_________________________________________________________________
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended November 30,1995
___ TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
For the transition period from __________ to __________
Commission file number 0-8814
PURE CYCLE CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 84-0705083
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5650 York Street, Commerce City, CO 80022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number(303) 292 - 3456
_________________________________________________________________
N/A
(Former name, former address and former fiscal year,
if changed since last report.)
Check whether the registrant (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x]; NO [ ]
State the number of shares outstanding of each of the issuer's
classes of common equity, as of November 30, 1995:
Common Stock, 1/3 of $.01 par Value 78,439,763
(Class) (Number of Shares)
Transitional Small business Disclosure Format (Check one):
Yes [ ]; No [x]
_________________________________________________________________
1 of 10
PURE CYCLE CORPORATION AND SUBSIDIARY
INDEX TO NOVEMBER 30, 1995 FORM 10-QSB
Page
Part I - Financial Information (unaudited)
Balance Sheets - November 30, 1995 and 3
August 31, 1995
Statements of Operations - For the three months 4
ended November 30, 1995 and November 30, 1994
Statements of Cash Flows - For the three months 5-6
ended November 30, 1995 and November 30, 1994
Notes to Financial Statements 7
Management's Discussion and Analysis of 8
Results of Operations and Financial Condition
Signature Page 9
Financial Data Schedule 10
2 of 10
<PAGE>
PURE CYCLE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
November 30 August 31
Assets 1995 1995
------ ------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalent $ 698,735 $ 865,803
Marketable securities 3,429 3,429
Note receivable (Note 2) 148,903 119,327
Prepaid expenses and other current assets 9,740 16,037
---------- ----------
Total current assets 860,807 1,004,596
========== ==========
Investments in water projects:
Paradise water rights 5,463,983 5,462,457
Rangeview water commercialization
agreement (Rangeview WCA) 5,880,140 5,856,194
Sellers Gulch water rights -- 31,997
Equipment, at cost, net of accumulated
depreciation of $9,514 and $6,699 5,312 5,359
Patents, net of accumulated amortization
of $34,776 and $32,696 in 1996 and 1995,
respectively -- 684
Other assets 22,596 22,596
---------- ----------
$ 12,232,838 $ 12,383,883
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
debt $ 188,530 $ 185,460
Accounts payable 17,602 60,450
---------- ----------
Total current liabilities 206,132 245,910
Long-term debt payable to related parties,
less current maturities 2,929,591 2,888,296
Other non-current liabilities 122,012 120,228
Minority interest in Rangeview WCA 4,020,630 4,020,630
Stockholders' equity:
Preferred stock, par value $.001 per
share; authorized - 25,000,000 shares:
Series A - 1,600,000 shares issued
and outstanding 1,600 1,600
Series B - 432,513 shares issued
and outstanding 433 433
Common stock, par value 1/3 of $.01 per
share; authorized - 135,000,000 shares;
issued and outstanding 78,439,763 shares 261,584 261,584
Additional paid-in capital 23,615,561 23,615,561
Deficit accumulated during
development stage ( 6,198,333) ( 6,043,987)
Deficit accumulated prior to
September 1, 1986 (12,726,372) (12,726,372)
---------- ----------
Total stockholders' equity 4,954,473 5,108,819
---------- ----------
Contingency (Note 3)
$ 12,232,838 $ 12,383,883
========== ==========
</TABLE>
[FN]
See Accompanying Notes to the Consolidated Financial Statements
PAGE 3 OF 10
<PAGE>
PURE CYCLE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
November 30 November 30
1995 1994
----------- -----------
<S> <C> <C>
Expenses:
General, administrative
and marketing $( 88,687) $( 74,667)
Expiration of option to
purchase water rights ( 31,997) --
Interest ( 46,150) ( 51,846)
-------- -------
Total Expenses (166,834) (126,513)
Other income (expense):
Interest income 12,488 --
Gain/(loss) on marketable
securities -- ( 604)
------- -------
Net Loss $(154,346) $(127,117)
======= =======
Net Loss per common share $ --* $ --*
======= =======
* less than $.01 per share
</TABLE>
[FN]
See Accompanying Notes to the Consolidated Financial Statements
4 of 10
<PAGE>
PURE CYCLE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------- Cumulative
November 30 November 30 Sept.1, 1986 to
1995 1994 August 31, 1995
----------- ----------- ---------------
<S> <C> <C> <C>
Cash flows from operating
activities:
Net loss $(154,346) $(127,117) $(6,198,333)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization 1,394 1,210 29,679
Amortization of debt
issuance costs -- 2,300 23,000
(Loss)/gain on sale of
marketable securities -- 604 ( 24,809)
Accretion of discount
on long-term debt -- 5,235 69,630
Common shares issued as
additional interest
expense -- -- 25,000
Extraordinary gain on
extinguishment of debt -- -- ( 511,423)
Loss on abandonment of
option on water right -- -- 750,000
Financing expense on
purchase of water option -- -- 200,000
Financing costs for
issuance of stock options
below market price -- -- 187,500
Gain on put options waived -- -- ( 40,950)
Loss on abandonment of
power plant equipment -- -- 62,500
Payment for services and
expenses with common stock
donated by President -- -- 298,250
Other unrealized loss on
marketable securities -- -- 1,143
Increase in accrued interest
on note receivable ( 3,276) -- ( 6,603)
Other -- -- ( 1,065)
Changes in operating assets
and liabilities:
Prepaid expenses and
other current assets 6,297 ( 6,761) ( 4,790)
Accounts payable and
other non-current
liabilities ( 41,064) ( 7,705) 394,881
Accrued interest 44,365 44,311 1,462,484
------- ------- ---------
Net cash used in
operating activities $(146,630) $( 87,923) $(3,283,906)
------- ------- ---------
</TABLE>
(continued)
5 of 10
<PAGE>
PURE CYCLE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended Cumulative
November 30 November 30 Sept.1, 1986 to
1995 1994 August 31, 1995
----------- ----------- ---------------
<S> <C> <C> <C>
Cash flows from investing
activities:
Investments in water rights $ 6,525 $( 48,797) $(2,179,103)
Purchase of marketable
securitie -- -- (2,000,000)
Proceeds from sale of
marketable securities -- 50,000 2,024,809
Increase in note receivable ( 26,300) -- ( 142,300)
Purchase of equipment ( 663) ( 671) ( 15,535)
Increase in other assets -- -- ( 106,595)
------- --------- ---------
Net cash provided by
(used in) investing
activities ( 20,438) 532 (2,418,724)
------- --------- ---------
Cash flows from financing
activities:
Proceeds from issuance
of debt -- -- 2,677,629
Repayments of debt -- -- (1,024,690)
Proceeds from sale of
common stock -- -- 2,900,000
Proceeds from sale of
Series A convertible
Preferred stock -- -- 1,600,000
Proceeds from issuance of
redeemable common stock -- -- 245,000
Proceeds from issuance of
stock options -- -- 100,000
Repurchase of stock
options -- -- ( 100,000)
------- --------- ---------
Net cash provided by
(used in) financing
activities -- -- 6,397,939
Net increase (decrease) ------- --------- ---------
in cash and cash
equivalents (167,068) ( 87,391) 695,309
Cash and cash equivalents
beginning of period 865,803 122,441 3,426
------- --------- --------
Cash and cash equivalents
end of period $ 698,735 $ 35,050 $ 698,735
======= ========= ========
</TABLE>
[FN]
See Accompanying Notes to the Consolidated Financial Statements
6 of 10
<PAGE>
PURE CYCLE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING PRINCIPLES
The consolidated balance sheet as of November 30, 1995 and
August 31, 1995, the consolidated statements of operations for
the three and three months ended November 30, 1995 and November
30, 1994 and the consolidated statements of cash flows for the
three months ended November 30, 1995 and November 30, 1994, have
been prepared by the Company, without an audit. In the opinion
of management, all adjustments, consisting only of normal
recurring adjustments necessary to present fairly the financial
position, results of operations and cash flows at November 30,
1995 and for all periods presented have been made.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these consolidated financial statements be
read in conjunction with the financial statements and notes
thereto included in the Company's 1995 Annual Report on Form 10-
KSB. The results of operations for interim periods presented are
not necessarily indicative of the operating results for the full
year.
NOTE 2 - NOTE RECEIVABLE
In 1995, the Company extended short-term credit to the
Rangeview Metropolitan District. The loan permits borrowings up
to $150,000, is unsecured, bears interest based on the prevailing
prime rate plus 2% and, matures on December 31, 1995.
NOTE 3 - CONTINGENCY
In October 1994, the Company joined in a lawsuit initiated by
others including the Rangeview Metropolitan District (the
"District"), brought in the District Court of the City and County
of Denver, Colorado, against the Colorado State Board of Land
Commissioners (the "Board") seeking a declaratory judgment
affirming that the lease, as amended, (the "Lease"), between the
Board and the District is valid and enforceable. Under the Lease,
the Board leased the development rights to ground water
underlying certain lands controlled by the Board, to the current
lessee, the District. The Company has an interest in such water
by reason of agreements entered into between the District and
other parties.
On March 1, 1995, a counterclaim was filed by the Board against
the District, the Company and other plaintiffs, in which the
Board asserts that the Lease is void because the original lessee
breached his fiduciary duty to the Board and that successive
lessees have breached the Lease. The Board also claims damages
of unspecified amounts against the plaintiffs, including the
Company, because of alleged wrongs done in connection with the
Lease and subsequent transactions.
Based on ongoing settlement discussions, management believes
that the Rangeview litigation will be settled on terms acceptable
to the Company during fiscal year 1996. However, if the Board
were to change its current position on settling the matter and
were to prosecute and prevail on its claims that the Lease is
void or unenforceable, that would have an effect on the Company's
contractual rights under its Water Commercialization Agreement
(the "WCA") related to the water covered by the Lease and would
have a materially adverse effect on the Company.
7 of 10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
General and administrative expenses for the three months ended
November 30, 1995 were approximately $14,000 higher than for the
period ended November 30, 1994, primarily because of and increase
in professional fees expense. Interest expense decreased for the
three months ended November 30, 1995 by approximately $5,700
compared to the period ended November 30, 1994 primarily because
of a lower average outstanding balance of notes payable in the
first quarter of fiscal 1996 compared to the same period in
fiscal 1995. Net loss for the three months ended November 30,
1995 increased approximately $20,900 compared to the three months
ended November 30, 1994 primarily because the company did not
expercise its option to purchase certain water rights which
expired in November 1995.
Liquidity and Capital Resources
At November 30, 1995, current assets exceed current liabilities
by approximately $654,675 and, the Company had cash and cash
equivalents of $698,735.
During 1993, a judgment in the amount of $214,000 was awarded
to a broker pursuant to a complaint filed against the Company in
October of 1991. The Company reached a settlement agreement with
the broker which involved the payment of $60,000 and $154,000
plus 8% interest due on or before October 1, 1995. The note is
currently in default.
The Company is aggressively pursuing the sale and development
of its water rights. The Company cannot provide any assurances
that it will be able to sell its water rights. In the event a
sale of the Company's water rights is not forthcoming and the
Company is not able to generate revenues from the sale or
development of its technology, the Company may sell additional
portions of the Company's profit interest pursuant to the
WCA, incur short or long-term debt obligations or seek to sell
additional shares of Common Stock, Preferred Stock or stock
purchase warrants as deemed necessary by the Company to generate
operating capital.
Development of any of the water rights that the Company has, or
is seeking to acquire, will require substantial capital
investment by the Company. Any such additional capital for the
development of the water rights is anticipated to be financed
through the sale of water taps and water delivery charges to a
city or municipality. A water tap charge refers to a charge
imposed by a municipality to permit a water user to access a
water delivery system (i.e. a single-family home's tap into the
municipal water system), and a water delivery charge refers to a
water user's monthly water bill generally based on a per 1,000
gallons of water consumed.
8 of 10
<PAGE>
PURE CYCLE CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
PURE CYCLE CORPORATION
Date:
January 9, 1996 /S/ Thomas P. Clark
- ------------------------ ---------------------------
Thomas P. Clark,
President
Date:
January 9, 1996 /S/ Mark W. Harding
- ------------------------ ---------------------------
Mark W. Harding,
Chief Financial Officer
Date:
January 9, 1996 /S/ Michael S. Mehrtens
- ------------------------ ---------------------------
Michael S. Mehrtens
Controller
9 of 10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS DOCUMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S 10-QSB DATED NOVEMBER 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> NOV-30-1995
<CASH> 698,735
<SECURITIES> 3,429
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 860,807
<PP&E> 15,537
<DEPRECIATION> 10,225
<TOTAL-ASSETS> 12,230,444
<CURRENT-LIABILITIES> 203,738
<BONDS> 0
<COMMON> 261,584
0
2,033
<OTHER-SE> 4,690,856
<TOTAL-LIABILITY-AND-EQUITY> 12,230,444
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 31,997
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46,150
<INCOME-PRETAX> (154,346)
<INCOME-TAX> 0
<INCOME-CONTINUING> (154,346)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (154,346)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> 0
</TABLE>
