Good day and welcome to the ProPhase Labs First Quarter 2022. Financial Results and Corporate Update Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal our conference specialists by pressing star then zero. After today's presentation, there will be an opportunity to ask questions.

[Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Ted Karkus, Chairman and CEO of ProPhase Labs. Please go ahead, sir..

Thanks so much, Matt. And thank you all for joining me this morning. Obviously, we had a great quarter, and I'll get into that in a moment, but of course I have to do the standard forward looking statements, which obviously is important. So here goes.

Before we begin today's call, I want to advise everyone that today's conference call will contain forward-looking statements, including statements relating to our plans, expectations, future performance and future events, including statements regarding projected financial results for the second quarter of 2022, our expectations regarding the COVID-19 pandemic, future waves of the pandemic and continued demand for diagnostic testing, purse of funding; our plans to grow our diagnostic business, and expand our lab services, and our plans to grow our genomics businesses, build a WGS library and attract academic institutions, and our plans to develop a broad spectrum anti-viral OTC dietary supplement, and build a pharmaceutical division, and our expectations regarding the sufficiency of our cash or working capital.

These statements are subject to risks and uncertainties that could cause our actual results to differ materially from those suggested by the forward-looking statements.

Additional information concerning factors that could cause our results to differ materially from these forward-looking statements are contained in the earnings release that we issued earlier today, as well as in our public filings with the SEC.

The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise except to the extent required by applicable law. Finally, the conference call is being webcast. Webcast link is available in the investor relations section of ProPhaseLabs.com.

Thank you for bearing with me while I read all that. I take the forward-looking statement actually quite seriously. I do like to talk a lot about our future plans and of course they're never guarantees, but I will tell you that everything I state today, I believe 100% as of today question in my mind, as the things that I talked about.

And so look let's get into it. I have to start by saying we have built an amazing team when you start into new business. So, we started in the CLIA lab business in late 2020. It was new business for me, it was new business for our company. We built out very, very quickly. You hire people you've developed the good management teams continue to evolve.

The people that I thought were strong understand I didn't know the business a year-and-a-half ago. I thought I was hiring fantastic people for the business. They were -- I appreciate all they did in the beginning to get us off the ground. But as the company evolve, we hired people.

I was able to learn the business and also understand exactly what we needed to develop the business, and exactly the type of people we needed. And quite frankly, we substantially upgraded our management team throughout 2021. We have excused the expression, we have a kick ass management team. And I do these virtual non-deal roadshows.

I want to give a lot of thanks to Renmark financial, who sets up the virtual non-deal roadshows, I do one or two of these a month. I started every one of those calls. I think if you're going to invest in micro-cap or startup or development stage companies, there's nothing more important than analyzing your management team.

I can tell you from 40 years of investing, I always invest in companies where I'm excited about the product or the service. The management team most of the time doesn't execute. And I've said this quarter-after-quarter, you want to invest if you're investing in development stage companies, you have to put a lot of faith in the management teams.

And the problem is 95% of the time the management teams don't execute, and that's why you lose money, and so when you look at this bear market that started. And I've been telling everybody, hope for a year that we've been in the bear market.

Now, all the side and the median last few months is picking up on it because the larger cap, the Dow average, the Nasdaq, indexes, these are all dropped dramatically over the last three to six months. But we've actually been at a bear market for Microcap stocks for almost a year-and-a-half.

Breakingly reminds me of 1998, and I'm daring myself now but that's a period of time you want to look at. We're talking 24 years ago. And what happened was the micro-caps dropped and then the major averages followed. And then we went into this boom for a while with the micro-caps and with the high-tech stocks into 2,000. And it was pretty crazy tome.

The reason I point that actually is we're going through the exact same thing. Now 24 years ago, the micro-caps have already been in a bear market for almost a year-and-a-half. This is the time to be looking at them. Well, you want to be looking at are the micro-caps that have a management team that has demonstrated to execute.

So it's interesting, you go back over time. And yes, we raised capital in January of 2021 as did a ton of other companies is an enormous time for investment banks to be.

The raising capital for companies, look at most of those startup companies, they are burning through most of that cash, they've lost most of that cash, and they're going to have to raise more and we're in a bear market, they can't raise more.

And that's why there's stocks continue to plummet because they're going to have to do dilutive rounds of financing or go out of business. Meanwhile, if you look at our capital, we've now paid, we just announced today another $0.30 dividend after we just announced a couple of months ago.

So at $0.60 and dividends just in the last couple of months, we also paid a $0.30 dividend last year, in the middle of last year. So we paid $0.90 in dividends and yet our working capital is up dramatically from the capital that we raised in January 2021. That's a company and a management team that executes.

And again, going back on a little bit of [Indiscernible], I'm so excited about the management team that we have in place now. We have a killer team. People that are incredibly willed. I don't want to go through their names, I don't want to leave anybody out, but just suffice it to say in every department, we are incredibly strong.

And what we built out in the lab business, we very quickly became one of the strongest CLIA labs for COVID testing in the entire state of New York, and in fact in the entire country. We are the darlings of our customers. We not knock on wood. I don't believe we've ever lost a customer.

And it's because our turnaround times are better, our IT is more efficient, our customer service is fantastic. And so now what we have done in the COVID testing business, we want to expand. So I want to talk about the numbers a little bit. But I did want to just say and acknowledge how great our entire management team is.

And we literally have been building it in every department and in that regard, we came out with a press release the other day, so we just hired Bill White to be our new CFO. I want to thank Monica Brady for doing an absolute fantastic job.

When our former COO / CFO left the company, she took over as the CFO and provided really a smooth transition, and has done a fantastic job helping build our company from a $10 million to a $100 million company. Now, the goal is to build our company from a $100 million company to a a billion-dollar company.

And the same that we're building in every other department, we're also building out our finance department so that we're prepared as we grow. And so that's why we hired the white. Monica was extremely helpful and helping me and our company and our Board of Directors and searching for a CFO that she will now work with.

She is an incredible team player, incredibly loyal, and honestly, nobody has worked harder than Monica, she works 24/7 to get the job done. And now it's simply time to build the department further. Same thing in all the other departments, we have such strong departments.

Our IT -- and you got to understand, we built out this lab in this past year, and we did it with state-of-the-art equipment, and the same thing with our IT, we've built out really custom-made high-end IT platforms that are so easy to use for our customers. So we really are a state-of-the-art lab.

It's very difficult for other labs, quite frankly, to compete with us. And so even in this time where COVID may have slowed a little bit, our businesses, as you can see, is still booming. And there's a reason for that because we're not losing customers. We're a more diversified lab in terms of our customer base, I can get into this in the Q&A.

There's so much to cover. And I'm really going to leave it up to people to as questions in terms of what directions I go in. The numbers speak for themselves. I also want to give a quick sat out to a couple of our investment bankers. Of course, think equity has done a phenomenal job first and last year and half, H.C.

Wainwright picked up coverage and working very closely with them as well. Those two fantastic investment banks are [art of my job, in order to do a good job and our management team to do a good job, you have to have good relationships with investment bankers.

If you really want to build and we want to build to be a billion or multi-billion-dollar company and unique fantastic relationships of 40 years of experience on Wall Street, and we have those relationships with these firms. And of course, are already gave a shut out to Renmark, who works with us on the retail investors. All right. The numbers.

I don't really want to talk a lot about the numbers. They really speak for themselves. Obviously, Q1 revenues, $47.5 million up to 211% from a year ago. The reason I point that out up 211% from a year-ago -- a year ago, we were heavy into COVID. There was a huge spike in COVID in the first quarter of 2021, huge testing, huge spike.

And yet our revenues grew up 211%, our earnings are up a ridiculous amount. My point being, why our numbers up so much this year versus last year when there was a huge spikes both times? The difference is we're a much more efficient lab and we have a much more significant customer based that's diversified that we expanded.

And so, on an apples-to-apples basis, we had a COVID spike both years and yet our numbers were up hugely year-over-year. I have to mention HRSA. There's a big question mark around HRSA. HRSA is government-funded. And quite frankly, a significant percentage of our testing is from -- gets reimbursed by HRSA.

And so without HRSA, our numbers are going to drop. And I have no way of knowing. I'm hoping that Congress gets their act together and that they pass the bill. I just literally heard the other day that the administration is requesting, yet again, and this request has been going on for about eight weeks now.

So I believe, or I hope, that some time in the near future HRSA will be funded. If it is, we're going to make an enormous amount of money. If HRSA is not funded, we're still going to make an enormous amount of money, just not as ridiculous. Okay? So you can expect -- COVID does go in waves.

You can expect that typically the fourth quarter and first quarters are going to be our strongest quarters when it comes to COVID testing. So it does go in waves. People typically don't test as much in the summer months, the schools are closed, and so on and so forth. People aren't as nervous. Whatever the reasons.

So, you can expect sequentially, our numbers are not necessarily going to be as strong. I don't expect these types of numbers from the fourth and first quarters. I don't expect them in the second or third quarters, but our numbers, I do expect them to be up substantially year-over-year.

We are a growing company and honestly, we're killing it, and we're making a ton of money, and it's quite great place to be. I don't want to get ahead of myself. I don't ever want to get carried away.

I don't know if it's going last forever, but it doesn't matter because you're investing in our company, you're investing in a management team that execute that we're going to diversify our company. The same way we diversified into the CLIA lab, COVID testing business. We're now going to diversify our lab.

I'm highly confident that we're going to do that and in short order, we are going to build out a fully diversified clinical lab. So for those of you that are nervous that we're a, "one -trick pony.

" We are not any thing close to one-trick pony and of course, we have our manufacturing which is growing this year, we have dietary supplement business, which is growing this year. Our COVID testing business is growing this year, obviously. And now we're going to expand into your traditional clinical testing.

And then alongside that expansion not only are we going to expand into the clinical testing at the same time in parallel, we plan to build a genetics laboratory.

This is going to provide holds -- and addition to and as you know, I'm assuming most of you know our company, I'm not going through all the basics, but with Nebula Genomics, and I'm not going to explain that unless you're asking in the Q&A. But Nebula provides whole genome sequencing direct-to-consumers line.

We're going to expand and leverage our food drug and mass retail distribution to also sell to consumers in retail stores. We're working on that as we speak. I have this phenomenal head of sales that's been with the company longer than I have, and I've worked very closely with him the last 12 years, Joe Bryden. He does a fantastic job.

He knows the business inside and out, and I'm highly confident that we're going to be successful in rolling out our whole genome sequencing product in retail stores. If and when we do, I believe that that will be a monster business.

In addition to that, both selling whole genome sequencing online and, in the stores, we're going to have a subscription model connected with that. We have a library that is proprietary.

We don't believe there's another library in the world like our library, where you can go for information, when you learn about diseases that you're predisposed to, genetic mutations and so forth. You get to go to our library and learn all about yourself, your personal genetic mutations, potential diseases, etc.

It gets updated with all the latest clinical research from around the world. It gets updated weekly, if not daily. And that subscription model is fantastic for us, huge profit margins.

We have a couple of scientists updating it regularly, but so understand the more consumers that sign up for it's all electronic, there's very little cost to us that more people sign up. So, it's a phenomenal subscription game plan for us to grow revenues, and earnings highly profitable.

And then finally in building out, we want to build the same way we built out a state-of-the-art COVID testing lab. We want to build that a state-of-the-art, traditional clinical testing lab, and then we want to build out a state-of-the-art genetics’ lab. And that is huge. It is the future of precision medicine. It is the future of healthcare.

At the heart of it is a genetics tests. We want to be the leader in this country in providing genetic testing, both whole genome sequencing and a whole range of genetic tests. Not only direct-to-consumer, but then ultimately to physicians. And we're already talking to universities.

I literally two days ago, I was speaking to a university, who does major genetic research. And they said this is so exciting that there's going to be a lab right in New York. They don't want to send their specimens outside this country and he said, he has lots of colleagues that are going to be excited about our lab.

So there's tremendous potential to all the different things that we're doing in the lab business. No, we're not going to be a one foot public. And in the meantime, that I'm sorry if I'm ranting a little bit. But as you can, Dell are very excited about our company we're going in a lot of directions.

We're executing, we're making a lot of money and their is so much to be excited about. Just this morning in my driveway, pure coincident long island Newsday. That's the major newspaper on long island where our company is located. Big headline. Front pace headline. COVID alert on long island. CBC says community level of risk elevated too high, wear mask.

First of all, COVID is not dead. Secondly, even if it's less deadly, it's still spreading as fast as ever after a year of vaccinations. It's spread more this winter than it did a year ago. There was more of a spread. It might have been a little less deadly, but the hospitals were still filled up with patients and everybody needs to be tested.

What's interesting is even if it's a little less deadly, it's still 10 times more deadly than flu and you still got to get tested. So testing isn't going anywhere. That's what people understand. COVID testing is not going anywhere and our COVID testing business is booming. Okay. So that's a non - COVID, that's on expansion.

I left a little tweak for all of you in the press release. It's up to you if you want to talk about it. We are also planning on building a pharmaceutical division. There's two aspects to this.

One is, we are in plans to develop a broad-based antiviral that would be sold in all the same food, drug, mass stores, so we're selling our other dietary supplements. And we think this product will be big. And at the same time, we are -- we have plans to develop a pharmaceutical division, to develop FDA -approved drugs.

We believe that we are -- well, I don't know that I want to get to into this right now. But I expect to be licensing a very exciting early-stage compounds that we could develop, that we can easily afford to develop the first rounds of testing with a working capital that we have.

So it's not anything we're also -- we're running out in a bear market to raise capital, that's not how I operate, I do the opposite. I like to pay dividends. I don't like to do dilutive round of financing. Big difference depends on what's kind of management you want to invest in.

Me personally, I'd rather invest in a management team that generate cash and cash flow and pays dividends than a management team that burns through your capital in the net too more. Okay. I said a mouthful in 20 a little more than 20 minutes. I'm hoping that people are going to sign up for the Q&A.

If they don't, I'll go into some more details on the call. And with that, Matt, why don't I hand it over to you. I'll get more into the barrier’s divisions, our subsidiaries after the Q&A or during the Q&A and depending on how long the Q&A is.

I'm happy to spend a little bit more time talking about various subsidiary, but I do like the idea of getting into the Q&A. I don't like to be too repetitious. And with that, Matt, why don't I hand it over to you to start the questions..

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. At this time, we will pause momentarily to assemble our roster..

Matt, we can get started with the questions. I see number of people are already in the queue..

Thank you. Our first question will come from Yi Chen with H.C. Wainwright. Please go ahead..

Thank you for taking my questions.

My first question is, could you please clarify that in the first quarter, what percentage of your testing volume was reimbursed by HRSA? And if HRSA is no longer funded, what would be the alternative to get the best for the test?.

Sure. So this is, honestly, it's a complicated question. I'd never broken it out. If the HRSA funding was probably was north of 50%, but we are at the same time Instituting ways to adjust for that. So that, for instance, we have any customer, our customers are our collection partners that are collection partners.

What a couple of our sets of collection partners are actually on the street could New New York City where they attend, and because of HRSA, if we don't get reimbursed by HRSA, they don't get reimbursed either, so it hurts them as much as it hurts us.

And so, they are doing an incredibly diligent job and we are adjusting so that they only accept cash from patients that have insurance or for which we have such good information on the patients that it is likely that we're going to get insurance.

So while our high level numbers may drop off a little bit, we're going to adjust by increasing our percentage of specimens that our company by insurance at the outset.

So, this really is a dynamic situation, but I can tell you our numbers are running up so substantially year-over-year that even without HRSA, our numbers will still be up substantially year-over-year in the second quarter and for the foreseeable future. I wish I could give you a more specific answer than that right now.

I apologize that I can't, but I hope that somewhat answers your questions. And in the last part of this, I just heard the Biden Administration they are still fighting to get that funding. And there's a good probability that the HRSA funding is going to come back. If that happens, our numbers will be extraordinary this year for the rest of the year.

Otherwise, they're still going to be up substantially year-over-year as as I sit here today..

Thank you.

And my second question is, as the personnel genomic testing service are already available in the quick retail stores and has the sales, how are the sales looking recently?.

Got it. So no, we're not in the big-box stores yet. We have big-box stores -- I don't want to mention any names, but we have major retailers that are very interested, and we're actually very far along in the process. But you got to understand to go into retail stores, it sounds simple, but we had to completely change the package.

The Nebula package, it's sold online, that's shift direct to the consumer. That's not a package that very friendly sitting on the shelf in retail stores. Also, love the job that the founders of Nebula did, Kamala and Dennis and backed by George Church, in starting the company and building over the last couple of years.

But we have 25 years of experience in retail sales, and so we want to optimize the package so that it attracts consumers when they are walking down the aisle. We want to optimize the package, not only the shape of the package so that the retailers accept it on the shelves, but we want to optimize the claims on the package.

So, there's a number variables that we're working very, very quickly on. We're in late stages of finalizing the package, making final presentations to retailers. But unfortunately, I wish this was a fast process.

It's just that we've been through it a number of times, and I don't want to give exact timing, but we're in late stages of finalizing the package and getting it on the shelf. But we're talking months late this year. We're not talking about the next few weeks. But we expect -- and our goal and understand the goal and putting the package on the shelf.

You have your 5%, 2%, 5%, I don't know exactly what the numbers, percentage of the public that knows about whole genome sequencing, 95% of country doesn't even know what whole genome sequencing mean.

Our goal is to get this out to the masses and educate them on how interesting it is not just to get information about your accessory, but to get information about your health, about diseases you're potentially predisposed though. I mean, that's such critically important personal information.

If we educate consumers, we think that there's a monster market that is untapped. And that's the goal. So we have not rolled out our storage yet, but we are highly optimistic that we're going to be successful. We have 25-years of expertise doing this. And I bet you a dollar, we're going to do this the right way.

And I'm very confident what we're -- in the packaging that we're developing and the responses so far from the retailers has been excellent..

Thank you..

Yes, thanks so much for your spot and I appreciate the questions. Matt, we can go into the next question, please..

Thank you. Our next question will come from Patrick E. Patterson with Home. Please go ahead..

Good morning, Ted. Phenomenon job --.

Good morning, Patrick..

Terrific numbers. I'm Just really shocked, you're great. Ted, my -- I really have two questions. And the first one is about the whole genome sequencing. And it's -- unlocking a couple of ads from ancestry.com in 23 [Indiscernible] and they're advertising that they can do helps things or so with their products.

Can you just go in a little bit and explained the differences and what the advantages are that [Indiscernible] has?.

Europe, night and days, not it's not in the same ballpark. If you want to learn about your health, you want to know details.

You don't want some just overall picture, you want details, you cannot get the details from the way they do sequencing compared to whole genome sequencing, what they do is very inexpensive way that they study a very small percentage of your genome. It's great -- it's all they need in order to provide you with detailed, answers-free information.

Especially after they've tested so many people around the world, it's easy for them to go with a low cost, to know MCAST to study is very small percentage of your genome. To tie you in to other people around the world that has that same genetic makeup. So therefore, they can give you a high level ancestry information the way they do their testing.

However, I don't see why anyone, once you learn about whole genome sequencing would ever pay for their testing if you want to learn about health information.

So, to put it in perspective you can get high level granular ancestry information and minimal health information from their test or with our tests, you can get basic ancestry information, but very high-level health-related information. So if the reason you're ordering a test is for ancestry information, go to one of those companies.

Most people that want ancestry information have already done that test. So they actually have difficult business models. We, on the other hand, we're at the forefront. We're at the beginning. It's first inning.

I don't even know -- we're warming up, it's not even in the first inning yet, to reach out to the masses, to educate them about health-related information. If you want high level health-related information about your genetic makeup and diseases that you're predisposed to, and so on and so forth, then you're going to want whole genome sequencing.

The reason why those companies that you mentioned don't do whole genome sequencing is because historically, it was so expensive, it was out of the reach of the average person. The average person wants ancestry information, doesn't want to spend $600.

Even up to like a year ago, $600 is the lowest and that was the base price of the whole genome sequencing. That's the cost to the lab. So then to the consumer, it would be over $1,000. Nobody's paying that to learn about your ancestry information.

It was a model where they could not provide whole genome sequencing, and so it's not the way they do business. They're in a completely different business, so to be honest to shouldn't even be comparing to them. The only reason we ever even make comparisons to them is because those are the names that everybody hears about and everybody knows about.

They're not -- excuse me. They're not in the business that we are in. I hope that answers your question, Pat, and I appreciate it. It's a great question..

No, yes, that has answered too. My other question is about this potential new product is over-the-counter antiviral dietary supplements.

You mentioned, are we talking a supplement that's preventive, or one that's for treatment after you get it?.

That's a -- that is a great question znd I'm jumping ahead. And I don't know, maybe I shouldn't even put it in the press release. But I want shareholders to understand that we're continuing to diversify and grow. We have an incredible platform. I mean, I had this platform two years ago when we had a $1.5 stock.

We're doing $10 million in revenues and break it even. So we had a platform, we had a Nasdaq platform with a history and people and infrastructure, all that stuff. I and our management team took that to the next level to be this $100 million market cap company with over $50 million in net worth and capital. We are a different companies.

It's a different platform now than what we were just a year and a half ago. We're a completely different company, completely different ballpark. Our platform is five levels above what we were a year and a half ago.

But now with the platform we have now, now with this platform, I can build the company and our management team can build the company the next day.

So, one of those things that we're doing, we're looking at opportunities all the time and I just wanted everyone to know we're in late-stage discussions and I'm not sitting here sleeping at the switch and I'm not resting on my laurels, and yes, [Indiscernible].

I really appreciate you saying great quarter and all that, but I don't want people to get spoiled by the quarter. Sequentially, we're probably not going to have numbers like this in the second and third quarter, we might in the fourth quarter, but we're not likely to in the second and third quarters, the demand just isn't there.

Even though we do have this new spike of COVID coming, so they're a lot of variables. But the point that such as one business. I'm to building the next business already and the next two businesses, we're getting into genomics and I want to build a pharma company. What I want to proxy contest the way to control the company, we had to pharma division.

And thought that that was going to be worth a lot of money and that's why me and a lot of other investors roughly invested in the company after I one control the company found out it was worthless. What I can tell you is the pharma division that we're going to build now we're going to execute on the same way we executed on the CLIA labs.

So, if I tell you we're going to build a pharmaceutical division that has big potential, you can bet on it. And I'm simply telling you, I'm in the late-stages of developing that I'm really excited about it, and I will be updating shareholders in the coming months, but I'd rather not to get in many more details on it today..

Okay. Thank you, Ted..

Thank you, Pat. Really appreciate your support. Matt, next question, please..

Our next question will come from Robert Titus with MRT and please go ahead..

Hey, Ted. Stellar quarter. It's really nice to see so much free cash flow generated again.

My question is -- was the ramp up in hiring and especially bill-like? I noticed that he had some international experience and I was just wondering, does ProPhase have can to speak to any plans to expand internationally?.

That's a great question. Is that interesting? Actually, I mentioned the founders of Nebula Genomics, Kamal Obbad and Dennis Grishin over really, really bright people in founding Nebula and of course, backed by world-renowned George Church.

But then we hired Sam Beeler to be our Chief Operating Officer for that business for the ProPhase precision management subsidiary. And he has tremendous relationships abroad. And I think I've mentioned. I don't know. I think I mentioned one other companies.

Actually, I think I mentioned before, so I can mention G42 it's a $10 billion company that has -- it probably has the greatest initiative of anyone in the world for doing homes -- whole genome sequencing through the Emirati Genome Product EGP.

And their tests with conducting whole genome sequencing, like everybody in the UA, I mean, what they're doing is vast and they want to do something worldwide.

And they want to develop a relationship, partnership with us because they don't have a presence in the United States, in the United States, of course, is one of the biggest have not the biggest markets to go after. So they're actually excited to work with us. So Beel is going to complement initiative that we're already working on.

And the reason why we hired Beel, if we were just going to remain a $100 million company, our current CFO, Monica Brady, is fantastic. She's so loyal, works 24/7 to get the job done. We switched auditors and built a whole new business. She oversaw all of it from the finance perspective. She did a fantastic job.

I want to build to a $1 billion, a multi-billion-dollar company. To do that, you have to continue to bring some tremendous experience in perspective and skill sets that are complementary to Monica's. So I think we're going to have the dream team on the finance side and, yes, absolutely.

And to be honest with you, I've been working with all the investment banks myself all these years. I have a 40-year history with Wall Street. I worked on Wall Street for decades. So, I've been doing all that myself. Bill has a lot expertise. It turns out he has a lot of the same relationships I do.

In fact, I was introduced to Bill through our -- through ThinkEquity, our investment bank. And so it's a match made in heaven. He's just going to significantly add to our overall team. And absolutely, on the global front, he is going to be very helpful on working with Sam on the Nebula side, but also in every subsidiary of our Company..

Yeah. That really helps. I was reading the tea leaves there. So I appreciate you shedding some light on that. Thank you..

You're quite welcome. Thanks for the question. Matt, next question, please..

[Operator Instructions]. Our next, question will come from Dennis Waldman with the Barrett Productions, LLC. Please go ahead..

Hi, Ted. Congratulations on an awesome first quarter. Pat actually asked my initial question, but I'll ask a question about the diagnostic testing. You're saying that you don't see second, third quarter having the same sort of rates yet I live in New England.

I watched the New York rates quite a bit positivity has gone in last month from 3% to certain areas that are over 20%. The CDC's is saying that we're expecting another surge in the New England area and then northeast area.

How could you be so sure that we're not going to see the same sort of numbers that we saw in the -- was in the first quarter?.

Dennis, you are -- what an amazing question. First of all, I really appreciate your support and actually it's a fantastic question. So here goes; I don't want to get to caught up in myself and I don't want shareholders to think that every quarter we're just going to keep announcing revenues up a bazillion percent and earnings up a bazillion percent.

It's just not fair to put that -- I don't want to put that pressure on myself, and I like to under-promise and over-deliver. And I think that I have done that for 12 years as CEO of our company and it's the reason why we've paid out $2.10 in special dividend.

We had a stock that bottomed $0.65, paid out $2.10 in special dividend and we now have over $50 million in networking capital. None of that happen by accident.

But I'm really interested in continuing to collaborate and partner with long-term investors, and I just can't and won't be chained to short-term traders and I want our shareholders to keep that perspective that if you're a long-term shareholder, I'm the largest shareholder in the company and I'm going to build the value of the company to protect my interest.

And I say that just to make all of you feel better. The truth of the matter is I care more about your investment than I do mine is just the way I was born and it's the way I'm wired and I want everybody who is a long-term shareholder to do really well. But I don't want them, to get wrapped up in short-term psychological swings.

I've invested in hundreds, if not, thousands, of companies over 40 years. The only time I ever really made substantial money were in the smart long-term investments. I never made it on the deals where I thought, I know something for two or three months or five months. Never ever worked out you heard that.

All those investments, I lost a ton of money in all of them. The only ones that are made money were in the ones where I invested in something long term, and the management team executed. And that's why out of a thousand investments, maybe five worked out. But the five work that big enough to put me in a position where I'm in now.

So I just want people to have that perspective. I don't know what our next couple of quarters are going to be. And yes, that long on a noonday newspaper, that literally just came out this morning, it was on my driveway. I picked it up coming in to work, which is why I mentioned it. Yes. And I've been telling everybody there more waves of COVID coming.

But I can say that, so I'm blue, but whether people want to listen or not. And so yes, our testing is continuing. Our testing is significant. We have a wrench in the works in that has been funded. And a decent percent of through our business, I -- Yi Chen is nice enough at H.C.

Wainwright to follow our company and do updates he really does fantastic job and he asked the question about the percentage person, and I admitted it is over 50%, so I mean, that's a dramatic difference if you cut out half of our revenues, you're going to cut out more than half of our earnings. Of course, because you still have the overhead.

So I don't know what's going on with HRSA, it's a real wildcard. Without HRSA, it means that we're only going to get reimbursed from people with -- who have insurance and a lot of times people -- but the issue is a lot of times people don't have the insurance with them when they are walking down the streets but they have it at home.

But what we're doing is we're continually -- we have such a sophisticated IT system. We're continually upgrading so that if they don't have their insurance with them, but they have it, we're instituting policies for collecting specimens only if you provide your legal ID like a driver's license.

And we have IT in place to actually to scan your driver's license. So the odds of us getting insurance goes way up. So we got two variables. We have HRSA that may not get -- and I didn't see the numbers -- but the numbers are high and it depends on the customers, so it varies. I don't want to -- but it is more than 50%.

But on the other hand, I think that we're going to start getting a higher percentage of people that have insurance.

So, I don't know where the numbers play out and that's why I know that year-over-year, the people that we're testing now that have insurance is significantly greater than the total number of tests, we were doing a year ago at this time, significantly greater. So without HRSA, I know our numbers are up.

I just don't know how much they're going to be up without HRSA because we were making so much money off of HRSA. And if we we're making money, it's not a bad thing, it's a good thing. It's testing people who don't have insurance.

The amazing thing about all of this is that HRSA funds people who are in poverty, people that don't have insurance, people who are minorities, people who are struggling. Those are the people that need a good health care. So how do you not fund HRSA to take care of these people? So I think it's inevitable, illogical that HRSA won't be funded.

If it is, I'll be very excited. But long-term, my game plan is a lot bigger than COVID testing. And I hope that -- I'm sure that came across on this call with the other things that we're working on.

The Nebula Genomics -- I'm telling you, genomic testing right now is where the internet -- and I've said this before, it's where the internet was 20 years ago. Why wouldn't you want to invest in a company that's at the beginning of an exploding industry? And we've demonstrated that we execute and we have great people.

We've got George Church, world-renowned leader in genomics, working in partnership with us. I mean, what more could you asked for? We have a couple of brilliant people from Harvard who founded Nebula. And then our whole management team. I think we're going to blow this up big. But this is something over the next few years to do.

In 1998 or 1999 or 2000, you didn't look at Amazon and Google and did you look at these companies and say, "Oh, wait, this took three months longer than I expected. It's a lousy investment. " No, that's something you buy, you put it away, and you watch it blossom. That's what I'm doing in genomics. And I'm not even resting on that.

I'm going to continue to build the COVID business, but we're going to continue to build our entire clinical lab business. That's going to take time, but we're doing that this year. We're going to have a fully-diversified clinical lab. We are going to have the genomics. And then in addition to that, what I discussed about the pharma business.

This is the first time I've mentioned this, and it's the per talk a put it in a press release but we are at lifestages and we're working on there. And I'm really excited about it. That's something I've been working on for many, many, many months. But I'm the opposite of both managements.

I'm not going to hide something that's not real and I don't talk about something until it is real. So that's something I've been working on to literally six months or nine months that haven't talked about before. And if I'm talking about it now, in late-stage, it's not in the early-stages.

So, I have some exciting things up my fleet, hopefully for our shareholders. But it's a long-term shareholders. And I hope that I answered your question. So look, the short answer is that I went on because I don't feel a lot more questions. The short answer is, I don't know what our numbers you're going to be for COVID. And frankly, I don't care.

Would I like to earn more money over the next couple of quarters? Sure, of course, why wouldn't I? And I hope to when I expect that our company's going to be very profitable over the foreseeable future every quarter. But we're -- I want to build the multi-billion-dollar company. I'm not doing that with COVID testing.

COVID is generating -- it's generating enormous amount of cash. It puts us in the enviable position, unlike the 98% above other micro capital, all trying to raise money and it burned through all their capital, and that's why their stocks have gone down 90%.

There's a reason why the stock market just crashed over the last six months and our stocks up over the last six months. It's not an accident because we're executing, we're generating cash flow, we're generating earnings, and we don't have to raise capital. We don't need investment banks to raise capital right now.

But the investment banks are working with us as we build a multi-billion-dollar company and they see the potential. The reason they're following us and working with us so closely is because they know that the potential is there for us to grow big, and so there will be a lot of capital activity in the coming years, and they're long-term.

And that's specifically why I like ThinkEquity and HC Wainwright so much because they are thinking long term with me and they're truly partners in our [Indiscernible]. ThinkEquity raised all that capital for us a year ago, they just did a phenomenal job, like surprisingly a phenomenal job. We have all that to build the company longer-term.

I'm sorry I ran on a little bit. I'm obviously excited about the future of our company. I just don't want people buying the stock because they're trying to figure out how we going to earn $0.10, or are we going to earn a dollar in the third quarter. It's just not relevant to why you want to be investing in our company.

Wow, that was a long answer to your question, Dennis..

But I am long-term and and I do wonder about how ProPhase gets affected by what's happening in the current worlds of course, like everybody else, how are uninsured people getting tested now?.

They can't..

Wow..

But they have to pay cash. If they have the cash.

But now if you're talking about people who are running short, they're also poor, then guess what? They're not going to want to get tested, which is a shame, because at the end of the day, the best way to handle this COVID problem is to get tested and find out as quickly as possible if you have COVID, and if you do have COVID quarantine immediately before you spread it.

I mean, it's the most logical thing in the world, to get tested, find out if you have COVID, if you have symptoms, you feel sick.

So right now, this whole notion, this whole idea with masks and no masks and do we, people are worried, there's so much government, politics and psychology and media, that's -- which has absolutely nothing to do what's going on with COVID. We have a monster outbreak of COVID going on right now. A year ago, everybody would've been in a panic.

Right now nobody is paying attention. They just changed the rules. You don't have to wear mask. No, I don't know if mask helped with COVID or not. Quarantine and staying away from people does. Listen, I don't know what the answer are, I just know that the way the media covers this isn't always accurate.

The way it's handled politically isn't always accurate, but yes, for people without insurance they've got a real problem right now and that's why I think -- I just heard that in the last two days the Biden Administration again, is pushing hard on getting HRSA funded again. So I'm assuming it's inevitable it's going.

If it's going through then we're just going to have killer numbers. I'm just being honest with you. But my other point is we don't need killer numbers to build our company.

We have all the capital, we have all the management, we have all the initiatives in place that we're going to -- I believe we're going to grow a very large company over the next couple of years with or without COVID.

COVID to me is sort of icing on the case, that it's just generating extra process for us while we build these other businesses, and pay dividends. Such to that's a bad thing, generate capital. I mean, here we pay a $0.30 dividends at our working capital in the earnings that we generated dramatically more than the dividend we paid.

So we can pay out a dividend and still be better off than before we pay the dividend, two quarters of what we did this and we did the last year, that's not a bad place today..

Well congratulations again, and thank you for your answer..

Thank you so much, Dennis. We really appreciated, and it looks like Matt, we have another question..

Our next question will come from Kyle Krueger with Apollo capital. Please go ahead..

Good morning, Ted how many Nebula Genomics tests were sold during the quarter? What's the run rate on that since it's your incipient business.

Yeah. That's a great question. I got to be honestly with you, I don't even know the answer to that question. In my mind, we're still in the very early stages of building it. If you wanted to -- I really don't know what the numbers are. In general, you should assume that we're probably somewhere around, I don't know, 1,000 tests a month.

And we're looking to grow that number and that's online. But again, we haven't formerly dropped our prices permanently. We're still working on longer-term major deals for the sequencing. And we haven't gotten into retail stores yet. The retail stores, those numbers could go up by multiples, very, very quickly once we get into retail stores.

So we're in the early stages, I literally, I don't know the numbers. It's almost immaterial to me to be honest and I -- and not to make some fact we haven't posted them publicly and I don't want to say anything out of turn.

So, I apologize, for not giving a definitive answer, but I gave you a ballpark and our goal with this is to grow those numbers dramatically. But even having said that at a thousand whole genome sequencing tests provides or in that ballpark, we're a major player in that business direct-to-consumer -- major player, nobody even comes close.

Everyone else [Indiscernible] All the other companies in the business want to partner with us to use our volume to try leverage them, getting better pricing. But we're the leader and we're just starting out and with our capital in our expertise, even our numbers, I think we're going blow them out of the whatever the next year..

Yeah. Okay. My final question is on the reported revenues for the quarter.

Are all those revenues associated with reimbursement certainty, or are you saying that half of the revenues are related to uncertainty?.

That is a brilliant question. Can I tell you -- that is an absolutely brilliant question. Oh, my God. You have no idea what we've had to work through between our finance team and our auditors. The answer to your question is, we have reserved for whatever revenues are questionable that we're not going on. So what you see is what we expect to get.

And so, our earnings are based on -- so basically, our earnings are based on us not earning anything from HRSA after March 22 because HRSA said that they're not accepting claims after March 22.

So, any testing that we've done since that time on uninsured people is not in our numbers, although there's still a possibility that we could we could actually collect on those. And then we have reserves. We have big reserve numbers.

I don't want to -- Monica is going to kill me if I say something I'm not supposed to, or that I say something incorrectly. But what I can tell you is our numbers, our auditors make sure and we make sure anyway to report the accurate numbers on what's real and not what we hope. So those are not inflated numbers at all.

I think that's the best way to answer that question. And I hope that answers your question..

Yeah..

Yes, absolutely. Our numbers -- all right. Good, good, good. We really appreciate it. That was a great question. Thank you.

Matt, we have another question?.

Thank you..

Thank you..

Our next question will come from Fred McDonald, a Private Investor. Please go ahead..

Hi Ted.

Hey Ted, how many currently do we have for our temporary employees, and how long does it take to get them productive?.

Good question. So I've covered this before when things were crazy in December and January, and I've mentioned I don't love mentioning names per say.

Jason Karkus built a tremendous customer business that absolutely exploded, particularly in December and January, and Alice Lioi completely restructured our lab and they work together as the Co-COOs and Alice developed strategy for hiring tempts.

So that as the business built she has more tempt, as the business slows, she let the tempt go so that our overhead is more in life and our overhead is more variable and it's not all fixed. So that we can still be profitable. Lower levels of testing. So, I can't tell you what the exact numbers are right now.

But we have a nice cushion, so that if the testing ramps up significantly again, like it did a few months ago, will be prepared for it. But at the same time our overhead is very efficient at the moment. So we're monitoring this on an almost daily basis in terms of the amount of testing we're doing, the amount of testing we expect to be doing.

And then varying our employees accordingly. But you got to understand after a year-and-a-half of doing this now. We have a really good team. We just had something called lab week two weeks ago that everybody participated in, and it's like a little special party each day with wearing different clothes and doing different things.

And there are so much camaraderie within our lab. I was so proud of everybody, truly. So we have a great lab. We have a great team in terms of the overhead. And the temps fit right in and the flexibility is fantastic. So, we're in great shape. We have a -- we always keep a cushion relative to where we are now. So we have a cushion if things grow.

And I've got to be honest with you, we're doing more business now than we were a year-ago. Things were crazy first-quarter 2021, things were crazy. If we did 2,000 tests in a day, we we're like, "Oh my God, we [Indiscernible]. Now, we've had days where we do 3,000 or 4,000 tests and it's like the lab is quiet. It just runs so efficiently, it's scary.

How nice this business. And I also got to throw in Sergio Morales who did such a great job at our IT, which is what also helps make it run so efficiently. So, this whole team has just may things run so efficiently. So, yeah, we have a nice cushion of people.

The employee overhead, which was such a big deal last year, isn't an issue for us at all anymore. And so we're very well-positioned if we ramp up again. And if not, we're hugely profitable with the amount of testing we're doing at present.

And again, even without HRSA, we're doing significantly more testing right now than we were a year ago at this time and that's without HRSA. If HRSA comes back the numbers overnight could double or more. I hope that answered your question. We're at the of the hour so --.

[Indiscernible].

All right. You're quite welcome. Matt, if there are no more questions, I believe we should pardon on the call now..

Okay. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..