9. Fair Value - Contingent Payments

6 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

FAIR VALUE - CONTINGENT PAYMENTS

Fair value – contingent payments at December 31, 2012 and June 30, 2012 relate to AES asset purchase transactions completed in conjunction with the construction of water disposal facilities for the treatment and disposal of produced water generated by oil and natural gas producers in Western Colorado. Details of the contingent payments are as follows:

		December 31,		June 30,
		2012		2012
Fair value - contingent land payment	$	632,000	$	625,000
Fair value - contingent purchase price		505,700		500,000
		1,137,700		1,125,000
Less current portion		(50,000)		(50,000)
Fair value - contingent payments, long-term	$	1,087,700	$	1,075,000

Fair value – contingent land payment of $632,000 at December 31, 2012 represents the net present value of $800,000 of estimated contingent land payments due under an agreement whereby Alanco Energy Services, Inc. (“AES”) acquired 160 acres of land known as Indian Mesa. The payment is based upon 10% of any quarterly income (defined as gross revenues less operating expenses up to a maximum of $200,000 per quarter) for activity at both the Deer Creek and the Indian Mesa locations. The payments were projected considering current operating plans as approved by the Alanco Board of Directors, with the payments discounted at a rate of 3% per annum. Interest is being imputed at 3% per annum, increasing the fair value of the contingent land payment during the six months ended December 31, 2012 by $7,000.

Fair value – contingent purchase price of $505,700 at December 31, 2012 represents the net present value of projected payments to be made to TC Operating, LLC (“TCO”) pursuant to an Asset Purchase Agreement under which TC Operating transferred a land lease for approximately 20 acres of land known as Deer Creek and all related tangible and intangible assets. Per the agreement, the contingent payments are determined as 28% of the Cumulative EBITDA in excess of all of AES’s capital investment for the ten (10) year period commencing on the earlier of (i) the recovery of AES’s capital investment, or (ii) January 1, 2014. AES’s Capital investment shall mean the aggregate amount incurred by AES in acquiring the Assets, the Indian Mesa Facility, and or improving either the Deer Creek Facility or the Indian Mesa Facility. Payments of said Contingent Purchase Price shall be payable quarterly. The projected payments consider current operating plans as approved by the Alanco Board of Directors, with payments discounted at a rate of 3% per annum to determine net present value. Interest is being imputed at 3% per annum, increasing the fair value of the contingent land payment during the six months ended December 31, 2012 by $5,700.