Elite Pharms Inc

At this time, all lines have been placed on a listen-only mode. Before management begins speaking, the conference has the following statements. Elite would like to remind listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties that are subject to change at any time, including but not limited to statements about Elite's expectations regarding forward operating results. Forward-looking statements are made pursuant to the safe harbor provisions of the federal securities laws and represent management's current expectations. Actual results may differ materially. Elite disclaims any obligation to update or revise its forward-looking statements except as required by law. More complete information regarding forward-looking statements, risks, and uncertainties can be found in the report's Elite files with the SEC, which is available on Elite's website at ElitePharma.com under the Investor Relations section. Elite encourages you to review these documents carefully. 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, Matthew. And happy Valentine's Day, everybody. And good morning, ladies and gentlemen, and thank you for joining us today. My name is Nasrat Hakim. I am Elite's Chairman and CEO. This is our earnings call. Our CFO, Carter Ward, will give us a summary of the company's financials, after which I'll give you an update and answer some of the questions that you've submitted to Diane. Mr. Ward, you have the floor.

Thank you, Nasrat. Yesterday, we filed our 10-Q. It's for the third quarter of our fiscal year ending March 31st, 2025. So our third quarter ends December 31st, 2024. It's available on our website, EliteFarmer.com, under the Investor Relations sections. If you haven't seen it yet, please get a copy. As I always do, I'm going to provide some context, give you some color to the financial statements. And throughout my presentation, I received a lot of questions overnight, and I'll weave in answers to those questions as best I can into my presentation as well. Let's start with the P&L. Total revenues for the quarter were $14.4 million. That compares to $15.5 million for the December 2023 quarter. It's a $1.1 million increase. decrease or 8% decrease, was a delay in shipments, among other factors, at the end of December due to the Christmas, New Year's holidays, if you guys remember, happened on a Wednesday in the middle of the week, and that impacted revenues for the quarter. Many customers, they delayed shipments into January since a lot of people took most of those two weeks off. Our customers, they don't want shipments sitting in trucks waiting to be received and processed, so instead we just had to hold onto them until everyone was back at full strength a few days later in January. Now, when I say shipments were delayed until early January, I'm not just talking about the product lines which we had been selling the past two years, which were substantial, especially the generic Adderalls. Those had delays, but also included in this delay is the full commercial launch of the LizDex amphetamine. which is our generic to Vyvanse. These volumes were well in excess of all of our other products combined. And they were delayed as well, same reason. Would have been nice to have some of that shipped before December 31st instead of a few days later. But the most important thing is that they were shipped, they're on the market, we're gaining share. I did get a question on was the Vyvanse launch, were the revenues included in this quarter, December quarter? Just so you know, when we shipped, we shipped in December. We shipped to our distribution center in Ohio, and that was – That's not revenue to the company. Our revenue is recorded when it's earned, and when it's earned with regards to most of our products is when we deliver to the customer. So I have other questions on revenue recognitions. So those volumes were not included in the December financials because they were delivered in first week of January. So if you look at a balance sheet, you'll see that our inventory increased more than $6 million during this quarter. So from 14 million in September to 20 million in December, December 31st. That should give you a good visual of the shipments that went a few days after the quarter end. They were there, they were sitting in our warehouse, orders received, pallet stage, ready to ship, and they were. In fact, January 2025 was our best ever. with regards to shipments, revenues, contribution margin, and February's tracking in a similar fashion. The month of January was almost as much as the entire quarter that we just reported. And as I said, January is also tracking in a similar fashion. So I did get some questions asking about what would the revenue be like without a delay. Well, this will give you some idea of what it would have been like. On a year-to-date basis, The nine-month revenues are $52 million. That's compared to $38.7 million last year. So that's a 35% increase, $13.4 million on year-to-date this year as compared to last year. Last year, for the whole year, all 12 months, we did $56 million. This year, we're already above $52 million, still have a quarter to go. So you'll note that Another thing, the nine-month numbers this year, they do not include a contribution from LizDex, which has taken our January and February revenues to the highest levels so far. So, it's safe to say that last year's record revenue number has already been eclipsed. Moving down the P&L statement, there's R&D expense of 1.8 million. and G&A expense of 2.7 million for the December 2024 quarter. Both of them are up compared to the December 2023 quarter. R&D is up 28% and G&A is up 59%. I'll address each one as far as R&D is concerned. As I said, probably every presentation I've ever made, R&D is the lifeblood of any generic pharmaceutical company. We just had a successful LizDex launch, which was two years in the making. You don't just launch the product overnight. It doesn't just happen overnight. It's two years of developing, formulating, testing, submitting, getting approval. It takes quite a while. That's what we're doing now for future products. So we're spending money now to ensure that in the future there's a continuous flow of of follow-on products in the next one to two years, just as we did with the LISDECs, which we began several years ago. But Nazra will discuss product developments in more detail. But just from a finance perspective, accounting rules, GAAP, requires we expense these costs when we incur them. but the expectations are obviously that what we're doing now will be successful in the future, result in more products, future products, future revenues, and future profits. So with regards to the increase in G&A costs, there's a couple factors at play. First, regulatory costs have been increasing. The fees are up. Costs more to comply. Compliance is more expensive. The consultants and everything we need to do for compliance with FDA, DEA, SEC, you know, all of the alphabet agencies, everything costs more. And we also have a few more head counts that we had to hire for compliance. The second factor in the GNA increase, and that's a temporary, the second one is a temporary one. And that factor has just ended. And that's the facility at 144 Ludlow. that was constructed and validated in 2024, but it was only approved last week, a couple days ago actually. Now that the packaging facility 144 is approved, it becomes part of our manufacturing assets, and it's not an overhead asset thanks to this approval. This is a big deal from both operational as well as the financial. I got some questions on clarifying what is this new facility, what is it going to do. It's going to more than double our packaging capacity, which was our bottleneck up until now. Plus, we're adding a lot of new warehouse space that we can now use. We were running out of space before. The business is increasing so fast. We needed this extra space, and we especially needed this tremendous increase in packaging facilities and capacity. So operational, that's a big deal. From a finance standpoint, these costs, I can now match them with our revenues. It's part of our product costs. It's part of our COGS. And it's no longer part of our G&A overheads. So the increase in G&A overheads At least that portion of it was temporary, and that will go away as of a few days ago when we got the approval. Looking at the balance sheet, we're continuing to strengthen. The two-week delay in shipment doesn't affect the balance sheet as much as it does the P&L. Since the inventories are there, they're ready to go, they're sitting in working capital. Our working capital, which is current assets minus current liabilities, our working capital continues to increase. It was $27 million at the beginning of the year, the fiscal year, and it's now $33 million as of December 31st, 2024. So that's a 6.4 million or 24% increase over the nine-month period. It's also up almost a million dollars since September as well. So in addition to strong and growing working capital, our long-term debt is low and it continues to decrease. Our non-derivative long-term cash liabilities were $6.7 million at the beginning of the year, the fiscal year, and on December 31st, they were less than $6.1 million. The takeaway here is that our increase in working capital is resulting from profits and efficient operations and not from long-term debt. I did get a question. asking did we have to borrow money to fund the new launches, the LizDex launch, and the answer is no. The investment in working capital for LizDex alone is in excess of $6 million. It's actually a little over $7 million. We funded that from our own cash flow, our own working capital. So some companies do get working capital from long-term debt. We do not. At Elite, we fund our own working capital. We're paying down long-term debt, and we're increasing working capital at the same time. So those are two things you want to see. Had a couple of other questions that I'll answer. What are our plans to clean up our capital structure? Our capital structure is actually very solid and very clean. We have almost everything in common stock. We have no preferreds. We do have some warrants. We have no onerous. So this capital structure is almost as clean as anything can possibly be. So we're really looking good as far as that's concerned. Got a question on will the Hakeem and Kasky promissory notes be paid at the end of the fiscal year? Remember, the fiscal year ends March 31st. Those are due on March 31st. They're actually due in the first quarter of the next fiscal year. And our plans are that we will pay those amounts, which total $4 million, when they come due, which will be in the Q1 of the 2026 fiscal year. So to sum things up, one other question, is a new lease in Florida signed? Will this benefit Elite in future from a tax perspective? Not really. First of all, Florida has a corporate income tax, but our income taxes are based really upon our operations and where we ship the state income taxes. We have multiple states that we have to file in, so it's quite complex. But having an office in Florida doesn't really have much of an impact on our taxable situation. It really is depending upon where we ship, and there's all of these concepts of state nexus that apply based upon our shipments. So to sum things up, Our financials have never been stronger, and they are one of the reasons that Elite is positioned extremely well for the next phase of our strategic plan, which I'm sure Nasrat will go into a little more in detail. So now I'd like to introduce him, our CEO and President, Mr. Nasrat Hakim.