What changed in this filing

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Item 1. Business

2024-11-13 compared with 2023-11-15 · 83 added, 82 removed, 411 unchanged (29% of the section changed)

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We are a diversified water and wastewater service provider, land developer, and home rental company.

We provide wholesale water and wastewater services in the Denver Colorado area as well as develop land we own into master planned communities and develop single-family homes for rent.

We provide wholesale water and wastewater services in the Denver, Colorado area, develop land we own into master planned communities, and develop single-family homes for rent.

Each of our businesses, providing water and wastewater services, land development and single-family home rentals generate attractive recurring monthly income.

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Sky Ranch is zoned to include up to 3,200 single family and multifamily homes, parks, open spaces, trails, recreational centers, schools, and over two million square feet of retail, commercial and light industrial space, all of which will be serviced by our water and wastewater services segment.

More recently we have retained lots in our Sky Ranch development for our single-family rental business where we build single-family homes for rent under annual lease agreements.

Additionally, we have retained lots in our Sky Ranch development for our single-family rental business where we build single-family homes for rent under annual lease agreements.

With 14 homes currently owned and rented, we continue to expand this new line of business which may include more than 200 rental homes at Sky Ranch over the next several years.

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Our land development activities provide a strategic complement to our water and wastewater resource and service business, and vice versa.

One of the most significant components of any master planned community in Colorado is its ability to bring high quality domestic water, irrigation water, and wastewater services to the community.

Having control over the water resources in conjunction with developing the land enables us to efficiently build and maintain infrastructure for potable water and irrigation water distribution,

wastewater and storm water collection, roads, parks, open spaces, and other investments.

One of the most significant components of any master planned community in Colorado is its ability to bring high quality domestic

water, irrigation water, and wastewater services to the community.

Having control over the water resources in conjunction with developing the land enables us to efficiently build and maintain infrastructure for potable water and irrigation water distribution, wastewater and storm water collection, roads, parks, open spaces, and other investments.

It also enables us to efficiently align construction and delivery of these investments with phased take-down commitments from our home builder customers, minimizing expensive excess capacity or downtime with these significant investments.

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We refer to these segments as our water and wastewater resource development segment, our land development segment, and our single-family rental segment, all of which are described in greater detail below.

To date, within our three business segments, we have sold or have contracted for sale with national home builders approximately 1,350 lots, we have constructed and operated and maintain the water and wastewater systems with capacity to serve approximately 2,500 residential equivalent units and we have constructed and are renting 14 homes.

To date, within our three business segments, we have sold or are actively developing 1,395 finished lots, we have constructed and operated and maintain water and wastewater systems with capacity to serve approximately 2,500 residential equivalent units, and we have constructed and are renting 14 homes.

Water and Wastewater Resource Development Segment

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Multiple operators lease more than 135,000 acres in and adjacent to our service area with more than 100 wells and miles of oil and gas collection lines.

Sales of water to industrial customers in the oil and gas industry are unpredictable and fluctuate dramatically but provide a high margin attractive revenues for our water assets.

Sales of water to industrial customers in the oil and gas industry are unpredictable and fluctuate dramatically but provide a high margin attractive revenue for our water assets.

Beginning in late 2021 and continuing through 2024, we saw a significant recovery in the oil and gas markets, and this resulted in additional water sales to oil and gas clients in our fiscal 2024 and 2023.

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Sky Ranch is being developed in phases over several years, which began in June 2017, when we entered into agreements with three national home builders to sell the initial residential lots at Sky Ranch (referred to as Phase 1) and has continued to expand as we sell lots to national homebuilders now up to 1,395 residential lots.

We divided our land development into phases now working on Phase 2 which is further divided into subphases that we refer to as Phases 2A, 2B, 2C and 2D to optimize the delivery of infrastructure and lots to our home builder customers on a real time basis without excess inventories of lots and homes.

We divided our land development into phases.

We are now working on Phase 2 which is further divided into subphases that we refer to as Phases 2A, 2B, 2C and 2D to optimize the delivery of infrastructure and lots to our home builder customers on a real time basis without excess inventories of lots and homes.

Illustrative map of the Sky Ranch Master Planned Community

As of August 31, 2023, we have delivered to homebuilders 738 finished lots, retaining 14 lots for our single-family rental segment, are under construction on 211 lots scheduled for delivery in fiscal 2024, and have under contract an additional 410 lots scheduled for delivery in 2025/2026 at Sky Ranch.

As of August 31, 2024, we have delivered to homebuilders 949 finished lots, retaining 31 lots for our single-family rental segment, are under construction on 228 lots (Phase 2C) scheduled for delivery in fiscal 2025, and have an additional 218 lots (Phase 2D) scheduled for delivery in fiscal 2026 at Sky Ranch.

As of August 31, 2024, homebuilders have built and sold 719 homes at Sky Ranch, with approximately 53 additional homes under construction.

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As part of our land development activities, we formed a new Charter School, Sky Ranch Academy, for the purpose of partnering with the Bennett School District 29J to operate a new K-12 Charter School to be located at Sky Ranch.

Sky Ranch Academy has partnered with National Heritage Academy (NHA) to operate the charter, NHA brings more than 25 years of experience providing educational services at more than 100 schools in nine states, educating more than 60,000 students including five other schools in Colorado.

Ranch Academy opened in August 2023 serving grades K-7.

We anticipate the opening of the high school which will serve grades 9-12 for the school year 2025.

Sky Ranch Academy has partnered

with National Heritage Academy (NHA) to operate the charter, NHA brings more than 25 years of experience providing educational services at more than 100 schools in nine states, educating more than 60,000 students including five other schools in Colorado.

Sky Ranch Academy opened in August 2023 serving grades K-7.

In August of 2024 Sky Ranch Academy added grade 8.

We anticipate that NHA will be opening a high school which will serve grades 9-12 for the school year 2026.

Single-Family Rentals

During the past several years the housing market and home prices in Colorado grew at double-digit rates.

In recent months this growth has tapered off in many market segments, specifically in higher priced homes.

As mortgage rates increase, and the average price of homes in Colorado continues to rise, we believe rental homes are increasingly attractive to provide affordable housing options to the growing population in Colorado.

Additionally, more than any other time in the USA, we have seen a shift from people having to rent to people choosing to rent.

For several years the housing market and home prices in Colorado grew.

As mortgage rates increased, and the average price of homes in Colorado rose, we believed rental homes would become increasingly attractive to provide affordable housing options to the growing population in Colorado.

Additionally, we saw a shift from people having to rent to people choosing to rent.

We believe this shift will continue to shape the housing market for the foreseeable future.

To capitalize on the growing single-family rental market, we launched our single-family rental division.

We contracted with a local home builder to construct 14 single-family detached homes at Sky Ranch that we retained for use in our rental division.

These rental homes represent the initial investment into our third operating segment as we expect to add 65 homes in Phase 2 with the ability to add more than 200 homes as Sky Ranch builds out.

We believe having ongoing recurring rental income, in a community which is experiencing double digit growth in home values and in which we are actively involved adds value to the community and provides tremendous upside for growing our balance sheet and diversifying our recurring revenue streams.

We initially contracted with a local home builder to construct 14 single-family detached homes at Sky Ranch that we retained for use in our rental division.

We are currently under contract with a regional home builder to construct the next 12 single-family detached homes at Sky Ranch.

These rental homes represent our investment in our third operating segment as we expect to add 94 homes in Phase 2 with the ability to add more than 200 homes as Sky Ranch builds out.

Although the rise in home prices has dropped off in the last couple of years, we believe having ongoing recurring rental income, in a community which is experiencing double digit growth in home values and in which we are actively involved adds value to the community and provides tremendous upside for growing our balance sheet and diversifying our recurring revenue streams.

Our Water Assets

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Rangeview Water Supply

The Rangeview Water Supply consists of 26,985 acre-feet of tributary surface water, non-tributary groundwater, and not non-tributary groundwater, and approximately 26,000 acre-feet of adjudicated reservoir sites.

Our Rangeview Water Supply consists of 26,924 acre-feet of tributary surface water, non-tributary groundwater, and not non-tributary groundwater, and approximately 26,000 acre-feet of adjudicated reservoir sites.

Terminology typically used in the water industry that may help readers understand water rights are detailed below.

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

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

● The Option Agreement, dated January 20, 2024, among us, Rangeview District, and the Land Board (ECCV Option), which allows us to add the East Cherry Creek Valley (ECCV) system and 4,000 acre-feet or Arapahoe aquifer groundwater, to the lease described above, subject to the payments of additional rent, effective as of July 8, 2032, the expiration of the ECCV lease, described below under the heading “East Cherry Creek Valley System”.

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

We provide wholesale water service and wastewater service to customers located both on and outside of the Lowry Ranch, including customers of the Rangeview District and other governmental entities, and industrial and commercial customers.

Pursuant to service agreements with Rangeview (including the Lowry Service Agreement, the Lowry Wastewater Agreement and the Non-Lowry Service Agreement described below), we design, construct, operate and maintain the Rangeview District’s water and wastewater systems that are used to provide water and wastewater services to the Rangeview District’s customers located within the Rangeview District’s exclusive service area, and other approved areas.

Pursuant to service agreements with Rangeview (including the Lowry Service Agreement, the Lowry Wastewater Agreement and the Non-Lowry Service

Agreement described below), we design, construct, operate and maintain the Rangeview District’s water and wastewater systems that are used to provide water and wastewater services to the Rangeview District’s customers located within the Rangeview District’s exclusive service area, and other approved areas.

Subject to the terms and conditions of our agreements with the Rangeview District, we are the exclusive water and wastewater provider to the Rangeview District’s customers.

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In June 2022, we purchased 370 acre-feet of designated groundwater.

All the Lost Creek Water has been changed for use as municipal/industrial water, additionally we have filed an application with the Colorado Water Court to use the Lost Creek Water to augment our municipal/industrial water supplies at the Lowry Ranch.

All the Lost Creek Water has been changed for use as municipal/industrial/agricultural water, additionally we have filed an application with the Colorado Water Court to use the Lost Creek Water to augment our municipal/industrial water supplies at the Lowry Ranch.

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

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Harding (our President, Chief Executive Officer, and a director), Scott E.

Lehman (an employee of ours), Dirk Lashnits (an employee of ours), one independent board member, and one vacancy.

Lehman (our employee), Dirk Lashnits (our employee), Brent Brouillard (our employee), and one independent board member.

Pursuant to Colorado law, directors may receive $100 for each board meeting they attend, up to a maximum of $1,600 per year.

Harding, Lehman, and Lashnits have all elected to forego these payments .

Harding, Lehman, Lashnits, and Brouillard have all elected to forego these payments .

Land Board Royalties and Fees

Water Deliveries – Pursuant to the Rangeview Water Agreements, the Land Board is entitled to royalty payments based on a percentage of revenues earned from water sales that use the Rangeview Water Supply.

Water Deliveries – Pursuant to the Rangeview Water Agreements, the Land Board is entitled to royalty payments based on a percentage of revenue earned from water sales that use the Rangeview Water Supply.

The calculation of royalties depends on the location of the customer and whether the customer is a public or private entity.

The Land Board does not receive a royalty from wastewater services.

When we develop, operate, and deliver water from our Rangeview Water Supply, the Land Board receives royalties on the gross revenues at a rate of 12% from water delivered to all customers located on the Lowry Ranch and to all private customers located off the Lowry Ranch and 10% from public entity customers located off the Lowry Ranch.

When we develop, operate, and deliver water from our Rangeview Water Supply, the Land Board receives royalties on the gross revenue at a rate of 12% from water delivered to all customers located on the Lowry Ranch and to all private customers located off the Lowry Ranch and 10% from public entity customers located off the Lowry Ranch.

In the event that (i) metered production of water used on the Lowry Ranch in any calendar year exceeds 13,000 acre-feet or (ii) 10,000 acres of land on the Lowry Ranch have been rezoned to non-agricultural use, finally platted and water tap agreements have been entered into with respect to all improvements to be constructed on such acreage, the Land Board may elect, at its option, to receive (in lieu of its royalty of 12% from customers on the Lowry Ranch), 50% of the collective net profits (ours and the Rangeview District’s) derived from the sale or other disposition of water on the Lowry Ranch.

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The next increase will occur in 2026.

Option Fee – Pursuant to the terms of the ECCV Option, we paid the Land Board an initial fee of $50,000, and we pay an annual fee of $50,000 through 2032, which grants us the option to add the ECCV system and 4,000 acre-feet or Arapahoe aquifer groundwater, to our Lease upon the expiration of the ECCV Lease.

South Metropolitan Water Supply Authority (SMWSA) and Water Infrastructure Supply Efficiency Partnership (WISE)

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If a WISE member, including the Rangeview District, does not need its WISE water each year or a member needs additional water, the members can trade and/or buy and sell water amongst themselves.

For the year ended August 31, 2023, we, through the Rangeview District, purchased a total of just over 199 acre-feet of WISE water for $0.4 million.

For the year ended August 31, 2024, we, through the Rangeview

District, purchased a total of just over 134 acre-feet of WISE water for $0.4 million.

For the year ended August 31, 2023, we, through the Rangeview District, purchased a total of just under 199 acre-feet of WISE water for $0.4 million.

During the years ended August 31, 2023 and 2022, we provided $0.6 and $0.9 million of financing to the Rangeview District to fund the Rangeview District’s obligation to purchase WISE water rights and pay for operational and construction charges.

During the years ended August 31, 2024 and 2023, we provided $0.6 million each year of financing to the Rangeview District to fund the Rangeview District’s obligation to purchase WISE water rights and pay for operational and construction charges.

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

Additionally, in 2021 the Rangeview District entered into an agreement with WISE to construct special facilities for $0.6 million.

The construction of these special facilities began in our fiscal 2021 and was completed in our fiscal 2022.

We funded the construction of the special facilities, and the Rangeview District remitted the entire $0.6 million it received to us.

East Cherry Creek Valley System

Pursuant to a 1982 agreement, the Rangeview District may purchase water from East Cherry Creek Valley Water and Sanitation District’s (ECCV) Land Board system.

ECCV’s Land Board system is comprised of eight wells and more than ten miles of buried water pipeline located on the Lowry Ranch.

Pursuant to a 1983 lease, ECCV Water and Sanitation District’s leased the right to develop infrastructure to pump up to 4,000 acre feet of groundwater from the Arapahoe aquifer below the Lowry Range (ECCV Lease).

ECCV’s system is comprised of eight wells and more than ten miles of buried water pipeline located on the Lowry Ranch.

In May 2012, we entered into an agreement to operate and maintain the ECCV facilities allowing us to utilize the system to provide water to commercial and industrial customers, including hydraulic fracturing for oil and gas wells.

The agreement allows us to use the ECCV system through April 30, 2032, in exchange for a flat monthly fee and a fee per 1,000 gallons of water produced from ECCV’s system, which is included in the water usage fees charged to customers.

Sources of Water and Wastewater Service Revenues

Pursuant to the ECCV Option, we will be able to add the use of the ECCV system and 4,000 acre-feet of Arapahoe aquifer groundwater to our Lease, upon the expiration of the ECCV lease (July 8, 2032) through the expiration of our Lease in 2081.

Sources of Water and Wastewater Service Revenue

Our water and wastewater resource development segment generates revenue from the following sources, described in greater detail below:

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The royalty to the Land Board is required for water service provided utilizing our Rangeview Water Supply, which includes most of our current customers off the Lowry Ranch except those at the Elbert & Highway 86 Commercial District (also known as “Wild Pointe” described below).

We sell hydrant water at a rate of $14.76 per thousand gallons to commercial and industrial customers via hydrant meters or the Company’s water fill stations.

We sell bulk water at a rate of $14.76 per thousand gallons to commercial and industrial customers via bulk meters or the Company’s water fill stations.

We also collect other immaterial fees and charges from customers and other users to cover miscellaneous administrative and service expenses, such as application fees, review fees, reinspection fees, and permit fees.

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Water and Wastewater Tap Fees

We generate significant revenues from fees charged to customers to connect to our water and wastewater systems.

We generate significant revenue from fees charged to customers to connect to our water and wastewater systems.

These fees are known as tap fees.

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We have no obligation to physically connect the property to the lines;

this is typically done by the homebuilder.

this is typically done by the homebuilder or commercial developer.

Once connected to the water and/or wastewater systems, the property has live service, and the customer can receive metered water deliveries from our system and send wastewater into our system.

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Consulting Fees

Consulting fees are fees we receive, typically monthly, from municipalities and area water providers for whom we provide contract operation services.

Consulting fees are received, typically monthly, from municipalities and area water providers for whom we provide contract operation services.

Industrial – Oil and Gas Operations Fees

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In addition to customers on the Lowry Ranch, we have an agreement with the Rangeview District to be its exclusive water and wastewater service provider throughout its service area.

This includes the design, construction, operation and maintenance of water and wastewater systems to serve the Rangeview District’s customers located outside the Lowry Ranch Service Area (for example Wild

Pointe and Sky Ranch) (Non-Lowry Service Agreement).

In exchange for providing water and wastewater services to the Rangeview District’s customers that are not on the Lowry Ranch, we receive 100% of water and wastewater tap fees, 98% of the water usage fees, and 90% of the monthly wastewater service and usage fees received by the Rangeview District from these customers, after deduction of royalties due to the Land Board, if applicable (i.e., if we use a portion of the Rangeview Water Supply, such as the Export Water, to provide service to such customers).

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The development of Sky Ranch will occur in multiple filings and phases which will take several years to complete.

As of August 31, 2024, we have delivered to homebuilders 949 finished lots, retaining 31 lots for our single-family rental segment, are under construction on 228 lots scheduled for delivery in fiscal 2025, and have under contract an additional 218 lots scheduled for delivery in fiscal 2026 at Sky Ranch.

As of August 31, 2024, homebuilders have built and sold 719 homes at Sky Ranch, with approximately 53 homes under construction.

All Phase 1 lots in Sky Ranch are complete and all public improvements (roads, parks, open spaces, storm drain facilities, etc.) have been accepted by the various governmental entities that will control and maintain the infrastructure.

The total sales price for the 785 lots sold to the homebuilders in Phase 2 is $65.3 million, which is subject to price escalations depending on development timing which are not included in that figure.

The total sales price for the 792 lots sold and to be sold to the homebuilders in Phase 2 is approximately $69.9 million, which is subject to price escalations depending on development timing which are not included in that figure.

The total sales price for the 219 lots in Phase 2A is $18.4 million, which were completed in fiscal year 2022.

Total sales price for the 194 lots in Phase 2B is $17.3 million.

See below for a description of the conditions that may limit our ability to receive reimbursables and a definition of the Sky Ranch CAB.

As the land developer, we are providing finished lots (i.e.

lots ready for building permits to construct homes) to each of the home builders.

We build, or contract to build, the roads, curbs, wet and dry utilities, storm drains, parks, open spaces, and other related improvements as part of a master planned community.

As the land developer, we are obligated to provide finished lots (i.e.

lots ready for building permits to construct homes) to each of the home builders as part of our agreements with them.

We build, or contract to build, the roads, curbs, wet and dry utilities, storm drains, parks, open spaces, and other related improvements as part of a master planned community as part of our agreement with the Sky Ranch CAB.

Each builder is required to purchase water and wastewater taps for each lot from the Rangeview District at the time a building permit is issued.

The cost of the water and wastewater tap for a lot depends on the size of the lot, the size of the house, and the amount of irrigated landscaping.

Pursuant to the Non-Lowry Service Agreement, we receive all the water and wastewater tap fees from tap sales at Sky Ranch and 98% of the ongoing monthly water and 90% of ongoing monthly wastewater service revenues.

Public improvements, such as roads, parks, and water and sanitary sewer mains, storm sewer, and drainage improvements, that are shared by all homeowners in the development and not specific to any private finished lot are ultimately owned by the governmental metropolitan district or other municipality that is responsible for the maintenance of the improvements.

Upon completion and acceptance of certain public improvements by the “Sky Ranch Districts” or the Sky Ranch CAB (both of which are defined below), we are entitled to receive reimbursement for the verified public improvement costs.

Pursuant to certain agreements with the Sky Ranch Districts and the Sky Ranch CAB, on their behalf we construct public infrastructure such as roads, curbs, storm water, drainage, sidewalks, parks,

open space, trails etc., which costs are reimbursed to us by the Sky Ranch CAB, through funds generated by the Sky Ranch Districts through taxes, fees, or the issuance of municipal bonds.

Pursuant to certain agreements with the Sky Ranch Districts and the Sky Ranch CAB, on their behalf we construct public infrastructure such as roads, curbs, storm water, drainage, sidewalks, parks, open space, trails etc., which costs are reimbursed to us by the Sky Ranch CAB, through funds generated by the Sky Ranch Districts through taxes, fees, or the issuance of municipal bonds.

See Note 2 and Note 5 to the accompanying consolidated financial statements regarding treatment and recognition of these public improvement costs.

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The current directors of the districts are Mark W.

Harding (our President, Chief Executive Officer, and a director), Scott E.

Lehman (our employee), Dirk Lashnits (an employee of ours), two independent board members, and one vacancy.

Pursuant to Colorado law, directors may receive $100 for each board meeting they attend, up to a maximum of $1,600 per year.

Harding, Lehman, and Lashnits have all elected to forego these payments.

Harding (our President, Chief Executive Officer, and a director), Marc Spezialy (our Vice President, Chief Financial Officer), Scott E.

Lehman (our employee), Dirk Lashnits (our employee), and two independent board members.

Colorado law, directors may receive $100 for each board meeting they attend, up to a maximum of $1,600 per year.

Harding, Spezialy, Lehman, and Lashnits have all elected to forego these payments.

Sky Ranch Community Authority Board

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Advances and verified costs expended by us for expenses related to the construction of the agreed upon public improvements are reimbursable to us by the Sky Ranch CAB.

fees, or the issuance of bonds in an amount sufficient to reimburse us for all or a portion of advances or other public improvement expenses incurred.

No repayment is required of the Sky Ranch CAB for advances made or expenses incurred related to the construction of public improvements unless and until the Sky Ranch CAB and/or Sky Ranch Districts generate sufficient funds from property taxes, fees, or the issuance of bonds in an amount sufficient to reimburse us for all or a portion of advances or other public improvement expenses incurred.

Unpaid advances accrue interest at the rate of 6% annually.

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● In November 2019, the Sky Ranch CAB issued bonds and repaid $10.5 million;

● In January 2021, the Sky Ranch CAB repaid $0.4 million from unencumbered funds resulting from a budget surplus;

● In May 2022, the Sky Ranch CAB repaid $0.1 million from unencumbered funds resulting from a budget surplus;

● In fiscal 2021, the Sky Ranch CAB repaid $0.4 million from unencumbered funds resulting from a budget surplus;

● In fiscal 2022, the Sky Ranch CAB repaid $0.1 million from unencumbered funds resulting from a budget surplus;

● In August 2022, the Sky Ranch CAB issued bonds and repaid $23.6 million;

● In April 2023, the Sky Ranch CAB repaid $0.5 million from unencumbered funds resulting from a budget surplus;

● In June 2023, the Sky Ranch CAB repaid $0.4 million from unencumbered funds resulting from a budget surplus.

Prior to our fiscal 2021, the reimbursable expenditures we funded were expensed through land development construction costs, and project management revenue and interest income were not recognized as the reimbursement was deemed contingent on a sufficient tax base and/or the issuance of municipal bonds for collectability to be considered probable.

As Sky Ranch continues to grow, housing values increased, and the Sky Ranch CAB demonstrated the ability to repay the amounts owed to us, the collectability of reimbursable expenditures incurred to date has been determined to be probable;

Therefore, during fiscal 2021 we recognized the remaining reimbursable costs, project management fees, and interest.

During the year ended August 31, 2021, we recognized $21.7 million as a note receivable – related party with the offsetting entries being to other income, project management revenue and interest income for costs deemed reimbursable from the Sky Ranch CAB.

Due to continue growth and the continued belief the Sky Ranch CAB can repay amounts we spend on public improvements, Phase 2 reimbursable public improvements, along with the project management revenue, and interest income are being recorded as a note receivable from the Sky Ranch CAB as incurred.

● In fiscal 2023, the Sky Ranch CAB repaid $0.9 million from unencumbered funds resulting from a budget surplus;

● In fiscal 2024, the Sky Ranch CAB repaid $0.8 million from unencumbered funds resulting from a budget surplus.

Due to continued growth and the continued belief the Sky Ranch CAB can repay amounts we spend on public improvements, Phase 2 reimbursable public improvements, along with the project management revenue, and interest income are being recorded as a note receivable from the Sky Ranch CAB as incurred.

Note 5 to the accompanying consolidated financial statements summarizes the changes to the note receivable.

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The current directors of the Sky Ranch CAB are Mark W.

Harding (our President, Chief Executive Officer, and a director), Scott E.

Lehman (our employee), Dirk Lashnits (our employee), one independent board member, and one vacancy.

Harding (our President, Chief Executive Officer, and a director), Marc Spezialy (our Vice President, Chief Financial Officer), Scott E.

Lehman (our employee), Dirk Lashnits (our employee), and one independent board member.

Pursuant to Colorado law, directors may receive $100 for each board meeting they attend, up to a maximum of $1,600 per year.

Harding, Lehman, and Lashnits have all elected to forego these payments.

Harding, Spezialy, Lehman, and Lashnits have all elected to forego these payments.

Oil and Gas Leases

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To extend its rights under the OGOA for one additional year, the oil and gas operator paid us $75,000, which is being recognized into income over the term of the extension.

In July 2023, the operator paid us an additional $75,000 to extend its rights under the OGOA for one additional year, which is being recognized into income over the

term of the extension.

In July 2023, the operator paid us an additional $75,000 to extend its rights under the OGOA for one additional year, which is being recognized into income over the term of the extension.

This was the final extension allowed under the OGOA for a total of five years.

As of August 31, 2023, no wells have been drilled.

During fiscal year ending August 31, 2024, seven new wells were drilled on the pad site and placed into operations.

Arkansas River Land and Minerals

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We believe that we are well positioned to assist certain of these providers in meeting their current and future water needs.

We design, construct, and operate our water and wastewater facilities using advanced water treatment and wastewater treatment technologies, which allow us to use our water supplies in an efficient and environmentally sustainable manner.

We design, construct, operate and maintain our water and wastewater facilities using advanced water treatment and wastewater treatment technologies, which allow us to use our water supplies in an efficient and environmentally sustainable manner.

We develop our water and wastewater systems in stages to efficiently meet customer demands in our service areas by managing capital investments required for construction of facilities.

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We continue developing our Sky Ranch property, including finishing lots for home builders, building additional water and wastewater infrastructure for residential and commercial development at the property, and having homes constructed for our single-family home rental business.

During the years ended August 31, 2023 and 2022, for Phases 2A and 2B we invested $9.8 million and $11.5 million in our Sky Ranch land which included $1.9 million and $2.0 million of expensed costs related to the delivery of finished lots and $7.9 million and $9.5 million of costs for public improvements which we expect to be repaid by the Sky Ranch CAB.

During the years ended August 31, 2024 and 2023, for Phase 2 we invested $18.8 million and $9.8 million in our Sky Ranch land which included $7.1 million and $1.9 million of expendable costs related to the delivery of finished lots and $11.7 million and $7.9 million of costs for public improvements which we expect to be repaid by the Sky Ranch CAB.

Additionally, we spent approximately $0.4 million and $3.8 million on construction costs related to our single-family rental business.

Phase 1 was our first project as a land developer and was done ahead of our original schedule and on budget.

Phase 2A, which broke ground in February 2021, incurred a total of $21.2 million of construction costs to deliver the lots (of which we estimate $18.5 million is for public improvements which is to be repaid by the Sky Ranch CAB).

Phase 2B, which broke ground in March 2023, incurred a total of $16.9 million of construction costs to deliver the lots (of which we estimate $14.0 million is for public improvements to be repaid by the Sky Ranch CAB).

During the years ended August 31, 2024 and 2023, we sold 69 and 90 water and wastewater taps at Sky Ranch to homebuilders, which generated $2.6 million and $2.7 million of tap fees.

As of August 31, 2023, we have sold 703 water and wastewater taps at Sky Ranch in Phases 1 and 2A.

Based on current prices and engineering estimates, we believe Phase 2 of Sky Ranch will produce additional tap fee revenue of $20.6 million in water and wastewater tap fee revenue and cash over the next 3-5 years.

The Company sold an additional 4 and 14 water taps during the years ended August 31, 2024 and 2023, which generated $0.8 million and $0.4 million.

As of August 31, 2024, we have sold 777 water and wastewater taps at Sky Ranch in Phases 1, 2A, and 2B.

Based on current prices and engineering estimates, we believe Phase 2 of Sky Ranch will produce additional tap fee revenue of $19.8 million in water and wastewater tap fee revenue and cash over the next three years.

Our first three rental homes at Sky Ranch were completed and rented in November 2021.

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This indicates that water will continue to be critical to growth prospects for the region and the state, and that competition for available sources of water will continue to intensify.

Due to COVID-19, we have witnessed several changing consumer patterns, including residents leaving downtown urban areas to buy homes in the suburbs.

In recent years we have witnessed several changing consumer patterns, including residents leaving downtown urban areas to buy homes in the suburbs and work remotely.

This put our Sky Ranch community in the enviable position of being able to respond to this demand due to its great location, affordable home prices, available inventory, and easy access to work centers and major transportation corridors.

We believe our ability to pair our water to our land and our in-house expertise for operating our systems allowed us to provide home builders with an affordable and sustainable master planned community that allowed our builders to quickly satisfy the increased demand from home buyers.

We believe our affordable community will continue to grow even in the slowing housing market we experienced in fiscal 2023 and continue to experience in fiscal 2024.

We believe our affordable community will continue to grow through cyclical housing markets such as we experienced in fiscal 2024 and continue to experience in fiscal 2025.

Growth in the Denver area has trended east with significant activity occurring along the I-70 corridor, an area which enjoys excellent transportation infrastructure with I-70, rail access, and Denver International Airport (DIA).

The region has significant employment centers, including DIA, the University of Colorado Anschutz Medical Campus, an Amazon fulfillment center, the Rocky Mountain Regional VA Medical Center, Buckley Space Force Base, and more, creating demand for residential, retail, and commercial development opportunities.

This tremendous growth, coupled with the low new and resale home inventories, along with a shift in lifestyle choices from home ownership to renting, has pushed the single-family rental market into double-digit growth.

This tremendous growth, coupled with relatively low new and resale home inventories, along with a shift in lifestyle choices from home ownership to renting, has pushed the single-family rental market into double-digit growth.

Although this market has existed for decades, the focus has shifted from individuals owning the units to commercial institutions buying large blocks of houses for rentals.

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Demand for rental units has been steadily increasing due to current demographic trends related to Gen-Y and baby boomers;

however, migration patterns related to COVID-19 have accelerated that demand.

however, migration patterns related to remote work have accelerated that demand.

According to the 2021 census, single-family rentals grew by 31% from 2007 to 2016, compared to 14% for multifamily rentals over the same period.

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Increased costs or shortages of skilled labor, concrete, steel, pipe, and other materials could cause increases in development costs and delays.

These shortages and delays may result in delays in the delivery of the lots under development or the completion of water or wastewater facilities, increase costs for us or other contractors on our projects, reduce gross margins from sales, or subject us to penalties or defaults under our agreements.

These shortages and delays may result in delays

in the delivery of the lots under development or the completion of water or wastewater facilities, increase costs for us or other contractors on our projects, reduce gross margins from sales, or subject us to penalties or defaults under our agreements.

While we contract with third parties for our labor and materials at a fixed price, which we believe allows us the ability to mitigate the risks associated with shortages of and increases in the cost of labor and building materials, other unforeseen factors may arise which could increase our costs.

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(iii) specific terms related to our provision of ongoing water and wastewater services to our local governmental customers as well as the governmental entities’ end-use customers.

Although we have exclusive long-term water and wastewater service contracts for 24,000 acres of the Lowry Ranch, Wild Pointe, and Sky Ranch pursuant to our service agreements, providing water and wastewater service is subject to competition.

Although we have exclusive long-term water and wastewater service contracts for 24,000 acres of the Lowry Ranch, Wild Pointe, and Sky Ranch, providing water and wastewater service is subject to competition elsewhere.

Alternate sources of water are available, principally from other private parties such as farmers or others owning water rights that have historically been used for agriculture, and from municipalities seeking to annex new development areas in order to increase their tax base.

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Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our shareholders.

We provide employees with compensation packages that include base salary, incentive bonuses, and long-term equity awards tied to the value of our stock price.

We provide employees with compensation packages that include base salary, incentive bonuses, and long-term equity awards tied to the value of our stock price and other key performance indicators.

We believe that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns employee and shareholder interests, including by incentivizing business and individual performance (pay for performance), motivating based on long-term company performance and integrating compensation with our business plans.

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

What changed 10-K

Item 1. Business