The Company’s water rights and current water and wastewater service agreements are more fully described in Note 4 – Water and Land Assets in Part II, Item 8 of the 2014 Annual Report. There have been no significant changes to the Company’s water rights or water and wastewater service agreements during the three months ended November 30, 2014.

The Company’s water, water systems, land and improvements consist of the following costs and accumulated depreciation and depletion at November 30, 2014 and August 31, 2014:

Capitalized terms in this section not defined herein are defined in Note 4 – Water and Land Assets to the 2014 Annual Report.

Depletion and Depreciation. The Company recorded depletion charges of $2,500 and $100 during the three month periods ended November 30, 2014 and 2013, respectively. During the three months ended November 30, 2014 this related to the Rangeview and Sky Ranch Water supplies (defined below) and during the three months ended November 30, 2013 this related entirely to the Rangeview Water Supply. No depletion is taken against the Arkansas River (defined below) because the water located at this location is not yet being utilized for municipal purpose as of November 30, 2014.

The Company recorded $76,400 and $48,400 of depreciation expense during the three months ended November 30, 2014 and 2013, respectively.

Land and Water Shares Held for Sale. During fiscal year end 2012, management decided to sell certain farms in order to have the cash flow sufficient to acquire the notes defaulted upon by HP A&M and to meet the future obligations on the promissory notes the Company intended to issue as consideration to purchase the notes owed by HP A&M. Management planned to sell approximately 1,603 acres of land along with 3,397 FLCC shares associated with this land.

Through August 31, 2014, the Company completed sales of approximately 1,886 acres of land and 2,982 FLCC shares associated with the land; and, in November 2014, completed sales of approximately 299 acres of land along with 239 FLCC shares associated with the land. Management believes that the November 2014 sale completed the sales cycle related to the land held for sale.

In addition, management identified an additional 640 acres of land and 512 FLCC shares associated with the land as held for sale in order to have sufficient cash available to continue to meet future obligations on the promissory notes the Company issued to purchase the defaulted notes owed by HP A&M and to continue to fund water system expansions. The net book value of the assets identified as held for sale was $1.9 million prior to designation as held for sale. The anticipated sales price for these assets is $1.5 million based on recent sales transactions, which required the Company to record an impairment of approximately $400,000 in fiscal 2014.