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, 2001
___ 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)
8451 Delaware Street, Thornton, Colorado 80260
(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, 2001:
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, 2001 FORM 10-QSB
Page
Part I - Financial Information (unaudited)
Balance Sheets - May 31, 2001 and 3
August 31, 2000
Statements of Operations - For the three months 4
ended May 31, 2001 and May 31, 2000
Statements of Operations - For the nine months 5
ended May 31, 2001 and May 31, 2000
Statements of Cash Flows - For the nine months 6
ended May 31, 2001 and May 31, 2000
Notes to Financial Statements 7
Management's Discussion and Analysis of
Results of Operations and Financial Condition 8
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
(unaudited)
May 31, August 31,
ASSETS 2001 2000
Current assets:
Cash and cash equivalents $ 394,680 $ 821,124
Trade accounts receivable 2,000 18,619
Accounts receivable - stock subscriptions 114,500
Prepaid expenses and other current assets 11,259 11,259
Total current assets 407,939 965,502
Investment in water projects:
Rangeview water rights 13,469,870 13,422,134
Paradise water rights 5,487,433 5,484,868
Rangeview water system 126,611 126,611
Total investment in water projects 19,083,914 19,033,613
Note receivable, including accrued
interest 364,933 347,162
Other assets 1,441 1,441
$ 19,858,227 $ 20,347,718
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 10,918 6,955
Billings in excess of costs and
estimated earnings (Note 2) -- 772,500
Accrued liabilities 12,300 21,692
Total current liabilities 23,218 801,147
Long-term debt - related parties,
including accrued interest 4,453,339 4,287,251
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 667 667
Series C3 - 1,666,667 shares issued
and outstanding 1,667 1,667
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 24,583,910 24,583,910
Accumulated deficit (20,532,021) (20,549,371)
Treasury stock at cost; 903,334
and 203,334 shares (30,500) (135,500)
Total stockholders' equity 4,291,040 4,046,123
$ 19,858,227 $ 20,347,718
See Accompanying Notes to the Financial Statements
3
PURE CYCLE CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
May 31, May 31,
2001 2000
Water service revenues
Revenue- Usage fees $ 6,630 $ 12,279
Revenue - Construction 178,167 --
184,797 12,279
Construction costs incurred (32,664) --
Water service operating expense (2,573) (1,380)
Gross margin 149,560 10,899
General, administrative and
marketing expenses ( 54,463) ( 62,498)
Other income (expense)
Interest income 9,763 10,958
Interest expense
Related party ( 49,240) ( 63,237)
Other -- --
Net income (loss) $ 55,620 $(103,878)
Basic and diluted net income (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,
2001 2000
Water usage fees $ 49,060 $ 29,600
Water construction revenue 772,500 613,461
821,561 643,061
Construction costs incurred (Note 2) (488,983) (475,786)
Water service operating expense ( 6,677) ( 3,980)
Gross margin 325,900 163,295
General, administrative and
marketing expenses ( 176,308) (201,993)
Other income (expense)
Interest income 33,846 40,896
Interest expense
Related party ( 166,088) ( 181,898)
Other -- 15,374
Net income (loss) $ 17,350 $( 164,326)
Basic and diluted net income
(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,
2001 2000
Cash flows from operating activities:
Net income (loss) $ 17,350 $(164,326)
Adjustments to reconcile net loss to
net cash used in operating activities:
Increase in accrued interest on
note receivable (17,771) (18,775)
Increase in accrued interest on
long-term debt and other non-
current liabilities 166,088 181,898
Changes in operating assets and
liabilities:
Accounts receivable 16,619 6,106
Accounts payable and accrued
liabilities (5,429) (59,097)
Billings in excess of costs and
estimated earnings (772,500) (613,461)
Change in other assets -- 21,155
Cash used in operating activities (595,643) (646,500)
Cash flows from investing activities:
Investments in water rights ( 50,301) (71,259)
Cash used in investing activities (50,301) (71,259)
Cash provided by financing activities -
proceeds from sale of stock 219,500 120,000
Net decrease in cash and cash
equivalents (426,444) (597,759)
Cash and cash equivalents beginning
of period 821,124 981,025
Cash and cash equivalents end of
period $ 394,680 $ 383,266
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, 2001, the statements of
operations for the three months and nine months ended May 31,
2001 and May 31, 2000 and the statements of cash flows for the
nine months ended May 31, 2001 and May 31, 2000, 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, 2001 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 2000 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 paid
Water System Development and Water Resources Charges to fund
construction of water and wastewater systems. Pursuant to its
Service Agreements, the Company has received $1,998,014 of the
total charges of $2,013,495 to be paid by the Model Facility.
Additionally, the Company has received $154,800 from the State of
Colorado for the construction of additional facilities related to
the wastewater plant undertaken by the Company on behalf of the
State of Colorado. The Company has completed construction of the
water and wastewater facilities. Cost for construction of the
combined water and sewer capital project totaled $1,652,895. The
Model Facility is projected to open in August 2001. 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 settled this matter with the contractor's surety
company enabling the Company to retain $95,000 in liquidated
damages. This amount has been recorded as construction revenue.
NOTE 3 - STOCKHOLDERS' EQUITY
In December 2000, the Company sold and two accredited
investors purchased, a total of 700,000 shares of common stock,
at $.15 per share, generating proceeds to the Company of
$105,000. The 700,000 shares were sold from treasury stock.
In August 2000, the Company entered into a Plan of
Recapitalization and a Stock Purchase Agreement whereby the
Company issued 1,666,667 shares of Series C-3 Preferred Stock to
Mr. Thomas Clark in exchange for 1,666,667 shares of common
stock owned by Mr. Clark.
In August 2000, the Company committed to issue, and four
accredited investors committed to purchase, a total of 763,333
shares of common stock, at $.15 per share.
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 Preferred Stock to
Mr. Thomas Clark in exchange for 666,667 shares of common stock
owned by Mr. Clark. The Company sold 666,667 shares of the
Company's Common Stock at $.18 per share to three accredited
investor. Proceeds to the Company were $120,000. The shares
were issued under Section 4(2) of the Securities Act of 1933.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
During the quarter ended May 31, 2001, the Company delivered
approximately 5.6 million gallons of water to customers in the
Service Area generating revenues from water sales of $6,630
compared to the delivery of 6.7 million gallon generating
revenues of $12,279 during the three months ended May 31, 2000.
The Company incurred water service operating costs of $2,573 for
the three months ending May 31, 2001 as compared to $1,380 for
the three month ending May 31, 2000. During the three months
ended May 31, 2001, the Company recognized construction revenues
of $178,167 compared to $0 for the three months ended May 31,
2000 based on the percentage-of-completion of the project for the
Model Facility. The Company incurred construction costs of
$32,664 during the three months ended May 31, 2001 compared to $0
during the three months ended May 31, 2000.
During nine months ended May 31, 2001, the Company generated
water usage revenues from the sale of water to customers within
the Company's Service Area of $49,060 compared $29,600 for the
nine months ended May 31, 2000, and incurred approximately $6,677
in operating costs compared $3,980 for the nine months ended May
31, 2000.
During the nine months ended May 31, 2001, the Company
generated water service revenues of $821,561 of which $772,500
were water construction revenues due primarily to the agreement
with the Model Facility. Also during the nine months ended May
31, 2001, Company incurred construction costs of $488,984.
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 settled this matter with the contractor's surety
company enabling the Company to retain $95,000 in liquidated
damages. This amount has been recorded as construction revenue.
The Company recognizes revenue from construction based on
percentage-of-completion methodology. As of May 31, 2001,
construction of the water and wastewater facilities for the Model
Facility are complete.
During the three months ended May 31, 2001, the Company
delivered approximately 5.6 million gallons of water to customers
in the Service Area. During the nine months ended May 31, 2001,
the Company delivered approximately 18.6 million gallons of water
to customers in the service area, compared to 16.8 million
gallons delivered during the nine months ended May 31, 2000.
General, administrative and marketing expenses for the three
months ended May 31, 2001 were approximately $7,900, or
approximately 12% lower than for the three months ended May 31,
2000. General, administrative and marketing expenses for the
nine months ended May 31, 2001 were approximately $25,700, or
approximately 13% lower than for the nine months ended May 31,
2000. Interest expense for the three and nine months ended May
31, 2001 was approximately $14,000 and $15,800 lower than for the
respective comparable periods ended May 31, 2000, primarily due
to lower interest rates. Net income for the three months ended
May 31, 2001 was approximately $55,600 compared to a net loss of
approximately $104,000 for the three months ended May 31, 2000,
due to the recognition of revenues and the associated profit
pursuant to the construction of the water and wastewater systems
for the Model Facility. Net income for the nine months ended
May 31, 2001 was approximately $17,400 compared to a net loss of
approximately $164,000 for the nine months ended May 31, 2000 due
to the recognition of revenues and associated the profit pursuant
to the construction of the water and wastewater systems for the
Model Facility.
Liquidity and Capital Resources
The Company's primary source of liquidity has been sales of
common stock as more fully described in Note 3 to of the
accompanying Financial Statements and the construction contract
profits. The construction project is now complete and the
Company anticipates water usage revenues and costs will increase
when the Model Facility opens. Cash used in operating activities
during each period was primarily due to the payment of
construction costs and administrative expenses. The cash from
construction project revenues was received in fiscal year 2000.
Investing activities consist of investments in the Company's
water assets totaled $50,301 and $71,259 during the nine months
ended May 31, 2001 and 2000 respectively.
8
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, 2001 /S/ Thomas P. Clark
Thomas P. Clark,
Chief Executive Officer
Date:
July 14, 2001 /S/ Mark W. Harding
Mark W. Harding,
President
9