Q4 2020 Prophase Labs Inc Earnings Call

Ladies and gentlemen, thank you for standing by our presentation will begin momentarily, ladies and gentlemen, thank you for standing by our presentation will begin momentarily.

Thank you for your patience.

[music].

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.

Today is prophase labs, CEO and chairman of the board of Directors Ted Carcass.

A press release detailing these results crossed the wires today and is available on the company's website Prophase labs dotcom.

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 maybe 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 S.

E SEC filings for a list of associated risks. Finally this call. This conference call is being webcast. The webcast link is available and the Investor Relations section of Prophase Labs Dot com at this time I would like to turn the call over to Prophase Labs, Chief Executive Officer, Ted Carcass, Ted the floor is.

Thank you Hector and greetings, everybody and thanks for joining me on the call today.

It's kind of an interesting time for call given that we just reported year end numbers, while we're at the end of the first quarter I was actually thinking about waiting until we reach.

We reported the first quarter, where we had more to talk about about the first quarter and six weeks, but then I have a feeling a lot of investors would be upset with me.

Stock is obviously volatile when the stock volatile I got a bunch of comments.

Or is the update and so.

So I would just like to start by.

By reminding everyone.

And those that have known me a long time notice to be true for those that are newer investors I'm sure. Many of you I told us too 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.

The long term.

And I've been pretty consistent and doing that.

I've, certainly been pretty consistent and doing that.

As CEO of.

Prophase labs over the last approximately 11 years when I turned around the company the stock bottomed out at 65.

For those that stuck with me I paid.

It out.

Turned around the cold. These brand sales are for $50 million and then subsequently have to 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.

Always gone by the same theory every.

And you move I make is in terms of what's best for long term shareholders in terms of building value and per share basis.

Consider that is critical to what management should be paying attention to most Madison and don't I don't want to go into more detail than that but I just want to remind you all debt. That's my goal. That's my game plan.

I am not responsible for NASDAQ selling off 1000 points.

And you know all of the tech stocks and <unk>.

Small mid cap stocks like I felt a lot of other stocks and the same industry that we're in and they only got hammered and.

And so frankly I have no control over that I also have no control over short term swings.

And 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 and it was being done all of a sudden and middle of February those numbers drop dramatically.

Dramatically.

NASDAQ dropped dramatically our stock dropped and so forth what I can control is making smart decisions to build our company longer term.

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 person.

<unk>.

Which quite frankly, and and are in and of itself I'm pretty proud of that.

Both our base business, it's our manufacturing business and so.

It's our 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.

But.

We did not report a profit, but that's because we are rebuilding the company.

And taking it and new directions and.

And so that's all planned the same way I used to plan and when I turned around and grew the Colby Brown, which we ultimately saw from $50 million. We lost money, while we were developing the brand, but ultimately resulted from $50 million, whereas when I took over.

And maybe it was worth $5 million to $10 million. So I'm doing the same thing now and building value and the company long term.

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 and the stock goes down it gets closer to actual liquidate.

Eddie and value, while we're actually growing the business share growing revenues and.

And going forward growth.

Our earnings and cash flow.

So I'm going to get into that a little bit more and a minute I just wanted to give you that.

The background color overall and the same page.

One more comment on our dietary supplement business.

Which I'm actually feeling pretty good about.

We did get into our lead product was already and Rite aid and Walgreens and it's doing so well and those stores, we got into Cvs and Walmart and these are considered the four largest retailers for dietary supplements and of course, we have a laundry list of other.

And the retailers that we're in now as well but.

But we got the biggest ones Walmart and Cvs and.

And the fourth quarter, which means just a pipeline fill and the fact that our product sales off the shelf.

Yeah.

It means that we're going to have significant.

A significant uptick and revenues and now earnings from.

Dietary supplement business and I actually feel really good about that while it's a small business. It is going to grow very nicely. This year and all of a sudden youll see a small business that youre not paying attention to actually have real value and the company.

Especially with the stock price down where it is.

I don't really want to talk more about that because our testing business now going forward.

Is going to dwarf.

And our dietary supplement manufacturing business, but.

Suffice it to say our other core business is doing just fine.

We ramped up.

And a very short order, we decided to pivot into Covid testing.

And basically it was late last year that we decided rather.

Rather than partner with another company to actually do it ourselves and and in a matter of literally weeks, we went from not being in the business to buy and a business without customers having to do a lot of validation work and Lo and Behold from late October to mid December period, like six to seven weeks, we bought closed.

On a lab hired people got validation work done and actually started testing and late December we quickly ramped up which is honestly pretty incredible that we ramped up to 1000 tests a day at the end of December and then actually have 500 day tons per day and the end of December.

Frankly that was a herculean task.

Because there are other than the large labs, 95% of the labs across the country are smaller labs that are happy to do 205 hundred tests, a day and we within weeks, we're already doing 500 tests, a day, which is actually a pretty incredible number in and of itself and January we.

I actually had 2500 tests per day.

I was really excited about that I expected that to.

And continue at the time and should just keep growing and just so you know since that time.

I'll go back a step.

We had a fantastic January expected it to continue in February I alluded to this and.

Our press release, I really want to stick to what's out there thats public information.

And middle of February we got hit with horrendous weather, we do a significant amount of business and the southwest and.

And.

Frankly, and the areas, where we do business I guess I've never seen snow flurries before but.

Basically the whole states shut down.

We had several testing centers.

Shutdown and this was from our biggest customer and so that hit our overall business. I mean, this is 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 and small business.

From one customer and a little business from another customer that's all adding every week and every month.

We had a big knock from our largest customer.

The diversity and our business is growing on a weekly basis. So we have a really nice core business. So we ended and I also made sure to put this in the press release, so I could talk about a little.

But we.

We finished we average for the quarter based on a on a five day testing week average, we haven't just under 2000 and tests a day.

And 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.

Rates that we had.

And 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 our scoring and our business we continue to grow our business.

I'm going to talk about the business, a little bit more and a.

And in a moment, but I'd like to just pause.

And so point the fact that we built in.

And incredible infrastructure.

Over these past two or three months.

We have a very very strong management team.

And besides our CFO Monica Brady who's been with me for many years.

Specific to the lab business, Steve <unk>.

And the industry I joke about how many decades he has been in it but he built up another lab from a very small lab to a very large lab and.

And it couldn't be more grateful that he.

Join me and this new endeavor.

Also attracted some fantastic people.

Got it.

And to go on too long with us because many of you have heard this before and I really do want to get to Q&A, but I just have to touch on a couple of things.

We hired too.

People led by Sergio morale.

Who led and 18 person company and on a consulting basis prior and I.

And how you how blessed we are and a half of them and how important it is and all of this.

And we've hired two of the best Molecular lab Techs, who are you know are regularly working with the FDA there too.

<unk> filed with the FDA and we're waiting for approval on and <unk>.

I can't tell her and Amanda Vasquez, and so we really have a strong team.

<unk> rounded out for every facet of the lab business.

And so it makes it easier to grow and you have a good foundation and have a good team.

Yeah.

We also.

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 that we can test for the new mutations of Covid.

So we have the state of the art equipment, we had a fantastic capacity, which I talked about AD nauseum, we can turnaround and 24 hours.

And I've talked about how important it is because once you have the key people and and the equipment and place the.

And the lab process and runs pretty smoothly as it does for us, but it's still at the collection of the patient data and.

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 Backtrack, which is really cool if we didn't have Sergio.

First of all I don't know if we would have made the acquisition and number two we wouldn't have been able to integrate itself.

It's already integrated into our system.

While and and the seller of the technology.

And who was quoted in our press release, but this ore body, 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.

So quick and the deal, but we've already been integrating backtrack.

Backtrack into our system.

Even before we actually officially signed the deal and so Sergio.

Has already integrated into our system, we're already in beta testing and we're about to roll this out.

Any day now in fact.

I think we.

We may have some customers that are willing to beta test that we've done some internal beta testing and we're about to roll that out.

And coincidentally.

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.

And you don't know what backpack and as 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.

It's a 1000 people.

Get tested it gives us and ability to report directly to those each of those thousand people directly to their portal.

Directly to their <unk>.

Smartphone on and App.

They can then use that it has and.

Altra Bowl.

QR code and report on it.

And where you can basically see your vaccinations you can see if you are COVID-19 positive or negative or any other test for that matter.

So that it could be used to enter events and this is a big deal now and that's opening up so I'm really excited about backtrack interest.

Built out our technology.

And built out a company and it does differentiate us one step further.

And I'd also like to point out.

Matters that we have several partners out there that we didn't have three months ago.

The partners that are bringing business to us that we're working extremely well with.

We have a group that are experts.

And testing and schools.

And we have experts that are.

And testing.

Testing towns and and testing and states.

And there is tremendous opportunities out there. So I just wanted 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 and middle of February and March but what's interesting is over in Europe.

Covid is on the rise again.

And I believe that.

And there was this burn out and our country people don't want to deal with mass to anymore, whether its getting warmer they hear about vaccinations and they're like okay screw COVID-19.

But what people don't understand it's just because you havent mentality and screw COVID-19 I don't need to get tested I don't.

Need to wear masks.

I can.

And have to social distance, all that's doing and is it.

Starting the wave all over again and.

I think I've said this before I'll say it again.

Every virtually every expert I talked to such that there is no cure for Covid, we've never been able to cure flu, even with vaccines vaccines.

<unk> nine months behind it took 910 months to create a vaccine for Covid now, it's mutating rapidly faster than flow.

Everyone's concerned with the current vaccines out there how long theyre going to be effective on the new strains.

We are seeing more and more we're now starting to see an uptick and.

And as the Covid, we're also seeing an uptick and the positivity rates and we're seeing an uptick and the mutations. So all of this is going on while everybody's psychologically feels like Covid is going away I don't want to point out that only about 15% of the population has been vaccinated with two vaccines.

And.

And maybe most importantly, when you get vaccinated that's.

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 gonna, let your guard down when you vaccinated, there's a higher probability that you're going to get COVID-19 and what that means is you're now more dangerous because you're a.

Symptomatic, which means that you're not going to be as careful and you may spread to other people that haven't been vaccinated.

Which makes you a deadly.

So we have all these different factors going on.

One thing that I pointed out is that even if COVID-19 and I pointed this out months ago, even if COVID-19 testing dropped.

And it had theres still going to be testing and a perfect example of that or the school systems, where the.

The current administration.

And is funding and and and and a significant way, they're funding and schools to reopen there is a ton of opportunity for testing with schools.

We've had actually and develop particularly with our partners some expertise and testing at schools. We currently testing over 75 schools high schools and that number I expect to grow significantly and the coming months. The other thing I'd point out is that our three largest customers well told us somewhat coincidental.

Italy that within a couple of weeks, they expect that they're testing with us their business with us to grow dramatically.

And in addition to all that we have lots of other partners out there working on weddings and events.

We're starting to develop a network of independent pharmacies that are doing testing, where they're sending their spend.

And studies to a lab. So there's just an enormous amount of opportunities and while.

And 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.

Passenger January and so they've come back down, but they're not going away and now they're turning on 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 and base of business.

With Covid testing and.

And now.

And how do we pivoted and now are substantial lab and we're actually of course to be reckoned with with regard to the rfps.

And quite frankly, nobody can beat our turnaround times and they might be able to match them, but they can't beat our turnaround times.

Our customer services is first class R.

Our reported.

Porting systems now.

We're as good as it gets and now it's just a matter of getting the word out and.

And as.

As we do more and more business with more and more accounts and that's going to be.

And we get 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.

And that we had that dip.

But by the same token when you look at it and.

And I'm looking at every week, if you look at a quarter to quarter I expect to grow every quarter.

We grew 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 and the first quarter I expect them to grow significantly more and the second quarter from first quarter.

The last point on this is we raised an awful lot of money.

Which significantly increased.

Our liquidity and value on a per share basis I always.

Always say that I pay taxes, the terminal value on a per share basis, meaning and 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 Cigna.

Difficult 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 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 and consumables and at the time back in January there was a big concern of shortages of consumables I wanted to make sure we had more than enough consumable. 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 as you buy them about 30 days in advance of testing you have to pay for them.

Upfront 90 per cent upfront and 10% of delivery. So from the time, we were 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 the first quarter.

Our second quarter.

We've got a lot of building going out to insurance companies. Now we are just now starting to get paid back from them I expect our cash flow.

Two.

Price dramatically and 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 and an obnoxious way, which I don't.

Frankly.

And I don't respect and I found a low effective.

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 and building it for myself as well.

But we're all on the same ROE and the same team here.

I just wanted to make sure.

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-19 testing really nicely. Obviously it can also be used for vaccinations, but I'm looking at diversification and many different ways and.

Looking at other tests, Besides just PCR.

And looking at fast PCR test and looking at antigen tests and I'm looking at immunity tests.

With companies and we might partner with.

I am looking at labs to acquire other than labs into Covid testing, but lab to do other types of testing I have groups of people who can bring business.

Other than Covid testing.

And I'm talking about all the other types of testing that were being done before COVID-19 that are going to be done after COVID-19 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-19.

So I'm looking at a lot of different directions, and I'm looking at M&A activity.

What's nice about our company.

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 other than from an M&A activity or acquisitions or things of that nature.

I expect that our balance sheet and are liquidating value.

To grow every quarter going forward.

And now that I've said all of 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.

Can't guarantee what's going to happen.

With COVID-19 or with NASDAQ or with the stock market or things of that nature I can control, what I can control and I can't control and I cant, but I can tell you I am working my butt off harder than I ever worked before.

This is reminiscent of what I turn.

Sitting around a decade ago and it was working around the clock, while 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 can happen week to week. So please stop asking me of quarter.

And a quarter I expect really nice growth and our company and I'm looking forward zone.

Let me just see if I have anything else before I open it up to <unk>.

Q&A My IR firm Who's on the call told me keeps us to 25% to 30 minutes well it's.

We're 58 eastern time, it's been 28 minutes.

And I think and covered just about everything I wanted I would like to open it up.

Two questions now Hector I'll hand, it back to you and I think I'm right on time and thank.

Thank you, Sir and I'll take it away.

And thank you Sir we will now begin the question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is and the question queue. You May Press Star two if you would like to remove your question from the queue for participants using speaker equipment and 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.

And that long time share holder and are actually Oh and I. Thank you for getting rid of Mr. Quigley and that's how long I've done.

<unk>.

Yeah. Thank you David I have no comments about that that was a long time ago.

And as a fix and trades, but just a couple of questions number one I can admire.

And comprehend and completely year.

And to have a solid battle.

Because that is the most important thing but in addition to.

The stock price.

Can you give us any timeframe because I know you know cashiers came right now, but as far as co tenants do buybacks or dividends, how far out do you see a word.

And they may come into play.

Sure that's and that's a great question and I only wish I could answer directly alright, here's what I can tell you.

And so I can tell you I have a history of doing what's best for shareholders. Okay. So we have a very strong balance sheet.

But because we have a strong balance sheet because cash is king if I can.

Find and acquisition of a lab for $5 million, which I think and I can build to make it worth $25 million or there was a lab that I can buy from 50, my and and I think I can make it a two or three years' worth $200 million got ask your price.

Well I want to spend that cash or do I want to buy that so yes cash is king. What's also nice to say have a fantastic relationship with our our two investment banks debt that did the underwriting for us back in January and for the right opportunity.

We already have a strong balance sheet and because.

We have strong revenue growth and now and things are going well for the company to be honestly, it's pretty easy to raise capital for opportunities so but by the same track and 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.

And for granted they burn through it and then they come back asking for more I don't write that way.

And do anything sloppy with the cash and that what people don't understand why they're selling the talked out is how much cash the company has and how strong and is and I'm shaking my head stuck in raw and getting down to a point where they're valuing.

Cash for our new business, which is growing and their value and it was the right I'm sitting there saying.

And now I am not making stock price recommendations and your stock recommendation, but what I will also tell you and possible that I weigh all factors and in the past when we sold the Colby's brand and the stock was trading below liquidating value added to stock buybacks.

After I did that we still had cash and I didn't I didn't know what to do with it so I did.

Dividends right.

And I don't understand and I am a big believer and stock buyback from a belief big believer and stock dividend at the right time and at the end of the day, it's gotta be what's best for the shareholders weighing that.

And against opportunities. So alright, so I can't give you a quarter after that.

Sure that's fine and in part to a you probably know that you've.

You've got two analysts that Ah I know you don't like to give any forward guidance because of all of the variable factors, but you've got different analysts.

That are better I think one is projecting $2 and earnings per share and the other one alright and with <unk>.

And five forward right, probably a year can you make the comment about that that sounds quite a price.

Yeah.

Yeah of course, so if we were talking in January I would tell you that I felt.

Lists blow those numbers away if.

If you ask me right now it depends on how we it depends on how we grow from here I'll give you.

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've come across every single day and what I've learned is the largest.

The opportunity to lower the probability of success, but to give you an example.

We're working on some opportunities that could be nationwide.

Literally no huh.

If I if it now but I don't know what the odds are what are the odds are or one and five alright, and one of our friends and maybe I.

Alright, but if I have if a company hits on that we can do 40000 and tests, a day and one opportunity and what would happen. We you know we don't and you know I don't think I didn't even.

The numbers for all I know you know we could.

We can write $6 $6 a share this year and that went wrong and earn $10 a share, but if we don't get that and I don't expect to GAAP.

But by the same token.

We're dealing with growing our school business.

And you know and almost weekly basis variety and schools. If you think about it we are already over 75 schools are reported just over the last couple of months, that's growing now there's a bit.

And more cash so we should be able to accelerate that but I don't know.

No when I reported that we are doing just under 2000 and I expect that number to grow significantly and just a few weeks from now, but I can't guarantee it's going to.

Look at what happened back in December and January and we grew but what's nice is the amount and the number of accounts is growing we're less reliant on any one customer or.

And.

Of that our base business is solid and growing and I like to think it's going to continue growth. So we just have to wait and see.

And therefore, better answers and that book that we have good faith and you because of your track records of David One of the reason why I think it and so much from that.

And I really appreciate your call.

Our partner to go to another call I really appreciate your comments, David I have a great day. Good luck to you too.

Hudson Who's the next call.

Your next question comes from the line of Vincent MRO with Fordham and financial. Please proceed with your question.

I guess, hey, Ted Thanks for thanks for taking the question I was just wondering this news that came out yesterday.

It's really about this COVID-19 passport did you acquired is that is that the only one out there or is that just your version of it.

It's it's.

And that's I.

I don't want to say that that's a trick question because I know you don't mean it is a true no no Hitler army.

Well, let me spend and I'll answer it.

Yesterday, and I'm Gonna Cat I know I understand your question.

To be clear there are other quote passports out there. So that for instance is something that I b M created that new.

And New York State sponsored and this is going back weeks win.

And the state and New York, They were trying to figure out you know and I've ever.

I'll take the rules are different every governor has different ideas about what to do and in the state of New York in particular, and they were trying to figure out if they were going up and when they're going to open basket and square garden up and first and.

And they basically sponsored.

And another past and it's called Empire Steakhouse.

We believe.

Every state our past is actually better.

And then whatever else we have seen in the marketplace. It doesn't mean that there aren't any other technologies coming and yeah. So then the next step is we can look into New York State and ZIP Bill sponsor, our paas as well they may.

Believe real point is that our past and unalterable.

Report card on your.

And your smartphone that you can use.

To report to enter events. So that for instance, you know.

You want to go to city field, you want a Yankee stadium.

And you need that report card and all.

But the winter we provide that for you on your smartphone. So it's a really nice piece of technology I think I mentioned that just today, we got a verbal from new accounts and wants to do business with us and and the deciding factor actually was our backpack tests.

So I think it's going to.

Turning to our business and are 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 of developer of it we're actually working with not only on that.

But he is also bringing this business and we have a great relationship and we integrated and very smoothly.

And into our technology and a part of that again.

Our head of IP, Sergio and morale is a lot of credit for that and also bidding for working closely with him to make this go smoothly and where we're ready to roll. It out. So it's an exciting piece of technology, but to put in perspective, I'm working on and our company and our management of working on so.

So many additional initiatives on behalf of our company.

Nobody built out of business and the timeframe that we built out our business I've just nobody thought it's unheard of I don't I don't care about put our track record and last six months up against anybody in the business and so.

We're working on so many initiatives. This is a really exciting one.

And we're working on and a number of other initiatives and I hope they come to fruition and I hope to be able to talk about them in the coming weeks and months I.

And I hope that answers your question it does and I. Thank you very much.

Have a great day.

And I appreciate your call after back to you.

Thank you Sir and our next question comes from Robert.

Yamaha with private Investor. Please proceed with your question.

Hey, Thanks for taking my call I just had a quick question, but first I want to congratulate you on your hard work and their success.

A longtime investor net but.

You've got to watch you on Fox news of some time ago and Uh Huh.

I caught the I bought the cold EEZE.

And then and I went into the store and tried to find the cold ease and it was hard to find but over time gradually just got more and more shelf space I was just flabbergasted.

So thank you for you and all your hard work and now you fill them up.

New products, that's awesome and he's doing great go out and thank you Matt.

And I really appreciate that you have.

A question as well.

Yes, I just wanted to quickly about Europe is there any way you can think about breaking into Europe for testing or is that too far away.

Christine well.

And there's so much opportunity and the United States I don't know that we need to but.

And.

At the end of debt.

And I didn't believe it or I don't believe.

Believe it's going to happen.

One of our and I call them part, whether you call them partners and customers. We are intermediaries to Gulf wind business for us that are working with us as consultants and so forth and one of our partners actually was dealing with the U K because they are looking for a large lab large labs are labs with.

Capacity to do a lot of their testing.

And you know I think it's a little crazy because I am not going to spread myself and by building a lab over and the U K, but by the same token.

Fedex you know a if you think about and airplane flight, whether Fedex you know, we do a ton of Texas.

Large scale testing all across the state of Texas and.

And that's all done by Fedex, where the specimens were collected during the afternoon.

You've got them on a drop them off and Fedex by six P M and they get to US eight o'clock in the morning, we're reporting results by the end of that day, so not only within.

And so not only within 24 hours when we received this.

And then we all report results within 24 hours and the specimens being collected and that's across the country, but what differences there between across the country or across.

The water, what's the difference of the flight is four hours.

Six hours or seven hours and it just doesn't matter. So conceivably you could see that happen, but it's not.

And my.

It's not my focal point right now, but by the same token all of the new upticks and issues and new way Covid wave going on in Europe, It's inevitable that it's coming over here and as I mentioned.

And the upticks and positive Covid incidents is happening when we look.

And of test, we do every day, how many of them are positive.

And for six weeks ago dropped down to near zero now those numbers and starting to uptick again and it's starting to pick up again, so whether or not testing is going to take off again I don't know Theres also I'll always new competition coming out.

But regardless it's.

At the enormous amount of opportunity for us over here. So we don't have to necessarily look abroad to find opportunity.

Alright, well good luck, thanks very much.

Awesome. Thanks, so much for your compliment.

Next question Hector.

Your next question comes from the line of Dennis Waldmann Private Investor. Please proceed with your question.

Hi, Ted.

Congratulations on everything you've accomplished and the last six months, it's quite amazing and.

And I know you were offering a great service, great capacity, and we just need more customers as our sales and marketing person could you go into detail on your sales team.

Sure so.

I try and keep.

Overhead.

At a reasonable level I try and operating and 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 and.

And we have different types of customers and we have different types.

The partnerships.

But there is this is more than a dozen groups of people that are working on our behalf.

And attracting new business. So in particular, our three largest accounts.

Intermediaries that do.

The specimen collection and they are responsible.

And for finding new business and then they bring those specimens to us. So we have three three customers are three largest customers, who are bringing us and enormous amount of business there signing up.

More of their customers.

Every day as I mentioned as well.

So I.

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 and some cases. These are individuals or groups that are simply going to find the bedroom and bring it over to US and then one of our partners will handle.

The specimen collection and logistics and other cases, we have partners, who actually find the customers and then they do the specimen.

Specimen collection and logistics themselves. So we have different groups of people for instance, finding and schools.

Some of those are large customers, who are finding and the schools themselves and also did the specimen collection and other cases.

Because there's so much opportunity there we might have a dozen different people right now searches for schools across the country that are looking for testing and then I'll bring and.

A partner.

Partner to actually.

Provide the logistics and specimen collection and we do the.

And of course, the lab processing and reporting of results I Hope that's fairly answers your question.

And it does.

Asking another question about the vacs tracks sure, but 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 acquisitions fantastic I, just try and understand how to make money on.

Yeah, so to phone the first thing it does it.

Is.

It's significantly.

Hum.

Grades.

Our offering to customers, which means that it significantly increases our ability to close on a new customer and as I said.

I described our sales force, which is primarily and external sales force. Obviously, we have several people within our company that are working with the external sales force and.

We do a great job of that but you got to and ship our whole management team everybody is working on this alright. So.

So, but there's basically two model.

<unk>. The first is is that we now offer this as a part of our our technology.

When when you bring on a new customer.

The first thing they ask you and they are deciding that they want a higher yield and want to know about your OIS system. Your alliance system as Youre lab information system and the reason that's so important as I mentioned once.

Once you know how to process test that becomes the easy part the more complicated part is the collection of patient data the collection of the requisition form.

The reporting of the results and the ability I mean, all of that is serious stuff and the sophisticated customers know that so the first thing they want to know do you.

Our strong technology backup when we tell them not only do we have a great L. I F and a great team, but that we also now have a great reporting system.

Archrock that that gives us a leg up so my my first GUL and.

And acquired by product is it.

It makes us a stronger company.

And 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 is no different than than purchasing the best state of the art equipment and.

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.

<unk> 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 out a smartphone are at so we're just now looking into that you've got to understand and I literally just signed the paperwork I don't remember we just closed on the deal literally in the last 24 48.

And 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 and both directions and I can't promise you, what's going to happen and the licensing deal, but that could certainly be bullish for our company.

But regardless it should help us close more accounts.

And I said and as I mentioned, just coincidentally from one of our partners. They they truly believe that the backpack helped.

US win an RFP.

Although it's not official yet he got a verbal you have got it alright.

So I hope that answered your question, but.

And it's certainly a really nice addition to the company.

And I agree thank you.

You are quite welcome and Hector next question. Please. Your next question comes from the line of Lee Alper with Hammock investors. Please proceed with your question.

Alright, Thanks for taking the question a couple of them.

One.

And backtrack did you buy and.

Or did you buy a company and you acquired the whole infrastructure.

That's a great honestly, that's a legal question and I don't know that I want to get into the answer and a legal question, but.

But you know we acquired all the if you think about technology its really all about the IP.

We.

We acquired the exclusive rights to all the IP.

Does that answer your question and nobody nobody from us as it did.

Did you hire any people.

Oh no no no no no it's not.

It's not a company and although the founder is working very closely with us anyway. So it's almost like.

Acquiring his company when we acquired his company, but but we did not acquire like customer business and if that's what you mean, although there are relationships that are certainly coming with it so and a sense. It's the same thing.

And our technology.

And he said what anyone else does he have other no no.

No no no no no no and I understand I pay the intellectual property. The patents that all belongs to US. This is our technology is for us to license out it's not for him or anybody else that we own the technology. So if you want to look at it in layman's terms do we buy the company has to be bought the company.

So and legal and so that's about it.

And so it all right. So you could license it because.

And there's no restrictions on exactly none we own it and we own the IP, we own everything locked.

Lock stock and now it's our technologies and if we develop it ourselves and.

Have you given us and we own that.

On the cost from that.

No I didn't put it in there it's not public information and it's not relevant.

And I'm, sorry, I I would love to talk more about it but it's not public information and both sides.

Decided not to make that public.

And it didn't kill US I can tell you that much it's not convinced it's not gonna be able and adventure real numbers and it would have.

Would you not have to disclose it and when you.

Trial.

And I just followed up.

Just.

Following our attorneys and based on that.

Alright.

So we think we 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 and honestly I look at the dealers and win win for both sides and do you have any long term and rate arrangements with him or can you walk away from you tomorrow.

Well he can.

And walk away, we have the technology, we've already integrated we have a fantastic ITK that now understands the technology livestock and barrel, we've already integrated and so it's not an issue there's no risk whether it works or not that's not a risk in terms of the functionality of the technology or using it going forward and that's not an issue.

And there's no risk from that point of view, we've already integrated.

And to raise into our system, we already know it works we've already integrated we're just finishing a beta beta testing right now as we speak.

And can you give us a little more color.

And on.

What you are looking at doing testing and number of test and.

April.

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 our three largest customers all coincidentally within a week of each other all said.

And that by mid April they expected to bring us significantly more business I, even have a fourth customer.

And who isn't that large is bringing us a significant amount of business.

And the next week or two I expect a very active April I can't look out.

And that other than to say all of our schools are continuing to test and we continue to open up more school. So I expect.

On a quarterly basis, I expect our revenues and our accounts.

<unk> and our testing business will also grow.

And of course again I refer to forward looking statements I can only tell you what the expectation probably there's no guarantees and this world, but every indication suggests to me.

We have an uptick and COVID-19 I don't expect it necessarily to get back from what it was in January but we are but that's not a downtick and even at current levels. There is a ton.

Tony and out there and I believe we're testing is going to grow.

Over the course of the quarter in fact, I think our testing is going to grow and the month of April.

Okay, I'm, sorry, I can't give you more definitive answer because I you know I just don't know it's as simple as.

Unfortunately, it's not something that can be known but I can just tell you we're growing our business every quarter.

And about but I can't I can tell you with this quarter.

Yes.

Can you give us an idea about how many customers you do have.

Oh, I don't even know and and and it depends on how you and what I mean by that is it depends on how you characterize the customers and we have so many different types of customers as I said, we have one.

And if you want to call. It a partnership we have one customer who I think test and like 65 schools or some kind of a number like that right now we have another customer that's probably doing 10.

But growing very rapidly.

We have another customer who's testing and the whole state of Texas.

We have another.

I mean I can just go on and on with examples, but so who are our customers as the thousands of patients being tested is that our intermediaries.

It.

As a school and customers the person in the company that brings us to school, it's honestly, it's pretty convoluted.

And and I'm not trying to avoid your question at all.

But just the fact that we're testing 75 schools as an example, and I expect that to grow significantly over the next month or two.

And in general terms.

Yeah.

How much is local.

Doing and how much is out of state and when I say out of state I'm, not I mean, and New York, Pennsylvania.

And so well like I said, one of our one of our largest customers testing across the state of Texas. So that's about as out of state as you can get and and that business was significant or otherwise and I said the weather in February and.

Really hurt that business and it's hard to tell whether part of that was because there was a tremendous downtick and covenants.

And incidents and koga.

Covid testing and it's hard to tell except there are centers that were shut down and that I believe are reopening but in the meantime, we have lots of other accounts that are opening, but where we're testing and many states.

Okay, Newark, New Jersey, Pennsylvania, Texas and <unk>.

And the location and really doesn't matter to us.

And if it's.

Nearby and its career service. So you know we drive the result, the I'm sorry, the specimens are drifting over to it takes an hour or two hours three hours.

Fedex as I described and taxes, they collect specimens and took until <unk> P. M.

They put it out and Fedex, we get at eight o'clock in the morning, we provide the results of the other day so it honestly.

And it's a 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 and not a difference and days.

And it shouldnt prevent somebody from doing business with us.

Okay great.

That's good and ranks.

Thanks, and appreciate your interest and support.

Alright Hector.

Your next question.

<unk> comes from the line of Michael <unk> Private Investor. Please proceed with your question.

Hello, Hi, I hate and attach and I have a question I thought debt, that's Q4, and so theres, a 5.2 million and revenue due to news and numbers are what is how much is it related to the testing.

I say, Oh and I apologize.

And it's not broken out and.

And I don't well I don't want to give answers to numbers that are not public information and if it's not broken out and I'm certainly not going to do it on this call and not the CFO anyway, and honestly off the top of my head I don't know the number there was clearly a bump from our testing.

Because we started testing and very late December and started a small number.

But even free 2000 tests, we did at the end of December.

We're talking about potentially another $100000 and.

<unk> revenues. So we certainly got a bump from that but our core business, obviously did well too.

So okay and yes.

Yes, Sir.

Okay, and so so could you give me some like you know rough idea and what is and roughly how and what is and like the expansions you all card in last year and last quarter, you know roughly idea I don't need to aggregate Zach Nomura.

Hello, and thank you.

Yeah, Yeah, yeah, so here Youre right.

Yes mhm.

Oh, I'm, sorry, and the December quarter.

Yeah, Yeah last quarter, and yeah, yeah cause and Macquarie.

And what was it all kind of five meeting.

Total cost how much Oh, yeah and.

And here's the problem.

I would love.

Expenses related to the testing or expenses overall of the company Here's the problem, where we're getting and there's something very specific with financials, it's not public information I'm not sure what the answer and whatnot cancer and I don't know what okay, I actually know and I honestly I would I would be guessing anyway I can just tell you there was a significant amount.

And of startup expenses for our business you know some of it you have to separate out obviously, we acquired a lab, but that's not that's something that we'll capitalize overtime. But then there are all the expenses with starting up and there's the people we hire theres a theres the recruiters that we pay for it I mean that was significant and and the first.

Or you know we hired we hired 100 people.

100 employees and our lab business may be more between November and December and January and then if you think about it for a lot of that we use recruiters there were paying 20 per cent to and many of them. That's all cash expense, there's a tremendous amount of Ah I T technology, that's all.

First quarter and so there's a lot of startup expenses, but as I outlined months ago. We had we had an enormous need for cash back in December and January and then and in February March as we're testing and purchasing consumables, but now we're going into a period with just the opposite.

All expect our cash flow to be significantly positive.

And the second quarter, and then that goes back to the other gentleman that was asking about stock buybacks or dividends and if we are significantly cash flow.

You know positive going into the company and we already have tremendous working capital and cash balances, which we do.

Yeah.

And it leaves the door open to a to a lot of flexibility of things that we can do without and with that cash and so they'll start up expenses of course.

Or go away now going forward, because we are no longer starting up and we've already hired all the people we've already installed all of the technology.

Good to go we're up where operational where.

We're running smoothly. So all those sort of start up expenses are gone and never gone after the after December and after the first quarter and so I'm actually really excited about the second quarter.

Okay, great great. Thank you and that's why they are so yeah that sounds right.

Further information.

Yeah, I have a different question.

The testing so you indicated in multiple and chances and I and you have 30 40, you know like that that's got profit, it's not gross profit ours as well what is that yeah. So okay. So again.

And here's why that's a complicated question.

And and I'm not being evasive.

At all but there's so many different variables. So first of all we have cash customers and.

And we haven't and 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 is as.

And my partner, we might be paying out $25 and the other hand, we might be doing a cash customer, where we don't have to pay them out or the ones doing specimen collections are billing and short separately under a different code for <unk>.

For collections.

We have all different prices for which we're doing testing. We also have all different prices.

From what we're paying people to bring the customers, whether it's just an introduction where they're responsible for the specimen collection.

And then on the other side.

We had a bunch of startup expenses. So it's it's to be argued whether those startup expenses should be a part of the.

Profit per test or not.

Profit per test because on the margin. If you don't include the startup.

<unk> expenses, which are ongoing which you shouldn't be if you really just want to calculate what the profit is protest and you don't look at the startup expenses, but of course, we have a lot of startup expenses. So it's a complicated toward the number to be honest with you.

But you're certainly.

Part of the ballpark with the numbers you were talking about and I I've talked about in prior presentations I don't know whether and the numbers.

Honestly and also two day, 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 of average of 105 to 100.

$15 and that's very different than if we got 90% reimbursement and the reimbursements and $100.

Because out of network and sure it sometimes pays more than $100 so on and so.

So we have more experience with us and buy experience.

And until we see how the insurance companies or pay because we're just starting to the cash flow just starting to come.

And then.

Over the next months, 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 per test. So if you don't want to include the startup expenses and then that our profit per test is quite high. If you do include the startup expenses than our profit per test goes down but either way.

And going forward and we don't have those startup expenses and.

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 and the next four to six weeks, but I can tell you. It's it's certainly a healthy it's a very healthy profit and we're making a lot of money per test and.

Without the startup expenses behind us that.

You got to get better and the second quarter.

Okay great.

Okay and my understanding is that that's just the profit it's not set revenue right and like that money and your cat and rain is including the call Tonight.

Total that yeah.

No no because the way okay. So first of all the revenue number that's the number that's you know per.

Number two.

And that can vary anywhere from $75 to $125.

And it could be the revenue on top of that that's just the revenue of what we're getting paid to do the processing, whether it's somebody paying cash or somebody.

<unk>.

We're getting reimbursed by insurance and then small customers pay more than larger customers when it's cash.

Cash so the number those numbers are incredibly variable, but that's a revenue number when it comes to a tougher.

Okay great.

About about your supply and I have another question. So I thought of your last question because yes, okay and this year.

And last quite because we're over an hour and we still have somebody else and wanted to ask the question right.

And could make this average and it till you have amplified you have and like a lot of the and the range and you know and.

And the supply so what is the shelf life I was just saying you know and love.

And it can be useful within one year or Javier always searching.

And if you're talking about the consumables that I don't see I don't know.

After but.

And the consumables that could be anywhere from six months too.

Over a year and 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 their inventories.

Non issue.

Okay.

Okay and lost Michael.

I saw I don't I don't know if we have any other questions or not and Hector if you want to ask one last time or if we should end the call net of $5 30 to no no no no further questions at this time and this concludes our question and answer session and I'd like to turn the floor back over to you Ted for any closing remarks.

Sure.

I just want to thank you all for joining me today.

Truly appreciate the support.

And.

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 and.

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 and the months and quarters ahead. Thank you all for joining me today are Hector and thank you for preset.

Setting this up thank you all have a great day.

Ladies and gentlemen, and this does conclude today's conference call. Thank you all for your participation.

Okay.

[music].