What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-11-12 compared with 2024-11-13 · 283 added, 318 removed, 738 unchanged (45% of the section changed)

8 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Shareholders, Board of Directors,

and Audit Committee of

To the Shareholders, Board of Directors, and Audit Committee

Pure Cycle Corporation

2 unchanged sentences

We have audited the accompanying consolidated balance sheets of Pure Cycle Corporation (the “Company”) as of August 31, 2025 and 2024, the related consolidated statements of income, shareholders’ equity, and cash flows for each of the years in the two-year period ended August 31, 2025, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of August 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended August 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of August 31, 2025 and 2024, and the results of their operations and their cash flows for each of the years in the two-year period ended August 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

To the Shareholders, Board of Directors, and Audit Committee

Pure Cycle Corporation

Revenue Recognition of Lot Sales

1 unchanged sentence

Any revenue in excess of amounts entitled to be billed is reflected on the balance sheet as a contract asset, and amounts received in excess of revenue recognized are recorded as deferred revenue.

For the year ended August 31, 2024, the Company recognized $16.0 million of lot sale revenue, over time, using the percentage of completion method.

For the year ended August 31, 2025, the Company recognized approximately $14 million of lot sale revenue, over time, using the percentage of completion method.

Auditing lot sales revenue recognized under the percentage of complete method required a high degree of auditor judgment due to the use of significant assumptions developed by the management team, most notably the estimated budgeted cost for any particular phase to be developed and the estimated remaining cost to complete the phase being developed.

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The Company has determined the reimbursement of public improvement costs, for which the Company has an enforceable right to payment, are probable of collection.

The note receivable from

the Sky Ranch CAB reports the balances owed by the Sky Ranch CAB to the Company for public improvements paid for by the Company, project management fees, and interest accrued on the unpaid balances related to the ongoing development of the Sky Ranch master planned community.

As of August 31, 2024, the Company’s related-party note receivable was approximately $41.0 million.

The note receivable from the Sky Ranch CAB reports the balances owed by the Sky Ranch CAB to the Company for public improvements paid for by the Company, project management fees, and interest accrued on the unpaid balances related to the ongoing development of the Sky Ranch master planned community.

As of August 31, 2025, the Company’s related-party note receivable – reimbursable public improvements was approximately $44 million.

Management’s estimate of collectability and whether the Sky Ranch CAB will have sufficient sources of liquidity to support the payment of the note receivable balance involves a long-term projection of the development of the Sky Ranch master planned community, and the future revenues that will be available for repayment of the note.

Auditing this estimate requires complex auditor judgment because of the subjective and long-term nature of the estimation, and the specialized knowledge needed to address the

Auditing this estimate requires complex auditor judgment because of the subjective and long-term nature of the estimation, and the specialized knowledge needed to address the matter.

Our audit procedures related to the collectability of the related party note receivable included the following procedures:

● Obtained an understanding and evaluated the design effectiveness of the Company’s processes over the valuation analysis of the notes receivable.

To the Shareholders, Board of Directors, and Audit Committee

Pure Cycle Corporation

● Obtained and reviewed a legal analysis of the enforceability of the Company’s right to payment from the Sky Ranch CAB for the reimbursable costs.

● Obtained and reviewed the valuation analysis of notes receivable report of management’s outside vendor and challenged management’s review of the appropriateness of the valuation;

● Obtained and reviewed the valuation analysis of note receivable report of management’s outside vendor and challenged management’s review of the appropriateness of the valuation;

including but not limited to, testing all critical inputs, reasonableness of assumptions applied, and valuation models utilized by the outside vendor.

● Utilized internal valuation specialists to assist with testing the reasonableness of the valuation analysis of notes receivable.

/s/ Forvis Mazars, LLP

We have served as the Company’s auditor since 2022.

/s/ Forvis Mazars, LLP

Denver, Colorado

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Cash and cash equivalents

Trade accounts receivable, net

Land under development

Reimbursable public improvements and project management fees

Income taxes receivable

Accounts receivable, net

Related party notes receivable, including accrued interest, current portion

Prepaid expenses and other assets

Land under development

Total current assets

Restricted cash

Investments in water and water systems, net

Construction in progress

Investment in water and wastewater systems, net

Land and mineral rights held for development

Single-family rental units

Land and mineral rights:

Held for development

Held for investment purposes

Notes receivable – related parties, including accrued interest

Reimbursable public improvements and project management fees

Operating leases - right of use assets

Related party notes receivable, including accrued interest, less current portion

LIABILITIES & SHAREHOLDERS’ EQUITY:

Current Liabilities:

Accounts payable

Accrued liabilities

Accrued liabilities – related parties

Income taxes payable

Deferred lot sales revenue

Deferred water sales revenue

Accrued and other liabilities

Deferred revenue

Debt, current portion

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Deferred tax liability, net

Lease obligations - operating leases, less current portion

Lease obligations, less current portion

Total liabilities

Commitments and contingencies

SHAREHOLDERS’ EQUITY:

Series B preferred shares:

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Total shareholders’ equity

Total liabilities and shareholders’ equity

See accompanying Notes to Consolidated Financial Statements

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August 31, 2024

Metered water usage from:

Municipal customers

Commercial customers

Wastewater treatment fees

Water and Wastewater

Water and wastewater activities

Water and wastewater tap fees

Total water and wastewater

Land Development

Project management fees

Single-family rentals

Special facility projects and other

Total land development

Single-family rentals

Total revenues

COST OF REVENUES:

Water service operations

Wastewater service operations

Land development construction costs

Project management costs

Single-family rental costs

Depletion and depreciation

Water and wastewater

Lot development

Single-family rental

Total cost of revenues

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Other income (expense):

Interest income - related party

Interest income - Investments

Interest income

Interest expense

Oil and gas royalty income, net

Oil and gas lease income, net

Interest expense, net

Income from operations before income taxes

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Share-based compensation

Repurchases of common stock

Balance at August 31, 2024

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Adjustments to reconcile net income to net cash used by operating activities:

Depreciation and depletion

Trade accounts receivable

Accounts payable and accrued liabilities

Other assets and liabilities

Depreciation and depletion

Share-based compensation expense

Net activity on notes receivable - related party, other

Net activity on note receivable - related party, reimbursable public improvements

Deferred income taxes

Other assets and liabilities

Prepaid expenses

Amortized discount on U.S.

Treasury Bills

Net activity for notes receivable - related party, other

Deferred water sales revenue

Land under development

Deferred lot sale revenue

Accounts payable and accrued liabilities

Taxes payable / receivable

Net activity on note receivable - related party, reimbursable public improvements

Net cash provided by (used in) operating activities

Deferred revenue

Net cash provided by operating activities

Cash flows from investing activities:

Maturity of held-to-maturity investments in U.S.

Treasury Bills

Purchase of property and equipment

Investments in future development phases at Sky Ranch

Construction costs of single-family rentals

Investments in water and water systems

Payments on note receivable - related party, other

Purchase of held-to-maturity investments in U.S.

Treasury Bills

Net purchase of property and equipment

Future land development activity

Single-family rentals activity

Water and wastewater infrastructure activity

Sale of land held for sale

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from notes payable

Payments on notes payable

Repurchases of common stock

Payments to contingent liability holders

Net cash (used in) provided by financing activities

Net cash used in financing activities

Net change in cash, cash equivalents and restricted cash

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Pure Cycle Corporation (Company or Pure Cycle) was incorporated in Delaware in 1976 and reincorporated in Colorado in 2008.

Pure Cycle currently operates in two reportable business segments:

(i) wholesale water and wastewater services and (ii) land development.

Pure Cycle launched its single-family rental business which constructs and leases single-family homes in its Sky Ranch neighborhood.

Management believes the single-family rental business will likely become its third operating segment, once material.

Pure Cycle currently operates in three reportable business segments:

(i) wholesale water and wastewater services, (ii) land development and (iii) its single-family rental business which constructs and leases single-family homes in the Sky Ranch neighborhood.

Since its inception, Pure Cycle has accumulated valuable water and land interests and has developed an extensive network of wholesale water production, storage, treatment and distribution systems and wastewater collection and treatment systems which serve domestic, commercial and industrial customers in the Denver metropolitan region.

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To date, the Company has never suffered a loss due to such excess balance.

Contract Asset

Contract assets reflect revenue which has been earned but not yet invoiced.

Contract assets are transferred to receivables when the Company has the right to bill such amounts and they are invoiced.

Contract receivables are recorded at the invoiced amount and do not bear interest.

Credit is extended based on the evaluation of a customer’s financial condition and collateral is not required.

At August 31, 2024 and August 31, 2023, the Company had no contract assets.

Land Under Development

The land under development account primarily includes land and land improvements stated at cost which Pure Cycle is developing and plans to sell.

Pure Cycle began developing its Sky Ranch property in 2017.

Cost incurred on certain public improvements in the Company’s development are included in the Notes Receivable for Sky Ranch CAB explained below.

Pure Cycle began developing the Sky Ranch property in 2017.

Pure Cycle capitalizes certain legal, engineering, design, permitting, land acquisition, and construction costs related to the development at Sky Ranch that meet the Company’s capitalization criteria for improvements to a lot.

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If recent sales prices are not available, the Company will consider several factors, including, but not limited to, current market conditions, nearby recent sales transactions, and market analysis studies.

If the net realizable value is lower than the current carrying value, the land is written down to its net realizable value.

If the net realizable value is lower than the current carrying value, the land is written down to its net realizable value and disclosed if material.

Notes Receivable – Sky Ranch CAB

As noted above and described in greater detail in Note 5, the Sky Ranch CAB is responsible for building certain public improvements at Sky Ranch.

Through various funding, the Company is obligated to provide funding to the Sky Ranch CAB for public improvements, which is reimbursable to the Company.

Through various funding agreements, the Company is obligated to provide funding to the Sky Ranch CAB for public improvements, which is reimbursable to the Company.

The Company has determined the reimbursement of public improvement costs, for which the Company has an enforceable right to payment, are probable of collection.

Therefore, the Company recognizes the reimbursable public improvements costs incurred to date at Sky Ranch in the Notes receivable – related party, reimbursable public improvements and project management fees account on the accompanying consolidated balance sheet.

The Company performs a quantitative impairment assessment by estimating the fair value of the Notes receivable – related party using the discounted cashflow method.

The Company performs a quantitative impairment assessment by estimating the fair value of the Notes receivable – related party using the discounted cash flow method.

Concentration of Credit Risk and Fair Value

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Trade accounts receivable – Trade accounts receivable are reported net of allowances for uncollectible accounts and the carrying values approximate fair value due to the short-term nature of the receivables.

Restricted cash – The Company has entered into eight separate cash-secured performance standby letter of credit agreements with its primary banks to provide assurance the Company will perform on various construction agreements.

As of August 31, 2024, the eight

letters of credit totaled $ 3.4 million, which are fully secured by cash held in restricted accounts at the banks, which approximates its fair value is cash is held in savings accounts.

Restricted cash – The Company has entered into 12 separate cash-secured performance standby letter of credit agreements with its primary banks to provide assurance the Company will perform on various construction agreements.

As of August 31, 2025, the 12 letters of credit totaled $ 6.4 million, which are fully secured by cash held in restricted accounts at the banks, which approximates its fair value is cash is held in savings accounts.

Notes receivable – related parties – The carrying amounts of the notes receivable – related parties with the Rangeview Metropolitan District (Rangeview District) and the Sky Ranch CAB approximate their fair value because the interest rates on the notes currently approximate market rates.

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The Company has recorded expected credit losses for uncollectible accounts receivables from continuing operations totaling less than $ 0.1 million and $ 0.1 million for the periods ended August 31, 2025 and 2024.

The expected credit losses for uncollectible accounts was determined based on lifetime expected credit losses using an aging schedule for each pool of trade accounts receivable.

The expected credit losses for uncollectible accounts were determined based on lifetime expected credit losses using an aging schedule for each pool of trade accounts receivable.

Pools are determined based on risk characteristics by the type of customer.

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Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

During the years ended August 31, 2024 and 2023, the Company did no t identify any indications of impairment loss.

During the years ended August 31, 2025 and 2024, the Company recognized less than $ 0.1 million and $ 0 .

Capitalized Costs of Water and Wastewater Systems and Depreciation and Depletion Charges

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The Company capitalizes design and construction costs related to construction activities, and it capitalizes certain legal, engineering and permitting costs relating to the adjudication and improvement of its water assets.

The Company depletes its water assets that are being utilized based on units produced (i.e., acre-feet sold) divided by the total volume of water adjudicated in the water decrees.

The Company depletes its water assets that are being utilized based on units produced (i.e., acre-feet sold) divided by the total volume of water adjudicated pursuant to the water decrees.

Revenue Recognition

The Company disaggregates revenue by major product line as reported on the consolidated statements of income.

The Company currently generates revenues through its two business segments.

The Company currently generates revenues through its three business segments.

Revenues are derived through its wholesale water and wastewater business and through the sale of developed land primarily for residential lots, both of which businesses are described below.

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Monthly water usage and wastewater treatment fees – Pure Cycle provides water and wastewater services to customers, for which the customers are charged monthly usage fees.

Water usage fees are assessed to customers based on actual metered usage each month plus

a base monthly service fee assessed per single-family equivalent (SFE) unit served.

Water usage fees are assessed to customers based on actual metered usage each month plus a base monthly service fee assessed per single-family equivalent (SFE) unit served.

One SFE is a customer, whether residential, commercial or industrial, that imparts a demand on the Company’s water or wastewater systems similar to the demand of a family of four persons living in a single-family house on a standard-sized lot.

Water usage pricing is based on a tiered pricing structure.

Pure Cycle recognizes wholesale water usage revenue at a point in time upon delivering water to its governmental customers’ end-use customers.

Cycle recognizes wholesale water usage revenue at a point in time upon delivering water to its governmental customers’ end-use customers.

Revenue recognized by Pure Cycle from the sale of “Export Water” and other portions of its “Rangeview Water Supply” off the “Lowry Ranch” are reported net of royalties to the State of Colorado Board of Land Commissioners (Land Board).

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Revenue recognized by Pure Cycle from the sale of water on the Lowry Ranch are shown net of royalties paid to the Land Board and amounts retained by the Rangeview District.

For water sales on the Lowry Ranch, the Rangeview District is directly selling the water and deemed the primary distributor of the water.

For water sales on the Lowry Ranch, the Rangeview District is directly selling the water and is deemed to be the primary distributor of the water.

The Rangeview District sets the price for the water sales on the Lowry Ranch.

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Pure Cycle also sells raw water for industrial uses, mainly to oil and gas companies for use in the drilling processes (referred to as “O&G operations”).

O&G operations revenue is recognized at a point in time upon delivering water to its governmental customers’ end-use customers, unless other special arrangements are made.

O&G operations revenue is recognized at a point in time upon delivering water to its end-use customers, unless other special arrangements are made.

During the years ended August 31, 2025 and 2024, the Company delivered 639 acre-feet and 1,818 acre-feet of water to customers.

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Management has determined that special facilities are separate and distinct performance obligations because these projects are contracted to construct a specific water and wastewater system or transmission pipeline and typically do not include multiple performance obligations in a contract with a customer.

For the years ended August 31, 2024 and 2023, Pure Cycle recognized $ 0.1 million and less than $ 0.1 million of special facilities revenue.

As of August 31, 2024 and 2023, Pure Cycle had no contract liabilities related to tap and construction fee/special facility funding revenue.

For the years ended August 31, 2025 and 2024, Pure Cycle recognized less than $ 0.1 million and $ 0.1 million of special facilities revenue.

Consulting fees – Pure Cycle can receive, typically monthly, fees from customers including municipalities and area water providers, for contract operations services.

Consulting fees are recognized monthly based on a flat monthly fee plus charges for additional work performed.

For the years ended August 31, 2024 and 2023, Pure Cycle recognized less than $ 0.1 million and less than $ 0.1 million of consulting fees.

These fees are classified in Special facility projects and other income.

For each of the years ended August 31, 2025 and 2024, Pure Cycle recognized less than $ 0.1 million of consulting fees.

These fees are classified in Water and wastewater activities.

Land Development Segment Revenue

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Pure Cycle has entered into multiple purchase and sale agreements with home builders pursuant to which Pure Cycle agreed to sell, and each builder agreed to purchase, finished residential lots at Sky Ranch.

Per our agreements, Pure Cycle is obligated to deliver finished lots for which we develop through agreements with the Sky Ranch CAB.

Per its agreements, Pure Cycle is obligated to deliver finished lots, which the Company develops through agreements with the Sky Ranch CAB.

Pure Cycle began Phase 1 in March 2018 and broke ground on Phase 2 in February 2021.

As of August 31, 2025, Phase 1 is complete and includes 509 lots, of which 505 were sold to three homebuilders and the remainder were retained by Pure Cycle for use in its single-family rental business.

Phase 2 is planned to have 886 lots ( 792 allocated for sale to homebuilders and 94 retained for use in the single-family rental business) and is being developed in four subphases (referred to as Phase 2A, 2B, 2C and 2D).

Phase 2A broke ground in February 2021, includes a total of 229 lots, of which 219 lots were sold to home builders and 10 were retained for use in the single-family rental business.

Phase 2B broke ground in March 2023, includes a total of 211 lots, of which 194 lots were sold to home builders and 17 lots were retained for use in the single-family rental business.

Phase 2C broke ground in March 2024, includes a total of 228 lots, of which 188 lots were sold to home builders, and 40 lots were retained for use in the single-family rental business.

Phase 2 is planned to have 1,020 lots ( 929 allocated for sale to homebuilders and 91 retained for use in the single-family rental business) and is being developed in five subphases (referred to as Phase 2A, 2B, 2C, 2D and 2E).

Phase 2A broke ground in February 2021 and includes a total of 229 lots, of which 219 lots were sold to home builders and 10 were retained for use in the single-family rental business.

Phase 2B broke ground in March 2023 and includes a total of 211 lots, of which 194 lots were sold to home builders and 17 lots were retained for use in the single-family rental business.

Phase 2C broke ground in March 2024 and includes a total of 228 lots, of which 180 lots were sold to home builders, eight lots are in the process of being sold, and 40 lots were retained for use in the single-family rental business.

The timing of cash flows from Phase 2, consistent with Phase 1, includes certain milestone deliveries, including, but not limited to, completion of governmental approvals for final plats, installation of wet utility public improvements, and final completion of lot deliveries.

Pure Cycle sells lots at Sky Ranch pursuant to distinct agreements with each builder.

These agreements require the same level of construction for all lots and builders, the primary difference in the agreements is the timing of payments and timing of the transfer of ownership of the lots.

These agreements require the same level of construction for all lots and builders, the primary difference in the agreements being the timing of payments and timing of the transfer of ownership of the lots.

Pure Cycle’s lot sales agreements require payments under one of the two following structures:

(1) Upon the substantial completion of the finished lot, whereby the builder pays for a ready-to-build finished lot and the sales price is paid in a lump-sum upon substantial completion of the finished lot (typically subject to completion of related public improvements by Pure Cycle, through our development agreement with the Sky Ranch CAB) that is permit ready.

(1) Upon the substantial completion of the finished lot, whereby the builder pays for a ready-to-build finished lot and the sales price is paid in a lump sum upon substantial completion of the finished lot (typically subject to completion of related public improvements by Pure Cycle, through its development agreement with the Sky Ranch CAB) that is permit ready.

Depending on timing of delivery of the finished lot to the builder, Pure Cycle may still have unfulfilled contract performance obligations related to the timing of completion of public improvements and other amenities.

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(2) As certain construction milestones are achieved, which include payments due as follows pursuant to a lot development agreement with the builder:

(i) payment upon the delivery of platted lots (which requires Pure Cycle to deliver deeded title to individual lots), (ii) a second payment upon the completion of certain infrastructure milestones, and (iii) final payment upon the delivery of the finished lot.

Typically these lots are also subject to completion of related public improvements by the Company, through our development agreement with the Sky Ranch CAB, after all three payments have been received.

(i) first payment upon the execution of an agreement and transfer of platted lots (which requires Pure Cycle to deliver deeded title to individual lots), (ii) a second payment upon the completion of certain infrastructure milestones, and (iii) final payment upon the delivery of the finished lot.

Typically these lots are also subject to completion of related public improvements by the Company, through its development agreement with the Sky Ranch CAB, after all three payments have been received.

Under the first payment structure, the builder (i.e., the customer) takes control/ownership of the lot at the time payment is received and the lot is substantially complete, at which point the Company recognizes revenue.

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Under both payment scenarios Pure Cycle has subsequent improvements to make to the lot to either improve the builder’s lot and/or complete its performance obligations of managing the construction of public improvements required to complete the neighborhood, which includes items such as fencing, final utility installation, and landscaping.

Because Pure Cycle has obligations remaining under the contracts, Pure Cycle accounts for lot sales revenue over time as construction progresses, with progress measured based upon costs incurred to date compared to total expected costs for a particular construction phase (i.e.

for Phases 2A, 2B and 2C).

Any revenue in excess of amounts entitled to be billed is

reflected on the balance sheet as a contract asset, and amounts received in excess of revenue recognized are recorded as deferred revenue.

Any revenue in excess of amounts entitled to be billed is reflected on the balance sheet as a contract asset, and amounts received in excess of revenue recognized are recorded as deferred revenue.

Pure Cycle does not have any material significant payment terms as all payments are expected to be received within a few months after invoicing.

Pure Cycle adopted the practical expedient for financing components and does not need to account for a financing component of these lot sales as the delivery of lot sales is expected to occur within one year .

For the years ended August 31, 2024 and 2023, Pure Cycle recognized $ 16.0 million and $ 6.8 million of lot sale revenue related to Phases 2A, 2B and 2C at Sky Ranch for recognition of the performance obligations using the percentage-of-completion methods for each builder contract in each phase.

Since development of Sky Ranch began through August 31, 2024, Pure Cycle has received payments totaling $ 18.4 million in Phase 2A, $ 17.3 million in Phase 2B, and $ 3.4 million in Phase 2C.

Of the amounts received for Phase 2A, as of August 31, 2024, $ 18.3 million has been recognized as revenue as Phase 2A is approximately 99 % complete.

For the years ended August 31, 2025 and 2024, Pure Cycle recognized $ 13.7 million and $ 16.0 million, respectively, of lot sale revenue related to Phases 2A, 2B, 2C and 2D at Sky Ranch for recognition of the performance obligations using the percentage-of-completion methods for each builder contract in each phase.

Since development of Sky Ranch began through August 31, 2025, Pure Cycle has received payments totaling $ 18.4 million for Phase 2A, $ 17.3 million for Phase 2B, $ 16.5 million for Phase 2C and $ 1.4 million for Phase 2D.

Of the amounts received for Phase 2A, as of August 31, 2025, $ 18.4 million has been recognized as revenue as Phase 2A is complete.

Of the amounts received for Phase 2B, as of August 31, 2025, $ 16.8 million has been recognized as revenue as Phase 2B is approximately 97 % complete.

Of the amounts received for Phase 2C, as of August 31, 2025, $ 13.6 million has been recognized as revenue as Phase 2C is approximately 82 % complete.

As of August 31, 2024, $ 0.1 million of revenue has been deferred related to Phase 2A contracts, $ 1.3 million of revenue has been deferred related to Phase 2B contracts, and $ 0.7 million of revenue has been deferred related to Phase 2C contracts.

Deferred revenue will be recognized over time as the Company completes its performance obligations of managing the completion of the public improvements in Phases 2A, 2B, and 2C, which includes items such as fencing, final utility installation, and landscaping.

We anticipate the completion of Phase 2A and substantial completion of Phases 2B and 2C by the end of fiscal 2025.

Of the amounts received for Phase 2D, as of August 31, 2025, $ 1.8 million has been recognized as revenue as Phase 2D is approximately 43 % complete.

As of August 31, 2025, no revenue has been deferred related to Phase 2A contracts, $ 0.5 million of revenue has been deferred related to Phase 2B contracts, and $ 2.9 million of revenue has been deferred related to Phase 2C contracts.

As of August 31, 2025 there is a receivable of $ 0.4 million which is included in Accounts receivable, net.

Deferred revenue will be recognized over time as the Company completes its performance obligations of managing the completion of the public improvements in Phases 2A, 2B, 2C, and 2D which includes items such as fencing, final utility installation, and landscaping.

We anticipate the completion of Phase 2B and substantial completion of Phases 2C and 2D by the end of fiscal 2026.

Reimbursable Costs for Public Improvements – The Sky Ranch CAB is responsible for the construction of certain public improvements at Sky Ranch.

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Additional information about the amounts spent on public improvements as well as amounts repaid are further detailed in Note 5.

The Company evaluates the notes receivable - related parties, reimbursable public improvements for indicators of impairment each reporting period by estimating the fair value of the Notes receivable – related party using the discounted cashflow method.

The note receivable from the Sky Ranch CAB bears an interest rate of six percent ( 6 %) per annum until paid.

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The project management fee is based only on the actual costs of the improvements;

thus, items such as fees, permits, review fees, and land acquisition or any other costs that are not directly related to the cost of construction of Sky Ranch CAB-eligible public improvements are not included in the calculation of the

project management fee.

Other costs incurred by Pure Cycle that are not directly related to the construction of Sky Ranch CAB-eligible public improvements are included in the land under development account and accounted for in the same manner as construction support activities as described below.

Per the Project Management Agreements, no payment is required by the Sky Ranch CAB with respect to project management fees unless and until the Sky Ranch CAB and/or the Sky Ranch Districts have sufficient funds from tax assessment, fees or the issuance of municipal bonds in an amount sufficient to reimburse Pure Cycle for all or a portion of advances provided or expenses incurred for construction of public improvements that qualify as reimbursable expenses.

Per the Project Management Agreements, no payment is required by the Sky Ranch CAB with respect to

project management fees unless and until the Sky Ranch CAB and/or the Sky Ranch Districts have sufficient funds from tax assessment, fees or the issuance of municipal bonds in an amount sufficient to reimburse Pure Cycle for all or a portion of advances provided or expenses incurred for construction of public improvements that qualify as reimbursable expenses.

Additional information on the Project Management fees and treatment of the related receivables is included in Note 5.

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The Phase 2 activities are invoiced based on an agreement between Pure Cycle and the Sky Ranch CAB.

The amounts are invoiced and recognized as special facility projects revenue and is a component in trade accounts receivable, net.

For the years ended August 31, 2024 and 2023, the Company recognized $ 0.3 million and less than $ 0.4 million related to construction support activities at Sky Ranch.

The amounts are invoiced and recognized as special facility projects revenue and are a component of trade accounts receivable, net.

For the years ended August 31, 2025 and 2024, the Company recognized $ 0.8 million and $ 0.9 million, respectively, related to construction support activities at Sky Ranch.

Deferred Revenue

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The Company recognizes this revenue into income as control of lots are transferred to the homebuilder, generally from the period title to a lot is transferred until all construction activities (including public improvements) for that phase or subphase are completed and turned over to the governmental agency that will maintain the asset.

As construction activities progress, which is measured based on the amount of costs incurred compared to total expected costs of the project (i.e.

The progress of construction activities is measured based on the amount of costs incurred compared to total expected costs of the project (i.e.

Phase 2A), which management believes is a faithful representation of the transfer of goods and services to the customer.

As of August 31, 2025 and 2024, the Company’s deferred revenue along with the changes in the deferred revenue are as follows:

Three Months Ended August 31, 2024

(In thousands)

Water and Wastewater Resource Development

Land Development

Balance at May 31, 2024

Revenue recognized

Revenue deferred

Balance at August 31, 2024

Three Months Ended August 31, 2023

Water and Wastewater Resource Development

Land Development

Balance at May 31, 2023

Revenue recognized

Revenue deferred

Balance at August 31, 2023

Year Ended August 31, 2025

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Royalty and Other Obligations

Revenue from the sale of Export Water are shown net of royalties payable to the Land Board.

Revenue from the sale of water on the Lowry Ranch are invoiced directly by the Rangeview District, and a percentage of such collections are then paid to the Company by the Rangeview District.

Water revenue from such sales are shown net of royalties paid to the Land Board and amounts retained by the Rangeview District.

Revenue from the sale of Export Water is shown net of royalties payable to the Land Board.

Revenue from the sale of water on the Lowry Ranch is invoiced directly by the Rangeview District, and a percentage of such collections is then paid to the Company by the Rangeview District net of royalties paid to the Land Board and amounts retained by the Rangeview District.

Oil and Gas Lease Payments

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Nine wells have been drilled within the Company’s mineral interest and placed into service and are producing oil and gas and accruing royalties to the Company.

During the years ended August 31, 2024, and 2023, the Company received $ 0.8 million and $ 0.3 million, in royalties attributable to these wells.

During the years ended August 31, 2025, and 2024, the Company received $ 6.7 million and $ 0.8 million, respectively, in royalties attributable to these wells.

The Company classifies income from lease and royalty payments as Other income in the consolidated statements of income as the Company does not consider these arrangements to be an operating business activity.

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The impact on the income tax provision for the granting and exercise of stock options during each of the years ended August 31, 2025 and 2024, was immaterial.

During the years ended August 31, 2024 and 2023, the Company recognized $ 0.4 million and $ 0.5 million of share-based compensation expense.

During the years ended August 31, 2025 and 2024, the Company recognized $ 0.3 million and $ 0.4 million, respectively, of share-based compensation expense.

The Company uses a “more-likely-than-not” threshold for the recognition and de-recognition of tax positions, including any potential interest and penalties relating to tax positions taken by the Company.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax positions as a component of income tax expense.

At August 31, 2024, the Company did no t have any

accrued interest or penalties associated with any unrecognized tax benefits, no r was any interest expense recognized during the year ended August 31, 2024.

At August 31, 2025, the Company did no t have any accrued interest or penalties associated with any unrecognized tax benefits, no r was any interest expense recognized during the year ended August 31, 2025.

The Company does no t have any significant unrecognized tax benefits as of August 31, 2025.

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Certain outstanding options are excluded from the diluted earnings per share calculation because they are anti-dilutive (i.e., their assumed conversion into common stock would increase rather than decrease earnings per share).

Recently Issued Accounting Pronouncements

New Accounting Pronouncements

The Company continually assesses any new accounting pronouncements to determine their applicability.

When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequence of the change to its consolidated financial statements and to ensure that there are proper controls in place to ascertain that the Company’s consolidated financial statements properly reflect the change.

the Company’s consolidated financial statements properly reflect the change.

New pronouncements assessed by the Company recently are discussed below:

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments — Credit Losses:

Measurement of Credit Losses on Financial Instruments , which changes the impairment model for most financial assets.

The ASU introduces a new credit loss methodology, Current Expected Credit Losses (“CECL”), which requires earlier recognition of credit losses, while also providing additional transparency about credit risk.

Since its original issuance in 2016, the FASB has issued several updates to the original ASU.

The CECL framework utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses for loans, held-to-maturity securities and other receivables at the time the financial asset is originated or acquired.

The expected credit losses are adjusted each period for changes in expected lifetime credit losses.

The methodology replaces the multiple existing impairment methods, which generally require that a loss be incurred before it is recognized.

The Company adopted the guidance on September 1, 2023 on a modified retrospective basis and does not expect a material impact to the Company’s consolidated financial statements.

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures" ("ASU 2023-07"), which requires expanded disclosure of significant segment expenses and other segment items on an annual and interim basis.

ASU 2023-07 is effective for the Company for annual periods beginning after September 1, 2024 and interim periods beginning after September 1, 2025.

The Company is currently evaluating the impact ASU 2023-07 will have on its consolidated financial statement disclosures.

In December 2023, FASB issued ASU 2023-09, "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures" ("ASU 2023-09"), which requires expanded disclosure of our income rate reconciliation and income taxes paid.

ASU 2023-09 is effective for the Company for annual periods beginning after September 1, 2025.

The Company is currently evaluating the impact ASU 2023-09 will have on its consolidated financial statement disclosures.

Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.

Reclassifications

The Company has reclassified certain prior year information to conform to the current year presentation.

In November 2024, the FASB issued ASU No.

2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses .

This ASU requires disaggregated disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements.

ASU 2024-03 is effective for the Company for annual periods beginning after December 31, 2026.

The Company is are currently evaluating the impact ASU 2024-03 will have on our financial statement disclosures.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

Upon adoption of this ASU, the company will disclose specific new categories in its income tax rate reconciliation and provide additional information for reconciling items above a quantitative threshold.

The Company will also disclose the amount of income taxes paid disaggregated by federal and state.

The Company expects these amendments will first be applied in the company’s annual report on form 10-K for the fiscal year ending August 31, 2026, on a prospective basis.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

Upon adoption of this ASU, the Company has disclosed significant segment expenses, the title and position of the CODM, and an explanation of how the reported measure of segment profit or loss is used by the CODM to assess segment performance and make resource allocation decisions.

Effective August 31, 2025, the Company adopted the provisions of this ASU on a retrospective basis.

Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on the Company’s consolidated financial statements and related disclosures.

Changes Affecting Comparability

For the year ended August 31, 2025, the Company made changes to certain categories within its financial statements.

These changes were made as part of the Company’s adoption of ASU 2023-07, Segment Reporting (Topic 280).

The changes (i) provide additional details about the Company’s operations by reporting segment and enable the readers of its financial statements to more easily trace the performance of its segments from the financial statements through to the notes and (ii) align its presentation with industry peers.

The Company made changes in the presentation of “Revenues” and “Cost of revenues” categories within the Consolidated Statements of Income.

As a result, changes within the Consolidated Statements of Income in the prior periods were made to conform to the current period presentation.

The changes had no impact on gross margins or net income.

The Company allocated “Construction in progress” into its corresponding fixed asset class within the Consolidated Balance Sheet.

The Company consolidated “Land held for investment purposes,” “Land held for sale” and “Operating lease – right to use assets” into “Other assets” within the Consolidated Balance Sheets.

The changes had no impact on total assets, total liabilities, or total equity.

Changes to the Consolidated Statement of Cash Flows were made to align with new categories on the Consolidated Balance Sheet.

All prior period amounts have been reclassified to conform to the current presentation .

NOTE 3 – FAIR VALUE MEASUREMENTS

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Level 2 — Valuations for assets and liabilities obtained from readily available pricing sources via independent providers for market transactions involving similar assets or liabilities.

As of August 31, 2024 and 2023, the Company had three non-recurring Level 2 liabilities, both of the SFR Notes and the Lost Creek Note (all defined in Note 8), for which the Company has determined the valuation of the liabilities can be obtained from readily available pricing sources via independent providers for market transactions involving similar liabilities.

As of August 31, 2025 and 2024, the Company had three non-recurring Level 2

liabilities, both of the SFR Notes and the Lost Creek Note (all defined in Note 7), for which the Company has determined the valuation of the liabilities can be obtained from readily available pricing sources via independent providers for market transactions involving similar liabilities.

Level 3 — Valuations for assets and liabilities that are derived from other valuation methodologies, including discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker-traded transactions.

Level 3 valuations incorporate certain significant unobservable assumptions and projections in determining the fair value assigned to such assets or liabilities.

As of August 31, 2024 and 2023, the Company had one Level 3 asset, the notes receivable – related party, reimbursable public improvements, for which the Company did not record any impairment charges, as the fair value, based on a discounted cash flow analysis, exceeded the carrying value.

As of August 31, 2024 and 2023, the Company had one Level 3 liability, the contingent portion of the CAA.

The Company has determined that the contingent portion of the CAA does not have a readily determinable fair value and is immaterial (see Note 6).

As of August 31, 2025 and 2024, the Company had one Level 3 asset, the notes receivable.

The Company did not record any impairment charges related to the notes receivable, as their fair value, based on a discounted cash flow analysis, exceeded the carrying value.

The Company maintains policies and procedures to value instruments using what management believes to be the best and most relevant data available.

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Wild Pointe service rights

Construction in progress - water and water systems

Net investments in water and water systems

Construction in Progress

The construction in progress account represents costs incurred on various construction projects currently underway that as of the balance sheet date have not been completed and placed into service.

The construction in progress account consists primarily of water facilities being constructed which the Company anticipates will be placed in service during the next twelve months.

During the year ended August 31, 2024, the Company incurred net disposals and/or capitalization of assets placed in service from construction in process of (1) $ 0.1 million of costs related to its construction projects, (2) $ 1.8 million of various water infrastructure projects, and (3) $ 0.4 million for its single-family rental business.

During the year ended August 31, 2023, the Company added (1) $ 1.2 million of costs related to its construction projects, (2) $ 3.2 million toward various water infrastructure project costs, and (3) $ 3.5 million in net costs associated with its single-family rental homes resulting in the capitalization of $ 3.6 million of costs.

a) Change in Water supply – Other for the year ended August 31, 2025 compared to 2024 is primarily due to reclassification of WISE infrastructure into Rangeview water system.

b) During the year ended August 31, 2025, the Company’s Lost Creek water supply increased $ 3.5 million, primarily from the acquisition of 378 acre-feet of ditch water in the Henrylyn Irrigation District and 220 acre-feet of groundwater rights in the Lost Creek Designated Basin

Single-Family Rental Homes

During the year ended August 31, 2022, the Company contracted for construction of 11 additional rental homes to be used in the rental business.

During the year ended August 31, 2023, the Company capitalized nine additional single-family homes, whether detached houses, townhomes or paired homes, which are being utilized in the Company’s single-family rental business.

During the year ended August 31, 2024, the Company capitalized the remaining two homes in Phase 2A.

The costs of the homes are capitalized and when applicable are depreciated over periods not exceeding thirty-years , which is dependent on the asset type.

As of August 31, 2024, all 14 completed homes have been rented, with contracts signed to construct the first 12 single-family rentals in Phase 2B with construction set to begin in fiscal 2025.

During the year ended August 31, 2024, the Company capitalized two homes in Phase 2A.

The costs of the homes are capitalized and when applicable are depreciated over periods not exceeding thirty-years , depending on the asset type.

As of August 31, 2025, all 14 completed homes have been rented, with contracts signed to construct 17 single-family rentals in Phase 2B.

Construction began on five of those homes, which will be ready for lease by the end of calendar year 2025.

The Company has reserved a total of 91 lots in Phase 2 ( 10 of which are in Phase 2A and completed as of August 31, 2025) of Sky Ranch to build additional rental homes.

Depletion and Depreciation

During the years ended August 31, 2024 and 2023, the Company recorded an immaterial amount of depletion charges, which relates entirely to the Rangeview Water Supply (as defined below).

During the years ended August 31, 2024 and 2023, the Company recorded $ 2.1 million and $ 2.2 million of depreciation expense, which include $ 0.6 million and $ 0.5 million of depreciation expense for other equipment not included in the table above.

During the years ended August 31, 2025 and 2024, the Company recorded an immaterial amount of depletion charges, which related entirely to the Rangeview Water Supply (as defined below).

During the years ended August 31, 2025 and 2024, the Company recorded $ 2.3 million and $ 2.1 million, respectively, of depreciation expense, which include $ 0.6 million and $ 0.6 million, respectively, of depreciation expense for other equipment not included in the table above.

The following table presents the estimated useful lives by asset class used for calculating depreciation and depletion charges:

Assets Classes

Asset Classes

Estimated Useful Lives

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As of August 31, 2025, the Company has invested $ 31.4 million in facilities to extend water service to customers located on and off the Lowry Ranch.

The recorded costs of the Rangeview Water Supply include payments

to the sellers of the Rangeview Water Supply, design and construction costs and certain direct costs related to improvements to the asset, including legal and engineering fees.

The recorded costs of the Rangeview Water Supply include payments to the sellers of the Rangeview Water Supply, design and construction costs and certain direct costs related to improvements to the asset, including legal and engineering fees.

The Company acquired the Rangeview Water Supply in 1996 pursuant to the following agreements:

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● The 1996 Service Agreement between the Company and the Rangeview District, which was superseded by the Amended and Restated Service Agreement, dated July 11, 2014, between the Company and the Rangeview District (Lowry Service Agreement), which allows the Company to provide water service to the Rangeview District’s customers located on the Lowry Ranch;

● The Agreement for Sale of non-tributary and not non-tributary groundwater between the Company and the Rangeview District (Export Agreement), pursuant to which the Company purchased a portion of the Rangeview Water Supply referred to as the “Export Water” because the Export Agreement allows the Company to export this water from the Lowry Ranch to supply water to nearby communities;

● The 1997 Wastewater Service Agreement between the Company and Rangeview District (Lowry Wastewater Agreement), which allows the Company to provide wastewater service to the Rangeview District’s customers on the Lowry Ranch.

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The Lease, the Lowry Service Agreement, the Export Agreement, and the Lowry Wastewater Agreement, and the ECCV Option are collectively referred to as the Rangeview Water Agreements.

In August 2019, the Company acquired 300 acre-feet of fully consumptive surface water in the Lost Creek Designated Ground Water Basin.

In June 2022, the Company acquired 370 acre-feet of fully consumptive surface water through the acquisition of three wells located in the Lost Creek Designated Ground Water Basin (both acquisitions are referred to collectively as the Lost Creek Water).

The Lost Creek Water is currently adjudicated for municipal/industrial use, and the Company has filed an application with the Colorado water court to change the use of the water to augment its municipal/industrial water supplies at the Lowry Ranch.

The Company has consolidated the Lost Creek Water with the Rangeview Water Supply to provide service to the Rangeview District’s customers both on and off the Lowry Ranch.

Pursuant to the Rangeview Water Agreements, the Company owns 11,650 acre-feet of water consisting of 10,000 acre-feet of groundwater and 1,650 acre-feet of average yield surface water which can be exported off the Lowry Ranch to serve area users (referred to as Export Water).

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The Rangeview Water Agreements also provide for the Company to use surface reservoir storage capacity in providing water service to customers both on and off the Lowry Ranch.

The Company, Rangeview District and the State Land Board filed a Water Court Application on December 31, 2020 seeking to:

(1) adjudicate 1,635 acre feet of water from the Box Elder Creek Alluvial aquifer (a new water right), (2) consolidate and enlarge certain reservoirs on the Lowry Ranch, (3) approve new places of use for existing water rights, (4) approve new places of storage for certain water rights, and (5) approve a new alternate diversion point for certain existing water rights.

On February 7, 2025, the Water Court denied the Company’s new water right application of 1,635 acre feet of Box Elder Creek Alluvial aquifer water as well as the consolidation and enlargement of certain reservoirs on the Lowry Ranch.

Neither of these rulings impacted the Company’s existing water rights or existing reservoir storage sites.

The Court sought additional information from the Company and opposing parties regarding the three claims which remain outstanding before continuing the trial.

The Company is working with opposing parties to reach a settlement agreement for all five claims in the Water Court Application.

Services on the Lowry Ranch – Pursuant to the Rangeview Water Agreements, the Company designs, finances, constructs, operates and maintains the Rangeview District’s water and wastewater systems to provide service to the Rangeview District’s customers on the Lowry Ranch.

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Rates and charges cannot exceed the average of similar rates and charges of three surrounding municipal water and wastewater service providers, which are reassessed annually.

Pursuant to the Rangeview Water Agreements, the Land Board receives a royalty of 10 % or 12 % of gross revenue from the sale or disposition of the water, depending on the nature and location of the purchaser of the water, except that the royalty on tap fees shall be 2 % (other than taps sold for Sky Ranch which are exempt).

The Company also is required to pay the Land Board a minimum annual water production fee of approximately $ 46,000 per year, which offsets earned royalties, and annual rent of $ 8,400 which amount is increased every five years based on the Consumer Price Index for Urban Customers.

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Certain infrastructure has been constructed and other infrastructure will be constructed over the next several years.

During each of the years ended August 31, 2024 and 2023, the Company made less than $ 0.1 million in capital investments in WISE.

During each of the years ended August 31, 2025 and 2024, the Company made $ 0.5 million and less than $ 0.1 million, respectively, in capital investments in WISE.

Capitalized terms used under this caption are defined in Note 7 below.

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The Lost Creek Water Supply

On June 27, 2022, Pure Cycle acquired 370 acre-feet of designated groundwater rights located in the Lost Creek basin in Weld County Colorado.

The acquisition included three water wells and related well permits and structures.

The total purchase price was $ 3.7 million, which was allocated entirely to the water rights as the other assets were deemed to not have determinable values.

This acquisition of Lost Creek water was accounted for as an asset acquisition.

In August 2019, the Company purchased 150 acre-feet of ditch water rights, 300 acre-feet of designated groundwater rights, 70 acre-feet of deep groundwater rights and 260 acres of land in the Lost Creek Basin in Weld County.

Total consideration for the land, water and related costs was $ 3.5 million.

The Company allocated the acquisition cost to the land and water rights based on estimates of each asset’s respective fair value at the acquisition date.

The Lost Creek land and water acquisition was accounted for as an asset acquisition.

This transaction was accounted for as an asset acquisition.

On June 27, 2022, Pure Cycle acquired an additional 370 acre-feet of designated groundwater rights located in the Lost Creek basin in Weld County Colorado.

The acquisition included three water wells and related well permits and structures.

The total purchase price was $ 3.7 million, which was allocated entirely to the water rights as the other assets were deemed to not have determinable values.

This transaction was accounted for as an asset acquisition.

In October 2024, the Company purchased an additional 378 acre-feet of ditch water rights, 300 acre-feet of designated groundwater rights, 432 acres of land, a house, barn, outbuildings and irrigation pivots in the Lost Creek Basin.

Total consideration for the land, water and other purchased items was $ 5.4 million.

The Company allocated the acquisition cost to the land, water rights, and various other assets based on estimates of each asset’s respective fair value at the acquisition date.

This transaction was accounted for as an asset acquisition.

All the Lost Creek Water will be changed for use as municipal/industrial/agricultural water as needed.

Additionally, the Company has filed an application with the Colorado Water Court, as described under Item 3 – Legal Proceedings, to use the Lost Creek Water to augment its municipal/industrial water supplies at the Lowry Ranch.

The Company plans are to consolidate its Lost Creek Water with its Rangeview Water Supply to provide service to the Rangeview District’s customers both on and off the Lowry Ranch.

Service to Customers Not on the Lowry Ranch

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The Elbert 86 District’s water system currently provides water service to approximately 249 SFE water connections in Wild Pointe.

In 2011, the Company entered the Sky Ranch O&G Lease.

In 2011, the Company entered into the Sky Ranch O&G Lease.

Pursuant to the Sky Ranch O&G Lease, the Company received an up-front payment for the purpose of exploring for, developing, producing, and marketing oil and gas on 634 acres of mineral estate owned by the Company at its Sky Ranch property.

The Sky Ranch O&G Lease is now held by production, entitling the Company to royalties based on production.

In September 2017, the Company entered a three-year O&G Lease for the purpose of exploring for, developing, producing, and marketing oil and gas on 40 acres of mineral estate owned by the Company adjacent to the Lowry Ranch.

This O&G lease expired during the year ended August 31, 2024.

Land and Mineral Rights

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Lost Creek land

Construction in progress

Net land and mineral interests held for development

The Company also owns 700 acres of land in the Arkansas River valley which is held for investment purposes.

As of August 31, 2025 and 2024, the Company owned 544 acres and 698 acres of land in the Arkansas River valley which is classified as held for sale as we intend to sell the remaining 544 acres in due course.

We also own approximately 13,900 acres of mineral interests in the Arkansas River Valley, which has no carrying value on the Company’s books due to an impairment charge of $ 1.4 million recorded in fiscal 2020.

The Company currently has no plans to sell its mineral interests.

NOTE 5 – REIMBURSABLE PUBLIC IMPROVEMENTS AND NOTE RECEIVABLE FROM THE SKY RANCH CAB

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The Company has advanced funds to the Sky Ranch CAB for the cost of public improvements which the Sky Ranch CAB is responsible for constructing and the Company is obligated to fund through various funding agreements between the Sky Ranch CAB and the Company.

During the year ended August 31, 2024, the Company spent $ 14.4 million on public improvements which are payable by the Sky Ranch CAB to

the Company and were therefore added to the note receivable from the Sky Ranch CAB.

During the year ended August 31, 2025, the Company spent $ 15.0 million on public improvements which were certified by a third-party engineer and reimbursable by the Sky Ranch CAB to the Company and were therefore added to the note receivable from the Sky Ranch CAB.

Additionally, for the year ended August 31, 2025, project management fees owed to the Company of $ 0.8 million, and interest income on the outstanding note receivable of $ 2.3 million, were also added to the note receivable.

During the year ended August 31, 2024, the Sky Ranch CAB made two payments to the Company on the note totaling $ 0.7 million, which was applied to interest on the note.

During the year ended August 31, 2025, the Sky Ranch CAB made seven payments to the Company on the note totaling $ 15.2 million, which was applied first to interest and then to public improvements on the note.

The following table summarizes the activity and balances associated with the note receivable from the Sky Ranch CAB:

(In thousands)

August 31, 2025

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The Sky Ranch CAB has an obligation to repay the Company, but the ability of the Sky Ranch CAB to do so before the contractual termination dates is dependent upon the establishment of a tax base or other fee generating activities sufficient to fund reimbursable costs incurred.

NOTE 6 – PARTICIPATING INTERESTS IN EXPORT WATER

The acquisition of the Rangeview Water Supply was finalized with the signing of the CAA in 1996.

Upon entering the CAA, the Company recorded a liability of $ 11.1 million, which represented the cash the Company received from the participating interest holders that was used to purchase the Company’s Export Water (described in greater detail in Note 4).

The Company agreed to remit a total of $ 31.8 million of proceeds received from the sale of Export Water to the participating interest holders in return for their initial $ 11.1 million investment.

The obligation for the $ 11.1 million was recorded as debt, and the remaining $ 20.7 million contingent liability was (and is) not reflected on the Company’s balance sheet because the obligation to pay this is contingent on the sale of Export Water, the amounts and timing of which are not reasonably determinable.

The CAA obligation is non-interest bearing, and if the Export Water is not sold, the parties to the CAA have no recourse against the Company.

Additionally, if the Company does not sell the Export Water, the holders of the Series B Preferred Stock are not entitled to payment of any dividend and have no contractual recourse against the Company.

As the proceeds from the sale of Export Water are received and the amounts are remitted to the CAA holders, the Company allocates a ratable percentage of each payment to the principal portion (the Participating Interests in Export Water Supply liability account), with the balance of the payment being charged to the contingent obligation portion.

Because the original recorded liability, which was $ 11.1 million, was 35 % of the original total liability of $ 31.8 million, approximately 35 % of each payment remitted to the CAA holders is allocated to the recorded liability account.

The remaining portion of each payment is allocated to the contingent obligation, which is recorded on a net revenue basis.

Since entering the CAA, the Company has repurchased nearly all of the CAA obligations, which retained their original priority.

During the year ended August 31, 2023 the Company acquired $ 0.7 million of the remaining $ 1.0 million of the CAA obligations for a cash payment of just over $ 0.1 million.

Because of these acquisitions, the Company is currently receiving 99 % of the total proceeds from the sale of Export Water (after payment of the Land Board royalty).

Additionally, as a result of the acquisitions, and the consideration from the cumulative sales of Export Water, at August 31, 2023, the remaining total potential third-party unrecorded contingent obligation is $ 0.2 million, while the recorded portion has been eliminated.

The CAA includes contractually established priorities which call for payments to CAA holders in order of their priority.

This means the first payees receive their full payment before the next priority level receives any payment and so on until full repayment.

As a result of

the CAA obligation acquisition during the year ended August 31, 2023, the Company will be entitled to all but approximately $ 0.2 million of the proceeds from the sale of Export Water after deduction of the Land Board royalty.

NOTE 6 – ACCRUED LIABILITIES

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Rental deposits

Total accrued liabilities

Taxes Payable

Land development costs due to the Sky Ranch CAB

Due to Rangeview Metropolitan District

Total accrued liabilities - related parties

The amounts due to the Sky Ranch CAB are included in notes receivable – related parties, including accrued interest or land under development.

Total accrued and other liabilities

The amounts due to the Sky Ranch CAB are either included in notes receivable or land under development.

The amounts recorded in land under development will be subsequently expensed through Land development construction costs.

In addition, the amounts payable to the Rangeview District relate to construction costs of water infrastructure, these costs are included in Investments in water and water systems.

In addition, the amounts payable to the Rangeview District relate to construction costs of water infrastructure, which are included in Investments in water and water systems.

The remaining items that make up accrued liabilities are generally self-explanatory.

NOTE 7 – DEBT AND OTHER LONG-TERM OBLIGATIONS

The total scheduled maturities of the Company’s loans for each of the years ending August 31 are as follows, with each loan described below the table:

As of August 31, 2025, the outstanding principal and deferred financing costs of the Company’s loans are as follows:

(In thousands)

August 31, 2025

Single-Family Rental Home Note Payable

Lost Creek Note Payable

Total outstanding principal

Deferred financing costs

Less current maturities, net of current deferred financing costs

Debt, less current portion

As of August 31, 2025, the scheduled maturities (i.e., principal payments) of the Company’s loans are as follows:

(In thousands)

Scheduled principal payments

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● Maturity date of December 1, 2026

● Six interest only payments beginning January 1, 2022

● Fifty-three principal and interest payments each month beginning July 1, 2022 in the amount of $ 4,600 each

● Fifty-three principal and interest payments each month which began July 1, 2022, in the amount of $ 4,600 each and increased to $ 5,000 each on November 1, 2024

● Estimated final principal and interest balloon payment of $ 0.9 million payable on December 1, 2026

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On June 28, 2022, the Company entered a loan with its primary bank to fund the acquisition of 370 acre-feet of water rights the Company acquired on June 27, 2022, in the Lost Creek region of Colorado (Lost Creek Note).

The Lost Creek Note has a principal balance of $ 3.0 million, a ten-year maturity, monthly interest only payments averaging $ 12,000 per month for thirty-six months beginning on July 28, 2022, twenty-four monthly principal and interest payments of $ 42,000 beginning on July 28, 2025, fifty-nine monthly principal and interest payments of $ 32,000 beginning on July 28, 2027, and a balloon payment of less than $ 0.8 million plus unpaid and accrued interest due on June 28, 2032.

The Lost Creek Note has an initial principal balance of $ 3.0 million, a ten-year maturity, monthly interest only payments averaging $ 12,000 per month for thirty-six months beginning July 28, 2022, twenty-four monthly principal and interest payments of $ 42,000 beginning July 28, 2025, fifty-nine monthly principal and interest payments of $ 32,000 beginning on July 28, 2027, and a balloon payment of less than $ 0.8 million plus unpaid and accrued interest due on June 28, 2032.

The Lost Creek Note has a thirty-year amortization period and a fixed per annum interest rate equal to 4.90 %.

Lost Creek Note is secured by the Lost Creek Water rights acquired with the note and any fees derived from the use of the Lost Creek Water rights.

Lost Creek Note is secured by the Lost Creek Water rights acquired with the proceeds of the note issuance and any fees derived from the use of the Lost Creek Water rights.

The Lost Creek Note does not contain any financial covenants.

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On January 31, 2022, the Company entered into a Business Loan Agreement (Working Capital LOC) with its primary bank to provide a $ 5.0 million operating line of credit.

The Working Capital LOC has a two-year maturity, monthly interest only payments if the line is drawn upon with unpaid principal and interest due at maturity, and a floating per annum interest rate equal to the rate published in the Western Edition of the Wall Street Journal as the Prime Rate plus 0.5 %, which has a floor of 3.75 %.

In the event of default, the interest rate on the Working Capital LOC would be increased by adding an additional 2.0 %.

During the year ended August 31, 2024, the Company extended the Working Capital LOC, which now has an expiration date of January 31, 2026, a floating per annum interest rate equal to the rate published in the Western Edition of the Wall Street Journal as the Prime Rate plus 0.0 % ( 8.5 % as of August 31, 2024) and an amended floor rate of 5.00 %.

During the year ended August 31, 2025, the Company extended the Working Capital LOC, which now has an expiration date of January 31, 2026, a floating per annum interest rate equal to the rate published in the Western Edition of the Wall Street Journal as the Prime Rate ( 7.5 % as of August 31, 2025) and an amended floor rate of 5.00 %.

As of August 31, 2025, the Company has no t drawn on the Working Capital LOC.

Letters of Credit

During the year August 31, 2021, the Company entered four Irrevocable Letters of Credit (LCs).

The LCs are to guarantee the Company’s performance related to certain construction projects at Sky Ranch.

As of August 31, 2024, these four LCs totaled $ 2.3 million.

During the year ended August 31, 2023, the Company entered into an additional LC for less than $ 0.2 million, which expired one year from date of issuance but was renewed for a one-year period and can be renewed for additional periods of one year .

During the year ended August 31, 2024, the Company entered into an additional three LCs totaling $ 0.9 million.

So long as the Company performs on the contracts, the LCs will expire at various dates from December 2024 through November 2025.

All eight LCs are secured by cash balances maintained in restricted cash accounts at the Company’s banks.

The Participating Interests in Export Water Supply are obligations of the Company that have no scheduled maturity dates.

Therefore, these liabilities are not disclosed in tabular format.

However, the Participating Interests in Export Water Supply are described in Note 6.

At August 31, 2025, the Company had 12 Irrevocable Letters of Credit (“LOCs”) outstanding.

The LOCs are to guarantee the Company’s performance related to certain construction projects at Sky Ranch relating to the delivery of finished lots and as collateral for payment obligations outlined in the construction contract for certain single-family rental homes in Phase 2B.

The Company has the intent and ability to perform on the contracts, after which, the LOC’s will expire at various dates from November 2025 through July 2026.

However, the Company is required to renew the majority of the LOCs.

As of August 31, 2025, the LOCs totaled $ 6.4 million, an amount secured by cash balances maintained in restricted cash accounts at the Company’s bank.

The LOCs renew annually at various dates and have a 1 % annual fee.

WISE Partnership

11 unchanged sentences

Operating lease expense is generally recognized evenly over the term of the lease.

Effective October 1, 2023, the Company replaced its operating lease with a new operating lease (New Lease).

The New Lease decreased the square footage of leased space to approximately 11,434 square feet.

The New Lease replaced the July 1, 2022 operating lease and June 1, 2023 amendment.

In addition, a 5,100 square feet sublease was terminated after entering into the New Lease.

The New Lease has an initial thirty-six -month term with the option to extend the lease term for up to two two-year periods.

The New Lease rental payment is approximately $ 10,000 per month which includes a certain pro-rata share of the lessor’s operating costs, which are variable in nature.

The monthly payment will increase roughly 2.0 % after twelve months.

During the year ended August 31, 2025, the Company amended its office lease twice terminating the rental of the previous office and warehouse spaces within the same complex.

The result is the rental of approximately 6,460 square feet of office space and 8,400 square feet of warehouse space for a monthly payment of roughly $ 11,000 which includes a certain pro-rata share of the lessor’s operating costs, which are variable in nature.

The Company performed its own leasehold improvements which are credits against our monthly payments.

The monthly payment will increase roughly 2.5 % every October 1st.

The Company’s lease agreement does not contain any residual value guarantees or material restrictive covenants.

As a result of the New Lease, the Company’s associated right of use asset and liability decreased, as noted in the table below.

For the years ended August 31, 2024 and 2023, payments on lease liabilities totaled less than $ 0.1 million.

As a result, the Company’s associated right of use asset and liability decreased, as noted in the table below.

For each of the years ended August 31, 2025 and 2024, payments on lease liabilities totaled less than $ 0.1 million.

The Company’s lease agreements generally do not provide an implicit borrowing rate;

31 unchanged sentences

therefore, the compensation expense has not been reduced for estimated forfeitures.

For the years ended August 31, 2024 and 2023, 0 options and 30,000 options expired.

No options expired in either of the years ended August 31, 2025 and 2024.

The Company attributes the value of share-based compensation to expense using the straight-line single option method for all options granted.

6 unchanged sentences

For the year ended August 31, 2025, the Company granted no stock options.

In addition, six non-employee Board members were each granted 3,006 unrestricted stock shares and one non-employee Board member was granted 1,608 unrestricted stock shares.

The fair market value of the unrestricted shares for share-based compensation expense is equal to the closing price of the Company’s common stock on the date of grants of $ 9.98 and $ 9.33 .

In addition, six non-employee Board members were each granted 2,566 unrestricted shares of common stock.

The fair market value of the unrestricted shares for share-based compensation expense is equal to the closing price of the Company’s common stock on the date of grants of $ 11.69 .

Stock-based compensation expense includes $ 0.2 million of expense related to these unrestricted stock grants.

1 unchanged sentence

For the year ended August 31, 2024, the Company granted no stock options.

The six non-employee Board members were each granted 3,033 unrestricted stock grants.

The fair market value of the unrestricted shares for share-based compensation expensing is equal to the closing price of the Company’s common stock on the date of grant of $ 9.89 .

In addition, six non-employee Board members were each granted 3,006 unrestricted shares of common stock and one non-employee Board member was granted 1,608 unrestricted shares of common stock.

The fair market value of the unrestricted shares for share-based compensation expense is equal to the closing price of the Company’s common stock on the date of grants of $ 9.98 and $ 9.33 , respectively.

Stock-based compensation expense includes $ 0.2 million of expense related to these unrestricted stock grants.

1 unchanged sentence

During the years ended August 31, 2025 and 2024, 35,000 and 38,500 options were exercised.

For the options exercised in 2024, the Company had no options exercised for cash and only net settlement exercises of stock options, whereby the optionee did not pay cash for the options but instead received the number of shares equal to the difference between the exercise price and the market price on the date of exercise.

The net settlement exercises during the year ended August 31, 2024, resulted in 17,456 shares issued and 21,044 options cancelled in settlement of shares issued.

For the options exercised in 2023, the Company had no options exercised for cash and only net settlement exercises of stock options, whereby the optionee did not pay cash for the options but instead received the number of shares equal to the difference between the exercise price and the market price on the date of exercise.

The net settlement exercises during the year ended August 31, 2023, resulted in 63,877 shares issued and 55,623 options cancelled in settlement of shares issued.

The options exercised in 2025 were net settled, meaning the optionee did not pay cash for the options but instead received the number of shares equal to the difference between the exercise price and the market price on the date of exercise.

The net settlement exercises during the year ended August 31, 2025, resulted in 13,815 shares being issued and 21,185 options being cancelled in settlement of shares issued.

The options exercised in 2024 were also net settled resulting in 17,456 shares being issued and 21,044 options being cancelled in settlement of shares issued.

The following table summarizes the combined stock option activity for the 2014 Equity Plan and 2024 Equity Plan for the years ended August 31, 2025 and August 31, 2024:

22 unchanged sentences

All non-vested options are expected to vest.

For the years ended August 31, 2024 and 2023, the total fair value of options that vested during the year was $ 0.2 million and $ 0.4 million.

For each of the years ended August 31, 2025 and 2024, the total fair value of options that vested during the year was $ 0.2 million.

For the year ended August 31, 2025, there were no options granted.

For the years ended August 31, 2024 and 2023, share-based compensation expense was $ 0.4 million and $ 0.5 million.

As of August 31, 2024, the Company had unrecognized share-based compensation expenses totaling $ 0.1 million relating to non-vested options that are expected to vest.

The weighted average period over which these options are expected to vest is less than 1 year .

For the years ended August 31, 2025 and 2024, share-based compensation expense was $ 0.3 million and $ 0.4 million, respectively.

As of August 31, 2025, the Company had unrecognized share-based compensation expenses totaling $ 0.1 million relating to non-vested options and restricted stock units that are expected to vest.

The weighted average period over which these options are expected to vest is just over one year .

The Company has not recorded any excess tax benefits to additional paid-in capital.

As of August 31, 2024, the Company had outstanding warrants to purchase 92 shares of common stock at an exercise price of $ 1.80 per share.

These warrants expire six months from the earlier of:

● The date that all the Export Water is sold or otherwise disposed of,

● The date that the CAA is terminated with respect to the original holder of the warrant, or

● The date on which the Company makes the final payment pursuant to Section 2.1(r) of the CAA.

No warrants were exercised during fiscal 2024 and 2023.

NOTE 9 – SIGNIFICANT CUSTOMERS

7 unchanged sentences

Melody (DR Horton)

Two oil & gas operators

Sky Ranch CAB

Additionally, as of August 31, 2023, 14 % of the trade accounts receivable balance was owed by National Heritage Academies related to construction activities for the school site managed by the Company on the school’s behalf.

Taylor Morrison

Two oil & gas operators

NOTE 10 – INCOME TAXES

For the year ended August 31, 2024, Pure Cycle recorded income tax expense of $ 4.0 million, which consisted of current income tax expense of almost $ 4.0 million and deferred income tax expense of less than $ 0.1 million.

The deferred tax expense consists mainly of timing difference between book and tax depreciation of fixed assets.

For the year ended August 31, 2025, Pure Cycle recorded income tax expense of $ 4.4 million, which consisted of current income tax expense of $ 4.2 million and deferred income tax expense of $ 0.1 million.

The deferred tax expense consists mainly of timing difference between book and tax depreciation of fixed assets.

During the year ended August 31, 2024, Pure Cycle paid Federal and State income tax installments of $ 1.6 million and $ 0.5 million.

During the year ended August 31, 2023, Pure Cycle paid Federal and State income tax installments of $ 3.5 million and $ 0.9 million.

The deferred tax expense consists mainly of the timing difference between book and tax depreciation of fixed assets.

During the year ended August 31, 2025, Pure Cycle paid Federal and State income tax installments of $ 3.6 million and $ 0.8 million, respectively.

During the year ended August 31, 2024, Pure Cycle paid Federal and State income tax installments of $ 1.6 million and $ 0.5 million, respectively.

Deferred income taxes reflect the tax effects of net operating loss carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

10 unchanged sentences

As of August 31, 2025 and 2024, the Company had no liability for unrecognized tax benefits.

Income taxes computed using the federal statutory income tax rate differs from the Company’s effective tax rate primarily due to the following for the fiscal years ended August 31:

Income taxes computed using the federal statutory income tax rate differ from the Company’s effective tax rate primarily due to the following for the fiscal years ended August 31:

(In thousands)

August 31, 2025

5 unchanged sentences

Total income tax expense

At August 31, 2024 and 2023, the Company had no net operating loss carryforwards available for income tax purposes.

As of August 31, 2025 and 2024, the Company had no net operating loss carryforwards available for income tax purposes.

NOTE 11 – 401(k) PLAN

10 unchanged sentences

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.

As of August 31, 2024, the Company had no contingencies where the risk of material loss was probable or reasonably possible of resulting in a material loss.

As of August 31, 2025, the Company has accrued an estimated $ 0.5 million in legal expenses associated with potential legal liability relating to the water court’s ruling in February 2025.

The Company's current settlement negotiations have the potential to obtain a new water right asset as well as a favorable outcome on the remaining three claims, which would result in a reversal of the legal accrual.

The water court proceedings are described under Item 3 – Legal Proceedings.

NOTE 13 – SEGMENT REPORTING

1 unchanged sentence

The Company has identified its CODM as its Chief Executive Officer.

Based on the methods used by the CODM to allocate resources, the Company has identified two operating segments which meet GAAP segment disclosure requirements, namely the water and wastewater resource development segment and the land development segment.

The Company’s new single-family rental business will likely be presented as a third segment in future periods when it is material to the Company’s operations.

Based on the methods used by the CODM to allocate resources, the Company has identified three operating segments which meet GAAP segment disclosure requirements, namely the water and wastewater resource development segment, the land development segment and single-family rental business segment.

The water and wastewater resource development segment provides water and wastewater services to customers for fees.

The water is provided by the Company using water rights owned or controlled by the Company, and developing infrastructure to divert, treat and distribute that water and collect, treat, and reuse wastewater.

The land resource development segment includes all the activities necessary to develop and sell finished lots, which as of August 31, 2024 and 2023, was done exclusively at the Company’s Sky Ranch Master Planned Community.

O&G operations, although material in certain years, are deemed a passive activity as the CODM does not actively allocate resources to these projects;

therefore, this is not classified as a reportable segment.

The tables below present the measure of profit and assets the CODM uses to assess the performance of the segment for the periods presented:

The land resource development segment includes all the activities necessary to develop and sell finished lots, which as of August 31, 2025 and 2024, was done exclusively at the Sky Ranch Master Planned Community.

The single-family rental business segment includes single-family homes that the Company has contracted with homebuilders to build on finished lots retained by the Company during its land development activities.

The revenue for this segment includes rental income from those homes, which as of August 31, 2025 and 2024 were located exclusively at the Company’s Sky Ranch Master Planned Community.

The Company’s operating segments, as defined in ASC 280, Segment Reporting, reflect how its CODM reviews financial information, makes operating decisions and assesses business performance.

In identifying operating segments, the Company also considers its annual budgeting and forecasting process, management reporting structure, and information presented to the Board of Directors.

The Company only operates in one geographic region and is not able to be aggregated by geographic operating segments.

The CODM evaluates the performance of the reportable segments based on operating income.

Sales, gross margins, and operating expenses are also monitored closely.

This information is used to monitor operating margins, measure segment profitability, allocate resources, and make budgeting and forecasting decisions about the reportable segments.

The CODM also uses these measures to monitor trends in year over year performance comparisons, sequential quarter performance comparisons, and to compare actual results to forecasts.

More disaggregated information about operating expense is generally only reviewed by the CODM on a consolidated basis.

As a result of the Company’s philosophy of maximizing operating efficiencies through the centralization of certain functions, operating income for the reportable segments excludes unallocated corporate overhead costs, depreciation on corporate fixed assets, other costs and other income, as they are not attributable to the individual reportable segments and are included in the corporate line item.

The tables below present the measure of profit and assets as well as the interest income and expense that the CODM uses to assess the performance of the segment for the periods presented:

Year Ended August 31, 2025

7 unchanged sentences

Total cost of revenue

Segment (loss) profit

Segment profit

Interest income

Interest expense

Year Ended August 31, 2024

8 unchanged sentences

Segment profit

Interest income

Interest expense

The following table summarizes the Company’s total assets by segment.

11 unchanged sentences

The Rangeview District

On December 16, 2009, the Company entered into a Participation Agreement with the Rangeview District, whereby the Company agreed to provide funding to the Rangeview District in connection with the Rangeview District joining the South Metro Water Supply Authority (SMWSA).

During the years ended August 31, 2025 and 2024, the Company provided funding of less than $ 0.1 million to the Rangeview District related to this Participation Agreement.

4 unchanged sentences

As of January 1, 2025, WISE water was $ 7.23 per thousand gallons and such rate remained in effect through calendar 2025.

Effective, January 1, 2023, WISE water increased to $ 6.48 per thousand gallons which was in effect through the end of calendar 2023.

Effective January 1, 2024, WISE water increased to $ 6.55 per thousand gallons , a price that was in effect through the end of calendar 2024.

In addition, the Company pays certain system operational and construction costs.

2 unchanged sentences

Ongoing funding requirements are dependent on the WISE water subscription amount and the Rangeview District’s allocated share of the operational and overhead costs of SMWA and construction activities related to delivery of WISE water.

The Company has outstanding notes receivable of $ 42.2 million in the aggregate from the Rangeview District and the Sky Ranch CAB, which are related parties, as discussed below:

The Rangeview District is a quasi-municipal corporation and political subdivision of Colorado formed in 1986 for the purpose of providing water and wastewater service to the Lowry Ranch and other approved areas.

The Rangeview District is governed by an elected board of directors.

Eligible voters and persons eligible to serve as a director of the Rangeview District must own an interest in property within the boundaries of the Rangeview District.

Eligible voters and persons eligible to serve as directors of the Rangeview District must own an interest in property within the boundaries of the Rangeview District.

The Company owns certain rights and real property interests which encompass the current boundaries of the Rangeview District.

In 1995, the Company extended a loan to the Rangeview District.

The loan provided for borrowings of up to $ 0.25 million, is unsecured, and bears interest based on the prevailing prime rate plus 2 % ( 10.50 % at August 31, 2024).

The maturity date of the loan is December 31, 2025.

Beginning in January 2014, the Rangeview District and the Company entered into a funding agreement that allows the Company to continue to provide funding to the Rangeview District for day-to-day operations and accrue the funding into a note that bears interest at a rate of 8 % per annum and remains in full force and effect for so long as the Lease remains in effect.

The August 31, 2024 balance in notes receivable - related parties, other totaled $ 1.2 million, which included borrowings of $ 1.2 million and accrued interest of less

than $ 0.1 million.

The Rangeview District and the Company have entered into two loan agreements.

In 1995, the Company extended a loan to the Rangeview District for borrowings of up to $ 0.3 million, which is unsecured, and bears interest based on the prevailing prime rate plus 2 % ( 9.50 % at August 31, 2025).

The maturity date of the loan is December 31, 2025, at which time it automatically renews through December 31, 2026.

At August 31, 2025, balance in notes receivable - related parties, other totaled $ 1.2 million, which included borrowings of $ 1.2 million and accrued interest of less than $ 0.1 million.

During the year ended August 31, 2025, the Rangeview District made payments totaling $ 0.2 million on the notes payable to the Company.

The August 31, 2023 balance in notes receivable - related parties, other totaled $ 1.5 million, which included borrowings of $ 1.3 million and accrued interest of $ 0.1 million.

The August 31, 2024 balance in notes receivable totaled $ 1.2 million, which included borrowings of $ 1.2 million and accrued interest of less than $ 0.1 million.

Sky Ranch CAB

5 unchanged sentences

The PF Agreement required the Company to fund an agreed upon list of public improvements for Sky Ranch with respect to earthwork, erosion control, streets, drainage, and landscaping at an estimated cost of $ 13.2 million for calendar years 2018 and 2019.

Each advance or reimbursable expense accrues interest at a rate of six percent ( 6 %) per annum.

The Company and the Sky Ranch CAB entered into a Facilities Funding and Acquisition Agreement (FFAA) effective November 2017, obligating the company to advance funding to the Sky Ranch CAB for specified public improvements constructed from 2018 to 2023.

All amounts owed under the FFAA bear interest at a rate of six percent ( 6 %) per annum.

Each advance or reimbursable expense is certified by a third-party engineer and accrues interest at a rate of six percent ( 6 %) per annum.

The Company and the Sky Ranch CAB entered into a Facilities Funding and Acquisition Agreement (FFAA) for Phase 1 effective November 2017 and amended on September 2024, obligating the Company to advance funding to the Sky Ranch CAB for specified public improvements.

The Company and the Sky Ranch CAB entered into a Phase 2 Facilities Funding and Acquisition Agreement

(FFAA2) for Phase 2 effective December 2020, obligating the Company to advance funding to the Sky Ranch CAB for specified public improvements.

All amounts owed under the FFAA and FFAA2 bear interest at a rate of 6 % per annum.

Any advances not paid or reimbursed by the Sky Ranch CAB by December 31, 2058 for Phase 1 and December 31, 2060 for Phase 2 shall be deemed forever discharged and satisfied in full.

7 unchanged sentences

1 has a board comprised of three employees of the Company (including the Company’s CEO and CFO) and two independent board members.

The following table summarizes the balances associated with the note receivable related party:

(In thousands)

August 31, 2025

August 31, 2024

Sky Ranch CAB reimbursable public improvements and project management fees

Rangeview Metro District note receivable

Related party notes receivable, including accrued interest

Nelson Pipeline Constructors LLC

1 unchanged sentence

As the project progressed, change orders were approved by the Sky Ranch CAB board upon review by an independent engineer hired by the Sky Ranch CAB to certify costs are reasonable and appropriate for the scope of work contemplated.

During the years ended August 31, 2024 and August 31, 2023, the Sky Ranch CAB paid Nelson $ 0.1 million and $ 1.1 million, respectively, related to this contract.

During the years ended August 31, 2025 and August 31, 2024, the Sky Ranch CAB paid Nelson $ 0 and $ 0.1 million, respectively, related to this contract.

Nelson is majority owned by the chair of the Company’s board of directors.

11 unchanged sentences

NOTE 16 – SUBSEQUENT EVENTS

On October 21, 2024, the Company completed the purchase of approximately 432 acres of land in Weld County together with 378 acre-feet of ditch water in the Henrylyn Irrigation District and 300 acre-feet of groundwater rights in the Lost Creek Designated Basin for a purchase price of approximately $ 5.4 M.

The purchase adds to the Company’s Lost Creek Water Supply, which it plans to consolidate with its Rangeview Water Supply to provide service to the Rangeview District’s customers both on and off the Lowry Ranch.

On October 30, 2024, the Sky Ranch CAB sold tax-exempt, fixed rate, investment grade senior bonds in the aggregate principal amount of $ 18,585,000 and tax-exempt, fixed-rate subordinate bonds in the aggregate principal amount of $ 3,307,000 (collectively, the “2024 Bonds”).

Upon the issuance of the 2024 Bonds, the Company received $ 10.1 million as partial reimbursement of the Company’s Note Receivable from the Sky Ranch CAB for advances the Company made to the Sky Ranch CAB to fund the construction of public improvements to the Sky Ranch property.

On September 29, 2025, PCY Holdings, LLC and PCYO Home Rentals, LLC, both a wholly owned subsidiary of the Company, entered into a debt Facility Agreement (Facility Agreement) with a new banking partner.

The Facility Agreement provides up to $ 10 million to finance new single-family rental homes.

Under the Facility Agreement the Company guarantees payment and performance by its subsidiaries of obligations due under the Facility Agreement and related lending documents.

The Facility Agreement allows for flexibility to close on multiple single-family rental homes over a short duration with a variable per annum interest rate equal to the Western Edition of the Wall Street Journal as Prime Rate, with a floor of 4.55 %.

Under the Facility Agreement the Company and its subsidiaries have the option to consolidate multiple single-family rental homes into a term loan which would bear interest at a rate per annum equal to 5-year US CMT plus a margin of 2.75 %.

The term loan will be amortized over 25 years with a 5-year ballon.

The Facilities Agreement also contains financial covenants and collateral requirements.

On October 20, 2025 , the Company used proceeds from the Facility Agreement to fund the completed construction cost of five additional single-family rental homes.

As of the filing of this Form 10-K, the Company’s outstanding balance under the Facilities Agreement is $ 1.3 million.

Item 9 – Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

As previously reported, on September 15, 2022, we dismissed Plante & Moran, LLC as our independent registered public accounting firm and appointed Forvis Mazars, LLP (formerly known as FORVIS, LLP) as our independent registered public accounting firm for the Company’s fiscal year ending August 31, 2023.

The dismissal of Plante & Moran, LLC and engagement of Forvis Mazars, LLP was approved by the Audit Committee of the board of directors and the full board of directors.

We filed a Current Report on Form 8-K with the Securities and Exchange Commission on September 19, 2022 announcing the change in auditors, which filing is incorporated by reference herein.

Our independent registered accounting firm’s report on the financial statements for each of the past two years did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope, or accounting principles.

In connection with the foregoing change in accountants, there was no disagreement of the type described in paragraph (a)(1)(iv) of Item 304 of Regulation S-K or any reportable event as described in paragraph (a)(1)(v) of such Item.

For more information, please refer to the Company’s Current Report on Form 8-K filed on September 19, 2022.

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 8. Financial Statements and Supplementary Data