|
Accounting Policies, by Policy (Policies)
|
3 Months Ended |
|---|---|
|
Nov. 30, 2012
|
|
| 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
three months ended November 30, 2012, exceeded federally
insured limits. At various times during the
three months ended November 30, 2012, 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 US 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 represents the fair values of the underlying
instruments as reported by the financial institutions where
the funds are held as of November 30, 2012 and August 31,
2012. The Company has recorded net unrealized
losses on its marketable securities of $2,000 and $1,100 as
of November 30, 2012 and August 31, 2012,
respectively. The unrealized losses at November
30, 2012 and August 31, 2012 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 bears 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 below, High Plains A&M (“HP
A&M”) defaulted on certain promissory notes
payable to third parties; which were secured by property
owned by the Company. To protect its land and
water interests, the Company has purchased certain of the
HP A&M notes and the Company now has the right to
collect from HP A&M any amounts the Company spends to
cure the defaulted notes. Accordingly 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 $3.5 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 HPA&M which were purchased by the Company as
of November 30, 2012 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 November 30, 2012, the Company acquired $5.0 million of
the $9.6 million of promissory notes that are payable to
third parties. Subsequent to November 30, 2012,
the Company purchased an additional $816,600 of the
promissory notes. These promissory notes were
acquired through the payment of approximately $492,000 and
the issuance of notes by the Company which have a five year
term and bear interest at an annual rate of five percent
(5%), and require semi-annual payments with a straight-line
amortization schedule. The carry 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 Assest 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 months ended November 30, 2012 or
2011.
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 $894,600 and
$851,400 during the three months ended November 30, 2012
and 2011, respectively.
At
November 30, 2012, 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 November 30, 2012 and 2011,
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
November 30, 2012 and 2011, 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 November 30, 2012, 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 twice per
year 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 November 30, 2012, was determined by the
Company’s specific review of all past due
accounts. As of November 30, 2012 and August 31,
2012, the Company has recorded allowances for doubtful
accounts totaling $41,000 and $20,000, respectively.
The Company manages the farm lease business as a separate
line of business from the wholesale water and wastewater
business.
As
of November 30, 2012, the Company has deferred recognition
of $121,500 of revenue related to the farm operations,
which will be recognized in the second quarter of fiscal
2013.
|
| 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. Pursuant to the O&G Lease, during
the year ended August 31, 2011, the Company received
up-front payments of $1,243,400 from Anadarko 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 from
Anadarko 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
November 30, 2012 and 2011, the Company recognized $103,600
of income and royalty related to the up-front payments
received pursuant to the O&G Lease.
As
of November 30, 2012, the Company has deferred recognition
of $535,700 of income related to the O&G Lease, which
will be recognized into income ratably through February
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
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 $10,600 and $18,800 of share-based
compensation expense during the three months ended November
30, 2012 and 2011, 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 November 30,
2012.
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 November 30, 2012, 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 months ended
November 30, 2012 and 2011.
|
| 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
215,100 and 275,100 common share equivalents were
outstanding as of November 30, 2012 and 2011, 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 financials
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 and interim periods 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.
|