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 May 31, 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)
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 May 31, 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 MAY 31, 2000 FORM 10-QSB
Page
Part I - Financial Information (unaudited)
Balance Sheets - May 31, 2000 and 3
August 31, 1999
Statements of Operations - For the three months 4
ended May 31, 2000 and May 31, 1999
Statements of Operations - For the nine months 5
ended May 31, 2000 and May 31, 1999
Statements of Cash Flows - For the nine months 6
ended May 31, 2000 and May 31, 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.
2
PURE CYCLE CORPORATION
BALANCE SHEETS
May 31, August 31,
ASSETS 2000 1999
(unaudited)
Current assets:
Cash and cash equivalents $ 383,266 $ 981,025
Accounts Receivable -- 6,106
Prepaid expenses and other current assets 11,259 11,259
Total current assets 394,525 998,390
Investment in water projects:
Rangeview water rights 13,351,179 13,282,485
Paradise water rights 5,484,868 5,482,303
Rangeview Water System 126,611 126,611
Total investment in water projects 18,962,658 18,891,399
Note receivable, including accrued interest 340,569 321,794
Other assets 1,441 22,596
$ 19,699,193 $20,234,179
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,936 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 304,546 977,104
Long-term debt - related parties, including
accrued interest 4,203,075 4,021,177
Other non-current liabilities 128,123 128,123
Participating interests in Rangeview
water rights 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 - 432,513 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 (20,630,742)(20,466,416)
Total stockholders' equity 3,972,819 4,017,145
$ 19,699,193 $20,234,179
See Accompanying Notes to the Financial Statements
3
PURE CYCLE CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
May 31, May 31,
2000 1999
Water usage fees $ 12,279 $ 11,683
12,279 11,683
Water service operating expense (1,380) (1,200)
Gross Margin 10,899 10,483
General, administrative and marketing ( 62,498) ( 55,836)
Other income (expense)
Interest income 10,958 8,878
Interest expense
Related party ( 63,237) ( 50,046)
Other -- ( 1,785)
Net Loss $(103,878) $(88,304)
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
4
PURE CYCLE CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
Nine Months Ended
May 31, May 31,
2000 1999
Water usage fees $ 29,600 $ 21,319
Water construction revenue 613,461 --
643,061 21,319
Construction costs incurred (Note 2) (475,786) --
Water service operating expense ( 3,980) ( 3,600)
Gross Margin 163,295 17,719
General, administrative and marketing ( 201,993) (211,777)
Other income (expense)
Interest income 40,896 31,710
Interest expense
Related party ( 181,898) ( 150,136)
Other 15,374 ( 5,355)
Net Loss $( 164,326) $(317,839)
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
5
PURE CYCLE CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
May 31, May 31,
2000 1999
Cash flows from operating activities:
Net loss $(164,326) $(317,839)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization -- 1,143
Increase in accrued interest on
note receivable (18,775) (28,628)
Increase in accrued interest on long term debt and
other non-current liabilities 181,898 155,491
Changes in operating assets and liabilities:
Accounts receivable 6,106 --
Accounts payable and accrued liabilities (59,097) (12,990)
Billings in excess of costs and
estimated earnings (613,461) 104,496
Change in other assets 21,155 --
Net cash used in operating activities (646,500) (98,327)
Cash flows from investing activities:
Investments in water rights ( 71,259) (162,922)
Investment in Rangeview water system -- (14,993)
Net cash used in investing activities (71,259) (177,915)
Net cash provided by financing activities
proceeds from sale of stock 120,000 90,000
Net decrease in cash and cash equivalents (597,759) (186,242)
Cash and cash equivalents beginning of period 981,025 423,027
Cash and cash equivalents end of period $ 383,266 $ 236,785
See Accompanying Notes to the Financial Statements
6
PURE CYCLE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING PRINCIPLES
The balance sheet as of May 31, 2000, the statements of operations for the
three months and nine months ended May 31, 2000 and May 31, 1999 and the
statements of cash flows for the nine months ended May 31, 2000 and May 31,
1999, 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 May 31, 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. It is suggested that these
consolidated financial statements 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 CONTRACTS
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 purchased the equivalent of 201 residential
water taps. Pursuant to its Service Agreements, the Company received
$1,372,014 from the water tap fees during fiscal 1999, and will receive
$624,000 from the sewer tap fees upon the initiation of construction of the
wastewater treatment facility scheduled for fourth quarter 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 as of the end of the
quarter ended May 31, 2000 of $835,000. No construction activity occurred
during the third quarter, however the Company did complete the design and bid
documents for the wastewater facility which will begin construction in the
fourth quarter with projected costs of $600,000. The Company recognizes
revenue from construction based on percent-of-completion methodology.
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
C2 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
C2 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 who have previously invested in the Company. Proceeds
to the Company were $120,000.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
During the three months ended May 31, 2000, the Company generated water usage
revenues from the sale of water to customers within the Company's Service
Area of $12,279 compared to $11,683 for the three months ended May 31, 1999,
and incurred approximately $1,380 in operating costs compared to $1,200 for
the three months ended May 31, 1999. No construction costs were incurred
during the three months ended May 31, 2000 and accordingly, the Company
recognized no revenue under the percent-of-completion method.
During nine months ended May 31, 2000, the Company generated water usage
revenues from the sale of water to customers within the Company's Service
Area of $29,600 compared $21,319 for the nine months ended May 31, 1999, and
incurred approximately $3,980 in operating costs compared $3,600 for the nine
months ended May 31, 1999.
During the nine months ended May 31, 2000, the Company generated water service
revenues of $643,061 of which $613,461 were water construction revenues due
primarily to the agreement with the Model Facility. Also during the nine
months ended May 31, 2000, Company incurred construction costs of $475,786.
Completion of the water facilities by the Company's contractor was
approximately 118 days late. The contracts for construction of the water
facilities with the contractor included provision for liquidated damages for
late completion total $1,000 per day. The Company has retained
approximately $100,000 from the contract pending resolution of the liquidated
damages by the contractor and the contractor's surety bond company. The
Company recognizes revenue from construction based on percentage-of-
completion methodology. As of May 31, 2000, construction of the water and
wastewater facilities for the Model Facility were estimated to be
approximately 54% complete.
During the three months ended May 31, 2000, the Company delivered approximately
6.7 million gallons of water to customers in the Service Area. During the
nine months ended May 31, 2000, the Company delivered approximately 16.8
million gallons of water to customers in the service Area.
General, administrative and marketing expenses for the three months ended May
31, 2000 were approximately $6,700 higher than for the three months ended
May 31, 1999. General, administrative and marketing expenses for the nine
months ended May 31, 2000 were approximately $10,000 lower than for the nine
months ended May 31, 1999. Interest expense for the three and nine months
ended May 31, 2000 were approximately $13,000 and $32,000 higher than for
the respective periods ended May 31, 1999, primarily due to higher interest
rates. Net loss for the three months ended May 31, 2000 was approximately
$15,500 higher than for the three months ended May 31, 1999, primarily due
to higher interest costs. Net loss for the nine months ended May 31, 2000
was approximately $153,500 lower than for the nine months ended May 31, 1999
primarily due to revenue received during fiscal 1999 for the construction
of the water and wastewater facilities for the Model Facility.
Liquidity and Capital Resources
At May 31, 2000, current assets exceed current liabilities by $53,979 and,
the Company had cash and cash equivalents of $383,266. Net cash used in
operating activities for the nine months ended May 31, 2000 was $646,500.
The Company received construction contract payments in Fiscal year 1999 to
fund the construction costs incurred in Fiscal 2000.
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.
8
Liquidity and Capital Resources (continued)
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.
9
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:
July 14, 2000 /S/ Thomas P. Clark
Thomas P. Clark,
President
Date:
July 14, 2000 /S/ Mark W. Harding
Mark W. Harding,
Chief Financial Officer
10
