Good day, ladies and gentlemen and welcome to the special investor call. All lines have been placed on a listen-only mode and the floor will be open for questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Mark Harding, President and CEO of Pure Cycle. Sir, the floor is yours.

Thank you, thank you very much, and I’d like to welcome you all to this investor call. Little bit unusual for us as this is kind of an interim call but enough exciting news has occurred recently that I wanted to bring a little bit more color and a little more detail to specifically how the Company’s proceeding with some of its core assets and it conterminously occurred at about the same time as our third quarter financial results. So, we will incorporate some of those financial results as part of the presentation but for the most part what I’d like to do is just kind of highlight some of the key elements of the initiation of starting development at Sky Ranch. For all of those that are listening on the call, you can find the slide deck for this call on our website; it’ll be on a home page. There’ll be a link to it on the home page, will drive you to where the link is and it’ll be sort of the nine months ended May 31, 2017 slide deck. So that’ll give you a path to get to the deck for this. And then as part of my presentation, I’ll try and note the slide changes as we move through the presentation, so that you all can follow on with me on that. So, for the first part, what I’d like to do is talk about our Safe Harbor Statement that statements that are not historical facts contained or incorporated by reference in this presentation are forward-looking statements. I think most of you are familiar with forward-looking statements, but that’s our slide two. Real briefly on for those that are new to the story or new to the Company, we’re a water utility Company. At our DNA…

[Operator Instructions] Okay. It doesn’t look like we have any questions again. Our first question comes from Mason Matschke from Raymond James. Please state your question.

Hey, Mark. Congratulations on closing the three builders. Great job. My question was if you could just talk maybe a little bit more about the potential commercial sales and what the expectations are for that, and maybe the timing of that.

So, the commercial from a land value is really very significant by comparison to the residential side. I mean where we might make a few, maybe $20,000 a lot on the residential side; the commercial side, you can make significantly more, [Indiscernible] equivalent amount. So, that’s the type of -- on price per square foot. Those price per square foots can range from maybe $3 to $7 per square foot. So, on the first few sales, you might see those being at that three bucks a square foot, but as the commercial kind of matures, you are going to see a much, much higher number in terms of what you are getting at a price per square foot. The other side of it, so not only do you get a lot more in terms of the residual land value, we do see a highly improved value in terms of water for those commercial opportunities as well. A standard single family tap is one tap but when you take a look at a five-acre pad site for commercial development, you may sell 30, 40 taps on a five-acre pad side. And so, it depends on the type of uses that you have, but you see really a compounding effect for both land value as well as the water utility. And biggest thing that we found for most of these commercial opportunities in the marketplace is how -- that we are there -- we are ready with all of the water and the sewer side of it that we have full build out utilities for commercial and are unconstrained in terms of what they can put on that commercial facility from a water standpoint gives us a very competitive advantage on that commercial.

Okay. Our next question comes from [Rick Jeffery from Chaplain Investment] [ph]. Please state your question.

Congratulations again to reiterate the precious comment. If you wouldn’t mind, just talking a little bit about, if you can be a bit more specific in kind of timing and then also you mentioned several years ago on a call about what you were thinking about doing with use of proceeds. And that’s kind of a little bit premature but would you expect a dividend down the road, a share buyback? That would be kind of a two-part question, so timing over the number of years and then what you might be doing with some of this money when it comes in?

Okay. Good question. So, I’ll be -- let’s say that all things are predictable in the world and that we’re only just dealing with capacity constraints. Setting aside the market question, really a lot of these production builders really like to be in a position where they can do 7 to 10 homes a month. So, if we’ve got an inventory of 500 homes and I’ve got three builders out there and the market is strong and the market reacts well to their product, you can take a look at this summer being between the two and three-year buildout at the first phase of the first 500 lots. And the thing that we want to do is kind of keep that rolling average cause the thing that you don’t want to do is once everybody gets rolling and gets some momentum up and the market has a lot of penetration, a lot of traffic, you want to keep delivering those lots. I think from an infrastructure standpoint, we’re very well-phased on that because we have water that’s going to be available for that. Our initial sewer will have significant capacity. We can’t build just sewer for the 500 lots. So, our sewer site’s going to be somewhere around 1,800 units worth of capacity. So, we’ll additional capacity within the sewer that’s going to be unconstrained. Those being the two long lead items really will be just expanding out the zoning, it’ll expand out some of the land plans that we have our existing zoning that we can just flex within and take that second phase into a more detailed plan than we have today. So, if you look at it -- if all of the momentum stays strong from the first phase through buildout that could be about a 10-year…

Just a quick follow-up if you wouldn’t mind. So, that would imply that your margins would be slightly better on ongoing phases because a portion of what you’re laying out for phase one will be higher capacity than what your phase one needs will be?

If you really try to balance out the investment to where we add capacity in the system, I think that’s right Rick. We may have a little bit more investment on opening which we typically do and then I think that will continue to return to us as we add additional phases to the project.

Okay. Our next question comes from Bill Miller from Hartwell. Please state your question.

Mark, the build-up of cash, what is the -- how much cash you’re going to have to put into this operation, both commercial operation and the residential operation? It sounded to me like as it’s 8 million. Is it more than that, I mean just initially and then you start getting a return on that or how much you’re going to have to spend?

That’s a good question and really kind of a function of some of that phasing. What I think we’ll have, we’ll have probably I’d say 12 million of water, sewer, drainage and entry roadway investment. And then the land side, the real trick for us, Bill, and all that are sort of listening, the real trick for the Company on extending into being a developer wasn’t that we had a compunction or a really compelling desire to be a developer but it was that we really were a developer by virtue of what we were going to do on the front end of the project anyway. Water and sewer utilities for particular projects are probably the single most expensive component of that, and that’s something that we felt we were well-positioned to do. We understood that business, we have the expertise to do that business, and then getting into expanding beyond that, one of the things that we tried to do was work out a win-win relationship with builders such that they didn’t have to inventory a lot of taps because we could provide it them on a real time basis and they were more accustomed to buying those taps on a real time basis, and instead be able to help us on some of that horizontal infrastructure. So, we were able to use a lot of those cash flows that they would have otherwise had to buy tap fees in that area and be able to redeploy that into the land site so that we didn’t over extend ourselves on the land site. So, we’ve got 12 we know that we’re going to do on the off sites; the additional six, some of that’s going to time out very well, it’s not going to exactly time out where I…

Yes, it answers the question and what it really does is tell me that you’ve right now on your balance sheet more than enough cash to satisfy either the acquisitions of water systems or to build out these two phases, commercial and residential. Is that correct?

That is correct. So, we’re in a very good position to capitalize on many types of opportunities. So, we want to be careful about them; we want to make sure that they meet our requirements. And so, it gives us the flexibility that we can pursue those as they become available.

Okay. Our next question comes from [Elliot Knight with Knight Advisors]. Please state your question.

Hi, Mark. I think I heard you say, if all goes well, the first phase of Sky Ranch 500 lots builds out in two to three years. And the entire project, if all goes well, could build out in ten. Is that right?

Yes.

Within that, there is a highly profitable commercial segment of it. When from now out to year ten, in that timetable, do you see commercial coming in and being completed?

I would say that’s probably in the cycle of years anywhere from two to eight or nine. You leave some of that -- you don’t want to build that all at once because those commercial needs mature based on rooftops. And if you have existing capacity and having as much land as we do, gives us an opportunity where we can capitalize on some of that, maybe we get some retail, we get some box stores, we get some opportunities on the commercial side, maybe the second phase. We want to have that extend into years eight and nine as well because those are where you are going to get the higher price per square foot too.

You deliberately delay it for profitability reasons.

Yes. You get some inventory, you want to capitalize on some but you want to keep some inventory for other uses later on.

Okay. Now, you’ve got an awful lot of water available for sale and you’ve got, I understand, projects in the areas that are at different phases of possible future development. Could you talk a little bit about them and their size and what they might mean to the Company?

Good question. So, really, our sandbox and I’m going to say our focus of development on the utility side is going to be the I-70 corridor. And there could be as many as 11 miles between Sky Ranch, and we operate water system for the Town of Bennett about 11 miles, which will be a number of interchanges between Sky Ranch and Bennett. But from a long range planning perspective, there is a tremendous amount of opportunity along that corridor. And there is large land owners that own very significant positions there, some of them have got their entitlements, some of them are pursuing their entitlements, but it will far exceed our capacity. Our direct neighbor for example has zoning capacity somewhere in that 150,000 lots, so about three times of size of Sky Ranch. They need additional water supply. They have some water supply beneath the property themselves that they can get started with some other water supply that they have. They are moving forward. I know that they are watching us as much as we’re watching them in terms of what types of successes that each of us are going to have with our residential stuff. I think they are leading with some residential. They have they have their infrastructure issues where they’ve got to build sewer plans and drainage and they have school issues and a bunch of things that they are working on their project and those are all opportunity for us. And that’s just the corridor. And then you take a look at our Lowry Range, which we have our service rights on Lowy. And there is 30,000 to 40,000 unit potential there. I mean, we had a developer prior to the downturn of the real estate cycle that was engaged, build the project out,…

Now, the paragraph that is in the most recent 10-Q about farc water sales, as far as I can tell, that is a completely new paragraph. And it seems to me substantially important because basically aren’t your frac water sales basically pulling from inventory that you have and wouldn’t sell for many years in the future but you are now monetizing them?

It does. That’s one way of looking at it. The other thing that is helpful about that is that we have the ability to have current use of that system. And so, we have invested into a system. And anytime you invest in a system, you have to invest in some sizing that allows you to grow into that system. While we invested -- we built a 24-inch line that goes from our Lowry property up to Sky Ranch and that far exceeds what we can serve within Sky Ranch. But we do have demand for that new oil and gas phase. And if turns out that we have additional contracts that we can provide extended service to our neighbors to use that capacity that 24-inch line, we still have the ability to monetize that line in the interim. So, we are very fortuitous to have that oil and gas as a customer because it allows us to bring those systems on line. The other side of it is when they want water they want a lot of water. So, there are some peaking issues attributable to that that we have been able to develop for them and that we can use those peaking facilities over time to meet the peaking demands that we have on the municipal side. So, it’s a very complementary framework. Oil and gas may allow us to use some of those peaking facilities year out where after the summary irrigation season declines, we have excess capacity in that system the rest of the year and they will continue to use it. So, it’s a matter of managing those two accounts and it really does provide a unique opportunity for us.

One of the reasons I’m interested in the immediate drilling activity is as soon as the well is completed, you start that cycle towards -- leading towards refracs. You have got about 40 plus wells drilled there now. Where do we stand on the refracs of the first wells that were drilled out there?

Great question, sounds like a question from an oil industry analyst. Goes back to your old days. So, the industry as a whole takes a look at those refracs. And our wells are relatively new. And as I understand that those are typically every five or six years. So, we are just about to mature up to some of the early portion of that with some of those wells. And so, we have not had a refrac of an existing well, but we will be interested to see that not only in terms of what the water demand is but also how that changes projection profile, where returns and then again the decline curve of the typical shell oil plays. But if you take a look at the inventory of total well capacity and then a refrac of well capacity, terrific opportunity for us and our shareholders.

But we must be then getting close to the first of the refracs?

Time wise, I think that’s true. I have not…

Yes, time wise.

Yes. Time wise, I think that’s true, but we have not heard from any of our operators about opportunities to refrac to date.

Our next question comes from Joe Cunningham. [Ph] Please state your question.

The slides in your presentation are great, I find them very interesting and detailed and I actually have a couple of questions on the roads for you. The first is on Monaghan Road coming in. It looks like most of it is right on the border of Sky Ranch. And I’m wondering whether it’s entirely on Sky Ranch property or whether half of it is on the neighbor’s property.

Good question. So, anytime you get a -- that’s a section line. And so, anytime you get a section line road, what happens is, you get half the road on each side of that section line. So, in the initial development, what we’re doing is we’re building, if you take a look at the entry part of that, so there’s a half a mile that we extend that’ll be along the commercial corridor and then it gets to -- we would be on both sides of the road. So, we’re going to build the three lanes on our half of that section line and then as we get down to where Sky Ranch is, we cross over and we build a three line -- the three lanes on our property to the west of the section line. And then when we go for the second phase, we’ll build the three lanes on the east half of that section line. But ultimately we will have to fill in the other three lanes on the neighboring property owner’s half at some point in the future.

And then, does that become then public, I guess does that get ceded over to the state of Colorado or the county or something or I assume it’s no longer…

It does. The county has the requirement that they have to get those roads and then they maintain those roads. Once we build them to their standards and then we dedicate the -- and it’s typically on section lines, it’s a 144 feet to allow you to have six lanes, three lanes on each side.

Okay, good. And then on the road at the bottom of this new section, which I believe is what East 6th Avenue, is that right?

That’s right.

Okay, at which it’s kind of interesting, I know that East 6th Avenue comes out from Denver, then it stops, then it starts again at East Gun Hill or Gun Hill Road and goes into that development to the West View [ph] and then it looks like it kind of stops again. And I know, there’re plans for some construction going on from development to the West View [ph] towards Denver. I’m wondering if there are plans to ultimately connect this section of East 6th Avenue into development to the West View and then basically become another route into Denver.

It would be, it would be a tortured route but it would give you access through it. And really, the interesting thing about that will be there’s a half mile that would be between our property and where 6th Avenue is. And we obviously don’t want to pay for that because it’s really not our property and the neighboring property owner obviously would rather have somebody else pay for it. A lot of those types of infrastructures are funded under -- if somebody’s first to build a road like that, they’re funded under a reimbursement agreement such that when the property that a benefits does develop that they have to reimburse the person that did actually make that road happen. But that half mile of road is an interesting aspect for us because what that does is it puts into play all of those homes on our neighbor to the west. And there could be as many as 3,000 homes over there and that we could see a lot of commercial opportunity traffic going by our interchange with those folks going home that way, if we open up that road. So that would be one of our calculuses on the commercial development as that may be something where we would invest in that road and get a reimbursement on that, because it would accelerate some demand and some revenue for the commercial.

Yes, because it’s really just getting that half a mile over to what Powhatan Road, I believe it is…

Yes, exactly right.

The north-south road there that at least once there you can kind of roundabout get into that subdivision with DR. Horton and Lenoir and things, so, that kind of looks interesting. And then, give me idea what’s going to happen with what are the plans might be for that property between Powhatan and your property along 6th Avenue.

It will be, it will likely be residential, I think it’s zoned for residential but it’s owned by a passive land owner. The property directly south of that is owned by a much more active developer, it’s still in the city of Aurora, so they get their utilities from Aurora but that’s owned by a Canadian developer and they’re very active on that property.

Okay. And that was the final question.

Well, I’d like to thank you all again for your continued support for this Company. We’re really excited about where we’re at. We’re looking forward to the next year and really the next phases of monetizing our assets. Just a couple of announcements on some conferences. I will be in Minneapolis at the Intellisight Conference on August 22nd and then I will be at the IDEAS Conference in Chicago on August 30th. So, I have a couple of conferences in August but in the meantime we’re trying to be a bit more active about getting out and talking a little bit more about what is it that we’re doing. So, if we’re in markets, we’ll try and reach out with some press releases on markets that we’re at and perhaps we can sit down and have some meetings with you folks and other people that might be interested in the story. But other than that, if you want to ask a question that you didn’t get dialed in on, please don’t hesitate to give me a call and I look forward to speaking with you all again soon.

Thank you. This concludes today’s conference call. We thank you for your participation. You may disconnect your lines at this time and have a great day.