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LITIGATION LOSS CONTINGENCIES | 12 Months Ended
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Aug. 31, 2015
Litigation Loss Contingencies |
LITIGATION LOSS CONTINGENCIES | The Company has historically been involved in various claims, litigation and other legal proceedings that arise in the ordinary course of its business. The Company records an accrual for a loss contingency when its occurrence is probable and damages can be reasonably estimated based on the anticipated most likely outcome or the minimum amount within a range of possible outcomes. The Company makes such estimates based on information known about the claims and experience in contesting, litigating and settling similar claims. Disclosures are also provided for reasonably possible losses that could have a material effect on the Company's financial position, results of operations or cash flows. On September 29, 2014, the Company entered into a settlement agreement and release with HP A&M. The settlement agreement settled the lawsuit filed by HP A&M against the Company in the District Court, City and County of Denver, Colorado on February 27, 2012, alleging breaches of representations and warranties made in connection with the Arkansas River Agreement. Pursuant to the settlement agreement and a joint stipulated motion to dismiss filed with the court following execution of the settlement agreement, HP A&M released all claims asserted against the Company in its 2012 lawsuit, and the lawsuit was dismissed with prejudice. On January 29, 2015, the Company and its wholly-owned subsidiary, PCY Holdings, LLC ("PCY Holdings"), entered into a comprehensive Settlement Agreement and Release (the "Settlement Agreement") with HP A&M settling all remaining lawsuits among the parties. The Settlement Agreement settled the following four lawsuits: A lawsuit filed by the Company against HP A&M in the District Court, City and County of Denver, State of Colorado, on April 4, 2014, alleging HP A&M breached the Arkansas River Agreement, the Property Management Agreement and other agreements entered into in connection with the Arkansas River Agreement, among other ways, by failing to (i) pay, perform and discharge its obligations when due or otherwise pursuant to the Excluded Indebtedness, (ii) cure defaults under the notes and deeds of trust applicable to the Excluded Indebtedness, and (iii) use Net Revenue, pursuant to the Property Management Agreement, to pay Excluded Indebtedness. A lawsuit pending before the Colorado Court of Appeals that HP A&M filed against PCY Holdings and the Public Trustee for the County of Bent, Colorado, on September 16, 2013, seeking (i) a declaratory judgment that HP A&M was entitled to redeem four properties from foreclosure sales in which PCY Holdings was the successful bidder, and (ii) preliminary and permanent injunctions against the Public Trustee preventing the Public Trustee from issuing confirmation deeds for the foreclosure sales to PCY Holdings or anyone other than HP A&M. A related lawsuit filed by PCY Holdings against HP A&M on December 23, 2013, in which PCY Holdings was seeking removal of lis pendens filed by HP A&M against the four properties which were the subject of the above-referenced appellate action. A lawsuit filed on July 17, 2014, against HP A&M, in which PCY Holdings was seeking judicial foreclosure of a note. In exchange for settling these lawsuits, the Settlement Agreement provided for, among otherthings, (i) HP A&M's relinquishment of the TPF, (ii) the sale of 300,000 shares of the Company's common stock owned by HP A&M, with the proceeds to be delivered to the Company, (iii) the assignment of HP A&M's 75% mineral interests in the Arkansas River land to the Company, (iv) the dismissal of all claims by HP A&M, and (v) the forgiveness by the Company of the HP A&M receivable. The elimination of the HP A&M receivable in the amount of $7,133,300 outstanding as of the date of the Settlement Agreement is reflected in the financial statements as of August 31, 2015, as follows: (1) the value of the common shares to be sold on behalf of the Company pursuant to the settlement of $1,407,000 is recorded as collateral stock on the consolidated balance sheet as a contra-equity balance, (2) the mineral interests were recorded on the balance sheet as part of the Arkansas River Valley asset with an estimated value of $1,425,500, and (3) the TPF of $1,731,800 outstanding as of the date of settlement was reduced to nil. The balance of $2,926,100 was recorded as an equity transaction resulting in a decrease to equity. Rather than requiring the 300,000 shares of common stock to be sold, the Company retired the shares on September 30, 2015.

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