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, 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 theExchange 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, 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 NOVEMBER 30, 2001 FORM 10-QSB Page Part I - Financial Information (unaudited) Balance Sheets - November 30, 2001 and 3 August 31, 2001 Statements of Operations - For the three months 4 ended November 30, 2001 and 2000 Statements of Cash Flows - For the three months 5 ended November 30, 2001 and 2000 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 resour- ces 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 2001 2001 Current assets: Cash and cash equivalents $ 441,737 $ 435,660 Trade accounts receivable 7,258 33,255 Other current assets 11,259 11,259 Total current assets 460,254 480,174 Investment in water and systems: Rangeview water supply 13,493,013 13,483,425 Paradise water supply 5,488,573 5,487,433 Rangeview water system 125,556 126,611 Total investment in water and systems 19,107,142 19,097,469 Note receivable, including accrued interest 374,106 369,806 Other assets 121,141 127,441 $ 20,062,643 $ 20,074,890 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 26,868 -- Accrued liabilities 3,995 17,994 Total current liabilities 30,863 17,994 Long-term debt - related parties, including accrued interest 4,569,039 4,518,619 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 (20,676,950) (20,601,414) Total stockholders' equity 4,372,111 4,447,647 $ 20,062,643 $ 20,074,890 See Accompanying Notes to the Financial Statements 3 PURE CYCLE CORPORATION STATEMENTS OF OPERATIONS (unaudited) Three Months Ended November 30 November 30 2001 2000 Water service revenue Water construction revenues $ -- $ 574,798 Water usage fees 32,754 17,909 32,754 592,707 Construction costs incurred (Note 2) -- (441,320) Water service operating expense ( 8,561) (2,219) Gross Margin 24,193 149,168 General and administrative expense ( 49,773) ( 51,008) Other income (expense): Interest income 6,764 14,282 Interest expense: Related parties ( 56,720) ( 62,920) Other -- -- Net income (loss) $(75,536) $ 49,522 Basic and diluted net loss per common share $ --* $ --* Weighted average common shares outstanding 78,439,763 77,536,429 * 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 2001 2000 Cash flows from operating activities: Net loss $(75,536) $ 49,522 Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation on water system 1,055 -- Increase in accrued interest on note receivable (4,300) ( 6,593) Increase in accrued interest on long term debt and other non-current liabilities 50,420 62,920 Changes in operating assets and liabilities: Accounts receivable 25,996 8,454 Billings in excess of costs and estimated earnings -- (574,797) Other assets 6,300 -- Accounts payable and accrued liabilities 12,870 156,118 Net cash provided by (used in) operating activities 18,916 (304,376) Cash flows from investing activities: Investments in water supply (10,728) (22,612) Net cash used in investing activities (10,728) (22,612) Cash flows from financing activities: Proceeds from sale of common stock -- 114,500 Net cash provided by financing activities -- 114,500 Net increase (decrease)in cash and cash equivalents 6,077 (212,488) Cash and cash equivalents beginning of period 435,660 821,124 Cash and cash equivalents end of period $ 441,737 $ 608,636 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, 2001 and August 31, 2001, the statements of operationsfor the three months ended November 30, 2001 and 2000 and the statements of cash flows for the three months ended November 30, 2001 and 2000, have been prepared by the Company, without an audit. In theopinion 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, 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 2001 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 In 1998, the Company entered into an agreement to provide water and wastewater service to a 400 acre development which includes a 500-bed Academic Model Juvenile Facility ("Model Facility"). The Model Facility paid a Water System Development and Water Resource Charge based on estimated water consumption, for the construction of water and wastewater systems. Pursuant to its Service Agreements, the Company has received all fees pursuant to the agreements totaling $2,013,495 for the construction of the water and wastewater facilities. Additionally, the Company received $154,800 from the State of Colorado for the construction of additional facilities related to the wastewater plant which the Company constructed on behalf of the State of Colorado. The Company completed construction of the water and wastewater facilities in July 2001, concurrent with the opening of the Model Facility. NOTE 3 - 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. In December 2000, the Company sold 700,000 shares of the Company's Common Stock to two accredited investors at $.15 per share. Proceeds to the Company were $105,000. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations During the three months ended November 30, 2001, the Company generated water service revenues of $32,754 compared to $592,707 for the period ended November 30, 2000. The decrease in water service revenues is a result of the completion of the water and wastewater system and the corresponding revenues recognized pursuant to the construction of the water and wastewater systems for the Model Facility. During the quarter ended November 30, 2001, the Company delivered approximately 13.1 million gallons of water to customers in the Service Area generating revenues from water sales of $32,754 compared to 12.1 million gallons generating $17,909 during the quarter ending November 30, 2000. The increase in water revenues is attributable to the delivery of potable water during the current year compared to raw water during the previous year. The Company incurred approximately $8,561 in operating costs during the quarter ending November 30, 2001, compared to $2,219 for the quarter ending November 30, 2000. The increasein operating costs are attributable to 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, 2001 were approximately $3,348 lower than for the three months ended November 30, 2000. Net loss for the three months ended November 30, 2001 was $73,423 compared to a net income of $49,522 in the three months ended November 30, 2000 primarily because of revenues recognized pursuant to the construction of the water and wastewater systems for the Model Facility. Liquidity and Capital Resources At November 30, 2001, current assets exceed current liabilities by $429,474 and the Company had cash and cash equivalents of $441,737. 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 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 8