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 February 29, 2000 ___ 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) Registrants 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 issuers classes of common equity, as of February 29, 2000: 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 FEBRUARY 29, 2000 FORM 10-QSB Page Part I - Financial Information (unaudited) Balance Sheets As of February 29, 2000 and 3 August 31, 1999 Statements of Operations - For the three months 4 ended February 29, 2000 and February 28, 1999 Statements of Operations For the six months 5 ended February 29, 2000 and February 28, 1999 Statements of Cash Flows - For the six months 6 ended February 29, 2000 and February 28, 1999 Notes to Financial Statements 7 Management's Discussion and Analysis of 8 Results of Operations and Financial Condition 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. PURE CYCLE CORPORATION BALANCE SHEETS (unaudited) February 29, August 31, ASSETS 2000 1999 Current assets: Cash and cash equivalents $ 579,622 $ 981,025 Accounts Recievable -- 6,106 Prepaid expenses and other current assets 11,259 11,259 Total current assets 590,881 998,390 Investment in water and systems: Rangeview water supply 13,322,487 13,282,485 Paradise water supply 5,484,868 5,482,303 Rangeview water system 126,611 126,611 Total investment in water and systems 18,933,966 18,891,399 Note receivable, including accrued interest 333,83 321,794 Other assets 1,441 22,596 19,860,121 20,234,179 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 139,222 55,915 Billings in excess of costs and estimated earnings (Note 2) 281,918 895,379 Accrued liabilities 3,692 25,810 Total current liabilities 424,832 977,104 Long-term debt - related parties, including accrued interest 4,139,838 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 (20,526,863)(20,466,416) Total stockholders' equity 4,076,698 4,017,145 $ 19,860,121 $ 20,234,179 See Accompanying Notes to the Financial Statements PURE CYCLE CORPORATION STATEMENTS OF OPERATIONS (unaudited) Three months Ended February 29, February 28, 2000 1999 Water service revenue Water construction revenues $ 301,349 $ -- Water usage fees 10,449 3,265 311,798 3,265 Construction costs incurred (Note 2) (233,719) -- Water service operating expense (1,300) (1,200) Gross Margin 76,779 2,065 General and administrative expense (83,519) (100,937) Other income (expense): Interest income 13,442 11,786 Interest expense: Related parties (60,112) (50,046) Other -- (1,785) Net Loss $(53,410) $(138,917) 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 PURE CYCLE CORPORATION STATEMENTS OF OPERATIONS (unaudited) Six months Ended February 29, February 28, 2000 1999 Water service revenue Water construction revenues $ 613,461 $ -- Water usage fees 17,321 9,636 630,782 9,636 Construction costs incurred (Note 2) (475,786) -- Water service operating expense (2,600) (2,400) Gross Margin 152,396 7,236 General and administrative expense (139,494) (157,941) Other income (expense): Interest income 29,938 22,831 Interest expense: Related parties (118,661) (100,091) Other 15,374 (3,570) Net Loss $(60,447) $(231,535) 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 PURE CYCLE CORPORATION STATEMENTS OF CASH FLOWS (unaudited) Six months Ended February 29, February 28, 2000 1999 Cash flows from operating activities: Net loss $(60,447) $(231,535) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization -- 529 Disposal of other assets 21,155 -- Increase in accrued interest on note receivable (12,039) ( 22,752) Increase in accrued interest on long term debt and other non-current liabilities 118,661 103,661 Changes in operating assets and liabilities: Accounts receivable 6,106 -- Billings in excess of costs and estimated earnings (613,461) 158,800 Accounts payable and accrued liabilities 61,189 540 Net cash provided by (used in) operating activities (478,836) 9,243 Cash flows from investing activities: Investments in water supply (42,567) (113,858) Investment in Rangeview water system -- (14,993) Net cash used in investing activities (42,567) (128,851) Cash flows from financing activities: Proceeds from sale of common stock 120,000 90,000 Net cash provided by financing activities 120,000 90,000 Net decrease in cash and cash equivalents (401,403) (29,608) Cash and cash equivalents beginning of period 981,025 423,027 Cash and cash equivalents end of period $ 579,622 $ 393,419 See Accompanying Notes to the Financial Statements PURE CYCLE CORPORATION NOTES TO FINANCIAL STATEMENTS NOTE 1 - ACCOUNTING PRINCIPLES The balance sheets as of February 29, 2000 and August 31, 1999, the statements of operations for the three and six months ended February 29, 2000 and February 28, 1999 and the statements of cash flows for the three and six months ended February 29, 2000 and February 28, 1999, have been prepared by the Company and have not been audited. 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 February 29, 2000 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. These financial statements should 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 agreed to pay $2,265,165 for residential water and wastewater service. Pursuant to its Service Agreements, the Company received $1,372,014 for water taps under the agreement during fiscal 1999, and will receive $624,000 from the wastewater taps upon the initiation of construction of the wastewater treatment facility, which is scheduled for the third quarter of fiscal 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 related thereto of $613,000 during the six months ended February 29, 2000 with the remaining portion of the water system currently under bonded contract for $337,000 for a combined total of $950,000. Projected costs for construction of the wastewater system are $600,000; projected costs for completion of the combined water and wastewater facilities are $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 C-2 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 C-2 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, all of whom have previously invested in the Company. Proceeds to the Company were $120,000. In January 1999, the Company entered into a Plan of Recapitalization and a Stock Purchase Agreement whereby the Company issued 500,000 shares of Series C-1 Convertible Preferred Stock to the Company's President, Mr. Thomas Clark, in exchange for 500,000 shares of Common Stock owned by Mr. Clark. The Series C-1 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 500,000 shares of the Company's Common Stock at $.18 per share to an accredited investor. Proceeds to the Company were $90,000. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations During the three months ended February 29, 2000, the Company generated water service revenue of $311,798, compared to $3,265 for the period ended February 28, 1999, due primarily to the agreement with the Model Facility. Also during the three months ended February 29, 2000, Company incurred construction costs of $233,719 whereas no construction costs were incurred for the comparable period ended February 28, 1999. General and administrative expenses for the three months ended February 29, 2000 decreased $17,418, to $83,519, from $100,937 in the comparable period ended February 28, 1999, primarily because of higher compensation expense in the prior year. Net loss for the three months ended February 29, 2000 decreased approximately $85,507 compared to the three month ended February 28, 1999 primarily because of the revenues recognized pursuant to the percentage-of-completion method of accounting for the construction of the water and wastewater systems for the Model Facility During the six months ended February 29, 2000, the Company generated water service revenues of $630,782 compared to $9,636 for the period ended February 28, 1999 due primarily to the agreement with the Model Facility. Also during the six months ended February 29, 2000, Company incurred construction costs of $475,786 and has remaining construction deposits totaling $281,918. The Company recognized revenues from construction based on percentage-of- completion methodology. As of February 29, 2000, construction of the water and wastewater facilities for the Model Facility were estimated to be approximately 54% complete. During the quarter ended February 29, 2000, the Company delivered approximately 4.6 million gallons of water to customers in the Service Area, generating revenues from water sales of $17,321. The Company incurred approximately $2,600 in operating costs associated with the water service revenue. General and administrative expenses for the six months ended February 29, 2000 decreased $18,447 to $139,494 from $157,941 in the comparable period ended February 28, 1999, primarily because of higher compensation expense in the prior year. Net loss for the six months ended February 29, 2000 decreased approximately $171,088 compared to the six month ended February 28, 1999 primarily because of the revenue recognized pursuant to the percentage-of- completion method of accounting for the construction of the water and wastewater systems for the Model Facility. Liquidity and Capital Resources At February 29, 2000, current assets exceed current liabilities by $166,049 and, the Company had cash and cash equivalents of $579,622. 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. 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: April 10, 2000 /S/ Thomas P. Clark Thomas P. Clark, President Date: April 10, 2000 /S/ Mark W. Harding Mark W. Harding, Chief Financial Officer