Good day, ladies and gentlemen and welcome to the Pure Cycle Corporation’s Second Fiscal Quarter 2016 Financial Results Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to Mark Harding, President and CEO of Pure Cycle Corporation. You may begin.

Thanks, very much. I would like to welcome you all to our midyear earnings call. As with all our calls in the past and with this call, we do have a slide deck for this that is accessible through our website, if you go to purecyclewater.com. It will be on the homepage, where you can click on the slide deck there and then you can follow along with us on the presentation and I will note the transition of the slides as we move through the presentation. First, I would like to lead off with our Safe Harbor statement that says statements in this call are not historical facts that are contained and incorporated by reference are forward-looking statements. I think everybody is familiar with our Safe Harbor statement. So with that, I would like to get started. Really, I would like to summarize 2016 upfront and really note difference this year for 2016 and really emphasize the fact in the second quarter that we will see a discontinuance of our farm operations. We did sell our farm portfolio just at the end of last fiscal year. So moving into 2016, we worked out the remaining portion of the calendar year last year in 2015, because we were collecting the remaining rents from our year leases of the farms through 2015, which straddled our second quarter. We had our 11/30 first quarter close. So, a portion of the farm operations continued into the second quarter. And what you will see in the financial statement presentation is a little bit new because of the discontinuance of the farm operations, but – excuse me, that’s the biggest change to the company for 2016 together with the liquidity that came with that farm sale and some of the opportunities that liquidity present for…

Thank you. [Operator Instructions] And our first question comes from Jeff Mann from MYDA Advisors. Your line is open.

Hey, Mark. How are you doing?

I am good, Jeff. How are you?

Good. I hopped on a little bit late, so I just wanted to be clear, I guess, from the slides that on the Sky Ranch, the estimates, the $6 million and the $5 million, is that money – is that just where you are estimating the development costs are going to be on the new plans you are filing or is that actually – you guys are actually going to paying up the money to do this?

That’s the infrastructure for opening the lot. So, the money that we are putting up to actually update the plan and get the engineering on that’s very modest, I mean, we are looking at maybe $300,000 to do that. And that was really where the disconnect was coming in. All the developers said, look, there is nothing left for us to do on this. You are already there. All I would do is update this plan and maybe change this layout a little bit. So, with that little investment, then we are able to really be in a position to sell platted lots and we will know specifically. Okay, we will be able to sell you a platted lot for this dollar for a platted lot and then have the number that says okay. And if you want to know what the cost is to finish that to grade that out and get to streets for this particular phase, we will have those costs as well. The $5 million of the pipeline, that’s cost that the company is going to incur to build that water pipeline, that’s our business model. The $2 million for the wastewater, that’s cost that we would – those are costs we were always comfortable with. The third cost, that $6 million for the roadway, we were only comfortable investing that because it was a reimbursable and that’s something that we can have our engineers – our contract engineers, engineer bid that out and we get that as a reimbursable. So those are the only costs that we are participating in the development of the project and that’s something that because of the sale of the farm assets that the company and the Board really did look to be able to be in a position to incentify that. And then we will get some pricing in our platted lots for being able to take that investment on.

I see okay, fine. So right, but those costs are not going to come unless you actually have someone who is prepared to build the houses?

Yes. We are not going to – right, well, let me pull that back. The $5 million line, we are going to do now, regardless of demand for lots, because we need to bring that line and interconnect the two supplies, so we are doing that now regardless. But the other $8 million, we will not invest that until we have sales of platted lots, you are right.

Okay, fine, so okay, great. And when you are talking – I kind of came in the part when you are talking about strategic acquisitions, I mean do you have any sort of budget mind as to what you are looking total to spend on each type of acquisition to spend, are you not really that far long to even is more of a general type of thought?

No, I mean I have very specific targets that we are looking at.

Okay.

Do I have a pool of money that we would be allocating to that, I look at that less than that. I mean, if we are able to get something that’s actively developing and they are adding new taps that’s worth more to us and we would put a little more of our capital and play something like that. If it’s more mature and more built-out and we are really just picking up the customer accounts, that were a little bit more conservative about how we value those sorts of things. But we will probably look at somewhere in the $8 million to $10 million range of acquisitions and see how those look to us as a mix of the existing customer accounts as well as how many new accounts that are going to develop pursuant to those types of acquisitions.

Okay, great, it sounds good. Thanks a lot Mark. I appreciate the time.

You bet.

Thank you. And our next question comes from Mason Matschke from Raymond James. Your line is open.

Hi Mark, how are you. Congratulations…

Good to hear from you.

I just wanted to hear a little bit more about the Lowry Range and to get any insight if there was any possibilities of development on that property also?

Great question. And I will tell you I have learned a lot in my discussions with some of the builders because they are seeing some of the same infrastructure. And when they look at this, they look at our opportunities as Sky Ranch being ideally positioned. But one of the things that they also were very interested in, was the sort of that Southwest corner of the Lowry Range. And most of the folks that we talk to, when they are looking at the three reservoirs there they are sort of looking at that as a very, very attractive piece of property. There is 3,000 acres or 4,000 acres down there that they look at and they are sang jeez, this is really attractive, can we buy that property, and I said, well, I don’t own that. The State of Colorado owns that. And I have given their contact information, but that’s certainly what developers have more recently told me as some of the most attractive ground – from a ground standpoint. Now that would not be entry-level housing, that’s something that they would look at building some higher priced housing down there. It has challenged access just because it’s pretty far away from any of the main transportation systems, but anywhere in Colorado where you look out over flat water storages is going to have very high premiums for view corridors. So I do know that, that has something that’s surfaced by the number of conversations that we have had. Where the states had in that whole process is really they have not foreshadowed anything to us or anybody else as to how they look at that property and the timeliness of development of that property. And I think it’s going to be a function of how many times people reach out to them with an interest in starting a project. They are pretty passive about how they look at their landholdings and really don’t through something on the market until somebody expresses an interest to it in the first place. And then they will coordinate after that. So that’s as best as I can give you is sort of what I have learned from the developers we have talked to about those two different types of market segments.

Alright. Thank you. That’s encouraging.

Yes. We thought so as well, but again that’s going to be a function of the state, its going to be a function of how that area has been very, very active all around the south side of the existing reservoir there for Aurora.

Okay. Thank you very much.

[Operator Instructions] And our next question comes from Bill Smith from William Smith & Company. Your line is open.

Hi. Thank you. Hi Mark.

Hi Bill.

Looking at this slide, you have got the fee and for the tap fee for $30,000, what about the lot itself, I mean I don’t think I see anything for the sale of the lot to the builder?

You are right, you don’t and I really did – I was hopeful that I might have a little bit more information from our engineering on that to be able to price into that yet, that’s what this process will tell me. And let me show you how it’s going to get there. Typically, you want to take a look at if I am targeting an entry-level house and let’s say, that entry-level house is somewhere between $300,000 and $325,000. And I know what the building cost is. I know what the square foot per cost – cost per square foot for that, how the vertical side of that house is going to look like. Then I am going to know what the engineered cost is for developing the horizontal frameworks, the individual lot cost, all of that engineering is what we are working on right now. And I am going to know what that cost is and that cost will back down into what is the right price per lot size, whether that’s a 45-foot lot, 50-foot lot, 60-foot lot, what that pricing should be per platted lot. And so I don’t have that number yet, but as soon as I do, that’s something that I think will be pretty vocal about because it’s going to be out there in the market.

Alright. I mean just from a historical standpoint, I mean does that comparable areas around Sky Ranch, is that around $20,000 a lot, is that...?

Yes. I am thinking it’s to be in the $12,000 to $15,000 a lot that we are going have to wait and see. We will probably be aggressive on the first few lots and then be a little more price competitive on the last few lots.

Okay. Thank you.

Now, that you forced me to put a number out there.

Okay. Thanks Mark.

Okay. And I am showing no further questions. I would now like to turn the call back to Mark Harding for any further remarks.

Okay, great. So let me close by saying we will have a replay of this on our website, so the replay code will be listed right there with it. To the extent that, you all didn’t have time to get in or had a technical difficulty asking your question, please don’t hesitate to give me a call to drill down any of the specifics that we did not cover today. Again, I want to thank our shareholders, our Board for the support and the efforts that we have undertook for the company. Management, our Board of Directors could not be more excited about where we are at today. As many of you know, saw from our last announcement, we did add a new Board member, who has brought a tremendous level of expertise in the development field here to give us a lot more confidence about what it is that we are doing here, how we need to structure these transactions, a lot of the interplay on making sure that we are asking the right questions and having our advisors and the consultants plan this thing out correctly and accordingly. So I think we have a little bit more comfort as to how it is that we are looking at doing this and really in a very good position. So we are very excited about what the next 12 months are going to like and what the next 3 years are going to look like. So with that, I will thank you all. I will conclude the call and look forward to speaking with you soon. Thanks.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Everyone have a great day.