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, 2002
___ 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 November 30, 2002:
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 NOVEMBER 30, 2002 FORM 10-QSB
Page
Part I - Financial Information (unaudited)
Balance Sheets - November 30, 2002 and 3
August 31, 2002
Statements of Operations - For the three months 4
ended November 30, 2002 and 2001
Statements of Cash Flows - For the three months 5
ended November 30, 2002 and 2001
Notes to Financial Statements 6
Management's Discussion and Analysis of 7
Results of Operations and Financial Condition
Item 3 - Controls and Procedures 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)
November 30 August 31
ASSETS 2002 2002
Current assets:
Cash and cash equivalents $ 281,141 $ 287,720
Trade accounts receivable 21,171 50,919
Total current assets 302,312 338,639
Investment in water and systems:
Rangeview water supply 13,631,120 13,566,777
Paradise water supply 5,491,423 5,491,423
Rangeview water system 148,441 148,441
Accumulated depreciation & depletion (6,751) (4,958)
Total investment in water and systems 19,264,233 19,201,683
Note receivable, including accrued
interest 389,299 385,716
Other assets 95,941 102,241
$ 20,051,785 $ 20,028,279
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable 10,077 2,384
Accrued liabilities 24,919 19,495
Total current liabilities 34,996 21,879
Long-term debt - related parties,
including accrued interest 4,757,534 4,713,270
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 - 432,514 shares issued and
outstanding 433 433
Series D - 6,455,000 shares issued and
outstanding 6,455 6,455
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 24,778,989 24,778,989
Accumulated deficit (20,880,436) (20,846,561)
Total stockholders' equity 4,168,625 4,202,500
$ 20,051,785 $ 20,028,279
See Accompanying Notes to the Financial Statements
3
PURE CYCLE CORPORATION
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
November 30 November 30
2002 2001
Water service revenue
Water usage fees 57,447 32,754
Wastewater usage fees 12,570 --
70,017 32,754
Water service operating expense ( 3,213) (8,561)
Wastewater service operating expense ( 2,900) --
( 6,113) (8,561)
Gross Margin 63,904 24,193
General and administrative expense ( 49,859) ( 48,718)
Depreciation expense (1,055) (1,055)
Depletion expense (738) --
Other income (expense):
Interest income 4,437 6,764
Interest expense:
Related parties ( 44,264) ( 56,720)
Amortization of warrants (6,300) --
Net income (loss) $(33,875) $ (75,536)
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 CASH FLOWS
(unaudited)
Three Months Ended
November 30 November 30
2002 2001
Cash flows from operating activities:
Net loss $(33,875) $(75,536)
Adjustments to reconcile
net loss to net cash provided by
operating activities:
Depreciation on water system 1,055 1,055
Depletion expense 738 --
Increase in accrued interest
on note receivable (3,583) ( 4,300)
Increase in accrued interest on long
term debt and other non-current
liabilities 44,264 50,420
Changes in operating assets and liabilities:
Accounts receivable 29,748 25,996
Other assets 6,300 6,300
Accounts payable and accrued liabilities 13,117 12,870
Net cash provided by
operating activities 57,764 18,916
Cash flows from investing activities:
Investments in water supply ( 64,343) (10,728)
Net cash used in investing activities: (64,343) (10,728)
Net decrease
in cash and cash equivalents (6,579) 6,077
Cash and cash equivalents
beginning of period 287,720 435,660
Cash and cash equivalents
end of period $ 281,141 $ 441,737
See Accompanying Notes to the Financial Statements
5
PURE CYCLE CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ACCOUNTING PRINCIPLES
The balance sheets as of November 30, 2002 and August 31,
2002, the statements of operations for the three months ended
November 30, 2002 and 2001 and the statements of cash flows for
the three months ended November 30, 2002 and 2001, 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, 2002 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 2001 Quarterly Report on Form 10-QSB.
The results of operations for interim periods presented are not
necessarily indicative of the operating results for the full
year.
NOTE 2 - STOCKHOLDERS' EQUITY
In August 2001, the Company entered into a Plan of
Recapitalization and a Stock Purchase Agreement whereby the
Company issued 6,455,000 shares of Series D Preferred Stock to
the Company's CEO, Mr. Thomas Clark in exchange for 421,666
shares of common stock, 3,200,000 shares of Series C Preferred
Stock, 500,000 shares of Series C-1 Preferred Stock, 666,667
shares of Series C-2 Preferred Stock, and 1,666,667 shares of
Series C-3 Preferred Stock, all of which were owned by Mr.
Clark. The Company retired 3,200,000 shares of Series C
Preferred Stock, 500,000 shares of Series C-1 Preferred Stock,
666,667 shares of Series C-2 Preferred Stock, and 1,666,667
shares of Series C-3 Preferred Stock. The Company sold 625,000
shares of the Company's Common Stock at $.16 per share to two
accredited investors. Proceeds to the Company were $100,000.
The shares were issued under Section 4(2) of the Securities Act
of 1933.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
During the three months ended November 30, 2002, the Company
delivered 12.6 million gallons of water generating revenues of
$57,447 compared to 13.1 million gallons during the quarter ended
November 30, 2001, generated revenues of $32,754. The increase
in water service revenues is a result an increase in the
occupancy for the Model Facility and the potable water service
for the Model Facility. During the three months ended November
30, 2002, the Company processed approximately 1,000,000 gallons
of wastewater generating revenues of $12,570, which represent the
first full year of occupancy at the Model Facility. The Company
incurred approximately $6,113 in water and wastewater operating
costs during the quarter ending November 30, 2002, compared to
$8,561 for the quarter ending November 30, 2001. The decrease in
operating costs are attributable to one time startup costs
incurred from the initiation of domestic water and wastewater
service to the Model Facility beginning in July 2001.
General and administrative expenses for the three months ended
November 30, 2002 were $1,141 higher than for the three months
ended November 30, 2001. Net loss for the three months ended
November 30, 2002 was $33,875 compared to $75,536 in the three
months ended November 30, 2001 primarily because of increased
water and wastewater revenues from the Model Facility.
Liquidity and Capital Resources
At November 30, 2002, current assets exceed current
liabilities by $267,316 and the Company had cash and cash
equivalents of $281,141.
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.
7
Item 3. - Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company's chief executive officer and chief financial
officer have concluded that the Company's disclosure controls
(as defined in Exchange Act Rule 13a-14(c)) are sufficiently
effective to ensure that the information required to be
disclosed by the Company in the reports it files under the
Exchange Act is gathered, analyzed and disclosed with adequate
timeliness, accuracy and completeness, based on an evaluation of
such controls and procedures conducted within 90 days prior to
the date hereof.
Changes in Internal Controls
There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect
these controls subsequent to the date of the evaluation referred
to above.
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:
January 14, 2001 /S/ Thomas P. Clark
Thomas P. Clark,
CEO
Date:
January 14, 2001 /S/ Mark W. Harding
Mark W. Harding,
President
9
CERTIFICATION
I, Thomas P. Clark, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
PureCycle Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date: January 14, 2003
/s/ Thomas P. Clark
Chief Executive Officer
CERTIFICATION
I, Mark W. Harding, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
PureCycle Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-
14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have
indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.
Date January 14, 2003
/s/ Mark W. Harding
President, Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of PureCycle Corporation
(the "Company"), on Form 10-QSB for the period ending November
30, 2002 as filed with the Securities and Exchange Commission on
the date hereof (the "Report"), I, Thomas P. Clark, Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C.
1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and
result of operations of the Company.
/s/ Thomas P. Clark
Chief Executive Officer
January 14, 2003
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of PureCycle Corporation
(the "Company"), on Form 10-QSB for the period ending November
30, 2002 as filed with the Securities and Exchange Commission on
the date hereof (the "Report"), I, Mark Harding, President, Chief
Financial Officer of the Company, certify, pursuant to 18 U.S.C.
1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) The information contained in the Report fairly
presents, in all material respects, the financial condition and
result of operations of the Company.
/s/ Mark W. Harding
Chief Financial Officer
January 14, 2003