PCYO Pure Cycle Corp

Pure Cycle Corporation (the �Company�) (NASDAQ: PCYO) announced today it has filed an amended 2006 Annual Report on Form 10-K/A and an amended Interim Report for the three months ended November 30, 2006 on Form 10-Q/A. The reasons for these amendments are described below. The Company also announced it posted a net loss of approximately $3.4 million ($.19 per share) on revenues of approximately $115,700 for the six months ended February 28, 2007 and that it will file its February 28, 2007 Form 10-Q today. This compares to a net loss of approximately $511,800 ($.04 per share) on revenues of approximately $87,700 for the six months ended February 28, 2006. The increased loss is mainly attributable to approximately $2.3 million of imputed interest expense related to the �Tap Participation Fees payable to HP A&M,� which is described with the restatement items below. The Company will host a conference call to discuss this restatement and the results at its second fiscal quarter on Wednesday, April 18, 2007. Details of the call and additional financial highlights are below. In December 2006, the Company requested concurrence from the Office of the Chief Accountant of the Securities and Exchange Commission (the �Staff�) regarding the accounting for certain items in its �Arkansas River Agreement� signed with High Plains A&M, LLC (�HP A&M�) on August 31, 2006. As a result of the consultations the Company had with the Staff, it was determined that the following corrections were required: Removal of the liability �Contingent obligations payable upon default by HP A&M� and the contra-equity account �Receivable from HP A&M in event of default� (this was a restatement to the 2006 Form 10-K only as the originally filed November 30, 2006 Form 10-Q already reflected this correction, and therefore is not addressed further below), and Change of accounting for the liability Tap Participation Fees payable to HP A&M and the values assigned to the assets acquired from HP A&M. Upon review, it was determined that the Company should not have accounted for the Tap Participation Fees payable to HP A&M as contingent consideration as that term is defined in Statement of Financial Accounting Standard No. 141 Business Combinations (as amended) and it should not have valued the liability using a residual value approach as the Company had initially done. Instead, the Company should have treated the Tap Participation Fees as a financing instrument and valued it using a discounted cash flow method. The Company completed a discounted cash flow valuation and based on this, reduced the recorded liability account and the values allocated to the assets acquired from HP A&M by approximately $20.5 million as of August 31, 2006. This restatement had no impact on the Company�s originally reported August 31, 2006 net loss, net loss per share or cash flows. Beginning September 1, 2006, it was determined that since the Tap Participation Fees are a financing instrument and not contingent consideration, the Company must impute interest on the unpaid balance using the effective interest method. As a result, the Company restated its November 30, 2006 statements of operations and cash flows to reflect the expensing of approximately $1.1 million of imputed interest expense (along with the reduction to the recorded liability and asset accounts described above). Further, as a result of the reduction in the values assigned to the acquired assets, the restatement of the Company�s November 30, 2006 Form 10-Q also includes a reduction of depreciation expenses of approximately $11,000. These restatements are explained in greater detail in explanatory notes included with each of the restatements. FINANCIAL HIGHLIGHTS Unaudited Results of Operations � Six months ended February 28, 2007� 2006� Total revenues $ 115,700� $ 120,500� Total cost of revenues (80,600) (32,800) Gross margin 35,100� 87,700� � Total operating expenses (1,267,200) (682,100) Other income (expense) - includes imputed interest of $2.3 million and $0 (2,182,400) 82,500� � Net loss $ (3,414,500) $ (511,900) � Weighted average shares outstanding (basic and diluted) 18,361,083� 14,504,143� Loss per share $ (0.19) $ (0.04) Financial Position Data � February 28, 2007 August 31, 2006 (unaudited) (restated) Current assets $ 2,083,900� $ 3,121,400� Total assets $ 106,844,300� $ 108,833,900� � Current liabilities $ 255,300� $ 380,100� Total liabilities $ 55,426,400� $ 54,169,200� � Total stockholders' equity $ 51,417,900� $ 54,664,700� CALL INFORMATION What: Second quarter fiscal 2007 earnings call When: April 18, 2007 at 2:00 p.m. Mountain To listen: Click on the link posted on the Company's website: www.purecyclewater.com Log on 5 minutes early in case downloads are required. Call-in Number: Toll free: 800-561-2731 REPLAY INFORMATION The call will be available for replay until 9:59 p.m. on April 25, 2007: Toll free: 888-286-8010 Passcode: 42637386 A replay will be available on the Company's Website through May 31, 2007. For questions, please contact Investor Relations at info@purecyclewater.com. Company Information Pure Cycle owns water assets in several river basins in the State of Colorado as well as certain aquifers in the Denver, Colorado metropolitan area. Pure Cycle provides water and wastewater services to customers located in the Denver metropolitan area including the design, construction, operation and maintenance of water and wastewater systems. Additional information including our recent press releases and fiscal year ended August 31, 2005 Annual Report are available at www.purecyclewater.com, or you may contact our President, Mark W. Harding, at 303-292-3456.