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 February 29, 2000
___ 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)
Registrants 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 issuers classes of
common equity, as of February 29, 2000:
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]
PURE CYCLE CORPORATION
INDEX TO FEBRUARY 29, 2000 FORM 10-QSB
Page
Part I - Financial Information (unaudited)
Balance Sheets As of February 29, 2000 and 3
August 31, 1999
Statements of Operations - For the three months 4
ended February 29, 2000 and February 28, 1999
Statements of Operations For the six months 5
ended February 29, 2000 and February 28, 1999
Statements of Cash Flows - For the six months 6
ended February 29, 2000 and February 28, 1999
Notes to Financial Statements 7
Management's Discussion and Analysis of 8
Results of Operations and Financial Condition
Signature Page 9
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.
PURE CYCLE CORPORATION
BALANCE SHEETS
(unaudited)
February 29, August 31,
ASSETS 2000 1999
Current assets:
Cash and cash equivalents $ 579,622 $ 981,025
Accounts Recievable -- 6,106
Prepaid expenses and other current assets 11,259 11,259
Total current assets 590,881 998,390
Investment in water and systems:
Rangeview water supply 13,322,487 13,282,485
Paradise water supply 5,484,868 5,482,303
Rangeview water system 126,611 126,611
Total investment in water and systems 18,933,966 18,891,399
Note receivable, including accrued interest 333,83 321,794
Other assets 1,441 22,596
19,860,121 20,234,179
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 139,222 55,915
Billings in excess of costs and
estimated earnings (Note 2) 281,918 895,379
Accrued liabilities 3,692 25,810
Total current liabilities 424,832 977,104
Long-term debt - related parties,
including accrued interest 4,139,838 4,021,177
Other non-current liabilities 128,123 128,123
Participating interests in Rangeview
water supply 11,090,630 11,090,630
Stockholders' equity:
Preferred stock, par value $.001 per
share; authorized - 25,000,000 shares:
Series A1 - 1,600,000 shares issued
and outstanding 1,600 1,600
Series B - 432,514 shares issued and outstanding 433 433
Series C 3,200,000 shares issued and outstanding 3,200 3,200
Series C1 500,000 shares issued and outstanding 500 500
Series C2 666,667 shares issued and outstanding 667 --
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 24,335,577 24,216,244
Accumulated deficit (20,526,863)(20,466,416)
Total stockholders' equity 4,076,698 4,017,145
$ 19,860,121 $ 20,234,179
See Accompanying Notes to the Financial Statements
PURE CYCLE CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
Three months Ended
February 29, February 28,
2000 1999
Water service revenue
Water construction revenues $ 301,349 $ --
Water usage fees 10,449 3,265
311,798 3,265
Construction costs incurred (Note 2) (233,719) --
Water service operating expense (1,300) (1,200)
Gross Margin 76,779 2,065
General and administrative expense (83,519) (100,937)
Other income (expense):
Interest income 13,442 11,786
Interest expense:
Related parties (60,112) (50,046)
Other -- (1,785)
Net Loss $(53,410) $(138,917)
Basic and diluted net loss per common share $ * $ *
Weighted average common shares outstanding 78,439,763 78,439,763
* less than $.01 per share
See Accompanying Notes to the Financial Statements
PURE CYCLE CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
Six months Ended
February 29, February 28,
2000 1999
Water service revenue
Water construction revenues $ 613,461 $ --
Water usage fees 17,321 9,636
630,782 9,636
Construction costs incurred (Note 2) (475,786) --
Water service operating expense (2,600) (2,400)
Gross Margin 152,396 7,236
General and administrative expense (139,494) (157,941)
Other income (expense):
Interest income 29,938 22,831
Interest expense:
Related parties (118,661) (100,091)
Other 15,374 (3,570)
Net Loss $(60,447) $(231,535)
Basic and diluted net loss per common share $ * $ *
Weighted average common shares outstanding 78,439,763 78,439,763
* less than $.01 per share
See Accompanying Notes to the Financial Statements
PURE CYCLE CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited)
Six months Ended
February 29, February 28,
2000 1999
Cash flows from operating activities:
Net loss $(60,447) $(231,535)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization -- 529
Disposal of other assets 21,155 --
Increase in accrued interest on note receivable (12,039) ( 22,752)
Increase in accrued interest on long
term debt and other non-current liabilities 118,661 103,661
Changes in operating assets and liabilities:
Accounts receivable 6,106 --
Billings in excess of costs and
estimated earnings (613,461) 158,800
Accounts payable and accrued liabilities 61,189 540
Net cash provided by (used in)
operating activities (478,836) 9,243
Cash flows from investing activities:
Investments in water supply (42,567) (113,858)
Investment in Rangeview water system -- (14,993)
Net cash used in investing activities (42,567) (128,851)
Cash flows from financing activities:
Proceeds from sale of common stock 120,000 90,000
Net cash provided by financing activities 120,000 90,000
Net decrease in cash and cash equivalents (401,403) (29,608)
Cash and cash equivalents
beginning of period 981,025 423,027
Cash and cash equivalents
end of period $ 579,622 $ 393,419
See Accompanying Notes to the Financial Statements
PURE CYCLE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING PRINCIPLES
The balance sheets as of February 29, 2000 and August 31, 1999, the statements
of operations for the three and six months ended February 29, 2000 and
February 28, 1999 and the statements of cash flows for the three and
six months ended February 29, 2000 and February 28, 1999, have been prepared
by the Company and have not been audited. 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
February 29, 2000 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. These financial statements should
be read in conjunction with the financial statements and notes thereto
included in the Company's 1999 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 CONSTRUCTION DEPOSITS
Pursuant to its Service Agreements, the Company is obligated to provide water
and wastewater service to a 400 acre development which will include the
construction of a 500-bed Academic Model Juvenile Facility (Model Facility).
The Model Facility agreed to pay $2,265,165 for residential water and
wastewater service. Pursuant to its Service Agreements, the Company
received $1,372,014 for water taps under the agreement during fiscal 1999,
and will receive $624,000 from the wastewater taps upon the initiation of
construction of the wastewater treatment facility, which is scheduled for
the third quarter of fiscal 2000, for a combined total of $1,996,014. The
Company began construction of the water system in fiscal year 1999 and has
incurred costs related thereto of $613,000 during the six months ended
February 29, 2000 with the remaining portion of the water system currently
under bonded contract for $337,000 for a combined total of $950,000.
Projected costs for construction of the wastewater system are $600,000;
projected costs for completion of the combined water and wastewater facilities
are $1,550,000.
NOTE 3 - STOCKHOLDERS' EQUITY
In September 1999, the Company entered into a Plan of Recapitalization and a
Stock Purchase Agreement whereby the Company issued 666,667 shares of Series
C-2 Convertible Preferred Stock to the Company's President, Mr. Thomas Clark,
in exchange for 666,667 shares of common stock owned by Mr. Clark. The Series
C-2 Convertible Preferred Stock converts into an equivalent number of shares
of Common stock at the election of Mr. Clark, provided the Company has
authorized and unissued shares of Common Stock available. The Company
sold 666,667 shares of the Company's Common Stock at $.18 per share to 3
accredited investors, all of whom have previously invested in the Company.
Proceeds to the Company were $120,000.
In January 1999, the Company entered into a Plan of Recapitalization and a
Stock Purchase Agreement whereby the Company issued 500,000 shares of Series
C-1 Convertible Preferred Stock to the Company's President, Mr. Thomas Clark,
in exchange for 500,000 shares of Common Stock owned by Mr. Clark. The Series
C-1 Convertible Preferred Stock converts into an equivalent number of shares
of Common stock at the election of Mr. Clark, provided the Company has
authorized and unissued shares of Common Stock available. The Company sold
500,000 shares of the Company's Common Stock at $.18 per share to an
accredited investor. Proceeds to the Company were $90,000.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
During the three months ended February 29, 2000, the Company generated
water service revenue of $311,798, compared to $3,265 for the period ended
February 28, 1999, due primarily to the agreement with the Model Facility.
Also during the three months ended February 29, 2000, Company incurred
construction costs of $233,719 whereas no construction costs were incurred
for the comparable period ended February 28, 1999. General and administrative
expenses for the three months ended February 29, 2000 decreased $17,418, to
$83,519, from $100,937 in the comparable period ended February 28, 1999,
primarily because of higher compensation expense in the prior year. Net loss
for the three months ended February 29, 2000 decreased approximately $85,507
compared to the three month ended February 28, 1999 primarily because of the
revenues recognized pursuant to the percentage-of-completion method of
accounting for the construction of the water and wastewater systems for the
Model Facility
During the six months ended February 29, 2000, the Company generated water
service revenues of $630,782 compared to $9,636 for the period ended February
28, 1999 due primarily to the agreement with the Model Facility. Also during
the six months ended February 29, 2000, Company incurred construction costs
of $475,786 and has remaining construction deposits totaling $281,918. The
Company recognized revenues from construction based on percentage-of-
completion methodology. As of February 29, 2000, construction of the water
and wastewater facilities for the Model Facility were estimated to be
approximately 54% complete. During the quarter ended February 29, 2000, the
Company delivered approximately 4.6 million gallons of water to customers in
the Service Area, generating revenues from water sales of $17,321. The
Company incurred approximately $2,600 in operating costs associated with the
water service revenue.
General and administrative expenses for the six months ended February 29, 2000
decreased $18,447 to $139,494 from $157,941 in the comparable period ended
February 28, 1999, primarily because of higher compensation expense in the
prior year. Net loss for the six months ended February 29, 2000 decreased
approximately $171,088 compared to the six month ended February 28, 1999
primarily because of the revenue recognized pursuant to the percentage-of-
completion method of accounting for the construction of the water and
wastewater systems for the Model Facility.
Liquidity and Capital Resources
At February 29, 2000, current assets exceed current liabilities by $166,049
and, the Company had cash and cash equivalents of $579,622.
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 Water
Commercialization Agreement, 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.
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:
April 10, 2000 /S/ Thomas P. Clark
Thomas P. Clark,
President
Date:
April 10, 2000 /S/ Mark W. Harding
Mark W. Harding,
Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<LEGEND>
THIS DOCUMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 10-QSB DATED FEBRUARY 29, 2000 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-END> FEB-29-00
<CASH> 579,622
<SECURITIES> 11,259
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 590,881
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,860,121
<CURRENT-LIABILITIES> 424,832
<BONDS> 0
<COMMON> 261,584
0
6,400
<OTHER-SE> 4,076,698
<TOTAL-LIABILITY-AND-EQUITY> 19,860,121
<SALES> 311,798
<TOTAL-REVENUES> 311,798
<CGS> 235,019
<TOTAL-COSTS> 235,019
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,112
<INCOME-PRETAX> (53,410)
<INCOME-TAX> 0
<INCOME-CONTINUING> (53,410)
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