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