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, 1999
___ 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, 1999:
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, 1999 FORM 10-QSB
Part I - Financial Information (unaudited)
Balance Sheets - November 30, 1999 and 3
August 31, 1999
Statements of Operations - For the three months 4
ended November 30, 1999 and 1998
Statements of Cash Flows - For the three months 5
ended November 30, 1999 and 1998
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
BALANCE SHEETS
(unaudited)
November 30 August 31
ASSETS 1999 1999
Current assets:
Cash and cash equivalents $ 930,604 $ 981,025
Accounts Recievable -- 6,106
Prepaid expenses and other current assets 11,259 11,259
Total current assets 941,863 998,390
Investment in water and systems:
Rangeview water supply 13,300,938 13,282,485
Paradise water supply 5,482,303 5,482,303
Rangeview Water System 126,611 126,611
Total investment in waterand systems 18,909,852 18,891,208
Note receivable, including accrued interest 327,670 321,794
Other assets 1,441 22,596
$ 20,180,826 $ 20,234,179
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable -- 55,915
Billings in excess of costs and
estimated earnings (Note 2) 583,267 895,379
Accrued liabilities 168,972 25,810
Total current liabilities 752,239 977,104
Long-term debt - related parties,
including accrued interest 4,079,726 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 (20,473,453) (20,466,416)
Total stockholders' equity 4,130,108 4,017,145
$ 20,180,826 $ 20,234,179
See Accompanying Notes to the Financial Statements
3
Page
PURE CYCLE CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
November 30 November 30
1999 1998
Water service revenue
Tap fees $ -- $ --
Water usage fees 6,871 6,371
Water construction revenue 312,112 --
318,983 6,371
Construction costs incurred (Note 2) ( 242,066) --
Water service operating expense ( 1,300) (1,200)
Gross Margin 75,617 5,171
General and administrative expense ( 55,975) ( 59,404)
Other income (expense):
Interest income 16,496 11,045
Interest expense:
Related parties ( 58,549) ( 50,045)
Other 15,374 ( 1,785)
Net Loss $(7,037) $(95,018)
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
Page
PURE CYCLE CORPORATION
STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
November 30 November 30
1999 1998
Cash flows from operating activities:
Net loss $(7,037) $(95,018)
Adjustments to reconcile
net loss to net cash provided by
in operating activities:
Depreciation and
amortization -- 287
Disposal of other assets 21,155 --
Increase in accrued interest
on note receivable ( 5,876) ( 16,876)
Increase in accrued interest on long
term debt and other non-current
liabilities 58,549 51,830
Changes in operating assets
and liabilities:
Accounts receivable 6,106 --
Accounts payable and accrued
liabilities 87,247 541
Billings in excess of costs and
estimated earnings (312,112) 459,800
Net cash provided by (used in)
operating activities (151,968) 400,564
Cash flows from investing activities:
Investments in water supply ( 18,453) (29,368)
Investment in Rangeview water system -- (15,056)
Net cash used in
investing activities ( 18,453) (44,424)
Cash flows from financing activities:
Proceeds from sale of common stock 120,000 --
Net cash provided by financing
activities 120,000 --
Net increase (decrease)
in cash and cash
equivalents (50,421) 356,140
Cash and cash equivalents
beginning of period 981,025 423,027
Cash and cash equivalents
end of period $ 930,604 $ 779,167
See Accompanying Notes to the Financial Statements
5
Page
PURE CYCLE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING PRINCIPLES
The balance sheet as of November 30, 1999 and August 31, 1999, the
statements of operations for the three months ended November 30, 1999
and 1998 and the statements of cash flows for the three months ended
November 30, 1999 and 1998, 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, 1999 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
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 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 purchased the equivalent of 201 residential
water taps at $8,165 per tap (or $1,641,165), and the equivalent of 156
residential wastewater taps at $4,000 per tap (or $624,000, collectively
$2,265,165). 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 second 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 November 30, 1999 of $601,000 with the remaining portion of the water
system currently under bonded contract for $349,000 for a combined total
of $950,000. Projected costs for construction of the wastewater system
are $600,000 or combined water and wastewater costs of $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 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.
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,
1999 were approximately $3,429 lower than for the period ended November 30,
1998, primarily because of compensation expense. Net loss for the three
months ended November 30, 1999 decreased approximately $87,982 compared to
the three month ended November 30, 1998 primarily because of the revenues
recognized pursuant to the percentage-of-completion of the construction
of the water and wastewater systems for the Model Facility.
During the three months ended November 30, 1999, the Company generated
water service revenues of $318,984 compared to $6,371 for the period ended
November 30, 1998 due primarily to the agreement with the Model Facility.
The Company incurred construction costs of $242,066 and has remaining
construction deposits totaling $583,267. The Company recognized revenues
from construction based on percentage-of-completion methodology. As of
the quarter ended November 30, 1999, construction of the water and
wastewater facilities for the Model Facility were approximately 39%
complete. During the quarter ended November 30, 1999, the Company delivered
approximately 5.5 million gallons of water to customers in the Service Area
generating revenues from water sales of $6,871. The Company incurred
approximately $1,300 in operating costs associated with the water service
revenues.
Liquidity and Capital Resources
At November 30, 1999, current assets exceed current liabilities by $189,624
and, the Company had cash and cash equivalents of $930,604.
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.
Year 2000
The Company has completed its assessment of year 2000 issues on its
computer systems, applications and water facilities. Conversion and
testing activities have been completed. The Company's cost for conversion
and testing for year 2000 compliance was less than $10,000. As of the date of
this report the Company has not experienced any interruptions or failures
in service as a result of the year 2000 problem and does not anticipate any
year 2000 problems. The Company does have emergency preparedness procedures
in the event of extended power service interruption to restore service to its
customers. Such failures could materially and adversely affect the
Company's results of operations, liquidity and financial condition.
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 14, 1999 /S/ Thomas P. Clark
Thomas P. Clark,
President
Date:
January 14, 1999 /S/ Mark W. Harding
Mark W. Harding,
Chief Financial Officer
<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-31-1999
<PERIOD-END> NOV-30-1999
<CASH> 930,604
<SECURITIES> 11,259
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 941,863
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,180,826
<CURRENT-LIABILITIES> 752,239
<BONDS> 0
<COMMON> 261,584
0
6,400
<OTHER-SE> 4,130,108
<TOTAL-LIABILITY-AND-EQUITY> 20,180,826
<SALES> 0
<TOTAL-REVENUES> 318,984
<CGS> 0
<TOTAL-COSTS> 243,366
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 58,549
<INCOME-PRETAX> (7,036)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,036)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,036)
<EPS-BASIC> (0.01)
<EPS-DILUTED> 0
</TABLE>
