Nasrat Hakim - President and CEO Carter Ward - CFO

Good morning, ladies and gentlemen, and welcome to the Elite Pharmaceuticals' Conference Call. At this time, all lines have been placed on a listen-only mode. Before management begins speaking, the company has the following statement. This conference contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Including those related to the effects, if any, on future results, performance or other expectations that may have some correlation to the subject matter of this conference call. Participants are cautioned that such forward-looking statements involve risks and uncertainties including, without limitation, its ability to obtain FDA approval of the transfers of the ANDAs or the timing of such approval processes, delays, uncertainties, inability to obtain necessary ingredients and other factors not under the control of Elite, which may cause actual results, performance or achievements of Elite to be materially different from the results, performance or other expectations that may be implied by these forward-looking statements. These risks and other factors, including, without limitation, the company’s ability to obtain sufficient funding under the LPC Agreement or from other sources, the timing of results for pending and future clinical trials, regulatory reviews, and approvals by the Food and Drug Administration and other regulatory authorities, intellectual property protections and defenses, and the company’s ability to operate as a going concern, are discussed in Elite’s filings with the Securities and Exchange Commission, including its reports on Forms 10-K, 10-Q and 8-K. Elite undertakes no obligation to update any forward-looking statements. With that covered, it is now my pleasure to turn the floor over to your host, Mr. Nasrat Hakim, President and Chief Executive Officer of Elite Pharmaceuticals. Sir, the floor is yours.

Thank you John. Good morning ladies and gentlemen. My name is Nasrat Hakim, I am Elite's President and CEO. This morning Carter Ward, our Chief Financial Officer will give us a summary of our great financials, after which I will come back with final comments and Q&A. Mr. Ward, you have the floor.

Thank you Nasrat, and thanks to everyone calling in today. Yesterday we filed our 10-Q for the quarter ended December 31, 2015, we're on a March 31st fiscal year, so the December quarter is our third quarter of the 2016 fiscal year. The 10-Q is available in the investor relations section of our website, which is elitepharma.com or whereever else you may get your SEC filings. So if you haven't seen our 10-Q yet, please get a copy from our site or your website as well. Before getting into the financials, and the 10-Q, it’s important to remember that all financial statements and the Qs and the Ks that we file, they try to tell two basic things. They try to tell, number one, where the company has been and the number two, where is it going? First one, that’s the easy one. The financial statements by definition, they tell you where we have been. We report on the last three months or the last nine months or our balance sheet is as of December 31 which is almost six weeks ago. So that’s where we have been. It’s important but that information viewed in isolation does have its limits. What people really want to know is where are you going. Now that’s not so clear. The future, there’s always uncertainties when you are trying to figure out what’s going to happen in the future. But still much can be gleaned from the financial report on where company is going. And this 10-Q contains fine examples of some major factors that give a good insight into where Elite is going. Specifically this 10-Q contains probably – I would say, definitely the biggest accomplishment to date at Elite and that’s the 505(b)(2) NDA filing for SequestOx, that’s what we used to call ELI-200. It’s our first abuse-deterrent opiod. The filing actually occurred just after December 31 but regardless it’s the most important item in the Q. Nasrat will talk more about this filing and what it means to Elite. But here is a few of my observations from the finance perspective. First, the external cost of development. Clinical trials, material, lab studies and other third party costs incurred over the past two to two and half years of development were around $15 million for SequestOx . And that’s a material amount to Elite that banks to the growing contribution from our generic operations which are really doing very well, plus the invaluable support from credit lines and loans from Nasrat Hakim and Jerry Treppel and of course, the Lincoln Park equity lines. Thanks to all of that we were able to finance these costs and now we find ourselves in a much stronger financial position than when we began developing SequestOx, plus now we have an actual product filed with the FDA. It can’t be under-stated, that’s really significant. Second is the internal cost of development. Product development resources, they are largest costs. We’re still a lean company with regards to employees, we have less than 50 employees in total. But lab personnel, chemists, formulators, regulatory, IP lawyers, they comprise majority of our workforce. We’ve upgraded our lab, our analytical and product development equipment and related resources. Again all of this is to improve and support our product development operations. So it’s quite a bit of overhead that’s in place which we’re mainly focused on SequestOx . But now the filing has been achieved, and the resources they remain. So we’re not resting and we’re utilizing all these resources in the development of additional abuse deterrent products. Always remember, our vision at Elite is to become the leader in abuse deterrent opiods. That means a full line of products, not just one filing. So it’s natural that R&D is a top priority in our strategic plans, and the in-house resources that were previously dedicated to SequestOx are still there, and they are focused on executing our other product development plans. Another good example of something that’s – indicates where we are going. My third and last financial point on the SequestOx filing has to do with the FDA’s waiver of the $2.4 million filing fee for the NDA. There is a program that’s offered by the NDA whereby certain businesses that can qualify for a waiver of this filing fee relating to the company’s first NDA filing, which this was for us. We met the criteria of this program and after a lengthy application progress – process, we were granted the waiver of the filing fee. The fee was $2.4 million and that is not a small amount to us. Not having to pay this fee means that we have $2.4 million now available for the development of additional products. Again I can’t underestimate just how big that is to us. We were actually ready to file by late December but the waiver wasn’t yet approved. So we delayed the filing by 3 weeks. We eventually got the waiver. We saved more than $2 million and we filed SequestOx. So a three week delay was $2.4 million, it was less than that [ph]. And we’re putting the money to good use, and I can assure you of that. Now let’s look at some of the key areas of our financials. Starting with the P&L statement. Our revenues for the quarter were $2.2 million, approximately $2 million of that came from our generic operations and $250,000 from amortization of the $5 million license fee received from that for SequestOx. That’s a 61% year-on-year increase in revenues. Revenues for the first nine months of the fiscal year from April through December was $7.3 million. That number, that nine month number is almost 50% higher than the $5 million in revenues that we recorded for the entire 12 months of last year. Again this is almost entirely due to the growth in our generic products which continue to perform well as they mature in the market. The financials clear show this growth is being sustained and all data and forecasts that we have give no reason to conclude otherwise when looking forward as well. Moving down the P&L statement, our biggest operating expense is no surprise research and development. That’s the investment we’re making in Elite’s future. That’s our abuse deterrent pipeline. We filed SequestOx but we’re not done with R&D. There is a full line of products utilizing our abuse deterrent technology. R&D costs will naturally continue. However near the mid term clinical costs, the third party costs will be less than those that were recently incurred for SequestOx, and this is just due to the types of trials that are scheduled, the types of products, the prioritization that we gave. So this is going to be positive for future results being lower expenses, somewhat lower and it’s something that we expected, and again, it’s due to the prioritization of the product pipeline and the scheduling of the trials that would be required for those products. So on our cash flow statement, we had negative operating cash flow of $3.4 million. Again this is due to the heavy R&D costs as well as decreases in payables and current liabilities of $1.5 million, all of that would result in the use of cash. Going down the cash flow statement, however, if you look at the investing section of the cash flows, we have spent almost $1.4 million in the new fluid pet [ph] packaging line, various other equipment, additional manufacturing suites we’ve built and an overall facility expansion which is now almost complete. Here is another very good example of one of those where are we going indicators in our financial statements. We are nearing completion of this major expansion in the facility, something that’s required to manufacture the expected commercial volumes of SequestOx and the other abuse deterrent products that are moving to our pipeline. So while the cash flow statement shows what we expect, it’s also giving insight into what we are putting in place for the future. Filing SequestOx is important but just as important is being able to efficiently manufacture large volumes. And that part of the equation is coming together nicely. Look at our cash flow statements and you see what we are doing in that regard. Finally, our balance sheet. Cash at December 31 was $8.1 million, that was slightly better than the $7.5 million that we started the year off with. Working capital didn’t change very much at all. We went from $7.3 million at the beginning of the year to $7.1 million at December 31. The real takeaway here is that we funded $10 million in product development so far this year. We spent – invested $1.4 million in facility expansion and we filed our first NDA, all without a material hit to our overall financial strength. This is another example of one of these – where we are headed indicator in our financials. SequestOx is not a one-off deal and we still have the critical finance mass in place to develop more products in our pipeline and that’s what we are doing. But to wrap things up, our financials show that the strong results of the past they continue. The where-we-have-been continues to get better, and the where we are going aspects of the Q have never been clearer or better as well. We filed our first NDA, we’re nearing completion of a major facility expansion and our financial position is a strong as ever. With the critical mass in place to continue developing our pipeline and executing our business plan. So now our President, CEO and Chairman of the board, Mr. Nasrat Hakim would like to give an update.

Thank you, Carter. That was an excellent update, appreciate that. Two critical points this quarter. First, our financials are as good as they could be, that was excellent. And second, it really is a great reason for us to celebrate at Elite that for the first time in Elite’s history an NDA was submitted. This company has been around for a very long time, they’ve had this technology for a very long time, filed for patents in 2013 and we finally have our first abuse deterrent formulation filed with the FDA. We’re going to do things slightly differently during this conference call, that I am going to reach out to stockholders and asking to submit questions and boy, did you guys submit questions. So I got some questions, so what we did is stick them in and we group them, because many of them are addressing the same issues that most of you have the same concerns. So I have more than half a dozen different areas that I am going to address in the next few minutes. The first is an update on ELI-200 submission, that is the SequestOx submission. We submitted the NDA on January 14. We sent it to the FDA on January 14. FDA acknowledged the receipt of the NDA in a letter to Elite dated January 25. So they received the NDA, acknowledged its receipt, and this is general, all the parts are there. They have not gotten into a serious analysis of the NDA. The FDA has 60 days to notify Elite if the NDA is not, and I am quoting, “sufficiently complete to permit a review”. So that’s what the FDA does. When they get it, they look quickly all the parts that are there. They say we receive it, then they take 60 days or up to 60 days and if the NDA is sufficiently complete for a review, they do not respond to you. If it is not sufficiently complete to permit review, then they notify the company that we’re not going to review it. When we receive a PDUFA date from the FDA, we do expect that we will have a priority review. Several of you were asking: are you confident that you will get a priority review? What I can tell you is this: This is not an Elite special. This is not something that we did, that the FDA is doing for Elite. The FDA’s policy is very simple. Anybody that files an ADF formulation will get the priority review. And during our correspondence with FDA we told them, do we qualify and they said, if you are telling us is the truth, basically once we look at the application we will make that determination but from what you told us it sounds like you qualify for priority review. I am confident that we qualify for priority review because our technology uses the pharmacological approach and it is abuse deterrent. And when we hear an official response from FDA we will definitely notify the stockholders. The second set of questions were around what I call the supply chain. SequestOx supply chain. We have secured API and excipient suppliers of the manufacturing course of SequestOx. And we have negotiated pricing for the critical items. We do have capacity in the current manufacturing facility in order to make the product and for product launch. The facility today in its present form is sufficient to handle product launch for SequestOx. We will not manufacture launch quantities till we get closer to the launch date. Again we are a small company. I don’t want any surprises, I don’t want a question from the FDA, I don’t want any delays, and therefore we’re not going to take any chances and we’re going to wait. And to give you an example on here, Pfizer filed their Oxy BID and they got priority review and the FDA at the end of the prior review said we would need three more months to discuss it further and after the three months, they also needed some more time because has not disclosed. If we make launch quantities, it will be sure dated and will be about to expire, and we’re not going to take that risk. We will wait till all the events are lined up in our favor and then we will go ahead and make the launch quantities. The launch quantity should not take that long. Therefore it’s not really a showstopper, or not even a bottleneck. The next set of questions were around the sales and marketing and Epic. So I will give you an update on SequestOx sales and marketing. A lot of the questions I cannot answer because -- here is one. What’s your target profit margin. Okay, we’re not going to discuss that right now, because frankly, I don’t even know. There are experts that are working on this. We’ve hired organizations that do the studies to determine what that will be. How do you plan on educating doctors and what’s the products compared to competitors? What I can tell you is this: our licensee Epic Pharma hired a third party that Epic and us are working with, to develop an initial commercial plan for SequestOx. Additional preparation work for sales and marketing continue, including developing the pricing we just talked about and detailing strategy. Epic and the consultants, the third party are studying and which seasons [ph] in the country to have the sales and marketing team, which doctors to approach, ones in pain management or general practitioners, and actual hiring of the sales and marketing force will take place when we get closer to approval date. Currently this third party does have their own sales and marketing but Epic and us may for financial use and have to have our own or contract with them to sell the product for us. The clinical results for SequestOx, now that we disclosed what the product is, will be presented at various pain conferences this year. So far we have two -- possibly three lines up for these presentations act. We have now announced that SequestOx, ELI-200 are oxycodone, the current market for the generic part is $400 million. The next category was really impressive. Our stockholders are looking to the political environment and the increased support for ADF in that environment. This is very true, the recent political environment has been very positive for Elite and its ADF pipeline. ADF discussions have been very prominent in the presidential campaign and national news. The FDA put out a factsheet on opiod abuse that they committed to expanding access to ADF. Robert Califf, the nominee for FDA commissioner, he co-authored a paper in the New England Journal of Medicine reiterating the importance of FDA to encourage the use of ADF. It’s a very good paper, if you get a chance, read it. A lot of our states like Utah, Colorado, and Maryland have passed legislation to ensure that managed care provides equal access to physicians and patients desiring ADF. Many more states have similar litigation under review and hopefully one of these days the federal government will act on that. There is more pressure now to overcome the short term budget concerns for the higher priced ADF so that the government can achieve the long term reduction in costs for addressing opiod abuse issue that we face in this nation. The next set of questions were oriented around our pipeline. Now that we have filed SequestOx, ELI-200, what are we going to do about our other products? Let me pause in here before I give you an update on our products and tell you this. Just because we filed does not mean the work is done. There are a host of things that have to be done between now and the filing, in facility preparation and APIs and testing and making validation, lots on sales and marketing aspect, it’s going to be a lot of work in a very short period of time, 6 days a month is not that long of a time for you to prepare for product launch. But we have been concurrently working on multiple things that I wanted everybody to focus on, on the main event, then that is SequestOx, instead of giving updates on multiple products, some of them are in the early stages only because we do not have the financials to take them to the next level. So I will start by updating you on ELI-201 Oxycodone BID. Pfizer submitted an NDA in this category using the pharmacological approach, and we believe they will be getting an approval very soon. As I mentioned few minutes ago, Pfizer submitted for Oxy BID and the PDUFA date I believe was October and then the FDA requested three more months to evaluate their clinical trials and in January they were supposed to be receiving an approval and they announced that they haven’t yet and they are working with the agency. We await the FDA’s decision on Pfizer’s BID because it is very similar to our technology, it is a pharmacological approach and it is a capsule as well. Elite plans to develop a generic of Pfizer’s product by building one of the – on the work that we have done already in this category, ABE2 Pfizers will be required but we intend to use these studies that we have already conducted, our previous fees and other support our submission. I think Pfizer is one of the best and largest pharmaceutical companies there is, Pfizer will lead the way and we believe that they can create a substantial market for this product. We will follow with a generic once this product is available in the market for us to compare ours then. There will be very few people who can do that. Because there isn’t anybody to the best of my knowledge that have this technology that Pfizer and Elite has. So this will be a very limited market for others to join in. We expect the development program to be a lot less costly, of course, if we are making a generic versus making a NDA for the BID, it can run us about $30 million to $70 million. The generic will be a fraction of a fraction of that, and we will take the necessary steps once we hear what the FDA have to say and Pfizer gets their product to the market. The second product that we were pursuing and we updated you on before is ELI-202. What we are doing with the ELI-202 is utilizing our Naltrexone sequester technology with an Oxy APAP combination. We moved to the clinical trials and the FDA notified us, Dr. Hertz pleaded that it is highly unlikely that we will give anybody the labelling for a product that has APAP and it is because they consider APAP to be the abuse deterrrent. As a matter of fact, the FDA guidelines that came out in 2015 did indicate that, that Oxy APAP and hydro APAP are products that are not used abuse nasally and via injection, that’s not the desired route. People take them orally, why, because the APAP is an irritant, it irritates your nose, so as I just noted. Therefore adding Naltrexone which is an expensive substance and it costs another $15 million, clinical trial does not give us any edge over just using APAP. We do intend to be competitive in this category but we also intend to be intelligent and not with our money on something that’s not going to get us a preferrable – preferred labeling. We do expect to develop additional ADF products in this arena and after augment I committed that we will be filing two applications this year. I believe we can definitely do that. The next category is other generic products in the pipeline. There were questions about Oxy IR that is owned by Epic Pharmaceuticals that Elite helped develop and Elite is entitled to 15% of profit split from that product. That is correct. The product has been launched, Elite is entitled to 15% of the product and we look forward for Epic having a successful launch and generating revenue and sharing the profit with Elite. I believe they just launched the product, so we will probably see something by mid year. Other generics that are being handled by Epic for Elite for a partnership is Loxapine and Dantrolene and we are still waiting for them to file these products and get them to the market. One of the questions had to do with the arbitration with TAGI. The arbitration with TAGI was settled, our relationship with TAGI is excellent, it’s never been better, and they have exclusivity to the product and they still have performance targets that they have to meet. But other than that everything is settled with TAGI and our relationship as I said is wonderful. There were questions about IP and abuse deterrent, I will summarize all of them with one statement. Pfizer is filing for an Oxy BID, we will wait and see what happens between Perdue and Pfizer and the two giants can settle out their indication and we will see what’s going to happen in the future after we figure out what the two companies are going to do. Are they going to settle, are they going to sue each other, all of that will hopefully materialize over the next four, five months. And finally, forward update. NASDAQ keeps coming up and I have the same answer, the ultimate point for me is to get Elite to the NASDAQ. We’re not going to rush in to anything but we’re not going to sit around and take forever. I would like to get to NASDAQ by organic growth and if it does not happen, we will do it with a reverse split. My preference is the fundamentals, and we will not do it unless we have fundamentals. And that’s really the guiding principles right now. So our other generics and SequestOx hopefully will provide the fundamentals for us to make a smooth transition to NASDAQ. As I said before I do not prefer having a reverse split but if we have to, that will do. We are at least a year away from that decision and we will discuss it in future conference calls. The Lincoln Park deal, a lot of questions on that, we have utilized it minimally recently. The Lincoln Park deal has been one of the best things that’s happened to Elite frankly historically. The folks at Lincoln Park are excellent, we have a great relationship with them. We have used the money that we have gotten from the Lincoln Park deal to develop SequestOx and today that’s being a huge dividend because again we have the first NDA that we’ve ever filed in our history, and in the future we will make determination as to when to draw money from Lincoln Park deal as per the company’s needs. And finally, I wanted to address the resignation of Jerry Treppel from our board. Let me read a couple line of statements that I wrote and then I will speak to the issue. Jerry is moving outside of New Jersey area and so for personal reason, Jerry stepped down. We thank Jerry for his great service over the recent years and we continue to interface with Jerry on opportunities and we welcome his ongoing support. Having said that let me state the following. I have great relationship with Jerry Treppel and Jerry has a business on a public phase and he was an analyst and he is a Wall Street guru and well know in the industry. But Jerry is also a family man and sometimes there are certain things in your life that conflict with the job. We worked with Jerry to try and get him to stay but at the end of the day, it was in his best interest at this time to move on. We have a great relationship with Jerry, we enjoyed having him as a CEO at one time and the Chairman and we will continue to work with him because he is still in the industry and he still has companies that do work with the pharmaceutical industry, and as a matter of fact, I got couple of emails from him today. So we wish him the best of luck and we really appreciate his past and continuing support. John, you may open the line for questions, please.

[Operator Instructions] The first question is coming from Jay Dana [ph].

Hello Nasrat. Couple of questions, the first one is given the new FDA opiod action plan, what will be the impact of that on your ELI-200 NDA process and follow on, meaning, do you think it accelerates or decelerates process increases its likelihood that they get it within the next six month window etcetera? And then so if you look at the 60 days to approve the filing and six months in theory to get that done, I guess we are looking at sometime in mid to late October, best case scenario for approval. Would that imply some sort of revenue in the fourth quarter if that timeline happens and more likely the first quarter of calendar?

Thank you. Another good question and similar to ones we’ve got in writing. So let me address the first part. I do think that the political environment and the social environment is going to help Elite and all other companies that have abuse deterrent formulations to get through FDA – to receive faster review, whether they approve it or not that’s up to FDA but they’re going to take a lot of time in reviewing anything that they have versus not giving it as much of priority. So I think that’s going to work in our favor. Second, I am not sure if the FDA is going to go 60 days plus six months, they have done that before, and they have done it in six months, so we will await their decision on how much time they’re going to take to review our application. As for revenues I recall cannot comment on that. My hope is that we will share revenues this year, yes. But other than that till the third party experts come up with a plan for launch and when are we going to launch the product and when Epic is going to get paid back so they can give us our share because there is always a leg time between the time that a company sells to the market and then they collect the receivables and then they split the profits. So I cannot answer that, however my hope is that we will recognize revenue in 2016 for sure. And I will ask Carter to try that.

Hi this is Carter here. First of all, excuse my voice, I am getting over a cold and I lost my voice, coming back it’s not fully there yet. As far as revenue is concerned, there is different types of revenues. There is the revenue related to the manufacturing, the transfer price manufacturing, so that product is launched, we would definitely be recognizing those revenues. The revenues that Nasrat is referring is really the larger revenues not being the profit split and again that’s a time factor, really depends on how long it takes to percolate in the market and get repaid on that but there will be revenue – manufacturing revenues, there will also be milestone revenues that will be earned up to and including the launch period. If we get a product approval during this calendar year, 2016 calendar year there will be some revenues almost certainly.

I got a quick follow on if I could. If you look at the existing market for immediate release opiods that you are targeting, I know you said something about value and generic and if you look at branded and generic what is the current annualized dollar value for the market that ELI 200 will address?

The market that ELI 200 will address, $400 million generic pricing, so it’s $400 million, for that by itself we are not talking about Oxy with any combinations with APAP or anything else, just Oxy IR, the current market is about $400 million.

And how does that split between the people that are servicing it?

One more time?

What’s the market share split between the vendors that are servicing that market right now?

I am not sure.

Your next question is coming from Craig Moss.

This is the best call that we’ve had since you have been doing these calls. You actually answered and addressed a lot of the questions in your talk and Carter did a very good job on the financial side. Congratulations on getting that first NDA filing. I had a couple of questions that, I don’t know if you can really answer them but maybe you can give me a little bit of color on your thoughts. The first is assuming fast forward six months and 60 days or whatever and you get the approval, how many other abuse resistant opiod products do you anticipate in your pipeline right now based on the technology that you have?

Craig, that’s a tough question, I don’t want to give you a floppy answer that gives you an exact number. It’s a lot. The issue is financials, on how do we get them to the market. I have about 17 formulations on my head and on paper and in early stages, the problem is not really how many formulations we have and what can we take to the clinical trials, the problem is the cost. So I was addressing BID earlier, if Pfizer did not, so there hasn’t during two years before we did and they did all these clinical trials, I would need about $60 million to get that done. And that would be more than worth it for a multi million dollar product. But we have a lot of formulations, we have a lot of potential and you heard what Carter said when we took over just two and half years ago we had to loan this poor company money to survive.

I understand that, but my thinking is if you get the approval on the first application, the NDA that you filed January 14, obviously that would be a validation of your technology and I would think the markets being as efficient as they are, that you have a lot of interest and a lot of potential sources of getting that financing. So saying that 17 formulations that you had is basically the answer that I was looking for. The second question I had is again fast forward and say you get the approval on ELI 200, what do you think based on your experience and years in the industry the FDA would do, with the products that exist without the anti-abuse technology, do you think the FDA would be forced or motivated to remove those one by one off the market as the resistant alternatives came to market?

This is again my not only personal view but what I have heard FDA say before. They spoke of two things. Number one, any time you introduce an abuse deterrent product, then nobody else can bring in a product that is not abuse deterrent. So when we file our application, that the feel for Oxy IR nobody else can get in. I think the last one was Epic. And after that FDA is not supposed to approve anybody else for anti-abuse. So that’s the first thing. And the second thing they talked about is that when you have more than two or you have two or more then they’re going to ask everybody else to exit over specific period of time. Now they have not specified the time, it could be three years, it could be five years, they left it open ended. When you have more than two and that’s for competitive reasons they don’t want a company to have a monopoly on it, then they will do that. To date they haven’t but again to date we only have Perdue and Pfizer, each in different niche. So maybe when the FDA gets a couple of more filings they will ask everybody to exit but in the meantime we actually have looked in and blocked everybody else from entering into that field.

And my thought process personally and again I am not a legal expert by any stretch of imagination but I would think doctors themselves, the people that prescribe these opiods would be very reluctant from a liability standpoint to prescribe something that doesn’t have the technology and then leave themselves wide open to potential lawsuit when they had an alternative, that they could prescribe that has the abuse resistant technology. So again we will see what to do with that, but I would think that’s going to be where the biggest push comes from. Again Nasrat, the whole team, Carter, you guys have gotten us to this stage, they say the balls on the tea, so let’s see what happens. Congratulations.

And just one thing I would like to add going back to your earlier comment on the financing of these 17 products. The first one though – when we start earning –start generating the fundamentals we’re always talking about the NASDAQ, getting the fundamentals – fundamentals is two things, it gets us on the NASDAQ, it opens up finance sources but also we can self finance with these fundamentals, as well. So a domino effect begins, so once we get that first one out there and we have filed it already then we just build on that. So that’s been our plan and it’s progressing nicely.

The next question is coming from Brian Snyder [ph].

I got a couple of questions in regard to – we started off the conversations where we have been and where we are going. And in light of the conversation on the NASDAQ up listing potential, basic accounting things such as how you guys recognize revenue, we had that little miss that where revenue was recognized all upfront instead of straight line, the accounting of how that mezz preferred structure was accounted for and then had to be backed out. The question is, as the company grows, as more revenues are being brought online, as financials get a little bit more complex, how is scrutiny going to be paid so that these kinds of lapses and oversights aren’t going to be going forward? And then second question on the going forward part, currently rev mix is about 74% manufacturing, 26% licensing, can you guys – I know that at this point it would be impossible to predict what that mix is going to be in any kind of hard number but can you sort of guide us as far as how you see that product revenue mix going forward, let’s call it over the next one year, two year, three year period?

We’ve already engaged and we have on a regular basis accounting – technical accounting experts that we consult with, going over a lot of these accounting issues, we are working on our Sarbanes Oxley internal control reviews. If you look at our financial statements we are disclosing that, we have a material weakness in our internal controls, according to Sarbanes Oxley, and that’s something we need to rectify, we plan on rectifying that during this calendar year, the fiscal year that’s almost over, we won’t have enough time to rectify that, but prior to getting on NASDAQ we will have a system of internal control that is effective and be able to give that assertion and that includes having the proper and technical review of our – technical accounting issues. So that’s already been put in place, we prepared white papers on various things that come up from to time for accounting technicalities. So we are doing everything we can to avoid any type of situation that occurred in the past. Secondly, with regards to the revenue mix, you are right, it’s hard to give you any concrete percentages but generally if you look what’s happening we are going to be doing these abuse resistant opiods where the bulk of revenues or profits are expected to come from profit split, so that would mean percentage wise our revenues should go down, as far as the proportion, the dollar number will go up but the proportion of share will do down. We also have this other licensing agreement with Epic for a line of generic products most of which or all of which are manufactured at Epic, and our revenues coming online are all profit splits, all royalties. As that increases once again, the manufacturing share proportionately will go down. We also have the Oxy IR, the generic Oxy IR that Epic is just launching almost as we speak and then once again that’s another profits that we don’t manufacture that, so there is no manufacturing revenues but we will be getting more licensing revenues. So what’s going to happen is the manufacturing revenues as a percentage, as a overall proportion will decrease, the numbers will all increase but the mix will change.

One quick piggyback, you guys year over year spend an additional million bucks on building improvements, you went from 4.3 million to 5.4 million which is like 25.5% percentage, that’s excluding any kind of machinery investments that you guys have made, I am presuming that’s part of the expansion of facility. Can you guys just kind of give us an idea, because we are not sitting in Jersey, we’re not – we don’t get to actually see what’s going on? Can you guys give us like just a general news as far as what’s been going on as far as what kind of building improvements, how you guys are growing your facilities, just give us a little bit of color around that so that we can in our mind’s eye sort of conceptualize where money is being spent?

There is a lot that goes into a facility, much more than just the equipment itself, that’s probably the simplest part, there’s all of the building of the suites and air handling, the dust collector, we have vaults and security systems, there is a lot of super structure and overhead that goes to support, we have to have the proper electricity running through, so there is just a lot to a facility, it’s not just having tablet compression machine or Vmax or up there.

So that is it safe to assume then that we will see this kind of cost going in a building in a linear fashion going forward as you would presume the fixed costs are in for the first launch of SequestOx, and that you wouldn’t be going in and continuing to go in to increase the 25% rate year on year?

Correct, we are nearing completion of that facility expansion. There is always going to be CapEx placing stuff we expanding, but not this level.

Your next question is coming from Stanley Goldberg [ph].

I usually don’t comment on these conference calls, I have been listening to them for years, I am an investor and I do follow you company very closely, and I always notice that at the end of every conference call the value of the stock goes down and I think part of the reason is of course we are not on the NASDAQ and people look at this company and they don’t believe it’s a real company and I think they are completely wrong and I’d like to just point out a couple of things. In my research about the huge market on opiods and if I could just take a minute, I would like to read something. In an article dated May 14, 2014 called the America’s addiction to opiods, it said, there is an estimated 2.1 million people in the United States alone that are suffering from substance use disorders related to prescription opiods, pain related medication. In 2010 this was six years ago, over 16000 deaths occurred in the United States due to overdosing of opiods. The market for opiods is a multi billion dollar market and Elite now has a product SequestOx, which is ELI-200, that deters the use of opiods, as a recreational drug. Imagine if we capture even a small part of that market, what this company would be worth, this is a real company. I have been in it for about five years, I have seen it going from really a company struggling for survival to where we are today, as somebody said before, putting the ball on the tee and hitting it, I’d say we are within as football is concerned, the 10-year line. I read the two articles from the FDA and maybe everybody should take a look at it, they were dated February 4, and what I see occurring now is more and more of the politicians wanting to really wrap around the abuses of the use of opiods. And we are in the center of that, the products that we have, I think it’s a product that any person who is in politics or any doctor return around and say this is the product and even though we are a small company at this point in time, I really believe if we capture a small part of this market, this company can be a real company which it is now, and grow tremendously. And I would just like to get your comments from what I said.

Thank you, Stan. You really know your business, you do your due diligence, you’ve visited the place, you have looked at the company. We do have a very company, we’ve expanded a lot in the past two and half years, we had only the building that we owned in here at 165, we got half of the building at 163 and then we took over the entire building. We have several suites that are ready for expansion, a lot of the money that Brian was talking about earlier, we also spent it for future products, I can launch SequestOx with what we have but we have our eye on the future just like you do when you are talking about. We are a small company, however a small percentage of what Pfizer could bring in will send our stocks through the roof. We share the same technology as Pfizer have for their pharmacological approach. We have our patents on our polymer, they have theirs on there. They have made their product into multi million dollar or billion dollar product and we need to do the same thing. It may not affect Pfizer a lot if they make a 100 million or 200 million but to us the stock will go through the roof. I am not promising anybody that that’s what’s going to happen but I need to be careful on what I say on these calls. But you are right, a small little percentage of that profit, you make $100 million and even if you had a billion shares outstanding, on a PE ratio of 20 the stock will go to several dollars. And it is possible and it’s doable and that’s our plan, and if we succeed, then all of you stockholders will suffer the wonderful rewards of that and if we don’t you still are making quite a bit of money because we have done a good job with the stock and built a facility that has great foundation, where it’s now stable financially and infrastructure and many other things. I really appreciate your feedback, Stan and as always you are wonderful.

Those people who are listening on these conference calls, if you do not believe in the company my advice is you sell the stock now and you will be crying later. I truly feel that this is a company that could really grow, you have a game plan which you have mentioned many times, and we can be a big force in this abuse deterrent product.

On our next stockholder meeting we need to have one sometime probably the summer or something. I will invite the stockholders to come in, we will do – next to Elite and give them a tour of the facility. So whenever we have that and hopefully we will do it this year definitely later in the summer or so, we can’t do that right now. But once we do, love to invite the stockholders and give them a tour to see how wonderful this place is. John, we have time for one more question please?

Your next question is coming from Sally Prescot [ph].

I just want to say thank you again for all your hard work, you’ve really turned this company around, all of you, solid press [ph] to shareholders, real shareholders not show it. But I did want to ditto everything Stanley said, and so just one other thing. You have out there free publicity on CNN and NBC those particular shows 60 minutes, night line, you give this information to them, talk about what you have and before you know it, the FDA will move because this actually should be a fast track situation because of the drug addition of these young people who are going then to heroin, and we really need this information to get to the Congress, to get to the people when they have the hearings, to be in advance and I am sure that you do this, but this could be discussed on all of these different shows, I’d love this kind of stuff, especially CNN. And so it would be a great idea to take advantage of free advertising and just by giving them information even though it’s not approved yet, still the pressure begins to build because people will ask the Congressman why don’t you do something to move this along, the six months is not necessarily fair. When something is needed like this, if it was a plague coming in and they had to do something they could do it in a month, a week. We need more action out of our government, less foot dragging and that is my remark and thank you so much for all your progress and I am sure it will be a $2, $3 stock and I don’t think we will have to do our risk to go to NASDAQ but best of luck to all of you and thank goodness for all the loyal shareholders who are not idiots and who don’t have a clue as to what’s going on. Thank you so much. Bye bye. End of Q&A

Ladies and gentlemen this concludes today’s meeting. This was a good meeting. I look forward to the stock not going down with all good news, and let’s do this in the future. Please direct your additional questions and comments and follow-ups to Dianne. It worked very well this time. She compiled all of the questions and passed on to me and here we collected them and addressed them. Maybe we will do this next time. Thank you very much and have a wonderful day.

Thanks. Ladies and gentlemen this does conclude today’s conference. You may disconnect your phone lines at this time and wonderful day. Thank you for your participation.