Financial Analysis

NOTE 6 DEBT AND OTHER LONG-TERM OBLIGATIONS As of May 31, 2026, the outstanding principal and deferred financing costs of the Companys loans are as follows: (In thousands) May 31, 2026 SFR Notes $ 3,857 SFR Facility Agreement 7,690 Lost Creek Note 2,663 Working Capital Line of Credit - Total outstanding principal 14,210 Deferred financing costs (87) Less current maturities, net of current deferred financing costs (1,454) Debt, less current portion $ 12,669 As of May 31, 2026, the scheduled maturities (i.e., principal payments) of the Companys loans are as follows: (In thousands) Scheduled principal payments Within 1 year $ 1,478 Year 2 448 Year 3 3,277 Year 4 452 Year 5 7,466 Thereafter 1,089 Total principal payments 14,210 Deferred financing costs (87) Total principal payments, net $ 14,123 SFR Note 1 On November 29, 2021, PCY Holdings, LLC, a wholly owned subsidiary of the Company, issued a Promissory Note (SFR Note 1) to its primary bank to reimburse amounts expended for the construction of the first three single-family rental units. The SFR Note 1 has the following terms: Initial principal amount of $1.0 million Floating per annum interest rate equal to the Western Edition of the Wall Street Journal Prime Rate plus 0.5% , which has a floor of 3.75% and a ceiling of 4.25% ( 4.25% as of May 31, 2026). In the event of default, the interest rate on the SFR Note 1 would be increased by adding an additional 2.0% Maturity date of December 1, 2026 Fifty-three monthly principal an …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 7 EMPLOYEE STOCK PLANS The Company reserved 2.0 million shares of common stock for issuance to employees and directors pursuant to the Companys 2024 Equity Incentive Plan (the 2024 Equity Plan). As of May 31, 2026, there were 1,956,631 shares available for grant under the 2024 Equity Plan. Prior to the effective date of the 2024 Equity Plan, the Company granted options and stock awards to eligible participants under its 2014 Equity Plan (the 2014 Equity Plan), which expired on April 12, 2024. The following table summarizes the combined stock option activity for the 2014 Equity Plan and 2024 Equity Plan for the periods noted: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term Approximate Aggregate Intrinsic Value (in thousands) Outstanding at August 31, 2025 489,500 $ 9.52 3.8 $ 616 Granted 30,000 10.75 Exercised (62,000) 9.26 Forfeited / Expired Outstanding at May 31, 2026 457,500 9.64 3.5 605 Options exercisable at May 31, 2026 427,500 $ 9.56 3.1 $ 605 Outstanding at August 31, 2024 524,500 $ 9.42 4.7 $ 877 Granted Net settlement exercised (35,000) 7.89 Forfeited / Expired Outstanding at May 31, 2025 489,500 $ 9.52 4.0 $ 769 During the three months ended May 31, 2026, the Company issued 962 shares pursuant to the exercise of stock options. These options were net settled, meaning that, the optionee did not pay cash for the options exercised but instead received the number of shares equal to the difference between the exercise pr …

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NOTE 4 FAIR VALUE MEASUREMENTS Fair value accounting guidance includes a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs) and the lowest priority to unobservable inputs (Level 3 inputs). The carrying value for certain of the Companys financial instruments (i.e., cash, restricted cash, short term investments, accounts receivable, accounts payable, accrued liabilities, the SFR Notes and the Lost Creek Note (each as defined in Note 6 below) approximate their fair value because of their short-term nature and generally negligible credit losses. As of May 31, 2026 and August 31, 2025, the Company had no assets or liabilities measured at fair value on a recurring basis. As of May 31, 2026 and August 31, 2025, the Company had one Level 3 asset (notes receivable related party), evaluated at fair value on a nonrecurring basis, for which the Company did not record any impairment charges. There were no transfers between Level 1, 2 or 3 categories during the three and nine months ended May 31, 2026 and 2025. …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

NOTE 13 INCOME TAXES The income tax provision for interim periods is determined using an estimate of the annual effective tax rate, adjusted for discrete items. As of May 31, 2026, the Company is estimating an annual effective tax rate of approximately 24%. Each quarter, the estimate of the annual effective tax rate is updated, and if the estimated effective tax rate changes, a cumulative adjustment is made. There is a potential for volatility in the effective tax rate due to various factors. The provision for income taxes is recorded at the end of each interim period based on the Companys best estimate of its effective income tax rate expected to be applicable for the full fiscal year considering any items requiring discrete recognition. The effective income tax rate for the three and nine months ended May 31, 2026 was impacted by adjustments related to reconciling items between the Companys books and tax returns. …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

"Recently Issued Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07). Upon adoption of this ASU, the Company has disclosed significant segment expenses, the title and position of the Chief Operating Decision Maker (CODM), and an explanation of how the reported measure of segment profit or loss is used by the CODM to assess segment performance and make resource allocation decisions. Effective August 31, 2025, the Company adopted the provisions of this ASU on a retrospective basis. See Note 11. In December 2023, FASB issued ASU 2023-09, ""Income Taxes (Topic 740): Improvements to Income Tax Disclosures"" (""ASU 2023-09""), which requires expanded disclosure of the Companys income rate reconciliation and income taxes paid. ASU 2023-09 is effective for the Company for annual periods beginning September 1, 2025. The Company expects the adoption of ASU 2023-09 to result in enhanced income tax disclosures, including expanded rate reconciliation detail and disaggregated information regarding income taxes paid, in its annual consolidated financial statements. The adoption is not expected to have a material impact on the Company's consolidated financial position, results of operations or cash flows. In November 2024, the FASB issued ASU 2024-03, Income StatementReporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopi …

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NOTE 8 RELATED PARTY TRANSACTIONS The Rangeview Metropolitan District The Rangeview District and the Companys agreements with the Rangeview District are described in greater detail in Note 14 to the financial statements in the 2025 Annual Report. The Rangeview District and the Company have entered into two loan agreements. In 1995, the Company extended a loan to the Rangeview District for borrowings of up to $0.3 million, which is unsecured and bears interest based on the prevailing prime rate plus 2% (8.75% at May 31, 2026). The maturity date of the loan is December 31, 2026, at which time it automatically renews through December 31, 2027. Beginning in January 2014, the Rangeview District and the Company entered into a funding agreement that allows the Company to continue to provide funding to the Rangeview District for day-to-day operations and accrue the funding into a note that bears interest at a rate of 8% per annum and remains in full force and effect for so long as the 2014 Amended and Restated Lease Agreement among the Rangeview District, the Company, and the State Board of Land Commissioners remains in effect. At May 31, 2026, the balance of the related party notes receivable totaled $0.9 million, which included borrowings of $0.9 million and accrued interest of less than $0.1 million. As of August 31, 2025, the principal and interest on both loan agreements totaled $1.2 million, which included $1.2 million of borrowings and less than $0.1 million of accrued interes …

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NOTE 3 REVENUES, FEES AND OTHER INCOME ITEMS The Companys revenue is primarily generated from three unique segments: (1) sales of water and wastewater taps, metered water and wastewater usage; (2) the sale of lots to homebuilders; and (3) rent collected from its single-family homes. Detailed descriptions of the policies related to revenue recognition are included in Note 2 to the financial statements included in the 2025 Annual Report. The following describes significant components of revenue for the three and nine months ended May 31, 2026 and 2025. Water and wastewater tap fees During the three months ended May 31, 2026 and 2025, the Company sold a total of 66 and 40 water taps, respectively, generating $1.9 million and $1.4 million in tap fee revenues, respectively. During the three months ended May 31, 2026 and 2025, the Company sold a total of 48 and 40 wastewater taps, respectively, generating $0.4 million and $0.3 million in tap fee revenues, respectively. During the nine months ended May 31, 2026 and 2025, the Company sold a total of 161 and 130 water taps, respectively, generating $4.6 million and $4.3 million in tap fee revenues, respectively. During the nine months ended May 31, 2026 and 2025, the Company sold a total of 117 and 127 wastewater taps, respectively, generating $1.0 million and $1.0 million in tap fee revenues, respectively. The water taps were all sold at Sky Ranch and Wild Pointe, and the wastewater taps were all sold at Sky Ranch. Water and wastewat …

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NOTE 11 SEGMENT INFORMATION The Company reports three operating segments which meet segment disclosure requirements, the water and wastewater resource development segment, the land development segment, and the single-family rental segment. The water and wastewater resource development segment includes providing water and wastewater services to customers. The Company delivers these services by using water rights owned or controlled by the Company and developing, operating, and maintaining infrastructure to divert, treat and distribute that water and collect, treat and reuse reclaimed wastewater. The land development segment includes all activities necessary to develop and sell finished lots, which for the three and nine months ended May 31, 2026 and 2025 was done exclusively at the Companys Sky Ranch Master Planned Community. The single-family rental business includes the monthly rental fees received from the renters under non-cancelable annual leases. The tables below present the measure of profit and assets as well as the interest income and expense that the CODM uses to assess the performance of the segments for the periods presented: Three Months Ended May 31, 2026 (In thousands) Water and wastewater resource development Land development Single-family rental Corporate Total Total revenue $ 4,659 $ 3,332 $ 231 $ $ 8,222 Cost of revenue 1,549 1,916 78 3,543 Depreciation and depletion 394 394 Total cost of revenue 1,943 1,916 78 3,937 Segment profit $ 2,716 $ 1,416 $ 153 $ $ …

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NOTE 14 SUBSEQUENT EVENTS On June 15, 2026, the Company and certain of its subsidiaries entered into a Second Amendment to the SFR Facility Agreement that increased the lending capacity available to finance new single-family rental homes from $10 million to $20 million and extended the period during which that capacity may be drawn to May 29, 2028. Advances may continue to be converted into term loans that amortize over 25 years with a five-year balloon payment. The amendment removed the minimum Debt Service Coverage Ratio covenant applicable to PCYO Home Rentals, LLC; the Company's remaining financial covenants and the $10 million Working Capital LOC were unchanged, bringing total lending capacity under the SFR Facility Agreement to $30 million. …

SubsequentEventsTextBlock · excerpt; the full note is in the filing