Barry Weiner - President, Chief Financial Officer, Principal Accounting Officer.

Bill Bonello - Craig-Hallum Pat Gallagher - Laidlaw Norman Hale - Stifel.

Good morning, and welcome to the Enzo Biochem Inc. Fourth Quarter 2016 Operating Results Conference Call. I will now read the company's Safe Harbor statements.

Except for historical information, the matters discussed in this news release may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended.

Such statements include declarations regarding the intent, belief or current expectations of the company and its management, including those related to cash flow, gross margins, revenues and expenses are dependent on the number of factors outside of the control of the company, including, inter alia, the markets for the company's products and services, cost of goods and services, other expenses, government regulations, litigations and general business conditions.

See risk factors in the company's Form 10-K for the fiscal year ended July 31, 2016. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve a number of risks and uncertainties that could materially affect actual results.

The company disclaims any obligation to update any forward-looking statement as a result of developments occurring after the date of this conference call. During this conference call, the company may refer to EBITDA, a non-GAAP measure.

EBITDA is not and should not be considered an alternative to net loss, loss from operations or any other measure for determining operating performance. The company has provided a reconciliation of the difference to GAAP on its Web site, www.enzo.com and in the press release issued last night. Our speaker today is Barry Weiner, President.

At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments following the presentation. I would now like to turn the floor over to your host. Mr. Weiner, the floor is yours..

Good morning and thank you for joining us today. On the call with me is Jim O'Brien, our Executive Vice President of Finance and David Goldberg, our Vice President of Corporate Development. We issued our fiscal 2016 fourth quarter and full year results press release after the close yesterday; you can take a look at it on our Web site at enzo.com.

Today's call is a very special call in that we wrapped an excellent fourth fiscal quarter and year-end for 2016, we did this on all fronts. And we ended it on a particularly strong note, setting the stage for what we anticipate will be further gains in the new fiscal year.

I will go into details shortly, but briefly here are some of the high points, I want to share with you as to what we accomplished in fiscal 2016. We had solid revenue growth and final quarter with strong marginal improvements. Our consolidated revenues were over $26.6 million for the fourth quarter and $102.8 million for the year.

Consolidated gross margins were 100 basis points better in the fourth quarter this year than over prior year period and gross margins were solid year-over-year despite a decline in third-party royalties.

We saw another 5% growth in the fourth quarter at Enzo Clinical Labs and double-digit growth of 12% for the fiscal year as the segment continues to achieve solid growth in women's genetic health marketplace. Both clinical labs and life sciences operating segments continue to be profitable and generate positive cash flow.

In fact, on a consolidated basis, if non-GAAP adjusted EBITDA were to exclude legal litigation expenses, Enzo would have positive cash flow returns for the full year.

Along with the improved operating performance of our businesses and aided by legal settlements and licensing agreements, net income for the quarter was $36.1 million and $45.3 million for the full fiscal year.

Gross legal settlements and license agreements were over $82 million in fiscal 2016, illustrating the value of Enzo's intellectual property estate.

This year, we saw three new product approvals by New York State along with a strong product development pipeline underscoring our growth opportunities as a supplier of advanced low cost molecular diagnostics for reimbursement constraint independent clinical laboratories.

Enzo Clinical Labs is growing market share in the women's health market and also expanding general operations beyond the current regional New York area. Our cash position is over $67.8 million with working capital of over $70.8 million.

Cash flow provided by operations in the fourth quarter and year ended July 31, 2016 was $36.1 million and $53.1 million respectively. The legal settlements and licenses and the operating performance of business segments here are providing the financial strength that will enable us to execute on our business strategy.

All these gains have resulted because of our integrated structure, which is unlike any in our industry and one which we believe would be very difficult for others to duplicate. It starts with an extremely comprehensive patent estate built-up over several decades.

This asset provides us with broad freedom to operate allowing us to be self-reliant from discovery, right through to product development validation and launch. It also allows us to produce product at lower cost than most molecular diagnostic companies, as our products are free from the royalty tax that plague most of our industry.

This also provides our company with enormous flexibility and technical insight that measurably enhances our development programs.

In addition, we have uniquely and strategically woven an integrated ability that combines the product development, production and global marketing capabilities of our life sciences division with a practical real-world testing and utilization of our clinical laboratory.

This combination has given us a commanding position as both a reference lab and provider of molecular diagnostic tests.

Together our group plans to offer independent labs throughout the country and overseas and opportunistic return to meaningful profit margins in this day of shrinking reimbursements with savings of 30% to 50% or greater from the market prices.

And our structure has proven important and our ability to gain regulatory approval for our laboratory developed test from New York State which can be marketed nationwide. At the same time, our focus litigation program to protect our valuable patent estate is paying off handsomely.

With a solid growing cash position operations that continue to generate cash positive flow and virtually no debt, our strong financials are providing us an important capability to pursue our goals and deliver investor value. As for the financials, the year was excellent. Consolidated revenues rose to $102.8 million at sub-5% from the prior year.

Double-digit growth at Enzo clinical labs was highly instrumental in that performance. Gross margin for the year increased 6% with gross profit amounting to a solid 44% for both years despite a decline in third-party royalties.

With our concentrated development effort, which is critical to our future success, R&D though up 5% year-over-year held steady at 3% of revenues. SG&A likewise was up 6% including a particular one-time expense, but it also held firm at 42% of revenues for both years.

Legal expenses declined by 27% to $2.4 million due to pre-trial, expert testimony and other related expenses that have already occurred. We will have more on the legal front later. Meanwhile, we reported $57.3 million in legal settlements net in 2016, which helped materially to drive net income of $45.3 million or $0.97 per share fully diluted.

In the prior year, with net legal settlements of $11.5 million, we had a net loss of $2.3 million, important improvement of over $47 million year-over-year. On a non-GAAP basis adjusted for this fiscal year's proxy cost and various legal issues, this was a tax effect.

The net loss was $9.2 million or $0.20 on a diluted share basis, sharply down from the fiscal 2015 net loss on a similar adjusted basis of $13.5 million or $0.30 per share on a diluted basis, that's $4.3 million difference. Likewise, non-GAAP EBITDA improved to a negative $5 million from a $9.4 million negative.

It is important to note, if non-GAAP adjusted EBITDA were to exclude legal litigation expenses, Enzo would have positive cash flow returns for the full year. Our non-GAAP results underscore the achievement and the progress, we have made to execute on our business strategy and deliver successful results.

Mentioned earlier, we ended the year on a strong note with fourth quarter revenues up 4% to $26.6 million. Gross margin increased 7% to $12.1 million and gross profit advanced 100 basis points to 45%.

As it has all year, the provision for uncollectible expenses for the three month period was very satisfactory and on a year over basis remained at 3% of revenues despite growth. This is the result of our focus billing and collection procedures, which have kept this key item in check.

The quarter also saw legal expenses declined by more than half to about $700,000. As most of you know, it was an exceptional quarter for legal settlement and licensing proceeds, which net totaled almost $39 million as compared to proceeds of $11.3 million a year ago that was realized in fiscal 2015's final period.

The fourth quarter results include the Life Technologies and Illumina's settlements, which were previously announced and like similar arrangements, these included fully paid up licenses on Enzo's patented technologies. The result, net income totaled $36.1 million for the fiscal 2016's fourth quarter. Net income equaled $0.77 per diluted share.

A year earlier net income was $8.4 million or $0.18 per diluted share. The non-GAAP quarterly net losses improved 27% to $0.04 on a diluted share basis, while the non-GAAP adjusted EBITDA loss improved as well by 53%.

On a segment basis, both the clinical labs and life sciences performed extremely well and are positioned for future expansion as an integrated operation. Life Sciences' continues to be challenged by highly competitive environment along with the fact that research funding especially in academia continues to be weak industry-wide.

However, we have applied tight controls and as we previously as discussed are concentrating our selling efforts as well as inventory and higher margin products. Our commercial and clinical sales and marketing efforts are working to penetrate key accounts and developing valuable leads and advancing Enzo's products and services.

The results of these efforts should be visible over the next year. As for clinical labs, business has been growing well, the result of increasing revenues from proprietary tests and the continued focus on higher margin molecular testing. At the same time, costs are being well-managed.

The result is that for the year revenues grew 12% to $70.9 million with resulting gross margins of 40%, 200 basis points better than last year. Operating income more than doubled to $1.2 million.

We believe many opportunities for growth in the clinical lab exists including our reference services business outside of the New York metropolitan area, strategic account management, some of which has already occurred this fiscal year, and broadening our relationships with insurance providers as an in-network partner.

Fourth quarter lab revenues increased 5% with gross margin improving 7% and the gross profit percentage improving 100 basis points to 40%. Operating income was up 60% to $800,000.

Fourth quarter life science product revenues given the continued flux in the market, we are constant with the prior year at $8.1 million with gross profit amounting to $4.4 million a 6% increase and gross margin advancing 300 basis points to 55%.

Excluding legal settlements, net operating income at life sciences was ahead 58% year-over-year to $1 million. For the year, life science product revenues were off $1.4 million, again, chiefly in-line with our concentration on fewer products with greater returns. Gross margin consequently was off slightly.

But gross profit increased 100 basis points to 53%, while operating income was equal to a year ago. Royalty and fee income fell to $1.5 million from $2.5 million a year earlier, the result of declining sales are related products by our license fee.

At the close of year, our balance sheet was exceptionally strong, cash and cash equivalents amounted to $67.8 million, total assets were approximately $112 million.

As strong is the year was financially, what perhaps these figures do not show is the inherent strength in our growing portfolio of new platforms and diagnostic assays especially in the realm of molecular diagnostics.

We have this past year, received approvals for new products that should be accorded good acceptance given their unique scientific properties and the fact that they compete with products that cost considerably more.

Our estimates are that by utilizing our products both those already approved and those in the pipeline, other clinical apps can save materially on their cost of goods.

This is perhaps more important now than ever given the fact that reimbursements continue to trend down and that the cost of tests by most other suppliers continue to increase as a percentage of revenues. The result is that independent labs are finding themselves between a rock and hard place literally with dwindling or non-existent profit margins.

In addition to utilizing these new products in-house, our approach is to offer these products either for sale out right and/or performed by our clinical lab on a reference basis. Under either scenario, these labs should see consequential savings.

As we move forward with more and more approved products, we anticipate increased recognition and acceptance. Our current efforts are in marketing products and services once approved paving the way for increased recognition and utilization of our product line.

Given the economics of our systems, lab should be compelled to evaluate and integrate our product lines into their work flow. The line-up of products approvals by the New York State Department of Health and just this past year has been important.

I might add also the fact that we are seeing less lead time in gaining approvals now that there has been, where I would suggest this is perhaps a greater understanding of our methodologies as well as an overall development and testing standard appreciation. So, here is what we have accomplished on the product approval just this past year.

Last November, we received a first approval for a technology based on our AmpiProbe platform encompassing high sensitivity real-time nucleic acid amplification assays. Our AmpiProbe HCV assay can address a key and growing market in the identification and quantification of hepatitis C virus in patient specimens.

Incidentally, our scientists demonstrated at the last annual meeting of the prestigious American Society of Clinical Pathology, the superior thresholds of sensitivity for our HCV assay. The limit of detection a standard yardstick showed a significant improvement in analytics sensitivity than the leading commercially available HCV viral load assays.

Also approved what is the Candidiasis AmpiProbe Assay, which is our second test aimed at the women's health market. I might add that products for diagnosing various women's health issues have been an important target for Enzo.

It is reflected in the results of our clinical lab, though we have yet to fully display the full extent of our product line-up in this area. We have in development currently a number of additional tests related to women's health for which we anticipate gaining approval in the months ahead.

More recently, we announced last month, we received conditional approval for our PLAQPRO Lp-PLA2 Assay. This is designed to identify lipoprotein-associated phospholipase A2, a marker associated with the potential for coronary heart disease especially in women.

You maybe aware the detection as well as the treatment we made out of heart disease among women has been somewhat behind that of men, and so, this is an important new product in the growing arsenal to correct that deficiency, which should help improve matters all around.

We also rolled out a line of products aimed at the pathology market designed to allow for a more precise interpretation of tumor biopsies.

The first publication on this important product line is to due out shortly and we believe that these products could potentially reduce both phos positives and phos negatives that are sometime seen and difficult to identify tumor specimens.

As we look ahead to 2017, we have underdevelopment assays for the quantification of hepatitis B virus and HIV, as well as additional products based on our proprietary FlowScript platform in such fields as immunology and cancer.

And as I just mentioned, we are also working on a full spectrum of test designed to identify a number of infectious diseases related to women's health, one of the fastest growing segments of the molecular testing market. On the legal front, our case against Life Technologies in federal court in Connecticut is under appeal.

Our New York federal court case against Roche Diagnostic and a subsidiary is also still in progress and six of 11 cases of patent infringement brought in Delaware federal court remain to be resolved. Last week, we filed an additional action in Delaware against [Dealogic] [ph], which is separate from those currently pending.

In sum, we are embarked on an exciting growth cycle and we are well-positioned financially and operationally to realize that potential. The year has been one of incredible achievement for us both internally and externally. We appreciate your support. We thank you for joining us this morning. And I would like to now open the floor for questions..

Thank you. The floor is now open for questions. [Operator Instructions] Our first question comes from the line of Bill Bonello of Craig-Hallum..

Hey, good morning, guys. Wondering if you could just touch a little bit more on sort of how you are thinking about expansion opportunities and I know we've talked about this in the past.

But, ways that you can reach out to the market beyond the New York metropolitan area particularly as a -- maybe a national reference lab, how you might go about doing that timeframe capital needed et cetera..

Fine. We spoke within the context of the call about the integrated structure that Enzo is nurturing and putting into place. We are unique in that. We have both the integrated elements of product development of IP of platform development in cohesion with the services part of our business, the clinical laboratory.

Right now, many of the major customers of our life sciences business are clinical laboratories around the world. We are a marketer and seller of reagents and compounds that are utilized in the development of tests and processes by many of these clinical labs, many of the largest or of our largest customers; we have access to labs globally.

And the product lines that are being developed the low cost of molecular testing as well as the other product platforms as such as FlowScript are targeted specifically at this customer group. So we have existing sales operation globally that have already targets and markets to the customers through which we wish to expand our reference services.

And looking at the clinical laboratory market today, we see the stress of margin constraint. We see the cost of goods for kids not being reduced commensurately with the reimburse declines that are being provided by the insurance providers and Medicare. There needs to be a solution.

Our strategic approach is to offer a bifurcated services product solution to our customers specifically the clinical lab customers of which already exist within our marketing system allow them to acquire low cost systems and systems that will provide them marginal return where today they are not getting marginal return on tests run internally, or if they do not have the critical demand, the scale or the infrastructure to perform tests to allow them to reference their work to our clinical lab for which we will provide services at a cost structure that will be less than the cost of running the test themselves.

And I think that structure is one that is unique within the marketplace because it offers a full solution. And Enzo clinical labs is a New York state created cap as you are aware as the ability to reach out to a great majority of the marketplace, the few states that are not covered have already been submitted for coverage.

We have gotten a number of them already. So we will have the full reach hopefully within the very near term of being able to accept specimens from every state in the United States.

So our marketing strategy is one of both product and service, low cost provision of a test results to allow labs to both expand the menu to their clients, if they don't currently perform certain tests to be able to pick and choose, to be able to provide the service or reference it out at a cost which gives them profitable margin return.

So that is really the strategy very simply..

Okay. Thank you. That is very helpful.

And then, just curious I know that was hard to pick, but if you can give us any sort of flavor of where you feel like you are with some of the remaining legal cases that are outstanding?.

It's very difficult to handicap litigation timing. I think this past year has been a very successful year in terms of coming to conclusion, I would say very successful conclusion with a number of our parties that we are in litigation with. We have cases that cover broad approaches with many different parties out there.

I think what we have established this past year is the viability, the validity, we have -- as you recall, not received agreements that involve licenses on every one of the three patents that we have asserted in the Delaware cases.

I think it's an important issue to know that every time we receive a license it's a validation of the integrity of the test -- of the patent. The cases that are in front of us concern major parties that have major penetration in the market. So we believe many of these parties have infringement levels of scale here.

We are pursuing the pass to resolution whether it would be through an agreed upon resolution or a litigation or trial aggressively. The majority of these cases are in Delaware, which is noted for expedited processing of these tests. So we are following the path.

We will -- it's difficult to put a timeframe on any of these cases, but I think over the next year significant progress should be made..

Okay. Great. Thank you very much..

Our next question comes from the line of Pat Gallagher of Laidlaw..

Good morning, Barry and congrats on another great quarter. Just a couple of follow-up questions.

Are you actively trying to get the message out currently on the new technology and when do you think that starts to have an impact? And maybe you can just also touch on the impact you think AmpiProbe will have on your own lab in terms of roughly whatever due to margins over time? And then, finally, maybe we can just chat a little bit about potentially you think PLAQPRO has? Thank you..

Our sales teams are actively starting to solicit and contact labs around the country. We are in dialogue with multiple parties now over the application as well as the opportunity of our platforms. Remember the product sell here is an economic sell for the most part.

Technology is certainly elegant and exquisite, but the real impetus for the labs to listen to our sales effort is one of economics and that's a compelling component of the sales mix.

So, we are out there and we are talking to people, we are seeing people, we are looking to build relationships, we are talking to providers to see if we can engage interest in low cost testing approaches on a more grand scale.

So we are touching all the bases that we have in the sense to pre-market and get the understanding and the knowledge of these systems out there in advance of what I would consider to be the critical mass of tests emerging, which will happen some time I believe over the next year.

In terms of the cost at the laboratory, remember, we have no royalty drag on this particular cost structure. We manufacture these internally. So our cost of goods is extraordinarily dramatic from purchasing these products externally.

The margin is quite high on these particular tests because they are all internally developed and internally manufactured. The products that we are driving towards are products that have the highest growth opportunity within the market. The molecular space is growing about 10% or 11% range annually.

Its most frequently noted in the literature is the highest growing segment and that's why we have targeted. We have also been targeting what we consider to be the largest volume test within that sector. We are not looking for the exotic rare test. We are looking for the high volume tests that drive the heart of the molecular testing universe.

That's why we focused on hep C in my comments; I talked about hepatitis B and HIV. Those will constitute a viral load panel, which we will -- when all approved, will be able to be offered at a very, very economic price point to our competitors. And also internally drive our own cost structure.

The margins on these types of tests were internal improvement are somewhat close to double what the routine margin would be for running a clinical diagnostics. So it's very, very high. So we feel that this approach will not only be a value on a universal level to labs around the country.

But, it will certainly drive our cost structure from the cost of goods perspective down rather dramatically in the areas where we produced test. So it will help us on two fronts. I'm sorry, if I missed part of your -- any of your question..

No. That's super helpful. Thank you. The only other thing I had was chatting perhaps a bit about what you think the potential of PLAQPRO is, because it seems like a pretty exciting technology..

PLAQPRO is a test which actually is being used in the marketplace today. It's exposure I think needs to be accelerated. We are working to do that. It's difficult for me to put a natural number because the test was just approved. We are working on giving our marketing presentation more inline.

We certainly will be using it in our own lab on an extensive level. And again, recall, we have a very large women's health practice in our laboratory. So this test fits in perfectly with the direction of the clinical lab as it is today. And we will be offering it to other labs. I mean the market is in the millions.

I just -- it will depend on the extent of marketing effort we put behind it. And we are looking to make a considerable effort..

Terrific. Thank you, Barry..

Our next question comes from the line of Norman Hale of Stifel..

Good morning. Good progress on your -- on a variety of fronts there guys. Primarily looking at your assays and obviously, this year -- well, starting last year and going into this year, again, had some product approvals. And I know you've already submitted some additional assays for approval.

If you could give me an -- and this is just a guess because I know you guys can't predict when the regulatory authorities are going to give you approval. But, if you could sort of guide me in terms of what products, what assays you think will be approved by -- say the middle of 2017..

Again, it's very hard for me to speculate the process, the timing of this. I can tell you what our development program is targeting? We are targeting women's health anolides. The women's health channel is a panel that will constitute approximately 14 different anolides.

Today, we have approval of the Candidiasis series which is about four of those anolides or five actually. We are looking to the approval of a bunch of additional assays including chlamydia, gonorrhea as well as the whole variety of that serial identification assays that will be included within this platform So, in terms of timing, it's difficult.

I mean, we hope to have them in -- within the -- the next six months or eight months, it depends, what -- how quickly the regulatory agencies approve all of these. But, we are looking for complete panel of 14 sometime within the year. On the other side, we also have work that is being done on the viral load, panel as I mentioned.

And we are looking at hepatitis B and HIV. We have a fertility assay, which is also a very interesting and important assay, which is being worked on. So we have a fairly broad variety as you can see from my comments very much targeted towards women's health. We believe that's a big market.

I mean if you look at the totality of the women's health market particularly the tests that I delineated, you are looking at a market opportunity that could approach close to $800 million to $1 billion in size. So it's very focused and very targeted. And we hope to see all this within the next year..

Okay, excellent.

Another question, when your sales people are calling laboratories throughout the country and as you pointed out earlier; there is an economic benefit of using our product -- your product? What sort of pushback do the sales people typically get in -- it's pretty obvious that they are going to save money and they have got a good product, so what sort of objections do the sales people typically encounter?.

Well, I mean, this process is just beginning. But, I think the typical challenge is to get people to change their behavior, to change their routine to accept something new within their work flow. And I mean, obviously, we are making an economic sale here, so one is compelled to listen if you have a business that is marginally if not profitable at all.

And the other thing is, for us, the larger the menu that we can provide labs the more receptive they will be to a change of process within their labs and their process maybe a change of a reference lab, a change of reverting from internally running a test to sending it out.

So the more that we can provide our customers, the more receptivity I think we will have because the economics will be more compelling to them. And I think what we will be doing which is really and very interesting aspect of the reference work.

We will be turning reference testing from a -- given clinical lab from a cost center a lost lab to a profit center for the lab. So it's a very strategic shift and thought process and change which is very positive. It's a very strong selling. It's a very strong selling statement for us. But, it's -- in the medical establishment, change takes time.

It's a conservative population. We are optimistic that the selling proportion of value cost will help to expedite that process..

And this PAMA does that going to affect in 2018?.

Well, PAMA will come into effect in 2018. We are fortunately very well positioned to deal with PAMA, mainly Medicare because our focus in the clinical lab has been very strongly positioned around women's health. The utility of Medicare in that population is not very high. So Medicare represents a relatively low percentage of the work that we do.

So, we do not believe that PAMA will have a tremendous effect on our clinical laboratory. And if anything, it is what will give us the impetus with other labs to be able to go in and to be able to drive more profitability and the cost structure for these labs if they continually see their margins getting cut.

And as you are aware we are in an environment where we are seeing continuously reducing reimbursement and cost structures being fixed. So, we believe that's an opportunity for us not a negative..

I would agree. Barry to you kind of -- so called the best guess in the laboratories, this is going to get -- the business environment is going to get tougher and tougher obviously, when PAMA comes into effect and reimbursements are further reduced.

I mean it looks to me like the labs that don't change the cost structure are basically just quite a business, do you agree with that?.

What? Well, we were seeing the transition within the market today. You are looking at a very significant consolidation of laboratories within the marketplace today. Look, it's an environment which is very, very difficult.

I mean you just have to look around and again you have different types of labs within our markets some are independent labs, others are academically driven clinical labs and hospital systems. And so we have different types of labs. And there are also different types of reimbursement associated with these different types of labs.

Targeted the independent labs as well as -- as any lab, I mean but independent labs are the most needy right now because they are the ones that are going to take the biggest brunt of all these reimbursement hits.

So we think that as the market tightens and gets tighter and consolidation takes place, our offerings will standout as very much a necessity and appreciated and required product opportunity for these different companies..

Actually consolidation of these laboratories facilities make it easier for you guys since you have fewer sales calls to make then it’s going to be more efficient to sell a product. So….

Well, that's hard to see. There are lot of labs out there. There are 7500 independent labs around the country today. So there is a significant market to attack, but look I think we have designed our corporate strategy to address the macro economic elements that are impacting our business.

Our industry today, they are specifically targeting the needs and to take advantage of the trends..

Great. Okay. And Barry, obviously, the cash position of the company is now very healthy and should improve with few more settlements together -- sort of the litigation.

The money that is currently sitting in there in bank account or where you keep it? As far as what that money is going to be used for going forward, are you going to be adding to your sales and marketing team some of that capital?.

We are -- we will be enhancing our teams across the board here to drive our business strategy. The products -- at the end of the day, the value proposition is driving the product volume within the company and we are determined to do such. So, we will be investing into that.

But, I think it's interesting to note, if you look at the numbers I reported today, the company fundamentally excluding legal expenses is cash flow neutral. And we hope that we will soon be cash flow positive on a much broader level as our revenues and businesses build.

We do have investment but we have a very, very well-defined infrastructure in place already which is incorporated into the cost structure of the company, granted we need to expand that. We need to drive the sales activity at a much more aggressive and higher level to drive revenue growth. We intend to do that.

And we certainly will use capital to achieve that..

And some of this capital as far as your research, R&D cost or shall we say your amount of money that you target to set aside to allocate to R&D, as sales ramp-up further, your intension to add some additional capital into R&D division of the company?.

Yes. Simple it is..

Yes. Exactly is.

And then, Barry just my last question, any of the previous conference calls one of the things that still being kicked around is, you guys doing some sort of joint venture with some other entity, you have -- is there anything you can talk about on that front?.

Establishing business relationships on many fronts is a key goal -- of the many goals that we have set forth for our team here. We are in dialogue with multiple parties. We are -- we are fortunate that we have many platform technologies that appeal and touch on different segments of this particular marketplace.

And we are looking to expand those platforms into areas where we may not have the interest or the time or the focus to expand the utility of the platform. So we are in dialogue. And you could very well see the confirmation of relationships with a number of parties out there in the near future..

Very good. Thank you very much..

Thank you..

Our next question comes from the line of [Robert Gomez of Gold Capital] [ph]..

Yes. Good morning.

I was wondering whether you might be able to comment on the status of the Optiquel?.

Interesting question. We have not really said too much up on that particular product. Optiquel for those that might not know is our -- is one of our therapeutic activities which has been engaged in a Phase IIb trial at the NIH. It's in the process of being followed up in terms of data understanding right now.

It is a product that therapeutic that is geared towards treating autoimmune uveitis, which is the third leading cause of blindness in the United States I believe, if not the world. It works from the perspective of down regulating immune response. We have run an extensive Phase II trial under the hospice of the National Institute of Health.

They are now evaluating the potential of that particular product nothing has been publicly released as of yet. But, we are looking forward to the expansion and the utility of that product into other areas of inflammatory eye disease treatment. I think when definitive data and/or direction are consummated, we will report on it.

But, it is without question a very interesting and active approach for the treatment of inflammatory eye disease of which macular degeneration falls within. So, it's a little bit secured response, but it is an active project on our table..

Is there any sense of timing as to when they will be done with the analysis and there will be some commentary about that?.

It's actively being pursued. I can't comment on a specific timing. Again, much of that timing is not within our control. It is being handled at the National Institute of Health..

Great. Thank you..

You're welcome..

There appear to be no further questions at this time. I would now like to turn the call back over to Mr. Weiner for any additional or closing remarks..

Thank you, again, for being with us. As you have heard it has been a very, very strong and productive year for us at Enzo. We believe the coming year will also be one of important transformation and value generation. We look forward to discussing further the results of the company when we speak to you in December for our next quarterly call.

Thank you very much for joining us..

Thank you. A replay of this broadcast will be available until Friday, October 28 at 12 Midnight. You may access this replay by dialing 1800-585-8367. The pin number is 85947927. This replay is also available over the Internet at www.enzo.com. This concludes today's teleconference. You may now disconnect your lines at this time and have a wonderful day..