ProPhase Labs, Inc.

Hello and good morning, everyone. Welcome to today's presentation. My name is Noella Alexander-Young, Virtual Event Moderator here at Benmark Financial Communications. On behalf of our team, we want to thank everyone for joining us today for ProPhase Labs' first quarter 2025 results. ProPhase is trading on the NASDAQ under the ticker symbol PRPH. Presenting today is Ted Karkas, Chairman and CEO. Following the presentation is a Q&A session through which you can participate using the chat box in the top right-hand corner of your screen. With that being said, I will now hand over to Ted.

Greetings, everybody, and thank you for joining today. I'm Ted Karkas, the CEO of ProPhase Labs. I'm really pleased. with where we are right now relative to where we've been in the last six to nine months. It has been an incredibly trying time, but we are at the turning point, I believe, in the company where you're now going to see second quarter, all the moves and transformations and transactions and changes that we made in the first quarter are also going to start to show up in the second quarter. We also have major liquidity events. which we think are coming very soon. So we're basically bridging the company. But before we get into all of that, I'm excited to talk to you about all that. We really should do the forward-looking statement first. And since this is a quarterly conference call and not simply a virtual non-deal roadshow, I'm actually going to read it. Except for the historical information contained herein, this document contains forward-looking statements. within the meeting of the private securities litigation reform act of 1995 including statements regarding your strategy plans objectives and initiatives including our expectations to enter into new agreements for nebula genomics our expectations regarding the future revenue growth potential of each of our subsidiaries our expectations regarding future liquidity events the expected timeline for commercializing our b-smart esophageal cancer test And our ability to enter into new domestic international long-term contracts for Nebula Genomics business and the financial impact of any such contracts. The anticipated timing for the receipt of new equipment and installation of additional lozenge lines. That's no longer relevant. We'll have to update that. Et cetera, et cetera. And the anticipated timing, the expected timeline for the launch of Equivir capsules. Management believes that these forward-looking statements are reasonable as and when made. However, such forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from those projected in the forward-looking statements. These risks and uncertainties include but are not limited to our ability to obtain and maintain necessary regulatory approvals, general economic conditions, consumer demand for our products and services, challenges relating to entering into and growing new business lines, the competitive environment, and the risk factors involved. listed from time to time in our annual report on Form 10-K for the year end of December 31, 2023, our subsequent quarterly reports on Form 10-Q, and any other filing with the SEC. These forward-looking statements are based on current expectations, estimates, forecasts, and projections are not guarantees. of future performance and development. The company undertakes no obligation to update forward-looking statements except as required by applicable securities laws. Readers are questioned that forward-looking statements are not guarantees of future performance and are questioned not to place undue reference on any forward-looking statements. So, you know, we have our company presentation and then we have our earnings report. I think The question is, how many people on this call are shareholders and have been following the company for a long time? How many are new shareholders? Since the number of shares outstanding grew and the stock price is so low, my sense is we have a lot of new shareholders. So I want to find a balance for the new shareholders, but really tell everybody where we are and what's going on. Overall, we have prophase biopharma, that's our Be Smart Esophageal Cancer Test. We have DNA-completed nebulogenomics. We have prophase supplements. My thought is, and look, I can tell you I have a history, 40 years of success in executing I turned around ID Biomedical, which was ultimately sold to GlaxoSmithKline for $1.4 billion. It was a $15 to $25 million market cap when I got involved with that company. I don't take credit for the sale, but I take credit for turning around a potentially bankrupt company. I did the same thing with our company, ProPhase Labs. I took over as an activist shareholder from a prior management company. that none of us that were shareholders were very happy with. I launched a proxy contest, won control, had to turn around a company that was nose-diving, turned around a Colby's brand that was nose-diving, and sold it for $50 million. That led us to have the capital to get us into COVID testing. We had never done COVID testing. I had never been a CEO before before I took over. I had to learn the consumer product industry and turn around the Colby's brand and sold it for $50 million. I learned marketing from the bottom up. I figured it all out and killed it. And then we then did the same thing with COVID testing. Now, I've got to give Jason Karkas a trumpet, this amount of credit for building the COVID testing business. We did it together. He built the business in terms of the revenues. I built a lot of the infrastructure and provided the capital and so forth in the new lab and all those great things. But the point is, we killed it again. grew the business dramatically. The issue has been in the last year is that we did not get reimbursed for all the COVID testing that we were supposed to. In the meantime, we were branching out. We knew that COVID was going to decline. And so we looked for the future of the company. We acquired, I went through probably 300 potential acquisitions. We acquired Nebula Genomics. which we are now putting up for sale. We acquired the Be Smart esophageal cancer test, and we acquired Equivir, and that's what we're developing today. They all have tremendous potential. They're all good acquisitions. We didn't overpay for them. The issue has been the same way we built out the COVID testing business, we built a tremendous lab. We started buying a very small lab once we saw that the business was there. We built a tremendous lab in Garden City, New York, 25,000 square feet that ultimately became 30,000 square feet. At our peak, we had hundreds and hundreds of employees. We went through 800 employees while doing more tests, COVID tests, than 95% of the labs in the country. We went from never being in the lab business to outperforming almost every lab in the country other than, you know, the handful of the really big ones. The issue is When we went to build out Nebula Genomics, we did it with the understanding that the COVID testing The cash flow was going to continue, and it didn't. It got cut off for two reasons. One, the government ran out of money when they guaranteed testing. Number two, the insurance companies stopped paying the way they were paying. And a part of that I learned after the fact is because the government was subsidizing the insurance companies. And so when the government ran out of money, it cut back the insurance companies, but the insurance companies still owe us that money. So I'm going to get into that in a moment. But because of that dynamic, it put us in a situation where we were building businesses where I thought I had tens of millions of dollars coming into the company. All of a sudden, they're not there, and we had overhead as if it was there. Put me in a precarious situation I've never been in in 40 years. Made me look like all those other managements that don't know what they're doing. Some of you out there that are long-term shareholders probably think I don't know what I'm doing. I promise you I do. And so now we've gone through the last six months. Did everything I could to keep the company on solid footing. Yes, we got dilution, but now we have tremendous underlying assets. We've restructured. We shut down the genomics laboratory, which was costing a fortune. We sold the manufacturing facility, cleaned up the balance sheet a lot when we sold the manufacturing facility. That, by the way, increased our shareholders' equity. Our net assets roughly doubled. And now we have Nebula Genomics for sale. If and when we sell that, that's going to significantly increase our net assets on a per share basis and our total assets as well. So we have a lot to look forward to. I wanted to go through the past. It took all of seven minutes. All right. I want to talk about our esophageal cancer test. So we came out with an announcement today. And if you want to, I can go a little bit through the press release first. And if you don't mind, I'm going to turn it over here. You know, I mentioned some of the highlights of it. We did sell the formulas for $23 million in January. We shut down the laboratory that was costing us over $6 million a year in February, in March. We were able to, once we shut down the lab, the following month we were able to shut out and cut down on a number of IT services that were costing us a fortune. We also reduced our headcount dramatically. And I don't want to read the press release to all of you, but we went from 96 employees in December to we're now currently at 25. And when we sell Nebula Genomics, if we sell it, that number will drop even further. So when you look at our overhead going forward, it's going to be dramatically less than what we had last year. And at the same time, with the liquidity events that we're looking forward to, we should be in a situation similar to the way I ran the company for 10 years, where our overhead was tight as a drum. We weren't spending the money. And we had a ton of money and a ton of flexibility. And at the time, all I was thinking about was stock buybacks and stock dividends, not how am I going to raise debt capital without the company being ripped off. So I'm looking forward to much better times. You can wait until the dust has settled and everything's clear in three or four months. But my guess is you're not going to be able to buy the stock at current prices. That's called risk and reward. That's the way the stock market works. So I can only outline for you what I believe is going to happen. It's up to you whether you invest, whether you hold, what you do. I shouldn't even mention the word stock price. It only plays a role if we're issuing shares. And right now my goal is to focus on debt financing, not issuing shares, because I believe there's only a period of time of a few months before the cash is going to start flowing into the company and we're going to start paying down debt as opposed to looking to take on new debt. And the last thing I want to do, since I so believe and our management team and our directors so believe in the cash flow that's going to be coming into the company and the liquidity events in the second half of this year, it makes sense to take on debt financing, even if it's incredibly high interest rates, because even at an extremely high interest rate, It's significantly less dilution if we have such large amounts of money coming into the company than issuing shares right now. For me to raise $3 million by issuing shares Somebody is going to want a deep discount. They're going to take, you know, 10, 20, 25% of the company for a few million dollars. Totally absurd. So I'm not interested in doing something like that. If I think we have $50, $60, $70 million of cash potentially coming into our company over the next, I like to say the second half of the year. It doesn't mean it's all coming in in the second half of the year. but a substantial amount of that could. Okay. So that gives you a little background, a little of what I'm thinking about. I put it in the press release. We actually did this. I've never even mentioned this before, but this was a decision we made months ago that myself, I've reduced, I am deferring two-thirds of my compensation of my salary until we have a liquidity event. We have two other senior executives, Jason Karkas and Stu Hollinshead, who agreed to the same thing. They cut theirs in half, and our directors agreed to cut in half. So we're all on the same team here. We're all on the same side with the shareholders. I, by the way, used to be the largest shareholder in the company. I had no idea with all the volume and all the craziness in the stock and the fact that it's so cheap. But understand, I bought my first million shares more than a decade ago, a $6, $8 share. I still own that stock. I've never sold any of that stock. I have a larger investment in our company than anybody by a long shot. And I bought a lot more shares, too. My point being, you know, when people now report to me that they have 100,000 shares or 200,000 shares, that used to sound like a lot. And believe me, I appreciate everybody that has 100,000 or 200,000 shares. But if you paid 30 cents for 100,000 shares, you have a $30,000 investment. I have a $10 million investment in this company. Okay, just to put that in a little bit of perspective. So believe me, everything I am doing right now is for the shareholders, everything, every move I make. And since I have a track record and a history of doing right by shareholders and running companies the right way, I know the last six months may not look like it, but I promise you what we are doing now going forward, you will see I am still fully aligned and our management team is fully aligned with the shareholders moving forward. And that's how we're executing it, by cleaning up all the overheads, making sure we get to those liquidity events, then we get to clean up the balance sheet, and then all of a sudden we're a very strong company and very different than the penny stock the way it's trading right now. Okay. So I hope that answered some of your questions and some of your issues. So, you know, just yesterday, I know because a lot of people have this question on their mind, the NASDAQ listing qualifications, the fact that we've been under a dollar for five months, what's going to happen? Are we going to get delisted? I have no intention, actually no guarantees. I am not NASDAQ, but I spoke to NASDAQ yesterday. They went through all of their qualifications with me on the telephone. We meet or exceed every single qualification other than stock price. And what NASDAQ said to me yesterday, as long as we meet every qualification other than NASDAQ, other than stock price, we will get the six-month extension. I said, well, can't you give me the six-month extension now since we meet all qualifications? And she said, no, because that's not the way it works. We don't give the extension until the first six months expires. So I fully anticipate late next month, I don't remember the exact date, I think it's around June 24th, June 25th, when the first six months expires, I am highly confident. In fact, I am virtually certain that we will get the next six months Maybe I shouldn't say the word virtually certain, forward-looking statement, because I can't guarantee it. I don't want to be sued if something happens. But we went through all the qualifications, and then one of them was the net assets or shareholders' equity. And what's interesting is she said that we qualified based on the December 2024 financials. Since that time, we sold formalized manufacturing that boosted, our net stockholders' equity from about $7 million to $15 million. So we right now have about $15 million, and I think you only need five. So we have triple the shareholders' net equity or the net assets that you need in order to qualify. So we will more than qualify a month from now. And that's whether the stock price is over $1 or not. We clearly are going to get that extension. Again, I cannot guarantee it, but We are going to get it, okay? You know, like she said, we're going to get it. She said, in fact, she said there's never been a situation like ours where you didn't get the extension. So for those of you really worried about the extension, I wouldn't worry about the extension. More importantly, and this is another question that people are asking, what's going to happen to get the stock price back above $1 in the next six months, actually in the next seven months? I think the stock price is going to take care of itself. If we have tens of millions of dollars coming into the company and we have a market cap right now, I don't know what the market cap is today and I haven't looked at the stock price, but if we have a market cap of $13, $14 million and we have many tens of millions of dollars of cash in the company, what do you think is going to happen to the stock price? I'm really not worried about the stock price. I will also tell you, Well, I don't really want to focus on that. I am aware of people out there that really believe in the company, and they're accumulating a lot of stock, and they're telling all their friends to accumulate a lot of stock, and I assume that's what all the volume is. I'm not getting in the middle of it. I'm not doing any deals with anyone. People love to inform me of what they're doing. There's some people that are very bullish on our company. Okay, let's talk about, you know, I have Protase Biopharma up here. So, you know, why don't we, let's see how much time we have here. And I did a lot of talking, which was interesting, because I didn't know, you know, how much time I was going to spend doing all this. Our B-Sport esophageal cancer diagnostic test literally has multibillion-dollar potential. And I'm not going to go through the whole thing. We don't have time. I'm just going to go to this slide right here. Our target market is in the bottom, approximately 7 million endoscopies per year in the United States. for people at high risk of esophageal cancer. Every single person getting that endoscopy should be getting our test alongside the endoscopy. Understand there are a lot of esophageal cancer tests popping up in the market. They are all before you get the endoscopy. If you test positive on many of these tests, the next step is to get an endoscopy. It's kind of like when you used to get COVID tested, you would take the quick test. If you tested positive, the next step was to get the PCR test. So this is exactly the same thing. This is the way it works. So the idea with a lot of these tests, and I sincerely apologize because I took this call from my home office. Hang on one quick second. Apologize for the interruption. This is probably unheard of. I am back. So now you know I'm a real human being and I'm not a model or whatever. So the bottom line of this is if you're at high risk of esophageal cancer and you're worried, You want to get the endoscopy. That's the standard. But if you get that endoscopy, our test makes the results of the endoscopy significantly more valuable. Right now, if you get an endoscopy, there's a pathologist studying, and an endoscopy is where they take tissue specimens out of your esophagus and study them under a microscope. A pathologist is studying those specimens with the naked eye. There's no way. that is nearly as accurate as our test. And it's proven by the fact that if that's the standard, and almost 80% of people are dying of esophageal cancer, the reason they're dying is because they're getting diagnosed too late. The reason they're getting diagnosed too late is because the endoscopy is an inexact science. We take an inexact science and make it much more exact. And not only do we tell you whether or not you have esophageal cancer or not, we tell you if you're at high risk or low risk. If you're at high risk, there's a procedure you can get called an ablation. And GIs would love to give an ablation on everybody at risk, but the insurance companies won't reimburse unless they definitely know that you have a childhood cancer, but by then a lot of times it's too late. Our test tells you ahead of time, we may get reimbursed $1,000 to $2,000 per test, on 7 million endoscopies. It's a $7 to $14 billion market with virtually no competition because we are testing you. When you get the endoscopy, it makes the endoscopy a much more accurate test. There are GIs that love this test. I can't wait to commercialize it. We just announced today that the Mayo Clinic, Dr. Chris Hartley from the Mayo Clinic, has submitted a paper, and this is to the same journal. that Castle Biosciences submitted to. I am not going to compare our test to their test. I don't want to be sued. But what I can tell you is our statistics are really, really good. And there are other esophageal cancer testing companies out there that are doing really, really well. There's an enormous demand for these tests. And the reason is because so many people are dying and they're looking for a more accurate diagnosis. And that's what we give you. We also save billions of dollars if you're at low risk because then you don't have to get an endoscopy. It gives the patient peace of mind that they don't have to worry. They also don't have to get endoscopies all the time. And so this is very important. We're the most convenient. The reason we're the most convenient is you don't have to take the test at home. You don't have to make a separate visit to the doctor's office. When you're getting the endoscopy, you're already getting the endoscopy. That's a decision made that has nothing to do with us. But if you're already getting an endoscopy, we're simply making the result significantly better. And there's no way a computerized piece of lab equipment with AI isn't going to give you a better diagnosis. And we have proprietary IP. We have IP as the eight key proteins that shift. You have hundreds, you've got thousands of proteins. But there's eight key proteins that shift almost always express themselves when you're developing esophageal cancer. We have a brilliant scientist, Dr. Joe Abdu, who is working very closely with us as a consultant, and working very closely with Dr. Chris Hartley at Mayo Clinic. And he also has helped commercialize other tests. And so now that we're ready to commercialize this, he's working very closely with us. Publishing this paper is a key step because that brings attention to the GIs, it brings credibility, and our hope is that this gets published in roughly the next four to eight weeks. I'll certainly give you an update when it does. I spent a lot of time. I'm happy to do more on Q&A, but I'm really excited about this test and can't wait for it. All right. I'm going to skip ahead. Nebula genomics. So, again, this is now a liquidity event. Here's the bottom line. We explored in the first quarter strategic alternatives and strategic possibilities for Nebula and DNA Complete. We decided to sell it. One of the reasons is because of the capital structure of the company. We want to clean it up. We want to take the pressure off the stock price. We want to clean up the debt. We want to stop raising capital. We want to have excess capital, DNA Complete, and Nebula Genomics can do that for us. This literally just happened in, I think, the last 48 hours. Regeneron, you know, monster drug research development company. Interestingly, I worked at the brokerage firm 30 years ago that took Regeneron public. Regeneron just acquired 23andMe for $256 million. A big part of the reason why was a genomic database. I don't know what else went into it. I don't want to say that's it. I don't want to compare. We're not getting acquired for anywhere near that amount of money. You know, I'd be happy with 10% of that. But what I can tell you, we have one of the largest genomic data sets in the world. For those of you that don't know, and I'm just going to, you know, and I mentioned this, our data set, 16 petabytes. For those of you who don't know, and I didn't know, it's an enormous amount of data. It's one of the largest data sets in the world. And the reason is because a 23andMe or an Ancestry.com or a MyHeritage Ancestry test, most of their tests, I won't say they don't do some whole genome sequencing, but mostly they used to do SNP-based tests. These study less than 1% of your DNA, which is great for Ancestry testing, not so good if you want to learn about the health insights and learn about your genetic makeup. But it's great if you just want ancestry information. And so if they're studying less than 1% of your DNA and we're studying your whole DNA, that's what it means when you say whole genome sequencing. The data that we collect is 1,000 to 5,000 times as much. Furthermore, Nebula was founded by Dr. George Church, world-renowned in the field of genomics. And, by the way, he's agreed to be an advisor if we sell it. That's another great asset. Everybody wants to work with Dr. George Church up at Harvard. But the point is, this is over seven years that we've been collecting the data. from over 130 countries. And so our database, those more than 60,000 old genome sequencing tests, are the equivalent in size to over 150 million ancestry tests. So just the database alone is incredible. And then, as I said in the press release, Jason has restructured Nebula Genomics and DNA Complete, so that it's a clean business now. It's no longer losing money. It's operating probably at about break-even. And the only reason it's not making money is two reasons. Number one, because we haven't spent the marketing dollars because we've been very careful on how we spend cash right now. If we spend cash, this business will grow dramatically quickly. And number two, Unlike some of our competing companies, we have a subscription model where you renew the second year and a significant percentage of those who buy it the first year renew the second year. When you renew the second year, that's cash flowing to the company. We used to do lifetime and three years and all this stuff. Jason actually figured it out. just have them renew, and it turns out just many people renew in the second year anyway. That's free cash flow. So for, like, private equity that might be looking to acquire us, they love a business model where it's break-even the first year. You spend more money, you grow more if you can just operate at break-even. But the second year, half of those who purchased the first year renew their subscriptions at almost no cost to the company. It becomes a big deal. growing cash flow company over time. So I think this is very attractive, both in terms of the business as well as the data set. We'll see what happens. Think Equity are investment bankers, and they have located – a large number, dozens. I don't want to say a number. I don't know how specific I should get. Dozens of potential acquirers. They're filling out NDAs as we speak. We literally just went to market with this about a week ago. We already did our first due diligence call. We separately have some in the industry who are interested. It's possible within weeks we could have our first LOIs coming. Not a guarantee. Don't quote me on this, but realistically, we really could sell this in three to four months. How much we're going to sell it for, I don't know. And I don't want anybody to be disappointed, but there's the possibility we sell this for more, you know, for approximately the market cap of the company. All right. So I would like to get into, and I don't have a lot of time before Q&A, although we can have a shorter Q&A. We obviously have to talk about, you know, it's written here, 50 million opportunity with Crown Medical. And, you know, that's not even in – I don't know if that's even in our slide presentation. So what's going on with Crown Medical? I have to be careful what I say because when you get into litigation, you can't talk about it. And so they warned me, don't say too much. Crown Medical spent several months going through our entire – set of specimens that we tested. I mean, it's just an enormous amount of data. As I said, we tested more than a million patients. I don't remember what the exact number was, but it was a ridiculous number. Maybe it approached two million. I don't remember the exact number. Hundreds of millions of dollars. They went through all of it. They didn't just go through the testing where we didn't get reimbursed. They went through the testing where we did get reimbursed because they're also analyzing for those insurance companies that underpaid. So an interesting component of this initiative is that insurance companies may have reimbursed us but paid us less than they were supposed to. A lot of insurance companies regularly did that. But as a lab, most labs just accepted whatever they got paid. We just had to calculate, okay, this is what our gross margins are on average based on this is what the insurance companies are reimbursing us for. So we just accepted it. We didn't know that we could fight it. We didn't know how to. Nor did any of the other smaller labs. What's interesting is when Crown Medical goes after these insurance companies, for those that underpaid, the insurance company has already paid something, which means they've already – committed to having been a valid test, you know, with a valid order, you know, from a medical doctor, a valid patient that has insurance, and they pay. But they underpay, and they have no defense for underpaying. Those, what I am told from the head of Crown Medical, those are the easiest collections. Those settlements start happening very quickly. We have an enormous amount of dollars of underpaying. So that could be, you know, for the company, I don't want to say it's a lot of fun, we're in litigation, or we will be in litigation, but those could be fund dollars coming in pretty easily. In addition to that, we are getting very close to filing. And, again, I don't want to get into too many details, but within a short period of time, within a couple of months, maybe sooner, we will be able to, CrowdMedical will be able to start serving all the insurance companies. But now knowing that, based on what's going on in the courts, they will be in the not-too-distant future going to the insurance companies saying, we're going to be serving you in the next four to eight weeks. Would you like to settle now for less, or would you like to get your attorneys involved? Because if you do, this is how much you owe us. We're not going to back down on the total amount, and you're going to have to pay it. and you're going to have a lot of expenses involved. Or you can pay less now and settle. A lot of the insurance companies want to settle for less and pay now and not get into litigation. It just so happens the head of Crown Medical told me that he's working with a number of insurance companies right now, and there may be settlements coming in the next year. I don't know, one to two months. I don't want to guarantee it, but I think we could end up with some surprises. People have told me once they see the first million dollars come in, they know that this is real and that more is going to follow. So it's possible the first million dollars comes in in the next couple of months. Not a guarantee. I don't know. I'm not managing this. But then the money is going to start to flow. So that's a little bit about Crowd Medical. Again, I spoke a little bit about Be Smart and being pure for peer review in the Journal of Clinical Gastrointestinal Hepatology. That is a very important journal. We get published there. We go to next steps on commercialization. And, by the way, I also mentioned in the press release, the FDA, and I mentioned this last year, And my team was spot on. They said, there's no way. The FDA was talking about oversight on all LDTs. My team said, no way that's ever going to pass muster. They just don't have the bandwidth, the manpower. It's just not going to happen. Sure enough, they've now backed off of that. And so for a test like ours, which is a very safe test, we should be able to fly through as an LDT, that's a laboratory-developed test, which means we can start commercialization later this year. Joe Abdu is an expert at that. And so we have to start getting the GIs involved and key opinion leaders. In order to do that, we have to get published. So this was the next step. They've been working on this submission for many, many months. That's what I was waiting for. This is a big deal. So I'm really looking forward to the next steps now. Okay. We're a little bit over time. I think I covered virtually everything that I wanted to I know that we have a lot of questions, so why don't we go to the questions. I will tell you, I asked Noelle, and by the way, Noelle, I didn't even know if I said hello to you today. I always love having you on these calls. It's awesome to see you. I did ask Noella if there are questions about, you know, what are your revenues, what are your earnings in the reports. First of all, I'm not going to give you projections because we don't give projections. And number two, if it's in the press release, the financials are there. Please read them for yourselves. Let's spend time on strategy questions as opposed to the numbers. And quite frankly, the numbers in the past are irrelevant anyway. As I just described, our second and third quarters, are going to be dramatically different than what we saw last year. We were losing an enormous amount of money. Now, you also have amortization, depreciation, stock ops, all these other things that go into it that are non-cash expenses. But there were real cash expenses also last year. We've dropped those real cash expenses dramatically going forward into the second quarter and beyond. Okay. With that, Noella, why don't I turn it over to you for questions.

Thank you, Ted, for the presentation. As you said, we'll now take some questions. Your first question is, what's a realistic timeline we should expect to see Be Smart commercialized? Will it be this year?

That's a good question. So it depends on how you define commercialization. This will probably be a multi-year process. But the very first patient being tested, absolutely, on a commercial basis, I absolutely anticipate that being later this year. How many? I don't know right now. It's premature. I don't want to give estimates. I don't want to over-promise and under-deliver. I want to do the opposite. It may not feel like that for the last six months, but I under-promised and over-delivered for a decade, and I did that most of my career, and I want to get back to doing that again. So what I will tell you is, We're going to be very methodical. The question wasn't asked and it isn't normally raised, but I just thought of it. Very important question. We are not going to spend millions and millions of dollars. We're not going to do what 23andMe did on drug development, spending hundreds of millions of dollars. We're not going to do what other cancer testing companies I've seen, where they spend an enormous amount of money and then they go bankrupt. A good friend of mine runs a company. The company is struggling because they spent on building out a big sales force. I will not do that. What I would rather do, we think we are going to have one of the best cancer tests in the world. And so we're going to go to companies that have networks of salespeople already visiting the GI's offices or the medical, you know, a lot of these, by the way, you don't just have a GI in his own office. So they're going in, you know, to these buildings, you know, that have dozens of medical doctors covering everything, including the GIs. And so these salespeople, we can give them our test to sell, and they get a percentage of, on what they sell so that it's a profit center for us as opposed to being a big expense up front. So I will not spend all of our money trying to build out a sales force. I don't want to ever be in a situation again like we've been in the last six or nine months. So I'm really looking forward to later this year, and I'm sure I will be updating you. We do these RENMARK presentations, by the way, once a month. Obviously, this one is for our first quarter results, but we do them the other two months out of every three as well. Noelle, next question, please.

Thank you, Ted. Your next question is, specifically, what vaccines or illnesses are we working on, and is anything past clinical studies? Thank you.

We're not working on any vaccines, and we're not spending a lot of money on anything related to FDA drug development, prescription drugs. We're not doing anything of significance right now. We're developing Equivir. We're still waiting. It's unfortunate our CRO is in another country working with our consultant here, and they're going back and forth on the final results. It's been incredibly frustrating. I expect to be able to report the final results soon. The reality is we're looking to commercialize this the next cold season anyway, so we have a few months on that. But other than that, We have the Smart Esophageal Cancer Test. We have our other dietary supplements we're developing. And we have Nebula Genomics, which now, as I said, Nebula Genomics as an entity by itself is now operating break-even. We're looking to now grow it and sell it.

Thank you, Ted. Next, I believe you touched on this in the presentation, but a viewer did ask, what steps are being taken to meet NASDAQ compliance? Will you need to file for an extension?

Yeah, so I went through that in great detail already. And the bottom line is I already filed for the extension. They just don't answer the extension request until the end of the six-month period at the end of next month. But, of course, I already stated I fully believe it was indicated to me that we will get the six-month extension. There are no issues. So, to be honest, there's nothing to talk about other than the fact that I'm not allowed to say we got the extension today, which is incredibly frustrating because we meet all the criteria. And she said to me yesterday, if you meet all the criteria, you automatically get the extension. So, we're going to get the extension, but for some reason, I'm not allowed to say that today. So, we are going to get the extension. But for those listening to this call, don't sue me if we don't get it. But as far as I'm aware, we're getting the extension and That's it. And as I said, the only variable, I believe, would be that they would check our shareholders' equity, which actually increased since we went over it yesterday. So with the 10Q coming out today, our shareholders' equity virtually doubled. You know, we went from like 7 point something million to over 15 million. What's next?

Thank you. The next question is, has the DNA Complete division started generating revenues?

Yes, that was. So I know for some people it might be a little confusing between Nebula Genomics and DNA Complete. They're part of the same company. DNA Complete has developed into a more sophisticated company. direct-to-consumer product. It's more consumer-friendly. And so the combination is doing, I don't know, about $5 million a year right now in revenues, maybe a little bit more than that. But if we spent the money on marketing, we'd get to $10 million very quickly. Unfortunately, we've just been tight on capital. So depending on when we sell it, I mean, if we get a liquidity event earlier rather than later, we spend some money You know, obviously we have a world-class marketing team, and we've perfected the marketing, we've perfected the platform, the website, et cetera. The upside is enormous. But we can certainly also spell that out to anybody that potentially is going to acquire it. And as I said, the database also is hugely valuable in a potential sale.

Thank you, Ted, for that response. The next question is, are we still looking at June slash July for COVID testing payments?

So let's see. We're in the middle of May. June is next month. So I had to go by when Crown Medical was ready to go into the court system. So I think I gave the accurate statement. It is possible we will get our first payments actually in the month of June. The time frame for when we went into court took longer than I expected. But on the other hand, we could get a surprise sooner than I expected. So it's possible we're still on track. I don't know. What I can tell you is I am confident a significant amount of capital is going to come into our company in the second half of this year. When it starts exactly is hard to time. I can tell you that the head of Crown Medical is very confident, number one, in the amount that's going to come in, and number two, that once it starts to flow, it's going to flow significantly, and it's in the not-too-distant future. in the next few months. And I, I really don't know if that's one to two months or three to four months. I'm sure if you ask him, he's going to give you, um, The more optimistic time frame, I'm just afraid to do that on this call right now. I don't think we're far away. But by far away, it could be three months. But that's life-changing, game-changing for a company once that happens. And as I said, you can buy the stock now or you can buy it after the money starts to come in. I'd be shocked if the money starts to come in, I'd be shocked if the stock's at the same price. Shocked. But, you know, we'll see. People do silly things when it comes to the stock market. What's next, please?

Thank you for the clarity on that, Ted. Next is, you announced an agreement with a global private equity group for debt financing. Have you accessed the line of credit yet?

Yeah, so we did take in a small amount of capital. And then we moved on from that, and we did put up shares of stock as collateral. And, by the way, when we pay back the debt, we're supposed to get those shares back. So it's possible we'll have a significant reduction in share count down the road. I don't want to get more into that now. but the bottom line is I'm looking at other sources of debt financing currently to continue to bridge the gap between where we are now and the liquidity events, the combination of crown medical collections and selling nebula genomics. Either one of which, we could have a material amount of cash flow could come into our company from either one of those initiatives, you know, in the next, and I just don't know if it's and four collections to start.

Thank you for that Ted. Next is, what are the milestone items shareholders should be aware of for the balance of 2025?

So those are two big ones and then following the development of our esophageal cancer test and then ultimately rolling out Equivir and building our dietary supplement business. I am not looking to diversify into more businesses by the way. When we come into a lot of cash, I want to sit on that cash, figure out how to earn a decent interest rate. I mean, it's amazing what we're paying in interest to borrow money right now. I know there are tremendous opportunities when that cash comes in to loan it at a higher interest rate. And if you're sophisticated in how you do it, you know, even though you get some defaults, the overall Total return is tremendous. I'm not saying we're even going to do that. It's just amazing to me what we're paying in interest rates for debt financing right now. It's so frustrating. I can't wait for the cash to come in. I will never take that cash for granted.

Thank you, Ted. The next question is, does the company still have a high degree of confidence in collecting the $25 million of uncollected AR?

Yeah, so on our books we have about $20 million of uncollected AR. We believe that's conservative. The auditors said that technically you're not supposed to increase, you know, when you have an accounts receivable outstanding for a while, you're not supposed to then just increase the estimates on it. We're, it's not a guarantee, we're anticipating that the amount we actually collect could be a lot more than $20 million. So the answer, you know, I've already gone through this process. in a lot of detail over the last 45 minutes. So the answer is yes. We're confident we're going to collect what's on the books, and we are hopeful that it's going to be significantly more than that. But to be honest with you, if we just collected what was on the books, plus we sell Nebulon, we're home free. We're going to be a great company. Our esophageal cancer test by itself, we have nothing else. The industry for esophageal cancer tests, if you look into it, it's a hot market. And again, the reason is... Because the endoscopy by itself is an inexact science. And the industry patients need a better test. So all these new tests coming out, the doctors are just buying them. They're just selling. Some of these tests, as I said, by the way, if you test positive, the next step is you're directed to go get an endoscopy. Our test is for those getting an endoscopy. So, and again, we test eight specific proteins, but it's the proteins that are almost always expressed when you're developing esophageal cancer. There's another test out there that tests 400 proteins, but it's not testing the eight which we think are the most important. And then there are other tests. I don't want to get into the science. I'm not a scientist. It's complicated. Personally, based on spending a couple of years with this and talking to multiple scientists about this, I truly believe in my heart this is the best esophageal cancer test on the market by far and that there will be enormous demand from the GIs as soon as they hear about it. Word is going to spread very quickly. This thing is going to go. So if we get to a position later this year where we're sending a large block of cash and we only have to spend a small amount of money to develop this, and the market understands that we don't have to do dilutive financing to finance the commercialization of our B-smart esophageal cancer test, the market value of that alone could be enormous. It could easily be ten times the current market cap, our entire market cap right now. And that's without all the gas coming in, which I anticipate is going to be significantly more than the whole market cap of our company. So there are interesting dynamics at play here, but obviously I'm very excited and bullish on the future.

Thank you for that, Ted. Next, a viewer says, not a question, but a preference. If and when we receive payment for past due COVID testing, think smaller dividend and more cash in the bank. I hold position of nearly 200K shares.

Right. So I have no idea when you bought your 200,000 shares. Thank you for being a shareholder. If you bought those shares at 30 cents a share, you know, what is that, a $60,000 investment? Those same 200,000 shares that I probably paid $8 for, you know, I paid $1.6 million. You paid $60,000. And I'm not saying to belittle the investment. I'm more just sitting here in amazement of what's happened. And, you know, obviously, well, I don't seem upset right now. I'm not upset because I'm really looking forward to the future. But it's kind of frustrating. But the answer is I totally agree with you. There's no way I will ever allow our company to get into the position it's been in over the last six, nine months. Now, and to be clear, I still have to get through the next three months, and I still have to do debt financings. So we're not out of the woods yet, but we're getting very, very close. Once we're completely out of the woods and the coast is clear, I doubt the stock's going to be trading where it's trading right now. Again, but that's not for me to decide. That's for the market to decide. That's one of the reasons the market's here because obviously we're tight on cash. That's not hard to figure out. By the same token, I anticipate some new debt financing deals very shortly, and then we'll be home free because I'm really just looking for a bridge to when the liquidity events start. Also, by the way, in the not-too-distant future, there's also the possibility, but not a guarantee, that we'll be able to do debtor in possession financing where they get the money back. We don't have to ever pay that back. They get that back directly from the court system when the insurance company starts to pay. It goes into a lockbox and they get paid first. So we don't have access to that, but I think we could have access to that in the not too distant future, which would then take the pressure off of me having to do other types of debt financing. However, to be honest, it's a little premature, but I just want you to know there are potential other options. I don't know. I haven't gone into detail. That's one of the things I'm going to be working on over the next two or three weeks as we progress with the Crown Medical Initiative and the court system.

Thank you for the insight on that, Ted. Next is, how do you plan to bring up the stock price?

Great question. I don't think I'm going to have to do anything. I think it's going to take care of itself. Now, Depending on how much cash flow comes in and when it comes in, I don't think I'm allowed to discuss in advance what I might do. But if you look at my past in the last 10 years, when we sold to Colby's brand for $50 million, I did two Dutch auctions. I had one shareholder that was adversarial to the company. He owned 14.9% of the shares I was doing. I did a Dutch auction. Took him out virtually off of his stock. The Dutch auction was oversubscribed. So I did a second Dutch auction specifically because I wanted that guy gone. All right? But by doing the two Dutch auctions, took out everybody that ever wanted to sell. And the stock, you know, proceeded, you know, in a few years after. The stock went up ten times after. Because it was one of the tightest held stocks in all of NASDAQ. And so I loved. to have the opportunity to do something like that again. I can't talk about that I'm going to do that now. We'll see. We'll see with stock prices. But as I said, I expect that we're going to get the six-month extension. Oh, by the way, this is really important. We are not, in our upcoming annual general meeting, in the proxy, you know, we have to file that. I'm not sure, probably within the next month. We are not intending to even put a reverse split. We're not looking for authorization for a reverse split, even in our proxy. Now, there is a requirement if in the second six months the stock's not above $1 that we'll agree to reverse split the stock. Of course, we would have to or we would get delisted. I don't want to get delisted. But if we even get a portion of the liquidity events I think we're going to, I don't think that's going to be an issue at all. And that's without me considering stock buybacks. But that's not something I'm considering today. We don't have any cash. We're clearly not doing stock buybacks and dividends. The last thing I'm thinking about is dividends right now. All right. And even when the cash comes in, the last thing I'm thinking about is dividends. All right. But you can look at my history. I'm shareholder friendly. I think like a shareholder. I was an investor for 40 years. I was an investor for 30 years before I became CEO of this company. And so you better believe I'm not spending that money. I want the shareholders to bet that the shareholders that have stuck with me, I want them to benefit. So that's the way I'm thinking. We'll see what happens. Again, we're jumping the gun now because we have to wait for one of the major liquidity events. But you can bet if the past is any indication of the future, you can bet I will be shareholder-friendly again in the future. Thank you for that question. Noelle, what's next?

Thanks, Ted. The next question is, can you tell us what you're going to do with the funds you get in from Crown Medical or possibly selling Nebula?

I think I just answered those questions in the last question. No need to repeat myself. Look, we'll see what happens. Obviously, I care about stock price. I care about NASDAQ listing. and all those good things, and we'll just play it by ear. I can just tell you my background's on Wall Street, so I want to make the right decisions that are best for shareholders, certainly going forward. We were in a stressful time the last six or nine months with things that we did that I wished in a million years I never had to do, and I absolutely, as chaos comes in, I can virtually guarantee you I will never do again. But the things that I do like doing are all shareholder-friendly, and we'll just see when the time comes. But I'm really excited, among other things. commercializing our be smart esophageal cancer test and not spending a lot of money doing it. Also, I didn't even mention this. There's a very real possibility that as we gather a little more momentum later this year, somebody's going to want to acquire our esophageal cancer test for a lot of money or partnering it. partnering it would be great because then you just make a lot of money. You have somebody else that already has a huge distribution network. It becomes an overnight success. You get a significant, you get milestones and a significant royalty. Not a bad business to be in. To have monster cash coming into the company every year, I mean, I would love a business like that. I think I could semi-retire on that. All right, what's the next question?

So your next question is, what happened to Equivir?

Yeah, so the only reason I'm not talking a lot about it is I'm frustrated like everybody else. I'm just waiting for our consultants and the CROs to get on the same page and finalize the results. We have some time because this is a product for the cold season, and we're initially going to introduce this online anyway. So we have a little bit of time, but it is a little frustrating. And I'm waiting like everybody else. So we have phenomenal results. preliminary results, and I'm just waiting for the actual final results that we can both publish and also use to make claims on the packaging. Although, as an over-the-counter dietary supplement, you can't make any of the claims that you can make with the drug anyway, so I'm not sure how much it's going to even affect the claims you can make on the package. other than basic claims, but it would be nice where we have, if and where we have statistical significance, it would be nice to be able to say that. So I'm frustrated like everybody else, to be honest with you. But, again, we have much bigger fish to fry and much bigger things to look forward to at the moment, although Echo Beer could be a very big product. We have some things that are front and center right now that could be very big. It's one thing to generate, you know, $25 million of revenues and make a few million dollars. It's another thing to generate $25 million of cash with no overhead. And, again, when we talk about $50 million coming in from Crown Medical, that's net. We're not paying them anything. By the way, they have dozens of attorneys working on this. We're not paying them a single penny. They would not be doing that if they were not highly confident that they were going to collect a lot of money. It's all contingency fees. It's all based on collecting the money. They take out their percentage. We get the rest. They believe that we're going to net after their contingency fees up to $50 million. And they said, and if possible, it's more. But it could be some kind of big number like that. So even at $25 million, that's game-changing for the company. And that's not revenue. It is revenues, but it's revenues without costs associated with it. We, you know, we expensed the cost of this when we did COVID testing, you know, two and three years ago. Well, do we have more? We have time for one or two more?

Yeah, so we're coming to the end of the presentation, but I think we have time for one more question here. The question is, what is the forward-looking prospectus from here?

Boy, so that sort of, like, sets me up to just give my summary. So why don't we just move this to summary since that's the last question and we're out of time. I want to thank everybody for joining us. I think I covered virtually everything that everybody would want to know on this call. Obviously, if you can't tell, I'm very bullish on the future of the company. We have a few months of debt financing that we have to get through. I am optimistic, actually, based on some recent conversations I'm having, that we're going to have some solid debt financing very, very shortly. And then following that, I may have an opportunity to do the debtor and possession finance. If I can do that, we're home free. Because now we never have to pay that back that comes out of collections. So we'll see. And then at that point, then the liquidity events start. And, again, Crown Medical, we could have a – the first liquidity event for Crown Medical could surprise us. I hate saying that in case it doesn't. But the first liquidity event for Crown Medical could be upon us within the next two months. And to be honest with you, it could be sooner than that. I don't want to commit to it because I don't want anybody to say that I misled them or it didn't happen. But I think there's a good chance. couple of months on the Crown Medical. And on the Nebula front, given that Regeneron just paid $256 million for 23andMe, and again, I don't want to compare the two. We're not getting $50 million or $100 million for Nebula, okay? And I don't want to tell you what kind of numbers we think we're going to get, because we specifically made the decision, let's see what the market is interested in. So what I can tell you is the number's kind of all over the place, but what's interesting is The fact that we're a break-even business is actually a good thing with a huge data set and a business that, number one, we can grow very quickly. Number two, we can grow it efficiently. And number three, it creates positive cash flow and earnings the following year with the subscription renewals. Makes this a very interesting business as an investment to be acquired by private equity. And then, of course, potentially you have your drug development companies that want to acquire the business because you get the data set that goes along with it. And, again, there are all sorts of issues with, you know, privacy, with sharing data. We don't share our data with anyone. But if you buy the whole company, obviously the data set comes with it. So there's some interesting dynamics. We'll see how it plays out. As I said, NDAs are going out. LOIs may be coming back short term. We'll see how it plays out. I do these Renmark calls once a month. You know, stay tuned. I hope to have some nice positive updates by the time that we do our next Renmark virtual non-deal roadshow. Many thanks, Noella. Have a great day. I think that concludes. You're supposed to say, I think that concludes the call. Go for it.

Thank you, Ted. And that concludes our Q&A. Thank you to everyone for joining us today for ProPhase Labs' first quarter 2025 results. ProPhase is trading on the NASDAQ under the ticker symbol PRPH. The playback will be available on our website 24 to 48 hours after this presentation under the VNDR library tab. Please stay tuned for other presentations in your area and see you next time.