What changed in this filing

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Item 1A. Risk Factors

2025-11-12 compared with 2024-11-13 · 110 added, 107 removed, 397 unchanged (35% of the section changed)

23 unchanged sentences

The residential housing market is impacted by federal and state personal income tax rates and provisions, and government actions, policies, programs and regulations directed at or affecting the housing market, including the Tax Cuts and Jobs Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, tax benefits associated with purchasing and owning a home, and the standards, fees and size limits applicable to the purchase or insuring of mortgage loans by government-sponsored enterprises and government agencies.

For example, from 2020 to 2022 housing starts as well as home prices in Colorado increased.

In 2022 and 2023 due to rising interest rates, the demand for new home starts weakened in the Colorado housing market.

Notwithstanding stabilizing house conditions in 2024, the current demand for new homes is subject to continued uncertainty due to many factors, and we could experience declines in the market value and demand for our lots and rental homes, any of which could have a material adverse effect on our business, results of operations, cash flows and financial condition.

In addition, changes in immigration policy and enforcement and tariffs imposed on products used in the construction industry can increase construction cost and thereby reduce demand for new housing.

Macroeconomic factors also affect demand.

For example, from 2020 to 2022 housing starts as well as home prices in Colorado increased, but more recently, rising interest rates have reduced demand for new home starts.

The current demand for new homes is subject to continued uncertainty due to many factors, and we could experience declines in the market value and demand for our lots and rental homes, any of which could have a material adverse effect on our business, results of operations, cash flows and financial condition.

Tariffs, trade restrictions, and related supply chain disruptions could increase our costs, delay our projects, or reduce demand for our products and services, any of which could adversely affect our business, results of operations, and financial condition.

Our development, construction, and water operations rely on materials and equipment that may be subject to U.S.

and foreign tariffs, duties, quotas, sanctions, and similar trade barriers.

Existing or new measures—such as antidumping and countervailing duties, customs reclassifications, “Buy America”/local-content mandates, and retaliatory actions—can raise procurement costs, lengthen lead times, limit availability, or require alternative suppliers or redesigns, which may delay projects, compress margins, or require additional capital.

Tariffs and trade restrictions on our oil and gas customers and homebuilding partners may also indirectly reduce demand for our industrial water sales and for residential lots and related water and wastewater services.

Additionally, frequent changes in trade policy

create pricing uncertainty and may limit our ability to pass through cost increases, especially under fixed-price or capped contracts.

Suppliers may impose surcharges or assert force majeure tied to tariff shifts or shipping constraints, further increasing costs or causing schedule slippage.

Prolonged or expanded tariffs, trade disputes, or sanctions regimes could materially raise construction and operating costs, delay or defer projects, reduce demand from key customer segments, and adversely affect our liquidity, results of operations, and financial condition.

Significant competition from other development projects could adversely affect our results.

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Disruptions to the commercial transportation network, including limited container and trucking capacity and port congestion, have increased supplier delivery times for materials to our facilities.

Our margins and overall financial performance may be adversely affected by increases in our operating costs, such as material, labor, supplier costs, logistics and energy costs, all of which may be subject to inflationary pressures.

Since the onset of COVID-19, we have seen operating costs trending upward, labor shortages, logistics disruptions, commodity cost increases and shortages, and overall increased demand in the land development and water business industries.

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Drought and overuse may limit the availability of water, and such droughts may become more frequent and prolonged with climate change.

These factors might adversely affect our ability to supply water in sufficient quantities to our customers, and our revenue and earnings may be adversely affected.

These factors might adversely affect our ability to supply water in sufficient quantities to our customers, and our revenue and earnings may be adversely affected by any supply issues.

Additionally, cool, and wet weather, as well as drought restrictions and our customers’ conservation efforts, may reduce consumption demands, adversely affecting our revenue and earnings.

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We conduct our operations in the Colorado Front Range, which is subject to natural disasters, including droughts, tornadoes, wildland fires, and severe weather.

The occurrence of natural disasters or severe weather conditions in Colorado or elsewhere could result in interruptions in our water and wastewater operations, delay our construction activities, increase costs, and lead to shortages of labor and materials.

The occurrence of natural disasters or severe weather conditions in Colorado or

elsewhere could result in interruptions in our water and wastewater operations, delay our construction activities, increase costs, and lead to shortages of labor and materials.

Moreover, such extreme weather conditions and natural disasters are likely to increase in frequency and intensity as a result of projected unabated climate change.

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Our continuing development of Sky Ranch requires significant cash expenditures.

We have advanced the Sky Ranch CAB $67.5 million for construction of public improvements in Phases 1 and 2 at Sky Ranch and expect to advance approximately another $30.0 million for the completion of the Phase 2 public improvements.

We have advanced the Sky Ranch CAB $85.6 million for construction of public improvements in Phases 1 and 2 at Sky Ranch and expect to advance approximately another $23.5 million for the completion of Phase 2 public improvements.

The Sky Ranch CAB is not required to repay us for advances made or expenses incurred for improvements at Sky Ranch unless and until the Sky Ranch CAB and/or Sky Ranch Districts generate sufficient funds from either tax revenue, fees or by issuing bonds in an amount sufficient to reimburse us for all or a portion of advances made or expenses incurred.

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As of August 31, 2025, we had $22 million of cash on hand.

If our cash on hand and future cash flows from operations are not sufficient to fund our operations and the significant capital expenditure requirements to continue to develop Sky Ranch, we may be forced to seek to obtain additional debt or equity capital.

Economic conditions and disruptions have previously caused substantial volatility in capital markets, including credit markets and the banking industry, increasing the cost, and significantly reducing the availability of financing, which may reoccur in the future.

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Our costs associated with the construction of water systems and the production, treatment and delivery of water are subject to market conditions and other factors, which may increase at a significantly higher rate than that of the fees we receive from the Rangeview District.

Factors beyond our control and which cannot be predicted, such as government regulations, insurance and labor markets, drought, water contamination and severe weather conditions may result in additional labor and material costs that may not be recoverable under the current rate structure.

Factors beyond our control and which cannot be predicted, such as government regulations, tariffs and other charges, changs in insurance and labor markets, drought, water contamination and severe weather conditions may result in additional labor and material costs that may not be recoverable under the current rate structure.

Both increased customer demand and increased water conservation may also impact the overall cost of our operations.

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however, there can be no assurance that the Land Board would approve a rate increase request.

Further, even if a rate increase were approved, it might not be granted in a timely manner or in an amount sufficient to cover the expenses for which the rate increase was sought.

Our water sales have been historically concentrated directly and indirectly with a limited number of companies providing hydraulic fracturing services to the oil and gas industry in our service area.

Generally, investment in oil and gas development is dependent on the price of, and demand for, oil and gas.

We have no long-term contractual commitments that will ensure these sales continue in the future.

The oil and gas industry has periodically gone through periods when activity has significantly declined due to low oil and gas prices, reduced world-wide demand and other impacts to the world-wide economy such as the COVID-19 pandemic, which have had a negative impact on the water we sell to these operators.

Further sales to this customer base as well as renewals of our oil and gas leases in the future may be impacted by ballot initiatives, new federal and state legislation, regulations by multiple federal and state agencies such as the U.S.

Environmental Protection Agency, the Colorado Energy and Carbon Management Commission (CECMC, formerly the Colorado Oil and Gas Conservation Commission

(COGCC)), the Colorado Department of Public Health and Environment (DPHE), and the Colorado Air Quality Control Commission (AQCC), local zoning rules, court interpretations of laws and regulations at all levels of government, fracking technologies, the success of the wells, and the price of oil and gas, among other things.

We could see increased opposition and tougher oversight of oil and gas operations, which could reduce the demand for water for fracking and reduce our associated water sales as a result of the enactment and implementation of multiple state bills over the last several years targeting the siting of, emissions from, and chemicals used in oil and gas production, such as Senate Bill SB 19-181 (increased local and state government oversight of oil and gas siting and environmental impacts), SB 22-198 (fees on oil and gas wells for an orphaned well fund), HB 22-1361 (audits of and reporting on oil and gas taxes and emissions), HB 22-1244 (toxic air emissions reporting, permitting, and controls from certain sources, which may be more stringent than the federal Clean Air Act), HB 22-1348 (disclosure of chemicals used in oil and gas operations and ban on use of added perfluoroalkyl or polyfluoroalkyl chemicals), HB 22-1345 (ban on PFAS in oil and gas products), and SB 24-230 (establishing new fees on oil and gas production).

The oil and gas industry, and associated demand for water for fracking, may also be impacted by the adoption of new or revised state regulations in recent years, such as:

(i) Colorado Energy and Carbon Management Commission fees and financial assurance requirements for oil and gas facilities (adopted in 2022) and a new rule (adopted in October 2024) requiring that oil and gas operators seeking drilling permits must analyze the cumulative impacts of their proposals and conduct enhanced community outreach in disproportionately impacted communities ;

(ii) AQCC GHG intensity standards that will become more restrictive over time and apply to upstream oil and gas operations, including well sites and production facilities and related “verification” and monitoring requirements (Regulation 7);

(iii) AQCC reporting and emission reduction requirements for GHGs, ozone precursors, and hydrocarbons from oil and gas operations and industrial wastewater treatment, as well as regional haze limit (Regulations 7, 22, and 23);

(iv) a list of toxic air contaminants identified by the DPHE in 2022 as a first step in implementing HB 22-1244;

and (v) additional maintenance, monitoring, and emissions regulations on the upstream and midstream oil and gas industry facilities in AQCC Regulation Numbers 7 and 22 .

Recent federal laws and regulatory initiatives may also impact the oil and gas industry and thus associated water demand and sales.

For example, the federal Inflation Reduction Act of 2022 imposes a fee on methane emissions from certain oil and gas facilities, and it increases certain corporate taxes that could impact the oil and gas industry.

The Inflation Reduction Act also increases the amount of federal property available for oil and gas leasing, which could impact the desirability of developing oil and gas on private property.

In addition, the EPA issued a final rule that includes, among other things, revised “New Source Performance Standards” regulating greenhouse gas (GHG), methane, and volatile organic compounds (VOCs) emissions for the Crude Oil and Natural Gas source category pursuant to the Clean Air Act, as well as emissions guidelines for states to follow in developing state plan to establish performance standards to limit GHG emissions from existing sources in the Crude Oil and Natural Gas source category.

That final rule was announced by the EPA on December 2, 2023 and published in the Federal Register on March 8, 2024, and a new interim final rule to make technical corrections was issued on June 11, 2024.

Other future potential laws, regulations, or ballot initiatives may also impact oil and gas development and, therefore, our water sales.

Further, even if a rate increase were

approved, it might not be granted in a timely manner or in an amount sufficient to cover the expenses for which the rate increase was sought.

A significant portion of our water supplies come from non-renewable aquifers and inadequate water and wastewater supplies could have a material adverse effect on us.

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Nonetheless, we may need to seek additional water supplies to prove our supply can last for 300 years as our non-renewable supplies are depleted.

While the acquisition of Lost Creek water, a renewable “surface” water right that is diverted from an alluvial aquifer that is hydrologically connected to the surface water system, mitigates some of the risk of owning non-renewable supplies, if we are unable to obtain sufficient replacement supplies, it would have a material adverse impact on our business and financial condition.

While the acquisition of WISE and Lost Creek water mitigates some of the risk of owning non-renewable supplies, if we are unable to obtain sufficient replacement supplies, it would have a material adverse impact on our business and financial condition.

Additionally, the cost of developing and withdrawing water from the aquifers is expected to increase over time, and we may not be able to recover the increased costs through our rates and charges.

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We continuously look for new sources of water to augment our reserves in our service areas, but our ability to obtain such rights may depend on factors beyond our control.

We may not be able to obtain sufficient water or water supplies to increase customer growth necessary to increase or even maintain our revenues.

We may not be able to obtain sufficient water or water supplies to increase customer growth as needed to increase or maintain our revenues.

Also, increased costs to develop water from aquifers could have a significant negative impact on our business, results of operations, cash flows and financial condition.

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This may take several years to complete, and there is no assurance that we will be able to obtain a favorable ruling, which may adversely impact our business and financial condition.

Water resources that have been historically used for purposes other than municipal and industrial uses or that have been used in other locations, such as or Lost Creek Water, require a favorable change of use ruling by the water court in order for us to use the water as planned.

Water resources that have been historically used for purposes other than municipal and industrial uses or that have been used in other locations, such as our Lost Creek Water, require a favorable change of use ruling by the water court in order for us to use the water as planned.

A change of use ruling by the water court could take several years and be a costly and contentious effort since it is anticipated that many parties will oppose the change of use and the transfer of the water.

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We expect to face opposition to any consumptive use calculations of the historic agricultural uses of this water.

The water court may impose conditions on our transfer of the water rights such as requiring us to mitigate the loss of the farming tax base, imposing re-vegetation requirements to convert soils from irrigated to non-irrigated, imposing water quality measures, and imposing limitations on the timing and location of transfers to mitigate other users who may be affected by such transfers.

Any such conditions, including a change of use ruling that precludes us from using the water resource as intended, would likely increase the cost of transferring the water rights or require us to develop alternative plans or water resources, which could result in substantial delays or expense which my adversely impact our business and financial condition.

Any such conditions, including a change of use ruling that precludes us from using the water resource as intended, would likely increase the cost of transferring the water rights or require us to develop alternative plans or water resources, which could result in substantial delays or expense which may adversely impact our business and financial condition.

A failure of the water wells or distribution networks we own or control could result in losses and damages that may affect our business and financial condition.

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In addition, there are often significant delays in the adoption and implementation of plans with respect to property administered by the Land Board because the process involves many constituencies with diverse interests.

In the event water sales are not forthcoming or development of the Lowry Ranch is delayed or abandoned, we may need to use our capital resources, incur additional short or long-term debt obligations, or seek to sell additional equity.

In the event water sales are not forthcoming or development of the Lowry Ranch is delayed

or abandoned, we may need to use our capital resources, incur additional short or long-term debt obligations, or seek to sell additional equity.

We may not have sufficient capital resources or be successful in obtaining additional operating capital.

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Continued activities are dependent on federal appropriations, and the Army Corps of Engineers has no assurance from year to year of such appropriations for its activities at the Lowry Ranch.

Dependence on third-party utilities for power and gas could delay our projects, increase costs, and adversely affect our results of operations and financial condition.

Our development timelines and delivery of finished lots to national homebuilders depend on timely availability of electric and natural gas service from third-party utilities, including Xcel Energy and other providers.

If these utilities are unable or unwilling to extend service when needed—due to permitting or siting delays, labor or equipment shortages, capacity constraints, storm or wildfire response priorities, regulatory proceedings, supply chain disruptions, interconnection backlogs, or changes in their construction schedules or investment plans—we may be forced to delay or resequence phases at Sky Ranch and other projects.

Such delays can increase carrying and construction costs;

postpone lot closings, water and wastewater service revenues, and rental home lease-up;

and strain builder relationships.

In addition, utility design changes, cost allocations, or line extension rules can increase off-site or on-site infrastructure costs beyond our estimates, and we may be unable to recover those increases through pricing.

Prolonged or repeated utility service delays or cost escalations could materially and adversely affect our development activities, cash flows, results of operations, and financial condition.

We have limited experience with the development of real property.

While we have extensive experience designing and constructing water and wastewater facilities and maintaining and operating these facilities, despite having completed Phase 1 and a substantial amount of Phase 2A and 2B at Sky Ranch, we have less experience developing real property.

While we have extensive experience designing and constructing water and wastewater facilities and maintaining and operating these facilities, despite having completed Phase 1 and 2A, as well as a substantial amount of Phases 2B through 2E at Sky Ranch, we have less experience developing real property.

We may underestimate the capital expenditures required to complete the development of Sky Ranch, including the costs of certain infrastructure improvements and construction costs related to our single-family home rental business.

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At August 31, 2025, of the amounts advanced to the Sky Ranch CAB, $43.8 million has not been repaid, including interest and project management fees.

We expect these amounts will be repaid by the

Sky Ranch CAB.

No payment is required by the Sky Ranch CAB with respect to construction of public improvements unless and until the Sky Ranch CAB and/or the Sky Ranch Districts have generated sufficient funds from property taxes, fee, or the issuance of municipal bonds in an amount sufficient to reimburse the Company for all or a portion of advances provided or expenses incurred for reimbursables.

We expect that these amounts will be repaid by the Sky Ranch CAB but cannot guarantee that repayment will occur.

No payment is required by the Sky Ranch CAB with respect to construction of public improvements unless and until the Sky Ranch CAB and/or the Sky Ranch Districts have generated funds from property taxes, fee, or the issuance of municipal bonds in an amount sufficient to reimburse the Company for all or a portion of advances provided or expenses incurred for reimbursables.

The ability and obligation of the Sky Ranch CAB to reimburse us is dependent on sufficient home sales and commercial development occurring at Sky Ranch to create a tax base that would enable the Sky Ranch CAB to issue bonds to pay for the improvements.

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work stoppages, labor disputes, and shortages of qualified trades people, such as carpenters, roofers, masons, electricians, and plumbers;

changes in laws relating to union organizing activity;

changes in laws and regulations relating to union organizing activity, immigration, tariffs or other matters;

lack of availability of adequate utility or infrastructure and services;

our need to rely on local subcontractors who may not be adequately capitalized or insured or may not, despite our quality control efforts, engage in proper construction practices or comply with applicable regulations;

our need to rely on local subcontractors who may not be adequately capitalized or insured or may not, despite our quality control efforts,

engage in proper construction practices or comply with applicable regulations;

inadequacies in components purchased from building supply companies;

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If there is considerable lag time between when we acquire the land and when we begin selling finished lots or renting homes, we may generate significant operating losses.

In addition, if sales of homes on the finished lots are delayed, renters cannot be found in a timely manner, our revenue from water and wastewater resource development services will be delayed.

If our cash on hand and future cash flows from operations are not sufficient to fund our operations and the significant capital expenditure requirements to develop any acquired land, construct housing and build water and wastewater systems, we may be forced to seek to obtain additional debt or equity capital.

In addition, if sales of homes on the finished lots are delayed or renters cannot be found in a timely manner, our revenue from water and wastewater resource development services will be delayed.

If our cash on hand and future cash flows from operations are not sufficient to fund our operations and the significant capital expenditures required to develop any acquired land, construct housing and build water and wastewater systems, we may be forced to seek to obtain additional debt or equity capital.

There can be no assurance that financing will be available on acceptable terms or at all.

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A significant downturn in the housing market could cause our builders to delay building homes on their lots until market conditions improve, and could result in us not renting our single-family rentals for rates that provide a sufficient return.

Builders with contracts that do not require purchasing the lot until we deliver a finished, ready-to-build lot, could walk away from the contract prior to closing without consequence other than the forfeiture of their upfront deposits for the lot, utilities and other improvements.

Builders with contracts that do not require them to purchase a lot until we deliver a finished, ready-to-build lot could walk away from the contract prior to closing without consequence other than the forfeiture of their upfront deposits for the lot, utilities and other improvements.

If a builder elected to walk away without cause, we would be entitled to keep these deposits as liquidated damages, but the deposits would not be sufficient to cover the expenses we expect to incur to finish the lots for delivery.

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If our tenants do not renew their leases or the rental rates for our properties decrease, our operating results could be adversely affected.

Tenant relief laws, including laws restricting evictions and other regulations could limit our ability to evict bad tenants which may negatively impact our rental income and profitability.

Landlords of numerous properties tend to be involved in evicting tenants who are not paying their rent or are otherwise in material violation of the terms of their lease.

Tenant relief laws, including laws restricting evictions and other regulations could limit our ability to evict bad tenants, and this may negatively impact our rental income and profitability.

Landlords of numerous properties may be involved in evicting tenants who are not paying their rent or are otherwise in material violation of the terms of their lease from time to time.

Eviction activities impose legal and managerial expenses that would raise our costs.

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Government regulations and legal challenges may delay the closing of the sale of our residential lots, increase our expenses or limit other activities, which could have a negative impact on our results of operations.

The approval of numerous governmental authorities must be obtained in connection with both our water and wastewater projects and our land development activities, and these governmental authorities often have broad discretion in exercising their approval authority.

The approval of numerous governmental authorities must be obtained in connection with both our water and wastewater projects and our land development activities, and these governmental

authorities often have broad discretion in exercising their approval authority.

We incur substantial costs related to compliance with legal and regulatory requirements.

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Thus, local zoning or other regulations may seek to create stricter setbacks from oil and gas drilling operations or impose other restrictions on the use of land.

Several local governments in Colorado have adopted their own oil and gas regulatory requirements and setbacks.

For example, Arapahoe County adopted oil and gas regulations in November 2021 and amended those regulations in 2023 to include, among other things, a one-mile setback from existing and planned reservoirs, subject to certain exceptions that may allow a 2,000-foot setback.

That 2,000-foot minimum setback was once again amended in November 2023, requiring the setback from an occupied structure to be at 3,000 feet, allowing for a setback of not less than 1,000 feet through variance procedures, and increasing the setback to 3,000 feet for well pad sites that are hydrologically separated from existing and planned reservoirs, permitting a setback of 2,000 feet if approved through a Use by Special Review process Similarly, in 2021, Adams County adopted a rule requiring oil and gas facilities to be set back 2,000 feet from residences, schools, and certain waterbodies.

In December 2024, Arapahoe County adopted additional oil and gas regulations that require, among other things, increased setbacks, financial assurance for wells, certain air quality monitoring at facilities, and a requirement that drilling and permanent production equipment be operated with electric equipment and power where available.

Similarly, in 2021, Adams County adopted a rule requiring oil and gas facilities to be set back 2,000 feet from residences, schools, and certain waterbodies.

As these state and local setback regulations are implemented, and to the extent that additional regulations are enacted, the value of the land that we already own or the availability of land that we are looking to acquire may decline, either of which may adversely impact the financial position, results of operations and cash flows of our business.

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New building code energy laws and regulations may also adversely impact our costs of construction.

For example, HB 22-1362 requires the Colorado Energy Office to identify by 2025, and local governments to adopt by 2026, more energy efficient and low carbon building codes.

For example, the Colorado Energy Office published in September 2025 its Model Low Energy and Carbon Code, required by HB 22-1362.

The Model Low Energy and Carbon Code becomes Colorado’s new minimum energy code on July 1, 2026.

Any new municipality or county that updates any of its building codes after that date must adopt the model code, or a code that will achieve greater energy efficiency and pollution reductions.

Further, HB 23-1161 establishes water and energy efficiency standards for a range of appliances, which could impact appliance costs and, relatedly, costs for finishing new buildings.

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and (vi) expects to develop additional rules restricting PFAS discharges from industrial sources.

These new regulatory initiatives addressing PFAS in drinking water could impact the water side of our business.

On May 14, 2025, however, EPA announced the agency will keep the current National Primary Drinking Water Regulations (NPDWR) for PFOA and PFOS.

As part of this action, EPA also announced its intent to extend the PFOA and PFOS Maximum Contaminant Level compliance deadlines and establish a federal exemption framework.

Additionally, EPA announced its intent to rescind the regulations and reconsider the regulatory determinations for PFHxS, PFNA, HFPO-DA (commonly known as GenX), and the Hazard Index mixture of these three PFAS plus PFBS to ensure the determinations and any resulting drinking water

regulation follow the Safe Drinking Water Act process.

Any new regulatory initiatives addressing PFAS in drinking water could impact the water side of our business.

With respect to service of customers on the Lowry Ranch, the Rangeview District’s rates might not be sufficient to cover the cost of compliance with additional or more stringent requirements, or we may be required to reserve more water than necessary for use on the Lowry Ranch to ensure the proper level of service to Lowry Ranch customers.

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Since the Sackett decision, various challenges have continued in federal courts in an effort to further clarify the scope of federal jurisdiction.

Indeed, Colorado passed HB 24-1379, requiring the Water Quality Control Commission to establish requirements, prohibitions, and standards for the regulation of discharged dredge and fill materials into state waters, including wetlands, and administering a state dredge and fill discharge authorization program, expected to be established by 2026.

Indeed, Colorado passed HB 24-1379, requiring the Water Quality Control Commission (WQCC) to establish requirements, prohibitions, and standards for the regulation of discharged dredge and fill materials into state waters, including wetlands, and administering a state dredge and fill discharge authorization program, expected to be established by 2026.

The WQCC is currently scheduled for a hearing in December 2025 to adopt these new regulations per HB 24-1379.

It is expected that further clarifications and changes may arise through implementing federal regulations, additional litigation over application of the Court’s decision, and/or state laws and regulations.

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For example and as mentioned above, HB 22-1362 requires energy efficient and low carbon building codes to be adopted by the state and local governments by 2025 and 2026, respectively.

Additionally, HB 23-1233 will require multifamily buildings to be solar-ready and electric vehicle-ready.

Additionally, HB 23-1233 requires multifamily buildings to be solar-ready and electric vehicle-ready.

Our future housing development costs and the cost of operating and maintaining our multifamily housing developments could be negatively impacted by HB 22-1362, and HB 23-1233, in conjunction with HB 23-1161 (appliance efficiency standards) and earlier enacted efficiency standards for appliances, plumbing fixtures, and buildings (e.g., HB 19-1231, HB 19-1260).

Colorado has also enacted ambitions GHG reduction targets, initially with HB 19-1261 and recently made yet more stringent with SB 23-016, which aims to reduce the state’s overall greenhouse gas emissions 100% below 2005 levels by 2050 and includes a series of interim targets.

Colorado has also enacted ambitious GHG reduction targets, initially with HB 19-1261 and recently made yet more stringent with SB 23-016, which aims to reduce the state’s overall greenhouse gas emissions 100% below 2005 levels by 2050 and includes a series of interim targets.

These legislated targets could lead to additional regulation impacting the housing development, water, and oil and gas industries in the future, which could increase our costs.

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SB 23-1210, requiring the Colorado Energy Office to create a “carbon management roadmap”), and the Colorado Governor’s Colorado Greenhouse Gas Pollution Reduction Roadmap (first released in 2021, and updated in 2024) identifying strategies to reduce greenhouse gas emissions from a variety of sources, including buildings, transportation, and oil and gas mining and production.

For example, pursuant to 19-096 the AQCC adopted and updated its Air Regulation Number 22 and Regulation Number 7 requiring monitoring, reporting, and reduction of GHGs and ozone precursors from certain categories of emitters, such as industrial wastewater treatment facilities and oil and gas operators.

In addition, at the federal level, the SEC’s climate-related financial risks disclosures and greenhouse gas reporting rule, finalized in 2024, could impose additional compliance costs on our business, as well as for the oil and gas producers with whom we do business.

For example, pursuant to 19-096, the AQCC adopted and updated its Air Regulation Number 22 and Regulation Number 7 requiring monitoring, reporting, and reduction of

GHGs and ozone precursors from certain categories of emitters, such as industrial wastewater treatment facilities and oil and gas operators.

As climate change concerns continue to grow, enactment of additional climate and energy legislation and regulations at the state, local, and federal levels may continue, and compliance with legislation and regulations of this nature is expected to become more costly.

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We may not be able to secure performance and completion bonds when required.

The enactment and implementation of SB 19-181 increasing state and local regulatory oversight of oil and gas development could have an adverse effect on our water sales to the oil and gas industry for hydraulic fracturing (fracking) and demand for new homes at Sky Ranch.

Enacted in 2019, SB 19-181 authorizes local governments to approve the siting of oil and gas locations and regulate the surface impacts of oil and natural gas development through local requirements that may be more stringent than state requirements.

Our water sales for the past several years have been highly concentrated among companies providing hydraulic fracturing services to the oil and gas industry, and such sales can fluctuate significantly, including as a result of increasing regulatory burdens on oil and gas development activities.

Our water sales have been historically concentrated directly and indirectly with a limited number of companies providing hydraulic fracturing services to the oil and gas industry in our service area.

Generally, investment in oil and gas development is dependent on the price of, and demand for, oil and gas.

We have no long-term contractual commitments that will ensure these sales continue in the future.

In addition, the activity level of our oil and gas customers may also vary based on their drilling results, changes in drilling and fracking technology and other factors.

Further, the oil and gas industry is heavily regulated, particularly in Colorado, and existing, new or amended federal, state and local regulations may adversely affect the amount of oil and gas activity that occurs and therefore, the amount of water we sell to oil and gas companies.

Rules that may be enforced, implemented or amended address emissions from, and chemicals and water used in, oil and gas production;

fees on oil and gas wells;

air pollution and related permitting and reporting requirements;

limits on water usage;

limits on the usage of certain chemicals in the hydraulic fracturing process;

setbacks of wells from homes and other sites;

environmental review processes;

greenhouse gas emissions;

and other matters.

Regulation of the oil and gas industry has generally become more intensive over time.

For example, SB 19-181 authorizes local governments to approve the siting of oil and gas locations and regulate the surface impacts of oil and natural gas development through local requirements that may be more stringent than state requirements.

SB 19-181 also changed the mission of the Colorado Energy and Carbon Management Commission (or, at the time, the Colorado Oil and Gas Conservation Commission) from fostering responsible and balanced development of natural resources and oil and gas, to regulating the development and production of natural resources and oil and gas in order to “protect” and “minimize” “adverse impacts to public health, safety, and welfare, including protection of the environment and wildlife resources.

SB 19-181 also requires what is now the Colorado Energy and Carbon Management Commission and the AQCC to undertake rulemakings on environmental protection, facility siting, increased inspections and public disclosures, elimination of hard caps on application fees, increasing required financial assurances, and minimizing emissions of hydrocarbons and other compounds.

The CECMC and the AQCC have promulgated several rules pursuant to SB 19-181 over the past several years, as summarized below.

Regulations implemented by the Colorado Energy and Carbon Management Commission pursuant to SB 19-181 could adversely impact our land development activities by limiting the number of lots available for land development in Colorado and could adversely impact our water sales for fracking by limiting the land available for oil and gas production.

As a part of implementing SB 19-181, the CECMC approved a rule (Setback Rule) imposing setbacks and siting requirements for well locations.

The Setback Rule, which took effect in 2021, prohibits, without exception, working well pad surfaces from being located within 2,000 feet of a school facility or childcare center, or within 500 feet from one or more residential buildings that are not subject to a surface use agreement or waiver.

The Setback Rule also generally prohibits any well pad surface from being located greater than 500 feet and less than 2,000 feet from a residential or high occupancy building, but allows such locations to obtain an exemption by satisfying certain requirements (such as consent from owners and tenants) or by obtaining a CECMC finding, after a hearing, that the conditions of approval will provide “substantially equivalent protections” to a 2,000 foot setback for public health, safety, welfare, the environment, wildlife resources, and disproportionately impacted communities.

Depending on how the Setback Rule is applied and interpreted, it could have the effect of limiting property development within 2,000 feet of a well pad surface.

As noted above, to develop oil and gas near residential or high occupancy buildings, the applicant will need an exception from the CECMC by obtaining explicit, informed consent from both the landowner and their tenants (as applicable) to the proposed oil and gas location, or by demonstrating that conditions on approval will provide “substantially equivalent protections” to a 2,000-foot setback.

Applicants who are unable to obtain such an exception may be forced to choose between using their property for oil and gas development or for residential and commercial development.

So, under a restrictive interpretation of the Setback Rule and its exceptions, we might have to limit drilling on our mineral rights at Sky Ranch to proceed with the occupancy densities we have planned, which would adversely affect our industrial water sales to the oil and gas industry.

The Setback Rule could also reduce the supply of other land acquisition opportunities for development.

Alternatively, the Setback Rule could make such residential properties more attractive to people who prefer to live farther from oil and gas developments.

Additionally, any rules that would require the Land Board to elect between oil and gas or residential and commercial land development with respect to the Lowry Ranch would likely have an adverse effect on our financial condition, because we have the exclusive right to provide water service to customers on the Lowry Ranch, including both lessees of the oil and gas rights on the Lowry Ranch and future occupants of the Lowry Ranch if the Land Board sells the land for development.

Our business could be further impacted by more restrictive local regulations, such as Adams County’s rule requiring oil and gas facilities to be set back 2,000 feet from residences, schools, and certain waterbodies, and Arapahoe County’s rule generally requiring a one-mile setback from existing and planned reservoirs, as well as Arapahoe County’s recently adopted rule that increases setbacks from occupied structures (generally 3,000 feet), platted lots, outside activity areas, and water bodies.

These local ordinances, as well as similar ordinances that other local jurisdictions may implement in the future, may adversely impact the buildable area and costs of our development and our clients’ development.

In addition to the CECMC Setback Rule, state agencies have recently adopted other regulations on oil and gas development as a part of implementing SB 19-181 and other recently enacted legislation such as HB 22-1244, HB 19-096, and HB 19-1261.

For example, the CECMC in recent years has adopted rules for testing and ensuring the integrity of oil and gas flow lines and well bores and has imposed new fees and financial assurance requirements for oil and gas facilities.

The CECCM also adopted a rule in 2024 requiring that oil and gas operators seeking drilling permits must analyze the cumulative impacts of their proposals and conduct enhanced community outreach in disproportionately impacted communities.

In addition, the AQCC has, in recent years, approved rules calling for more frequent inspections of oil and gas equipment, imposing new GHG intensity standards for oil and gas operators, and requiring reporting and

reduction of GHG emissions, ozone precursors, and hydrocarbons by oil and gas operations as well as industrial wastewater treatment facilities, where applicable.

Similarly, the AQCC adopted increasingly restrictive GHG intensity standards for upstream oil and gas operations and related “verification” and monitoring requirements.

The AQCC also published an initial list of toxic air contaminants as a first step toward regulation under HB 22-1244.

These and related rulemaking activities by state agencies and local governments could lead to delays and additional costs for oil and gas operators, which, in turn, could result in a decline in oil and gas drilling activities.

A significant decline in oil and gas drilling activities in and around the Lowry Ranch and our Sky Ranch property would have an adverse effect on our water sales for fracking and our financial condition.

Further, a significant decline in oil and gas activities throughout Colorado could negatively impact the Colorado economy, which could have an adverse effect on demand for new homes at Sky Ranch.

Future Ballot Initiatives at the State or Local Level Could Restrict Oil and Gas and Land Development.

In the past decade, interest groups in Colorado opposed to oil and natural gas development generally, and hydraulic fracturing in particular, have put forward ballot initiatives that, if approved, would have significantly curtailed oil and natural gas development in the state.

For example, in 2018, Proposition 112 would have imposed a 2,500-foot setback from any building or waterway in Colorado.

Although Colorado voters rejected that measure, the influential power of even failed ballot initiatives is demonstrated by the fact that the Colorado Legislature and Governor passed SB 19-181 the following year and, pursuant to that law, the Colorado Energy and Carbon Management Commission promulgated the similar, though less restrictive, Setback Rule.

In August 2023, environmental groups submitted language for the 2024 ballot that would ban new hydraulic fracturing permits after 2030.

While that initiative did not make it to the 2024 ballot, similar positions have been set forth by democratic lawmakers of the state, and if such initiatives do make it to the ballot in future years and are passed, it would have material impacts to our oil and gas clients.

Rules implemented under SB 19-181 or other legislation may also adversely affect the development of our mineral rights and our land development activities.

In particular, Colorado and Adams County rules requiring a minimum setback between oil and gas wells and homes or schools may reduce our and our oil and gas customers’ ability to generate revenue from drilling activity as well as our residential and commercial development activities at Sky Ranch.

We may be subject to significant potential liabilities because of warranty and liability claims made against us.

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Conflicts of interest may arise relating to the operation of the Rangeview District, the Sky Ranch Districts and the Sky Ranch CAB.

Our Chief Executive Officer and three of our employees, one of who is our Chief Financial Officer, constitute the majority of the directors of each of the Rangeview District, the Sky Ranch Districts and the Sky Ranch CAB.

Our Chief Executive Officer and three of our employees, one of whom is our Chief Financial Officer, constitute the majority of the directors of each of the Rangeview District, the Sky Ranch Districts and the Sky Ranch CAB.

These officers and employees, along with Pure Cycle and one unrelated individual, own certain property interests in the 40 acres that constitute the Rangeview District and the acreage that constitutes the Sky Ranch Districts.

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As of August 31, 2024, total principal and interest owed to us by the Rangeview District was $1.2 million.

Pursuant to our water and wastewater service agreements with the Rangeview District, of the net amounts retained by the Rangeview District, the Rangeview District retains

two percent of the revenue from the sale of water to its end-use customers and 10% of the revenue from the provision of wastewater services to its end-use customers.

Pursuant to our water and wastewater service agreements with the Rangeview District, of the net amounts retained by the Rangeview District, the Rangeview District retains two percent of the revenue from the sale of water to its end-use customers and 10% of the revenue from the provision of wastewater services to its end-use customers.

Proceeds from the fee collections will initially be used to repay the Rangeview District’s obligations to us, but after these loans are repaid, the Rangeview District is not required to use the funds to benefit Pure Cycle.

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In 2023, the State of Colorado enacted HB 23-1255, which generally prohibits local governments from enacting or enforcing local housing growth-restrictions laws that would limit housing supply, development applications, or building permits.

However, under certain circumstances, local governments may implement a temporary moratorium of up to 2 years.

However, under certain circumstances, local governments may implement a temporary moratorium of up to two years.

While this law alleviates concerns that a local government in our planned development areas might permanently restrict new growth, a temporary moratorium could still have the effect of delaying, limiting or halting development within Sky Ranch or other areas where we may provide water and wastewater services or develop land.

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We could be hurt by efforts to impose liabilities or obligations on us regarding labor law violations by other persons whose employees perform contracted services .

The infrastructure and improvements on our water and wastewater systems and on the finished lots we sell or that we must provide pursuant to service agreements and lot development agreements are done by employees of subcontractors and other contract parties.

The infrastructure and improvements on our water and wastewater systems and on the finished lots we sell or that we must provide pursuant to service agreements and lot development agreements are constructed by employees of subcontractors and other contract parties.

We do not have the ability to control what these contract parties pay their employees or the work rules they impose on their employees.

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If any of these events occur, we may have to interrupt the use of that water supply until we are able to substitute the supply from another source or treat the contaminated supply.

We cannot assure that we will successfully manage these issues, and failure to do so could have a material adverse effect on our future results of operations.

We cannot guarantee that we will successfully manage these issues, and failure to do so could have a material adverse effect on our future results of operations.

We may incur significant costs in order to treat the contaminated source through expansion of our current treatment facilities or development of new treatment methods.

If we are unable to substitute water supply from an uncontaminated water source, or to adequately treat the contaminated water source in a cost-effective manner, there may be an adverse effect on our revenues, operating

results and financial condition.

The costs we incur to decontaminate a water source or an underground water system could be significant and could adversely affect our business, operating results and financial condition and may not be recoverable in rates.

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In the past the Rangeview District’s and our rights under the Lease have been challenged by third parties, including the Land Board.

In 2014, in connection with settling a lawsuit filed by us and the Rangeview District against the Land Board, the Land Board, the Rangeview District and we amended and restated the Lease to clarify and update a number of provisions.

In 2014, in connection with settling a lawsuit filed by us and the Rangeview District against the Land Board, the Land Board, the Rangeview District and Pure Cycle amended and restated the Lease to clarify and update a number of provisions.

However, there are issues still subject to disagreement and negotiation, including our rights with respect to revenue from our Export Water after 2081, and it is likely that during the remaining term (through 2081) of the Lease, the parties will disagree over interpretations of provisions in the Lease again.

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The water court entered a finding of reasonable diligence on the Lowry Ranch surface water decrees in January 2025.

Our next review for reasonable diligence on the Lowry Ranch surface water decrees will be in January 2025.

Pursuant to our settlement discussions on amending these water rights, together with our application for a new water right we have also reached agreement with opposing parties regarding our 2025 diligence review.

If concluded our next diligence review will be in 2032.

We believe we will be successful in maintaining our decrees as we continue to develop these rights.

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Political concerns and governmental procedures and policies may hinder or delay our ability to enter into service agreements or develop our water rights or infrastructure to deliver our water.

While we have worked to reduce the political risks in our business through our participation as the service provider for the Rangeview District

in regional cooperative resource programs, such as the SMWSA and the WISE partnership with Denver Water and Aurora Water, as well as education and communication efforts and community involvement, our efforts may be unsuccessful.

While we have worked to reduce the political risks in our business through our participation as the service provider for the Rangeview District in regional cooperative resource programs, such as the SMWSA and the WISE partnership with Denver Water and Aurora Water, and education and communication efforts and community involvement, our efforts may be unsuccessful.

The number of connections we can serve are affected by local governmental policies that are beyond our control.

We market our water rights through service agreements to developers, municipalities and other governmental entities.

We market our water rights through service agreements with developers, municipalities and other governmental entities.

We believe that our water rights can serve approximately 60,000 single-family connections based on standards applied to water providers in Arapahoe, Douglas, and Adams Counties.

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If these standards become more restrictive, our water supplies may not serve the number of connections that we currently estimate we can serve.

General Risks

The number of homes we can construct are affected by local governmental policies relating to the construction of infrastructure .

We are required to construct certain roads and drainage and other infrastructure to serve the communities in which we build.

We have certain access restrictions relating to the number of homes we can construct at Sky Ranch totaling 1,400 SFEs of which through Phases 1 and 2 A-E, we have permitted 1,319 SFEs.

The Company, together with Arapahoe County and the Colorado Department of Transportation, have been working on the design, permitting, financing of a new interchange which will accommodate traffic from the full buildout of Sky Ranch and the surrounding areas and the ratable participation of the financing of the cost of the interchange.

We may have to advance funds to other parties to finance construction of the interchange and solicit reimbursement in the future.

We cannot guarantee that we will be able to secure a permit to construct the interchange or finance the construction of the interchange, which may limit the number of homes we can construct at Sky Ranch and future efforts to obtain reimbursement for funds we advance may be unsuccessful.

G eneral Risk s

We are dependent on the services of a key employee .

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We have physical, technical and procedural safeguards in place that are designed to protect information and protect against security and data breaches as well as fraudulent transactions and other activities.

Despite these safeguards and our other security processes and protections, we cannot be assured that all of our systems and processes are free from vulnerability to security breaches.

Despite these safeguards and our other security processes and protections, we cannot provide assurance that all of our systems and processes are free from vulnerability to security breaches.

Cyberattacks are evolving and becoming increasingly sophisticated.

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Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a

material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

As disclosed in Item 9A, during fiscal 2021, we concluded that a material weakness existed in our internal controls resulting from ineffective procedures related to the preparation and review of spreadsheets, which compromised the integrity of the spreadsheets used to support and record transactions related to tracking the public improvement reimbursable amounts and related interest income.

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If we fail to maintain effective internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, we could fail to meet our reporting obligations, and there could be a material adverse effect on our share price.

Conflicts, terrorist attacks, public health crises, including the occurrence of a contagious disease or illness, such as the COVID-19 coronavirus and general instability could adversely affect our business .

Conflicts, terrorist attacks, public health crises, including the occurrence of a contagious disease or illness, such as the COVID-19 coronavirus, or general instability could adversely affect our business .

We are vulnerable to the effects of conflicts, terrorist attacks and public health crises.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors