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 six months ended February 28, 2015.

The Company’s water and water systems consists of the following costs and accumulated depreciation and depletion at February 28, 2015 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 $3,700 and $100 during the three month periods ended February 28, 2015 and 2014, respectively. The Company recorded depletion charges of $6,200 and $200 during the six months ended February 28, 2015 and 2014, respectively. During the three and six months ended February 28, 2015, this related to the Rangeview and Sky Ranch Water supplies (defined below), and during the three and six months ended February 28, 2014, 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 was not being utilized for municipal purpose as of February 28, 2015.

The Company recorded $89,600 and $45,000 of depreciation expense during the three months ended February 28, 2015 and 2014, respectively. The Company recorded $165,900 and $93,400 of depreciation expense during the six months ended February 28, 2015 and 2014, respectively.

Land and Water Shares Held for Sale. During fiscal year end 2012, management decided to sell certain farms in order to have liquidity 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 Fort Lyon Canal Company (“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 as of August 31, 2012.

In addition, management identified as of August 2014 an additional 640 acres of land and 512 FLCC shares associated with the land as held for sale in order to have sufficient liquidity 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 year 2014.