|
Accounting Policies, by Policy (Policies)
|
6 Months Ended |
|---|---|
|
Feb. 28, 2013
|
|
| Use of Estimates, Policy [Policy Text Block] |
Use of
Estimates
The
preparation of financial statements in accordance with GAAP
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
|
| Cash and Cash Equivalents, Policy [Policy Text Block] |
Cash and
cash equivalents
Cash
and cash equivalents include all highly liquid debt
instruments with original maturities of three months or less.
The Company’s cash equivalents are comprised entirely
of money market funds maintained at a high quality financial
institution in an account which at various times during the
six months ended February 28, 2013, exceeded federally
insured limits. At various times during the three and six
months ended February 28, 2013, the Company’s main
operating account exceeded federally insured limits.
|
| Fair Value of Financial Instruments, Policy [Policy Text Block] |
Financial
Instruments – Concentration of Credit Risk and Fair
Value
Financial
instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash
equivalents and marketable securities. The Company places
it’s cash equivalents and investments with high quality
financial institutions. The Company invests its cash
primarily in certificates of deposits, money market
instruments, and U.S. government treasury obligations. To
date, the Company has not experienced significant losses on
any of these investments.
The
following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which
it is practicable to estimate that value.
Current
Assets and Liabilities – The amounts reported on
the balance sheets for cash and cash equivalents, trade
receivables, and trade payables approximate their fair values
because of the short maturity of these instruments.
The
amounts reported on the balance sheets for marketable
securities represent the fair values of the underlying
instruments as reported by the financial institutions where
the funds are held as of February 28, 2013 and August 31,
2012. The Company has recorded an accumulated net
unrealized gain on its marketable securities of $56 and an
accumulated net unrealized loss on its marketable
securities of $1,081 as of February 28, 2013 and August 31,
2012, respectively. The unrealized gain and loss were the
result of changes in interest rates in the
market.
Notes
Receivable and Construction Proceeds Receivable
– The amounts reported on the balance sheets for
notes receivable and construction proceeds receivable
approximate fair value as they bear interest at rates which
are comparable to current market rates.
The
fair value of the Note Receivable – related party
Rangeview Metropolitan District (the “District”)
is not practical to estimate due to the related party nature
of the underlying transaction.
Receivable
from HP A&M – As described in Note 4 –
Long-Term
Obligations and Operating Lease below, High Plains
A&M, LLC (“HP A&M”) defaulted on certain
promissory notes payable to third parties which are secured
by real property and water rights owned by the Company. To
protect its property and water rights, the Company has
purchased certain of the HP A&M notes. The Company has
the right to recover from HP A&M all costs and expenses,
including reasonable attorneys’ fees, incurred by the
Company in curing the defaulted notes and in protecting its
right and title to the property and water rights securing the
notes. The Company has recorded the entire amount of the HP
A&M notes purchased by the Company and the value of
remaining notes the Company is currently negotiating to
purchase as a receivable from HP A&M net of the $3.4
million in proceeds received from the sale of shares held as
pledged assets. The short term portion of the receivable
represents the amount of the defaulted promissory notes
payable by HP A&M which were purchased by the Company as
of February 28, 2013, due within the next 12 months. The
carrying value of the accounts receivable approximate the
fair value as the rates are comparable to market
rates.
Long-term
Financial Liabilities – The
Comprehensive Amendment Agreement No. 1 (the
“CAA” as further described in Note 4 –
Long-Term
Obligations and Operating Lease below) is comprised of
a recorded balance and an off-balance sheet or
“contingent” obligation associated with the
Company’s acquisition of its “Rangeview Water
Supply” (defined in Note 4 – Water
Assets to the 2012 Annual Report). The amount payable
is a fixed amount but is repayable only upon the sale of
“Export Water” (defined in Note 4 – Water
Assets to the 2012 Annual Report). Because of the
uncertainty of the sale of Export Water, the
Company has determined that the contingent portion of the CAA
does not have a determinable fair value.
The
recorded balance of the “Tap Participation Fee”
liability (as described below and in Note 4 - Long-Term
Obligations and Operating Lease below) is its
estimated fair value determined by projecting new home
development in the Company’s targeted service area over
an estimated development period.
Notes
Payable – As of February 28, 2013, the Company
has acquired approximately $5.8 million of the $9.6 million
of promissory notes that are payable by HP A&M to third
parties. Subsequent to February 28, 2013, the Company
purchased an additional $385,100 of promissory notes. To
date these promissory notes were acquired with cash
payments of $887,400 and the issuance of notes by the
Company, the majority of which have a five-year term, bear
interest at an annual rate of five percent (5%), and
require semi-annual payments with a straight-line
amortization schedule. The carrying value of the notes
payable approximate the fair value as the rates are
comparable to market rates.
|
| Interest Expense, Policy [Policy Text Block] |
Tap
Participation Fee
This
note should be read in conjunction with Note 4 – Long-Term
Obligations and Operating Lease below.
Pursuant
to the Asset Purchase Agreement (the “Arkansas River
Agreement”) dated May 10, 2006, the Company is
obligated to pay HP A&M a defined percentage of a defined
number of water tap fees the Company receives after the date
of the Arkansas River Agreement. A Tap Participation Fee is
due and payable once the Company has sold a water tap and
received the consideration due for such water tap. The
Company did not sell any water taps during the three or six
months ended February 28, 2013 or February 29, 2012.
The
Company imputes interest expense on the unpaid Tap
Participation Fee using the effective interest method over an
estimated period which is utilized in the valuation of the
liability. The Company imputed interest of $650,100 and
$862,400 during the three months ended February 28, 2013 and
February 29, 2012, respectively. The Company imputed interest
of $1,544,800 and $1,713,800 during the six months ended
February 28, 2013 and February 29, 2012, respectively.
At
February 28, 2013, there remain 19,427 water taps subject to
the Tap Participation Fee.
|
| Revenue Recognition, Policy [Policy Text Block] |
Revenue
Recognition
Tap
and Construction Fees – In August 2005, the
Company entered into the Water Service Agreement (the
“County Agreement”) with Arapahoe County (the
“County”). In fiscal 2006, the Company began
recognizing water tap fees as revenue ratably over the
estimated service period upon completion of the
“Wholesale Facilities” (defined in the 2012
Annual Report) constructed to provide service to the
County. The Company recognized $3,600 of water tap fee
revenues during each of the three months ended February 28,
2013 and February 29, 2012, respectively. The Company
recognized $7,100 of water tap fee revenues during each of
the six months ended February 28, 2013 and February 29,
2012, respectively. The water tap fees to be recognized
over this period are net of the royalty payments to the
State of Colorado Board of Land Commissioners (the
“Land Board”) and amounts paid to third parties
pursuant to the CAA as further described in Note 4 –
Long-Term
Obligations and Operating Lease below.
The
Company recognized $10,400 of “Special
Facilities” (defined in the 2012 Annual Report) funding
as revenue during each of the three months ended February 28,
2013 and February 29, 2012, respectively. The Company
recognized $20,800 of Special Facilities funding as revenue
during each of the six months ended February 28, 2013 and
February 28, 2012, respectively. This is the ratable portion
of the Special Facilities funding proceeds received from the
County pursuant to the County Agreement as more fully
described in Note 4 – Water
Assets to the 2012 Annual Report.
As
of February 28, 2013, the Company has deferred recognition of
$1.3 million of water tap and construction fee revenue from
the County, which will be recognized as revenue ratably over
the estimated useful accounting life of the assets
constructed with the construction proceeds as described
above.
Farm
Operations - The Company leases its Arkansas River
water and land to area farmers who actively farm the
properties. Prior to August 3, 2012, pursuant to a property
management agreement between HP A&M and the Company (the
“Property Management Agreement”), HP A&M
received a management fee equal to 100% of the income from
the land and water leases. As a result, the Company presented
its land and water lease income net of the management fees
paid to HP A&M. Effective August 3, 2012, the Company
terminated the Property Management Agreement due to a default
by HP A&M on certain promissory notes secured by deeds of
trust on the land and water purchased by the Company from HP
A&M in 2006. As of August 3, 2012, the Company manages
the land and water leases and the income from the land and
water leases became payable to the Company. Pursuant to the
farm lease agreements, the Company bills the lessees
semi-annually in March and November. The lease billings
include minimum billings and adjustments based on actual
water deliveries by the Fort Lyon Canal Company
(“FLCC”) or are based on crop yields. Subsequent
to August 3, 2012, the Company records farm lease income
ratably each month based on estimated annual lease income the
Company anticipates collecting from its land and water
leases. The Company recorded these amounts as receivables,
less an estimated allowance for uncollectible accounts. The
allowance as of February 28, 2013, was determined by the
Company’s specific review of all past due accounts. The
Company has recorded allowances for doubtful accounts
totaling $41,000 and $20,000 as of February 28, 2013 and
August 31, 2012, respectively. The Company manages the farm
lease business as a separate line of business from the
wholesale water and wastewater business.
|
| Revenue Recognition, Services, Royalty Fees [Policy Text Block] |
Royalty
and other obligations - Revenues from the sale of
Export Water are shown net of royalties payable to the Land
Board. Revenues from the sale of water on the “Lowry
Range” (described in Note 4 – Water
Assets to the 2012 Annual Report) are shown net of the
royalties to the Land Board and the amounts retained by the
District.
|
| Oil and Gas Properties Policy [Policy Text Block] |
Oil
and Gas Lease Payments - As further described in Note
2 – Summary of
Significant Accounting Policies to the 2012
Annual Report, on March 10, 2011, the Company entered into a
Paid-Up Oil and Gas Lease (the “O&G Lease”)
and a Surface Use and Damage Agreement (the “Surface
Use Agreement”) with Anadarko E&P Company, L.P.
(“Anadarko”), a wholly owned subsidiary of
Anadarko Petroleum Company. In December of 2012 the O&G
lease was purchased by a wholly owned subsidiary of
ConocoPhillips Company. Pursuant to the O&G Lease, during
the year ended August 31, 2011, the Company received up-front
payments of $1,243,400 for the purpose of exploring for,
developing, producing and marketing oil and gas on
approximately 634 acres of mineral estate owned by the
Company at its “Sky Ranch” property (described in
Note 4 – Water
Assets to the 2012 Annual Report). The Company began
recognizing the up-front payments as income on a
straight-line basis over three years (the initial term of the
O&G Lease) on March 10, 2011. During each of the three
months ended February 28, 2013 and February 29, 2012, the
Company recognized $103,600 of income and royalty related to
the up-front payments received pursuant to the O&G Lease.
During each of the six months ended February 28, 2013 and
February 29, 2012, the Company recognized $207,200 of income
and royalty related to the up-front payments received
pursuant to the O&G Lease.
As
of February 28, 2013, the Company has deferred recognition
of $431,800 of income related to the O&G Lease, which
will be recognized into income ratably through March
2014.
|
| Depreciation, Depletion, and Amortization [Policy Text Block] |
Capitalized
Costs of Water and Wastewater Systems and Depletion and
Depreciation of Water Assets
Costs
to construct water and wastewater systems that meet the
Company’s capitalization criteria are capitalized as
incurred, including interest, and depreciated on a
straight-line basis over their estimated useful lives of up
to thirty years. The Company capitalizes design and
construction costs related to construction activities, and it
capitalizes certain legal, engineering and permitting costs
relating to the adjudication and improvement of its water
assets. The Company depletes its groundwater assets that are
being utilized on the basis of units produced (i.e. thousands
of gallons sold) divided by the total volume of water
adjudicated in the water decrees.
|
| Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block] |
Share-based
Compensation
The
Company maintains a stock option plan for the benefit of its
employees and non-employee directors. The Company records
share-based compensation costs as expense over the applicable
vesting period of the stock award using the straight-line
method. The compensation costs to be expensed are measured at
the grant date based on the fair value of the award. The
Company has adopted the alternative transition method for
calculating the tax effects of share-based compensation,
which allows for a simplified method of calculating the tax
effects of employee share-based compensation. Because the
Company has a full valuation allowance on its deferred tax
assets, the granting and exercise of stock options has no
impact on the income tax provisions.
The
Company recognized $12,500 and $21,400 of share-based
compensation expense during the three months ended February
28, 2013 and February 29, 2012, respectively. The Company
recognized $23,100 and $40,100 of share-based compensation
expense during the six months ended February 28, 2013 and
February 29, 2012, respectively.
|
| Income Tax, Policy [Policy Text Block] |
Income
taxes
The
Company uses a "more-likely-than-not" threshold for the
recognition and de-recognition of tax positions, including
any potential interest and penalties relating to tax
positions taken by the Company. The Company did not have any
significant unrecognized tax benefits as of February 28,
2013.
The
Company files income tax returns with the Internal Revenue
Service and the State of Colorado. The tax years that remain
subject to examination are fiscal 2010 through fiscal 2012.
The Company does not believe there will be any material
changes in its unrecognized tax positions over the next
twelve months.
The
Company's policy is to recognize interest and penalties
accrued on any unrecognized tax benefits as a component of
income tax expense. At February 28, 2013, the Company did not
have any accrued interest or penalties associated with any
unrecognized tax benefits, nor was any interest expense
recognized during the three or six months ended February 28,
2013 and February 29, 2012.
|
| Earnings Per Share, Policy [Policy Text Block] |
Loss per
Common Share
Loss
per common share is computed by dividing net loss by the
weighted average number of shares outstanding during each
period. Common stock options and warrants aggregating 247,600
and 275,100 common share equivalents were outstanding as of
February 28, 2013 and February 29, 2012, respectively, and
have been excluded from the calculation of loss per common
share as their effect is anti-dilutive.
|
| New Accounting Pronouncements, Policy [Policy Text Block] |
Recently
Issued Accounting Pronouncements
The
Company continually assesses any new accounting
pronouncements to determine their applicability. When it is
determined that a new accounting pronouncement affects the
Company’s financial reporting, the Company undertakes a
study to determine the consequence of the change to its
financial statements and assures that there are proper
controls in place to ascertain that the Company’s
financial statements properly reflect the change.
In
June 2011, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) No. 2011-05, Comprehensive
Income (Topic 220) – Presentation of Comprehensive
Income (“ASU 2011-05”). ASU 2011-05
requires entities to present net income and other
comprehensive income in either a single continuous
statement or in two separate, but consecutive, statements
of net income and other comprehensive income. ASU 2011-05
is effective for fiscal years beginning after December 15,
2011 (September 1, 2012 for the Company). The adoption of
ASU 2011-05 did not have a material impact on its results
of operations, financial condition or cash
flows.
In
February 2013, the FASB issued ASU No. 2013-02, Comprehensive
Income (Topic 220) - Reporting of
Amounts Reclassified Out of Accumulated Other Comprehensive
Income (“ASU 2013-02). ASU 2013-02 finalizes
Proposed ASU No. 2012-240, and seeks to improve the
transparency of reporting reclassifications out of
accumulated other comprehensive income. ASU 2013-02 is
effective prospectively
for reporting periods beginning after December 15, 2012
(September 1, 2013 for the Company). The adoption of ASU
2013-02 will not have a material impact on its results of
operations, financial condition or cash
flows.
|