Elite Pharms Inc

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 conference has the following statement. Elite would like to remind the 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 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 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 Hakeem, President and Chief Executive Officer of Elite Pharmaceuticals. Sir, the floor is yours.

Thank you, Jenny, and good morning, ladies and gentlemen, and thank you for joining us today. My name is Nasrat Hakeem. 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 submitted to Diane. Mr. Ward, you have the floor.

Thank you, Nazrat, and thanks to everybody calling in. We had to wait a few extra minutes to have such a big crowd calling in, so we really appreciate your interest. Thank you again for calling in. Yesterday we filed our 10-K. That's the annual report. We're on a fiscal year, a March fiscal year. So it's for the fiscal year ending March 31st, 2025. That's our 2025 fiscal year. The report's available at our website, ElitePharma.com, under the Investor Relations section. If you haven't seen it yet, please get a copy and take a look. As always, I'm going to provide some context and a little color to the financial statements and also answer finance questions that we received overnight as well. I'll answer that throughout my presentation. Let's start with the P&L. Total revenues for the 2025 fiscal year were $84 million. You compare that to 56.6 million for the prior year, March 2024 fiscal year. That is a $27.9 million increase, or 52%. There's two main factors that contributed to the increase. First, the elite label has become well-established in our niche markets. The 2024 fiscal year is when we launched our elite label. That was the first year. We were an unknown net. We did well in 2024 and throughout 2025. We've now solidified our place in the market. We've expanded our market share, and we're no longer unknown. We are a known entity in the market. And we have distinguished ourselves as a reliable supplier of quality product, and that equals increased revenues. The second main factor is the launch of our Lizdex Amphetamine product line during the last quarter of this fiscal year, so January to March quarter. Lizdex Amphetamine is the generic for Vyvanse. It's a very large market with high demand. The flip side, there's also quite a bit of competition in that market, more than 10 suppliers currently in the market. Now, we've done a really good job. We've grabbed a decent share of the market, as reflected in the P&L statement. One thing to keep in mind, though, the Lizdex market remains highly competitive. Our good name in the industry goes far, but it only goes so far. So we're doing very well with this product, but this is generic pharmaceuticals. It's an industry which is defined by tough competition, and Lizdex is a typical generic product when it comes to those characteristics. More than 10 suppliers in the market, that equals price pressure. There's quota pressure because this is a Class II product, all of the factors that are typical to the generic market. Kirkle is doing, he's our chief commercial officer. Kirkle is doing a great job, but this is generic, and that saying about past performance not guaranteeing future results is a part of the fabric of this industry. That being said, we are doing excellent with Liz Beck's incentive. Moving down to P&L, our operating income was, $19.6 million. That's our income, our profit. Compare that to $10.8 million for the 2024 fiscal year. That's an $8.8 million increase or 82%, almost doubling profits. Now, I got a question that I received. pretty much every quarter and that's regarding there's an item on our P&L below the line that's called change in fair value of derivatives. Now this is related to the valuation of warrants that were issued in 2017. It's a non-cash technical entry required by GAAP. It has to do with the valuation of the warrants. If the valuation of the warrant goes up, we record an expense and we increase liability. On the flip side, if the valuation goes down, we record income, and we decrease the liability. How do we value it? We value it using the Black-Scholes model, which essentially means that if our stock price increases, the valuation will also increase, and therefore we book an expense. If the stock price goes down, the opposite happens. We book income. During the fiscal 2025 year, this year, our stock price almost tripled. We went from 15 cents to 44 cents, and we're very grateful for that. It's a good thing. But when you run that through the Black-Scholes model, the result is an increase in valuation of approximately $18.9 million, and that's the expense we show on the P&L. The most important thing to take away here is that we will never pay cash for any expense shown And the flip side is we also will never receive cash if the stock price goes down and we report income. So it's a non-cash expense and a non-cash income item. There's no cash ever associated with this. This is a technical gap book entry. Please also note that our stock price today is much higher than it was even three months ago. On March 31st, it was 44 cents. So the next 10Q, the one for the quarter just ended, Q2025, we're going to show another expense for change in share value of derivatives as a result of the further increase in the stock price. Another thing to note that with the $18.9 million change in derivative value, it resulted in Elite having a pre-tax loss of $52,000. Despite showing a pre-tax loss, we still booked income tax expense $4.3 million. And I got a question on that. How do we have an income tax expense if we show a pre-tax loss? Well, the answer is that the $18.9 million expense is not deductible for tax purposes. The IRS and the state tax authorities, they don't recognize this as an expense when it comes to taxes. So I'll also add that this item is also not considered in any enterprise valuation models either. It something you have to do for GAAP. Got a question on earnings per share. Wanting to know what is our earnings per share? Well, that's listed right on our P&L statement towards the bottom. The EPS for this year, 2025, was zero. And last year, it was two cents. Now, the EPS includes all of those below-the-line items. So this year, we had that $18.9 million gap. change in valuation, which is a negative as far as EPS. That's why the EPS went down to zero. Last year, we had the release of a deferred tax valuation allowance, the asset valuation allowance. That was approximately $19 million in income. Again, a non-cash item, but that increases EPS. That's a positive to EPS. So keep those things in mind when you're looking at the EPS. Take a look at the below-the-line items and know that they are in peace. And now for the cash flow statement, our operating cash flow this year was positive $7.5 million. That's compared to a cash burn last year of $3.2 million. So that's a $10.7 million swing to the positive. Now in 2024, last year we just launched the elite label and then That means we have investments in inventory, receivables, so increases in inventory, increases in receivables, and those are dragged from cash flow. And those, in last year, those total $20 million. So that's the reason for the burn in 2024. This year, we continue to expand the market share. We launched the LISDX, and the inventory and receivables continue to rise, which is a good thing because that portends to future revenues. But it is a drag on cash flow. Those increases were 13.2 million. That's 6.8 million less than the 20 million in the prior year, but it's also less than the 10.7 million positive trend in cash flow, meaning that this doesn't fully explain how we went from 3 million burns to 7 million positives. The factor that bridges these two is the profits. Remember, operating profits were up 8.8 million. Profits are a major driver of cash flows and profits are the reason that we are in business. So we buy inventory, we sell, we increase our receivables, we collect every time. We call that a rotation. Everything is to the positive and eventually it's going to result in cash flow and it has. So now to the balance sheet. This is a good segue because the balance sheet continues to strengthen. I looked over some of my prior presentations, and I've been saying that for quite a while now. So our balance sheet continues to strengthen, which is a great thing. Our working capital as of March 31, 2025, was $45.9 million. You can compare that to $27 million as of March 2024. That's a $19 million increase of 41%. Drill down further into working capital. Remember, working capital is current assets minus current liabilities. Our current assets increased from $40 million in 2024 to $58 million this year. And then for the current liabilities, they decreased from $13 million in 2024 to $12 million this year. So you don't see that too often. Current assets increasing by $18 million with current liabilities actually decreasing. You can expand that analysis even further, and you look at the non-current liability, you're going to see a similar trend. Our non-current liability, excluding the derivatives, the non-cash, was $5.8 million this year compared to $6.7 million in 2024. So that's a decrease of $900,000. The takeaway here is that Elite has low debt, and it continues to decrease. Our debt continues to decrease. We have low debt, decreasing debt, combined with increasing working capital. Both things you want to see, and both are hallmarks of a strong balance sheet. So this is what I mean when I say our balance sheet continues to shrink. That's what I look at. Also received a question on when we are paying the loans, which are owed to Nasrat and one of our directors, Davis Kasky. If you look on our financial statements, there's a subsequent event section, I think it's note 17, and it says that we have paid those loans to Nasrat and to Davis Caskey. They've been repaid after March 31st, so as of March 31st, we still owe the money. It's on our financial statement, but it's no longer owed, and going forward, you'll no longer see those liabilities on our balance sheet. That loan gave us Working capital, that was about two years ago when we were just starting with the process of launching the elite label. So that loan gave us the working capital that kick-started the elite label. And you see how well that's worked out. And that working capital was crucial in this success. So Nasrat and Davis provided that money just when we needed it at the perfect time, and it worked out extremely well. And that's one of the Good things about working here, one of the things I enjoy, working with Nasrat and having such support from him and our entire board of directors. Really great working with them. I have a few more questions that I received before I wrap it up here. Will Elite be an accelerated filer in fiscal 2026, the fiscal year that we're currently in? To be an accelerated filer, The main criteria that we would have to meet is, that we haven't already met, is we need more than $100 million in annual revenue to be an accelerated file. So let's see how that plays out. Just something that we're monitoring. Does the LEAP plan to change to calendar year reporting? We get that question a lot, and the answer to that is no. We are focusing on other areas. that provides greater shareholder value than changing the reporting period. We're not going to extend the resources or the time and the focus on that. We're doing that elsewhere. So some of these financials are record revenue. We had record revenues this year above the record revenues from last year. This year we crossed $80 million for the first time. We had record profits, just over $20 million in profits. It's clear that the elite label is establishing itself in the market. The LISDEX launch was extremely successful and continues. Our balance sheet is strengthening. Our cash flow is solid. Working capital is increasing. Debt is decreasing. So put that all together, I'd say it was a good year. It was a really good year. Our next quarterly report is due in August, and we'll have more to say then. Now, I'd like to introduce our chairman and CEO, Mr. Nasraf Hakim.