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<SEC-DOCUMENT>0001015402-04-002516.txt : 20040607
<SEC-HEADER>0001015402-04-002516.hdr.sgml : 20040607
<ACCEPTANCE-DATETIME>20040607172908
ACCESSION NUMBER:		0001015402-04-002516
CONFORMED SUBMISSION TYPE:	SB-2/A
PUBLIC DOCUMENT COUNT:		11
FILED AS OF DATE:		20040607

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			PURE CYCLE CORP
		CENTRAL INDEX KEY:			0000276720
		STANDARD INDUSTRIAL CLASSIFICATION:	REFRIGERATION & SERVICE INDUSTRY MACHINERY [3580]
		IRS NUMBER:				840705083
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0831

	FILING VALUES:
		FORM TYPE:		SB-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-114568
		FILM NUMBER:		04852496

	BUSINESS ADDRESS:	
		STREET 1:		8451 DELAWARE STREET
		CITY:			THORNTON
		STATE:			CO
		ZIP:			80260
		BUSINESS PHONE:		3032923456

	MAIL ADDRESS:	
		STREET 1:		8451 DELAWARE STREET
		CITY:			THORNTON
		STATE:			CO
		ZIP:			80260
</SEC-HEADER>
<DOCUMENT>
<TYPE>SB-2/A
<SEQUENCE>1
<FILENAME>doc1.txt
<TEXT>
      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 2004.

                                                    REGISTRATION NO.  333-114568
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549
                       ___________________________________

                                 AMENDMENT NO. 1
                                       TO
                                    FORM SB-2

             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                       ___________________________________


                             PURE CYCLE CORPORATION
             (Exact name of registrant as specified in its charter)
                       ___________________________________

            DELAWARE                                      84-0705083
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

                                      4941
                (Primary Standard Industrial Classification Code)

                       ___________________________________

                                8451 DELAWARE ST.
                            THORNTON, COLORADO 80260
                                 (303) 292-3456
    (Address, including zip code, and telephone number, including area code, of
                    registrant's principal executive offices)


                                 MARK W. HARDING
                                8451 DELAWARE ST.
                            THORNTON, COLORADO 80260

                            TELEPHONE: (303) 292-3456

  (Name, address, including zip code, and telephone number, including area code,
                              of agent for service)


                                 With copies to:

                               WANDA J. ABEL, ESQ.
                            DAVIS GRAHAM & STUBBS LLP
                       1550 SEVENTEENTH STREET, SUITE 500
                             DENVER, COLORADO 80202
                            TELEPHONE: (303) 892-9400
                       ___________________________________


APPROXIMATE  DATE  OF  PROPOSED SALE TO THE PUBLIC: As soon as practicable after
this  registration  statement  becomes  effective.

     If  this  Form  is  filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and  list  the  Securities  Act  registration  statement  number  of the earlier
effective  registration  statement  for  the  same  offering.  [  ]

     If  this  Form  is a post-effective amendment filed pursuant to Rule 462(c)
under  the  Securities  Act, check the following box and list the Securities Act
registration  statement  number  of the earlier effective registration statement
for  the  same  offering.  [  ]

     If  this  Form  is a post-effective amendment filed pursuant to Rule 462(d)
under  the  Securities  Act, check the following box and list the Securities Act
registration  statement  number  of the earlier effective registration statement
for  the  same  offering.  [  ]

     If  delivery of the prospectus is expected to be made pursuant to Rule 434,
please  check  the  following  box.  [  ]


<PAGE>
<TABLE>
<CAPTION>
                                     _______________________________________
                                          CALCULATION OF REGISTRATION FEE

- ------------------------------------------------------------------------------------------------------------------
                                                               Proposed         Proposed
                                               Amount          maximum           maximum
          Title of each class of               to be        offering price      aggregate          Amount of
        securities to be registered        registered (2)   per share (1)    offering price   registration fee(2)
- ------------------------------------------------------------------------------------------------------------------
<S>                                        <C>             <C>               <C>              <C>
Common Stock, $.00333 par value per share          99,962  $           9.93  $    992,622.66  $             125.77
- ------------------------------------------------------------------------------------------------------------------
<FN>
(1)  Estimated solely for the purpose of computing the registration fee. The
     proposed maximum offering price per share and maximum aggregate offering
     price for the shares being registered hereby are calculated in accordance
     with Rule 457(c) under the Securities Act using the average of the high and
     low sales price per share of our common stock on June 2, 2004, as reported
     on the OTC Bulletin Board.

(2)  We previously registered 3,586,210 shares and paid the fee in respect of
     such shares.
</TABLE>

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.


                                        2
<PAGE>
The information in this prospectus is not complete and may be changed.  The
selling stockholders may not sell these securities pursuant to this prospectus
until the registration statement filed with the Securities and Exchange
Commission becomes effective.  This prospectus is not an offer to sell these
securities and neither Pure Cycle nor the Selling Stockholders are soliciting
offers to buy these securities in any state where the offer or sale is not
permitted.


Subject to completion, dated June 7, 2004


PROSPECTUS

                                3,205,367 SHARES
                             PURE CYCLE CORPORATION
                         COMMON STOCK, $.00333 PAR VALUE


                                ________________

     The 3,205,367 shares of common stock, $.00333 par value, offered hereby are
being offered by Pure Cycle Corporation and by certain Pure Cycle stockholders.
Of the total number of shares offered, 700,000 shares are being offered by Pure
Cycle and 2,505,367 shares are being offered by the selling stockholders.  See
"Selling Stockholders."

     Pure Cycle's common stock is quoted on the OTC Bulletin Board under the
symbol "PCYO."  On June 2, 2004, the last reported sales prices of our common
stock on the OTC Bulletin Board was $9.95 per share.  We have applied for
listing of our common stock on the NASDAQ Small Cap Market under the symbol
"PCYO."

     FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS, SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THIS PROSPECTUS.

     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE.  ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
                                                    PER SHARE  TOTAL
                                                    ---------  -----
<S>                                                 <C>        <C>
Offering price                                          -        -
Underwriting discount                                   -        -
Proceeds, before expenses, to Pure Cycle                -        -
Proceeds, before expenses, to selling stockholders      -        -
</TABLE>

     We have granted an over-allotment option to the underwriters.  Under this
option, the underwriters may elect to purchase a maximum of 480,805 additional
shares from us within 30 days following the date of this prospectus to cover
over-allotments.   See "Plan of Distribution."


                              FLAGSTONE SECURITIES


                The date of this prospectus is __________, 2004.


<PAGE>


                                [GRAPHIC OMITED]


<PAGE>
                  SPECIAL SUITABILITY FOR CALIFORNIA RESIDENTS

     Natural persons resident in California who wish to purchase shares of our
common stock must:

     -    Have  net worth exclusive of home, furnishings and automobiles of
          not  less  than  $250,000;  and

     -    Have an individual income in excess of $65,000 in each of the two
          most  recent  years  prior  to  the  purchase,  and  a reasonable
          expectation  of  reaching  the  same  income level in the current
          year.

<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
<S>                                                                         <C>
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7
FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . .  15
USE OF PROCEEDS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  16
CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  18
MARKET PRICE OF AND DIVIDENDS FOR OUR COMMON EQUITY AND
    RELATED STOCKHOLDER MATTERS  . . . . . . . . . . . . . . . . . . . . . .  19
SELECTED FINANCIAL DATA  . . . . . . . . . . . . . . . . . . . . . . . . . .  20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION
    AND RESULTS OF OPERATIONS  . . . . . . . . . . . . . . . . . . . . . . .  21
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  42
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS . . . . . . . . . . . . . .  45
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERSHIP AND
    MANAGEMENT  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   46
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . .  48
DESCRIPTION OF SECURITIES  . . . . . . . . . . . . . . . . . . . . . . . . .  49
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .  55
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . .  56
LEGAL MATTERS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  59
EXPERTS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  59
WHERE YOU CAN FIND MORE INFORMATION  . . . . . . . . . . . . . . . . . . . .  59
</TABLE>



                                _______________

     As used in this prospectus, the terms "Pure Cycle," the "Company," "we,"
"our," or "us" refer to Pure Cycle Corporation, unless the context otherwise
indicates.

     Unless otherwise stated, all information in this prospectus gives effect
to the 1-for-10 reverse stock split of our common stock that was effective on
April 26, 2004.

     Unless otherwise stated in this prospectus, all information contained in
this prospectus assumes no exercise of the over-allotment option granted to the
underwriters.

     The underwriters are offering the shares subject to various conditions and
may reject all or part of any order.  The common stock should be ready for
delivery on or about _____________ ___, 2004 against payment in immediately
available funds.


                                        i
<PAGE>
                               PROSPECTUS SUMMARY

     This summary  highlights information contained elsewhere in this
prospectus.  Because it is a summary, it does not contain all of the information
that you should consider before investing in our common stock.  You should read
the entire prospectus carefully.

                                   THE COMPANY

     We own or have rights to use significant water assets which we have begun
to utilize to provide water and wastewater services to customers located in the
Denver, Colorado metropolitan area near our principal water assets.  We will
operate water and wastewater systems to deliver and treat the water we provide.
Our services will include designing, constructing, operating and maintaining
systems to service our customers.

Rangeview  Water  Assets.
- -------------------------

     We have exclusive access to approximately 29,000 acre feet per year of
water from, and the exclusive right to provide water and wastewater services to,
24,000 acres of primarily undeveloped land in eastern Colorado known as the
Lowry Range (the "Lowry Range service area").  The Lowry Range is located in
Arapahoe County approximately 15 miles southeast of Denver and 12 miles south of
the Denver International Airport.  Of the approximately 29,000 acre feet of
water to which we have access annually, 17,500 acre feet are available to us for
use on the Lowry Range.  We own the remaining 11,650 acre feet and we can
"export" it from the Lowry Range to supply water to nearby communities and
developers in need of additional water supplies ("Export Water").  If we do not
use our full annual entitlement in any year, we are permitted to increase our
utilization in a subsequent year to the extent of the deficit, but the aggregate
amount to be withdrawn cannot exceed 1,165,000 area feet for customers located
off the Lowry Range.  We acquired these rights and the Export Water in 1996 when
we entered into an 85-year agreement with the State of Colorado Board of Land
Commissioners ("State Land Board"), which owns the Lowry Range, and the
Rangeview Metropolitan District (the "District"), a quasi-municipal political
subdivision formed for the sole purpose of providing water and wastewater
services to the Lowry Range.  We refer to all of these assets as our Rangeview
water supply.

     We are in the early stages of utilizing our Rangeview water assets.  Since
June 2001, we have been supplying water and wastewater services in the Lowry
Range service area to approximately 200 single family equivalent, or SFE, units
through service to the Ridge View Youth Services Center, a 500 bed juvenile
facility.  In October 2003, we entered into a contract  to provide water service
to Sky Ranch, a proposed mixed-use development of single and multi-family
residences and commercial space.  Sky Ranch will be located approximately four
miles north of the Lowry Range along Interstate-70 in Arapahoe County.  When the
development is complete, we expect to supply Sky Ranch with water services for
4,000 SFE units.  Our agreement does not call for us to provide wastewater
services to Sky Ranch.  In May 2004, we entered into a second agreement with the
developer of Sky Ranch to provide water services to an additional 850 SFEs at
Hills at Sky Ranch, a development adjacent to, and to be developed concurrently
with, Sky Ranch.  These two contracts are referred to herein as the "Sky Ranch
Agreements."  We expect the initial site development of both Sky Ranch and Hills
at Sky Ranch to begin in the fall of 2004, with housing construction to begin in
the spring of 2005.  While we are currently actively marketing our water
services to other developers and property owners in areas near the Sky Ranch
development, the Ridge View Youth Services Center represents our only current
operation.

     Operations.  We will have two sources of revenue from providing water and
     ----------
water services.  We will receive a one time "tap" fee, generally paid by the
developer, and annual service and use charges based on the monthly metered water
deliveries to the water user.  The water tap fee has two components:


                                        1
<PAGE>
a system development fee, which gives the customer access to the water system
and is used for construction of the water delivery system, and a water resource
fee, which defrays the costs of acquiring the water rights.  Under the terms of
our agreement with the State Land Board, our tap fees and use charges may not
exceed the average of the tap fees and use charges of three nearby communities.
This average, which is adjusted annually, has risen by approximately 52% since
2000 and is presently $12,420 per SFE.  Generally, we receive 95% of these tap
fees after deducting a 12% royalty payable to the State Land Board, which
royalty will be subject to increase in certain circumstances.  In exchange for
developing, operating and maintaining the wastewater system, we receive 100% of
wastewater tap fees, presently $4,883 per SFE, and 90% of monthly wastewater
usage fees.  We also receive wastewater service fees.  Annual water service fees
per SFE are approximately $578 and annual wastewater service fees per SFE are
approximately $404.

     We expect to utilize the portion of the tap fees designated by the District
as the system development portion to construct the infrastructure necessary to
deliver water.  We expect ongoing water and wastewater usage fees to cover costs
of operating the water and wastewater systems.  We will design the water and
wastewater delivery systems and contract with third parties for construction of
the systems.  We plan to utilize a dual distribution system that contains two
water pipes, one for potable water that will go directly to a residence and a
second for non-potable water that will be used to deliver water for outdoor
irrigation use.  A third pipe will return the wastewater to our treatment
facility where it will be processed to Colorado Department of Public Health and
Environment ("CDPHE") standards for irrigation water and then, subject to
approval by the CDPHE,  returned through the second delivery pipe for outdoor
non-potable use.

     Under the terms of financing agreements we entered into in connection with
the acquisition of our Rangeview water assets, we are obligated to pay the first
$36,240,000 of proceeds (after royalty payments) from the sale of Export Water
to parties to these agreements.  We will make these payments from the water
resource portion of the tap fees we receive on the sale of Export Water.  These
financing agreements will not restrict our use of the system development portion
of the tap fees to finance construction of the water and wastewater delivery
systems.

     Opportunity.  The Denver Regional Council of Governments has estimated that
     -----------
between 2000 and 2025 the population in the Denver metropolitan area will
increase from 2.4 million to 3.4 million.  An independent consultant to the
State Land Board and the District has forecast that approximately 50% of new
land development in metropolitan Denver will occur in the area south of
Interstate-70 and east of Interstate-25, an area of Arapahoe County that
includes the Lowry Range, Sky Ranch and surrounding areas.  Because of ongoing
water shortages, any developer submitting a land use plan to Arapahoe County is
required to provide assurance that water will be available to service the
development prior to any consideration of a change in land use.

     The State Land Board is in the initial stages of developing a plan to
solicit requests for proposals (RFPs) to engage a development partner to assist
the State Land Board in planning for future development of the Lowry Range.  If
RFPs are sent as planned later this summer, we expect that the first stage of
the long-term development of the Lowry Range could start within three years.  We
estimate that full development of the Lowry Range will take in excess of 30
years.

     We have received confirmation from independent engineering firms that our
Rangeview water assets are capable of providing water service to approximately
80,000 SFE units.  Our Rangeview water assets have been adjudicated in the
Colorado water courts in decrees specifying the amount of water we own or have a
right to use and that the water is available for municipal use.  We believe,
based on these Water Court decrees and the location of our water on or near
areas of projected future development, that we have significant opportunities to
utilize our water resources.


                                        2
<PAGE>
Paradise  Water  Supply.
- ------------------------

     We own conditional water rights in western Colorado that entitle us to
build a 70,000 acre foot reservoir to store tributary water on the Colorado
River.  We will seek to develop and market this water either to the greater
Denver metropolitan area or in markets in the downstream states of Nevada,
Arizona and California.  Our ability to use this asset may be limited, however,
because of constraints imposed by the difficulties and costs involved in
transporting the water out of  the Colorado River watershed to the Denver
metropolitan area and because of legal complications in transferring such water
to downstream states under the interstate Colorado River Compact.

General.
- --------

     We were incorporated in Delaware in 1976.  Our corporate offices are
located at 8451 Delaware Street, Thornton, Colorado 80260.  Our telephone number
is (303) 292-3456.


                                        3
<PAGE>
<TABLE>
<CAPTION>
                                     THE OFFERING

<S>                                 <C>
Common stock offered by Pure Cycle  700,000 shares

Common stock offered by selling
  stockholders . . . . . . . . . .  2,505,367 shares

Common stock outstanding before
  the offering . . . . . . . . . .  10,374,957 shares

Common stock to be outstanding
  after the offering . . . . . . .  11,074,954 shares

Use of proceeds of common stock. .  To pay outstanding indebtedness, for water
  sold by Pure Cycle . . . . . . .  system expenditures, and for working capital and
                                    other general corporate purposes, including
                                    acquisitions and to buy out third party rights to
                                    receive proceeds from the sale of Export Water,
                                    to the extent such rights are available on
                                    acceptable terms.

OTC Bulletin Board and symbol. . .  PCYO

Proposed NASDAQ SmallCap symbol. .  PCYO
</TABLE>

     The shares of common stock outstanding before the offering is based on the
number of shares of common stock outstanding at February 29, 2004, increased by:

     -    645,500 shares of common stock issued upon conversion on April 13,
          2004 of 6,455,000 shares of Series D preferred stock,

     -    200,000 shares of common stock issued upon conversion on April 13,
          2004 of 2,000,000 shares of Series D-1 preferred stock, and

     -    475,589 shares of common stock purchasable on exercise of outstanding
          stock options at an exercise price of $1.80 per share and 908,778
          shares of common stock purchasable on exercise of outstanding warrants
          at an exercise price of $1.80 per share, which shares are being sold
          in this offering (the "Selling Stockholder Option and Warrant
          Shares").

     and excludes:

     -    2,139,411 shares of common stock issuable on the exercise of
          outstanding options at an exercise price of $1.80 per share,

     -    an additional 1,585,000 shares of common stock reserved for future
          issuance under our stock option plan,

     -    1,531,506 shares of common stock issuable on the exercise of
          outstanding warrants at an exercise price of $1.80 per share, and


                                        4
<PAGE>
     -    587,778 shares of common stock issuable upon the conversion of
          outstanding Series A-1 convertible preferred stock at a conversion
          ratio of .55556 shares of common stock for each share of Series A-1
          preferred stock.

     The common stock offered by selling stockholders in this offering consists
of the Selling Stockholder Option and Warrant Shares and 1,121,000 shares of
common stock that are currently owned by selling stockholders (collectively, the
"Selling Stockholder Shares").

     At February 29, 2004, the Selling Stockholder Option and Warrant Shares
were not outstanding, but these options and warrants will be exercised
immediately prior to the sale of the shares in this offering.  If all of these
options and warrants are exercised, we will receive $2,491,860 of gross
proceeds.  The $856,060 exercise price for the options will be paid in cash and
the exercise price for the warrants will be paid $3,026 in cash and $1,632,774
in the form of 4% promissory notes payable to Pure Cycle, secured by the stock
issued upon exercise.  The notes are required to be paid with the proceeds of
the sale of the stock in this offering.  If the warrant holders' shares are not
sold, we expect that we will foreclose on the promissory notes and cancel the
shares.

     The information in this prospectus, other than the financial statements
and Management's Discussion and Analysis of Financial Condition and Results of
Operations, assumes that these options and warrants have been exercised, the
Series D and Series D-1 preferred stock have been converted, the common stock
issued or issuable on exercise and conversion are outstanding, and the
promissory notes payable to Pure Cycle in partial consideration of the exercise
price for the warrants have been repaid.


                                        5
<PAGE>
                             SUMMARY FINANCIAL DATA

     The following table shows selected summary financial data for Pure Cycle
as of the dates and for the periods indicated.  You should read this data in
conjunction with the financial statements and notes included in this prospectus
beginning on page F-1.

<TABLE>
<CAPTION>
                                                 SIX MONTHS ENDED               YEAR ENDED
                                             ------------------------  --------------------------
                                              FEB. 29,     FEB. 28,     AUGUST 31,    AUGUST 31,
                                                2004         2003          2003          2002
                                             -----------  -----------  ------------  ------------
                                                    (UNAUDITED)
<S>                                          <C>          <C>          <C>           <C>
STATEMENT OF OPERATIONS
Revenues  . . . . . . . . . . . . . . . . .  $   85,731   $  103,812   $   225,432   $   204,858
Expenses:
 Operating  . . . . . . . . . . . . . . . .      11,338       10,732        37,496        27,792
 General and administrative . . . . . . . .     219,302      124,556       318,182       221,872
Operating loss  . . . . . . . . . . . . . .    (147,691)     (34,784)     (135,841)      (49,764)
Other expense, net  . . . . . . . . . . . .      91,259       92,572       185,212       195,383

Net loss  . . . . . . . . . . . . . . . . .    (238,950)    (127,356)     (321,043)     (245,147)

Basic and diluted net loss per common share  $    (0.03)  $    (0.02)  $     (0.04)  $     (0.03)
Weighted average number of shares of common
  stock outstanding - basic and diluted       8,056,418    7,843,976     7,843,976     7,843,976
                                             ===========  ===========  ============  ============
</TABLE>

<TABLE>
<CAPTION>
                                                                      FEBRUARY 29, 2004
                                                            -----------------------------------------
                                                              ACTUAL                  AS ADJUSTED(1)
                                                            -----------------------------------------
                                                                         (UNAUDITED)
<S>                                                         <C>                       <C>
BALANCE SHEET DATA:
Cash and cash equivalents. . . . . . . . . . . . . . . . .  $   338,559               $     8,068,904
Investment in water and systems. . . . . . . . . . . . . .   19,410,635                    19,410,635
Total assets . . . . . . . . . . . . . . . . . . . . . . .   20,254,298                    27,989,603
Working capital. . . . . . . . . . . . . . . . . . . . . .      327,790                     8,058,095
Long-term debt-related parties, including accrued interest    4,976,511                     3,867,450
Participating interests in Rangeview water supply. . . . .   11,090,630                    11,090,630
Stockholders' equity . . . . . . . . . . . . . . . . . . .    4,142,507                    12,981,873
<FN>
     (1)  The "as adjusted" column reflects (a) the exercise of options to
          purchase 475,589 shares of common stock at an exercise price of $1.80
          per share and the exercise of warrants to purchase 908,778 shares of
          common stock at an exercise price of $1.80 per share, and (b) the sale
          by Pure Cycle of 700,000 shares of common stock in this offering at an
          assumed offering price of $10.00 per share, after deducting the
          estimated underwriting discount and offering expenses, and the
          application of the net proceeds from the sale of these shares as
          described under "Use of Proceeds."
</TABLE>


                                        6
<PAGE>
                                  RISK FACTORS

     INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK.  YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS, IN ADDITION TO THE OTHER
INFORMATION IN THIS PROSPECTUS, BEFORE INVESTING IN OUR COMMON STOCK.

WE ARE DEPENDENT FOR FUTURE REVENUES ON DEVELOPMENT OF THE LOWRY RANGE AND OF
THE OTHER AREAS NEAR OUR RANGEVIEW WATER ASSETS THAT ARE POTENTIAL MARKETS FOR
OUR EXPORT WATER.

     We expect that our principal source of future revenue will be from two
contracts that entitle us to provide water and wastewater service in the Lowry
Range service area.  The timing and amount of these revenues will depend
significantly on the development of this area.  The land in the Lowry Range is
owned by the State Land Board, which is in the early stages of considering
various development alternatives, but no timetable exists for development.  We
are not able to determine the timing of water sales or the timing of
development.  There can be no assurance that development will occur, or that
water sales will occur on acceptable terms or in the amounts or time required
for us to support our costs of operation.  Because of the prior use of the Lowry
Range as a military reservation, environmental clean-up may be required prior to
development, including to remove unexploded ordnance.  There is often
significant delay in adoption of development plans, as the political process
involves many constituencies with differing interests.  In the event water sales
are not forthcoming or development of the Lowry Range is delayed, we may incur
additional short or long-term debt obligations or seek to sell additional equity
to generate operating capital.  These sales of equity may be at prices that are
dilutive to existing investors.

     Our operations are significantly affected by the general economic
conditions for real estate development and the pace and location of real estate
development activities in the greater Denver metropolitan area, most
particularly areas such as Sky Ranch which are near to our Rangeview water
assets and thus are potential markets for our Export Water.  Increases in the
number of our water and wastewater connections, our connection fees and our
billings and collections will depend on real estate development in this area.
We have no ability to control the pace and location of real estate development
activities which affect our business.

WE ARE A START-UP BUSINESS AND DO NOT HAVE SIGNIFICANT EXPERIENCE IN THE
LARGE-SCALE SALE OF WATER AND OPERATION OF WATER AND WASTEWATER SYSTEMS.

     Although we have been in operation since 1976, our expected future
operations are significantly different from the businesses in which we have been
engaged over most of our past.  While we have constructed and are operating one
water and wastewater treatment facility on the Lowry Range, that facility serves
only one customer and provides revenues of only about $15,000 per month,
representing 81% of our total revenues.  We do not yet have significant
experience in the large-scale sale of water and operation of water and
wastewater systems and our revenue growth will depend on our ability to enter
into new operating contracts with municipal water districts and developers.
Because we have not built a large number of water and wastewater systems, we
cannot assure you that the portion of the tap fee revenue that we will utilize
for construction of our water delivery system will cover the costs of
construction, particularly since a disproportionately greater cost must be paid
in the initial stage of construction, and the tap fees are assessed equally at
all stages of a development.  A significant portion of our marketing and sales
effort is spent demonstrating to municipal water districts and developers our
operating capabilities and the viability of our water assets, but our inability
to point to a history of successful operations may be a competitive disadvantage
in obtaining new contracts.  In the Sky Ranch Agreements, the developer retained
a right to terminate the agreements if it was unable to sell a specified number
of lots to homebuilders within 24 months of receipt of required approvals due
principally to the homebuilders' concerns over our ability to provide the
required water.  Our business is subject to the risks


                                        7
<PAGE>
often associated with start-up businesses, and you will be unable to evaluate
our operations based on our past operating results.

OUR NET LOSSES MAY CONTINUE AND WE MAY NOT HAVE SUFFICIENT LIQUIDITY TO PURSUE
OUR BUSINESS OBJECTIVES.

     We have experienced significant net losses and could continue to incur net
losses.  For the year ended August 31, 2003 and the six months ended February
29, 2004, we had net losses of $321,000 and $238,950, respectively, on revenues
of $225,000 and $85,731 in the respective periods.  Our cash flow from
operations has been insufficient to fund our operations in the past, and we have
been required to raise debt and equity capital from related parties to remain in
operation.  Since 1998, we have raised $1,310,000 through the issuance of
776,133 shares of common stock to support our operations.  Our ability to fund
our operational needs and meet our business objectives will depend on our
ability to generate cash from future operations.  If our future cash flow from
operations and other capital resources are insufficient to fund our operations
and the significant capital expenditure requirements to build our water delivery
systems, we may be forced to reduce or delay our business activities, grant
additional priority rights to revenues from the sale of Export Water, or seek to
obtain additional debt or equity capital, which may not be available on
acceptable terms, or at all.

OBLIGATIONS UNDER THE COMMERCIALIZATION AGREEMENT AND OTHER AGREEMENTS WILL
DELAY OUR ABILITY TO BENEFIT FROM INCREASED REVENUES.

     We have entered into financing agreements with investors and in settlement
of controversies over our Rangeview water assets that obligate us to pay to
others the first $36,240,000 of certain revenues we receive from our sale of
Export Water.  Under the provisions of one of these financing agreements, called
the Commercialization Agreement, we are required to pay to investors in the
Rangeview project signatory to such agreement the first $31,807,000 from the
water resource component of the tap fees we receive from the sale or other
disposition of Export Water.  We are obligated to pay the next $4,000,000 of
such revenues to another investor, and the next $433,000 in such revenues to the
holders of our Series B Preferred Stock.  These obligations, along with other
indebtedness, pose risks to the holders of our common stock, including the risks
that:

     -    A substantial portion of our cash flow from the sale of Export Water
          for a significant period of time will be dedicated to the payment of
          obligations to investors;

     -    These obligations may impair our ability to obtain external financing
          in the future, including for capital expenditures required for growth;

     -    The obligation to pay out these amounts may make us more vulnerable to
          economic downturns and may limit our ability to withstand competitive
          pressures; and

     -    Payment of these amounts will limit the amount of cash we will have
          available to invest in acquisitions and other growth opportunities.

THE RATES WE ARE ALLOWED TO CHARGE CUSTOMERS ARE LIMITED BY THE DISTRICT'S
CONTRACT WITH THE STATE LAND BOARD AND OUR CONTRACT WITH THE DISTRICT AND MAY BE
INSUFFICIENT TO COVER OUR COSTS OF CONSTRUCTION AND OPERATION.

     The price we can charge for our water and wastewater services are subject
to pricing regulations set in the District's contract with the State Land Board
and our contract with the District.  Both the tap fees and our usage rates and
charges are based on the average of the rates of three surrounding
quasi-governmental water providers.  We survey annually the tap fees and rates
and charges from the water providers that comprise our rate base group and set
our tap fees and rates and charges based on the


                                        8
<PAGE>
average of those charged by this group.  Our costs associated with the
construction of water delivery systems and the production, treatment and
delivery of our water are subject to market conditions and other factors, which
may increase at a significantly greater rate than the prices charged by our rate
base water providers.  Factors beyond our control and which cannot be predicted,
such as drought, water contamination and severe weather conditions, like
tornadoes and floods, may result in additional labor and material costs that may
not be recoverable under our operations and maintenance contracts, creating
additional differences from the costs of our rate base water providers.
Increased customer demand can also increase the overall cost of our operations.
If the costs for construction and operation of our water services, including the
cost of extracting our groundwater, exceed our revenues, we may petition the
State Land Board for rate increases.  We cannot assure that the State Land Board
would grant us approval to increase rates beyond the average of the rate base
water providers.  Our profitability could be negatively impacted if we
experience an imbalance of costs and revenues and are not successful in
receiving approval for rate increases.

WE ARE LIKELY TO BE INVOLVED IN ON-GOING NEGOTIATIONS WITH THE STATE LAND BOARD
TO CLARIFY OUR RIGHTS AND OBLIGATIONS UNDER CONTRACTS AS THEY RELATE TO SPECIFIC
TRANSACTIONS WE ENTER INTO OR TO DEAL WITH ADDITIONAL OPPORTUNITIES, AND WE MAY
BE SUBJECT TO ADVERSE DETERMINATIONS IF WE ARE REQUIRED TO ARBITRATE THESE
MATTERS.

     Our rights and obligations to our Rangeview water assets derive principally
from an Amended and Restated Lease (the "Lease") between the State Land Board
and Rangeview entered into in 1996 prior to any development of the Lowry Range
or of areas outside the Lowry Range that utilize our Export Water.  The terms of
this agreement did not anticipate the specific circumstances of the development
that have arisen and may not clearly delineate rights and responsibilities for
the forms of transactions that may arise in the future as we enter into and
negotiate agreements for sale of water.  We anticipate that we will engage in
negotiations with the State Land Board from time to time to clarify the
applicability of contract terms to circumstances that were not anticipated at
the time the agreements were entered into.  Certain of these provisions may be
material, and a determination, by an arbitrator or otherwise, of positions that
are not favorable to us could have a material adverse effect on our financial
results.  In addition, we discuss periodically with the State Land Board
opportunities for water utilization that were not available at the time of the
Lease, which opportunities could be incorporated into the Lease.  We cannot
assure you that we will pursue additional opportunities or that such activities
will be successful.

OUR CAPITAL RESOURCES MAY RESTRICT OUR ABILITY TO OPERATE AND EXPAND OUR
BUSINESS.

     As of February 29, 2004, we had cash and cash equivalents of $338,599.  We
have not been able to secure lines of credit to enable us to expand our
operations.  We may be unable to establish credit facilities or execute
financing alternatives on terms that we find acceptable.

     In order to obtain contracts, we must be able to demonstrate the ability to
fund the significant investments required to build water delivery and treatment
facilities.  We may obtain funds for these obligations from the proceeds of this
offering or the sale of stock and other equity related securities, our cash flow
from operations, contributions by developers and the use of both short and
long-term debt.  If we are unable to establish lines of credit, or if we are
unable to secure additional financing sources, our capital spending would be
reduced or delayed, which would limit our growth.

WE ONLY HAVE THREE EMPLOYEES AND MAY NOT BE ABLE TO MANAGE THE INCREASING
DEMANDS OF OUR EXPANDING OPERATIONS.

     We expect that our activities relating to the Sky Ranch agreement will
significantly expand our business, and we are actively pursuing additional
development opportunities in areas near Sky Ranch, as well as acquisition
opportunities to continue to grow our operations.  We currently have only three


                                        9
<PAGE>
employees to administer our existing assets, interface with applicable
governmental bodies and investors, market our services, and plan for the
construction and development of our future assets.  We may not be able to
maximize the value of our water assets because of our limited manpower.  We
depend significantly on the services of Mark Harding, our President, and Thomas
P. Clark, our Chief Executive Officer.  Loss of either of these employees would
cause a significant interruption of our operations.  The success of our future
business development and ability to capitalize on growth opportunities depends
on our ability to attract and retain additional experienced and qualified
persons to operate and manage our business.  State regulations set the training,
experience and qualification standards required for our employees to operate
specific water and wastewater facilities.  Failure to find state-certified and
qualified employees to support the operation of our facilities could put us at
risk, among other things, for operational errors at the facilities, for improper
billing and collection processes, and for loss of contracts and revenues.  We
cannot assure you that we can successfully manage our assets and our growth.

OUR BUSINESS IS SUBJECT TO GOVERNMENTAL REGULATION AND PERMITTING REQUIREMENTS.
WE MAY BE ADVERSELY AFFECTED BY ANY FUTURE DECISION BY THE COLORADO PUBLIC
UTILITIES COMMISSION TO REGULATE US AS A PUBLIC UTILITY AND TO IMPOSE
REGULATION.

     The Colorado Public Utilities Commission (CPUC) regulates investor-owned
water companies that hold themselves out to the public as serving, or ready to
serve, all of the public in a service area.  The CPUC regulates many aspects of
public utilities' operations, including the siting and construction of
facilities, establishing water rates and fees, initiating inspections,
enforcement and compliance activities and assisting consumers with complaints.
Although we act as a service provider under contracts with quasi-municipal
metropolitan districts that are exempt by statute from regulation by the CPUC,
the CPUC could decide to regulate us as a public utility.  If this were to
occur, we might incur significant expense challenging the CPUC's assertion of
authority, and we may be unsuccessful.  In the future, existing regulations may
be revised or reinterpreted, and new laws and regulations may be adopted or
become applicable to us or our facilities.  If we become regulated as a public
utility, our ability to generate profits could be limited and we might incur
significant costs associated with regulatory compliance.

WATER IS A DEPLETING RESOURCE AND WE MAY NOT BE ABLE TO PROVIDE AN ADEQUATE
SUPPLY OF WATER TO OUR CUSTOMERS.

     We obtain our water from various sources.  The preferred source is pumping
tributary groundwater from the alluvial aquifer beneath or connected with the
surface streams located on the Lowry Range.  Although a relatively small portion
of our water supply comes from these renewable surface water supplies, the
volume of water available through surface water rights are subject to a priority
system which, particularly in times of drought, may diminish the supply of
available water.  A significant portion of our water supply comes from
nontributary groundwater that can only be withdrawn at an average rate of 1% per
year so that the resource, which is thought to be non-renewable, will last for
100 years.  Water court decrees are based on engineering estimates of the amount
of water contained in the aquifer.  Actual amounts of water may vary from these
estimates as the aquifer is developed.  In addition, frequently, after a certain
number of years, it becomes more difficult to extract the water from the
aquifer, resulting in higher costs of extraction.  Our obligations to deliver
water are fixed obligations, and are not conditioned on the continuing
availability of water from our existing supplies.  If our water supply is
depleted, we would be obligated to acquire water elsewhere in order to meet our
contractual obligations, and the cost of that replacement water could exceed the
amount we are permitted to charge to water users.  We will seek to recycle and
reuse our existing water assets and to replenish and increase our water rights
through acquisition of additional tributary and nontributary water rights, but
we cannot assure you that we will continue to have sufficient supplies of water
in the future to meet our customers' needs and to support continued growth.


                                       10
<PAGE>
OUR WATER RIGHTS MAY BE CHALLENGED BASED ON CHANGES IN WATER LAW AND POLICY.

     Our rights to our water assets have been adjudicated by Colorado water
courts, but it is not possible to obtain title insurance on water rights. We
believe that adjudicated water rights constitute property interests that are not
subject to subsequent challenge. However, the evolving nature of water law in
Colorado and the political sensitivity and importance of water as a scarce
commodity could lead to challenges to our adjudicated water rights. We cannot
assure you that we will be successful in defeating all such challenges.

THERE ARE MANY OBSTACLES TO OUR ABILITY TO REALIZE ON OUR PARADISE WATER ASSETS.

     We currently earn no revenues from our Paradise water assets, which as of
February 29, 2004 are recorded at $5,498,124. Our ability to convert our
Paradise water supply into an income generating asset is limited. While there is
demand for water in the downstream states of California, Nevada and Arizona,
Colorado law prohibits the export of water out of state without obtaining a
Water Court decree. To issue a decree the Water Court must find that the export
is not in violation of the provisions of interstate compacts and does not
prevent Colorado from complying with its interstate compact obligations. In
addition, there are significant difficulties and costs involved in transporting
the water out of the Colorado River watershed to the Denver metropolitan area.
As part of our Water Court decree for the Paradise water, we are permitted to
construct a storage facility on the Colorado River. However, due to the strict
regulatory requirements for constructing an on-channel reservoir, completing the
conditional storage right at its decreed location would also be difficult. Our
Paradise water right is also conditioned on a Finding of Reasonable Diligence
from the water court every six years. To arrive at that finding, a water court
must determine that we are continuing diligently to pursue the actual use of the
water right by us or by some third party who has a contractual commitment for
its use. If the water court is unable to make such a finding, our right to the
Paradise water may be lost. The next such funding will be required to be made in
2005. To date, the required finding has been made at each six-year period. If
challenged, we intend to vigorously defend our Paradise asset. We cannot assure
you that we will ever be able to make use of this asset or sell the water
profitably.

CONFLICTS OF INTEREST MAY ARISE RELATING TO THE OPERATION OF THE RANGEVIEW
METROPOLITAN DISTRICT.

     Our officers and employees constitute a majority of the directors of the
Rangeview Metropolitan District and Pure Cycle, along with our officers and
employees and one unrelated individual, own as tenants in common the 40 acres
that form the District.  We have made loans to the District to fund its
operations.  At February 29, 2004, total principal and interest owed to us by
the District was approximately $400,000.  The District is a party to our
agreements with the State Land Board and receives fees of 5% of the revenues
from the sale of water on the Lowry Range, and will hold title to the water
distribution system at the Sky Ranch development.  Proceeds from the fee
collections will initially be used to repay the District's obligations to us,
but after these loans are repaid, the District is not required to use the funds
to benefit Pure Cycle.  Officers and directors of Pure Cycle that serve as
directors of the Rangeview Metropolitan District will not benefit from the fees
to be paid to the District other than nominal director fees.  We have received
benefits from our activities undertaken in conjunction with the District, but
conflicts may arise between our interests and those of the District, and with
our officers who are acting in dual capacities in negotiating contracts to which
both we and the District are parties.  We expect that the District will expand
when more properties are developed and become part of the District, and our
officers acting as directors of the District will have fiduciary obligations to
those other constituents.  There can be no assurance that all conflicts will be
resolved in the best interests of Pure Cycle and its stockholders.  In addition,
other landowners coming into the District will be eligible to


                                       11
<PAGE>
vote and to serve as directors of the District.  There can be no assurances that
our officers and employees will remain as directors of the District or that the
actions of a subsequently elected board would not have an adverse impact on our
operations.

WEATHER CONDITIONS CAN IMPACT OUR FINANCIAL RESULTS AND OPERATIONS.

     Rainfall and weather conditions may affect our operations, with most water
consumption occurring during the summer months when weather tends to be hot and
dry.  Drought or unusually wet conditions may also adversely impact our results
of operations.  During a drought, we may experience lower revenues, due to
consumer conservation efforts and regulatory mandates.  Since a fairly high
percentage of our water is used outside our customers' homes, unusually wet
conditions could result in decreased customer demand and lower revenues.  In
addition, heavy rainfall may limit our ability to perform certain work such as
pipeline maintenance, manhole rehabilitation and other outdoor services.

WE ARE REQUIRED TO MAINTAIN STRINGENT WATER QUALITY STANDARDS AND ARE SUBJECT TO
REGULATORY AND ENVIRONMENTAL RISKS.

     We must provide water that meets all federal and state regulatory water
quality standards and operate our water and wastewater facilities in accordance
with the standards. We face contamination and pollution issues regarding our
water supplies. Improved detection technology, increasingly stringent regulatory
requirements, and heightened consumer awareness of water quality issues
contribute to an environment of increased focus on water quality. In contrast
with other providers in Colorado, we are combining the water delivery and
wastewater treatment processes, which may introduce technical treatment issues
that make compliance with water quality standards more difficult.  We plan to
return effluent wastewater for irrigation and other nonpotable uses, although
the Colorado Department of Public Health and Environment is currently evaluating
the use of effluent wastewater for residential irrigation.  We cannot assure you
that we will be able in the future to reduce the amounts of contaminants in our
water to acceptable levels. In addition, the standards that we must meet are
constantly changing and becoming more stringent. For example, in February 2002,
the U.S. Environmental Protection Agency lowered the arsenic standard in
drinking water from 50 parts per billion to 10 parts per billion.  Future
changes in regulations governing the supply of drinking water and treatment of
wastewater may have a material adverse impact on our financial results.

     We handle certain hazardous materials at our water treatment facilities,
primarily sodium hypochlorite.  Any failure of our operation of the facilities
in the future, including sewage spills, noncompliance with water quality
standards, hazardous materials leaks and spills, and similar events could expose
us to environmental liabilities, claims and litigation costs.  We cannot assure
you that we will successfully manage these issues, and failure to do so could
have a material adverse effect on our future results of operations by increasing
our costs for damages and cleanup.

WE HAVE ENGAGED IN TRANSACTIONS WITH RELATED PARTIES.

     We have engaged in transactions, particularly the issuance of debt and
equity securities, with related parties, most significantly our chief executive
officer, Mr. Thomas P. Clark.  Mr. Clark beneficially owns approximately 31% of
our common stock.  In addition, we have outstanding borrowings at February 29,
2004 totaling $546,163 from Mr. Clark and $402,104 from other stockholders who
hold 10% or more of our common stock, and have issued warrants to certain
investors in connection with these loans.  Those related party lenders have been
willing to forgo periodic payments of principal and interest on such debt.  Many
of the Selling Stockholders are related parties that have engaged in
transactions with Pure Cycle.  There can be no assurance that our equity and
debt issuances or other related party transactions have been on arms length
terms.


                                       12
<PAGE>
OUR CONTRACTS FOR THE CONSTRUCTION OF WATER AND WASTEWATER PROJECTS MAY EXPOSE
US TO CERTAIN COMPLETION AND PERFORMANCE RISKS.

     We will rely on independent contractors to construct our water and
wastewater facilities. These construction activities may involve risks,
including shortages of materials and labor, work stoppages, labor relations
disputes, weather interference, engineering, environmental, permitting or
geological problems and unanticipated cost increases.  These issues could give
rise to delays, cost overruns or performance deficiencies, or otherwise
adversely affect the construction or operation of the water delivery system.

     In addition, we may experience quality problems in the construction of our
systems and facilities, including equipment failures.  We cannot assure you that
we will not face claims from customers or others regarding product quality and
installation of equipment placed in service by contractors.

     Certain of our contracts may be fixed-price contracts, in which we may bear
all, or a significant portion of, the risk for cost overruns. Under these
fixed-price contracts, contract prices are established in part based on fixed,
firm subcontractor quotes on contracts and on cost and scheduling estimates.
These estimates may be based on a number of assumptions, including assumptions
about prices and availability of labor, equipment and materials, and other
issues. If these subcontractor quotations or cost estimates prove inaccurate, or
if circumstances change, cost overruns may occur, and our financial results
would be negatively impacted.  In many cases, the incurrence of these additional
costs are not within our control.

     We may have contracts in which we guarantee project completion by a
scheduled date. At times, we may guarantee that the project, when completed,
will achieve certain performance standards. If we fail to complete the project
as scheduled, or if we fail to meet guaranteed performance standards, we may be
held responsible for cost impacts and/or penalties to the customer resulting
from any delay or for the costs to alter the project to achieve the performance
standards. To the extent that these events occur, and are not due to
circumstances for which the customer accepts responsibility, and cannot be
mitigated by performance bonds or the provisions of our agreements with
contractors, the total costs of the project would exceed our original estimates
and our financial results would be negatively impacted.

     Our customers may require us to secure performance and completion bonds for
certain contracts and projects.  The market environment for surety companies has
become more risk averse.  We secure performance and completion bonds for our
contracts from these surety companies.  To the extent we are unable to obtain
bonds, we may not be awarded new contracts.  We cannot assure you that we can
secure performance and completion bonds where required.

     We may operate engineering and construction activities for water and
wastewater facilities where design, construction or system failures could result
in injury to third parties or damage to property.  Any losses that exceed claims
against our contractors, the performance bonds and our insurance limits at
facilities so managed could result in claims against us.  In addition, if there
is a customer dispute regarding performance of our services, the customer may
decide to delay or withhold payment to us.

OUR CONTRACT TO PROVIDE WATER SERVICES TO THE LOWRY RANGE TERMINATES IN 2081.

     Our contract with the Rangeview Metropolitan District grants us the
exclusive right to use water underlying the Lowry Range and to provide water to
customers on the Lowry Range until 2081, at which time ownership and control of
the water delivery system (other than the wastewater system) reverts to the
State Land Board and our ability to use such water to serve customers on the
Lowry Range will cease.  While we may negotiate a new agreement to operate  the
water assets, the selection process will be competitive and there can be no
assurance that we would continue as operator.  In such event, our receipt of the
monthly water usage fees will terminate with respect to all customers located on
the Lowry Range.


                                       13
<PAGE>
We estimate that our income from Lowry Range customers will represent a
significant component of our overall revenues at such date, so the loss of such
revenues will be material.

WE WILL HAVE BROAD DISCRETION IN ALLOCATION OF NET PROCEEDS TO US IN THIS
OFFERING.

     Approximately $4,017,000, or 64%, of the estimated net proceeds to us in
this offering has been allocated to working capital and general corporate
purposes.  Accordingly, our management will have broad discretion as to the
application of these proceeds.  We may use a portion of the proceeds allocated
to working capital for acquisitions and to purchase contract rights under the
Commercialization Agreement.  We currently have no agreement, arrangement or
understanding with respect to any acquisition or purchase under the
Commercialization Agreement.

THE MARKET PRICE OF OUR COMMON STOCK COULD BE VOLATILE.

     A number of factors could cause the market price of our common stock to
fluctuate significantly, including:

     -    Small number of shares of our common stock available for purchase or
          sale in the public markets;

     -    Large number of shares of our common stock held by insiders and
          related parties;

     -    Our announcement of significant new development agreements,
          acquisitions, strategic partnerships or capital commitments.

     -    Changes in general conditions or trends in the water industry;

     -    Announcements regarding development of the Lowry Range;

     -    Changes in regulatory guidelines that restrict our operations,
          including the rates we can charge our customers;

     -    Adverse or unfavorable publicity regarding us or our services;

     -    Additional issuances of debt or equity; and

     -    Natural disasters, terrorist attacks or acts of war.

OUR REVERSE STOCK SPLIT MAY CONTRIBUTE TO GREATER VOLATILITY IN OUR STOCK PRICE.

     On April 26, 2004, we effected a 1-for-10 reverse split of our common stock
with the goal of improving the liquidity of our stock by increasing the stock
price and thereby increasing interest of a broader range of investors in our
stock.  While the initial post-split stock price has been proportionate to the
reduction in the number of shares of common stock outstanding before the reverse
stock split, if the market price of the common stock later declines, the
percentage decline may be greater than would occur in the absence of the reverse
stock split and the market price per share of our common stock could be more
volatile as a result of the stock split.  We cannot assure you that even after
the reverse stock split, our share price will attract new investors or that our
share price will satisfy the investing guidelines of institutional investors.
As a result, the trading liquidity of the common stock may not necessarily
improve.

FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE.

     At the conclusion of this offering, we will have outstanding options and
warrants to purchase 3,670,917 shares of common stock with an exercise price of
$1.80 per share, 105,800 shares of Series A-1 preferred stock that are
convertible into 587,778 shares of common stock and a stock option plan that


                                       14
<PAGE>
permits the issuance of options to purchase an additional 1,585,000 shares of
common stock.  We have been informed that a number of warrantholders intend to
exercise their warrants following this offering.  Such exercises are likely to
be on a net or cashless exercise basis, resulting in the issuance of shares that
may not be subject to holding period restrictions on transfer under Rule 144 of
the Securities Act.  Holders of 3,128,706 shares of common stock, options to
purchase 2,124,411 shares, warrants to purchase 1,320,112 shares and Series A-1
preferred stock that converts into 559,999 shares of common stock have agreed
with the underwriters not to sell any shares for 180 days following completion
of this offering.  Sales of  substantial amounts of common stock by our
stockholders, including shares issued upon the exercise of outstanding options
and warrants, or even the potential for such sales, may have a depressive effect
on the market price of our common stock and could impair our ability to raise
capital through the sale of our equity securities.


                           FORWARD-LOOKING STATEMENTS

     This prospectus contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
our financial condition, results of operations and business.  The words
"anticipate," "believe," "estimate," "expect," "plan," "intend" and similar
expressions, as they relate to us, are intended to identify forward-looking
statements. Such statements reflect our current views with respect to future
events and are subject to certain risks, uncertainties and assumptions.  We
cannot assure you that any of our expectations will be realized.  Factors that
may cause actual results to differ materially from those contemplated by such
forward-looking statements include, without limitation, the timing of
development of the areas where we are selling our water, the market price of
water, changes in applicable statutory and regulatory requirements,
uncertainties in the estimation of water available under decrees, costs of
delivery of water, uncertainties in the estimation of revenues and costs of
construction projects, the strength and financial resources of our competitors,
our ability to find and retain skilled personnel, climatic conditions, labor
relations, availability and cost of material and equipment, delays in
anticipated permit and construction dates, environmental risks, the results of
financing efforts and the ability to meet capital requirements, and general
economic conditions.


                                       15
<PAGE>
                                 USE OF PROCEEDS

     We estimate that the net proceeds from the sale of the shares of common
stock we are offering will be approximately $6,347,500, assuming a stock price
of $10.00 per share in this offering. If the underwriters fully exercise their
over-allotment option, the net proceeds of the shares we sell will be
approximately $11,000,000. "Net proceeds" is what we expect to receive after
paying the underwriting discount and other expenses of the offering.

     The following table summarizes the use of the net proceeds that we will
receive from this offering:

<TABLE>
<CAPTION>
<S>                                                         <C>         <C>
          Repayment of outstanding debt to related parties  $1,109,061     18%
          Water system expenditures  . . . . . . . . . . .  $1,200,000     19%
          Working capital and general corporate purposes .  $4,017,189     64%
                                                            ----------  ------
              Total  . . . . . . . . . . . . . . . . . . .                100%
</TABLE>

     $512,439 of the debt to be repaid bears interest at prime plus 2% (6% at
May 27, 2004) and $596,622 bears interest at 10.25%.  All debt to be repaid
matures in August 2007.  One of the creditors to be repaid is the Harrison Augur
Money Purchase Plan, which is affiliated with one of our directors.  Net
proceeds payable to this creditor will be $86,513.  The remaining holders of
this indebtedness are all selling stockholders:  Apex Investment Fund II, L.P.,
Proactive Partners, L.P., Environmental Venture Fund Liquidating Trust,
Environmental Private Equity Fund II, L.P., The Productivity Fund II, L.P., and
Gregory M. Morey.  Accordingly, these persons will also receive proceeds from
the sale of shares in the offering.

     The net proceeds allocated to water system expenditures will be used to
drill wells and build the infrastructure needed to provide water services to Sky
Ranch.

     We anticipate that a portion of the proceeds allocated to working capital
and general corporate purposes will be used for acquisition of water rights and
acquisition of contractual rights to receive payments under the
Commercialization Agreement, in each case if and to the extent agreements can be
reached.  Amounts to be utilized for these purposes will depend on the
opportunities that arise, but we do not expect to spend more than $5,000,000 on
acquisition of water rights or more than $3,600,000 on purchase of contract
rights under the Commercialization Agreement.  We are not currently in
discussions regarding any specific acquisition of water rights.

     We intend following the completion of this offering to approach certain of
the persons who have contractual rights to receive payments under the
Commercialization Agreement and offer to buy out a portion of those contractual
rights.  We have had preliminary discussions regarding such purchases with some
of the parties to the Commercialization Agreement, but no firm commitments have
been made regarding any such sale.  Many of the selling stockholders that are
exercising warrants are parties to the Commercialization Agreement.
Accordingly, if we purchase their contract rights, they will receive additional
proceeds from this offering.  No assurance can be given that any of the parties
to the Commercialization Agreement will be willing to sell their contract rights
at all or on terms that would be acceptable to us.

     While the amounts indicated above reflect what we currently expect to spend
on these matters, opportunities may arise that cause us to change the allocation
of proceeds among the categories described.  Prior to using the net proceeds, we
plan to invest the net proceeds in bank deposits or short-term interest-bearing
investment grade securities.


                                       16
<PAGE>
     Many of the selling stockholders are exercising options or warrants
immediately prior to the completion of this offering to obtain the shares to be
sold in this offering.  In connection with this exercise, we will receive
$2,491,860, $1,632,774 of which will be paid in the form of promissory notes
secured by the shares we issue.  The selling stockholders will pay the
promissory notes with the proceeds of this offering.  We are paying the
expenses, other than underwriting discounts and expenses of separate counsel for
the selling stockholders, relating to the sale of the selling stockholder
shares.


                                       17
<PAGE>
                                 CAPITALIZATION

     The following table sets forth:

     -    our actual cash and cash equivalents and capitalization as of February
          29, 2004, adjusted to reflect the reverse stock split; and

     -    our cash and cash equivalents and capitalization as of February 29,
          2004, as adjusted to reflect (i) the increase in our authorized shares
          of common stock, (ii) the exercise by the Selling Stockholders of
          certain options and warrants and the issuance of the 1,384,367
          underlying shares of common stock, and our receipt of $2,491,860 of
          proceeds upon such exercise, (iii) the conversion of the Series D
          preferred stock and Series D-1 preferred stock into 845,500 shares of
          common stock, and (iv) completion of the offering of 700,000 shares of
          our common stock at an assumed public offering price of $10.00 per
          share and the use of net proceeds as described under "Use of
          Proceeds." The "As Adjusted" column assumes no acquisitions of water
          rights or of contractual rights under the Commercialization Agreement.

<TABLE>
<CAPTION>
                                                        AS OF FEBRUARY 29, 2004
                                                    --------------------------------
                                                       ACTUAL           AS ADJUSTED
                                                    -------------       ------------
<S>                                                 <C>                 <C>
Cash and cash equivalents  . . . . . . . . . . . .  $    338,599          8,068,904
                                                    -------------       ------------

Current liabilities  . . . . . . . . . . . . . . .        44,650             44,650
                                                    =============       ============

Long-term debt - related parties, including
    accrued interest . . . . . . . . . . . . . . .     4,976,511          3,867,450
                                                    =============       ============

Participating interests in Rangeview water rights     11,090,630         11,090,630

Preferred stock, par value $.001 per share;
    authorized - 25,000,000 shares:

  Series A-1 - 1,058,000 shares issued and
    outstanding actual and as adjusted . . . . . .         1,058              1,058

  Series B -  432,514 shares issued and
    outstanding actual and as adjusted . . . . . .           433                433

  Series D - 6,455,000 shares issued and
    outstanding actual, no shares issued and
    outstanding as adjusted  . . . . . . . . . . .         6,455                 --

  Series D-1 - 2,000,000 shares issued and
    outstanding actual, no shares issued and
    outstanding as adjusted  . . . . . . . . . . .         2,000                 --

Common stock, par value 1/3 of $.01 per share;
  authorized - 135,000,000 shares actual,
  225,000,000 shares as adjusted; 8,145,087 shares
  issued and outstanding actual, 11,074,954 shares
  issued and outstanding as adjusted . . . . . . .        27,123             36,880

Additional paid in capital . . . . . . . . . . . .    25,511,992         34,350,056

Accumulated deficit  . . . . . . . . . . . . . . .   (21,406,554)       (21,406,554)

Total stockholders' equity . . . . . . . . . . . .     4,142,507         12,981,873

Total noncurrent liabilities and
stockholders' equity . . . . . . . . . . . . . . .    20,209,648         27,939,953
                                                    =============       ============
</TABLE>


                                       18
<PAGE>
               MARKET PRICE OF AND DIVIDENDS FOR OUR COMMON EQUITY
                         AND RELATED STOCKHOLDER MATTERS

     Our common stock is quoted on the OTC Bulletin Board under the symbol
"PCYO."  We have applied for listing of our common stock on the NASDAQ Small Cap
Market under the symbol "".  The following table shows, for the fiscal periods
indicated, the high and low sales prices for our common stock as reported by the
OTC Bulletin Board.

<TABLE>
<CAPTION>
                                                      LOW    HIGH
                                                     -----  ------
<S>                                                  <C>    <C>
              FISCAL 2004
              -----------
              First Quarter . . . . . . . . . . . .  $2.00  $ 5.10
              Second Quarter. . . . . . . . . . . .   4.00   13.00
              Third Quarter . . . . . . . . . . . .   6.00   10.60
              Fourth Quarter (through June 3, 2004)   9.35   10.15


              FISCAL 2003
              -----------
              First Quarter . . . . . . . . . . . .  $ .90  $ 1.80
              Second Quarter. . . . . . . . . . . .   1.00    2.80
              Third Quarter . . . . . . . . . . . .   1.60    2.70
              Fourth Quarter. . . . . . . . . . . .   1.70    3.00


              FISCAL 2002
              -----------
              First Quarter . . . . . . . . . . . .  $ .80  $ 1.50
              Second Quarter. . . . . . . . . . . .    .60    1.20
              Third Quarter . . . . . . . . . . . .    .60    2.10
              Fourth Quarter. . . . . . . . . . . .    .90    1.90
</TABLE>

     On June 2, 2004, the last reported sale price of our common stock on the
OTC Bulletin Board was $9.95 per share.  As of May 31, 2004, there were
approximately 3,751 holders of record of our common stock.

     We have never paid any dividends on our common stock and expect for the
foreseeable future to retain all of our earnings from operations for use in
expanding and developing our business.  Any future decision as to the payment of
dividends will be at the discretion of our board of directors and will depend
upon our earnings, financial position, capital requirements, plans for expansion
and such other factors as our board of directors deems relevant.  The terms of
our Series A-1 Preferred Stock and Series B Preferred Stock prohibit the payment
of dividends on common stock unless all dividends accrued on such series of
preferred stock have been paid.  See "Description of Securities -- Series A-1
Convertible Preferred Stock" and "-- Series B Preferred Stock."


                                       19
<PAGE>
                             SELECTED FINANCIAL DATA

     This section presents our selected historical financial data.  You should
read carefully the financial statements included in this prospectus, including
the notes to the financial statements.  The selected data in this section is not
intended to replace the financial statements.

     The following tables as of August 31, 2003 and 2002 and for each of the
years in the two year period ended August 31, 2003, and as of February 29, 2004
and February 28, 2003 and for the six month periods ended February 29, 2004 and
February 28, 2003, present selected financial information of the Company which
has been derived from our financial statements included elsewhere in this
prospectus.  The financial statements as of August 31, 2003 and 2002 and for the
two years ended August 31, 2003 have been audited by KPMG LLP, our independent
auditors.  The consolidated balance sheet data at February 29, 2004 and February
28, 2003 and the consolidated statement of operations data for the six months
ended February 29, 2004 and February 28, 2003 are derived from unaudited
financial statements which have been prepared on the same basis as the audited
annual financial statements and, in the opinion of management, contain all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the consolidated position at such dates and the operating
results for such periods.  Operating results for the six months ended February
29, 2004 are not necessarily indicative of the results that may be expected for
the year ending August 31, 2004.  This selected financial data should be read in
conjunction with the consolidated financial statements of Pure Cycle and notes
thereto, and Management's Discussion and Analysis of Financial Condition and
Results of Operations, included elsewhere in this prospectus.

<TABLE>
<CAPTION>
                                                    SIX MONTHS ENDED              YEAR ENDED
                                                ------------------------  --------------------------
                                                 FEB. 29,     FEB. 28,     AUGUST 31,    AUGUST 31,
                                                   2004         2003          2003          2002
                                                -----------  -----------  ------------  ------------
                                                       (UNAUDITED)
<S>                                             <C>          <C>          <C>           <C>
  STATEMENT OF OPERATIONS
  Revenues . . . . . . . . . . . . . . . . . .  $   85,731   $  103,812   $   225,432   $   204,858
  Expenses:
    Operating  . . . . . . . . . . . . . . . .      11,338       10,732        37,496        27,792
    General and administrative . . . . . . . .     219,302      124,556       318,182       221,872
  Operating loss . . . . . . . . . . . . . . .    (147,691)     (34,784)     (135,841)      (49,764)
  Other expense, net . . . . . . . . . . . . .      91,259       92,572       185,212       195,383

  Net loss . . . . . . . . . . . . . . . . . .    (238,950)    (127,356)     (321,043)     (245,147)

  Basic and diluted net loss per common share   $    (0.03)  $    (0.02)  $     (0.04)  $     (0.03)
                                                ===========  ===========  ============  ============
  Weighted average number of shares
    of common stock outstanding -
    basic and diluted  . . . . . . . . . . . .   8,056,418    7,843,976     7,843,976     7,843,976
</TABLE>

<TABLE>
<CAPTION>
                                                       FEBRUARY 29,   AUGUST 31,   AUGUST 31,
                                                           2004          2003         2002
                                                       ---------------------------------------
<S>                                                    <C>            <C>          <C>
            BALANCE SHEET DATA:
            Cash and cash equivalents . . . . . . . .  $     338,559  $   525,780  $   287,720
            Investment in water and systems, net. . .     19,410,635   19,342,994   19,201,683
            Total assets. . . . . . . . . . . . . . .     20,254,298   20,413,404   20,028,279
            Working capital . . . . . . . . . . . . .        327,790      541,695      316,760
            Long-term debt-related parties, including
            accrued interest. . . . . . . . . . . . .      4,976,511    4,889,545    4,713,270
            Participating interests in Rangeview
            water supply. . . . . . . . . . . . . . .     11,090,630   11,090,630   11,090,630
            Stockholders' equity. . . . . . . . . . .      4,142,507    4,381,457    4,202,500
</TABLE>


                                       20
<PAGE>
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     You should read this discussion together with the financial statements and
other financial information included in this prospectus.  This prospectus
contains forward-looking statements that involve risks and uncertainties.  Our
actual results may differ materially from those indicated in the forward-looking
statements.  Please see "Forward-Looking Statements" elsewhere in this
prospectus.

GENERAL

     We own or have rights to use significant water assets which we have begun
to utilize to provide water and wastewater services to customers located in the
Denver, Colorado metropolitan area near our principal water assets.  We will
operate water and wastewater systems to deliver and treat the water we provide.
Our services will include designing, constructing, operating and maintaining
systems to service our customers.

     We have exclusive access to approximately 29,000 acre feet per year of
water from, and the exclusive right to provide water and wastewater services to,
24,000 acres of primarily undeveloped land in eastern Colorado known as the
Lowry Range.  The Lowry Range is located in Arapahoe County approximately 15
miles southeast of Denver and 12 miles south of the Denver International
Airport.  Of the approximately 29,000 acre feet of water to which we have
access, 17,500 acre feet are available to us for use on the Lowry Range.  We own
the remaining 11,650 acre feet and can "export" it from the Lowry Range to
supply water to communities and developers in need of additional water supplies.
There are no legal limitations on the locations outside of the Lowry Range in
which we can sell Export Water, except that, if we sell Export Water for use
outside of Arapahoe County, we are required to offer to Arapahoe County the
right to buy such water at the same rates.  We acquired these rights and the
Export Water in 1996 when we entered into an agreement with the State Land
Board, which owns the Lowry Range, and 85-year agreements with the District.

     The 17,500 acre feet of water designated for use within the Lowry Range
service area is capable of providing water service to approximately 47,000 SFE
units.  We will design, construct, operate and maintain the water and wastewater
systems on the Lowry Range service area on behalf of the District and the State
Land Board.  The District will own all water and wastewater facilities
constructed to serve customers in the Lowry Range service area during our
contract service period.  At the end of our contract service period, ownership
of the water facilities will revert to the State Land Board.

     Our annual entitlements to 11,650 acre feet of surface water and
groundwater on and beneath the Lowry Range service area can be developed for
"export" off the property to service approximately 32,000 SFE equivalent
customers outside of the Lowry Range service area.  We will design, construct,
operate and maintain facilities for water and/or wastewater service for
customers located off the Lowry Range service area and we will own these
facilities.

     Water and/or wastewater service, whether to customers located in the Lowry
Range service area or off the Lowry Range service area, is subject to individual
water and wastewater service agreements.  We will negotiate individual service
agreements with developers and/or homebuilders to provide water and wastewater
service.  Our service contracts will outline our obligations to construct
certain facilities necessary to develop and treat water and/or wastewater,
including the timing of installation of the facilities, capacities of the
systems, and where the services will be provided.  Developers and/or
homebuilders are required to purchase water and/or wastewater taps from us in
exchange for our obligation to construct the water and/or wastewater facilities.


                                       21
<PAGE>
     Revenues we earn from providing water and/or wastewater service are divided
into two components:  one-time tap fees, which are generally paid by the
developer, and service charges, which are monthly charges based on metered water
delivery or wastewater usage.  Water tap fees are further divided into two
components: system development fees, which are used to construct facilities
necessary to develop and treat water and/or wastewater; and water resource fees,
which are used to defray the acquisition costs of the water rights.  We are
generally required to use the water resource portion of the tap fees received
from water exported off the Lowry Range service area to repay investors.  Under
the Commercialization Agreement that we entered into in conjunction with our
agreement to obtain our Rangeview water assets, we are obligated to pay
investors that are parties to the Commercialization Agreement the first
$31,807,000 from the water resource fees we receive from the sale of the Export
Water.  In another agreement (the "LCH Agreement"), we agreed to pay the next
$4,000,000 of these revenues to another investor.  Under the terms of our
certificate of designations for the Series B preferred stock, we are obligated
to pay the next $433,000 of these revenues to the holders of our Series B
preferred stock (collectively, the Commercialization Agreement, the LCH
Agreement and the Series B preferred stock are referred to as the "Financing
Agreements").  We will retain 100% of the water resource fees we receive in
excess of $36,240,000 from tap fees we receive from sale of Export Water, to the
extent such fees are not required to be used to defray infrastructure costs.

     In agreements marketing our Export Water, developers that own rights to
groundwater underlying their property may choose to dedicate the water to us for
service to their properties, in exchange for credit against a portion of their
water resource fees.  Such dedicated water would not be subject to obligations
under any Financing Agreements.  Similarly, water resource fees received from
the sale of taps to customers located in the Lowry Range service area are not
subject to obligations under any Financing Agreements.

     Due to the continuing growth of the Denver metropolitan region and the
limited availability of new water supplies, many metropolitan planning agencies
are requiring property developers to first demonstrate adequate water
availability prior to any consideration for zoning requests for property
development.  As a result, we believe we are well positioned to market and sell
our water and wastewater services to developers and home builders seeking to
develop new communities both within the Lowry Range service area as well as in
other areas in the Denver metropolitan region.

     We also own conditional water rights in western Colorado enabling us to
build a 70,000 acre-foot reservoir to store tributary water on the Colorado
River, a right-of-way permit from the U.S. Bureau of Land Management for
property at the dam and reservoir site, and four tributary water wells with a
theoretical capacity to produce approximately 56,000 acre feet of water annually
(collectively known as the Paradise Water Supply).  Although we will seek to
utilize the Paradise Water Supply to deliver water to customers located in the
Denver metropolitan area or to customers in the downstream states of Nevada,
Arizona and California, legal issues relating to interstate water transfers and
inter-basin water transfers make the short-term realization on these assets
unlikely.

     The State Land Board is in the initial stages of developing a plan to
solicit requests for proposals this summer to engage a development partner to
assist in the planning for future development of the Lowry Range.  We are not
able to determine the timing of development of property in and around the Lowry
Range service area, although residential, commercial and industrial development
is under way outside of the Lowry Range service area along its southern, western
and northern borders, and we anticipate that initial development of Sky Ranch
will begin shortly.  Water sales will only occur after development has
commenced.  We cannot assure you regarding the pace of development or that water
sales can be made on terms acceptable to us.  In the event development of the
property within the Lowry Range service area or of Sky Ranch and surrounding
areas is delayed, we may be required to incur additional short or long-term debt
obligations or seek to sell equity services to generate operating capital.


                                       22
<PAGE>
Critical  Accounting  Policies

     Our financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America ("GAAP").  The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ significantly from those
estimates.

     We have identified certain key accounting policies on which our financial
condition and results of operations are dependent. These key accounting policies
most often involve complex matters or are based on subjective judgments or
decisions.  In the opinion of management, our most critical accounting policies
are those related to revenue recognition, impairment of water assets and other
long-lived assets, depletion and depreciation, accounting for participating
interests, royalty and other obligations, and income taxes.  Management
periodically reviews its estimates, including those related to the
recoverability and useful lives of assets.  Changes in facts and circumstances
may result in revised estimates.

Revenue Recognition

     For customers located on the Lowry Range service area, the District will
sell the taps and contract with us to construct the water delivery
infrastructure.  We will recognize revenues relating to tap fees on the Lowry
Range service area as construction project income using the
percentage-of-completion method, measured by the contract costs incurred to date
as a percentage of the estimated total contract costs.  Since we do not own the
facilities constructed for customers located in the Lowry Range service area, we
believe the treatment of these revenues as construction project income is the
most correct accounting methodology.  Contract costs include all direct
material, labor and equipment costs and those indirect costs related to contract
performance, such as indirect labor and supplies costs.  If the construction
project revenue is not fixed, we estimate revenues that are most likely to
occur.  Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined.  Billings in excess of costs and
estimated earnings represent payments received on construction projects for
which the work has not been completed.  These amounts, if any, are recognized as
construction progresses in accordance with the percentage-of-completion method.

     We will recognize revenues from the sale of taps relating to properties
located off the Lowry Range service area, and related costs of providing water
access, as water service is made available to the property under the tap fee
agreement.

     We recognize water and wastewater service revenues as services are
performed, which are based upon metered water deliveries to customers or a flat
fee per SFE.  We recognize costs of delivering water and processing wastewater
as incurred.

Impairment of Water Assets and Other Long-Lived Assets

     We review our long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable.  We measure recoverability of assets to be held and used by a
comparison of the carrying amount of an asset to future undiscounted net cash
flows we expect to be generated by the asset.  If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets.  We
report assets to be disposed of at the lower of the carrying amount or fair
value less costs to sell.  We believe there were no impairments in the carrying
amounts of our investments in water and water systems at February 29, 2004.


                                       23
<PAGE>
Depletion and Depreciation

     We deplete our water assets on the basis of units produced divided by the
total volume of water adjudicated in the water decrees.  Water and wastewater
facilities we own are depreciated on a straight line basis over their estimated
useful lives.

Accounting for Participating Interests

     The balance sheet liability captioned "participating interests in Rangeview
water supply" represents an obligation which arose under the Commercialization
Agreement.  We recorded a liability of $11.1 million, which represents the cash
we received and applied to the purchase of the Rangeview water assets.  The
remainder of the participating interest of $20.7 million represents a contingent
return to the financing investors, Series A-1 preferred stockholders, and the
sellers of the Rangeview water assets that are parties to the Commercialization
Agreement.  These amounts, totaling $31.8 million, will only be payable from the
water resource portion of the tap fees we receive from the sale of Export Water.
As we recognize revenues from the sale of Export Water to make payments to
investors, we will allocate a ratable percentage of the repayment to the
principal portion of the participating interest represented by the $11.1 million
(i.e., 35%), and the balance to the expense portion, $20.7 million (i.e., 65%),
as amounts are payable.  The portion allocated to the principal portion will be
recorded as a reduction in participating interest in Rangeview water supply.

Royalty and other obligations

     Pursuant to our service agreements, royalties we incur relating to gross
revenues received will be expensed in the same period that the revenue is
recognized.

Income taxes

     We use the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases.  Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which we expect to recover or settle those temporary differences.  The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.  A
valuation allowance is provided for deferred tax assets until realization is
more likely than not.

Results  of  Operations

Year Ended August 31, 2003 Compared with Year Ended August 31, 2002

     During fiscal 2003, we delivered approximately 47.3 million gallons of
water generating water usage revenues of $156,217 from the sale of water to
customers within the Lowry Range service area, compared to the delivery of 54.5
million gallons of water generating revenues of $156,026 for fiscal 2002.  Our
water service charges are based on a tiered pricing structure that provides for
higher prices as customers use greater amounts of water.  The following table
outlines our tiered pricing structure:

                                       24
<PAGE>
<TABLE>
<CAPTION>
                    Consumption            Price
                    (1,000 gallons/month)  ($/1,000 gallons)
                    ---------------------  ------------------
<S>                                        <C>
                    0 to 10                $ 2.40
                    >10 to 20              $ 3.10
                    >20                    $ 5.40
</TABLE>

     This pricing structure is sensitive to the date and volume of water use.
Actual water deliveries in fiscal 2003 decreased approximately 13% while
revenues remained the same, due primarily to seasonal water deliveries with
higher water rates during peak times.

     Prior to May 2002, we contracted for the operation of our water and
wastewater systems through an agreement with a third party contract operations
firm.  Beginning in May 2002, we began operating our water and wastewater system
using our in-house licensed water and wastewater operator.  We incurred
approximately $20,580 in water service operating costs in fiscal 2003 compared
to $13,896 for fiscal 2002.  Water service operating costs increased
approximately $7,000 in 2003 compared to fiscal 2002 due primarily to this
change from contracting out those services in 2002 to providing these services
in-house in 2003.

     During fiscal 2003, we had wastewater usage revenues of $56,780 and
incurred $10,692 in wastewater service operating costs.  This compares to
wastewater usage revenues of $48,832 and wastewater operating costs of $13,896,
in fiscal 2002.  In 2003, we changed from a variable pricing structure to a
fixed pricing structure, resulting in higher revenues.

     General and administrative expenses for fiscal 2003 were $318,182, or
approximately $96,310 higher than for fiscal 2002, due primarily to the hiring
of an additional employee beginning in January 2003.  Interest income decreased
to $16,263 in fiscal 2003, compared to $22,181 for fiscal 2002, due primarily to
a decrease in interest rates and a decrease in the average balance in our
operating cash accounts.  Interest expense decreased $18,376 in fiscal 2003 to
$176,275, as compared to $194,651 in fiscal 2002 due primarily to a decrease in
the prime lending rate.  Net loss for fiscal 2003 of $321,043 was $75,896
greater than the net loss of $245,147 for fiscal year 2002, primarily due to the
addition of one employee.

Six Months Ended February 29, 2004 Compared With Six Months Ended February 28,
2003

     During the six months ended February 29, 2004, we delivered approximately
22.0 million gallons of water generating water service revenues of $55,314,
compared to delivery of approximately 19.3 million gallons of water generating
$77,225 for the six months ended February 28, 2003.  The higher revenues in the
six month period ended February 28, 2003 were the result of an approximately
$20,000 reversal of a water service revenue recorded in 2003.  We incurred water
service operating expenses of $5,190 during the six month period ended February
29, 2004, compared to $5,719 during the six months ended February 28, 2003.
During the six months ended February 29, 2004, we generated revenues from
wastewater fees of $27,002 from customers in the Lowry Range service area, as
compared to revenues from wastewater fees of $26,587 during the six months ended
February 28, 2003.  We incurred wastewater operating costs of $3,819 during the
six month period ending February 29, 2004 as compared to $5,013 for the
six-month period ending February 28, 2003.

     General and administrative expenses for the six months ended February 29,
2004 were $94,748 higher than for the six months ended February 28, 2003,
primarily due to an increase in salary and overhead expenses from the addition
of one employee beginning in January 2003 and legal costs incurred in connection
with our annual meeting held on April 12, 2004.  Net loss for the six months
ended February 29, 2004 was $238,950 compared to a net loss of $127,356 for the
six months ended February


                                       25
<PAGE>
28, 2003.  The $111,595 increase in net loss is due to additional overhead costs
from an additional employee, as well as additional legal fees incurred in
connection with our annual meeting.

Liquidity and Capital Resources

     At February 29, 2004, our working capital, defined as current assets less
current liabilities, was $327,790.  We believe that at February 29, 2004, we had
sufficient working capital to fund our operations for the next year.  However,
there can be no assurance that we will be successful in marketing the water from
our two primary water projects in the near term.  In the event revenues from
providing water service are not achieved, we may incur additional short or
long-term debt or seek to sell additional equity securities to generate working
capital.

     Development of any of the water that we have, or are seeking to acquire,
will require substantial capital investments.  We anticipate that additional
capital for the development of the water will be financed by the entity
purchasing such water, through the sale of water taps to developers and water
delivery charges to users.  A water tap charge refers to a charge we impose to
permit access to a water delivery system (e.g., a single-family home's tap into
our water system), and a water service charge refers to a water customer's
monthly water bill, generally charged per 1,000 gallons of water consumed by the
customer.  Annually, the developer must purchase not less than a minimum number
of taps, the proceeds from which are used to expand the capacity of our water
system to deliver water to additional customers in the development.  We
anticipate that the system development portion of tap fees will be sufficient to
generate funds with which we can design and construct the necessary water
facilities.  However, once we receive tap fees from a developer, we are
contractually obligated to construct the water delivery system for the taps paid
for, even if our costs are not covered by the fees we receive.  We can not
assure you that our revenues will be sufficient to cover our capital costs.

     In October 2003, we entered into a water service agreement with a developer
to provide water to approximately 4,000 SFE units that are being built on
approximately 800 acres known as "Sky Ranch" located 4 miles north of the Lowry
Range along Interstate 70.  In May 2004, we entered into a second agreement with
the developer of Sky Ranch to provide water services to an additional 850 SFEs
at Hills at Sky Ranch, a development adjacent to, and to be developed
concurrently with, Sky Ranch.  We expect that the construction of the Sky Ranch
project will begin in October 2004, with the first homes available in February
2005.  Based on housing market demands of similar projects in the area and
projections provided by the developer, we expect that the project will be fully
built out within 10 years.  Under the Sky Ranch Agreements, the developer must
purchase at least 400 water taps before occupancy of the first home.  The
agreement permits the developer to add additional taps annually, with at least
310 taps to be purchased each year.  This schedule is designed to provide us
with adequate funds with which to construct the facilities needed to provide
water service to the areas being built.

     The water service agreements for Sky Ranch incorporate 4,850 SFE
connections, which at current rates and charges would generate approximately $60
million in total water tap fee revenues and approximately $2.8 million annually
in water service revenues.  These represent gross fees and, to the extent that
water service is provided using Export Water, we are required to pay a royalty
to the State Land Board equal to 12% of the net revenue after deducting our
costs.  This royalty rate will increase after net revenues exceed $45.0 million.
We expect to dedicate approximately 1,450 acre feet, or approximately 12%, of
our Export Water supply (which is about 5.0% of our overall Rangeview water
supply) for this project.  We estimate we will spend approximately $27 million
for infrastructure related to the development and delivery of water to the 4,850
single family equivalent units.  We have never undertaken a project of this
size, and no contracts have been entered into to perform this work.
Accordingly, we cannot assure you that our costs will not exceed this estimate.


                                       26
<PAGE>
     For the initial developments at Sky Ranch, we anticipate receiving tap fees
of approximately $1.9 million, representing approximately 156 taps, in the
current fiscal year ending August 31, 2004, and approximately $3.0 million,
representing an additional 244 taps, prior to January 2005.  We estimate that it
will cost approximately $2.5 million to construct the infrastructure to service
the initial 400 taps.  We will expand the infrastructure to meet demand as
houses are built at the Sky Ranch developments.  We will initially develop the
water beneath the Sky Ranch property, which is being dedicated to us by the
developer in exchange for credit of a portion of the water resource tap fee.
The dedicated water is sufficient to provide water service to approximately
1,400 customers.  Because the dedicated water is not Export Water, no payments
will be required to be made under the Financing Agreements and no royalty
payments will be required to be made to the State Land Board with respect to tap
fee revenues from the first 1,400 taps at Sky Ranch serviced with the dedicated
water.  Because the project has not yet commenced, we cannot assure you that
these revenue and expense estimates will be the actual revenues and expenses
that we will experience.

     At February 29, 2004, we had outstanding debt to seven related parties
totaling $1,109,061, $512,439 of which bears interest at prime plus 2% (6% at
May 27, 2004) and $596,622 of which bears interest at 10.25%.  All notes mature
in August 2007.  Interest is not payable on a current basis, but accrues and is
added to principal monthly.

     In addition, we are obligated under notes totaling $848,023 at February 29,
2004 which bear interest at rates at 7.18% and 8.04% and notes totaling
$2,473,263 at February 29, 2004 which bear interest at prime plus 3% (7% at May
27, 2004).  These notes mature in August 2007.  The holders of these notes are
parties to the Commercialization Agreement and have agreed that if the amount of
principal and accrued interest on these notes is paid under the
Commercialization Agreement prior to the maturity date of the notes, the notes
will be canceled.

Operating Activities

     Operating activities include revenues we receive from the sale of water and
wastewater service to our customers, costs incurred in the delivery of those
services, general and administrative expenses, and depreciation and depletion
expenses.

     During fiscal 2003, cash used in operating activities was approximately
$115,000, compared to cash used of approximately $39,000 in fiscal 2002.
Operating costs increased in 2003 due principally to additional overhead costs
from the addition of one person to our staff.  Accrued interest on notes
receivable of $14,000 was offset by accrued interest on notes payable of
$176,000, for a change in accrued interest of approximately $162,000.

     During the six months ended February 29, 2004, cash used in operating
activities was approximately $117,000, compared to approximately $9,000 during
the six months ended February 28, 2003.  Operating costs increased due to
additional costs of operating the domestic water and wastewater systems.  We
anticipate that a similar level of cash will be used in our operations during
the remainder of fiscal 2004.  We continue to provide domestic water and
wastewater service to customers in the Lowry Range service area and operate and
to maintain our water and wastewater systems with our own employees.

Investing Activities

     We continue to invest in the acquisition, maintenance and development of
both the Rangeview and Paradise water assets.  These investments include legal
and engineering fees associated with adjudicating additional water through the
Water Court system, as well as right-of-way permit fees to the Department of
Interior Bureau of Land Management.


                                       27
<PAGE>
     Cash used in investing activities for fiscal 2003 was approximately
$147,000, of which $144,000 was capitalized to the Rangeview assets and $3,000
was capitalized to the Paradise Water Supply.  Cash used in investing activities
for fiscal 2002 was approximately $109,000.

     Cash used in investing activities for the six month ended February 29, 2004
was approximately $70,000, which costs were capitalized to the Rangeview Water
Supply.  We capitalize certain legal, engineering and permitting costs relating
to the improvement of our water assets.

Financing Activities

     In August 2003, we entered into a Plan of Recapitalization and a Stock
Purchase Agreement with Mr. Thomas Clark, our Chief Executive Officer.  Under
this agreement, we issued 200,000 shares of Series D-1 preferred stock in
exchange for 200,000 shares of common stock owned by Mr. Clark.  We sold 200,000
shares of our common stock at $2.50 per share to 11 accredited investors, four
of whom were existing common stockholders, generating proceeds of $500,000.  We
issued the preferred stock under Section 4(2) of the Securities Act.  We sold
the common stock pursuant to Regulation D, Rule 506, promulgated under the
Securities Act.

IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities," which addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring).  Generally, SFAS
No. 146 requires that a liability for a cost associated with an exit or disposal
activity be recognized as incurred, whereas EITF Issue No. 94-3 required such a
liability to be recognized at the time that an entity committed to an exit plan.
SFAS No. 146, which is effective for exit or disposal activities that are
initiated after December 31, 2002, did not have a material impact on us.

     In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, an interpretation of ARB No. 51.  FIN 46 requires
an entity to consolidate a variable interest entity if it is designated as the
primary beneficiary of that entity even if such entity does not have a majority
of voting interests.  A variable interest entity is generally defined as an
entity whose equity is insufficient to finance its activities or whose owners
lack the risk and rewards of ownership.  The Company has determined that it is
not a party to a variable interest entity.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation". SFAS No. 148 provides alternative
methods of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation.  In addition, Statement 148
amends the disclosure requirements of SFAS No. 123 to require more prominent and
more frequent disclosures in financial statements about the effects of
stock-based compensation, including requiring that this information be included
in interim as well as annual financial statements.  We have no plans to change
to the fair value based method of accounting for stock-based employee
compensation based on current literature, and therefore are not affected by the
transition provisions of SFAS No. 148.  We adopted the disclosure provisions of
SFAS No. 148 effective December 31, 2002.

     In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others."  FIN 45 clarifies that a guarantor is
required to recognize, at the inception of a guarantee, a liability for the fair
value of the obligation undertaken in issuing the guarantee, including its
ongoing obligation to stand


                                       28
<PAGE>
ready to perform over the term of the guarantee in the event that the specified
triggering events or conditions occur.  The objective of the initial measurement
of the liability is the fair value of the guarantee at its inception.  The
initial recognition and initial measurement provisions of FIN 45 are effective
on a prospective basis to guarantees issued after December 31, 2002.  However,
the disclosure requirements are effective for interim and annual financial
statement periods ending after December 15, 2002.  Our adoption of FIN 45 had no
impact on our results of operations or financial position.

     In June 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity."  The
statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatory redeemable financial
instruments of a nonpublic entity.  The adoption of this statement did not have
a material effect on our results of operations.

TOTAL CONTRACTUAL CASH OBLIGATIONS

     A summary of our total contractual cash obligations (in millions) as of
August 31, 2003 is as follows:

<TABLE>
<CAPTION>
                                             PAYMENTS DUE BY PERIOD:
                                                                          MORE
                                        LESS THAN                         THAN
  CONTRACTUAL OBLIGATIONS      TOTAL      1 YR.    1-3 YRS.   3-5 YRS.   5 YRS.
  --------------------------  --------  ---------  --------  ----------  ------
<S>                           <C>       <C>        <C>       <C>         <C>
  Long-term debt              $ 5.0(1)         --        --  $   5.0(1)      --
  Participating interests in
      Rangeview water supply  $36.2(2)         --        --         --       --
<FN>
(1)  As of February 29, 2004, $3,321,287 of this debt, due in August 2007, is
subject to reduction through payments to holders of the notes under the
Commercialization Agreement. If the amount of principal and accrued interest on
the notes is paid under the Commercialization Agreement prior to the maturity of
the notes, the notes will be canceled.

(2)  These amounts are payable under the Financing Agreements entered into to
finance our acquisition of the Rangeview water assets. We are only required to
make payments from the water resource portion of tap fees we receive from the
sale of Export Water. If we do not receive sufficient proceeds from the sale of
Export Water to satisfy these obligations, the obligations will not become
payable.
</TABLE>

OFF-BALANCE SHEET ARRANGEMENTS

     We have no off balance sheet arrangements.


                                       29
<PAGE>
                                    BUSINESS

Background

     Pure Cycle was founded and continues to be managed based on the belief that
water is a precious commodity, one that is often undervalued and therefore used
inefficiently.

     We own or have rights to use significant water assets which we have begun
to utilize to provide water and wastewater services to customers located in the
Denver, Colorado metropolitan area near our principal water assets.  We will
operate water and wastewater systems to deliver and treat the water we provide.
Our services will include designing, constructing, operating and maintaining
systems to service our customers.

     We have exclusive access to approximately 29,000 acre feet per year of
water from, and the exclusive right to provide water and wastewater services to,
the Lowry Range service area.  The Lowry Range is located in Arapahoe County
approximately 15 miles southeast of Denver and 12 miles south of the Denver
International Airport.  Of the 29,000 acre feet of water to which we have
access, 17,500 acre feet are available to us for use on the Lowry Range.  We own
the remaining 11,650 acre feet that we can "export" from the Lowry Range to
supply water to communities and developers in need of additional water supplies.
There are no legal limitations on the locations outside of the Lowry Range in
which we can sell Export Water, except that, if we sell Export Water for use
outside of Arapahoe County, we are required to offer to Arapahoe County the
right to buy such water at the same rates.  We acquired these rights and the
Export Water in 1996 when we entered into an agreement with the State Land
Board, which owns the Lowry Range, and the District, a quasi-municipal political
subdivision formed for the sole purpose of providing water and wastewater
services to the Lowry Range.

History

     Pure Cycle was incorporated in 1976 to commercialize a patented single
family water recycling technology and became a public company in 1977.  During
the late 1970's, we manufactured, installed and maintained approximately 50
water recycling systems that captured and treated wastewater flows from homes
and recycled that water for potable use.  However, these individual recycling
systems proved to be too costly for us to operate, monitor and maintain, and we
discontinued the business in the early 1980's.

     Beginning in 1987, concurrent with a change of management and ownership
control, we shifted our business to the acquisition, development and wholesale
marketing of water and large scale wastewater utility systems, principally for
sale to municipalities in the Denver area.  We acquired rights to what we refer
to as the Paradise Water Supply, which includes several water wells and rights
to divert and store up to 70,000 acre feet of Colorado River water near DeBeque,
Colorado.  Our ability to provide water service was greatly enhanced in 1996
when we entered into a water privatization agreement with the District and the
State Land Board and purchased annual entitlement rights to 11,650 acre feet of
water available for service to customers located off the Lowry Range service
area and entered into a water service agreement extending through 2081 which
grants us the rights to an additional 17,500 acre feet of water per year to
serve customers located in the Lowry Range service area.

Water  to  Meet  Colorado  Demands

     In common with large portions of the desert West, the Denver metropolitan
area is semi-arid, receiving an average of only 13 inches of precipitation
annually.  Eighty percent of the State's water supplies reside west of the
Continental Divide, while 80 percent of the population resides east of the
Continental Divide.  Roughly 80 percent of Colorado's annual surface water
supply comes from snow.


                                       30
<PAGE>
Due to wide fluctuations in snowfall from year to year and area to area, the
amount of surface water that can be captured for use varies greatly.  Further,
the State is obligated through compacts and treaties to allow much of the water
that originates in the State to pass out of Colorado for use by downstream
out-of-state users.

     Most of the state's population resides along the "front range," which
extends from Pueblo to Fort Collins and lies along the eastern side of the Rocky
Mountains.  The largest population center is the greater Denver metropolitan
area which has been growing at above average rates for decades.  By the 1960s,
water available during an average precipitation year from Denver's primary
source of surface water, the South Platte River, was no longer sufficient to
meet the area's needs.  To address this imbalance, numerous reservoirs and
tunnels have been built to transport an average of 500,000 acre feet per year of
Colorado River water located in western Colorado to eastern Colorado users.
Even with this diversion, the U.S. Department of the Interior has identified the
Denver metropolitan area as one that is 'highly likely' to experience a 'water
supply crisis' by 2025.

     The Denver Regional Council of Governments, a voluntary association of 50
county and municipal governments in the Denver metropolitan area, estimates that
between 2000 and 2025 the population in the Denver metropolitan area will grow
from 2.4 million to 3.4 million.  To accommodate for this growth, the
metropolitan area is expected to grow from about 500 square miles to about 770
square miles during the same 25-year period.  We expect that servicing this
population expansion will require an additional 300,000 acre feet of water
annually.

     With our Rangeview water assets, we are positioned to supply water to meet
the needs of approximately 80,000 single family homes, or approximately 240,000
people.

Pure  Cycle  Assets

     Rangeview Water Assets.  Our primary assets are a combination of
nontributary groundwater rights and tributary surface water and storage rights
associated with the Lowry Range property, which we collectively call the
"Rangeview Water Supply."  We own the rights to use annually 1,650 acre feet of
tributary surface water, together with 10,000 acre feet of non-tributary water,
that can be exported off the Lowry Range property to serve area users.  We have
the right to use an additional 1,650 acre feet of surface water together with
over 16,000 acre feet of nontributary groundwater to serve customers within our
Lowry Range service area.  We provide additional information regarding tributary
and non-tributary water rights under "Colorado Water Law Principles" below.  The
Export Water we own, together with water available under our service agreements,
total over 29,000 acre feet.

     Beginning in 1988, we began to pursue acquisition of a portion of the Lowry
Range water.  Our initial interest was the water which could be exported off the
property to serve customers throughout the Denver area.  Through a series of
transactions between the initial project principals, the State Land Board and
the District, we ultimately acquired the rights we now own.  These assets were
acquired using a financing instrument, called the Commercialization Agreement,
in which we raised approximately $11,100,000 to purchase the Rangeview water
supply, and issued in exchange therefore 2,189,952 shares of common stock,
warrants to purchase 2,038,000 shares of common stock, 1,600,000 Series A
Preferred Stock and an obligation to pay to these investors the first
$31,807,000 we receive from the sale or other disposition of the Export Water.
Also, as part of the Rangeview water supply acquisition, we raised an additional
$950,000 from another investor, and incurred an incremental obligation to pay
the next $4,000,000 we receive from the sale or other disposition of Export
Water to this investor.  The investors that are parties to the Commercialization
Agreement comprise the majority of the selling stockholders in this prospectus.
The shares being sold by the selling stockholders represent equity issued in
connection with the Commercialization Agreement transactions.


                                       31
<PAGE>
     We are the exclusive water and wastewater service provider for the
24,000-acre Lowry Range property through 2081.  Under this agreement we are
entitled to manage 17,500 acre feet of water capable of servicing up to 47,000
SFE equivalents (or approximately 140,000 people).  We also own the rights to an
additional 11,650 acre feet of water annually that we can sell to other areas
throughout the Denver metropolitan region.  If we do not use our full annual
entitlement in any year, we are permitted to increase our utilization in a
subsequent year to the extent of the deficit, but the aggregate amount to be
withdrawn cannot exceed 1,165,000 acre feet for customers located off the Lowry
Range.  We estimate that this amount of Export Water is sufficient to service up
to 32,000 single family homes (or approximately 96,000 people).

     We will design, construct and operate facilities to provide water and
wastewater service to customers located on the Lowry Range through our service
contract period ending in 2081.  The District owns both the water and the
wastewater systems during our contract period, and we will operate both systems
during this period pursuant to our service contract.  After 2081, ownership of
the water system will revert to the State Land Board.  We will also design,
construct and operate the facilities to provide water and wastewater service to
customers located off the Lowry Range that will use our Export Water, and will
own these assets.  We will contract with third parties for construction of these
facilities.  We will design, engineer, and develop these systems as a single
unified system to improve reliability and economies of scale for customers
located both on and off the Lowry Range property.

     Paradise Water Assets.  In 1987, we acquired assets known as the Paradise
Water Supply.  These assets include a Water Court decree for conditional water
rights enabling us to build a 70,000 acre-foot reservoir to store tributary
water on the Colorado River, a right-of-way permit for U.S. Bureau of Land
Management property at the dam and reservoir site, and four existing tributary
water wells with a theoretical capacity to produce approximately 56,000 acre
feet of water per year.  The reservoir site is located in western Colorado on
the Colorado River about 60 miles east of the Utah border.  Our ability to use
this asset may be limited, however, because of constraints imposed by the
difficulties and costs involved in transporting the water out of  the Colorado
River watershed to the Denver metropolitan area and because of legal
complications in transferring such water to down-stream states like California
under the interstate Colorado River Compact.  See "Governmental Regulation -
Water Deliveries."  Due to the strict regulatory requirements for constructing
an on-channel reservoir, completing this conditional storage right at its
decreed location would also be difficult.  Our Paradise water right is also
conditioned on a Finding of Reasonable Diligence from the water court every six
years.  To arrive at that finding, a water court must determine that we are
using the water right or that there is a commitment for its use.  If the water
court is unable to make such a finding, our right to the Paradise water may be
lost.  The next such finding will be required to be made in 2005.  To date, the
required finding has been made at each six-year period.  If challenged, we
intend to vigorously defend our Paradise asset.  We cannot assure you that we
will ever be able to make use of this asset or sell the water profitably.

     We continue to evaluate prospects for the acquisition of additional water
rights in the Denver metropolitan area to expand our water service capabilities.

Revenue

     We will derive revenue from two principal sources:  one-time tap fees,
which are typically paid by the developer of a property and become part of the
cost of the lot or home, and service fees, which are monthly metered water
deliveries paid by all customers connected to our water and wastewater systems.
Under our privatization agreement with the District and the State Land Board,
pricing for water and wastewater services is controlled through a market-driven
pricing mechanism in which our rates and charges may not exceed the average of
similar rates and charges of three nearby communities that comprise our water
pricing group.


                                       32
<PAGE>
     Table 1 provides a summary of our tap fees over the past several years.  We
base our tap fees on the average of the tap fees that have been charged by the
three communities whose rates determine our allowable charges.

<TABLE>
<CAPTION>
                          TABLE 1 - WATER SYSTEM TAP FEES

- -----------------------------------------------------------------------------------
Year                   1998    1999    2000     2001     2002      2003      2004
- -----------------------------------------------------------------------------------
<S>                   <C>     <C>     <C>     <C>       <C>      <C>       <C>
Tap Fee (per SFE)     $8,165  $8,165  $8,165  $10,500   $10,500  $11,150   $12,420
- -----------------------------------------------------------------------------------
Percentage increase      ---     ---     ---       29%      ---      6.2%     11.4%
- -----------------------------------------------------------------------------------
</TABLE>

     Water system tap fees consist of two components:  a system development fee
and a water resource charge.  System development fees are typically used to
defray the cost to develop and deliver the water into the distribution system.
Water resource charges are typically used to defray the costs associated with
the water rights.  Our current water system development fee is $9,020 per single
family equivalent (SFE), and our water resource charge is $3,400 per SFE.  An
SFE is defined as the amount of water required each year by a family of three
persons living in a single family house on a standard   acre lot.  We will also
collect an additional wastewater system development fee of $4,883 per SFE to
develop, operate and maintain the wastewater system.  Currently, for a typical
residential customer using approximately 0.4 acre feet of water annually, the
water service fee is approximately $578 per year and the wastewater service fees
are approximately $404 per year for a typical residential customer.  We also
collect other relatively small fees and charges from residential customers and
other end users to cover miscellaneous administrative and service expenses, such
as application fees, review fees and permit fees.

     We negotiate the payment terms for tap fees and other water/wastewater
service obligations with each land developer or builder before we commit to
providing service and  begin construction of the project.  In some cases where
service is provided off the Lowry Range, we may provide only water service, but
will typically retain the right to reuse treated effluent wastewater in our
dual-pipe distribution system.  We are typically responsible for the
construction of wholesale facilities, which are those facilities necessary to
develop and treat the water, including water wells, water collection pipelines,
water reservoirs, water treatment plants, storage tanks, pump stations and
wastewater treatment plants.  The costs for these facilities are financed by the
system development fee portion of the tap fees paid by developers to gain access
to the water and wastewater systems.

     Developers are typically responsible for the construction of retail
facilities - the water distribution system that transports the water throughout
the subdivision or community.  Retail facilities are constructed pursuant to our
design standards and are inspected by our engineers prior to completion.  Once
we certify that the retail facilities have been constructed in accordance with
our design criteria, the developer is required to dedicate the retail facilities
to us at no cost.  In the Sky Ranch transaction, the developer will dedicate the
retail facilities to the District.  We are then responsible for the operation
and maintenance of those facilities.

     Customer facilities consist of water service pipelines, plumbing, meters
and other components that carry potable water and re-use water from the street
to the customer's house and collect wastewater from the customer's house to the
street.  In many cases, a portion of the customer's facilities are also
constructed by the developer, again pursuant to our design standards, but are
owned and maintained by the customer.

     Under the Amended and Restated Lease Agreement dated April 4, 1996 between
the State Land Board and the District and the Agreement for Sale of Export Water
dated April 11, 1996 between the District and us (our "water privatization
agreements"), the State Land Board is entitled to a royalty and the District is
entitled to retain a fee, each based on a percentage of revenues from water
sales that utilize


                                       33
<PAGE>
water from the Rangeview water assets.  The calculation of royalties and fees
depends on whether the customer is located on the Lowry Range or elsewhere.
Payments from customers who are on the Lowry Range generate royalties to the
State Land Board at a rate of 12% of gross revenues, except that the State Land
Board could elect instead to receive royalties equal to 50% of the aggregate net
profits of the District and us if (i) metered production in any calendar year
exceeds 13,000 acre feet or (ii) 10,000 surface acres on the Lowry Range has
been rezoned to a non-agricultural use and finally platted and water tap
agreements have been entered into with respect to all improvements to be
constructed on such acreage.

     Payments from customers located outside the Lowry Range also generate
royalties to the State Land Board.  These royalties vary depending on a number
of factors, including whether we pay any of the costs of withdrawal, treatment
or delivery of the water ("Delivered Basis") or whether we sell the water
without incurring those costs ("Entitlement Basis").  Water sold on a Delivered
Basis is sold net of costs (including reasonable overhead) incurred as a direct
or indirect result of incremental activity associated with the withdrawal,
treatment and delivery of Export Water ("infrastructure costs").  Water sold on
an Entitlement Basis generates royalties on a gross revenue basis.  We have not
entered into any agreements to sell water on an Entitlement Basis, and do not
currently anticipate that we would enter into agreements to sell water on that
basis.

     Delivered Basis.  When we sell Export Water on a Delivered Basis, the
     ---------------
royalty is based on gross revenues less infrastructure costs ("net revenues")
and escalates based on the amount of net revenues we receive.  The royalty for
Export Water is lower for sales to a water district or similar municipal or
public entity than for sales to a private entity.

<TABLE>
<CAPTION>
                                                         Royalty Rate
                                               ----------------------------
                                                  Private        Public
Net Revenues                                   Entity Buyer   Entity Buyer
- ------------                                   -------------  -------------
<S>                                            <C>            <C>
0 - $45,000,000                                     12%            10%
45,000,000 - $60,000,000                            24%            20%
60,000,000 - $75,000,000                            36%            30%
75,000,000 - $90,000,000                            48%            40%
Over $90,000,000                                    50%            50%
</TABLE>

     We sell water in our Sky Ranch Agreements on a Delivered Basis, and for the
near future we believe our royalty obligation to the State Land Board will be
12% of net revenues.

     Entitlement Basis.  We do not currently anticipate that we will sell water
     -----------------
on an Entitlement Basis.  However, if the Export Water is sold to a public
entity on an Entitlement Basis, the royalty payable to the State Land Board is
10% of the first $45.0 million of the sum of gross revenue plus $500 per acre
foot sold, escalating on a graduated scale as revenues increase to a maximum of
50% if gross revenues exceed $90.0 million.  If Export Water is sold for a
private use on an Entitlement Basis, the royalty rates begin at 12% on the first
$45.0 million of the sum of gross revenues plus $500 per acre foot sold, and
escalate with increases in revenue to 50%.

     The water privatization agreements were written prior to any development of
the Lowry Range or of areas outside the Lowry Range that utilize our Export
Water and did not anticipate the specific circumstances of the development that
have arisen and may not clearly delineate rights and responsibilities for the
forms of transactions that arise in the future as we enter into and negotiate
agreements for sale of the Export Water.  We anticipate that we will be required
to enter into negotiations with the State Land Board from time to time to
clarify the applicability of contract terms to circumstances


                                       34
<PAGE>
that were not anticipated at the time the agreements were entered into.  Certain
of these provisions may be material, and a determination, by an arbitrator or
otherwise, of positions that are not favorable to us could have a material
adverse effect on us.  We cannot assure you that the outcome of such
negotiations will be favorable to us.

     The District collects fees from customers on the Lowry Range, pays the
royalties and fees, and remits the remainder to Pure Cycle.

     Subject to the factors set forth above, Table 2 below summarizes these
payments:

<TABLE>
<CAPTION>
               TABLE 2 - OBLIGATIONS RELATING TO USE OF RANGEVIEW WATER ASSETS

- ---------------------------------------------------------------------------------------------
                                                                        RANGEVIEW
REVENUE SOURCE                     STATE LAND BOARD               METROPOLITAN DISTRICT
- ---------------------------------------------------------------------------------------------
<S>                         <C>                              <C>
Water Tap Fees & Service       12-50% of gross revenue       5% of gross revenue after State
Fees within Lowry Range                                      Land Board royalty
- ---------------------------------------------------------------------------------------------
Water Tap Fees & Service    12-50% of net revenue (gross                     0%
Fees from Export Water      revenue less costs incurred to
                            deliver water)
- ---------------------------------------------------------------------------------------------
Wastewater Tap Fees                      0%                                  0%
- ---------------------------------------------------------------------------------------------
Wastewater Service Charges               0%                       10% of gross revenue
- ---------------------------------------------------------------------------------------------
</TABLE>

     Developers having rights to groundwater underlying their properties can
receive a credit against a portion of their tap fees if they dedicate their
water to us.  The credit is equal to the water resource charge portion of the
tap fee - currently $3,400 of the total $12,420 tap fee, based on 0.7 acre feet
of water being dedicated to us for each water resource tap credit issued.  In
the Sky Ranch transactions, we are crediting the developer the water resource
charge portion of the tap fee for the first 767 taps and combining the water
resources underlying the Sky Ranch property with a portion of our Export Water
to provide the full amount of water required for the Sky Ranch developments.

     We are obligated to pay investors in the Commercialization Agreement the
water resource fee component from the sale of Export Water taps up to a total of
$36,240,000.  The State Land Board has a security interest in the Export Water
to ensure that we pay our obligations under the Commercialization Agreement.
The obligations under the Commercialization Agreement will not prevent us from
utilizing the system development portion of the tap fee to construct the
infrastructure we will need to build to provide our water services.

Water  Reclamation

     With interest heightened by an ongoing drought, most water providers in
Colorado are actively pursuing the re-use of treated wastewater for irrigation
and other non-potable uses.  Our master plan for the Lowry Range and other areas
in which we will work with developers to install water service calls for the
installation of a dual water distribution system, with one pipe supplying the
customer with potable water and the second pipe providing treated effluent
wastewater, or "reclaimed" water, for irrigation and other nonpotable uses.  A
third pipe would retrieve effluent wastewater for treatment and subsequent
reuse.  About one-half of the water needed to meet Denver-area municipal water
demands is used for irrigation of lawns and landscape.  We believe that treated
wastewater would provide an essentially drought-proof supply of irrigation water
for the areas we will serve.  The Colorado Department of Public Health and
Environment is currently evaluating the use of effluent wastewater for
residential irrigation,


                                       35
<PAGE>
and, pending the outcome of their review, we may not be able to deliver this
water to residential customers.  However, even if we cannot use this reclaimed
water for residential irrigation , we will be able to use it in other approved
commercial irrigation uses, such as for golf course watering.  We expect that
the implementation of an extensive water reclamation system, in which
essentially all wastewater treatment plant effluent will be re-used to meet
nonpotable water demands, will greatly expand our capability to provide quality
water service and will reinforce our philosophy that emphasizes the importance
of water recycling.

The  Lowry  Range

     The State Land Board acquired the Lowry Range, which was formerly a
military reservation, in the 1960s.  The Lowry Range encompasses approximately
27,000 acres, of which 24,000 acres are within our exclusive service area.

     The Lowry Range is located in unincorporated Arapahoe County 15 miles
southeast of downtown Denver and 12 miles directly south of Denver International
Airport.  The State Land Board has stated that the Lowry Range is the most
valuable property in its nearly 2,500,000 acre portfolio.  It has explored a
number of development models for the property, including continued development
similar to that which is ongoing adjacent to the property's western borders, a
new planned community, and a compact development model with high density village
centers surrounded by large expanses of open space.  The State Land Board
continues to review and refine the development opportunities for the Lowry Range
and anticipates approaching the development community for "requests for
qualification" and "requests for proposals" during 2004.

     We believe that the Lowry Range is among the single largest contiguous
parcel of primarily undeveloped land in the United States that is near a
metropolitan area and owned by a single landowner.  In October 2003, the State
Land Board directed its staff to prepare a request for proposal to send to the
development community to seek assistance with the planning and development of
this tract of property.  The State Land Board has engaged the Urban Land
Institute to assist in the preparation of evaluation criteria for a request for
qualification and request for proposal.  The Urban Land Institute's criteria are
expected to be completed in June 2004.  The State Land Board has indicated that
it will shortly thereafter send a request for qualification followed by a
request for proposal to local and national developers to assist in the
development of the Lowry Range.

     We have designed and constructed, and we currently operate and maintain,
water and wastewater facilities that service customers on the Lowry Range.  We
currently have one facility that during 2003 provided, treated and delivered
approximately 47 million gallons of potable water and treated approximately 7
million gallons of wastewater.  We intend to plan, construct and operate the
facilities serving the Lowry Range and areas outside the Lowry Range in a
unified manner to capitalize on economies of scale.

     Full build-out of the Lowry Range is likely to take more than 30 years,
with initial development occurring as soon as two to three years from now,
depending on the decisions of State Land Board and the results of the proposal
process.

Export  Water

     Colorado municipalities have strong incentives to attract commercial
development to their areas, as a large portion of their revenues are derived
through sales tax receipts.  Cities and municipalities historically have used
water availability as a means to attract development in competition with other
municipalities.  As water has become scarce, cities and municipalities have
begun requiring property developers to demonstrate that they have sufficient
water supplies for their proposed projects before the


                                       36
<PAGE>
cities and municipalities will consider rezoning applications.  This is forcing
developers to find adequate water supplies in order to develop new property.

     Our water marketing activities are centered around targeting our water and
wastewater services to developers and homebuilders developing new areas of the
Denver metropolitan area.  Our water supplies are largely undeveloped and are
located in southeast Arapahoe County, one of the fastest growing regions of the
Denver metropolitan area.  We work with area developers to investigate water
supply constraints, water and wastewater utility issues, market demand,
transportation concerns, employment centers and other issues in order to
identify suitable areas for development.

Current  Operations

     At this time, we operate and maintain all of our water supply and
wastewater treatment facilities with limited assistance from third party
maintenance contractors.  Water deliveries during 2003 totaled about 47 million
gallons, ranging from 2 million gallons per month in the winter to 7 million
gallons per month in the summer.  Our wastewater treatment plant currently has a
permitted capacity of 130,000 gallons per day and receives about 20,000 gallons
per day.

     Presently, approximately 81% of our water and wastewater treatment revenues
are from one customer.  In 1998, we entered into a water service agreement with
the State of Colorado Department of Human Services to provide water and
wastewater services to a juvenile correction facility on the western edge of the
Lowry Range known as the Ridge View Youth Services Center.  We designed and
built this facility to provide water and wastewater services serving the
approximately 200 single family equivalents of the Ridge View Youth Services
Center.  Upon completion in 2001, we commenced service to this facility.

     In October 2003, we entered into a water service agreement with a developer
to provide water to approximately 4,000 SFE that are being built on
approximately 800 acres known as "Sky Ranch" located 4 miles north of the Lowry
Range along Interstate 70.  In May 2004, we entered into a second agreement with
the developer of Sky Ranch to provide water services to an additional 850 SFEs
at Hills at Sky Ranch, a development adjacent to, and to be developed
concurrently with, Sky Ranch.  We expect that the construction of the Sky Ranch
projects will begin in October 2004, with the first homes available in February
2005.  Based on housing market demand in similar projects in the area and
projections provided by the developer, we expect that the project will be fully
built out within 10 years.  Under the Sky Ranch Agreements, the developer must
purchase at least 400 water taps before occupancy of the first home.  The Sky
Ranch Agreements permit the developer to add additional taps annually, with at
least 310 taps to be purchased each year.  This schedule is designed to provide
us with adequate funds with which to construct the facilities needed to provide
water service to the areas being built.

     The water service agreements for Sky Ranch incorporate 4,850 SFE
connections, which at current rates and charges would generate approximately $60
million in total water tap fee revenues and approximately $2.8 million annually
in water service revenues.  These represent gross fees and, to the extent that
water service is provided using Export Water, we are be required to pay a
royalty to the State Land Board equal to 12% of the net revenue after deducting
our costs.  This royalty rate increases after we have received net revenues in
excess of $45.0 million.  We expect to dedicate approximately 1,450 acre feet,
or approximately 12%, of our Export Water supply (which is about 5.0% of our
overall Rangeview water supply) for this project.  We estimate we will spend
approximately $27 million for infrastructure related to the development and
delivery of water to the 4,850 single family equivalent units.  We have never
undertaken a project of this size, and no contracts have been entered into to
perform this work.  Accordingly, we cannot assure you that our costs will not
exceed this estimate.


                                       37
<PAGE>
     For the initial developments at Sky Ranch, we anticipate receiving tap fees
of approximately $1.9 million, representing approximately 156 taps, in the
current fiscal year ending August 31, 2004, and approximately $3.0 million,
representing an additional 244 taps, prior to January 2005.  We estimate that it
will cost approximately $2.5 million to construct the infrastructure to service
the initial 400 taps.  We will expand the infrastructure to meet demand as
houses are built at the Sky Ranch developments.  We will initially develop the
water beneath the Sky Ranch property, which is being dedicated to us by the
developer in exchange for credit of a portion of the water resource tap fee.
The dedicated water is sufficient to provide water service to approximately
1,400 customers.  Because the dedicated water is not Export Water, no payments
will be required to be made under the Financing Agreements and no royalty
payments will be required to be made to the State Land Board with respect to tap
fee revenues from the first 1,400 taps at Sky Ranch serviced with the dedicated
water.  Because this project has not yet commenced, we cannot assure you that
these revenue and expense estimates will be the actual revenues and expenses
that we will experience.

Projected  Operations

     We will develop water and wastewater infrastructure in stages to meet
demand.  We anticipate that development of the entire 29,000 acre feet of
non-tributary water will require between 250 and 300 high capacity water wells
ranging in depth from 800 feet to over 2,500 feet.  We will drill separate wells
into each of the three principal aquifers and each well will deliver water to
central water treatment facilities for treatment prior to delivery to customers.
We also intend to build structures to divert surface water to four storage
reservoirs to be located in the Lowry Range.  The surface water will be diverted
when available and, prior to distribution to our customers, will be treated by a
separate water treatment facility that we will build specifically to treat
surface water.  We anticipate that full build-out of water facilities on the
Lowry Range will cost approximately $340 million and will accommodate up to
water service to 80,000 single family equivalent units incorporating both
customers located in and outside the Lowry Range service area.

     We intend to design, construct and operate our own wastewater treatment
facilities using advanced wastewater treatment technologies currently available
in the market.  We plan to store our treated effluent water in surface water
reservoirs for reuse in our irrigation water system.  The combination of deep
well water from our non-tributary water supplies, surface water supplies from
two surface water streams that flow through the Lowry Range and the reuse of the
treated effluent water supplies will provide an advanced water management system
that maximizes the use and reuse of our valuable water supplies.

     We currently operate one system serving customers on the Lowry Range that
has a capacity to treat approximately 130,000 gallons of wastewater per day;
current utilization is approximately 20,000 gallons per day.  We anticipate that
the full build-out of wastewater facilities on the Lowry Range will cost
approximately $68.4 million and will accommodate up to approximately 12.3
million gallons of wastewater per day serving an estimated 47,000 single family
equivalent units.

     We intend to utilize third party contractors to construct our facilities
and we will employ licensed water and wastewater operators to operate our water
and wastewater systems.  At full buildout, we expect to employ approximately 50
professionals to operate our systems, read meters, bill customers, and manage
our affairs.  We will take advantage of advanced technologies to keep personnel
requirements and operating costs low.  Currently available technologies enable
meter reading and billing to be done automatically, reducing associated handling
and labor costs.  A vehicle driving past a home can send a signal to the meter,
and the meter reading goes directly into a database, which automatically prints
billing information for the customer.


                                       38
<PAGE>
RANGEVIEW METROPOLITAN DISTRICT

     The Rangeview Metropolitan District is a quasi-municipal corporation and
political subdivision of Colorado formed in 1986 for the sole purpose of
providing water and wastewater service to the Lowry Range, using water leased to
the District by the State Land Board.  The District was formed following, and
based on, the purchase in 1986 of a 40 acre parcel of vacant land located in
unincorporated Arapahoe County near but not on the Lowry Range.  This land
comprises all of the property currently within the boundaries of the District.

     The District is run by an elected board of directors.  The only eligible
voters and the only persons eligible to serve as directors are the owners of
property in the 40 acre boundary of the District.  The current directors of the
District are Thomas P. Clark, Mark W. Harding, Scott E. Lehman (all employees of
Pure Cycle) and Thomas Lamm.

     We are party to a Right of First Refusal Agreement with the owners of the
property comprising the District.  Pursuant to a tenancy in common agreement, in
the event of death, bankruptcy or incompetence of any tenant, that tenant's
estate or representative must offer the property interest of that tenant to the
remaining tenants for purchase.  If the remaining tenants do not purchase all of
such person's interest, the property must be offered to us pursuant to its Right
of First Refusal Agreement.  In addition, if any tenant wants to sell his
interest in the parcel, such tenant must find a bona fide buyer and then offer
the property to us.  We have the right, at our option, to buy the property by
matching the terms of the bona fide third party offer or by paying the appraised
value of the property, as determined by independent appraisers.  A tenant may
also negotiate a sale directly with us if he elects not to locate a bona fide
buyer.  Each of the directors currently owns an undivided one-fifth interest in
the land comprising the District.  We also own an undivided one-fifth interest.
Under applicable Colorado law, entities are not qualified to serve as directors
of municipal districts and may not vote.

     We and the directors have attempted to transact business between the
District and us on an arms-length basis.  The conflicts of interest of the
directors in transactions between us and the District are disclosed in filings
with the Colorado Secretary of State.  The District and we were each represented
by separate legal counsel in negotiating the water service agreement and
wastewater service agreement between the parties.  The agreements were also
approved by the two members of the District's board who were not our employees
and by the State Land Board.

     It is likely that at some point in the future, the board of directors of
the District will be comprised entirely of directors independent from Pure
Cycle.  As the State Land Board develops the Lowry Range, landowners on the
Lowry Range may petition to include their land within the District's boundaries.
Provided such petition complies with applicable law, the District is required by
its lease with the State Land Board to proceed with due diligence to include the
area designated in such petition within the District's boundaries.  As the
District's boundaries expand beyond the initial 40 acre parcel, the base of
persons eligible to serve as directors and eligible to vote will also increase.
A board of the District that is not controlled by us would not have the power to
take away from us the water rights embedded in our existing agreements.

COMPETITION

     Although we have exclusive, long term water and wastewater service
contracts for the Lowry Range service area, our business of providing water
service using our Export Water is subject to competition.  Alternate sources of
water are available, principally from other private parties, such as farmers
owning senior water rights that are no longer being economically used in
agriculture, and municipalities seeking to annex newly developed areas in order
to increase their tax base.  Our principal


                                       39
<PAGE>
competition in areas close to the Lowry Range would be the City of Aurora.  The
principal factors affecting competition for potential purchasers of Export Water
include the availability of water for the particular purpose, the cost of
delivering the water to the desired location, and the reliability of the water
supply during drought periods.  We believe that our assets provide us with a
competitive advantage because our legal rights to the assets have been confirmed
for municipal use, our water supply is close to Denver area water users and our
pricing structure is competitive.  Further, the size of the Lowry Range service
area and the amount of property that can be served by the Export Water will
provide us with economies of scale that should give us advantages over our
competitors.

Colorado  Water  Law  Principles

     Under Colorado water law, a person generally does not own the water itself
but only the right to use the water from a certain source.  A water right,
however, is considered a property right that can be owned and conveyed, separate
from land, in the same manner as a real property interest.

     Generally, we own two types of water rights:  tributary water rights and
nontributary groundwater rights.  In addition, we own water storage or recharge
rights, which consist of both the right to use the water stored or recharged,
and the right to construct, maintain and/or use the reservoir or aquifer in
which the water is stored.

     Colorado water rights are administered jointly by special State Water
Courts and the State Engineer's Office.  Water Courts adjudicate and confirm the
nature and scope of water rights by issuing decrees.  The State Engineer is
responsible for issuing well permits, implementing interstate compacts and
administering tributary water rights.

     Tributary water rights are covered by the Colorado Constitution, which
provides that all surface and ground water in or tributary to natural streams in
Colorado is the property of the public and subject to appropriation.  Such
tributary water includes all springs, surface drainage and groundwater that is
hydrologically connected to surface streams.  Tributary water in Colorado is
subject to the "prior appropriation" doctrine, which is grounded on the
"first-in-time, first-in-right" principle.  Under this doctrine, an absolute
tributary water right is acquired by the act of diverting and placing the water
to some beneficial use, and the right is confirmed and assigned a priority based
on the date of initial use through a decree issued by a State Water Court.  The
Water Court decree legally confirms the appropriation date, the specific type
and place of use, and the amount of water permitted to be diverted under the
water right.  Decreed water that is appropriated earlier in time holds senior
priority over later-acquired water rights.  In times of shortage, a senior water
right must be fully satisfied before any junior right can use any water.  This
means that the relative priority of a tributary water right is critical to its
value.  A tributary water right cannot typically be used and reused successively
to exhaustion.

     Tributary water rights can also be "conditional" as opposed to absolute.  A
conditional water right permits an owner to take an initial step towards
appropriating water, such as planning a storage or diversion structure, and
demonstrating to the Water Court every six years that additional steps are
diligently being taken to put the water to a beneficial use.  The water right
can ultimately be perfected and become an absolute water right, with the date of
appropriation being the date of the initial action.  Our Paradise Water Supply
consists in part of conditional rights in tributary water in the Colorado River
basin in western Colorado.

     Nontributary groundwater is defined by statute as water that is not
hydrologically connected to surface water.  In Colorado, nontributary water is
most commonly found in the Denver Basin, which is a series of four aquifers
stretching from the town of Greeley south to Colorado Springs, and from the
foothills of the Rocky Mountains to east of the Denver metropolitan area.
Nontributary groundwater is not subject to the prior appropriation doctrine and
the related priority administration system.  Rather, the


                                       40
<PAGE>
right to use nontributary water is generally incident to overlying land
ownership.  By statute, owners of surface land have rights to withdraw the
calculated amount of nontributary groundwater that lies beneath their land, and
these rights are perfected by drilling a well or obtaining a Water Court decree.
An owner can withdraw one percent of the total volume of nontributary
groundwater to which it is entitled each year, in order to allow this resource,
to the extent non-renewable, to last 100 years.  If the full annual allotment in
any year is not used, the deficit can be used in subsequent years.  Nontributary
water is permitted to be used and reused successively to exhaustion.  As a
result, rights to nontributary water are extremely valuable, particularly in
times of drought and water shortages.

Government  Regulation

Water  Quality

     The water we deliver for use by customers must meet water quality standards
for public water supply systems that are set under the federal Safe Drinking
Water Act (SDWA), 42 U.S.C. Sec. 300f et seq. and related Colorado state law.
These standards are subject to periodic revision and may become more strict in
the future.  In general, we anticipate that groundwater from wells located on
the Lowry Range will conform with these water quality standards without
treatment, other than residual disinfection prior to use.  Lower quality
groundwater, if encountered, may be used directly in the non-potable irrigation
system, blended with other potable water supplies to yield an acceptable quality
mixture, or receive additional treatment.  We will build water filtration plants
to treat surface waters prior to use.  We believe that we should have no
difficulty meeting existing SDWA standards.

     Wastewater that we treat that is or will be discharged to any stream,
drainage or aquifer, must also comply with various water quality standards and
other requirements under the Federal Water Pollution Control Act (FWPCA), 33
U.S.C. Sec. 1251 et seq., as delegated to and administered by the State of
Colorado.  We currently operate a wastewater treatment plant that discharges
treated wastewater effluent to Coal Creek under a State discharge permit.  We
believe we should also have no difficulty meeting any applicable FWPCA or
related State requirements associated with any regulated treated wastewater
discharges.  As noted above, our master plan calls for a dual distribution
system under which treated wastewater can be reclaimed and redistributed to
customers for irrigation use, which would limit regulation under the above FWPCA
discharge permit program.

Water Deliveries

     While we are exploring the potential sale of our Paradise Water Supply to
customers in Arizona, Nevada and California, such out-of-state transactions are
subject to several significant regulatory hurdles.  Colorado is a signatory to
interstate compacts with six other western states to apportion fixed amounts of
water from the Colorado River.  These compacts contain complex provisions that
impose obligations on the states to ensure that each state receives and uses
only its allotted amount of Colorado River water.  Rights created by interstate
compacts are superior to state water rights granted by the State of Colorado;
Colorado may create and vest in-state water rights as property, but these rights
are subject to Colorado's allocated share of Colorado River water and its
obligation to deliver water to downstream states under the compacts.  Recently,
the U.S. Department of Interior began strictly enforcing the provisions of the
Colorado River Compact of 1922 to require that California limit the amount of
Colorado River water it diverts to 4.4 million acre-feet, the amount it was
originally allocated under that compact.  Significant demand for water exists in
California, Nevada and Arizona as a result of increased populations in these
states, giving rise to water needs that exceed the supplies of water originally
allocated to these states under the compact.  However, as a result of
obligations imposed on Colorado by the compacts to send water to the downstream
states, Colorado law restricts the export of water out of state without
obtaining a Water Court decree, and to issue a decree, the Water Court must find
that such export is not in violation


                                       41
<PAGE>
of provisions of interstate compacts and does not prevent Colorado from
complying with its interstate compact obligations.  Obtaining such a decree
would likely involve significant litigation cost.

Employees

     We currently have three employees, none of whom is subject to any
collective bargaining agreements.  We believe that our relations with our
employees are good.


                                   PROPERTIES

Office  Lease

     We currently occupy approximately 1,800 square feet of office space at no
cost from Thomas P. Clark, our Chief Executive Officer and one of our directors.
There is no written lease.

Facilities

     Generally, we will own and operate the water and wastewater facilities to
be constructed for service to customers located off the Lowry Range that are
using our Export Water.  While we have an exclusive right to provide water and
wastewater services to customers on the Lowry Range until 2081, as well as the
obligation to construct and operate the wastewater facilities to provide this
water, the facilities (other than the wastewater system) will be owned by the
State Land Board, and the District will own the wastewater system.  We intend to
construct the water supply facilities for both the Lowry Range service area and
for our Export Water services as part of a unified plan.  Under our service
agreement with the State Land Board and the District, we have a perpetual right
to construct, operate and maintain water supply facilities on the Lowry Range as
needed to produce and supply Export Water.

Rangeview  Metropolitan  District

     We own an undivided one-fifth interest as a tenant-in-common in a 40-acre
parcel of undeveloped land located in unincorporated Arapahoe County comprising
the Rangeview Metropolitan District.


                                   MANAGEMENT

Directors  and  Executive  Officers

     The following table sets forth the names, ages and titles of the persons
who are currently our directors and executive officers of the Company, along
with other positions they hold with us.

<TABLE>
<CAPTION>
                   Name            Age              Position
                   ----            ---              --------
<S>                                <C>  <C>
        Harrison H. Augur (1)(2)   62   Chairman of the Board

        Thomas P. Clark            67   Director, Chief Executive Officer

        Mark W. Harding            40   Director, President

        George M. Middlemas(1)(2)  57   Director

        Margaret S. Hansson        79   Director

        Richard L. Guido (1)(2)    59   Director
<FN>
________________

(1)  Member of Audit Committee.


                                       42
<PAGE>
(2)  Member of Compensation Committee.
</TABLE>

     HARRISON H. AUGUR was elected Chairman of the Board in April 2001.  For the
past 20 years, Mr. Augur has been involved with investment management and
venture capital investment groups.  Mr. Augur has been a General Partner of  CA
Partners since 1987, and General Partner of Patience Partners LLC since 1999.
Mr. Augur received a Bachelor of Arts degree from Yale University, an LLB degree
from Columbia University School of Law, and an LLM degree from New York
University School of Law.

     THOMAS P. CLARK was appointed Chief Executive Officer in April 2001.  Prior
to his appointment as our Chief Executive Officer, Mr. Clark served as our
President and Treasurer from 1987 to April 2001. Mr. Clark is primarily involved
in the management of our business.  His other business activities include:
President, LC Holdings, Inc. (business development), 1983 to present, and
partner (through a wholly owned corporation) of Resource Technology Associates
(development of mineral and energy technologies), 1982 to present.  Mr. Clark
serves on the board of the Rangeview Metropolitan District.  Mr. Clark received
his Bachelor of Science degree in Geology and Physics from Brigham Young
University.

     MARK W. HARDING joined Pure Cycle in April 1990 as Corporate Secretary and
Chief Financial Officer.  He was appointed President in April 2001, and on
February 13, 2004 was appointed to fill a vacancy on the board.  He brings a
background in public finance and management consulting.  From 1988 to 1990, Mr.
Harding worked for Price Waterhouse, where he assisted clients in providing
public finance and other investment banking related services.  Mr. Harding is
the President of the Rangeview Metropolitan District.  Mr. Harding has a B.S.
Degree in Computer Science and a Masters in Business Administration in Finance
from the University of Denver.

     GEORGE M. MIDDLEMAS has been a Director since April 1993.  Mr. Middlemas
has been a general partner with Apex Investment Partners, a diversified venture
capital management group, since 1991.  From 1985 to 1991, Mr. Middlemas was
Senior Vice President of Inco Venture Capital Management, primarily involved in
venture capital investments for INCO Securities Corporation.  From 1979 to 1985,
Mr. Middlemas was a Vice President and a member of the Investment Committee of
Citicorp Venture Capital Ltd., where he sourced, evaluated and completed
investments for Citicorp.  Mr. Middlemas is a director of Tut Systems, and
Pennsylvania State University - Library Development Board. Mr. Middlemas
received a Bachelors degree in History and Political Science from Pennsylvania
State University, a Masters degree in Political Science from the University of
Pittsburgh and a Master of Business Administration from Harvard Business School.

     MARGARET S. HANSSON has been a director since April 1977, Chairman from
1983 to 2001, Vice President from 1992 to 2003, and was our Chief Executive
Officer from September 23, 1983 to January 31, 1984.  From 1976 to May 1981, she
was President of GENAC, Inc., a Boulder, Colorado firm which she founded.  From
1960 to 1975, Ms. Hansson was CEO and Chairman of Gerry Baby Products Company
(formerly Gerico, Inc.), now a division of Evenflo.  She is a Director of Wells
Fargo Bank, Boulder, Colorado, Wells Fargo Banks, PC, Colorado Capital Alliance,
Realty Quest, Inc. (now RQI, Inc.), and the Boulder Technology Incubator.   Ms.
Hansson is currently President of two companies, Adrop, LLC and Erth, LLC,
companies engaged in development of a centrifuge for water purification systems.
Ms. Hansson received her Bachelor of Arts degree from Antioch College.

     RICHARD L. GUIDO served as a director from July 1996 through August 31,
2003, and on February 13, 2004 was appointed to fill a vacancy on the board.
Mr. Guido was an employee of INCO Securities Corporation, a 5.5% stockholder,
from 1980 through August 2003, and previously served on our board pursuant to a
voting agreement between INCO and us that is no longer in effect.  Mr. Guido was
Associate General Counsel of Inco Limited and President, Chief Legal Officer and
Secretary of Inco


                                       43
<PAGE>
United States, Inc.  Mr. Guido is a Director on the American-Indonesia Chamber
of Commerce and the Canada-United States Law Institute.  Mr. Guido received a
Bachelor of Science degree from the United States Air Force Academy, a Master of
Arts degree from Georgetown University, and a Juris Doctor degree from the
Catholic University of America.


                                       44
<PAGE>
                COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

     The following table sets forth information concerning the compensation
received by or awarded to (i) our chief executive officer and (ii) our other
executive officers for the fiscal years ended August 31, 2003, 2002 and 2001:

<TABLE>
<CAPTION>
                                      Annual Compensation
                            --------------------------------------
                                                     Other Annual
     Name and               Fiscal  Salary   Bonus   Compensation
     Principal Position      Year     ($)     ($)         ($)
     -------------------------------------------------------------
<S>                         <C>     <C>      <C>     <C>
     Thomas P. Clark , CEO    2003   60,000       0              0
                              2002   60,000       0              0
                              2001   60,000       0              0

     Mark W. Harding,         2003   80,000       0              0
     President and CFO        2002   80,000       0              0
                              2001   80,000       0              0
</TABLE>

     Each director who is not an employee of Pure Cycle receives a payment of
$10,000 for each full year in which he or she serves as a director, with an
additional payment of $1,000 for each committee on which he or she serves, and
$1,000 for serving as chairman of the board.  An additional $500 is paid to each
non-employee director for attendance at each board meeting and, if committee
meetings are held separate from board meetings, $500 is paid for attendance at
such committee meetings.  Directors who are employees of Pure Cycle receive no
additional compensation for serving as a director.

     In addition to cash compensation, as part of the 2004 Equity Incentive
Plan, each non-employee director will receive an option to purchase 5,000 shares
of common stock upon election to the board, and an option to purchase 2,500
shares for each subsequent full year in which he or she serves as a director.

     The functions to be performed by the audit committee include the
appointment, retention, compensation and oversight of the Company's independent
auditors, including pre-approval of all audit and non-audit services to be
performed by such auditors.

     Effective February 13, 2004, the Company appointed a compensation
committee.  The functions to be performed by the compensation committee include
establishing in the compensation of officers and directors, and administering
management incentive compensation plans.

                        Option Grants in Last Fiscal Year

     There were no grants of stock options made during the fiscal year ended
August 31, 2003 to our executive officers.


                                       45
<PAGE>
<TABLE>
<CAPTION>
          Aggregated Option Exercises and Fiscal Year End Option Values

                                            Number of           Value of
                                           Unexercised      Unexercised In-
                                            Securities         The-Money
                                        Underlying Options     Options at
                                           at 08/31/03          08/31/03
                 Acquired on   Value       Exercisable/       Exercisable/
Named Officer     Exercise    Received    Unexercisable      Unexercisable
- ---------------  -----------  --------  ------------------  ----------------
<S>              <C>          <C>       <C>                 <C>
Thomas P. Clark            -         -                   -                 -
Mark W. Harding            -         -      975,000/25,000  $  39,000/$1,000
</TABLE>

                    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                            OWNERSHIP AND MANAGEMENT

     The following table sets forth, as of May 31, 2004, the beneficial
ownership of our issued and outstanding common stock and Series A-1 Preferred
Stock by (i) each person who owns of record (or we know to own beneficially) 5%
or more of each such class of stock, (ii) each of our directors, (iii) each of
our executive officers and (iv) all directors and executive officers as a group.
Except as otherwise indicated, we believe that each of the beneficial owners of
the stock listed has sole investment and voting power with respect to such
shares, based on information provided by such holders

<TABLE>
<CAPTION>
                                                                                          Series A-1
                                                                    Common Stock        Preferred Stock
                                                                    ------------        ---------------
            Name and  Address of                                  # of                 # of
              Beneficial Owner                                   Shares         %     Shares       %
              ----------------                                   ------         -     ------       -
<S>                                                         <C>               <C>     <C>      <C>
     Thomas P. Clark
     8451 Delaware St.
     Thornton, CO 80260                                     2,546,485          31.3%

     George M. Middlemas
     225 W. Washington, #1500
     Chicago, IL  60606                                     1,842,114 (1)(2)   19.8%

     Harrison H. Augur
     P.O. Box 4389
     Aspen, CO  81611                                          53,166 (3)       0.7%

     Margaret S. Hansson
     2220 Norwood Avenue
     Boulder, CO  80304                                       824,600 (4)       9.2%

     Richard L. Guido
     121 Antebellum Drive
     Meridianville, AL 35759                                        0             0

     Mark W. Harding
     8451 Delaware St.
     Thornton, CO 80260                                     1,021,000 (5)      10.9%


                                       46
<PAGE>
                                                                                          Series A-1
                                                                    Common Stock        Preferred Stock
                                                                    ------------        ---------------
            Name and  Address of                                  # of                 # of
              Beneficial Owner                                   Shares         %     Shares       %
              ----------------                                   ------         -     ------       -
     All Directors and Officers as a group (6 persons)      6,262,365 (6)      56.2%

     INCO Securities Corporation
     145 King St. West, #1500
     Toronto, Ontario Canada  M5H4B7                          470,000 (7)       5.5%

     Apex Investment Fund II, L.P. ("Apex")
     225 W. Washington
     #1500
     Chicago, IL  60606                                     1,708,779 (2)(8)   18.5%  408,000      38.6%

     Environmental Venture Fund Liquidating Trust
     ("EVFund")
     233 S. Wacker Drive
     Suite 9500
     Chicago, IL 60606                                        629,133 (2)(9)    7.5%

     Environmental Private Equity Fund II, L.P. ("EPFund")
     233 S. Wacker Drive
     Suite 9500
     Chicago, IL 60606                                        712,142(2)(10)    8.4%  600,000      56.7%

     The Productivity Fund II, L.P. ("PFund")
     233 S. Wacker Drive
     Suite 9500
     Chicago, IL 60606                                        478,945(2)(11)    5.8%
<FN>
(1)  Includes 100,000 shares of common stock issuable upon exercise of options
and 1,708,781 shares of common stock which Mr. Middlemas may be deemed to own
but of which he disclaims beneficial ownership as described in more detail in
footnote (2) below.

(2)  Each of the Apex, PFund, and EPFund (the "Apex/FA Partnerships") is
controlled through one or more partnerships. The persons who have or share
control of such partnerships are referred to herein as "ultimate general
partners." The ultimate general partners of Apex are: First Analysis
Corporation, a Delaware corporation ("FAC"), Stellar Investment Co. ("Stellar"),
a corporation controlled by James A. Johnson ("Johnson"); George Middlemas
("Middlemas"); and Chartwell Holdings Inc. ("Chartwell"), a corporation
controlled by Paul J. Renze ("Renze"). The ultimate general partners of PFund
are FAC and Bret R. Maxwell ("Maxwell"). The ultimate general partners of EPFund
are FAC, Maxwell, RS Investment Management ("RSIM"), Argentum Environmental
Corporation ("AEC") and Schneur Z. Genack, Inc. ("SZG"). A wholly - owned
subsidiary of FAC is a broker-dealer registered with the National Association of
Securities Dealers, Inc.

EVFund is controlled through its liquidating trustee, which is FAC.

By reason of its status as ultimate general partner of each of Apex/FA
Partnerships and liquidating trustee of EVFund (together with the Apex/FA
Partnerships, the "Apex/FA Entities"), FAC may be deemed to be the indirect
beneficial owner of 3,528,999 shares of common stock, or 36.4% of such shares.
By reason of his status as the


                                       47
<PAGE>
majority stockholder of FAC, F. Oliver Nicklin, Jr. may also be deemed to be the
indirect beneficial owner of such shares. By reason of their status as ultimate
general partners of Apex, Stellar (and through Stellar, Johnson), Middlemas,
Chartwell (and through Chartwell, Renze) may be deemed to be the indirect
beneficial owners of 1,708,779 shares of common stock, or 18.6% of such shares.
When these shares are combined with his personal holdings of 33,333 shares of
common stock and his currently exercisable option to purchase 100,000 shares of
common stock, Middlemas may be deemed to be the beneficial owner (directly with
respect to his shares and the option shares and indirectly as to the balance) of
1,842,112 shares of common stock, or 19.8% of such shares.

By reason of his status as a general partner of an ultimate general partner of
PFund and EPFund, Maxwell may be deemed to be the indirect beneficial owner of
1,191,087 shares of common stock, or 14.2% of such shares.

By reason of RSIM's, AEC's and SZG's status as ultimate general partners of
EPFund, RSIM, AEC, SZG, and their and their controlling persons may be deemed to
be the indirect beneficial owners of 712,142 shares of common stock, or 8.7% of
such shares.

Each of the Apex/FA Entities disclaims beneficial ownership of all shares of
common stock described herein except those shares that are owned by that entity
directly. We understand that each of the other persons named as an officer,
director, partner, trustee or other affiliate of any Apex/FA Entity disclaims
beneficial ownership of all the shares of common stock described herein, except
for Middlemas with respect to the shares and options to purchase 133,333 shares
owned by him.

Each of the Apex/FA Entities disclaims the existence of a "group" among any or
all of them and further disclaims the existence of a "group" among any or all of
them and any or all of the other persons named as an officer, director, partner,
trustee or those affiliates of any of them, in each case within the meaning of
Section 13(d) of the 1934 Act.

The information herein was derived from information provided to us by
representatives of the Apex/FA Entities.

(3)  Includes (i) 30,000 shares of common stock issuable upon exercise of
warrants and (ii) 2,500 shares of common stock held by Patience Partners, L.P.,
a limited partnership in which a foundation controlled by Mr. Augur is a 60%
limited partner and Patience Partners LLC is a 40% general partner. Patience
Partners LLC is a limited liability company in which Mr. Augur owns a 50%
membership interest.

(4)  Includes 800,000 shares of common stock issuable upon exercise of options,
200,000 of the shares underlying these options are being sold in this offering.

(5)  Includes 100,000 shares of common stock issuable upon exercise of options.

(6)  Includes 1,875,000 shares of common stock issuable upon exercise of options,
880,619 shares of common stock issuable upon exercise of warrants and 237,777
shares of common stock purchasable on conversion of outstanding Series A-1
Convertible Preferred Stock. The directors and officers disclaim beneficial
ownership of 1,708,781 such shares.

(7)  Consists of 470,000 shares of common stock issuable upon exercise of
warrants.

(8)  Includes 850,618 shares of common stock issuable upon exercise of warrants
and 226,666 shares of common stock purchasable on conversion of 408,000 shares
of Series A-1 Convertible Preferred Stock.

(9)  Includes 260,977 shares of common stock issuable upon exercise of warrants.

(10) Includes 30,140 shares of common stock issuable upon exercise of warrants
and 333,333 shares of common stock purchasable on conversion of 600,000 shares
of Series A-1 Convertible Preferred Stock.

(11) Includes 178,377 shares of common stock issuable upon exercise of warrants.
</TABLE>

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     From time to time since December 6, 1987, Thomas P. Clark, our president
and a director, loaned funds to us to cover operating expenses.  We have treated
these funds as unsecured debt, and the promissory notes, with interest at 8.36%
and 9.01% per annum issued to Mr. Clark on various dates are payable October 1,
2007.  To date, Mr. Clark has loaned us $310,720, of which $43,350 has been
repaid, leaving a balance of $267,370.  As of February 29, 2004, accrued
interest on the notes totaled $278,792.  The board members, other than Mr.
Clark, determined that all loans were made at market rates.


                                       48
<PAGE>
     In 1996 and 1997, we entered into loan agreements with five related party
investors:  Apex, EVFund, EPFund and PFund, each a 5% stockholder, and Harrison
Augur, a director.  The loan balances to such persons totaled $1,109,061 at
February 29, 2004.  The loans are unsecured and bear interest at the rate of
10.25% and prime plus 2%.  The notes mature August 31, 2007.  In connection with
the loan agreements, we issued warrants to such persons to purchase 402,300
shares of our common stock with an exercise price of $1.80 per share.  Such
warrants expire August 31, 2007.  These loans are being repaid with the proceeds
of this offering, and the common stock underlying these warrants is being sold
by selling stockholders in this offering.

     In 1995, we extended a line of credit to the District, a related party.
Three of our officers and employees are directors of the District.  The loan
provides for borrowings of up to $250,000, is unsecured, bears interest based on
the prevailing prime rate plus 2% and matures on December 31, 2004.  The balance
of the note receivable at February 29, 2004 was $406,782, including accrued
interest.

                            DESCRIPTION OF SECURITIES

     The summary of the terms of the shares of our capital stock set forth below
does not purport to be complete and is subject to and qualified in its entirety
by reference to our Certificate of Incorporation, as amended (the
"Certificate"), and our Bylaws, as amended (the "Bylaws"), both of which may be
further amended from time to time and both of which are incorporated herein by
reference.  References to the "DGCL" are to the Delaware General Corporation
Law, as amended.

GENERAL

     We are authorized to issue 250,000,000 shares of stock, consisting of
225,000,000 shares of common stock, $.00333 par value per share, and 25,000,000
shares of preferred stock, par value $0.001 per share.  We have designated
1,600,000 shares of our preferred stock as Series A-1 Convertible Preferred
Stock and 432,514 shares of our preferred stock as Series B Preferred Stock.  As
of February 29, 2004, there were 8,145,087 shares of common stock issued and
outstanding, 1,058,000 shares of Series A-1 Preferred Stock issued and
outstanding, and 432,514 shares of Series B Preferred Stock issued and
outstanding.

COMMON STOCK

     All of the outstanding shares of common stock are fully paid and
nonassessable.  Each share of common stock has an equal and ratable right to
receive dividends when declared by our board of directors out of assets legally
available for that purpose and subject to the dividend obligations of Pure Cycle
to holders of any preferred stock then outstanding.

     In the event of a liquidation, dissolution or winding up, the holders of
our common stock are entitled to share equally and ratably in the assets
available for distribution after payment of all liabilities, and subject to any
prior rights of any holders of preferred stock outstanding at that time.

     The holders of common stock have no preemptive, subscription, conversion or
redemption rights, and are not subject to further calls or assessments.  Each
share of common stock is entitled to one vote in the election of directors and
on all other matters submitted to a vote of stockholders.  Cumulative voting in
the election of directors is not permitted.  Meetings of our stockholders may be
called on no fewer than 10 days nor more than 50 days notice.  The presence of a
majority of the shares outstanding, in person or by proxy, is required to
establish a quorum and conduct business at meetings of the stockholders.

     On April 12, 2004, our stockholders authorized the board of directors to
implement a reverse stock split.  On April 12, 2004, our board approved a
1-for-10 reverse stock split with a record date of


                                       49
<PAGE>
April 23, 2004.  The reverse stock split was effective on April 26, 2004.  All
information in this prospectus reflects this reverse stock split.

SERIES A-1 CONVERTIBLE PREFERRED STOCK

Liquidation Rights

     Upon any voluntary or involuntary liquidation, dissolution or winding up of
Pure Cycle, the holders of shares of Series A-1 Preferred Stock will be entitled
to be paid, before any distribution or payment is made upon any of our other
equity securities, $2.00 per share less an amount equal to all dividends paid
thereon.  This liquidation preference will only be paid from revenues derived
from the sale of Export Water (as defined) or the proceeds of a disposition of
such asset.  Holders of Series A-1 Preferred Stock are then entitled to
participate with the holders of common stock in any other distribution or
payment made to the holders of common stock, whether from the Export Water or
otherwise, on a pro rata basis with holders of common stock determined on an
as-converted basis.

Dividends

     Holders of the Series A-1 Preferred Stock are entitled to receive
dividends, when and as declared by the Company's board of directors, in a total
amount of $2.00 per share.  The Series A-1 Preferred Stock will only earn and
accrue dividends when and if Gross Proceeds (as defined), of between $23,036,233
and $32,026,232 after payment of royalties, are received from the marketing,
sale or other disposition of Export Water.  Holders of Series A-1 Preferred
Stock are entitled to receive 35.6% of Gross Proceeds received in the ranges set
forth above until total dividends equal $3,200,000.  Until all accrued dividends
on the Series A-1 Preferred Stock have been paid, we may not declare or pay
dividends on the common stock or the Series B Preferred Stock.  If we sell,
transfer or otherwise convey our interest in the Export Water, the Series A-1
Preferred Stock will cease to accrue dividends.

Conversion

     At the option of the holder, each share of Series A-1 Preferred Stock is
convertible into .55556 shares of common stock, subject to proportional
adjustments in the event of combinations or consolidations of common stock, and
the merger or reorganization of Pure Cycle.

     In the event that (i) the full dividends on the Series A-1 Preferred Stock
have been paid, (ii) we have transferred our interest in the Export Water, or
(iii) a majority of the Board and the holders of a majority of the Series A-1
Preferred Stock determine that it is no longer economically feasible to develop
the Export Water, all shares of Series A-1 Preferred Stock will automatically
convert into shares of common stock on a 1 for .55556 basis, subject to
proportional adjustments in the event of combinations or consolidations of
common stock, and the merger or reorganization of Pure Cycle.

Voting Rights

     Holders of Series A-1 Preferred Stock are entitled to vote together with
holders of common stock on all matters on which holders of common stock are
entitled to vote.  In any stockholder vote, each holder of Series A-1 Preferred
Stock will have a number of votes equal to the number of shares of common stock
that his or her shares are convertible into on the record date multiplied by
1.25.  Without the approval of the holders of a majority of the outstanding
Series A-1 Preferred Stock, we cannot:

     -    alter or change terms, preferences or privileges of Series A-1
          Preferred Stock;


                                       50
<PAGE>
     -    increase or decrease the number of authorized shares of Series A-1
          Preferred Stock;

     -    authorize a new security ranking prior to or on parity with the Series
          A-1 Preferred Stock as to dividends from earnings from the Export
          Water or the distribution of the Export Water or the proceeds
          therefrom;

     -    effect any transaction that would have the effect of decreasing our
          surplus, as defined in the DGCL, by more than $500,000 or that would
          cause our surplus to be equal to less than $1,000,000;

     -    make any expenditure in excess of $50,000 in any one month at any time
          that the surplus is equal to or less than $1,000,000; and

     -    merge or consolidate with or into one or more corporations or business
          entities if we are not the surviving entity.

Right of Purchase

     We have the right to purchase shares of Series A-1 Preferred Stock in the
public market at such prices as may be available in the public market and the
right at any time to acquire any Series A-1 Preferred Stock from holders on such
terms as may be agreeable to holders.

SERIES B PREFERRED STOCK

Liquidation Rights

     Upon any voluntary or involuntary liquidation, dissolution or winding up of
Pure Cycle, the holders of shares of Series B Preferred Stock will be entitled
to be paid, before any distribution or payment is made upon any other equity
securities of Pure Cycle, $1.00 per share less an amount equal to all dividends
paid thereon; provided, however, that with respect to the Export Water, the
              --------  -------
Series B Preferred will be subject to and junior to the rights and preferences
of the holders of the Series A-1 Preferred Stock in the Export Water and the
proceeds of disposition of such assets.

Dividends

     Holders of the Series B Preferred Stock are entitled to receive dividends,
when and as declared by Pure Cycle's board of directors, in a total amount of
$1.00 per share.  The Series B Preferred Stock will only earn and accrue
dividends when Pure Cycle receives proceeds from the marketing, sale or other
disposition of the Export Water or our interest in the Export Water in an amount
greater than $35,000,000.  Dividends are required to be paid when Pure Cycle
receives such proceeds.  Until all accrued dividends on the Series B Preferred
Stock have been paid, we may not declare or pay dividends on the common stock.
Dividends may accrue on Series B Preferred Stock based on proceeds from the
marketing, sale or other disposition of Export Water but may not be paid unless
all dividends accrued on the Series A-1 Preferred Stock have been paid in full.

Redemption

     The Series B Preferred Stock is redeemable for cash at our option at a
redemption price equal to $1.00 per share less an amount equal to all dividends
paid thereon.  The Series B Preferred Stock may not be redeemed using proceeds
from the sale of Export Water unless it would be permissible under the
Certificate to use such assets to pay a dividend on the Series B Preferred
Stock.  Pure Cycle may redeem


                                       51
<PAGE>
Series B Preferred Stock in lieu of payment of dividends thereon.  Holders of
Series B Preferred Stock do not have any right to require Pure Cycle to redeem
any or all shares of the Series B Preferred Stock.

Voting Rights

     Holders of Series B Preferred Stock generally will have no voting rights
except as required by law.  Certain changes to the terms of the Series B
Preferred Stock that would be materially adverse to the rights of holders of the
Series B Preferred Stock cannot be made without the approval of the holders of a
at least 66 2/3% of the outstanding Series B Preferred Stock voting separately
as a class.  These consist of the following:

     -    alter or change terms, preferences or privileges of Series B Preferred
          Stock; and

     -    authorize a new security ranking senior to the Series B Preferred
          Stock as to dividend or liquidation rights.

     In addition, when dividends on the Series B Preferred Stock have accrued
but have not been declared by the Board, the holders of the Series B Preferred
Stock will be entitled to vote with the holders of common stock  at any meeting
of stockholders held during the period such dividends remain in arrears.  Each
share of Series B Preferred Stock will have one vote when voting with the common
stock.

Right of Purchase

     We have the right to purchase shares of Series B Preferred Stock in the
public market at such prices as may be available in the public market and the
right at any time to acquire any Series B Preferred Stock from holders on such
terms as may be agreeable to holders.


                                       52
<PAGE>
WARRANTS

     At  May  31,  2004,  there were warrants outstanding to purchase a total of
2,440,284  shares  of  common stock.  This includes warrants to purchase 908,778
shares  of  common  stock  that  will  be  exercised  by selling stockholders in
connection with this offering.  There is no public market for our warrants.  Our
outstanding  warrants  contain anti-dilution provisions that adjust the exercise
price  of  the  warrants  in the event that we issue additional shares of common
stock  without  consideration or for a net consideration per share less than the
exercise  prices  in effect for the warrants immediately prior to such issuance.
The  following  table  summarizes  information  on  our  outstanding  warrants:

<TABLE>
<CAPTION>
                             NUMBER OF SHARES
                                UNDERLYING     EXERCISE   EXPIRATION
              DATE OF GRANT      WARRANTS        PRICE       DATE
              -------------  ----------------  ---------  ----------
<S>                          <C>               <C>        <C>
              12/11/1990               79,800  $    1.80           *
              02/12/1991              550,200  $    1.80           *
              09/23/1991              108,000  $    1.80           *
              11/20/1991              120,000  $    1.80           *
              12/10/1991            1,059,999  $    1.80           *
              08/12/1992              120,000  $    1.80           *
              08/30/1996              166,984  $    1.80  08/30/2007
              07/18/1997              179,999  $    1.80  08/30/2007
              08/08/1997               55,302  $    1.80  08/30/2007
                             ----------------
                                    2,440,284
<FN>
________________________

*  Expire six months from the earlier of (i) the date all of the Export Water is
sold  or  otherwise  disposed  of,  (ii)  the  date  the Comprehensive Amendment
Agreement  is terminated with respect to the original holder of this Warrant, or
(iii)  the date on which the Company makes the final payment pursuant to Section
2.1(r)  of  the  Comprehensive  Amendment  Agreement.
</TABLE>

     We recently received an inquiry from a former warrantholder pertaining to
the status of a warrant to purchase 160,000 shares of common stock we issued on
August 12, 1991.  We believe this warrant expired in August 1997 and have not
treated it or the shares of common stock underlying it as outstanding for
purposes of calculating our capitalization since August 1997.  There can be no
assurance, however, that we would prevail if the warrantholder pursued
enforcement of such warrant.

REGISTRATION RIGHTS

     We are party to a Stock Purchase Agreement dated December 10, 1991 (the
"Stock Purchase Agreement"), together with Apex Investment Fund II, L.P.,
Environmental Venture Fund Liquidating Trust and The Productivity Fund II, L.P.
The stockholders who are party to the Stock Purchase Agreement are entitled to
piggyback registration rights covering the shares of common stock issued to them
pursuant to the Stock Purchase Agreement and the shares of common stock issuable
to them upon exercise of warrants granted to them pursuant to the Stock Purchase
Agreement, subject to certain limitations.  The registration rights granted
under the Stock Purchase Agreement expire on December 10, 2006.  The shares
issued pursuant to this Stock Purchase Agreement are being registered in this
offering


                                       53
<PAGE>
and accordingly, the registration right contained in this Stock Purchase
Agreement will be satisfied upon consummation of this offering.

ANTI-TAKEOVER PROVISIONS

     We are subject to the provisions of Section 203 of the DGCL, which restrict
certain business combinations with interested stockholders even if such a
combination would be beneficial to all stockholders.  In general, Section 203
would require a two-thirds vote of stockholders for any business combination
(such as a merger or sale of all or substantially all of our assets) between us
and an "interested stockholder" unless such transaction is approved by a
majority of the disinterested directors or meets certain other requirements.  An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of our voting
stock.  These provisions could deprive stockholders of an opportunity to receive
a premium for their common stock as part of a sale of us or may otherwise
discourage a potential acquirer from attempting to obtain control of us.

TRANSFER AGENT

     Our transfer agent is Computershare Trust Company, Inc., 350 Indiana
Street, Suite 800, Golden, Colorado 80401, telephone (303) 262-0600.


                                       54
<PAGE>
                              SELLING STOCKHOLDERS

     The following table sets forth certain information as of May 31, 2004
regarding the Selling Stockholders in this offering.

<TABLE>
<CAPTION>
                                  NUMBER OF                          NUMBER OF
                                    SHARES                             SHARES        PERCENT OF
                                 BENEFICIALLY                       BENEFICIALLY    OUTSTANDING
                                OWNED PRIOR TO   SHARES OFFERED     OWNED AFTER      AFTER THIS
             NAME               THIS OFFERING   IN THIS OFFERING  THIS OFFERING(1)    OFFERING
- ------------------------------  --------------  ----------------  ----------------  ------------
<S>                             <C>             <C>               <C>               <C>
Inco Securities Corporation            470,000           470,000               -0-            *
Landmark Water Partners, L.P.          160,000           136,573            23,427            *
Alan C. Stormo                          36,000            18,000            18,000            *
Dianna Sue Pettyjohn                    36,000             7,500            28,500            *
Beverly A. Beardslee                    18,000            18,000               -0-            *
Robert Douglas Beardslee                 9,000             9,000               -0-            *
Bradley Kent Beardslee                   9,000             9,000               -0-            *
Fayyaz & Company, Inc.                  60,000            30,000            30,000            *
International Properties, Inc.          60,000            60,000               -0-            *
Apex Investment Fund II, L.P.        1,708,779           484,210         1,224,569        11.06%
Environmental Venture Fund             629,133           178,276           450,857         4.07%
Liquidating Trust
The Productivity Fund II, L.P.         478,945           135,717           343,228         3.10%
Landmark Water Partners II,             70,000            38,533            31,467            *
L.P.
Proactive Partners, L.P.                80,124            80,124               -0-            *
Environmental Private Equity           712,142           201,797           510,345         4.61%
Fund II, L.P.
Gregory M. Morey                        16,024            16,024               -0-            *
Don Fogel                               16,024            16,024               -0-            *
George Middlemas                       133,333           100,000            33,333            *
Margaret S. Hansson                    824,600           200,000           624,600         5.64%
Susan Byrom Evans                      233,333            26,667           206,666         1.87%
Carol Byrom Conrad                     233,333            26,700           206,633         1.87%
Fletcher L. Byrom, Jr.                 233,333            22,222           211,111         1.91%
Thomas P. Clark                      2,546,485           100,000         2,446,485        22.09%
Mark W. Harding                      1,021,000           121,000           900,000         8.13%
                                                ----------------
                                                       2,505,367
<FN>
_______________________
* Less than 1%.

(1) For purposes of calculating shares beneficially owned after this offering,
it is assumed that shares being registered for the benefit of the selling
stockholders have been sold pursuant to this offering. The selling stockholders
may have sold, transferred or otherwise disposed of their offered shares since
the date on


                                       55
<PAGE>
which they provided information in transactions exempt from the registration
requirements of the Securities Act.
</TABLE>

     Except as described below, none of the Selling Stockholders has, or has had
within the last three years, any position, office, or other material
relationship with the issuer.

     Margaret S. Hansson, Thomas P. Clark, George Middlemas and Mark Harding are
directors of Pure Cycle.  Mr. Clark also serves as the chief executive officer
and Mr. Harding serves as president and chief financial officer.

     Susan Byrom Evans, Carol Byrom Conrad and Fletcher L. Byrom, Jr. are the
adult children of Fletcher Byrom, who served as a director of Pure Cycle from
1988 until his retirement on February 13, 2004.

     Apex Investment Fund II, L.P. ("Apex") is controlled by several general
partners including George Middlemas, a director.

     The EPFund is a party to a Voting Agreement, as amended and restated August
12, 1992.  Pursuant to the voting agreement, Margaret Hansson and Thomas Clark
(current directors) and Fletcher Byrom (retired director) have agreed to vote
all of their shares of common stock in favor of a director candidate designated
by EPFund.  The current EPFund director candidate is George Middlemas.

     Each of the Selling Stockholders or their affiliates (other than Don Fogel,
Susan Evans, Carol Conrad, Fletcher Byrom, Tom Clark and Mark Harding) have at
various dates prior to 1996 made an investment in Pure Cycle which resulted in
the Selling Stockholder being entitled to a contingent return on such Selling
Stockholder's investment from the proceeds of the sale of Export Water pursuant
to the Commercialization Agreement.

     Apex, EVFund, EPFund and PFund hold promissory notes payable by us with
aggregate principal and interest outstanding as of February 29, 2004 in the
amount of $512,439.  The notes are due in August 2007.

     Apex, EV Fund, EP Fund, PFund, Gregory M. Morey and Proactive Partners,
L.P. hold promissory notes payable by us with aggregate principal and interest
outstanding as of February 29, 2004 in the amount of $596,622.  The notes are
due in August 2007.


                              PLAN OF DISTRIBUTION

     Flagstone Securities is acting as representative of the underwriters named
below. Subject to the terms and conditions described in an underwriting
agreement among us, the selling stockholders and the underwriters, we and the
selling stockholders have agreed to sell to the underwriters, and the
underwriters severally have agreed to purchase from us and the selling
stockholders, the number of shares listed opposite their names below.


                                       56
<PAGE>
<TABLE>
<CAPTION>
                                                                  NUMBER OF
          UNDERWRITERS                                             SHARES
<S>                                                               <C>
          Flagstone Securities






          Total                                                   3,205,367
                                                                  ---------
</TABLE>

     The underwriters have agreed to purchase all of the shares sold under the
underwriting agreement if any of these shares are purchased. If an underwriter
defaults, the underwriting agreement provides that the purchase commitments of
the nondefaulting underwriters may be increased or the underwriting agreement
may be terminated.

     We have agreed to pay the representative an expense allowance of $30,000 on
a non-accountable basis.  We have also agreed to pay all expenses in connection
with qualifying our securities offered hereby for sale under the laws of such
states as the underwriters may designate and the filing fees incurred in
registering the offering with the National Association of Securities Dealers,
Inc., or NASD.

     We and the selling stockholders have agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the underwriters may be required to
make in respect of those liabilities.

     The underwriters are offering the shares, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the shares and other conditions
contained in the underwriting agreement, such as the receipt by the underwriters
of officers' certificates and legal opinions. The underwriters reserve the right
to withdraw, cancel or modify offers to the public and to reject orders in whole
or in part.

     The representative has advised us and the selling stockholders that the
underwriters propose initially to offer the shares to the public at the initial
public offering price on the cover page of this prospectus and to dealers at
that price less a concession not in excess of $             per share. The
underwriters may allow, and the dealers may reallow, a discount not in excess of
$              per share to other dealers. After the offering, the public
offering price, concession and discount may be changed.

     The table below shows the public offering price, underwriting discounts and
commissions to be paid to the underwriters by us and proceeds before expenses to
us.  These amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional shares.

<TABLE>
<CAPTION>
                                          PER SHARE   WITHOUT OPTION   WITH OPTION
<S>                                       <C>         <C>              <C>
Public offering price                         $              $             $
Underwriting discounts and commissions        $              $             $
Proceeds, before expenses, to Pure Cycle      $              $             $
</TABLE>

     The table below shows the public offering price, underwriting discounts and
commissions to be paid to the underwriters by the selling stockholders and
proceeds before expenses to the selling stockholders.


                                       57
<PAGE>
<TABLE>
<CAPTION>
                                                                  PER SHARE
<S>                                                               <C>
Public offering price                                             $
Underwriting discounts and commissions                            $
Proceeds, before expenses, to the selling stockholders            $
</TABLE>

Option  to  Purchase  Additional  Shares

     We have granted an option to the underwriters to purchase up to an
additional 480,805 shares if the underwriters sell more shares in this offering
than the total number set forth in the table above. The underwriters may
exercise that option for 30 days. If any shares of common stock are purchased
pursuant to this option, the underwriters will severally purchase shares of
common stock in approximately the same proportion as set forth in the table
above.

No  Sales  of  Similar  Securities

     We, our executive officers, directors and Apex, EVFund, EPFund and PFund
will agree with the underwriters not to, directly or indirectly, offer, sell,
transfer or otherwise dispose of any shares of common stock, or any securities
convertible into, exchangeable for or that represent the right to receive shares
of common stock, during the period from the date of this prospectus continuing
through the date 180 days after the date of this prospectus, except with the
prior written consent of the representative on behalf of the underwriters.

Right  of  First  Refusal

     We have agreed that until the first anniversary of the closing of this
offering, in the event that at any time or from time to time during such period
we elect to sell equity securities through a public or private offering that
utilizes a placement agent or underwriter, we shall in each case offer to
Flagstone Securities the opportunity to act as underwriter or placement agent of
such offering.  The fees that Flagstone Securities charges us for its services
in such capacity must be comparable to fees that would be charged by other
registered broker-dealers for similar offerings.

Nasdaq  Listing

     We have applied to have our common stock approved for listing on the Nasdaq
SmallCap under the symbol "PCYO."

Price  Stabilization  and  Short  Positions

     Until the distribution of the shares is completed, SEC rules may limit
underwriters and selling group members from bidding for and purchasing our
common stock.  However, the underwriters may engage in transactions that
stabilize the price of the common stock.  These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales.  Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price of the common
stock while the offering is in progress.  The underwriters also may impose a
penalty bid.  This occurs when a particular underwriter repays to the
underwriters a portion of the underwriting discount received by it because the
representative has repurchased shares sold by or for the account of such
underwriter in stabilizing or short covering transactions.


                                       58
<PAGE>
     These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock.  As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market.  If these activities are commenced, they may be discontinued by the
underwriters at any time.  These transactions may be effected on the Nasdaq
SmallCap, in the over-the-counter market or otherwise.

     Certain persons participating in this offering may also engage in passive
market making transactions in the common stock on the Nasdaq SmallCap.  Passive
market making consists of displaying bids on the Nasdaq SmallCap limited by the
prices of independent market makers and affecting purchases limited by such
prices and in response to order flow.  Rule 103 of Regulation M under the
Securities Exchange Act of 1934 limits the amount of net purchases that each
passive market maker may make and the displayed size of each bid.  Passive
market making may stabilize the market price of the common stock at a level
above that which might otherwise prevail in the open market and, if commenced,
may be discontinued at any time.

     Neither we nor any of the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters make any representation that the representatives
or the lead managers will engage in these transactions or that these
transactions, once commenced, will not be discontinued without notice.


                                  LEGAL MATTERS

     The validity of the securities offered by this prospectus will be passed
upon by Davis Graham & Stubbs LLP, Denver, Colorado, and Richards, Layton &
Finger, P.A., Wilmington, Delaware.  Certain matters relating to Colorado water
law will be passed upon by Petrock & Fendel, P.C., Denver, Colorado.  Certain
matters in connection with this offering will be passed upon for the
underwriters by Davis & Gilbert LLP.


                                     EXPERTS

     The audited financial statements for Pure Cycle as of August 31, 2003 and
2002 and for the two years in the period ended August 31, 2003 included in this
prospectus have been audited by KPMG LLP, independent registered public
accounting firm, for the periods set forth in their report with respect thereto,
and are included, in reliance on the authority of that firm as experts in
accounting and auditing.


                       WHERE YOU CAN FIND MORE INFORMATION

     Pure Cycle files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission.  You may read
and copy any of these documents at the Commission's public reference room at 450
Fifth Street N.W., Washington, D.C. 20549.  Please call the SEC at
1-800-SEC-0330 for further information on the public reference room.  Our SEC
filings are also available to the public at the SEC's website at
http://www.sec.gov.
- -------------------

     You may receive a copy of any of these filings by writing or calling Pure
Cycle Corporation, 8451 Delaware St., Thornton, Colorado 80260, telephone (303)
292-3456, and directed to the attention of Mark Harding, President.


                                       59
<PAGE>
<TABLE>
<CAPTION>
                             INDEX TO FINANCIAL STATEMENTS


                                                                                   PAGE
<S>                                                                                <C>
Independent Registered Public Accounting Firm Report  . . . . . . . . . . . . . .  F-2

Balance Sheets as of August 31, 2003 and 2002 . . . . . . . . . . . . . . . . . .  F-3

Statements of Operations for each of the years ended December 31, 2003 and 2002    F-4

Statements of Stockholders' Equity for the years ended December 31, 2003 and 2002  F-5

Statements of Cash Flows for the years ended December 31, 2003 and 2002 . . . . .  F-6

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . .  F-7


Balance Sheet as of February 29, 2004 and August 31, 2003 . . . . . . . . . . . .  F-16

Statements of Operations for the six-month periods ended February 29, 2004 and
February 28, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-17

Statements of Cash Flows for the six-month periods ended February 29, 2004 and
February 28, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-18

Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . .  F-19
</TABLE>


                                      F-1
<PAGE>
              INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REPORT
              ----------------------------------------------------

The  Board  of  Directors
Pure  Cycle  Corporation:

We  have audited the accompanying balance sheets of Pure Cycle Corporation ("the
Company")  as  of  August  31,  2003  and  2002,  and  the related statements of
operations,  stockholders'  equity,  and  cash  flows  for the years then ended.
These  financial  statements are the responsibility of the Company's management.
Our  responsibility is to express an opinion on these financial statements based
on  our  audits.

We  conducted  our audits in accordance with the standards of the Public Company
Accounting  Oversight  Board  (United  States).  Those standards require that we
plan  and  perform  the  audit  to obtain reasonable assurance about whether the
financial  statements  are  free  of  material  misstatement.  An audit includes
examining,  on  a test basis, evidence supporting the amounts and disclosures in
the  financial  statements.  An  audit  also  includes  assessing the accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating  the  overall  financial statement presentation.  We believe that our
audits  provide  a  reasonable  basis  for  our  opinion.

In  our  opinion,  the financial statements referred to above present fairly, in
all  material  respects,  the financial position of Pure Cycle Corporation as of
August  31,  2003  and 2002 and the results of its operations and its cash flows
for  the  years  then  ended, in conformity with accounting principles generally
accepted  in  the  United  States  of  America.




                                               /s/  KPMG LLP

Denver, Colorado
October 10, 2003,
except Note 13 which is dated April 26, 2004


                                      F-2
<PAGE>
<TABLE>
<CAPTION>
                                       PURE CYCLE CORPORATION
                                           BALANCE SHEETS


                                                                                August 31,
                                                                       ----------------------------
          ASSETS                                                           2003           2002
          ------                                                       -------------  -------------
<S>                                                                    <C>            <C>
Current assets:
    Cash and cash equivalents                                          $    525,780   $    287,720
    Trade accounts receivable                                                67,687         50,919
                                                                       -------------  -------------
        Total current assets                                                593,467        338,639

Investment in water and systems:
    Rangeview water supply (Note 3)                                      13,710,773     13,566,777
    Paradise water supply                                                 5,494,323      5,491,423
    Rangeview water system (Note 3)                                         148,441        148,441
                                                                       -------------  -------------
    Investment in water and systems                                      19,353,537     19,206,641
    Accumulated depreciation & depletion                                    (10,543)        (4,958)
                                                                       -------------  -------------
        Total water and water systems                                    19,342,994     19,201,683

Note receivable - related party, including accrued interest (Note 4)        399,902        385,716
Other assets                                                                 77,041        102,241
                                                                       -------------  -------------
                                                                       $ 20,413,404   $ 20,028,279
                                                                       =============  =============
     LIABILITIES AND STOCKHOLDERS' EQUITY
     ------------------------------------

Current liabilities:
    Accounts payable                                                   $      8,244   $      2,384
    Accrued liabilities (Note 5 )                                            43,528         19,495
                                                                       -------------  -------------
        Total current liabilities                                            51,772         21,879

Long-term debt - related parties, including accrued interest (Note 6)     4,889,545      4,713,270

Participating interests in Rangeview water supply (Note 3)               11,090,630     11,090,630

Stockholders' equity (Notes 7):
    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
        Series D1-  2,000,000 shares issued and outstanding in 2003           2,000             --

    Common stock, par value 1/3 of $.01 per
        share; 135,000,000 shares authorized;
        7,843,976 shares issued and outstanding                              26,120         26,120
    Additional paid-in capital                                           25,512,453     25,014,453
    Accumulated deficit                                                 (21,167,604)   (20,846,561)
                                                                       -------------  -------------
    Total stockholders' equity                                            4,381,457      4,202,500
                                                                       -------------  -------------
                                                                       $ 20,413,404   $ 20,028,279
                                                                       =============  =============
<FN>
                           See Accompanying Notes to Financial Statements
</TABLE>


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                             PURE CYCLE CORPORATION
                            STATEMENTS OF OPERATIONS


                                            Years ended August 31,
                                         ---------------------------
                                             2003           2002
                                         -------------  ------------
<S>                                      <C>            <C>
Water service revenues:
  Water usage revenues                        156,217       156,026
  Wastewater processing revenues               56,780        48,832
  Revenue - Other                              12,435            --
                                         -------------  ------------
                                              225,432       204,858

Water service operating expense               (20,580)      (13,896)
Wastewater service operating expense          (10,692)      (13,896)
Other expense                                  (6,224)           --
                                         -------------  ------------
Gross margin                                  187,936       177,066

General and administrative expense           (318,182)     (221,872)
Depreciation expense                           (4,948)       (4,220)
Depletion expense                               ( 637)        ( 738)
                                         -------------  ------------
Operating income (loss)                      (135,841)      (49,764)


Other income (expense):
  Interest income                              16,263        22,181
  Interest expense - related parties         (176,275)     (194,651)
  Amortization of warrants                    (25,200)      (25,200)
Other income                                       --       __2,287
                                         -------------  ------------
  Total other income (expense)               (185,212)     (195,383)
                                         -------------  ------------

      Net loss                           $   (321,043)  $  (245,147)
                                         =============  ============

Basic and diluted net
  loss per common share                  $      (0.04)  $     (0.03)
                                         =============  ============


Weighted average common
  shares outstanding basic and diluted      7,843,976     7,843,976
                                         =============  ============
<FN>
                 See Accompanying Notes to Financial Statements
</TABLE>


                                      F-4
<PAGE>
<TABLE>
<CAPTION>
                                         PURE CYCLE CORPORATION
                                   STATEMENTS OF STOCKHOLDERS' EQUITY
                                  Years Ended August 31, 2003 and 2002

                                       PREFERRED STOCK       COMMON STOCK            TREASURY STOCK
                                    --------------------  --------------------  ------------------------
                                      SHARES     AMOUNT    SHARES     AMOUNT      SHARES       AMOUNT
                                    ----------  --------  ---------  ---------  -----------  -----------
<S>                                 <C>         <C>       <C>        <C>        <C>          <C>
Balance at August 31, 2001           8,487,513  $  8,488  7,843,976  $  26,120           0   $        0
                                    ==========  ========  =========  =========  ===========  ===========
Net loss                              ______--     ___--  _______--    _____--       ___--      _____--
                                    ----------  --------  ---------  ---------  -----------  -----------
Balance at August 31, 2002           8,487,513  $  8,488  7,843,976  $  26,120       ____0   $        0
                                    ==========  ========  =========  =========  -----------  ===========
Preferred Stock issued in
Exchanges, net (Note 7)              2,000,000     2,000         --         --  (2,000,000)   ( 500,000)
Common Stock issued from treasury
stock (Note 7)                              --        --         --         --   2,000,000      500,000
Net loss                             _______--   _____--  _______--   ______--       ___--      _____--
                                    ----------  --------  ---------  ---------  -----------  -----------
Balance at August 31, 2003          10,487,513  $ 10,488  7,843,976  $  26,120           -           --
                                    ==========  ========  =========  =========  ===========  ===========
</TABLE>


<TABLE>
<CAPTION>
                                                   ADDITIONAL                        TOTAL
                                                     PAID-IN     ACCUMULATED     STOCKHOLDERS'
                                                     CAPITAL       DEFICIT          EQUITY
                                                   -----------  --------------  ---------------
<S>                                                <C>          <C>             <C>
Balance at August 31, 2001                         $25,014,453  $ (20,601,414)  $    4,447,647
                                                   ===========  ==============  ===============
Net loss                                             _______--       (245,147)        (245,147)
                                                   -----------  --------------  ---------------
Balance at August 31, 2002                         $25,014,453  $ (20,846,561)  $    4,202,500
                                                   ===========  ==============  ===============
Preferred Stock issued in Exchanges, net (Note 7)      498,000             --               --
Common Stock
  Issued from treasury stock (Note 7)                       --             --          500,000
Net loss                                              ______--       (321,043)       _(321,043)
                                                   -----------  --------------  ---------------
Balance at August 31, 2003                         $25,512,453   ($21,167,604)  $    4,381,457
                                                   ===========  ==============  ===============
<FN>
                         See Accompanying Notes to Financial Statements
</TABLE>


                                      F-5
<PAGE>
<TABLE>
<CAPTION>
                                 PURE CYCLE CORPORATION
                                STATEMENTS OF CASH FLOWS

                                                               Years ended August 31,
                                                             ---------------------------
                                                                 2003           2002
                                                             -------------  ------------
<S>                                                          <C>            <C>
Cash flows from operating activities:
  Net loss                                                   $   (321,043)  $ ( 245,147)
  Adjustments to reconcile
  net loss to net cash used in operating activities:
    Depreciation expense                                            4,948         4,220
    Depletion expense                                                 637           738
    Change in accrued interest                                    162,089       178,741
    Changes in operating assets and liabilities:
      Trade accounts receivable                                   (16,768)      (17,664)
    Other assets                                                   25,200        36,459
      Accounts payable and accrued liabilities                     29,893         3,885
                                                             -------------  ------------
        Net cash used in operating activities                    (115,044)      (38,768)
                                                             -------------  ------------

Cash used in investing activities-
  Investments in water supply                                    (146,896)      (87,342)
  Investments in water systems                                         --       (21,830)
                                                             -------------  ------------
        Net cash provided by investing activities                (146,896)     (109,172)

Cash flows from financing activities-
  Proceeds from sale of equity instruments                        500,000            --
                                                             -------------  ------------

        Net increase (decease) in cash and cash equivalents       238,060      (147,940)
                                                             -------------  ------------
        Cash and cash equivalents beginning of year               287,720       435,660
                                                             -------------  ------------

        Cash and cash equivalents end of year                $    525,780   $   287,720
                                                             =============  ============
<FN>
                     See Accompanying Notes to Financial Statements
</TABLE>


                                      F-6
<PAGE>
                             PURE CYCLE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                            August 31, 2003 and 2002


NOTE 1 - ORGANIZATION AND BUSINESS

     Pure Cycle Corporation (Company) owns certain water assets and is providing
water and wastewater services to customers located in the Denver metropolitan
area (Service Area).  The Company operates water and wastewater systems and its
operating activities include designing, constructing, operating and maintaining
systems serving customers in the Denver metropolitan area. The Company also owns
patented water recycling technologies which are capable of processing wastewater
into pure potable drinking water. The Company's focus continues to be to provide
water and wastewater service to customers within its Service Area and the
Company expects to expand its service to other areas throughout the Denver
metropolitan area and the southwestern United States.

     Although the Company believes it will be successful in marketing the water
from one or both of its water projects, there can be no assurance that sales can
be made on terms acceptable to the Company.  The Company's ability to ultimately
realize its investment in its two primary water projects is dependent on its
ability to successfully market the water, or in the event it is unsuccessful, to
sell the underlying water assets.

     The Company believes that at August 31, 2003, it has sufficient working
capital and financing sources 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.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue recognition
- -------------------

     The Company recognizes construction project income using the
percentage-of-completion method, measured by the contract costs incurred to date
as a percentage of the estimated total contract costs.  Contract costs include
all direct material, labor, and equipment costs and those indirect costs related
to contract performance such as indirect labor and supplies costs.  If the
construction project revenue is not fixed, the Company estimates revenues that
are most likely to occur.  Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined.  Billings
in excess of costs and estimated earnings represent payments received on
construction projects under which the work has not been completed.  These
amounts, if any, are recognized as construction progresses in accordance with
the percentage-of-completion method.

     The Company recognizes water usage revenues upon delivering water to
customers.  The Company recognizes wastewater processing revenues based on flat
fees assessed per single family equivalent unit served.  Costs of delivering
water and providing wastewater service to customers are recognized as incurred.
Revenues from the sale of water and wastewater taps is recognized when taps are
sold.

Use  of  estimates
- ------------------

     The preparation of financial statements in conformity with accounting
principles generally accepted in the United State of America requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the


                                      F-7
<PAGE>
                             PURE CYCLE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                            August 31, 2003 and 2002


date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.  Actual results could differ from those
estimates.

Cash equivalents
- ----------------

     Cash and cash equivalents include all liquid debt instruments with an
original maturity of three months or less.

Cash  flows
- -----------

     No cash was paid for interest or taxes in 2003 or 2002.  See Note 6 for
discussion regarding non cash exchange of common stock for preferred stock.

Long lived assets
- -----------------

     The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.  Retention of the conditional Paradise water rights is subject
to periodic review of future use and satisfactory findings by the Colorado Water
Court.  In addition, legal issues relating to interstate water transfers and
interbasin water transfers make the short-term realization of these assets
unlikely.  Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted net cash
flows expected to be generated by the asset.  If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets.  Assets
to be disposed of are reported at the lower of the carrying amount or fair value
less costs to sell.  The Company believes there are no impairments in the
carrying amounts of its investments in water and water systems at August 31,
2003.

Water and wastewater systems
- ----------------------------

     The Company capitalizes certain legal, engineering and permitting costs
relating to the adjudication and improvement of its water assets.

Depletion and Depreciation of water assets
- ------------------------------------------

     The Company depletes its water assets on the basis of units produced
divided by the total volume of water adjudicated in the water decrees.  Water
systems are depreciated on a straight line basis over their estimated useful
lives of 30 years.


                                      F-8
<PAGE>
                             PURE CYCLE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                            August 31, 2003 and 2002


Stock-Based  Compensation
- -------------------------

     The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principals Board ("APB No. 25"), Accounting for
Stock Issued to Employees.  The Company has adopted the disclosure requirements
of Statement of Financial Accounting Standards ("SFAS No. 123"), "Accounting for
Stock-Based Compensation" as specified in SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure-an amendment of SFAS No.
123". The pro forma disclosure of net loss and loss per share required by SFAS
No. 123 is shown below.

<TABLE>
<CAPTION>
                                                              2003       2002
                                                              ----       ----
<S>                                                         <C>        <C>
Net loss, as reported                                       (321,043)  (245,147)
Add: Stock-based employee compensation
  Expense included in reported net income                         --         --
Deduct:  Total stock-based employee compensation
  expense determined under fair value based method for all
  options and warrants                                            --         --
Pro forma net loss                                             ($.04)     ($.03)
</TABLE>

Income  taxes
- -------------

     The Company uses the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases.  Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

Loss  per  common  share
- ------------------------

     Loss per common share is computed by dividing net loss by the weighted
average number of shares outstanding during each period.  Convertible preferred
stock and common stock options and warrants aggregating 6,774,688 common share
equivalents outstanding as of August 31, 2003 have been excluded from the
calculation of loss per share as their effect is anti-dilutive.

NOTE  3  -  RANGEVIEW  WATER  SUPPLY  AND  SYSTEM
- -------------------------------------------------

     Beginning in 1987, the Company initiated the purchase of the Rangeview
water assets.  From 1987 through 2003, the Company made payments to the sellers
of the Rangeview water assets and capitalized costs incurred relating to the
acquisition of the water assets totaling $12,038,161, and capitalized certain
direct costs relating to improvements to the asset which include legal and
engineering costs totaling $1,672,612.

     In April 1996, the Company completed the purchase of the Rangeview water
assets and entered into a water privatization agreement with the State of
Colorado and the Rangeview Metropolitan District (the "District"), a related
party, which enabled the Company to acquire ownership rights to a total gross
volume of 1,165,000 acre feet of groundwater (approximately 11,650 acre feet per
year), an option to


                                      F-9
<PAGE>
                             PURE CYCLE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                            August 31, 2003 and 2002


substitute 1,650 acre feet of surface water in exchange for a total gross volume
of 165,000 acre feet of groundwater, and the use of surface reservoir storage
capacity (collectively referred to as the "Export Water Supply").

     In addition to the Export Water Supply, the Company entered into a water
and wastewater service agreement ("The Service Agreements") with the District
which grants the Company an eighty-five year exclusive right to design,
construct, operate and maintain the District's water and wastewater systems.  In
exchange for designing, constructing, operating and maintaining the District's
water and wastewater system, the Company will receive 95% of the District's
water revenues remaining after payment of royalties which are currently 12% of
gross revenues to the State Land Board (which may change in the future), 100% of
the District's wastewater system development charges and 90% of the District's
wastewater usage charges. The Company delivered approximately 47.3 and 54.5
million gallons of water to customers in the Service Area in fiscal 2003 and
2002, respectively.  The Company processed approximately 6.95 and 3.7 million
gallons of wastewater from customers within its Service Area during fiscal 2003
and 2002, respectively.

     The Company capitalizes certain legal, engineering and other costs relating
to the acquisition of the Rangeview Water Supply due to improvements of the
water assets through adjudication and engineering services.

     Participating interests in the Comprehensive Amendment Agreement (the
"CAA"), in the aggregate, have the right to receive approximately $32 Million
out of the proceeds of a sale or other disposition of the Export Water Supply.
The State Land Board has a security interest in such water rights for
obligations owed to it the Company under the CAA. As monies from the sale of the
Export Water are received, they are required to be paid to the holders of the
CAA participation interests, including holders of Series A-1 Preferred Stock, on
a pari passu basis for the first approximately $32 Million. After payment of
approximately $32 Million in participating interest pursuant to the CAA, LCH
Inc., a company affiliated with the Company's CEO, has the right to receive the
next $4,000,000 in proceeds in exchange for $950,000 in notes payable entered
into between LCH and the Company in 1987 and 1988. The next $433,000 in proceeds
are payable to the holders of the Company's Series B Preferred Stock. In 1994,
the Company issued the Series B Preferred Stock in exchange for certain accounts
payable totaling $433,000 to LC Holdings Inc. The total obligation of
$36,240,000 is non-interest bearing, and if the Export Water is not sold, the
parties to the agreement have no recourse against the Company. If the Company
does not sell the Export Water, the holders of the Series A-1, and Series B
Preferred Stock are not entitled to payment of any dividend and have no
contractual recourse against the Company.

     The participating interests liability of $11.1 million represents the
obligation recorded by the Company relating to actual cash financings received
and costs incurred to acquire the Rangeview water supply.  The remainder of the
participating interests ($20.7 million) represent a contingent return to
financing investors and certain preferred stock holders that will only be
payable from the sale of Export Water and will be recognized if and when such
sale occurs.

     During fiscal 2003 and 2002, the Company had revenues from two significant
customers that accounted for 81%  and 11%, respectively of the Company's
revenues during 2003 and 76% and 14%, respectively of revenues during 2002.


                                      F-10
<PAGE>
                             PURE CYCLE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                            August 31, 2003 and 2002


NOTE  4  -  NOTE  RECEIVABLE
- ----------------------------

     In 1995, the Company extended a line of credit to the District, a related
party.  The loan provides for borrowings of up to $250,000, is unsecured, bears
interest based on the prevailing prime rate plus 2% and matures on December 31,
2003.  The balance of the note receivable at August 31, 2003 was $399,902,
including accrued interest.  The Company intends to extend the due date to
December 31, 2004.  Accordingly, the note has been classified as non-current.

NOTE  5  -  ACCRUED  LIABILITIES
- --------------------------------

     During fiscal year ended August 31, 2003, the Company had accrued
liabilities of $43,528, of which approximately $26,000 were for audit fees and
the remainder was for operating trade accounts payables.  During fiscal year
ended August 31, 2002, the Company had accrued liabilities of $19,495, of which
approximately 18,000 were for audit fees.

NOTE 6 - LONG-TERM DEBT
- -----------------------

     Long-term debt, including accrued interest, at August 31, 2003 and 2002 is
comprised of the following:

<TABLE>
<CAPTION>
                                                                                       2003        2002
                                                                                    ----------
<S>                                                                                 <C>         <C>
Notes payable, including accrued interest to six related parties, due August 2007,
  interest at prime plus 2% (6.25% at August 31, 2003), unsecured                   $  503,439  $  484,876

Notes payable, including accrued interest to five related parties, due August
  2007, interest at 10.25%, unsecured, net of unamortized discount of $0 and
  $9,000, respectively                                                                 578,685     542,809

Note payable, to CEO, due October 2007, non-interest bearing, unsecured                 26,542      26,542

Notes payable, including accrued interest, to CEO due October 2007, interest at
  8.36% to 9.01%, unsecured                                                            508,941     487,581

Notes payable, including accrued interest, to related party, due October, 2007,
  interest at the prime rate plus 3% (7.25% at August 31, 2003), secured
  by shares of the Company's common stock owned by the President                     2,440,014   2,371,733

Notes payable, including accrued interest, to a related party, due August 2007,
  interest ranging from 7.18% to 8.04%, unsecured                                    __831,924   __799,729
                                                                                    ----------  ----------

Total long-term debt                                                                $4,889,545  $4,713,270
                                                                                    ==========  ==========
</TABLE>

Aggregate  maturities  of  long-term  debt  are  as  follows:

<TABLE>
<CAPTION>
    Year Ending August 31,                         Amount
- ---------------------------                      ----------
<S>                                              <C>

        2007                                      1,914,048
        2008 and thereafter                       2,975,497
                                                 ----------
        Total                                    $4,889,545
                                                 ==========
</TABLE>

     In 1996 and 1997, the Company entered into loan agreements with eleven
related party investors.  The loan balances total $1,082,124 at August 31, 2003,
the loans are unsecured, and bear interest at the rate of 10.25% and prime plus
2%.  In connection with the loan agreements, the Company issued warrants to
purchase 210,000 shares of the Company's common stock at $1.80 per share.  A
portion of the


                                      F-11
<PAGE>
                             PURE CYCLE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                            August 31, 2003 and 2002


proceeds received under the agreement ($45,000) was attributed to the estimated
fair value of the warrants issued.  The resulting discount is being amortized
over the term of the loan.  In 2001, the term of the warrants and debt was
extended to 2007.  The fair value of the warrants extension are being amortized
over the revised term of the debt.  See further discussion of the warrant in
Note 7.

     As of August 31, 2003, the CEO of the Company has pledged a total of
2,000,000 shares of the Company's common stock from his personal holdings as
collateral on certain of the above notes payable.

NOTE  7  -  STOCKHOLDERS'  EQUITY
- ---------------------------------

     Preferred and Common Stock
     --------------------------

     The holders of the Series A-1 Convertible Preferred Stock are entitled to
be paid a distribution amount equal to $2.00 per share represented by a
Participating Interest in the CAA.  Each share of Series A-1 Preferred Stock is
convertible into .55556 shares of Common Stock at the election of the holders of
the Preferred Stock or the Company under certain conditions.  The holders of the
Series B Preferred Stock are entitled to be paid a distribution of $1.00 per
share from the disposition of the Rangeview asset after payment of the Series
A-1 distribution.  The holders of the Series D and D-1 have dividend rights
equal to those of common stockholders and each such share is convertible into .1
share of Common Stock at the election of the holder.  The preferred stockholders
have liquidation priorities as defined in their certificates of designation.

     In August 2003, the Company entered into a Plan of Recapitalization and a
Stock Purchase Agreement whereby the Company issued 2,000,000 shares of  Series
D-1 Preferred Stock to the Company's CEO, Mr. Thomas Clark in exchange for
200,000 shares of Common Stock owned by Mr. Clark.  The Company sold 200,000
shares of the Company's Common Stock at $2.50 per share to eleven accredited
investors, four of whom had previously invested with the Company.  Proceeds to
the Company were $500,000.  The Series D-1 Preferred Stock does not earn
dividends and is convertible into 200,000 shares of common stock at such time
that the Company has sufficient shares of authorized Common Stock.  The shares
were issued under Section 4(2) of the Securities Act of 1933.

     Stock Options
     -------------

     Pursuant to the Company's Equity Incentive Plan approved by stockholders in
June of 1992, the Company granted Mr. Fletcher Byrom, Ms. Margaret Hansson, Mr.
George Middlemas, and Mr. Mark Harding options to purchase 700,000, 800,000,
100,000, and 700,000 shares of common stock respectively at an exercise price of
$1.80 per share.  In April of 2001, the Board extended the expiration date of
options granted to Mr. Fletcher Byrom, Ms. Margaret Hansson, Mr. George
Middlemas and Mr.  Mark Harding from August 2002 to August 2007.  In connection
with their extension of the expiration dates and whereas the related options
were fully vested in April 2001, and whereas these options were not in the money
at the time of their extension, no compensation expense was recognized for the
extensions.  Also in April 2001, the Board granted Mr. Harding options pursuant
to employment arrangements outside the Equity Incentive Plan to purchase an
additional 300,000 shares of common stock at an exercise price of $1.80 per
share of which 225,000 vested immediately and 25,000 shares vest on each
anniversary date of the grant over the following three years.   Mr. Harding's
new options also expire in August 2007.

     No options were granted in fiscal year 2003.

     A summary of the status of the Company's Equity Incentive Plan and other
compensatory options as of August 31, 2003 and 2002, and changes during the
years then ended is presented below:


                                      F-12
<PAGE>
                             PURE CYCLE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                            August 31, 2003 and 2002


<TABLE>
<CAPTION>
                                           2003                        2002
                                   --------------------------  --------------------------
                                                 WEIGHTED                    WEIGHTED
                                                  AVERAGE                     AVERAGE
FIXED OPTIONS                       SHARES    EXERCISE PRICE    SHARES    EXERCISE PRICE
                                   ---------  ---------------  ---------  ---------------
<S>                                <C>        <C>              <C>        <C>
Outstanding at beginning of year   2,600,000  $          1.80  2,600,000  $          1.80
Granted                            _______--               --   ______--               --
                                   ---------                   ---------
Outstanding at end of year         2,600,000  $          1.80  2,600,000  $          1.80
                                   =========                   =========

Options exercisable at year end    2,575,000  $          1.80  2,550,000  $          1.80
Weighted average fair value of
  options granted during the year                          --                          --
</TABLE>

     The weighted average remaining contractual life of the Options Outstanding
and Options Exercisable as of August 31, 2003 is 4 years.

     No options were exercised during the years ended August 31, 2003 and 2002.

Warrants
- --------

     In addition to the warrants discussed in Note 6, the Company issued
warrants from 1990 through 1996 to purchase 2,230,300 shares of the Company's
stock at $1.80 per share in connection with the sale of profits interests in the
Rangeview project, which remain outstanding as of August 31, 2003.  In 1996, all
interests held in the Rangeview water rights were converted into participating
interests in the CAA.  The warrants expire 6 months after the payment of the
participating interests in the Comprehensive Amendment Agreement ("CAA").

     Certain related parties, who hold notes payable from the Company which
aggregate a total of $1,082,124, as of August 31, 2003, extended the maturity
date of the notes from August 2002 to August 2007.  In connection with the
extension of the  maturity of the notes, the expiration date of the warrants was
extended to August 2007.  The $126,000 recorded in connection with extension of
the warrants' expiration date is the fair value of the warrants as of April 9,
2001, calculated using a Black-Scholes option-pricing model with the following
assumptions: no dividend yield; annualized expected volatility of 101%; and a
weighted average risk-free interest rate of 4.65%.  This amount is being
amortized straight-line over the period August 2002 to August 2007 as the
imputed consideration relating to the extension of the debt terms.

     No warrants were exercised during the years ended August 31, 2003 and 2002.

NOTE  8  -  SIGNIFICANT  CUSTOMERS
- ----------------------------------

     The Company had accounts receivable from two significant customers totaling
approximately $56,546 and $7,187, respectively, as of August 31, 2003 and
$38,700 and $12,200, respectively, as of August 31, 2002.  The same customers
accounted for approximately 81% and 11%, respectively of the Company's revenue
during the year ended August 31, 2003 and approximately 76% and 14%,
respectively of the Company's revenue during the year ended August 31, 2002.


                                      F-13
<PAGE>
                             PURE CYCLE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                            August 31, 2003 and 2002


NOTE  9  -  INCOME  TAXES
- -------------------------

     The tax effects of the temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at August 31, 2003 and 2002
are presented below.

<TABLE>
<CAPTION>
                                                          2003          2002
                                                      ------------  ------------
<S>                                                   <C>           <C>
  Deferred tax assets:
      Net operating loss carry forwards               $ 2,483,000   $ 2,423,000
      Less valuation allowance                         (2,483,000)   (2,423,000)
                                                      ------------  ------------
      Net deferred tax asset                          $        --   $        --
                                                      ============  ============
</TABLE>

     The valuation allowance for deferred tax assets as of August 31, 2003 was
$2,483,000.  The net change in the valuation allowance for the year ended August
31, 2003 was  a net increase of $60,000, primarily attributable to the net
operating loss incurred during the year, expiration of a portion of net
operating loss carry forwards, and difference in amortization.  The deferred tax
asset at August 31, 2003, for which a valuation allowance has been recorded,
will be recognized, if ever, when realization is more likely than not.

     The expected statutory tax rate applied to the book loss is equal to the
increase in the net operating tax loss carry forwards less the expiration of any
tax loss carry forwards.  At August 31, 2003, the Company has estimated net
operating loss carry forwards for federal income tax purposes of  approximately
$6,423,000, which are available to offset future federal taxable income, if any,
through fiscal 2023.

NOTE 10 - INFORMATION CONCERNING BUSINESS SEGMENTS
- --------------------------------------------------

     The Company has two lines of business:  one is the design and construction
of water and wastewater systems pursuant to the Service Agreements to provide
water and wastewater service to customers within the Service Area; and the
second is the operation and maintenance of the water and wastewater systems
which serve customers within the Service Area.  The Company did not recognize
construction revenues during fiscal years 2003 or 2002.

     The accounting policies of the segments are the same as those of the
Company, described in note 2.  The Company evaluates the performance of its
segments based on gross margins of the respective business units.

     Segment information for the years ended August 31, 2003 and 2002 is as
follows:

<TABLE>
<CAPTION>
                                        2003                      2002
                              ------------------------  ------------------------
                                Service       Total       Service       Total
                              -----------  -----------  -----------  -----------
<S>                           <C>          <C>          <C>          <C>
Revenues                      $   225,432  $   225,432  $   204,858  $   204,858
Gross margin                      187,936      187,936      177,066      177,066
Total assets                   20,413,404   20,413,404   20,028,279   20,028,279
Capital expenditures              146,896      146,896      109,172      109,172
</TABLE>

NOTE 11 - RELATED PARTY TRANSACTIONS
- ------------------------------------

     During the years ended August 31, 2003 and 2002, the Company has occupied
office space from a related party at no cost to the Company.  Additionally, the
Company has certain debt instruments between related parties (see notes 3, 4 and
5).


                                      F-14
<PAGE>
                             PURE CYCLE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                            August 31, 2003 and 2002


NOTE 12 - SUBSEQUENT EVENT TRANSACTION
- --------------------------------------

     Subsequent to fiscal year end August 31, 2003, subject to final
governmental approvals, the Company entered into a long-term Water Service
Agreement ("Agreement") whereby the Company will provide domestic water service
to a new master planned community located in the Denver metropolitan area in
Arapahoe County.  The new community will be developed over several years and be
composed of up to 4,000 single family residences.  The Company will generate
one-time revenues from the sale of water taps (currently $11,100 per tap) and
annual revenues through the delivery of water.  The agreement is expected to
generate gross revenues of $44 million in tap fee revenues and approximately $2
million annually from water usage sales.  The Company is responsible for
developing the associated infrastructure, which is expected to commence in the
summer of 2003 to provide water service to the development and expects the tap
fee revenues will provide sufficient capital to the Company to construct
facilities necessary to deliver water to the development.

NOTE 13 - SUBSEQUENT EVENT - REVERSE STOCK SPLIT
- ------------------------------------------------

     Effective April 26, 2004, the Company completed a 1-for-10 reverse stock
split for its common stock.  All common share amounts and per share amounts have
been restated to reflect the reverse stock split.


                                      F-15
<PAGE>
<TABLE>
<CAPTION>
                             PURE CYCLE CORPORATION
                                 BALANCE SHEETS
                    February 29, 2004 and February 28, 2003

                                                                February 29,    August 31,
     ASSETS                                                         2004           2003
     ------                                                    --------------  -------------
                                                                (unaudited)
<S>                                                            <C>             <C>
Current assets:
    Cash and cash equivalents                                  $     338,599   $    525,780
    Trade accounts receivable                                       __33,841         67,687
                                                               --------------  -------------
        Total current assets                                         372,440        593,467

Investment in water and systems:
    Rangeview water supply                                        13,777,395     13,710,773
    Paradise water supply                                          5,498,124      5,494,323
    Rangeview water system                                           148,441        148,441
    Accumulated depreciation & depletion                             (13,325)       (10,543)
                                                               --------------  -------------
        Total investment in water and systems                     19,410,635     19,342,994

Note receivable, including accrued interest                          406,782        399,902

Other assets                                                          64,441         77,041
                                                               --------------  -------------
                                                               $  20,254,298   $ 20,413,404
                                                               ==============  =============

     LIABILITIES AND STOCKHOLDERS' EQUITY
     ------------------------------------

Current liabilities:
    Accounts payable                                           $      23,550          8,244
    Accrued liabilities                                               21,100         43,528
                                                               --------------  -------------
        Total current liabilities                                     44,650         51,772

Long-term debt - related parties, including accrued interest       4,976,511      4,889,545

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 - 1,058,000 and 1,600,000 shares issued and
          outstanding, respectively                                    1,058          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
        Series D1- 2,000,000 shares issued and outstanding             2,000          2,000
    Common stock, par value 1/3 of $.01 per
        share; authorized - 135,000,000 shares;
        8,145,087 and 7,843,976 shares issued and
        outstanding, respectively                                     27,123         26,120
    Additional paid-in capital                                    25,511,992     25,512,453
    Accumulated deficit                                          (21,406,554)   (21,167,604)
                                                               --------------  -------------
        Total stockholders' equity                                 4,142,507      4,381,457
                                                               --------------  -------------
                                                               $  20,254,298   $ 20,413,404
                                                               ==============  =============
<FN>
                     See Accompanying Notes to the Financial Statements
</TABLE>


                                      F-16
<PAGE>
<TABLE>
<CAPTION>
                             PURE CYCLE CORPORATION
                            STATEMENTS OF OPERATIONS
            Six Months Ended February 29, 2004 and February 28, 2003

                                                    Six months ended
                                             ------------------------------
                                              February 29,    February 28,
                                                  2004            2003
                                             --------------  --------------
<S>                                          <C>             <C>
Water service revenue
        Water usage revenues                 $      55,314   $      77,225
        Wastewater usage fees                       27,002          26,587
        Revenues - other                             3,415              --
                                             --------------  --------------
                                                    85,731         103,812
                                             --------------  --------------


Water service operating expense                   (  5,190)       (  5,719)
Wastewater service operating expense              (  3,819)       (  5,013)
Consulting services expense                       (  2,329)             --
                                             --------------  --------------

Gross margin                                        74,393          93,080

General and administrative expense               ( 219,302)      ( 124,556)
Depreciation expense                             (   2,474)      (   2,482)
Depletion expense                                (     308)      (     826)

Other income (expense):

    Interest income                                  8,307           8,556
    Interest expense related parties             (  86,966)      (  88,528)
    Interest expense other                       (  12,600)        (12,600)
                                             --------------
Net loss                                     $   ( 238,950)  $    (127,356)
                                             ==============  ==============


Basic and diluted net loss per common share  $       (0.03)  $       (0.02)
                                             ==============  ==============

Weighted average common shares outstanding       8,056,418       7,843,976
                                             ==============  ==============
<FN>
               See Accompanying Notes to the Financial Statements
</TABLE>


                                      F-17
<PAGE>
<TABLE>
<CAPTION>
                             PURE CYCLE CORPORATION
                            STATEMENTS OF CASH FLOWS
            Six Months Ended February 29, 2004 and February 28, 2003

                                                                   Six months ended
                                                            ------------------------------
                                                             February 29,    February 28,
                                                                 2004            2003
                                                            --------------  --------------
<S>                                                         <C>             <C>
Cash flows from operating activities:
  Net loss                                                  $    (238,950)  $    (127,356)
      Adjustment to reconcile
      net loss to net cash provided by
        operating activities:
        Depreciation on water systems                               2,474           2,482
        Depletion expense                                             308             826

    Increase (decrease) in accrued interest
      on note receivable                                           (6,880)        ( 7,166)
    Increase in accrued interest on long
      term debt and other non-current
      liabilities                                                  86,966          88,528
    Changes in operating assets and liabilities:
      Trade accounts receivable                                    33,846          23,284
      Other assets                                                 12,600          12,600
      Accounts payable and accrued liabilities                   (  7,122)       (  2,455)
                                                            --------------  --------------
        Net cash used in
        operating activities                                     (116,758)         (9,257)
                                                            --------------  --------------

Cash flows provided by (and in) from investing activities:
    Investments in water supply                                   (70,423)        (95,716)
    Investment in Rangeview water system                               --              --
                                                            --------------  --------------
      Net cash used in investing  activities                      (70,423)        (95,716)

Cash flows from financing activities:

    Net decrease
      in cash and cash
      equivalents                                                (187,181)       (104,973)
    Cash and cash equivalents
      beginning of period                                         525,780         287,720
                                                            --------------  --------------
    Cash and cash equivalents
      end of period                                         $     338,599   $     182,747
                                                            ==============  ==============
<FN>
                    See Accompanying Notes to the Financial Statements
</TABLE>


                                      F-18
<PAGE>
                             PURE CYCLE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
            Six Months Ended February 29, 2004 and February 28, 2003


NOTE 1 - ACCOUNTING PRINCIPLES
- ------------------------------

     The balance sheet as of February 29, 2004 and the statements of operations
and statements of cash flows for the six month periods ended February 29, 2004
and February 28, 2003 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 29, 2004 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 2003 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.

     Certain prior period amounts have been reclassified to conform to the
current period presentation.

NOTE  2  -  STOCKHOLDERS'  EQUITY
- ---------------------------------

     In August 2003, the Company entered into a Plan of Recapitalization and a
Stock Purchase Agreement whereby the Company issued 2,000,000 shares of  Series
D-1 Preferred Stock to the Company's CEO, Mr. Thomas Clark, in exchange for
200,000 shares of Common Stock owned by Mr. Clark.  The Company sold 200,000
shares of the Company's Common Stock at $2.50 per share to eleven accredited
investors, four of whom had previously invested with the Company.  Proceeds to
the Company were $500,000.  The Series D-1 Preferred Stock does not earn
dividends and is convertible into 200,000 shares of common stock at such time
that the Company has sufficient shares of authorized Common Stock.  The shares
were issued under Section 4(2) of the Securities Act of 1933.

     During the six months ended February 29, 2004, the Company issued 301,111
shares of Common Stock in exchange for 542,000 shares of Series A-1 Preferred
Stock, pursuant to the certificate of designation of the Series A-1 Preferred
Stock.  The holders of the 542,000 shares of Series A-1 Preferred Stock
surrendered the shares to the Company for retirement.

NOTE 3 - WATER CONTRACT
- -----------------------

     On October 31, 2003, the Company entered into a long-term Water Service
Agreement ("Agreement") whereby the Company will provide domestic water service
to a new master planned community located in the Denver metropolitan area in
Arapahoe County.  The new community will be developed over several years and be
composed of up to 4,000 single family residences.  The Company will generate
one-time revenues from the sale of water taps (currently $11,100 per tap) and
annual revenues through the delivery of water.  The agreement is expected to
generate gross revenues of $44 million in tap fee revenues and approximately $2
million annually from water usage sales.  The Company is responsible for
developing the associated infrastructure, which is expected to commence in the
summer of 2004 to provide water service to the development and expects the tap
fee revenues will provide sufficient capital to the Company to construct
facilities necessary to deliver water to the development.


                                      F-19
<PAGE>
                             PURE CYCLE CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
            Six Months Ended February 29, 2004 and February 28, 2003


NOTE  4  -  RECENT  ACCOUNTING  PRONOUNCEMENTS
- ----------------------------------------------

     In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation
of Variable Interest Entities, an interpretation of ARB No. 51. FIN No. 46
requires an entity to consolidate a variable interest entity if it is designated
as the primary beneficiary of that entity even if the entity does not have a
majority of voting interests. A variable interest entity is generally defined as
an entity where its equity is unable to finance its activities or where the
owners of the entity lack the risk and rewards of ownership. The provisions of
this statement apply at inception for any entity created after January 31, 2003.
For small business entities, the provisions of this Interpretation must be
applied at the end of the first reporting period that ends after December 15,
2004. The Company has determined it is not party to a variable interest entity.

     In June 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." The
statement is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003, except for mandatory redeemable financial
instruments of a nonpublic entity.  The adoption of SFAS No. 150 did not have an
impact on the Company's financial statements.


                                      F-20
<PAGE>
================================================================================


     You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement to this prospectus.  We have
authorized no one to provide you with different information.  We are not making
an offer of these securities in any state where the offer is not permitted.  You
should not assume that the information in this prospectus is accurate as of any
date other than the date on the front of this prospectus.




                             PURE CYCLE CORPORATION

                                  COMMON STOCK







                                  ____________

                                   PROSPECTUS

                                  ____________




                               ____________, 2004


================================================================================


<PAGE>
                                     PART II
                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     Pure Cycle is incorporated in the State of Delaware.  The Delaware General
Corporation Law (the "DGCL") permits corporations to indemnify a present or
former director or officer of the corporation (and certain other persons serving
at the request of the corporation in related capacities) for liabilities,
including legal expenses, arising by reason of service in such capacity if such
person shall have acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and in any
criminal proceeding if such person had no reasonable cause to believe his
conduct was unlawful. However, in the case of actions brought by or in the right
of the corporation, no indemnification may be made with respect to any matter as
to which such director or officer shall have been adjudged liable, except in
certain limited circumstances.

     Pure Cycle's Amended and Restated Certificate of Incorporation (the
"Certificate") and Bylaws, as amended (the "Bylaws") provide that the registrant
shall indemnify directors and executive officers to the fullest extent now or
hereafter permitted by the DGCL.

     The indemnification provided by the DGCL and the registrant's Certificate
and Bylaws is not exclusive of any other rights to indemnification to which a
director or officer may be entitled. The general effect of the foregoing
provisions may be to reduce the number of circumstances in which an officer or
director may be required to bear the economic burden of the foregoing
liabilities and expenses.

     Pure Cycle is in the process of obtaining a liability policy for its
directors and officers as permitted by the DGCL which extends to, among other
things, liability arising under the Securities Act of 1933, as amended.


ITEM 25.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     The following table sets forth various expenses in connection with the sale
and distribution of the securities being registered, other than the underwriting
discounts and commissions.  All amounts shown are estimates except the
Commission's registration fee and the NASD filing fee.

<TABLE>
<CAPTION>
<S>                                                          <C>
       Registration fee--Securities and Exchange Commission  $4,112.08
                                                             ---------
       NASD filing fee. . . . . . . . . . . . . . . . . . .   3,745.52
                                                             ---------
       Legal fees and expenses. . . . . . . . . . . . . . .   125,000*
                                                             ---------
       Accountants fees and expenses. . . . . . . . . . . .    50,000*
                                                             ---------
       Printing expenses. . . . . . . . . . . . . . . . . .     4,500*
                                                             ---------
       Blue sky filing fees and expenses. . . . . . . . . .     15,000
                                                      ---------
       Transfer agent and custodian fees and expenses . . .      7,500
                                                             ---------
       Miscellaneous. . . . . . . . . . . . . . . . . . . .   5,142.40
                                                             ---------

       Total. . . . . . . . . . . . . . . . . . . . . . . .  $215,000*
                                                             ---------
<FN>
     *Estimated.
</TABLE>

     The  selling  stockholders  have  paid none of the expenses related to this
offering.


                                      II-1
<PAGE>
ITEM 26.  RECENT SALES OF UNREGISTERED SECURITIES

     During the six-month period ended February 29, 2004, we issued 301,111
shares of common stock in exchange for 542,000 shares of Series A-1 Preferred
Stock, pursuant to the certificate of designation of the Series A-1 Preferred
Stock.  The holders of the 542,000 shares of Series A-1 Preferred Stock
surrendered the shares to us for retirement.

     In August 2003, we entered into a Plan of Recapitalization and a Stock
Purchase Agreement whereby we issued 2,000,000 shares of Series D-1 Convertible
Preferred Stock to our CEO, Mr. Thomas Clark in exchange for 200,000 (post
reverse split) shares of common stock owned by Mr. Clark.  We sold 200,000 (post
reverse split) shares of our common stock at $2.50 per share to eleven
accredited investors, four of whom had previously invested with us.  Proceeds to
us were $500,000.  The Preferred Stock was issued under Section 4(2) of the
Securities Act of 1933.  The common stock was sold pursuant to Regulation D,
Rule 506.

     In August 2001, we entered into a Plan of Recapitalization and a Stock
Purchase Agreement whereby we issued 6,455,000 shares of Series D Preferred
Stock to our CEO, Mr. Thomas Clark in exchange for 42,166 (post reverse split)
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.  We 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.  We sold
62,500 (post reverse split) shares of our common stock at $1.60 per share to two
accredited investors.  Proceeds to us were $100,000.  The shares were issued
under Section 4(2) of the Securities Act of 1933.

ITEM 27.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
Exhibit
 No.     Description of Exhibit
- ----     ----------------------
<S>      <C>

   1.1   Underwriting Agreement.*

   3.1   Amended and Restated Certificate of Incorporation.*

   3.2   Bylaws (incorporated by reference from Exhibit 4.C to Registration Statement No. 2-62483).

   3.3   Amendment to Bylaws effective April 22, 1988 (incorporated by reference from Annual Report
         on Form 10-KSB for the fiscal year ended August 31, 1989).

   5.1   Opinion of Davis Graham & Stubbs LLP.***

  10.1   Letter Agreement dated August 31, 1987 between the Company and Paradise Oil, Water &
         Land Development, Inc. (incorporated by reference from Current Report on Form 8-K filed
         with the SEC on August 5, 1988).

  10.2   Right of First Refusal Agreement dated August 12, 1992 between Inco Securities Corporation
         and Richard F. Myers, Mark W. Harding, Thomas P. Clark, Thomas Lamm and Rowena
         Rogers.**

  10.3   Stock Purchase Agreement dated December 10, 1991 by and among the Company and Apex
         Investment Fund II, L.P., the Environmental Fund II, L.P. and Productivity Fund II, L.P.
         (incorporated by reference from Annual Report on Form 10-KSB for the fiscal year ended
         August 31, 1992).


                                      II-2
<PAGE>
  10.4   Service Agreement dated April 11, 1996 by and between the Company and the District
         (incorporated by reference from Quarterly Report on Form 10-QSB for the fiscal quarter ended
         May 31, 1996).

  10.5   Settlement Agreement and Mutual Release dated April 11, 1996 by and among the State Land
         Board and the District, the Company, INCO Securities Corporation, Apex Investment Fund II,
         L.P., Landmark Water Partners, L.P., Landmark Water Partners II, L.P., Environmental
         Venture Fund, L.P., Environmental Private Equity Fund II, L.P., The Productivity Fund II, L.P.,
         Proactive Partners, L.P., Warwick Partners, L.P., Auginco, Anders C. Brag, Amy Leeds, and
         D.W. Pettyjohn, and OAR, Incorporated, Willard G. Owens and H.F. Riebesell, Jr.
         (incorporated by reference from Quarterly Report on Form 10-QSB for the fiscal quarter ended
         May 31, 1996).

  10.6   Agreement for Sale of Export Water dated April 11, 1996 by and among the Company and the
         District (incorporated by reference from Quarterly Report on Form 10-QSB for the fiscal
         quarter ended May 31, 1996).

  10.7   Comprehensive Amendment Agreement No. 1 dated April 1, 1996 by and among ISC, the
         Company, the Bondholders, Gregory M. Morey, Newell Augur, Jr., Bill Peterson, Stuart
         Sundlun, Alan C. Stormo, Beverlee A. Beardslee, Bradley Kent Beardslee, Robert Douglas
         Beardslee, Asra Corporation, International Properties, Inc., and the State Land Board
         (incorporated by reference from Quarterly Report on Form 10-QSB for the fiscal quarter ended
         May 31, 1996).

  10.8   Wastewater Service Agreement dated January 22, 1997 by and between the Company and the
         District (incorporated by reference from Annual Report on Form 10-KSB for the fiscal year
         ended August 31, 1998).

  10.9   Water Service Agreement for the Sky Ranch PUD dated October 31, 2003 by and between
         Airpark Metropolitan District, Icon Investors I, LLC, the Company and the District.**

  10.10  1992 Equity Incentive Plan (incorporated by reference from Proxy Statement filed with the SEC
         on March 18, 1993).

  10.11  2004 Incentive Plan (incorporated by reference from Proxy Statement filed with the SEC on
         March 25, 2004).

  10.12  Non-Statutory Stock Option Agreement dated April 19, 2001 between the Company and
         Mark W. Harding.**

  10.13  Amendment to Water Service Agreement for the Sky Ranch PUD dated January 6, 2004.*

  10.14  Amendment to Water Service Agreement for the Sky Ranch PUD dated January 30, 2004.*

  10.15  Amendment to Water Service Agreement for the Sky Ranch PUD dated January 30, 2004
         pertaining to amendment of the Option Agreement for Export Water.*

  10.16  Amendment to Water Service Agreement for the Sky Ranch PUD dated March 5, 2004.*

  10.17  Amended and Restated Lease Agreement between the State Land Board and the District dated
         April 4, 1996.*

  10.18  Bargain and Sale Deed among the State Land Board, the District and the Company dated April
         11, 1996.*

  10.19  Mortgage Deed, Security Agreement, and Financing Statement between the State Land Board
         and the Company dated April 11, 1996.*


                                      II-3
<PAGE>
  10.20  Water Service Agreement for the Hills at Sky Ranch Water dated May 14, 2004 among Icon
         Land II, LLC, a Colorado limited liability company, the Company, and the District
         (incorporated by reference from the Current Report on Form 8-K filed with the SEC on May 21,
         2004).

  23.1   Consent of Davis Graham & Stubbs LLP (included in Exhibit 5.1).

  23.2   Consent of KPMG LLP.*
<FN>
_________________
*  Filed  herewith.

**  Previously  filed.

***  To  be  filed  by  amendment.
</TABLE>

ITEM  28.  UNDERTAKINGS.

     (a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.  In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the small business issuer will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.

     (b)  The undersigned small business issuer will:

          (1)  For determining any liability under the Securities Act, treat the
     information omitted from the form of prospectus filed as part of this
     registration statement in reliance upon Rule 430A and contained in a form
     of prospectus filed by the small business issuer under Rule 424(b)(1) or
     (4) or 497(h) under the Securities Act as part of this registration
     statement as of the time the SEC declared it effective; and

          (2)  For determining any liability under the Securities Act, treat
     each post-effective amendment that contains a form of prospectus as a new
     registration statement for the securities offered in the registration
     statement, and that offering of the securities at that time as the initial
     bona fide offering of those securities.


                                      II-4
<PAGE>
                                   SIGNATURES

     In  accordance  with  the  requirements  of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of  the  requirements  for  filing on Form SB-2 and authorized this registration
statement  to  be  signed  on  its  behalf  by  the  undersigned, thereunto duly
authorized,  in  the  City  of  Denver,  State  of  Colorado,  on  June 7, 2004.

                              PURE CYCLE CORPORATION

                              By:  /s/ Mark W. Harding
                                 ------------------------------------------
                              Name:  Mark W. Harding
                              Title: President

     Pursuant  to  the  requirements  of  the  Securities  Act  of  1933,  this
registration  statement  has  been  signed  by  the  following  persons  in  the
capacities  and  on  the  dates  indicated.

     Signature         Title                     Date
     ---------         -----                     ----

     *                 Chief Executive Officer   June 7, 2004
- ---------------------
Thomas P. Clark        and Director (Principal
                       Executive Officer)

  /s/ Mark W. Harding  President and Director    June 7, 2004
- ---------------------
Mark W. Harding            (Principal Financial
                       Officer and Principal
                       Accounting Officer)

     *                 Chairman of the Board     June 7, 2004
- ---------------------
Harrison H. Augur

     *                 Director                  June 7, 2004
- ---------------------
Richard L. Guido

     *                 Director                  June 7, 2004
- ---------------------
Margaret S. Hansson

     *                 Director                  June 7, 2004
- ---------------------
George M. Middlemas

     * Mark W. Harding, by signing his name hereto, signs this document on
     behalf of each of the persons indicated by an asterisk above pursuant to a
     power of attorney duly executed by each such persons and previously filed
     with the Securities and Exchange Commission as part of the Registration
     Statement.

Date:  June 7, 2004               /s/ Mark W. Harding
                                  -----------------------------------------
                                  Mark W. Harding, Attorney-In-Fact


<PAGE>
<TABLE>
<CAPTION>
                                  EXHIBIT INDEX

Exhibit
 No.     Description of Exhibit
- ----     ----------------------
<S>      <C>

   1.1   Underwriting Agreement.*

   3.1   Amended and Restated Certificate of Incorporation.*

   3.2   Bylaws (incorporated by reference from Exhibit 4.C to Registration Statement No. 2-62483).

   3.3   Amendment to Bylaws effective April 22, 1988 (incorporated by reference from Annual Report
         on Form 10-KSB for the fiscal year ended August 31, 1989).

   5.1   Opinion of Davis Graham & Stubbs LLP.***

  10.1   Letter Agreement dated August 31, 1987 between the Company and Paradise Oil, Water &
         Land Development, Inc. (incorporated by reference from Current Report on Form 8-K filed
         with the SEC on August 5, 1988).

  10.2   Right of First Refusal Agreement dated August 12, 1992 between Inco Securities Corporation
         and Richard F. Myers, Mark W. Harding, Thomas P. Clark, Thomas Lamm and Rowena
         Rogers.**

  10.3   Stock Purchase Agreement dated December 10, 1991 by and among the Company and Apex
         Investment Fund II, L.P., the Environmental Fund II, L.P. and Productivity Fund II, L.P.
         (incorporated by reference from Annual Report on Form 10-KSB for the fiscal year ended
         August 31, 1992).

  10.4   Service Agreement dated April 11, 1996 by and between the Company and the District
         (incorporated by reference from Quarterly Report on Form 10-QSB for the fiscal quarter ended
         May 31, 1996).

  10.5   Settlement Agreement and Mutual Release dated April 11, 1996 by and among the State Land
         Board and the District, the Company, INCO Securities Corporation, Apex Investment Fund II,
         L.P., Landmark Water Partners, L.P., Landmark Water Partners II, L.P., Environmental
         Venture Fund, L.P., Environmental Private Equity Fund II, L.P., The Productivity Fund II, L.P.,
         Proactive Partners, L.P., Warwick Partners, L.P., Auginco, Anders C. Brag, Amy Leeds, and
         D.W. Pettyjohn, and OAR, Incorporated, Willard G. Owens and H.F. Riebesell, Jr.
         (incorporated by reference from Quarterly Report on Form 10-QSB for the fiscal quarter ended
         May 31, 1996).

  10.6   Agreement for Sale of Export Water dated April 11, 1996 by and among the Company and the
         District (incorporated by reference from Quarterly Report on Form 10-QSB for the fiscal
         quarter ended May 31, 1996).

  10.7   Comprehensive Amendment Agreement No. 1 dated April 1, 1996 by and among ISC, the
         Company, the Bondholders, Gregory M. Morey, Newell Augur, Jr., Bill Peterson, Stuart
         Sundlun, Alan C. Stormo, Beverlee A. Beardslee, Bradley Kent Beardslee, Robert Douglas
         Beardslee, Asra Corporation, International Properties, Inc., and the State Land Board
         (incorporated by reference from Quarterly Report on Form 10-QSB for the fiscal quarter ended
         May 31, 1996).

  10.8   Wastewater Service Agreement dated January 22, 1997 by and between the Company and the
         District (incorporated by reference from Annual Report on Form 10-KSB for the fiscal year
         ended August 31, 1998).

  10.9   Water Service Agreement for the Sky Ranch PUD dated October 31, 2003 by and between
         Airpark Metropolitan District, Icon Investors I, LLC, the Company and the District.**


<PAGE>
  10.10  1992 Equity Incentive Plan (incorporated by reference from Proxy Statement filed with the SEC
         on March 18, 1993).

  10.11  2004 Incentive Plan (incorporated by reference from Proxy Statement filed with the SEC on
         March 25, 2004).

  10.12  Non-Statutory Stock Option Agreement dated April 19, 2001 between the Company and
         Mark W. Harding.**

  10.13  Amendment to Water Service Agreement for the Sky Ranch PUD dated January 6, 2004.*

  10.14  Amendment to Water Service Agreement for the Sky Ranch PUD dated January 30, 2004.*

  10.15  Amendment to Water Service Agreement for the Sky Ranch PUD dated January 30, 2004
         pertaining to amendment of the Option Agreement for Export Water.*

  10.16  Amendment to Water Service Agreement for the Sky Ranch PUD dated March 5, 2004.*

  10.17  Amended and Restated Lease Agreement between the State Land Board and the District dated
         April 4, 1996.*

  10.18  Bargain and Sale Deed among the State Land Board, the District and the Company dated April
         11, 1996.*

  10.19  Mortgage Deed, Security Agreement, and Financing Statement between the State Land Board
         and the Company dated April 11, 1996.*

  10.20  Water Service Agreement for the Hills at Sky Ranch Water dated May 14, 2004 among Icon
         Land II, LLC, a Colorado limited liability company, the Company, and the District
         (incorporated by reference from the Current Report on Form 8-K filed with the SEC on May 21,
         2004).

  23.1   Consent of Davis Graham & Stubbs LLP (included in Exhibit 5.1).

  23.2   Consent of KPMG LLP.*
<FN>
_________________
*  Filed  herewith.

**  Previously  filed.

***  To  be  filed  by  amendment.
</TABLE>


<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-1.1
<SEQUENCE>2
<FILENAME>doc2.txt
<DESCRIPTION>EXHIBIT 1.1
<TEXT>

                             UNDERWRITING AGREEMENT

                                     BETWEEN

                             PURE CYCLE CORPORATION

                                       AND

                              FLAGSTONE SECURITIES




                              DATED:  JUNE __, 2004


<PAGE>
                             PURE CYCLE CORPORATION

                        3,205,367 SHARES OF COMMON STOCK


                             UNDERWRITING AGREEMENT


                                                              New York, New York
                                                                   June __, 2004

Flagstone Securities
347 West 57th Street
34th Floor
New York, New York  10019

Gentlemen:

          Pure Cycle Corporation, a corporation organized and existing under the
laws of the State of Delaware (the "Company"), and those certain selling
stockholders set forth on Schedule II attached hereto (the "Selling
Stockholders"), propose, subject to the terms and conditions stated herein, to
issue and sell to Flagstone Securities (being referred to herein variously as
"you", "Flagstone" or the "Representative" and, with the other underwriters
named in Schedule I hereto, the "Underwriters") an aggregate of 3,205,367 shares
(the "Firm Shares") of the Company's common stock, par value 1/3 of $0.01 per
share (the "Common Stock").  For the sole purpose of covering over-allotments in
connection with the sale of the Firm Shares, at the option of the Underwriters,
the Company proposes to issue and sell up to an additional 480,805 shares (the
"Option Shares") of Common Stock.  Of the Firm Shares, 700,000 are being offered
by the Company and 2,505,367 are being offered by the Selling Stockholders.  The
Firm Shares and any Option Shares purchased by the Underwriters are referred to
herein collectively as the "Shares."  The Shares are more fully described in the
Registration Statement referred to below.

     1.   Purchase and Sale of Securities.
          -------------------------------

          1.1  Firm Securities.
               ---------------

               1.1.1     Purchase of Firm Securities.  On the basis of the
                         ---------------------------
representations, warranties, covenants and agreements herein contained, but
subject to the terms and conditions herein set forth, (i) the Company agrees to
issue and sell, severally and not jointly, to the several Underwriters, an
aggregate of 700,000 Firm Shares and (ii) the Selling Stockholders, severally
and not jointly, agree to sell to the several Underwriters an aggregate of
2,505,367 Firm Shares, each Selling Stockholder selling the number of Firm
Shares set forth opposite such Selling Stockholder's name on Schedule II hereto.
On the basis of the representations, warranties, covenants and agreements herein
contained, but subject to the terms and conditions herein set


<PAGE>
forth, the Underwriters, severally and not jointly, agree to purchase from the
Company and the Selling Stockholders, at a purchase price (net of commissions of
6.625%) of $_____ per share, the number of Firm Shares set forth opposite their
respective names on Schedule I attached hereto and made a part hereof plus any
additional number of Shares that the Underwriters may become obligated to
purchase pursuant to the provisions of Section 7 hereof.

               1.1.2     Delivery and Payment.  Delivery and payment for the
                         --------------------
Firm Shares shall be made at 10:00 A.M., New York time, on or before the third
business day (unless postponed in accordance with the provisions of Section 7
hereof) following the date that the Firm Shares commence trading, or at such
other time as shall be agreed upon by the Representative and the Company, at the
offices of counsel to the Underwriters or at such other place as shall be agreed
upon by the Representative and the Company.  The hour and date of delivery and
payment for the Firm Shares are called the "Closing Date."  As used herein, the
term "Business Day" means any day other than a day on which banks are permitted
or required to be closed in New York City.  Payment for the Firm Shares shall be
made on the Closing Date at the Representative's election by wire transfer or by
certified or bank cashier's checks in New York Clearing House funds, payable to
the order of the Company and each of the Selling Stockholders (or the Custodian
named in the Custody Agreement on behalf of the Selling Stockholders) upon
delivery to the Representative of a certificate of the Company's transfer agent
stating that the Firm Shares have been registered in book entry form in such
name or names and such denominations as are requested by the Representative.
The Company and the Selling Stockholders shall not be obligated to sell or
deliver the Firm Shares except upon tender of payment by the Representative for
all the Firm Shares.  Each Selling Stockholder hereby agrees that (i) it will
pay all stock transfer taxes, stamp duties and other similar taxes, if any,
payable upon the sale or delivery of the Shares to be sold by such Selling
Stockholder to the several Underwriters, or otherwise in connection with the
performance of such Selling Stockholder's obligations hereunder and (ii) the
Custodian is authorized to deduct for such payment any such amounts from the
proceeds to such Selling Stockholder hereunder and to hold such amounts for the
account of such Selling Stockholder with the Custodian under the Custody
Agreement.

          1.2  Over-Allotment Option.
               ---------------------

               1.2.1     Option Shares.  For the purposes of covering any
                         -------------
over-allotments in connection with the distribution and sale of the Firm Shares,
the Company hereby grants to the Underwriters, severally and not jointly, an
option to purchase up to 480,805 Option Shares from the Company ("Over-allotment
Option").  The purchase price to be paid for the Option Shares will be the same
price per Option Share as the price per Firm Share set forth in Section 1.1.1
hereof.

               1.2.2     Exercise of Option.  The Over-allotment Option granted
                         ------------------
pursuant to Section 1.2.1 hereof may be exercised by the Representative on
behalf of the Underwriters as to all or any part of the Option Shares at any
time (but not more than once) within thirty (30) days after the effective date
("Effective Date") of the Registration Statement (as hereinafter defined).  The
Underwriters will not be under any obligation to purchase any Option Shares
prior to the exercise of the Over-allotment Option.  The Over-allotment Option
granted hereby may be exercised by the giving of oral notice to the Company from
the Representative, which must be


                                        2
<PAGE>
confirmed within twenty-four (24) hours by a letter or facsimile setting forth
the number of Option Shares to be purchased, the date and time for delivery of
and payment for the Option Shares and stating that the Option Shares referred to
therein are to be used for the purpose of covering over-allotments in connection
with the distribution and sale of the Firm Shares.  If such notice is given at
least two full business days prior to the Closing Date, the date set forth
therein for such delivery and payment will be the Closing Date.  If such notice
is given thereafter, the date set forth therein for such delivery and payment
will not be earlier than three full business days after the date of the notice,
unless the Representative and the Company agree upon an earlier or later date.
If such delivery and payment for the Option Shares does not occur on the Closing
Date, the date and time of the closing for such Option Shares will be as set
forth in the notice (hereinafter the "Option Closing Date").  Upon exercise of
the Over-allotment Option, the Company will become obligated to convey to the
Underwriters, and, subject to the terms and conditions set forth herein, the
Underwriters will become obligated to purchase, the number of Option Shares
specified in such notice.  The number of Option Shares to be sold to each
Underwriter shall be the number that bears the same ratio to the aggregate
number of Option Shares being purchased as the number of Firm Shares set forth
opposite the name of such Underwriter on Schedule I hereto (or such number
increased as set forth in Section 7 hereof) bears to the total number of Firm
Shares set forth on Schedule I hereto, subject, however, to such adjustments to
eliminate any fractional shares as you in your sole discretion shall make.

               1.2.3     Payment and Delivery.  Payment for the Option Shares
                         --------------------
will be made at the Representative's election by wire transfer or by certified
or bank cashier's check(s) in New York Clearing House funds, payable to the
order of the Company at the offices of the Representative or at such other place
as shall be agreed upon by the Representative and the Company upon delivery to
the Representative of a certificate of the Company's transfer agent stating that
the Option Shares have been registered in book entry form in such name or names
and in such denominations as are requested by the Representative.

     2.   Representations and Warranties of the Company.  The Company represents
          ---------------------------------------------
and warrants to the Underwriters as follows:


          2.1  Filing of Registration Statement.  The Company has filed with the
               --------------------------------
Securities and Exchange Commission ("Commission") a registration statement and
an amendment or amendments thereto, on Form SB-2 (No. 333-114568), including any
related preliminary prospectus ("Preliminary Prospectus"), for the registration
of the Shares under the Securities Act of 1933, as amended (the "Act"), which
registration statement and amendment or amendments have been prepared by the
Company in conformity with the requirements of the Act, and the rules and
regulations (the "Regulations") of the Commission under the Act.  Except as the
context may otherwise require, such registration statement, as amended, on file
with the Commission at the time the registration statement becomes effective
(including the prospectus, financial statements, schedules, exhibits and all
other documents filed as a part thereof or incorporated therein and all
information deemed to be a part thereof as of such time pursuant to paragraph
(b) of Rule 430A of the Regulations), is hereinafter called the "Registration
Statement," and the form of the final prospectus dated the Effective Date or
such later date as may be determined by the Representative (or, if applicable,
the form of final prospectus filed with the Commission pursuant to Rule 424 of
the Regulations), is hereinafter called the


                                        3
<PAGE>
"Prospectus."  The Registration Statement has been declared effective by the
Commission on the date hereof.

          2.2  No Stop Orders, Etc.  No stop order suspending the effectiveness
               -------------------
of the Registration Statement or preventing or suspending the use of any
Preliminary Prospectus has been issued under the Act and no proceedings for that
purpose have been instituted or are pending or, to the best knowledge of the
Company, are contemplated. No state regulatory authority has issued any order
preventing or suspending the offering or sale of the Shares in such
jurisdiction, or, to the best knowledge of the Company, threatened to institute
any proceedings with respect to such order.

          2.3  Disclosures in Registration Statement.
               -------------------------------------

               2.3.1     Securities Act Representation.  At the time the
                         -----------------------------
Registration Statement became effective and at all times subsequent thereto up
to and including the Closing Date and the Option Closing Date, if any, the
Registration Statement and the Prospectus and any amendment or supplement
thereto complied and will comply in all material respects with the applicable
requirements of the Act and the Regulations; neither the Registration Statement
nor the Prospectus, nor any amendment or supplement thereto, during such time
period and on such dates, contained or will contain any untrue statement of a
material fact or omitted or will omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.  The representation
and warranty made in this Section 2.3.1 does not apply to statements made or
statements omitted in reliance upon and in conformity with information herein or
otherwise furnished in writing by (i) the Selling Stockholders or (ii) the
Representative on behalf of the Underwriters, expressly for use in the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto.

               2.3.2     Disclosure of Contracts.  The description in the
                         -----------------------
Registration Statement and the Prospectus of contracts and other documents is
accurate in all material respects and presents fairly the information required
to be disclosed and there are no contracts or other documents required to be
described in the Registration Statement or the Prospectus or to be filed with
the Commission as exhibits to the Registration Statement that have not been so
described or filed.  Each contract or other instrument (however characterized or
described) to which the Company is a party or by which its property or business
is or may be bound or affected and that is (i) referred to in the Prospectus, or
(ii) required to be filed as an exhibit to the Registration Statement by the Act
or the Regulations, has been duly and validly executed by the Company, is in
full force and effect in all material respects and is enforceable against the
Company and, to the Company's knowledge, the other parties thereto in accordance
with its terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally, (ii) as enforceability of any indemnification or contribution
provision may be limited under the federal and state securities laws, and (iii)
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to the equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought.  None of such
contracts or instruments has been assigned by the Company, and neither the
Company nor, to the Company's knowledge, any other party, is in default
thereunder and, to the Company's knowledge, no event has occurred that, with the
lapse


                                        4
<PAGE>
of time or the giving of notice, or both, would constitute a default thereunder.
The performance of such contracts or instruments in accordance with their terms
has not resulted, and will not result, in a violation by the Company of any
existing applicable law, rule or regulation or any judgment, order or decree of
any governmental agency or court applicable to the Company or any of its assets
or businesses, including, without limitation, those relating to environmental
laws and regulations.

               2.3.3     Prior Securities Transactions.  No securities of the
                         -----------------------------
Company have been sold by the Company or by or on behalf of, or for the benefit
of, any person or persons controlling, controlled by, or under common control
with the Company within the three years prior to the date hereof, except as
disclosed in the Registration Statement.

          2.4  Changes After Dates in Registration Statement.
               ---------------------------------------------

               2.4.1     No Material Adverse Change.  Since the respective dates
                         --------------------------
as of which information is given in the Registration Statement and the
Prospectus, except as otherwise specifically stated therein, (i) there has been
no material adverse change in the capital stock of the Company or the long-term
indebtedness of the Company, (ii) there has been no material adverse change in
the condition, financial or otherwise, or in the results of operations, business
or business prospects of the Company, including, but not limited to, a material
loss or interference with its business from fire, storm, explosion, flood or
other casualty, whether or not covered by insurance, or from any labor dispute
or court or governmental action, order or decree, whether or not arising in the
ordinary course of business, and (iii) there have been no transactions entered
into by the Company, other than those in the ordinary course of business, that
are material with respect to the condition, financial or otherwise, or to the
results of operations, business or business prospects of the Company.

               2.4.2     Recent Securities Transactions, Etc.  Since the
                         -----------------------------------
respective dates as of which information is given in the Registration Statement
and the Prospectus, and except as may otherwise be indicated or contemplated
herein or therein, the Company has not (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money; or (ii)
declared or paid any dividend or made any other distribution on or in respect to
its capital stock.

          2.5  Independent Accountants.  KPMG LLP ("KPMG"), whose report is
               -----------------------
filed with the Commission as part of the Registration Statement, are independent
accountants as required by the Act and the Regulations and are registered and in
good standing with the Public Company Accounting Oversight Board ("PCAOB").
KPMG has not, during the periods covered by the financial statements included in
the Prospectus, provided to the Company any non-audit services, as such term is
used in Section 10A(g) of the Securities Exchange Act of 1934, as amended
("Exchange Act").

          2.6  Financial Statements.  The financial statements, including the
               --------------------
notes thereto, included in the Registration Statement and Prospectus, present
fairly the financial position and the results of operations of the Company at
the dates and for the periods to which they apply; and such financial statements
have been prepared in conformity with generally


                                        5
<PAGE>
accepted accounting principles, consistently applied throughout the periods
involved.  The selected financial data and the summary financial data included
in the Prospectus present fairly in all material respects the information shown
therein and have been compiled on a basis consistent with that of the financial
statements included in the Registration Statement.  The "as adjusted" column in
the sections of the Prospectus captioned "Prospectus Summary - Summary Financial
Data" and "Capitalization" reflect accurately the adjustments referred to in the
text of such sections.  The historical financial data set forth in the
Prospectus under the captions "Prospectus Summary--Summary Financial Data,"
"Capitalization" and "Selected Financial Data" fairly present in all material
respects the information set forth therein and have been compiled on a basis
consistent with that of the audited financial statements contained in the
Registration Statement.  The Registration Statement discloses all material
off-balance sheet transactions, arrangements, obligations (including contingent
obligations), and other relationships of the Company with unconsolidated
entities or other persons that may have a material current or future effect on
the Company's financial condition, results of operations, liquidity, capital
resources or significant components of revenues or expenses.


          2.7  Authorized Capital; Options; Etc.  The Company had at the date or
               --------------------------------
dates indicated in the Prospectus duly authorized, issued and outstanding
capitalization as set forth in the Registration Statement and the Prospectus as
adjusted to reflect the reverse stock split effective on April 26, 2004.  Based
on the assumptions and adjustments stated in the Registration Statement and the
Prospectus, the Company will have on the Closing Date the adjusted stock
capitalization set forth therein.  Except as set forth in the Registration
Statement and the Prospectus, on the Effective Date and on the Closing Date
there will be no outstanding or authorized subscriptions, options, warrants or
other rights to purchase or otherwise acquire, or preemptive rights with respect
to the issuance or sale of, any Common Stock of the Company, including any
obligations to issue any shares pursuant to anti-dilution provisions, or any
security convertible into Common Stock, or any contracts or commitments to issue
or sell Common Stock or any such options, warrants, rights or convertible
securities.

          2.8  Valid Issuance of Securities; Etc.
               ---------------------------------

               2.8.1     Outstanding Securities.  All issued and outstanding
                         ----------------------
securities of the Company have been duly authorized and validly issued and are
fully paid and non-assessable; the holders thereof have no rights of rescission
with respect thereto, and are not subject to personal liability by reason of
being such holders; and none of such securities were issued in violation of the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company.  The outstanding options and warrants
to purchase Common Stock constitute valid and binding obligations of the
Company, enforceable in accordance with their terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.  The authorized Common Stock and preferred stock and outstanding
options and warrants to purchase Common Stock conform to all statements relating
thereto contained in the Registration Statement and the Prospectus.  The


                                        6
<PAGE>
offers and sales by the Company of the outstanding Common Stock, preferred
stock, options and warrants to purchase Common Stock, and securities convertible
into Common Stock, were at all relevant times registered under the Act and
registered or qualified under the applicable state securities or Blue Sky laws
or exempt from such registration or qualification requirements.

               2.8.2     Shares Sold Pursuant to this Agreement.  The Shares
                         --------------------------------------
have been duly authorized and, when issued and paid for, will be validly issued,
fully paid and non-assessable; the holders thereof are not and will not be
subject to personal liability by reason of being such holders; the Shares are
not and will not be subject to or issued in violation of the preemptive rights
of any holders of any security of the Company or similar contractual rights
granted by the Company; and all corporate action required to be taken for the
authorization, issuance and sale of the Shares has been duly and validly taken.

          2.9  Registration and Anti-Dilution Rights of Third Parties.  Except
               ------------------------------------------------------
as described in the Prospectus, no holders of any securities of the Company or
of any options or warrants of the Company or other rights exercisable for or
convertible or exchangeable into securities of the Company (i) have any right to
require the Company to register any such securities of the Company under the
Act, or (ii) have rights to have the exercise or conversion prices of their
securities lowered and/or the number of securities that they may purchase
increased as a result of the issuance by the Company of securities for a price
less than such exercise or conversion price.

          2.10 Validity and Binding Effect of Agreement.  This Agreement has
               ----------------------------------------
been duly and validly authorized by the Company and duly and validly executed by
the Company and constitutes the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except (i) as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.

          2.11 No Conflicts, Etc.  The execution, delivery, and performance by
               -----------------
the Company of this Agreement, the consummation by the Company of the
transactions herein contemplated and the compliance by the Company with the
terms hereof do not and will not, with or without the giving of notice or the
lapse of time or both, (i) result in a breach of, or conflict with any of the
terms and provisions of, or constitute a default under, or result in the
creation, modification, termination or imposition of any lien, charge or
encumbrance upon any property or assets of the Company pursuant to the terms of,
any indenture, mortgage, deed of trust, note, loan or credit agreement or any
other agreement or instrument evidencing an obligation for borrowed money, or
any other agreement or instrument to which the Company is a party or by which
the Company may be bound or to which any of the property or assets of the
Company is subject; (ii) result in any violation of the provisions of the
certificate of incorporation or the by-laws of the Company; (iii) violate any
existing applicable law, rule or regulation or any judgment, order or decree of
any governmental agency or court, domestic or foreign, having jurisdiction over
the Company or any of its properties or businesses; or (iv) have


                                        7
<PAGE>
a material adverse effect on any permit, license, certificate, registration,
approval, consent, license or franchise of or concerning the Company.

          2.12 No Defaults; Violations.  Except as described in the Prospectus,
               -----------------------
no default exists in the due performance and observance of any term, covenant or
condition of any license, contract, indenture, mortgage, deed of trust, note,
loan or credit agreement, or any other agreement or instrument evidencing an
obligation for borrowed money, or any other agreement or instrument to which the
Company is a party or by which the Company may be bound or to which any of the
properties or assets of the Company is subject, which default would have a
material adverse effect on the condition, financial or otherwise, results of
operations, or prospects of the Company (a "Material Adverse Effect").  The
Company is not in violation of any term or provision of its certificate of
incorporation or by-laws or in violation of any authorization, approval,
franchise, license, permit, certificate, applicable federal, state and local
law, rule, regulation, judgment, order or decree of any governmental agency or
court, domestic or foreign, having jurisdiction over the Company or any of its
properties or businesses, which violation would have a Material Adverse Effect.

          2.13 Corporate Power; Licenses; Consents.
               -----------------------------------

               2.13.1    Conduct of Business.  The Company has all requisite
                         -------------------
corporate power and authority, and has all necessary authorizations, approvals,
orders, licenses, certificates and permits of and from all governmental
regulatory officials and bodies to own or lease its properties and conduct its
business as described in the Prospectus to the extent required at the date of
the Prospectus.  The disclosures in the Registration Statement concerning the
effects of federal, state and local regulation on the Company's business as
currently contemplated are correct and do not omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

               2.13.2    Transactions Contemplated Herein.  The Company has all
                         --------------------------------
corporate power and authority to enter into this Agreement and to carry out the
provisions and conditions hereof, and all consents, authorizations, approvals
and orders required in connection therewith have been obtained.  No consent,
approval, authorization or order of, and no filing with, any court, government
agency or other body is required for the valid authorization, issuance, sale and
delivery of the Shares and the consummation of the transactions and agreements
contemplated by this Agreement and the Prospectus, except with respect to
applicable federal and state securities laws and the rules of the NASD (as
defined below) and NASDAQ (as defined below).

          2.14 Title to Property; Insurance.  Except as disclosed in the
               ----------------------------
Prospectus, the Company has valid and defensible title to, or valid and
enforceable leasehold estates in, all items of real and personal property
(tangible and intangible) owned or leased by it, free and clear of all liens,
encumbrances, claims, security interests, defects and restrictions of any nature
whatsoever, other than those referred to in the Prospectus (including in the
exhibits thereto and financial statements and notes thereto), purchase money
security interests, and liens for taxes not yet due and payable.  The Company
has adequately insured its properties (other than its water rights)


                                        8
<PAGE>
against loss or damage by fire, theft, damage, destruction, acts of vandalism or
terrorism or other casualty and maintains, in adequate amounts, such other
insurance as is usually maintained by companies engaged in the same or similar
business.  The Company has no reason to believe that it will not be able to
renew its existing insurance coverage from similar insurers as may be necessary
to continue in its business.

          2.15 Litigation; Governmental Proceedings.  Except as set forth in the
               ------------------------------------
Prospectus, there is no action, suit, proceeding, inquiry, arbitration,
investigation, litigation or governmental proceeding pending or, to the
Company's knowledge, threatened against, or involving the properties or business
of, the Company that might have a Material Adverse Effect or that questions the
validity of the capital stock of the Company or this Agreement or of any action
taken or to be taken by the Company pursuant to, or in connection with, this
Agreement.  There are no outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal, domestic or foreign, naming the Company
and enjoining the Company from taking, or requiring the Company to take, any
action, or to which the Company, its properties or business is bound or subject.

          2.16 Good Standing.  The Company has been duly organized and is
               -------------
validly existing as a corporation and is in good standing under the laws of the
state of its incorporation.  The Company is duly qualified and licensed and in
good standing as a foreign corporation in each jurisdiction in which ownership
or leasing of any properties or the character of its operations requires such
qualification or licensing, except where the failure to qualify would not have a
material adverse effect on the financial position, prospects or value or the
operation of the properties or the business of the Company.


          2.17 Taxes.  The Company has filed all returns (as hereinafter
               -----
defined) required to be filed with taxing authorities prior to the date hereof
or has duly obtained extensions of time for the filing thereof.  The Company has
paid all taxes (as hereinafter defined) shown as due on such returns that were
filed and has paid all taxes imposed on or assessed against the Company.  The
provisions for taxes payable, if any, shown on the financial statements filed
with or as part of the Registration Statement are sufficient for all accrued and
unpaid taxes, whether or not disputed, and for all periods to and including the
dates of such consolidated financial statements.  No issues have been raised
(and are currently pending) by any taxing authority in connection with any of
the returns or taxes asserted as due from the Company, and no waivers of
statutes of limitation with respect to the returns or collection of taxes have
been given by or requested from the Company.  The term "taxes" mean all federal,
state, local, foreign, and other net income, gross income, gross receipts,
sales, use, ad valorem, transfer, franchise, profits, license, lease, service,
service use, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, windfall profits, customs, duties or other taxes,
fees, assessments, or charges of any kind whatever, together with any interest
and any penalties, additions to tax, or additional amounts with respect thereto.
The term "returns" means all returns, declarations, reports, statements, and
other documents required to be filed in respect to taxes.


                                        9
<PAGE>
          2.18 Transactions Affecting Disclosure to NASD.
               -----------------------------------------

               2.18.1    Finder's Fees.  There are no claims, payments,
                         -------------
issuances, arrangements or understandings for services in the nature of a
finder's, consulting or origination fee with respect to the introduction of the
Company to the Representative or any of the Underwriters or the sale of the
Shares hereunder.  Except for the arrangements, agreements, understandings,
payments and issuances between the Company and the Representative that are
described in the "Underwriting" section of the Prospectus, there are no
arrangements, agreements, understandings, payments or issuances pursuant to
which the Company will make a payment (i) to any member of the National
Association of Securities Dealers, Inc. ("NASD") or (ii) to any person or entity
that, to the knowledge of the Company, has any direct or indirect affiliation or
association with any NASD member, except for payments to George Middlemas in his
capacity as a director.

               2.18.2    Payments Within 12 Months.  Other than payments to the
                         -------------------------
Representative, within the 12-month period prior to the date on which the
Registration Statement was filed with the Commission ("Filing Date") or
thereafter, the Company has not made or became obligated to make any direct or
indirect payments (in cash, securities or otherwise) to (i) any person, as a
finder's fee, investing fee or otherwise, in consideration of such person
raising capital for the Company or introducing to the Company persons who
provided capital to the Company, (ii) to the knowledge of the Company, any NASD
member or any person or entity that has any direct or indirect affiliation or
association with any NASD member, except for payments to George Middlemas in his
capacity as a director.

               2.18.3    Use of Proceeds.  Except for debt repayment to Gregory
                         ---------------
M. Morey and entities affiliated with First Analysis Corporation, none of the
net proceeds of the offering will be paid by the Company to any participating
NASD member or any affiliate or associate of any participating NASD member.  In
addition, the Company may utilize proceeds of the offering to offer to purchase
contract rights under the Commercialization Agreement, and to the knowledge of
the Company, the following parties to the Commercialization Agreement may be, or
may be affiliated with, a participating NASD member:  Gregory M. Morey, Warwick
Partners, L.P., Apex Investment Fund II, L.P., Environmental Venture Fund L.P.,
currently named Environmental Venture Fund Liquidating Trust, Environmental
Private Equity Fund II, L.P. and The Productivity Fund II, L.P.

               2.18.4    Insiders' NASD Affiliation.  Except as set forth in the
                         --------------------------
Prospectus no officer or director of the Company or, to the knowledge of the
Company, owner of at least 5% of the Company's outstanding Common Shares, has
any direct or indirect affiliation or association with any NASD member.  The
Company will advise the Underwriters and the NASD if it learns that any other
officer, director or owner of at least 5% of the Company's outstanding Common
Shares is or becomes an affiliate or associated person of an NASD member
participating in the offering.

          2.19    Foreign Corrupt Practices Act.  Neither the Company nor any of
                  -----------------------------
its officers, directors, employees, agents or any other person acting on their
behalf has, directly or indirectly, given or agreed to give any money, gift or
similar benefit (other than legal price


                                       10
<PAGE>
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or employee
of any governmental agency or instrumentality of any government (domestic or
foreign) or any political party or candidate for office (domestic or foreign) or
other person who was, is, or may be in a position to help or hinder the business
of the Company (or assist it in connection with any actual or proposed
transaction) that (i) might subject the Company to any damage or penalty in any
civil, criminal or governmental litigation or proceeding, (ii) if not given in
the past, might have had a material adverse effect on the assets, business or
operations of the Company as reflected in any of the financial statements
contained in the Prospectus or (iii) if not continued in the future, might
adversely affect the assets, business, operations or prospects of the Company.
The Company's internal accounting controls and procedures are sufficient to
cause the Company to comply with the Foreign Corrupt Practices Act of 1977, as
amended.

          2.20 NASDAQ Eligibility.  As of the Effective Date, the Shares have
               ------------------
been approved for listing on the NASDAQ SmallCap Market ("NASDAQ").  The Company
is presently in compliance with Rule 4350 of the NASDAQ Marketplace Rules and
will continue to comply with such Rule.

          2.21 Intangibles.  The Company owns or possesses the requisite
               -----------
licenses or rights to use all trademarks, service marks, service names, trade
names, patents and patent applications, copyrights and other rights
(collectively, "Intangibles") described as being licensed to or owned by it in
the Registration Statement or used by the Company in its business or relating to
products or services sold or currently proposed to be sold by the Company.  The
Company has no Intangibles that are currently registered in the United States
Patent and Trademark Office .  There is no claim or action by any person
pertaining to, or proceeding pending or, to the Company's knowledge, threatened
relating to, and the Company has not received any notice of conflict with the
asserted rights of others that challenges the exclusive right of the Company
with respect to, any Intangibles used in the conduct of the Company's business.
To the Company's knowledge, after due inquiry, the Intangibles and the Company's
current products, services and processes do not infringe on any Intangibles held
by any third party, and no others have infringed upon the Intangibles of the
Company.

          2.22 Relations With Employees.
               ------------------------

               2.22.1    Employee Matters.  The Company has generally enjoyed a
                         ----------------
satisfactory employer-employee relationship with its employees and is in
compliance in all material respects with all federal, state and local laws and
regulations respecting the employment of its employees and employment practices,
terms and conditions of employment and wages and hours relating thereto.  There
are no pending investigations involving the Company by the U.S. Department of
Labor or any other governmental agency responsible for the enforcement of such
federal, state and local laws and regulations.  There is no unfair labor
practice charge or complaint against the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or, to the Company's knowledge, threatened against or involving
the Company or any predecessor entity, and none has ever occurred.  No question
concerning representation exists respecting the employees of the Company and no
collective bargaining agreement or modification thereof is currently being


                                       11
<PAGE>
negotiated by the Company.  No grievance or arbitration proceeding is pending
under any expired or existing collective bargaining agreements of the Company,
if any.

               2.22.2    Employee Benefit Plans.  The Company neither maintains,
                         ----------------------
sponsors nor contributes to, nor is it required to contribute to, any program or
arrangement that is an "employee pension benefit plan," an "employee welfare
benefit plan," or a, "multi-employer plan" as such terms are defined in Sections
3(2), 3(1) and 3(37), respectively, of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") ("ERISA Plans").  The Company does not
maintain or contribute to, and has at no time maintained or contributed to, a
defined benefit plan, as defined in Section 3(35) of ERISA.

          2.23 Officers' Certificate.  Any certificate signed by any duly
               ---------------------
authorized officer of the Company and delivered directly to you or to your
counsel shall be deemed a representation and warranty by the Company to the
Underwriters as to the matters covered thereby and as of the date given.

          2.24 Lock-Up Agreements.  The Company has caused to be duly executed
               ------------------
legally binding and enforceable agreements pursuant to which all of the officers
and directors of the Company, Apex Investment Fund II, L.P., Environmental
Venture Fund Liquidating Trust, The Productivity Fund II, L.P., and
Environmental Private Equity Fund II, L.P. (including their family members and
affiliates) (collectively, the "Insiders"), agree not to sell any Common Stock
or warrants or options to purchase, or other securities convertible into Common
Stock  owned by them (either pursuant to Rule 144 of the Regulations or
otherwise) for a period of 180 days following the Effective Date ("Lock-up
Period").

          2.25 Subsidiaries.  The Company does not own an interest in any
               ------------
corporation, partnership, limited liability company, joint venture, trust or
other business entity.  The Company has no subsidiaries.

          2.26 Environmental Matters.  The Company is in compliance with all
               ---------------------
environmental, safety or similar laws or regulations applicable to it or its
business or property relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants and the disposal of hazardous or toxic substances, wastes,
pollutants and contaminants.

          2.27 Product Liability Insurance.  The Company does not maintain
               ---------------------------
product liability insurance.

          2.28 Company Not an Investment Company. The Company has been advised
               ---------------------------------
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after receipt of
payment for the Shares will not be, an "investment company" within the meaning
of the Investment Company Act, and will conduct its business in a manner so that
it will not become subject to the Investment Company Act.


                                       12
<PAGE>
          2.29 Related Party Transactions.  There are no business relationships
               --------------------------
or related party transactions involving the Company or any other person required
to be described in the Prospectus that have not been described as required.

     3.   Representations and Warranties of the Selling Stockholders.  Each of
          ----------------------------------------------------------
the Selling Stockholders, with respect to itself, represents, warrants and
covenants to, and agrees with, each Underwriter and the Company as follows:

          3.1  Validity and Binding Effect of Underwriting Agreement.  This
               -----------------------------------------------------
Agreement has been duly authorized (to the extent due authorization is a
relevant concept to such Selling Stockholder), executed and delivered by or on
behalf of such Selling Stockholder and is a valid and binding agreement of such
Selling Stockholder, enforceable in accordance with its terms, except (i) as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally, (ii) as enforceability of
any indemnification or contribution provision may be limited under the federal
and state securities laws, and (iii) that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.

          3.2  Custody Agreement and Power of Attorney.  Each of the (1) Custody
               ---------------------------------------
Agreement signed by such Selling Stockholder and ComputerShare Trust Company as
custodian (the "Custodian"), relating to the deposit of the Shares to be sold by
such Selling Stockholder (the "Custody Agreement") and (2) Power of Attorney
appointing certain individuals named therein as such Selling Stockholder's
attorneys-in-fact (each, an "Attorney-in-Fact") to the extent set forth therein
relating to the transactions contemplated hereby and by the Prospectus (the
"Power of Attorney"), of such Selling Stockholder has been duly authorized (to
the extent due authorization is a relevant concept to such Selling Stockholder),
executed and delivered by such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder, enforceable in accordance with its terms,
except (i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally, (ii) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws, and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.  Each Selling Stockholder agrees
that the Shares to be sold by such Selling Stockholder on deposit with the
Custodian are subject to the interests of the Custodian, that the arrangements
made for such custody are irrevocable to the extent set forth in the Custody
Agreement, and that the obligations of such Selling Stockholder hereunder and
thereunder shall not be terminated, except as provided in this Agreement or in
the Custody Agreement, by any act of the Selling Stockholder, by operation of
law, by death or incapacity of such Selling Stockholder or by the occurrence of
any other event.  If such Selling Stockholder should die or become
incapacitated, or if any other event should occur, before the delivery of the
Shares to be sold by such Selling Stockholder hereunder, the documents
evidencing the Shares to be sold by such Selling Stockholder then on deposit
with the Custodian shall be delivered by the Custodian in accordance with the
terms and conditions of this Agreement as if such death, incapacity or other
event had not occurred, regardless of


                                       13
<PAGE>
whether or not the Custodian shall have received notice thereof and to the
extent permitted by law.

          3.3  Shares Sold Pursuant to this Agreement.  Such Selling Stockholder
               --------------------------------------
is the lawful owner of the Shares to be sold by such Selling Stockholder
hereunder and has, and on the Closing Date will have, good and valid title to
all of the Shares that may be sold by such Selling Stockholder pursuant to this
Agreement on such date and the legal right and power, and all authorizations and
approvals required by law and, where applicable, under its charter or by-laws,
partnership agreement, trust agreement or other organizational documents, to
enter into this Agreement and its Custody Agreement and Power of Attorney, to
sell, transfer and deliver all of the Shares that may be sold by such Selling
Stockholder pursuant to this Agreement and to comply with its other obligations
hereunder and thereunder, and upon sale and delivery of, and payment for, such
Shares, as provided herein, such Selling Stockholder will convey good and
marketable title to such Shares, free and clear of all liens, encumbrances,
equities and claims whatsoever, assuming that you are bona fide purchasers.

          3.4  Transactions Contemplated Herein.  No consent, approval,
               --------------------------------
authorization or order of any court or governmental agency or body is required
for the consummation by such Selling Stockholder of the transactions
contemplated herein, except such as may be required under applicable federal and
state securities laws and the rules of the NASD or except as have been obtained
or may be required, and where applicable, will not conflict with or constitute a
breach of any of the terms or provisions of, or a default under, the charter or
by-laws of such Selling Stockholder, if applicable, or any agreement, indenture
or other instrument to which such Selling Stockholder is a party or by which
such Selling Stockholder or property of such Selling Stockholder is bound, or
violate or conflict with any law, administrative regulation or ruling or court
decree applicable to such Selling Stockholder or property of such Selling
Stockholder.

          3.5  Registration Rights.  Such Selling Stockholder does not have any
               -------------------
registration or other similar rights to have any equity or debt securities
registered for sale by the Company under the Registration Statement or included
in the offering contemplated by this Agreement, except for such rights as are
described in the Prospectus.

          3.6  Preemptive and Other Rights.  Such Selling Stockholder does not
               ---------------------------
have, or has waived prior to the date hereof, any preemptive right, co-sale
right or right of first refusal or other similar right to purchase any of the
Shares that are to be sold by the Company or any of the other Selling
Stockholders to the Underwriters pursuant to this Agreement; and such Selling
Stockholder does not own any warrants, options or similar rights to acquire, and
does not have any right or arrangement to acquire, any capital stock, right,
warrants, options or other securities from the Company, other than those
described in the Registration Statement and the Prospectus.

          3.7  Selling Stockholder Information.  All information furnished by or
               -------------------------------
on behalf of such Selling Stockholder in its capacity as a Selling Stockholder
in writing expressly for use in the Registration Statement and Prospectus is,
and on the Closing Date will be, true, correct, and complete in all material
respects, and does not, and on the Closing Date will not, contain any untrue
statement of a material fact or omit to state any material fact, in either case
relating to such Selling Stockholder, necessary to make such information not
misleading.


                                       14
<PAGE>
          3.8  Stabilization.  Such Selling Stockholder has not taken and will
               -------------
not take, directly or indirectly, any action designed to or that might be
reasonably expected to cause or result in stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Shares, and other than as permitted by the Act, such Selling Stockholder has not
distributed and will not distribute any prospectus or other offering material in
connection with the offering and sale or resale of the Shares.

          3.9  NASD.  Neither the Selling Stockholder nor any of the Selling
               ----
Stockholder's affiliates directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, or
had any other association with (within the meaning of Article I of the Bylaws of
the NASD), any member firm of the NASD, other than as disclosed to the
Representative in such Selling Stockholder's NASD questionnaire.

          3.10 Notification of Changes.  At any time when a prospectus relating
               -----------------------
to the Shares is required to be delivered under the Act, if there is any change
in the information referred to in this Section 3, such Selling Stockholder will
immediately notify you of such change.

          3.11 Organization.  Such Selling Stockholder, where applicable, has
               ------------
been duly organized and is validly existing as a corporation or organization
under its jurisdiction of incorporation or organization, as the case may be.

          3.12 Certificates.  Any certificate, including, without limitation,
               ------------
any custody agreement, power of attorney, questionnaire and certificate of a
Selling Stockholder (collectively, the "Selling Stockholder Documents) signed by
or on behalf of such Selling Stockholder and delivered to the Representative or
to counsel for the Underwriters shall be deemed to be a representation and
warranty by such Selling Stockholder to each Underwriter as to the matters
covered thereby.

     4.   Covenants of the Company.  The Company covenants and agrees as
          ------------------------
follows:

          4.1  Amendments to Registration Statement.  The Company will deliver
               ------------------------------------
to the Representative, prior to filing, any amendment or supplement to the
Registration Statement or Prospectus proposed to be filed after the Effective
Date and not file any such amendment or supplement to which the Representative
shall reasonably object.

          4.2  Federal Securities Laws.
               -----------------------

               4.2.1     Compliance.  During the time when a Prospectus is
                         ----------
required to be delivered under the Act, the Company will use all reasonable
efforts to comply with all requirements imposed upon it by the Act, the
Regulations and the Exchange Act and by the regulations under the Exchange Act,
as from time to time in force, so far as necessary to permit the continuance of
sales of or dealings in the Shares in accordance with the provisions hereof, and
the Prospectus.  If at any time when a Prospectus relating to the Shares is
required to be delivered under the Act, any event shall have occurred as a
result of which, in the opinion of counsel for the Company or counsel for the
Underwriters, the Prospectus, as then amended or supplemented, includes an
untrue statement of a material fact or omits to state any material fact


                                       15
<PAGE>
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or if it
is necessary at any time to amend the Prospectus to comply with the Act, the
Company will notify the Representative and counsel for the Underwriters promptly
and prepare and file with the Commission, subject to Section 4.1 hereof, an
appropriate amendment or supplement in accordance with Section 10 of the Act.

               4.2.2     Filing of Final Prospectus.  The Company will file the
                         --------------------------
Prospectus (in form and substance reasonably satisfactory to the Representative)
with the Commission pursuant to the requirements of Rule 424 of the Regulations.

               4.2.3     Exchange Act Registration.  For a period of three years
                         -------------------------
from the Effective Date, the Company will use its best efforts to maintain the
registration of the Common Stock under the provisions of Section 12 of the
Exchange Act, unless the transaction pursuant to which the Common Stock is
deregistered is approved by the Company's stockholders.

          4.3  Blue Sky Filings.  The Company will endeavor in good faith, at or
               ----------------
prior to the time the Registration Statement becomes effective, to qualify the
Shares for offering and sale under the securities laws of such jurisdictions as
the Representative may reasonably determine are consistent with the proper
distribution of the Shares, provided that no such qualification shall be
required in any jurisdiction where, as a result thereof, the Company would be
subject to service of general process or to taxation as a foreign corporation
doing business in such jurisdiction.  In each jurisdiction where such
qualification shall be effected, the Company will, unless the Representative
agrees that such action is not at the time necessary or advisable, use all
reasonable efforts to file and make such statements or reports at such times as
are or may be required by the laws of such jurisdiction.

          4.4  Delivery to the Underwriters of Prospectuses.  The Company will
               --------------------------------------------
deliver to each of the several Underwriters, without charge, from time to time
during the period when the Prospectus is required to be delivered under the Act
or the Exchange Act, such number of copies of each Preliminary Prospectus and
the Prospectus as such Underwriter may reasonably request and, as soon as the
Registration Statement or any amendment or supplement thereto becomes effective,
deliver to the Representative two original executed Registration Statements,
including exhibits, and all post-effective amendments thereto and copies of all
exhibits filed therewith or incorporated therein by reference and all original
executed consents of certified experts.

          4.5  Events Requiring Notice to the Representative.  The Company will
               ---------------------------------------------
notify the Representative immediately and confirm the notice in writing (i) of
the effectiveness of the Registration Statement and any amendment thereto, (ii)
of the issuance by the Commission of any stop order or of the initiation, or the
threatening, of any proceeding for that purpose, (iii) if it becomes aware of
the issuance by any state securities commission of any proceedings for the
suspension of the qualification of the Shares for offering or sale in any
jurisdiction or of the initiation, or the threatening, of any proceeding for
that purpose, (iv) of the mailing and delivery to the Commission for filing of
any amendment or supplement to the Registration Statement or Prospectus, (v) of
the receipt of any comments or request for any additional information from the


                                       16
<PAGE>
Commission, and (vi) of the happening of any event during the period described
in Section 4.4 hereof that, in the judgment of the Company, makes any statement
of a material fact made in the Registration Statement or the Prospectus untrue
or that requires the making of any changes in the Registration Statement or the
Prospectus in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.  If the Commission or
any state securities commission shall enter a stop order or suspend such
qualification at any time, the Company will make every reasonable effort to
obtain promptly the lifting of such order.

               4.5.1     NASDAQ Maintenance.  For a period of three years from
                         ------------------
the date hereof, the Company will use its commercially reasonable best efforts
to maintain the listing by NASDAQ of the Common Stock.

          4.6  Payment of Expenses.
               -------------------

               4.6.1     General Expenses.  The Company hereby agrees to pay on
                         ----------------
the Closing Date and, to the extent not paid on the Closing Date, on the Option
Closing Date, all expenses incident to the performance of the obligations of the
Company and the Selling Stockholders under this Agreement, including but not
limited to (i) the preparation, printing, filing, delivery and mailing
(including the payment of postage with respect to such mailing) of the
Registration Statement and any post-effective amendments thereto, the Prospectus
and the Preliminary Prospectuses and the printing and mailing of this Agreement
and related documents, including the cost of all copies thereof and any
amendments thereof or supplements thereto supplied to the Underwriters in
quantities as may be required by the Underwriters, (ii) the printing, engraving,
issuance and delivery of the Firm Shares and the Option Shares, including any
transfer or other taxes payable thereon, (iii) the qualification of the Shares
under state or foreign securities or Blue Sky laws, including the filing fees
under such Blue Sky laws, the costs of printing and mailing the "Preliminary
Blue Sky Memorandum"and all amendments and supplements thereto, the fees and
disbursements of the Company's counsel, and fees and disbursements of local
counsel, if any, retained for such purpose, (iv) filing fees incurred in
registering the offering with the NASD, (v) costs of placing "tombstone"
advertisements in various publications to be selected by the Representative,
(vi) fees and disbursements of the transfer agent, (vii) the Company's expenses
associated with "road show" meetings with potential investors arranged by the
Representative, (viii) the preparation, velo-binding and delivery of closing
documents, in quantity, form and style satisfactory to the Representative and
transaction lucite cubes or similar commemorative items in a style and quantity
as reasonably requested by the Representative, (ix) listing of the Shares on
NASDAQ and (x) all other costs and expenses incident to the performance of its
obligations hereunder that are not otherwise specifically provided for in this
Section 4.6.1.  Notwithstanding the foregoing, the aggregate amount of costs
relating to subsection (v) above and transfer taxes and fees shall not exceed
$10,000.  The Representative may deduct from the net proceeds of the offering
payable to the Company on the Closing Date, or the Option Closing Date, if any,
the expenses set forth herein to be paid by the Company to the Representative
and/or, following notice to the Company, to third parties.

               4.6.2     Non-Accountable Expenses.  In addition to the expenses
                         ------------------------
payable pursuant to Section 4.6.1, on or prior to the date hereof the Company
has paid to the


                                       17
<PAGE>
Representative a non-accountable expense allowance equal to $30,000.  If the
offering contemplated by this Agreement is not consummated for any reason
whatsoever then the following provisions shall apply: The Company's liability
for payment to the Representative of the non-accountable expense allowance shall
be equal to the sum of the Representative's actual out-of-pocket expenses
(including, but not limited to, counsel fees, and expenses of the Company
associated with "road show" meetings with potential investors advanced by the
Representative), up to an aggregate maximum of $30,000.  The Representative
shall retain such part of the non-accountable expense allowance previously paid
as shall equal such actual out-of-pocket expenses.  If the amount previously
paid exceeds the amount of actual out-of-pocket expenses, the Representative
shall promptly remit to the Company any such excess.

          4.7  Application of Net Proceeds.  The Company will apply the net
               ---------------------------
proceeds from the offering received by it in a manner consistent with the
application described under the caption "Use of Proceeds" in the Prospectus.
The Company hereby agrees that, except as so described, without the express
prior written consent of the Representative the Company will not apply any net
proceeds from the offering to pay (i) any debt for borrowed funds; or (ii) any
obligations (including indebtedness, both principal and any interest thereon,
for borrowed funds and unpaid salaries, fees or other compensation) owed to any
Insider (excluding salaries or fees payable on a current basis to officers and
directors in the ordinary course of the Company's business).  Notwithstanding
the foregoing, the Company shall have no obligation under this Agreement
restricting the use of proceeds of the Offering after 180 days from the
Effective Date.

          4.8  Delivery of Earnings Statements to Security Holders.  The Company
               ---------------------------------------------------
will make generally available to its security holders as soon as practicable,
but not later than the first day of the fifteenth full calendar month following
the Effective Date, an earnings statement (which need not be certified by
independent certified public accountants unless required by the Act or the
Regulations, but which shall satisfy the provisions of Rule 158(a) under Section
11(a) of the Act) covering a period of at least twelve (12) consecutive months
beginning after the Effective Date.

          4.9  Stabilization.  Neither the Company, nor, to its knowledge, any
               -------------
of its employees, directors or stockholders has taken or will take, directly or
indirectly, any action designed to or that has constituted or that might
reasonably be expected to cause or result in, under the Exchange Act, or
otherwise, stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities.

          4.10 Sale of Securities.  The Company agrees not to permit or cause a
               ------------------
private or public sale or private or public offering of any of its securities
(in any manner, including pursuant to Rule 144 under the Act) owned nominally or
beneficially by the Insiders for the time period set forth in Section 2.24
following the Effective Date.

          4.11 Disclosure Controls and Procedures.  The Company has established
               ----------------------------------
and observes, and will continue to observe, those "disclosure controls and
procedures," as defined in Rule 13a-15(e) under the Exchange Act, that are
required by applicable law.


                                       18
<PAGE>
          4.12 Internal Control Over Financial Reporting.  The Company has
               -----------------------------------------
established and observes, and will continue to observe, "internal control over
financial reporting," as defined in Rule 13a-15(f) under the Exchange Act, as
required by applicable law.

          4.13 Publicity.  The Company agrees that, until the date that is 180
               ---------
days after the Effective Date, the Company shall not issue any press release or
make any other public announcement, or otherwise communicate with the media,
unless such press release, announcement or other communication is first reviewed
and cleared by Davis Graham & Stubbs LLP ("DG&S"), counsel to the Company, and
one day's prior written notice of such press release, announcement or
communication is given to Flagstone.

          4.14 Right of First Refusal.  The Company agrees that until the first
               ----------------------
anniversary of the Closing Date, in the event that at any time or from time to
time during such period the Company elects to sell equity securities through a
public or private offering that utilizes a placement agent or underwriter, the
Company shall in each such case deliver prompt written notice of such
determination to Flagstone and offer to Flagstone the opportunity to act as
underwriter or placement agent with respect to such offering.  Within fifteen
(15) days after receipt of such notice, Flagstone shall provide written notice
to the Company setting forth Flagstone's intention to act as underwriter or
placement agent for such offering (the "Acceptance Notice").  The Acceptance
Notice shall specify the fees Flagstone intends to charge for its services in
such capacity, which shall be comparable to fees that would be charged by other
registered broker-dealers for similar offerings.  In the event that Flagstone
does not deliver an Acceptance Notice to the Company within such fifteen (15)
day period, or if Flagstone delivers written notice that it declines to act as
underwriter or placement agent for such offering, then unless the parties
otherwise agree, Flagstone shall have no further right to act as underwriter or
placement agent with respect to such offering.

     5.   Conditions of the Underwriters' Obligations.  The obligations of the
          -------------------------------------------
several Underwriters to purchase and pay for the Shares, as provided herein,
shall be subject to the continuing accuracy of the representations and
warranties of the Company and the Selling Stockholders as of the date hereof and
as of each of the Closing Date and the Option Closing Date, if any, to the
accuracy of the statements of officers of the Company made pursuant to the
provisions hereof and to the performance by the Company of its obligations
hereunder and to the following conditions:

          5.1  Regulatory Matters.
               ------------------

               5.1.1     Effectiveness of Registration Statement.  The
                         ---------------------------------------
Registration Statement has been declared effective on or prior to the date of
this Agreement and, at each of the Closing Date and the Option Closing Date, no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for such purpose shall have been instituted or
shall be pending or, to the Company's knowledge, contemplated by the Commission
and any request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of Davis & Gilbert LLP
("D&G"), counsel to the Underwriters.


                                       19
<PAGE>
               5.1.2     NASD Clearance.  By the Effective Date, the
                         --------------
Representative shall have received clearance from the NASD as to the amount of
compensation allowable or payable to the Underwriters as described in the
Registration Statement.

               5.1.3     No Blue Sky Stop Orders.  No order suspending the sale
                         -----------------------
of the Shares in any jurisdiction designated by the Representative pursuant to
Section 4.3 hereof shall have been issued on or before either the Closing Date
or the Option Closing Date, and no proceedings for that purpose shall have been
instituted or, to the Company's knowledge, shall be contemplated.

          5.2  Company Counsel Matters.
               -----------------------

               5.2.1     Opinion of Company Counsel, Water Counsel and Delaware
                         ------------------------------------------------------
Counsel.  On the Closing Date, the Representative shall have received the
- -------
favorable opinion from each of DG&S, Petrock & Fendel, P.C. ("Water Counsel"),
and Richards, Layton & Finger, P.A. ("Delaware Counsel"), each dated the Closing
Date, addressed to the Underwriters and in the forms attached hereto as Exhibits
A, B and C, respectively.

               5.2.2     Option Closing Date Opinion of Company Counsel, Water
                         -----------------------------------------------------
Counsel and Delaware Counsel.  On the Option Closing Date, if any, the
- ----------------------------
Representative shall have received the opinions of DG&S, Water Counsel and
Delaware Counsel, each dated the Option Closing Date, addressed to the
Underwriters and in form and substance satisfactory to D&G, confirming as of the
Option Closing Date the statements made by DG&S, Water Counsel and Delaware
Counsel in their respective opinions delivered on the Closing Date.

               5.2.3     Reliance.  In rendering such opinions, such counsels
                         --------
may rely (i) as to matters involving the application of laws other than the laws
of the United States and jurisdictions in which they are admitted, to the extent
such counsel deem proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
D&G) of other counsel reasonably acceptable to D&G, familiar with the applicable
laws, and (ii) as to matters of fact, to the extent they deem proper, on
certificates of the officers of the Company and certificates or other written
statements of officers of departments of various jurisdiction having custody of
documents respecting the corporate existence or good standing of the Company,
provided that copies of any such statements or certificates shall be delivered
to D&G.  Any opinion relied upon by the Company Counsel, Water Counsel or
Delaware Counsel, and the opinions of Company Counsel, Water Counsel and
Delaware Counsel, shall include statements to the effect that they may be relied
upon by counsel for the Underwriters in its opinion delivered to the
Underwriters.

          5.3  Cold Comfort Letter.  At the time this Agreement is executed, and
               -------------------
at each of the Closing Date and the Option Closing Date, if any, you shall have
received a letter, addressed to the Underwriters and in form and substance
satisfactory in all respects (including the non-material nature of the changes
or decreases, if any, referred to in clause (iii) below) to you and to D&G, from
KPMG dated, respectively, as of the date of this Agreement and as of the Closing
Date and the Option Closing Date, if any:


                                       20
<PAGE>
                         (i)    confirming that they are independent certified
public accountants with respect to the Company within the meaning of the Act and
the applicable Regulations;

                         (ii)   stating that in their opinion the financial
statements and the financial statement schedules of the Company included in the
Registration Statement and Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act and the published
Regulations thereunder;

                         (iii)  stating that, based on the performance of
procedures specified by the American Institute of Certified Public Accountants
or, when promulgated and effective, the procedures specified by the PCAOB, for a
review of the latest available unaudited interim financial statements of the
Company (as described in Statement on Auditing Standards ("SAS") No. 71 --
"Interim Financial Information"), with an indication of the date of the latest
available unaudited interim financial statements, a reading of the latest
available minutes of the stockholders and board of directors and the various
committees of the board of directors, consultations with officers and other
employees of the Company responsible for financial and accounting matters and
other specified procedures and inquiries, nothing has come to their attention
that would lead them to believe that (a) the unaudited financial statements of
the Company included or incorporated by reference in the Registration Statement
do not comply as to form in all material respects with the applicable accounting
requirements of the Act and the Regulations or any material modification should
be made to the unaudited interim financial statements included in the
Registration Statement for them to be in conformity with generally accepted
accounting principles applied on a basis substantially consistent with that of
the audited financial statements of the Company included in the Registration
Statement, (b) at a date not later than five days prior to the Effective Date,
Closing Date or Option Closing Date, as the case may be, there was any change in
the capital stock or long-term debt of the Company, or any decrease in the net
current assets (working capital) or shareholders' equity of the Company as
compared with amounts shown in the March 31, 2004 balance sheet included in the
Registration Statement, other than as set forth in or contemplated by the
Registration Statement, or, if there was any  decrease, setting forth the amount
of such decrease, and (c) during the period from March 31, 2004 to a specified
date not later than five days prior to the Effective Date, Closing Date or
Option Closing Date, as the case may be, there was any  decrease in revenues,
net earnings or net earnings per share, in each case as compared with the
corresponding period in the preceding year and as compared with the
corresponding period in the preceding quarter, other than as set forth in or
contemplated by the Registration Statement, or, if there was any such  decrease,
setting forth the amount of such decrease;

                         (iv)   stating that they have compared specific dollar
amounts, numbers of shares, percentages of revenues and earnings, statements and
other financial information pertaining to the Company set forth in the
Prospectus in each case to the extent that such amounts, numbers, percentages,
statements and information may be derived from the general accounting records,
and work sheets, of the Company with the results obtained from the application
of specified readings, inquiries and other appropriate procedures (which
procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter and found them to be in
agreement; and


                                       21
<PAGE>
                         (v)    statements as to such other matters incident to
the transaction contemplated hereby as you may reasonably request.

          5.4  Officers' Certificates.
               ----------------------

               5.4.1     Officers' Certificate.  At each of the Closing Date and
                         ---------------------
the Option Closing Date, if any, the Representative shall have received a
certificate, that is true and correct in fact, of the Company signed by the
Chief Executive Officer and the Chief Financial Officer of the Company, dated
the Closing Date or the Option Closing Date, as the case may be, respectively,
to the effect that the Company has in all material respects performed all
covenants and complied with all conditions required by this Agreement to be
performed or complied with by the Company prior to and as of the Closing Date or
the Option Closing Date, as the case may be, and that, as of the Closing Date or
the Option Closing Date, as the case may be, the representations and warranties
of the Company set forth in Section 2 hereof are true and correct.  In addition,
the Representative will have received such other and further certificates of
officers of the Company as the Representative may reasonably request.

               5.4.2     Secretary's Certificate.  At each of the Closing Date
                         -----------------------
and the Option Closing Date, if any, the Representative shall have received a
certificate of the Company signed by the Secretary of the Company, dated the
Closing Date or the Option Date, as the case may be, respectively, certifying
(i) that the By-Laws and Certificate of Incorporation, as amended, of the
Company are true and complete, have not been modified and are in full force and
effect, (ii) that the resolutions relating to the public offering contemplated
by this Agreement are in full force and effect and have not been modified, (iii)
all correspondence between the Company or its counsel and the Commission, (iv)
all correspondence between the Company or its counsel and NASDAQ concerning
listing of the Shares on NASDAQ and (vi) as to the incumbency of the officers of
the Company.  The documents referred to in such certificate shall be attached to
such certificate.

          5.5  Selling Stockholders' Certificates.  All the representations and
               ----------------------------------
warranties of the Selling Stockholders contained in this Agreement shall be true
and correct on the Closing Date with the same force and effect as if made on and
as of the Closing Date, and you shall have received a certificate to such
effect, dated the Closing Date, from the Attorney-in-Fact for each of the
Selling Stockholders.

          5.6  Selling Stockholders' Counsel Matters.
               -------------------------------------

               5.6.1     Opinions of Selling Stockholders' Counsel.  At the
                         -----------------------------------------
Closing Date you shall have received the opinions of counsel for the Selling
Stockholders that collectively hold more than 1,934,754 of the total number of
shares being offered by the Selling Stockholders, dated the Closing Date
addressed to the Underwriters and in form and substance satisfactory to D&G,
substantially to the effect that:  [Open]

                         (i)    Such Selling Stockholder has full legal right,
power and authority, and any approval required by law (other than any approval
imposed by the applicable


                                       22
<PAGE>
state securities and Blue Sky laws), to sell, assign, transfer and deliver the
Shares to be sold by such Selling Stockholder in the manner provided in this
Agreement.

                         (ii)   Such Selling Stockholder has good and clear
title to the certificates for the Shares to be sold by such Selling Stockholder,
and upon delivery thereof pursuant hereto and payment therefor, good and clear
title will pass to the Underwriters, severally, free of all restrictions on
transfer, liens, encumbrances, security interests and claims whatsoever.

                         (iii)  This Agreement has been duly and validly
authorized, executed and delivered by such Selling Stockholder and is a valid
and binding agreement of each Selling Stockholder.

                         (iv)   The power of attorney signed by such Selling
Stockholder appointing Mark W. Harding and Thomas P. Clark as such Selling
Stockholder's attorney-in-fact, to the extent set forth therein with regard to
the transactions contemplated hereby and by the Registration Statement, has been
duly authorized, executed and delivered by or on behalf of such Selling
Stockholder and is the valid and binding instrument of such Selling Stockholder
enforceable in accordance with its terms, and pursuant to such power of
attorney, such Selling Stockholder has authorized such attorney-in-fact to
execute and deliver on such Selling Stockholder's behalf this Agreement and any
other document necessary or desirable in connection with the transactions
contemplated hereby and to deliver the Shares to be sold by such Selling
Stockholder pursuant to this Agreement.

                         (v)    Where applicable, such Selling Stockholder has
been duly organized and is validly existing as a corporation or organization
under its jurisdiction of incorporation or organization, as the case may be.

                         (vi)   The execution, delivery and performance of this
Agreement by such Selling Stockholder, compliance by such Selling Stockholders
with all the provisions hereof and the consummation of the transactions
contemplated hereby will not require any consent, approval, authorization or
other order of any court, regulatory body, administrative agency or other
governmental body (except as such may be required under the Act, state
securities laws or Blue Sky laws or except as such may have been obtained) and
will not conflict with or constitute a breach of any of the terms or provisions
of, or a default under, the charter or by-laws of such Selling Stockholder, if
applicable, or any material agreement, indenture or other instrument to which
such Selling Stockholder is a party or by which such Selling Stockholder or
property of such Selling Stockholder is bound, or violate or conflict with any
laws, administrative regulation or ruling or court decree applicable to such
Selling Stockholder or property of such Selling Stockholder.

               5.6.2     Reliance.  In rendering such opinions, such counsel may
                         --------
rely (i) as to matters involving the application of laws other than the laws of
the United States and jurisdictions in which they are admitted, to the extent
such counsel deem proper and to the extent specified in such opinion, if at all,
upon an opinion or opinions (in form and substance reasonably satisfactory to
D&G) of other counsel reasonably acceptable to D&G, familiar with


                                       23
<PAGE>
the applicable laws, and (ii) as to matters of fact, to the extent they deem
proper, on certificates or other written statements of officers of departments
of various jurisdiction having custody of documents respecting the corporate
existence or good standing of one or more of the Stockholders, where applicable,
provided that copies of any such statements or certificates shall be delivered
to D&G.  Any opinion relied upon by any counsel for the Selling Stockholders,
and the opinions of counsel for the Selling Stockholders, shall include
statements to the effect that they may be relied upon by counsel for the
Underwriters in its opinion delivered to the Underwriters.


          5.7  Other Information.  Prior to the Closing Date the Company and the
               -----------------
Selling Stockholders shall have furnished to you such further information,
certificates and documents as you may reasonably request.  With respect to the
Option Shares, prior to the Option Closing Date, the Company shall have
furnished to you such further information, certificates and documents as you may
reasonably request.


          5.8  Opinion of Counsel for the Underwriters.  All proceedings taken
               ---------------------------------------
in connection with the authorization, issuance or sale of the Shares as herein
contemplated shall be reasonably satisfactory in form and substance to you and
to D&G, counsel to the Underwriters, and you shall have received from such
counsel a favorable opinion, dated the Closing Date and the Option Closing Date,
if any, with respect to such of these proceedings as you may reasonably require.
On or prior to the Effective Date, the Closing Date and the Option Closing Date,
as the case may be, counsel for the Underwriters shall have been furnished such
documents, certificates and opinions as they may reasonably require for the
purpose of enabling them to review or pass upon the matters referred to in this
Section 5.9, or in order to evidence the accuracy, completeness or satisfaction
of any of the representations, warranties or conditions herein contained.

          If any of the conditions specified in this Section 5 shall not have
been fulfilled when and as required by this Agreement, or if any of the
certificates, opinions, written statements or letters furnished to you or to D&G
pursuant to this Section 5 shall not be in all material respects reasonably
satisfactory in form and substance to you and to D&G, all obligations of the
Underwriters hereunder may be cancelled by you at, or at any time prior to, the
Closing Date and the obligations of the Underwriters to purchase the Option
Shares may be canceled by you at, or at any time prior to, the Option Closing
Date.  Notice of such cancellation shall be given to the Company in writing, or
by telephone, facsimile, confirmed in writing.

     6.   Indemnification.
          ---------------

          6.1  Indemnification of the Underwriter.
               ----------------------------------

               6.1.1     General.
                         -------

                         (a)  Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each of the Underwriters, their
respective directors, officers, agents and employees and each person, if any,
who controls any such Underwriter ("controlling person") within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act,


                                       24
<PAGE>
against any and all loss, liability, claim, damage and expense whatsoever
(including but not limited to any and all legal or other expenses reasonably
incurred in investigating, preparing or defending against any litigation, or any
claims whatsoever, commenced or threatened, whether arising out of any action
between any of the Underwriters and the Company or between any of the
Underwriters and any third party or otherwise) to which they or any of them may
become subject under the Act, the Exchange Act or any other statute or at common
law or otherwise or under the laws of foreign countries (including in settlement
of any litigation, if such settlement is effected with the written consent of
the Company), arising out of or based upon any untrue statement or alleged
untrue statement of a material fact (i) contained in any Preliminary Prospectus,
the Registration Statement or the Prospectus (as from time to time each may be
amended and supplemented, and including any information deemed to be a part
thereto pursuant to Rule 430A or Rule 434 of the Regulations); (ii) contained in
any post-effective amendment or amendments to the Registration Statement; (iii)
contained in any application or other document or written communication (in this
Section 6 collectively called "application") executed by the Company or based
upon written information furnished by the Company in any jurisdiction in order
to qualify the Shares under the securities laws thereof or filed with the
Commission, any state securities commission or agency, the NASD (including
NASDAQ and NASD Regulation, Inc.) or any securities exchange; or the omission or
alleged omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, unless such statement or omission
was made in reliance upon, and in strict conformity with, written information
furnished to the Company with respect to an Underwriter by or on behalf of such
Underwriter expressly for use in any Preliminary Prospectus, the Registration
Statement or Prospectus, or any amendment or supplement thereof, or in any
application, as the case may be.  The Company agrees to notify the
Representative promptly of the commencement of any litigation or proceedings
against the Company or any of its officers, directors or controlling persons in
connection with the issue and sale of the Shares or in connection with the
Registration Statement or Prospectus.


                         (b)  Subject to the conditions set forth below, each of
the Selling Stockholders severally, but not jointly, agree to indemnify and hold
harmless each of the Underwriters, their respective directors, officers, agents
and employees and each person, if any, who controls any such Underwriter
("controlling person") within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage
and expense whatsoever (including but not limited to any and all legal or other
expenses reasonably incurred in investigating, preparing or defending against
any litigation, or any claims whatsoever, commenced or threatened, whether
arising out of any action between any of the Underwriters and the Company or
between any of the Underwriters and any third party or otherwise) to which they
or any of them may become subject under the Act, the Exchange Act or any other
statute or at common law or otherwise or under the laws of foreign countries
(including in settlement of any litigation, if such settlement is effected with
the written consent of the Company), arising out of or based upon any untrue
statement or alleged untrue statement of a material fact provided by such
Selling Stockholder (i) contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time each may be
amended and supplemented, and including any information deemed to be a part
thereto pursuant to Rule 430A or Rule 434 of the Regulations); (ii) contained in
any post-effective amendment or amendments to the Registration Statement; (iii)
contained in any application or other document or written


                                       25
<PAGE>
communication (in this Section 6 collectively called "application") executed by
such Selling Stockholder or based upon written information furnished by such
Selling Stockholder in any jurisdiction in order to qualify the Shares under the
securities laws thereof or filed with the Commission, any state securities
commission or agency, the NASD (including NASDAQ and NASD Regulation, Inc.) or
any securities exchange; or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, unless such statement or omission was made in reliance upon, and in
strict conformity with, written information furnished to such Selling
Stockholder with respect to an Underwriter by or on behalf of such Underwriter
expressly for use in any Preliminary Prospectus, the Registration Statement or
Prospectus, or any amendment or supplement thereof, or in any application, as
the case may be.  Notwithstanding the foregoing, each Selling Stockholder shall
be liable hereunder in any case only to the extent of the total net proceeds
received by such Selling Stockholder from the sale of the Shares sold by such
Selling Stockholder.

               6.1.2     Procedure.  If any action is brought against an
                         ---------
Underwriter or controlling person in respect of which indemnity may be sought
against the Company pursuant to Section 6.1.1, such Underwriter shall promptly
notify the Company in writing of the institution of such action and the Company
shall assume the defense of such action, including the employment and fees of
counsel, which counsel must be reasonably satisfactory to the Underwriter, and
payment of actual expenses.  Such Underwriter or controlling person shall have
the right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the employment of such counsel shall have been
authorized in writing by the Company in connection with the defense of such
action, or (ii) the Company shall not have employed counsel to have charge of
the defense of such action, or (iii) such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
that are different from or additional to those available to the Company (in
which case the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties), in any of which events
the fees and expenses of not more than one additional firm of attorneys selected
by the Underwriter and/or controlling person shall be borne by the Company.
Notwithstanding anything to the contrary contained herein, if the Underwriter or
controlling person shall assume the defense of such action as provided above,
the Company shall have the right to approve the terms of any settlement of such
action which approval shall not be unreasonably withheld.

          6.2  Indemnification of the Company and the Selling Stockholders.
               -----------------------------------------------------------
Each Underwriter, severally and not jointly, agrees to indemnify and hold
harmless the Company, each of the directors of the Company, each of the officers
of the Company who shall have signed the Registration Statement, the Selling
Stockholders and each other person, if any, who controls the Company or any
Selling Stockholder within the meaning of Section 15 of the Act or Section 20(a)
of the Exchange Act, against any and all loss, liability, claim, damage and
expense described in the foregoing indemnities from the Company and the Selling
Stockholders to the several Underwriters, as incurred, but only with respect to
untrue statements or omissions, or alleged untrue statements or omissions made
in any Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any application in reliance upon, and in
strict conformity with, written information furnished to the Company with


                                       26
<PAGE>
respect to such Underwriter by or on behalf of the Underwriter expressly for use
in such Preliminary Prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereto or in any such application.  The Company and the
Selling Stockholders acknowledge that the statements with respect to the public
offering of the Firm Securities and the Option Securities set forth under the
heading "Plan of Distribution" in the Prospectus have been furnished by the
Underwriters expressly for use therein and constitute the only information
furnished in writing by or on behalf of the Underwriters for inclusion in the
Registration Statement or Prospectus or any amendment thereof or supplement
thereto.  In case any action shall be brought against the Company or any Selling
Stockholder based on any Preliminary Prospectus, the Registration Statement or
Prospectus or any amendment or supplement thereto or any application, and in
respect of which indemnity may be sought against any Underwriter, such
Underwriter shall have the rights and duties given to the Company and the
Selling Stockholders, and the Company and the Selling Stockholders shall have
the rights and duties given to the several Underwriters, by the provisions of
Section 6.1.2.

          6.3  Contribution.  In order to provide for contribution in
               ------------
circumstances in which the indemnification provided for in this Section 6, if
otherwise available in accordance with its terms, is for any reason (a) held to
be unavailable from any indemnifying party or (b) is insufficient to hold
harmless a party indemnified thereunder, the Company, the Selling Stockholders
and the Underwriters shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Company or the Selling
Stockholders any contribution received by the Company or the Selling
Stockholders from persons, other than insurers and the Underwriters, who may
also be liable under the securities laws for contribution, including persons who
control the Company or any Selling Stockholder within the meaning of Section 15
of the Act or Section 20(a) of the Exchange Act, officers of the Company who
signed the Registration Statement and directors of the Company) as incurred to
which the Company, the Selling Stockholders and one or more of the Underwriters
may be subject, in such proportions as is appropriate to reflect the relative
benefits received by the Company, each Selling Stockholder and the Underwriters
from the offering of the Shares or, if such allocation is not permitted by
applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in Section 6.1.2
hereof, in such proportion as is appropriate to reflect not only the relative
benefits referred to above but also the relative fault of the Company, the
Selling Stockholders and the Underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company, each Selling Stockholder and the Underwriters
shall be deemed to be in the same proportion as (x) the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company, on the one hand, and each Selling
Stockholder, on the other hand, and (y) the underwriting discounts and
commissions received by the Underwriters, respectively, in each case as set
forth in the table on the cover page of the Prospectus.  The relative fault of
the Company, each Selling Stockholder and the Underwriters shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material


                                       27
<PAGE>
fact relates to information supplied by the Company, each Selling Stockholder or
the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree that it would
not be just and equitable if contribution pursuant to this Section 6.3 were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to above.  Notwithstanding the
provisions of this Section 6.3, (i) in no case shall any Underwriter be liable
or responsible for any amount in excess of the underwriting discount applicable
to the Shares purchased by such Underwriter hereunder, and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding the provisions of this Section 6.3
and the preceding sentence, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.  For purposes of this Section 6.3, each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act shall have the same rights to contribution as such
Underwriter, and each person, if any, who controls the Company within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each
officer of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to clauses (i) and (ii) of this Section 6.3.  Any
party seeking contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties,
notify each party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have under this Section 6.3 or otherwise.  No party shall be liable for
contribution with respect to any action or claim settled without its consent;
provided, however, that such consent was not unreasonably withheld.  The
liability of each Selling Stockholder under this Section 6.3 shall be limited to
an amount equal to the total net proceeds from the Underwriters for the Shares
sold by each such Selling Stockholder to the Underwriters.

     7.   Default by an Underwriter.
          -------------------------

          7.1  Default Not Exceeding 10% of Shares. If any Underwriter or
               -----------------------------------
Underwriters shall default in its or their obligations to purchase the Firm
Shares, or the Option Shares if exercised, hereunder, and if the number of Firm
Shares or Option Shares with respect to which such default relates does not
exceed in the aggregate 10% of the number of Firm Shares or Option Shares that
all Underwriters have agreed to purchase hereunder, then such Firm Shares or
Option Shares to which the default relates shall be purchased by the
non-defaulting Underwriters in proportion to their respective commitments
hereunder.

          7.2  Default Exceeding 10% of Firm Shares or Option Shares. In the
               -----------------------------------------------------
event that such default relates to more than 10% of the  Firm Shares or Option
Shares, you may in your discretion arrange for yourself or for another party or
parties to purchase such Firm Shares or


                                       28
<PAGE>
Option Shares to which such default relates on the terms contained herein. If
within one business day after such default relating to more than 10% of Firm
Shares or Option Shares you do not arrange for the purchase of such Firm Shares
or Option Shares, then the Company shall be entitled to a further period of one
business day within which to procure another party or parties satisfactory to
you to purchase said Firm Shares or Option Shares on such terms. In the event
that neither you nor the Company arrange for the purchase of Firm Shares or
Option Shares to which a default relates as provided in this Section 7, this
Agreement may be terminated by you or the Company without liability on the part
of the Company (except as provided in Sections 4.6 and 6 hereof) or the several
Underwriters (except as provided below, with respect to the defaulting
Underwriter, and in Section 6 hereof); provided, however, that if such default
occurs with respect to the Option Shares this Agreement will not terminate as to
the Firm Shares; and provided further that nothing herein shall relieve a
defaulting Underwriter of its liability, if any, to the other several
Underwriters and to the Company for damages occasioned by its default hereunder.

          7.3  Postponement of Closing Date. In the event that the Firm Shares
               ----------------------------
or Option Shares to which the default relates are to be purchased by the
non-defaulting Underwriters, or are to be purchased by another party or parties
as aforesaid, you or the Company shall have the right to postpone the Closing
Date or Option Closing Date for a reasonable period, but not in any event
exceeding five business days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus or in any other
documents or arrangements, and the Company agrees to file promptly any amendment
to the Registration Statement or the Prospectus that in the opinion of counsel
for the Underwriters may thereby be made necessary.  The term "Underwriter" as
used in this Agreement shall include any party substituted under this Section 7
with like effect as if it had originally been a party to this Agreement with
respect to such Shares.

     8.   Representations and Agreements to Survive Delivery.  Except as the
          --------------------------------------------------
context otherwise requires, all representations, warranties and agreements
contained in this Agreement shall be deemed to be representations, warranties
and agreements at the Closing Dates and such representations, warranties and
agreements of the Underwriters, Selling Stockholders and Company, including the
indemnity and contribution agreements contained in Section 6 hereof, shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any Underwriter, Selling Stockholder, the Company or any
controlling person, and shall survive termination of this Agreement or the
issuance and delivery of the Shares to the several Underwriters until the
earlier of the expiration of any applicable statute of limitations and the
seventh anniversary of the later of the Closing Date or the Option Closing Date,
if any, at which time the representations, warranties and agreements shall
terminate and be of no further force and effect.

     9.   Effective Date of This Agreement and Termination Thereof.
          --------------------------------------------------------

          9.1  Effective Date.  This Agreement shall become effective when
               --------------
executed by all parties.

          9.2  Termination.  You shall have the right to terminate this
               -----------
Agreement at any time prior to any Closing Date, (i) if any domestic or
international event or act or occurrence has


                                       29
<PAGE>
materially disrupted, or in your opinion will in the immediate future materially
disrupt, general securities markets in the United States; or (ii) if trading on
the New York Stock Exchange, the American Stock Exchange, on NASDAQ National or
SmallCap Market shall have been suspended, or minimum or maximum prices for
trading shall have been fixed, or maximum ranges for prices for securities shall
have been fixed, or maximum ranges for prices for securities shall have been
required on the over-the-counter market by the NASD or by order of the
Commission or any other government authority having jurisdiction, or (iii) if
the United States involvement in war or major hostilities escalates materially
or if a material disruption of trading caused by a terrorist incident or a
series of such incidents shall have occurred in the United States, or (iv) if a
banking moratorium has been declared by a New York State or federal authority,
or (v) if a moratorium on foreign exchange trading has been declared that
materially and adversely impacts the United States securities market, or (vi) if
the Company shall have sustained a material loss by fire, flood, accident,
hurricane, earthquake, theft, sabotage, terrorism or other calamity or malicious
act that, whether or not such loss shall have been insured, or (vii) if there
occurs a material adverse change in general market conditions, in each case that
will, in your opinion, make it impracticable or inadvisable to proceed with the
offering, sale and/or delivery of the Shares or to enforce contracts made by the
underwriters for the sale of the Shares.

          9.3  Expenses.  In the event that this Agreement shall not be carried
               --------
out for any reason whatsoever, within the time specified herein or any
extensions thereof pursuant to the terms hereof, the obligations of the Company
to pay the expenses related to the transactions contemplated herein shall be
governed by Section 4.6 hereof.

          9.4  Indemnification.  Notwithstanding any contrary provision
               ---------------
contained in this Agreement, any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Section 6 shall not be in any way affected by such election or
termination or failure to carry out the terms of this Agreement or any part
hereof.

     10.  Miscellaneous.
          -------------

          10.1 Notices.  All communications hereunder, except as herein
               -------
otherwise specifically provided, shall be in writing and shall be mailed,
delivered or facsimiled and confirmed.

          If to the Representative:

               Flagstone Securities
               347 West 57th Street
               34th Floor
               New York, New York  10019
               Attention:  Philip G. Putnam
               Facsimile:  (212) 262-0989


                                       30
<PAGE>
          Copy to:

               Davis & Gilbert LLP
               1740 Broadway
               New York, New York 10019
               Attention:  Ralph W. Norton, Esq.
               Facsimile:  (212) 468-4888

          If to the Company:

               PureCycle Corporation
               8451 Delaware Street
               Thornton, Colorado  80260
               Attention:  Mark Harding, President
               Facsimile:  (303) 292-3475

          Copy to:

               Davis Graham & Stubbs LLP
               Suite 500
               1550 Seventeenth Street
               Denver, Colorado  80202
               Attention:  Wanda Abel, Esq.
               Facsimile:  (303) 893-1379

          If to a Selling Stockholder, to the address specified in the Selling
Stockholder Documents.

          10.2 Headings.  The headings contained herein are for the sole purpose
               --------
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Agreement.

          10.3 Amendment.  This Agreement may be amended only by a written
               ---------
instrument executed by each of the parties hereto.

          10.4 Entire Agreement.  This Agreement (together with the other
               ----------------
agreements and documents being delivered pursuant to or in connection with this
Agreement) constitutes the entire agreement of the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings of the parties, oral and written, with respect to the subject
matter hereof.


                                       31
<PAGE>
          10.5 Binding Effect.  This Agreement shall inure solely to the benefit
               --------------
of and shall be binding upon, the Representative, the Underwriters, the Company,
each Selling Stockholder and the controlling persons, directors and officers
referred to in Section 6 hereof, and their respective successors, legal
representatives and assigns, and no other person shall have or be construed to
have any legal or equitable right, remedy or claim under or in respect of or by
virtue of this Agreement or any provisions herein contained.

          10.6 Failure of One or More of the Selling Stockholders to Sell and
               --------------------------------------------------------------
Deliver Shares.  If one or more of the Selling Stockholders shall fail to sell
  ------------
and deliver to the Underwriters the Shares to be sold and delivered by such
Selling Stockholders at the Closing Date pursuant to this Agreement, the Company
hereby agrees, at the option of the Underwriters, to sell and deliver to the
Underwriters any or all of the Shares (the "Company Reallocation") not sold and
delivered by such Selling Stockholders.  The Underwriters shall determine the
allocation of Shares sold in connection with the Company Reallocation.  If one
or more of the Selling Stockholders shall fail to sell and deliver to the
Underwriters the Shares to be sold and delivered by such Selling Stockholders
pursuant to this Agreement at the Closing Date, then the Underwriters shall have
the right, by written notice from the Representatives to the Company and the
Selling Stockholders, to postpone the Closing Date, but in no event for longer
than three Business Days in order that the required changes, if any, to the
Registration Statement and the Prospectus or any other documents or arrangements
may be effected.

          10.7 Governing Law.  This Agreement shall be governed by and construed
               -------------
and enforced in accordance with the law of the State of Delaware, without giving
effect to principles of conflicts of law.

          10.8 Execution in Counterparts.  This Agreement may be executed in one
               -------------------------
or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement, and shall become
effective when one or more counterparts has been signed by each of the parties
hereto and delivered to each of the other parties hereto.

          10.9 Waiver, Etc.  The failure of any of the parties hereto at any
               -----------
time to enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any provision hereof or the right of any of the
parties hereto thereafter to enforce each and every provision of this Agreement.
No waiver of any breach, non-compliance or non-fulfillment of any of the
provisions of this Agreement shall be effective unless set forth in a written
instrument executed by the party or parties against whom or which enforcement of
such waiver is sought; and no waiver of any such breach, non-compliance or
non-fulfillment shall be construed or deemed to be a waiver of any other or
subsequent breach, non-compliance or non-fulfillment.


                                       32
<PAGE>
          If the foregoing correctly sets forth the understanding among the
Underwriters, the Company and the Selling Stockholders, please so indicate in
the space provided below for that purpose, whereupon this letter shall
constitute a binding agreement between us.


                              Very truly yours,

                              PURE CYCLE CORPORATION


                              By:
                                  ---------------------------
                              Name:  Mark Harding
                              Title: President


                              SELLING STOCKHOLDERS LISTED ON SCHEDULE II


                              By:
                                  ---------------------------
                                  Attorney-in-Fact for the Selling
                                  Stockholders listed on Schedule II hereto

Accepted as of the date first
above written.

New York, New York

FLAGSTONE SECURITIES


By:
   --------------------------
Name: Philip G. Putnam
Title: Managing Director


                                       33
<PAGE>
<TABLE>
<CAPTION>
                                                                      SCHEDULE I

                             PURE CYCLE CORPORATION

                        3,205,367 SHARES OF COMMON STOCK


                                                           Number of Firm Shares
         Underwriter                                          to be Purchased
         -----------                                          ---------------
<S>                                                        <C>
Flagstone Securities




                                                           ---------------------
                                                                  3,205,367
</TABLE>


                                       34
<PAGE>
<TABLE>
<CAPTION>
                                                                     SCHEDULE II

                           -     SELLING STOCKHOLDERS


                                                                Number of Firm
Name                                                           Shares to be Sold
- ------------------------------------------                     -----------------
<S>                                                            <C>
Inco Securities Corporation                                              470,000

Landmark Water Partners, L.P.                                            136,573

Alan C. Stormo                                                            18,000

D.W.Pettyjohn                                                              7,500

Beverly A. Beardslee                                                      18,000

Robert Douglas Beardslee                                                   9,000

Bradley Kent Beardslee                                                     9,000

Fayyaz & Company, Inc.                                                    30,000

International Properties, Inc.                                            60,000

Apex Investment Fund II, L.P.                                            484,210

Environmental Venture Fund                                               178,276
Liquidating Trust

The Productivity Fund II, L.P.                                           135,717

Landmark Water Partners II, L.P.                                          38,533

Proactive Partners, L.P.                                                  80,124

Environmental Private Equity Fund II, L.P.                               201,797

Gregory M. Morey                                                          16,024

Don Fogel                                                                 16,024

George Middlemas                                                         100,000

Margaret S. Hansson                                                      200,000

Susan Byrom Evans                                                         26,667

Carol Byrom Conrad                                                        26,700

Fletcher L.Byrom, Jr.                                                     22,222

Thomas P. Clark                                                          100,000

Mark W. Harding                                                          121,000
                                                               -----------------

                                                                       2,505,367
</TABLE>




                                       35
<PAGE>
<TABLE>
<CAPTION>

                                TABLE OF CONTENTS


                                                                        PAGE
<S>                                                                     <C>

1.  Purchase and Sale of Securities.   . . . . . . . . . . . . . . . . .   1
      1.1  Firm Securities.  . . . . . . . . . . . . . . . . . . . . . .   1
            1.1.1  Purchase of Firm Securities . . . . . . . . . . . . .   1
            1.1.2  Delivery and Payment. . . . . . . . . . . . . . . . .   2
      1.2  Over-Allotment Option.  . . . . . . . . . . . . . . . . . . .   2
            1.2.1  Option Shares   . . . . . . . . . . . . . . . . . . .   2
            1.2.2  Exercise of Option  . . . . . . . . . . . . . . . . .   2
            1.2.3  Payment and Delivery  . . . . . . . . . . . . . . . .   3
2.  Representations and Warranties of the Company  . . . . . . . . . . .   3
      2.1  Filing of Registration Statement  . . . . . . . . . . . . . .   3
      2.2  No Stop Orders, Etc   . . . . . . . . . . . . . . . . . . . .   4
      2.3  Disclosures in Registration Statement . . . . . . . . . . . .   4
            2.3.1  Securities Act Representation . . . . . . . . . . . .   4
            2.3.2  Disclosure of Contracts . . . . . . . . . . . . . . .   4
            2.3.3  Prior Securities Transactions . . . . . . . . . . . .   5
      2.4  Changes After Dates in Registration Statement . . . . . . . .   5
            2.4.1  No Material Adverse Change  . . . . . . . . . . . . .   5
            2.4.2  Recent Securities Transactions, Etc . . . . . . . . .   5
      2.5  Independent Accountants . . . . . . . . . . . . . . . . . . .   5
      2.6  Financial Statements  . . . . . . . . . . . . . . . . . . . .   5
      2.7  Authorized Capital; Options; Etc  . . . . . . . . . . . . . .   6
      2.8  Valid Issuance of Securities; Etc.  . . . . . . . . . . . . .   6
            2.8.1  Outstanding Securities  . . . . . . . . . . . . . . .   6
            2.8.2  Shares Sold Pursuant to this Agreement  . . . . . . .   7
      2.9  Registration and Anti-Dilution Rights of Third Parties  . . .   7
      2.10 Validity and Binding Effect of Agreements . . . . . . . . . .   7
      2.11 No Conflicts, Etc . . . . . . . . . . . . . . . . . . . . . .   7
      2.12 No Defaults; Violations . . . . . . . . . . . . . . . . . . .   8
      2.13 Corporate Power; Licenses; Consents.  . . . . . . . . . . . .   8
            2.13.1  Conduct of Business  . . . . . . . . . . . . . . . .   8
            2.13.2  Transactions Contemplated Herein . . . . . . . . . .   8
      2.14 Title to Property; Insurance  . . . . . . . . . . . . . . . .   8
      2.15 Litigation; Governmental Proceedings  . . . . . . . . . . . .   9
      2.16 Good Standing . . . . . . . . . . . . . . . . . . . . . . . .   9
      2.17 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
      2.18 Transactions Affecting Disclosure to NASD . . . . . . . . . .  10
            2.18.1  Finder's Fees  . . . . . . . . . . . . . . . . . . .  10
            2.18.2  Payments Within 12 Months  . . . . . . . . . . . . .  10
            2.18.3  Use of Proceeds  . . . . . . . . . . . . . . . . . .  10
            2.18.4  Insiders' NASD Affiliation . . . . . . . . . . . . .  10
      2.19 Foreign Corrupt Practices Act . . . . . . . . . . . . . . . .  10
      2.20 NASDAQ Eligibility  . . . . . . . . . . . . . . . . . . . . .  11
      2.21 Intangibles . . . . . . . . . . . . . . . . . . . . . . . . .  11
      2.22 Relations With Employees. . . . . . . . . . . . . . . . . . .  11
            2.22.1  Employee Matters . . . . . . . . . . . . . . . . . .  11


                                        i
<PAGE>
            2.22.2  Employee Benefit Plans . . . . . . . . . . . . . . .  12
      2.23 Officers' Certificate . . . . . . . . . . . . . . . . . . . .  12
      2.24 Lock-Up Agreements  . . . . . . . . . . . . . . . . . . . . .  12
      2.25 Subsidiaries  . . . . . . . . . . . . . . . . . . . . . . . .  12
      2.26 Environmental Matters . . . . . . . . . . . . . . . . . . . .  12
      2.27 Product Liability Insurance . . . . . . . . . . . . . . . . .  12
      2.28 Company Not an Investment Company . . . . . . . . . . . . . .  12
      2.29 Related Party Transactions  . . . . . . . . . . . . . . . . .  13
3.  Representations and Warranties of the Selling Stockholders . . . . .  13
      3.1  Validity and Binding Effect of Underwriting Agreement . . . .  13
      3.2  Custody Agreement and Power of Attorney . . . . . . . . . . .  13
      3.3  Share Sold Pursuant to this Agreement . . . . . . . . . . . .  14
      3.4  Transactions Contemplated Herein  . . . . . . . . . . . . . .  14
      3.5  Registration Rights . . . . . . . . . . . . . . . . . . . . .  14
      3.6  Preemptive and Other Rights . . . . . . . . . . . . . . . . .  14
      3.7  Selling Stockholder Information . . . . . . . . . . . . . . .  14
      3.8  Stabilization . . . . . . . . . . . . . . . . . . . . . . . .  15
      3.9  NASD  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
      3.10 Notification of Changes . . . . . . . . . . . . . . . . . . .  15
      3.11 Organization  . . . . . . . . . . . . . . . . . . . . . . . .  15
      3.12 Certificates  . . . . . . . . . . . . . . . . . . . . . . . .  15
4.  Covenants of the Company . . . . . . . . . . . . . . . . . . . . . .  15
      4.1  Amendments to Registration Statement  . . . . . . . . . . . .  15
      4.2  Federal Securities Laws . . . . . . . . . . . . . . . . . . .  15
            4.2.1  Compliance  . . . . . . . . . . . . . . . . . . . . .  15
            4.2.2  Filing of Final Prospectus  . . . . . . . . . . . . .  16
            4.2.3  Exchange Act Registration . . . . . . . . . . . . . .  16
      4.3  Blue Sky Filings  . . . . . . . . . . . . . . . . . . . . . .  16
      4.4  Delivery to the Underwriters of Prospectuses  . . . . . . . .  16
      4.5  Events Requiring Notice to the Representative  . . . . . . .   16
            4.5.1  NASDAQ Maintenance  . . . . . . . . . . . . . . . . .  17
      4.6  Payment of Expenses . . . . . . . . . . . . . . . . . . . . .  17
            4.6.1  General Expenses  . . . . . . . . . . . . . . . . . .  17
            4.6.2  Non-Accountable Expenses  . . . . . . . . . . . . . .  17
      4.7  Application of Net Proceeds . . . . . . . . . . . . . . . . .  18
      4.8  Delivery of Earnings Statements to Security Holders . . . . .  18
      4.9  Stabilization . . . . . . . . . . . . . . . . . . . . . . . .  18
      4.10 Sale of Securities  . . . . . . . . . . . . . . . . . . . . .  18
      4.11 Disclosure Controls and Procedures  . . . . . . . . . . . . .  18
      4.12 Internal Control Over Financial Reporting . . . . . . . . . .  19
      4.13 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . .  19
      4.14 Right of First Refusal  . . . . . . . . . . . . . . . . . . .  19
5.  Conditions of the Underwriters' Obligations  . . . . . . . . . . . .  19
      5.1  Regulatory Matters  . . . . . . . . . . . . . . . . . . . . .  19
            5.1.1  Effectiveness of Registration Statement . . . . . . .  19
            5.1.2  NASD Clearance  . . . . . . . . . . . . . . . . . . .  20
            5.1.3  No Blue Sky Stop Orders . . . . . . . . . . . . . . .  20


                                       ii
<PAGE>

      5.2  Company Counsel Matters . . . . . . . . . . . . . . . . . . .  20
            5.2.1  Opinion of Company Counsel, Water Counsel and
                   Delaware Counsel  . . . . . . . . . . . . . . . . . .  20
            5.2.2  Option Closing Date Opinion of Company Counsel,
                   Water Counsel and Delaware Counsel  . . . . . . . . .  20
            5.2.3  Reliance  . . . . . . . . . . . . . . . . . . . . . .  20
      5.3  Cold Comfort Letter . . . . . . . . . . . . . . . . . . . . .  20
      5.4  Officers' Certificates. . . . . . . . . . . . . . . . . . . .  22
            5.4.1  Officers' Certificate . . . . . . . . . . . . . . . .  22
            5.4.2  Secretary's Certificate . . . . . . . . . . . . . . .  22
      5.5 Selling Stockholders' Certificates . . . . . . . . . . . . . .  22
      5.6 Selling Stockholders' Counsel Matters  . . . . . . . . . . . .  22
            5.6.1  Opinions of Selling Stockholders' Counsel . . . . . .  22
            5.6.2  Reliance  . . . . . . . . . . . . . . . . . . . . . .  23
      5.7  Other Information . . . . . . . . . . . . . . . . . . . . . .  24
      5.8  Opinion of Counsel for the Underwriters . . . . . . . . . . .  24
6.  Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . .  24
      6.1  Indemnification of the Underwriter  . . . . . . . . . . . . .  24
            6.1.1  General.  . . . . . . . . . . . . . . . . . . . . . .  24
            6.1.2  Procedure.  . . . . . . . . . . . . . . . . . . . . .  26
      6.2  Indemnification of the Company and the Selling Stockholders .  26
      6.3  Contribution. . . . . . . . . . . . . . . . . . . . . . . . .  27
7.  Default by an Underwriter. . . . . . . . . . . . . . . . . . . . . .  28
      7.1  Default Not Exceeding 10% of Shares . . . . . . . . . . . . .  28
      7.2  Default Exceeding 10% of Firm Shares or Option Shares . . . .  28
      7.3  Postponement of Closing Date  . . . . . . . . . . . . . . . .  29
8.  Representations and Agreements to Survive Delivery . . . . . . . . .  29
9.  Effective Date of This Agreement and Termination Thereof.  . . . . .  29
      9.1  Effective Date. . . . . . . . . . . . . . . . . . . . . . . .  29
      9.2  Termination . . . . . . . . . . . . . . . . . . . . . . . . .  29
      9.3  Expenses  . . . . . . . . . . . . . . . . . . . . . . . . . .  30
      9.4  Indemnification . . . . . . . . . . . . . . . . . . . . . . .  30
10.  Miscellaneous.  . . . . . . . . . . . . . . . . . . . . . . . . . .  30
      10.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .  30
      10.2 Headings  . . . . . . . . . . . . . . . . . . . . . . . . . .  31
      10.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . .  31
      10.4 Entire Agreement  . . . . . . . . . . . . . . . . . . . . . .  31
      10.5 Binding Effect  . . . . . . . . . . . . . . . . . . . . . . .  32
      10.6 Failure of One or More of the Selling Stockholders to Sell
           and Deliver Shares  . . . . . . . . . . . . . . . . . . . . .  32
      10.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . .  32
      10.8 Execution in Counterparts . . . . . . . . . . . . . . . . . .  32
      10.9 Waiver, Etc.  . . . . . . . . . . . . . . . . . . . . . . . .  32
</TABLE>


                                      iii
<PAGE>
<TABLE>
<CAPTION>
                              INDEX OF DEFINITIONS


<S>                                                                   <C>
A

Acceptance Notice  . . . . . . . . . . . . . . . . . . . . . . . . .      19
Act  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       3
application  . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25, 26
Attorney-in-Fact . . . . . . . . . . . . . . . . . . . . . . . . . .      13

B

Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . .       2

C

Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . .       2
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       3
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1
Company  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1
Company Reallocation . . . . . . . . . . . . . . . . . . . . . . . .      32
controlling person . . . . . . . . . . . . . . . . . . . . . . . . .  24, 25
Custodian  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      13
Custody Agreement  . . . . . . . . . . . . . . . . . . . . . . . . .      13

D

D&G  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      19
DG&S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19, 20

E

Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . .       2
employee pension benefit plan  . . . . . . . . . . . . . . . . . . .      12
employee welfare benefit plan  . . . . . . . . . . . . . . . . . . .      12
ERISA  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      12
ERISA Plans  . . . . . . . . . . . . . . . . . . . . . . . . . . . .      12
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . .       5

F

Filing Date  . . . . . . . . . . . . . . . . . . . . . . . . . . . .      10
Firm Shares  . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1
Flagstone  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1

I

Insiders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      12
Intangibles  . . . . . . . . . . . . . . . . . . . . . . . . . . . .      11
Investment Company Act . . . . . . . . . . . . . . . . . . . . . . .      12


                                       iv
<PAGE>
K

KPMG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       5

L

Lock-up Period . . . . . . . . . . . . . . . . . . . . . . . . . . .      12

M

Material Adverse Effect  . . . . . . . . . . . . . . . . . . . . . .       8
multi-employer plan  . . . . . . . . . . . . . . . . . . . . . . . .      12

N

NASD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      10
NASDAQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      11

O

Option Closing Date  . . . . . . . . . . . . . . . . . . . . . . . .       3
Option Shares  . . . . . . . . . . . . . . . . . . . . . . . . . . .       1
Over-allotment Option  . . . . . . . . . . . . . . . . . . . . . . .       2

P

PCAOB  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       5
Power of Attorney  . . . . . . . . . . . . . . . . . . . . . . . . .      13
Preliminary Blue Sky Memorandum  . . . . . . . . . . . . . . . . . .      17
Preliminary Prospectus . . . . . . . . . . . . . . . . . . . . . . .       3
Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       4

R

Registration Statement . . . . . . . . . . . . . . . . . . . . . . .       3
Regulations  . . . . . . . . . . . . . . . . . . . . . . . . . . . .       3
Representative . . . . . . . . . . . . . . . . . . . . . . . . . . .       1
returns  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       9

S

SAS  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      21
Selling Stockholder Documents  . . . . . . . . . . . . . . . . . . .      15
Selling Stockholders . . . . . . . . . . . . . . . . . . . . . . . .       1
Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1

T

taxes  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       9

U

Underwriter  . . . . . . . . . . . . . . . . . . . . . . . . . . . .      29
Underwriters . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1


                                        2
<PAGE>
W

Water Counsel  . . . . . . . . . . . . . . . . . . . . . . . . . . .      20

Y

you  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1
</TABLE>


                                        3
<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>3
<FILENAME>doc3.txt
<DESCRIPTION>EXHIBIT 3.1
<TEXT>
                              AMENDED AND RESTATED

                          CERTIFICATE OF INCORPORATION

                                       OF

                             PURE CYCLE CORPORATION



                         PURSUANT TO SECTION 245 OF THE

                        DELAWARE GENERAL CORPORATION LAW





     Pure  Cycle  Corporation  (the  "Corporation"), a corporation organized and
existing  under  and  by  virtue  of the General Corporation Law of the State of
Delaware,  DOES  HEREBY  CERTIFY:

     1.  That  the  present  name  of the Corporation is Pure Cycle Corporation.

     2.  That  the Certificate of Incorporation (as amended, the "Certificate of
Incorporation")  of  the  Corporation  was originally filed in the office of the
Secretary  of  State  of  the  State  of  Delaware  on  April  1,  1976.

     3.  That the text of the Certificate of Incorporation is hereby amended and
restated, effective at 8:00 a.m. Eastern time, on April 26, 2004, to read in its
entirety  as  follows:

                                    ARTICLE I

                                      NAME
                                      ----

     The  name  of  the  corporation  is  Pure  Cycle  Corporation.

                                   ARTICLE II

                           REGISTERED AGENT AND OFFICE
                           ---------------------------

     The  registered  agent  of the corporation shall be The Company Corporation
and its office is located at 1300 Market Street, Wilmington, Delaware 19801, New
Castle  County.

                                   ARTICLE III

                                    PURPOSES
                                    --------

     The  purpose  of the corporation is to engage in any lawful act or activity
for  which  corporations  may  be organized under the General Corporation Law of
Delaware.


<PAGE>
                                   ARTICLE IV

                                  CAPITAL STOCK
                                  -------------

     Section 1.     Authorized Shares.  The number of shares of capital stock of
                    -----------------
all  classes  which the Corporation shall have authority to issue is two hundred
fifty  million  (250,000,000)  shares,  of which two hundred twenty-five million
(225,000,000)  shares  shall  be of a class designated as "common stock," with a
par  value of one-third of one cent ($.00333) per share, and twenty-five million
(25,000,000)  shares shall be of a class designated as "Preferred Stock," with a
par  value  of  one-tenth  of  one  cent  ($.001)  per  share.

     Effective  at  8:00  a.m.,  Eastern Time, on April 26, 2004 (the "Effective
Time"), each 10 shares of Common Stock of the Corporation issued and outstanding
immediately  prior  to  the  Effective  Time  (the  "Old Common Stock") shall be
automatically reclassified as and combined into, without any further action, one
(1)  fully-paid and nonassessable share of the same class of Common Stock of the
Corporation, par value one-third of one cent ($.00333) (the "New Common Stock"),
provided that no fractional shares shall be issued to any holder of less than 10
shares  of  Old  Common  Stock  immediately  before the Effective Time, and that
instead of issuing such fractional shares, the Corporation shall pay in cash the
fair value of fractions of a share as of the time when those entitled to receive
such  fractions  are  determined.

     Section  2.     Designations, Powers and Preferences.  The designations and
                     ------------------------------------
the  powers,  preferences  and  rights,  and  the qualifications, limitations or
restrictions  of  the  shares  of  each  class  of  stock  are  as  follows:


          A.     Common  Stock.  Except  for  and  subject to those preferences,
                 -------------
rights,  and privileges expressly granted to the holders of Preferred Stock, and
except  as  may be provided by the laws of the State of Delaware, the holders of
Common  Stock  shall  have  exclusively  all  rights  of  stockholders  of  the
Corporation,  including,  but not by way of limitation, (i) the right to receive
dividends, when and as declared by the Board of Directors out of assets lawfully
available  therefor, (ii) the right to vote for the election of directors and on
all other matters requiring stockholder action, each share being entitled to one
vote,  and (iii) in the event of any distribution of assets upon the dissolution
and liquidation of the Corporation, the right to receive ratably and equally all
of  the  assets of the Corporation remaining after the payment to the holders of
Preferred  Stock  of  the  specific  amounts, if any, which they are entitled to
receive  as  may  be  provided  herein  or  pursuant  hereto.

          B.     Preferred  Stock.  Shares  of  Preferred Stock may be issued in
                 ----------------
one  or  more  series  at  such  time  or  times  as  the Board of Directors may
determine.  All  shares  of  any one series of Preferred Stock shall be of equal
rank  and  identical in all respects except as to the dates from and after which
dividends  thereon  shall  cumulate,  if  cumulative.  The  number of authorized
shares  of Preferred Stock may be increased or decreased by the affirmative vote
of  a  majority  of  the  stock  of the Corporation entitled to vote without the
separate  vote  of  holders  of  Preferred  Stock  as  a  class.  Subject to the
limitations hereof and the limitations prescribed by law, the Board of Directors
is  expressly  authorized to fix from time to time, by resolution or resolutions
adopted  prior  to  the  issuance  of and providing for the establishment and/or
issuance  of  any  series of Preferred Stock, the designation of such series and
the  powers,  preferences,  and  rights  of  such


                                      -2-
<PAGE>
series,  and  the  qualifications,  limitations  or  restrictions  thereof.  The
authority  of  the  Board  of  Directors  with respect to each such series shall
include,  but  shall  not  be  limited  to,  determination  of  the  following:

               (i)     The  distinctive  serial designation and number of shares
comprising  each  such  series  (provided  that  the  aggregate number of shares
constituting  all series of Preferred Stock shall not exceed twenty-five million
(25,000,000)), which number may (except where otherwise provided by the Board of
Directors  in creating such series) be increased or decreased (but not below the
number of shares of such series then outstanding) from time to time by action of
the  Board  of  Directors;

               (ii)     The  rate  of  dividends,  if any, on the shares of that
series,  whether  dividends  shall  be  non-cumulative, cumulative to the extent
earned  or  cumulative  (and,  if cumulative, from which date or dates), whether
dividends  shall  be  payable  in cash, property, or rights, or in shares of the
Corporation's  capital  stock,  and the relative priority, if any, of payment of
dividends  on  shares  of  that  series  over  shares  of  any  other  series;

               (iii)     Whether  the  shares of that series shall be redeemable
and,  if  so, the terms and conditions of such redemption, including the date or
dates  upon or after which they shall be redeemable, the event or events upon or
after  which  they  shall  be  redeemable  or  at  whose  option  they  shall be
redeemable, and the amount per share payable in case of redemption (which amount
may  vary  under  different conditions and at different redemption dates) or the
property  or  rights,  including securities of any other corporation, payable in
case  of  redemption;

               (iv)     Whether  that  series  shall have a sinking fund for the
redemption  or  purchase  of  shares  of  that  series and, if so, the terms and
amounts  payable  into  such  sinking  fund;

               (v)     The  rights  to  which  the holders of the shares of that
series  shall  be entitled in the event of voluntary or involuntary liquidation,
dissolution  or  winding-up  of  the  Corporation,  and  the  relative rights of
priority,  if  any,  of  payment  of  shares  of  that series in any such event;

               (vi)     Whether  the  shares of that series shall be convertible
into  or exchangeable for shares of stock of any other class or any other series
and,  if  so, the terms and conditions of such conversion or exchange, including
the  rate  or  rates  of conversion or exchange, the date or dates upon or after
which they shall be convertible or exchangeable or at whose option they shall be
convertible  or  exchangeable, and the method, if any, of adjusting the rates of
conversion  or  exchange  in  the  event  of  a  stock  split,  stock  dividend,
combination  of  shares  or  similar  event;

               (vii)     Whether  the  issuance of any additional shares of such
series  shall  be  subject  to  restrictions, or whether any shares of any other
series  shall  be  subject  to restrictions as to issuance, or as to the powers,
preferences  or  rights  of  any  such  other  series;

               (viii)     Voting  rights, if any, including, without limitation,
the  authority to confer multiple votes per share, voting rights as to specified
matters  or  issues  or,  subject  to  the


                                      -3-
<PAGE>
provisions  of  this Certificate of Incorporation, voting rights to be exercised
either together with holders of Common Stock as a single class, or independently
as  a  separate  class;  and

               (ix)     Any  other  preferences,  privileges  and  powers  and
relative,  participating,  optional  or other special rights and qualifications,
limitations  or  restrictions of such series, as the Board of Directors may deem
advisable  and  as  shall  not  be  inconsistent  with  the  provisions  of this
Certificate  of  Incorporation and to the full extent now or hereafter permitted
by  the  laws  of  the  State  of  Delaware.

          C.     Series  A-1  Convertible  Preferred  Stock.
                 ------------------------------------------

               (i)     Number  of  Shares  and Designation.  1,600,000 shares of
                       -----------------------------------
the  Preferred Stock, $.001 par value, of the Corporation are hereby constituted
as  a  series  of  the  Preferred  Stock  designated  as  Series A-1 Convertible
Preferred  Stock  (the  "Series  A-1  Preferred  Stock").

               (ii)     Liquidation.
                        -----------

                    1.     Upon  any  liquidation,  dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the Series A-1
Preferred  Stock will be entitled to be paid, before any distribution or payment
is made upon any other equity securities of the Corporation, the amount of $2.00
per  share  less an amount equal to all dividends paid thereon (the "Liquidation
Value");  provided,  however,  that such preference on liquidation shall only be
paid  from  the  Export  Water  or  the proceeds of a disposition of such asset.

                    2.     In  addition  to  the preference provided for in this
Section  (ii),  upon  any  liquidation,  dissolution  or  winding  up  of  the
Corporation,  whether  voluntary  or  involuntary  the holders of the Series A-1
Preferred Stock will be entitled to share in any distribution or payment made to
the  holders  of  Common Stock, whether from the Export Water or otherwise, on a
pro  rata  basis  with  the  holders  of  the Common Stock determined as if such
holders  had converted their Series A-1 Preferred Stock to Common Stock pursuant
to  Section  (iv)  hereof  immediately prior to such liquidation, dissolution or
winding  up.

                    3.     The  Corporation  will  mail  written  notice  of any
distribution in connection with such liquidation, dissolution or winding up, not
less  than  60  days  prior  to  the payment date stated therein, to each record
holder  of  Series  A-1 Preferred Stock.  Neither the consolidation or merger of
the Corporation into or with any other corporation or corporations, nor the sale
or  transfer  by  the  Corporation  of  all  or  any part of its assets, nor the
reduction  of  the  capital  stock  of  the  Corporation, will be deemed to be a
liquidation,  dissolution or winding up of the Corporation within the meaning of
this  Section  (ii).

               (iii)     Dividends.
                         ---------

                    1.     General  Obligations.  The  holders of the Series A-1
                           --------------------
Preferred  Stock  shall  be  entitled to receive cash dividends, as set forth in
this  Section  (iii)  or  when  and as declared by the board of directors out of
funds  legally  available for such purpose in a total amount of $2.00 per share,
and  no  more.  Each share of Series A-1 Preferred Stock shall earn and accrue a
dividend  only  if  and when Gross Proceeds, after payment of royalties pursuant


                                      -4-
<PAGE>
to  the  Amended  and  Restated  Lease, are received from the marketing, sale or
other  disposition  of  the  Export  Water  by  Inco Securities Corporation, the
Corporation  or  the  Export  Water Contractor in the amounts set forth below (a
"Qualifying  Rangeview  Sale"):

          Series               Proceeds  Required
          ------               ------------------

          Series  A-1          $23,036,233  to  $32,026,232

Such  dividend  shall  be  paid upon completion of any Qualifying Rangeview Sale
unless  payment  is  prohibited  by Delaware law.  The holders of the Series A-1
Preferred  Stock  shall  be  entitled  to  35.6% of that portion of the proceeds
between  $23,036,233  and $32,026,232 from a Qualifying Rangeview Sale up to the
total  amount  of  $3,200,000  ($2.00 per share).  No dividends shall be paid on
Common Stock unless all dividends accrued on the Series A-1 Preferred Stock have
been  paid.


                    2.     Distribution  of Partial Dividend Payment.  If at any
                           -----------------------------------------
time  less  than  the total amount of dividends have accrued with respect to the
Series  A-1  Preferred Stock, any such payment will be distributed ratably among
the  holders  of  the Series A-1 Preferred Stock based upon the number of shares
held  by  such  holders.

                    3.     Cessation of Dividend Earnings.  Once the Corporation
                           ------------------------------
sells,  transfers  or  otherwise  conveys  all  of its remaining interest in the
Export  Water  or  its  interest  in  such asset expires and the Corporation has
received  all proceeds available to it from such asset, the Series A-1 Preferred
Stock  will cease to accrue dividends even if the earnings from the Export Water
total  less  than  $32,026,232.

               (iv)     Conversion.
                        ----------

                    1.     Right to Convert.  Each share of Series A-1 Preferred
                           ----------------
Stock  shall  be  convertible,  at the option of the holder thereof, at any time
after  the  Issuance  Date  of such share at the office of the Corporation, into
5.5556  fully  paid  and  non-assessable shares of Common Stock (the "Conversion
Rate").

                    2.     Fractional Shares.  In the event the aggregate number
                           -----------------
of  shares  of Series A-1 Preferred Stock being converted by a holder thereof is
convertible  into  a  number  of  shares of Common Stock which would require the
issuance  of  a  fractional interest in a share of Common Stock, the Corporation
shall  deliver  cash  in  the amount of the fair market value of such fractional
interest.

                    3.     Accrued  Dividends.  If,  at  the  time the holder of
                           ------------------
shares  of  Series  A-1  Preferred Stock exercises its right of conversion under
Section (iv)(1), such holder's shares of Series A-1 Preferred Stock have accrued
dividends  which  remain  unpaid  at  the time of such conversion, such holder's
right to receive dividends on the shares so converted, to the extent accrued but
unpaid  on  the  date  of  conversion,  shall  continue.

               4.     Mandatory  Conversion.  In  the  event  that  (i) the full
                      ---------------------
dividends earnable on the Series A-1 Preferred Stock have been paid, or (ii) the
Corporation  has  sold,  transferred, or otherwise conveyed all of its remaining
interest  in  the  Export  Water  or  its


                                      -5-
<PAGE>
interest  in  such  asset  has  expired,  or  (iii)  a  majority of the board of
directors  and  the holders of a majority of the Series A-1 Preferred Stock then
outstanding  voting  as  a  class  determine  that  it is no longer economically
feasible  to  develop the Export Water, all shares of Series A-1 Preferred Stock
shall  thereupon  be converted into shares of Common Stock of the Corporation at
the Conversion Rate then in effect.  Any such conversion shall be deemed to take
place at 5:01 Mountain Time on the day such dividends are paid, such interest is
sold, transferred, or otherwise conveyed or expires, or the vote of the board of
directors  and  the holders of the Series A-1 Preferred Stock becomes effective,
and  at that time the holders of the Series A-1 Preferred Stock shall be treated
for  all  purposes  as  the  record holders of shares of Common Stock; provided,
however,  that the right to receive dividends on the shares so converted, to the
extent  accrued  but  unpaid  (whether  or  not  declared)  on  the date of such
conversion,  shall  continue.


                    5.     Mechanics  of  Conversion.  Before  any holder of the
                           -------------------------
Series  A-l  Preferred  Stock  shall be entitled to voluntarily convert the same
into shares of Common Stock, and before the holder of Series A-1 Preferred Stock
that  has  been  converted  into  Common Stock pursuant to Section (iv)(4) above
shall  be  entitled  to  receive a replacement certificate therefor, such holder
shall  surrender the certificate or certificates therefor, duly endorsed, at the
office  of  the  Corporation,  in  the  case of a conversion pursuant to Section
(iv)(1)  above, shall give written notice to the Corporation at such office that
he  or she elects to convert the same and shall state therein his or her name or
the  name  or  names  of  his  or  her  nominees  in  which he or she wishes the
certificate  or  certificates  for  shares  of  Common  Stock to be issued.  The
Corporation  shall, as soon as practicable thereafter, issue and deliver at such
office  to  such  holder  of  the  Series  A-1 Preferred Stock, or to his or her
nominee  or  nominees, a certificate or certificates for the number of shares of
Common  Stock  to  which he or she shall be entitled as aforesaid.  Any optional
conversion shall be deemed to have taken place at 5:01 Mountain Time on the date
of  such  surrender  of  the  shares  to be converted, and the person or persons
entitled  to  receive  the  shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such shares
of  Common  Stock  on  such  date;  provided, however, that the right to receive
dividends  on  the  shares so converted, to the extent accrued but unpaid on the
date  of  such  conversion  (whether  or  not  declared),  shall  continue.

                    6.     Adjustment  for  Combinations  or  Consolidations  of
                           -----------------------------------------------------
Common  Stock.  In  the  event  the Corporation at any time or from time to time
- -------------
after  the  Issuance Date effects a subdivision, combination or reclassification
of  its  outstanding  shares  of Common Stock into a greater or lesser number of
shares,  then  and  in each such event the Conversion Rate shall be increased or
decreased  proportionately.

                    7.     Adjustments  for  Merger  or Reorganization, etc.  In
                           ------------------------------------------------
case  of  any  consolidation  or  merger of the Corporation with or into another
corporation  or  the conveyance of all or substantially all of the assets of the
Corporation  to  another corporation or other person, provision shall be made so
that  each  share  of  the  Series  A-1  Preferred  Stock  shall  thereafter  be
convertible  into  the number of shares of stock or other securities or property
to  which  a  holder  of the number of shares of Common Stock of the Corporation
deliverable  upon  conversion of such Series A-1 Preferred Stock would have been
entitled  upon  such consolidation, merger or conveyance; and, in any such case,
appropriate  adjustment  (as determined by the board of directors) shall be made
in the application of the provisions herein set forth with respect to the rights
and  interest  thereafter  of  the  holders  of  the  Series  A-1  Preferred


                                      -6-
<PAGE>
Stock,  to  the  end  that the provisions set forth herein (including provisions
with  respect  to changes in and other adjustments of the Conversion Rate) shall
thereafter  be  applicable,  as nearly as they reasonably may be, in relation to
any  shares of stock or other securities or property thereafter deliverable upon
the  conversion  of  the  Series  A-1  Preferred  Stock.


               (v)     Voting.
                       ------

                    1.     Except as set forth in Section (v)(2), holders of the
Series A-1 Preferred Stock shall have the right to vote together with the Common
Stock, and not separately as a class, for the election of directors and upon all
other  matters  to  be  voted  on  by  the  holders  of  the Common Stock of the
Corporation.  Every  holder  of  shares  of the Series A-1 Preferred Stock shall
have  the number of votes equal to the number of shares of Common Stock that his
or  her  shares of Series A-1 Preferred Stock would be convertible into pursuant
to Section (iv) on the record date of the meeting at which such shares are being
voted  multiplied  by  1.25.

                    2.     So  long  as  any  shares of the Series A-1 Preferred
Stock remain outstanding, the consent of the holders of a majority of the shares
of the Series A-1 Preferred Stock outstanding voting separately as a class (with
each  share being entitled to one vote) in person or by proxy, either in writing
or  at  any  special  or annual meeting, shall be necessary to permit, effect or
validate  any  one  or  more  of  the  following:

                         a.     The  authorization, creation or issuance, or any
     increase  in  the  authorized or issued amount, of (a) Series A-1 Preferred
     Stock  or  (b) any class or series of stock ranking prior to or on a parity
     with  the Series A-1 Preferred Stock as to dividends from earnings from the
     Export  Water  or  the  distribution  of  the  Export Water or the proceeds
     therefrom;

                         b.     The  amendment, alteration or repeal, whether by
     merger,  consolidation  or  otherwise,  of  any  of  the  provisions of the
     Certificate  of  Incorporation  of  the  Corporation  which would adversely
     affect  any  right,  preference or voting power of the Series A-1 Preferred
     Stock  or  of  the  holders  thereof.

                         c.     Any  transaction  by the Corporation which would
     have the effect of decreasing the Surplus (as defined in Section 154 of the
     Delaware  General Corporation Law) of the Corporation by more than $500,000
     or  which  would  cause  its  Surplus  to be equal to less than $1,000,000;

                         d.     Any expenditures by the Corporation in excess of
     $50,000  in  any  one  month  at any time that the Corporation's Surplus is
     equal  to  or  less  than  $1,000,000;  and

                         e.     The  merger  or consolidation of the Corporation
     with  or into one or more other corporations or business entities where the
     Corporation  is  not  the surviving entity; provided, however, that no such
     consent  shall  be  required  if  the merger and governing documents of the
     surviving  entity  provide for the issuance of securities to holders of the
     Series  A-1  Preferred  Stock with economic and voting rights equivalent to
     the  rights accorded the Series A-1 Preferred Stock under this Certificate.


                                      -7-
<PAGE>
                    3.     At  each  meeting  or  at  any adjournment thereof at
which  the holders of the Series A-1 Preferred Stock have the right to vote as a
class,  the presence, in person or by proxy, of the holders of a majority of the
Series  A-1  Preferred  Stock  then outstanding will be required to constitute a
quorum.  The  vote  of  a  majority  of such quorum will be required to take any
action  at  such  meeting.  Cumulative voting by holders of Series A-1 Preferred
Stock  is  prohibited.  In  the  absence  of a quorum, a majority of the holders
present  in  person or by proxy of the Series A-1 Preferred Stock shall have the
power  to  adjourn  the portion of the meeting related to that particular series
for  a  period  of  up  to 30 days without notice other than announcement at the
meeting  until  a  quorum  shall  be  present.

               (vi)  Corporation's Right to Purchase Series A-1 Preferred Stock.
                     ----------------------------------------------------------

                    1.     The  Corporation  shall  have  the  right to purchase
shares  of Series A-1 Preferred Stock in the public market at such prices as may
then  be available in the public market for such shares and shall have the right
at  any  time  to  acquire any Series A-1 Preferred Stock from the owner of such
shares  on  such  terms as may be agreeable to such owner.  Shares of Series A-1
Preferred Stock may be acquired by the Corporation from any stockholder pursuant
to  this  Section  (vi)(1)  without  offering  any  other  stockholder  an equal
opportunity  to  sell  his  stock  to  the  Corporation,  and no purchase by the
Corporation  from  any  stockholder  pursuant  to  this Section (vi)(1) shall be
deemed  to create any right on the part of any stockholder to sell any shares of
Series  A-1  Preferred  Stock  (or  any  other  stock)  to the Corporation.  The
purchase  by the Corporation of shares of Series A-1 Preferred Stock pursuant to
this  Section  (vi)(1)  shall  not be deemed for any purpose to be a redemption.
Such  shares  shall  not  be  entitled  to  receive  dividends while held by the
Company.

                    2.     Notwithstanding  the  foregoing  provisions  of  this
Section (vi) if a dividend upon any shares of Series A-1 Preferred Stock is past
due,  the  Corporation  shall  not  purchase  or otherwise acquire any shares of
Series  A-1 Preferred Stock, except (i) pursuant to a purchase or exchange offer
made on the same terms to all holders of the Series A-1 Preferred Stock, or (ii)
by  conversion of shares of Series A-1 Preferred Stock into, or exchange of such
shares for, Common Stock or any other stock of the Corporation ranking junior to
the Series A-1 Preferred Stock as to dividends and upon liquidation, dissolution
or  winding  up  of  the  Corporation.

                    3.     No  holder  of  Series A-1 Preferred Stock shall have
any  right  to  require  the  Corporation  to redeem any or all of the shares of
Series  A-1  Preferred  Stock.

               (vii)     Preemptive Rights.  The holders of shares of Series A-1
                         -----------------
Preferred  Stock  are  not  entitled to any preemptive or subscription rights in
respect  of  any  securities  of  the  Corporation.

               (viii)    Notices.  Any  notice  required  hereby  to be given to
                         -------
the  holders of shares of Series A-1 Preferred Stock shall be sufficiently given
if sent by telecopier, registered or certified mail, postage prepaid, by express
mail  or  by  other  express  courier  addressed to each holder of record at his
address  appearing  on  the  books  of  the  Corporation.  All notices and other
communications shall be effective (i) if mailed, when received or three (3) days
after  mailing,  whichever  is earlier; (ii) if sent by express mail or courier,
when  delivered;  and  (iii)  if  telecopied,


                                      -8-
<PAGE>
when  received  by  the  telecopier  to  which  transmitted (a machine-generated
transaction  report  produced  by  sender  bearing recipient's telecopier number
being  prima  facie  proof  of  receipt).


               (ix)     Transfer  Costs.  The  Corporation shall pay any and all
                        ---------------
documentary  stamp  and  other transaction taxes attributable to the issuance or
delivery  of  shares of Common Stock upon conversion of any shares of Series A-1
Preferred  Stock;  provided, however, that the Corporation shall not be required
to  pay  any tax which may be payable in respect of any transfer involved in the
issue  or  delivery  of  shares of Common Stock in a name other than that of the
holder  of  the  Series A-1 Preferred Stock to be converted and no such issue or
delivery  shall  be  made  unless  and until the person requesting such issue or
delivery  has  paid  to  the  Corporation  the  amount  of  any  such tax or has
established,  to  the  satisfaction  of  the Corporation, that such tax has been
paid.

               (x)     Definitions.
                       -----------

                    1.     "Issuance  Date"  shall  mean the initial date of the
issuance  of  any  shares  of  the  Series  A-1  Preferred  Stock.

                    2.     "Amended  and  Restated  Lease"  shall mean the lease
between  the  Rangeview Metropolitan District, a quasi-municipal corporation and
political subdivision of the State of Colorado, and the State of Colorado acting
through  the  State  Board of Land Commissioners (the "State") denominated State
Lease  Number  S-37280,  dated April 26, 1982, as amended and restated April 11,
1996.

                    3.     "Comprehensive  Amendment Agreement No. 1" shall mean
the  agreement  entered  into  as  of  April 11, 1996 among the Corporation, the
State,  OAR,  Incorporated,  Willard  G.  Owens,  H.F.  Riebesell,  and  various
investors  who had invested in the Corporation through investment agreements and
stock  purchase  agreements entered into from 1990 through 1994, which agreement
amends  the  Corporation's  obligations  under  the  prior  investment and stock
purchase agreements and defines the rights of the parties to Gross Proceeds from
the  marketing,  sale,  or  other  disposition  of  the  Export  Water.

                    4.     "Export  Water" shall mean the 1,165,000 acre-feet of
water deeded by Rangeview and the State to the Corporation pursuant to the terms
of  the Amended and Restated Lease and an agreement for the sale of export water
(the  "Export  Water  Agreement"), which is attached to the Amended and Restated
Lease  as  Exhibit  C.

                    5.     "Export  Water Contractor" shall have the meaning set
forth  in  Section  6.1  of  the  Amended  and  Restated  Lease.

                    6.     "Gross  Proceeds" shall have the meaning set forth in
Section  2.4  of  the  Comprehensive  Amendment  Agreement.

     D.     Series  B  Preferred  Stock.
            ---------------------------

          (i)     Number  of  Shares  and  Designation.  432,514  shares  of the
                  ------------------------------------
preferred stock, $.001 par value, of the Corporation are hereby constituted as a
series  of  preferred


                                      -9-
<PAGE>
stock of the Corporation designated as Series B Convertible Preferred Stock (the
"Series  B  Preferred  Stock").

          (ii)     Liquidation.
                   -----------

               1.     Liquidation  Value.  Upon  any liquidation, dissolution or
                      ------------------
winding  up of the Corporation, whether voluntary or involuntary, the holders of
the  Series  B  Preferred  Stock  will  be  entitled  to  be  paid,  before  any
distribution  or  payment  is  made  upon  any  other  equity  securities of the
Corporation, the amount of $1.00 per share less an amount equal to all dividends
paid  thereon (the "Liquidation Value"); provided, however, that with respect to
the  Rangeview  Assets, the Series B Preferred Stock shall be subject and junior
to  the  rights  and  preferences of the holders of the Corporation's Series A-1
Preferred  Stock  in  Rangeview Assets and the proceeds of a disposition of such
assets.

               2.     Notice  of Liquidation.  The Corporation will mail written
                      ----------------------
notice  of  any distribution in connection with such liquidation, dissolution or
winding  up,  not less than 60 days prior to the payment date stated therein, to
each  record  holder  of Series B Preferred Stock.  Neither the consolidation or
merger  of  the  Corporation into or with any other corporation or corporations,
nor  the  sale  or transfer by the Corporation of all or any part of its assets,
nor  the reduction of the capital stock of the Corporation, will be deemed to be
a  liquidation,  dissolution or winding up of the Corporation within the meaning
of  this  Section  (ii).

          (iii)     Dividends.
                    ---------

               1.     General  Obligations.  The  holders  of  the  Series  B
                      --------------------
Preferred Stock shall be entitled to receive cash dividends when and as declared
by  the  Board of Directors out of funds legally available for such purpose in a
total  amount of $1.00 per share, and no more.  Each share of Series B Preferred
Stock  shall  earn  and  accrue  a dividend if and when the Corporation receives
proceeds  from (i) the retirement of the Rangeview Bonds whether for cash or for
new  bonds or other debt obligations of the District or (ii) the marketing, sale
or  other distribution of the Rangeview Water Right or the water underlying such
right  in  an  amount  greater  than $35,000,000 plus PPI (a "Qualifying Sale").
Such  dividend  shall be paid when and as declared by the Board of Directors and
upon completion of any Qualifying Rangeview Sale unless payment is prohibited by
Delaware  law.  No  dividends shall be paid on Common Stock unless all dividends
accrued  on  the  Series  B  Preferred  Stock  have  been  paid.

               2.     Distribution  of Partial Dividend Payment.  If at any time
                      -----------------------------------------
less  than the total amount of dividends have accrued with respect to the Series
B  Preferred  Stock,  any  payment  of  such  dividends declared by the Board of
Directors  will  be  distributed  ratably  among  the  holders  of  the Series B
Preferred  Stock  based  upon  the  number  of  shares  held  by  such  holders,
respectively.

               3.     Junior Dividend Right.  Dividends may accrue but shall not
                      ---------------------
be  paid  by  the  Corporation  on  the  Series  B Preferred Stock utilizing the
Rangeview  Assets  or the proceeds therefrom unless all dividends accrued on the
Corporation's  Series  A-1  Preferred  Stock  have  been  paid  in  full.

          (iv)     Optional  Redemption.
                   --------------------


                                      -10-
<PAGE>
               1.     Redemption.  The  Series B Preferred Stock may be redeemed
                      ----------
by  the  Corporation at its option on any date set by the Board of Directors, in
whole  or  in part, out of funds legally available therefor, at any time or from
time  to  time,  at  a  redemption  price  equal  to  the  Liquidation  Value.

               2.     As  Alternative  to  Dividend.  In  lieu  of  payment of a
                      -----------------------------
dividend  accruing  from a Qualifying Rangeview Sale, the Board of Directors may
alternatively  cause  the Corporation to redeem shares of the Series B Preferred
Stock,  on  any  date set by the Board of Directors, in whole or in part, out of
funds  legally  available  therefor,  at  any  time  or  from time to time, at a
redemption  price  equal to the Liquidation Value.  If the Corporation elects to
redeem shares of Series B Preferred Stock in lieu of paying an accrued dividend,
the  Corporation  must  redeem  the  full  number of shares purchasable with the
aggregate  dividend  accrued.

               3.     Limitation  on  Use  Rangeview  Assets.  The  Series  B
                      --------------------------------------
Preferred  Stock  may not be redeemed utilizing the Rangeview Assets or proceeds
therefrom  unless  it  would be permissible under Section (iii)(3) hereof to use
such  assets  to  pay  a  dividend  on  the  Series  B  Preferred  Stock.

               4.     Notice  of  Redemption.  Notice of any proposed redemption
                      ----------------------
of  shares of Series B Preferred Stock shall be sent to the holders of record of
the  shares  of  Series  B  Preferred  Stock to be redeemed, at their respective
addresses  then appearing on the books of the Company, at least 20, but not more
than  60 days prior to the date fixed for such redemption (herein referred to as
the "Redemption Date").  Each such notice shall specify (i) the Redemption Date,
(ii)  the  Redemption  Price, (iii) the place for payment and for delivering the
stock  certificate(s)  and  transfer  instrument(s)  in  order  to  collect  the
Redemption  Price,  and  (iv) the number of shares to be redeemed.  If less than
all  the  outstanding shares of Series B Preferred Stock are to be redeemed, the
Corporation shall redeem (or offer to redeem) the outstanding shares of Series B
Preferred  Stock  on a pro rata basis.  In order to facilitate the redemption of
the  shares of Series B Preferred Stock, the Board of Directors may fix a record
date  for  determination  of holders of Series B Preferred Stock to be redeemed,
which  date  shall  not  be  more  than  60 (nor less than 10) days prior to the
Redemption  Date  with  respect  thereto.

               5.     Return of Stock Certificates.  The holder of any shares of
                      ----------------------------
Series  B  Preferred  Stock  that  are redeemed shall not be entitled to receive
payment of the Redemption Price for such shares until such holder shall cause to
be  delivered  to  the  place specified in the notice given with respect to such
redemption (i) the certificate(s) representing such shares of Series B Preferred
Stock,  and  (ii)  transfer  instrument(s)  satisfactory  to the Corporation and
sufficient  to  transfer  such shares of Series B Preferred Stock to the Company
free  of any adverse interest.  No interest shall accrue on the Redemption Price
of  any  share  of  Series  B  Preferred  Stock  after  its  Redemption  Date.

               6.     Extinguishment of Rights.  At the close of business on the
                      ------------------------
Redemption  Date  for any share of Series B Preferred Stock to be redeemed, such
share  shall  (provided  the  Redemption  Price  of  such share has been paid or
properly  provided  for)  be deemed to cease to be outstanding and all rights of
any person other than the Corporation in such share shall be extinguished on the
Redemption  Date  for  such  share  except  for  the  right  to  receive  the


                                      -11-
<PAGE>
Redemption  Price,  without  interest,  for  such  share  in accordance with the
provisions  of  this  Section  (iv),  subject  to  applicable  escheat  laws.

               7.     Open  Market  Purchases.  The  Corporation  shall have the
                      -----------------------
right  to  purchase  shares  of Series B Preferred Stock in the public market at
such  prices  as  may then be available in the public market for such shares and
shall  have  the  right at any time to acquire any Series B Preferred Stock from
the  owner  of  such  shares  on  such  terms as may be agreeable to such owner.
Shares  of  Series B Preferred Stock may be acquired by the Corporation from any
stockholder  pursuant  to  this  Section  (iv)(7)  without  offering  any  other
stockholder  an  equal  opportunity to sell his or her stock to the Corporation,
and no purchase by the Corporation from any stockholder pursuant to this Section
(iv)(7)  shall  be  deemed to create any right on the part of any stockholder to
sell  any  shares  of  Series  B  Preferred  Stock  (or  any other stock) to the
Corporation.  The  purchase  by  the Corporation of shares of Series B Preferred
Stock pursuant to this Section (iv)(7) shall not be deemed for any purpose to be
a redemption.  Such shares shall not be entitled to receive dividends while held
by  the  Corporation.

               8.     Limitations  on  Redemption  Right.  Notwithstanding  the
                      ----------------------------------
foregoing  provisions  of  this  Section  (iv), and subject to the provisions of
Section  (iii) hereof, if a dividend upon any shares of Series B Preferred Stock
is  past due, the Corporation shall not purchase or otherwise acquire any shares
of  Series  A-1 Preferred Stock, except pursuant to a purchase or exchange offer
made  on  the  same  terms  to  all  holders  of the Series A-1 Preferred Stock.

               9.     Mandatory  Redemption.  No  holder  of  Series B Preferred
                      ---------------------
Stock  shall  have  any right to require the Corporation to redeem any or all of
the  shares  of  Series  B  Preferred  Stock.

          (v)     Voting.
                  ------

               1.     General.  The holders of Series B Preferred Stock will not
                      -------
have  any  voting  rights except as set forth below or as otherwise from time to
time  required  by  law.  In  connection  with any right to vote, each holder of
Series  B  Preferred  Stock  will  have  one vote for each such share held.  Any
shares  of  Series  B  Preferred  Stock  held  by  the Corporation or any entity
controlled  by  the Corporation shall not have voting rights hereunder and shall
not  be  counted  in  determining  the  presence  of  a  quorum.

               2.     Default Voting Rights.  Whenever dividends on the Series B
                      ---------------------
Preferred  Stock  shall  have accrued pursuant to Section (iii)(1), but have not
been  declared  by the Board of Directors, the holders of the Series B Preferred
Stock  shall  be  entitled  to  vote with the holders of the Common Stock at any
meeting  of  the  shareholders  of  the  Corporation held during the period such
dividends  remain in arrears.  Each share of Series B Preferred Stock shall have
one  vote  when  voting  with the Common Stock.  The right of the holders of the
Series  B Preferred Stock to vote with the Common Stock shall terminate when all
accrued  and unpaid dividends on the Series B Preferred Stock have been declared
and  paid  or  set  apart  for  payment.


                                      -12-
<PAGE>
               3.     Class  Voting  Rights.  So  long as the Series B Preferred
                      ---------------------
Stock is outstanding, the Corporation shall not, without the affirmative vote or
consent  of  the holders of at least 66-2/3% (or such higher percentage, if any,
as  may  then  be  required  by applicable law) of all outstanding shares of the
Series  B  Preferred  Stock  voting  separately  as a class, (i) amend, alter or
repeal  any  provision of the Certificate of Incorporation or the By-Laws of the
Corporation,  so  as  to  affect  adversely  the  relative  rights, preferences,
qualifications,  limitations  or restrictions of the Series B Preferred Stock or
(ii)  create, authorize, issue, or increase the amount of any class or series of
stock,  or  any security convertible into stock of such class or series, ranking
senior  to the Series B Preferred Stock as to dividend or liquidation rights.  A
class  vote  on  the  part  of  the  Series  B  Preferred  Stock  shall, without
limitation,  specifically  not  be  deemed  to  be required (except as otherwise
required  by  law  or  resolution of the Board of Directors) in connection with:
(a)  the  authorization,  issuance  or  increase in the authorized amount of any
shares  of  any  other  class  or series of stock which ranks junior to, or on a
parity with, the Series B Preferred Stock in respect of the payment of dividends
and  distributions  upon  liquidation,  dissolution  or  winding  up  of  the
Corporation; or (b) the authorization, issuance or increase in the amount of any
notes,  commercial  paper,  bonds, mortgages, debentures or other obligations of
the  Corporation.

               4.     Preemptive  Rights.  The  holders  of  shares  of Series B
                      ------------------
Preferred  Stock  are  not  entitled to any preemptive or subscription rights in
respect  of  any  securities  of  the  Corporation.

          (vi)     Definitions.
                   -----------

               1.     "Option  Agreements"  shall  mean  a  certain  Option  and
Purchase Agreement between Inco Securities Corporation and OAR, Incorporated and
a  certain Option and Purchase Agreement between Inco Securities Corporation and
Colorado  Water  Consultants,  Incorporated,  each  dated  November 8, 1990, and
amended  February  12, 1991, and further amended August 12, 1992, and as many be
further  amended  from  time  to  time.

               2.     "PPI"  shall  mean  interest  at  the annual rate of 9% on
$8,084,000.00  (which  has been accruing since August 12, 1992) which represents
the  remaining  adjusted  purchase  price of the Rangeview Bonds pursuant to the
Option  Agreements.

               3.     "Rangeview  Assets"  shall  mean  the  Rangeview Bonds and
Rangeview  Water  Rights  which the Corporation has rights to market and develop
pursuant  to  a Water Rights Commercialization Agreement (the "Commercialization
Agreement")  with Inco Securities Corporation dated as of December 11, 1990, and
amended  February  12,  1991, and further amended August 12, 1992, and as may be
further  amended  from  time  to  time.

               4.     "Rangeview  Bonds"  shall mean the certain notes and bonds
issued by the Rangeview Metropolitan District, a quasi-municipal corporation and
political  subdivision  of  the State of Colorado (the "District"), having a par
value  of  $24,914,058.00, which Inco Securities Corporation and the Corporation
have  purchased  in  part and the remainder of which Inco Securities Corporation
has  an  option  to purchase pursuant to the Option Agreements as may be further
amended  from  time  to  time.


                                      -13-
<PAGE>
               5.     "Rangeview  Water  Right"  shall  mean  the certain 10,000
acre-foot water production right which Inco Securities Corporation has an option
to acquire from the District pursuant to a certain Option Agreement For Sale and
Operation  of  Production  Right,  dated  as  of  November 14, 1990, and amended
February  12,  1991,  and  as  may  be  further  amended  from  time  to  time.

          (vii)     Notices.  Any  notice  required  hereby  to  be given to the
                    -------
holders  of  shares  of  Series B Preferred Stock shall be sufficiently given if
sent  by  telecopier,  registered or certified mail, postage prepaid, by express
mail  or  by  other express courier addressed to each holder of record at his or
her  address  appearing  on the books of the Corporation.  All notices and other
communications shall be effective (i) if mailed, when received or three (3) days
after  mailing,  whichever  is earlier; (ii) if sent by express mail or courier,
when  delivered;  and  (iii)  if  telecopied, when received by the telecopier to
which  transmitted  (a  machine-generated  transaction report produced by sender
bearing  recipient's  telecopier  number  being  prima  facie proof of receipt).

                                    ARTICLE V

                           COMPROMISE AND ARRANGEMENT
                           --------------------------

     Whenever  a  compromise or arrangement is proposed between this corporation
and  its  creditors or any class of them and/or between this corporation and its
stockholders  or  any  class of them, any court of equitable jurisdiction within
the  State  of  Delaware  may,  on  the  application  in  a  summary way of this
corporation  or  of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions of
Section 291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution  or  any  receiver or receivers appointed for this corporation under
the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of
the  creditors  or  class  of  creditors  and/or of the stockholders or class of
stockholders  of  this  corporation,  as the case may be, to be summoned in such
manner  as  the  said  court  directs.  If  a  majority  of members representing
three-fourths  in  value  of  the creditors or class of creditors, and/or of the
stockholders  or  class of stockholders of this corporation, as the case may be,
agree  to  any  compromise  or  arrangement  and  to  any reorganization of this
corporation  as  a  consequence  of  such compromise or arrangement and the said
reorganization,  shall, if sanctioned by the court to which said application has
been  made, be binding on all the creditors or class of creditors, and/or on all
the  stockholders  or class of stockholders of this corporation, as the case may
be,  and  also  on  this  corporation.

                                   ARTICLE VI

                                 INDEMNIFICATION
                                 ---------------

     (a)     The corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit  or  proceeding,  whether  civil, criminal, administrative or investigative
(other  than  an  action by or in the right of the corporation) by reason of the
fact  that  he  is  or  was  a  director,  officer,  employee,  or  agent of the


                                      -14-
<PAGE>
corporation,  or  is  or  was  serving  at  the  request of the corporation as a
director,  officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees),
judgments,  fines  and  amounts  paid  in  settlement  or otherwise actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he  acted  in  good faith and in a manner he reasonably believed to be in or not
opposed  to  the  best  interests  of  the corporation, and, with respect to any
criminal  action  or  proceeding, had no reasonable cause to believe his conduct
was  unlawful.  The  termination  of any action, suit or proceeding by judgment,
order,  settlement,  conviction,  or  upon  a  plea  of  nolo  contendere or its
equivalent  shall not of itself create a presumption that the person did not act
in  good  faith  and  in  a  manner which he reasonably believed to be in or not
opposed  to  the  best  interests  of  the corporation, and, with respect to any
criminal  action or proceeding, that he had reasonable cause to believe that his
conduct  was  unlawful.

     (b)     The corporation shall indemnify any person who was or is a party or
is  threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the corporation to procure a judgment in its favor
by  reason  of the fact that he is or was a director, officer, employee or agent
of  the corporation, or is or was serving at the request of the corporation as a
director,  officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually  and  reasonably  incurred  by  him  in  connection with the defense or
settlement  of  such action or suit if he acted in good faith and in a manner he
reasonably  believed  to  be  in  or  not  opposed  to the best interests of the
corporation,  except  that  no  indemnification  shall be made in respect of any
claim,  issue  or  matter as to which such person shall have been adjudged to be
liable  for  negligence  or  misconduct  in  the  performance of his duty to the
corporation  unless  and  only  to  the extent that the Court of Chancery of the
State  of  Delaware  or the court in which such action or suit was brought shall
determine  upon  application  that, despite the adjudication of liability but in
view  of  all the circumstances of the case such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of the State
of  Delaware  or  such  other  court  shall  deem  proper.

     (c)     To  the  extent  that  any  person referred to in the preceding two
sections  of  this  Article VI has been successful on the merits or otherwise in
defense  of  any  action, suit or proceeding referred to in such sections, or in
defense  of  any claim, issue or matter therein, he shall be indemnified against
expenses  (including attorneys' fees) actually and reasonably incurred by him in
connection  therewith.

     (d)     Any indemnification under the first two sections of this Article VI
(unless  ordered by a court) shall be made by the corporation only as authorized
in  the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable  standard  of conduct set forth therein.  Such determination shall be
made (a) by the board of directors by a majority vote of a quorum (as defined in
the  bylaws  of the corporation) consisting of directors who were not parties to
such  action,  suit  or proceeding, or (b) if such quorum is not obtainable, or,
even  if  obtainable,  a  quorum  of  disinterested  directors  so  directs,  by
independent  legal  counsel  in  a  written opinion, or (c) by the stockholders.


                                      -15-
<PAGE>
     (e)     Expenses  incurred in defending a civil or criminal action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
such  action,  suit or proceeding as authorized by the board of directors of the
corporation  in the specific case upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount unless it shall
ultimately  be  determined  that  he  is  entitled  to  be  indemnified  by  the
corporation  as  authorized  in  this  Article  VI.

     (f)     The indemnification provided by this Article VI shall not be deemed
exclusive  of  any  other  rights  to which those seeking indemnification may be
entitled,  under  any  statute,  bylaw,  agreement,  insurance  policy,  vote of
shareholders  or  disinterested  director or otherwise, both as to action in his
official  capacity  and  as  to  action  in  another capacity while holding such
office,  and  shall  continue  as  to  a person who has ceased to be a director,
officer,  employee  or  agent  and  shall  inure  to  the  benefit of the heirs,
executors  and  administrators  of  such  a  person.

     (g)     By  action  of its board of directors, notwithstanding any interest
of the directors in the action, the corporation shall have power to purchase and
maintain insurance, in such amounts as the board of directors deems appropriate,
on  behalf of any person who is or was a director, officer, employee or agent of
the  corporation,  or  is  or was serving at the request of the corporation as a
director,  officer, employee or agent of another corporation, partnership, joint
venture,  trust  or other enterprise, against any liability asserted against him
and  incurred by him in any such capacity, or arising out of his status as such,
whether  or  not  he  is indemnified against such liability or expense under the
provisions  of this Article VI and whether or not the corporation would have the
power  or  would  be  required to indemnify him against such liability under the
provisions  of this Article VI or of the General Corporation Law of the State of
Delaware,  now  or  hereafter  in  effect,  or  by  any  other  applicable  law.

     (h)     For the purpose of this Article VI, references to "the corporation"
include  all  constituent  corporations absorbed in a consolidation or merger as
well  as the resulting or surviving corporation so that any person who is or was
a  director,  officer, employee or agent of such a constituent corporation or is
or  was  serving  at  the request of such constituent corporation as a director,
officer,  employee  or agent of another corporation, partnership, joint venture,
trust  or other enterprise shall stand in the same position under the provisions
of  this Article VI with respect to the resulting or surviving corporation as he
would  if  he  had  served  the  resulting  or surviving corporation in the same
capacity.

                                   ARTICLE VII

                                     BYLAWS
                                     ------

     The  Board  of  Directors of the corporation shall have the power to adopt,
amend  or  repeal  bylaws  for  the  governance  of  the  corporation.


                                      -16-
<PAGE>
                                  ARTICLE VIII

                        LIMITATION OF DIRECTOR LIABILITY
                        --------------------------------

     A  director  of  the  corporation  shall  not  be  personally liable to the
corporation  or  its  stockholders  for monetary damages for breach of fiduciary
duty  as  a  director, except for liability (i) for any breach of the director's
duty  of  loyalty  to  the  corporation  or  its  stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation  of  law,  (iii) under Section 174 of the Delaware General Corporation
Law,  or  (iv)  for any transaction from which the director derived any improper
personal  benefit.  If,  after approval by the stockholders of this Article, the
Delaware  General  Corporation  Law  is  amended  to  authorize corporate action
further  eliminating  or  limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.

     Any  repeal  or modification of the foregoing paragraph by the stockholders
of  the  corporation  shall  not  adversely  affect any right or protection of a
director of the corporation existing at the time of such repeal or modification.


                                      -17-
<PAGE>
                            *     *     *     *     *

     This  Amended and Restated Certificate of Incorporation was duly adopted by
the  Board  of Directors of the Corporation in accordance with the provisions of
Section  242  and  245  of  the General Corporation Law of Delaware and was duly
adopted  by  vote  of the stockholders of the Corporation in accordance with the
provisions  of  Section  242  of  the  General  Corporation  Law  of  Delaware.

     In  witness  whereof,  the Corporation has caused this Amended and Restated
Certificate of Incorporation to be executed by its duly authorized officer as of
this  22nd  day  of  April,  2004.

                                            PURE  CYCLE  CORPORATION


                                            By:    /s/Scott E. Lehman
                                                   -----------------------------
                                                   Scott E. Lehman, Secretary


                                      -18-
<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.13
<SEQUENCE>4
<FILENAME>doc4.txt
<DESCRIPTION>EXHIBIT 10.13
<TEXT>
                            AGREEMENT TO AMEND/EXTEND
                             WATER SERVICE AGREEMENT
                                     FOR THE
                                  SKY RANCH PUD
                                                                 January  6,2004
                                                                 ---------------

RE:  Water  Service  Agreement  dated  October 31. 2003  by  and between AIRPARK
                                       ----------------
     METROPOLITAN  DISTRICT  ("AMD");  ICON  INVESTORS 1 LLC ("DEVELOPER"); PURE
     CYCLE  CORPORATION  ("PURECYCLE");  and  RANGE  VIEW  METROPOLITAN DISTRICT
     ("RANGEVIEW")  relating to the provision of water services to the Sky Ranch
     PUD  (Arapahoe  County  case  No.  Z01-010).


This  Amendment,  dated January 6. 2004, shall amend the aforesaid water service
                        ---------------
agreement  as  follows:

     Section  10.02, Termination Contingency, Subsection (c) shall be amended to
     read  as  follows:

(c)  Water  Rights.  If  AMD  or  the DEVELOPER are unsatisfied with the opinion
     -------------
     of water counsel provided pursuant to Section 6.03(e), AMD or the DEVELOPER
     shall  have  the right to terminate this Agreement by giving written notice
     to  RANGEVIEW  and  PURECYCLE.  In no event shall AMD or DEVELOPER have the
     right  to terminate this Agreement pursuant to this Section after the Board
     of  County  Commissioners of Arapahoe County has approved the PDP, or March
     6,  2004,  whichever  is  latest.

AIRPARK  METROPOLITAN  DISTRICT

By:  /s/  Andrew  R.  Klein
     ----------------------------------
     Andrew  R.  Klein,  President

ICON  INVESTORS  I  LLC

By:  AIRWAY  PARK  MANAGER,  LLC,  A  COLORADO  LIMITED  LIABILITY  COMPANY

By:  /s/  Andrew  R.  Klein
     ----------------------------------
     Andrew  R.  Klein,  its  Manager


PURE  CYCLE  CORPORATION,  A  DELAWARE  CORPORATION

By:  /s/  Mark  Harding
     ----------------------------------
     Mark  Harding,  President


RANGEVIEW  METROPOLITAN  DISTRICT

By:  /s/  Thomas  P.  Clark
     ----------------------------------
     Thomas  P.  Clark,  Director


<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.14
<SEQUENCE>5
<FILENAME>doc5.txt
<TEXT>
                               AGREEMENT TO AMEND
                             WATER SERVICE AGREEMENT
                                     FOR THE
                                  SKY RANCH PUD
                                                      Dated:  January  30.  2004
                                                              ------------------


RE:   Water  Service  Agreement  dated  October 31. 2003  by and between Airpark
                                        ----------------
Metropolitan  District  ("AMD");  Icon Investors I LLC ("DEVELOPER"); Pure Cycle
Corporation  ("PURECYCLE");  and  Rangeview  Metropolitan District ("RANGEVIEW")
relating  to  the  provision  of  water  services to the Sky Ranch PUD (Arapahoe
County  case  No.  Z01-010).

This  Amendment, dated January 30, 2004, shall amend the aforesaid Water Service
Agreement  as  follows:

     Section  4.02  of  the  above  referenced Water Service agreement is hereby
     amended  to read as follows, with amended language being designated in BOLD
     TYPE:

     "4.02  Water  Tap  Fees. DEVELOPER shall purchase Water Taps from PURECYCLE
            ----------------
     for  use  on  the  Property  in  accordance  with  the  "Water Tap Takedown
     Schedule"  in  Exhibit  C.  FOR  EACH  WATER TAP PURCHASED BY DEVELOPER FOR
     SERVICE FROM 1,501 EQR TO 4,000 EQR, DEVELOPER SHALL PAY THE WATER RESOURCE
     CHARGE  PORTION  OF THE WATER TAP FEE DIRECTLY TO THE DAVIS GRAHAM & STUBBS
     LLP  TRUST  ACCOUNT.  SUCH  WATER  RESOURCE CHARGE SHALL BE USED TO RELEASE
     OUTSTANDING  SECURITY  INTERESTS  ON  THE  DEDICATED  EXPORT  WATER."


AIRPARK  METROPOLITAN  DISTRICT

By:  /s/  Andrew  R.  Klein
     ----------------------------------
     Andrew  R.  Klein,  President


ICON  INVESTORS  I,  LLC,  a  Colorado  Limited  Liability  Company

By:  Airway  Park  Manager,  LLC,  a  Colorado  Limited  Liability  Company

By:  /s/  Andrew  R.  Klein
     ----------------------------------
     Andrew  R.  Klein,  its  Manager


PURE  CYCLE  CORPORATION,  a  Delaware  Corporation

By:  /s/  Mark  Harding
     ----------------------------------
     Mark  Harding,  President


RANGEVIEW  METROPOLITAN  DISTRICT

By:  /s/  Thomas  P.  Clark
     ----------------------------------
     Thomas  P.  Clark,  Director


<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.15
<SEQUENCE>6
<FILENAME>doc6.txt
<DESCRIPTION>EXHIBIT 10.15
<TEXT>
                               AGREEMENT TO AMEND
                    OPTION AGREEMENT FOR EXPORT WATER SERVICE
                                     FOR THE
                                  SKY RANCH PUD
                                                     Dated:     January 30. 2004
                                                                ----------------


RE:     Option  Agreement  dated  October  31.  2003  by  and  between  Airpark
                                  ------------------
Metropolitan  District  ("AMD");  Icon Investors I LLC ("DEVELOPER"); Pure Cycle
Corporation  ("PURECYCLE");  and  Rangeview  Metropolitan District ("RANGEVIEW")
relating  to  the  provision  of  water  services to the Sky Ranch PUD (Arapahoe
County  case  No.  Z01-010).

This  Amendment,  dated  January  30,  2004,  shall  amend  the aforesaid Option
Agreement  for  Export  Water  Service  follows:

     Section  2.03 of the above referenced Option Agreement is hereby amended to
     read  as  follows,  with  changes  being  highlighted  in  BOLD  TYPE:

     "203 Extension of Option. In the event that the DEVELOPER has not exercised
          -------------------
     the  Option  in  accordance with Section 2.01, the DEVELOPER may extend the
     Option  for  up  to  an  additional three one-year terms by making payments
     DIRECTLY  TO  THE  DAVIS  GRAHAM  & STUBBS LLP TRUST ACCOUNT of One Hundred
     Thousand  Dollars ($100,000) (the Option Extension Fee) for each additional
     one-year extension term. Payments shall be due on the fifth Anniversary for
     a  one  year extension, on the fifth and sixth Anniversaries for a two year
     extension,  and  on  the fifth, sixth and seventh Anniversaries for a three
     year extension. ANY SUCH PAYMENTS FOR EXTENDING THE OPTION SHALL BE USED TO
     RELEASE  OUTSTANDING  SECURITY  INTERESTS  ON  THE DEDICATED EXPORT WATER."

AIRPARK  METROPOLITAN  DISTRICT

By:  /s/  Andrew  R.  Klein
     ----------------------------------
     Andrew  R.  Klein,  President

ICON  INVESTORS  I,  LLC,  A  Colorado  Limited  Liability  Company
By:     Airway  Park  Manager  LLC,  a  Colorado  Limited  Liability  Company

By:  /s/  Andrew  R.  Klein
     ----------------------------------
     Andrew  R.  Klein,  its  Manager

PURE  CYCLE  CORPORATION,  a  Delaware  Corporation

By:  /s/  Mark  Harding
     ----------------------------------
     Mark  Harding,  President

RANGEVIEW  METROPOLITAN  DISTRICT

By:  /s/  Thomas  P.  Clark
     ----------------------------------
     Thomas  P.  Clark,  Director


<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>7
<FILENAME>doc7.txt
<DESCRIPTION>EXHIBIT 10.16
<TEXT>

                               SECOND AMENDMENT TO
                            AGREEMENT TO AMEND/EXTEND
                             WATER SERVICE AGREEMENT
                                     FOR THE
                                  SKY RANCH PUD

                                                                   March 5, 2004
                                                                   -------------

RE:  Water  Service  Agreement  dated  October  31,  2003 by and between AIRPARK
     METROPOLITAN  DISTRICT  ("AMD");  ICON  INVESTORS I LLC ("DEVELOPER"); PURE
     CYCLE  CORPORATION  ("PURECYCLE");  and  RANGEVIEW  METROPOLITAN  DISTRICT
     "(RANGEVIEW") relating to the provisions of water services to the Sky Ranch
     PUD  (Arapahoe  County  case  No.  Z01-010).

This  Amendment,  dated  March  5, 2004, shall amend the aforesaid water service
                         --------------
agreement  as  follows:

     Section  10.2,  Termination Contingency, Subsection (c) shall be amended to
     read  as  follows:

     (c)  Water  Rights. If AMD or the DEVELOPER are satisfied with the opinions
          -------------
          of  water  counsel  provided  pursuant  to Section 6.03(e), AMD or the
          DEVELOPER  shall  have the right to terminate this agreement by giving
          written  notice  to RANGEVIEW and PURECYCLE. In the event shall AMD or
          DEVELOPER  have the right to terminate this Agreement pursuant to this
          Section after the Board of County Commissioners of Arapahoe County has
          approved  the  PDP,  on  March  20,  2004,  whichever  is  latest.

AIRPARK  METROPOLITAN  DISTRICT

By:    [signature  not  legible]
     ----------------------------------

     ----------------------------------


ICON  INVESTORS  I  LLC,  a  Colorado  Limited  Liability  Company

By:  AIRWAY  PARK  MANAGER  LLC,  A  COLORADO  LIMITED  LIABILITY  COMPANY

By:    [signature  not  legible]
     ----------------------------------

     ----------------------------------


PURE  CYCLE  CORPORATION,  a  Delaware  Corporation

By:  /s/  Mark  Harding
     ----------------------------------
     Mark  Harding,  President


RANGEVIEW  METROPOLITAN  DISTRICT

By:  /s/  Thomas  P.  Clark
     ----------------------------------
     Thomas  P.  Clark,  Director


<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.17
<SEQUENCE>8
<FILENAME>doc8.txt
<DESCRIPTION>EXHIBIT 10.17
<TEXT>


                      AMENDED AND RESTATED LEASE AGREEMENT


                                     between


                  STATE OF COLORADO, ACTING BY AND THROUGH THE
                    STATE BOARD OF LAND COMMISSIONERS, LESSOR


                                       and


                     RANGEVIEW METROPOLITAN DISTRICT, LESSEE

                                Lease No. S-37280


<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                                -----------------

<S>                                                                <C>
ARTICLE 1  Definitions. . . . . . . . . . . . . . . . . . . . . .   1

ARTICLE 2  Preliminary Matters. . . . . . . . . . . . . . . . . .   5

ARTICLE 3  Effective Date . . . . . . . . . . . . . . . . . . . .   5
     3.1   Effective Date of This Agreement . . . . . . . . . . .   5
     3.2   Amendment. . . . . . . . . . . . . . . . . . . . . . .   5
     3.3   Objectives of This Agreement . . . . . . . . . . . . .   5
     3.4   Rangeview. . . . . . . . . . . . . . . . . . . . . . .   6

ARTICLE 4  Leased Premises. . . . . . . . . . . . . . . . . . . .   6
     4.1   General Description of Water Subject to This Agreement   6

ARTICLE 5  Grant of Lease . . . . . . . . . . . . . . . . . . . .   6
     5.1   Grant. . . . . . . . . . . . . . . . . . . . . . . . .   6
     5.2   Term . . . . . . . . . . . . . . . . . . . . . . . . .   7
     5.3   Effect of Expiration of the Agreement. . . . . . . . .   7
     5.4   Land Board's Legal Right to Water. . . . . . . . . . .   7
     5.5   Sale of Land . . . . . . . . . . . . . . . . . . . . .   8

ARTICLE 6  Right to Sell Water. . . . . . . . . . . . . . . . . .   8
     6.1   Rangeview's Conveyance of Export Water . . . . . . . .   8
     6.2   Right to Artificially Recharge . . . . . . . . . . . .  10
     6.3   Water Available to Export. . . . . . . . . . . . . . .  13
     6.4   Sale of Use of Water on the Lowry Range. . . . . . . .  13
     6.5   Quality of Water . . . . . . . . . . . . . . . . . . .  14
     6.6   Termination of Export Water. . . . . . . . . . . . . .  14

ARTICLE 7  Rent and Royalty Payments to Land Board. . . . . . . .  15
     7.1   Annual Rent. . . . . . . . . . . . . . . . . . . . . .  15
     7.2   Royalty for Export Water . . . . . . . . . . . . . . .  15
     7.3   Royalties for On-site Use. . . . . . . . . . . . . . .  18
     7.5   Payment of Royalty . . . . . . . . . . . . . . . . . .  19
     7.6   Reporting. . . . . . . . . . . . . . . . . . . . . . .  20

ARTICLE 8  Development of Infrastructure
           and Water Service on the Lowry Range . . . . . . . . .  21
     8.1   Rangeview Shall Serve. . . . . . . . . . . . . . . . .  21
     8.2   Water Fees and Rates . . . . . . . . . . . . . . . . .  21
     8.3   Substitution of Facilities . . . . . . . . . . . . . .  21
     8.4   Right to Use Transmission Lines; Infrastructure. . . .  22
     8.5   Title to Equipment and Improvements. . . . . . . . . .  23
     8.6   Future Leases. . . . . . . . . . . . . . . . . . . . .  23
     8.7   Rangeview District Boundaries. . . . . . . . . . . . .  23
     8.8   Development of Lowry Range . . . . . . . . . . . . . .  23
     8.9   Reserves . . . . . . . . . . . . . . . . . . . . . . .  23

ARTICLE 9  Service Provider Contract. . . . . . . . . . . . . . .  24
     9.1   Service Provider for Rangeview . . . . . . . . . . . .  24


                                     -ii-
<PAGE>
ARTICLE 10 East Cherry Creek Valley
           Water and Sanitation District. . . . . . . . . . . . .  26
     10.1  Terms and Revenue. . . . . . . . . . . . . . . . . . .  26
     10.2  Title Reversion. . . . . . . . . . . . . . . . . . . .  26

ARTICLE 11 Rights-of-Way. . . . . . . . . . . . . . . . . . . . .  26
     11.1  Master Plan. . . . . . . . . . . . . . . . . . . . . .  26
     11.2  Fee for Right-of-Way . . . . . . . . . . . . . . . . .  27
     11.3  License to Service Provider. . . . . . . . . . . . . .  27

ARTICLE 12 Bonding Requirements . . . . . . . . . . . . . . . . .  27
     12.1  Bond . . . . . . . . . . . . . . . . . . . . . . . . .  27
     12.2  Bond of Contractors. . . . . . . . . . . . . . . . . .  27

ARTICLE 13 Default and Remedies . . . . . . . . . . . . . . . . .  28
     13.1  Events of Default. . . . . . . . . . . . . . . . . . .  28
     13.2  Remedies . . . . . . . . . . . . . . . . . . . . . . .  29
     13.3  No Waiver. . . . . . . . . . . . . . . . . . . . . . .  30
     13.4  Land Board's Right to Cure Rangeview's Breach. . . . .  30

ARTICLE 14 Improvements . . . . . . . . . . . . . . . . . . . . .  31
     14.1  Transfer of Improvements . . . . . . . . . . . . . . .  31
     14.2  Abandonment of Export Water Facilities . . . . . . . .  31

ARTICLE 15 General Provisions . . . . . . . . . . . . . . . . . .  31
     15.1  Assignment by Rangeview. . . . . . . . . . . . . . . .  31
     15.2  Work Requirements. . . . . . . . . . . . . . . . . . .  32
     15.3  Third Party Beneficiaries. . . . . . . . . . . . . . .  33
     15.4  Notice . . . . . . . . . . . . . . . . . . . . . . . .  33
     15.5  Construction . . . . . . . . . . . . . . . . . . . . .  34
     15.6  Entire Agreement . . . . . . . . . . . . . . . . . . .  34
     15.7  Authority. . . . . . . . . . . . . . . . . . . . . . .  34
     15.8  Copies . . . . . . . . . . . . . . . . . . . . . . . .  34
     15.9  Amendment. . . . . . . . . . . . . . . . . . . . . . .  34
     15.10 Compliance with Law. . . . . . . . . . . . . . . . . .  34
     15.11 Binding Effect . . . . . . . . . . . . . . . . . . . .  35
     15.12 Severability . . . . . . . . . . . . . . . . . . . . .  35
     15.13 Optimum Long-Term Revenue. . . . . . . . . . . . . . .  35
     15.14 Further Assurance. . . . . . . . . . . . . . . . . . .  35
     15.15 Governing Law. . . . . . . . . . . . . . . . . . . . .  35
     15.16 Arbitration. . . . . . . . . . . . . . . . . . . . . .  35
     15.17 Litigation . . . . . . . . . . . . . . . . . . . . . .  36
     15.18 Duty of Good Faith and Fair Dealing. . . . . . . . . .  36
     15.19 Force Majeure. . . . . . . . . . . . . . . . . . . . .  36
</TABLE>


                                     -iii-
<PAGE>
                                    EXHIBITS
                                    --------


Exhibit  A          Water  Previously  Conveyed

Exhibit  B          Service  Agreement

Exhibit  C          Export  Water  Contract

Exhibit  D          Master  Plan  of  Well  Field  and  Rights-of-Way

Exhibit  E          Pipe  Sizes

Exhibit  F          Right-of-Way  Grant  Form

Exhibit  G          Service  Provider  Right-of-Way  License

Exhibit  H          Export  Water  Contractor  Right-of-Way  License


                                     -iv-
<PAGE>
                      AMENDED AND RESTATED LEASE AGREEMENT
                      ------------------------------------


     THIS  AMENDED  AND  RESTATED LEASE AGREEMENT is by and between the State of
Colorado,  acting  through  its  State Board of Land Commissioners and Rangeview
Metropolitan  District,  a  state  quasi-municipal  corporation  and  political
subdivision  of  the State of Colorado, acting by and through its water activity
enterprise.

     NOW,  THEREFORE, in consideration of the promises hereinafter stated, to be
kept  and  performed  by  the Parties, their successors and assigns, the Parties
agree  as  follows:


                                    ARTICLE 1
                                    ---------
                                   Definitions
                                   -----------

     "Agreement"  shall  be  defined  to  mean  this  Amended and Restated Lease
Agreement,  Lease  No.  S-37280,  dated  April  4,  1996.

     "Annual  Rent"  shall  be  defined  as  set  forth  in  Section  7.1.

     "Construction"  shall  be  defined  as  set  forth  in  Section  5.1.

     "Delivered  Basis"  shall  be  defined  as  set forth in Section 7.2(d)(2).

     "Effective  Date"  shall  be  defined  as  set  forth  in  Section  3.1.

     "East  Cherry  Creek  Agreement"  shall  be  defined  to  mean that certain
agreement  dated  July  8,  1983  by  and between OAR, Incorporated (Rangeview's
predecessor),  and  East  Cherry  Creek  Valley  Water  and Sanitation District.

     "ECCV"  shall  be  defined  to  mean  East  Cherry  Creek  Valley Water and
Sanitation  District.

     "Enterprise"  shall  be  defined  as  Rangeview's water activity enterprise
established  by  resolution  of  Rangeview  adopted  at  a  public  meeting  of
Rangeview's  board  of  directors on September 11, 1995, and effective as of the
date  of  its  adoption.

     "Entitlement Basis" shall be defined to mean a sale or other disposition of
water  to  a  third  party with the third party bearing all costs of withdrawal,
treatment  and  delivery.

     "Export  Water"  shall  be  defined  as  set  forth  in  Section  6.1.

     "Export  Water  Contractor"  shall  be defined as set forth in Section 6.1.


                                      -1-
<PAGE>
     "Export  Water Purchaser" shall be defined to mean the person or entity who
purchases  Export  Water other than the Export Water Contractor and a retail end
user.

     "Force  Majeure"  shall  be  defined  as  set  forth  in  Section  15.20.

     "Gross  Revenues"  shall  be  defined  to  mean  all  pre-tax  amounts  or
consideration  actually  received  directly  or  indirectly  by Rangeview or the
Export  Water  Contractor,  as applicable, from the sale or other disposition of
Water  Rights,  including  tap  fees,  usage fees, service charges and all other
revenues,  excluding  taxes  and  refunds.

     "Index"  shall  be  defined  to  mean  the  Consumer  Price Index for Urban
Consumers-All  items  (CPI-U) published by the Bureau of Labor Statistics of the
U.S.  Department  of  Labor.  In  the event that the Index shall subsequently be
converted  to  a  different  standard  reference  base or otherwise revised, the
determination  involved  shall  be  made with the use of such conversion factor,
formula  or table for converting said Index as may be published by the Bureau of
Labor  Statistics,  or  if said Bureau shall not publish the same, then with the
use  of such conversion factor, formula or table as may be published by Prentice
Hall,  Inc.,  or,  failing  such publication, by any other nationally recognized
publisher of similar statistical information.  In the event that the Index shall
cease  to  be published, then for the purposes of this Agreement, there shall be
substituted  such  other  index as the Parties shall agree upon, and if they are
unable  to  agree, then ninety (90) days after the Index ceases to be published,
such  matters shall be determined by arbitration as provided in Section 15.16 of
this  Agreement.

     "Initial  Export  Royalty  Rates"  shall be defined as set forth in Section
7.2(a).

     "Initial  Permitted  Sale"  shall  be  defined as set forth in Section 6.1.

     "Land Board" is defined to mean the State of Colorado acting by and through
its  State  Board  of  Land  Commissioners.

     "Lease"  is  defined  to  mean  the  aggregate  of  the  following:

     a.     Lease  S-37280, dated April 26, 1982 between the Land Board and OAR,
Inc.,  whose  rights  and  obligations were subsequently conveyed to Lowry Range
Metropolitan  District,  now  known  as  Rangeview;

     b.     Amendment  to  Lease  S-37280,  dated  February  22,  1983;

     c.     Amendment  to  Lease  S-37280,  dated  December  19,  1983;

     d.     Amendment  to  Lease  S-37280,  dated  November  26,  1984;


                                      -2-
<PAGE>
     e.     Amendment  to  Lease  S-37280,  dated  June  5  and  6,  1986;

     f.     Transfer  Agreement  dated  December 8, 1986 ("Transfer Agreement");
and

     g.     Novation  Agreement  dated  December 7, 1988 ("Novation Agreement").

     "Litigation" is defined to mean the case entitled Apex Investment Firm, II,
L.P.,  et  al.  v.  Colorado State Board of Land Commissioners, et al., Case No.
94CV5405,  District  Court,  in  and for the City and County of Denver, State of
Colorado.

     "Lowry  Range"  shall be defined to mean the approximately 24,567.21 acres,
more  or less, according to U.S. Government survey, in Arapahoe County, Colorado
more  particularly  described  as  follows:

          Township  5  South,  Range 64 West of the 6th P.M., Sections 7 through
          --------------------------------------------------
          10:  all;  Sections  15  through 22: all; Sections 27 through 34: all.

          Township 4 South, Range 65 West of the 6th P.M., Sections 33: all; and
          -----------------------------------------------
          34:  all.

          Township  5  South,  Range  65  West  of the 6th P.M., Section 3: all;
          -----------------------------------------------------
          Sections  10  through 15: all, less certain surface rights granted for
          the  Aurora  Reservoir  (but  including  the  water  under  the Aurora
          Reservoir)  in  Section  15; Sections 22 through 27: all, less certain
          surface  rights  granted  for  the Aurora Reservoir (but including the
          water  under  the Aurora Reservoir) in Section 22; Sections 35 and 36:
          all;  Section  34:  north  2,183.19  feet.

          Township  5  South,  Range  66 West, of the 6th P.M., Section 36: all.
          ----------------------------------------------------

     "Non-Export Water" shall be defined to mean the Water Rights other than (i)
the  Export Water and (ii) the water subject to the East Cherry Creek Agreement.

     "Off-Site"  shall  be  defined  to mean outside the boundaries of the Lowry
Range.

     "Operating  Expenses" shall mean all actual maintenance and operating costs
incurred  by  Rangeview  or  its  Service  Provider  in  discharging Rangeview's
obligations  to  provide  Non-Export Water to Water Users as required by Section
8.1.  Such  Operating Expenses may include, for example, expenses for repairs to
the  infrastructure;  salaries,  wages  and  employee benefit expenses; fees for
services,  materials  and  supplies; rents, administrative


                                      -3-
<PAGE>
and  general  expenses;  insurance  expenses;  fees  for  legal,  engineering,
accounting  and  other  consulting  and  technical services; and taxes and other
governmental  charges.  Such  Operating  Expenses shall not include expenditures
which  are  properly capitalized under generally accepted accounting principles,
depreciation  or  obsolescence  charges  or  reserves therefor, reserves for any
other  purpose,  amortization  of  intangibles or other bookkeeping entries of a
similar  nature,  interest  charges  and charges for the payment of principal or
amortization  of  bonded  or  other  indebtedness, royalties, or losses from the
sale,  abandonment,  reclassification,  re-evaluation  or  other  disposition of
capitalized  assets.

     "Parties"  shall  be  defined  to  mean  the  Land  Board  and  Rangeview.

     "Rangeview"  shall  be  defined  to mean Rangeview Metropolitan District, a
State  quasi-municipal  corporation  and  political  subdivision of the State of
Colorado,  acting  directly  as  such  or  acting by and through the Enterprise.

     "Reserved  Water"  shall  be  defined  as  set  forth  in  Section  5.1(e).

     "Retail  Sales  Price" shall be defined to mean the gross rates and charges
per  1,000  gallons  charged  by  a  municipality, water district or other water
provider  to  retail  end  users  of  the  water.

     "Royalty  Base"  shall  be  defined  as  set  forth  in  Section  7.2(b).

     "Sale  of  Water" or similar phrases used herein shall mean the sale of the
rights  as  set  forth  in  Section  5.1  and  Section  6.1.

     "Service  Agreement"  shall  be  defined  as  set  forth  in  Section  6.4.

     "Service  Provider"  shall  be  defined  to  mean  any  entity,  other than
Rangeview,  actually delivering the Non-Export Water and related services to the
Water  Users  as  permitted  by  Article  9.

     "Settlement  Agreement"  shall  be defined to mean the Settlement Agreement
and  Mutual  Release dated April 4, 1996 among the Parties and the other parties
in  the  Litigation.

     "Substitute  Facilities"  shall  be  defined  as  set forth in Section 8.3.

     "Water  Interest  Ratio"  shall  be  defined  as  set forth in Section 8.3.


                                      -4-
<PAGE>
     "Water  Rights"  shall  be  defined  as  set  forth  in  Section  5.1.

     "Water  Users"  shall  be  defined  to  mean  surface  tenants,  occupants,
developers,  land  owners  and  all  other  water  users  on  the  Lowry  Range.


                                    ARTICLE 2
                                    ---------
                               Preliminary Matters
                               -------------------

     2.1     A  dispute has arisen between the Parties and others concerning the
status  of  the Lease as evidenced in part by the claims asserted by and against
various  parties  in  the  Litigation.

     2.2     The  Parties  to this Agreement desire to: (1) amend and completely
restate  the rights and obligations of the Lease; (2) acknowledge and agree that
the  Lease  as  amended  and  completely restated by this Agreement is valid and
enforceable;  (3)  eliminate  uncertainty  surrounding  the Lease as amended and
completely  restated  by  this Agreement; and (4) resolve all issues between the
Parties to this Agreement which are related to all issues which have been raised
or  could  be  raised  in  connection  with  the  Litigation.


                                    ARTICLE 3
                                    ---------
                                 Effective Date
                                 --------------

     3.1     EFFECTIVE  DATE OF THIS AGREEMENT.  This Agreement shall be binding
             ---------------------------------
on  the  date it is fully executed and delivered by the Parties subject only to,
as a condition subsequent, entry of the final non-appealable order of the Denver
District  Court  in  the  Litigation  approving  this  Agreement and the related
Settlement  Agreement.  The date of the final non-appealable order of the Denver
District  Court  shall  be  deemed  the  Effective  Date of this Agreement.  The
Parties  agree to cooperate and to use their best efforts to obtain prompt entry
of  a  final  non-appealable  order.

     3.2     AMENDMENT.  This  Agreement  amends,  restates in its entirety, and
             ---------
supersedes  in  all  respects  the Lease, and from and after the Effective Date,
this  Agreement,  including  the  Exhibits  hereto and the Settlement Agreement,
shall  control and define the rights and obligations of the Parties with respect
to  the  subject  matter  of  this  Agreement.

     3.3     OBJECTIVES  OF  THIS AGREEMENT.  The Parties acknowledge that it is
             ------------------------------
in  their  best interests to arrange for water development on the Lowry Range to
be  pursued  in  a  manner  which encourages efficient and economical use of the
water  resources  which are the subject of this Agreement and encourages surface
development  on  the  Lowry  Range.  Rangeview has the objective of acquiring an
adequate  water supply to provide water delivery to Water Users pursuant to this
Agreement and, subject to the terms


                                      -5-
<PAGE>
of  this Agreement, to apply the Export Water to a use which creates revenue and
thereby  provides  additional  royalty  payments  to the Land Board. In order to
achieve  this objective, the Parties acknowledge that Rangeview's first priority
for  utilization  of  its  available  revenues  will  be  the fulfillment of its
commitment  to  provide  water  service  to  its  Water  Users.  The  Land Board
contemplates  that  it  may lease, sell, or otherwise dispose of portions of the
surface  of  the  Lowry  Range  at  some  undetermined  point  in the future and
anticipates  that  the  availability and provision of water service to the Lowry
Range  pursuant  to  this  Agreement may promote development on the Lowry Range.

     3.4     RANGEVIEW.  The  Enterprise  agrees  that it shall cause Rangeview,
             ---------
acting  directly  and  not  through  the  Enterprise,  to  execute and deliver a
guaranty  of  this  Agreement  in  the  form  attached  hereto  as  Exhibit  I.


                                    ARTICLE 4
                                    ---------
                                 Leased Premises
                                 ---------------

     4.1     GENERAL  DESCRIPTION OF WATER SUBJECT TO THIS AGREEMENT.  Except as
             -------------------------------------------------------
otherwise  reserved to the Land Board in Section 5.1 below, this Agreement shall
encompass  the  use  of  all of the waters on and under the surface of the Lowry
Range.


                                    ARTICLE 5
                                    ---------
                                 Grant of Lease
                                 --------------

     5.1     GRANT.  Subject  to the terms, conditions and limitations set forth
             -----
in  this  Agreement,  the  Land  Board  hereby leases to Rangeview the right and
privilege  during the term of this Agreement to divert and put to beneficial use
all  water  on and under the surface of the Lowry Range, including all rights to
the  first  use,  reuse,  successive use and disposition of such water, together
with  the  right  to  use as much of the surface and underground portions of the
Lowry  Range  as  provided  in Article 11 of this Agreement as may be reasonably
required  in the exercise of the rights granted by this Agreement, including, in
accordance  with  commercially reasonable and prudent water provider practice in
Colorado, the right to drill and build wells, construct buildings (except office
and  other  such  buildings  not  directly  necessary  for  the  extraction  and
transportation  of  water),  make excavations, stockpiles, dumps, drains, roads,
power  lines,  pipelines,  and other improvements (all such activity hereinafter
being  referred  to  as "Construction"), but only as may be reasonably necessary
for  the  development and delivery of the water pursuant to this Agreement.  The
foregoing  items  exclusive of the reservations set forth below are collectively
referred  to  as  the  "Water  Rights."


                                      -6-
<PAGE>
     Reserving,  however,  to  the  Land  Board:

          (a)     Except  as  are  herein  specifically  granted,  the  right to
exercise  all  rights and privileges of every type and nature which are incident
to  the  ownership of the Lowry Range, or any part thereof, at any time, for any
purpose,  including,  without limitation, the right to explore, prospect for and
extract  oil  and gas and other minerals, including sand and gravel, on or under
said  land,  in a manner not inconsistent with the full exercise by Rangeview of
the  rights  and  privileges  herein  granted;

          (b)     The  right  at any time to go upon those portions of the Lowry
Range  not  exclusively  utilized  by  Rangeview and the right at all reasonable
times upon five (5) days' written notice during the term of this Agreement to go
upon  those  portions  of  the Lowry Range exclusively utilized by Rangeview and
every  part  thereof  for  the  purpose  of inspecting same, including metering,
measuring  and  other  similar  devices, and, in accordance with Section 7.6, to
inspect  the books of accounts and records of water development and use therein,
and  of  ascertaining whether or not Rangeview, and those entities holding under
and  buying  from  or  contracting  with  Rangeview, are carrying out the terms,
covenants  and  agreements  of  this  Agreement;

          (c)     All  interests  in  the  Water Rights and all interests in the
Lowry  Range  previously  granted  by  the  Land  Board identified in EXHIBIT A;

          (d)     The  Land  Board's  recharge  rights  set forth in 6.2(b); and

          (e)     A  total of 1,135 acre feet annually  of non-tributary and not
non-tributary  (as  defined  by  statute)  water blended proportionally from all
aquifers  based  on water court decrees adjudicating water under the Lowry Range
as such decrees may be amended from time to time ("Reserved Water").  Except for
the  restriction  on sale set forth in Section 6.1(b), this Reserved Water shall
not  be  subject to this Agreement and is released by Rangeview in favor of Land
Board.

     5.2     TERM.  The  term  of  the  Lease  commenced at 12:00 noon on May 1,
             ----
1982,  and,  as  amended by this Agreement, shall expire at 12:00 noon on May 1,
2081 unless terminated earlier in accordance with the terms of this Agreement or
otherwise  extended.

     5.3     EFFECT OF EXPIRATION OF THE AGREEMENT.  Upon expiration, or earlier
             -------------------------------------
termination  of  the  term  of  this  Agreement,  the  right  to  the use of the
Non-Export  Water  shall automatically and without further act of the Parties or
anyone  else  revert  to  the  Land  Board.  To  the  extent Non-Export Water is
actually being delivered to provide water service to Water Users, the Land Board
agrees  that  such water will continue to be made available to


                                      -7-
<PAGE>
Water  Users  under  commercially  reasonable agreements to be negotiated at the
time  of such expiration or termination, which agreements shall include adequate
revenue for the Land Board. In the event no agreement is reached, then the terms
of such agreements shall be determined by arbitration pursuant to Section 15.16.

     5.4     LAND  BOARD'S LEGAL RIGHT TO WATER.  The Land Board hereby warrants
             ----------------------------------
and  represents  that,  except as provided in EXHIBIT A, it has all right, title
and  interest  in  the  Water Rights granted to Rangeview and it has not granted
such  rights  to  any  other  person  or  entity.  Rangeview  agrees  to  pursue
diligently  (1)  the  adjudication  of  all  of  the  Water  Rights, and (2) the
development  of  the Water Rights as necessary to provide water service to Water
Users  in  a  commercially  reasonable  time  and  manner and in accordance with
prudent  water  provider  practice in Colorado, without cost or legal expense to
the Land Board.  The Land Board shall reasonably cooperate and render assistance
with  respect  to  all  permits,  applications, filings and documents related to
Rangeview's  activity  in  adjudicating  all  of  the  Water Rights and shall be
provided courtesy copies of such papers five (5) days before they are filed.  It
is further agreed by the Parties hereto that all permits, applications, filings,
documents  and  decrees  in connection with establishing such Water Rights shall
bear  the  name  of,  and  be  made in the name of Land Board and, if necessary,
Rangeview, as lessee.  Legal title to the Water Rights shall be held in the name
of  the  Land  Board  except  to  the  extent  reasonably  necessary  to include
Rangeview,  as lessee, in water decrees, without cost to the Land Board, and any
water rights adjudicated on and under the Lowry Range shall automatically become
Water Rights under this Agreement.  Nothing in this Agreement shall be deemed to
prohibit  Rangeview  from adjudicating in its sole name and for its sole benefit
any  other  Off-Site  water  rights  not  subject  to  this  Agreement.

     Unless  expressly  agreed  to  by the Land Board in writing and in its sole
discretion,  the  Water  Rights,  the  water  system  to be constructed, and the
rights-of-way  on  and  aquifers  under the Lowry Range required to deliver both
Export  and  Non-Export Water, and any other rights granted hereunder, shall not
be  used  for  any  business  or  other  purpose except to provide water service
consistent  with this Agreement and the water decrees by which such Water Rights
have  been  or  may  be  adjudicated.

     5.5     SALE OF LAND.  C.R.S. 36-1-118(4) provides that the Land Board may,
             ------------
in its discretion, offer for sale any land leased at any time during the term of
any  lease  as  though said lease had not been executed, or it may withdraw such
land  from  sale during the full term of the lease.  The Land Board affirms that
the  right  to develop, divert, convey and use the Water Rights and the interest
in  the  surface  of  the  Lowry Range conferred by Article 11 of this Agreement
shall  be  withdrawn  from  sale  until


                                      -8-
<PAGE>
this  Agreement  terminates  in  accordance  with  the  provisions  hereof.


                                    ARTICLE 6
                                    ---------
                               Right to Sell Water
                               -------------------

     6.1     RANGEVIEW'S  CONVEYANCE  OF  EXPORT  WATER.
             ------------------------------------------

          (a)     As of the Effective Date and subject only to the terms of this
Agreement,  Rangeview  shall  sell or have the right to sell the right to divert
and  sell  outside  the  Lowry  Range  the  use of up to a total gross volume of
1,165,000 acre feet of the non-tributary and not non-tributary water included in
the  Water Rights ("Export Water") pursuant to an agreement in the form attached
hereto as EXHIBIT C (the "Initial Permitted Sale").  The purchaser of the Export
Water,  pursuant  to EXHIBIT C, shall be referred to herein as the "Export Water
Contractor."  The  Export Water may be withdrawn only to the extent permitted by
the  water  decrees  by which such water was adjudicated, as such decrees may be
amended  from  time  to  time,  and may not be withdrawn in quantities or in any
other  manner  that  would  adversely affect the delivery of Non-Export Water to
Water  Users.  Notwithstanding  the  expiration  or  early  termination  of this
Agreement,  such  right  to  divert,  sell  and  use  the  total gross volume of
1,165,000 acre feet of Export Water shall be absolute and irrevocable subject to
the  provisions of Section 6.6.  The diversion and use of the Export Water shall
be  in  accordance  with  the terms of the water decrees by which such water was
adjudicated,  as such decrees may be amended, from time to time and will include
the right to sell all use, reuse, and successive uses of the Export Water.  Upon
the  sale  or  other  disposition  of  all  or  any  portion of the Export Water
following  the  Initial Permitted Sale, Rangeview shall cause to be paid and the
Land  Board  shall receive the royalty described in Section 7.2 below.  The Land
Board  will  have  no approval rights as to any sale or other disposition of the
use  of  the  Export Water subsequent to the Initial Permitted Sale, except that
Rangeview  shall  provide  to the Land Board written notice of and access to the
contemplated  sale  documents  twenty-one  (21)  days in advance of such sale or
other disposition pursuant to Rangeview's rights as set forth in Section 12.1 of
EXHIBIT C.  Contracts for sales of the use of Export Water shall provide for the
substitution  of  facilities and oversizing of pipes as provided in Sections 8.3
and  8.4  below  and that the capital costs for the Off-Site delivery system and
oversizing  of  pipes  will  not be charged, directly or indirectly, to the Land
Board,  Rangeview,  or  Water  Users  (except  to the extent such facilities are
substituted  for on-site service, in which case Water Users will indirectly bear
costs  through  rates  and  charges  and  Rangeview may incur administrative and
maintenance  expenses with respect thereto).  In addition, Rangeview shall cause
such  contracts to provide for the payment of royalties as otherwise provided in
this  Agreement.


                                      -9-
<PAGE>
          (b)     The  Land  Board  agrees  that the Reserved Water shall not be
sold by the Land Board before (i) the sale or disposition of the Export Water by
the Export Water Contractor subsequent to the Initial Permitted Sale or (ii) May
1,  2032,  whichever  is  earlier.

          (c)     Rangeview  is in the process of adjudicating certain tributary
waters  on the Lowry Range.  To the extent Rangeview is successful in completing
adjudication  of  such  rights, and to the extent water is available pursuant to
such  adjudication, the Export Water Contractor shall have the right at any time
during  the  first five (5) years following the adjudication to substitute up to
1,650  acre  feet  per  year of non-tributary water which constitutes the Export
Water  as defined in this Section 6.1 for an absolute and irrevocable decree for
up  to  1,650  acre  feet  of  tributary  water.  If the Export Water Contractor
exercises  the  foregoing  right,  the  Export Water Contractor shall reconvey a
total  gross  volume  of  165,000  acre  feet  of  non-tributary  water  and not
non-tributary  water  which  constitutes  the Export Water to the Land Board, as
lessor,  and  Rangeview,  as  lessee, to become Non-Export Water subject to this
Agreement  and  the  Export  Water Contractor shall enter into an agreement with
Rangeview which provides that in years when less than a total of 3,300 acre feet
per  year  of  tributary  water  on the Lowry Range is physically available, the
Export  Water  Contractor  shall  only  utilize up to fifty percent (50%) of the
available  tributary water unless the remaining available tributary water is not
being  utilized  by  Rangeview,  its  Service  Provider,  or  the Land Board, as
applicable,  and  Rangeview,  its  Service  Provider,  or  the  Land  Board,  if
applicable,  agrees that it does not plan to utilize such water during the year,
in  which  case  the Export Water Contractor may utilize the available tributary
water  which Rangeview, its Service Provider, or the Land Board does not plan to
use  up  to  a maximum of 1,650 acre feet.  In no case shall Non-Export Water be
used  to  augment  the  Export  Water  Contractor's  tributary  water hereunder.

     For example, if in a year there are only 2,400 acre feet of tributary water
available, the Export Water Contractor could only utilize 1,200 acre feet unless
Rangeview, its Service Provider, or the Land Board, if applicable, does not plan
to  use  some portion of the remaining 1,200 acre feet, in which case the Export
Water  Contractor  could  use  the unused tributary water up to a maximum of 450
acre  feet  for  a  combined  total  of  1,650  acre  feet.

     6.2     RIGHT  TO  ARTIFICIALLY  RECHARGE.
             ---------------------------------


          (a)     Rangeview's  Right  to  Recharge.  Rangeview,  the  Service
                  --------------------------------
Provider  (but  only as to the provision of water to Water Users pursuant to the
Service  Agreement)  and  the  Export  Water  Purchaser  shall have the right to
artificially  recharge  and  to


                                      -10-
<PAGE>
store  the  recharged  water  in  the  aquifers from which such Water Rights are
withdrawn  (but  only  to  the  extent all or some of the Water Rights have been
withdrawn  from  the  aquifers  by  the  recharging  party) and to withdraw such
artificially  recharged  and  stored water. Rangeview, the Service Provider, and
the Export Water Purchaser shall also have the right, to the extent Water Rights
have  been  withdrawn  from  the  aquifers  by  the  recharging  party, to store
additionally acquired water in reservoirs on the surface of the Lowry Range in a
commercially  reasonable  manner consistent with prudent water provider practice
in  Colorado  and  subject  to  the  requirements  set  forth  herein.

          (i)  The  amount  of recharged water stored in the aquifers and on the
surface  in  reservoirs  combined  cannot  exceed  the  amount  of  Water Rights
withdrawn  by  the  recharging  entity  from  the  aquifers.

          (ii)  If  Rangeview,  the  Service  Provider,  or  the  Export  Water
Purchaser  desires to construct a surface reservoir, such entity must notify the
other entities of such intention and give them the opportunity to participate in
the  project.  Any  such  reservoir  must  be  compatible  with the existing and
reasonably  projected development of the surrounding land.  The Land Board shall
have  the  right  to  veto  the  construction  of  any  surface  reservoir if it
reasonably  determines  that the reservoir would adversely impact either (i) the
provision  of service to Water Users, or (ii) the value of the Land Board's land
within  the  Lowry  Range,  based on then known facts and reasonable projections
regarding future needs of Water Users and future development of the Lowry Range.
Any  disputes over whether the reservoir will be compatible with the development
of  the  surrounding  land  or  whether the reservoir would adversely impact the
provision  of service to Water Users or the value of the Land Board's land shall
be  resolved  by  arbitration  pursuant to Section 15.16 of this Agreement.  The
burden of proof in such arbitration shall be on the entity desiring to construct
the  reservoir.  If  a  reservoir  is  constructed,  the  entity  or  entities
constructing  such reservoir shall permit reasonable access to the reservoir, if
requested  by  surrounding  land  owners,  municipalities,  parks and recreation
districts  or  similar  entities,  provided  that  the access requested does not
interfere  with  or  render  more  costly  the  planned use and operation of the
reservoir and provided that it shall not be the responsibility of Rangeview, the
Service  Provider,  or the Export Water Purchaser to provide amenities or safety
features  to  accommodate  needs  of  such  third persons unrelated to the water
service  function  of  the  reservoir.

          (iii)  Subject  to  the  provisions  of  subsection  (ii)  above:


               (a)     Notwithstanding Article 11, if the Export Water Purchaser
plans to construct the reservoir, the Land Board shall grant to the Export Water
Purchaser  a  perpetual  right-of-way on the land for such reservoir, which does
not


                                      -11-
<PAGE>
expire  unless  the reservoir is abandoned in accordance with Section 14.2. This
right-of-way  shall  be  granted in exchange for payment of the then fair market
value  for  the  land.

               (b)     If  Rangeview  or  the  Service  Provider  requests  a
right-of-way  for  a reservoir, Rangeview shall be granted the right-of-way, and
Rangeview  shall  grant a license to the Service Provider, if necessary, and the
Land  Board  shall  receive  fees  in  accordance  with  Article  11.

               (c)     If  the reservoir is planned to be jointly constructed by
Rangeview  and/or  its Service Provider and the Export Water Purchaser, then the
fees  and  rights-of-way  granted will be based on the proportionate part of the
reservoir  to  be used by Rangeview or its Service Provider on the one hand, and
the  Export  Water  Purchaser  on  the  other.

          For  example,  if  Rangeview  and  the Export Water Purchaser agree to
construct  a  reservoir  which  will be used to store ten thousand (10,000) acre
feet of water per year and which requires a one hundred (100) acre right-of-way,
and each party intends to utilize one-half of the reservoir, then Rangeview will
pay to the Land Board the fee set forth in Section 11.2 for fifty (50) acres and
the  Export  Water  Purchaser will pay fair market value for the remaining fifty
(50) acres. Rangeview will receive a right-of-way in the one hundred (100) acres
in  the  form of EXHIBIT F, and, if necessary, will license such right-of-way to
the  Service Provider pursuant to a license in the form of EXHIBIT G. The Export
Water  Purchaser shall receive a perpetual right-of-way in the one hundred (100)
acres.  Each  entity  would  thereafter  have access to the entire reservoir but
would  only  have the usage rights to their undivided one-half of the reservoir.

          (iv)  Any  artificial  recharge  must  be  done in accordance with all
applicable laws, rules, and regulations in effect at the time of such artificial
recharge,  and  notwithstanding  such  compliance,  shall  not interfere with or
render  more  burdensome  or  costly  delivery  of the Non-Export Water to Water
Users.

          (v)  Rangeview, the Service Provider, the Export Water Contractor, and
the  Export  Water  Purchaser  (but excluding the end user) shall be jointly and
severally liable for all damages, including without limitation, environmental or
water  quality  damages,  if  any, incurred by the Land Board or the Water Users
arising  out  of  the  artificial  recharge,  storage,  or  withdrawal  of  such
artificially  recharged  water.

          (vi)  Rangeview  shall  cause  all  contracts  for  the  sale or other
disposition of the Export Water to provide that the Land Board shall be paid the
royalty required by Section 7.4(a) at the time the recharged water is withdrawn.
The  royalty  shall be


                                      -12-
<PAGE>
payable  by  the entity withdrawing such water and the Land Board shall have the
right  to  enforce such payment requirement, including the rights as provided in
Section  6.6.  If  there  is  a  dispute  as to the royalty attributable to such
recharged  water  when  it  is  withdrawn,  the  royalty  shall  be  resolved by
arbitration  pursuant  to  Section  15.16  of  this  Agreement.

          (vii)  The  right  to  recharge Export Water is not alienable from the
Export  Water  and  must  be  sold in conjunction therewith.  Subject to Section
15.19,  the  right  to  recharge  sold  with  the  Export  Water shall be deemed
abandoned  when  the  Export Water Purchaser withdraws the entire portion of the
Export  Water  purchased plus the entire amount of water recharged by the Export
Water  Purchaser  and  such  purchaser has failed to recharge any portion of the
aquifers  for  a  period  of  ten  (10) years.  In the event of a dispute in the
determination  of  the abandonment of the right to recharge, the matter shall be
determined  by  arbitration  pursuant  to  Section  15.16  of  this  Agreement.

          (viii)  Rangeview  shall  cause  the  Service  Provider and the Export
Water  Purchaser  to  comply with this Section 6.2(a) in conducting any recharge
activities  permitted  above.


          (b)     Land Board's Right to Recharge.  The Land Board shall have the
                  ------------------------------
right  to  artificially  recharge,  store  and  withdraw  water  in the aquifers
beneath  the  Lowry  Range  in  accordance  with  all applicable laws, rules and
regulations  in  effect  at  the  time  of  such  artificial recharge; provided,
however,  that  notwithstanding  such  compliance,  the  Land  Board  shall  not
interfere with or render more burdensome or costly the storage of or delivery of
or  recharge  of  water  by Rangeview, the Service Provider, or the Export Water
Purchaser  and  shall not interfere with or render more burdensome or costly the
delivery  of  Export Water by the Export Water Contractor if the Export Water is
sold  by  the  Export  Water Contractor on a Delivered Basis.  Further, the Land
Board  shall  be liable for damages, including without limitation, environmental
or  water  quality damages, if any, incurred by Rangeview, the Service Provider,
the  Export  Water  Contractor,  the  Export  Water Purchaser or the Water Users
arising  out  of  such  artificial  recharge,  storage or withdrawal by the Land
Board.

     6.3     WATER  AVAILABLE  TO  EXPORT.  The  Non-Export  Water  (and  water
             ----------------------------
recharged  other than with respect to Export Water withdrawn) shall not be used,
transferred, sold, or otherwise disposed of Off-Site without the express written
consent  of the Land Board.  Disposal of untreated effluent, sewage, or sewerage
Off-Site  shall  be  permitted only with the express written consent of the Land
Board, which consent shall not be unreasonably withheld.  Rangeview shall pay to
the  Land  Board  forty-five  percent  (45%)  of Gross Revenues, if any, for the
disposal of untreated effluent, sewage, or sewerage Off-Site, within thirty (30)
days  after  receipt.  In  the event that Rangeview sells or


                                      -13-
<PAGE>
disposes  of  treated  effluent off-site (subject to the consent required in the
first  sentence of this Section 6.3), then Rangeview shall pay to the Land Board
forty-five  percent  (45%) of all Gross Revenues received after deduction of all
costs  of  treatment. If there is a dispute as to such payment, the matter shall
be resolved by arbitration pursuant to Section 15.16 of this Agreement. The Land
Board  shall  be provided twenty-one (21) days advance written notice and access
to  contemplated  contracts  for  the disposal of effluent, sewage, and sewerage
Off-Site.

     6.4     SALE OF USE OF WATER ON THE LOWRY RANGE.  Subject to the provisions
             ---------------------------------------
of  this  Agreement,  Rangeview  shall  provide water service to all current and
future  Water  Users needing water service on the Lowry Range and shall have the
right  to  divert  and  use  all  Non-Export  Water for such purpose.  Reuse and
successive  use  of  Non-Export  Water,  if any, shall be done in a commercially
reasonable  manner  consistent with prudent water provider practice in Colorado.
At  its  option, and subject to the provisions of Article 9 below, Rangeview may
enter  into  a  Service  Agreement contract to provide Non-Export Water to Water
Users  substantially  in  the  form  attached  hereto as EXHIBIT B (the "Service
Agreement").  To  the  extent  that  Non-Export Water is insufficient to provide
water  service to Water Users, Rangeview shall be obligated to locate additional
sources  of  water  for  Water  Users.  Rangeview  shall  either  acquire  such
additional water and provide service to Water Users at the rates and charges set
forth  in  Section  8.2  or  it  shall notify the Land Board that it requires an
increase  in the rates and charges to cover the cost of acquiring the additional
water,  in  which  case  the  Land Board shall have the option of (i) permitting
Rangeview  to  charge  such  increased  rates  or  (ii)  serving any Water Users
requesting  service  after  the Non-Export Water is committed.  Rangeview agrees
that  if  it  acquires  such additional water, it shall, consistent with prudent
water provider practices in Colorado, use such water to provide water service to
Water  Users  without  additional  cost to the Land Board.  Any additional water
shall  not  be  subject  to the terms of this Agreement except (i) to the extent
that  such  additional  water  is  stored in aquifers beneath the surface of the
Lowry  Range  or in reservoirs on the surface of the Lowry Range, in which case,
such  water  shall  thereafter  be  subject  to the royalty set forth in Section
7.4(b)  and  (ii)  to the extent such additional water may remain subject to the
rates  and  charges  in  Section  8.3 as described above.  Such additional water
shall  not  be  used  to determine when Section 7.3(b) of this Agreement becomes
applicable  and  Section 7.3(b) shall not be applicable to such additional water
unless  Rangeview  utilizes  additional  water to provide water service to Water
Users  when  there  is  still  sufficient  Non-Export  Water  available  on  a
commercially  reasonable  basis  and  in  compliance with prudent water provider
practice  in  Colorado  to  provide such service.  If Rangeview does not acquire
additional  water  for Water Users, because the Land Board elects to serve Water
Users requesting service after the Non-Export Water is committed, then Rangeview
shall  continue  to


                                      -14-
<PAGE>
provide  Non-Export  Water  to Water-Users who are issued taps prior to the time
when  the  available  Non-Export  Water  was  committed  pursuant  to such taps.
Rangeview  shall  not  issue  taps  based  on unused cumulative rights under the
decrees for the Non-Export Water. The phrase "unused cumulative rights under the
decrees"  means  the  amount  of  water  that  could otherwise have been legally
withdrawn  pursuant  to the Statewide Non-Tributary Ground Water Rules, 2 C.C.R.
402-7,  Rule 8A., over and above the allowed average annual amount of withdrawal
permitted  under  the  decrees. The Land Board may utilize the Reserved Water or
any  other  water  sources  it  may have or acquire, to service subsequent Water
Users.  The  Land  Board  shall  have  the  right  to jointly use and expand the
facilities  constructed  by  Rangeview  or  its  Service  Provider  to  provide
Non-Export  Water to Water Users to provide service to subsequent Water Users to
the  same  extent  Rangeview  would  have  used  and  expanded  such  facilities
consistent  with prudent water provider practices in Colorado if it had acquired
additional  water  to  service  such  Water  Users.

     6.5     QUALITY  OF WATER.  Unless authorized in writing by the Land Board,
             -----------------
the  use  of  Water  Rights  may  only be sold or otherwise disposed of as water
blended  proportionally  from  all  aquifers  based  on  water  court  decrees
adjudicating  the  Water  Rights, except for the water committed pursuant to the
East  Cherry  Creek Agreement and the sale or disposition of any tributary water
(including  the  tributary  water  described  as  set  forth in Section 6.1(c)).

     6.6     TERMINATION  OF  EXPORT  WATER.  In  the  event  the  Export  Water
             ------------------------------
Contractor  or the Export Water Purchaser fails to pay the royalties required by
this  Agreement  within ten (10) business days after the applicable due date, or
takes  or  fails  to  take  action  which would cause material harm to the Water
Rights or the aquifers, or the surface of the Lowry Range then owned by the Land
Board  and  such  action  or  failure is not cured within thirty (30) days after
written  notice  has  been  given  by  the  Land Board or Rangeview specifically
setting  forth  the  nature  of the problem, or if more than thirty (30) days is
reasonably  required  to  cure  such  matter  complained of, if the Export Water
Contractor  or  Export Water Purchaser, as applicable, shall fail to commence to
correct the same within said thirty (30) day period and shall thereafter fail to
prosecute  the  same to completion with reasonable diligence, or commits a fraud
in  the  performance (as opposed to the inducement) of this Agreement, as may be
determined in a final non-appealable order of a court of competent jurisdiction,
the  Land Board or Rangeview may elect to terminate the rights to the portion of
the  Export  Water  which has not been conveyed or is not otherwise subject to a
good  faith,  binding  agreement to be conveyed to an Export Water Purchaser and
pursue such other remedies as may be provided by law.  Rangeview, at its option,
without  prejudice  to  any  other  remedies  it  may  have, may cure any of the
foregoing  defaults  in order to protect its rights under this Agreement without
waiting  for  the  thirty


                                      -15-
<PAGE>
(30)  day  period to run and seek reimbursement from the Export Water Contractor
or  Export  Water Purchaser, as applicable, for any costs and damages associated
therewith.


                                    ARTICLE 7
                                    ---------
                     Rent and Royalty Payments to Land Board
                     ---------------------------------------

     7.1     ANNUAL  RENT.  Rangeview  shall  pay annual rent ("Annual Rent") in
             ------------
the  amount  of Five Thousand Dollars ($5,000.00) to the Land Board on or before
May  1  of  each year until this Agreement expires or otherwise terminates.  The
Annual  Rent  shall be increased every five (5) years proportionally to the five
(5)  year  increase, in the Index.  In no case shall the annual rent be reduced.

     7.2     ROYALTY  FOR  EXPORT  WATER.
             ---------------------------

          (a)     Royalty  Rates  for Public Versus Private Use.  A sum equal to
                  ---------------------------------------------
ten  percent  (10%)  of  the  Royalty  Base shall be paid to the Land Board as a
royalty in the case of a sale or other disposition of Export Water to a Title 32
water  district  or other similar municipal or public entity, and a sum equal to
twelve  percent  (12%)  of the Royalty Base shall be paid to the Land Board as a
royalty  in  the  case  of  a  sale  or other disposition of Export Water to all
others.  These royalty rates shall be referred to as the "Initial Export Royalty
Rates."

          (b)     Application  of  Initial  Royalty  Rates.  In  addition to the
                  ----------------------------------------
Annual Rent, Rangeview shall pay or cause the Export Water Contractor to pay the
Initial  Export  Royalty  Rates  (subject  to  adjustment as provided in Section
7.2(c))  on the sale or other disposition of the Export Water.  The royalty paid
to  the  Land  Board  upon  a sale or other disposition of Export Water shall be
based  on  the  greater of the following values ("Royalty Base"): (1) the Export
Water  Contractor's Gross Revenues for the specific interest granted; or (2) the
value of the specific interest granted, as determined in accordance with Section
7.2(d).  The  Parties  intend  that  the  Royalty  Base  shall  include, without
limitation,  all Gross Revenues relative to the sale or other disposition of any
or  all  Export  Water  rights, including without limitation, option rights, the
right  to  first  use,  reuse,  successive  use, or any other disposition of the
Export  Water.

          (c)     Adjustment  of  Initial  Export  Royalty  Rate.
                  ----------------------------------------------

               (1)     If  the Export Water is sold or disposed of by the Export
Water  Contractor  on  an  Entitlement Basis to a public entity for an amount in
excess  of  Forty-Five  Million  Dollars  ($45,000,000)  in  Gross Revenues, the
Initial  Export  Royalty  Rate shall be increased for Gross Revenues received in
excess  of  $45,000,000  as  follows:


                                      -16-
<PAGE>

                                                   Royalty
               Gross  Revenue                        Rate
               --------------                        ----

               0  -  $45,000,000                10%
               $45,000,000  -  $60,000,000      20%
               $60,000,000  -  $75,000,000      30%
               $75,000,000  -  $90,000,000      40%
               Over  $90,000,000                     50%

     As  an example, if the Export Water Contractor receives One Hundred Million
Dollars  ($100,000,000)  in  Gross Revenues from sales of the Export Water on an
Entitlement  Basis  to a public entity, the Land Board will receive a royalty as
follows:

               Gross  Revenue                       Royalty
               --------------                       -------

               the  first  $45,000,000            $4,500,000
               the  next  $15,000,000             $3,000,000
               the  next  $15,000,000             $4,500,000
               the  next  $15,000,000             $6,000,000
               the  next  $10,000,000             $5,000,000

               (2)     If  the  Export  Water  is  sold by or disposed of by the
Export  Water Contractor on an Entitlement Basis for a private use for an amount
in  excess of Forty-Five Million Dollars ($45,000,000), the Initial Royalty Rate
shall be increased for the Export Water Contractor's Gross Revenues in excess of
Forty-Five  Million  Dollars  ($45,000,000)  as  follows:

                                                   Royalty
               Gross  Revenue                        Rate
               --------------                        ----

               0  -  $45,000,000                12%
               $45,000,000  -  $60,000,000      24%
               $60,000,000  -  $75,000,000      36%
               $75,000,000  -  $90,000,000      48%
               Over  $90,000,000                     50%

               (3)     The  foregoing  adjustments to the Initial Export Royalty
Rate  shall  also  apply  to  sales  or  other  dispositions  on  other  than an
Entitlement  Basis, i.e., where the Export Water Contractor bears all or part of
the  costs  of  withdrawal, treatment or delivery. In such cases, there shall be
deducted  from  Gross  Revenues  those  costs  (including  a reasonable overhead
allocation) which are incurred as a direct or indirect result of the incremental
activity  associated  with  the withdrawal, treatment and delivery of the Export
Water  involved on an other than Entitlement Basis. In such cases, the resulting
number  (Gross Revenues less such incremental costs) shall be used as the "Gross
Revenues"  number  in the formulae set forth in subparagraphs 7.2(c)(1) and (2).

          (d)     Determination  of  Royalty  Base.
                  --------------------------------


                                      -17-
<PAGE>
          (1)     If  interests  in  the  Export  Water  are  sold  or otherwise
disposed of by the Export Water Contractor on an Entitlement Basis, the value of
the  Export  Water  shall  be  conclusively  deemed  to  equal  the Export Water
Contractor's  Gross  Revenues  attributable to each acre foot of water plus Five
Hundred  Dollars  ($500.00)  per  acre foot and the $500 shall be added to Gross
Revenues  for purposes of calculating the Royalty Base.  The Five Hundred Dollar
($500.00)  figure  shall  be  increased  or  decreased  every  five  (5)  years
proportionally  to  the  five  (5)  year  increase  or  decrease  in  the Index.

          (2)     If  the Export Water is sold or otherwise disposed of with the
Export  Water  Contractor bearing the cost of withdrawal, treatment and delivery
to  a  purchaser  at  least  to  the  boundary  of the Lowry Range (a "Delivered
Basis"),  then  the  Royalty  Base  shall  be as set forth in Section 7.2(b)(1).

          (3)     If the Export Water is sold other than on a Delivered Basis or
an  Entitlement Basis, then each contract for the sale or other disposition of a
specific  interest  in the Export Water shall be delivered to the Land Board for
its  review  together  with  a  written statement setting forth the Royalty Base
believed  to  apply to each such transaction (the "Proposed Royalty Base").  The
Land  Board  shall  have  forty-five  (45)  days  to either approve the Proposed
Royalty  Base  or  make  its own determination of the Royalty Base.  If the Land
Board does not make such determination within forty-five (45) days after receipt
of  the  Proposed  Royalty Base, the Proposed Royalty Base shall conclusively be
deemed to have been accepted.  In the event of a dispute in the determination of
the Royalty Base under this Section 7.2(d)(3), the matter shall be determined by
arbitration  pursuant  to Section 15.16 of this Agreement.  The arbitrator shall
be  required  to  determine a Royalty Base for a sale or other disposition under
this  Section  7.2(d)(3)  which  results  in a royalty no higher than that for a
Delivered  Basis  sale  and  no  less  than  that for an Entitlement Basis sale.

          (4)     Except  for  the  sale  or  disposition  of  Export Water on a
Delivered  Basis,  Rangeview  shall  cause  each  contract for the sale or other
disposition  of  Export  Water  by  the  Export  Water  Contractor  to include a
requirement  that  the  first  Export  Water  Purchaser  pay  as  additional
consideration  ("Additional  Consideration")  at least five percent (5%) of such
Export  Water  Purchaser's  Retail  Sales  Price at the time the Export Water is
delivered  to  a third person (regardless of whether such person is a retail end
user).  Rangeview shall cause the Export Water Contractor to pay directly to the
Land  Board  an  amount  equal  to  the greater of (i) five percent (5%) of such
Export  Water Purchaser's Retail Sales Price or (ii) fifty percent (50%) of such
Additional  Consideration  received  by  the  Export  Water  Contractor.


                                      -18-
<PAGE>
As  an  example,  if  the  Export  Water Contractor sells the Export Water on an
Entitlement  Basis  for  Two  Thousand  Dollars  ($2,000.00) per acre/foot, plus
twelve  percent  (12%)  of  the Export Water Purchaser's Retail Sales Price, the
Land Board royalty shall be calculated as follows:  the Land Board shall receive
Two  Hundred Fifty Dollars ($250.00) per acre/foot (ten percent (10%) of the sum
of Two Thousand Dollars ($2,000.00) plus Five Hundred Dollars ($500.00) for each
acre  foot)  plus  fifty percent (50%) of the twelve percent (12%) of the Retail
Sales Price when the Export Water is delivered to a third person.  If the Retail
Sales  Price  to  retail end users totals $2.00 per 1,000 gallons, then the Land
Board shall receive $.12 for each 1,000 gallons delivered to a third person even
if  such  third  person  uses  such  water  for  an  augmentation  plan or other
non-retail  use.

          (e)     Subsequent  to  the  anniversary date of this Agreement in the
year 2081, any ongoing Gross Revenues from the sale of Export Water shall belong
to  and  be  paid  to  the  Land  Board.

     7.3     ROYALTIES  FOR  ON-SITE  USE.
             ----------------------------

          (a)     Initial  Royalty.  For  sales  or  other  dispositions  of
                  ----------------
Non-Export  Water  for  use  on  the Lowry Range, Rangeview will pay to the Land
Board  a  royalty  of  twelve percent (12%) of the Gross Revenues related to the
sale  or  other  disposition  of  the  Non-Export  Water (including any reuse or
successive  use)  to  Water  Users.

          (b)     Royalty  at  Build-Out.  At such time as metered production in
                  ----------------------
any  calendar  year  of Non-Export Water reaches 13,000 acre feet (including any
re-use  of  water), or, alternatively, at such time as a total of 10,000 surface
acres  on the Lowry Range has been (i) rezoned to a use other than agricultural,
(ii) finally platted, and (iii) water tap agreements have been entered into with
respect  to  all  improvements  to be constructed on such acreage, then the Land
Board  may  elect  to receive, at its option, in lieu of the royalty provided in
Section  7.3(a),  an  amount  equal to fifty percent (50%) of the collective net
profits  derived  by  Rangeview  and  the  Service  Provider  from  the  sale of
Non-Export  Water  to  Water  Users.  Net  Profits shall be defined as the Gross
Revenues  received  from Water Users less (i) the currently amortized portion of
applicable  capital  costs  (assuming for purposes of this calculation that such
costs  are  to  be  amortized  over  the  estimated  useful  lives of the assets
involved)  incurred  with  respect  to the Non-Export Water delivery system; and
(ii)  all  Operating  Expenses  whether  incurred  by  Rangeview  or its Service
Provider.


                                      -19-
<PAGE>
     7.4     RECHARGE  ROYALTY.
             -----------------

          (a)     Export  Water.  If  additional  water  acquired  by the Export
                  -------------
Water Purchaser is stored pursuant to Section 6.2(a) in surface reservoirs or in
aquifers beneath the surface of the Lowry Range, Rangeview shall pay or cause to
be  paid  to  the  Land Board a royalty equal to ten percent (10%) (for sales or
dispositions  to  public  entities)  or  twelve  percent  (12%)  (for  sales  or
dispositions  to  all others) of the Export Water Purchaser's Retail Sales Price
at  the  time of the sale or other disposition of such stored or recharged water
(regardless of whether such sale or other disposition is to a retail purchaser).

          (b)     Non-Export  Water.  If  additional water acquired by Rangeview
                  -----------------
or  its  Service  Provider  is  stored  pursuant  to  Section  6.2(a) in surface
reservoirs  or  in  aquifers  beneath the surface of the Lowry Range for sale or
other disposition to Water Users, Rangeview shall pay or cause to be paid to the
Land  Board  a  royalty equal to ten percent (10%) (for sales or dispositions to
public  entities)  or  twelve  percent  (12%)  (for sales or dispositions to all
others)  of the Retail Sales Price received by Rangeview or its Service Provider
from  the  sale  or other disposition of such stored or recharged water to Water
Users.

     7.5     PAYMENT  OF  ROYALTY.  Payment  of  any royalty payable pursuant to
             --------------------
this  Agreement  shall  be deemed earned in proportionate part as Gross Revenues
derived  from  the  subject  transaction  are  received.  In  the  case  of  an
installment  sale,  the  royalty  shall  be  deemed  earned upon receipt of each
installment  payment.  The  royalty  on  Export  Water  sold by the Export Water
Contractor  shall  be deemed earned as actual payments are made by the purchaser
of  the  Export  Water  or when the Export Water is delivered Off-Site whichever
shall  first occur.  Royalties earned in any calendar year quarter shall be paid
to  the Land Board within thirty (30) days after the end of the quarter in which
earned.  Unpaid  royalties shall accrue interest at the rate of two percent (2%)
per  month  from  the  date  due.

     7.6     REPORTING.
             ---------

          (a)     Rangeview shall report to the Land Board the quantity of Water
Rights  (including  any  recharged  or  stored water pursuant to Section 6.2(a))
delivered,  the  exact  amount of Gross Revenues or, if applicable, Retail Sales
Price  relating to the sale or other disposition of Water Rights, and the entity
to  whom the Water Rights were delivered.  The report shall be due within thirty
(30)  days after the end of each calendar year, until such time as production of
Export  and/or  Non-Export  Water  reaches 500 acre feet in a calendar year, and
thereafter  on  or  before  the  thirtieth  (30th) day following the end of each
calendar  quarter  during  the  term  of  this  Agreement.


                                      -20-
<PAGE>
          (b)     Rangeview  shall,  or  shall cause its Service Provider and/or
the  Export  Water  Contractor  to,  prepare and keep full, complete, and proper
books,  records  and  accounts  of  all Water Rights (including any recharged or
stored  water  pursuant  to  Section  6.2(a))  sales  or  dispositions and shall
document  such transactions as may be required by law.  Said books, records, and
accounts  of Rangeview, its Service Provider, and/or the Export Water Contractor
shall be open at all reasonable times, upon ten (10) days' prior written notice,
to the inspection of the Land Board and its representatives who may, at the Land
Board's  expense,  copy  or extract all or a portion of said books, records, and
accounts for a period of up to five (5) years after the date such books, records
and  accounts  are  made.  The Land Board's right to inspect shall not prejudice
the  Land Board's right to collect payments due pursuant to this Agreement.  The
Land  Board  may,  upon no less than fourteen (14) days' prior written notice to
Rangeview,  its  Service  Provider,  and/or the Export Water Contractor, cause a
partial or complete audit of the entire records and operations of Rangeview, its
Service  Provider, and/or the Export Water Contractor for a five (5) year period
preceding  the  date  of  the  audit  relating  to the Lowry Range and water use
pursuant  to this Agreement to be made at the Land Board's expense by an auditor
selected  by  the  Land  Board.  Within  fourteen  (14)  days following the Land
Board's  notice,  Rangeview,  its  Service  Provider,  and/or  the  Export Water
Contractor  shall  make  available  to  the  Land  Board's auditor the books and
records  the  auditor reasonably deems necessary or desirable for the purpose of
making  the  audit.  Any  deficiency in the payment of royalties determined upon
such  inspection or audit shall be immediately due and payable by Rangeview, and
by  the  inspected  or  audited  party  if  other  than Rangeview, together with
interest  thereon  at  the  rate  of two percent (2%) per month from the date or
dates  such  amounts  should have been paid.  If such deficiency is in excess of
two  percent  (2%)  of  the royalty previously paid, then Rangeview shall pay or
cause  the  audited  party  if other than Rangeview to pay to the Land Board the
actual  cost  of  the  audit  at  the  time  the  deficiency  is  paid.


                                    ARTICLE 8
                                    ---------
                          Development of Infrastructure
                          -----------------------------
                      and Water Service on the Lowry Range
                      ------------------------------------

     8.1     RANGEVIEW  SHALL  SERVE.  Subject to the requirement that customers
             -----------------------
pay  any appropriate fees and charges and comply with reasonable policies, rules
and  regulations  which  may  govern  the  activities of Rangeview acting in its
capacity  as  the provider of water service to the Lowry Range, Rangeview shall,
consistent with the terms of this Agreement, and consistent with the obligations
of  the  Service Provider as set forth in Article 9 below, provide water service
during the term of this Agreement to all Water Users.  All such service, whether
actually  provided  by Rangeview, or some other entity as may be approved by the
Land


                                      -21-
<PAGE>
Board, shall remain the primary obligation and responsibility of Rangeview,
and  shall  be  provided in a commercially reasonable time and manner consistent
with  prudent  water  service  practice  in  Colorado.

     8.2     WATER FEES AND RATES.  Tap fees, usage charges, and service charges
             --------------------
to  Water  Users  on  the  Lowry Range for Non-Export Water shall not exceed the
average  of  those similar charges then imposed by the Town of Castle Rock, East
Cherry  Creek  Valley  Water  and  Sanitation  District,  and  Parker  Water and
Sanitation  District,  or  their  respective  successors.

     8.3     SUBSTITUTION  OF  FACILITIES.  All contracts for the sale of Export
             ----------------------------
Water shall allow Rangeview or the Service Provider, or the Land Board (upon the
expiration  or  termination of this Agreement), as applicable, at its option, to
utilize  a portion (equal to the ratio of Export Water to Non-Export Water based
on  the  acre  feet  decreed in the now existing water court decrees, said ratio
being  hereinafter referred to as the "Water Interest Ratio") of the capacity of
the  ground  water  wells  which are used to produce the Export Water, under the
following  conditions:


          (a)     Rangeview,  the  Service  Provider  or  the  Land  Board,  as
applicable,  must provide substitute well capacity (the "Substitute Facilities")
of equivalent quantity and, to the extent practicable, water quality as the well
capacity  utilized  by  the  Export  Water  Purchaser  under  this  Section 8.3.

          (b)     Subject  to  further  substitution,  the Substitute Facilities
will  be  dedicated  to  the  benefit  of  the  Export Water user.  Title to the
Substitute  Facilities  shall  be  held  in  the  same  manner  as  title to the
facilities  which  they  replace.

          (c)     The  construction  and  operation of the Substitute Facilities
are  intended  to  enable  Rangeview, the Service Provider or the Land Board, as
applicable,  to incrementally expand the delivery system for the Export Water to
provide  service  to  those  areas  of the Lowry Range on which the Export Water
delivery  system  has  already  been  developed.

          (d)     The  intent  of  this  Section  8.3 is to allow Rangeview, the
Service  Provider  or  the Land Board, as applicable, the use of that portion of
the  Export Water delivery system, utilizing the excess capacity as discussed in
Section 8.4, to provide water service to the Lowry Range.  The further intent of
this  Section  8.3  is  to ensure that facilities initially constructed to serve
Export  Water will, as necessary, be available for service to the Lowry Range if
Substitute  Facilities are constructed and dedicated to the Export Water user as
outlined  in  Sections 8.3(a) and (b).  The Export Water user will have the same
opportunity  to  substitute facilities from the Non-Export Water delivery system
for  the  Export  Water delivery system so that the well field is developed in a
manner  reasonably


                                      -22-
<PAGE>
consistent with the master plan attached hereto as EXHIBIT D. The well field and
Export  Water and Non-Export Water delivery systems, when fully completed, shall
have  been  developed  in  a  manner  such  that  each of Rangeview, the Service
Provider,  or  the  Land  Board,  as applicable, on the one hand, and the Export
Water  Purchaser(s),  on the other, shall bear the economic burden of developing
their proportionate part of the total infrastructure based on the ratio of Water
Rights  used  on  the  Lowry  Range  and  outside  the  Lowry  Range.

          (e)     In  the  event  a  dispute  arises  concerning substitution of
facilities  pursuant  to  this  Section,  the  dispute  shall  be  resolved  by
arbitration  pursuant  to  Section  15.16  of  this  Agreement.

     8.4     RIGHT TO USE TRANSMISSION LINES; INFRASTRUCTURE.  All contracts for
             -----------------------------------------------
the  sale  of  Export  Water will provide for construction of excess capacity in
Export  Water  transmission  lines  only  within  the  Lowry  Range,  so  as  to
accommodate the transmission of water for on-site use within that portion of the
Lowry  Range  which  may  be  served  by  those  lines.  The  Service  Provider,
Rangeview,  or the Land Board, as applicable, shall have access to and the right
to  use a portion of the capacity of any and all Export Water transmission lines
on  the premises to the extent set forth in EXHIBIT E attached hereto.  The well
field  and delivery system built for delivery of Export Water must be built in a
commercially  reasonable manner using accepted engineering practices considering
the  requirements  of  Section  8.3  and  8.4  related  to  the  development  of
infrastructure  for water service on the Lowry Range.  The costs of constructing
(1) infrastructure to deliver Export Water; and (2) the excess pipeline capacity
required by this Section will not be paid, directly or indirectly, by Rangeview,
the  Land  Board,  or  Water  Users  (except  to  the extent such facilities are
substituted  for on-site service, in which case Water Users will indirectly bear
costs  through  rates  and  charges  and  Rangeview may incur administrative and
maintenance  expenses  with  respect thereto).  Ownership of the excess capacity
needed  for  on-site use will be transferred to Rangeview, the Service Provider,
or  the  Land  Board,  as applicable, at such time as such capacity is utilized,
under  agreements  which  provide  for  the  payment  by  Rangeview, the Service
Provider,  or  the  Land  Board,  as  applicable,  of  a  proportionate share of
operation,  maintenance  and  replacement  costs.

     8.5     TITLE  TO  EQUIPMENT  AND  IMPROVEMENTS. Rangeview acknowledges and
             ---------------------------------------
shall  cause its Service Provider to acknowledge that equipment and improvements
placed  on  the  Lowry  Range  are  subject to the provisions of this Agreement.
Rangeview  shall  pay  or  cause  its  Service  Provider to pay all taxes, fees,
assessments  or  other charges, if any, which may be assessed upon or become due
with  respect  to,  the  equipment  and  improvements  during  the  term of this
Agreement.  On  the  Effective  Date,  this Agreement


                                      -23-
<PAGE>
shall  be  recorded  with  the  Clerk  and  Recorder  for  Arapahoe  County.

     8.6     FUTURE LEASES.  The Parties acknowledge that the Lowry Range is tax
             -------------
exempt as long as it is owned by the Land Board or another tax exempt entity and
that the operation of Rangeview is based upon a revenue and not a tax base.  The
provisions of any leases or contracts for exchanges, sales or other dispositions
pertaining  to any interest in the surface of the Lowry Range shall not restrict
the  ability  of  Rangeview  to  sell  water to, and receive revenue from, Water
Users.  Unless  expressly  authorized  in  writing  by  the Land Board or unless
otherwise required by law, Rangeview will not impose taxes, assessments or other
charges  of any kind on Water Users in connection with the provision of, or cost
to  deliver,  Non-Export  Water  to  such  Water Users except as contemplated by
Section 8.2; provided that Rangeview may assess amounts it is required to pay in
lieu  of  taxes  pursuant  to  Sec.  36  1-120.5(5),  15  C.R.S.  (1990  Rplc.).

     8.7     RANGEVIEW  DISTRICT  BOUNDARIES.  Subject  to  complying  with
             -------------------------------
reasonable  policies,  rules  and regulations which may govern the activities of
Rangeview,  and to the extent permitted by law, upon petition for inclusion by a
landowner  within  the Lowry Range qualified under Title 32 or other appropriate
action  thereafter, Rangeview shall cooperate and, with due diligence proceed to
take  action  pursuant to law, to include such area as may be designated by such
petition  or  other  action  within  Rangeview's  district  boundaries.

     8.8     DEVELOPMENT  OF LOWRY RANGE.  Rangeview shall have no obligation to
             ---------------------------
promote  development  of  the  Lowry Range, other than its obligation under this
Agreement  to  provide  water service and associated infrastructure as a prudent
water  provider  to meet all reasonable Water User demands, if and when a demand
may  arise.  The  nature,  timing, financing, and approval of development of any
land  uses  shall  be the sole responsibility of the Land Board.  The Land Board
makes no representation as to if, when, and how the land development, if any, on
the  Lowry  Range  will  occur,  or  as  to the density of any such development.

     8.9     RESERVES.  Rangeview shall establish and maintain a maintenance and
             --------
operating  reserve  for  providing Non-Export Water to Water Users in accordance
with  Section  8.1.  The  amount  of  such  reserve  shall  be at least equal to
thirty-three and one-third per cent (33-1/3%) of the Operating Expenses budgeted
by  Rangeview  and,  if  applicable,  its Service Provider, for the then current
calendar  year.  In  establishing  such  reserve initially and in increasing the
amount of such reserve as a result of an increase in budgeted Operating Expenses
or  an  expenditure  which  diminishes  the  reserve  below the required amount,
Rangeview  shall  allocate  any available funds not budgeted to other proper and
necessary  functions  of  Rangeview  toward building such reserve.  Such reserve
funds  shall  be continuously maintained and may be


                                      -24-
<PAGE>
utilized  by  Rangeview  solely  for  paying  lawful obligations relating to the
provision  of  Non-Export  Water  to  Water  Users  as  required by Section 8.1.


                                    ARTICLE 9
                                    ---------
                            Service Provider Contract
                            -------------------------

     9.1     SERVICE  PROVIDER  FOR RANGEVIEW.  As of the Effective Date, at its
             --------------------------------
option  Rangeview may enter into a contract pursuant to which a Service Provider
will  provide  the  service  of  delivering  Non-Export Water to the current and
future  Water Users pursuant to and consistent with the terms of this Agreement.
Rangeview  shall  not  enter  into  any  Service  Provider  contract  except  as
contemplated  by the Settlement Agreement without the express written consent of
the  Land Board.  All Service Provider contracts shall be in the form of EXHIBIT
B  only  with  such changes as may be approved in writing by the Land Board.  If
Rangeview  chooses  to  contract  with  a Service Provider to provide Non-Export
Water  services  on the Lowry Range, Rangeview shall cause such Service Provider
to  comply  with  all  obligations of Rangeview under this Agreement relating to
Non-Export  Water services on the Lowry Range.  Rangeview agrees (and will cause
any  other  Service  Provider  to  agree)  that:

          (a)     The  Service  Provider  contract  cannot  be  assigned  or
transferred without the express written consent of the Land Board, which consent
may  be withheld by the Land Board in its sole discretion.  The Service Provider
contract  cannot  be  amended  without  the  express written consent of the Land
Board,  which  consent  shall  not  be  unreasonably  withheld.

          (b)     Any  breach  by  the Service Provider of its obligations under
its  Service  Provider contract with Rangeview shall constitute a breach of this
Agreement  by  Rangeview  subject  to  Rangeview's  right to cure such breach or
default.

          (c)     Ten  (10)  days  prior to the execution of any construction or
financing  contracts  by  Rangeview  or  the  Service Provider in excess of Five
Hundred Thousand Dollars ($500,000) related to the provision of Non-Export Water
Service to Water Users (including contracts for the disposal of effluent, sewage
or  sewerage  as permitted under Section 6.3 of this Agreement), Rangeview shall
provide  or  cause  the Service Provider to provide the Land Board with courtesy
copies  of  such  contracts  (drafts  being  acceptable  if  finals  are not yet
available).

          (d)     Water  service  on the Lowry Range shall be provided as needed
in  a  commercially  reasonable  time  and  manner consistent with prudent water
service practice in Colorado if and when development of the surface of the Lowry
Range  may  occur.


                                      -25-
<PAGE>
          (e)     If  there  is  an approved Service Provider, all financing for
infrastructure  for  delivery  of  Water  Rights  and  all  costs  of operation,
maintenance,  debt  service  and  repair to provide water service to Water Users
will  be provided without cost to Rangeview, the Land Board or any Water User on
the  Lowry  Range,  except  to the extent paid for with the water fees and rates
described  in  Section  8.2, and Rangeview shall not issue bonds to finance such
infrastructure  or  service.

          (f)     Re-use  and  successive use of Non-Export Water, if any, shall
be  done  in  a  commercially  reasonable  manner  consistent with prudent water
provider  practice  in  Colorado.

          (g)     Except  for  the  disposal  of  effluent,  sewage  or sewerage
Off-Site  as  provided  in  Section 6.3 of the Agreement, none of the Non-Export
Water,  including  all  re-use and successive uses of such water, shall be used,
sold,  transferred, or otherwise disposed of outside the Lowry Range without the
express  written  consent  of  the  Land  Board.

          (h)     If  the  Service  Provider  decides  not  to provide or not to
continue  providing service to Water Users on the Lowry Range during the term of
this  Agreement,  then  Rangeview shall require the Service Provider to give one
(1)  year's  prior  written  notice  to  Rangeview which written notice shall be
transmitted  by  Rangeview  to the Land Board.  During such one-year period, the
Service  Provider shall continue to provide service in accordance with the terms
of  the  Service  Agreement, unless Land Board and Rangeview require the Service
Provider  to  discontinue  providing  services  prior  to the expiration of such
one-year  period.

          (i)     Rangeview and its Service Provider shall, at all times, act in
a commercially reasonable manner consistent with prudent water provider practice
in  Colorado.

          (j)     If  and  to the extent at any time monies are not available to
Rangeview  to  fund the reserve which Rangeview is required to maintain pursuant
to  Section  8.9 or if monies in such reserve are withdrawn such that the amount
of  the  reserve  drops below the amount which Rangeview is required to maintain
and  such  reserve  cannot  reasonably  be  expected  to  be  reestablished from
anticipated  income  to Rangeview within one year, then Rangeview shall promptly
notify  the  Service Provider of such fact and the Service Provider shall within
thirty  (30) days deliver funds to Rangeview sufficient to replenish the reserve
fund  to  its  required  level.  Notwithstanding  the  fact that the reserve can
reasonably be expected to be reestablished within one year, the Service Provider
shall  be  required  to  deliver  funds to Rangeview sufficient to replenish the
reserve fund to its required level at the time the Service Provider discontinues
service.


                                      -26-
<PAGE>
                                   ARTICLE 10
                                   ----------
                            East Cherry Creek Valley
                            ------------------------
                          Water and Sanitation District
                          -----------------------------

     10.1     TERMS  AND  REVENUE.  The terms of the East Cherry Creek Agreement
              -------------------
are  not  altered  or  affected by this Agreement, nor is its duration extended.
All  revenue paid by ECCV pursuant to the East Cherry Creek Agreement subsequent
to the Effective Date of this Agreement shall be paid as follows:  fifty percent
(50%)  to be paid by Rangeview directly to the Land Board (unless ECCV agrees to
pay such fifty percent (50%) directly to the Land Board) and fifty percent (50%)
to  be paid by ECCV directly to Rangeview.  Rangeview further agrees that within
ten  (10)  days following the Effective Date, Rangeview shall pay the Land Board
ten percent (10%) of all revenues paid by ECCV for January and February 1995 and
fifty  percent  (50%)  of  all revenues paid by ECCV to Rangeview for the period
from  March  1,  1995  through  the  Effective Date.  No additional royalty with
respect  to  the  revenue  derived from the East Cherry Creek Agreement shall be
payable  to  the  Land  Board.

     10.2     TITLE  REVERSION.  Upon  the expiration or termination of the East
              ----------------
Cherry  Creek  Agreement,  for  whatever  reason,  all  interests  in the water,
infrastructure,  and leased premises related thereto, to the extent provided for
in  the East Cherry Creek Agreement, shall automatically and without further act
of  the  Parties  or anyone else revert to the Land Board free and clear of this
Agreement.  Failure of Rangeview to contest the expiration or termination of the
East  Cherry  Creek  Agreement,  which  the Land Board contends expires in 2032,
shall  not be a default under this Agreement.  The Land Board agrees not to take
any action inconsistent with the Land Board's rights, duties, and obligations of
this  Agreement which would cause Rangeview to be in default or otherwise result
in liability to Rangeview under the East Cherry Creek Agreement.  Nothing in the
preceding  sentence  shall  prevent  the Land Board or Rangeview from taking any
actions  they  are  permitted  to  take  by  law  with  respect  to  ECCV.


                                   ARTICLE 11
                                   ----------
                                  Rights-of-Way
                                  -------------

     11.1     MASTER PLAN.  The Parties agree to a master plan of rights-of-way,
              -----------
which  plan  is  attached  to  this  Agreement  as EXHIBIT D.  To the extent not
already  granted,  the  rights-of-way described on EXHIBIT D shall be granted by
Land  Board  to  Rangeview  within  sixty  (60)  days  of  Rangeview's  complete
application  with  Land  Board  for  specific  rights-of-way,  provided that the
requested  rights-of-way  are  necessary for construction of facilities within a
reasonable  time  after the rights-of-way are to be granted.  The grant shall be
made  in  accordance  with  the  form  attached  as EXHIBIT F, which form may be
amended  to


                                      -27-
<PAGE>
comply  with  applicable  statutes, regulations and Land Board policy directives
from  time  to  time.  Said  master  plan  may  be amended by Land Board for the
convenience  of  the  Parties,  provided  that  any  such  amendment  shall  not
materially  adversely  affect  the rights and privileges of any Party. The total
acres  of  rights-of-way  shall  not  be reduced and the Land Board may relocate
rights-of-way,  whether  planned  or  in  use,  for  the commercially reasonable
development  of the Lowry Range. If the Land Board relocates rights-of-way which
are in use by Rangeview, its Service Provider, or the Export Water Purchaser (or
which  any  such  entity  has  expended funds to develop for use), then the Land
Board  must  pay  the  affected  entities' costs associated with relocating such
rights-of-way.

     11.2     FEE  FOR  RIGHT-OF-WAY.  Rangeview  shall pay Land Board an amount
              ----------------------
equal  to  Fifty  Dollars  ($50.00) per acre of the surface land utilized at the
time  of  granting  a right-of-way, which, commencing with the Effective Date of
this  Agreement,  shall  be increased every five (5) years proportionally to the
five  (5) year increase in the Index.  In no case shall the rights-of-way fee be
reduced.  Land  Board  shall  include  a  description  of  the  master  plan  of
rights-of-way  in  subsequent  leases, sales or other dispositions pertaining to
the  Lowry  Range  and  shall,  subject to the amendment provisions set forth in
Section  11.1,  be  bound by such master plan in all subsequent leases, sales or
other  dispositions.

     11.3     LICENSE TO SERVICE PROVIDER.  To the extent necessary to implement
              ---------------------------
the intent of Article 11, Rangeview may grant to its Service Provider and/or the
Export  Water  Purchaser  a license to use the rights-of-way granted by the Land
Board  to  Rangeview  for  the  purposes  contemplated  by this Agreement.  Such
licenses  shall  be  in  the  forms  attached  hereto  as  EXHIBITS  G  and  H,
respectively.


                                   ARTICLE 12
                                   ----------
                              Bonding Requirements
                              --------------------

     12.1     BOND.  No  operations are to be commenced on the Lowry Range until
              ----
Rangeview, its Service Provider, the Export Water Purchaser or their agents have
filed good and sufficient bonds with Land Board consistent with the requirements
of  C.R.S.  Sec.38-26-106  and Sec.36-1-129 in an amount fixed by Land Board, to
secure  the  payment  for  damages,  losses or expenses caused by Rangeview, its
Service  Provider,  the  Export  Water  Purchaser or their agents as a result of
operations  on  or  under  the  Lowry  Range.  Land  Board may waive the bonding
requirements,  in its discretion, and may require that the bond be maintained in
full  force  and  effect  for one (1) year after cessation of the operations for
which  the  bond  was  intended.


                                      -28-
<PAGE>
     12.2     BOND  OF  CONTRACTORS.  Bonds  provided  by  contractors  for
              ---------------------
construction  activities to Rangeview, its Service Provider, or the Export Water
Purchaser  may  list Land Board as a coinsured.  As long as such bonds otherwise
comply with Section 12.1 above and list Land Board as coinsured, the contractors
shall  not  be  required to obtain any other bonds for the Land Board. Contracts
entered  into  by  Rangeview, its Service Provider or the Export Water Purchaser
which constitute public works shall comply with Sec. 24-91-103, 103.5 and 103.6,
10B  C.R.S.  (1988  Rplc.).


                                   ARTICLE 13
                                   ----------
                              Default and Remedies
                              --------------------

     13.1     EVENTS  OF  DEFAULT.  The  following  events  shall hereinafter be
              -------------------
referred  to  as  "Events  of  Default":

          (a)     Rangeview  shall  default  in  the due and punctual payment of
royalties,  rents or any other amounts payable hereunder, and such default shall
continue  for  ten  (10)  business  days  after  the  applicable  due  date;

          (b)     This  Agreement  shall  be  transferred to or shall pass to or
devolve  upon  any  other  person or party except as expressly permitted by this
Agreement;

          (c)     This  Agreement  or  the  Non-Export Water or any part thereof
shall  be  taken  upon  execution  or  by  other process of law directed against
Rangeview,  or  shall be taken upon or subject to any attachment at the instance
of  any creditor or claimant against Rangeview, and said attachment shall not be
discharged  or  disposed  of  within  sixty  (60)  days  after the levy thereof;

          (d)     Rangeview shall file a petition in bankruptcy or insolvency or
for reorganization or arrangement under the bankruptcy laws of the United States
or under any insolvency act of any state, or shall be dissolved or shall make an
assignment  for  the  benefit  of  creditors;

          (e)     Involuntary  proceedings  under  any  such  bankruptcy  law or
insolvency  act  or for the dissolution of Rangeview shall be instituted against
Rangeview,  or a receiver or trustee shall be appointed for all or substantially
all  of the property of Rangeview, and such proceeding shall not be dismissed or
such  receivership  or  trusteeship  vacated  within  sixty (60) days after such
institution  or  appointment;

          (f)     If  either  party  shall  fail  to  perform any material term,
covenant  or  condition herein contained and such failure shall continue and not
be  cured  for  a  period  of thirty (30) days after written notice specifically
setting  forth  the  nature  of the default has been given by the non-defaulting
party  to  the  defaulting party, or if more than thirty (30) days is reasonably


                                      -29-
<PAGE>
required  to  cure such matter complained of, if the defaulting party shall fail
to  commence  to  correct  the same within said thirty (30) day period and shall
thereafter  fail  to prosecute the same to completion with reasonable diligence.
For  purposes  of this subparagraph (f), if Rangeview has a Service Provider and
such  Service  Provider  shall breach any of its obligations to Rangeview, or if
the Export Water Contractor shall breach any of its obligations to Rangeview, or
if  the  Export Water Purchaser shall breach any of its obligations to Rangeview
or  the  Export  Water Contractor, and such acts or omissions also constitute or
result  in  the failure to perform a material obligation for which Rangeview has
responsibility  hereunder,  then the same shall constitute a material failure of
performance  by  Rangeview.  Further  in  such event, the thirty (30) day period
provided  in the first sentence of such subparagraph (f) shall be extended up to
a  maximum of sixty (60) days if Rangeview first attempts to require its Service
Provider,  the  Export  Water  Contractor,  or  the  Export  Water Purchaser, as
applicable, to cure during any applicable cure period provided in the agreements
applicable  to  the  defaulting  party,  so  that  if  in  such case the Service
Provider,  the  Export  Water  Contractor,  or  the  Export  Water Purchaser, as
applicable, fails to cure, Rangeview itself shall have an additional thirty (30)
days to cure such material failure of performance.  Thus, for example, if such a
material  failure  of performance results from an act or omission of Rangeview's
Service Provider, the Land Board may immediately give Rangeview notice regarding
the  same  and  thereby  commence  the running of Rangeview's cure period.  That
period  would  be thirty (30) days, unless Rangeview in turn gives notice to its
Service  Provider  and  commences  an  applicable  cure period under the Service
Provider  Agreement,  in  which  case  if  the  Service  Provider fails to cure,
Rangeview  would  have  an additional thirty (30) days to cure; provided that no
more  than  a  total  of  sixty  (60) days shall be allowed for such cure period
(subject  to any reasonably required extension as provided in the first sentence
of  this  paragraph  (f)).

     13.2     REMEDIES.  If  any  one  or more Events of Default shall occur and
              --------
not  be  cured  within  any  applicable  cure  period,  then:

          (a)     If  Rangeview  is  the  defaulting  party, Land Board, without
prejudice to any other remedies that it may have, may give written notice of its
intention to terminate this Agreement on the date of such notice or on any later
date  specified  in  such  notice,  and,  on  the date specified in such notice,
Rangeview's  right  to  possession of the premises will cease and this Agreement
will be terminated (except as to Rangeview's liability set forth in this Section
13.2)  as if the expiration of the term fixed in such notice were the end of the
term  of  this  Agreement.  In connection with such termination, Land Board with
notice  may  re-enter  and  take  possession  of the leased premises or any part
thereof  (subject  to any existing licenses related to delivery of Export Water)
and  repossess  the  same as the Land Board's former


                                      -30-
<PAGE>
estate,  and  expel  Rangeview  from  the premises and those claiming through or
under  Rangeview except with respect to the Export Water, and remove the effects
of  both  or  either,  without being deemed guilty of any manner of trespass and
without  prejudice  to  any  other  remedies.  In the event of such termination,
Rangeview and its Service Provider shall surrender and peacefully deliver to the
Land  Board  the above-described land and the Non-Export Water, and such land as
was  in Rangeview's possession or control shall be returned to the Land Board in
good  condition  (subject  to  any  existing licenses related to the delivery of
Export  Water),  and  the  Land  Board  shall  be  entitled to the return of all
Non-Export  Water,  plus  the  title  to  all  infrastructure built to divert or
withdraw  and  deliver  Non-Export  Water  and  any  other  interest  in  shared
facilities for use with the Non-Export Water, plus the revenue stream associated
with such Non-Export Water and the East Cherry Creek Agreement, and the reserves
required  to  be  maintained  by  Rangeview  pursuant  to Section 8.9. Upon such
termination,  if  Rangeview  shall remain in possession of any part of the Lowry
Range  (subject to any existing licenses related to delivery of Export Water) or
Non-Export Water, Rangeview shall be guilty of an unlawful detainer and shall be
subject to eviction or removal, forcibly or otherwise, to the extent provided by
law.

          (b)     In  the  Event  of Default by either party, the non-defaulting
party shall be entitled to any and all damages proximately caused by the default
or  breach and its costs and reasonable attorney fees from the defaulting party.
In  addition, Rangeview shall be entitled to specifically enforce performance by
the  Land  Board  of  the  Land  Board's  obligations  under  this  Agreement.

     13.3     NO  WAIVER.  No  failure by Rangeview or the Land Board, to insist
              ----------
upon the strict performance of any agreement, term, covenant or condition hereof
or  to  exercise  any  right  or remedy consequent upon a breach thereof, and no
acceptance  of  full  or  partial  payment  of  any  amount  payable  during the
continuance  of any such breach, shall constitute a waiver of any such breach of
such  agreement,  term, covenant or condition hereof to be performed or complied
with  by  Rangeview  or  the  Land Board, as the case may be.  No breach thereof
shall  be  waived, altered, or modified except by written instrument executed by
the Land Board, or Rangeview, as the case may be.  No waiver of any breach shall
affect or alter this Agreement, but each and every agreement, term, covenant and
condition  hereof  shall  continue  in full force and effect with respect to any
other  then-existing  or  subsequent  breach  thereof.  Notwithstanding  any
termination of this Agreement, the same shall continue in force and effect as to
any  provisions  hereof  which require observance or performance of Rangeview or
Land  Board  subsequent  to  termination.

     13.4     LAND  BOARD'S  RIGHT  TO  CURE RANGEVIEW'S BREACH.  The Land Board
              -------------------------------------------------
may,  but shall not be obligated to, cure any default by Rangeview, specifically
including,  but not by way of


                                      -31-
<PAGE>
limitation,  Rangeview's failure to pay any tax due hereunder, obtain insurance,
make  repairs,  or  satisfy  lien  claims,  after providing reasonable notice to
Rangeview, and whenever the Land Board so elects, all costs and expenses paid by
the Land Board in curing such default, including, without limitation, reasonable
attorneys'  fees,  shall be so much additional rent due ten (10) days after such
payment  together  with  interest at the rate of two percent (2%) per month from
the date of advancement to the date of repayment by Rangeview to the Land Board.


                                   ARTICLE 14
                                   ----------
                                  Improvements
                                  ------------

     14.1     TRANSFER  OF  IMPROVEMENTS.  In  the  event  this  Agreement  is
              --------------------------
terminated  by forfeiture, surrender, or election upon default or breach, and no
later  than  the  expiration  of  this  Agreement, title to all improvements and
equipment  and  related  permits and licenses and all rights-of-way on the Lowry
Range  exclusively  for  delivering  Non-Export  Water  and  interests in shared
facilities  used  for  delivery of Non-Export Water shall automatically, without
the necessity of any further action by the Parties or anyone else, revert and be
transferred  to  the  Land  Board  as of the date of such forfeiture, surrender,
election,  upon  default  or  breach,  or as of the expiration of the Agreement.
Such  automatic reversion and transfer shall be conclusively evidenced of record
by  the  Land  Board's  filing with the Clerk and Recorder for Arapahoe County a
certificate  stating  the  fact  of  such  reversion  and  transfer.  Title  to
improvements  and  rights-of-way  on  the Lowry Range for the sale of the use of
Export  Water  including,  without  limitation, the East Cherry Creek Agreement,
shall  not  be  affected  by  termination  of  this  Agreement.

     14.2     ABANDONMENT  OF  EXPORT  WATER  FACILITIES.  Once the Export Water
              ------------------------------------------
Purchaser  withdraws  the  entire portion of the Export Water purchased plus the
entire  amount  of  water  recharged  by  the  Export  Water  Purchaser and such
purchaser  has failed to recharge any portion of the aquifer for a period of ten
(10)  years,  the  Land  Board  shall  have the right to notify the Export Water
Purchaser in writing of its intention to declare the rights-of-way, improvements
and  equipment  on  the  Lowry  Range  owned  or  licensed  by such Export Water
Purchaser  as abandoned.  The Export Water Purchaser shall have three (3) months
from  receipt  of such notice to remove any improvements and equipment which can
be  removed  without  damaging the Lowry Range or any shared facilities.  At the
end of such three (3) month period, title to any improvements and equipment then
remaining  and  all  rights-of-way shall automatically, without necessity of any
further  action  by  the  Export  Water  Purchaser or anyone else, revert and be
transferred  to  the  Land  Board as of such date.  Such automatic reversion and
transfer  shall  be  conclusively evidenced of record by the Land Board's filing
with  the  Clerk and Recorder for Arapahoe County a certificate stating the fact
of  such  reversion


                                      -32-
<PAGE>
and  transfer. In the event of a dispute regarding this Section 14.2, the matter
shall  be determined by arbitration pursuant to Section 15.16 of this Agreement.


                                   ARTICLE 15
                                   ----------
                               General Provisions
                               ------------------

     15.1     ASSIGNMENT  BY  RANGEVIEW.  Rangeview  may  assign its interest in
              -------------------------
this  Agreement,  but  only upon terms expressly approved in writing by the Land
Board in its sole discretion.  Any attempted assignment in contravention of this
section  shall  be  null  and  void.

     15.2     WORK  REQUIREMENTS.  To  the extent work is performed on the Lowry
              ------------------
Range  directly  by  (i)  Rangeview  or  its  Service  Provider (ii) independent
contractors  of  Rangeview or its Service Provider or (iii) a permitted assignee
(in  which  case any reference to Rangeview shall be deemed to be a reference to
the  assignee  where  appropriate),  the  following  shall  apply:

          (a)     Indemnity.  Rangeview  and  its Service Provider shall jointly
                  ---------
and  severally  indemnify  and hold harmless the Land Board against and from all
liabilities,  claims  and demands, settlement or litigation expenses and related
attorneys'  fees (hereafter "Indemnified Items") for personal injury or property
damage  arising  out  of,  or  caused  by, any act or omission of Rangeview, its
Service  Provider,  or  their  contractors,  agents  or  employees.

          (b)     Insurance.  Rangeview  shall  at  all times carry insurance in
                  ---------
the amounts and for the liabilities required by Sec. 24-10-114, 10A C.R.S. (1988
Repl.),  as  amended, which insurance shall name the Land Board as an additional
insured.  Rangeview  shall  require  its  Service Provider at all times to carry
insurance  in  amounts and with carriers reasonably acceptable to the Land Board
for  worker's  compensation  coverage  in  accordance with Colorado law, and for
public  liability  insurance covering death and bodily injury with limits of not
less  than  One  Million  Five  Hundred Thousand Dollars ($1,500,000.00) for one
person,  and  Five  Million  Dollars  ($5,000,000.00)  for  any  one accident or
disaster, and property damage coverage with limits of not less than Five Hundred
Thousand  Dollars ($500,000.00), which insurance shall name the Land Board as an
additional insured. The Land Board reserves the right to reasonably increase the
limits  of insurance required of the Service Provider as the Land Board may deem
appropriate  from  time  to  time;  provided  that,  if Rangeview or the Service
Provider  disputes  the  reasonableness  of  such  increase, the matter shall be
submitted  to  arbitration  as  provided  in  Section  15.16.

          (c)     Liens.  Except with respect to liens or encumbrances expressly
                  -----
permitted  hereunder,  Rangeview  and  its


                                      -33-
<PAGE>
Service  Provider  shall jointly and severally indemnify and hold the Land Board
harmless  from  and against all Indemnified Items relating to liens or claims of
right  to  enforce  liens  arising  from  actions  of  Rangeview  or its Service
Provider, their contractors and agents. Rangeview and its Service Provider shall
promptly  cause  any  such  lien  to  be  removed  notwithstanding the fact that
Rangeview may believe that there is a valid defense to any such claim. Rangeview
and its Service Provider shall retain the right to pursue any claims against the
claimant  after  any  such  lien  is  removed.

          (d)     Permits  and Licenses.  Rangeview  and  its  Service  Provider
                  ---------------------
shall,  at  their  own  expense,  apply  for  and obtain all necessary building,
occupancy,  well  and  other  permits  and licenses which may be required by any
governmental  entity  which has jurisdiction over the operations to be performed
pursuant  to  this  Agreement.  Copies of all such permits and licenses shall be
provided  to  the  Land  Board.

          (e)     Taxes.  Rangeview  and  its  Service Provider shall be jointly
                  -----
and  severally  responsible  for  and shall pay all taxes, fees and assessments,
including  payments  pursuant  to Sec. 36-1-120.5(5), 15 C.R.S. (1990 Rplc.), if
any,  in  connection with the work, improvements, facilities or the materials to
be utilized in accomplishing the activities of Rangeview or its Service Provider
pursuant  to  this  Agreement.

     15.3     THIRD  PARTY  BENEFICIARIES.  Except  as otherwise contemplated by
              ---------------------------
the provisions of this Agreement, it is not the intent of the Parties, nor shall
it  be  the  effect  of  this Agreement, to vest rights of any nature or form in
individuals  or  entities  not  executing  this  Agreement.

     15.4     NOTICE.  All  notices  required  by  this  Agreement  shall  be in
              ------
writing  and  shall  be  delivered to the person to whom the notice is directed,
either  in  person,  by  courier service or by United States mail as a certified
item,  return receipt requested, addressed to the address stated below.  Notices
delivered  in  person or by courier service shall be deemed given when delivered
to  the  person to whom the notice is directed.  Notices delivered by mail shall
be deemed given on the date of delivery as indicated on the return receipt.  The
Parties may change the stated address by giving ten (10) days' written notice of
such  change  pursuant  to  this  section.


                                      -34-
<PAGE>
     >RANGEVIEW  METROPOLITAN  DISTRICT:

     Rangeview  Metropolitan  District
     141  Union  Boulevard,  Suite  150
     Lakewood,  Colorado  80228

     With  a  copy  to:

     Pure  Cycle  Corporation
     5650  York  Street
     Commerce  City,  Colorado  80022
     Attn:  President

     STATE  BOARD  OF  LAND  COMMISSIONERS:

     Board  of  Land  Commissioners
     Attention:  President
     620  Centennial  Building
     1313  Sherman  Street
     Denver,  Colorado  80203

     With  a  copy  to:

     Office  of  Attorney  General
     Attn:  State  Land  Board  Attorney
     1525  Sherman  Street,  Fifth  Floor
     Denver,  Colorado  80203

     15.5     CONSTRUCTION.  Where  required for proper interpretation, words in
              ------------
the  singular  shall  include the plural, and the masculine gender shall include
the neuter and the feminine, and vice versa, as is appropriate.  The article and
section  headings  are for convenience and are not a substantive portion of this
Agreement.  This Agreement shall be construed and interpreted in accordance with
the  laws of the State of Colorado.  It shall be construed as if it were equally
drafted  in  all  aspects  by  all  Parties.

     15.6     ENTIRE AGREEMENT.  This Agreement, including the items attached in
              ----------------
accordance  with the provisions of this Agreement and Service Provider Agreement
and  the  Settlement  Agreement  and  Mutual  Release  of  even  date  herewith,
constitute  the  entire  agreement  among  the Parties pertaining to the subject
matter  of this Agreement and supersede all prior and contemporaneous agreements
and  understandings  of  the Parties as to the subject matter of this Agreement.
No  representation,  warranty, covenant, agreement


                                      -35-
<PAGE>
or  condition  not expressed in this Agreement shall be binding upon the Parties
or  shall  change  or  restrict  the  provisions  of  this  Agreement.

     15.7     AUTHORITY.  Each  of  the  Parties represents and warrants that it
              ---------
has  all  requisite  power,  corporate  and  otherwise,  to execute, deliver and
perform its obligations pursuant to this Agreement, that the execution, delivery
and performance of this Agreement and the documents to be executed and delivered
pursuant  to  this  Agreement  have  been  duly  authorized by it, and that upon
execution  and  delivery,  this  Agreement  and all documents to be executed and
delivered  pursuant  to  this  Agreement  will  constitute  its legal, valid and
binding  obligations,  enforceable  against  it  in accordance with their terms.

     15.8     COPIES.  Numerous  copies  of this Agreement have been executed by
              ------
the Parties.  Each such executed copy shall have the full force and effect of an
original,  executed  Agreement.

     15.9     AMENDMENT.  This  Agreement  shall  not  be  amended  except  by a
              ---------
writing  executed  by  all  Parties.

     15.10     COMPLIANCE  WITH  LAW.  Rangeview and the Land Board covenant and
               ---------------------
agree  that  during  the  continuance of this Agreement, they shall comply fully
with all provisions, terms, and conditions of all laws whether state or federal,
and  orders  issued  thereunder,  which  may be in effect during the continuance
hereof,  which in any manner affect their operations and the Lowry Range and the
Water  Rights  which  are  the  subject  of  this  Agreement.

     15.11     BINDING  EFFECT.  The  benefits and terms and obligations of this
               ---------------
Agreement  shall  extend  to  and  be  binding  upon the successors or permitted
assigns  of  the  respective  Parties  hereto.

     15.12     SEVERABILITY.  If  any  clause  or provision of this Agreement is
               ------------
illegal,  invalid or unenforceable under present or future laws effective during
the  term  of this


                                      -36-
<PAGE>
Agreement,  then  and  in  that event, it is the intention of the Parties hereto
that  the  remainder of this Agreement shall not be affected thereby. It is also
agreed  that  in  lieu  of  each  clause  or provision of this Agreement that is
illegal,  invalid  or  unenforceable,  there  shall  be  added as a part of this
Agreement  a clause or provision as similar in terms to such illegal, invalid or
unenforceable  clause  or  provision  as may be possible and be legal, valid and
enforceable.

     15.13     OPTIMUM  LONG-TERM  REVENUE.  C.R.S.  Sec.  36-1-118(1)(a) states
               ---------------------------
that  the  public lands of the State of Colorado may be leased by the Land Board
in such manner and to such persons as will produce an optimum long-term revenue.
Article IX, Section 10 of the Colorado Constitution provides that the Land Board
shall  provide  for  the  disposition of lands in such manner as will secure the
maximum  possible  amount  therefor.  The  Land Board determines that, under all
existing  facts  and  circumstances,  this  Agreement constitutes an arrangement
which  will  produce  an  optimum long-term revenue and meet the requirements of
C.R.S.  Sec.  36-1-118(1)(a)  and  Article  IX,  Section  10  of  the  Colorado
Constitution.

     15.14     FURTHER  ASSURANCE.  Each  of the Parties hereto, at any time and
               ------------------
from  time  to  time, will execute and deliver such further instruments and take
such further action as may reasonably be requested by the other Party hereto, in
order to cure any defects in the execution and delivery of, or to comply with or
accomplish  the covenants and agreements contained in, this Agreement and/or any
other  agreements  or  documents  related  thereto.

     15.15     GOVERNING LAW.  This Agreement shall be governed by and construed
               -------------
in accordance with the laws of the State of Colorado and applicable federal law.

     15.16     ARBITRATION.  Any controversy or claim arising out of or relating
               -----------
to  the  computation  of royalties or net profits interest under this Agreement,
and  all  other  controversies or claims which the Parties have expressly agreed
herein  shall  be  submitted  to  arbitration,  shall  be settled by


                                      -37-
<PAGE>
arbitration  administered  by the American Arbitration Association in accordance
with  its  commercial  rules,  and  judgment  upon  the  award  rendered  by the
arbitrator(s) may be entered in any court having jurisdiction thereof. Rangeview
and the Land Board agree that the Service Provider, the Export Water Contractor,
or  the  Export  Water Purchaser, as applicable, may participate directly in any
arbitration  which  affects such entity's rights and/or obligations with respect
to  the Water Rights; provided such entity agrees to be bound by the arbitration
award  to  the  same  extent  as  the  Land  Board  and  Rangeview.

     15.17     LITIGATION.  Except  as  provided  in Section 15.16 above, in the
               ----------
event  of  claims, disputes or other disagreements between the Parties which the
Parties are not able to resolve amicably, either party may bring suit in a court
of  competent  jurisdiction  seeking  resolution  of  the  matter.

     15.18     DUTY OF GOOD FAITH AND FAIR DEALING.  The parties acknowledge and
               ------------------------------------
agree  that  each  party  has  a  duty  of  good  faith  and fair dealing in its
performance  of this Agreement.  Rangeview will advise the Land Board of its and
its  Service  Provider's  activities  no  less  than annually until such time as
production  of  Water  Rights  exceeds  500  acre  feet per year and thereafter,
quarterly  during  the  term  of  this  Agreement and will respond to reasonable
requests  of  the  Land  Board for additional information on Rangeview's and its
Service  Provider's  activities  affecting  the  Lowry  Range.

     15.19     FORCE  MAJEURE.  Should  either  Party  be  unable to perform any
               ---------------
obligation required of it under this Agreement, other than the payment of money,
due  to  any  cause  beyond  its  control  (including,  but  not limited to war,
insurrection,  riot,  civil  commotion,  shortages,  strikes,  lockout,  fire,
earthquake,  calamity,  windstorm,  flood,  material  shortages,  failure of any
suppliers,  freight  handlers, transportation vendors or like activities, or any
other force majeure), then such party's performance of any such obligation shall
      -------------
be  suspended for such period as the party is unable to perform such obligation.


                                      -38-
<PAGE>
     >IN  WITNESS  WHEREOF,  the  Land  Board  has  caused  these presents to be
executed  in  multiple  originals  by  the State Board of Land Commissioners and
sealed  with  the  official  seal  of  the  Land Board.  Rangeview has similarly
executed  this  Agreement  this  4th  day  of  April,  1996.

APPROVED  AS  TO  FORM:            STATE  OF  COLORADO
                                   STATE  BOARD  OF  LAND COMMISSIONERS

GALE  A.  NORTON
Attorney  General  of  the
State  of  Colorado                /s/  Maxine  F.  Stewart
                                   ------------------------
                                   President
STEPHEN  K.  ERKENBRACK
Chief  Deputy  Attorney
General

TIMOTHY  M.  TYMKOVICH
Solicitor  General


/s/  Richard  A.  Westfall
- --------------------------
Richard  A.  Westfall
Special  Deputy  Solicitor
General
                                   RANGEVIEW  METROPOLITAN  DISTRICT,
                                   ACTING  BY  AND  THROUGH  ITS WATER
                                   ACTIVITY  ENTERPRISE


                                   By:  /s/  Thomas  P.  Clark
                                        -------------------------------
                                   Its: President
                                        -------------------------------



                                      -39-
<PAGE>
STATE  OF  COLORADO          )
                             )  SS.
COUNTY  OF  Denver           )
           ---------


     The  foregoing  instrument  was  acknowledged  before me this  9th  day  of
                                                                   -----
April,  1996, by Maxine F. Stewart, as President of the State of Colorado, State
Board  of  Land  Commissioners.

     Witness  my  hand  and  official  seal.

     My  commission  expires:    July  28,  1997
                               -----------------------------


                                /s/  Kathleen  N.  Akin
                               -----------------------------
                               Notary  Public


STATE  OF  COLORADO          )
 CITY  AND                   )  SS.
COUNTY  OF  Denver           )
           ---------


     The  foregoing  instrument  was  acknowledged  before  me this  9th  day of
                                                                     ----
April,  1996,  by  Thomas  P.  Clark, as  President  , of Rangeview Metropolitan
                  ------------------     ------------
District.

     Witness  my  hand  and  official  seal.

     My  commission  expires:    July  17,  1996
                               -----------------


                                /s/  Joan  M.  Brennan
                               -----------------------
                               Notary  Public


                                      -40-
<PAGE>
                                    EXHIBITS



Exhibit  A     Water  Previously  Conveyed

Exhibit  B     Service  Agreement

Exhibit  C     Export  Water  Contract

Exhibit  D     Master  Plan  of  Well  Field  and  Rights-of-Way

Exhibit  E     Pipe  Sizes

Exhibit  F     Right-of-Way  Grant  Form

Exhibit  G     Service  Provider  Right-of-Way  License

Exhibit  H     Export  Water  Contractor  Right-of  Way  License

Exhibit  I     Guaranty


                                      -38-
<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.18
<SEQUENCE>9
<FILENAME>doc9.txt
<DESCRIPTION>EXHIBIT 10.18
<TEXT>
                              BARGAIN AND SALE DEED
                              ---------------------


     This  Bargain  and  Sale  Deed (the "Deed") is dated the 11th day of April,
1996, among the State of Colorado, acting by and through the State Board of Land
Commissioners (the "Land Board"), whose address is 620 Centennial Building, 1313
Sherman  Street,  Denver, Colorado 80203, and Rangeview Metropolitan District, a
quasi-municipal  corporation and political subdivision of the State of Colorado,
acting by and through its water activity enterprise ("Rangeview"), whose address
is  141 Union Boulevard, Suite 150, Lakewood, Colorado 80228 (Rangeview and Land
Board  being  collectively  referred  to  herein  as "Grantors"), and Pure Cycle
Corporation,  a  Delaware  corporation  ("Grantee"),  whose address is 5650 York
Street,  Commerce  City,  Colorado  80022.

     WITNESSETH,  that Rangeview, for and in consideration of delivery from Pure
Cycle  to  Rangeview  of  Rangeview  Metropolitan  District Water Revenue Bonds,
Series  1988M,  Rangeview  Metropolitan  District  Water  Revenue  Notes, Series
1988A-L,  Rangeview  Metropolitan  District Water Revenue Notes, Series 1987A-L,
and  other  good  and  valuable  consideration,  the  receipt of which is hereby
acknowledged  by  Rangeview; and the Land Board, for and in consideration of (a)
Rangeview's  agreement  to  obtain  and extinguish all said notes and bonds, (b)
other  consideration  contained  in the Amended and Restated Lease Agreement No.
S-37280,  dated April 11, 1996 between Rangeview and the Land Board, which Lease
is  recorded  with  the Arapahoe County Clerk and Recorder at Book No. A6097802,
                                                                       --------
Page  No. _______ (Reception No. A6097802) (the "Lease"), and (c) other good and
                                 --------
valuable  consideration, the receipt of which is hereby acknowledged by the Land
Board; do hereby severally grant, bargain, sell, convey, assign and confirm unto
Grantee,  its  successors and assigns forever, the Export Water (as that term is
defined  in  the Lease) which is located on and under that certain real property
consisting  of  approximately  24,567.21  acres, more or less, according to U.S.
Government  survey, in Arapahoe County, Colorado, more particularly described as
follows  (the  "Lowry  Range"):

          Township  5  South,  Range  64  West  of  the  6th  P.M.,
          --------------------------------------------------------
          Sections  7  through  10:  all;
          Sections  15  through  22:  all;
          Sections  27  through  34:  all.

          Township  4  South,  Range  65  West  of  the  6th  P.M.,
          --------------------------------------------------------
          Sections  33:  all  and  34:  all.

          Township  5  South,  Range  65  West  of  the  6th  P.M.,
          --------------------------------------------------------
          Section  3:  all;  Sections 10 through 15: all, less certain
          surface  rights  granted  for  the  Aurora  Reservoir  (but
          including  the  water under the Aurora Reservoir) in Section
          15; Sections 22 through 27: all, less certain surface rights
          granted  for  the  Aurora Reservoir (but including the water
          under  the  Aurora Reservoir) in Section 22; Sections 35 and
          36:  all;  Section  34:  north  2,183.19  feet.


<PAGE>
          Township  5  South,  Range  66  West  of  the  6th  P.M.,
          --------------------------------------------------------
          Section  36:  all

(a  street  address  of  the  Lowry  Range  does  not  exist);

     TOGETHER  WITH  all  rights  afforded  to the Export Water under the Lease;

     SUBJECT  TO the reservations, exceptions, terms, and conditions, including,
without  limitation,  provisions  concerning royalty payments, quality of water,
abandonment,  shared  use  of  transmission  lines  and  facilities, default and
termination  of  rights  to  Export  Water,  set  forth  in  the  Lease,  which
reservations,  exceptions terms and conditions, and the rights of the Land Board
and  Rangeview  with respect thereto, shall not be modified or superseded by any
provision  in  this  Deed,  it  being  understood and agreed that the provisions
hereof  are  merely  cumulative  of  the  provisions  of  the  Lease;

     FURTHER  SUBJECT  TO  rights of first refusal, if any such rights exist, to
the  Export Water which may be held by the County of Arapahoe, Colorado, or East
Cherry  Creek  Valley  Water  and  Sanitation  District;

     AND SUBJECT FURTHER TO the covenants, conditions and restrictions set forth
herein  and  in  the  water  decrees  by  which such water is adjudicated, which
decrees  shall remain in the name of the Land Board subject to the provisions of
the  Lease;

     TO  HAVE AND TO HOLD the Export Water, and its appurtenances, unto Grantee,
its  successors  and  assigns  forever.


ARTICLE  I

                                     Decrees
                                     -------

     Rangeview  represents that the following water decrees currently adjudicate
the  water  rights  of  which  the  Export  Water  is  a  part:

          Case  Nos.  83CW330, 83CW373, 89CW048, and 89CW164, District
          Court,  Water Division 1, and plan for augmentation to allow
          use  of  not  nontributary  Denver  aquifer  groundwater  as
          pending  in  Case  No.  94CW048,  and  application to change
          decreed  well  locations  as  pending  in  Case No. 94CW049,
          District  Court,  Water  Division  1.


ARTICLE  II

Royalties  and  Reporting
- -------------------------


<PAGE>
     2.1     Payment  to  Land Board.  As between Rangeview and Grantee, Grantee
             -----------------------
shall  be  responsible  for  and shall timely pay directly to the Land Board all
royalties  payable to the Land Board by the Export Water Purchaser (as that term
is  defined in the Lease) pursuant to the Lease.  Notwithstanding the foregoing,
Rangeview  may,  at  its option, pay to the Land Board any royalties due but not
paid  by  Grantee  on  the  Export Water in order to prevent a default under the
Lease.  In  such  case, Rangeview shall be entitled to interest on any royalties
paid  by Rangeview on the Export Water at the rate of two percent (2%) per month
from the date paid by Rangeview and Rangeview may exercise any other remedies it
may  have,  including  its  termination  rights  under Section 6.6 of the Lease.

     2.2     Reporting.  In  addition  to  any  requirements  under  the  Lease,
             ---------
Grantee  shall  prepare  the  following  reports:

          (a)     Grantee shall report to Rangeview the quantity of Export Water
delivered (including any recharged or stored water pursuant to Section 6.2(a) of
the  Lease),  the exact amount of Gross Revenues or, if applicable, Retail Sales
Price  (as  those  terms are defined in the Lease) relating to the sale or other
disposition  of  Export  Water,  and  the  entity  to  whom the Export Water was
delivered.  The  report  shall  be  due within twenty (20) days after the end of
each  calendar  year,  until  such  time  as  Rangeview  notifies  Grantee  that
production  of  Export  Water and Non-Export Water (as defined in the Lease) has
reached  500  acre  feet  in  a  calendar year, and thereafter, on or before the
twentieth  (20th) day following the end of each calendar quarter during the term
of  the  Lease.

          (b)     Grantee  shall  prepare  and  keep  full, complete, and proper
books,  records  and  accounts  of  all Export Water (including any recharged or
stored  water pursuant to Section 6.2(a) of the Lease) sales or dispositions and
shall document such transactions as may be required by law. Said books, records,
and  accounts  of  Grantee  shall be open at all reasonable times, upon ten (10)
days'  prior  written notice, to the inspection of Rangeview, the Land Board and
their  respective  representatives  who  may, at Rangeview's or the Land Board's
expense, as applicable, copy or extract all or a portion of said books, records,
and  accounts  for  a  period of up to five (5) years after the date such books,
records  and  accounts  are made. The Land Board's right to inspection shall not
prejudice  the Land Board's right to collect payments due pursuant to the Lease.
Rangeview  or  the  Land  Board may, upon no less than fourteen (14) days' prior
written  notice  to  Grantee,  cause  a  partial or complete audit of the entire
records  and operations of Grantee for a five (5) year period preceding the date
of  the  audit  relating  to the use of Export Water pursuant to this Deed to be
made  at  Rangeview's  or the Land Board's expense, as applicable, by an auditor
selected  by  Rangeview  or  the Land Board, as applicable. Within fourteen (14)
days  following  Rangeview's  or the Land Board's notice, as applicable, Grantee
shall  make available to Rangeview's or the Land Board's auditor, as applicable,
the  books  and  records the auditor reasonably deems necessary or desirable for
the  purpose  of  making  the  audit. Any deficiency in the payment of royalties
determined  upon  such  audit  shall  be immediately due and payable to the Land
Board,  together with interest thereon at the rate of two percent (2%) per month
from the date or dates such amounts should have been paid. If such deficiency is
in excess of two percent (2%) of the royalty previously paid, then Grantee shall
pay  to  the  auditing  party  the  actual  cost  of  the  audit at the time the
deficiency  is  paid.


                                      -3-
<PAGE>
ARTICLE  III

General  Provisions
- -------------------

     3.1     Notice.  All notices required by this Deed or the Lease shall be in
             ------
writing  and  shall be delivered to the person to whom the notice is directed at
the  address  set forth below, either in person, by courier service or by United
States  mail  as  a  certified  item, return receipt requested, addressed to the
address  stated  below.  Notices delivered in person or by courier service shall
be  deemed  given  when  delivered to the person to whom the notice is directed.
Notices  delivered  by  mail  shall  be  deemed given on the date of delivery as
indicated  on  the return receipt.  The parties may change the stated address by
giving  ten  (10)  days' written notice of such change pursuant to this Section.

          If  to  Rangeview:

          Rangeview  Metropolitan  District
          141  Union  Boulevard,  Suite  150
          Lakewood,  Colorado  80228
          Attention:  President

          If  to  the  Land  Board:

          Board  of  Land  Commissioners
          Attention:  President
          620  Centennial  Building
          1313  Sherman  Street
          Denver,  Colorado  80203

          and

          Office  of  the  Attorney  General
          Attention:  State  Land  Board  Attorney
          1525  Sherman  Street,  Fifth  Floor
          Denver,  Colorado  80203

          If  to  Grantee:

          Pure  Cycle  Corporation
          5650  York  Street
          Commerce  City,  Colorado  80022
          Attention:  President


                                      -4-
<PAGE>
     3.2     Construction.  Where  required  for proper interpretation, words in
             ------------
the  singular  shall  include the plural, and the masculine gender shall include
the neuter and the feminine, and vice versa, as is appropriate.  The article and
section  headings  are for convenience and are not a substantive portion of this
Deed.  This Deed shall be construed as if it were equally drafted in all aspects
by  all  parties.  All capitalized terms herein not otherwise defined shall have
the  same  meaning  as  provided  with  respect  to  such  terms  in  the Lease.

     3.3     Severability.  If  any clause or provision of this Deed is illegal,
             ------------
invalid  or unenforceable under present or future laws, then, and in that event,
it  is the intention of the parties hereto that the remainder of this Deed shall
not  be  affected  thereby.  It  is  also  agreed that in lieu of each clause or
provision of this Deed that is illegal, invalid or unenforceable, there shall be
added  as  a part of this Deed a clause or provision as similar in terms to such
illegal,  invalid or unenforceable clause or provision as may be possible and be
legal,  valid  and  enforceable.

     3.4     Governing  Law.  This  Deed  shall  be governed by and construed in
             --------------
accordance  with  the  laws of the State of Colorado and applicable federal law.

     (a).a     No  Oral  Amendment  or Modifications.  No amendments, waivers or
               -------------------------------------
modifications  of  the  terms  and  provisions  contained  in  this Deed, and no
acceptances, consents or waivers by the Land Board or Rangeview under this Deed,
shall  be  valid  or  binding  unless in writing and executed by the party to be
bound  thereby.  Any  covenant,  condition or restriction contained in this Deed
may  be terminated, extended, modified or amended, as to the whole of the Export
Water  or any portion thereof, only by the written consent of the Land Board and
Rangeview.  No  such  termination, extension, modification or amendment shall be
effective  unless and until a proper instrument in writing has been executed and
recorded  in  the  records  of  the  Clerk  and  Recorder  of  Arapahoe  County.

     (a).b     Binding Effect.  This Deed shall be binding upon and inure to the
               --------------
benefit  of the parties hereto and their respective successors and assigns.  The
covenants,  conditions,  and  restrictions  contained  in  this  Deed and, where
applicable,  the  Lease, shall be construed as covenants running with the Export
Water,  and every person who now or hereafter owns or acquires any right, title,
estate or interest in or to the Export Water is and shall be conclusively deemed
to  have  consented  and  to  have  agreed  to  every  covenant,  condition, and
restriction  contained in this Deed and, where applicable, the Lease, whether or
not  any  reference  to such covenant, condition, or restriction is contained in
the  instrument  by  which such person acquires an interest in the Export Water.


                                      -5-
<PAGE>
     IN  WITNESS  WHEREOF, the Land Board has caused this Deed to be executed by
the  State  Board of Land Commissioners and sealed with the official seal of the
Land Board.  Rangeview has similarly executed this Deed this  11th day of April,
                                                             -----
1996.

                                        STATE  OF  COLORADO
                                        STATE  BOARD  OF  LAND  COMMISSIONERS


                                       /s/  Maxine  F.  Stewart
                                        ----------------------------------------
                                        Maxine  F.  Stewart,  President



APPROVED  AS  TO  FORM:

GALE  A.  NORTON,  Attorney  General
STEPHEN  K.  ERKENBRACK,  Chief  Deputy  Attorney  General
TIMOTHY  M.  TYMKOVICH,  Solicitor  General


 /s/  Richard  A.  Westfall
- -----------------------------------
Richard  A.  Westfall
Special  Deputy  Solicitor  General

State  of  Colorado


                                        RANGEVIEW  METROPOLITAN  DISTRICT,
                                        ACTING  BY  AND  THROUGH  ITS WATER
                                        ACTIVITY  ENTERPRISE

ATTEST:

By:  /s/  Mark  Harding                  By:  /s/  Thomas  P.  Clark
   ---------------------------               --------------------------------
Title:  Secretary                        Title:  President
      ------------------------                  -----------------------------




                                      -6-
<PAGE>
STATE  OF  COLORADO     )
                        )  ss.
COUNTY  OF_Denver       )
           --------

     The foregoing instrument was acknowledged before me this 9th  day of April,
                                                              ---
1996  by  Maxine F. Stewart, as President, of the State of Colorado, State Board
of  Land  Commissioners.

     Witness  my  hand  and  official  seal.

     My  commission  expires:   July  28,  1997
                               ----------------


                                        /s/  Kathleen  N.  Akin
                                        ------------------------------
                                        Notary  Public


STATE  OF  COLORADO     )
   City  and            )  ss.
COUNTY  OF    Denver    )
            ----------

     The  foregoing  instrument  was  acknowledged  before me this   9th__day of
                                                                   -----
April,  1996  by   Thomas  P. Clark  , as President, and by  Mark Harding   , as
                 --------------------                       ---------------
Secretary,  of  Rangeview  Metropolitan  District.

     Witness  my  hand  and  official  seal.

     My  commission  expires:   July  17,  1996
                               ----------------------------------------


                                        /s/  Joan  M.  Brennan
                                        -------------------------------
                                        Notary  Public


                                      -7-
<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.19
<SEQUENCE>10
<FILENAME>doc10.txt
<DESCRIPTION>EXHIBIT 10.19
<TEXT>
                     MORTGAGE DEED, SECURITY AGREEMENT, AND
                               FINANCING STATEMENT


     This  Mortgage Deed, Security Agreement, and Financing Statement ("Mortgage
Deed")  is  dated  the  11th  day of April, 1996, between the State of Colorado,
acting by and through the State Board of Land Commissioners (the "Land Board" or
"Mortgagee"),  whose  address  is  620 Centennial Building, 1313 Sherman Street,
Denver,  Colorado  80203,  and  Pure  Cycle  Corporation, a Delaware corporation
("Pure Cycle" or "Mortgagor"), whose address is 5650 York Street, Commerce City,
Colorado  80022.  The Land Board is the Secured Party/Creditor and Pure Cycle is
the  Debtor.

     WITNESSETH,  that  in  order  to  secure the payment of certain obligations
under  an  agreement entitled Comprehensive Amendment Agreement No. 1 among Pure
Cycle,  the  Land  Board,  and  others  dated April 11, 1996 (the "Comprehensive
Agreement"),  the Mortgagor does hereby grant, bargain, sell, convey, and assign
unto  the  Mortgagee, its successors and assigns, the Export Water (as that term
is  defined in the Amended and Restated Lease Agreement No. S-38280, dated April
11, 1996, between Rangeview Metropolitan District, a quasi-municipal corporation
and  political  subdivision  of the State of Colorado, acting by and through its
water  activity enterprise, and the Land Board recorded with the Arapahoe County
Clerk  and  Recorder  at  Book  No.  ________,  Page No. ________ (Reception No.
________),  which  definition of Export Water is incorporated by this reference)
which Export Water is located on and under that certain real property consisting
of  approximately  24,567.21  acres,  more or less, according to U.S. Government
Survey,  in  Arapahoe  County,  Colorado, more particularly described as follows
(the  "Lowry  Range"):

          Township  5  South,  Range  64  West  of  the  6th  P.M.,
          --------------------------------------------------------
          Sections  7  through  10:  all;
          Sections  15  through  22:  all;
          Sections  27  through  34:  all.

          Township  4  South,  Range  65  West  of  the  6th  P.M.,
          --------------------------------------------------------
          Sections  33:  all  and  34:  all.

          Township  5  South,  Range  65  West  of  the  6th  P.M.,
          --------------------------------------------------------
          Section  3:  all;  Sections 10 through 15: all, less certain
          surface  rights  granted  for  the  Aurora  Reservoir  (but
          including  the  water under the Aurora Reservoir) in Section
          15; Sections 22 through 27: all, less certain surface rights
          granted  for  the  Aurora Reservoir (but including the water
          under  the  Aurora Reservoir) in Section 22; Sections 35 and
          36:  all;  Section  34:  north  2,183.19  feet.


                                      -1-
<PAGE>
          Township  5  South,  Range  66  West  of  the  6th  P.M.,
          --------------------------------------------------------
          Section  36:  all

          (a street address of the Lowry Range does not exist);

     TO HAVE AND TO HOLD the same, together with all and singular the privileges
and  appurtenances  thereunto  belonging  forever;  provided always, that if the
Mortgagor  or  its  successor  or  assigns  shall pay or cause to be paid to the
Mortgagee, or its successors or assigns, the obligations under the Comprehensive
Agreement  in accordance with the terms of the Comprehensive Agreement and shall
in  the meantime keep and perform the covenants and agreements herein contained,
then  these  presents shall be null and void, but otherwise remain in full force
and  effect.

     This  Mortgage  Deed  shall  constitute  a security agreement and financing
statement,  in  accordance  with  the  Uniform Commercial Code of Colorado, with
respect  to  all personal property and fixtures included within the Export Water
located on and under the Lowry Range.  Mortgagor, as Debtor, does hereby grant a
security  interest  in  the  Export Water, and all its substitutions, additions,
replacements  and  proceeds,  to  the  Mortgagee,  as  Secured  Party.

     That  the  Mortgagor,  for itself and its successors and assigns, covenants
and  agrees to and with the Mortgagee, its successors and assigns, that it holds
the  said  premises  free  and  clear  of  all  liens and encumbrances, that the
Mortgagor  will  pay  in  due  season  all  taxes and assessments levied on said
premises;  that  it  will  pay  the  costs  and  attorneys' fees incurred by the
Mortgagee,  or  its successors and assigns in any foreclosure action, other suit
or  proceeding,  by  reason  hereof; and that upon default in the payment of the
obligations  under  the Comprehensive Agreement or any part thereof, or upon the
breach  of  any  of  the covenants or agreements herein contained; this Mortgage
Deed  may  be  forthwith  foreclosed.

     IN  WITNESS  WHEREOF,  the Mortgagor has executed this Mortgage Deed on the
date  set  forth  above.

                                        PURE  CYCLE  CORPORATION
Attest:


By:  /s/  Mark  W.  Harding             By:  /s/  Thomas  P.  Clark
     --------------------------------        ---------------------------------
     Mark  W.  Harding,  Secretary           Thomas  P.  Clark,  President
                                        Tax  Payer  ID  No.   84-0705083
                                                              ----------------


                                      -2-
<PAGE>
STATE  OF  COLORADO     )
   City  and            )  ss.
COUNTY  OF    Denver    )
            ----------

     The  foregoing  instrument  was  acknowledged  before me this   9th__day of
                                                                   -----
April,  1996,  on  behalf  of  Pure  Cycle  Corporation,  by Thomas P. Clark, as
President,  and  by  Mark  W.  Harding,  as  Secretary.

     Witness  my  hand  and  official  seal.

     My  commission  expires:   July  17,  1996
                               ----------------


                                        /s/  Joan  M.  Brennan
                                        -----------------------------------
                                        Notary  Public


                                      -3-
<PAGE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.2
<SEQUENCE>11
<FILENAME>doc11.txt
<DESCRIPTION>EXHIBIT 23.2
<TEXT>

                                                                    EXHIBIT 23.2

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Pure Cycle Corporation:

We consent to the use of our report dated October 10, 2003, except Note 13 which
is dated April 26, 2004, in the registration statement on Form SB-2, as amended,
with  respect  to  the balance sheets of Pure Cycle Corporation as of August 31,
2003  and  2002, and the related statements of operations, stockholders' equity,
and  cash flows for the years then ended, and to the reference to our firm under
the  headings "Selected Financial Data" and "Experts"  in  the  prospectus.


                              /s/  KPMG  LLP

                              KPMG LLP

Denver, Colorado
June 4, 2004


<PAGE>

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
