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