2016: Number of Options Weighted-Average Grant Date Fair Value Non-vested options outstanding at beginning of period 59,333 $ 3.66 Granted 36,000 2.89 Vested (59,333 ) 3.66 Forfeited - - Non-vested options outstanding at August 31, 2016 36,000 $ 2.89 All non-vested options are expected to vest. The total fair value of options vested during the fiscal years ended August 31, 2016, 2015 and 2014 was $216,900, $280,700 and $219,200, respectively. The weighted average grant date fair value of options granted during the fiscal years ended August 31, 2016, 2015 and 2014 was $2.89, $2.78, and $4.09, respectively. Share-based compensation expense for the fiscal years ended August 31, 2016, 2015 and 2014, was $219,900, $240,000, and $251,900, respectively. At August 31, 2016, the Company had unrecognized expenses relating to non-vested options that are expected to vest totaling $51,400. 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, 2016, 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 2016, 2015 or 2014. |
SIGNIFICANT CUSTOMERS
SIGNIFICANT CUSTOMERS | 12 Months Ended |
Aug. 31, 2016 | |
Significant Customers | |
SIGNIFICANT CUSTOMERS | The Company sells wholesale water and wastewater services to the District pursuant to the Rangeview Water Agreements. Sales to the District accounted for 67%, 19% and 7% of the Companys total water and wastewater revenues for the fiscal years ended August 31, 2016, 2015 and 2014, 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 Districts significant customer accounted for 55%, 16%, and 7% of the Companys total water and wastewater revenues for the fiscal years ended August 31, 2016, 2015 and 2014, respectively. Revenues from another customer directly and indirectly represented approximately less than 1%, 75% and 88% of the Companys water and wastewater revenues for the fiscal years ended August 31, 2016, 2015 and 2014, respectively. The Company had accounts receivable from the District which accounted for 74% and 87% of the Companys water and wastewater trade receivables balances at August 31, 2016 and 2015, respectively. Accounts receivable from the Districts largest customer accounted for 63% and 77% of the Companys water and wastewater trade receivables as of August 31, 2016 and 2015, respectively. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Aug. 31, 2016 | |
Income Taxes | |
INCOME TAXES | Deferred income taxes reflect the tax effects of net operating loss carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets as of August 31 are as follows: For the Fiscal Years Ended August 31, 2016 2015 Deferred tax assets: Net operating loss carryforwards $2,393,200 $1,816,200 Deferred revenue 344,300 503,300 Depreciation and depletion 247,400 320,300 Other 65,600 34,200 Valuation allowance (3,050,500) (2,674,000) 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, 2016 2015 2014 Expected benefit from federal taxes at statutory rate of 34% $(420,300) $(195,500) $97,100 State taxes, net of federal benefit (40,700) (19,000) 9,400 Expiration of net operating losses - - 89,400 Permanent and other differences 84,500 91,900 96,500 Change in valuation allowance 376,500 122,600 (292,400) Total income tax expense / (benefit) $- $- $- At August 31, 2016, the Company has $6.5 million of net operating loss carryforwards available for income tax purposes, which expire between fiscal 2032 and 2036. 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. No net operating loss carryforwards expired during the fiscal years ended August 31, 2016 or 2015. Net operating loss carryforwards of $239,600 expired during the fiscal year ended August 2014. |
401(k) PLAN
401(k) PLAN | 12 Months Ended |
Aug. 31, 2016 | |
K Plan | |
401(k) PLAN | The Company maintains a Pure Cycle Corporation 401(k) Profit Sharing Plan (the Plan), a defined contribution retirement plan for the benefit of its employees. The Plan is currently a salary deferral only plan, and at this time the Company does not match employee contributions. The Company pays the annual administrative fees of the Plan, and the Plan participants pay the investment fees. The Plan is open to all employees, age 21 or older, who have been employees of the Company for at least six months. During the fiscal years ended August 31, 2016, 2015 and 2014, the Company paid fees of $5,000, $3,800 and $3,600, respectively, for the administration of the Plan. |
LITIGATION LOSS CONTINGENCIES
LITIGATION LOSS CONTINGENCIES | 12 Months Ended |
Aug. 31, 2016 | |
Litigation Loss Contingencies | |
LITIGATION LOSS CONTINGENCIES | The Company has historically been involved in various claims, litigation and other legal proceedings that arise in the ordinary course of its business. The Company records an accrual for a loss contingency when its occurrence is probable and damages can be reasonably estimated based on the anticipated most likely outcome or the minimum amount within a range of possible outcomes. The Company makes such estimates based on information known about the claims and experience in contesting, litigating and settling similar claims. Disclosures are also provided for reasonably possible losses that could have a material effect on the Companys financial position, results of operations or cash flows. |
SEGMENT REPORTING
SEGMENT REPORTING | 12 Months Ended |
Aug. 31, 2016 | |
Segment Information | |
SEGMENT REPORTING | Prior to the sale of the Companys agricultural assets and the residual operations through December 31, 2015, the Company operated primarily in two lines of business: (i) the wholesale water and wastewater business and (ii) the agricultural farming business. The Company has discontinued its agricultural farming operations. Currently the Company operates its wholesale water and wastewater services segment as its only line of business. The wholesale water and wastewater services business includes selling water service to customers, which is then provided by the Company using water rights owned or controlled by the Company and developing infrastructure to divert, treat and distribute that water and collect, treat and reuse wastewater. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Aug. 31, 2016 | |
Related Party Transactions | |
RELATED PARTY TRANSACTIONS | On December 16, 2009, the Company entered into a Participation Agreement with the District, whereby the Company agreed to provide funding to the District in connection with the District joining the South Metro Water Supply Authority (“SMWSA”). The Company provided funding of $113,600, $78,600, and $114,900 for the fiscal years ended August 31, 2016, 2015, and 2014, respectively. Through the WISE Financing Agreement, to date the Company made payments of $2,870,500 to purchase certain rights to use existing water transmission and related infrastructure acquired by the WISE project and to construct the connection to the WISE system. The amounts are included as Investments in Water and Water Systems on the Company’s balance sheet as of August 31, 2016. The Company anticipates spending the following over the next five fiscal years to fund the District’s purchase of its share of the water transmission line and additional facilities, water and related assets for WISE and to fund operations and water deliveries related to WISE: Estimated WISE Costs For the Fiscal Years Ended August 31, 2017 2018 2019 2020 2021 Operations $ 96,600 $ 96,600 $ 96,600 $ 96,600 $ 96,600 Water Delivery 45,000 225,000 495,000 675,000 855,000 Capital 464,000 339,000 464,000 1,339,200 57,100 Other 43,500 23,600 86,600 23,600 23,600 $ 649,100 $ 684,200 $ 1,142,200 $ 2,134,400 $ 1,032,300 The Company has outstanding loans of $800,400 to the District and Sky Ranch Metropolitan District No. 5, which are both related parties, as discussed below: The District In 1995, the Company extended a loan to the District. The loan provided for borrowings of up to $250,000, is unsecured, and bears interest based on the prevailing prime rate plus 2% (5.5% at August 31, 2016). The maturity date of the loan is December 31, 2020. Beginning in January 2014, the District and the Company entered into a funding agreement that allows the Company to continue to provide funding to the District for day-to-day operations and accrue the funding into a note that bears interest at a rate of 8% per annum and remains in full force and effect for so long as the 2014 Amended and Restated Lease Agreement remains in effect. The $628,500 balance of the notes receivable at August 31, 2016, includes borrowings of $260,200 and accrued interest of $368,300. The $591,200 balance of the notes receivable at August 31, 2015, includes borrowings of $237,000 and accrued interest of $354,200. Sky Ranch Metropolitan District No. 5 Each year, beginning in 2012, the Company has entered into an Operation Funding Agreement with Sky Ranch Metropolitan District No. 5 obligating the Company to advance funding to the district for the district's operations and maintenance expenses for the then current calendar year. The District is expected to repay the amounts advanced pursuant to the funding agreements from future revenues from property tax assessments. All payments are subject to annual appropriations by the district in its absolute discretion. The advances by the Company accrue interest at a rate of 8% per annum from the date of the advance. In November 2014, but effective as of January 1, 2014, the Company entered into a Facilities Funding and Acquisition Agreement with Sky Ranch Metropolitan District No. 5 obligating the Company to either finance district improvements or to construct improvements on behalf of the district subject to reimbursement. Improvements subject to this agreement are determined pursuant to a mutually agreed upon budget. Each year in September, the partieis are to mutually determine the improvements required for the following year and finalize a budget by the end of October. Each advance or reimbursable expense accrues interest at a rate of 6% per annum. No payments are required by the district unless and until the district issues bonds in an amount sufficient to reimburse the Company for all or a portion of the advances and costs incurred. Pursuant to the Operation Funding Agreements and the Facilities Funding and Acquisition Agreement, the Company has provided funding to the district in the amounts of $8,500, $97,500 and $50,900 for the fiscal years 2016, 2015, and 2014, respectively. The $171,900 balance of the receivable at August 31, 2016, includes advances of $156,900 and accrued interest of $15,000. Upon the district’s ratification of the advances and related expenditures, the amount was reclassified to long-term and is recorded as part of Notes receivable – related parties. |
UNAUDITED QUARTERLY FINANCIAL D
UNAUDITED QUARTERLY FINANCIAL DATA | 12 Months Ended |
Aug. 31, 2016 | |
Unaudited Quarterly Financial Data | |
UNAUDITED QUARTERLY FINANCIAL DATA | Quarterly results of operations 2016 2015 Three months ended Three months ended 30 Nov 29 Feb 31 May 31 Aug 30 Nov 28 Feb 31 May 31 Aug (In thousands, except per share data) Total revenues $ 126 $ 76 $ 101 $ 149 $ 570 $ 372 $ 120 $ 135 Gross margin (7 ) (44 ) (34 ) 8 373 217 (19 ) (134 ) Operating loss (472 ) (557 ) (533 ) (618 ) 47 (324 ) (448 ) (952 ) Net income (loss) $ (97 ) $ (271 ) $ (422 ) $ (521 ) $ 10 $ (86 ) $ 30 $ (23,082 ) Basic and diluted income (loss) per share * $ (0.01 ) $ (0.02 ) $ (0.03 ) * * * $ (0.96 ) * Amount is less than $.01 per share The following item had a significant impact on the Companys net income (loss): ● In August 2015, the Company sold its remaining farm portfolio. The Company recognized a loss of $22.1 million. |
SUMMARY OF SIGNIFICANT ACCOUN22
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Aug. 31, 2016 | |
Presentation Of Interim Information Policies | |
Principles of Consolidation | The consolidated financial statements of the Company include the accounts of Pure Cycle Corporation and its majority-owned and controlled subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. |
Use of Estimates | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and cash equivalents include all highly liquid debt instruments with original maturities of three months or less. The Companys cash equivalents are comprised entirely of money market funds maintained at a reputable financial institution. At various times during the fiscal year ended August 31, 2016, the Companys main operating account exceeded federally insured limits. The Company has never suffered a loss due to such excess balance. |
Investments | Management determines the appropriate classification of its investments in certificates of deposit and debt and equity securities at the time of purchase and reevaluates such determinations each reporting period. Certificates of deposit and debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. The Company has $6.9 million of investments classified as held-to-maturity at August 31, 2016 which represent certificates of deposit and U.S. treasury notes with maturity dates after August 31, 2017. Debt securities for which the Company does not have the positive intent or ability to hold to maturity are classified as available-for-sale, along with any investments in equity securities. Securities classified as available-for-sale are marked-to-market at each reporting period. Changes in value on such securities are recorded as a component of Accumulated other comprehensive income (loss). |
Concentration of Credit Risk and Fair Value | Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and investments. From time to time, the Company places its cash in money market instruments, commercial paper obligations, corporate bonds and U.S. government treasury obligations. To date, the Company has not experienced significant losses on any of these investments. The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value. Cash and Cash Equivalents Trade Accounts Receivable Investments Fair Value Measurements. Accounts Payable Long-Term Financial Liabilities Water and Land Assets Water and Land Assets Participating Interests in Export Water Notes Receivable Related Parties Off-Balance Sheet Instruments Participating Interests in Export Water |
Cash Flows | The Company did not pay any interest during the fiscal year ended August 31, 2016. The Company paid $441,400 and $310,400 in interest during the fiscal years ended August 31, 2015 and 2014, respectively. In the fiscal year ended August 31, 2016, the Company paid $292,700 for alternative minimum tax the Company owed as a result of the sale of the Companys farm assets. The Company did not pay any income taxes during the fiscal years ended August 31, 2015 and 2014. |
Trade Accounts Receivable | The Company records accounts receivable net of allowances for uncollectible accounts. Excluded in trade accounts receivable are balances due from discontinued operations. The Company has not recorded an allowance for uncollectible accounts in receivables from continuing operations for either of the periods ended August 31, 2016 or 2015. The allowance for uncollectible accounts was determined based on specific review of all past due accounts. |
Long-Lived Assets | The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the eventual use of the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. |
Capitalized Costs of Water and Wastewater Systems and Depreciation and Depletion Charges | Costs to construct water and wastewater systems that meet the Companys capitalization criteria are capitalized as incurred, including interest, and depreciated on a straight-line basis over their estimated useful lives of up to 30 years. The Company capitalizes design and construction costs related to construction activities, and it capitalizes certain legal, engineering and permitting costs relating to the adjudication and improvement of its water assets. The Company depletes its 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. |
Revenue Recognition | The Company generates revenues through one line of business. Its revenues are derived through its wholesale water and wastewater business, which is described below. The Company generates revenues through its wholesale water and wastewater business predominately from three sources: (i) monthly wholesale water usage fees and wastewater service fees, (ii) one-time water and wastewater tap fees and construction fees, and (iii) consulting fees. Because these items are separately delivered, the Company accounts for each of the items separately, as described below. i. Monthly wholesale water and wastewater service fees – Water and Land Assets The Company recognizes wastewater processing revenues monthly based on 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, 2016, 2015 and 2014 are presented in the statements of operations. Costs of delivering water and providing wastewater service to customers are recognized as incurred. The Company delivered 33.9 million, 97.5 million and 190.1 million gallons of water to customers during the fiscal years ended August 31, 2016, 2015 and 2014, respectively. ii. Water and wastewater tap fees and construction fees Proceeds from tap fees and construction fees are deferred upon receipt and recognized in income either upon completion of construction of infrastructure or ratably over time, depending on whether the Company owns the infrastructure constructed with the proceeds or a customer owns the infrastructure constructed with the proceeds. Tap and construction fees derived from agreements in which the Company will not own the assets constructed with the fees are recognized as revenue using the percentage-of-completion method. Costs of construction of the assets when the Company will not own the assets are recorded as construction costs. Tap and construction fees derived from agreements for which the Company will own the infrastructure are recognized as revenues ratably over the estimated accounting service life of the facilities constructed, starting at completion of construction, which could be in excess of 30 years. Costs of construction of the assets when the Company will own the assets are capitalized and depreciated over their estimated economic lives. From time to time, the Company enters into water service agreements to provide water service to customers. The Company owns the facilities which store, treat, and deliver the water and amortizes the cost of these facilities over their useful lives. The Company recognized $14,300 of tap fee revenue in each of the three fiscal years ended August 31, 2016, 2015 and 2014. The Company recognized $41,500 of “Special Facilities” funding as revenue in each of the three fiscal years ended August 31, 2016, 2015, and 2014. As of August 31, 2016, the Company has deferred recognition of $1.1 million of tap and construction revenue from customer agreements, which will be recognized as revenue ratably through 2036. iii. Consulting fees |
Royalty and other obligations | Revenues from the sale of Export Water are shown gross of royalties payable to the Land Board. Revenues from the sale of water on the Lowry Range are shown net of the royalties to the Land Board and the amounts retained by the District. |
Oil and Gas Lease Payments | As further described in Note 4 Water and Land Assets As of August 31, 2016, the Company has deferred recognition of $19,000 of income related to the Rangeview Lease, which will be recognized as income ratably through June 2017. During the three months ended February 28, 2015, two wells were drilled within the Companys mineral interest. Beginning in March 2015, both wells were placed into service and began producing oil and gas and accruing royalties to the Company. In May 2015, certain gas collection infrastructure was extended to the property to allow the collection of gas from the wells and accrual of royalties attributable to gas production. During the fiscal years ended August 31, 2016 and 2015, the Company received $343,600 and $412,600, respectively, in royalties attributable to these two wells. |
Share-based Compensation | The Company maintains a stock option plan for the benefit of its employees and directors. The Company records share-based compensation costs which are measured at the grant date based on the fair value of the award and are recognized as expense over the applicable vesting period of the stock award using the straight-line method. The Company has adopted the alternative transition method for calculating the tax effects of share-based compensation which allows for a simplified method of calculating the tax effects of employee share-based compensation. Because the Company has a full valuation allowance on its deferred tax assets, the granting and exercise of stock options during the fiscal years ended August 31, 2016 and 2015 had no impact on the income tax provisions. The Company recognized $219,900, $240,000, and $251,900 of share-based compensation expenses during the fiscal |
Income Taxes | The Company uses a more-likely-than-not threshold for the recognition and de-recognition of tax positions, including any potential interest and penalties relating to tax positions taken by the Company. The Company does not have any significant unrecognized tax benefits as of August 31, 2016. The Company files income tax returns with the Internal Revenue Service and the State of Colorado. The tax years that remain subject to examination are fiscal 2012 through fiscal 2015. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. The Companys policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. At August 31, 2016, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the fiscal years ended August 31, 2016, 2015 or 2014. |
Discontinued Operations | In August 2015, the Company sold approximately 14,600 acres of irrigated farm land and related Arkansas River water rights, which were substantially all of the assets comprising the Company’s agricultural segment. Pursuant to the terms of the purchase and sale agreement, the Company continued to manage and receive the lease income until December 31, 2015. As a consequence of the sale, the operating results and the assets and liabilities of the discontinued operations, which formerly comprised the agricultural segment, are presented separately in the Company’s consolidated financial statements. Summarized financial information for the discontinued agricultural business is shown below. Prior period balances have been reclassified to present the operations of the agricultural business as a discontinued operation. Discontinued Operations Statements of Operations Fiscal years ended August 31, 2016 2015 2014 Farm revenues $267,472 $1,127,155 $1,068,026 Farm expenses (77,132) (126,279) (88,105) Gross profit 190,340 1,000,876 979,921 General and administrative expenses (313,389) (760,192) (911,230) Impairment of land and water rights held for sale - - (402,657) Operating (loss) profit (123,049) 240,684 (333,966) Finance charges 38,428 21,710 14,392 (Loss) gain on sale of farm assets 4,273 (22,108,145) 1,407,326 Interest expense (1) - (390,505) (239,200) Interest imputed on the Tap Participation Fee payable to HP A&M (2) - (23,816) (1,445,509) Taxes - (292,729 ) - Loss from discontinued operations, net of taxes $(80,348) $(22,552,801) $(596,957) (1) Interest expense represents interest accrued related to notes the Company had on its farm assets prior to the sale. All notes associated with the farms have been paid off, and as a result the Company no longer incurs interest on such notes. (2) Imputed interest represents an estimate of the interest accrued on the Tap Participation Fee payable to High Plains A&M, LLC (“HP A&M”), which was eliminated as a result of the settlement with HP A&M during the three months ended February 28, 2015. As a result, the Company no longer accrues interest related to the Tap Participation Fee. The Company anticipates continued expenses through the end of calendar 2016 related to the discontinued operations. The Company will continue to incur expenses related to the remaining agricultural land the Company continues to own and for the purpose of collecting outstanding receivables. The individual assets and liabilities of the discontinued agricultural business are combined in the captions “Assets of discontinued operations” and “Liabilities of discontinued operations” in the consolidated balance sheets. The carrying amounts of the major classes of assets and liabilities included part of the discontinued business are presented in the following table: Discontinued Operations Balance Sheets August 31, 2016 2015 Assets: Trade accounts receivable $227,060 $549,993 Escrow receivable - 1,342,250 Land held for sale (1) 450,347 - Prepaid expenses 2,880 65,309 Total assets $680,287 $1,957,552 Liabilities: Accounts payable $- $25,704 Accrued liabilities 4,394 90,725 Deferred revenues - 900 Total liabilities $4,394 $117,329 (1) Land Held for Sale. |
Loss per Common Share | Loss per common share is computed by dividing net loss by the weighted average number of shares outstanding during each period. Common stock options and warrants aggregating 338,100, 312,100, and 315,100 common share equivalents as of August 31, 2016, 2015 and 2014, respectively, have been excluded from the calculation of loss per common share as their effect is anti-dilutive. |
Recently Issued Accounting Pronouncements | The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Companys financial reporting, the Company undertakes a study to determine the consequence of the change to its consolidated financial statements and ensure that there are proper controls in place to ascertain that the Companys consolidated financial statements properly reflect the change. New pronouncements assessed by the Company recently are discussed below: In May 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. Revenue from Contracts with Customers In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing Revenue from Contracts with Customers, In March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) Revenue from Contracts with Customers In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity |
SUMMARY OF SIGNIFICANT ACCOUN23
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Summary Of Significant Accounting Policies Tables | |
Discontinued operations | Discontinued Operations Statements of Operations Fiscal years ended August 31, 2016 2015 2014 Farm revenues $267,472 $1,127,155 $1,068,026 Farm expenses (77,132) (126,279) (88,105) Gross profit 190,340 1,000,876 979,921 General and administrative expenses (313,389) (760,192) (911,230) Impairment of land and water rights held for sale - - (402,657) Operating (loss) profit (123,049) 240,684 (333,966) Finance charges 38,428 21,710 14,392 (Loss) gain on sale of farm assets 4,273 (22,108,145) 1,407,326 Interest expense (1) - (390,505) (239,200) Interest imputed on the Tap Participation Fee payable to HP A&M (2) - (23,816) (1,445,509) Taxes - (292,729 ) - Loss from discontinued operations, net of taxes $(80,348) $(22,552,801) $(596,957) (1) Interest expense represents interest accrued related to notes the Company had on its farm assets prior to the sale. All notes associated with the farms have been paid off, and as a result the Company no longer incurs interest on such notes. (2) Imputed interest represents an estimate of the interest accrued on the Tap Participation Fee payable to High Plains A&M, LLC (“HP A&M”), which was eliminated as a result of the settlement with HP A&M during the three months ended February 28, 2015. As a result, the Company no longer accrues interest related to the Tap Participation Fee. Discontinued Operations Balance Sheets August 31, 2016 2015 Assets: Trade accounts receivable $227,060 $549,993 Escrow receivable - 1,342,250 Land held for sale (1) 450,347 - Prepaid expenses 2,880 65,309 Total assets $680,287 $1,957,552 Liabilities: Accounts payable $- $25,704 Accrued liabilities 4,394 90,725 Deferred revenues - 900 Total liabilities $4,394 $117,329 (1) Land Held for Sale. |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Fair Value Measurements Tables | |
Schedule of fair value of assets and liabilities measured on a recurring basis | Fair Value Measurement Using: Cost / Other Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs Accumulated Unrealized Gains and Fair Value Value (Level 1) (Level 2) (Level 3) (Losses) Money Market $4,184,900 $4,184,900 $4,184,900 $- $- $- Available for sale $23,176,500 $23,173,400 $- $23,176,500 $- $3,100 |
WATER AND LAND ASSETS (Tables)
WATER AND LAND ASSETS (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Investments In Water Water Systems Land And Improvements Tables | |
Schedule of water and water systems | August 31, 2016 August 31, 2015 Costs Accumulated Depreciation and Depletion Costs Accumulated Depreciation and Depletion Rangeview water supply $ 14,444,600 $ (9,400 ) $ 14,444,600 $ (8,800 ) Sky Ranch water rights and other costs 6,607,400 (334,500 ) 6,440,800 (194,600 ) Fairgrounds water and water system 2,899,900 (886,800 ) 2,899,900 (798,700 ) Rangeview water system 1,624,800 (152,800 ) 1,256,300 (110,300 ) Water supply other 3,703,000 (297,800 ) 3,649,800 (193,900 ) Construction in progress 723,500 - 323,500 - Totals 30,003,200 (1,681,300 ) 29,014,900 (1,306,300 ) Net investments in water and water systems $ 28,321,900 $ 27,708,600 |
PARTICIPATING INTERESTS IN EX26
PARTICIPATING INTERESTS IN EXPORT WATER (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Participating Interests In Export Water Tables | |
Schedule of remaining third party obligation | Export Water Proceeds Received Initial Export Water Proceeds to Pure Cycle Total Potential Third-party Obligation Participating Interests Liability Contingency Original balances $ $ 218,500 $ 31,807,700 $ 11,090,600 $ 20,717,100 Activity from inception until August 31, 2014: Acquisitions 30,428,900 (30,428,900 ) (10,622,100 ) (19,806,800 ) Option payments - Sky Ranch and The Hills at Sky Ranch 110,400 (42,300 ) (68,100 ) (23,800 ) (44,300 ) Arapahoe County tap fees (1) 533,000 (373,100 ) (159,900 ) (55,800 ) (104,100 ) Export Water sale payments 361,500 (262,800 ) (98,700 ) (34,300 ) (64,400 ) Balance at August 31, 2014 1,004,900 29,969,200 1,052,100 354,600 697,500 Fiscal 2015 activity: Export Water sale payments 207,900 (183,200 ) (24,700 ) (8,600 ) (16,100 ) Balance at August 31, 2015 1,212,800 29,786,000 1,027,400 346,000 681,400 Fiscal 2016 activity: Export Water sale payments 49,200 (43,300 ) (5,900 ) (2,000 ) (3,900 ) Balance at August 31, 2016 $ 1,262,000 $ 29,742,700 $ 1,021,500 $ 344,000 $ 677,500 (1) The Arapahoe County tap fees are less $34,522 in royalties paid to the Land Board. |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Shareholders Equity Tables | |
Schedule of stock option activity | Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Approximate Aggregate Intrinsic Value Outstanding at beginning of period 312,000 $ 5.10 Granted 36,000 $ 4.26 Exercised - $ - Forfeited or expired (10,000 ) $ 13.25 Outstanding at August 31, 2016 338,000 $ 4.77 5.68 $ 248,000 Options exercisable at August 31, 2016 302,000 $ 4.83 5.36 $ 227,100 |
Schedule of activity and value of non-vested options | Number of Options Weighted-Average Grant Date Fair Value Non-vested options outstanding at beginning of period 59,333 $ 3.66 Granted 36,000 2.89 Vested (59,333 ) 3.66 Forfeited - - Non-vested options outstanding at August 31, 2016 36,000 $ 2.89 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Income Taxes Tables | |
Schedule of deferred tax assets | For the Fiscal Years Ended August 31, 2016 2015 Deferred tax assets: Net operating loss carryforwards $2,393,200 $1,816,200 Deferred revenue 344,300 503,300 Depreciation and depletion 247,400 320,300 Other 65,600 34,200 Valuation allowance (3,050,500) (2,674,000) Net deferred tax asset $- $- |
Schedule of income tax reconciliation | For the Fiscal Years Ended August 31, 2016 2015 2014 Expected benefit from federal taxes at statutory rate of 34% $(420,300) $(195,500) $97,100 State taxes, net of federal benefit (40,700) (19,000) 9,400 Expiration of net operating losses - - 89,400 Permanent and other differences 84,500 91,900 96,500 Change in valuation allowance 376,500 122,600 (292,400) Total income tax expense / (benefit) $- $- $- |
RELATED PARTY TRANSACTIONS (Tab
RELATED PARTY TRANSACTIONS (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Related Party Transactions Tables | |
Related party transactions | Estimated WISE Costs For the Fiscal Years Ended August 31, 2017 2018 2019 2020 2021 Operations $ 96,600 $ 96,600 $ 96,600 $ 96,600 $ 96,600 Water Delivery 45,000 225,000 495,000 675,000 855,000 Capital 464,000 339,000 464,000 1,339,200 57,100 Other 43,500 23,600 86,600 23,600 23,600 $ 649,100 $ 684,200 $ 1,142,200 $ 2,134,400 $ 1,032,300 |
UNAUDITED QUARTERLY FINANCIAL30
UNAUDITED QUARTERLY FINANCIAL DATA (Tables) | 12 Months Ended |
Aug. 31, 2016 | |
Unaudited Quarterly Financial Data Tables | |
Quarterly results of operations | Quarterly results of operations 2016 2015 Three months ended Three months ended 30 Nov 29 Feb 31 May 31 Aug 30 Nov 28 Feb 31 May 31 Aug (In thousands, except per share data) Total revenues $ 126 $ 76 $ 101 $ 149 $ 570 $ 372 $ 120 $ 135 Gross margin (7 ) (44 ) (34 ) 8 373 217 (19 ) (134 ) Operating loss (472 ) (557 ) (533 ) (618 ) 47 (324 ) (448 ) (952 ) Net income (loss) $ (97 ) $ (271 ) $ (422 ) $ (521 ) $ 10 $ (86 ) $ 30 $ (23,082 ) Basic and diluted income (loss) per share * $ (0.01 ) $ (0.02 ) $ (0.03 ) * * * $ (0.96 ) * Amount is less than $.01 per share |
ORGANIZATION (Details Narrative
ORGANIZATION (Details Narrative) - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | Aug. 31, 2013 |
Organization Details Narrative | ||||
Cash and cash equivalents | $ 4,697,288 | $ 37,089,041 | $ 1,749,558 | $ 2,448,363 |
Working capital | $ 28,600,000 |
SUMMARY OF SIGNIFICANT ACCOUN32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 12 Months Ended | |||
Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | ||
Summary Of Significant Accounting Policies Details | ||||
Farm revenues | $ 267,472 | $ 1,127,155 | $ 1,068,026 | |
Farm expenses | (77,132) | (126,279) | (88,105) | |
Gross profit | 190,340 | 1,000,876 | 979,921 | |
General and administrative expenses | (313,389) | (760,192) | (911,230) | |
Impairment of land and water rights held for sale | 0 | 0 | (402,657) | |
Operating (loss) profit | (123,049) | 240,684 | (333,966) | |
Finance charges | 38,428 | 21,710 | 14,392 | |
(Loss) gain on sale of farm assets | 4,273 | (22,108,145) | 1,407,326 | |
Interest expense | [1] | 0 | (390,505) | (239,200) |
Interest imputed on the Tap Participation Fee payable to HP A&M | [2] | 0 | (23,816) | (1,445,509) |
Taxes | 0 | (292,729) | 0 | |
Loss from discontinued operations | (80,348) | (22,552,801) | $ (596,957) | |
Assets: | ||||
Trade accounts receivable | 227,060 | 549,993 | ||
Escrow receivable | 0 | 1,342,250 | ||
Land held for sale | [3] | 450,347 | 0 | |
Prepaid expenses | 2,880 | 65,309 | ||
Total assets | 680,287 | 1,957,552 | ||
Liabilities: | ||||
Accounts payable | 0 | 25,704 | ||
Accrued liabilities | 4,394 | 90,725 | ||
Deferred revenues | 0 | 900 | ||
Total liabilities | $ 4,394 | $ 117,329 | ||
[1] | Interest expense represents interest accrued related to notes the Company had on its farm assets prior to the sale. All notes associated with the farms have been paid off, and as a result the Company no longer incurs interest on such notes. | |||
[2] | Imputed interest represents an estimate of the interest accrued on the Tap Participation Fee payable to High Plains A&M, LLC ("HP A&M"), which was eliminated as a result of the settlement with HP A&M during the three months ended February 28, 2015. As a result, the Company no longer accrues interest related to the Tap Participation Fee. | |||
[3] | During the fiscal quarter ended November 30, 2015, the Company purchased three farms totaling 700 acres for approximately $450,300. The farms were acquired to correct dry-up covenant issues related to water only farms to obtain the release of the escrow funds related to the Company's farm sale to Arkansas River Farms, LLC. The Company intends to sell the farms within the next fiscal year. |
SUMMARY OF SIGNIFICANT ACCOUN33
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 12 Months Ended | ||
Aug. 31, 2016USD ($)sharesgal | Aug. 31, 2015USD ($)sharesgal | Aug. 31, 2014USD ($)sharesgal | |
Water delivered to customers | gal | 33,900,000 | 97,500,000 | 190,100,000 |
Water tap fees recognized | $ 14,294 | $ 14,294 | $ 14,294 |
Special facility (deferred construction) funding recognized | $ 41,508 | $ 41,508 | $ 41,508 |
Antidilutive securities excluded from earnings per share calculation | shares | 338,100 | 312,100 | 315,100 |
Interest | $ 0 | $ 441,400 | $ 310,400 |
Allowance for uncollectible accounts | 0 | 0 | |
Stock-based compensation expense | 219,886 | 239,986 | 251,915 |
Oil And Gas Lease | |||
Royalty revenue | 343,600 | 412,600 | |
Lease revenue from up-front payments | 360,800 | $ 645,700 | $ 525,400 |
Deferred revenue recognizable | $ 19,000 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) | Aug. 31, 2016USD ($) |
Fair Value | |
Money market | $ 4,184,900 |
Available for sale | 23,176,500 |
Cost/Other Value | |
Money market | 4,814,900 |
Available for sale | 23,173,400 |
Accumulated Unrealized Gains and (Losses) | |
Money market | 0 |
Available for sale | 3,100 |
Quoted Prices in Active Markets for Identical Assets (Level 1) | |
Money market | 4,184,900 |
Available for sale | 0 |
Significant Other Observable Inputs (Level 2) | |
Money market | 0 |
Available for sale | 23,176,500 |
Significant Unobservable Inputs (Level 3) | |
Money market | 0 |
Available for sale | $ 0 |
WATER AND LAND ASSETS (Details)
WATER AND LAND ASSETS (Details) - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 |
Costs | $ 30,003,200 | $ 29,014,900 |
Accumulated Depreciation and Depletion | (1,681,300) | (1,306,300) |
Net investments in water and water systems | 28,321,926 | 27,708,595 |
Rangeview Water Supply | ||
Costs | 14,444,600 | 14,444,600 |
Accumulated Depreciation and Depletion | (9,400) | (8,800) |
Sky Ranch Water Rights And Other Costs | ||
Costs | 6,607,400 | 6,440,800 |
Accumulated Depreciation and Depletion | (334,500) | (194,600) |
Fairgrounds Water And Water System | ||
Costs | 2,899,900 | 2,899,900 |
Accumulated Depreciation and Depletion | (886,800) | (798,700) |
Rangeview Water System | ||
Costs | 1,624,800 | 1,256,300 |
Accumulated Depreciation and Depletion | (152,800) | (110,300) |
Water Supply Other | ||
Costs | 3,703,000 | 3,649,800 |
Accumulated Depreciation and Depletion | (297,800) | (193,900) |
Construction in Progress | ||
Costs | 723,500 | 323,500 |
Accumulated Depreciation and Depletion | $ 0 | $ 0 |
WATER AND LAND ASSETS (Detail N
WATER AND LAND ASSETS (Detail Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | |
Depletion | $ 500 | $ 7,000 | $ 4,400 |
Depreciation | $ 419,600 | $ 340,300 | $ 192,200 |
PARTICIPATING INTERESTS IN EX37
PARTICIPATING INTERESTS IN EXPORT WATER (Details) - USD ($) | 12 Months Ended | 48 Months Ended | |
Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | |
Export Water Proceeds Received | |||
Remaining Third Party Obligation: | |||
Balance, original | $ 0 | ||
Balance, beginning | $ 1,212,800 | $ 1,004,300 | |
Acquisitions | 0 | ||
Option payments | 110,400 | ||
Arapahoe Tap fees | 533,000 | ||
Export Water Sale Payments | 49,200 | 207,900 | 361,500 |
Balance, ending | 1,262,000 | 1,212,800 | 1,004,300 |
Initial Export Water Proceeds To Pure Cycle | |||
Remaining Third Party Obligation: | |||
Balance, original | 218,500 | ||
Balance, beginning | 29,786,000 | 29,969,200 | |
Acquisitions | 30,428,900 | ||
Option payments | (42,300) | ||
Arapahoe Tap fees | (373,100) | ||
Export Water Sale Payments | (43,300) | (183,200) | (262,800) |
Balance, ending | 29,742,700 | 29,786,000 | 29,969,200 |
Total Potential Third Party Obligation | |||
Remaining Third Party Obligation: | |||
Balance, original | 31,807,700 | ||
Balance, beginning | 1,027,400 | 1,052,100 | |
Acquisitions | (30,428,900) | ||
Option payments | (68,100) | ||
Arapahoe Tap fees | (159,900) | ||
Export Water Sale Payments | (5,900) | (24,700) | (98,700) |
Balance, ending | 1,021,500 | 1,027,400 | 1,052,100 |
Participating Interests Liability | |||
Remaining Third Party Obligation: | |||
Balance, original | 11,090,600 | ||
Balance, beginning | 346,000 | 354,600 | |
Acquisitions | (10,622,100) | ||
Option payments | (23,800) | ||
Arapahoe Tap fees | (55,800) | ||
Export Water Sale Payments | (2,000) | (8,600) | (34,300) |
Balance, ending | 344,000 | 346,000 | 354,600 |
Contingency | |||
Remaining Third Party Obligation: | |||
Balance, original | 2,717,100 | ||
Balance, beginning | 681,400 | 697,500 | |
Acquisitions | (19,806,800) | ||
Option payments | (44,300) | ||
Arapahoe Tap fees | (104,100) | ||
Export Water Sale Payments | (3,900) | (16,100) | (64,400) |
Balance, ending | $ 677,500 | $ 681,400 | $ 697,500 |
ACCRUED LIABILITIES (Detail Nar
ACCRUED LIABILITIES (Detail Narrative) - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 |
Accrued Liabilities Detail Narrative | ||
Accrued liabilities | $ 242,624 | $ 499,808 |
Accrued compensation | 160,000 | 400,000 |
Estimated property taxes | 5,700 | 4,800 |
Professional Fees | 18,000 | 52,500 |
Operating payables | $ 28,900 | $ 42,500 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) | 12 Months Ended |
Aug. 31, 2016USD ($)$ / sharesshares | |
Number of options | |
Outstanding, beginning | shares | 312,000 |
Granted | shares | 36,000 |
Exercised | shares | 0 |
Forfeited or expired | shares | (10,000) |
Outstanding, ending | shares | 338,000 |
Exercisable | shares | 302,000 |
Weighted average exercise price | |
Outstanding, beginning | $ / shares | $ 5.10 |
Granted | $ / shares | 4.26 |
Exercised | $ / shares | 0 |
Forfeited or expired | $ / shares | 13.25 |
Outstanding, ending | $ / shares | 4.77 |
Exercisable | $ / shares | $ 4.83 |
Weighted average remaining contractual term | |
Outstanding, ending | 5 years 8 months 5 days |
Exercisable | 5 years 4 months 10 days |
Approximate aggregate intrinsic value | |
Outstanding, ending | $ | $ 248,000 |
Exercisable | $ | $ 227,100 |
SHAREHOLDERS' EQUITY (Details 1
SHAREHOLDERS' EQUITY (Details 1) - $ / shares | 12 Months Ended | ||
Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | |
Number of options | |||
Outstanding, beginning | 59,333 | ||
Granted | 36,000 | ||
Vested | (59,333) | ||
Forfeited | 0 | ||
Outstanding, ending | 36,000 | 59,333 | |
Weighted average grant date fair value | |||
Outstanding, beginning | $ 3.66 | ||
Granted | 2.89 | $ 2.78 | $ 4.09 |
Vested | 3.66 | ||
Forfeited | 0 | ||
Outstanding, ending | $ 2.89 | $ 3.66 |
SHAREHOLDERS' EQUITY (Details N
SHAREHOLDERS' EQUITY (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | |
Fair value of options vested | $ 216,900 | $ 280,700 | $ 219,200 |
Weighted average grant date fair value of options granted | $ 2.89 | $ 2.78 | $ 4.09 |
Stock-based compensation | $ 219,900 | $ 240,000 | $ 251,900 |
Series B Preferred stock, liquidation preference value | $ 432,513 | $ 432,513 |
SIGNIFICANT CUSTOMERS (Details
SIGNIFICANT CUSTOMERS (Details Narrative) | 12 Months Ended | ||
Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | |
Sales | The District | |||
Concentration Risk Percentage | 69.00% | 19.00% | 9.00% |
Sales | The District's Significant Customer | |||
Concentration Risk Percentage | 55.00% | 16.00% | 7.00% |
Sales | Oil and Gas Industry Customer | |||
Concentration Risk Percentage | 1.00% | 75.00% | 88.00% |
Accounts Receivable | The District | |||
Concentration Risk Percentage | 74.00% | 87.00% | |
Accounts Receivable | The District's Significant Customer | |||
Concentration Risk Percentage | 63.00% | 77.00% |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | Aug. 31, 2016 | Aug. 31, 2015 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 2,393,200 | $ 1,816,200 |
Deferred revenue | 344,300 | 503,300 |
Depreciation and depletion | 247,400 | 320,300 |
Other | 65,600 | 34,200 |
Valuation allowance | (3,050,500) | (2,674,000) |
Net deferred tax asset | $ 0 | $ 0 |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | ||
Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | |
Income Taxes Details 1 | |||
Expected benefit from federal taxes at statutory rate of 34% | $ (420,300) | $ (195,500) | $ 97,100 |
State taxes, net of federal benefit | (40,700) | (19,000) | 9,400 |
Expiration of net operating losses | 0 | 0 | 89,400 |
Permanent and other differences | 84,500 | 91,900 | 96,500 |
Change in valuation allowance | 376,500 | 122,600 | (292,400) |
Total income tax expense / (benefit) | $ 0 | $ 0 | $ 0 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | |
Income Taxes Details Narrative | |||
Net operating loss carryforwards | $ 6,500,000 | ||
Net operating loss carryforwards expired | $ 0 | $ 0 | $ 239,600 |
401(k) PLAN (Details Narrative)
401(k) PLAN (Details Narrative) - USD ($) | 12 Months Ended | ||
Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | |
K Plan Details Narrative | |||
Administrative fees paid for plan | $ 5,000 | $ 3,800 | $ 3,600 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) | Aug. 31, 2016USD ($) |
2,017 | $ 649,100 |
2,018 | 684,200 |
2,019 | 1,142,200 |
2,020 | 2,134,400 |
2,021 | 1,032,300 |
Operations | |
2,017 | 96,600 |
2,018 | 96,600 |
2,019 | 96,600 |
2,020 | 96,600 |
2,021 | 96,600 |
Water Delivery | |
2,017 | 45,000 |
2,018 | 225,000 |
2,019 | 495,000 |
2,020 | 675,000 |
2,021 | 855,000 |
Capital | |
2,017 | 464,000 |
2,018 | 339,000 |
2,019 | 464,000 |
2,020 | 1,339,200 |
2,021 | 57,100 |
Other | |
2,017 | 43,500 |
2,018 | 23,600 |
2,019 | 86,600 |
2,020 | 23,600 |
2,021 | $ 23,600 |
UNAUDITED QUARTERLY FINANCIAL48
UNAUDITED QUARTERLY FINANCIAL DATA (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||||||||||||
Aug. 31, 2016 | May 31, 2016 | Feb. 29, 2016 | Nov. 30, 2015 | Aug. 31, 2015 | May 31, 2015 | Feb. 28, 2015 | Nov. 30, 2014 | Aug. 31, 2016 | Aug. 31, 2015 | Aug. 31, 2014 | |||||
Unaudited Quarterly Financial Data Details | |||||||||||||||
Total revenues | $ 149 | $ 101 | $ 76 | $ 126 | $ 135 | $ 120 | $ 372 | $ 570 | $ 452,161 | $ 1,196,569 | $ 2,023,114 | ||||
Gross margin | 8 | (34) | (44) | (7) | (134) | (19) | 217 | 373 | (76,598) | 437,165 | 1,247,948 | ||||
Operating loss | (618) | (533) | (557) | (472) | (952) | (448) | (324) | 47 | (2,179,775) | (1,676,947) | (1,244,492) | ||||
Net income (loss) | $ (521) | $ (422) | $ (271) | $ (97) | $ (23,082) | $ 30 | $ (86) | $ 10 | $ (1,310,607) | $ (23,127,947) | $ (311,444) | ||||
Basic and diluted income (loss) per share | $ (0.03) | $ (0.02) | $ (0.01) | [1] | $ (.96) | [1] | [1] | [1] | $ (0.06) | $ (0.96) | $ (0.01) | ||||
[1] | Amount is less than $.01 per share |