Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
 9 Months Ended
May 31, 2018
FAIR VALUE MEASUREMENTS [Abstract]  
FAIR VALUE MEASUREMENTS
NOTE 2 – FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of input to determine where within the fair value hierarchy the measurement falls.

Level 1 — Valuations for assets and liabilities traded in active exchange markets, such as the NASDAQ Stock Market. The Company had no Level 1 assets or liabilities as of May 31, 2018 or August 31, 2017.

Level 2 — Valuations for assets and liabilities obtained from readily available pricing sources via independent providers for market transactions involving similar assets or liabilities. The Company had 16 and 56 Level 2 assets as of May 31, 2018 and August 31, 2017, respectively, which consist of certificates of deposit, U.S. Treasury bills and U.S. Treasury notes.

Level 3 — Valuations for assets and liabilities that are derived from other valuation methodologies, including discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. The Company had one Level 3 liability, the contingent portion of the CAA, as of May 31, 2018 and August 31, 2017. The Company has determined that the contingent portion of the CAA does not have a determinable fair value (see Note 4 – Long-Term Obligations and Operating Lease).
 
The Company maintains policies and procedures to value instruments using what management believes to be the best and most relevant data available.

Level 2 Asset – Available for Sale Securities. The Company’s available for sale securities are the Company’s only financial asset measured at fair value on a recurring basis. The fair value of the available for sale securities is based on the values reported by the financial institutions where the funds are held. These securities include only federally insured certificates of deposit and U.S. Treasury bills and notes.

The Company’s non-financial assets measured at fair value on a non-recurring basis consist entirely of its investments in water and water systems, land held for sale, and other long-lived assets. See Note 3 – Water and Land Assets below.

The following table provides information on the assets and liabilities measured at fair value on a recurring basis as of May 31, 2018:
 
               
Fair Value Measurement Using:
        
       
Fair Value
      
Cost / Other
Value
      
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
      
Significant
Other
Observable
Inputs
(Level 2)
      
Significant
Unobservable
Inputs
(Level 3)
      
Accumulated
Unrealized
Gains and
(Losses)
   
Certificates of deposit
  
$
1,248,781
    
$
1,250,000
    
$
-
    
$
1,248,781
    
$
-
    
$
(1,219
)
U.S. treasuries
    
15,757,133
      
15,695,690
      
-
      
15,757,133
      
-
      
61,443
  
Total
  
$
17,005,914
    
$
16,945,690
    
$
-
    
$
17,005,914
    
$
-
    
$
60,224
  
 
The following table provides information on the assets and liabilities measured at fair value on a recurring basis as of August 31, 2017:

               
Fair Value Measurement Using:
        
       
Fair Value
      
Cost / Other
Value
      
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
      
Significant
Other
Observable
Inputs
(Level 2)
      
Significant
Unobservable
Inputs
(Level 3)
      
Accumulated
Unrealized
Gains and
(Losses)
   
Certificates of deposit
  
$
12,673,700
    
$
12,694,500
    
$
-
    
$
12,673,700
    
$
-
    
$
(20,800
)
U.S. treasuries
    
7,381,700
      
7,372,000
      
-
      
7,381,700
      
-
      
9,700
  
Total
  
$
20,055,400
    
$
20,066,500
    
$
-
    
$
20,055,400
    
$
-
    
$
(11,100
)

The Company also holds a certificate of deposit that is not carried at fair value on the consolidated balance sheets and is classified as a held-to-maturity security. As of May 31, 2018, the carrying amount of held-to-maturity securities was $189,800. As of August 31, 2017, the carrying amount of held-to-maturity securities was $188,000.