NOTE 5 – WATER, LAND AND OTHER FIXED ASSETS

The Company’s water rights and current water and wastewater service agreements, including capitalized terms not defined herein, are more fully described in Note 4 to the 2023 Annual Report.

Investment in Water and Water Systems

The Company’s Investments in water and water systems consist of the following costs and accumulated depreciation and depletion:

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Construction in Progress

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The construction in progress account represents costs incurred on various construction projects currently underway that as of the balance sheet date have not been completed and placed into service. The construction in progress account consists primarily of costs incurred relating to water facilities and Sky Ranch infrastructure being constructed, which Pure Cycle anticipates will be placed in service during the next 12 months. During the three and six months ended February 29, 2024, the Company incurred $0.4 million and $2.1 million of

costs related to construction in Sky Ranch and water and wastewater construction projects. The Company capitalized less than $0.1 million and $1.3 million of costs as projects were completed and placed into service during the three and six months ended February 29, 2024.

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Single-Family Rental Homes

During the year ended August 31, 2023, the Company completed 11 additional rental homes to be used in the rental business. The Company began construction on one single-family detached unit in March 2022 which was completed in December 2022 and rented effective December 15, 2022. For the remaining 10 units, comprised of single-family detached houses and paired homes, construction began in the summer of 2022 and was completed during the fourth quarter of fiscal 2023.

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At February 29, 2024, the Company has reserved a total of 93 lots in Phase 2 of Sky Ranch (10 of which are in Phase 2A and completed) to build additional rental units.