Pure Cycle Corporation (Nasdaq:PCYO) announced the following
summary results of operations:
Summary Statements
Our summarized results of operations for the fiscal years ended
August 31, 2012 and 2011 are as follows:
|
Fiscal Years Ended |
|
|
August 31, 2012 |
August 31, 2011 |
$ Change |
Revenues |
$ 284,400 |
$ 282,100 |
$ 2,300 |
Cost of revenues |
(188,000) |
(159,700) |
(28,300) |
Gross margin |
96,400 |
122,400 |
(26,000) |
Operating expenses: |
|
|
|
General and
administrative |
(2,374,100) |
(2,212,000) |
(162,100) |
Impairment of land and
water assets held for sale |
(6,457,800) |
-- |
-- |
Impairment of water
assets |
(5,544,000) |
-- |
-- |
Other |
(220,700) |
(212,200) |
(8,500) |
Loss from operations |
(14,500,200) |
(2,301,800) |
(196,600) |
Other (expense) income: |
|
|
|
Interest imputed on
TPF |
(3,470,500) |
(3,847,000) |
376,500 |
Interest on Convertible
Debt |
-- |
(151,700) |
151,700 |
Oil and gas lease
income |
423,000 |
199,300 |
223,700 |
Other |
129,000 |
85,000 |
44,000 |
Net loss |
$ (17,418,700) |
$ (6,016,200) |
$ 599,300 |
|
|
|
|
Weighted average shares outstanding (basic
and diluted) |
24,037,596 |
23,168,450 |
|
Loss per share |
$ (0.72) |
$ (0.26) |
|
Our summarized financial position as of August 31, 2012 and 2011
is as follows:
|
August 31, 2012 |
August 31, 2011 |
$ Change |
Assets |
|
|
|
Cash, cash equivalents
and marketable securities |
$ 2,724,900 |
$ 4,660,400 |
$ (1,935,500) |
Current portion of
related party receivable - HP A&M |
4,456,900 |
-- |
$ 4,456,900 |
Other current assets |
580,000 |
405,200 |
174,800 |
Total
current assets |
7,761,800 |
5,065,600 |
2,696,200 |
Investments in water and
water systems, net |
88,510,400 |
106,472,000 |
(17,961,600) |
Land - Sky Ranch |
3,778,500 |
3,743,300 |
35,200 |
Land and water held for
sale |
5,748,600 |
-- |
5,748,600 |
Note receivable - related
party |
5,093,400 |
-- |
|
Other long-term
assets |
689,300 |
841,800 |
(152,500) |
Total assets |
$ 111,582,000 |
$ 116,122,700 |
$ (4,540,700) |
|
|
|
|
Liabilities and Shareholders'
Equity |
|
|
|
Current liabilities |
$ 913,900 |
$ 658,300 |
$ 255,600 |
Current portion of
mortgages payable |
5,340,900 |
-- |
5,340,900 |
Tap participation fee
payable to HP A&M |
68,269,200 |
64,988,300 |
3,280,900 |
Mortgages payable |
4,209,300 |
-- |
4,209,300 |
Other long-term
liabilities |
2,730,900 |
3,185,800 |
(454,900) |
Total
liabilities |
81,464,200 |
68,832,400 |
12,631,800 |
Total shareholders'
equity |
30,117,800 |
47,290,300 |
(17,172,500) |
Total liabilities and
shareholders' equity |
$ 111,582,000 |
$ 116,122,700 |
$ (4,540,700) |
Summary of Significant Events and Changes
Revenues increased 1% during the fiscal year ended August 31,
2012, compared to the fiscal year ended August 31, 2011, and water
deliveries for 2012 were in line with prior year
deliveries.
General and administrative expenses increased 7% during the
fiscal year ended August 31, 2012 compared to the fiscal year ended
August 31, 2011. The increase was due primarily to the
increase in legal fees related to the lawsuit we filed against the
State of Colorado by and through its State Board of Land
Commissioners (the Land Board) in December 2011 and the lawsuit
filed against us by High Plains A & M, LLC (HP A&M), as
well as legal fees associated with the default by HP A&M on
certain promissory notes secured by deeds of trust on our Arkansas
River assets.
The Company incurred a substantial increase in Net Operating
Losses for fiscal year 2012. The increase in NOL is summarized
in four categories:
1. A 7% increase in G&A
expense ($2.3M) mostly attributable to additional attorney fees
associated with the HP A&M default;
2. Imputed Interest expense on the
Tap Participation Fee ($3.5M);
3. Impairment of the Paradise
asset ($5.5M); and
4. Impairment of Water and Land
held for Sale ($6.5M).
General and administrative expenses have increased modestly over
the past two years, which is primarily attributable to increased
attorney costs. The two significant impairment expenses
attributable to the Paradise asset and the water and land held for
sale represent approximately 70% of the net operating loss for
2012.
The Company's Paradise Water Supply is subject to a finding of
reasonable diligence review by the water court and the State
Engineer every six years. Due to the significant development
costs of water assets along the western slope and agreements with
other western slope water interests, the use of our Paradise Water
Supply is limited to opportunities along the western slope. In
order to obtain a finding of reasonable diligence at the next
diligence proceeding for the Paradise conditional water rights in
October 2014, we are required to (i) select an alternate reservoir
site; (ii) file an application with the Water Court for Water
Division 5 to change the place of storage; (iii) identify specific
end users and places of use for the Paradise conditional water
rights within the Colorado River basin in Colorado, excluding the
Gunnison River basin; and (iv) identify specific source(s) of the
water rights for use. We do not intend to spend the resources
needed to find an alternative reservoir site without a specific use
for the water. We have been unable to find potential customers
for this water and cannot be certain that any customer will commit
to use the water within the next two years. Since we do not
have a customer that will commit to use the water and will not
commit the resources necessary to move the reservoir site without a
customer, we are expecting to lose the conditional water rights.
Accordingly during the fourth quarter of fiscal 2012, the
Company determined the Paradise Water Supply is fully impaired and
an impairment charge of $5.5 million was recorded.
HP A&M began defaulting on promissory notes secured by deeds
of trust on the Company's Arkansas River properties and water
rights in June 2012. HP A&M currently owes approximately
$9.6 million of principal and accrued interest on the notes secured
by approximately 14,000 acres of farm land and 16,882 FLCC shares
representing water rights owned by the Company, which represent
nearly 70% of the Company's Arkansas River land and water
interests. HP A&M's promissory notes were secured by 1.5
million shares of the Company's common stock issued to HP A&M
(the "Pledged Shares") which were pledged by HP A&M pursuant to
a pledge agreement (the "Seller Pledge Agreement") entered into in
conjunction with the Arkansas River Agreement. The
Company foreclosed on the Pledged Shares and sold them at an
auction open only to pre-qualified accredited investors for $3.5
million, or $2.35 per share, on September 27, 2012.
In the fourth quarter of fiscal 2012, the Company
identified farms to sell totaling 1,486 acres of land along with
3,377 shares of the Fort Lyon Canal Company associated with this
land with a net book value of $12.2 million. These farms and
associated water shares are anticipated to be sold for
approximately $5.7 million. The Company recorded an impairment
charge for the land and water rights held for sale of approximately
$6.5 million for the year ended August 31, 2012.
The Company's book value for its Arkansas River land and water
assets were valued based on the value of the common stock and the
obligation payable to HP A&M known as the Tap Participation Fee
paid to HP A&M as consideration for the acquisition. HP
A&M's failure to pay the promissory notes constituted an Event
of Default under the Seller Pledge Agreement and a default of a
material covenant under the Arkansas River Agreement. The
Company has and will pursue any and all remedies available to it,
which include, but are not limited to, the right to (i) foreclose
on the Pledged Shares; (ii) reduce the Tap Participation Fee; (iii)
terminate the Property Management Agreement; and (iv) recover
damages caused by the defaults, including certain costs and
attorneys' fees. As we process our remedies for HP A&M's
default, we will reduce portions of the Tap Participation Fee
(resulting in a debit to the liability), and we will record a
credit to Additional Paid In Capital which will offset the land and
water impairment loss from the sale of certain farms within equity.
Until certain remedies are concluded, the Company does not
expect to reduce the Tap Participation Fee obligation, which
results in a timing difference for net operating losses from the
sale of certain farms. The Company expects finalization of its
remedies against HP A&M may take up to a year or
longer.
We will host a conference call on Thursday November 29, 2012 at
4PM Eastern (2PM Mountain) to discuss these results. Call
details are below. Additionally, we have posted a detailed
slide presentation which overviews the Company and presents summary
financial results on our website which can be accessed at
www.purecyclewater.com.
CALL DETAILS
When: |
4PM Eastern on Thursday November 29 2012 |
Call in number: |
1-877-307-1379 (no pass codes required) |
Replay available until: |
December 6, 2012 |
Replay call in number: |
1-800-585-8367 |
Passcode: |
75635433 |
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995 and other applicable securities laws. Forward-looking
statements are all statements, other than statements of historical
facts, included in this press release that address activities,
events or developments that we expect or anticipate will or may
occur in the future, such as statements regarding the remedies we
intend to seek from HP A&M, the timing of such remedies, the
quantity of farm land and water which may be sold, and the price
attainable from such sales. Investors are cautioned that
forward-looking statements are inherently uncertain and involve
risks and uncertainties that could cause actual results to differ
materially. Factors that could cause actual results to differ
from projected results include, without limitation: our ability to
find buyers for our farms and water rights; the market price of
land and water; the risk factors discussed in Part I, Item 1A of
our most recent Annual Report on Form 10-K; and those factors
discussed from time to time in our press releases, public
statements and documents filed or furnished with the U.S.
Securities and Exchange Commission. Although we have attempted
to identify important factors that could cause actual results to
differ materially from those described in forward-looking
statements, there may be other factors that cause results not to be
as anticipated or intended. Except as required by law, we
disclaim any obligation to publicly update any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Company Information
Pure Cycle owns water rights, storage rights and land in several
river basins in the State of Colorado. Pure Cycle provides
water and wastewater services, including the design, construction,
operation and maintenance of water and wastewater systems, to
wholesale customers, which are local governmental entities who
provide water and wastewater services to their end-use customers
located in the greater Denver metropolitan area.
Additional information including our recent press releases and
Annual Reports are available at www.purecyclewater.com, or you may
contact our President, Mark W. Harding, at 303-292-3456 or at
info@purecyclewater.com.
CONTACT: Mark W. Harding, President
303-292-3456
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