##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended August 31, 2008
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 0-8814
 PURE CYCLE CORPORATION
  Colorado
    
    84-0705083(State of incorporation)
    
    (I.R.S. Employer Identification No.)8451 Delaware Street, Thornton, CO 80260
    
    (303) 292-3456(Address of principal executive office) (Zip Code)
    
    (Registrants telephone number, including area code)Securities registered pursuant to Section 12(b) of
the Act:Common Stock 1/3 of $.01 par value
    
    The NASDAQ Stock Market, LLC(Title of Class)
    
    (Name of each exchange on which registered)
 NONE
 Yes o No þ
 Yes o No þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerate filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



Table of Contents
 Item
    
    PagePart I1. Business
    
    
    31A. Risk Factors
    
    
    151B. Unresolved Staff Comments
    
    
    202. Properties
    
    
    203. Legal Proceedings
    
    
    214. Submission of Matters to a Vote of Security Holders
    
    
    21Part II5. Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    216. Selected Financial Data
    
    
    237. Managements Discussion and Analysis of Financial Condition and Results of Operation
    
    
    247A. Quantitative and Qualitative Disclosures About Market Risk.
    
    
    318. Financial Statements and Supplementary Data
    
    
    329. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    619A. Controls and Procedures
    
    
    619B. Other Information
    
    
    62Part III10. Directors, Executive Officers and Corporate Governance
    
    
    6211. Executive Compensation
    
    
    6212. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    6213. Certain Relationships and Related Transactions, and Director Independence
    
    
    6214. Principal Accounting Fees and Services
    
    
    62Part IV15. Exhibits and Financial Statement Schedules
    
    
    62Signatures
    
    
    66Exhibit 10.36Exhibit 14Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 32.1
   2




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##### Table of Contents



SAFE HARBOR STATEMENT UNDER THE UNITED STATES PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
  
 PART I
 
 Item 1  Business
 Summary of our business
   Glossary of terms
  
    
    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, acre feet
is used to designate an annual decreed amount of groundwater or the amount of surface water
that might be available during a typical year.
    
    Consumptive Use  the amount of water that is evaporated, transpired, incorporated into
products or crops, consumed by humans or livestock, or otherwise removed from the immediate
water environment.
    
    Customer Facilities  facilities that carry potable water and reclaimed water to
customers from the Retail water distributions system and collect wastewater from customers
and transfer it to the retail wastewater collection system. Water and wastewater service
lines, interior plumbing, meters and other components are typical examples of Customer
Facilities. In many cases, portions of the Customer Facilities are constructed by the
developer, but they are owned and maintained by the customer.
    
    Section  a parcel of land being approximately one square mile and containing
approximately 640 acres.
  3




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##### Table of Contents




    
    Single Family Equivalent unit (SFE)  is defined in our water and wastewater service
rules and regulations as the amount of water required each year by a family of four persons
living in a single family house on a standard sized lot, which is equivalent to
approximately 0.4 acre-feet of water per year.
    
    Special Facilities  facilities that are required to extend services to an individual
development or 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.
    
    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 us or to a quasi-municipal political subdivision of the state and we operate
and maintain the facilities.
    
    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.
 Our Water Assets
 Item 1A  Risk Factors, Item 7  Managements Discussion and
Analysis of Financial Condition and Results of Operation  Critical Accounting Policies
  Rangeview Water Supply and the Lowry Range
 Our Rangeview Water
    4




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(i)
    
    The Amended and Restated Lease Agreement (the Lease) between the State Board of Land
Commissioners (the Land Board) and the Rangeview Metropolitan District (the District),
a quasi-municipal political subdivision of the State of Colorado,(ii)
    
    The Agreement for Sale of Export Water between us and the District, and(iii)
    
    The Service Agreement between us and the District for the provision of water service
to the Lowry Range.
     The Lowry Range Property
     5




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Arkansas River Water
    6




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Arapahoe County Fairgrounds Agreement for Water Service
   Sky Ranch Water Supply and Water Service Agreements
     See Item 7  Managements
Discussion and Analysis of Financial Condition and Results of Operation  Investing Activities
  7




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Paradise Water Supply
 Critical Accounting Policies
 Well Enhancement and Recovery Systems
 rd 12-18 months.
 Revenues
  1.
    
    Water and wastewater tap fees,2.
    
    Construction fees, and3.
    
    Monthly service fees.
  Water and Wastewater Tap Fees
   8




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##### Table of Contents



Table A  Water System Tap Fees
 2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002Water tap fees per SFE
    
    $
    21,500
    
    
    $
    20,000
    
    
    $
    16,840
    
    
    $
    14,740
    
    
    $
    12,420
    
    
    $
    11,150
    
    
    $
    10,500Percentage Increase
    
    
    7.5
    %
    
    
    18.8
    %
    
    
    14.2
    %
    
    
    18.7
    %
    
    
    11.4
    %
    
    
    6.2
    %
    
    
    
   Construction Fees
  Monthly Service Fees
  Table B  Tiered Water Usage Pricing Structure
 Price ($ per thousand gallons)Amount of consumption
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Base charge per SFE
    
    $
    25.11
    
    
    $
    25.11
    
    
    $
    20.44
    
    
    $
    20.28
    
    
    $
    19.800 gallons to 10,000
gallons
    
    $
    2.55
    
    
    $
    2.55
    
    
    $
    2.58
    
    
    $
    2.46
    
    
    $
    2.4010,001 gallons to
20,000 gallons
    
    $
    3.35
    
    
    $
    3.35
    
    
    $
    3.34
    
    
    $
    3.17
    
    
    $
    3.1020,001 gallons and
above
    
    $
    5.96
    
    
    $
    5.96
    
    
    $
    5.90
    
    
    $
    5.54
    
    
    $
    5.40
     9




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Land Board Royalties and District Fees
   Item 1A  Risk Factors,
 Lowry Range Customers
  Export Water Customers
   Table C  Royalties for Export Water Sales
 Royalty RatePrivate
    
    
    PublicNet Revenues
    
    Entity
    
    
    Entity$0  $45,000,000
    
    
    12
    %
    
    
    10
    %$45,000,001  $60,000,000
    
    
    24
    %
    
    
    20
    %$60,000,001  $75,000,000
    
    
    36
    %
    
    
    30
    %$75,000,001  $90,000,000
    
    
    48
    %
    
    
    40
    %Over $90,000,000
    
    
    50
    %
    
    
    50
    %
  10




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Our Current Operations
      Significant Customers
  Table D  Significant Customers
 % of Water Usage Fees2008
    
    
    2007
    
    
    2006Ridgeview Youth Services Center
    
    
    71
    %
    
    
    67
    %
    
    
    67
    %Schmidt Aggregates
    
    
    15
    %
    
    
    20
    %
    
    
    27
    %Combined
    
    
    86
    %
    
    
    87
    %
    
    
    94
    %
 % of Wastewater Service Fees2008
    
    
    2007
    
    
    2006Ridgeview Youth Services Center
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 Our Projected Operations
 Item 1A  Risk Factors
    11




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Table E  Our Balanced Water Plan
 
   Rangeview Metropolitan District
    12




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Water and Growth in Colorado
    13




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Competition
  (i)
    
    The purchase of water and wastewater taps in exchange for our obligation to construct
the 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.
 Our Water Assets  Rangeview Water Supply and the Lowry
Range  Lowry Range Property
 Employees
  Available Information and Website Address
 www.purecyclewater.com www.sec.gov/edgar/searchedgar/companysearch.html 276720
  14




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Item 1A  Risk Factors
 Our business, operations, and financial condition are subject to significant risks. These risks
include those listed below and may include additional risks of which we are not currently aware or
which we currently do not believe are material. If any of the events or circumstances described in
the following risk factors actually occurs, our business could be materially adversely affected.
These risks should be read in conjunction with the other information set forth in this report.
 We are dependent on the development of the Lowry Range, Sky Ranch, and other areas near our
Rangeview Water Supply that are potential markets for our Rangeview Water Supply.
  Lowry Range
      15




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Sky Ranch
  Colorado housing market
  We are involved in on-going negotiations with the Land Board to clarify our rights and
obligations with respect to our Rangeview Water Supply and such negotiations may not be successful.
  In order to utilize the Arkansas River water acquired in fiscal 2006, we must apply for a
change of use with the Colorado water court and this may take several years to complete.
  We may not be able to obtain sufficient capital to develop our water rights, in particular the
Arkansas River water.
   16




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Our valuation of the Tap Participation Fee payable to HP A&M contains estimates and management
assumptions. The actual results could differ significantly from those estimates.
  In the event of default by HP A&M on promissory notes secured by deeds of trust on our
properties, we would be required to cure the defaults or lose the properties.
  Our net losses may continue and we may not have sufficient liquidity to pursue our business
objectives.
  The rates we are allowed to charge customers on the Lowry Range are limited by the Lease with
the Land Board and our contract with the District and may not be sufficient to cover our costs of
construction and operation.
   17




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We only have three employees and may not be able to manage the increasing demands of our
expanding operations.
  We may be adversely affected by any future decision by the Colorado Public Utilities Commission
to regulate us as a public utility.
   There are many obstacles to our ability to sell our Paradise Water Supply.
    18




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Conflicts of interest may arise relating to the operation of the District.
  We are required to maintain stringent water quality standards and are subject to regulatory and
environmental risks.
   Our contracts for the construction of water and wastewater projects may expose us to certain
completion and performance risks.
     19




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Our business is subject to seasonal fluctuations, which could affect demand for our water
service and our revenues.
  Weather conditions and overuse may interfere with our sources of water, demand for water
services, and our ability to supply water to our customers.
  
 Item 1B  Unresolved Staff Comments
  
 Item 2  Properties
   20




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Item
1: Our Water Assets
 Item 1: Our
Water Assets  Arkansas River Water
 
 Item 3  Legal Proceedings
  
 Item 4  Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5  Market for Registrants Common Equity, Related  Stockholder Matters and Issuer Purchases of Equity Securities
 (a) Market Information
  (b) Holders
  (c) Dividends
   21




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(d) Securities authorized for issuance under equity compensation plans
 Table F  Securities Authorized for Issuance Under Equity Compensation Plans
 Number of securities remainingNumber of securities to
    
    
    Weighted-average
    
    
    available for future issuancebe issued upon exercise
    
    
    exercise price of
    
    
    under equity compensationof outstanding options,
    
    
    outstanding options,
    
    
    plans (excluding securitiesPlan category
    
    warrants and rights
    
    
    warrants and rights
    
    
    reflected in column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved by
security holders
    
    
    155,000
    
    
    $
    8.50
    
    
    
    1,445,000Equity compensation plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    155,000
    
    
    $
    8.50
    
    
    
    1,445,000
 (e) Performance Graph1
  2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Pure Cycle Corporation
    
    $
    274.55
    
    
    $
    347.27
    
    
    $
    375.91
    
    
    $
    334.09
    
    
    $
    365.91
    
    
    $
    100.00S&P 500
    
    $
    139.75
    
    
    $
    157.27
    
    
    $
    136.59
    
    
    $
    125.45
    
    
    $
    111.46
    
    
    $
    100.00Peer Group (2)
    
    $
    153.30
    
    
    $
    174.55
    
    
    $
    167.04
    
    
    $
    165.92
    
    
    $
    111.07
    
    
    $
    100.00
 
 1.
    
    This performance graph is not soliciting material, is not deemed filed with the
Commission and is not to be incorporated by reference in any of our filings under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended,
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 or industry leadership: American States Water Company, Aqua America,
Inc., Artesian Resources Corp., California Water Service Group, Connecticut Water Service,
Inc., Middlesex Water Company, Pennichuck Corp., SJW Corp., and The York Water Company.
In 2007 we included BIW Limited, which ceased trading in 2007 and is therefore no longer
included in our Peer Group. (f) Recent Sales of Unregistered Securities
   22




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Item 6  Selected Financial Data
 Table G  Selected Financial Data
 August 31,In thousands (except per share data)
    
    2008
    
    
    2007
    
    
    2006 *
    
    
    2005
    
    
    2004Summary of Statement of Operations items:Total revenues
    
    $
    282.4
    
    
    $
    265.7
    
    
    $
    271.7
    
    
    $
    234.7
    
    
    $
    205.0Net loss
    
    $
    (6,926.7
    )
    
    $
    (6,914.7
    )
    
    $
    (792.9
    )
    
    $
    (1,050.9
    )
    
    $
    (1,975.7
    )Basic and diluted loss per share
    
    $
    (0.34
    )
    
    $
    (0.37
    )
    
    $
    (0.05
    )
    
    $
    (0.08
    )
    
    $
    (0.22
    )Weighted average shares outstanding
    
    
    20,189
    
    
    
    18,590
    
    
    
    14,694
    
    
    
    13,674
    
    
    
    8,880Summary Balance Sheet Information:Current assets
    
    $
    5,502.2
    
    
    $
    7,288.4
    
    
    $
    3,121.4
    
    
    $
    5,740.3
    
    
    $
    5,738.7Total assets
    
    $
    109,899.4
    
    
    $
    111,891.9
    
    
    $
    108,833.9
    
    
    $
    26,046.5
    
    
    $
    25,625.6Current liabilities
    
    $
    163.9
    
    
    $
    183.3
    
    
    $
    380.1
    
    
    $
    689.4
    
    
    $
    183.9Long term liabilities
    
    $
    56,567.8
    
    
    $
    53,863.8
    
    
    $
    53,789.1
    
    
    $
    10,004.3
    
    
    $
    12,118.2Total liabilities
    
    $
    56,731.6
    
    
    $
    54,047.1
    
    
    $
    54,169.2
    
    
    $
    10,693.7
    
    
    $
    12,302.1Equity
    
    $
    53,167.8
    
    
    $
    57,844.8
    
    
    $
    54,664.7
    
    
    $
    15,352.7
    
    
    $
    13,323.5
 *
    
    As restated   
    
    In fiscal 2008 and 2007, respectively, we imputed approximately $4.4 million and $4.7
million of interest related to the Tap Participation Fee payable to HP A&M (explained further
in Note 7 to the accompanying financing statements).
    
    In fiscal 2008 and 2007, respectively, we recognized approximately $273,700 of losses and
$1.04 million of gains related to the acquisition of certain CAA interests (explained further
in Note 5 to the accompanying financial statements). In fiscal 2007, approximately $765,000
of the gain was recorded as additional paid in capital because the CAA interests were acquired
from parties that are deemed related to us.
    
    In fiscal 2006, we acquired water and real property interests in the Arkansas River Valley.
The consideration for these assets consisted of equity valued at approximately $36.2 million,
and a Tap Participation Fee agreement valued at approximately $45.6 million (at August 31,
2006), which is payable when we sell water taps. The total consideration of approximately
$81.9 million was allocated to the acquired assets based on each assets relative fair value.
    
    In fiscal 2006, we recognized $390,900 of gain related to the extinguishment of debt and
the acquisition of certain CAA interests.
    
    In fiscal 2004, we recognized a $1.1 million dollar loss related to the acquisition of
certain CAA interests.
  23




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Item 7  Managements Discussion and Analysis of Financial Condition and Results of
Operation
 Overview
 The discussion and analysis below includes certain forward-looking statements that are subject to
risks, uncertainties and other factors, as described in Risk Factors and elsewhere in this Annual
Report on Form 10-K , that could cause our actual growth, results of operations, performance,
financial position and business prospects and opportunities for this year and the periods that
follow to differ materially from those expressed in, or implied by, those forward-looking
statements. Readers are cautioned that forward-looking statements contained in this Form 10-K
should be read in conjunction with our disclosure under the heading: SAFE HARBOR STATEMENT UNDER
THE UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 on page 3.
 Part II, Item 8
 Our Business 
 Critical Accounting Policies and Estimates 
 Results of Operations 
 Liquidity, Capital Resources and Financial Position 
 Our Business
  Critical Accounting Policies and Use of Estimates
    24




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##### Table of Contents



Results of operations
 Executive Summary
  Table H  Summary Results of Operations
 Change2008
    
    
    2007
    
    
    2006
    
    
    2008-2007
    
    
    2007-2006Millions of gallons of water delivered
    
    
    42.8
    
    
    
    44.4
    
    
    
    56.6
    
    
    
    -1.6
    
    
    
    -12.2Water revenues generated
    
    $
    159,600
    
    
    $
    149,500
    
    
    $
    163,600
    
    
    $
    10,100
    
    
    $
    (14,100
    )Water delivery operating costs incurred (excluding depreciation and depletion)
    
    $
    58,600
    
    
    $
    54,600
    
    
    $
    48,500
    
    
    $
    4,000
    
    
    $
    6,100Water delivery gross margin %
    
    
    63
    %
    
    
    63
    %
    
    
    70
    %Wastewater treatment revenues
    
    $
    67,000
    
    
    $
    60,300
    
    
    $
    59,000
    
    
    $
    6,700
    
    
    $
    1,300Wastewater treatment operating costs incurred
    
    $
    18,900
    
    
    $
    22,800
    
    
    $
    17,300
    
    
    $
    (3,900
    )
    
    $
    5,500Wastewater treatment gross margin %
    
    
    72
    %
    
    
    62
    %
    
    
    71
    %General and administrative expenses
    
    $
    2,316,800
    
    
    $
    2,476,500
    
    
    $
    1,544,500
    
    
    $
    (159,700
    )
    
    $
    932,000Net losses
    
    $
    6,926,700
    
    
    $
    6,914,700
    
    
    $
    792,900
    
    
    $
    12,000
    
    
    $
    6,121,800
 Water and Wastewater Usage Revenues
 rate-base
  Fiscal 2008 compared to fiscal 2007
    Fiscal 2007 compared to fiscal 2006
    25




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General and Administrative and Other Expenses
 Share
Based Payment
 Table I  G&A Expenses
 Years ended August 31,
    
    
    Change2008
    
    
    2007
    
    
    2006
    
    
    2008-2007
    
    
    2007-2006G&A expenses as reported
    
    $
    (2,316,300
    )
    
    $
    (2,476,500
    )
    
    $
    (1,544,500
    )
    
    $
    (160,200
    )
    
    $
    932,000Stock-based compensation expenses
    
    
    351,500
    
    
    
    287,300
    
    
    
    209,600
    
    
    
    64,200
    
    
    
    77,700G&A expenses less SFAS 123(R)
expenses
    
    $
    (1,964,800
    )
    
    $
    (2,189,200
    )
    
    $
    (1,334,900
    )
    
    $
    (224,400
    )
    
    $
    854,300
  Fiscal 2008 compared to fiscal 2007
  
    
    Excluding stock-based compensation expenses our salary and salary related expenses in
fiscal 2008 and 2007 would have been $515,800 and $833,000, respectively, a decrease of
$320,800 or 38%. Salary and salary related expenses including stock-based compensation
expenses totaled approximately $867,300 and $1.12 million for the fiscal years ended August
31, 2008 and 2007, respectively. The decrease in salaries is mainly attributable to
management and employee wages remaining unchanged in 2008 and there being no incentive
compensation paid in 2008 as compared to incentive compensation of $330,000 being paid in
fiscal 2007 upon the completion of the July 2007 equity offering.
    
    Professional fees (legal and accounting) totaled approximately $386,000 and $470,300,
for 2008 and 2007, respectively. This decrease of $84,300 is a result of legal and
accounting bills incurred in fiscal 2007 related to our consultations with the Staff of the
Commission which did not recur in 2008.
    
    Franchise fees to the State of Delaware and NASDAQ listing fees decreased approximately
$92,900 from $220,800 in fiscal 2007 to approximately $127,900 in fiscal 2008. This is due
to our reincorporation into Colorado saving us franchise fees payable to the State of
Delaware.
  
    
    During fiscal 2008 and 2007, we expensed approximately $330,500 and $255,900 related to
water assessment charges payable to the FLCC. This is an increase of $74,600, which is a
result of the FLCC increasing assessments for the current year. This represents our share
(based on the number of FLCC shares we own) of FLCCs annual operating and maintenance
expenditures. Additionally, in fiscal 2008 and 2007 we expensed approximately $49,700 and
$37,200 for work performed in the Arkansas River Valley on our behalf by HP A&M,
respectively. The increase is a result of increased salaries to the HP A&M farm management
personnel which resulted in an increase in our costs.
    
    We paid approximately $227,600 and $40,000 in consulting fees related to our discussions
with Lend Lease as it relates to the potential development of six sections of the Lowry
Range in fiscal 2008 and 2007, respectively.
  26




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##### Table of Contents



Fiscal 2007 compared to fiscal 2006
  
    
    Excluding stock-based compensation, salary and salary related expenses in fiscal 2007
and 2006 would have been $833,000 and $735,200, respectively, an increase of $97,800.
Salary and salary related expenses including stock-based compensation expenses totaled
approximately $1.12 million and $944,800 for the fiscal years ended August 31, 2007 and
2006, respectively. The increase in salary and salary related expenses is mainly
attributable to incentive compensation of $330,000 being paid in fiscal 2007 upon
completion of the July 2007 equity offering, which exceeded the $250,000 of incentive
compensation paid in fiscal 2006.
    
    During fiscal 2007, we expensed approximately $256,000 related to water assessment
charges payable to the FLCC. Additionally, in fiscal 2007 we expensed approximately
$37,200 for work performed in the Arkansas River Valley on our behalf by HP A&M. These
charges were not incurred during fiscal 2006 because we acquired the Arkansas Water Rights
in the fourth quarter of fiscal 2006.
    
    Professional fees (legal and accounting) totaled approximately $470,300 and $187,400,
for 2007 and 2006, respectively. Approximately $190,000 of the increase was a result of
services performed in connection with our consultations with the Staff of the Commission
completed during fiscal 2007. The remaining increase resulted primarily from the internal
control audit that was carried out to comply with the Sarbanes-Oxley Act of 2002.
    
    Franchise fees to the State of Delaware and NASDAQ listing fees increased approximately
$113,500 due to the increase in our total assets as a result of the Arkansas River water
acquisition and the issuance of common stock as a result of the exercising of stock
options.
    
    In fiscal 2007 we paid approximately $40,000 in consulting fees related to our
discussions with Lend Lease as it related to the potential development of six sections of
the Lowry Range, which were not incurred in fiscal 2006.
     27




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##### Table of Contents



Table J  Non-GAAP Financial Disclosure
 Years ended August 31,
    
    
    Change2008
    
    
    2007
    
    
    2006
    
    
    2008-2007
    
    
    2007-2006Net loss as reported
    
    $
    (6,926,700
    )
    
    $
    (6,914,700
    )
    
    $
    (792,900
    )
    
    $
    (12,000
    )
    
    $
    (6,121,800
    )Interest imputed on Tap Participation Fee payable
to HP A&M
    
    
    4,393,000
    
    
    
    4,669,700
    
    
    
    
    
    
    
    (276,700
    )
    
    
    4,669,700Stock-based compensation expense
    
    
    351,500
    
    
    
    287,300
    
    
    
    209,600
    
    
    
    64,200
    
    
    
    77,700Net loss less imputed interest and stock-based
compensation expense
    
    $
    (2,182,200
    )
    
    $
    (1,957,700
    )
    
    $
    (583,300
    )
    
    $
    (224,500
    )
    
    $
    (1,374,400
    )Net loss per common share as reported
    
    $
    (0.34
    )
    
    $
    (0.37
    )
    
    $
    (0.05
    )
    
    $
    0.03
    
    
    $
    (0.32
    )Interest imputed on Tap Participation Fee payable
to HP A&M
    
    
    0.22
    
    
    
    0.25
    
    
    
    
    
    
    $
    (0.03
    )
    
    $
    0.25Stock-based compensation expense
    
    
    0.02
    
    
    
    0.02
    
    
    
    0.01
    
    
    $
    
    
    
    $
    0.01Net loss per common share less imputed interest
and stock-based compensation expense
    
    $
    (0.10
    )
    
    $
    (0.10
    )
    
    $
    (0.04
    )Weighted average common shares outstanding
    
    
    20,188,675
    
    
    
    18,589,737
    
    
    
    14,693,585
  Liquidity, capital resources and financial position
    28




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##### Table of Contents



Repayment of all related party and non-related debt
  Operating Activities
      29




---



##### Table of Contents



Investing Activities
    Financing Activities
  Off-Balance Sheet Arrangements
   30




---



##### Table of Contents



Recently Adopted and Issued Accounting Pronouncements
  Total Contractual Cash Obligations
 Table K  Contractual Cash Obligations
 Payments due by periodLess than
    
    
    1-3
    
    
    3-5
    
    
    More thanTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsContractual obligationsOperating lease obligations
    
    $
    12,000
    
    
    $
    12,000
    
    
    
    (a
    )
    
    
    (a
    )
    
    
    (a
    )Participating Interests in Export Water
    
    
    1,217,900
    
    
    
    (b
    )
    
    
    (b
    )
    
    
    (b
    )
    
    
    (b
    )Tap Participation Fee payable to HP A&M
    
    
    108,449,300
    
    
    
    (c
    )
    
    
    (c
    )
    
    
    (c
    )
    
    
    (c
    )Total
    
    $
    109,679,200
    
    
    $
    12,000
    
    
    $
    
    
    
    $
    
    
    
    $
    
 (a)
    
    Our only operating lease is related to our office space. The lease is month-to-month and is
cancelable upon thirty days notice. Due to this not being a long-term lease, payments cannot
be reasonably estimated beyond one year.(b)
    
    The participating interests liability is payable to the CAA holders upon the sale of Export
Water, and therefore, the timing of the payments is uncertain and not reflected in the above
table by period.(c)
    
    The Tap Participation Fee payable to HP A&M is payable upon the sale of water taps. Because
the timing of these water tap sales is not fixed and determinable, the estimated payments are
not reflected in the above table by period. The amount listed above includes an unamortized
discount of approximately $54.6 million. The valuation of the Tap Participation Fee payable
to HP A&M is a significant estimate based on available historic market information and
estimated future market information. Many factors are necessary to estimate future market
conditions, including but not limited to, supply and demand for new homes, population growth
along the Front Range, cash flows, tap fee increases at our rate-base districts, and other
market forces beyond our control. Because the estimates and assumptions used to value the Tap
Participation Fees payable to HP A&M are subjective, actual results could vary materially
from the estimates.
 
 Item 7A  Quantitative and Qualitative Disclosures About Market Risk
 General. Balance Sheets Statements of Operations Statements of Cash Flows
 Interest Rates.
  31




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##### Table of Contents



Item 8  Financial Statements and Supplementary Data
 Index to Financial Statements and Supplementary Data
 PageReports of Independent Registered Public Accounting Firms
    
    
    33Balance Sheets
    
    
    35Statements of Operations
    
    
    36Statements of Stockholders Equity
    
    
    37Statements of Cash Flows
    
    
    38Notes to Financial Statements
    
    
    39Supplemental Data: Selected Quarterly Financial Information
    
    
    60
  32




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##### Table of Contents



Internal ControlIntegrated Framework
    Internal ControlIntegrated Framework
  
  33




---



##### Table of Contents



34




---



##### Table of Contents



August 31,2008
    
    
    2007ASSETS:Current assets:Cash and cash equivalents
    
    $
    5,238,973
    
    
    $
    6,095,075Marketable securities
    
    
    
    
    
    
    799,802Trade accounts receivable
    
    
    71,401
    
    
    
    70,217Interest receivable
    
    
    
    
    
    
    11,585Prepaid expenses
    
    
    127,018
    
    
    
    246,968Current portion of construction proceeds receivable
    
    
    64,783
    
    
    
    64,783Total current assets
    
    
    5,502,175
    
    
    
    7,288,430Investments in water and water systems, net
    
    
    103,346,623
    
    
    
    103,248,427Construction proceeds receivable, less current portion
    
    
    467,102
    
    
    
    792,719Note receivable  Rangeview Metropolitan District, including
accrued interest
    
    
    494,799
    
    
    
    475,734Assets held for sale
    
    
    77,940
    
    
    
    77,940Investment in Well Enhancement and Recovery Systems, LLC
    
    
    2,759
    
    
    
    4,431Property and equipment, net
    
    
    8,005
    
    
    
    4,210Total assets
    
    $
    109,899,403
    
    
    $
    111,891,891LIABILITIES:Current liabilities:Accounts payable
    
    $
    37,585
    
    
    $
    15,056Accrued liabilities
    
    
    70,478
    
    
    
    85,919Deferred revenues
    
    
    55,800
    
    
    
    55,800Current debt  related party
    
    
    
    
    
    
    26,542Total current liabilities
    
    
    163,863
    
    
    
    183,317Deferred revenues, less current portion
    
    
    1,501,910
    
    
    
    1,557,711Participating Interests in Export Water Supply
    
    
    1,217,876
    
    
    
    2,851,037Tap Participation Fee payable to HP A&M, net of $54.6 million
and $55.1 million
discount
    
    
    53,848,000
    
    
    
    49,455,000Total liabilities
    
    
    56,731,649
    
    
    
    54,047,065Commitments and ContingenciesSTOCKHOLDERS EQUITY:Preferred stock:Par value $.001 per share, 25 million shares authorized;
Series B  432,513 shares issued and outstanding
(liquidation preference of $432,513)
    
    
    433
    
    
    
    433Common stock:Par value 1/3 of $.01 per share, 40 million shares
authorized;
20,206,566 and 19,995,338 shares outstanding
    
    
    67,360
    
    
    
    67,512Additional paid-in capital
    
    
    91,928,398
    
    
    
    91,650,897Treasury stock, at cost, 0 and 256,800 shares of common stock
    
    
    
    
    
    
    (1,979,447
    )Accumulated comprehensive income
    
    
    
    
    
    
    7,168Accumulated deficit
    
    
    (38,828,437
    )
    
    
    (31,901,737
    )Total stockholders equity
    
    
    53,167,754
    
    
    
    57,844,826Total liabilities and stockholders equity
    
    $
    109,899,403
    
    
    $
    111,891,891
   35




---



##### Table of Contents



For the Years Ended August 31,2008
    
    
    2007
    
    
    2006Revenues:Metered water usage
    
    $
    159,649
    
    
    $
    149,539
    
    
    $
    163,560Wastewater treatment fees
    
    
    66,976
    
    
    
    60,335
    
    
    
    59,008Special facility funding recognized
    
    
    41,508
    
    
    
    41,508
    
    
    
    3,494Water tap fees recognized
    
    
    14,296
    
    
    
    14,294
    
    
    
    1,191Sky Ranch options
    
    
    
    
    
    
    
    
    
    
    44,416Total revenues
    
    
    282,429
    
    
    
    265,676
    
    
    
    271,669Expenses:Water service operations
    
    
    (58,576
    )
    
    
    (54,631
    )
    
    
    (48,508
    )Wastewater service operations
    
    
    (18,925
    )
    
    
    (22,817
    )
    
    
    (17,312
    )Depletion and depreciation
    
    
    (88,511
    )
    
    
    (87,739
    )
    
    
    (8,078
    )Total cost of revenues
    
    
    (166,012
    )
    
    
    (165,187
    )
    
    
    (73,898
    )Gross margin
    
    
    116,417
    
    
    
    100,489
    
    
    
    197,771General and administrative expenses
    
    
    (2,316,291
    )
    
    
    (2,476,462
    )
    
    
    (1,544,516
    )Depreciation
    
    
    (292,778
    )
    
    
    (278,360
    )
    
    
    (12,004
    )Operating loss
    
    
    (2,492,652
    )
    
    
    (2,654,333
    )
    
    
    (1,358,749
    )Other income (expense):Interest income
    
    
    283,590
    
    
    
    155,712
    
    
    
    190,987(Loss) gain on extinguishment of contingent obligations and debt
    
    
    (273,723
    )
    
    
    271,127
    
    
    
    390,866(Loss) gain on sale of assets
    
    
    (270
    )
    
    
    17,927
    
    
    
    (Loss) gain on sales of marketable securities
    
    
    (1,973
    )
    
    
    142
    
    
    
    10,414Share of losses of Well Enhancement and Recovery Systems, LLC
    
    
    (48,672
    )
    
    
    (35,569
    )
    
    
    Interest imputed on the Tap Participation Fees payable to HP A&M
    
    
    (4,393,000
    )
    
    
    (4,669,742
    )
    
    
    Interest expense  related parties
    
    
    
    
    
    
    
    
    
    
    (7,120
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (19,258
    )Net loss
    
    $
    (6,926,700
    )
    
    $
    (6,914,736
    )
    
    $
    (792,860
    )Net loss per common share  basic and diluted
    
    $
    (0.34
    )
    
    $
    (0.37
    )
    
    $
    (0.05
    )Weighted average common shares outstanding  basic and diluted
    
    
    20,188,675
    
    
    
    18,589,737
    
    
    
    14,693,585
   36




---



##### Table of Contents



Additional
    
    
    AccumulatedPreferred Stock
    
    
    Common Stock
    
    
    Treasury Stock
    
    
    Paid-in
    
    
    Comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Income (loss)
    
    
    Deficit
    
    
    TotalAugust 31, 2005 balance:
    
    
    432,513
    
    
    $
    433
    
    
    
    14,329,981
    
    
    $
    47,770
    
    
    
    (73,154
    )
    
    $
    (554,939
    )
    
    $
    40,050,159
    
    
    $
    3,453
    
    
    $
    (24,194,141
    )
    
    $
    15,352,735Related party debt extinguishment gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    363,208
    
    
    
    
    
    
    
    
    
    
    
    363,208CAA acquired and debt extinguished
    
    
    
    
    
    
    
    
    
    
    242,169
    
    
    
    807
    
    
    
    
    
    
    
    
    
    
    
    2,127,389
    
    
    
    
    
    
    
    
    
    
    
    2,128,196Arkansas River water acquisition
    
    
    
    
    
    
    
    
    
    
    3,000,000
    
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    36,230,000
    
    
    
    
    
    
    
    
    
    
    
    36,240,000Warrants exercised
    
    
    
    
    
    
    
    
    
    
    15,520
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    27,884
    
    
    
    
    
    
    
    
    
    
    
    27,936Stock options exercised
    
    
    
    
    
    
    
    
    
    
    891,443
    
    
    
    2,973
    
    
    
    (57,125
    )
    
    
    (454,595
    )
    
    
    1,601,624
    
    
    
    
    
    
    
    
    
    
    
    1,150,002Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209,611
    
    
    
    
    
    
    
    
    
    
    
    209,611Unrealized loss on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,107
    )
    
    
    
    
    
    
    (14,107
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (792,860
    )
    
    
    (792,860
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (806,967
    )August 31, 2006 balance:
    
    
    432,513
    
    
    
    433
    
    
    
    18,479,113
    
    
    
    61,602
    
    
    
    (130,279
    )
    
    
    (1,009,534
    )
    
    
    80,609,875
    
    
    
    (10,654
    )
    
    
    (24,987,001
    )
    
    
    54,664,721CAA acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    765,071
    
    
    
    
    
    
    
    
    
    
    
    765,071Equity offering (net of $275,000
expenses)
    
    
    
    
    
    
    
    
    
    
    1,200,000
    
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    9,020,608
    
    
    
    
    
    
    
    
    
    
    
    9,024,608Stock options exercised
    
    
    
    
    
    
    
    
    
    
    538,836
    
    
    
    1,796
    
    
    
    (126,521
    )
    
    
    (969,913
    )
    
    
    968,117
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock grant
    
    
    
    
    
    
    
    
    
    
    34,189
    
    
    
    114
    
    
    
    
    
    
    
    
    
    
    
    (114
    )
    
    
    
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    287,340
    
    
    
    
    
    
    
    
    
    
    
    287,340Unrealized gain on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,822
    
    
    
    
    
    
    
    17,822Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,914,736
    )
    
    
    (6,914,736
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,896,914
    )August 31, 2007 balance:
    
    
    432,513
    
    
    
    433
    
    
    
    20,252,138
    
    
    
    67,512
    
    
    
    (256,800
    )
    
    
    (1,979,447
    )
    
    
    91,650,897
    
    
    
    7,168
    
    
    
    (31,901,737
    )
    
    
    57,844,826CAA acquired
    
    
    
    
    
    
    
    
    
    
    211,228
    
    
    
    704
    
    
    
    
    
    
    
    
    
    
    
    1,904,573
    
    
    
    
    
    
    
    
    
    
    
    1,905,277Retirement of treasury stock
    
    
    
    
    
    
    
    
    
    
    (256,800
    )
    
    
    (856
    )
    
    
    256,800
    
    
    
    1,979,447
    
    
    
    (1,978,591
    )
    
    
    
    
    
    
    
    
    
    
    Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    351,519
    
    
    
    
    
    
    
    
    
    
    
    351,519Unrealized loss on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,168
    )
    
    
    
    
    
    
    (7,168
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,926,700
    )
    
    
    (6,926,700
    )Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,933,868
    )August 31, 2008 balance:
    
    
    432,513
    
    
    $
    433
    
    
    
    20,206,566
    
    
    $
    67,360
    
    
    
    
    
    
    $
    
    
    
    $
    91,928,398
    
    
    $
    
    
    
    $
    (38,828,437
    )
    
    $
    53,167,754
   37




---



##### Table of Contents



For the Years Ended August 31,2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (6,926,700
    )
    
    $
    (6,914,736
    )
    
    $
    (792,860
    )Adjustments to reconcile net loss to net cash
used for operating activities:Imputed interest on Tap Participation Fees payable to HP A&M
    
    
    4,393,000
    
    
    
    4,669,742
    
    
    
    Depreciation, depletion and other non-cash items
    
    
    382,648
    
    
    
    368,960
    
    
    
    20,082Stock based compensation expense included with
general and administrative expenses
    
    
    351,519
    
    
    
    287,340
    
    
    
    209,611Loss (gain) on extinguishment of contingent obligations and debt
    
    
    273,723
    
    
    
    (271,127
    )
    
    
    (390,866
    )Share of losses of Well Enhancement and Recovery Systems, LLC
    
    
    48,672
    
    
    
    35,569
    
    
    
    Loss (gain) on sales of marketable securities
    
    
    1,973
    
    
    
    (142
    )
    
    
    (10,414
    )Loss (gain) on sale of fixed assets
    
    
    270
    
    
    
    (17,927
    )
    
    
    Interest added to note receivable  Rangeview Metropolitan District
    
    
    (19,065
    )
    
    
    (23,504
    )
    
    
    (21,508
    )Interest added to construction proceeds receivable
    
    
    (30,906
    )
    
    
    (49,877
    )
    
    
    Interest accrued on long-term debt  related parties
    
    
    
    
    
    
    
    
    
    
    7,120Interest accrued on long-term debt
    
    
    
    
    
    
    
    
    
    
    19,258Changes in operating assets and liabilities:Export water proceeds to be remitted to escrow agent
    
    
    
    
    
    
    
    
    
    
    174,890Trade accounts receivable
    
    
    (1,184
    )
    
    
    (4,797
    )
    
    
    (15,361
    )Interest receivable and prepaid expenses
    
    
    131,535
    
    
    
    (170,849
    )
    
    
    (27,250
    )Construction proceeds receivable
    
    
    150,518
    
    
    
    57,330
    
    
    
    Accounts payable and accrued liabilities
    
    
    7,088
    
    
    
    (223,271
    )
    
    
    19,957Deferred revenues
    
    
    (55,801
    )
    
    
    (55,804
    )
    
    
    39,754Net cash used for operating activities
    
    
    (1,292,710
    )
    
    
    (2,313,093
    )
    
    
    (767,587
    )Cash flows from investing activities:Sales and maturities of marketable securities
    
    
    790,661
    
    
    
    1,955,669
    
    
    
    4,833,174Sale of LAWMA shares
    
    
    
    
    
    
    849,742
    
    
    
    Sale of property and equipment
    
    
    1,000
    
    
    
    19,250
    
    
    
    Purchase of property and equipment
    
    
    (7,547
    )
    
    
    (3,003
    )
    
    
    (2,781
    )Capitalized acquisition costs
    
    
    
    
    
    
    (37,600
    )
    
    
    (173,110
    )Investment in Well Enhancement and Recovery Systems LLC
    
    
    (47,000
    )
    
    
    (40,000
    )
    
    
    Investments in water and water systems
    
    
    (270,998
    )
    
    
    (46,983
    )
    
    
    (2,411,746
    )Purchase of marketable securities
    
    
    
    
    
    
    (208,101
    )
    
    
    (3,885,238
    )Net cash provided (used) by investing activities
    
    
    466,116
    
    
    
    2,488,974
    
    
    
    (1,639,701
    )Cash flows from financing activities:Proceeds from the sale of common and preferred stock, net
    
    
    
    
    
    
    9,024,608
    
    
    
    1,177,938Payments to contingent liability holders
    
    
    (2,966
    )
    
    
    (4,516
    )
    
    
    (174,890
    )Tap Participation Fee payments to HP A&M
    
    
    
    
    
    
    (849,742
    )
    
    
    Payments to purchase contingent liabilities
    
    
    
    
    
    
    (2,625,225
    )
    
    
    Payments on long-term debt  related parties
    
    
    (26,542
    )
    
    
    
    
    
    
    (195,573
    )Net cash (used) provided by financing activities
    
    
    (29,508
    )
    
    
    5,545,125
    
    
    
    807,475Net change in cash and cash equivalents
    
    
    (856,102
    )
    
    
    5,721,006
    
    
    
    (1,599,813
    )Cash and cash equivalents  beginning of year
    
    
    6,095,075
    
    
    
    374,069
    
    
    
    1,973,882Cash and cash equivalents  end of year
    
    $
    5,238,973
    
    
    $
    6,095,075
    
    
    $
    374,069
   38




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##### Table of Contents



NOTE 1: ORGANIZATION
    NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Revenue Recognition
  (i)
    
    water and wastewater tap fees,(ii)
    
    construction fees, and(iii)
    
    monthly water usage fees and wastewater service fees.
 Revenue Arrangements with Multiple Deliverables
 Tap and Construction Fees.
 Accounting for Performance of
Construction-Type and Certain Production-Type Contracts
 Revenue Recognition (SAB 104),
  39




---



##### Table of Contents



Monthly Usage and Service Fees.
    Use of Estimates
  Cash and Cash Equivalents
  Financial Instruments  Concentration of Credit Risk and Fair Value
   40




---



##### Table of Contents



Cash Flows
  Marketable Securities
   Gross
    
    
    GrossUnrealized
    
    
    Unrealized
    
    
    EstimatedCost Basis
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueCommercial paper
    
    $
    95,500
    
    
    $
    
    
    
    $
    
    
    
    $
    95,500U.S. government debt securities with
unrealized gains
    
    
    597,984
    
    
    
    2,197
    
    
    
    
    
    
    
    600,181U.S. corporate debt securities with
unrealized gains
    
    
    194,650
    
    
    
    4,971
    
    
    
    
    
    
    
    199,621Total investments
    
    
    888,134
    
    
    
    7,168
    
    
    
    
    
    
    
    895,302Less cash equivalents
    
    
    95,500
    
    
    
    
    
    
    
    
    
    
    
    95,500Total marketable securities
    
    $
    792,634
    
    
    $
    7,168
    
    
    $
    
    
    
    $
    799,802
  Accounts receivable
  Long-Lived Assets
  Water and Wastewater Systems
   41




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##### Table of Contents



Depletion and Depreciation of Water Assets
  Share-based Compensation
 Share-Based Payment Accounting for Stock Issued to Employees
  Transition Election Related to Accounting for Tax Effects of Share-Based Payment
Awards
  Income Taxes
 Accounting for Uncertainty in
Income Taxes  an interpretation of FASB Statement No. 109
    42




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##### Table of Contents



Accumulated Comprehensive Income (Loss)
  Years Ended August 31,2008
    
    
    2007
    
    
    2006Net loss
    
    $
    (6,926,700
    )
    
    $
    (6,914,736
    )
    
    $
    (792,860
    )Unrealized (loss) gain on
marketable securities
    
    
    (7,168
    )
    
    
    17,822
    
    
    
    (14,107
    )Comprehensive loss
    
    $
    (6,933,868
    )
    
    $
    (6,896,914
    )
    
    $
    (806,967
    )
  Loss per Common Share
  Recently Issued Accounting Pronouncements
  The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity
with Generally Accepted Accounting Principles.
 The Fair Value Option for Financial Assets and
LiabilitiesIncluding an amendment of FASB Statement No. 115
  43




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##### Table of Contents



ue Measurement
 Reclassifications
  NOTE 3: WATER ASSETS
  2008
    
    
    2007Accumulated
    
    
    
    
    
    
    AccumulatedDepreciation
    
    
    
    
    
    
    DepreciationCosts
    
    
    and Depletion
    
    
    Costs
    
    
    and DepletionArkansas River Valley assets
    
    $
    81,232,769
    
    
    $
    (544,126
    )
    
    $
    81,234,547
    
    
    $
    (265,466
    )Rangeview water supply
    
    
    14,192,298
    
    
    
    (5,034
    )
    
    
    13,949,036
    
    
    
    (4,408
    )Rangeview water system
    
    
    167,720
    
    
    
    (46,785
    )
    
    
    167,720
    
    
    
    (38,032
    )Paradise water supply
    
    
    5,528,818
    
    
    
    
    
    
    
    5,525,017
    
    
    
    Fairgrounds water and water system
    
    
    2,899,863
    
    
    
    (182,252
    )
    
    
    2,669,924
    
    
    
    (94,325
    )Sky Ranch water supply
    
    
    100,000
    
    
    
    
    
    
    
    100,000
    
    
    
    Water supply  other
    
    
    5,307
    
    
    
    (1,955
    )
    
    
    5,307
    
    
    
    (893
    )Totals
    
    
    104,126,775
    
    
    
    (780,152
    )
    
    
    103,651,551
    
    
    
    (403,124
    )Net investments in water and water
systems
    
    $
    103,346,623
    
    
    
    
    
    
    $
    103,248,427
 Depletion and Depreciation
   Arkansas River Valley Assets
 Arkansas River Water.
  44




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##### Table of Contents



Land. Reporting Revenue Gross as Principal versus Net as an Agent
  Fort Lyon Canal Company (FLCC) Shares.
   45




---



##### Table of Contents



Sale of irrigation well. Statement of
Operations
 Lower Arkansas Water Management Association (LAWMA) Shares.
 Accounting for the Impairment of Long-Lived
Assets
 Non-Solicitation Agreement.
 Rangeview Water Supply and Water System
   (i)
    
    The Company entered into the Agreement for Sale of Export Water with the District, a
quasi-municipal political subdivision of the State of Colorado;(ii)
    
    The District entered into the Amended and Restated Lease Agreement with the Land
Board, which owns the Lowry Range; and(iii)
    
    The Company entered into the Service Agreement with the District for the provision of
water service to the Lowry Range (collectively these agreements are referred to as the
Rangeview Water Agreements).
   46




---



##### Table of Contents



Paradise Water Supply
   Arapahoe County Fairgrounds Agreement for Water Service
   47




---



##### Table of Contents



(i)
    
    In August 2006, the County purchased water taps for 38.5 SFEs for $567,490, or $14,740
per tap, which was used to construct the Wholesale Facilities. This was paid by the County
in August 2005, as follows:
 a.
    
    A cash payment of approximately $514,600, andb.
    
    The transfer of rights to 27 acre-feet of dedicated groundwater valued
at approximately $52,900.
 (ii)
    
    The County agreed to provide funding of approximately $1,245,200 for the Special
Facilities. This is being paid by the County as follows:
 a.
    
    An initial cash payment of approximately $397,000, which was paid in
August 2005,b.
    
    The transfer of approximately 294 acre-feet of water, valued at
approximately $206,000, with a cash payment of approximately $34,100, received in
August 2008 (this was initially 336 acre-feet of water valued at approximately
$240,100 with no additional cash payment, see discussion of the amendment to the
County Agreement below),c.
    
    The balance of approximately $607,900 in monthly payments over 10 years
(including interest at 6% per annum).
      48




---



##### Table of Contents



Amendment to the County Agreement. acre-feet acre-feet Construction proceeds receivable
 Sky Ranch Water Supply and Water Service Agreements
        49




---



##### Table of Contents



INVESTMENT IN WELL ENHANCEMENT AND RECOVERY SYSTEMS, LLC
  The Equity Method of Accounting for Investments in
Common Stock (as amended) Accounting for Investments
in Limited Liability Companies Investment in Well Enhancement
and Recovery Systems, LLC rd
 PARTICIPATING INTERESTS IN EXPORT WATER
 Sales of Future Revenues
  50




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##### Table of Contents



Export Water
    
    
    Export Water
    
    
    
    
    
    
    ParticipatingProceeds
    
    
    Proceeds to
    
    
    Total Potential
    
    
    InterestsReceived
    
    
    Pure Cycle
    
    
    Obligation
    
    
    Liability
    
    
    ContingencyOriginal balances
    
    $
    
    
    
    $
    218,500
    
    
    $
    31,807,732
    
    
    $
    11,090,630
    
    
    $
    20,717,102Activity from inception until
August 31, 2007:Acquisitions
    
    
    
    
    
    
    23,398,234
    
    
    
    (23,398,234
    )
    
    
    (8,158,430
    )
    
    
    (15,239,804
    )Option payments  Sky Ranch
and The Hills at Sky Ranch
    
    
    110,400
    
    
    
    (42,280
    )
    
    
    (68,120
    )
    
    
    (23,754
    )
    
    
    (44,366
    )Arapahoe County tap fees *
    
    
    532,968
    
    
    
    (373,078
    )
    
    
    (159,890
    )
    
    
    (55,754
    )
    
    
    (104,136
    )Export Water Sale payments
    
    
    15,810
    
    
    
    (11,067
    )
    
    
    (4,743
    )
    
    
    (1,655
    )
    
    
    (3,088
    )Balance at August 31, 2007
    
    
    659,178
    
    
    
    23,190,309
    
    
    
    8,176,745
    
    
    
    2,851,037
    
    
    
    5,325,708Fiscal 2008 activity:Export Water Sale payments
    
    
    15,367
    
    
    
    (10,757
    )
    
    
    (4,610
    )
    
    
    (1,608
    )
    
    
    (3,002
    )Acquisitions
    
    
    
    
    
    
    4,679,266
    
    
    
    (4,679,266
    )
    
    
    (1,631,553
    )
    
    
    (3,047,713
    )Balance at August 31, 2008
    
    $
    674,545
    
    
    $
    27,858,818
    
    
    $
    3,492,869
    
    
    $
    1,217,876
    
    
    $
    2,274,993
 *
    
    The Arapahoe County tap fees are less the $34,522 royalty payment to the Land Board.   Participating Interests in Export Water supply Participating Interests in Export Water
  51




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##### Table of Contents



ACCRUED LIABILITIES
  LONG-TERM DEBT
    Tap Participation Fee
    (i)
    
    An increase in the overall future estimated Tap Participation Fee of approximately
$3.9 million (from approximately $104.6 million to approximately $108.5 million),(ii)
    
    A decrease in the imputed effective interest rate from 10% to approximately 8.6% and(iii)
    
    A decrease in the imputed interest expense for the year ended August 31, 2008 of
approximately $702,000.
  52




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##### Table of Contents



Promissory Notes Payable by HP A&M
  Consolidation of Variable Interest Entities (as amended)
  53




---



##### Table of Contents



SHAREHOLDERS EQUITY
 Preferred Stock
  Equity Compensation Plan
   (i)
    
    Compensation expense for share-based payment awards granted prior to, but not yet
vested as of, September 1, 2005. The stock-based compensation expense for these options
was recognized pursuant to the pro forma provisions of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation(SFAS 123), and(ii)
    
    Compensation expense for share-based payment awards granted subsequent to September 1,
2005. The stock-based compensation expense for these options was recognized pursuant to
SFAS 123(R).
  
    
    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  pursuant to the Equity Plan, all option grants have a 10 year life;
    
    Risk-free interest rates  with maturities that approximate the expected life of the
options granted;
    
    Calculated stock price volatility  calculated over the expected life of the options
granted, which is calculated based on the weekly closing price of the Companys common stock
over a period equal to the expected life of the option; and
    
    Option exercise behaviors  based on actual and projected employee stock option exercises
and forfeitures.
  54




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##### Table of Contents



Month of option grant
    
    January 2008
    
    
    August 2008
    
    
    August 2007
    
    
    April 2007Number of options granted
    
    
    15,000
    
    
    
    2,500
    
    
    
    5,000
    
    
    
    10,000Number of directors granted options
    
    six
    
    
    one
    
    
    one
    
    
    
    fourExercise price
    
    $
    7.50
    
    
    $
    7.64
    
    
    $
    7.61
    
    
    $
    8.00Estimated option life (years)
    
    
    8.0
    
    
    
    8.0
    
    
    
    8.0
    
    
    
    8.0Estimated dividend and forfeiture rate
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Weighted-average risk-free interest rate
    
    
    4.25
    %
    
    
    4.75
    %
    
    
    4.75
    %
    
    
    4.63
    %Weighted-average stock price volatility
    
    
    90.83
    %
    
    
    92.50
    %
    
    
    92.60
    %
    
    
    93.40
    %Vesting period
    
    One year from
    
    One year from
    
    50% on 1st
    
    One year fromgrant date
    
    grant date
    
    anniversary
    
    grant date50% on 2ndanniversaryApproximate SFAS 123(R) fair value
    
    $
    93,600
    
    
    $
    16,100
    
    
    $
    32,100
    
    
    $
    67,700
  Treasury
Stock
  Weighted-Weighted-
    
    
    Average
    
    
    ApproximateAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    InstrinsicOptions
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at beginning of period
    
    
    140,000
    
    
    $
    8.60Granted
    
    
    15,000
    
    
    
    7.50Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Outstanding at August 31, 2008
    
    
    155,000
    
    
    $
    8.50
    
    
    
    7.2
    
    
    
    *Options exercisable at August 31, 2008
    
    
    127,500
    
    
    $
    8.60
    
    
    
    6.8
    
    
    
    *
 *
    
    Intrinsic value less than zero  55




---



##### Table of Contents



Weighted-AverageNumber of
    
    
    Grant DateOptions
    
    
    Fair ValueNon-vested options outstanding at beginning of period
    
    
    40,000
    
    
    $
    7.22Granted
    
    
    15,000
    
    
    
    6.25Vested
    
    
    (27,500
    )
    
    
    7.11Forfeited
    
    
    
    
    
    
    Non-vested options outstanding at August 31, 2008
    
    
    27,500
    
    
    $
    6.81
    Restricted Stock
  Weighted-AverageGrant DateShares
    
    
    Fair ValueRestricted stock outstanding at August 31, 2007
    
    
    34,189
    
    
    $
    7.59Restricted stock granted, vested, released or forfeited
    
    
    
    
    
    
    Restricted stock outstanding at August 31, 2008
    
    
    34,189
    
    
    $
    7.59
  Treasury Stock
   56




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##### Table of Contents



Warrants
  (i)
    
    The date all of the Export Water is sold or otherwise disposed of,(ii)
    
    The date the CAA is terminated with respect to the original holder of the warrant, or(iii)
    
    The date on which the Company makes the final payment pursuant to Section 2.1(r) of
the CAA.
  Pledged Common Stock Owned by HP A&M
  Registration Rights Agreement
    Voting Rights Agreement
  Gain on Extinguishment of Related Party CAA Obligations and Debt
 Related Party Transactions
  57




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##### Table of Contents



SIGNIFICANT CUSTOMERS
  INCOME TAXES
  2008
    
    
    2007
    
    
    2006Deferred tax assets:Net operating loss carryforwards
    
    $
    4,537,600
    
    
    $
    3,950,800
    
    
    $
    3,366,200Imputed interest on Tap Participation Fee payable to HP A&M
    
    
    3,380,400
    
    
    
    1,741,800
    
    
    
    Depreciation and depletion
    
    
    85,900
    
    
    
    
    
    
    
    479,200Loss in Well Enhancement LLC
    
    
    31,400
    
    
    
    13,300
    
    
    
    Other
    
    
    5,200
    
    
    
    4,100
    
    
    
    159,500Valuation allowance
    
    
    (8,040,500
    )
    
    
    (5,706,200
    )
    
    
    (4,003,300
    )Net deferred tax asset
    
    
    
    
    
    
    3,800
    
    
    
    1,600Deferred tax liabilities:Depreciation and depletion
    
    
    
    
    
    
    (3,800
    )
    
    
    (1,600
    )Net deferred assets
    
    $
    
    
    
    $
    
    
    
    $
    
   2008
    
    
    2007
    
    
    2006Expected benefit from federal taxes at statutory rate of 34%
    
    $
    (2,355,100
    )
    
    $
    (2,351,000
    )
    
    $
    (269,600
    )State taxes, net of federal benefit
    
    
    (228,600
    )
    
    
    (228,200
    )
    
    
    (26,200
    )Expiration of net operating losses
    
    
    117,600
    
    
    
    393,900
    
    
    
    160,500Permanent differences
    
    
    131,800
    
    
    
    (243,200
    )
    
    
    (319,100
    )Change in valuation allowance
    
    
    2,334,300
    
    
    
    2,428,500
    
    
    
    454,400Total income tax expense / benefit
    
    $
    
    
    
    $
    
    
    
    $
    
    58




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##### Table of Contents



401(k) PLAN
  SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
 Years Ended August 31,2008
    
    
    2007
    
    
    2006Water rights received from Arapahoe County which
reduced the Construction proceeds receivable
balance
    
    $
    206,005
    
    
    $
    
    
    
    $
    Adjustment to purchase price relating to LAWMA
shares acquired from HP A&M
    
    $
    
    
    
    $
    927,682
    
    
    $
    Treasury stock accepted upon exercise of stock
options with mature shares used as consideration
    
    $
    
    
    
    $
    969,913
    
    
    $
    454,595Gain on extinguishment of related party debt
accounted for as contributed capital
    
    $
    
    
    
    $
    765,071
    
    
    $
    363,208Tap Participation Fee issued to HP A&M pursuant to
Arkansas River Agreement
    
    $
    
    
    
    $
    
    
    
    $
    45,635,000Common stock issued to HP A&M pursuant to the
Arkansas River Agreement
    
    $
    
    
    
    $
    
    
    
    $
    36,240,000Common stock issued to acquire contingent
obligations, and extinguish debt
    
    $
    
    
    
    $
    
    
    
    $
    2,128,196Construction proceeds receivable included in
deferred revenue
    
    $
    
    
    
    $
    
    
    
    $
    864,955Investments in water and water systems included
with accrued liabilities
    
    $
    
    
    
    $
    
    
    
    $
    117,287Capitalized legal and engineering fees incurred in
connection with Arkansas River water acquisition
included with accrued liabilities
    
    $
    
    
    
    $
    
    
    
    $
    77,842Water rights acquired with deferred tap fee credits
    
    $
    
    
    
    $
    
    
    
    $
    52,938Estimated common stock registration costs included
with accrued liabilities
    
    $
    
    
    
    $
    
    
    
    $
    15,000
  59




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RELATED PARTY TRANSACTIONS
       
 SUPPLEMENTAL DATA: SELECTED QUARTERLY FINANCIAL INFORMATION (unaudited)
 In thousands, except per share amountsFiscal 2008 quarters ended:
    
    August 31
    
    
    May 31
    
    
    February 28
    
    
    November 30Total revenues
    
    $
    88.3
    
    
    $
    67.6
    
    
    $
    56.8
    
    
    $
    69.7Gross margin
    
    $
    40.8
    
    
    $
    31.3
    
    
    $
    16.0
    
    
    $
    28.3Net loss
    
    $
    (1,653.6
    )
    
    $
    (1,728.4
    )
    
    $
    (1,649.7
    )
    
    $
    (1,895.0
    )Earnings per share  basic and diluted
    
    $
    (0.08
    )
    
    $
    (0.09
    )
    
    $
    (0.08
    )
    
    $
    (0.09
    )Market price of common stockHigh
    
    $
    6.75
    
    
    $
    6.80
    
    
    $
    8.99
    
    
    $
    9.37Low
    
    $
    5.11
    
    
    $
    5.04
    
    
    $
    6.49
    
    
    $
    7.35
 Fiscal 2007 quarters ended:
    
    August 31
    
    
    May 31
    
    
    February 28
    
    
    November 30Total revenues
    
    $
    87.6
    
    
    $
    62.4
    
    
    $
    52.0
    
    
    $
    63.7Gross margin
    
    $
    43.5
    
    
    $
    21.9
    
    
    $
    12.8
    
    
    $
    22.3Net loss
    
    $
    (1,757.3
    )
    
    $
    (1,742.9
    )
    
    $
    (1,829.3
    )
    
    $
    (1,585.2
    )Earnings per share  basic and diluted
    
    $
    (0.09
    )
    
    $
    (0.09
    )
    
    $
    (0.10
    )
    
    $
    (0.09
    )Market price of common stockHigh
    
    $
    8.66
    
    
    $
    8.71
    
    
    $
    9.32
    
    
    $
    9.74Low
    
    $
    7.16
    
    
    $
    6.47
    
    
    $
    7.60
    
    
    $
    6.41
   60




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##### Table of Contents



Item 9  Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
  
 Item 9A  Controls and Procedures
 (a)
    
    Evaluation of Disclosure Controls and Procedures
  Internal
ControlIntegrated Framework
 (b)
    
    Managements 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 the
assets of the Company;
    
    Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with accounting principles generally accepted in the United States of
America, and that receipts and expenditures of the Company are being
made only in accordance with authorizations of management and
directors of the Company; and
    
    Provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Companys
assets that could have a material effect on the financial statements.
    61




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##### Table of Contents



Item 8. Financial Statements and
Supplementary Data
 (c)
    
    Changes in Internal Controls
  
 Item 9B  Other Information
  
 PART III
  
 PART IV
 
 Item 15  Exhibits and Financial Statement Schedules
 (a)
    
    
    Financial Statements1.
    
    
    See Index to Financial Statements and Supplementary Data in Part II,
Item 8 of this Form 10-K.2.
    
    
    Financial Statement Schedules: None3.
    
    
    Exhibits: The exhibits listed in the accompanying Index to Exhibits
are filed or incorporated by reference as part of this Form 10-K
 Index to Exhibits
 Exhibit No.
    
    Description3.1
    
    
    Amended and Restated Certificate of Incorporation  Incorporated by reference from Exhibit
3.1 to Amendment No. 2 to Registration Statement on Form SB-2, filed June 10, 2004,
Registration No. 333-1145683.2
    
    
    Amended and Restated Bylaws of Registrant  Incorporated by reference from Exhibit 3.2 to
Amendment No. 2 to Registration Statement on Form SB-2, filed June 10, 2004, Registration
No. 333-114568.4.1
    
    
    Specimen Stock Certificate  Incorporated by reference to Registration Statement No. 2-62483.10.1
    
    
    Right of First Refusal Agreement dated August 12, 1992 between INCO Securities Corporation
and Richard F. Myers, Mark W. Harding, Thomas P. Clark, Thomas Lamm and Rowena Rogers.
Incorporated by Reference from Registration Statement on Form SB-2, filed April 19, 2004,
Registration No. 333-114568.10.2
    
    
    2004 Equity Incentive Plan. Incorporated by reference from Proxy Statement for Annual
Meeting held April 12, 2004. **10.3
    
    
    Service Agreement, dated April 11, 1996, by and between Pure Cycle Corporation and the
Rangeview Metropolitan District. Incorporated by reference from Quarterly Report on Form
10-QSB for the period ended May 31, 1996.
  62




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##### Table of Contents



Exhibit No.
    
    Description10.4
    
    
    Wastewater Service Agreement, dated January 22, 1997, by and between Pure Cycle Corporation
and the Rangeview Metropolitan District. Incorporated by reference from the Annual Report on
Form 10-KSB for the fiscal year ended August 31, 1998.10.5
    
    
    Comprehensive Amendment Agreement No. 1, dated April 11, 1996, by and among ISC, 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 from Quarterly Report on Form 10-QSB for the period ended May 31,
1996.10.6
    
    
    Agreement for Sale of Export Water dated April 11, 1996 by and among the Company and the
District. Incorporated by reference from Quarterly Report on Form 10-QSB for the fiscal
quarter ended May 31, 1996).10.7
    
    
    Water Service Agreement for the Sky Ranch PUD dated October 31, 2003 by and between Airpark
Metropolitan District, Icon Investors I, LLC, the Company and the District. Incorporated by
reference from Registration Statement on Form SB-2, filed April 19, 2004, Registration No.
333-114568.10.8
    
    
    Amendment to Water Service Agreement for the Sky Ranch PUD dated January 6, 2004.
Incorporated by Reference from Amendment No. 1 to Registration Statement on Form SB-2, filed
June 7, 2004, Registration No. 333-114568.10.9
    
    
    Amendment to Water Service Agreement for the Sky Ranch PUD dated January 30, 2004.
Incorporated by Reference from Amendment No. 1 to Registration Statement on Form SB-2, filed
June 7, 2004, Registration No. 333-114568.10.10
    
    
    Amendment to Water Service Agreement for the Sky Ranch PUD dated January 30, 2004 pertaining
to amendment of the Option Agreement for Export Water. Incorporated by Reference from
Amendment No. 1 to Registration Statement on Form SB-2, filed June 7, 2004, Registration No.
333-114568.10.11
    
    
    Corrected Amendment to Water Service Agreement for the Sky Ranch PUD dated March 5, 2004.
Incorporated by Reference from original Annual Report on Form 10-K for the fiscal year ended
August 31, 2006, filed November 21, 2006.10.12
    
    
    Amended and Restated Lease Agreement between the Land Board and the District dated April 4,
1996. Incorporated by Reference from Amendment No. 1 to Registration Statement on Form SB-2,
filed June 7, 2004, Registration No. 333-114568.10.13
    
    
    Bargain and Sale Deed among the Land Board, the District and the Company dated April 11,
1996. Incorporated by Reference from Amendment No. 1 to Registration Statement on Form SB-2,
filed June 7, 2004, Registration No. 333-114568.10.14
    
    
    Mortgage Deed, Security Agreement, and Financing Statement between the Land Board and the
Company dated April 11, 1996. Incorporated by Reference from Amendment No. 1 to Registration
Statement on Form SB-2, filed June 7, 2004, Registration No. 333-114568.10.15
    
    
    Water Service Agreement for the Hills at Sky Ranch Water dated May 14, 2004 among Icon Land
II, LLC, a Colorado limited liability company, the Company, and the District. Incorporated
by reference from the Current Report on Form 8-K filed with the SEC on May 21, 2004.10.16
    
    
    Agreement for Water Service dated August 3, 2005 among Pure Cycle Corporation, Rangeview
Metropolitan District and Arapahoe County incorporated by reference from Form 8-K filed on
August 4, 2005.10.17
    
    
    Arkansas River Agreement dated May 10, 2006 among Pure Cycle Corporation and High Plains
A&M, LLC incorporated by reference from Form 8-K filed on May 16, 2006.
  63




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##### Table of Contents



Exhibit No.
    
    Description10.18
    
    
    Placement Agent Agreement by and among Pure Cycle Corporation, certain selling stockholders,
and Wm Smith Securities, Incorporated and Flagstone Securities, LLC, as Placement Agents,
dated July 24, 2007 incorporated by reference from Form 8-K filed on July 25, 2007.10.19
    
    
    Purchase and Sale Agreements dated July 31, 2007 between Pure Cycle Corporation and Apex
Investment Fund II, L.P., incorporated by reference from Form 10-K for the year ended August
31, 2007.10.20
    
    
    Purchase and Sale Agreements dated July 31, 2007 between Pure Cycle Corporation and
Productivity Fund II, L.P., incorporated by reference from Form 10-K for the year ended
August 31, 2007.10.21
    
    
    Purchase and Sale Agreements dated July 31, 2007 between Pure Cycle Corporation and
Environmental Private Equity Fund II, L.P., incorporated by reference from Form 10-K for the
year ended August 31, 2007.10.22
    
    
    Purchase and Sale Agreements dated July 31, 2007 between Pure Cycle Corporation and
Environmental Venture Fund, L.P., incorporated by reference from Form 10-K for the year
ended August 31, 2007.10.23
    
    
    Purchase and Sale Agreements dated July 31, 2007 between Pure Cycle Corporation and the
Estate of Thomas P. Clark., incorporated by reference from Form 10-K for the year ended
August 31, 2007.10.24
    
    
    Purchase and Sale Agreements dated July 31, 2007 between Pure Cycle Corporation and Auginco,
incorporated by reference from Form 10-K for the year ended August 31, 2007.10.25
    
    
    Purchase and Sale Agreements dated July 31, 2007 between Pure Cycle Corporation and Newell
Augur, Jr., incorporated by reference from Form 10-K for the year ended August 31, 2007.10.26
    
    
    Purchase and Sale Agreements dated July 31, 2007 between Pure Cycle Corporation and Anders
Brag, incorporated by reference from Form 10-K for the year ended August 31, 2007.10.27
    
    
    Purchase and Sale Agreements dated July 31, 2007 between Pure Cycle Corporation and Bill
Peterson, incorporated by reference from Form 10-K for the year ended August 31, 2007.10.28
    
    
    Purchase and Sale Agreements dated July 31, 2007 between Pure Cycle Corporation and Gregory
M. Morey, incorporated by reference from Form 10-K for the year ended August 31, 2007.10.29
    
    
    Purchase and Sale Agreements dated July 31, 2007 between Pure Cycle Corporation and Amy
Leeds, incorporated by reference from Form 10-K for the year ended August 31, 2007.10.30
    
    
    Purchase and Sale Agreements dated July 31, 2007 between Pure Cycle Corporation and Margaret
S. Hansson, incorporated by reference from Form 10-K for the year ended August 31, 2007.10.31
    
    
    Purchase and Sale Agreements dated October 1, 2007 between Pure Cycle Corporation and
Landmark Water Partners, L.P., incorporated by reference from Form 10-K for the year ended
August 31, 2007.10.32
    
    
    Purchase and Sale Agreements dated October 1, 2007 between Pure Cycle Corporation and
Landmark Water Partners II, L.P., incorporated by reference from Form 10-K for the year
ended August 31, 2007.10.33
    
    
    Purchase and Sale Agreements dated October 1, 2007 between Pure Cycle Corporation and
Warwick Partners, L.P., incorporated by reference from Form 10-K for the year ended August
31, 2007.10.34
    
    
    Purchase and Sale Agreements dated October 1, 2007 between Pure Cycle Corporation and
International Properties, Inc., incorporated by reference from Form 10-K for the year ended
August 31, 2007.
  64




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##### Table of Contents



Exhibit No.
    
    Description10.35
    
    
    Purchase and Sale Agreements dated October 1, 2007 between Pure Cycle Corporation and Fayyaz
& Company, Inc., incorporated by reference from Form 10-K for the year ended August 31,
2007.10.36
    
    
    Amendment No. 1 to Agreement for Water Service dated August 25, 2008, between Pure Cycle
Corporation and Arapahoe County. *14
    
    
    Code of Ethics as amended August 2, 2007. *16.1
    
    
    Letter from Anton Collins Mitchell LLP to the Securities and Exchange Commission, dated
December 18, 2006, incorporated by reference from Form 8-K filed on December 18, 2006.23.1
    
    
    Consent of GHP Horwath, P.C. *23.2
    
    
    Consent of Anton Collins Mitchell LLP *31.1
    
    
    Certification under Section 302 of the Sarbanes-Oxley Act of 2002. *32.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. *
 *
    
    Filed herewith**
    
    Indicates management contract or compensatory plan or arrangement in which directors or
executive officers are eligible to participate.  65




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##### Table of Contents



SIGNATURES
   By:
    
    /s/ Mark W. HardingMark W. Harding, President and Chief Financial OfficerNovember 14, 2008
  Signature
    
    Title
    
    Date/s/ Mark W. Harding

Mark W. Harding
    
    President,
Chief Financial Officer and Director
(Principal Executive Officer,
Principal Financial and Accounting
Officer)
    
    November 14, 2008/s/ Harrison H. Augur

Harrison H. Augur
    
    Chairman, Director
    
    November 14, 2008/s/ Mark D. Campbell

Mark D. Campbell
    
    Director
    
    November 14, 2008/s/ Arthur G. Epker III

Arthur G. Epker III
    
    Director
    
    November 14, 2008/s/ Richard L. Guido

Richard L. Guido
    
    Director
    
    November 14, 2008/s/ Peter C. Howell

Peter C. Howell
    
    Director
    
    November 14, 2008/s/ George M. Middlemas

George M. Middlemas
    
    Director
    
    November 14, 2008
  66




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description10.36
    
    
    Amendment No. 1 to Agreement for Water Service dated August 25,
2008, between Pure Cycle Corporation and Arapahoe County. *14
    
    
    Code of Ethics as amended August 2, 2007. *23.1
    
    
    Consent of GHP Horwath, P.C. *23.2
    
    
    Consent of Anton Collins Mitchell LLP *31.1
    
    
    Certification under Section 302 of the Sarbanes-Oxley Act of 2002. *32.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
 *
    
    Filed herewith  67