Barry Weiner - President & CFO Jim O'Brien - EVP, Finance

Kevin Ellich - Craig-Hallum Norman Hale - Stifel

Thank you. Good morning and thank you for joining us today.

On the call with me is Jim O'Brien, our Executive Vice President of Finance. I am pleased to report that fiscal 2017 was a year of significant advancement for our company.

It ended on an especially strong note with higher fourth quarter revenue and significant business activity to drive our business strategy to provide low-cost, high-performing, and easily adaptable molecular diagnostics as both products and services to the clinical laboratory community. From its inception, Enzo has had a singular view of what we hope to achieve namely, the development of radical approaches to developing diagnostics.

Five years later, we introduced breakthrough technology for the nonradioactive labeling and detection of nucleic acid or DNA. That became the catalyst for the continued and expanded concepts and products that were eagerly embraced throughout our industry, incorporated in a host of diagnostics many of which continue to be widely used today.

Our innovation is centered on improving the diagnostic industry with leading-edge products and services at affordable prices. These have to be easily adaptable as well.

Ours has always been a practical approach, applying our knowledge and experience to health care and particularly to diagnostics, where we can achieve the greatest benefit for physicians and patients. We had numerous successes in product development approvals this year that demonstrate the validity and broad application of our science.

In the meantime, we have built one of the industry's largest libraries of intellectual property, attesting to our technological achievements over the past years. This has proven to be invaluably important as we have added to our capabilities without the need to secure from others permission or to pay them royalties as so many companies who do not have the benefits of our formidable and longstanding fundamental research do.

The other important component of our considerable strength is our manufacturing capabilities that fit together to reflect a strategic vision of self-reliance. Our research and our manufacturing complement the third leg of our unique standing, namely the coordinated integration and commercial operations of our life sciences and clinical lab activities, and the development and proof in production of highly effective products and services that are now becoming our hallmark.

It's not enough to have insight and vision. What's also needed is a practical method for evaluating and fine-tuning tests that can meet or surpass today's challenging diagnostic requirements, particularly in the fast growing molecular diagnostics area, and not least to do so on a cost-effective basis for our customers.

I'll have a bit more to say about our business and its progress shortly, but I first would like to review with you our recent financial results. In doing so, we want to note the growth we are reporting along with our cost management efforts directed at keeping our expenses in line.

The financial results as you may have already determined from the release we distributed late yesterday show higher revenues with increased gross margins, strong cash flows and a highly liquid balance sheet that gives us flexibility to grow our business. Our business is growing and Enzo has many exciting opportunities for expansion in a marketplace that is in need of affordable solutions.

The fourth quarter was a strong one. Total revenues advanced to $28.2 million, which is up 6%.

Clinical lab results, especially from molecular diagnostic tests were a key driver. Gross profit increased to $12.4 million.

This is a 2% gain. Operating expenses declined to $13 million.

This is from $13.5 million a year ago. SG&A expenses likewise declined to $10.9 million.

This is down 3% year-over-year. Due to higher clinical lab revenues, the provision for doubtful accounts also increased slightly to $800,000 from $600,000.

This is about 4% as a percentage of revenues, which compared with 3.3% a year ago. Legal expenses declined 43% to $400,000.

On a GAAP basis, net income approximated $100,000 or breakeven on a fully diluted share basis. This is compared to a year ago net income of $36.1 million of which $38.8 million came from legal settlements and licensing payments.

Excluding these legal settlements, the non-GAAP net loss for the previous quarter amounted to $1.9 million or $0.04 per fully diluted share. This is resulting in a notable turnaround to a non-GAAP profitability.

Similarly, EBITDA and adjusted EBITDA of $900,000 compared to a year ago EBITDA of $38.1 million and adjusted EBITDA of a loss of $700,000. This is a $1.6 million improvement.

Looking at quarterly segments, revenues at Clinical Labs increased 13% to $20.4 million. This growth has come from more testing volume, particularly in the areas of molecular diagnostics and esoteric testing, a deeper penetration into our existing markets such as the tri-state New York region and a move into the areas around us such as Connecticut.

We also are achieving new customers in our core service areas. An important reason for this has been our growing lines of medically relevant molecular testing products and platforms; and in particular, our women's health diagnostics capabilities.

Clinical Labs' fourth-quarter gross profit totaled $8.3 million or 41% of revenues. This compares to $7.3 million or 40% of revenues a year ago.

This is largely due to higher commissions resulting from the business growth. SG&A also increased $500,000 to $6.5 million, though as a percentage of revenues it was lower by 100 basis points to 32%.

Operating income increased 25% to $1 million. Enzo Life Sciences continues to perform well, given its shift in emphasis to clinical markets along with lower governmental and research spending.

Year-over-year revenues declined 7% to $7.5 million; however, they advanced 2% quarter-over-quarter. Gross profit was $4.1 million compared to $4.8 million a year ago.

SG&A declined 14% to $2.6 million and operating income declined $200,000 to $0.8 million. For all of fiscal 2017, consolidated revenues were up $5 million or 5% to almost $108 million.

Clinical Lab revenue was up 9% year-over-year, while Life Sciences were off 4%. Gross profit increased 6% to $48.3 million and consolidated gross margins were up 100 basis points to 45%.

SG&A increased slightly to $44.0 [ph] million. The full-year provision for uncollected accounts receivable increased 19%, again in line with the greater lab business.

The fiscal 2017 GAAP and non-GAAP net loss was $2.5 million, which equals to approximately $0.05 per share fully diluted, compared to GAAP net income of $45.3 million or $0.98 fully diluted per share and on a non-GAAP net loss of $9.2 million $0.20 per fully diluted share, a year-over-year improvement of approximately $6.7 million. The adjusted year ago largely reflect excluding the affirmation net legal settlements and licensing payments, which approximated $57.3 million.

EBITDA and adjusted EBITDA for 2017 was $0.6 million. In the prior year, EBITDA was $50.5 million and adjusted EBITDA was a loss of $5.1 million, again a sizable improvement year-over-year.

As I indicated earlier, our balance sheet remains strong and highly liquid. Cash and cash equivalents at year-end exceeded $64 million.

That is after fully paying down bank loans of $1.6 million leaving us debt-free apart from our capital leases. We also utilized approximately $1.8 million in capital expenditures during the year and are working capital as of July 31, 2017 stood at a solid $71.3 million.

The takeaway from all of this is that not only is our financial position on a highly sound footing, we're well-positioned to move forward on Enzo's business strategy. In recent meetings with potential partners and investors there has been a clear understanding and appreciation of the opportunities and the capabilities at Enzo.

Recently a report came across my desk that estimated the U.S. in vitro diagnostics market at $60 billion and targeting its side at over $78 billion in 2021, with molecular diagnostics as the fastest growing segment.

It noted however that market growth is restrained by the lack of reimbursement and increasing healthcare cost. While we agree with the latter assessment, the fact is that the plight of independent labs is getting more difficult.

Their economics are weak and frankly possibly unsustainable. The reason high cost of goods and services, coupled with declining reimbursement.

This was again reinforced with the release of the PAMA Legislation on Medicare Reimbursement this past week, that will potentially take a 10% price reduction of many high-volume tests in each of the next three years. Our strategy is to provide affordable diagnostic products and services, enabling these laboratories to realize higher returns despite the steady erosion of reimbursement and the rigid pricing of products that they need to effectively manage in their diagnostic processes.

Given this scenario, our vertically integrated diagnostic structure uniquely positions Enzo in this challenging environment. Our years of technology and product development and intellectual properties with our internal capability for platform creation, development and manufacturing all of which are currently in full swing, coupled with our clinical laboratory that is able to translate and validate our efforts, leads us to an extremely streamlined and efficient approach to bring pertinent products and services to the market.

In sum, we are able to market products and services at prices measurably below prevailing reimbursement allowance thereby improving margins for our client laboratories. Our increasing roster of lab-approved diagnostics is not only less expensive, but also superior in performance and utilization.

I'd like to share with you a brief example of a few of our newly developed affordable diagnostic products and platforms which we think will be a value added to assist in achieving the goal of allowing clinical laboratories and ability to generate sufficient margin from their services and products into the future. In the anatomical pathology area, our POLYVIEW technology that includes HPV probes that's human papilloma probes and detection reagents has received a recent important validation.

POLYVIEW is an enhanced detection system that is used by pathologists in reading tissue biopsies and it was the subject of an exceedingly favorable article for Enzo in the prestigious -- in the prestigious peer-reviewed annals of diagnostic pathology. It reported that POLYVIEW resulted in no false positive in tests as compared to other test from competitors and these I might suggest are the leading competitors in the industry that showed a larger percentage of false positives in their results.

The article in which the results were discussed was among the publication's most downloaded article in the last 90 days, indicating really substantial interest. False positives of course could lead to unnecessary treatments and health risks for patients.

Second, our flow script platform has consequential -- which has consequential and broad application for the detection of genotypic and phenotypic markets via flow cytometry is also starting to have some penetration. It is also the first product for its use, addressing the cervical cancer testing market.

While enabling the identification of certain upregulated oncogenes that can be indicative of cancer progression, it also importantly allows for the multiplex analysis of cell and function that can identify in a single assay to the simultaneous examination of thousands of individual cells. Similarly, our line of FISH probes consisting of proprietary dice and cell biology assays have demonstrated their outperformance compared to other commercially available dice and of course our AmpiProbe technology platform that encompasses high sensitivity and is in part built upon our pioneering real-time nucleic acid amplification breakthroughs is providing low-cost molecular diagnostics to our clinical lab.

The AmpiProbe platform efficiently and at considerably, relatively reduced cost provides a simpler and more sensitive testing capabilities than PCR, while allowing handling or running multiple analytes on a single test of a single specimen thereby improving cost and patient care. The multifaceted aspect of this platform is evident in our AmpiProbe HCV product, which provides for the quantitative detection of hepatitis C virus.

It was the first of a line that we have undertook in the development and expanded operation of producing these low-cost PCR platform-based tests. And these tests will ultimately identify a number of infectious diseases in many different areas.

High on the list is the Endo Women's Health Panel, which thus far encompasses 11 approved of the 14 projected analytes to be incorporated in the system. This panel will have an impact on our lab results and will even be more impactfully anticipate with the availability of the remaining four tests that will complete the full panel to be offered to the market.

The success of this line lies not only with its broad applications, but the fact that the panel will allow for the diagnosis of these 14 different analytes from a single vaginal sample. The savings in time, cost and the patient's discomfort is substantial and self-evident.

We anticipate the completed panel in the very near future. Our development work is of course ongoing for use on additional infectious diseases, as well as cancers where our platform and assays can provide new standards of effectiveness and economy.

The marketing of these products now that we will soon have available a full roster of products that can utilize these platforms is underway within energized sales team and the marketing tools necessary to get our story fully understood and appreciated. In addition, we are strategically expanding our nationwide approach to the laboratory for low-cost reference testing.

The benefit to Enzo is to utilize time available during the day to accommodate transcontinental specimen shipments while awaiting local deliveries that typically are done overnight. It will be an important value add.

But value is not a one-way street. It will be equally valuable to the many independent diagnostic labs that either do not have the wherewithal to keep up with the expense of hiring qualified technicians or to quit their facilities to meet today's advanced diagnostic needs.

And we’ll keep them in the game so to speak. In terms of continuing to properly serve and maintain relationships with their physician clients, as well as other local medical institutions, while at the same time providing a formidable avenue for dealing with the shrinking and in some cases nonexistent profit margins and providing them with a lower cost expandable menu to better compete in the broad market.

We believe Enzo is clearly on the cost of a profitable growth oriented strategy. We plan to add manufacturing space and make the appropriate investments to accommodate our growing product lines and customer demand.

Before I end my prepared comments, I'd like to share with you my thoughts on the CMS draft fee schedule issued under PAMA legislation last week. As many of you may know, CMS is targeting a 10% savings on most high-volume test in each of the next three years.

While Enzo service business will likely be modestly impacted if the draft fee schedules is enacted, we believe the impact on other independent labs could be dramatic and potentially devastating. High cost of reagents and other operating across, along with declining reimbursements could curtail services or more significantly force laboratories out of business.

The head of the National Independent Lab Association, NILA commented recently, and I quote, "Laboratories will be forced to lay-off thousands of workers across the U.S. eliminate services or close their business all altogether if the reimbursement trends continue specifically referring to PAMA".

This is precisely the reason why Enzo's business strategy and operations are so important to the industry's health. We are developing technologies that may enable independent labs to save 30% to 50% of the cost of their specific tests meaning that Enzo is providing a valuable alternative in the marketplace of shrinking profits.

We believe Enzo strategy is most timely for the market and is designed to support the survival of independent laboratories across the nation. Our program of offering labs a choice of low-cost product or a low-cost service is a unique option in the market.

It is said that the past is prologue. In Enzo's case, the past is very much a part of our present growth.

Since the years and experience we have accumulated and the technological advances we have achieved embedded in our intellectual property estate, provides our company with expansive opportunities. Our products are not only cost-effective they are qualitatively superior in many respects thus providing options for our customers and we believe a tremendous growth outlook for Enzo I think on that note I'd like to turn it over for questions now.

Good morning. Thanks to you guys for taking the questions, and Barry thanks for all the commentary.

I guess I wanted to jump off with your comments on PAMA, and maybe if you could provide a little bit more detail quantifying what you think the impact will be. And actually maybe even more so what’s your big picture view on the opportunity and where do you look to gain the most share if PAMA is implemented as it came out last week?

We believe the impact on lab could result in approximately plus or minus about $500,000 bottom line swing. We don’t consider that to be material considering the growth opportunity and the level of growth that we have been exhibiting in the lab and we’re fortunate.

As you can appreciate a very strong percentage of our business and our strategy is targeted towards the women's health market which is a marketplace which is not strongly impacted by Medicare reimbursement and that is a good fortune for us. In terms of the potential we are bringing forward products as you may be aware that our address markets that are in some respects outside of the Medicare universe in the women's health area.

The women's health panel though having utility in a broad female market certainly has its large-scale opportunity in women below the age of 65. And that panel I think will be a revitalizing approach for many labs around the country because not only will it be low-cost for them, it may provide them the opportunity to penetrate into markets that they don't have penetration in the women's health area.

Our strategy and approach is beyond just the singular capability of providing a low-cost panel but it’s a opening up other labs to the opportunity to capitalize on our flow of testing modalities and what I mean by that. We are emerging with HPV testing, the POLYVIEW product I spoke about briefly in my comments is a product that has utility in viewing the clinical morphology of HPV specimens that would be utilized by pathologists.

The women's health panel targets STD-based issues for women. The approach of using FlowScript and other product I referenced in terms of detecting E6, E7, which our markers that correlate with the integration of cervical into the nucleus of cells of high-risk HPV strains is another flow on test.

So you can see that there is a flow of products that will provide a comprehensive panel for physicians in the women's health market that will not only be lower cost to these labs, but in many cases may be unique and provide them with an opportunity to become a more full-service provider thus generating higher marginal returns for them, and we're looking to do this in all the other segments of the market. I commented on products in each of four or five different strategic categories that can be a value, and we will continue to grow analytes within each of those categories, so we think we will be providing a comprehensive package to labs around the country to expand their menus and expand them and provide products to their client base at a cost structure which they will make money and thus offset the potential changes that PAMA could enforce on them.

And then I guess just since you touched on the women's panel, we can move on, but with AmpiProbe just wondering what’s the status of the national launch and give us your thoughts as to how big that could be for you?

We are awaiting the launch of the final four analytes. The product is being assembled.

We have a program in place that is beginning to market. We’re actually expanding our sales group to address some of the needs on a nationwide basis.

We have done a fair amount of pre-marketing work in this area. We are awaiting the final assembly in comprehensive launch of this product, we hope to have it out by the end of the year.

And then you said expanding the sales group, should we bake in any additional costs into our model for the expansion of the sales force?

There will be an expansion of the sales force. It will not be an extensive expansion.

We believe it will be an expansion that will be absorbable into our current P&L approach. We are looking to higher revenues to offset the expansion costs of that.

And as a result, it will be a conservative yet directed level of increase in our sales team.

And then moving over to the gross margin, the lab gross margins expanded really nicely over the last couple of years. We saw even some nice expansion this quarter, just wondering how much more should we expect your lab gross margins to expand, and what are the main drivers behind that?

Kevin this is Jim O'Brien. I would say that you could expect gross margins to expand once the AmpiProbe panel and a number of our other proprietary technologies are rolled out on a national basis.

The reason why our strategy is so important is because if we can control the cost of goods, you’ll see the margins going up, and we expect that to happen over time with our penetration into the national market as a reference lab, but also providing products to labs, so if they choose to run themselves. So I think part of our overall strategy is not only to grow the topline but you'll see the improvement in gross margin when we are running the tests that we developed internally ourselves.

We internally manufacture all of these tests. and as a result we have a lot of leverage in the cost structure which moves to the costing capability as well as the revenue opportunity as we move forward.

So we are, I think one of the unique aspects of Enzo is that we have an extremely tight control of our cost, and I think that is a necessary and fundamental aspect to both produce products and to be able to excel as a clinical lab with significant margins that we are shooting for.

And then just wondering if you could give us an update I believe you guys last quarter talked about a new in network contract with and I think it was the fourth largest commercial payer in the country. Wondering how that’s going and how much volume that contributed this quarter?

So we did have a first full quarter of the new lab arrangement that we talked about last quarter. It has a couple hundred thousand dollars in this quarter by virtue of the fact that we were able to turn on and providing network benefits to our existing clients.

We really expect that to grow over time as we gain more customers but it has immediate impact on the – quarter and we're very happy to see that. We’ll also have another dialogue with other labs excuse me other providers to expand our in network status and those take time to develop.

But we’re optimistic that more relationships such as the one that we entered into on April 15 we’ll continue for Enzo.

And Jim can you remind us are you in network the top three commercial payer?

Yes we are.

And then just lastly what are your thoughts on clearly we like to focus on molecular diagnostics but what are your thoughts I think on high value diagnostic test are doing much in way of oncology and immunooncology that is like PD-L1and how big of an opportunity do you think that is?

We are a full-service laboratory as we have said in the past about 50% of our revenue we consider to be routine and about 50% esoteric. Obviously those percentages will change depending on how you cluster or categorize certain tests.

We tried ourselves on the fact that to our clients our regional clients we are a high level of service laboratory that will fulfill all of their testing needs and thus we can compete with a Quest or a LabCorp. And we have been able to do that successfully and I think that is being demonstrated in our numbers.

But specifically to your question, we have been expanding our testing menu dependent upon market need and you know we look at each test individually, we look at the opportunity of each test before we will consider to bring it in-house and I think there is growth but again when you look at some of these specific companion diagnostics such as you refer to, the market size I mean they're very important and necessary test but the market size may not be as large as test that require repetitive utilities such as hepatitis C virus which may be run every month and someone who is a carrier of hepatitis C virus. So we have been targeting on the high volume molecular tests.

We have in a partnership relationship with many other providers of tests within the industry as you aware we, we work with companies such as Councill and Progenity in the women's health area, and we are continuing to bring on relationships with other developers and we are serving as very much a logistics and service provider for them. So we have access to all of these tests.

The real key question is what do we wish to bring in-house and are the economics of bringing them in-house predicate an investment to do such. And this concept is what we believe will ultimately drive our concept of providing low-cost service reference testing to the marketplace.

We are looking to change the conventional paradigm, their referencing tests to other labs is a cost structure for a lab where it can be a profit structure for a laboratory and this is the paradigm shift that we are out soliciting and marketing and educating today and this is exactly to point. If a test does not have a large enough volume to predicate running a test in-house, we suggest that labs consider referencing it out but referencing it to a lab where they can make a marginal return which is not the conventional approach in the market today.

So we look at all the new test to come out. We think there is a space for them.

There is a market for them. The issue is the economic performance of the test and do you bring them in-house or do you reference them out.

And again one last point of that is also the reimbursement issue. Many of these tests have a challenging reimbursement issue at this point in time, and as a lab we are very stringently focused on getting paid for the test that we do and thus we will focus on them, on the ones that we get paid for over the ones that are more challenging to get paid for.

Impressive report obviously you guys are making significant progress on a variety of different front. I've got a few questions, first I haven't heard you guys mention anything about your product that’s targeted for uveitis.

Can you tell me how that is progressing?

That is currently under - the first stage of that trial was completed and is being evaluated at this point in time. We are - we've not released anything on it yet until the complete evaluation of the data is done.

It is you know a trial that was conducted at the National Institutes of Health and we are just awaiting results.

As far as timeframe, any idea when you guys could possibly hear something.

I really can't comment you know - this is not in our control.

Your product called POLYVIEW, I'm reading and rereading this paragraph but seems to me that if your product generates no false positives and these other products I guess frequently or at least noticeably producing false positives, I mean it would just make sense to me that the community should shift over to POLYVIEW. So if time and money…

That's correct. This product was run and this was run by an independent academic at Ohio State.

The publication is out it's a very, very compelling publication we've had a lot of feedback because of it the results were run against samples of human papillomavirus, breast cancer and certain types of sarcoma the uterus. The results were fairly striking we believe we have a very good product here now we’re starting to make it available in a broad level.

We were very pleased and I think it speaks to the capabilities of Enzo I mean our products not only do we target them as low cost, but we’re also providing superior results. And I think it's a combination which we hope will drive success on this.

Well I mean - exactly I think this thing is – very successful, but all of this reimbursement reduction and other things I mean this by itself is very cost effective I mean obviously Medicare is trying to do everything they can to cut costs I mean it’s just – the financial equation doesn't work over there. So they’re trying to cut cost but if you can eliminate the need to do unnecessary procedures to eliminate the need to have to redo some of these lab tests when we get a positive you – often times you’re going to go back and redo the test to verify whether it was correct or incorrect and this just eliminates those problems completely.

So we believe so we were very pleased with it. And again interestingly this product was run against the two market leaders in the industry.

So I mean I don't want to get into the specifics of the parties that this was run against, but the article is public and one can access it and read it to themselves.

The marketplace for the products or the diseases that you're selling into in terms of the dollar amount how big is this market?

I'm sorry you mean you’re talking about…

Yes, what’s the revenue potential on this product?

With the AmpiProbe products or the POLYVIEW product, on the POLYVIEW is a smaller product it’s a product which is used by pathologists in looking at tissues. So the markets – I mean – the size of the – I mean it depends if you look at the totality of the market which is in excess of $1 billion but the specific indications would probably bring that market down and I would say the market is probably about $500 million to $600 million for this product.

Barry going back to your Investor presentation if you guys generated several months ago the HIV viral load for the AmpiProbe real-time patient detection what is the status there?

That is under development right now we hope to have the complete viral load panel out in the first quarter of next year. That panel will consist of hepatitis C which is already approved, hepatitis B and HIV.

So it is in development and we hope to have it out soon after the first of the year?

And to be able to offer all three products I mean obviously from an efficiency standpoint your sales force I mean that's got to be a major step forward for the company?

Well its part of the compendium of products that we hope to offer to our community. Again this is a high-volume panel hepatitis C, hepatitis B if have these and even HIV viral load monitoring is a routine repetitive test.

And as a result has significantly high volumes. And we are targeting these high-volume areas of value.

And Barry on the reimbursement cuts that have been proposed and I would probably assume that they’ll probably go through. And I know you’ve discussed this previously but the labs have sort of bit let’s go on marginal profitability some of them are going to be tossed into unprofitable mode.

And obviously they’re going to have to either change their business model or they’re just going to have to close their doors one of the two. So have you been getting phone calls or had communication with some of these laboratories that will be vulnerable or to shift over to new business model which would be they would just collect the specimen send them to you et cetera?

As part of our marketing efforts we have done extensive outreach to the laboratory community. The issue of margin of cost is high on the spectrum of concern.

We've had actually extremely favorable feedback and interest from the marketplace. I think the issues here are significant and severe to this market.

I'm optimistic that this PAMA schedule will be reviewed and looked at and revised because I believe the consequences will be quite extreme for the market as a whole. We’ll see what happens I mean there is history for CMS to back away after the period of comment on these types of the price cuts we’ll see what happens.

As I mentioned earlier in many ways this is a supportive and supports our concept though it is bad for the industry as a whole. I believe it will drive more interest into our product lines into our approach.

I think it supports the thesis that we are putting forth that if you have 7600 independent labs in the United States they all do not need to be able to perform and run the same tests have the same overheads, have the same equipment in today's environment of logistics and communication and IT capabilities the consolidation of processing is not one that need to be handled internally by every lab in this country. So I think that requires a mindset change a paradigm shift and a review of how business is conducted in the clinical laboratory market.

And we hope to be a principal player in that and a principal beneficiary of the utility of providing low-cost tests.

I didn’t see in your new release I didn’t see anything about any discussion of how your litigation is progressing, can you talk on that subject?

Yes, we are now waiting the review and appeal of two summary judgments on two of our patents out of the I believe four or five that were put forth against a number of defendants until the appeal comes out I don't believe we will be moving forward with trials for them until these are consolidated which could be another four to six months. We have a number of patents still active against these parties and this is part of the process.

We recently had negative judgments on two patents which we believe consists of very appealable subject matter. We do not believe that they were correct and this is the up and down of the litigation process.

We’re still highly confident on what we’re doing its part of our process, but I think it will play out over the next year.

We thank you for joining with us this morning. We look forward to our first quarter which will be reported in mid-December.

We appreciate your confidence and your support, and we look forward to getting back to you in mid-December.