PURE CYCLE CORP Fair Value Disclosure
NOTE 3 – FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. The Company uses a fair value hierarchy that has three levels of inputs, both observable and unobservable, with use of the lowest possible level of significant inputs to determine the level in the fair value hierarchy which is applicable to the fair value measure.
Level 1 — Valuations for assets and liabilities traded in active exchange markets, such as The NASDAQ Stock Market. As of August 31, 2025 and August 31, 2024, the Company had no recurring Level 1 assets or liabilities.
Level 2 — Valuations for assets and liabilities obtained from readily available pricing sources via independent providers for market transactions involving similar assets or liabilities. As of August 31, 2025 and 2024, the Company had three non-recurring Level 2
liabilities, both of the SFR Notes and the Lost Creek Note (all defined in Note 7), for which the Company has determined the valuation of the liabilities can be obtained from readily available pricing sources via independent providers for market transactions involving similar liabilities.
Level 3 — Valuations for assets and liabilities that are derived from other valuation methodologies, including discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker-traded transactions. Level 3 valuations incorporate certain significant unobservable assumptions and projections in determining the fair value assigned to such assets or liabilities. As of August 31, 2025 and 2024, the Company had one Level 3 asset, the notes receivable. The Company did not record any impairment charges related to the notes receivable, as their fair value, based on a discounted cash flow analysis, exceeded the carrying value.
The Company maintains policies and procedures to value instruments using what management believes to be the best and most relevant data available.
There were no transfers between Level 1, 2 or 3 categories during the years ended August 31, 2025 or 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 12, 2025 | Showing above |
| 2024 | Nov 13, 2024 | |
| 2023 | Nov 15, 2023 | |
| 2022 | Nov 14, 2022 | |
| 2021 | Nov 10, 2021 | |
| 2020 | Nov 10, 2020 | |
| 2019 | Nov 12, 2019 | |
| 2018 | Nov 13, 2018 | |
| 2017 | Nov 15, 2017 | |
| 2016 | Oct 28, 2016 | |
| 2015 | Nov 9, 2015 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.