Pure Cycle (PCYO) risk factors, FY2025 10-K

Other

1. 01Our operations are concentrated in the Front Range area of Colorado; we are subject to general economic conditions in Colorado
2. 02We are dependent on the housing market and development in our targeted service areas for future revenue. The homebuilding industry is cyclical and a deterioration in industry conditions or downward changes in general economic or other business conditions could adversely affect our business, results of operations, cash flows and financial condition
3. 03Tariffs, trade restrictions, and related supply chain disruptions could increase our costs, delay our projects, or reduce demand for our products and services, any of which could adversely affect our business, results of operations, and financial conditionNew
4. 04Significant competition from other development projects could adversely affect our results
5. 05Our operations could be adversely impacted by increases in material, labor, supplier, logistics and other operating costs, or supply chain delays and shortages, which could cause lower margins or lost sales and adversely impact our business, financial position, results of operations and cash flows, and component price volatility and availability, as well as supplier concentration
6. 06Our water business is subject to seasonal fluctuations and weather conditions that could affect demand for our water service and our revenue and that could become more extreme with climate change
7. 07The physical impacts of natural disasters and severe weather conditions could reduce consumer demand for housing, result in service disruptions, delay the closing of the sale of residential lots at Sky Ranch and increase our costs, any of which could harm our sales and results of operations
8. 08We may not generate sufficient cash flows from operations or other capital resources to pursue our business objectives
9. 09We may not be able to manage the increasing demands of our expanded operations
10. 10The rates that the Rangeview District is allowed to charge customers on the Lowry Ranch for water services are limited by the Lease with the Land Board and our contract with the Rangeview District and may not be sufficient to cover our costs of construction and operation
11. 11A significant portion of our water supplies come from non-renewable aquifers and inadequate water and wastewater supplies could have a material adverse effect on us
12. 12To utilize our water resources as intended, we may need to apply for a change of use with the water court from time to time. This may take several years to complete, and there is no assurance that we will be able to obtain a favorable ruling, which may adversely impact our business and financial condition
13. 13A failure of the water wells or distribution networks we own or control could result in losses and damages that may affect our business and financial condition
14. 14Development on the Lowry Ranch is not within our control and is subject to obstacles
15. 15Dependence on third-party utilities for power and gas could delay our projects, increase costs, and adversely affect our results of operations and financial conditionNew
16. 16We have limited experience with the development of real property21% rewritten
17. 17The funds we are advancing to the Sky Ranch CAB for construction of public improvements might not be repaid, which would negatively impact our income, gross margin on selling lots, and cash flows29% rewritten
18. 18Supply shortages and risks related to the demand for skilled labor and building materials could increase costs and delay closings
19. 19We may purchase additional land parcels for development or other purposes, thereby exposing us to certain financial risks
20. 20Delays in property development may extend the time it takes us to recover our property development costs and delay our revenue from water and wastewater resource development services
21. 21Fluctuations in real property values may require us to write-down the book value of our land interests
22. 22Our land development segment may be subject to risks related to oil and gas operations in the vicinity of our Sky Ranch development, which could have an adverse impact on the marketability and/or value of our Sky Ranch property
23. 23Our single-family home development activities expose us to additional operational and real estate risks, which may adversely affect our financial condition and operating results
24. 24We will depend on our tenants for all of our rental home revenue. Poor tenant selection and defaults and nonrenewal by our tenants may adversely affect our reputation and financial performance
25. 25Our planned lease terms could require us to re-lease our properties frequently, which we may be unable to do on attractive terms, on a timely basis or at all
26. 26Tenant relief laws, including laws restricting evictions and other regulations could limit our ability to evict bad tenants, and this may negatively impact our rental income and profitability28% rewritten
27. 27It would be difficult for us to quickly generate cash from sales of our properties
28. 28Products supplied to us and work done by subcontractors can expose us to risks that could adversely affect our business
29. 29Government regulations and legal challenges may delay the closing of the sale of our residential lots, increase our expenses or limit other activities, which could have a negative impact on our results of operations
30. 30Laws and regulations related to climate change, greenhouse gases, and energy may adversely affect us by directly and indirectly increasing the cost of or restricting our planned future growth activities
31. 31Our construction of water and wastewater projects and improvements at Sky Ranch may expose us to certain completion, performance, and financial risks
32. 32Our water sales for the past several years have been highly concentrated among companies providing hydraulic fracturing services to the oil and gas industry, and such sales can fluctuate significantly, including as a result of increasing regulatory burdens on oil and gas development activities89% rewritten
33. 33We may be subject to significant potential liabilities because of warranty and liability claims made against us
34. 34A major health and safety incident relating to our business could be costly in terms of potential liabilities and reputational damage
35. 35Conflicts of interest may arise relating to the operation of the Rangeview District, the Sky Ranch Districts and the Sky Ranch CAB
36. 36Growth limitations or moratoriums imposed by governmental authorities could adversely affect our land development activities or the land development activities of our customers, which could adversely impact both the land development and water and wastewater segments of our business
37. 37We could be hurt by efforts to impose liabilities or obligations on us regarding labor law violations by other persons whose employees perform contracted services
38. 38Contamination to our water supply may result in disruption in our services and litigation, which could adversely affect our business, operating results and financial condition
39. 39We may be adversely affected by any future decision by the Colorado Public Utilities Commission to regulate us as a public utility
40. 40The Rangeview District’s and our rights under the Lease have been challenged by third parties
41. 41Our Lowry Ranch surface water rights are “conditional decrees” and require findings of reasonable diligence29% rewritten
42. 42Our operations are affected by local politics and governmental procedures that are beyond our control
43. 43The number of connections we can serve are affected by local governmental policies that are beyond our control
44. 44The number of homes we can construct are affected by local governmental policies relating to the construction of infrastructureNew

4. General Risks

1. 45We are dependent on the services of a key employee
2. 46Our stock price has been volatile in the past and may decline in the future
3. 47Unauthorized access to confidential information and data on our information technology systems and security and data breaches could materially adversely affect our business, financial condition, and operating results
4. 48Failure to maintain effective internal controls over financial reporting could result in material misstatements in our financial statements and affect our ability to meet our reporting requirements
5. 49Conflicts, terrorist attacks, public health crises, including the occurrence of a contagious disease or illness, such as the COVID-19 coronavirus, or general instability could adversely affect our business