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 30,1997
___ 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 of incorporation) (I.R.S. Employer
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, 1997:
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>
PURE CYCLE CORPORATION
INDEX TO NOVEMBER 30, 1997 FORM 10-QSB
Page
Part I - Financial Information (unaudited)
Balance Sheets - November 30, 1997 and 3
August 31, 1997
Statements of Operations - For the three months 4
ended November 30, 1997 and November 30, 1996
Statements of Cash Flows - For the three months 5
ended November 30, 1997 and November 30, 1996
Notes to Financial Statements 6
Management's Discussion and Analysis of 7
Results of Operations and Financial Condition
Signature Page 8
"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.
2
<PAGE>
PURE CYCLE CORPORATION
CONSOLIDATED BALANCE SHEETS
November 30 August 31
ASSETS 1997 1997
----------- ---------
Current assets:
Cash and cash equivalents $ 263,384 $ 370,426
Marketable securities 3,429 3,429
Prepaid expenses and other current assets 7,830 7,830
---------- ----------
Total current assets 274,643 381,685
Investment in water projects:
Rangeview water rights (Note 2) 12,945,242 12,920,490
Paradise water rights 5,468,041 5,468,041
Rangeview Water System 111,506 100,212
---------- ----------
Total investment in water projects 18,524,789 18,488,743
Note receivable 280,641 274,765
Equipment, at cost, net of accumulated
depreciation of $14,758 in 1997 and
$14,149 in 1996 2,480 3,089
Other assets 22,596 22,596
---------- ---------
$ 19,105,149 $ 19,170,878
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 28,671 $ 6,856
Accrued liabilities 0 45,809
---------- ----------
Total current liabilities 28,671 52,665
Long-term debt - related parties,
including accrued interest 3,600,970 3,550,925
Other non-current liabilities 115,628 113,843
Participating interests in Rangeview
water rights (Note 2) 11,090,630 11,090,630
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;
78,439,763 shares issued and
outstanding 261,584 261,584
Additional paid-in capital 23,678,561 23,678,561
Accumulated deficit (19,672,928) (19,579,363)
---------- ----------
Total stockholders' equity 4,269,250 4,362,815
---------- ----------
$ 19,105,149 $ 19,170,878
========== ==========
See Accompanying Notes to the Consolidated Financial Statements
3
<PAGE>
PURE CYCLE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
-------------------------------
November 30 November 30
1997 1996
----------- -----------
Water service revenue
Tap fees $ -- $ --
Water usage fees 5,608 --
Water service operating expense ( 1,000) --
Expenses:
General, administrative and marketing ( 55,576) ( 69,512)
Interest
Related party ( 50,045) ( 49,580)
Other ( 1,785) ( 1,785)
-------- -------
Total Expenses (108,406) (119,092)
Other income (expense):
Interest income 9,233 5,703
------ -------
Net Loss $(93,565) $(113,389)
====== =======
Net Loss per common share $ --* $ --*
* less than $.01 per share
See Accompanying Notes to the Consolidated Financial Statements
4
<PAGE>
PURE CYCLE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
-------------------------------
November 30 November 30
1997 1996
----------- -----------
Cash flows from operating activities:
Net loss $( 93,565) $(113,389)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization 609 721
Amortization of warrant
issuance costs -- 4,500
Increase in accrued interest
on note receivable ( 5,876) ( 4,774)
Other -- --
Changes in operating assets
and liabilities:
Prepaid expenses and
other current assets -- 2,889
Accounts payable and
other non-current
liabilities ( 23,994) ( 2,961)
Accrued interest 51,830 49,580
------- -------
Net cash used in
operating activities ( 70,996) ( 63,434)
------- -------
Cash flows from investing activities:
Investments in water rights ( 24,752) 35,439
Investment in rangeview water system ( 11,294) --
Increase in note receivable -- --
------- -------
Net cash provided by
(used in) investing
activities ( 36,046) 35,439
------- -------
Cash flows from financing activities:
Proceeds from issuance
of debt -- 300,000
------- -------
Net cash provided by
(used in) financing
activities -- 300,000
------- -------
Net increase (decrease)
in cash and cash
equivalents (107,042) 201,127
Cash and cash equivalents
beginning of period
370,426 126,756
------- -------
Cash and cash equivalents
end of period $ 263,384 $ 327,883
======= =======
See Accompanying Notes to the Consolidated Financial Statements
5
<PAGE>
PURE CYCLE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING PRINCIPLES
The consolidated balance sheet as of November 30, 1997 and
August 31, 1997, the consolidated statements of operations for
the three months ended November 30, 1997 and November 30, 1996
and the consolidated statements of cash flows for the three
months ended November 30, 1997 and November 30, 1996, 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, 1997 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 1997 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% or 10
1/4% and is due August 30, 2002. The agreement allowed the
Company to extend the due date to August 30, 2002 by issuing
additional warrants (see Note 3). In connection with the August
1996 loan agreement, the Company issued warrants to purchase
shares of the Company's common stock.
In August 1997, the Company entered into a loan agreement with
five related party investors. The loan is for $350,000, is
unsecured, bears interest at the rate of 10 1/4% and is due
August 30, 2002. In connection with the August 1997 loan
agreement, the Company issued warrants to purchase shares of the
Company's common stock (see Note 3).
NOTE 3 - STOCKHOLDERS' EQUITY
In connection with the August 1996 loan agreement described in
note 2, the Company issued warrants to purchase 600,000 shares of
the Company's common stock and additional warrants to purchase
1,323,000 shares to extend the due date of the note until August
30, 2002. The warrants are exercisable at $.25 per share and
expire August 30, 2002. 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.
In connection with the August 1997 loan agreement, the Company
issued warrants to purchase 2,100,000 shares of the Company's
common stock. The warrants are exercisable at $.25 per share and
expire August 30, 2002. A portion of the proceeds received under
the agreement ($45,000) has been attributed to the estimated fair
value of the warrants issued. The resulting discount is being
amortized over the term of the loan.
6
<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, 1997 were approximately $14,000 lower than for the
period ended November 30, 1996, primarily because of a reduction
payroll expense. Interest expense increased for the three months
ended November 30, 1997 by approximately $2,300 compared to the
period ended November 30, 1996 primarily because of a higher
average outstanding balance of notes payable in the first quarter
of fiscal 1997 compared to the same period in fiscal 1996. Net
loss for the three months ended November 30, 1997 decreased
approximately $20,000 compared to the three months ended November
30, 1996 primarily because the reduction in payroll expense.
Liquidity and Capital Resources
At November 30, 1997, current assets exceed current liabilities
by $245,972 and, the Company had cash and cash equivalents of
$274,643.
In August 1997, the Company entered into a loan agreement with
five related party investors. The loan is for $350,000, is
unsecured, bears interest based on the prime rate plus 2% or 10
1/4% and is due August 30, 2002.
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.
7
<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 10, 1998 /S/ Thomas P. Clark
---------------- ----------------------
Thomas P. Clark,
President
Date:
January 10, 1998 /S/ Mark W. Harding
---------------- ----------------------
Mark W. Harding,
Chief Financial Officer
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS DOCUMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S 10-QSB DATED NOVEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> NOV-30-1997
<CASH> 263,384
<SECURITIES> 3,429
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 274,643
<PP&E> 17,238
<DEPRECIATION> 14,758
<TOTAL-ASSETS> 19,105,149
<CURRENT-LIABILITIES> 28,671
<BONDS> 0
<COMMON> 261,584
0
2,033
<OTHER-SE> 4,005,633
<TOTAL-LIABILITY-AND-EQUITY> 19,105,149
<SALES> 0
<TOTAL-REVENUES> 5,608
<CGS> 0
<TOTAL-COSTS> 56,576
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51,830
<INCOME-PRETAX> (93,565)
<INCOME-TAX> 0
<INCOME-CONTINUING> (93,565)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93,565)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> 0
</TABLE>
