8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 9, 2023

PURE CYCLE CORPORATION

(Exact name of registrant as specified in its charter)

Colorado

(State or other jurisdiction of incorporation)

0-8814	84-0705083
(Commission File Number)	(IRS Employer Identification No.)

34501 East Quincy Avenue, Building 65, Suite A, Watkins, CO 80137

(Address of principal executive offices) (Zip Code)

Registrant’s telephone, including area code (303) 292-3456

N/A

(Former name or former address, if changed since last report.)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock 1/3 of $.01 par value	PCYO	The NASDAQ Stock Market
(Title of each class)	(Trading Symbol(s))	(Name of each exchange on which registered)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth Registrant as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth Registrant ☐

If an emerging growth Registrant, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

This current report on Form 8-K is filed by Pure Cycle Corporation (Registrant), a Colorado corporation, in connection with the matters described herein

Item 2.02 Results of Operations and Financial Condition.

On January 9, 2023, the Registrant issued a press release announcing its financial results for the three months ended November 30, 2022. A copy of the press release is furnished as Exhibit 99.1 hereto, and in incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the press release furnished as Exhibit 99.1 to this current report on Form 8-K shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information or exhibit be deemed incorporated by reference into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in any such filing.

Item 7.01Regulation FD Disclosure

On January 10, 2023, the Registrant presented and posted on its website a presentation summarizing Pure Cycle’s operations and financial results (Earnings Presentation). The Earnings Presentation is furnished as Exhibit 99.2 to this Form 8-K and is incorporated herein by reference.

The information contained in the Earnings Presentation is summary information and should be read in conjunction with Pure Cycle’s filings with the Securities and Exchange Commission and other public announcements that Pure Cycle may make by press release or otherwise from time to time. The Earnings Presentation will be posted in the Investor Relations section of Pure Cycle’s website, www.purecyclewater.com.

The information contained in this Item 7.01 of Form 8-K, including the accompanying Exhibit 99.2 is being furnished, and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liabilities of that section. The information contained in the presentation shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01Financial Statements and Exhibits.

(d)Exhibits

Exhibit No.	Description
99.1	Press Release dated January 9, 2023, announcing earnings for the three months ended November 30, 2022
99.2	Three months ended November 30, 2022 earnings presentation
104	Cover Page Interactive Data File (the cover page XBRL tags are embedded in the inline XBRL document)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: January 10, 2023

Vice
	PURE CYCLE CORPORATION
	By:	/s/ Kevin B. McNeill
		Kevin B. McNeill
		Vice President and Chief Financial Officer

EX-99.1

Exhibit 99.1

Pure Cycle Announces Financial Results

for the Three Months Ended November 30, 2022

DENVER, CO / ACCESSWIRE / January 9, 2023 – Pure Cycle Corporation (NASDAQ Capital Market: PCYO) announced for the three months ended November 30, 2022, it posted positive net income for the fifteenth consecutive fiscal quarter. The housing market downturn and quick turn in weather proved to be a challenge for our first quarter of fiscal 2023, but we received several surface use payments and other cash payments from oil and gas operators which are a positive sign to what we believe will be a strong year for oil and gas water sales. Highlights for the first quarter of fiscal 2023 are presented below.

Highlights

ØRevenues of $1.3 million which drove pre-tax income of $0.3 million

ØEBITDA of $0.8 million

o Reconciliation of net income to EBITDA is as follows: net income of $0.2M plus interest expense of $0.05M plus tax expense of $0.1M plus depreciation and depletion of $0.5M equals EBITDA of $0.8 million

ØCash and investments totaled $32.0 million at November 30, 2022

Ø67.5 million gallons of water delivered

“While the downward pressures on the housing industry created by rising interest rates and increasing prices took a toll on new home sales which in turn slowed our development activities, we were able to collect a number of surface use payments from oil and gas operators which we believe indicates a strong drilling forecast for the coming year,” commented Mr. Harding, CEO of Pure Cycle. “The winter months are always a cyclically slow season for home sales, but each of our builders continue to construct homes at Sky Ranch with over 60 starts in our second phase under construction and over 124 of the 219 tap sales, which correlate to building permits from our homebuilders. We believe our entry level priced homes will remain attractive in this market and believe the future growth at Sky Ranch will remain strong,” concluded Mr. Harding.

Financial Summary

Revenue

For the three months ended November 30, 2022 and 2021, we reported total revenues of $1.3 million and $4.3 million. This was generated by our water and wastewater resource development segment ($0.8 million and $1.1 million), our land development segment ($0.5 million and $3.2 million), and our single-family rental business (less than $.01 million in both periods). The decline in revenue was predominately due to the slowing of the housing industry, which resulted in our construction activities being scaled back to align our timing of lot deliveries with the projected construction needs of our homebuilding partners.

For the three months ended November 30, 2022 and 2021, we sold four and nine water and wastewater taps for $0.2 million and $0.3 million. These taps were sold predominately at our Sky Ranch community where we have sold a total of 766 water and wastewater taps since we began developing Sky Ranch in 2017.

As of November 30, 2022, the single-family rental business has three homes built and rented, a fourth house was completed and rented in mid-December 2022, with ten additional units under construction with expected delivery dates throughout fiscal 2023.

Profitability

We continue to be profitable with net income of $0.2 million and $1.5 million for the three months ended November 30, 2022 and 2021. This produced $0.01 and $0.06 of earnings per fully diluted share for the periods presented.

Working Capital

We reported working capital (current assets less current liabilities) of $23.8 million as of November 30, 2022, with $32.0 million of cash, cash equivalents and short-term investments.

“Although the housing market softened near the end of our fiscal 2022, which continued into Q1-2023, our strong balance sheet remains our differentiator. We have positioned ourselves with three very strong and long-term producing assets that have in the past proven to weather the inevitable up and down-market cycles. We continue to invest in our core asset, water, which we

believe is the most valuable long-term, appreciable asset we can own,” commented Kevin McNeill, CFO of Pure Cycle. “Fiscal 2023 didn’t start as strong as fiscal 2022, but with the projected oil and gas operations and continued focus on providing a reasonably priced lot in a market that is desperate for reasonably priced homes, we believe fiscal 2023 will pick up quickly,” concluded Mr. McNeill.

Operational Summary

Water and Wastewater Resource Development

For the three months ended November 30, 2022 and 2021, we delivered 67.5 million gallons and 77.3 million gallons to customers, a 13% decrease. This decrease in water sales was primarily due to the reduced construction water needs at Sky Ranch from slowed construction activities because of the downturn in the housing market overall, and declines in water sales as less new landscaping was installed in Q1-2023, which requires significantly more water to help it establish. Water and wastewater tap sales declined as well for the three months ended November 30, 2022 compared to 2021 due to the timing of closings at Sky Ranch. Tap sales are driven by building permit applications and are not contractually established with the builders. As evidenced by the $1.2 million of surface use payments we received, we believe we will see strong water sales to oil and gas operators the remainder of fiscal 2023.

We also continued our acquisition of water rights with the acquisition of three deep water wells in the Lost Creek Basin for $0.3 million, which will be added to our other Lost Creek Water and eventually transferred to the Denver market for use in our Denver service area.

Land Development

Lot sales revenue decreased for the three months ended November 30, 2022 compared to 2021 due to the reduction of construction activities to align our deliverables with the timing of home construction by the homebuilders. Because lot sale revenue is recognized predominately as construction progresses, revenue will fluctuate due to timing of construction activities.

Single Family Rentals

During fiscal 2022, we contracted for the construction of eleven more rental homes, which all began construction in fiscal 2022, and one home was delivered in December 2022. We expect the next ten units to be delivered at various dates throughout fiscal 2023.

Share Repurchase Authorization

On November 2, 2022, our Board of Directors approved a stock repurchase program. The program is open-ended and authorizes repurchases of up to an aggregate of 200,000 shares of common stock in the open market. As of the date of this release, no shares have been repurchased under the repurchase program.

The following table presents our unaudited results of operations for the three months ended November 30, 2022 and 2021:

	Three Months Ended
(In thousands, except share information)	November 30, 2022		November 30, 2021
Revenues:
Metered water usage from:
Municipal customers	$	121	$	147
Commercial customers		392		560
Wastewater treatment fees		63		55
Water and wastewater tap fees		150		261
Lot sales		513		2,945
Project management fees		8		248
Single-family rentals		25		8
Special facility projects and other		68		49
Total revenues		1,340		4,273
Expenses:
Water service operations		479		289
Wastewater service operations		138		129
Land development construction costs		143		531
Project management costs		72		—
Single-family rental costs		10		3
Depletion and depreciation		378		354
Other		106		77
Total cost of revenues		1,326		1,383
General and administrative expenses		1,388		1,325
Depreciation		115		85
Operating (loss) income		(1,489)		1,480
Other income (expense):
Interest income - related party		247		361
Interest income - Investments		228		1
Oil and gas royalty income, net		116		97
Oil and gas lease income, net		19		48
Other, net		1,218		11
Interest expense, net		(50)		(7)
Income from operations before income taxes		289		1,991
Income tax expense		130		477
Net income	$	159	$	1,514
Earnings per common share - basic and diluted
Basic	$	0.01	$	0.06
Diluted	$	0.01	$	0.06
Weighted average common shares outstanding:
Basic		23,985,788		23,917,908
Diluted		24,087,893		24,219,236

The following table presents our consolidated financial position as of November 30, 2022 (unaudited) and August 31, 2022 (audited):

(In thousands, except shares)	November 30, 2022		August 31, 2022
ASSETS:
Current assets:
Cash and cash equivalents	$	16,843	$	34,894
Investments		15,000		—
Trade accounts receivable, net		1,240		2,425
Prepaid expenses and other assets		427		467
Total current assets		33,510		37,786
Restricted cash		2,328		2,328
Investments in water and water systems, net		58,711		58,763
Construction in progress		2,484		1,224
Single-family rental units		963		975
Land and mineral rights:
Held for development		7,287		6,773
Held for investment purposes		451		451
Other assets		2,454		2,463
Notes receivable – related parties, including accrued interest:
Reimbursable public improvements		18,487		17,208
Other		1,242		1,120
Operating leases - right of use assets, less current portion		120		138
Total assets	$	128,037	$	129,229
LIABILITIES:
Current liabilities:
Accounts payable	$	1,039	$	849
Accrued liabilities		920		2,029
Accrued liabilities – related parties		653		560
Income taxes payable		2,645		2,530
Deferred lot sale revenues		3,889		4,275
Deferred water sales revenues		552		570
Debt, current portion		10		10
Total current liabilities		9,708		10,823
Participating interests in export water supply		—		323
Debt, less current portion		3,947		3,950
Deferred tax liability, net		1,090		1,075
Lease obligations - operating leases, less current portion		44		62
Total liabilities		14,789		16,233
Commitments and contingencies
SHAREHOLDERS’ EQUITY:
Series B preferred shares: par value $0.001 per share, 25 million authorized; 432,513 issued and outstanding (liquidation preference of $432,513)		—		—
Common shares: par value 1/3 of $.01 per share, 40.0 million authorized; 23,986,645 and 23,980,645 outstanding, respectively		80		80
Additional paid-in capital		174,243		174,150
Accumulated deficit		(61,075)		(61,234)
Total shareholders’ equity		113,248		112,996
Total liabilities and shareholders’ equity	$	128,037	$	129,229

Q1-2023 EARNINGS CALL

Pure Cycle will host a conference call on Tuesday, January 10, 2023, at 8:30AM Eastern (6:30AM Mountain) to discuss the financial results and answer questions. Call details are presented below. We will post a detailed slide presentation, which provides an overview of Pure Cycle and presents summary financial results on our website which can be accessed at www.purecyclewater.com.

When:                                         8:30AM Eastern (6:30AM Mountain) on January 10, 2023

Call in number:                           888-506-0062 (access code: 832069)

International call-in number:      973-528-0011 (access code: 832069)

Replay number:                           877-481-4010 | 919-882-2331 (passcode: 47370)

Replay available until:                January 24, 2023 at 8:30AM ET

Event link:                                   https://www.webcaster4.com/Webcast/Page/2247/47370

Company Information

Pure Cycle continues to diversify its operations, grow its balance sheet, and drive recurring revenues. We operate in three distinct business segments, each of which complement the other. At our core, we are an innovative and vertically integrated wholesale water and wastewater service provider. In 2017, we launched our land development segment which develops master planned communities on land we own and to which we provide water and wastewater services. In 2021, we launched our newest line of business, the rental of single-family homes located at Sky Ranch, which provides long-term recurring revenues, furthers our land development operations, and adds more customers to our water resource segment.

Additional information, including our recent press releases and SEC filings, is available at www.purecyclewater.com, or you may contact our President, Mark W. Harding, or our CFO, Kevin B. McNeill, at 303-292-3456 or info@purecyclewater.com. Be sure to follow Pure Cycle on Twitter @purecyclecorp.

SOURCE: Pure Cycle Corporation  

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements are all statements, other than statements of historical facts, included in this press release that address activities, events or developments that we expect or anticipate will or may occur in the future, such as statements about the following: our positioning to continue to grow through this market cycle, the completion and delivery of our rental units, timing of development at Sky Ranch, tap sales, and home sales by our home builder customers.  The words “anticipate,” “likely,” “may,” “should,” “could,” “will,” “believe,” “estimate,” “expect,” “plan,” “intend” and similar expressions are intended to identify forward-looking statements.  Investors are cautioned that forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause actual results to differ materially.  Factors that could cause actual results to differ from projected results include, without limitation: home mortgage interest rates, inflation, and other factors impacting the housing market and home sales; the risk factors discussed in Part I, Item 1A of our most recent Annual Report on Form 10-K for the fiscal year ended August 31, 2022; and those factors discussed from time to time in our press releases, public statement and documents filed or furnished with the U.S. Securities and Exchange Commission.  Except as required by law, we disclaim any obligation to update publicly any forward-looking statements, whether because of new information, future events or otherwise.

EX-99.2

Exhibit 99.2

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XML

Document and Entity Information	Jan. 09, 2023
Document and Entity Information [Abstract]
Document Type	8-K
Document Period End Date	Jan. 09, 2023
Entity File Number	0-8814
Entity Registrant Name	PURE CYCLE CORPORATION
Entity Incorporation, State or Country Code	CO
Entity Tax Identification Number	84-0705083
Entity Address State Or Province	CO
Entity Address, Address Line One	34501 East Quincy Avenue, Building 65, Suite A
Entity Address, City or Town	Watkins
Entity Address, Postal Zip Code	80137
City Area Code	303
Local Phone Number	292-3456
Title of 12(b) Security	Common Stock 1/3 of $.01 par value
Trading Symbol	PCYO
Security Exchange Name	NASDAQ
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0000276720
Amendment Flag	false