_________________________________________________________________
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 30,1996
___ 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, 1996:
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]
_________________________________________________________________
PAGE 1 OF 10
<PAGE>
PURE CYCLE CORPORATION AND SUBSIDIARY
INDEX TO NOVEMBER 30, 1996 FORM 10-QSB
Page
----
Part I - Financial Information (unaudited)
Balance Sheets - November 30, 1996 and 3
August 31, 1995
Statements of Operations - For the three months 4
ended November 30, 1996 and November 30, 1995
Statements of Cash Flows - For the three months 5-6
ended November 30, 1996 and November 30, 1995
Notes to Financial Statements 7-8
Management's Discussion and Analysis of 9
Results of Operations and Financial Condition
Signature Page 10
"SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Statements that are not historical facts contained in this
Quarterly Report on Form 10-QSB are forward looking statements
that involve risk and uncertainties that could cause actual
results to differ from projected results. Factors that could
cause actual results to differ materially include, among others:
general economic conditions, the market price of water, changes
in applicable statutory and regulatory requirements, changes in
technology, uncertainties in the estimation of water available
under decrees and timing of development, the strength and
financial resources of the Company's competitors, the Company's
ability to find and retain skilled personnel, climatic
conditions, labor relations, availability and cost of material
and equipment, delays in the anticipated permit and start-up
dates, environmental risks, and the results of financing efforts.
PAGE 2 OF 10
<PAGE>
PURE CYCLE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
November 30 August 31
ASSETS 1996 1996
----------- -----------
Current assets:
Cash and cash equivalents $ 327,883 $ 126,756
Marketable securities 3,429 3,429
Prepaid expenses and other current assets 7,795 10,864
---------- ----------
Total current assets 339,287 141,049
Investment in water projects:
Rangeview water rights (Rangeview Water
Commercialization Agreement in 1995) 12,829,952 12,788,413
Paradise water rights 5,466,834 5,466,834
---------- ----------
Total investment in water projects 18,296,786 18,255,247
Note receivable 256,056 251,282
Equipment, at cost, net of accumulated
depreciation of $12,804 in 1996 and
$10,225 in 1995 4,434 5,155
Other assets 36,096 40,596
---------- ----------
$ 18,932,659 $ 18,693,329
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 66,833 $ 53,796
Long-term debt - related parties, less
current maturities (Note 2) 3,098,106 2,750,311
Other non-current liabilities 129,253 127,468
Participating interests in Rangeview
water rights (Minority interest in Rangeview
Water Commercialization Agreement in 1995) 11,090,630 11,090,630
Stockholders' equity (Note 3):
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;
78,439,763 shares issued and outstanding 261,584 261,584
Additional paid-in capital 23,633,561 23,633,561
Deficit accumulated during
development stage ( 6,622,969) ( 6,499,682)
Deficit accumulated prior to
September 1, 1986 (12,726,372) (12,726,372)
---------- ----------
Total stockholders' equity 4,547,837 4,671,124
Contingency (Note 4)
---------- ----------
$ 18,932,659 $ 18,693,329
========== ==========
[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)
Three Months Ended
--------------------------
November 30 November 30
1996 1995
----------- -----------
Expenses:
General, administrative
and marketing $( 79,410) $( 88,687)
Expiration of option to purchase
water rights -- 31,997
Interest ( 49,580) ( 46,150)
------- -------
Total Expenses (128,990) (166,834)
Interest income 5,703 12,488
------- -------
Net Loss $(123,287) $(154,346)
======= =======
Net Loss per common share $ --* $ --*
* less than $.01 per share
[FN]
See Accompanying Notes to the Consolidated Financial Statements
PAGE 4 OF 10
<PAGE>
PURE CYCLE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
------------------------- Cumulative
November 30 November 30 Sept. 1, 1986 to
1996 1995 November 30, 1996
----------- ----------- -----------------
Cash flows from operating
activities:
Net loss $(123,287) $(154,346) $(6,622,969)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization 721 1,394 32,259
Amortization of debt
issuance costs -- -- 23,000
Amortization of warrant
issuance costs 4,500 -- 4,500
(Loss)/gain on sale of
marketable securities -- -- ( 24,809)
Accretion of discount
on long-term debt -- -- 69,630
Common shares issued as
additional interest
expense -- -- 25,000
Extraordinary gain on
extinguishment of debt -- -- ( 559,651)
Loss on abandonment of
option on water rights -- -- 781,997
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 ( 4,774) ( 3,276) ( 26,746)
Other -- -- ( 1,065)
Changes in operating assets
and liabilities:
Prepaid expenses and
other current assets 2,889 6,297 ( 3,025)
Accounts payable and
other non-current
liabilities 13,037 ( 41,064) 442,328
Accrued interest 49,580 44,365 1,642,222
------- ------- ---------
Net cash used in
operating activities $( 57,334) $(146,630) $(3,508,886)
------- ------- ---------
(continued)
PAGE 5 OF 10
<PAGE>
PURE CYCLE CORPORATION AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
Three Months Ended
------------------------- Cumulative
November 30 November 30 Sept. 1, 1986 to
1996 1995 November 30, 1996
----------- ----------- -----------------
Cash flows from investing
activities:
Investments in water rights $( 41,539) $ 6,525 $(2,393,763)
Purchase of marketable
securities -- -- (2,000,000)
Proceeds from sale of
marketable securities -- -- 2,024,809
Increase in note receivable -- ( 26,300) ( 229,310)
Purchase of equipment -- ( 663) ( 17,237)
Increase in other assets -- -- ( 106,595)
------- ------- ---------
Net cash provided by
(used in) investing
activities ( 41,539) ( 20,438) (2,722,096)
------- ------- ---------
Cash flows from financing
activities:
Proceeds from issuance
of debt 300,000 -- 2,977,629
Repayments of debt -- -- (1,167,190)
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 300,000 -- 6,555,439
------- ------- ---------
Net increase (decrease)
in cash and cash
equivalents 201,127 (167,068) 324,457
Cash and cash equivalents
beginning of period 126,756 865,803 3,426
------- ------- ---------
Cash and cash equivalents
end of period $ 327,883 $ 698,735 $ 327,883
======= ======= =========
[FN]
See Accompanying Notes to the Consolidated Financial Statements
PAGE 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, 1996 and
August 31, 1996, the consolidated statements of operations for
the three months ended November 30, 1996 and November 30, 1995
and the consolidated statements of cash flows for the three
months ended November 30, 1996 and November 30, 1995, 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, 1996 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 1996 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 - LONG-TERM DEBT
- -----------------------
In August 1996, the Company entered into a loan agreement with
six related party investors. The loan is for $300,000, is
unsecured, bears interest based on the prime rate plus 2%, is
payable in equal quarterly installments through August 30, 1997.
The agreement provides that the Company can extend the due date
of any of the four quarterly installment to August 30, 2002 by
issuing additional warrants (see Note 3). The funds were
advanced to the Company in September 1996. In connection with the
loan agreement, the Company issued warrants to purchase shares of
the Company's common stock. The agreement includes a covenant
that prohibits the note from being called prior to the expiration
of the warrants issued in conjunction with the note.
NOTE 3 - STOCKHOLDERS' EQUITY
- -----------------------------
In connection with a loan agreement described in note 2, the
Company issued warrants to purchase 600,000 shares of the
Company's common stock at $.25 per share. The warrants expire
August 30, 2002. The loan agreement includes a provision
entitling the Company to extend the due date of any of the
installments to August 30, 2002 by issuing additional warrants to
purchase common stock at $.25 per share. The number of warrants
to be issued is equal to 150% of the principal amounts due plus
accrued interest, divided by $.25. The estimated fair value of
the warrants issued of $18,000 has been capitalized and is being
amortized to expense over the term of the notes.
Note 4 - CONTINGENCY/SUBSEQUENT EVENT
- -------------------------------------
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 "State Land Board") seeking a declaratory
judgment affirming that the lease, as amended, from the State
Land Board to the District was valid and enforceable.
In April of 1996, the parties to the lawsuit agreed to a
settlement (the "Settlement"). The Settlement, among other
things, clarifies the State Land Board's royalty participation in
an amended and restated lease relating to the principal value of
of $24,914,058 in exchange for interests in the Company's
PAGE 7 OF 10
<PAGE>
Note 4 - CONTINGENCY/SUBSEQUENT EVENT (continued)
- -------------------------------------------------
Rangeview water rights. The Company negotiated agreements to
acquire the remainder of the District's Bonds not already owned
by the Company with a Comprehensive Amendment Agreement ("CAA").
Commitments to the former bondholders and investors to share in
the proceeds from the sale or other disposition of the Export
Water Rights decreased from approximately $33,546,000 to
approximately $31,807,000 as a result of the Settlement. The
Settlement was subject to obtaining a final non-appealable order
of the trial court approving the Settlement. The trial court
order was signed June 14, 1996 and became final and non-
appealable on July 29, 1996.
Certain crossclaims in the lawsuit remained pending between the
District and the East Cherry Creek Valley Water and Sanitation
District (the "ECCV"). One of ECCV's crossclaims would have
affected the Company in that ECCV asserted that it had the right
of first refusal to purchase the Export Water. If ECCV were to
have prevailed on this claim, the Company would have been
required to sell the Export Water to ECCV. The price for such a
purchase would have been determined by the court and might have
been more or less favorable than the price the Company could
obtain from a third party. In December 1996, the crossclaims in
the lawsuit were settled. ECCV set aside its right to first
refusal to purchase the Export Water in return for a financial
settlement with the District. The outcome of the settlement had
no effect on the Company.
PAGE 8 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, 1996 were approximately $9,500 lower than for the
period ended November 30, 1995, primarily because of a reduction
in salaries paid to the officers of the Company. Interest expense
increased for the three months ended November 30, 1996 by
approximately $3,400 compared to the period ended November 30,
1995, primarily because of a higher 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, 1996 decreased approximately $31,000 compared to the
three months ended November 30, 1995 primarily because of a non-
recurring expense relating to an option to purchase certain water
rights which expired in November 1995.
Liquidity and Capital Resources
- -------------------------------
At November 30, 1996, current assets exceed current liabilities
by $272,454 and, the Company had cash and cash equivalents of
$327,883.
In August 1996, the Company entered into a loan agreement with
six related party investors. The loan is for $300,000, is
unsecured, bears interest based on the prime rate plus 2%, and is
payable in equal quarterly installments through August 30, 1997
(see Notes 2 and 3 to the financial statements). Proceeds from
the note were received in September 1996.
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 CAA,
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.
PAGE 9 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 13, 1997 /S/ Thomas P. Clark
- ----------------------------- -----------------------
Thomas P. Clark,
President
Date:
January 13, 1997 /S/ Mark W. Harding
- ----------------------------- -----------------------
Mark W. Harding,
Chief Financial Officer
Date:
January 13, 1997 /S/ Michael S. Mehrtens
- ----------------------------- ------------------------
Michael S. Mehrtens
Controller
PAGE 10 OF 10
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS DOCUMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THECOMPANY'S 10-QSB DATED NOVEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BYREFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 03-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 327,883
<SECURITIES> 3,429
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 339,287
<PP&E> 17,238
<DEPRECIATION> 12,804
<TOTAL-ASSETS> 18,932,659
<CURRENT-LIABILITIES> 66,833
<BONDS> 0
<COMMON> 261,584
0
2,033
<OTHER-SE> 4,284,220
<TOTAL-LIABILITY-AND-EQUITY> 18,932,659
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 79,410
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,580
<INCOME-PRETAX> (123,287)
<INCOME-TAX> 0
<INCOME-CONTINUING> (123,287)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (123,287)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> 0
</TABLE>
