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spk01: Ladies and gentlemen, thank you for standing by. Our presentation will begin momentarily. Thank you for your patience. Thank you for watching! so so Thank you, and good afternoon. I would like to thank you all for taking time to join us for ProPhase Labs' fourth quarter and full year 2020 financial results conference call. Your host today is ProPhase Labs' CEO and Chairman of the Board of Directors, Ted Karkas. A press release detailing these results crossed the wires today and is available on the company's website, ProPhaseLabs.com. Before we begin the formal presentation, I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and future operational goals and industry prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company's SEC filings for a list of associated risks. Finally, this call This conference call is being webcast. The webcast link is available in the investor relations section of ProPhaseLabs.com. At this time, I would like to turn the call over to ProPhase Labs Chief Executive Officer, Ted Karkas. Ted, the floor is yours.
spk07: Thank you, Hector. And greetings, everybody, and thanks for joining me on the call today. It's kind of an interesting time for a call, given that we just reported the year-end numbers while we're at the end of the first quarter. I was actually thinking about waiting until we reported the first quarter where we had more to talk about about the first quarter in six weeks, but then I had a feeling a lot of investors would be upset with me. The stock is obviously volatile. When the stock's volatile, I get a bunch of comments, you know, where's the update? And so I would just like to start by reminding everyone, And those that have known me a long time know this to be true. For those that are newer investors, I'm sure many of you I've told this to before, but I'll repeat it. I have a history of building value for our companies and the companies that I get involved with over the long term. And I've been pretty consistent at doing that. I've certainly been pretty consistent at doing that as CEO of Prophe Labs over the last approximately 11 years. When I turned around the company, the stock bottomed out at $0.65. For those that stuck with me, I paid out, you know, I turned around and called these brands, sold them for $50 million, and then subsequently had the two stock buybacks, the three special dividends, a total of $1.50. So people that stuck with me have been handsomely rewarded. And since that time, I've always gone by the same theory every move I make, is in terms of what's best for long-term shareholders in terms of building value on a per-share basis. I consider that critical to what management should be paying attention to. Most managements don't. I don't want to go into more detail than that, but I just want to remind you all that that's my goal. That's my game plan. I am not responsible for NASDAQ selling off 1,000 points. All of the tech stocks and small, mid-cap stocks, I follow a lot of other stocks in the same industry that we're in, and they all got hammered. And so, frankly, I have no control over that. I also have no control over short-term swings in the incidence of COVID. Back in December and January, the numbers were going up dramatically every day in terms of the incidence of COVID and the amount of testing that was being done. All of a sudden, in middle of February, those numbers dropped dramatically. NASDAQ dropped dramatically, our stock dropped, and so forth. What I can control is making smart decisions to build our company longer term. That's what I'm doing. So just to talk a little bit, I know you all want to get into what's going on in Q1 and what's going on currently. Just to talk a little bit about last year, our revenues were up 45%, which quite frankly in and of itself I'm pretty proud of. That's both our base business, it's our manufacturing business, It's our dietary supplement business. And a little bit of testing, which we did at the end of December. I'm going to get into the COVID and the testing a little more in a moment. But we did not report a profit, but that's because we're rebuilding the company and taking it in new directions. And so that's all planned the same way I used to plan when I turned around and grew the Coldies brand, which we ultimately sold for $50 million. We lost money while we were developing the brand, but ultimately we sold it for $50 million. Whereas when I took over, maybe it was worth $5 or $10 million. So I'm doing the same thing now. I'm building value in the company long term. I really don't want to get too much into the stock price, even though that's what everybody seems to respond to. And I don't blame you. But by the same token, at some point it gets silly. As the stock goes down, it gets closer to actual liquidating value while we're actually growing a business here and growing revenues and now going forward, earning some cash flow. So I'm going to get into that a little bit more in a minute. I just wanted to give you that as a background for all on the same page. One more comment on our dietary supplement business, which I'm actually feeling really good about. We did get into a lead product. It was already in Rite Aid and Walgreens, and it's doing so well in those stores. We got into CVS and Walmart. These are considered the four largest retailers for dietary supplements. And, of course, you know, we have a laundry list of other retailers that we're in now as well. But we've got the biggest ones, Walmart and CVS, in the fourth quarter, which means just a pipeline, Phil. And the fact that our product sells off the shelf means that we're going to have significant, you know, a significant uptick in revenues and now earnings from the dietary supplement business. I actually feel really good about that. While it's a small business, it's going to grow very nicely this year. And all of a sudden, you'll see a small business that you're not paying attention to actually have real value in the company, especially with their stock price downwards. I don't really want to talk more about that because our testing business now going forward is going to dwarf our dietary supplement manufacturing business. But suffice it to say, our other core business is doing just fine. We ramped up in a very short order. We decided to pivot into COVID testing. And basically, it was late last year that we decided, rather than partner with another company, to actually do it ourselves. And in a matter of literally weeks, we went from not being in the business to buying a business without customers, to having to do a lot of validation work. And lo and behold, from late October to mid-December, a period of like six or seven weeks, we bought, closed on a lab, hired people, got validation work done, and actually started testing in late December. We quickly ramped up, which was honestly pretty incredible that we ramped up to 1,000 tests a day at the end of December and then actually had 1,500 tests a day in the end of December. Frankly, that was a hurricane task because there are, you know, other than the large labs, 95% of the labs across the country are smaller labs that are happy to do 200 or 500 tests a day. And we, within weeks, were already doing 1,500 tests a day, which is actually a pretty incredible number in and of itself. In January, we actually hit 2,500 tests a day. I was really excited about that. I expected that to continue with the time and to just keep growing. And just so you know, since that time, well, I'll go back a step. We had a fantastic January. I expected it to continue. In February, I alluded to this in our press release, I really want to stick to, what's out there that's public information. In the middle of February, we got hit with horrendous weather. We do a significant amount of business in the southwest, and frankly, in the areas where we do business, I guess I've never seen snow flurries before, but basically the whole state shut down. We had several testing centers shut down, and this was from our biggest customer, and so that hit Our overall business, I mean, it's from our largest customer. But at the same time, every month we've been adding customers. So the underlying business of adding customers and small business from one customer and a little business from another customer, that's all adding every week and every month. So we had a big knock from the largest customer, but the diversity in our business is growing on a weekly basis. So we have a really nice core business. So we ended, I also made sure to put this in the press release so I could talk about it a little bit. We finished, we averaged for the quarter based on a five-day testing week average. We averaged just under 2,000 tests a day, which, quite frankly, I am really pleased with from the point of view of not being in the business before. I'm not pleased with it relative to the incredible growth rates that we had in the last week of December and the first four weeks of January. So honestly, it was a little disappointing. But from the point of view of us growing our business, we continue to grow our business. I'm going to talk about the business a little bit more in a moment, but I'd like to just pause to also point the fact that we've built an incredible infrastructure over, you know, these past, you know, two or three months. We have a very, very strong management team. You know, besides our CFO, Monica Brady, who's been with me for many years, specific to the lab business, Steve Kamalek has been in the industry. I joke about how many decades he's been in it, but he built up another lab from a very small lab to a very large lab. And, you know, I couldn't be more grateful that he joined me in this new endeavor. We also attracted some fantastic IT people. I'm going to try not to go on too long with this because many of you have heard this before, and I really do want to get to a Q&A, but I just have to touch on a couple things. We hired two IT people led by Sergio Morales, who led an 18-person IT company on a consulting basis prior, and I can't tell you how blessed we are to have him and how important IT is in all of this. And we've hired two of the best molecular lab techs who are, you know, regularly working with the FDA. They have two EUAs filed with the FDA that we're waiting for approval on, Carlos Brewster and Amanda Vasquez. And so we really have a strong team, completely rounded out for every facet of the lab business. And so it makes it easier to grow when you have a good foundation and have a good team. We also, you know, when we built out our new lab, we built it out with state-of-the-art equipment. As I mentioned, we built it out with Thermo Fisher's latest equipment. They adjusted to COVID and responded and created new equipment and reagents with a multiplex platform so we can test for the new mutations of COVID. So we have the state-of-the-art equipment. We have a fantastic capacity, which I've talked about ad nauseum. We can turn around in 24 hours. I've talked about how important the IT is because once you have the key people and the equipment in place, the lab processing runs pretty smoothly as it does for us, but it's still the collection of the patient data and the technology to collect it and then also report out the results, and that's where IT is so important. And then, of course, we just announced last night about the acquisition of VACTrack, which is really cool. If we didn't have Sergio... First of all, I don't know if we would have made the acquisition. Number two, we wouldn't have been able to integrate it so quickly. It's already integrated into our system. You know, while and the seller of the technology who was quoted on a press release, we're actually working with him on a number of things right now. But he was nice enough while we were looking to and we literally just signed the deal. But we've already been integrating that track into our system even before we actually officially signed the deal. And so Sergio has already integrated in our system. We're already in beta testing, and we're about to roll this out any day now. In fact, I think we may have some customers that are willing to beta test it. We've done some internal beta testing. We're about to roll that out. And coincidentally, I was just talking to a partner of ours who thinks that he may have just landed an account And the deciding factor was actually Backtrack. And for those of you who don't know what Backtrack is, it is explained in the press release. It has a number of functions. Some of the key functions for us is it gives us the ability to report. If 1,000 people get tested, it gives us an ability to report directly to each of those 1,000 people, directly to their portal, directly to their smartphone on an app. They can then use that. It has an unalterable QR code and report on it where you can basically see your vaccinations. You can see if you're COVID positive or negative or any other test for that matter so that it could be used to enter events. This is a big deal now with events opening up. So I'm really excited about that track. It just builds out our technology. It builds out our company, and it just differentiates us one step further. I'd also like to point out that we have several partners out that we didn't have three months ago. These are partners that are bringing business to us that we're working extremely well with. We have a group that are experts in testing schools, and we have experts that are in testing towns and in testing states. And there's tremendous opportunities out there. So I just want to review the dynamics a little bit in terms of COVID incidents and COVID testing both dropped off. I mean, basically they dropped off a cliff in middle of February to March. But what's interesting is over in Europe, COVID is on the rise again. And I believe that there's just burnout in our country. People don't want to deal with masks anymore. Weather's getting warmer. They hear about vaccinations. And you're like, okay, screw COVID. But what people don't understand is just because you have a mentality of screw COVID, I don't need to get tested. I don't need to wear a mask. I can, you know, I don't have to social distance. All that's doing is it's starting the wave all over again. And I think I've said this before. I'll say it again. Every, virtually every expert I talk to says there is no cure for COVID. We've never been able to cure flu. Even with vaccines, vaccines are always nine months behind. It took nine, ten months to create a vaccine for COVID. Now it's mutating rapidly, faster than flu. Everyone's concerned with the current vaccines out there, how long they're going to be effective on the new strains. We are seeing more and more. We're now starting to see an uptick in the incidence of COVID. We're also seeing an uptick in the positivity rates, and we're seeing an uptick in the mutations. So all of this is going on while everybody psychologically feels like COVID is going away. I'd also point out that only about 15% of the population has been vaccinated with two vaccines. And maybe most importantly, when you get vaccinated, that does not protect you per se from getting COVID. It may protect you from getting symptoms, which actually makes you more dangerous because you're going to let your guard down when you're vaccinated. There's a higher probability that you're going to get COVID. And what that means is you're now more dangerous because you're asymptomatic, which means that you're not going to be as careful. And you may spread it to other people that haven't been vaccinated, which makes you, you know, deadly. So we have all these different factors going on. One thing that I pointed out is that even if COVID, and I pointed this out months ago, even if COVID testing dropped and it had, there's still going to be testing. And a perfect example of that are the school systems. where the current administration is funding in a significant way, they're funding schools to reopen. There is a ton of opportunity for testing with schools. We've actually developed, particularly with our partners, some expertise in testing at schools. We currently test in over 75 schools. These are high schools. And that number I expect to grow significantly in the coming months. The other thing I point out is that our three largest customers all told us, somewhat coincidentally, that within a couple of weeks, they expect that their testing with us, their business with us, to grow dramatically. And then in addition to all that, we have lots of other partners, though, that are working on weddings and events. We're starting to develop a network of independent pharmacies that are doing testing where they're sending their specimens to a lab. So there's just an enormous amount of opportunities, and while the overall level of testing has dropped significantly from mid-January to now, by the same token, we got into this business long before the numbers went up to where they got to in mid-January. And so, you know, they've come back down, but they're not going away, and now they're turning and going back up again. So the last thing I'd like to mention about this is that our goal was to build a strong infrastructure-invasive business with COVID testing. And now that we've pivoted, and now we're a substantial lab, and we're actually a force to be reckoned with with regard to RFPs, because quite frankly, nobody can beat our turnaround times. They might be able to match them, but they can't beat our turnaround time. Our customer service is first class. Our IT, our reporting systems now, you know, we're as good as it gets. And now it's just a matter of getting the word out. And as we do more and more business with more and more accounts, that's going to beget more business. And so I can't tell you how much our business is going to grow. As I said, I was a little disappointed that we had that dip. But by the same token, when you look at it, instead of looking at it every week, if you look at a quarter to quarter, I expect to grow every quarter. We grew, you know, last year we grew revenues 45%. Our fourth quarter grew really nicely. There was only a little bit of COVID testing at the very, very end of December, but, you know, our revenues are going to grow very strongly in the first quarter. I expect them to grow significantly more in the second quarter from the first quarter. The last point on this is we raised an awful lot of money, which significantly increased revenue our liquidating value on a per share basis. I always say that a pay tax is a terminal value on a per share basis, meaning look at the value of our company if we were to liquidate it, divided by the number of shares. My goal is to grow that every year. And I've been growing that every year, and I expect to continue to grow it every year. One of the reasons we raised that capital was because we were going through a period of significant negative cash flow, which I explained to everybody that was – One, for the building out of our Garden City lab, which I am so proud of. Anybody that's come to see it in person is really impressed with it. Number two, it's obviously providing the equipment for hiring people. But a large part of it is purchasing consumables. And at the time, back in January, there was big concern of shortages of consumables. I wanted to make sure we had more than enough consumables. So we bought an enormous amount of consumables to protect us for any large orders that might come our way. And so from the time you buy consumables, typically if you buy them about 30 days in advance of testing, you have to pay for them up front, 90% up front, 10% on delivery. So from the time we order 30 days in advance of the testing, we have to pay, and then once 30 days goes by, we do the testing, and then it could be up to two months before we actually get reimbursed. So we had a three-month period of tremendous negative cash flow, But I'm now looking forward to, and that basically was our first quarter. Our second quarter, we've got a lot of billing going out to insurance companies that were just now starting to get paid back from them. I expect our cash flow to rise dramatically in the second quarter. I expect to have really strong numbers going forward, and I'm excited for the future of our company. So I feel a little bit of pressure, quite frankly, from the stock price, and And there are people out there that made sure to let me know in an obnoxious way, which I don't, frankly, I don't respect. It sounds a little offensive. But for the most part, for the long-term shareholders that know me well, they know that I'm building value for them. And I am a very large shareholder of the company, so don't get me wrong. I'm building it for myself as well. But we're all on the same team here. I just want to make sure I look at my notes. And, again, the last part of this, is the next step is we're looking to diversify something like backtrack that rounds out our COVID testing really nicely. You know, obviously it can also be used for vaccinations, but I'm looking at diversification in many different ways. I'm looking at other tests besides just PCR tests. I'm looking at fast PCR tests. I'm looking at antigen tests. I'm looking at immunity tests with companies that we might partner with. I'm looking at labs. to acquire other than labs that do COVID testing, but labs that do other types of testing. I have groups of people who can bring business other than COVID testing. I'm talking about all the other types of testing that were being done before COVID that are gonna be done after COVID. And so I'm really looking to leverage our infrastructure to potentially buy a lab with licenses to do all the other types of testing besides COVID. So I'm looking at a lot of different directions. I'm looking at M&A activity. What's nice about our company is we have a very strong capital base. We have, you know, the company is up three levels from where it was last year in terms of our revenues, in terms of our business going forward, in terms of our cash flow going forward, but also in terms of our balance sheet. We have an incredibly strong balance sheet, and, you know, other than some M&A activity or acquisitions or things of that nature, I expect that, our balance sheet and our liquidating value to grow every quarter going forward. And now that I've said all that and that was a mouthful, I just want to highlight again the forward-looking statements. I'm not going to read them again. I believe everything that I just told you to be accurate. I can't guarantee what's going to happen with COVID or with NASDAQ or with the stock market or things of that nature. I can control what I can control. I can't control what I can't, but I can tell you I am Working my butt off harder than I ever worked before. This is reminiscent of when I turned this company around a decade ago and I was working around the clock. Well, I'm doing the same thing right now. I'm doing it on behalf of everyone on this call. And I'm very optimistic and confident that we are going to continue to grow our company from quarter to quarter. I can't tell you what's going to happen week to week, so please stop asking me. But quarter to quarter, I expect really nice growth in our company, and I'm looking forward to it. Let me just see if I have anything else before I open it up to a Q&A. My IR firm, who's on the call, told me keep this to 25 to 30 minutes. Well, it's 4.58 Eastern time. It's been 28 minutes. And I think I covered just about everything I wanted. I would like to open it up to questions now. Hector, I'll hand it off back to you. I think I'm right on time.
spk01: Thank you, sir. Thank you, sir. We'll now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Your first question comes from the line of David Deschler with Deschler and Associates. Please proceed with your question.
spk06: Ted, long-time shareholder. And actually, I want to thank you for getting rid of Mr. Quigley. That's how long I've been with you. Thank you, David.
spk07: I have no comments about that. That was a long time ago.
spk06: Yes, I've been through the fix and saves. But just a couple of questions. Number one, I can admire and comprehend completely your need to have a solid balance sheet because that is the most important thing. But in addition to the stock price, can you give us any timeframe? Because I know cash is king right now, but as far as potential buybacks or dividends, How far out do you see where they may come into play?
spk07: Sure. That's a great question, and I only wish I could answer it directly, all right? Here's what I can tell you. Here's what I can tell you. I have a history of doing what's best for shareholders, okay? We have a very strong balance sheet, but because we have a strong balance sheet and because cash is king, if I can – um, find an acquisition of a lab for $5 million, which I think I can build to make it worth $25 million. Or there was a lab that I can buy for 50 million that I think I can make it two or three years worth $200 million. Got to ask yourself, do I want to spend that cash or do I want to buy that? So yes, cash is King. It's also nice as I have a fantastic relationship with, um, our, our two investment banks that, that did the underwriting for us, uh, back in January, and for the right opportunity. Because we already have a strong balance sheet and because we have strong revenue growth now and things are going so well for the company, to be honest with you, it's pretty easy to raise capital for opportunities. But by the same token, I'm very careful with those opportunities. Cash is king, but cash is also the value to our shareholders. Most companies, most managements, most of the time, they take the cash for granted, they burn through it, and then they come back asking for more. I don't operate that way. So I will not do anything floppy with the cash. And what people don't understand while they're selling the stock down is how much cash our company has and how strong it is. And I'm shaking my head. You know, the stock is getting down to a point where they're valuing our new business, which is growing, and they're valuing it. I'm sitting here saying, what are you kidding me? Now, I am not making stock price recommendations or stock recommendations. But what I will also tell you on top of all that, I weigh all factors. And in the past, when we sold the Colby's brand and the stock was trading below liquidating value, I did two stock buybacks. After I did that, we still had cash and I didn't know what to do with it. So I did three special dividends, right? So you got to understand, I am a big believer in stock buybacks. I'm a big believer in stock dividends at the right time. And at the end of the day, it's got to be what's best for the shareholders weighing that against So I'm sorry I can't give you a better answer than that.
spk06: No, that's fine. And part two, you probably know that you've got two analysts that I know you don't like to give any forward guidance because of all of the variable factors, but you've got two different analysts that are, I think one is projecting $2 earnings per share and the other one possibly $3.25 for the year.
spk00: Right.
spk06: Can you make a comment about that? That sounds quite aggressive to me.
spk07: Yeah, of course. So if we were talking in January, I would tell you that I thought we were going to blow those numbers away. If you ask me right now, it depends on how we grow from here. You know, I'm just going to give you some perfect examples. And I just don't know because I'm talking about opportunities that I come across every single day. And what I've learned is The larger the opportunity, the lower the probability of success. But to give you an example, we're working on some opportunities that could be nationwide, literally. But I don't know what the odds are. What if the odds are 1 in 5 or 1 in 10? But if a company hits on that, we could do 40,000 tests a day. On one opportunity. What would happen? I didn't even calculate the numbers before all I know. We could earn $6 a share this year. On that one day, we could earn $10 a share. But if we don't get that, and I don't expect to get it, but by the same token, we're dealing with growing our school business on an almost weekly basis. We're adding schools. If you think about it, we already have 75 schools that are reported just over the last couple of months. That's growing now. There's a big advantage because there's more cash. So we should be able to accelerate that. But I don't know. When I reported that we're doing just under 2,000, I expect that number to grow significantly in just a few weeks from now. But I can't guarantee it's going to because look at what happened back in December and January. But what's nice is the number of accounts is growing. We're less reliant on any one customer or partnership. And because of that, our basic business is solid and growing, and I like to think it's going to continue to grow. So we just have to wait and see. And I don't know if you have any better answers than that.
spk06: No, we have good faith in you because of your track record. Thank you, David. One reason why I have so much of this.
spk07: I really appreciate your call. We should go to another call. I really appreciate your comments, David. Have a great day. Good luck to you, too. Hector, who's the next call?
spk01: Your next question comes from the line of Vincent Mara with Fordham Financial. Please proceed with your question.
spk00: Hey, Ted, thanks for taking the question. I was just wondering, this news that came out yesterday about this COVID passport that you acquired, is that the only one out there, or is that just your version of it?
spk07: It's, that's, I don't want to say that that's a trick question because I know you don't mean it as a trick question. No, no. Let me expand. I'll answer. No, no. I'm going to expand. No, I understand your question. To be clear, there are other, quote, passports out there. So, for instance, there's something that IBM created that New York State sponsored, and this is going back weeks when – In the state of New York, they were trying to figure out, you know, in every state, the rules are different. Every governor has different ideas about what to do. In the state of New York, in particular, they were trying to figure out if they were going to open, when they were going to open. Madison Square Garden opened first. And they basically sponsored, you know, another pass. I think it's called Empire State Pass. We believe that our pass is actually better than whatever else we have seen in the marketplace. It doesn't mean that there aren't any other technologies coming. And, you know, so then the next step is, you know, we can look into New York State and see if they'll sponsor our path as well. They may. But the real point is that our path is an unalterable report card on your smartphone that you can use to report to enter events. So that, for instance, you know, you want to go to Citi Field, you want to go to Yankee Stadium, um you need that report card in order to enter we provide that for you on your smartphone so it's a really nice piece of technology i think i mentioned that uh just uh today we got a verbal from a new account that wants to do business with us and and the deciding factor actually was our backtrack test so i i think it's going to um add to our business on a in addition to that we may actually have opportunities to license it it really is cutting edge technology i'm really proud of it. The inventor or developer of it, we're actually working with not only on that, but he's also bringing his business, and we have a great relationship, and we integrated it very smoothly into our technology, and a part of that, I give our head of IT, Sergio Morales, a lot of credit for that, and also Badiz for working closely with him to make this go smoothly, and we're ready to roll it out. So it's an exciting piece of technology, but To put it in perspective, I'm working on and our company and our management are working on so many additional initiatives on behalf of our company. Nobody built out a business in the timeframe that we built out our business. Just nobody. It's unheard of. I don't care. I'll put a track record in the last six months up against anybody in the business. And so we're working on so many initiatives. This is a really exciting one. We're working on a number of other initiatives, and I hope they come to fruition. I hope to be able to talk about them in the coming weeks and months. I hope that answers your question.
spk00: It does. I thank you very much.
spk07: Have a great day. I appreciate your call. Hector, back to you.
spk01: Thank you, sir. And our next question comes from Robert Damahar with Private Investor. Please proceed with your question.
spk05: Hey, Ted, thanks for taking my call. I just have a quick question, but first I want to congratulate you on your hard work and your success. I'm a long-time investor. I got to watch you on Fox News some time ago, and I bought the coldies then, and I went to the store trying to find the coldies, and it was hard to find, but over time, gradually, it just got more and more shelf space. I was just flabbergasted. So thank you for all your hard work. And now you're filling up Walmart with new products. It's awesome. You're doing a great job. Thank you.
spk07: Thank you. I really appreciate that. Do you have a question as well?
spk05: Yeah, one quick question. I just wanted to ask you about Europe. Is there any way you think about breaking into Europe for testing, or is that too far away?
spk07: That's interesting. Well, you know what? there's so much opportunity in the United States. I don't know that we need to, but you know, at the end of the day, I don't, you know, I don't, I didn't believe it or I don't believe it's going to happen. Uh, but one of our, and I call them part, whether you call them partners or customers, we have intermediaries to go find business for us that are working with us as consultants and so forth. And, um, one of our, our partners, um, actually was dealing with the UK because they're looking for large, you know, large labs or labs with large capacity, to do a lot of their testing. You know, I think it's a little crazy because I am not going to spread myself thin by building a lab over in the UK, but by the same token, you know, FedEx, you know, if you think about an airplane flight, whether FedEx, you know, we do a ton of testing all across the state of Texas, and that's all done by FedEx where the specimens are collected during the afternoon, You drop them off at FedEx by 6 p.m., they get to us 8 o'clock in the morning, we're reporting results by the end of that day. So not only within 24 hours when we receive the specimen, we often report results within 24 hours of the specimens being collected. And that's across the country, but what difference is there between across the country or across the water? What's the difference if the flight is four hours or six hours or seven hours? It just doesn't matter. So conceivably, you could see that happen, but it's not my focal point right now. But by the same token, all of the new upticks and issues and new COVID wave going on in Europe, it's inevitable that it's coming over here. And as I mentioned, the upticks in positive COVID incidents is happening. When we look at the amount of tests we do every day, how many of them are positive? Four or six weeks ago, it dropped down to near zero. Now those numbers are starting to uptick again, and it's starting to pick up again. So, you know, whether or not testing is going to, you know, take off again, I don't know. There's also always new competition coming out. But regardless, there's just an enormous amount of opportunity for us over here. So we don't have to necessarily look abroad to find opportunity.
spk05: All right. Well, good luck, Ted. Thanks very much.
spk07: Awesome. Thanks so much for your compliment. Next question, Hector.
spk01: Your next question comes from the line of Dennis Waldman, private investor. Please proceed with your question.
spk02: Hi, Ted. Congratulations on everything you've accomplished in the last six months. It's quite amazing. I know you're offering a great service, great capacity. We just need more customers. As a sales and marketing person, could you go into detail on your sales team?
spk07: Sure. So I try and keep overhead stable. at a reasonable level. I try and operate in an efficient way. So I don't necessarily like to hire a ton of people within the company, but we have a ton of consultants and customers so that we have different types of customers and we have different types of partnerships. But there's more than a dozen groups of people that are working on our behalf in attracting new business. So In particular, our three largest accounts are actually intermediaries that do the specimen collection, and they're responsible for finding new business, and then they bring those specimens to us. So we have three customers, or three largest customers, who are bringing us an enormous amount of business. They're signing up more of their customers every day. As I mentioned, as well, so I don't even want to go into more detail than that. But at the same time, we're signing on new groups of people to act on our behalf to find more business. In some cases, these are individuals or groups that are simply going to find the business, bring it over to us, and then one of our partners will handle the specimen collection and logistics. In other cases, we have partners who actually find the customers and then they do the specimen collection and logistics themselves. So we have different groups of people, for instance, finding schools. Some of those are our large customers who are finding the schools themselves and also do the specimen collection. In other cases, because there's so much opportunity there, you know, we might have a dozen different people right now searching for schools across the country that are looking for testing, and then I'll bring in a partner, you know, our partner to actually provide the logistics and specimen collection, and we do the you know, of course, the lab processing and reporting of results. I hope that fairly answers your question.
spk02: That does. May I ask another question about the VAX track?
spk07: Sure.
spk02: What's the revenue? Is there a revenue model for that? I'm not sure how exactly that works. I mean, I think it's fantastic. I think the acquisition is fantastic. I'm just trying to understand how to make money on it.
spk07: Yeah. So, twofold. The first thing it does is it significantly upgrades are offering to customers, which means that it significantly increases our ability to close on a new customer. As I said, you know, as I described our sales force, which is primarily an external sales force, obviously we have several people within our company that are working with the external sales, and, you know, we do a great job of that. So you've got to understand, our whole management, everybody's working on it, right? So... So... But, you know, there's basically two models for VATRAC. The first is that we now offer this as a part of our technology. When you bring in a new customer, the first thing they ask you, you know, when they decide if they want to hire you, they want to know about your LIS system. Your LIS system is your lab information system. The reason that's so important, as I mentioned, once you know how to process tests, that becomes the easy part. The more complicated part is the collection process. of patient data, the collection of the requisition form, the reporting of the results, and the billing. I mean, all of that is serious stuff, and sophisticated customers know that. So the first thing they want to know is, do you have a strong technology backup? When we tell them, not only do we have a great LIS and a great IT team, but that we also now have a great reporting system with Backtrack, that gives us a leg up. So my first goal is, in Acquire Backtrack is it makes us a stronger company in closing on more accounts. So it's not a direct revenue model, but there's no question it should help us build our account base. It's no different than purchasing the best state-of-the-art equipment and all the other things that we offer, but this is a really nice, strong add-on. The second thing we're going to start to look into is whether or not we can license the technology because we believe it really is cutting-edge, state-of-the-art technology for reporting on a smartphone or app. So we're just now looking into that. You've got to understand, I literally just signed the paperwork. I remember we just closed on this deal literally in the last 24, 48 hours. We were moving at the speed of light to integrate even while we were looking to close the deal. But we're going to move forward and aggressively in both directions. I can't promise you what's going to happen in a licensing deal, but that could certainly be bullish for our company. But regardless, it should help us close more accounts. And as I mentioned, just coincidentally from one of our partners, they truly believe that the backtrack helped us win an RFP, although it's not official yet. He got a verbal yes on it already. So I hope that answers your question, but it's certainly a really nice addition to the company.
spk02: I agree. Thank you.
spk07: You're quite welcome. And Hector, next question, please.
spk01: Your next question comes from the line of Lee Alper with Hammock Investors. Let's begin with your question.
spk04: Hi, Ted. I'm taking a question, a couple of them. One, on VACTrack, did you buy an app or did you buy a company and you acquired the whole infrastructure?
spk07: Yes. That's a great, honestly, that's a legal question. And I don't know that I want to get into answering a legal question. But, you know, we acquired all the, if you think about technology, it's really all about the IP. We acquired the exclusive rights to all the IP. Does that answer your question?
spk04: Did you hire any people along with it?
spk07: Oh, no, no, no, no, no. It's not a company and customers, although the founder is working very closely with with us anyway, so it's almost like acquiring his company, or we acquired his company, but we did not acquire, like, customer business, if that's what you mean, although there are relationships that are certainly coming with it. So, in a sense, it's the same thing. It's our technology.
spk04: Can he sell it to anyone else? Does he have other clients?
spk07: No, no, no, no, no. You understand, IP, the intellectual property, the patents, that all belongs to us. This is our technology. It's for us to license that. It's not for him or anybody else. We own the technology. So if you want to look at it in layman's terms, did we buy the company? Yes, we bought the company. In legal terms, that's not a legal answer, though.
spk04: Right. So you could buy it, and there's no restrictions on that.
spk07: Exactly. No, we own it. We own the IP. We own everything. Lock, stock, and barrel. It's our technology as if we developed it ourselves.
spk04: And have you given us any idea on the cost on that?
spk07: No, I didn't put it in there. It's not public information, and it's not relevant. And I'm sorry, I'd love to talk more about it, but it's not public information, and both sides decided not to make that public. It didn't kill us, I can tell you that much.
spk04: If it's a material number, then would you not have to disclose it when you file?
spk07: I just followed our attorney's advice on that. All right? So we think we've got a great deal on it, but we also think it's a win-win. As I said, we're working with the founder of the company, and honestly, I look at the deal as a win-win for both sides.
spk04: Do you have any long-term arrangements with him, or can he walk away from you tomorrow?
spk07: Well, he can walk away. We have the technology. We've already integrated. We have a fantastic IT team that now understands the technology lock, stock, and barrel. We've already integrated it, so it's not an issue. There's no risk whether he walks or not. That's not our problem. Risk in terms of the functionality of the technology or using it going forward, that's not an issue. There's no risk from that point of view. We've already integrated it into our system. We already know it works. We've already integrated it. We're just finishing up beta testing right now as we speak.
spk04: And can you give us a little more color on what you're looking at doing, testing, the number of tests in April or May?
spk07: I wish I could. I wish I could. I would love to. I can just tell you that all indications, and I'll repeat this, are three largest customers all coincidentally within a week of each other all said that by mid-April they expected to bring us significantly more business. I even have a fourth customer who isn't that large who's bringing us a significant amount of business in the next week or two. I expect a very active April. I can't look out beyond that. other than to say all of our schools are continuing to test and we continue to open up more schools. So I expect on a quarterly basis, I expect our revenues and our counts and our testing business will all to grow. You know, and, of course, again, I refer to forward-looking statements. I can only tell you what the expectations are. There's no guarantees of it as well. But every indication suggests to me we have an uptick in COVID. I don't expect necessarily to get back to what it was in January, but we have an uptick, not a downtick. And even at current levels, there's a ton of opportunity out there, and I believe our testing is going to grow over the course of the quarter. In fact, I think our testing is going to grow in the month of April. I'm sorry I can't give you a more definitive answer because, you know, I just don't know. Unfortunately, it's not something that can be known, but I can just tell you we're growing our business every quarter.
spk04: Can you give us an idea about how many customers you do have?
spk07: Oh, I don't even know. And it depends on how you, and what I mean by that is it depends on how you characterize the customers. We have so many different types of customers. As I said, you know, we have one, if you want to call it a partnership, we have one customer who's, you know, I think there's like 65 schools or some kind of number like that right now. We have another customer that's probably doing 10, but growing, you know, very rapidly. We have another customer who's testing the whole state of Texas. We have another customer. I mean, I can just go on and on with examples, but so who are our customers? Is it the thousands of patients being tested? Is it our intermediaries? Is it, you know, is the school a customer? Is the company that brings us to school? Honestly, it's pretty convoluted. And I'm not trying to avoid your question at all, you know, but just the fact that we're testing 75 schools is an example, and I expect that to grow significantly over the next month or two.
spk04: In general terms, how much is local, what you're doing, and how much is out-of-state? And when I say out-of-state, I'm not, I mean, New York, Pennsylvania, that's all considered.
spk07: Well, like I said, one of our largest customers testing across the state of Texas. So that's about as out-of-state as you can get, and that business was significant. Although, as I said, the weather in February really hurt that business. And it's hard to tell whether part of that was because there was a tremendous downtick in COVID incidents and COVID testing. It's hard to tell, except there were centers that were shut down that I believe are reopening. But in the meantime, we have lots of other accounts that are opening. But we're testing in many states. New York, New Jersey, Pennsylvania, Texas. The location really doesn't matter to us. If it's If it's nearby and it's courier service, so, you know, we drive, you know, the result, I'm sorry, the specimens are driven over to us. It takes an hour, two hours, three hours. If it's FedEx, as I described in Texas, they collect specimens up until 6 p.m. You know, they put it on FedEx. We get it at 8 o'clock in the morning. We provide the results at the end of the day. So, honestly, it's the difference of a few hours, whether we're testing down the block or we're testing across the country. You know, it's a difference of hours. It's not a difference of days. It shouldn't prevent somebody from doing business with us.
spk04: Okay, great. That's good.
spk07: Thanks. Thank you. Appreciate your interest and support. All right, Hector.
spk01: Your next question comes from the line of Michael Wu, private investor. Please proceed with your question.
spk03: Hello. Hi, Ted. I have a question about the last Q4 issue. So there's a 5.2 million revenue. Do you know the numbers? How much is related to the testing?
spk07: I'd say, you know, it's not broken out. And I don't want to give answers to numbers that are not public information. If it's not broken out, I'm certainly not going to do it on this call. I'm not the CFO anyway. And honestly, off the top of my head, I don't know the numbers. there was clearly a bump from our testing because we started testing in very late December. It started as a small number, you know, but even, you know, for each thousand tests we did at the end of December, you know, we're talking about potentially another $100,000 in revenues. So we certainly got a bump from that, but our core business obviously did well too. Okay. Yes, sir.
spk03: Okay, so... So could you give me some rough idea what is roughly what is the expenses you occurred in last quarter? Roughly idea. I don't need an exact number or something. Yeah, yeah. So here's the deal. Oh, I'm sorry. In the December quarter? Yeah, yeah. Last quarter. Yeah, yeah. December quarter. So like what would the 4.5 million be? total cost, how much, yeah, related to that. Here's the problem.
spk07: I would love expenses related to the testing or expenses overall of the company. Here's the problem. We're getting into something very specific with financials. It's not public information. I'm not sure what to answer and what not to answer, and I don't know which answers I actually know. Honestly, I would be guessing anyway. I can just tell you there's a significant amount of startup expenses related for our business. You know, some of it you have to separate out. Obviously, we acquired a lab. That's not, that's something, you know, that we'll capitalize over time. But when all the expenses are starting up, there's the people we hire, there's the recruiters that we pay for. I mean, that was significant. In the first quarter, you know, we hired, you know, we hired 100 people, 100 employees in our lab business, maybe more between you know, November, December, and January. And then if you think about it, for a lot of that we use recruiters that we're paying 20% to. That's all cash expense. There's a tremendous amount of IT technology. That's all expense. So there's a lot of startup expenses. But as I outlined months ago, we had an enormous need for cash back in December, in January, and then in February, March, as we're testing and purchasing consumables. But now we're going into a period with just the opposite. I expect our cash flow to be significantly positive in the second quarter. And then that goes back to the other gentleman that was asking about, you know, stock buyback for dividends. And if we have significantly cash flow, you know, positive going into the company, and we already have tremendous working capital and cash balances, which we do, It leaves the door open to a lot of flexibility of things that we can do with that cash. So those startup expenses, of course, all go away now going forward because we're no longer starting up. We've already hired all the people. We've already installed all of the technology. We're good to go. We're operational. We're running smoothly. So all those sort of startup expenses are gone. They were gone after December and after the first quarter. And so I'm actually really excited about the second quarter.
spk03: Okay, great, great. Thank you for the information. Thank you, Michael. I have a different question. Yes, sir. About the testing. So you indicated in the multiple chances that you have 30, 40, you know, like that's profit. Is that gross profit or what is that?
spk07: Yeah, so, okay, so, again, here's why that's a complicated question. And I'm not being evasive at all. But there's so many different variables. So first of all, we have cash customers and we have insurance-based customers. Those that are paying insurance, we're collecting $100. But for the ones where we're paying insurance, if we have somebody that's doing the specimen collections as a partner, we might be paying out $25. On the other hand, we might be doing a cash customer. where we don't have to pay them out. Or if one's doing specimen collections or billing insurance separately under a different code for collections. So we have all different prices for which we're doing testing. We also have all different prices for what we're paying people to bring to customers, whether it's just an introduction or they're responsible for the specimen collection. And then on the other side, we had a bunch of startup expenses. So it's to be argued whether those startup expenses should be a part of the profit per test or not a part of the profit per test, because on the margin, if you don't include the startup expenses, which aren't ongoing, which you shouldn't be, if you really just want to calculate what the profit is per test and you don't look at the startup expenses, but of course we have a lot of startup expenses. So it's a complicated sort of number, to be honest with you, but you're certainly in the ballpark with the numbers you were talking about. I talked about it in prior presentations, I don't know whether the numbers, honestly, and also to date, we're just starting to collect from insurance. So we have to see what insurance reimbursement looks like. If we get 100% reimbursement from insurance and the number averages $105 or $115, that's very different than if we get 90% reimbursement and the reimbursement's at $100 because out-of-network insurance sometimes pays more than $100. So until we have more experience with this, and by experience, I mean, until we see how the insurance companies are paid, because we're just starting to, that cash flow is just starting to come in, you know, over the next month, we're going to have a much better idea. And then, of course, it's a matter of how you want to define the profit test. So if you don't want to include the startup expenses, then our profit per test is quite high. If you do include the startup expenses, then our profit per test goes down. But either way, going forward, we don't have those startup expenses. And I'm sorry I can't give you a better answer because nobody knows that answer right now. We'll have a much better idea of that in the next four to six weeks. But I can tell you it's certainly healthy. It's a very healthy profit, and we're making a lot of money for tests. With the startup expenses behind us, that number is just going to get better in the second quarter.
spk03: Okay, great. So my understanding is that that's just the profit. It's not the revenue, right, like the money you get, right? It's including the cost. Right.
spk07: No, no, no. Wait. Okay. So first of all, the revenue number, that's the number that, you know, per test, you know, that can vary anywhere from $75 to $125. You know, it could be the revenue on a test. That's just the revenue of what we're getting paid to do the processing, whether it's somebody paying cash or it's somebody, you know, that we're getting reimbursed by insurance. And then, you know, small customers pay more than larger customers when it's cash. So those numbers are incredibly variable, but that's a revenue number when it comes to attestants.
spk03: Okay, great, great. So about your supply, I have another question. So about your supply, you have this...
spk07: This is the last question because we're over an hour and we still have somebody else who wants to ask a question, right?
spk03: So if you could make this the last question, I'd appreciate it. So you have a lot of the reagent, the supply. So what is the shelf life of this thing? It can be used within one year or a half a year?
spk07: If you're talking about the consumables, honestly, I don't know the answer. But the consumables, it could be anywhere from six months to, I think, over a year in some cases. It depends on which consumables and which reagents. But the shelf life is long enough that that's not a concern for us with our inventory. It's not an issue. Okay. Okay, I lost Michael. I don't know if we have any other questions or not. Hector, if you want to ask one last time, or if we should end the call now at 532.
spk01: No further questions at this time, and this concludes our question and answer session. I'd like to turn the floor back over to you, Ted, for any closing remarks.
spk07: Sure. I just want to thank you all for joining me today. I truly appreciate the support. And, you know, look, I'm looking to grow the company, as I said, longer term. If you're a long-term shareholder, I believe that I and our whole management team is going to continue to grow the value on a per share basis. to those that stick with it. For those of you that are traders, I wish you the best of luck. I don't know what to tell you as a trader. I'm focused on the long-term and building the value of the company. So far in the past, I've always been able to do that. I hope to be able to continue to do that in the months and quarters ahead. Thank you all for joining me today. Hector, thank you for setting this up. Thank you all. Have a great day.
spk01: Ladies and gentlemen, this does conclude today's conference call. Thank you all for your participation.
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