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LONG-TERM OBLIGATIONS AND OPERATING LEASE | 9 Months Ended
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May 31, 2021
LONG-TERM OBLIGATIONS AND OPERATING LEASE [Abstract] |
LONG-TERM OBLIGATIONS AND OPERATING LEASE | NOTE 7 – LONG-TERM OBLIGATIONS AND OPERATING LEASE The Participating interests in export water supply is an obligation of the Company that has no scheduled maturity date. Therefore, maturity of this liability is not disclosed in tabular form but is described below. Participating Interests in Export Water Supply The acquisition of the Rangeview Water Supply was finalized with the signing of the Comprehensive Amendment Agreement (the “CAA”) in 1996. The CAA is explained in greater detail in Note 5 to the 2020 Annual Report. The terms and conditions of the CAA, other than whom the amounts are payable too, have not been modified since signing. The CAA obligation is non-interest bearing, and if the Export Water is not sold, the parties to the CAA have no recourse against the Company. Additionally, if the Company does not sell the Export Water, the holders of the Series B Preferred Stock are not entitled to payment of any dividend and have no contractual recourse against the Company. As the proceeds from the sale of Export Water are received, they are either retained by the Company or remitted to various parties pursuant to the CAA. As of May 31, 2021, the recorded obligation of the CAA is $0.3 million, and the contingent off-balance sheet portion is $0.6 million. The CAA includes contractually established priorities which call for payments to CAA holders in order of their priority. This means that the first payees receive their full payment before the next priority level receives any payment and so on until full repayment. Of the next $6.3 million of Export Water payouts, which based on current payout levels would occur over several years, the Company will receive $5.6 million of revenue. Thereafter, the Company will be entitled to all but $0.2 million of the proceeds from the sale of Export Water after deduction of the State Land Board royalty. The Company has determined that the contingent portion of the CAA does not have a determinable fair value. Sky Ranch In November 2020 and February 2021, the Company entered into separate contracts with KB Home, Melody (a DR Horton Company), Challenger Homes, and Lennar Colorado, LLC to sell 789 single-family attached and detached residential lots at the Sky Ranch property. This next development phase of Sky Ranch will incorporate approximately 250 acres and is planned to be completed in four sub-phases. Due to the Company’s strong performance in the first phase of the Sky Ranch project, the Company was able to realize an approximate 30% increase in lot prices from $75,000 for a 50’ lot in phase one to $97,000 for the same 50’ lot in the first subphase of the second phase. The timing of cash flows will include certain milestone deliveries, including, but not limited to, completion of governmental approvals for final plats, installation of wet utility public improvements, and final completion of lot deliveries. The Company began construction in February 2021 on the second phase at Sky Ranch, which is expected to include 895 residential lots. The 106 lots not currently under contract to home builders are being retained for use as long-term Build-to-Rent rental properties. WISE Partnership The South Metro WISE Authority (“SMWA”) is a group of ten governmental or quasi-governmental water providers including the Rangeview District, that was formed to enable its members to participate in a regional water supply project known as the Water Infrastructure Supply Efficiency partnership (“WISE”) created by the “WISE Partnership Agreement,” defined below. Each member of SMWA controls a contractually defined share of WISE and the members’ rights and obligations with respect to WISE. The WISE Partnership Agreement provides for the purchase of certain infrastructure (i.e., pipelines, water storage facilities, water treatment facilities, and other appurtenant facilities) to deliver water to and among the ten members of the SMWA, and to “Denver Water” and “Aurora Water,” both defined below. Certain infrastructure has been constructed and other infrastructure will be constructed over the next several years. In December 2014, the Company, through the Rangeview District, consented to the waiver of all contingencies set forth in the Amended and Restated WISE Partnership – Water Delivery Agreement, dated December 31, 2013 (the “WISE Partnership Agreement”), among the City and County of Denver acting through its Board of Water Commissioners (“Denver Water”), the City of Aurora acting by and through its utility enterprise (“Aurora Water”). In December 2014, the Company and the Rangeview District entered the Rangeview/Pure Cycle WISE Project Financing and Service Agreement (the “WISE Financing Agreement”), which requires the Company to fund the Rangeview District’s participation in WISE. During the three and nine months ended May 31, 2021, the Company through the Rangeview District, received metered water deliveries of 100 and 300 acre-feet of WISE water, paying $0.2 and $0.6 million for this water. During the three and nine months ended May 31, 2020, the Company through the Rangeview District received metered water deliveries of 0 and 400 acre-feet of WISE water, paying $0 and $0.6 million for this water. See further discussion in Note 9 – Related Party Transactions. Lease Commitments In February 2018, the Company entered into an operating lease for 11,393 square feet of office and warehouse space in Watkins, Colorado. The lease has a three-year term with payments of $6,600 per month and an option to extend the primary lease term for a two-year period at a rate equal to a 12.5% increase over the primary base payments. For the nine months ended May 31, 2021 and 2020, the Company recorded less than $0.1 million of rent expense related to its office lease. During the nine months ended May 31, 2021 and 2020, the Company paid less than $0.1 million against the Lease obligations — operating leases. Operating lease expense is generally recognized evenly over the term of the lease. Leases with an initial term of twelve months or less are not recorded on the condensed consolidated balance sheet. For lease agreements entered into or reassessed in the future, the Company will be required to combine the lease and non-lease components in determining the lease liabilities and right-of-use (“ROU”) assets. The Company’s lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. The Company used the incremental borrowing rate of 6% on August 31, 2019, for all leases that commenced prior to that date. The Company elected the hindsight practical expedient to determine the lease term for existing leases, which resulted in the lengthening of the lease term related to the Company’s office lease. ROU lease assets and lease liabilities for the Company’s operating leases were recorded in the condensed consolidated balance sheet as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | As of May 31, 2021 |  | ​ | As of August 31, 2020 |
​ | ​ | (In thousands) | ​
Operating leases - right of use assets |  | $ | 141 |  | ​ | $ | 196 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Accrued liabilities | ​ | $ | 82 | ​ | ​ | $ | 74 | ​
Lease obligations - operating leases, net of current portion | ​ |  | 58 | ​ | ​ |  | 120 | ​
Total lease liability | ​ | $ | 140 | ​ | ​ | $ | 194 | ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Weighted average remaining lease term (in years) | ​ |  | 1.7 | ​ | ​ |  | 2.4 | ​
Weighted average discount rate | ​ |  | 6 | % | ​ |  | 6 | %
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