NOTE 2 – REIMBURSABLE PUBLIC IMPROVEMENTS AND NOTE RECEIVABLE FROM THE SKY RANCH COMMUNITY AUTHORITY BOARD

The Sky Ranch Community Authority Board (“Sky Ranch CAB”) and the Company’s agreements with the Sky Ranch CAB are described in greater detail in Notes 5 and 14 to the financial statements included in the 2025 Annual Report.

The related party notes receivable is comprised of two separate notes, one with the Rangeview Metropolitan District and one from the Sky Ranch CAB. The following table summarizes the balances associated with the note receivable related party:

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The note from the Sky Ranch CAB reports the balances owed to the Company for public improvements paid for by Pure Cycle that are reimbursable from the Sky Ranch CAB and include project management fees related to the Company’s management of the construction of the public improvements and interest accrued on the unpaid balances related the ongoing development of the Sky Ranch master planned community (Sky Ranch). Pure Cycle has advanced funds to the Sky Ranch CAB for the cost of constructing certain public improvements at Sky Ranch, which are the ultimate responsibility of the Sky Ranch CAB. During the three months ended November 30, 2025, Pure Cycle spent $5.8 million on public improvements that are reimbursable by the Sky Ranch CAB to Pure Cycle. Additionally, for the three months ended November 30, 2025, project management fees of $0.3 million and interest income on the outstanding note receivable of $0.7 million were also added to the note receivable. During the three months ended November 30, 2025, the Sky Ranch CAB made no payments to Pure Cycle.

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During the three months ended November 30, 2024, Pure Cycle spent $4.2 million on public improvements that are payable by the Sky Ranch CAB to Pure Cycle. Additionally, for the three months ended November 30, 2024, project management fees of $0.2 million and interest income on the outstanding note receivable of $0.5 million were also added to the note receivable. During the three months ended November 30, 2024, the Sky Ranch CAB paid Pure Cycle $10.3 million on the note. Pursuant to the agreements with the Sky Ranch CAB, any payments received are initially applied to interest.  

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

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The note receivable from the Sky Ranch CAB accrues interest at 6% per annum. Public improvements that do not qualify for reimbursement at the time of being incurred are considered contract fulfillment costs related to the delivery of lots to the Company’s home builder customers and are recorded as land development construction costs as incurred. If public improvement costs are deemed qualified for reimbursement, the costs are recognized as notes receivable - related party. The Company assesses the collectability of the note receivable from the Sky Ranch CAB, which includes reimbursable public improvements, project management fees and the related interest income, at each reporting period. The Sky Ranch CAB has an obligation to repay the Company, but the ability of the Sky Ranch CAB to do so before the contractual termination dates is dependent upon the establishment of a tax base or other fee generating activities sufficient to fund reimbursable costs incurred.