☒ |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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PURE CYCLE CORPORATION
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(Exact name of registrant as specified in its charter)
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Colorado
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84-0705083
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification Number)
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34501 E. Quincy Avenue, Bldg. 34, Watkins, CO
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80137
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(Address of principal executive offices)
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(Zip Code)
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(303) 292 – 3456
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(Registrant’s telephone number, including area code)
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Common Stock 1/3 of $.01 par value
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PCYO
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The NASDAQ Stock Market
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(Title of each class)
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(Trading Symbol(s))
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(Name of each exchange on which registered)
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Large accelerated filer ☐
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Accelerated filer ☒
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Non-accelerated filer ☐
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Smaller reporting company ☒
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Emerging growth company ☐
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Item
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Page
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Part I
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1
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4
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1A.
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18
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1B.
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28
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2
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28
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3
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28
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4
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28
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Part II
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5
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29
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6
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31 | |
7
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32
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7A.
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42
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8
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43
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9
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44
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9A.
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44
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9B.
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45
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Part III
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10
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46
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11
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46
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12
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46
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13
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46
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14
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46
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Part IV
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15
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47
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16
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47
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52
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● |
factors affecting demand for water;
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● |
our competitive advantage;
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● |
plans to develop additional water assets within the Denver area;
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● |
future water supply needs in Colorado and how such needs will be met;
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● |
anticipated increases in residential and commercial demand for water services and competition for these services;
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● |
estimated population increases in the Denver metropolitan area and the South Platte River basin;
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● |
plans for the use and development of our water assets and potential delays;
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● |
plans to provide water for drilling and hydraulic fracturing of oil and gas wells;
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● |
changes in oil and gas drilling activity on our property, on the Lowry Range, or in the surrounding areas;
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● |
regional cooperation among area water providers in the development of new water supplies and water storage, transmission and distribution systems as the most cost-effective way to expand and enhance service capacities;
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● |
the impact of individual housing and economic cycles on the number of connections we can serve with our water;
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● |
increases in future water tap fees;
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● |
negotiation of payment terms for fees;
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● |
plans for development of our Sky Ranch property;
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● |
the number of units planned for the first and second phase of development at Sky Ranch;
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● |
the timing for the completion of construction of finished lots at Sky Ranch;
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● |
the number of lots for which delivery is expected in fiscal years 2020 and 2021;
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● |
estimated costs of earthwork, erosion control, streets, drainage and landscaping at Sky Ranch;
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● |
the estimated amount of reimbursable costs for Sky Ranch;
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● |
capital required and costs to develop the first and second phase of Sky Ranch;
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● |
estimated costs of improvements to be funded by Pure Cycle and constructed by the Sky Ranch Community Authority Board;
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● |
anticipated revenues and margins from development of our Sky Ranch property;
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● |
estimated time period for build out of Sky Ranch and sufficiency of tap fees to fund infrastructure costs;
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● |
the impact of any downturn in the homebuilding and credit markets on our business and financial condition;
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● |
the sufficiency of our working capital and financing sources to fund our operations;
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● |
estimated supply capacity of our water assets;
|
● |
need for additional production capacity;
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● |
costs and plans for treatment of water and wastewater;
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● |
plans to use raw water, effluent water or reclaimed water for agricultural and irrigation uses;
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● |
participation in regional water projects, including “WISE” and the timing and availability of water from, and projected costs related to, WISE;
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● |
our ability to assist Colorado “Front Range” water providers in meeting current and future water needs;
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● |
timing of and interpretation of royalties to the State Board of Land Commissioners;
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● |
the number of new water connections needed to recover the costs of our water supplies;
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● |
the adequacy of the provisions in the “Lease” for the Lowry Range to cover present and future circumstances;
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● |
factors that may impact labor and material costs;
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● |
loss of key employees and hiring additional personnel for our operations;
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● |
anticipated timing and amount of, and sources of funding for, (i) capital expenditures to construct infrastructure and increase production capacities, (ii) compliance with water, environmental and other regulations, and (iii)
operations, including delivery and treatment of water and wastewater;
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● |
the ability of our deep water well enhancement tool and process to increase efficiency of wells and our plans to use the tool when we drill new water wells and to market the tool to area water providers;
|
● |
plans to drill water walls into aquifers located beneath the Lowry Range and the timing and estimated costs of such a build out;
|
● |
our ability to reduce the amount of up-front construction costs for water and wastewater systems;
|
● |
ability to generate working capital and market our water assets;
|
● |
plans to sell and estimated value of certain farms, and plans with respect to related mineral interests;
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● |
service life of constructed facilities;
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● |
use of third parties to construct water and wastewater facilities and Sky Ranch lot improvements;
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● |
plans to utilize fixed-price contracts;
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● |
payment of amounts due from the Rangeview District and the Sky Ranch Districts;
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● |
capital expenditures for investing in expenses and assets of the Rangeview District;
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● |
the impact of water quality, solid waste disposal and environmental regulations on our financial condition and results of operations;
|
● |
environmental clean-up at the Lowry Range by the U.S. Army Corps of Engineers;
|
● |
our ability to comply with permit requirements and environmental regulations and the cost of such compliance;
|
● |
our ability to meet customer demands in a sustainable and environmentally friendly way;
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● |
the recoverability of construction and acquisition costs from rates;
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● |
our belief that we are not a public utility under Colorado law;
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● |
changes in unrecognized tax positions;
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● |
plans to retain earnings and not pay dividends;
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● |
forfeitures of option grants, vesting of non-vested options and the fair value of option awards;
|
● |
the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting;
|
● |
accounting estimates and the impact of new accounting pronouncements;
|
● |
future fluctuations in the price and trading volume of our common stock;
|
● |
our plans to remediate material weaknesses in our internal control over financial reporting; and
|
● |
timing of the filing of our proxy statement.
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● |
the timing of new home construction and other development in the areas where we may sell our water, which in turn may be impacted by credit availability;
|
● |
population growth;
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● |
changes in employment levels, job and personal income growth and household debt-to-income levels;
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● |
changes in consumer confidence generally and confidence of potential homebuyers in particular;
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● |
the ability of existing homeowners to sell their existing homes at prices that are acceptable to them;
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● |
changes in the supply of available new or existing homes and other housing alternatives, such as apartments and other residential rental property;
|
● |
timing of oil and gas development in the areas where we sell our water;
|
● |
general economic conditions;
|
● |
the market price of water;
|
● |
the market price of oil and gas;
|
● |
changes in customer consumption patterns;
|
● |
changes in applicable statutory and regulatory requirements;
|
● |
changes in governmental policies and procedures, including with respect to land use and environmental and tax matters;
|
● |
changes in interest rates;
|
● |
private and federal mortgage financing programs and lending practices;
|
● |
uncertainties in the estimation of water available under decrees;
|
● |
uncertainties in the estimation of costs of delivery of water and treatment of wastewater;
|
● |
uncertainties in the estimation of the service life of our systems;
|
● |
uncertainties in the estimation of costs of construction projects;
|
● |
the strength and financial resources of our competitors;
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● |
our ability to find and retain skilled personnel;
|
● |
climatic and weather conditions, including floods, droughts and freezing conditions;
|
● |
labor relations;
|
● |
turnover of elected and appointed officials and delays caused by political concerns and government procedures;
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● |
availability and cost of labor, material and equipment;
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● |
delays in anticipated permit and construction dates;
|
● |
engineering and geological problems;
|
● |
environmental risks and regulations;
|
● |
our ability to raise capital;
|
● |
our ability to negotiate contracts with new customers;
|
● |
uncertainties in water court rulings;
|
● |
unauthorized access to confidential information and data on our information technology systems and security and data breaches; and
|
● |
the factors described under “Risk Factors” in this Annual Report on Form 10-K.
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● |
Acre Foot – approximately 326,000 gallons of water, or enough water to cover an acre of ground with one foot of water. For some instances herein, as context dictates, the term “acre feet” is used to designate an annual decreed amount
of water available during a typical year.
|
● |
Non-Tributary Groundwater – groundwater located outside the boundaries of any designated groundwater basins in existence on January 1, 1985, the withdrawal of which will not, within one hundred years of continuous withdrawal, deplete
the flow of a natural stream at an annual rate greater than one-tenth of one percent of the annual rate of withdrawal.
|
● |
Not Non-Tributary Groundwater – statutorily defined as groundwater located within those portions of the Dawson, Denver, Arapahoe, and Laramie Fox-Hill aquifers outside of designated basins that does not meet the definition of
“non-tributary.”
|
● |
Retail Facilities – facilities that distribute water to and collect wastewater from an individual subdivision or community. Developers are typically responsible for the funding and construction of Retail Facilities. Once we certify
that the Retail Facilities have been constructed in accordance with our design criteria, the developer dedicates the Retail Facilities to a quasi-municipal political subdivision of the state, and we operate and maintain the facilities on
behalf of such political subdivision.
|
● |
Section – a parcel of land equal to one square mile and containing 640 acres.
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● |
SFE – a single family equivalent unit. One SFE is a customer – whether residential, commercial or industrial – that imparts a demand on our water or wastewater systems similar to the demand of a family of four persons living in a
single-family house on a standard sized lot. One SFE is assumed to have a water demand of approximately 0.4 acre feet per year and to contribute wastewater flows of approximately 300 gallons per day.
|
● |
Special Facilities – facilities that are required to extend services to an individual development and are not otherwise classified as a typical “Wholesale Facility” or “Retail Facility.” Temporary infrastructure required prior to
construction of permanent water and wastewater systems or transmission pipelines to transfer water from one location to another are examples of Special Facilities. We typically design and construct the Special Facilities using funds
provided by the developer in addition to the normal rates, fees and charges that we collect from our customers. We are typically responsible for the operation and maintenance of the Special Facilities upon completion.
|
● |
Tributary Groundwater – all water located in an aquifer that is hydrologically connected to a natural stream such that depletion has an impact on the surface stream.
|
● |
Tributary Surface Water – water on the surface of the ground flowing in a stream or river system.
|
● |
Wholesale Facilities – facilities that serve an entire service area or major regions or portions thereof. Wells, treatment plants, pump stations, tanks, reservoirs, transmission pipelines, and major sewage lift stations are typical
examples of Wholesale Facilities. We own, design, construct, operate, maintain and repair Wholesale Facilities which are typically funded using rates, fees and charges that we collect from our customers.
|
● |
provides wholesale water and wastewater services;
|
● |
designs, constructs, operates and maintains water and wastewater systems;
|
● |
supplies untreated water for hydraulic fracturing and other commercial/industrial uses; and
|
● |
operates a land development segment that is developing a master planned mixed-use community.
|
Water Source
|
Groundwater
(acre feet)
|
|||
Lowry (Rangeview Water Supply)
|
||||
Export (1)
|
11,650
|
|||
Non-Export (1)
|
12,035
|
|||
Fairgrounds
|
321
|
|||
Sky Ranch
|
828
|
|||
24,834
|
Surface Water
(acre feet)
|
||||
Lowry (1)
|
3,300
|
|||
Lost Creek Supply (2)
|
300
|
|||
WISE
|
500
|
|||
4,100
|
Other Water
(acre feet)
|
||||
Lost Creek Supply (2)
|
220
|
(1) |
The combined Lowry water rights are 26,985 acre feet.
|
(2) |
In August 2019, we acquired over 800 acre feet of tributary groundwater, approximately 150 acre feet of Henrylyn surface water (which is not usable in our service areas) and approximately 70 acre feet of non-tributary groundwater.
Based on engineering estimates, we believe that the historic consumptive use of the tributary groundwater will be approximately 300 acre feet per year, which is the amount included under Surface Water attributable to the Lost Creek Supply
in the table above. Henrylyn is a statutory irrigation district that owns its water rights in trust for its landowners.
|
(i) |
The 1996 Amended and Restated Lease Agreement between the Land Board and the Rangeview District, which was superseded by the 2014 Amended and Restated Lease Agreement, dated July 10, 2014 (the “Lease”), among the Land Board, the
Rangeview District and us;
|
(ii) |
The Agreement for Sale of non-tributary and not non-tributary groundwater which we can “export” from the Lowry Range to supply water to nearby communities (this portion of the Rangeview Water Supply is referred to as our “Export
Water”) between us and the Rangeview District (the “Export Agreement”); and
|
(iii) |
The 1996 Service Agreement between us and the Rangeview District for the provision of water service to the Rangeview District’s customers located on the Lowry Range, which was superseded by the Amended and Restated Service Agreement,
dated July 11, 2014 (the “Lowry Service Agreement”), between us and the Rangeview District.
|
For the Fiscal Years Ended August 31,
|
||||||||||||||||||||
2020
|
2021
|
2022
|
2023
|
2024
|
||||||||||||||||
Subscription (Operations)
|
$
|
44,235
|
$
|
32,033
|
$
|
32,033
|
$
|
32,033
|
$
|
32,033
|
||||||||||
Water Deliveries
|
430,350
|
858,000
|
858,000
|
858,000
|
858,000
|
|||||||||||||||
Capital (Infrastructure)
|
2,296,138
|
50,000
|
50,000
|
50,000
|
50,000
|
|||||||||||||||
Other
|
55,000
|
55,000
|
55,000
|
55,000
|
55,000
|
|||||||||||||||
$
|
2,825,723
|
$
|
995,033
|
$
|
995,033
|
$
|
995,033
|
$
|
995,033
|
(i) |
Monthly Water Usage and Wastewater Treatment Fees – Monthly wholesale water usage fees are assessed to our customers based on actual metered deliveries to their end-use
customers each month. Water usage fees are based on a tiered pricing structure that provides for higher prices as customers use greater amounts of water. The water usage fees for end-use customers on the Lowry Range are noted below in
Table C:
|
Price ($ per thousand gallons)
|
||||
Base charge per SFE
|
$
|
32.74
|
||
0 gallons to 15,000 gallons
|
$
|
4.63
|
||
15,001 gallons to 30,000 gallons
|
$
|
8.10
|
||
30,001 gallons and above
|
$
|
9.95
|
(ii) |
Water and Wastewater Tap Fees and Construction Fees/Special Facility Funding – Tap fees are typically paid by developers in advance of construction activities and are
non-refundable. Tap fees are typically used to fund construction of the Wholesale Facilities and defray the acquisition costs of acquiring water rights.
|
(iii) |
Consulting Fees – Consulting fees are fees we receive, typically on a monthly basis, from municipalities and area water providers along the I-70 corridor, for systems with respect to which we provide contract operations
services.
|
● |
the CAB agreed to repay the amounts owed by Sky Ranch Metropolitan District No. 5 to Pure Cycle, and the previous agreement entered into between Pure Cycle and Sky Ranch Metropolitan District No. 5 in 2014 was terminated;
|
● |
previous agreements between the CAB and Pure Cycle were terminated;
|
● |
the CAB acknowledged all amounts owed to Pure Cycle under the terminated agreements, as well as amounts we incurred to finance the formation of the CAB; and
|
● |
Pure Cycle agreed to fund expenses related to the construction of an agreed upon list of improvements to be constructed by the CAB with an estimated cost of $30 million (including improvements already funded) on an as-needed basis for
calendar years 2018–2023.
|
Oil and Gas Leases
|
||
In 2011, we entered into a three-year Oil and Gas Lease (the “O&G Lease”) and Surface Use and Damage Agreement and received an up-front payment and a 20% of gross proceeds royalty (less certain taxes) from
the sale of any oil and gas produced from the approximately 634 acres of mineral estate we own at Sky Ranch. In 2014, the O&G Lease was extended for an additional two (2) years. The O&G Lease is now held by production, and we have
been receiving royalties from the oil and gas production from two wells drilled within our mineral interest. During the fiscal year ended August 31, 2019, we received $148,300 in
royalties attributable to these two wells.
|
||
In September 2017, we entered into a three-year Paid-Up Oil and Gas Lease with Bison Oil and Gas, LLP (the “Bison Lease”) for the purpose of exploring for, developing, producing, and marketing oil and gas from
40 acres of mineral estate we own adjacent to the Lowry Range, and we received an up-front payment of $167,200.
In July 2019, we entered into an Agreement on Locations of Oil and Gas Operations covering approximately 16 acres with the operator of the O&G Lease (the “OGOA”). The Company received an up-front payment of
$573,700 in fiscal 2019 for the OGOA, which will be recognized
|
● |
Housing Starts – From September 2018 to September 2019, annual housing starts decreased by 9%. From September 2017 to September 2018,
annual housing starts increased by 11.6%.
|
● |
Unemployment – The unemployment rate in Colorado was 2.2% at August 31, 2019, compared to a national unemployment rate of 3.5%.
|
● |
Population – The Denver Regional Council of Governments, a voluntary association of over 50 county and municipal governments in the Denver metropolitan area, estimates that
the Denver metropolitan area population will increase by about 38% from today’s 3.4 million people to 4.7 million people by the year 2040. A Statewide Water Supply Initiative report by the Colorado Water Conservation Board estimates that
the South Platte River basin, which includes the Denver metropolitan region, will grow from a current population of 3.9 million to 4.9 million by the year 2030, while the state’s population will increase from 5.7 million to 7.2 million.
|
● |
Demand – Approximately 70% of the state’s projected population increase is anticipated to occur within the South Platte River basin. Significant increases in Colorado’s
population, particularly in the Denver metro region and other areas in the water-short South Platte River basin, together with increasing agricultural, recreational, and environmental water demands, will intensify competition for water
supplies. The estimated population increases are expected to result in demands for water services in excess of the current capabilities of municipal service providers, especially during drought conditions.
|
● |
Supply – The Statewide Water Supply Initiative estimates that population growth in the Denver region and the South Platte River basin could result in additional water supply
demands of over 400,000 acre feet by the year 2030.
|
● |
Development – Colorado law requires property developers to demonstrate that they have sufficient water supplies for their proposed projects before zoning applications will be
considered. These factors indicate that water and availability of water will continue to be critical to growth prospects for the region and the state, and that competition for available sources of water will continue to intensify. We
focus the marketing of our water supplies and services to developers and home builders that are active along the Colorado Front Range as well as other area water providers in need of additional supplies.
|
(i) |
the purchase of water and wastewater taps in exchange for our obligation to construct certain Wholesale Facilities;
|
(ii) |
the establishment of payment terms, timing, capacity and location of Special Facilities (if any); and
|
(iii) |
specific terms related to our provision of ongoing water and wastewater services to our local governmental customers as well as the governmental entities’ end-use customers.
|
August 2014
|
August 2015
|
August 2016
|
August 2017
|
August 2018
|
August 2019
|
|||||||||||||||||||
Pure Cycle Corporation
|
$
|
100.00
|
$
|
76.69
|
$
|
74.23
|
$
|
111.20
|
$
|
172.55
|
$
|
166.41
|
||||||||||||
S&P 500
|
$
|
100.00
|
$
|
100.48
|
$
|
113.09
|
$
|
131.45
|
$
|
157.30
|
$
|
161.89
|
||||||||||||
Peer Group (2)
|
$
|
100.00
|
$
|
105.04
|
$
|
134.01
|
$
|
160.01
|
$
|
183.55
|
$
|
236.60
|
(1) |
This performance graph is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act or the Exchange Act whether made before or after the date
hereof and irrespective of any general incorporation language in any such filing.
|
(2) |
The peer group consists of the following companies that have been selected on the basis of industry focus and size: American States Water Company, Aqua America, Inc., Artesian Resources Corp., California Water Service Group,
Connecticut Water Service, Inc., Middlesex Water Company, SJW Corp., and The York Water Company.
|
For the Fiscal Years Ended August 31,
|
||||||||||||||||||||
2019
|
2018
|
2017
|
2016
|
2015
|
||||||||||||||||
Summary Statement of Operations Items:
|
||||||||||||||||||||
Total revenue
|
$
|
20,361.5
|
$
|
6,959.2
|
$
|
1,227.8
|
$
|
452.2
|
$
|
1,196.6
|
||||||||||
Income (loss) from operations
|
$
|
3,528.0
|
$
|
132.7
|
$
|
(1,678.8
|
)
|
$
|
(1,230.3
|
)
|
$
|
(575.1
|
)
|
|||||||
Net income (loss)
|
$
|
4,811.1
|
$
|
414.7
|
$
|
(1,710.9
|
)
|
$
|
(1,310.6
|
)
|
$
|
(23,127.9
|
)
|
|||||||
Basic and diluted income (loss) per share
|
$
|
0.20
|
$
|
0.02
|
$
|
(0.07
|
)
|
$
|
(0.06
|
)
|
$
|
(0.96
|
)
|
|||||||
Weighted average diluted shares outstanding
|
24,003
|
23,930
|
23,754
|
23,781
|
24,041
|
As of August 31,
|
||||||||||||||||||||
2019
|
2018
|
2017
|
2016
|
2015
|
||||||||||||||||
Summary Balance Sheet Information:
|
||||||||||||||||||||
Current assets
|
$
|
23,537.7
|
$
|
27,918.2
|
$
|
27,124.3
|
$
|
29,085.9
|
$
|
39,580.9
|
||||||||||
Total assets
|
$
|
83,721.4
|
$
|
71,906.6
|
$
|
69,787.6
|
$
|
70,879.6
|
$
|
73,060.9
|
||||||||||
Current liabilities
|
$
|
8,297.2
|
$
|
2,054.0
|
$
|
940.2
|
$
|
482.2
|
$
|
1,499.1
|
||||||||||
Long-term liabilities
|
$
|
693.0
|
$
|
399.4
|
$
|
1,341.3
|
$
|
1,399.5
|
$
|
1,476.4
|
||||||||||
Total liabilities
|
$
|
8,990.3
|
$
|
2,453.4
|
$
|
2,281.5
|
$
|
1,881.7
|
$
|
2,975.5
|
||||||||||
Shareholders’ equity
|
$
|
74,731.1
|
$
|
69,453.2
|
$
|
67,506.1
|
$
|
68,997.9
|
$
|
70,085.4
|
(a) |
In fiscal 2019, due to land development activities at Sky Ranch, we recognized $12.0 million in revenue from lot sales and
$3.4 million in revenue from the sale of water and wastewater taps. Our revenue from water sales increased by 2% to $4.7 million primarily related to industrial water sales. We invested $14.1 million in our water and wastewater systems,
including $8.1 million for the wastewater facility at Sky Ranch and $3.5 million for a water right and land acquisition, $354,000 for the purchase of equipment and $17.7 million in Inventories
for the development of our Sky Ranch property. During fiscal 2019, we had net sales or maturities of marketable securities of approximately $3.7 million. In addition, we released our valuation allowance on our net deferred tax
assets and recognized a deferred tax benefit of $1,283,195.
|
(b) |
In fiscal 2018, we invested $1.1 million in our water and wastewater systems, $1.8 million for the construction of pipelines, $5.3 million for the development of our Sky Ranch property, and $445,400 for the purchase of equipment.
During fiscal 2019, we had net sales or maturities of marketable securities of approximately $11.4 million. Our revenue from water sales increased by 452% to $4.6 million primarily related to industrial water sales. In addition, we began
construction on Sky Ranch and recognized $2.1 million in revenue from platted lot sales.
|
(c) |
In fiscal 2017, we invested $2.5 million in our water and wastewater systems, $4.4 million for the construction of pipelines, $902,600 for the development of our Sky Ranch property, and $95,400 for the purchase of equipment. During
fiscal 2017, we had sales or maturities of marketable securities of approximately $9.8 million.
|
(d) |
In fiscal 2016, we invested $923,800 in our water and wastewater systems and $285,600 for planning and design of our Sky Ranch property. We also purchased three farms for approximately $450,300 in order to correct dry-up covenant
issues related to water-only farms in order obtain the release of the escrow funds related to the Company’s farm sale to Arkansas River Farms, LLC.
|
(e) |
In fiscal 2015, we sold our remaining farm assets for approximately $45.8 million, for a loss of approximately $22.3 million. In conjunction with the sale, we repaid $4.9 million in mortgage debt relating to the farms and we invested
approximately $3.5 million into our water systems. Financial results for the farm assets have been reflected as discontinued operations, and all prior periods have been reclassified.
|
● |
Revenue generated from providing water and wastewater services;
|
● |
Expenses associated with developing our water and land assets;
|
● |
Revenue from lot sales at Sky Ranch;
|
● |
Expenses associated with developing lots at Sky Ranch; and
|
● |
Cash available to continue development of our land, water rights and service agreements.
|
● |
Total revenue increased by $13.4 million or 193% versus fiscal 2018 to $20.4 million due primarily to lot sales and water and wastewater tap fees
|
● |
Net income increased by $4.4 million or 1,060% versus fiscal 2018 to $4.8 million.
|
● |
Fully diluted earnings per common share for fiscal 2019 was $0.20 versus $0.02 for fiscal 2018.
|
Change
|
||||||||||||||||
Fiscal Years Ended August 31,
|
2019 versus 2018
|
|||||||||||||||
2019
|
2018
|
$ |
|
%
|
||||||||||||
Millions of gallons of water delivered
|
356.3
|
406.6
|
(50.3
|
)
|
(12
|
)%
|
||||||||||
Water revenues generated
|
$
|
4,654,400
|
$
|
4,555,900
|
$
|
98,500
|
2
|
%
|
||||||||
Water and wastewater tap fee revenue
|
3,544,700
|
49,900
|
3,494,800
|
7,004
|
%
|
|||||||||||
Water delivery operating costs incurred (excluding depreciation and depletion)
|
$
|
1,502,400
|
$
|
1,379,600
|
$
|
122,800
|
9
|
%
|
||||||||
Water delivery gross margin %
|
68
|
%
|
70
|
%
|
||||||||||||
Wastewater treatment revenues
|
$
|
35,800
|
$
|
46,200
|
$
|
(10,400
|
)
|
(23
|
)%
|
|||||||
Wastewater treatment operating costs incurred
|
$
|
28,000
|
$
|
28,400
|
$
|
(400
|
)
|
(1
|
)%
|
|||||||
Wastewater treatment gross margin %
|
22
|
%
|
39
|
%
|
||||||||||||
Lot fee revenue
|
$
|
11,956,000
|
$
|
2,139,000
|
$
|
9,817,000
|
459
|
%
|
||||||||
Lot fee construction costs incurred
|
$
|
11,305,000
|
$
|
2,013,800
|
$
|
9,291,200
|
461
|
%
|
||||||||
Lot fee gross margin %
|
5
|
%
|
6
|
%
|
||||||||||||
Other income
|
$
|
170,600
|
$
|
168,200
|
$
|
2,400
|
1
|
%
|
||||||||
Other income costs incurred
|
$
|
140,100
|
$
|
88,300
|
$
|
51,800
|
59
|
%
|
||||||||
Other income gross margin %
|
18
|
%
|
48
|
%
|
||||||||||||
General and administrative expenses
|
$
|
3,106,500
|
$
|
2,855,100
|
$
|
251,400
|
9
|
%
|
||||||||
Income (loss) from continuing operations
|
$
|
3,528,000
|
$
|
132,700
|
$
|
3,395,300
|
2,559
|
%
|
||||||||
(Loss) income from discontinued operations
|
$
|
—
|
$
|
—
|
$
|
—
|
0
|
%
|
||||||||
Net income (loss)
|
$
|
4,811,100
|
$
|
414,700
|
$
|
4,396,400
|
1,060
|
%
|
2019
|
2018
|
|||||||||||||||||||||||
Customer Type
|
Sales (in
thousands)
|
kgal
|
Average per
kgal
|
Sales (in
thousands)
|
kgal
|
Average per
kgal
|
||||||||||||||||||
On-Site
|
$
|
180.4
|
28,925.7
|
$
|
6.24
|
$
|
250.0
|
55,287.7
|
$
|
4.52
|
||||||||||||||
Export-Commercial
|
68.0
|
7,350.7
|
9.25
|
141.9
|
13,998.8
|
10.14
|
||||||||||||||||||
Wild Pointe
|
160.7
|
21,113.9
|
7.61
|
119.7
|
25,052.4
|
4.78
|
||||||||||||||||||
Sky Ranch
|
7.0
|
901.7
|
7.76
|
—
|
—
|
—
|
||||||||||||||||||
Industrial/Fracking
|
4,238.3
|
298,014.0
|
14.22
|
4,044.3
|
312,216.7
|
12.95
|
||||||||||||||||||
$
|
4,654.4
|
356,306.0
|
$
|
13.06
|
$
|
4,555.9
|
406,555.6
|
$
|
11.21
|
For the Fiscal Years Ended August 31,
|
Change
|
|||||||||||||||
2019 versus 2018
|
||||||||||||||||
2019
|
2018
|
$
|
%
|
|||||||||||||
Significant G&A Expense items:
|
||||||||||||||||
Salary and salary-related expenses
|
$
|
1,530,700
|
$
|
1,387,500
|
$
|
143,200
|
10
|
%
|
||||||||
Share-based compensation
|
336,200
|
324,800
|
11,400
|
4
|
%
|
|||||||||||
Professional fees
|
458,200
|
335,500
|
122,700
|
37
|
%
|
|||||||||||
Fees paid to directors including insurance
|
199,900
|
164,800
|
35,100
|
21
|
%
|
|||||||||||
Insurance
|
52,700
|
40,900
|
11,800
|
29
|
%
|
|||||||||||
Public entity-related expenses
|
118,400
|
115,800
|
2,600
|
2
|
%
|
|||||||||||
Consulting fees
|
24,400
|
41,300
|
(16,900
|
)
|
(41
|
)%
|
||||||||||
Property taxes
|
8,200
|
17,700
|
(9,500
|
)
|
(54
|
)%
|
||||||||||
Other
|
377,800
|
426,800
|
(49,000
|
)
|
(11
|
)%
|
||||||||||
G&A Expenses as reported
|
$
|
3,106,500
|
$
|
2,855,100
|
$
|
251,400
|
9
|
%
|
Change
|
||||||||||||||||
For the Fiscal Years Ended August 31,
|
2019 versus 2018
|
|||||||||||||||
2019
|
2018
|
$
|
%
|
|||||||||||||
Other income items:
|
||||||||||||||||
Oil and gas lease income, net
|
$
|
55,700
|
$
|
51,100
|
$
|
4,600
|
9
|
%
|
||||||||
Oil and gas royalty income, net
|
$
|
148,300
|
$
|
191,300
|
$
|
(43,000
|
)
|
(22
|
)%
|
|||||||
Interest income
|
$
|
298,600
|
$
|
206,100
|
$
|
92,500
|
45
|
%
|
||||||||
Other
|
$
|
26,600
|
$
|
(7,100
|
)
|
$
|
33,700
|
475
|
%
|
Change
|
||||||||||||||||
For the Fiscal Years Ended August 31,
|
2019 versus 2018
|
|||||||||||||||
2019
|
2018
|
$
|
%
|
|||||||||||||
Cash (used in) provided by:
|
||||||||||||||||
Operating activities
|
$
|
3,530,500
|
$
|
500
|
$
|
3,530,000
|
706,000
|
%
|
||||||||
Investing activities
|
$
|
(10,803,800
|
)
|
$
|
5,700,800
|
$
|
(16,504,600
|
)
|
(290
|
)%
|
||||||
Financing activities
|
$
|
186,200
|
$
|
288,000
|
$
|
(101,800
|
)
|
(35
|
)%
|
Page
|
|
F-1
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-7
|
|
F-8
|
ASSETS:
|
August 31, 2019
|
August 31, 2018
|
||||||
Current Assets:
|
||||||||
Cash and cash equivalents
|
$
|
4,478,020
|
$
|
11,565,038
|
||||
Short-term investments
|
5,188,813
|
8,717,967
|
||||||
Trade accounts receivable, net
|
1,099,631
|
1,067,268
|
||||||
Prepaid expenses and deposits
|
1,016,751
|
1,372,886
|
||||||
Inventories
|
11,613,112
|
5,195,059
|
||||||
Taxes receivable
|
141,410
|
—
|
||||||
Total current assets
|
23,537,737
|
27,918,218
|
||||||
Long-term investments
|
—
|
190,370
|
||||||
Investments in water and water systems, net
|
50,270,310
|
36,721,884
|
||||||
Land and mineral interests
|
5,104,477
|
4,659,569
|
||||||
Notes receivable – related parties, including accrued interest
|
988,381
|
906,199
|
||||||
Other assets
|
1,945,202
|
777,734
|
||||||
Long-term land investment
|
450,641
|
450,641
|
||||||
Deferred tax asset
|
1,283,246
|
282,000
|
||||||
Taxes receivable
|
141,410
|
—
|
||||||
Total assets
|
$
|
83,721,404
|
$
|
71,906,615
|
||||
LIABILITIES:
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
170,822
|
787,662
|
||||||
Accrued liabilities
|
3,428,418
|
849,538
|
||||||
Deferred revenues
|
3,991,535
|
361,050
|
||||||
Deferred oil and gas lease and water sales payment
|
706,464
|
55,733
|
||||||
Total current liabilities
|
8,297,239
|
2,053,983
|
||||||
Deferred oil and gas lease and water sales payment, less current portion
|
360,884
|
60,378
|
||||||
Participating Interests in Export Water Supply
|
332,140
|
339,035
|
||||||
Total liabilities
|
8,990,264
|
2,453,396
|
||||||
Commitments and contingencies
|
||||||||
SHAREHOLDERS’ EQUITY:
|
||||||||
Preferred stock:
|
||||||||
Series B – par value $.001 per share, 25 million shares authorized; 432,513 shares issued and outstanding (liquidation preference of $432,513)
|
433
|
433
|
||||||
Common stock:
|
||||||||
Par value 1/3 of $.01 per share, 40 million shares authorized; 23,826,598 and 23,764,098 shares issued and outstanding, respectively
|
79,427
|
79,218
|
||||||
Collateral stock
|
—
|
—
|
||||||
Additional paid-in capital
|
172,360,413
|
171,831,293
|
||||||
Accumulated other comprehensive income
|
3,891
|
66,446
|
||||||
Accumulated deficit
|
(97,713,023
|
)
|
(102,524,171
|
)
|
||||
Total shareholders’ equity
|
74,731,141
|
69,453,219
|
||||||
Total liabilities and shareholders’ equity
|
$
|
83,721,404
|
$
|
71,906,615
|
For the Fiscal Years Ended August 31,
|
||||||||
2019
|
2018
|
|||||||
Revenues:
|
||||||||
Metered water usage
|
$
|
4,654,344
|
$
|
4,555,912
|
||||
Wastewater treatment fees
|
35,818
|
46,199
|
||||||
Special facility funding recognized
|
—
|
—
|
||||||
Water tap fees recognized
|
3,544,737
|
49,948
|
||||||
Lot sales
|
11,955,989
|
2,138,950
|
||||||
Other income
|
170,621
|
168,190
|
||||||
Total revenues
|
20,361,509
|
6,959,199
|
||||||
Expenses:
|
||||||||
Water service operations
|
(1,502,370
|
)
|
(1,379,644
|
)
|
||||
Wastewater service operations
|
(28,020
|
)
|
(28,350
|
)
|
||||
Land development construction costs
|
(11,304,962
|
)
|
(2,013,840
|
)
|
||||
Other
|
(140,118
|
)
|
(88,318
|
)
|
||||
Depletion and depreciation
|
(968,229
|
)
|
(651,449
|
)
|
||||
Total cost of revenues
|
(13,943,699
|
)
|
(4,161,601
|
)
|
||||
Gross profit
|
6,417,810
|
2,797,598
|
||||||
General and administrative expenses
|
(3,106,548
|
)
|
(2,855,095
|
)
|
||||
Depreciation
|
(312,602
|
)
|
(251,230
|
)
|
||||
Operating income (loss)
|
2,998,661
|
(308,727
|
)
|
|||||
Other income (expense):
|
||||||||
Oil and gas lease income, net
|
55,733
|
51,089
|
||||||
Oil and gas royalty income, net
|
148,327
|
191,309
|
||||||
Interest income
|
298,605
|
206,138
|
||||||
Other
|
26,627
|
(7,129
|
)
|
|||||
Net income before taxes
|
3,527,953
|
132,680
|
||||||
Income tax benefit
|
1,283,195
|
282,000
|
||||||
Net income
|
$
|
4,811,148
|
$
|
414,680
|
||||
Unrealized holding (losses) gains
|
(62,556
|
)
|
77,551
|
|||||
Total comprehensive income
|
$
|
4,748,592
|
$
|
492,231
|
||||
Basic and diluted net income per common share
|
$
|
0.20
|
$
|
0.02
|
||||
Weighted average common shares outstanding – basic
|
23,795,973
|
23,760,765
|
||||||
Weighted average common shares outstanding – diluted
|
24,002,836
|
23,930,535
|
Preferred Stock
|
Common Stock
|
Additional
Paid-in
|
Accumulated
Other
Comprehensive
|
Accumulated
|
||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Income (Loss)
|
Deficit
|
Total
|
|||||||||||||||||||||||||
August 31, 2017 balance:
|
432,513
|
433
|
23,754,098
|
79,185
|
171,431,486
|
(11,105
|
)
|
(103,993,900
|
)
|
67,506,099
|
||||||||||||||||||||||
Share-based compensation
|
—
|
—
|
—
|
—
|
324,840
|
—
|
—
|
324,840
|
||||||||||||||||||||||||
Exercise of options
|
—
|
—
|
10,000
|
33
|
74,967
|
—
|
—
|
75,000
|
||||||||||||||||||||||||
Adoption of accounting standards
|
—
|
—
|
—
|
—
|
—
|
—
|
1,055,049
|
1,055,049
|
||||||||||||||||||||||||
Net income
|
—
|
—
|
—
|
—
|
—
|
—
|
414,680
|
414,680
|
||||||||||||||||||||||||
Unrealized holding gain on investments
|
—
|
—
|
—
|
—
|
—
|
77,551
|
—
|
77,551
|
||||||||||||||||||||||||
August 31, 2018 balance:
|
432,513
|
433
|
23,764,098
|
79,218
|
171,831,293
|
66,446
|
(102,524,171
|
)
|
69,453,219
|
|||||||||||||||||||||||
Share-based compensation
|
—
|
—
|
—
|
—
|
336,228
|
—
|
—
|
336,228
|
||||||||||||||||||||||||
Exercise of options
|
—
|
—
|
62,500
|
209
|
192,892
|
—
|
—
|
193,101
|
||||||||||||||||||||||||
Net income
|
—
|
—
|
—
|
—
|
—
|
—
|
4,811,148
|
4,811,148
|
||||||||||||||||||||||||
Unrealized holding loss on investments
|
—
|
—
|
—
|
—
|
—
|
(62,556
|
)
|
—
|
(62,556
|
)
|
||||||||||||||||||||||
August 31, 2019 balance:
|
432,513
|
$
|
433
|
23,826,598
|
$
|
79,427
|
$
|
172,360,413
|
$
|
3,891
|
$
|
(97,713,023
|
)
|
$
|
74,731,141
|
For the Fiscal Years Ended August 31,
|
||||||||
2019
|
2018
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$
|
4,811,148
|
$
|
414,680
|
||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
Share-based compensation expense
|
336,228
|
324,840
|
||||||
Depreciation and depletion
|
1,280,830
|
902,676
|
||||||
Bad debt (recovery) expense
|
(37,233
|
)
|
79,860
|
|||||
Investment in Well Enhancement and Recovery Systems LLC
|
6,601
|
10,490
|
||||||
Interest income and other non-cash items
|
(420
|
)
|
(2,366
|
)
|
||||
Interest added to receivable from related parties
|
(41,776
|
)
|
(17,728
|
)
|
||||
Deferred income taxes
|
(1,284,066
|
)
|
—
|
|||||
Changes in operating assets and liabilities:
|
||||||||
Inventories
|
(5,018,452
|
)
|
(1,217,292
|
)
|
||||
Trade accounts receivable
|
4,870
|
(369,923
|
)
|
|||||
Prepaid expenses and other assets
|
(700,063
|
)
|
(959,394
|
)
|
||||
Note receivable – related parties
|
(40,406
|
)
|
(110,161
|
)
|
||||
Accounts payable and accrued liabilities
|
(368,456
|
)
|
750,078
|
|||||
Income taxes
|
—
|
(282,000
|
)
|
|||||
Deferred revenues
|
3,630,485
|
360,611
|
||||||
Deferred income – oil and gas lease
|
951,237
|
116,111
|
||||||
Net cash provided by operating activities
|
3,530,527
|
482
|
||||||
Cash flows from investing activities:
|
||||||||
Investments in water, water systems and land
|
(14,106,724
|
)
|
(1,046,911
|
)
|
||||
Investments in Sky Ranch pipeline
|
—
|
(241,819
|
)
|
|||||
Investments in Sky Ranch land development
|
—
|
(3,977,767
|
)
|
|||||
Sales and maturities of marketable securities
|
55,697,933
|
34,057,552
|
||||||
Purchase of short-term investments
|
(52,040,964
|
)
|
(22,645,017
|
)
|
||||
Purchase of long-term investments
|
—
|
—
|
||||||
Purchase of property and equipment
|
(353,996
|
)
|
(445,286
|
)
|
||||
Net cash (used in) provided by investing activities
|
(10,803,751
|
)
|
5,700,752
|
|||||
Cash flows from financing activities:
|
||||||||
Proceeds from note receivable – related parties
|
—
|
215,504
|
||||||
Proceeds from exercise of options
|
193,101
|
75,000
|
||||||
Payment to contingent liability holders
|
(6,896
|
)
|
(2,523
|
)
|
||||
Net cash provided in financing activities
|
186,205
|
287,981
|
||||||
Net change in cash and cash equivalents
|
(7,087,019
|
)
|
5,989,215
|
|||||
Cash and cash equivalents – beginning of year
|
11,565,038
|
5,575,823
|
||||||
Cash and cash equivalents – end of year
|
$
|
4,478,019
|
$
|
11,565,038
|
||||
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|
||||||||
Inventories included in accounts payable and accrued liabilities
|
$
|
1,399,602
|
$
|
—
|
||||
Investments in water, water systems and land included in accounts payable and accrued liabilities
|
$
|
930,895
|
$
|
—
|
||||
Transfer of income taxes to income taxes receivable
|
$
|
282,820
|
$
|
—
|
||||
Transfer of prepaid asset to other asset
|
—
|
89,609
|
||||||
Transfer of land and development costs to inventory
|
$
|
—
|
$
|
3,977,767
|
(i) |
Monthly water usage and wastewater treatment fees – Monthly wholesale water usage charges are assessed to the Company’s customers based on actual metered usage each
month plus a base monthly service fee assessed per single family equivalent (“SFE”) unit served. One SFE is a customer, whether residential, commercial or industrial, that imparts a demand on the Company’s water or wastewater systems
similar to the demand of a family of four persons living in a single-family house on a standard-sized lot. Water usage pricing uses a tiered pricing structure. The Company recognizes wholesale water usage revenues at a point in time upon
delivering water to its customers or its governmental customers’ end-use customers, as applicable. Revenues recognized by the Company from the sale of “Export Water” and other portions of its “Rangeview Water Supply” off the Lowry Range
are shown gross of royalties to the State of Colorado Board of Land Commissioners (the “Land Board”). The Company is the primary distributor of the “Export Water” and sets pricing for the sale of Export Water. Revenues recognized by the
Company from the sale of water on the Lowry Range are shown net of royalties paid to the Land Board and amounts retained by the Rangeview District. For water sales on the Lowry Range, the Rangeview District is directly selling the water
and deemed the primary distributor of the water. The Rangeview District sets the price for the water sales on the Lowry Range. See further description of “Export Water,” the “Lowry Range,” and the “Rangeview Water Supply” in Note 4 – Water and Land Assets under “Rangeview Water Supply and Water System.”
|
(ii) |
Water and wastewater tap fees and construction fees/Special Facility funding – The Company has various water and wastewater service agreements, components of which may
include payment of tap fees. A tap fee constitutes a right to connect to the Company’s wholesale water and wastewater systems through a service line to a residential or commercial building or property, and once granted, the customer may
make a physical tap into the wholesale line(s) to connect its property for water and/or wastewater service. Once connected to the water and/or wastewater systems, the customer has live service to receive metered water deliveries from the
Company’s system and send wastewater into the Company’s system. Thus, the customer has full control of the connection right as it has the ability to obtain all of the benefits from this right. As such, management has determined that tap
fees are separate and distinct performance obligations.
|
(iii) |
Consulting fees – Consulting fees are fees that the Company receives, typically on a monthly basis, from municipalities and area water providers along the I-70 corridor, for contract operations services over time as services are
consumed. Consulting fees are recognized monthly based on a flat monthly fee plus charges for additional work performed. The Company recognized $158,600 and $142,700 of consulting fees during the years ended August 31, 2019 and 2018,
respectively.
|
(i) |
Land development through the sale of finished lots – The Company acquired approximately 930 acres of land zoned as a Master Planned Community known as Sky Ranch along the I-70 corridor east of Denver, Colorado. The Company has
entered into purchase and sale agreements with three separate home builders pursuant to which the Company agreed to sell, and each builder agreed to purchase, residential lots at the property. The Company began construction of lots in
March 2018 and segments its reporting of the activity relating to the costs and revenues from the construction and sale of lots at Sky Ranch.
|
(ii) |
Construction support activities – The Company performs certain construction activities at Sky Ranch. The activities performed include construction and maintenance of the grading erosion and sediment control best management
practices and other construction-related services. These activities are invoiced upon completion and are included in Inventories and subsequently expensed through Land development construction costs until bonds are issued by the Sky Ranch Districts (as defined in Note 14 – Related Party Transactions) and/or the CAB and the CAB reimburses
the Company for public improvements. The portion of the reimbursable costs that are repaid, including reimbursable costs for construction support activities, will be recorded as a note receivable and will reduce any remaining respective
reimbursable capitalized expenses in Inventories. Any reimbursable costs paid in excess of capitalized expenses will be recognized as other income. To date, the Company has invoiced the CAB
$430,300 for construction support activities, which amount is included in Inventories.
|
(iii) |
Project management services – The Company entered into two Service Agreements for Project Management Services with the CAB on May 2, 2018. The CAB was organized by Sky Ranch Metropolitan District Nos. 1 and 5 to construct,
operate and maintain certain public facilities and improvements in accordance with the Sky Ranch Community Authority Board Establishment Agreement and each of the service plans for Sky Ranch Metropolitan District Nos. 1 and 5. The Company
has experience in providing the services and is willing to provide such services to the CAB for reasonable consideration for the project improvements.
|
(iv) |
Reimbursable expenses – The CAB is required to construct certain infrastructure, the costs of which qualify as reimbursable costs. Reimbursable
costs include costs incurred for construction of water distribution systems, sewer collection systems, storm water system, drainage improvements, roads, curb, sidewalks, landscaping, and parks. The Company is obligated to finance this
infrastructure pursuant to its agreements with the CAB (see Note 14 – Related Party Transactions). The Company and the CAB have agreed that no payment is required with respect to advances made by
the Company or expenses incurred related to construction of improvements unless and until the CAB and/or the Sky Ranch Districts issue bonds in an amount sufficient to reimburse the Company for all or a portion of the advances made and
expenses incurred. Due to this contingency, the reimbursable costs for the construction of infrastructure are included in Inventories and subsequently expensed through Land development construction costs until the point in time when municipal bonds are issued and the CAB reimburses the Company for public improvements. At that point, the portion of the reimbursable costs repaid,
including reimbursable costs for the construction of infrastructure, will be recorded as a note receivable and will reduce any remaining capitalized expenses. Any reimbursable costs repaid in excess of capitalized expenses will be
recognized as other income.
|
August 31, 2019
|
August 31, 2018
|
|||||||
Wholesale water and wastewater services
|
$
|
—
|
$
|
—
|
||||
Land development activities
|
3,991,535
|
361,050
|
||||||
Oil and gas leases
|
1,067,348
|
116,111
|
||||||
Balance, end of period
|
$
|
5,058,883
|
$
|
477,161
|
August 31, 2019
|
August 31, 2018
|
|||||||
Balance, beginning of period
|
$
|
477,161
|
$
|
1,055,488
|
||||
Cumulative effect of adoption of ASU 2014-09
|
—
|
(1,055,488
|
)
|
|||||
Billings
|
24,943,231
|
2,667,200
|
||||||
Contract revenues recognized
|
(20,361,509
|
)
|
(2,190,039
|
)
|
||||
Balance, end of period
|
$
|
5,058,883
|
$
|
477,161
|
Fair Value Measurement Using:
|
||||||||||||||||||||||||
Fair Value
|
Cost /
Other Value
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Accumulated
Unrealized
Gains and
(Losses)
|
|||||||||||||||||||
Certificates of deposit
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||
U.S. treasuries
|
4,996,000
|
4,992,100
|
—
|
4,996,000
|
—
|
3,900
|
||||||||||||||||||
Total
|
$
|
4,996,000
|
$
|
4,992,100
|
$
|
—
|
$
|
4,996,000
|
$
|
—
|
$
|
3,900
|
Fair Value Measurement Using:
|
||||||||||||||||||||||||
Fair Value
|
Cost /
Other Value
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Accumulated
Unrealized
Gains and
(Losses)
|
|||||||||||||||||||
Certificates of deposit
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||||||||
U.S. treasuries
|
8,718,000
|
8,644,900
|
—
|
8,718,000
|
—
|
66,400
|
||||||||||||||||||
Subtotal
|
$
|
8,718,000
|
$
|
8,644,900
|
$
|
—
|
$
|
8,718,000
|
$
|
—
|
$
|
66,400
|
August 31, 2019
|
August 31, 2018
|
|||||||||||||||
Costs
|
Accumulated
Depreciation
and Depletion
|
Costs
|
Accumulated
Depreciation
and Depletion
|
|||||||||||||
Rangeview water supply
|
$
|
14,823,800
|
$
|
(14,700
|
)
|
$
|
14,813,800
|
$
|
(12,800
|
)
|
||||||
Sky Ranch water rights and other costs
|
7,371,500
|
(757,400
|
)
|
8,514,100
|
(561,400
|
)
|
||||||||||
Fairgrounds water and water system
|
2,899,800
|
(1,151,000
|
)
|
2,899,900
|
(1,062,900
|
)
|
||||||||||
Rangeview water system
|
5,617,800
|
(372,300
|
)
|
1,655,600
|
(261,200
|
)
|
||||||||||
Water supply – other
|
4,758,200
|
(860,100
|
)
|
4,337,200
|
(625,300
|
)
|
||||||||||
Wild Pointe service rights
|
1,631,800
|
(489,800
|
)
|
1,631,700
|
(267,700
|
)
|
||||||||||
Sky Ranch pipeline
|
5,723,700
|
(411,600
|
)
|
5,615,900
|
(222,000
|
)
|
||||||||||
Lost Creek water supply
|
3,324,000
|
—
|
—
|
—
|
||||||||||||
Construction in progress
|
8,176,600
|
—
|
267,000
|
—
|
||||||||||||
Totals
|
54,327,200
|
(4,056,900
|
)
|
39,735,200
|
(3,013,300
|
)
|
||||||||||
Net investments in water and water systems
|
$
|
50,270,300
|
$
|
36,721,900
|
Assets Classes
|
Estimated Useful Lives
|
|
Wild Pointe
|
Units of production depletion
|
|
Rangeview water supply
|
Units of production depletion
|
|
Lost Creek water supply
|
Units of production depletion
|
|
Rangeview, Sky Ranch and WISE water systems
|
30 years
|
|
ECCV wells
|
10 years
|
|
Furniture and fixtures
|
5 years
|
|
Trucks and heavy equipment
|
5 years
|
|
Water system general (pumps, valves, etc.)
|
5 years
|
|
Computers
|
3 years
|
|
Water equipment
|
3 years
|
|
Software
|
1 year
|
(i) |
The Rangeview District entered into the 1996 Amended and Restated Lease Agreement with the Land Board, which owns the Lowry Range;
|
(ii) |
The Company entered into the Agreement for Sale of Export Water with the Rangeview District;
|
(iii) |
The Company entered into the 1996 Service Agreement with the Rangeview District for the provision of water service to the Rangeview District’s customers on the Lowry Range; and
|
(iv) |
In 1997, the Company entered into the Wastewater Service Agreement with the Rangeview District for the provision of wastewater service to the Rangeview District’s customers on the Lowry Range.
|
August 31, 2019
|
August 31, 2018
|
|||||||
Sky Ranch land (1)
|
$
|
3,037,556
|
$
|
3,037,557
|
||||
Sky Ranch development costs
|
423,324
|
196,553
|
||||||
Lost Creek land
|
218,138
|
—
|
||||||
Arkansas Valley mineral rights
|
1,425,459
|
1,425,459
|
||||||
Net land and mineral interests
|
5,104,477
|
4,659,569
|
(1) |
The Company transferred $585,700 of Sky Ranch land costs to Inventories related to the initial phase of development, consisting of 151 acres, which began in fiscal 2018.
|
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, 2016:
|
||||||||||||||||||||
Acquisitions
|
—
|
28,042,500
|
(28,042,500
|
)
|
(9,790,000
|
)
|
(18,252,500
|
)
|
||||||||||||
Relinquishment
|
—
|
2,386,400
|
(2,386,400
|
)
|
(832,100
|
)
|
(1,554,300
|
)
|
||||||||||||
Option payments - Sky Ranch and The Hills at Sky Ranch
|
110,400
|
(42,300
|
)
|
(68,100
|
)
|
(23,800
|
)
|
(44,300
|
)
|
|||||||||||
Arapahoe County tap fees
|
533,000
|
(373,100
|
)
|
(159,900
|
)
|
(55,800
|
)
|
(104,100
|
)
|
|||||||||||
Export Water sale payments
|
676,500
|
(540,300
|
)
|
(136,200
|
)
|
(47,300
|
)
|
(88,900
|
)
|
|||||||||||
Balance at August 31, 2017
|
1,319,900
|
29,691,700
|
1,014,600
|
341,600
|
673,000
|
|||||||||||||||
Fiscal 2018 activity:
|
60,800
|
(53,600
|
)
|
(7,200
|
)
|
(2,500
|
)
|
(4,700
|
)
|
|||||||||||
Balance at August 31, 2018
|
1,380,700
|
29,638,100
|
1,007,400
|
339,100
|
668,300
|
|||||||||||||||
Fiscal 2019 activity:
|
||||||||||||||||||||
Export Water sale payments
|
166,300
|
(146,500
|
)
|
(19,800
|
)
|
(6,900
|
)
|
(12,900
|
)
|
|||||||||||
Balance at August 31, 2019
|
$
|
1,547,000
|
$
|
29,491,600
|
$
|
987,600
|
$
|
332,200
|
$
|
655,400
|
● |
The grant date exercise price – is the closing market price of the Company’s common stock on the date of grant;
|
● |
Estimated option lives – based on historical experience with existing option holders;
|
● |
Estimated dividend rates – based on historical and anticipated dividends over the life of the option;
|
● |
Life of the option – based on historical experience, option grants have lives of between five and 10 years;
|
● |
Risk-free interest rates – with maturities that approximate the expected life of the options granted;
|
● |
Calculated stock price volatility – calculated over the expected life of the options granted, which is calculated based on the weekly closing price of the Company’s common stock over a period equal to the expected life of the option;
and
|
● |
Option exercise behaviors – based on actual and projected employee stock option exercises.
|
For the Fiscal Years Ended
August 31,
|
||||||||
2019
|
2018
|
|||||||
Expected term (years)
|
5.80
|
5.80
|
||||||
Risk-free interest rate
|
2.93
|
%
|
2.41
|
%
|
||||
Expected volatility
|
41.83
|
%
|
57.88
|
%
|
||||
Expected dividend yield
|
0
|
%
|
0
|
%
|
||||
Weighted average grant-date fair value
|
$
|
4.60
|
$
|
4.41
|
Number
of Options
|
Weighted Average
Exercise Price
|
Weighted Average
Remaining
Contractual Term
|
Approximate
Aggregate
Intrinsic Value
|
|||||||||||||
Outstanding at August 31, 2017
|
465,500
|
$
|
4.88
|
6.30
|
$
|
1,007,740
|
||||||||||
Granted
|
82,500
|
$
|
8.05
|
|||||||||||||
Exercised
|
(10,000
|
)
|
$
|
7.50
|
||||||||||||
Forfeited or expired
|
(2,500
|
)
|
$
|
7.50
|
||||||||||||
Outstanding at August 31, 2018
|
535,500
|
$
|
5.31
|
6.04
|
$
|
3,180,990
|
||||||||||
Granted
|
82,500
|
$
|
10.48
|
|||||||||||||
Exercised
|
(62,500
|
)
|
$
|
3.09
|
||||||||||||
Forfeited or expired
|
—
|
$
|
—
|
|||||||||||||
Outstanding at August 31, 2019
|
555,500
|
$
|
6.33
|
6.27
|
$
|
2,527,590
|
||||||||||
Options exercisable at August 31, 2019
|
403,000
|
$
|
5.44
|
5.47
|
$
|
2,180,299
|
Number
of Options
|
Weighted Average
Grant Date
Fair Value
|
|||||||
Non-vested options outstanding at August 31, 2018
|
155,833
|
$
|
3.76
|
|||||
Granted
|
82,500
|
4.60
|
||||||
Vested
|
(85,833
|
)
|
3.46
|
|||||
Forfeited
|
—
|
—
|
||||||
Non-vested options outstanding at August 31, 2019
|
152,500
|
$
|
4.03
|
(i) |
The date that all of the Export Water is sold or otherwise disposed of,
|
(ii) |
The date that 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.
|
For the Fiscal Years Ended
August 31,
|
||||||||
2019
|
2018
|
|||||||
Deferred tax assets (liabilities):
|
||||||||
Net operating loss carryforwards
|
$
|
609,439
|
$
|
2,009,800
|
||||
AMT credit carryforward
|
—
|
282,000
|
||||||
Accrued compensation
|
113,559
|
—
|
||||||
Deferred revenues
|
149,895
|
28,600
|
||||||
Depreciation and depletion
|
(46,408
|
)
|
(104,900
|
)
|
||||
NQ stock options
|
410,633
|
—
|
||||||
Other
|
46,128
|
80,500
|
||||||
Valuation allowance
|
—
|
(2,014,000
|
)
|
|||||
Net deferred tax asset
|
$
|
1,283,246
|
$
|
282,000
|
For the Fiscal Years Ended
August 31,
|
||||||||
2019
|
2018
|
|||||||
Expected benefit from federal taxes at statutory rate of 21% and 34% for the years 2019 and 2018
|
$
|
740,870
|
$
|
34,100
|
||||
State taxes, net of federal benefit
|
129,123
|
4,600
|
||||||
Permanent and other differences
|
10,388
|
97,800
|
||||||
Change in tax rate
|
—
|
1,196,464
|
||||||
NOL true up
|
225,067
|
17,589
|
||||||
Temporary difference true up
|
—
|
240,352
|
||||||
NQ stock options adjustment
|
(348,441
|
)
|
—
|
|||||
AMT credit carryforward
|
—
|
(282,000
|
)
|
|||||
Other
|
(26,202
|
)
|
(17,705
|
)
|
||||
Change in valuation allowance
|
(2,014,000
|
)
|
(1,573,200
|
)
|
||||
Total income tax expense / (benefit)
|
$
|
(1,283,195
|
)
|
$
|
(282,000
|
)
|
For the Fiscal Years Ended August 31,
|
||||||||
2019
|
2018
|
|||||||
Wholesale water and wastewater services
|
$
|
8,405,520
|
$
|
4,794,749
|
||||
Land development activities
|
11,955,989
|
2,164,450
|
||||||
Total wholesale water and wastewater services and land development revenues
|
$
|
20,361,509
|
$
|
6,959,199
|
For the Fiscal Years Ended August 31,
|
||||||||
2019
|
2018
|
|||||||
Wholesale water and wastewater services
|
$
|
5,766,783
|
$
|
2,646,988
|
||||
Land development activities
|
651,027
|
150,610
|
||||||
Depreciation, general and administrative expenses
|
(3,419,149
|
)
|
(3,106,325
|
)
|
||||
Total income (loss) from operations
|
$
|
2,998,661
|
$
|
(308,727
|
)
|
August 31, 2019
|
August 31, 2018
|
|||||||
Wholesale water and wastewater services
|
$
|
51,588,079
|
$
|
36,721,884
|
||||
Land development activities
|
16,866,542
|
9,497,106
|
||||||
Corporate
|
15,266,783
|
25,687,625
|
||||||
Total assets
|
$
|
83,721,404
|
$
|
71,906,615
|
For the Fiscal Years Ended August 31,
|
||||||||||||||||||||
2020
|
2021
|
2022
|
2023
|
2024
|
||||||||||||||||
Operations
|
$
|
44,235
|
$
|
32,033
|
$
|
32,033
|
$
|
32,033
|
$
|
32,033
|
||||||||||
Water delivery
|
430,350
|
858,000
|
858,000
|
858,000
|
858,000
|
|||||||||||||||
Capital
|
2,296,138
|
50,000
|
50,000
|
50,000
|
50,000
|
|||||||||||||||
Other
|
55,000
|
55,000
|
55,000
|
55,000
|
55,000
|
|||||||||||||||
$
|
2,825,723
|
$
|
995,033
|
$
|
995,033
|
$
|
995,033
|
$
|
995,033
|
● |
the CAB agreed to repay the amounts owed by Sky Ranch Metropolitan District No. 5 to the Company totaling $857,900, and the previous Facilities Funding and Acquisition Agreement entered into between the Company and Sky Ranch
Metropolitan District No. 5 in 2014 was terminated;
|
● |
the PF Agreement and a June 2018 Funding Acquisition Agreement between the CAB and the Company totaling $2.4 million were terminated;
|
● |
the CAB acknowledged all amounts owed to the Company under the terminated agreements totaling $3.3 million, as well as amounts the Company incurred to finance the formation of the CAB; and
|
● |
the Company agreed to fund an agreed upon list of improvements to be constructed by the CAB with an estimated cost of $30,000,000 (including improvements already funded) on an as-needed basis for calendar years 2018–2023.
|
2019
|
2018
|
|||||||||||||||||||||||||||||||
Three Months Ended
|
Three Months Ended
|
|||||||||||||||||||||||||||||||
In thousands, except per share data
|
Nov 30
|
Feb 28
|
May 31
|
Aug 31
|
Nov 30
|
Feb 29
|
May 31
|
Aug 31
|
||||||||||||||||||||||||
Total revenues
|
$
|
3,073
|
$
|
2,630
|
$
|
5,185
|
$
|
9,474
|
$
|
1,010
|
$
|
845
|
$
|
1,212
|
$
|
3,892
|
||||||||||||||||
Gross profit
|
1,246
|
374
|
1,922
|
2,876
|
580
|
631
|
683
|
904
|
||||||||||||||||||||||||
Operating income (loss)
|
519
|
(276
|
)
|
1,159
|
1,597
|
(200
|
)
|
(14
|
)
|
(88
|
)
|
(7
|
)
|
|||||||||||||||||||
Net income (loss)
|
$
|
634
|
$
|
(96
|
)
|
$
|
1,261
|
$
|
3,012
|
$
|
(97
|
)
|
$
|
100
|
$
|
55
|
$
|
357
|
||||||||||||||
Basic and diluted income (loss) per share
|
$
|
0.03
|
$
|
*
|
$
|
0.05
|
$
|
0.13
|
*
|
$
|
*
|
$
|
*
|
$
|
0.01
|
* |
Amount is less than $.01 per share
|
● |
In fiscal 2019, the Company sold approximately $4,238,300 ($1,285,000, $124,200, $1,308,500 and $1,520,600 in fiscal Q1, Q2, Q3 and Q4, respectively) in water related to oil and gas
activities as compared to $4,044,300 ($846,400, $753,000, $1,022,300 and $1,422,600 in fiscal Q1, Q2, Q3 and Q4, respectively) in fiscal 2018.
|
(a) |
Evaluation of Disclosure Controls and Procedures
|
(b) |
Management’s Annual Report on Internal Control Over Financial Reporting
|
● |
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
|
● |
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with
authorizations of our management and our directors; and
|
● |
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
|
• |
We have initiated compensating controls in the near term, including designating an additional person to confirm accruals of costs incurred from related parties;
|
• |
We are enhancing and revising the design of existing controls and procedures to improve our identification of accruals of costs incurred from related parties; and
|
• |
We have initiated compensating controls in the near term, including designating an external tax consulting firm to review and confirm our quarterly tax provisions are correct and complete.
|
(c) |
Report of the Independent Registered Public Accounting Firm
|
(d) |
Changes in Internal Controls
|
(a) |
Documents filed as part of this Annual Report on Form 10-K
|
(1) |
Financial Statements. See “Index to Consolidated Financial Statements and Supplementary Data” in Part II, Item 8 of this Annual Report on Form 10-K.
|
(2) |
Financial Statement Schedules. All schedules are omitted either because they are not required or the required information is shown in the consolidated financial statements or notes thereto.
|
(3) |
Exhibits. The exhibits listed on the accompanying “Exhibit Index” are filed or incorporated by reference as part of this Annual Report on Form 10-K, unless otherwise indicated.
|
Exhibit Number
|
Description
|
|
Articles of Incorporation of the Company. Incorporated by reference to Appendix B to the Proxy Statement on Schedule 14A filed on December 14, 2007.
|
||
Bylaws of the Company. Incorporated by reference to Appendix C to the Proxy Statement on Schedule 14A filed on December 14, 2007.
|
||
Specimen Stock Certificate. Incorporated by reference to Exhibit 4.1 to Quarterly Report on Form 10 Q for the fiscal quarter ended February 28, 2015.
|
||
Description of Capital Stock. *
|
||
2004 Incentive Plan, effective April 12, 2004. Incorporated by reference to Exhibit F to the Proxy Statement for the Annual Meeting held on April 12, 2004. **
|
||
Wastewater Service Agreement, dated January 22, 1997, by and between the Company and the Rangeview Metropolitan District. Incorporated by reference to Exhibit 10.3 to the Annual Report on Form 10-KSB for the
fiscal year ended August 31, 1998.
|
||
Comprehensive Amendment Agreement No. 1, dated April 11, 1996, by and among Inco Securities Corporation, the Company, the Bondholders, Gregory M. Morey, Newell Augur, Jr., Bill Peterson, Stuart Sundlun, Alan C.
Stormo, Beverlee A. Beardslee, Bradley Kent Beardslee, Robert Douglas Beardslee, Asra Corporation, International Properties, Inc., and the Land Board. Incorporated by reference to Exhibit 10.7 to the Quarterly Report on Form 10-QSB for the
period ended May 31, 1996.
|
||
Agreement for Sale of Export Water dated April 11, 1996 by and between the Company and the Rangeview Metropolitan District. Incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-QSB for
the fiscal quarter ended May 31, 1996.
|
||
Bargain and Sale Deed among the Land Board, the Rangeview Metropolitan District and the Company dated April 11, 1996. Incorporated by reference to Exhibit 10.18 to Amendment No. 1 to Registration Statement on
Form SB-2, filed on June 7, 2004, Registration No. 333-114568.
|
||
Agreement for Water Service dated August 3, 2005 among the Company, Rangeview Metropolitan District and Arapahoe County incorporated by reference to Exhibit 10.24 to the Current Report on Form 8-K filed on
August 4, 2005.
|
||
Amendment No. 1 to Agreement for Water Service dated August 25, 2008, between the Company and Arapahoe County. Incorporated by reference to Exhibit 10.36 to the Annual Report on Form 10-K for the fiscal year
ended August 31, 2008.
|
||
Paid-Up Oil and Gas Lease dated March 14, 2011, between the Company and Anadarko E&P Company, L.P. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 15, 2011.
|
||
Surface Use and Damage Agreement dated March 14, 2011, between the Company and Anadarko E&P Company, L.P. Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on March 15, 2011.
|
||
2014 Equity Incentive Plan, effective April 12, 2014. Incorporated by reference to Appendix A to the Proxy Statement for the Annual Meeting held on January 15, 2014. **
|
||
2014 Amended and Restated Lease Agreement, dated July 10, 2014, by and between the Land Board, the Rangeview Metropolitan District, and the Company. Incorporated by reference to Exhibit 10.2 to the Current
Report on Form 8-K filed on July 14, 2014.
|
Exhibit Number
|
Description
|
|
2014 Amended and Restated Service Agreement, dated July 10, 2014, by and between the Company and the Rangeview Metropolitan District. Incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K
filed on July 14, 2014.
|
||
Rangeview/Pure Cycle WISE Project Financing and Service Agreement, effective as of December 22, 2014. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on December 30, 2014.
|
||
South Metro WISE Authority Formation and Organizational Intergovernmental Agreement, dated December 31, 2013. Incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q for the fiscal quarter
ended November 30, 2014.
|
||
Amended and Restated WISE Partnership – Water Delivery Agreement, dated December 31, 2013, among the City and County of Denver acting through its Board of Water Commissioners, the City of Aurora acting by and
through its Utility Enterprise, and South Metro WISE Authority. Incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2014.
|
||
Agreement for Purchase and Sale of Western Pipeline Capacity, dated November 19, 2014, among the Rangeview Metropolitan District and certain members of the South Metro WISE Authority. Incorporated by reference
to Exhibit 10.4 to Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2014.
|
||
Water Service Agreement by and between Rangeview Metropolitan District, acting by and through its Water Activity Enterprise, and Elbert & Highway 86 Commercial Metropolitan District, acting by and through
its Water Enterprise, dated as of December 15, 2016. Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on December 19, 2016.
|
||
Export Service Agreement, effective as of June 16, 2017, between the Company and the Rangeview Metropolitan District. Incorporated by reference to Exhibit 10.18 to the Annual Report on Form 10-K for the fiscal
year ended August 31, 2017
|
||
Contract for Purchase and Sale of Real Estate, dated June 27, 2017, by and between PCY Holdings, LLC and Richmond American Homes of Colorado, Inc., as amended by First Amendment to Contract for Purchase and
Sale of Real Estate, dated August 28, 2017, by and between PCY Holdings, LLC and Richmond American Homes of Colorado, Inc., as amended by Second Amendment to Contract for Purchase and Sale of Real Estate, dated August 29, 2017, by and between
PCY Holdings, LLC and Richmond American Homes of Colorado, Inc., as amended by Third Amendment to Contract for Purchase and Sale of Real Estate, dated September 8, 2017, by and between PCY Holdings, LLC and Richmond American Homes of
Colorado, Inc., as amended by Fourth Amendment to Contract for Purchase and Sale of Real Estate, dated September 20, 2017, by and between PCY Holdings, LLC and Richmond American Homes of Colorado, Inc., as amended by Fifth Amendment to
Contract for Purchase and Sale of Real Estate, dated October 6, 2017, by and between PCY Holdings, LLC and Richmond American Homes of Colorado, Inc., as amended by Sixth Amendment to Contract for Purchase and Sale of Real Estate, dated
October 11, 2017, by and between PCY Holdings, LLC and Richmond American Homes of Colorado, Inc., as amended by Seventh Amendment to Contract for Purchase and Sale of Real Estate, dated October 18, 2017, by and between PCY Holdings, LLC and
Richmond American Homes of Colorado, Inc., as amended by Eighth Amendment to Contract for Purchase and Sale of Real Estate, dated October 20, 2017, by and between PCY Holdings, LLC and Richmond American Homes of Colorado, Inc., as amended by
Ninth Amendment to Contract for Purchase and Sale of Real Estate, dated October 20, 2017, by and between PCY Holdings, LLC and Richmond American Homes of Colorado, Inc., as amended by Tenth Amendment to Contract for Purchase and Sale of Real
Estate, dated November 3, 2017, by and between PCY Holdings, LLC and Richmond American Homes of Colorado, Inc., as amended by Eleventh Amendment
to Contract for Purchase and Sale of Real Estate, dated November 10, 2017, by and between PCY Holdings, LLC and Richmond American Homes of Colorado, Inc., as amended by Twelfth Amendment to Contract for Purchase and Sale of Real Estate, dated April 20, 2018, by and between PCY Holdings, LLC and Richmond American
Homes of Colorado, Inc., as amended by Thirteenth Amendment* to Contract
for Purchase and Sale of Real Estate, dated August 9, 2018, by and between PCY Holdings, LLC and Richmond American Homes of Colorado, Inc., as amended by Fourteenth Amendment* to Contract for Purchase and Sale of Real Estate,
dated March 11, 2019, by and between PCY Holdings, LLC and Richmond American Homes of Colorado, Inc., as amended by Fifteenth Amendment* to Contract for Purchase and Sale of Real Estate, dated September 26, 2019, by and between PCY Holdings, LLC and Richmond American Homes of Colorado, Inc. The Contract for
Purchase and Sale of Real Estate and the First through Tenth Amendments are incorporated by reference to Exhibit 10.19 to the Annual Report on Form 10-K for the fiscal year ended August 31, 2017. The Eleventh Amendment is incorporated by
reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2017. The Twelfth Amendment is incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the fiscal quarter
ended May 31, 2018. The Thirteenth, Fourteenth and Fifteenth Amendments are filed herewith.
|
Exhibit Number
|
Description
|
|
Contract for Purchase and Sale of Real Estate, dated June 27, 2017, by and between PCY Holdings, LLC and Taylor Morrison of Colorado, Inc., as amended by First Amendment to Contract for Purchase and Sale of
Real Estate, dated August 24, 2017, by and between PCY Holdings, LLC and Taylor Morrison of Colorado, Inc., as amended by Second Amendment to Contract for Purchase and Sale of Real Estate, dated September 19, 2017, by and between PCY
Holdings, LLC and Taylor Morrison of Colorado, Inc., as amended by Third Amendment to Contract for Purchase and Sale of Real Estate, dated October 6, 2017, by and between PCY Holdings, LLC and Taylor Morrison of Colorado, Inc., as amended by
Fourth Amendment to Contract for Purchase and Sale of Real Estate, dated October 13, 2017, by and between PCY Holdings, LLC and Taylor Morrison of Colorado, Inc., as amended by Fifth Amendment to Contract for Purchase and Sale of Real Estate,
dated October 18, 2017, by and between PCY Holdings, LLC and Taylor Morrison of Colorado, Inc., as amended by Sixth Amendment to Contract for Purchase and Sale of Real Estate, dated October 20, 2017, by and between PCY Holdings, LLC and
Taylor Morrison of Colorado, Inc., as amended by Seventh Amendment to Contract for Purchase and Sale of Real Estate, dated October 20, 2017, by and between PCY Holdings, LLC and Taylor Morrison of Colorado, Inc., as amended by Eighth
Amendment to Contract for Purchase and Sale of Real Estate, dated November 3, 2017, by and between PCY Holdings, LLC and Taylor Morrison of Colorado, Inc., as amended by Ninth Amendment to Contract for Purchase and Sale of Real Estate, dated
November 7, 2017, by and between PCY Holdings, LLC and Taylor Morrison of Colorado, Inc., as amended by Tenth Amendment to Contract for
Purchase and Sale of Real Estate, dated November 10, 2017, by and between PCY Holdings, LLC and Taylor Morrison of Colorado, Inc., as amended by Eleventh
Amendment to Contract for Purchase and Sale of Real Estate, dated March 27, 2018, by and between PCY Holdings, LLC and Taylor Morrison of Colorado, Inc., as amended by Twelfth Amendment to Contract for Purchase and Sale of Real Estate, dated April 10, 2018, by and between PCY Holdings, LLC and Taylor Morrison of
Colorado, Inc., as amended by Thirteenth Amendment* to Contract for
Purchase and Sale of Real Estate, dated August 9, 2018, by and between PCY Holdings, LLC and Taylor Morrison of Colorado, Inc., as amended by Fourteenth Amendment* to Contract for Purchase and Sale of Real Estate,
dated July 19, 2019, by and between PCY Holdings, LLC and Taylor Morrison of Colorado, Inc. The Contract for Purchase and Sale of Real Estate and the First through Ninth Amendments are incorporated by reference to Exhibit 10.20 to the Annual
Report on Form 10-K for the fiscal year ended August 31, 2017. The Tenth Amendment is incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2017. The Eleventh and Twelfth
Amendments are incorporated by reference to Exhibits 10.1 and 10.2, respectively, to the Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2018. The Thirteenth and Fourteenth Amendments are filed herewith.
|
||
Contract for Purchase and Sale of Real Estate, dated June 29, 2017, by and between PCY Holdings, LLC and KB Home Colorado Inc., as amended by First Amendment to Contract for Purchase and Sale of Real Estate,
dated August 28, 2017, by and between PCY Holdings, LLC and KB Home Colorado Inc., as amended by Second Amendment to Contract for Purchase and Sale of Real Estate, dated September 15, 2017, by and between PCY Holdings, LLC and KB Home
Colorado Inc., as amended by Third Amendment to Contract for Purchase and Sale of Real Estate, dated September 28, 2017, by and between PCY Holdings, LLC and KB Home Colorado Inc., as amended by Fourth Amendment to Contract for Purchase and
Sale of Real Estate, dated October 9, 2017, by and between PCY Holdings, LLC and KB Home Colorado Inc., as amended by Fifth Amendment to Contract for Purchase and Sale of Real Estate, dated October 18, 2017, by and between PCY Holdings, LLC
and KB Home Colorado Inc., as amended by Sixth Amendment to Contract for Purchase and Sale of Real Estate, dated October 20, 2017, by and between PCY Holdings, LLC and KB Home Colorado Inc., as amended by Seventh Amendment to Contract for
Purchase and Sale of Real Estate, dated October 31, 2017, by and between PCY Holdings, LLC and KB Home Colorado Inc., as amended by Eighth Amendment to Contract for Purchase and Sale of Real Estate, dated November 3, 2017, by and between PCY
Holdings, LLC and KB Home Colorado Inc., as amended by Ninth Amendment to Contract for Purchase and Sale of Real Estate, dated November 7, 2017, by and between PCY Holdings, LLC and KB Home Colorado Inc., as amended by Tenth Amendment to Contract for Purchase and Sale of Real Estate, dated November 10, 2017, by and between PCY Holdings, LLC and KB Home
Colorado Inc., as amended by Eleventh Amendment to Contract for Purchase and Sale of Real Estate, dated March 29, 2018, by and between PCY
Holdings, LLC and KB Home Colorado Inc., as amended by Twelfth Amendment to Contract for Purchase and Sale of Real Estate, dated January 22,
2019, by and between PCY Holdings, LLC and KB Home Colorado Inc., as amended by Thirteenth Amendment to Contract for Purchase and Sale of Real
Estate, dated April 18, 2019, by and between PCY Holdings, LLC and KB Home Colorado Inc., as amended by Fourteenth Amendment to Contract for
Purchase and Sale of Real Estate, dated May 21, 2019, by and between PCY Holdings, LLC and KB Home Colorado Inc. The Contract for Purchase and Sale of Real Estate and the First through Ninth Amendments are incorporated by reference to Exhibit
10.21 to the Annual Report on Form 10-K for the fiscal year ended August 31, 2017. The Tenth Amendment is incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2017. The
Eleventh Amendment is incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2019. The Twelfth Amendment is incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form
10-Q for the fiscal quarter ended May 31, 2019. The Thirteenth Amendment is incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2019. The Fourteenth Amendment is incorporated by
reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q for the fiscal quarter ended May 31, 2019
|
Exhibit Number
|
Description
|
|
Letter of Crowe Horwath dated December 5, 2017. Incorporated by reference to Exhibit 16.1 to the Current Report on Form 8-K filed on December 6, 2017.
|
||
Letter of EKS&H LLLP, dated October 4, 2018. Incorporated by reference to Exhibit 16.1 to the Current Report on Form 8-K filed on October 4, 2018.
|
||
Subsidiaries *
|
||
Consent of Plante & Moran PLLC *
|
||
Certification under Section 302 of the Sarbanes-Oxley Act of 2002. *
|
||
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ***
|
||
101.INS
|
XBRL Instance Document.
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document. *
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document. *
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document. *
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document. *
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document. *
|
* |
Filed herewith
|
** |
Indicates management contract or compensatory plan or arrangement in which directors or executive officers are eligible to participate.
|
*** |
Furnished herewith
|
PURE CYCLE CORPORATION
|
|
/s/ Mark W. Harding
|
|
Mark W. Harding, President and Chief Financial Officer
|
|
November 12, 2019 |
Signature
|
Title
|
Date
|
||
/s/ Mark W. Harding
|
||||
Mark W. Harding
|
President, Chief Financial Officer and Director
|
November 12, 2019
|
||
(Principal Executive Officer, Principal Financial and Accounting Officer)
|
||||
/s/ Harrison H. Augur
|
||||
Harrison H. Augur
|
Chairman, Director
|
November 12, 2019
|
||
/s/ Patrick J. Beirne
|
||||
Patrick J. Beirne
|
Director
|
November 12, 2019
|
||
/s/ Arthur G. Epker III
|
||||
Arthur G. Epker III
|
Director
|
November 12, 2019
|
||
/s/ Richard L. Guido
|
||||
Richard L. Guido
|
Director
|
November 12, 2019
|
||
/s/ Peter C. Howell
|
||||
Peter C. Howell
|
Director
|
November 12, 2019
|
• |
40,000,000 shares of common stock, par value 1/3 of $.01 per share, of which 23,826,598 shares were issued and outstanding as of November 8, 2019; and
|
• |
25,000,000 shares of preferred stock, par value $.001 per share, of which 432,513 shares of Series B Preferred Stock were issued and outstanding as of November 8, 2019.
|
• |
the aggregate number of shares offered and the offering price;
|
• |
the dividend rate of the series, the conditions and dates upon which such dividends will be payable, the relation which such dividends will bear to the dividends payable on any other class or classes of stock, and whether such
dividends will be cumulative or noncumulative;
|
• |
whether and upon what terms the shares will be redeemable;
|
• |
the extent, if any, to which holders of shares of the series will have preemptive rights;
|
• |
the terms and amount of any sinking fund provided for the purchase or redemption of the shares of the series;
|
• |
whether or not the shares of the series will be convertible into or exchangeable for shares of any other class or classes of stock, and, if provision is made for conversion or exchange, the times, prices, rates, adjustments and other
terms and conditions of such conversion or exchange;
|
• |
the voting rights, if any, to which the holders of shares of the series will be entitled;
|
• |
the restrictions, if any, on the issue or reissue of any additional shares of preferred stock of that series;
|
• |
the rights of the holders of the shares of the series upon the dissolution, liquidation, or winding up of the Company;
|
• |
any restriction on alienability of shares of the series, or any provision discriminating against any existing or prospective holder of such shares as a result of such holder owning a substantial amount of shares of such series;
|
• |
any restriction on the repurchase or redemption of shares by us while there is any arrearage in the payment of dividends or sinking fund installments; and
|
• |
any other preferences, privileges and powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions of such series, as the board of directors may deem advisable and as shall not be
inconsistent with the provisions of the articles of incorporation and permitted by the laws of the State of Colorado.
|
• |
altering or changing terms, preferences or privileges of Series B Preferred Stock; and
|
• |
authorizing a new security ranking senior to the Series B Preferred Stock as to dividend or liquidation rights.
|
SELLER:
|
||||
PCY HOLDINGS, LLC, a Colorado limited liability company
|
||||
By: |
PURE CYCLE CORPORATION, its Sole Member
|
|||
By:
|
/s/ Mark W. Harding |
Name:
|
Mark W. Harding | ||
Title:
|
President |
PURCHASER:
|
||
RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware corporation
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||
By: |
/s/ Linda M. Purdy
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Name: |
Linda M. Purdy
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|
Title: |
Senior Vice President
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SELLER:
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PCY HOLDINGS, LLC, a Colorado limited liability company
|
||||
By: |
PURE CYCLE CORPORATION, its Sole Member
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|||
By:
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/s/ Mark W. Harding |
Name:
|
Mark W. Harding | ||
Title:
|
President |
PURCHASER:
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||
RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware corporation
|
||
By: |
/s/ Linda M. Purdy
|
Name: |
Linda M. Purdy
|
|
Title: |
Senior Vice President
|
SELLER:
|
||||
PCY HOLDINGS, LLC, a Colorado limited liability company
|
||||
By: |
PURE CYCLE CORPORATION, its Sole Member
|
|||
By:
|
/s/ Mark W. Harding |
Name:
|
Mark W. Harding | ||
Title:
|
President |
PURCHASER:
|
||
RICHMOND AMERICAN HOMES OF COLORADO, INC., a Delaware corporation
|
||
By: |
/s/ Matt Hengel
|
Name: |
Matt Hengel
|
|
Title: |
Senior Vice President
|
SELLER:
|
||||
PCY HOLDINGS, LLC, a Colorado limited liability company
|
||||
By: |
PURE CYCLE CORPORATION, its Sole Member
|
|||
By:
|
/s/ Mark W. Harding |
Name:
|
Mark W. Harding | ||
Title:
|
President |
PURCHASER:
|
||
TAYLOR MORRISON OF COLORADO, INC.,
|
||
a Colorado corporation
|
||
By: |
/s/ Phillip R. Cross
|
Name: |
Phillip R. Cross
|
|
Title: |
Vice President
|
SELLER:
|
||||
PCY HOLDINGS, LLC, a Colorado limited liability company
|
||||
By: |
PURE CYCLE CORPORATION,
|
|||
its Sole Member
|
||||
By:
|
/s/ Mark W. Harding |
Name:
|
Mark W. Harding | ||
Title:
|
President |
PURCHASER:
|
||
TAYLOR MORRISON OF COLORADO, INC.,
|
||
a Colorado corporation
|
||
By: |
/s/ Phillip R. Cross
|
Name: |
Phillip R. Cross
|
|
Title: |
Vice President
|
1. |
I have reviewed this Annual Report on Form 10-K of Pure Cycle Corporation;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
|
4. |
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons
performing the equivalent functions):
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
|
|
Mark W. Harding
|
|
Principal Executive Officer and Principal Financial Officer
|
|
1. |
The Form 10-K of the Company for the fiscal year ended August 31, 2019, as filed with the Securities and
Exchange Commission on the date hereof (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
|
|
Mark W. Harding
|
|
Principal Executive Officer and Principal Financial Officer
|
|
November 12, 2019
|
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