Revenue Growth - Water and wastewater resource development revenue increased by 90% to $2,198,000 for the three months ended May 31, 2021, compared to $1,154,000 for the same period in 2020[116] - Total revenue rose by 44% to $2,666,000 for the three months ended May 31, 2021, up from $1,850,000 in the prior year[116] - Total revenue for the nine months ended May 31, 2021, decreased by 22% to $12,273,000 compared to $15,829,000 for the same period in 2020[117] - Water and wastewater resource revenue increased by 71% to $7,386,000, while land development revenue decreased by 58% to $4,887,000[117] - Water and wastewater tap sales increased by 85% to $1,856,000, driven by increased home closings and higher average prices[129] - Total revenue for Q3 2021 was $468,000, a decrease of 33% from $696,000 in Q3 2020[144] - Total revenue for the nine months ended May 31, 2021 was $4.887 million, down 58% from $11.503 million in the prior year[145] Net Income and Earnings - Net income surged to $624,000 for the three months ended May 31, 2021, a significant increase of 2,211% from $27,000 in the same period last year[116] - Net income for the nine months ended May 31, 2021, increased by 201% to $18,276,000, with basic EPS rising to $0.77 from $0.25[117] - Segment operating income for the nine months ended May 31, 2021 increased by 162% to $2.8 million from $1.067 million in 2020[145] Water Delivery and Usage - Water delivered increased by 36% to 16,541 thousand gallons for the three months ended May 31, 2021, compared to 12,205 thousand gallons in the previous year[116] - Water deliveries increased by 290% to 126,253 thousand gallons compared to 32,394 thousand gallons in the prior year[117] - Water deliveries increased in 2021 compared to 2020, driven by increased oil and gas operations, new Sky Ranch customers, and higher landscaping and irrigation water usage[142] Development Projects - The Sky Ranch development is expected to include a total of roughly 5,000 residential and equivalent units upon completion, with 3,400 single-family and multifamily homes planned[106] - The company has incurred $35.3 million of the estimated $35.8 million costs related to the first phase of Sky Ranch development, with $32.2 million expected to be reimbursable[109] - The company expects to recognize revenue from phase two land development in the fourth fiscal quarter of 2021[118] - The estimated total costs to complete the second phase of Sky Ranch are $65 million, with approximately $21 million expected to be spent in the next twelve months[154] Costs and Expenses - General and administrative expenses rose by 37% to $3,986,000, attributed to increased headcount and legal fees[117] - Costs of revenue decreased by 59% to $4,949,000, mainly due to reduced land development costs as phase one nears completion[117] - Wastewater service costs increased in 2021 compared to 2020, primarily due to the new Sky Ranch water reclamation facility being operational for the entire fiscal year[141] Lot Sales and Pricing - Water and wastewater taps sold rose by 64% to 59 for the three months ended May 31, 2021, up from 36 in the same period in 2020[116] - The company anticipates an increase in lot prices by approximately 30%, from $75,000 to $97,000 for a 50' lot in the second phase of Sky Ranch[110] - Lot sales decreased by 36% in Q3 2021, totaling $445,000 compared to $696,000 in Q3 2020[144] - For the nine months ended May 31, 2021, lot sales decreased by 71% to $3.316 million from $11.503 million in the same period of 2020[145] Cash and Working Capital - As of May 31, 2021, the company had working capital of $16.5 million, including $19.8 million in cash and cash equivalents[153] - The company expects to receive an additional $1.5 million in water and wastewater tap fees during calendar 2021, following $13.3 million generated from the Sky Ranch development[109] - The company anticipates investing $1.1 million in 2021 and $7.5 million from 2022 to 2025 for the Rangeview District's participation in WISE[156] New Business Initiatives - The Build-to-Rent line of business was launched in March 2021, with three single-family homes under construction expected to be completed by fall 2021[112]

Water & Wastewater Resource Development - The company owns or controls over 29,000 acre-feet of groundwater & surface water, estimated to serve 60,000 taps[12, 15] - The average metered water & sewer annual usage charges are $1,500 per SFE[12] - The company projects buildout annual revenues of $90 million per year[13] Land Development (Sky Ranch) - Sky Ranch Phase 1 has delivered all 509 lots and sold 446 of 506 taps[25] - Sky Ranch Phase 1 recognized $367 million in lot revenue and $133 million in tap fees to date[25] - Sky Ranch Phase 2 has approximately 900 lots in total, with 800 lots under contract with home builders[27] - Sky Ranch Phase 2 estimates lot revenues of $726 million and tap fees of $215 million, along with $48 million of reimbursable costs[27] - 50' lots sold for 40% more and 45' lots sold for 30% more[29] Build-to-Rent (BTR) - The company estimates an annualized average cash flow per home of $15,000 in the BTR segment[41] - The company estimates a fair market value of $450,000 per house, with annual appreciation estimated at 4% per year[47] Financial Results - The company has recognized approximately $367 million in lot revenues, $133 million in tap fees, and $29 million in other income from reimbursables since the inception of Sky Ranch[58]

Financial Data and Key Metrics Changes - For the nine months ended, the company reported approximately $12 million in revenue, with gross margins around $7 million and net income reaching about $18 million [36][37] - The company recognized $36.7 million in lot revenues from Phase 1 and is nearing completion of tap fees, currently at $13.3 million with a target of $14.5 million [36][37] Business Segment Data and Key Metrics Changes - The Water Utility segment has a portfolio capable of serving about 60,000 connections, generating approximately $2 billion in top-line revenue with a 50% margin [11][12] - The Land Development segment has about 930 acres accommodating 3,400 residential lots, with $36.7 million in lot fee revenues recorded [15][18] - The Single-Family Rental segment forecasts rental income averaging $2,800 per unit, with significant appreciation in home values noted at nearly 26% [24][27] Market Data and Key Metrics Changes - The housing market in Colorado has seen a significant increase in average single-family home prices, moving from around $350,000 to approximately $480,000 - $500,000 [24] - Inventory levels have decreased from 9 weeks to 2 weeks year-over-year, indicating a robust demand in the starter home market [25] Company Strategy and Development Direction - The company is focused on acquiring additional land for future developments, leveraging its water rights to enhance its competitive position in the market [45] - The strategy includes a dual focus on land and utilities, which provides a unique advantage over competitors who do not have similar asset bases [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential of both the water utility and land segments, while also highlighting the recurring revenue from the single-family rental model [47] - The company is aware of the competitive landscape in the rental market but believes its integrated approach will yield significant cash flows [46] Other Important Information - The company plans to refresh its financial presentation with detailed metrics later in the week following a spreadsheet error [35] - An Investor Day is scheduled, providing an opportunity for stakeholders to see the company's developments and operations firsthand [52] Q&A Session Summary Question: Future land acquisition for rentals - Management confirmed they are actively seeking additional land for apartment and house rentals, with a focus on larger assemblages nearby [45] Question: Will recurring revenue become the largest part of the business? - Management indicated that while recurring revenue will be significant, the water utility and land segments will also continue to provide substantial growth opportunities [47]

Financial Data and Key Metrics Changes - The company recognized approximately $19 million in project-related other income due to the collectability of reimbursables, along with $1.5 million in project management fees and $1.4 million in interest income, aligning gross margins with expectations [52][53] - Metered water usage increased by about $100,000, primarily due to growth at Sky Ranch, which has around 300 homes built [56] - Lot fee revenue declined significantly as the first filing is substantially complete, with revenues expected to be recognized from the second filing later in the year [57] Business Segment Data and Key Metrics Changes - The Water Resource segment owns about 29,000 acre-feet of water rights, enabling service to an estimated 60,000 connections, generating about $2 billion in revenue with a 50% margin [6][8] - The Land Development segment has a project capacity of up to 3,400 residential units and a couple million square feet of commercial development, with the first phase of 509 single-family lots nearing sell-out [15][20] - The Build-to-Rent segment is projected to generate positive cash flow of approximately $15,000 per single-family connection, enhancing the income statement [40][41] Market Data and Key Metrics Changes - The Denver area has seen a significant decrease in entry-level home starts, dropping from 50% pre-recession to less than 4% currently, indicating strong demand for affordable housing [34] - The company is positioned in a competitive market for land acquisition, with a focus on properties that include water rights, providing a competitive advantage [94] Company Strategy and Development Direction - The company aims to capitalize on the growing demand for affordable housing through its Build-to-Rent model, which allows for long-term rental income while leveraging existing land and utility investments [32][41] - The strategy includes maintaining in-house property management to ensure efficiency and cost-effectiveness in managing rental properties [116] - The company is actively seeking additional land for development, balancing between purchasing and partnering with existing landowners [91][92] Management's Comments on Operating Environment and Future Outlook - Management noted that COVID-19 caused delays in processing approvals for the second phase of development, but they remain optimistic about future management of these processes [60][62] - The company is focused on maintaining competitive pricing despite rising costs in materials and labor, emphasizing partnerships with national builders to manage costs effectively [79][80] Other Important Information - The company plans to host an Investor Day in mid-July to showcase developments and provide updates on various projects [136] - A new website is in development to enhance virtual presence and provide real-time updates on construction activities [137] Q&A Session Summary Question: When and how will the company proceed with commercial development? - Management indicated that commercial development will likely begin in the later stages of the second phase, potentially in summer 2022, as residential units are built out [73][74] Question: How does residential development impact the value of remaining lots? - Management confirmed that amenities and infrastructure improvements significantly increase the value of both lots and homes, making the Build-to-Rent model attractive [76][77] Question: What is the financing structure for the Build-to-Rent project? - The financing is directly related to the residential units and does not impact the general balance sheet, with fixed-rate loans being utilized [78][124] Question: What is the company's strategy for land acquisition? - Management is actively pursuing land acquisitions while being disciplined about pricing, focusing on properties with water rights to maintain a competitive edge [91][94] Question: How will property management be handled? - The company plans to manage properties in-house to leverage existing resources and maintain efficiency [116] Question: What is the expected proportion of Build-to-Rent properties? - Management anticipates that around 10% to 15% of the overall units will be designated for Build-to-Rent, with a focus on maintaining community balance [111][115]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 28, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 000-08814 PURE CYCLE CORPORATION (Exact name of registrant as specified in its charter) Colorado 84-0705083 (State or ...

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents Pure Cycle Corporation's unaudited condensed consolidated financial statements and detailed notes for the period ended November 30, 2020 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%3A%20November%2030%2C%202020%20%28unaudited%29%20and%20August%2031%2C%202020) The balance sheet shows a slight decrease in total assets, primarily driven by a reduction in current assets, while total liabilities decreased, leading to an increase in total shareholders' equity | Metric | Nov 30, 2020 (unaudited) | Aug 31, 2020 | | :-------------------------------- | :----------------------- | :----------- | | Total Assets | $88,953 thousand | $89,761 thousand | | Total Liabilities | $5,978 thousand | $7,717 thousand | | Total Shareholders' Equity | $82,975 thousand | $82,044 thousand | - Current assets decreased from **$25,991 thousand to $24,358 thousand**, mainly due to reductions in cash, receivables, and land development inventories[9](index=9&type=chunk) - Total current liabilities decreased significantly from **$6,218 thousand to $4,422 thousand**, primarily due to decreases in deferred oil and gas lease payments, water sales payments, and accrued liabilities[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28unaudited%29%3A%20For%20the%20three%20months%20ended%20November%2030%2C%202020%20and%202019) The company experienced a substantial decrease in net income for the three months ended November 30, 2020, primarily due to lower lot sales revenue and a significant reduction in income from reimbursement of construction costs | Metric | 3 Months Ended Nov 30, 2020 | 3 Months Ended Nov 30, 2019 | Change ($) | Change (%) | | :------------------------------------ | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total Revenues | $4,868 thousand | $10,460 thousand | $(5,592) thousand | -53.5% | | Gross Profit | $2,123 thousand | $1,874 thousand | $249 thousand | 13.3% | | Operating Income | $953 thousand | $988 thousand | $(35) thousand | -3.5% | | Net Income | $845 thousand | $5,763 thousand | $(4,918) thousand | -85.3% | | Basic and Diluted EPS | $0.04 | $0.24 | $(0.20) | -83.3% | - Lot sales revenue decreased significantly from **$8,542 thousand in 2019 to $2,356 thousand in 2020**, contributing to the overall revenue decline[10](index=10&type=chunk) - Income from reimbursement of construction costs (related party) was **$0 in 2020**, down from **$6,276 thousand in 2019**, a major factor in the reduced net income[10](index=10&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders%27%20Equity%20%28unaudited%29%3A%20For%20the%20three%20months%20ended%20November%2030%2C%202020%20and%202019) Shareholders' equity increased from $82,044 thousand at August 31, 2020, to $82,975 thousand at November 30, 2020, primarily driven by net income and share-based compensation | Metric | Nov 30, 2020 | Aug 31, 2020 | | :-------------------------- | :----------- | :----------- | | Total Shareholders' Equity | $82,975 thousand | $82,044 thousand | | Accumulated Deficit | $(90,118) thousand | $(90,963) thousand | | Additional Paid-in Capital | $173,013 thousand | $172,927 thousand | - Net income of **$845 thousand** contributed to the increase in shareholders' equity for the three months ended November 30, 2020[12](index=12&type=chunk) - Share-based compensation added **$86 thousand** to additional paid-in capital during the period[12](index=12&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20%28unaudited%29%3A%20For%20the%20three%20months%20ended%20November%2030%2C%202020%20and%202019) Cash flows from operating activities significantly decreased in the three months ended November 30, 2020, primarily due to the absence of a bond payment reimbursement and lower lot sales revenues, while investing activities shifted from a net cash provider to a net cash user | Metric | 3 Months Ended Nov 30, 2020 | 3 Months Ended Nov 30, 2019 | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Net Cash Provided by Operating Activities | $6 thousand | $14,721 thousand | $(14,715) thousand | -100% | | Net Cash (Used) Provided by Investing Activities | $(499) thousand | $2,875 thousand | $(3,374) thousand | -117% | | Net Cash Used by Financing Activities | $(1) thousand | $(2) thousand | $1 thousand | 50% | | Net Change in Cash and Cash Equivalents | $(494) thousand | $17,594 thousand | $(18,088) thousand | -102.8% | - The substantial decrease in operating cash flow was mainly due to the **$4.2 million** proceeds from CAB reimbursement applied to land development inventories in 2019 and higher lot sales revenues in the prior year[15](index=15&type=chunk) - Investing activities used cash in 2020 due to investments in water, water systems, and land, contrasting with 2019 which saw cash provided by the sale of short-term investments[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential context and detailed accounting policies for the condensed consolidated financial statements, covering various financial aspects and disclosures [NOTE 1 – PRESENTATION OF INTERIM INFORMATION](index=8&type=section&id=NOTE%201%20%E2%80%93%20PRESENTATION%20OF%20INTERIM%20INFORMATION) This note clarifies that the interim financial statements are unaudited and prepared in accordance with GAAP, with certain disclosures condensed or omitted, and discusses the non-material impact of the CARES Act and ASU 2016-13 - The unaudited condensed consolidated financial statements include all necessary adjustments for fair presentation[18](index=18&type=chunk) - Management does not anticipate a material impact from the CARES Act on the financial statements[20](index=20&type=chunk) - The adoption of ASU 2016-13 (Credit Losses) is not expected to have a material impact on the Company's financial statements[22](index=22&type=chunk) [NOTE 2 – REVENUE RECOGNITION AND REIMBURSABLE COSTS](index=9&type=section&id=NOTE%202%20%E2%80%93%20REVENUE%20RECOGNITION%20AND%20REIMBURSABLE%20COSTS) The company disaggregates revenue into water/wastewater and land development segments, with recognition varying by service type, and defers reimbursable public improvement costs and project management fees until cash receipt due to payment contingencies - Water and wastewater resource development revenue includes monthly usage fees and tap fees, both recognized at a point in time[26](index=26&type=chunk)[27](index=27&type=chunk) - Land development revenue from finished lot sales is recognized at the point of sale, while revenue from lot development agreements is recognized over time based on costs incurred[28](index=28&type=chunk)[29](index=29&type=chunk) | Reimbursable Cost Type | Costs Incurred to Date (Nov 30, 2020) | Payments Repaid by Sky Ranch CAB | Amounts Payable to Pure Cycle by Sky Ranch CAB | | :-------------------------------- | :------------------------------------ | :------------------------------- | :--------------------------------------------- | | Public Improvements | $28,008 thousand | $10,505 thousand | $17,503 thousand | | Accrued interest | $1,456 thousand | — | $1,456 thousand | | Project management services | $1,496 thousand | — | $1,496 thousand | | Construction support activities | $683 thousand | — | $683 thousand | | **Total Reimbursable Costs** | **$31,643 thousand** | **$10,505 thousand** | **$21,138 thousand** | [NOTE 3 – FAIR VALUE MEASUREMENTS](index=12&type=section&id=NOTE%203%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) The company uses a three-level fair value hierarchy, with no Level 1 or Level 2 assets or liabilities as of November 30, 2020, and the only Level 3 liability being a contingent portion of the CAA with an undeterminable fair value - No assets or liabilities were measured at fair value on a recurring basis as of November 30, 2020, or August 31, 2020[46](index=46&type=chunk) - The contingent portion of the CAA is classified as a Level 3 liability but its fair value is not determinable[44](index=44&type=chunk) [NOTE 4 – WATER AND LAND ASSETS](index=13&type=section&id=NOTE%204%20%E2%80%93%20WATER%20AND%20LAND%20ASSETS) The company's investments in water and water systems primarily consist of various water supplies, water rights, and infrastructure, with construction in progress for additional water facilities at Sky Ranch expected to be completed in fiscal 2021 | Investment Category | Costs (Nov 30, 2020) | Accumulated Depreciation and Depletion (Nov 30, 2020) | Net Investment (Nov 30, 2020) | | :-------------------------------- | :------------------- | :------------------------------------------ | :---------------------------- | | Rangeview water supply | $14,570 thousand | $(16) thousand | $14,554 thousand | | Sky Ranch water rights and other costs | $7,538 thousand | $(1,035) thousand | $6,503 thousand | | Rangeview water system | $16,049 thousand | $(929) thousand | $15,120 thousand | | Construction in progress | $1,454 thousand | — | $1,454 thousand | | **Total Net Investments** | **$60,977 thousand** | **$(5,812) thousand** | **$55,165 thousand** | - Construction in progress increased from **$1,339 thousand to $1,454 thousand**, primarily for additional water facilities at Sky Ranch, anticipated to be in service during fiscal 2021[48](index=48&type=chunk) [NOTE 5 – LONG-TERM OBLIGATIONS AND OPERATING LEASE](index=13&type=section&id=NOTE%205%20%E2%80%93%20LONG-TERM%20OBLIGATIONS%20AND%20OPERATING%20LEASE) This note details the company's long-term obligations, including a contingent participating interest in export water supply, new contracts for 789 residential lots at Sky Ranch with a 30% price increase, WISE Partnership investments, and operating lease commitments - The recorded obligation of the CAA is **$0.3 million**, with a contingent off-balance sheet portion of **$0.6 million** as of November 30, 2020[52](index=52&type=chunk) - New contracts were signed in November 2020 to sell **789 residential lots at Sky Ranch**, with lot prices increasing by **30% from $75,000 to $97,000** for a 50' lot[54](index=54&type=chunk) - The company, through the Rangeview District, purchased an additional **166 acre-feet of WISE water for $0.3 million** during the three months ended November 30, 2020[56](index=56&type=chunk) [NOTE 6 – SHAREHOLDERS' EQUITY](index=16&type=section&id=NOTE%206%20%E2%80%93%20SHAREHOLDERS%27%20EQUITY) The company maintains the 2014 Equity Incentive Plan, with 979,382 shares available for grant as of November 30, 2020, and has unrecognized compensation expense for non-vested options totaling $0.8 million - As of November 30, 2020, **979,382 shares** were available for grant under the 2014 Equity Plan[62](index=62&type=chunk) | Stock Option Activity | Number of Options | Weighted Average Exercise Price | | :-------------------------------- | :---------------- | :------------------------------ | | Outstanding at August 31, 2020 | 661,500 | $7.23 | | Granted | 115,000 | $9.00 | | Net settlement exercised | (18,000) | $3.04 | | Outstanding at November 30, 2020 | 758,500 | $7.59 | - Unrecognized compensation expenses for non-vested options totaled **$0.8 million** at November 30, 2020, with a weighted-average vesting period of approximately three years[67](index=67&type=chunk) [NOTE 7 – RELATED PARTY TRANSACTIONS](index=17&type=section&id=NOTE%207%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) The company has significant related party transactions with the Rangeview Metropolitan District and the Sky Ranch Community Authority Board (CAB), involving funding for water infrastructure, loans, and advances for public improvements, with reimbursements contingent on bond issuances or property tax assessments - The Company's total investment in WISE assets as of November 30, 2020, is **$6.1 million**, funding the Rangeview District's participation[70](index=70&type=chunk) - Advances for improvements to the Sky Ranch CAB, including interest, totaled **$21.1 million** as of November 30, 2020, with interest income deferred until bonds are issued[75](index=75&type=chunk) - Notes receivable from related parties, primarily the Rangeview District, amounted to **$1.1 million** at November 30, 2020, including **$0.4 million** in accrued interest[71](index=71&type=chunk) [NOTE 8 – SIGNIFICANT CUSTOMERS](index=19&type=section&id=NOTE%208%20%E2%80%93%20SIGNIFICANT%20CUSTOMERS) Significant customers for the water and wastewater resource development segment include Sky Ranch homes and Crestone Peak Resources, while key customers for the land development segment and tap fees are homebuilders such as Taylor Morrison, KB Home, and Richmond Homes - Sky Ranch homes and Crestone Peak Resources are significant end users for water and wastewater services[78](index=78&type=chunk) - Taylor Morrison, KB Home, and Richmond Homes are significant customers for land development and water/wastewater tap fees[78](index=78&type=chunk) [NOTE 9 – ACCRUED LIABILITIES](index=19&type=section&id=NOTE%209%20%E2%80%93%20ACCURRED%20LIABILITIES) Total accrued liabilities decreased from $2,603 thousand at August 31, 2020, to $2,180 thousand at November 30, 2020, with key components including amounts due to the Sky Ranch CAB, other operating payables, and WISE water obligations | Accrued Liability | Nov 30, 2020 | Aug 31, 2020 | | :-------------------------------- | :----------- | :----------- | | Due to the Sky Ranch CAB - related party | $823 thousand | $1,169 thousand | | Accrued compensation | $146 thousand | $767 thousand | | WISE water | $326 thousand | $69 thousand | | Land development - warranty and other - related party | $321 thousand | — | | **Total** | **$2,180 thousand** | **$2,603 thousand** | - A significant decrease in accrued compensation and amounts due to the Sky Ranch CAB contributed to the overall reduction in accrued liabilities[79](index=79&type=chunk) [NOTE 10 – COMMITMENTS AND CONTINGENCIES](index=19&type=section&id=NOTE%2010%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) The company was not involved in any litigation or legal proceedings, nor did it have any contingencies with a reasonably possible risk of material loss as of November 30, 2020, or August 31, 2020 - No material loss contingencies were identified as probable or reasonably estimable[80](index=80&type=chunk) [NOTE 11 – SEGMENT INFORMATION](index=21&type=section&id=NOTE%2011%20%E2%80%93%20SEGMENT%20INFORMATION) The company operates in two reportable segments: water and wastewater resource development, and land development, with oil and gas operations considered a passive activity, and both reportable segments showing improved gross margins despite varying revenue performance | Segment | Total Revenue (Nov 30, 2020) | Gross Margin (Nov 30, 2020) | Pretax Operating Income (Nov 30, 2020) | | :-------------------------------- | :--------------------------- | :-------------------------- | :------------------------------------- | | Water and wastewater resource development | $2,512 thousand | $1,486 thousand | $1,486 thousand | | Land development | $2,356 thousand | $637 thousand | $637 thousand | | Corporate | $0 | $0 | $(1,170) thousand | | **Total** | **$4,868 thousand** | **$2,123 thousand** | **$953 thousand** | | Segment | Total Assets (Nov 30, 2020) | Total Assets (Aug 31, 2020) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Water and wastewater resource development | $55,376 thousand | $56,267 thousand | | Land development | $6,598 thousand | $6,975 thousand | | Corporate | $26,979 thousand | $26,519 thousand | | **Total** | **$88,953 thousand** | **$89,761 thousand** | - Water and wastewater resource development revenue increased from **$1,918 thousand in 2019 to $2,512 thousand in 2020**, while land development revenue decreased from **$8,542 thousand to $2,356 thousand**[84](index=84&type=chunk) [NOTE 12 – INCOME TAXES](index=22&type=section&id=NOTE%2012%20%E2%80%93%20INCOME%20TAXES) Income tax expense for the three months ended November 30, 2020, was $0.3 million, significantly lower than the prior year, with a stable effective income tax rate and an increased net deferred tax liability | Metric | 3 Months Ended Nov 30, 2020 | 3 Months Ended Nov 30, 2019 | | :-------------------- | :-------------------------- | :-------------------------- | | Income Tax Expense | $0.3 million | $1.9 million | | Effective Tax Rate | 24.6% | 24.7% | | Deferred Tax Component | Nov 30, 2020 | Aug 31, 2020 | | :----------------------- | :----------- | :----------- | | Depreciation and depletion | $(1,672) thousand | $(1,701) thousand | | Non-qualified stock options | $505 thousand | $491 thousand | | Net deferred tax liability | $(1,012) thousand | $(886) thousand | - No taxes were paid during the three months ended November 30, 2020, or 2019[88](index=88&type=chunk) [NOTE 13 – EARNINGS PER SHARE](index=22&type=section&id=NOTE%2013%20%E2%80%93%20EARNINGS%20PER%20SHARE) Basic and diluted net income per common share for the three months ended November 30, 2020, was $0.04, a significant decrease from $0.24 in the prior year, with certain outstanding options excluded from diluted EPS as they were anti-dilutive | Metric | 3 Months Ended Nov 30, 2020 | 3 Months Ended Nov 30, 2019 | | :------------------------------------ | :-------------------------- | :-------------------------- | | Net Income | $845 thousand | $5,763 thousand | | Basic EPS | $0.04 | $0.24 | | Diluted EPS | $0.04 | $0.24 | | Weighted Average Common Shares Outstanding – Basic | 23,866,740 | 23,826,598 | | Weighted Average Shares Applicable to Diluted EPS | 24,036,479 | 24,050,695 | - **180,000 outstanding options** were excluded from the diluted EPS calculation for the three months ended November 30, 2020, as they were anti-dilutive[90](index=90&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial condition and operating performance, discussing revenue and expense changes, liquidity, and future investments [OVERVIEW](index=23&type=section&id=OVERVIEW) Pure Cycle Corporation operates as a diversified land and water resource development company, integrating wholesale water and wastewater services with master planned community development at Sky Ranch - Pure Cycle is a vertically integrated wholesale water and wastewater service provider and land developer, primarily at its Sky Ranch Master Planned Community[94](index=94&type=chunk)[95](index=95&type=chunk) - The company owns or controls **29,500 acre-feet of groundwater and surface water supplies** and **26,000 acre-feet of adjudicated reservoir sites**, providing a competitive advantage in the water-limited Denver region[96](index=96&type=chunk) - Sky Ranch is zoned for up to **3,200 homes** and over **two million square feet of commercial space**, with land development activities generating revenue from lot sales and reimbursements for public improvements[98](index=98&type=chunk) [Recent Developments](index=24&type=section&id=Recent%20Developments) The company has signed new contracts for 789 lots at Sky Ranch, achieving a 30% price increase for comparable lots, with the first filing nearing completion and the second filing expected to begin construction in January 2021, despite COVID-19 related delays - New contracts for **789 residential lots** at Sky Ranch's second development phase resulted in a **30% increase in lot prices**, from **$75,000 to $97,000** for a 50' lot[102](index=102&type=chunk) - The first filing at Sky Ranch is nearly complete, with **$1.3 million** remaining obligations, and the second filing (895 lots) is expected to begin construction in January 2021[101](index=101&type=chunk)[102](index=102&type=chunk) - COVID-19 has caused delays in governmental inspections and permitting processes, but the company still delivered remaining lots for the first filing ahead of original contract dates[103](index=103&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) The company's net income significantly decreased by 85% for the three months ended November 30, 2020, primarily due to lower lot sales revenue and the absence of a large reimbursement for construction costs received in 2019, while water usage revenues saw substantial growth [Executive Summary](index=26&type=section&id=Executive%20Summary) The executive summary highlights a substantial increase in metered water usage revenues, particularly from oil and gas operations, and a significant decrease in lot sales revenue and other income from construction cost reimbursements, leading to an 85% drop in net income | Metric | 3 Months Ended Nov 30, 2020 | 3 Months Ended Nov 30, 2019 | $ Change | % Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :------- | :------- | | Total Metered Water Usage Revenues | $1,366 thousand | $140 thousand | $1,226 thousand | 876% | | Lot Sales Revenue | $2,356 thousand | $8,542 thousand | $(6,186) thousand | -72% | | Water Delivery Gross Margin | $821 thousand | $(114) thousand | $935 thousand | 820% | | Net Income | $845 thousand | $5,763 thousand | $(4,918) thousand | -85% | - Water deliveries increased by **549% (88 million gallons)** year-over-year, primarily driven by oil and gas operations[105](index=105&type=chunk) - Land development gross margin improved from **6% to 27%** despite lower revenue, indicating better cost control or higher-margin sales[105](index=105&type=chunk) [Discussion of Changes in Summary Results](index=26&type=section&id=Discussion%20of%20Changes%20in%20Summary%20Results) Metered water usage revenues surged by 876%, mainly due to increased fracking water sales at higher margins, while wastewater treatment revenues grew but with decreased gross margin, and lot sales revenue declined by 72% due to timing | Customer Type (Water Sales) | 3 Months Ended Nov 30, 2020 Sales | 3 Months Ended Nov 30, 2019 Sales | % Change | | :---------------------------- | :-------------------------------- | :-------------------------------- | :------- | | Fracking | $1,199 thousand | $37 thousand | 3,141% | | Sky Ranch | $99 thousand | $9 thousand | 1,000% | | Total Metered Water Usage | $1,366 thousand | $140 thousand | 876% | - Wastewater treatment revenues increased by **110%** but gross margin decreased by **733%** due to increased staff and startup costs for the new water reclamation facility at Sky Ranch[105](index=105&type=chunk)[108](index=108&type=chunk) - Lot sales revenues decreased by **72%** as the first filing at Sky Ranch neared completion, with most revenue already recognized[109](index=109&type=chunk) [General and Administrative Expenses](index=27&type=section&id=General%20and%20Administrative%20Expenses) General and administrative (G&A) expenses increased by 36% for the three months ended November 30, 2020, primarily driven by higher salary and salary-related expenses due to increased headcount, bonus accruals, and a new 401K match policy, as well as increased professional fees | G&A Expense Category | 3 Months Ended Nov 30, 2020 | 3 Months Ended Nov 30, 2019 | $ Change | % Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :------- | :------- | | Salary and salary-related (incl. share-based comp) | $685 thousand | $412 thousand | $273 thousand | 66% | | Professional fees | $186 thousand | $145 thousand | $41 thousand | 28% | | **Total G&A Expenses** | **$1,086 thousand** | **$801 thousand** | **$285 thousand** | **36%** | - The increase in salary and salary-related expenses was attributed to a headcount increase of 5, fiscal 2021 bonus accrual, and the addition of a 401K match policy[111](index=111&type=chunk) [Other Income and Expense Items](index=28&type=section&id=Other%20Income%20and%20Expense%20Items) Other income items saw a significant decrease, primarily due to the absence of the $6.3 million income from reimbursement of construction costs received in November 2019, alongside declines in oil and gas royalty/lease income and interest income | Other Income Item | 3 Months Ended Nov 30, 2020 | 3 Months Ended Nov 30, 2019 | $ Change | % Change | | :------------------------------------ | :-------------------------- | :-------------------------- | :------- | :------- | | Oil and gas royalty income, net | $75 thousand | $270 thousand | $(195) thousand | -72% | | Oil and gas lease income, net | $52 thousand | $62 thousand | $(10) thousand | -16% | | Interest income | $15 thousand | $54 thousand | $(39) thousand | -72% | | Income from reimbursement of construction costs (related party) | $0 | $6,276 thousand | $(6,276) thousand | -100% | - The **100% decrease** in income from reimbursement of construction costs was due to the Sky Ranch CAB issuing **$13.2 million in bonds** in November 2019, of which **$6.3 million** was recognized as income in that period[117](index=117&type=chunk)[118](index=118&type=chunk) - Decreased oil and gas production and the expiration of a lease with Bison Oil and Gas, LLP, led to declines in royalty and lease income[114](index=114&type=chunk)[115](index=115&type=chunk) [Liquidity, Capital Resources and Financial Position](index=28&type=section&id=Liquidity%2C%20Capital%20Resources%20and%20Financial%20Position) As of November 30, 2020, the company had $19.9 million in working capital, including $21.3 million in cash and cash equivalents, deemed sufficient for the next 12 months, with future obligations for Sky Ranch development and WISE partnership investments expected to be funded by future revenues and existing cash - Working capital was **$19.9 million**, with **$21.3 million** in cash and cash equivalents, considered sufficient for the next 12 months[119](index=119&type=chunk) - The company anticipates investing **$1.1 million in 2021** and **$7.5 million through 2025** in the WISE partnership for water and infrastructure, funded by future revenues and cash balances[122](index=122&type=chunk) - Cash provided by operating activities decreased by **100% (from $14.7 million to $6 thousand)** year-over-year, primarily due to the 2019 bond payment reimbursement and increased lot sales revenues in the prior period[123](index=123&type=chunk)[124](index=124&type=chunk) [Disclosure Regarding Forward-Looking Statements](index=31&type=section&id=Disclosure%20Regarding%20Forward-Looking%20Statements) This section provides a cautionary statement regarding forward-looking statements, highlighting inherent risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from projected results[129](index=129&type=chunk) - Readers are cautioned to read forward-looking statements in conjunction with 'Risk Factors' in the company's most recent Annual Report on Form 10-K[130](index=130&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no quantitative and qualitative disclosures about market risk applicable to the company for the reported period - The company has no applicable quantitative and qualitative disclosures about market risk[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's disclosure controls and procedures were evaluated and deemed effective as of November 30, 2020, with no material changes made to internal control over financial reporting during the most recently completed fiscal quarter - Disclosure controls and procedures were evaluated and concluded to be effective as of November 30, 2020[133](index=133&type=chunk) - No material changes to internal control over financial reporting occurred during the quarter[134](index=134&type=chunk) PART II. OTHER INFORMATION [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, certifications from principal executive and financial officers, and XBRL instance and taxonomy documents - Includes certifications from principal executive and financial officers as required by the Sarbanes-Oxley Act of 2002[137](index=137&type=chunk) - XBRL Instance Document and Taxonomy Extension documents are filed herewith[137](index=137&type=chunk) [SIGNATURES](index=34&type=section&id=SIGNATURES) This section contains the required signatures for the Form 10-Q, certifying its submission on behalf of Pure Cycle Corporation by its Vice President and Chief Financial Officer - The report was signed by Kevin B. McNeill, Vice President and Chief Financial Officer, on January 5, 2021[141](index=141&type=chunk)

Pure Cycle Corporation (NASDAQ:PCYO) Q3 2020 Earnings Conference Call July 7, 2020 4:00 PM ET Company Participants Mark Harding - President and CEO Conference Call Participants Geoffrey Scott - Scott Asset Management Tucker Andersen - Above All Advisors Elliot Knight - Knight Advisors Operator Greetings, and welcome to the Pure Cycle Corporation Three and Nine Months ended May 31, 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the form ...

Financial Data and Key Metrics Changes - Operating revenues for the first six months reached $14 million, showing an increase compared to the previous year [34] - Income from continuing operations per share is reported at $0.25, indicating profitability despite the challenges faced [35] - The company has a strong cash position and increasing assets, which is a positive indicator of financial health [32][33] Business Line Data and Key Metrics Changes - The Land Development segment generated over $10.8 million from lot sales and $2.8 million from tap fee revenue, demonstrating effective monetization of assets [36] - Fracking water revenue has significantly decreased, with only $57,000 reported for incidental water usage, highlighting a shift in revenue sources [36] Market Data and Key Metrics Changes - The company has seen strong demand in the I-70 Corridor, with builders averaging about six homes per month, indicating a robust housing market [15][107] - There is a noted increase in interest for the commercial component of the property, although it remains in early stages of development [58][63] Company Strategy and Development Direction - The company plans to diversify its residential offerings in the next phase, including smaller lots and paired products, to attract a broader customer base [20][21] - There is a focus on being opportunistic in acquisitions, particularly in distressed markets, to enhance growth potential [86][88] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the housing market's resilience, anticipating a rush of demand post-pandemic as families seek larger homes [110] - The company is well-positioned to capitalize on its liquidity and strong asset base during challenging market conditions [92][117] Other Important Information - The company is actively engaging with multiple builders for future phases, aiming to finalize agreements within the next 90 days [49] - Management emphasized the importance of maintaining a disciplined approach to cash management and investment opportunities [84][88] Q&A Session Summary Question: What are the plans for the commercial component of the property? - Management highlighted increased interest in the commercial segment but noted that it typically lags behind residential development, with expectations for growth in the next 18 months [58][63] Question: What percentage of revenue will be recurring in three years? - Management indicated that they expect to double the number of water connections, leading to a significant increase in recurring revenue from water services [76][81] Question: Are there any acquisition opportunities available? - Management is actively looking for acquisition opportunities, particularly in stressed markets, to enhance the company's asset base and revenue potential [86][88] Question: What is the outlook for contract signings in the housing market? - Management reported strong demand with no cancellations in contracts, indicating a healthy market despite current challenges [104][110] Question: How does the company view its oil and gas revenue? - Management noted that while fracking revenue is down, any income generated is beneficial as it incurs no fixed costs, making it a valuable segment [112][113]

PURE CYCLE a water and wastewater services company Financial Results for the Quar ter Ending February 29, 2020 PRESENTED BY MARK HARDING PURE CYCLE a water and wastewater services company T S N E 9 N O T 9 E T I A M 1 A T E P 02 5 Statements that are not historical facts contained or incorporated by reference in this presentation are "forward-looking statements" ("FLS") within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21C of th ...

Financial Performance (Q1 2020) - Total revenue increased significantly to $10461000, compared to $3073000 in Q1 2019[49] - Net income after taxes rose substantially to $5762000, a significant increase from $634000 in Q1 2019[49] - Income per share (diluted) increased to $024, compared to $003 in Q1 2019[49] - Sources of Income (EBITA) increased to $7649000 in Q1 2020, compared to $634000 in Q1 2019[39] Revenue Streams - Land development revenues (lot sales) increased to $8542000 in Q1 2020, compared to $1381000 in Q1 2019[36] - Municipal tap fee revenues increased to $1672000 in Q1 2020, compared to $255000 in Q1 2019[37] - Oil and Gas (O&G) royalties increased to $331000 in Q1 2020, compared to $45000 in Q1 2019[39] - Drill fracking industrial water sales decreased to $37300 in Q1 2020, compared to $1285000 in Q1 2019[38] Sky Ranch Development - The company has delivered 372 finished lots in the first phase of development[18] - 175 water and wastewater taps have been sold[18] - Phase 2 development is planned to accommodate 160 acres of commercial, retail, and light industrial space, as well as multifamily and single-family residential units, potentially including between 2500 and 3000 single-family equivalents (SFE's)[28]