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 28, 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 St., Thornton, CO 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 February 28, 2001: Common Stock, 1/3 of $.01 par Value 78,236,429 (Class) (Number of Shares) Transitional Small business Disclosure Format (Check one): Yes [ ]; No [x] PURE CYCLE CORPORATION INDEX TO FEBRUARY 28, 2001 FORM 10-QSB Page Part I - Financial Information (unaudited) Balance Sheets - February 28, 2001 and 3 August 31, 2000 Statements of Operations - For the six months 4 ended February 28, 2001 and 1999 Statements of Cash Flows - For the six months 5 ended February 28, 2001 and 1999 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 PURE CYCLE CORPORATION BALANCE SHEETS (unaudited) February 28, August 31, ASSETS 2001 2000 Current assets: Cash and cash equivalents $ 484,404 $ 821,124 Trade accounts recievable 1,900 18,619 Accounts receivable - stock subscriptions -- 114,500 Prepaid expenses and other current assets 11,259 11,259 Total current assets 497,563 965,502 Investment in water and systems: Rangeview water supply 13,457,596 13,422,134 Paradise water supply 5,487,433 5,484,868 Rangeview water system 126,611 126,611 Total investment in water and systems 19,071,640 19,033,613 Note receivable, including accrued interest 358,628 347,162 Other assets 1,441 1,441 $ 19,927,372 $ 20,347,718 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 12,156 6,955 Billings in excess of costs and estimated earnings (Note 2) 178,167 772,500 Accrued liabilities 8,800 21,692 Total current liabilities 199,123 801,147 Long-term debt - related parties, including accrued interest 4,404,099 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 - 432,514 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 667 667 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 78,236,429 shares outstanding 261,584 261,584 Additional paid-in capital 24,583,910 24,583,910 Accumulated deficit (20,587,641) (20,549,371) Treasury stock at cost; 203,334 shares (30,500) (135,500) Total stockholders' equity 4,233,520 4,168,690 $ 19,927,372 $ 20,347,718 See Accompanying Notes to the Financial Statements 3 PURE CYCLE CORPORATION STATEMENTS OF OPERATIONS (unaudited) Three months Ended February 28, February 29, 2001 2000 Water service revenue Water construction revenues $ 19,536 $ 301,349 Water usage fees 24,521 10,449 44,057 311,798 Construction costs incurred (Note 2) ( 15,000) (233,719) Water service operating expense ( 1,887) ( 1,300) Gross Margin 27,170 76,779 General and administrative expense (70,836) ( 83,519) Other income (expense): Interest income 9,801 13,442 Interest expense: Related parties ( 53,928) ( 60,112) Other -- -- Net income (loss) $(87,793) $(53,410) Basic and diluted net loss per common share $ --* $ --* Weighted average common shares outstanding 78,236,429 78,439,763 * less than $.01 per share See Accompanying Notes to the Financial Statements 4 PURE CYCLE CORPORATION STATEMENTS OF OPERATIONS (unaudited) Six months Ended February 28, February 29, 2001 2000 Water service revenue Water construction revenues $ 594,334 $ 613,461 Water usage fees 42,430 17,321 636,764 630,782 Construction costs incurred (Note 2) ( 456,320) (475,786) Water service operating expense ( 4,103) ( 2,600) Gross Margin 176,341 152,396 General and administrative expense ( 121,845) ( 139,494) Other income (expense): Interest income 24,083 29,938 Interest expense: Related parties ( 116,848) ( 118,661) Other -- 15,374 Net income (loss) $(38,269) $(60,447) Basic and diluted net loss per common share $ --* $ --* Weighted average common shares outstanding 78,236,429 78,439,763 * less than $.01 per share See Accompanying Notes to the Financial Statements 5 PURE CYCLE CORPORATION STATEMENTS OF CASH FLOWS (unaudited) Six months Ended February 28, February 29, 2001 2000 Cash flows from operating activities: Net income (loss) $(38,269) $(60,447) Adjustments to reconcile net loss to net cash provided by operating activities: Disposal of other assets -- 21,155 Increase in accrued interest on note receivable (11,466) ( 12,039) Increase in accrued interest on long term debt and other non-current liabilities 116,848 118,661 Changes in operating assets and liabilities: Accounts receivable 16,719 6,106 Billings in excess of costs and estimated earnings (594,334) (613,461) Accounts payable and accrued liabilities (7,691) 61,189 Net cash provided by (used in) operating activities (518,193) (478,836) Cash flows from investing activities: Investments in water supply ( 38,028) (42,567) Investment in Rangeview water system -- - -- Net cash used in investing activities (38,028) (42,567) Cash flows from financing activities: Proceeds from sale of common stock 219,500 120,000 Net cash provided by financing activities 219,500 120,000 Net increase (decrease) in cash and cash equivalents (336,721) (401,403) Cash and cash equivalents beginning of period 821,124 981,025 Cash and cash equivalents end of period $ 484,403 $ 579,622 See Accompanying Notes to the Financial Statements 5 PURE CYCLE CORPORATION NOTES TO FINANCIAL STATEMENTS NOTE 1 - ACCOUNTING PRINCIPLES The balance sheet as of February 28, 2001 and the statements of operations and statements of cash flows for the three and six months periods ended February 28, 2001 and February 29, 2000 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 28, 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 financial statements be read in conjunction with the financial statements and notes thereto included in the Company's fiscal year 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 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 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 facilities and has substantially completed (with the exception of holding retainage) all of the construction of wastewater facilities. The Model Facility is projected to open in July 2001. Projected cost for construction of the combined water and sewer capital project costs of $1,652,895. At February 28, 2001, the estimated period to complete the remaining work for the wastewater facility is approximately one month, and the Company expects to collect substantially all related accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts as of February 28, 2001 within one year. 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. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations During the quarter ended February 28, 2001, the Company delivered approximately 2.7 million gallons of water to customers in the Service Area generating revenues from water sales of $24,521 compared to the delivery of 2.3 million gallon generating revenues of $10,449 during the three months ended February 29, 2000. The Company incurred water service operating costs of $1,887 for the three months ending February 28, 2001 as compared to $1,300 for the six month ending February 29, 2000, due to an increase in water deliveries. During the three months ended February 28, 2001, the Company recognized construction revenues of $19,536 compared to $301,349 for the three months ended February 29, 2000 based on the percentage-of-completion of the project for the Model Facility. The Company incurred construction costs of $15,000 during the three months ended February 28, 2001 compared to $233,719 during the three months ended February 29, 2000 and has remaining construction deposits totaling $178,167 as of February 28, 2001. During the six months ended February 28, 2001, the Company generated water service revenues of $42,430 compared to $17,321 for the six months ended February 29, 2000 due primarily to increased water sales to the Model Facility. The Company incurred water service operating costs of $4,103 for the six months ending February 28, 2001 as compared to $2,600 for the six month ending February 29, 2000, due to an increase in water deliveries. During the six months ended February 28, 2001, the Company recognized construction revenues of $594,334 compared to $613,461 for the six months ended February 29, 2000 based on the percentage-of- completion of the project for the Model Facility. The Company incurred construction costs of $456,320 during the six months ended February 28, 2001 compared to $475,786 during the six months ended February 29, 2000 and has remaining construction deposits totaling $178,167 as of February 28, 2001. The Company recognized revenues from construction based on percentage-of- completion methodology. As of February 28, 2001, construction of the water and wastewater facilities for the Model Facility were approximately 98% complete. General and administrative expenses for the six months ended February 28, 2001 were approximately $17,649 lower than for the period ended February 29, 2000, primarily because of an decrease in space costs. The Company has occupied office space at no cost owned by a related party since December 2000. Net loss for the six months ended February 28, 2001 was $38,269 compared to a net loss of $60,447 for the six month ended February 29, 2000 primarily because of the sale of more water to the Model Facility. Liquidity and Capital Resources At February 28, 2001, current assets exceed current liabilities by $298,440 and, the Company had cash and cash equivalents of $497,563. The Company believes it has sufficient working capital and available credit to fund its operations for the next year or longer. There can be no assurances, however, that the Company will be successful in marketing the water from its two primary water projects in the near term. In the event sales are not achieved, the Company may sell additional participating interests in its water projects, incur additional short or long- term debt or seek to sell additional shares of common or preferred stock or stock purchase warrants, as deemed necessary by the Company, to generate working 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 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 16, 2001 /S/ Thomas P. Clark Thomas P. Clark, President Date: April 16, 2001 /S/ Mark W. Harding Mark W. Harding, Chief Financial Officer 8