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