Elite Pharmaceuticals, Inc. (PNK:ELTP) Q4 2023 Earnings Call Transcript June 30, 2023
Operator: 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 statements. Elite would like to remind their listeners that remarks made during this call may contain forward-looking statements that involve risks and uncertainties that are subject to changes at any time, including, but not limited to, statements about Elite’s expectations regarding future operating results. Forward-looking statements are made pursuant to the Safe Harbor provisions of the federal securities laws and represent management’s current expectation. 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 reports Elite files with the SEC, which are 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.
Nasrat Hakim: Thank you, Matthew, and good morning, ladies and gentlemen. Thank you for joining us today. My name is Nasrat Hakim, I am Elite’s Chairman and CEO. This is our year-end earnings call. I will give you a summary of the company’s financials, an update on Elite’s R&D, manufacturing, sale and distribution, and answer some of the questions that you have submitted to Diane. Before I start let me address the issue of our CFO vacancy. Since Diane received a few questions about the subject and I don’t want to wait till the end. We have Carter Ward as our CFO for over 13-years. He was here a lot longer than I have been here. And while Carter got a great opportunity elsewhere that we could not match, we wished him well and encouraged him to take it, because he, his family and he is a good person, good CFO and a good stockholder, whom we stay in contact with till today.
Mark helped us recruit his successor. We took a chance on a gentleman, who was a controller and we promoted him to CFO, and he was really good. The pressure got to him and he want to go back to his old job. Anytime you are in a regulated industry where you’re subject to the SEC and the auditors as scanning every decision you make and you have to consult with the SEC at times all the time, it [Indiscernible] when you are not used to it. But I would like to emphasize that he did a decent job. He was good and he actually resigned. He made the choice to leave. The next two CFOs did not. I will say nothing further about the subject out of respect for everybody. When you’re working for a small company, you got to work. All right. As the acting CFO at least for today, I have the pleasure of updating you on our wonderful financials.
Yesterday, we filed our 10-K for the year ending March 31, 2023. Elite is on a March fiscal year, a copy of the 10-K is available in the Investors Section of our website at elitepharma.com. It is also posted on sec.gov and many other websites that provide link to our filings. I’ll start with the financial update with the income statement. We had record sales of about $34 million this fiscal year, up approximately $2 million, compared to the last year ending in 2022. Last year we had $32 million this year it’s $34 million. This is primarily to the sales of our generic version of Adderall, Naltrexone tablets and Loxapine capsules. The cost of goods sold was $17.6 million, compared to $17.5 million during the previous year. Now as a general rule, the cost of goods usually increases as revenues increase.
Despite a $2 million increase in revenues, the cost of goods held constant. We posted an operating profit of approximately $3.7 million, compared to $5 million in 2022. The $1.7 million decrease in operating profit was primarily driven by an increase in R&D spending of about $2 million over the previous year. Previous year we have spent about $1.5 million, this year we spent $3.5 million, $2 million more than previous year. Our operating expenses were $13 million, an increase of approximately $3 million over the previous year of $10 million. The increase was primarily related to R&D increase in spending, that’s $2 million and $1 million of interest on our outstanding loan. Let’s move to our balance sheet. Our working capital is $13.6 million, compared to $12.2 million during the previous year.
Our cash from operating activities is $3.7 million, down from $6.5 million, compared to the previous year for the reasons we spoke of R&D expenses et cetera in 2023. Our total cash on hand was $7.8 million as of March 31, 2023. That is after we paid a $12 million loan to East West Bank. Let me say a couple of words about the loan that we recently repaid. Elite’s working capital requirements have increased as we transition to direct sales. Payment terms for direct sales require a longer time for repayment and a longer inventory hold time, compared to licensing our product. Elite had a $12 million loan from East West Bank that we intended to use part of it for this purpose. Due to restrictive covenants and Lannett’s termination agreement, the bank would not allow us access to the majority of the loan money, but continue charging us on the full loan.
Therefore, Elite decided to pay off the loan and decided to raise the money elsewhere. The company put in place a loan proposal to raise $6 million under the same terms as East West Bank, but without the restrictions. This is a short-term loan to be paid in one to two years. It’s a short-term loan for one year with only Elite having the right to extend it to a second year to support the sales transition. This new loan provides the working capital needed without the restrictions that East West Bank put on us. It will also allow us to reduce the outstanding debt interest by on $6 million by 50%. So we had $12 million, we really didn’t need all of it, so we’re, kind of, borrowed $6 million with paying interest on $12 million, to less pay interest on $6 million.
Same exact conditions except actual Elite the money instead of paying interest and not using it. And so far, I have contributed $3 million and there is $1 million in the queue that’s coming week and we may pause in here to see how we do before we raise the other two, okay? We have potential investors that are willing to do this, but for now we may pause and see how the working capital working and continue with that. That is mainly to help us reduce the cost of interest of borrowing this money. Now an important fact I was to highlight is our annual sales have been on progressive trend for the past five years. $7.5 million in fiscal year 2019, $18 million in 2020; $25 million in fiscal year 2021, $32 million in 2022, and now $34 million this fiscal year.
In a short period of five years, Elite’s revenues have drastically increased by 325%. That is excellent news for us. The bad news is our stock price is inversely proportional to our achievements. The better we do, the less value it gets over the past five years, even though quarter-after-quarter, year-after-year, we have shown growth in the business that is undeniable, the stock price is still disappointing and not where we want it to be. Once we go through an adjustment period in the next few months, now that we started our own sales and marketing, this trend will continue. The revenues after few months — just to give you a target date, let’s say January of 2024 and few months. From January — December, will be substantially higher when they are today.
I mentioned the number $40 million in revenues annually during the last conference call. I would like to resend that and say it will be north of $40 million. To continue this trend, we need to invest in R&D. We need to feed the pipeline. Elite continues to invest in product development. Our goal is to commercialize a new competitive products as we grow and diversify our portfolio. Elite recently filed two ANDAs, a generic antimetabolite ANDA and a generic dopamine agonist ANDA. These two are under review by FDA today. In addition, the company submitted partial ANDA for pain management for review by FDA. The partial application contains the recently conducted insufflation study. Elite intends to provide the FDA with the remaining data in Q3 of 2023 to complete this filing.
We disclosed a while back that we’re actually continued working on a generic version of Oxycodone. And the last time we filed it, we had deficiencies and one of the deficiencies that everybody got is that an insufflation study was not conducted. It was cost prohibitive. That study alone is about $1.5 million, $2 million, and this is why we put the project on hold. Once we learn that the things are turning in the opioid world and the states and the federal government have sued everybody they can sue and settled everything they can settle. Now the pendulum is switching and we really believe in the next three to five years that opioids are going to come back under managed control. Nowadays, before we release anything, we have to have realization, where actually the FDA can come in here and know exactly where each bottle not lot, each bottle ended up at what pharmacy or whose house okay?
That’s how sterilization works. It also demanded the FDA that we have RIMs where we have to educate the doctors and the patients about the use. They also reduce the amount of prescriptions or tablets per prescription that you can have at home you cannot likely all days have automatic refill. You have to go to the doctor. You can get a specific amount. So all of these are factors in opioids getting back to the market in my opinion. And this is why we started working on this product. Once we did the insufflation study, we are resourced because the results were positive and we wanted to make an announcement. But then we learned that there are three other companies that are doing the same thing and we did not want them to beat us to the punch by knowing that we just made an announcement that we’re going to file.
So we had to be quiet, wait till we file a partial application to get the PDUFA date going, okay? And now I can tell you about it. The full application should be filed by August 1st and hopefully the FDA would accept it. That usually takes 45 to 60 days and once they do, we’ll make an announcement. All right. Elite has three products that have moved from the formulation development phase and are now in the clinical phase. They are in the pilot BE phase. We have conducted pilot studies or the BE studies or the BE study is ongoing. For future growth, Elite has other products that have entered the formulation development stage. We will update you on other development products when we reach certain milestones such as filing or approval. Let me take a second and summarize R&D as I did with the financials.
In order to have a full R&D system and a company functional R&D system, you have to have formulations that are pending FDA approval, because they’re going to get approved and you recognize revenues from that. You need to have some that you’re doing clinical trials on or close to filing with the FDA. And you have to have some that you’ve just vetted the process, yes, these are good products for us to have, they are fit for our company, the extended release or tablet or capsule, which we can do versus an injectable. What I just described to you right now, we have products that are in the formulation stage. We have three that are in the clinical stage and two are with FDA. We have a fully functional R&D system. The second thing I want to emphasize is that the three products that I mentioned that are in the clinical stage are all needle movers.
What I mean by that, they will have material impact on the company if any of them is approved. If we got one of them approved, we’ll continue the positive revenue trend beyond 2024 and 2025 as a result of the contribution from them. If we hit all three of them, that would be a very good day for Elite and the stockholders. We finished this year with a strong sales through our licensees. And by year I mean fiscal year ending March 31st, 2023. We saw revenue growth from the year before. We invested some of our profits and the continued development of our pipeline and invested in creating our sales on — and distribution organization. The products that are bringing the revenues today are Amphetamine, IR and ER. These are Elite’s largest products this year.
We expect them to continue to be that under Elite’s label. We have contracts in place and we expect to maintain our double-digit marketing shares with these products. Management of the DEA quota is always a challenger. However, Elite has been able to manage through this challenge to-date. Amphetamine IR remains on the FDA shortage list and both products are in demand. A few minutes ago, I got a call from Kirko the IMS or IQVIA data came out for the month of May, we just launched in April and we didn’t have that much material to launch, because we were making everything for Lannett. And for the month of April, for the IR, were on command with 6.68% of the market. I definitely expect that number to improve. Isradipine and Trimipramine are being sold under Elite’s label now as of April 1st although modest in volume.
Both products have only one competitor and that is really important. Isradipine in particular is an interesting opportunity and we believe with direct sales, Elite can increase the value of this product. And so Isradipine can make a difference in contributing margins to the bottom line of Elite. Loxapine and Dantrolene are also transitioned to Elite’s label as of April 1st. Both products have only two competitors. Pricing has been challenging though despite few competitors and despite Loxapine only recently coming off of the FDA shortage list. But we do expect that we will be making a — they will be making a contribution to the company and hopefully the margins, because they are in a field of two players will be healthy margins of profit.
License products, we will continue to sell selected products through licensees as well. For example, our long-term partner TAGI that’s been with us for a decade and a half, we’ll continue to sell Phentermine and Naltrexone for us. The increase in sales are introducing new products once the ANDAs are approved, require more employees, more warehouse storage space and more equipment. We are in the process of upgrading several pieces of equipment in the facility to keep up with sales demands. But there is a point where we will have to have another facility to support our manufacturing. And the time to plan for it is now. It’s an expensive project, but it’s one of the most important projects that’s on my mind. As an executive, you always have to think within a three-year time zone plus or minus, not only three-years in the future.
Decisions we made few years ago impact us today. We need to continue refining these decisions, adjusting them and planning to make them better. Decisions we make today are going to affect us in the future and we need to do the same. For example, when we did the three basket approach or three-pronged approach, slowing the [art] (ph) technology, creating partnerships that led to SunGen and amphetamine combo and developing our own R&D, that decision is really what made us profitable today, okay? On the first part, slowing down the art technology, it was draining as the FDA kept asking for more and more and each study will cost millions of dollars and these millions of dollars, I don’t believe in borrowing money. So we were selling shares and we’ll address that in a second.
And we as a point where we can’t do that anymore, because it doesn’t look like there is an ending sight for that. Slowing that down and focusing our attention on partnerships and our own product give us amphetamine combo and give us the products we have today and made us the viable company we did today. If we did not and if we actually borrowed money back then in order to support the art technology, we will be like a corn bankrupt. It will be bankrupt even like Lannett, whom today even though they survived, but the stockholders didn’t. The stockholders got zero money and the private detectors took over the whole company. Elite would have been in the same position and even though our stock is low, it has the hope of coming back because our great financials.
But if we borrowed money, there will be zero hope and zero opportunity for us to even make it. Okay. Sales and marketing — sales and distribution is one of these instances. In addition to thinking of another plan, sales and distribution is another one of these instances. Just to give you a historic background of how we got here, you all know and understand and remember that we then have sales and marketing, so us and SunGen partners with Lannett for the IR and ER, we engaged in a three-year licensing agreement that would end March of 2022. Lannett did a good job with growing the net sales for the amphetamine IR and ER. Elite and Lannett decided to extend the licensing agreement by two years to 2024, and that’s March 2024. It was interesting that Lannett extended it at about the same month in November 2021, when they got approval for their amphetamine ER.
Well, when that happened, immediately responding into action and start planning for the company’s future, we start looking into sales and marketing by 2024 or another distributor, because we sold the writing on the wall. Now in January of 2022 after about a month or two of [Indiscernible] it was starting to bother me, I started to search for a VP of sales. We screened and interviewed several candidates, three very solid candidates, still we met Kirko and of course, we selected number four, who was in my opinion outstanding. In July 2022, Lannett received approval for the IR and for amphetamine. Even then, they placed them on the discontinued list and everybody tried to assure me like, hey, don’t worry, they have GMP issues, their financial problems, they don’t want to head up with making this, you’re making it taking all the risk and they’re just selling it, they put it on the discontinued list.
Photo by Raimond Klavins on Unsplash
There is no way they want to sell it. And I said, no. We continue trying to get licensed in all 50 states, hiring somebody to do this and planning for our own sales and marketing. Sure enough shortly after, Lannett exercised six month termination clause in the agreement. Within these six months because of all of the background work we did, we got licensed in all 50 states and we hired Kirko. September of ‘22, I believe 5th or 6th of September, we hired Kirko. When we hired Kirko, we want him to succeed, so we immediately also issued a termination notice to Epic to bring home Isradipine and Trimipramine also by March of ’22. We got six month notice from Lannett. We issued six month notice to everybody else, hey, we want our products back, because we’ve got somebody who’s going to sell them.
We terminated the contract with Lannett for Dantrolene and brought that home by March 2023. We terminated the Prasco agreement and brought home Loxapine by March 2023. So in addition to Amphetamine IR and ER, we also had Phendimetrazine and Phentermine and Dantrolene and Isradipine and Trimipramine and Loxapine for [Indiscernible] that makes it a little better for a salesperson to go in with all of these products instead of one. Kirko joins in September and with the mandate to set up a commercial operations group and launch the Elite brand, meaning launch Elite’s products on our label. For all of Elite’s ANDAs that are available by April 1st, 2023. Kirko explained to us what the process involved, he needed to set up a national distribution system with the support of 3PL partners, 3PL stands for third-party logistics provider.
Because Elite does not have the capability and the warehouse operation to ship directly from here to pharmacies in smaller months and pick and pack and all of that, we needed the 3PL to do that. So he did that, he developed the specifications for the 3PL service. He set up the RFP process for the interested 3PL service providers to bid on a three-year contract to work with Elite. We consider six providers, reduced it to three and selected [Crossroads] (ph). Kirko’s mandate was to develop a commercial sales, marketing and distribution strategy, ecocide and distribution contracts with distributing partners such as McKesson, AmerisourceBergen, Cardinal, buying groups such as Premier Genetics, Optisource, Topco, RX Sourcing strategies, LLC, retailers such as CVS, Walgreens, Publix and Myers.
He also set up the contracting with the Center for Medicare and Medicaid Services CMS to provide access to Elite’s products. And was ready for national distribution of 29 NDCs on Elite’s label by April 1st, 2023. We got him in September and October, he already signed the contract with Crossroads the 3PL in November, he had the first contract delivered to us with Premier by December. He had contracts with Publix, Myers, Optisource, Golden Oaks and then Red Oaks, which is 50% for our business. He had contracts in place with all of these guys in addition to working with the staff, getting license in all 50 states, listing at in the compendium as well. When in March, the customer awards commitments began coming in, we are making batches for Lannett and we still managed to launch our products on April 1st.
April 1st through June, it’s my rough estimation that this is going to be a dip quarter, it’s going to be a low quarter. It’s going to be in the $7 million range in revenues. Now we’re talking about $7 million range just remember in 2019 in the entire year we made seven $7 million. Now in this quarter is about as much as we used to make an entire year. Elite now has in place logistics, warehousing, sales, and financial reporting for both controlled and uncontrolled products. Elite is executing its growth plan by filing new ANDAs as I’ve explained, obtaining product approvals and creating our own sales and distribution organization. We look forward to reporting our first quarter’s earnings and talking to you about it or analyzing it with you on August 15th.
Goodbye. All right, so take — I’ll go to some of the questions that you sent to Diane. And honestly some of the questions are as always some of our stockholders are brilliant, they ask the right questions, some of them give me great feedback and some not so much. I’ll start first with the partnerships and sales. The first set of questions, but five, six of them, five of them are about Mikah and Adderall, okay? I’ve addressed this issue to death and there will be no more at a single decision. If and when, the Board of Directors decided this time to make an offer. And if it is accepted then there will be an announcement, till then, we are in the same norm we were in the port, where SunGen on this product and if SunGen sold it to a Chinese or Indian company, would have been in the same boat or even worse, it does not impact Elite in any way shape or form.
The board will decide if and when they are going to make an offer and you’re asking the question doesn’t mean I’m going to tell you, oh yeah, thanks for asking, I talked to the board and they said let’s do this. These questions are meant to create negative impact on the Board and create gossip and we’re done with that. We are a serious company. We’re starting sales and marketing. We need to start in sustaining serious questions. Questions like why didn’t you give us the money in 2020 in order to buy this are really ridiculous. Okay? Under Lannett, Adderall XR barely scratched the surface. What are the expectations for Elite with this and the IR? Very intelligent question, really very complicated question. If this was not a controlled substance, I will tell you it will be like a home run with the base is loaded, but this is a controlled substance.
We cannot sell more than what the DEA permits us. We definitely are trying, but today I’m trying to give you the honest to witness positive picture about the company, so I don’t want to talk about the demons on my head and that is the DEA Census Code hand to mouth, we are having to struggle and turn things around and all the hard work we’re doing here, that’s not for you guys to worry about. That’s for Doug Plassche and myself and Chris Dick and Kirko to worry about. But we cannot make a product if we don’t have the API. To get the API, the DEA needs to allow us quota. The DEA is really controlling the quota now. The DEA is not developed here. They have a good point. They sent us analysis that they authorize, let’s say I don’t remember the numbers, let’s say 5 billion units to go to the market and they only see 3 billion in the market.
So where are the other 2 million? Are people holding on in it to drive the prices up or to wait till somebody can deliver and they have a failure to supply situation? They need to investigate that stuff. But Elite is now one of these people, we’re a tiny little company that really are making this stuff and next day we’re shipping it and we can show evidence that it’s going straight to the pharmacy and it’s being sold, okay? But of course, we have to go through the channels everybody goes through and we have to work with the DEA. And but for that we would do very well, okay. With this long answer, let me give you a positive twist. My expectations for 2024 that will probably double the ER sales, okay, at least go 1.5 times what we have with Lannett.
I’m hoping showing the DEA that I’m selling all of this and I have contracts that will give us a break and that break will go a little at a time, so it’s not going to happen today. So maybe by next year, when I show them all that data, they’ll trust us and give us more. But up till then, we’re going to be selling pretty much about the same thing we sold under Lannett or maybe a little more. Development questions, any word on the oxy genetic abuse study? Yes, as I just updated you, we really ran the insufflation study. We had to go radio silence on it because of competitive reasons. We submitted the data to FDA will supplement it in another 30-days or so with the rest of it. We will wait for them to give us final answer, I’m going to have final answer, we’ll let you know.
Does Elite Pharmaceutical have any plans to resume their abuse deterrent technology? Not at this time, it’s extremely costly. As I mentioned before, we don’t have the money for us to go back to the SequestOx, which is going to cost millions of dollars, we are better served taking care of the facility, the parent R&D line, Kirko, sales and marketing, and creating a foundation that will survive. Later on, when we have money disbursed, then we can do that. But right now, I have no interest in doing that for the reasons I mentioned. The ER is of interest to me and Pfizer is still blocking everything, because of what they did and we forget a way around that when we have the money. Right now, we don’t. Please provide an update on the Pyros genetic vigabatrin launch?
We are nearing one year into three year deal with zero revenues generated thus far. We sold Pyros the product. It is theirs, okay? We are contact manufacturers. When they ask us to manufacture it, we will manufacture it at a cost plus, but that’s about it. This is not a product that we intend to discuss. I wish them success. We will support them in any way we can to succeed, but this is their product now and we will contact manufacturers for a couple of years for them and we’ll move on, okay. Any update on Dexcel in Israel? Fanish ask this week we actually heard it from them. They sent us a notification telling us they are going to sent a samples for us to test, so let me explain to our stockholders that don’t understand the issue in here what’s going on.
We have a product that’s approved by FDA. We are selling it in America. The Israelis would like it. These are either laws are different than ours. They have the administrative health that needs to approve this product. If it’s approved by FDA, that’s a plus, but that doesn’t mean they automatically let it in the country. So Dexcel have to go through specific steps in order to make that product fit their country if they can. They may not be able to, okay. This is an exploratory venture that are trying. They think they can. They think it’s a great opportunity, they think they want to talk about other products. But all of that to me is talking till we get to the point where it gets approved? From our end there is nothing for us to do. The product is already approved.
All we can do is they sent the samples to go please compare this to that. Please compare to what we sell in Israel. Please look if you can see certain impurities for the Israeli Ministry of Health. Whatever they ask us for, we’ll do it. If and when we have a material event such as they’re going to launch the product, we’ll tell you. It will be great news for us to share. Other than that, there’s nothing for us to discuss really. Can you please provide some clarity on the CFO changes? I already did that. There’s two, three questions on that. When you work for a small company, you got to work hard. Look at Kirko in six months, he moved mountains. Doug Plassche, unbelievable acoustic same thing, I have an outstanding senior staff that we are all on the front line doing the work.
I cannot handle a person that recruiters bring into us. So they can be a corporate person sitting in their office and wanting to hire and entire staff and not work. You need to be a worker be at Elite, that’s what we all are. Business strategies, almost all previously communicated, strategies have failed. The three-pronged that was the last long-term strategy review. Please provide a strategic vision for investors as to where the company is heading near-term and long-term? And I only read this questions to make a point. First, the reason we exist today is because of the three-pronged approach, number one. Number two, every single quarter even though we are an OTC, bulletin boards, small company, I have digitize on what we’re doing, what we have done and what we’re going to do.
So these are the questions I will not be answering in the future. What are the revenue expectations for the current quarter? It’s going to be above 7%. The next quarter maybe 8.5%. The one after, maybe we’ll start hitting the mark, if not, definitely, by January. And as I said, I do expect us to surpass the 40 million at least when they did this [Indiscernible] and we are full swing and especially for next fiscal year. And by the way, the next CFO, the very first mandate for him or her, is going to be change this fiscal year crap from March to a normal year, because that is really annoying. What events has happened between the loss you see and today that you feel may have a material impact on the Elite share price? The first question is part of the question is wonderful.
The second one is the depressing part. As I just said, all of the good things that happen it seems like our share price is inversely proportional to our achievement. We’ve done a lot of great things and the share price is not moving. So I am not sure yet short-term what I can do to move it. Long-term, I have a plan, okay. In a year or two when we get couple of more products, there are certain things we can do in order to change that. But right now we have done a lot of things. I just want to throw them all from all of the achievements setting up sales and marketing, moving the products in-house, our revenues, all of that has been since the last meeting. What impact, if any, has the expiration of the Lannett partnership with the Elite Financials revenues on profitability?
As I said, I am hoping that will be in better financial shape, because now we’re in charge for our own destiny we can sell other products not only Amphetamine IR and ER with the same figure. Okay, I’ll disclose something for you to understand what I mean. The company that was selling one of our products, not the Amphetamine IR and ER, our lesser products brought in certain revenues in 12-months in the whole year. Kirko in 12-weeks brought in twice as much money and they did in the whole year. Why? Because it’s his product, he’s going there and trying to sell it, okay, versus the other company they put it and some compendium registering and somebody orders that they do and they don’t, they don’t. He actually sold more than they did in a whole year in 2.5 months, okay?
And it’s still the first quarter, yes. So this is the kind of thing that I’m hoping will help us financially. Revenue wise it’s going to be more, profit is going to be a little tricky, because now we have a higher cost for the sales and marketing department, okay? Just to give you a simple example that just came to mind, let’s assume you’re a pharmacist and you have five products in your pharmacy and one of them is mine, you’re selling it. Well, you decide not to sell mine anymore and I want to sell it. If I open a pharmacy for that one product, if you and I sell the same amount of product, my cost is higher, because I only have one in the pharmacy and you got five, okay? So how the profitability is going to work over the next few months? I’m still trying to figure out that out and what other products we can supplemented with, maybe even going as far as asking another company if we can sell their product in order for us to do that.
There are other things we can do. But right now, I got to focus on how to make this a success, okay? And then we’ll move to the next step. As Elite has become self-sufficient financially. Would you consider taking your salary in all cash as this would have a definite impact on the dilution of the share of the company? Listen, nothing would please me more than I would have been paid in cash from day one. The reason I don’t is because we don’t have the money. And it is a little bit weird for me to say to the board, hey, yeah, why don’t you pay me in cash? And by the way, I’m loaning you money because you need it. So yes, the answer is yes long-term, I’m hoping in a year or two, we will change all of that. As of today, it’s only me and the Board that gets and talks everybody else, we’ve cleared that out.
And hopefully we will change that. But right now, this is what’s working for us and we’ll continue doing it for at least another year. Can Mr. Hakim explain on the press release regarding the increase in R&D and setting up sales and distribution effect or efforts? Both are quite important. My interest in R&D is if the company is working on products with substantial marketing opportunity. That’s very intelligent question. That’s really a true stockholders question and the answer is yes, as I’ve explained before, we’re spending more on R&D, because that’s our lifeline, that’s our bloodline and unless we feed that, is going to be a point where your revenues are kind of start to go down and you’ll go out of business and the same goes for the sales and marketing.
Thank you for that question. Okay. Launch of Elite’s label. How is the launch of the Elite label going? It’s going well. It’s very exciting actually. I traveled with Kirko to Dallas one time. We spent an entire week of going through with all of the potential sales and marketing distributors and man he knows everybody and he’s well connected in there. And we launched as April 1st, slow and study and May was much better than April and June was better than April and May. And July will be that and August will part to tip-off and after that we will be in a nice trajectory. We have not had any updates on the impact of the new sales department leader has had on the company? Can you share with us some of the achievements since he came on board? I already went through all of that.
Kirko has done an outstanding job with Elite. So I’ll not repeat everything I said, but I’ll tell you this, Kirko is not only a great employee. He’s really a great human being, yes. I sat when we want to meet with that also, I sat with him in the car for five, six hours each race, so we spent 10 to 12 hours in the car. He really is a wonderful human being. He is a good family man, a good human being. He is fun, he is intelligent, he is highly educated and IT graduate. He speaks multiple languages. He is well liked as I said everywhere we went to a conference call, it was like speed dating. They bring people every 20 minutes. Every 20 minutes you have to part two different company and they kicked them out another 20 minutes. And everybody that came in, he either knew them, knew the college that were there before them and knew their families and knew their company once it’s with their history.
So many of them were delighted to see him and that goes a long way in getting sales and marketing. What he’s done in the past six months, we take somebody else over two years, okay? I just realized something. Diane, do you think Kirko is listening? Because if Kirko is listening, this is going to ask me to renegotiate his contract. So let me amend my question and say this, he’s doing okay, all right? I’m going to have to study him for a year and two before I give you a final answer. Well, thank you all for listening. This concludes our meeting for today. We will talk to you on August 15. Have a wonderful weekend and happy birthday to America. Thank you, Mathews.
Operator: Thank you, everyone. This concludes today’s event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
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