Hello, and welcome to the ACETO Corporation Fourth Quarter Fiscal 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, this conference is being recorded. I’d now like to turn the conference over to Jody Burfening. Ms. Burfening Please go ahead.

Thank you, Steve. Good morning, everyone, and welcome to ACETO Corporation’s fourth quarter fiscal 2018 earnings conference call. With me today and providing comments on this call are Bill Kennally, President and CEO; and Becky Roof, Chief Financial Officer. Frances Scally, Senior Vice President and Chief Accounting Officer; and Steve Rogers, Chief Legal Officer, are also with us today to participate in the Q&A session. The company issued its fourth quarter earnings press release earlier this morning. For those of you who have not yet seen the release, a copy is available in the Investor Relations section of the company’s website at www.aceto.com. Before starting the call, I’d like to remind you that today’s call will contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995, that can be identified by words such as believes, expects, anticipates, plans, projects, seeks and similar expressions that involve numerous risks and uncertainties. The company’s actual results could differ materially from those anticipated or implied by these forward-looking statements as a result of certain factors that are set forth in the company’s filings with the Securities and Exchange Commission and the factors outlined in the fiscal 2018 fourth quarter earnings press release. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise. Also on today’s call, management will be referring to certain non-GAAP financial measures. These measures, ACETO’s adjusted net income and ACETO’s adjusted earnings per share, are defined as net income excluding amortization and impairment of goodwill and other identifiable intangible assets, separation costs, amortization of debt discounts, debt issuance costs and deferred financing costs, transaction costs related to acquisitions and the impact of the Tax Cuts and Jobs Act and the impact of Accounting Standards Update 2016-09 and the valuation allowance on net U.S. deferred tax assets. These non-GAAP measures allow investors to compare results of operations in the current period to prior period results based on the company’s fundamental performance and analyze operating trends of the business. Finally, before turning the call over to Bill, I’d like to remind everyone that the purpose of today’s call is to review and discuss ACETO’s financial performance and operating performance for the – and results for the fourth quarter. As a reminder, last April, the Board initiated strategic alternatives review process with the assistance of its financial and legal advisers, PJT Partners and Lowenstein Sandler, respectively. The Board has indicated that we’ll not comment on the process detail until and unless it has approved the transaction or otherwise is determined that future disclosure is appropriate or required by the law. Therefore, it would be appropriate – inappropriate for management to comment on or respond to questions about the process while it is underway. And we appreciate your understanding and patience. With those housekeeping items out of the way, I would now like to turn the call over to Bill. Good morning, Bill.

Thank you, Jody. Good morning, everyone, on this rainy Friday, and thanks for joining us today for our fourth quarter call. Before starting my prepared remarks, I wanted to express my appreciation and the entire team’s appreciation for your patience and waiting for us to report our results. Changing our reporting date on short notice wasn’t a decision that we made lightly, but it had to be done. We found ourselves in the position of having to file an extension at the 11th hour due to issues that arose around our deferred tax assets, and Becky will cover this matter in her prepared remarks in a few minutes. As for our fourth quarter performance, we brought a difficult fiscal year to a close during the fourth quarter, but also laid the foundation for reset and return to profitability in the future. Growth in sales and gross profit from our Pharmaceutical Ingredients and Performance Chemicals segments were overshadowed by declines from our Rising business. We’re all familiar with the industry headwinds that have eroded profits at most generic companies in the industry, including ours, and conditions in the fourth quarter were no exception. Several of our higher-profit products were subject to increased competition, resulting in lower pricing, and our new product launch has generated lower than expected returns. Failure to supply penalties had an unfavorable impact on revenue and gross profit in the quarter, as we continue to recover from supply interruptions with some of our products. Although I will note that we have made significant progress here since earlier this year when we began to track this closely. Our Pharmaceutical Ingredients and Performance Chemicals segments once again, were reliable generators of operating cash flow. And as a result, we produced cash provided by operating activities of $45.4 million during the…

Thank you, Bill, and good morning, everyone. I’ll start with a review of our consolidated results for the quarter. Consolidated net sales for the fourth quarter of fiscal 2018 were $168.9 million, a decrease of 13.2% from the $194.6 million reported for the fourth quarter of fiscal 2017. Gross profit was $9.9 million, compared to $36.8 million for the fourth quarter of fiscal 2017, and gross margin was 5.9%, compared to 18.9% in the prior year period. On a reporting segment basis, Human Health segment sales were $73.1 million, a decrease of $40.6 million, or 35.7% from the fourth quarter of fiscal 2017, almost entirely due to lower sales at Rising that reflect pricing and competitive pressures, approximately $14.9 million in failure to supply charges, of which $4.2 million was rebuild back to partners and partner reserves of approximately $9.2 million. Gross profit was a negative $8.3 million, compared to gross profit of $21.7 million last year and gross margin was a negative 11.3%, compared to 19.1% in the prior period due to the factors I just mentioned. Pharmaceutical Ingredients fourth quarter segment sales were $45.5 million, an increase of $9.3 million, or 25.6%, compared to $36.2 million for the fourth quarter of 2017. This improvement reflects higher sales of APIs, sold both abroad and domestically, and higher sales of Intermediates sold in France. Gross profit for the quarter was $7.4 million, compared to $5.6 million in the fourth quarter of fiscal 2017, an increase of $1.8 million, or 31.5%. Gross margin was 16.2%, compared to 15.5% for the fourth quarter last year, reflecting favorable product mix for both APIs and Intermediates. Performance Chemicals fourth quarter segment sales were $50.3 million, an increase of $5.6 million, or 12.5%, compared to $44.7 million for the fourth quarter of 2017, resulting from…

Hey, thanks a lot, Becky. So you may have seen in an 8-K filing from last evening that Walt Kaczmarek, our Chief Operating Officer, resigned from the company to pursue other opportunities. We appreciate Walt’s leadership these past two years and wish him well in his next role. Before I turn it over for questions, I wanted to leave you with three key messages. First, we have rebuilt our Rising business adding and/or replacing 69 colleagues since June of 2017, and we have a great senior leadership team and we are poised for growth. External factors around price declines are starting to normalize, and I feel this business is climbing out to be a best the industry has experienced the past two-plus years. I’m confident, we will continue to successfully address our needs that best position us to maximize revenue and gross profit and effectively manage through customer and partner expectations. Second, our failure to supply has been a significant negative factor in our revenue and profitability. As I outlined earlier, we have taken several steps to improve failure to supply issues, including improving our inventory position by about 80%, instituting enhanced tracking, developing a robust supply and demand forecast and increase communications with suppliers. In addition, the company is accelerating the review and resolution of failure to supply claims. The great strides we have made here will be evident in forward quarters. Third and last, our chemicals, ag protection, nutritional and farm ingredients business continue to significantly contribute cash provided by operating activities and they remain healthy and robust businesses. These businesses all have experienced leaders and personnel and are well poised to deal with external challenges, i.e., the China tariffs, as well as the Blue Sky initiative initiated by China’s Ministry and Ecology and Environment that has impacted supply shortages during – due to plant shutdowns. And with that, I’d like to turn the call over to Keith to open the lines for questions. Keith, over to you?

All right, thank you. We will now begin the question-and-answer session. [Operator Instructions]. And the first question comes from Matt Hewitt with Craig-Hallum Capital Group.

Good morning, and thank you very much for the update.

Good morning, Matt.

Several questions for me kind of hitting on each of the different revenue buckets. First, on the Human Health segment, I think, I’ve heard you, but I didn’t catch the numbers. So of the $14.2 million and failure to deliver amounts, did I hear you that you’re going to be $14.9 million. You’re going to be passing some of that on to your partners, and if so, how much was that?

Good morning. Yes.

$4.2 million?

Out of the $14. – out of the approximately $14 million, we will rebill to our partners $4.2 million of that amount.

Okay. And it sounds like you’ve taken a number of steps to resolve the issues there. But as you look at those and I’m sure it’s a case by case basis. But as you look at those different amounts, how much of those can you look at your partner, whether it’s on the manufacturing side or whatever and look at those and say, okay, we had no control over this. And why wouldn’t you be able to bill them a greater amount than the – what is effectively a – what a quarter or so of the amount?

Yes. So two things there, Matt. First of all, the – each of the contracts that we have differ. So in some cases, we would bill the partner the entire amount if the fault lies completely with them. In many of our partner agreements, we have a 50-50 partner share. And that has – to just basically do with the agreements that we have with our partners. So I think, if you think through how we manage this whole process, the burden of proof really lies with Rising, because we get hit by our customers. And then during that reconciliation process, we hand certain percentages over to our partners. Now it could also be that, that some additional monies out of that $14 million will come back our way. But at this point in time, we have, as you said, probably about 35% of that going back to our partners.

Okay, that’s helpful. And then I guess, one last on the Human Health segment. If you add the $14.9 million back in, you’ve got like a 9% gross margin. But then, if you’re supplying, I’m assuming it’s even higher than that. There is some positive margin from those products. Is it safe to – as we look out in our models for next year, you get those failure to supply issues resolved. Your gross margin should be back, at least, for that segment back high teens, low-20s, is that or am I thinking about that right?

I think you are, Matt.

Okay, that’s great. And then moving down Performance Chemicals, it sounds like a lot of the strength there, but there was one industry shortage that you referenced a couple of different times. Are you seeing that linger here into the – this quarter and how long do you anticipate that kind of lasting?

I – you know what, Matt, I’m going to have to get back with you on that specifically, because I don’t know if it’s still a lingering issue. I do know that the team there has had a lot of success in kind of alleviating some of the supply shortages. And I’m just a little unsure as to whether that particular product is still a drain. So we’ll – let me circle back with you on that.

All right, fair enough. And then one last one and then I’ll hop back in the queue. On the API side, a very nice quarter. Maybe if you could talk a little bit about some of the market trends you’re seeing there. We are continuing to see regulatory pressures, FDA inspections and all that kind of stuff that are weighing on pharmaceutical manufacturers they’re seeking alternatives. Are you benefiting from that? If so, maybe what’s differentiating you and your ability to find some of these manufacturers versus what appears to be a problem for some of the rest of the industry? Thank you.

Yes. Sure, Matt, thanks. Look, I think a lot of credit has to go out to the team in India and China in terms of how we’re sourcing our products. And that’s, I think, one of the competitive advantages that ACETO brings to the table is our sourcing abilities. And I think, we have done exactly that. So in addition to that, we have also tried to stay ahead of the Blue Sky initiative that we’re seeing in China for plant shutdowns. I’ve referenced this in previous quarters. But we really, I think, do an excellent job in understanding what our customer needs are and then we’re able to deliver whether it’s the API or the Intermediates, which in this case, we had higher API sales here in Europe and higher Intermediates sales in France. So, we’ve been able to just capitalize based on boots on the ground, and again, I think it’s a competitive advantage for us.

Great. All right. Thank you.

You’re welcome, Matt. Thank you.

Thank you. [Operator Instructions] And the next question comes from Lenny Dunn with Mutual Trust of America.

Good morning. And the numbers were pretty much where I expected them. They don’t alarm me, and obviously, we have selling pressure from the delisting from the S&P 600, which takes place on Tuesday. But that also doesn’t alarm me, because they’ll pass. But it would seem like you’ve had enough time to make some decisions on what we’re going to be going forward. And can we expect relatively soon? Are we going to continue to be – I’m going to use the word [cool armored][ph], I don’t think that’s the right word, but where we have two very distinct parts of the business, or will some of this be sold off to reduce debt? Could you give me a little clarity, please?

Yes. Hey, Lenny, thanks. This is Bill Kennally. I appreciate the question. Unfortunately, because where we’ve communicated previously that we won’t be commenting on the strategic review process that the Board has assigned, I really can’t provide any comment beyond that. So I wish I could provide more detail, but I unfortunately cannot. So I’m sorry about that.

But do you think we’ll have some answers in a reasonable timeframe perhaps by the next time you report?

Well, again, I think, what we have announced previously is that, when the strategic alternative process is completed, we will make an announcement.

Yes, that I understand, but that could be years, I don’t think it will be. But certainly, a quarter more would be more than adequate time. I mean, am I being – I’m being unrealistic in hoping for an announcement with the next earnings report?

I – well, I can’t really pinpoint a time. I can tell you, it won’t be years. But as soon as we have something to report, then we certainly will do that. And look, I understand that there are a lot of people out there that are waiting on this process to complete. It doesn’t – it’s not – it doesn’t fall on deaf ears, trust me. So we’re going to do our best to complete this process in a timely manner and then make an announcement. Hopefully, that will work with your expectations, and let’s have the same conversation on the next conference call in the event that we don’t have anything to announce.

Okay. And then the last thing is just a comment. Your CFO is doing a terrific job, so no question about that. But she’s also extremely highly paid and a drain on our earnings. Is there a potential maybe to retain her and not pay quite as much, or are there any plans in that direction?

Well, first of all, Lenny, I’m going to have you negotiate that with Becky directly, if that’s okay with you. No, kidding aside, you’re right, Becky has and her team have done a phenomenal job here. We’re really happy to have her. We really appreciate all that she and the team is doing. And as we move through this process, we’ll be making some decisions on our personnel, including Becky, and we’ll certainly keep you posted on that. But I echo your comments that she is doing an outstanding job and love having her on the team.

I’m not questioning that at all, just the amount of money for the size of the company.

Right.

That’s all.

Yes, I appreciate your comments.

Okay.

And right now, I will tell you that she’s worth every $0.01. So – but we’ll keep…

But I’ll tell now, yes.

Yes, we’ll keep an eye on her.

Okay. Thank you.

Thank you. And the next question comes from Rich Thompson with [indiscernible].

Hi, thanks, A couple of questions. Maybe just starting on the free cash flow, as you mentioned, the big source of cash this quarter. Just curious what enabled you to push payables and accrued expenses that much? And of that change, how much of it is timing, whether it’s deferral of and the failure to pay how much of it is just getting to normalized levels on those terms?

So yes. So thank you for the questions. And yes, the generation of our cash from operating activities is very heavily tied to the timing of our gross-to-net adjustments on Rising. It’s much more stable on our non-Rising business unit. And we encountered a situation at the end of June, where we were able to accrue a number of the chargeback credits, particularly in the form of rebates and for that payment into later quarters. When we file our K later today, you will find these specifics and the notes to our financial statement of exactly, which balances are differed. And then you can make a judgment as to when those will actually come out of our cash account. We work very, very closely with our wholesale customers on the timing of when these items are taken. With regards to the failure to supply, anything that we are disputing, we accrue for, but we do not pay until the dispute is resolved.

Okay. So I guess – and I’ll look in the 10-K. But just directionally, exceptionally, is most of – is a lot of the 48 do you expect 45 do you expect will, I guess, be a cash outflow in the coming quarter or two, or is that not the case?

There will be some outflow in the next couple of quarters. I’m not sure I could comment on the timing, because a lot of that is wholesaler or customer-driven as to when they take the credit against future payments.

Okay. And then from a gross margin standpoint, it was asked earlier. But obviously, pretty significant gross margin contraction in the quarter for Rising. I guess, just helpful to understand some of the factors that you think enable you to get back to, roughly, call it, a 20% gross margin? And then second, kind of, if assume you can get back to 25% gross margin, are you able to cut OpEx materially since right now at a 20% gross margin EBITDA for that segment still probably close to zero?

I don’t know that I’m in a position to comment on getting back to 25% gross margin since we’ve been instructed by our Board that we are not going to be providing guidance. I can tell you that minimizing or greatly reducing the FTF claims will have a significant impact on our gross margin. And we are always looking for ways in our operating expenses to make reductions and have been very active about doing that.

Okay. Of the 36% sales decline, how much – or maybe talk in dollars of the $40 million – approximately $40 million decline in Human Health. How much of that was the elimination of Lucid versus just broader headwinds in the segment?

Yes, a good percentage of that, Rich, was due to the VA revenue loss that we had. In addition to that, we had some products that didn’t perform as expected, and we also took a hit with some of our higher-margin products. So I don’t have a ballpark within those segments in terms of percentages, but that was the majority of the decrease that you saw in the fourth quarter, combination of all three.

Okay. And then if you could just talk a little bit about the tariff exposure that you’d reference in terms of which segments, kind of what – what’s the worse case in terms of what it would mean from a margin or profitability standpoint?

Yes, sure, and thanks for that question. I appreciate it, Rich. So, look, in the events that the tariffs stay at 10%, we think we can manage through that with our customers. If it goes to 25% [Multiple Speakers]

And which are the tariffs, I’m sorry?

I beg – so the tariffs are hitting the Performance Chemicals segment and the Nutritional segment. The farm intermediates is exempt from those. So on those two businesses, the plan right now is to pass those tariffs on to the customers. And the customers, for the most part, are onboard with that. So we’re actually seeing an uplift in our performance as it relates to that. However, if it goes to 25%, we’re going to have to lay it out to the customer is in terms of how we pass that on to them. But we have some mitigating factors that may help us there. So rebates certainly could participate there, but currency devaluation over in China may play a role in how this will play out. And then, as I said earlier, the Blue Sky Initiative continues to create market shortages that are also absorbed by customers when costs go up. So, there’s really a lot of factors in the Chinese market that makes it very interesting and fluid. And we believe that we’ll be able to manage through it, but we could see a hit to some of the early gains that we’re seeing as a result of the 10% tariff increase should customers choose to – go elsewhere.

Right. And generally speaking of that, do you feel, so they have a lot of options domestically that would avoid those tariffs or are most producers supply in from international from China?

Yes. Well, look, it’s certainly a competitive environment here in the U.S. But again, as I referenced earlier, I have a lot of confidence in the strength of the team. We’ve been able to participate in the markets that we’re participating in and doing a really good job. A lot of really strong relationships have been established. It’s real – that’s a really important component. At the end of the day, it does become a cost business, but similar costs are being passed on by other folks. And we just have to do the best we can to hang on the business. We’re not going to get all of it, but we feel confident that due to the strength of the team that we’ll get, we’ll retain and potentially gain additional business to offset any potential losses we might see.

Okay. And then maybe just lastly, as you look at the numbers for Q4 for the API and Performance Chemicals segments, I guess, would you with all of what we just discussed with the backdrop, do you see those EBITDA or gross margin numbers as generally representative of run rate, or is there seasonality such that looking at those numbers and multiplying it by four is not the right approach?

Well, there is a bit of seasonality in the Performance Chemicals segment. However, I think that what you’re seeing for the fourth quarter is going to be representative of what you can expect to see down the road.

Okay. Okay, all right. Thank you.

You’re welcome. Thank you, Rich.

Thank you. And the next question comes from Timothy Stabosz with Stabosz Asset Management.

Hi. One of the company’s larger shareholders with about 4% ownership. I got on the call late, so forgive me, I’m trying to ask a repeat question, hopefully. But do you see – I see the press release we talk about the Performance Chemicals and Pharmaceutical Intermediates being stable. And it looks like from disclosures in the slide deck that, I think, you disclosed gross profit, because we talk specifically about the stability of EBITDA, I heard the previous caller talking about that to the degree that we look at that separately in those divisions. Could you comment a little bit more on the stability of those divisions? Because obviously, ultimately, they represent the value in the business to potentially explore strategic alternatives and pay down debt. Are those businesses completely stable as you would see it? And are you highly content with the way they are performing and the way it looks for the future? You’ve obviously partially answered that with the previous caller, but can you flesh it out a bit more please?

Sure, Timothy, and thank you very much for your ownership of our stock. So I have a very high degree of confidence that the Performance Chemicals, Nutritionals, AG Protection business and Farm Intermediates Ingredients business will continue to provide steady and stable cash contributions to the company. Historically, those businesses have performed well. And our view on the business is down the road is that, that is going to continue. And again, it’s based on some comments that I made earlier, we feel that we have great boots on the ground in India and China. It’s really valuable. We’re also participating in markets that aren’t large market. So we strategically go after selected product size to and what – where we’re really good, I think, at sourcing at that level. And we try to stay within the goalposts, if you will, and try not to deviate from what’s worked successfully for us. So I feel very confident that those businesses all will continue to provide stable growth as you know, as I’ve described. Now look, there’s always the Blue Sky initiative, right? I mean, we’ve stayed ahead of it, but there’s threats out there – competitive threats and then there’s environmental threats that could always get in the way. But that notwithstanding, I’m highly confident. And I would want to add that we’ve made a lot of changes on the Rising side over the last year. We essentially rebuilt this business, we have suffered from failure to supply. But as I stated on the call earlier and you’ll be able to see in the prepared comments online that we really feel we got a handle on this and we’re poised for growth. So I think, going forward, the businesses are stable and we’re ready to go. I hope that helps.

Thank you. One other question and try to be as generous in answering as you can. I understand you said you won’t say anymore about strategic alternatives until there’s something to announce. As far as the background to the situation, what is the break? Have you done analysis as to the ready breakup ability of the three businesses, or – and can we continue with one or two of them, one of them, two of them, in part? Are they readily breakupable, or are we finding that the companies be sold in whole and cannot be sold in part, or can very readily be sold in part without additional loss of synergies – internal synergies?

Yes, I hear you, Timothy. And look, if were to be able to comment on that, I would, but I can’t. So, these are all options that, I think, are being considered by the company as we review our strategic alternatives going forward. I just really can’t comment on it.

Let me ask the question this way. Have we completed our homework? And do we fully understand the ramifications around that aspect, the relationship between the three businesses and their – do we fully have a handle on that at this point three, four months later, whatever it is after the initial announcement we’ve had?

I think that…

Do you feel we got our arms around that, that specific notion at this point?

I think, we’re well in control, yes.

Okay. Okay, thank you. I’ll come back in the queue if I got another question.

Thank you, Timothy.

Thank you.

Thank you. And the next question comes from Lester Petruzzi [ph] from JSA Partners.

Good morning, everyone. I think the gentleman made a mistake. He is describing he need some partnership and, of course, you all know me for the last 15 years. I’ve been a shareholder and I’ve attended all the annual shareholder meetings in some 60 quarterly conference calls, and they represent just myself, I’m an individual passive investor. So I just want to correct that. I don’t know how you get those signals crossed. My question is just very simple one. I’m disappointed just as we all are, but specifically disappointed that another C-Suite executive departure has occurred. I know, you won’t shed more color on it. But my question is simply, is your intention to soon replace our COO Walter Kaczmarek? Thank you.

Yes, thanks, Lester, I appreciate the comment. And look, we did lose Walt, too. He chose to pursue other opportunities. We’re going to miss him here. He did a great job in really building the Rising business up and getting our ERP systems up and running and a lot of the thanks go to him for his contributions there and elsewhere in the company. Whenever you have someone of his caliber that leaves the organization, it gives you time to reflect on other potential changes that might be needed within the company. And in the interim, Walt’s reports are going to reporting to me. And I’ll have an opportunity to dig down a little deeper from an operational standpoint to – in the manner that Walt was running this business. And then we’re going to make some decisions based on the needs of the company in the future and try to tie that in with our strategic alternative process. So we’ll certainly keep you posted and everyone else on any future changes that – and/or additions that take place. And I hope that answers your question, Lester, and nice to hear from you.

Yes, I still have a follow-up, actually, a follow-on to the last gentleman’s question. And I will respect your request not to ask questions about the strategic review. But in a related matter to a longstanding agreement in place, I’m talking about the change in control agreements. The gentleman was pressing you about whether you sell the company in total, or in pieces, or not at all, I suppose as an option. But clearly, if the total organization was sold, there would be a change in control trigger tripped in a payment, a significant payment to senior management and I presume the Board. But what if just a significant division were to be sold? Will that also trip change in control agreements or partial payments? Thank you.

I think…

Maybe Steven could add something – some color to that or Becky if you don’t have the answer?

The senior management of…

Is it Steven?

Yes, this is Steve Rogers…

Okay.

This is Steve Rogers, Chief Legal Officer. [Multiple Speakers]. The change of control agreements held by the senior management of ACETO Corporation would require with a double trigger a change of control at ACETO. There are some senior managers who work for particular division, specifically Rising, who under certain circumstances drove double trigger with respect to Rising could result in triggering that agreement. But the senior management of ACETO would require ACETO Corporation change.

Okay, thank you very much, Steven Rogers, and good luck to you all.

Thank you, Lester.

Thank you.

Thank you. And the next question is a follow-up from Rich Thompson with [indiscernible].

Just on the capital structure side, and thanks for taking the follow-up. What’s the seniority relative to the other items in the capital structure of the promissory note?

The promissory – it’s not actually a promissory note, but rather it’s a deferred payment due under the original transaction documents. So it is at the bottom of the capital structure compared to the rest of the company’s debt behind.

So the promissory note would be junior to the convertible notes?

Yes. And again, it’s not a promissory note, it’s a deferred payment.

The deferred payment, I guess…

Yes, it’s junior.

Okay, interesting. Okay. All right, thank you.

Thank you, Rich.

Thank you. And we also have a follow-up question from Timothy Stabosz. Please go ahead.

Yes. What’s the idea behind maintaining the $0.01 a quarter dividend? I personally appreciate that, not because I want the $0.01, but because I think it’s wise on management’s part with regard to not forcing out shareholders who have to have dividends to own the stock and further depressing it. And is that a fundamental kind of commentary on the basic financial strengths of the company the banks are saying, “Yes, you can maintain a token $0.01 a quarter or two” But then we essentially believe in the value of these assets versus the debt. Can you comment on that the $0.01 dividend?

So, Tim, I think you just said it better than I probably would have.

Tim, look…

Say more.

Well, look, we’ve had a history of paying dividends in this company for many years. And I think, we appreciate the shareholder base that, that we have and understand that paying a dividend is important. And I think to your point, the banks do have confidence in us in terms of cash flow. We wish that the dividend would be higher and we aspire to get to a higher amount down the road. But every quarter, the Board votes on this, and we plan to continue that, subject to significant changes that occur down the road. But I think, we’re pleased to be able to pay it, so thanks for bringing it up.

Are they have – thank you. Are they have confidence in the cash flow? I presume the confidence was actually in the asset value and perhaps the strategic alternatives process as providing good chance we’ll get their money. But the $0.01 a share could also be that they have confidence that the value of this company over the long run will be growing, because it is going to be a cash flow positive – free cash flow positive company that that’s part of the confidence is the value of the business as a cash-generating entity?

Yes. Well, we all want to answer. And I would say, as the Chief Legal Officer, what the banks think and we don’t speak for them. But the fact that it has to be approved by the banks and the banks specifically authorize it, speaks for itself what that means.

Yes.

And it is not controversy of ask at all.

Okay. One of the question and – yes, and that is the nature of the way of the amendments gets us into mid to late next year, I guess, it is. Is that a signal, I mean, someone take that as okay, they’re going to get something done by then? Is there reason that to the degree that we might remain 100% in control of our operations – all of our operations perhaps that waiver, that extension or amended extended where we call it, didn’t go out even further?

I think that you have to look at the waiver in the context of the maturity of the banks debt, which is 2021. I think that, first of all, I think it’s a very favorable waiver and we were pleased with the final terms. But I think that you would also gives the banks the protection to adopt the wait-and-see approach and give us the opportunity to demonstrate what we can do as an ongoing entity, while we consider other alternatives as well. And so I don’t want to speak to the banks, but that was the general tenure of the discussions.

Okay. Okay, I’ve got one more actually, and hopefully, you can explain some of this. You announced back September 12, September 13, about the amendments, you filed an NTK, a late Form 10-K for 13th, I think it was that said there’s going to be a $30 million roughly loss pre-disclosed. The stock was hovered around $3 generally went up a little bit, but then hovered around 3-ish. Then we had the announcement of the S&P 600 small-cap a few days ago that will be removed from that index. So stock has since plunged to as low as about two-tens a day, yet, since you pre-disclosed the earnings back in September 13, it doesn’t seem to me like there’s any material news other than the S&P 600 kick out, so to speak. Am I missing something, or is there something that’s come out other than the Chief Operating Officer departing, which players to be friendly as opposed to firing you’re staying around for another month? What – am I missing something here, or – not only I would like to ask about commenting on a stock price, but obviously it’s so unusual is, can you comment?

We’re not aware of anything out other than what we have disclosed. I’m not sure that any of the alternative position to speak as to what might be in the mind with certain shareholders. But we’re certainly not aware of anything that we haven’t discussed.

Since September 12th or 13th, right?

That’s correct.

Correct.

Other than the S&P small-cap index delisting that you just referred to.

Okay. And do you have any estimate of the number of shares that are attributable to the funds that hold because of that listing, that index?

I don’t believe we are.

Or percent of total or anything?

Not to my knowledge.

Okay. Thank you. Good luck with this. I’d like to see you sell assets and unlock value.

Great. I appreciate your comments.

Thanks, Timothy. I appreciate your thought – your questions and comments.

Thank you so much. Thank you. As it was the last question, I would like to turn the conference to Bill Kennally for any closing comments.

Yes, thanks, everyone. We appreciate your time and attention this morning, and look forward to being with you on next quarter’s conference call. Have a great weekend coming up. Thank you.

Thank you. The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines.