Q1 2024 ProPhase Labs Inc Earnings Call

May 9, 2024

Ted William Karkus: I think that these virtual presentations are a great way, not only for when I do the VNDRs, but we are now doing them for the earnings calls as well. Feel free to give me feedback if there's a different approach you think we should take, but I love this approach.

I feel free to give me feedback if there's a different approach you think we should take but I love this approach.

Ted William Karkus: Before we get started, a forward-looking statement, just very quickly for the VNDRs. I don't read them, but for the earnings calls, I think I should. Before we get started, I'd like to remind you of the company's Safe Harbor language. During this presentation, we will make forward-looking statements, including statements regarding our strategies, plans, objectives, and initiatives and underlying assumptions. While we believe that these forward-looking statements are reasonable as and when made, they are based on expectations that involve risks and uncertainties that could cause actual results to differ materially.

Ted William Karkus: Before we get started.

Ted William Karkus: Forward looking statements just very quickly for the <unk> that don't read them, but for the earnings calls I think I've shown before.

Ted William Karkus: These risks and uncertainties include, but are not limited to, our ability to obtain and maintain necessary regulatory approval, 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 listed from time to time in our filings with the SEC. This call will present non-GAAP financial measures such as adjusted EBITDA. Reconciliation of these non-GAAP measures to the most comparable GAAP measures is included in the earnings release furnished to the SEC prior to this call and is available on our website.

Ted William Karkus: Before we get started I'd like to remind you of the company's safe Harbor language. During this presentation, we will make forward looking statements, including statements regarding our strategy plans objectives and initiatives and underlying assumptions. While we believe that these forward looking statements are reasonable as and when made forward looking statements are based on expectations that involve risks and uncertainties that could cause actual.

Ted William Karkus: So with that, um... First of all, I always have to give a shout out to ThinkEquity, who we have had close to a four-year relationship with, and who were instrumental in financing our initiatives when we built out the COVID business that went on to a couple hundred million in revenues. They brought us some fantastic acquisitions that are now developing. So I always give a shout out to ThinkEquity and also to the other companies that follow us on an analytical and research basis, including H.C. Wainwright and Diamond Equity Research. So with that, I don't want to go through the presentation again.

Ted William Karkus: <unk> to differ materially these risks and uncertainties include but are not limited to our ability to obtain and maintain necessary regulatory approval 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 listed from time to time in our.

Ted William Karkus: Our filings with the SEC filings this call will present non-GAAP financial measures such as adjusted EBITDA reconciliation of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC prior to this call and available on our website so with that.

Ted William Karkus: First of all I, just have to give a shout out to <unk>.

Ted William Karkus: Equity, who we have close to a four four year relationship with was instrumental in financing our initiatives. When we built out the COVID-19 business that went down to a couple of hundred million revenues. They brought us some fantastic acquisitions that are now developing so I always give a shout out to think to think equity also.

Ted William Karkus: Other companies that follow us on an analytical research analytical basis, including H C. Wainwright.

Ted William Karkus: And Diamond equity research, so with that I don't want to go through the presentation again not that much has changed in the presentation itself from the last time I did an earnings call just six weeks ago, and so I was going to start the call by saying that that much changes in six weeks, but the fact is if you read the press release today.

Ted William Karkus: Not that much has changed in the presentation itself from the last time I did an earnings call just six weeks ago, and so I was going to start the call by saying not that much has changed in six weeks. But the fact is, if you read the press release today, a lot has developed in the last six weeks. So before I get into it, I always like to give a little perspective.

Ted William Karkus: A lot has developed in the last six weeks, so before I get into it I always like to put a little perspective, I really do believe that.

Ted William Karkus: I really do believe that a history of execution in a micro-cap company is critically important. When management executes historically, your probability of success goes up on the next initiatives that management is focusing on, as opposed to a management team that's new, that's starting up a company for the first time, and has, quote, some breakthrough technology that they're excited about. The risks are much greater when you have a management team that you can't assess. So I'm not going to go through all this again.

Ted William Karkus: A history of execution and a Microcap company is critically important when a management executes historically your probability of success goes up on the next initiatives that management is focusing on.

Ted William Karkus: As opposed to a management team, that's new that starting up a company for the first time as quote some.

Ted William Karkus: Breakthrough technology that Theyre excited about the risks are much larger larger when you have a management team that you can't assess so I'm not going to go through all this again, but again in 2012, when a restructured the company to start with 65 Dr.

Ted William Karkus: But again, in 2012, when I restructured the company, the stock was $0.65. It's around five and change right now, and it paid out $2.40 in a special dividend. So you're up 11, 10, 11, 12, 13 times in total returns in the last 11 or 12 years. More recently, a few years ago, our stock was about a dollar and a half. It's more than tripled.

Ted William Karkus: Dr around five and change right now paid out $2 40, and special dividend. So Europe 11, 10, 11, 12 13 times in total returns in the last 11 or 12 years more recently, a few years ago, our stock was about a dollar and a half.

Ted William Karkus: We paid out another $0.90 in special dividends since that time. So even in the last few years, we have paid tremendous returns to the shareholders. We are now; we've transitioned multiple times now. For some years, we were a development-stage company spending money to develop assets. For some years, we're generating revenues and earnings. And it goes back and forth, and that's the life and cycle of a development stage company. So first, we turned around the Colby's brand, lost money building the brand, and sold it for $50 million. I did the same thing, by the way, with IB Biomedical.

Ted William Karkus: More than tripled we paid out another 90 in special dividend.

Ted William Karkus: Since that time, so we've been the last few years trim.

Ted William Karkus: Tremendous returns to the shareholders.

Ted William Karkus: We are now we've transitioned multiple times now.

Ted William Karkus: Some years, where a development stage company spending money to develop assets. Some years, we are generating revenues and earnings.

Ted William Karkus: And it goes back and forth and Thats the life.

Ted William Karkus: And cycle of a development stage company. So first we turned around the cold. These brands lost money building. The brand sold are for $50 million did the same thing by the way with <unk> Biomedical I was instrumental in the turnaround of the company that ultimately was sold for $1 4 billion that was before I did the same thing with our company alright, sorry about history.

Ted William Karkus: I was instrumental in the turnaround of the company that ultimately was sold for $1.4 billion. That was before I did the same thing with our company. Okay. So I have a history of doing this. And it's not just me.

Ted William Karkus: We are doing this as not just me we have a great management team in place here alright. So.

Ted William Karkus: We have a great management team in place here. All right. In any event, after we sold the Kaldi's brand, then we went back really to being a development stage company again; we did stock buybacks and dividends at the time. And then we got into COVID testing, generated a lot of revenues, and made a lot of money. But now we're back to a development stage company again. And so you can expect in a development stage company developing assets that you're going to lose money. I have no interest in focusing on the losses of the last couple of quarters; we're going to lose money again next quarter again.

Ted William Karkus: In any event after we sold the call. These brand then we went back really to being a development stage company again, we did stock buybacks and dividends at the time and then we got into Covid deaths and generated a lot of revenues.

Ted William Karkus: Made a lot of money, but now we're back to a development stage company again, and so you can expect in a development stage company developing assets youre going to lose money I have no interest in focusing on the losses over the last couple of quarters, we're going to lose money next quarter again, but at some point with the new assets that we're developing theyre going to take off in value.

Ted William Karkus: But at some point, with the new assets that we're developing, they're going to take off in value. So the one that I really want to focus on today is the one that the focus of the earnings report is formalized because there are some interesting new developments. So just very quickly, so we're all on the same page here. Pharma Law is a business we've owned for decades. The supply and demand, over the last several years, for the manufacturing of lozenges has shifted where there is less supply of manufacturing, and there's enormous demand both globally and domestically here in the United States.

Ted William Karkus: The one that I really want to focus on today. That's the focus of the earnings report is formalized because there were some interesting new developments.

Ted William Karkus: Just very quickly so we're all on the same page here formalize the business we've owned for decades.

Ted William Karkus: [inaudible]

Ted William Karkus: And so for the last two years, I've understood this isn't, you know, there's the line about the 20-year overnight success. And I actually looked up some quotes about 10-year overnight successes, and it takes 10 years to be an overnight success. Well, formalized is all of a sudden going to sound like an overnight success. But besides the fact we've been developing it for a long time, specifically over the last year or two, we've been specifically focusing on building the capacity so that we can take advantage of the global demand so that we could have an asset worth tremendously more in the next six months, relative to what it was worth last year. So last year we did about $9.3 million and actually lost a little bit of money. We increased prices on all of our customers.

Ted William Karkus: And so for the last two years, understand, this isn't, you know, there's the line about the 20-year overnight success. And I actually looked up some quotes about 10-year overnight successes, and it takes 10 years to be an overnight success.

Ted William Karkus: Well, formalized is all of a sudden going to sound like an overnight success, but besides the fact we've been developing it for a long time Specifically over the last year or two, we've been specifically focusing on building the capacity so that we can take advantage and

Ted William Karkus: of the global demand so that we could have an asset worth tremendously more over the next six months relative to what it was worth last year. So last year we did about $9.3 million and actually lost a little bit of money.

Ted William Karkus: They all accepted the price increases they're kicking in now. We got two new orders in from two new brands, which adds another $5 million in revenues. So between the price increases and the two new orders, going into the second half of the year, just on existing business on the first manufacturing line, we're going from $9.3 million losing money to about $16 million in annualized run rate and making substantial money, somewhere in the order of $3.5 million in profits.

Ted William Karkus: We increase prices on all of our customers. They all accepted the price increases. They're kicking in now. We got two new orders in.

Ted William Karkus: from two new brands that adds another 5 million of revenues. So between the price increases and the two new orders, going into the second half of the year, just on existing business on the first manufacturing line,

Ted William Karkus: We're going from 9.3 million Luzi money to about 16 million in annualized run rate of revenues and making substantial money somewhere in the order of $3.5 million of profits. That'll be our run rate.

Ted William Karkus: That'll be our run rate, as the current new customers ramp up their businesses. One, we've started to ramp up already. The other one, we're going to be ramping up probably later in the second quarter, or we're very close.

Ted William Karkus: as the current new customers ramp up their business. One we've started to ramp up already, the other one we're going to be ramping up probably later in the second quarter, or we're very close in hand. So going into the third quarter, all of a sudden, the numbers dramatically changed for FarmLow's.

Ted William Karkus: So going into the third quarter, all of a sudden, the numbers dramatically changed for Pharmalab. More importantly, we have a second line of manufacturing equipment, we have additional automation equipment coming in, it's going to significantly increase our capacity, which now, for the first time, sets us up to be very attractive to very large brands who need capacity. And so, as I announced today, we are exploring strategic alternatives with formula. I don't make that statement lightly.

Ted William Karkus: More importantly, we have a second line of manufacturing equipment. We have additional automation equipment coming in. It's going to significantly increase our capacity, which now, for the first time, sets us up to be very attractive to very large brands who need capacity.

Ted William Karkus: And so as I announced today, we are exploring strategic alternatives with formulas. I don't make that statement lightly.

Ted William Karkus: It's not just an idea; this is something that's been in the works, literally for a year and a half, to two years in terms of the planning and then the execution of building out the capacity and then starting negotiations with large brands. I mentioned probably, I don't know, I can't remember, it was two earnings calls ago, that we were in talks. So understand, even just the talks with the large lozenge brands have been in effect for many, many months. This isn't just some new idea. Oh, we're going to talk about strategic alternatives. This is very far along in the discussions. And that's the only reason that I even mentioned it.

Ted William Karkus: It's not just an idea. This is something that's been in the works, literally, for a year and half,

Ted William Karkus: to two years in terms of the planning and in the execution of building out the capacity

Ted William Karkus: And then starting negotiations with large brands, I mentioned probably, I don't know, I can't remember, it was two earnings calls ago.

Ted William Karkus: that we were in talks. So understand, even just the talks with a large

Ted William Karkus: Lodge brands have been in effect for many, many months. This isn't just some new idea, oh, we're going to talk strategic alternatives. This is very far along in discussions, and it's the only reason that I even mention it. Doesn't mean there's a guarantee it's going to happen. So it's not a guarantee that

Ted William Karkus: It doesn't mean there's a guarantee it's going to happen. It's also not a guarantee that we will accept any offer that comes along if, you know, there is an offer. And I don't want to get into details because we have lots of options here.

Ted William Karkus: we will accept any offer

Ted William Karkus: that comes along if, you know, if there is an offer, and I don't want to get into details.

Ted William Karkus: We could either sell the facility now, potentially, or we could negotiate for the second line, which is, of course, going to have tremendous capacity and will be very attractive to some very large lozenge brands. They may want to lock up the capacity. They may want, if they lock up the capacity, I'm going to want a down payment because it means cutting out all the other customers that we're meeting that want the capacity as well. We were recently at an expo.

Ted William Karkus: because we have lots of options here. We could either sell the facility now, potentially, or

Ted William Karkus: we could negotiate for the second line, which is, of course, going to have tremendous capacity and will be very attractive.

Ted William Karkus: to some very large lodgings brands, they may want to lock up the capacity. If they may want, if they lock up the capacity, I'm going to want a down payment, because it means cutting out, while the other customers

Ted William Karkus: We potentially have a dozen new customers, smaller customers that could potentially fill up the second line as well. So we have different possibilities, a couple of opportunities there, a couple of possibilities for significant liquidity events. So this is all very exciting. I'll be happy to talk about it more in the Q&A. I'm going to try and get to the Q&A a little earlier today. I really don't want to spend a lot of time on slides that I've reviewed in the past.

Ted William Karkus: that we're meeting that want the capacity as well. We were recently at an expo, we have potentially a dozen new customers, smaller customers, that could potentially fill up the second line as well. So we have different possibilities.

Ted William Karkus: Couple of opportunities there, a couple of possibilities for significant

Ted William Karkus: liquidity events.

Ted William Karkus: So this is all very exciting, happy to talk about it more in the Q&A. I'm going to try and get to the Q&A a little earlier today, and not too, I really don't want to spend a lot of time on slides that I've reviewed in the past. This entire presentation, by the way, is available.

Ted William Karkus: This entire presentation, by the way, is available on our website. When there are updates, go to our website at least once a month. Anytime we have a new press release, we usually update this presentation as well, so feel free to go to the website.

Ted William Karkus: On our website, when there are updates, go to our website at least once a month. Anytime we have a new press release, we usually update this presentation as well. So feel free to go to the website.

Ted William Karkus: So, that's really exciting for today. Conceptually, before we get into the next slides, we're going to get into nebula genomics very, very briefly. I just want to explain that when you're developing assets, when you're developing businesses, there are always bumps in the road. There's no such thing as just snapping your fingers and taking a business and making it worth $5 million, and all of a sudden, it's worth $50 or $100 million.

Ted William Karkus: That's really exciting for today. Conceptually, before we get into the next slides, we're going to get into Nebula Genomics very, very briefly.

Ted William Karkus: I just want to explain that when you're developing assets, when you're developing businesses,

Ted William Karkus: There are always bumps in the road. There's no such thing as just snapping your fingers and taking a business and making it worth $5 million, and all of a sudden it's worth $50 or $100 million. Every once in a great while it happens with a technology company, you only hear about the one technology company that just takes off.

Ted William Karkus: Every once in a great while, it happens with a technology company. You only hear about the one technology company that just takes off. You don't hear about the other 99 that fail unless you're invested in them.

Ted William Karkus: You don't hear about the other 99 that fail.

Ted William Karkus: And it's not easy building a new business. And so, with Nebula Genomics, we have a new go-to-market strategy. And I'm not gonna go too much into what Nebula Genomics is, other than the fact that it was founded by George Church, who is world-renowned in the field of genomics. We built a world-class lab. We were doing COVID testing. We converted to a world-class lab here in New York. That lab costs a lot of money to manage right now.

Ted William Karkus: unless you're invested in them. And it's not easy building a new business.

Ted William Karkus: We're not generating enough business currently to support the lab. However, I believe that six and 12 months from now, the Nebula business is going to take off, and we're gonna be happy that we have the lab. We don't need the lab.

Ted William Karkus: And so with Nebula Genomics,

Ted William Karkus: we have a new go-to-market strategy,

Ted William Karkus: And I'm not going to go too much into what Nebula Genomics is, other than the fact that it was founded by George Church, world-renowned in the field of genomics.

Ted William Karkus: We built a world-class lab. We were doing COVID testing. We converted to a world-class lab here in New York. That lab costs a lot of money to manage right now. We're not generating the business currently to support the lab.

Ted William Karkus: However, I believe that six and 12 months from now, the nebula business is going to take off, and we're going to be happy that we have the lab. We don't need the lab. Historically, when we acquired nebula genomics, it didn't have a lab. It sent all the specimens to a partner lab.

Ted William Karkus: Historically, when we acquired Nebula Genomics, it didn't have a lab. It sent all the specimens to a partner lab. But our thought is we could provide, testing even less expensive expensively if we did it ourselves, but that's in the long term. But the other part of having a lab, it's not just the P&L of of sequencing a specimen in-house versus sending it to another lab. There are some other factors at play here. One is.

Ted William Karkus: But our thought is we could provide testing even less expensively if we did it ourselves, but that's in the long term. But the other part of having a lab, it's not just the P&L of

Ted William Karkus: of sequencing a specimen in-house versus sending it to another lab. There are some other factors to play here. One is

Ted William Karkus: In the long term, if somebody's interested in our business, it's going to be a lot more attractive if we're vertically integrated and horizontally integrated, and we have a lab, and we have all of these other pieces. The other part of it is that a lot of people are so worried about data privacy these days. They don't want you sending your specimens abroad.

Ted William Karkus: In the long term, if somebody's interested in our business, it's going to be a lot more attractive if we're vertically integrated,

Ted William Karkus: and horizontally integrated, and we have a lap and we have all of these other pieces.

Ted William Karkus: The other part of it is a lot of people are so worried about data privacy these days. They don't want you sending your specimens abroad. The fact that we can do the sequencing right here in New York. And then ultimately, we have four world-class, latest, greatest, state-of-the-art platforms of equipment that allows us to be the most efficient in terms of turnaround times, pricing, and so forth.

Ted William Karkus: The fact that we can do the sequencing right here in New York and then, ultimately, we have four world-class, latest, greatest, state-of-the-art platforms of equipment that allows us to be the most efficient in terms of turnaround times, pricing, and so forth. So it's incredibly well-suited, but the truth of the matter is the real value in Nebula is in our bioinformatics platform, and it's in the reporting And separate from that, it's in our database.

Ted William Karkus: So it's incredibly well situated. But the truth of the matter is the real value in Nebula. It's in our bioinformatics platform. It's in the reporting system.

Ted William Karkus: So I'm not going to I can go more into it in the Q&A, but understand the real value of Nebula is in our reporting system and our database that we're going to leverage over time. We're building a very exciting new go-to-market strategy where we're going to leverage some world-class social media and podcast experts, and we're potentially going to bring in some well-known celebrities to really get behind this. I just think of products, and I love to think of Prime because it's just a hydration drink that came out of nowhere.

Ted William Karkus: and separate from that, it's in our database. So I'm not going to, I can go more into it in the Q&A, but understand the real value of Nebula is in our reporting system and our database that we're going to leverage over time. We're building

Ted William Karkus: a very exciting new go-to-market strategy where we're going to leverage some world-class social media and podcast experts. We're potentially going to bring in

Ted William Karkus: some well-known celebrities to really get behind this.

Ted William Karkus: You know, I just think of products and I love to think of Prime.

Ted William Karkus: It got some celebrities and some social media behind it, and now they've sold a billion bottles out of nowhere. Now, understand it's a completely different business, but the concept is the same. I believe we have the right people in place. It took time to figure this out, and that's why I say this is a work in progress. Nebula is a work in progress, but to understand it's nice to have different assets in different stages of development so that we have formalized is about to kick in with either liquidity events or profitability. And that was two years in the making to get it to the point where it is now.

Ted William Karkus: because it's just a hydration drink that came out of nowhere, it got some celebrities and some social media behind it, and now they've sold a billion bottles out of nowhere. Now, understand it's completely different business, but the concept is the same. I believe we have the right people in place. It took time to figure this out.

Ted William Karkus: And that's why I say this is a work in progress. Nebula is a work in progress. But so understand, it's nice to have different assets in different stages of development.

Ted William Karkus: so that we have formulas, is about to kick in with either liquidity events or profitability,

Ted William Karkus: Nebula will be next. I can't tell you which quarter it's gonna take off. It's gonna be, you know, probably the fourth quarter and first quarter of next year.

Ted William Karkus: And that was two years in the making to get it to the point where it is now. Nebula will be next. I can't tell you which quarter is going to take off. It's going to be, you know, probably fourth quarter and first quarter next year. But

Ted William Karkus: Nebula is a really exciting business with enormous potential and different directions we can go in with it. And, you know, again, I'll talk more about it in the Q&A. I'm not going to talk more about it now, you know, but then next, we get into our esophageal cancer test. Again, this is a little development stage. This is six years. Nebula is six years in its development.

Ted William Karkus: Nebula is really exciting business with enormous potential.

Ted William Karkus: and the different directions we can go in with it. And, you know, again, I'll talk more about it in the Q&A. I'm not going to talk more about it now.

Ted William Karkus: You know, but then next, we get into our esophageal cancer test. Again, this is all development stage. This is six years. Nebula is six years in its development. Be Smart, Sophageal Cancer Test is six years in its development. It's not an overnight...

Ted William Karkus: The BeSmart esophageal cancer test has been six years in development. It's not an overnight, you know, wonder. Nothing happens overnight, but we're going to go from no one paying attention to this test. Clearly, I don't believe there's anything in our market cap for this test. And yet, this literally has multi billion dollar potential.

Ted William Karkus: you know, wonder, nothing happens overnight, but we're going to go from no one paying attention to this test. Clearly, I don't believe there's anything in our market cap for this test.

Ted William Karkus: This is a breakthrough cancer test that is surely needed in the medical community and, more importantly, for patients. I sincerely believe this is going to save patients' lives. And I think it's going to save insurance companies billions of dollars. So it only makes sense.

Ted William Karkus: And yet this literally has multi-billion dollar potential. This is a breakthrough cancer test that is sorely needed

Ted William Karkus: in the medical community and more importantly for patients. I sincerely believe this is going to save patients' lives.

Ted William Karkus: So,

Ted William Karkus: And I think it's going to save insurance companies billions of dollars.

Ted William Karkus: I can't tell you exactly how we're going to commercialize it, but what I can tell you is I work 24 hours a day. Everything I do is for the shareholders. I'm the largest shareholder in the company, and friends of mine are the other largest shareholders.

Ted William Karkus: So it only makes sense, I can't tell you exactly how we're going to commercialize this yet.

Ted William Karkus: But what I can tell you is I work 24-7. Everything I do is for the shareholders. I'm the largest shareholder in the company. Friends of mine are the other largest shareholders.

Ted William Karkus: I create value over time. It's not a guarantee of the future, but I always have in the past. And frankly, what I'm working on and what our management team is working on right now, I'm significantly more excited about than anything I've ever worked on, literally my entire career. Forget everything else that I just talked about. Farm allowance, to me, is now just crossing T's and dotting I's.

Ted William Karkus: It's just a matter of time before we generate some significant value for the shareholders, and that I highly believe is going to happen one way or another. Whether we sell it, sell the second line, the capacity of the second line, or whether we just build the business and start generating a lot of revenues and earnings, maybe sell it in 12 or 18 months. That's sort of on a fast track to success now, not very complicated. All right.

Ted William Karkus: Forget everything else that I just talked about. Farmalost, to me, is now just crossing T's and dotting knives. That's just a matter of time before we generate some significant value to the shareholders.

Ted William Karkus: That I highly believe is going to happen one way or another, whether we sell it, sell the second line, the capacity of the second line, or whether we just build the business and start generating a lot of revenues and earnings, maybe sell it in 12 or 18 months.

Ted William Karkus: That's sort of on a fast track to success now, not very complicated.

Ted William Karkus: Nebula Genomics, I think, has tremendously more potential than our formalized manufacturing facility, but it's probably, I don't know, six months, nine months behind in terms of the ramp up in revenues and earnings and recognizable value. And then we have our B-Smart esophageal cancer tests, kind of the same thing. But what I like about these assets that we're developing, particularly with B-Smart, is that this is not costing us a lot of money at this point. It's not like a cancer drug where you spend tens and hundreds of millions of dollars in 10 years to develop it and all that. We're about to commercialize this.

Ted William Karkus: All right, nebula genomics.

Ted William Karkus: I think has tremendously more potential than our farm allows manufacturing facility, but it's probably

Ted William Karkus: I don't know, six months, nine months behind in terms of the ramp up in revenues and earnings and recognizable value. And then we have our B-smart esophageal cancer test kind of the same thing.

Ted William Karkus: But what I like about these assets that we're developing, particularly would be somewhere, this is not costing us a lot of money at this point. It's not like a cancer drug,

Ted William Karkus: where you're spending tens and hundreds of millions of dollars in 10 years to develop it and what we're about to commercialize this.

Ted William Karkus: And we're not spending $10 million a year or $15 million a year right now getting it ready for commercialization. We're spending a small fraction of that just to complete it. Right now, we're not even really doing a lot of studies. We're doing statistical studies, statistical analysis, because originally this was focused on more as a test. But our test actually does a lot more than that, because we have breakthrough IP patented discoveries relating to the proteins that shift and are expressed differently when you're developing esophageal. And so our test can recognize those shifts in protein.

Ted William Karkus: because originally this was focused on more as a test to tell you whether or not you have cancer.

Ted William Karkus: But our test actually does a lot more than that, because we have breakthrough IP patented discoveries relating to the proteins that shift and are expressed differently when you're developing a softagil cancer.

Ted William Karkus: That's something that, by the way, doesn't show up in the blood until you're far too advanced, and it's too late, and you're, you know, potentially get diagnosed, you're going to die of esophageal cancer. You know, it's great, you know, but is it really a great test? If it says yes, you're diagnosed with esophageal cancer, and 80 to 90% of people that are diagnosed die. And if you get diagnosed, and two years later, you die of esophageal cancer. Is that a great test? You know, I guess maybe to put your financial affairs in order.

Ted William Karkus: And so our test can recognize those shifts in proteins. That's something that, by the way, doesn't show up in blood until you're far too progressed.

Ted William Karkus: and it's too late and you're, you know, potentially you get diagnosed and you're gonna die of esophageal cancer.

Ted William Karkus: You know, it's great, you know, is it really a great test?

Ted William Karkus: If it says yes, you're diagnosed with esophageal cancer, and 80-90% of people that are diagnosed die, and if you get diagnosed and two years later, you die of esophageal cancer. Is that a great test?

Ted William Karkus: But wouldn't you like a test that actually saves your life? That instead of telling you just before you die, it tells you years before that so that you can get an ablation procedure or take other actions to actually prevent getting the cancer. That's what our test does. So we're actually fine-tuning the statistics right now, not only to tell you whether or not you have cancer now, but we can do that with an incredibly high degree of accuracy.

Ted William Karkus: You know, I guess maybe to put your financial affairs in order,

Ted William Karkus: But wouldn't you like a test that actually saves your life, then instead it tells you just before you die, it tells you years before that so that you can get an ablation procedure or take other actions to actually prevent getting the cancer? That's what our test does.

Ted William Karkus: So we're actually fine-tuning the statistics right now, not only to tell you whether or not you have cancer now, that we can do with an incredibly high degree of accuracy.

Ted William Karkus: But in addition to that, right now, what we're working on are the statistics that tell you if you're at high risk or low risk. If you're at high risk, go out and get an ablation procedure immediately to save your life.

Ted William Karkus: But in addition to that, right now what we're working on are the statistics to tell you if you're at high risk or low risk. If you're a high risk, go out and get an ablacing procedure immediately to save your life.

Ted William Karkus: If you're at low risk, you don't have to get an endoscopy every year. Right now, insurance companies are spending billions and billions of dollars on unnecessary endoscopies. They're doing that because they don't know; the GI doesn't know if you should be getting an endoscopy every year or not. But our test will help guide the proper diagnosis and prognosis, and best course of treatment for the patient, based on whether you're low risk, medium risk, high risk, or you have esophageal cancer right now.

Ted William Karkus: If you're at low risk, you don't have to get an endoscopy every year. Right now, the insurance companies are spending billions and billions of dollars on unnecessary endoscopies.

Ted William Karkus: They're doing that because they don't know. The GI doesn't know if you should be getting an endoscopy every year or not. But our test will help guide the proper diagnosis and prognosis, best course of treatment,

Ted William Karkus: for the patient based on whether you're at low risk, medium risk, high risk, or you have esophageal cancer right now. So this is an incredible test

Ted William Karkus: So this is an incredible test. It's just remarkable to me that there's nothing in our stock price for it. And listen, as CEO, I don't know if I should say this or not. There's no guarantee this is going to happen. Maybe, maybe somehow we just don't figure out how to commercialize it. I don't know.

Ted William Karkus: It's just remarkable to me.

Ted William Karkus: that there's nothing in our stock price for it,

Ted William Karkus: Listen, as CEO , I don't know, I should say this or not. There's no guarantee this is going to happen. Maybe somehow we just don't figure out how to commercialize it. I don't know. I don't know.

Ted William Karkus: I don't know how, you know, if there's even a possibility that we would fail in this. You know, I guess there's some forward-looking statement. No guarantees. I don't see how this isn't going to be a monster.

Ted William Karkus: How, you know, if there's even a possibility that we would fail in this, you know, I guess there's some forward-looking statement, no guarantee. I don't see how this isn't going to be a monster test.

Ted William Karkus: You look at a company like Exact Sciences with a $10, $11, $12 billion market. And by the way, they came out with earnings and said that they have competition now, all right? We don't have any competition for our test. And what's the value of it in our stock? I don't know, zero. What's the potential?

Ted William Karkus: You look at a company like Exact Sciences with a 10, 11, 12, $12 billion market account.

Ted William Karkus: And by the way, they came out with earnings and said that they have competition now.

Ted William Karkus: We don't have any competition for our test.

Ted William Karkus: And what's the value of it in our stock? I don't know, zero.

Ted William Karkus: It's not an at-home test now, but we're also going to develop stage two, phase two, and phase three of this test. Who knows, one day it might be, but right now, what we're focused on are endoscopies because there are millions and millions of endoscopies performed every year. And we're not telling people to get endoscopies, but if you're getting one, take our test alongside of it, and it'll give you a high degree of accuracy for diagnosis and prognosis and course of treatment that you don't have without our test.

Speaker Change: What's the potential?

Ted William Karkus: It's not an at-home test now, but we're also going to develop stage two, you know, phase two and phase three of this test. Who knows one day? It might be, but right now what we're focused on are the endoscopies, because there's millions and millions of endoscopies performed every year. And we're not telling people get endoscopies, but if you're getting one,

Ted William Karkus: take our test alongside of it, and it'll give you a high degree of accuracy for diagnosis and prognosis and course of treatment that you don't have without our test. So I think I stated pretty clearly the excitement of this test. So if we have formalized...

Ted William Karkus: So I think I stated pretty clearly the excitement of this test. So if we have formalized that we're going to realize significant value from knock on wood very shortly, whether through the, you know, whether it's through the sale or sale of the second line, or through just building revenues and earnings for it. And then behind that, we have Nebula and our B-Smart esophageal cancer test. And I'm not going to go more into the numbers again; I can do that in the Q&A.

Ted William Karkus: that

Ted William Karkus: We're going to realize significant value knock on web very shortly, whether

Ted William Karkus: through the, you know, whether through sale or sale of the second line,

Ted William Karkus: or through just building revenues and earnings for it.

Ted William Karkus: And then behind that, we have Nebula and Arbosophageal Cancer Test.

Ted William Karkus: And I'm not going to go more into the numbers. Again, I can do that in the Q&A. Again,

Ted William Karkus: Again, our focus is 7 million endoscopies per year. Our goal, once we get CPT codes, assuming we get them, I believe we will very soon. If we get them, insurance will reimburse somewhere around $1,000 to $2,000. It makes it a $7 to $14 billion market with no competition. Pretty incredible.

Ted William Karkus: Our focus is 7 million endoscopies per year. Our goal, once we get CPT codes, assuming we get them, I believe we're going to very soon. If we get them, that the insurance will reimburse somewhere around $1,000 to $2,000, it makes it a $7 to $14 billion market with no...

Ted William Karkus: Elsewhere, Equivirges is really coming along really quickly. Again, we're developing this at very, very little cost. At this point, we're just completing one study, typically a dietary supplement. Class action attorneys jump all over you if you don't have two studies that total 100 patients.

Ted William Karkus: Competition.

Ted William Karkus: Pretty incredible. Elsewhere, Equivirges really quickly. Again, we're developing this at very, very little cost. At this point, we're just completing one study. Typically, a dietary supplement. The class action attorneys jump all over you. If you don't have two studies, the total 100 patients, we're totaling over 300 patients.

Ted William Karkus: We're totaling over 300. So we're doing this the right way. I learned from Kaldi's. I turned around Kaldi's myself. Epivir is a broad-based antiviral.

Ted William Karkus: So we're doing this the right way. I learned from coldies, I turned around coldies myself. Epidavir is a broad-based antiviral. We're going to sell in the same stores. We're going to market the same way.

Ted William Karkus: We're gonna sell it in the same stores. We're gonna market it the same way. I don't want to talk about Kaldi being not right. What you know, we actually still manufacture Kaldi for the owners of Coldee's.

Ted William Karkus: I don't want to talk about Kaldi is not right. We actually still manufacture Kaldives.

Ted William Karkus: So I don't want to get into that, but I can tell you Equivir has a lot of potential in the marketplace. We have all the infrastructure in place to roll this out ourselves. We don't need consultants and advisors.

Ted William Karkus: for the owners of Coles. So I don't want to get into that. But I can tell you, Equivir has a lot of potential in the marketplace. We have all the infrastructure in place to roll this out ourselves.

Ted William Karkus: We don't need other companies for manufacturing and distribution of logistics or selling. We have all that in place. It's a turnkey solution to rolling this out. We're going to roll it out online first in order to get into stores. It always takes longer, so I don't want to mislead anyone about that, but it has nice potential.

Ted William Karkus: We don't need consultants and advisors.

Ted William Karkus: We don't need other companies.

Ted William Karkus: [inaudible]

Ted William Karkus: No value in our stock price. It's a nice fourth asset or initiative to mention. I don't make a big deal about it right now, but it'll fit in nicely. We also have a product called Legends XL that's already in the store. It does two and a half, three million dollars in business. Makes about half a million a year.

Ted William Karkus: fourth

Ted William Karkus: [inaudible]

Ted William Karkus: It's a nice little product. I think Equivir can be a lot bigger than that. Actually, with the social media podcast experts that are working on Nebula Genomics, we may spread out to a bunch of different health tests that may include things like our Legends XL product, Equivir. So we could, with the social media podcast infrastructure we're building, we should ultimately be able to leverage that not only with Nebula Genomics but with other health tests and other health products, you know, and dietary supplements like Legends XL and Equivir. So that's an awful lot. I'm going to leave it be. I did that in about 24 minutes.

Ted William Karkus: with the social media podcast experts that are working on Nebula Genomics,

Ted William Karkus: We may

Ted William Karkus: spread out to a bunch of different health tests that may include things like our Legends XL product, like Equivir. So we could, with the social media podcast infrastructure we're building, we ultimately should be able to leverage that, not only with Nebula Genomics, but with other health tests,

Ted William Karkus: and other health products, you know, and dietary supplements, like Legends, Excel and Equivir.

Ted William Karkus: So that's an awful lot. I'm going to leave it there. I did that in about 24 minutes.

Ted William Karkus: I'm happy. I hope there are a bunch of questions. I love the Q&A, and I want to thank you all for joining me today. Thank you all, for those of you that are shareholders, for supporting us. I think that, I guess I shouldn't really talk about risk and reward, but given the value of some of our assets, the fact that we may realize some pretty significant value in the short to intermediate term for PharmaLabs should provide a lot of comfort in terms of downside support. And the upside, as I just laid out, we have several initiatives with enormous upside and a management team with a history of success and execution.

Ted William Karkus: I'm happy. I hope there's a bunch of questions. I love the Q&A. And I want to thank you all for joining me today. Thank you all for those of you that are shareholders for supporting us.

Ted William Karkus: I think that, I guess I shouldn't really talk about risk reward, but given the value of some of our assets, the fact that we may realize some pretty significant value,

Ted William Karkus: in the short to intermediate term for formulas, should provide a lot of comfort in terms of downside support. And the upside, as I just laid out, we have several initiatives with enormous upside and a management team with a history of success and execution.

Ted William Karkus: And with that, Noella. Thank you for being with me today. I'll turn it back over to Noella for the Q&A. Don't be shy. Feel free to ask a question. I love to be an open book and talk about our lives. Thank you, Ted.

Noella: And with that, Noella.

Speaker Change: Thank you for being with me today. I'll turn it back over to Nuella for the Q&A. Don't be shy, feel free to ask a question. I love to be an open book and talk about our company.

Noella: Thank you, Ted, for the presentation. So now we'll begin the Q&A. The first question is... We're interested in growth.

Noella: Thank you, Ted, for the presentation. So now we'll begin the Q&A. The first question is, we're interested in the growth plans of Nebula Genomics.

Noella: I'm sorry, it said we were interested in? Yes. Okay, I'm interested too.

Noella: I'm sorry, it said we're interested in? Yes.

Ted William Karkus: That's an interesting way to kick off the Q&A. Listen, I'm interested in the growth plans for Nebula as well. We are evolving and developing the best go-to-market strategy, a couple of core assets to Nebula that have enormous.

Ted William Karkus: Okay, I'm interested too. Is that a question?

Ted William Karkus: It was a statement, but I'm assuming. Okay, great. Okay, that's an interesting way to kick off the Q&A. Yeah, listen, I'm interested in the growth plans for Nebula as well. We are evolving and developing the best go-to market strategy.

Ted William Karkus: There are a couple of core assets to Nebula that have enormous

Ted William Karkus: Among them are our reporting, our bioinformatics reporting system, which is one of the best in the world. Another is our database, which is one of the biggest and most diverse in the world. It's the equivalent of 150 million ancestry tests.

Ted William Karkus: potential among them are our reporting our bioinformatics reporting system which is one of the best in the world another is our database

Ted William Karkus: which is one of the biggest, most diverse in the world, the equivalent of 150 million ancestry tests,

Ted William Karkus: We can leverage that potentially in enormous ways. I didn't even talk about, I'm sorry, because it was in the slides, our most recent AI initiative, which is actually a very big deal. In our AI initiative, we built a world-class AI platform that's going to leverage the database, and it's also going to leverage the knowledge that we've learned from the IP proprietary discoveries that we've learned with our esophageal cancer test, and our initial focus is ADCs, anti-drug conjugates that target the cancer cells directly and kill the cancer cells, leaving the healthy cells alone.

Ted William Karkus: We can leverage that potentially in enormous ways. I didn't even talk about, I'm sorry because it was in the slides, our most recent AI initiative, which is actually a very big deal. And our AI initiative, we built a world-class AI platform that's going to leverage...

Ted William Karkus: this database, and it's also going to leverage the knowledge

Ted William Karkus: that we've learned the IP proprietary discoveries that we've learned with our esophageal cancer test, and our initial focus are ADCs.

Ted William Karkus: anti-drug conjugates that source the cancer cells directly and kill the cancer cells leaving the healthy cells alone. This is the next stage of medical research.

Ted William Karkus: This is the next stage of medical research. It's a very big deal what we're working on. It's relatively in its early stage, but understand that our database was six years in the making, 130 countries worth of testing, patients from 130 countries, six years in the making of developing the esophageal cancer test and the proprietary knowledge we have. So again, it's one of these "quote-overnight successes," but some very big things could happen from the AI leveraging our nebula.

Ted William Karkus: It's a very big deal what we're working on. It's relatively at its early stage, but understand that our database was six years in the making 130 countries.

Ted William Karkus: worth of testing, you know, patients from 130 countries,

Ted William Karkus: six years in the making of developing the esophageal cancer,

Ted William Karkus: test and the proprietary knowledge we have. So again, it's one of these, quote, overnight successes.

Ted William Karkus: Separately, in terms of the go-to market strategy, there are several different strategies. Understand from the B2B perspective. When we built out the lab, it attracted businesses that don't want to send their specimens abroad. But a lot of these businesses are new businesses. They haven't done whole genome sequencing. So, for instance, I talk about the telemedicine platform. They're moving slowly.

Ted William Karkus: but some very big things could happen from the AI leveraging our nebula. Separately, in terms of the go-to market strategy, there are several different strategies. Understand from the B-to-B perspective,

Ted William Karkus: When we built out the lab, it attracted businesses that don't want to send their specimens abroad. But a lot of these businesses are new businesses. They haven't done whole genome sequencing before. So for instance, I talk about the telemedicine platform. They're moving slowly. It's frustrating.

Ted William Karkus: It's frustrating, but it's very real, and the potential is very large. But this is an organization that hasn't done whole genome sequencing before, so they want to do it the right way. Planning and details and big deals like that take, you know, several quarters, not not several weeks, but several quarters to develop, so we're in the stage of developing many businesses like this both here and abroad. We announced one deal abroad again.

Ted William Karkus: But it's very real and the potential is very large.

Ted William Karkus: But this is an organization that hasn't done whole genome sequencing before, so they want to do it the right way.

Ted William Karkus: planning and details and big deals like that

Ted William Karkus: take several quarters, not several weeks, but several quarters to develop. So we're in the stage of developing many businesses like this, both here and abroad. We announced one deal abroad. Again, that's just the beginning. We have one of our lead sales guys.

Ted William Karkus: That's just the beginning. We have one of our lead sales guys in another part of the world right now meeting with big players who are very interested in what Nebula is doing, so there's a lot going on on the b2b side. It's going to take time on the direct-to-consumer side. I already mentioned that we are working with world-class social media experts who are very involved in the podcasting world. I can just tell you, and this, Jason Karkus overseeing, it's a young man's world dealing with podcasts and social media and all that stuff.

Ted William Karkus: in another part of the world right now, meeting with big players who are very interested in what Nebula is doing. So there's a lot going on on the B2B side. It's going to take time. On the direct-to-consumer side, I already mentioned,

Ted William Karkus: We are working with world-class social media experts, very involved in the podcasting world, and

Ted William Karkus: I can just tell you, and this Jason Clark is overseen,

Ted William Karkus: I don't even want to be involved. I'm happy from a distance to oversee it and make sure we do this strategically the right way. I think it's going to be very, very big. But it's going to take time. It's going to take a couple of quarters before you start to see the results. Thank you, Noella. What's the next question, please?

Noella: It's a young man's world for dealing with podcasts and social media and all that stuff. I don't even want to be involved. I'm happy from a distance to oversee it and make sure strategically we do this the right way. I think it's going to be very, very big. But it's going to take time. It's going to take a couple of quarters before you start to see the results of that.

Ted William Karkus: Next, why did you enter into a standstill agreement with Think Equity on April 18th without explanation?

Speaker Change: Thank you, Noella. What's the next question, please? Next is, why did you enter into a Stansfield Agreement with Think Equity on April 18th without explanation?

Ted William Karkus: So I don't get into... investment banking decisions, by their very nature when you're working with an investment bank. It's usually proprietary and sometimes material non-public information, but it's kind of interesting, the responses, that I got to that. And what I can tell you very specifically, it says that we specifically are not going to issue equity. For the next couple of everybody said, Oh, this means you're going to issue equity. Actually, it's just the opposite.

Ted William Karkus: So I don't get into

Ted William Karkus: investment banking decisions by its very nature. When you're working with an investment bank,

Ted William Karkus: It's usually proprietary and sometimes material non-public information, but it's kind of interesting the responses

Ted William Karkus: that I got to that. And what I can tell you very specifically, it says that we specifically are not going to issue equity

Ted William Karkus: We're not going to issue equity. So we're always working on various strategies. Again, we have a relationship with Think Equity going back almost four years; they've helped us build tremendous value in our company. And again, I'm the largest shareholder in the company; everything I do is in the best interest of our long-term shareholders. This doesn't mean I won't ever do a round of equity financing if it's called for and it's the best strategy for the company.

Ted William Karkus: for the next couple of, everybody said, oh, this means you're gonna issue equity. Actually, it's just the opposite. We're not gonna issue equity.

Ted William Karkus: So we're always working on various

Ted William Karkus: Strategies, again, we have a relationship with Think Equity going back almost four years. They've helped us build tremendous value in our company. And again, I'm the largest shareholder in the company, everything I do,

Ted William Karkus: is for the best interests of our long-term shareholders.

Ted William Karkus: Doesn't mean I won't ever do a round of equity financing if it's called for and it's the best strategy for the company. Doesn't mean I won't take other actions. You know, I had a shareholder reach out to me and say, hey, Ted, how come you're not buying back stock?

Ted William Karkus: That doesn't mean I won't take other actions. You know, I had a shareholder reach out to me and say, Hey, Ted, how come you're not buying back stocks? How come you're not paying more dividends? Well, if we had a large block of cash that we didn't need right now, I probably would be buying back stock, but that's just not a possibility right now. There's no reality to

Ted William Karkus: How come you're not paying more dividends? Well, if we had a large block of cash that we didn't need right now, I probably would be buying back stock, but that's just not a possibility right now. There's no reality to that statement. To be a shareholder, of course, you always want to be buying back stock and paying stock dividends. I do it when...

Ted William Karkus: To be a shareholder, of course, you always want to be buying back stock and paying stock dividends. I do it when I think that could occur in the next couple of quarters. That's what I'm focused on. Now, if none of those things happened, then I'd have to reconsider, but as of right now, I'm not even considering anything like equity offers.

Ted William Karkus: Strategically, it makes sense. Right now it doesn't strategically make sense. So by the same token,

Ted William Karkus: work with think equity. We're always working on various strategies and various planning, and I'll leave it at that. But at the present time, I even put in the press release, we have no interest at the present time.

Ted William Karkus: of any sort of equity financing. And in fact, to the contrary, I just mentioned, there are three, I mentioned at the press release, there's three potential liquidity events

Ted William Karkus: that could occur in the next couple of quarters. That's what I'm focused on. Now, if none of those happened, then I'd have to reconsider. But as of right now, I'm not even considering anything like equity offers. Thank you.

Ted William Karkus: Thank you.

Ted William Karkus: Thank you for clarifying. Your next question is, do you think Prophase will have to raise money in the second or third quarter this year?

Ted William Karkus: Thank you for clarifying. Your next question is, do you think Propays will have to raise money in the second or third quarter this year?

Ted William Karkus: I just answered that question. I don't need to repeat myself. As of right now, the answer is no.

Ted William Karkus: Thank you, Ted. Next, why not do an IPO for Nebula or PharmaLaws, or both, and raise all the growth capital you need for expansion and also create a market value for these assets that the street is totally overlooking?

Ted William Karkus: I just answer that question. I don't need to repeat myself. As right now, the answer is no.

Speaker Change: Thank you, Ted. Next.

Ted William Karkus: Why not do an IPO for Nebula or Farm-Laws or both and raise all the growth capital you need for expansion and also create a market value for these assets that the street is totally overlooking?

Ted William Karkus: That's a great question. It's something that I've considered for quite a long period of time. One issue is that the books and records of both subsidiaries have to have completely separate audited financials to spin them off; that takes time to completely set them out. They are wholly owned subsidiaries, but right now, it's a little complicated. You need an independent review of all the finances and sign off on separate financials for each company, so, in effect, they have their own fully audited statements.

Ted William Karkus: That's a great question. It's something that I've considered for quite a long period of time. One issue.

Ted William Karkus: is that the books and records of both subsidiaries

Ted William Karkus: have to have completely separate audited financials to spin them off. That takes

Ted William Karkus: time to completely set them out. They are wholly on subsidiaries, but right now it's a little complicated. You need independent, you need orders to do with independent

Ted William Karkus: review of all the finances and sign off on separate financials for each company so that in effect they have their own fully audited statements and then the timing has to be right with the market for microcaps we've been a bare market for three years

Ted William Karkus: And then the timing has to be right with the market. For microcaps, we've been in a bear market for three years. For the larger companies, they had a great year last year. All indications were that money would start to flow into microcaps. It actually started to flow in the first quarter.

Ted William Karkus: for the larger companies. They had a great year last year.

Ted William Karkus: all indications where that money would start to flow into the microcaps. It actually started to in the first quarter, things look great,

Ted William Karkus: Things look great. And then all of a sudden, inflation has had, the Fed talks about, we thought we were going to start cutting interest rates, now we're not. And that puts a damper on things.

Ted William Karkus: And then all of a sudden,

Ted William Karkus: Inflation where it's had, Fed talks about, we thought we were going to start cutting interest rates now or not.

Ted William Karkus: We had a significant sell-off in April in the micro caps, and, in fact, there were a lot of IPOs that were canceled. So yes, I think it's a great idea at the right time, but I'm not going to do an IPO for either one of those subsidiaries at the wrong time and the wrong market conditions because instead of getting a large valuation and raising money at a high valuation, we do an IPO at a low valuation; the money you raise, you're giving away a big chunk of the company. And again, I think about what's best for So I would love to do an IPO of either subsidiary under the right market conditions.

Ted William Karkus: And that put a damper on things. We had a significant sell-off in April in the microcaps, and in fact, there were a lot of IPOs that were canceled.

Ted William Karkus: So yes, I think it's a great idea at the right time, but I'm not going to do an IPO for either one of those subsidiaries at the wrong time and the wrong market conditions, because instead of getting a large valuation and raising money

Ted William Karkus: at a high valuation, we do an IPO at a low valuation, the money you raise, you're giving away a big chunk of the company.

Ted William Karkus: And again, I think about what's best for the shareholders long term. So I would love to do an IPO of either subsidiary under the right market conditions. By the same token, with formulas, there's also the possibility that we just sell. And we don't have to do the IPO.

Ted William Karkus: By the same token, with formulas, there's also the possibility that we just sell, and we don't have to we don't have to do that. So we'll see. Again, these are decisions, these are strategic decisions and discussions that I'm having on virtually a daily basis. I live, breathe, and think about our company 24-7. And these are some of the things that I think about literally all the time. Thank you for that question

Ted William Karkus: So we'll see. Again, these are decisions, these are strategic decisions and discussions that I'm having on virtually a daily basis. I live, breathe.

Ted William Karkus: And think about our company 24-7, and these are some of the things that I think about literally all the time.

Ted William Karkus: It's a great question. I'm sorry, I don't have a better answer, but honestly, a part of it is market conditions and a part of it is strategically what's best for the company and how to optimize value for the company and its shareholders on a long-term basis, not to get a pop in the stock short term.

Ted William Karkus: Thank you for that question. It's a great question. I'm sorry I don't have a better answer, but honestly a part of it is market conditions and a part of it is strategically what's best for the company and how to optimize value for the company and its shareholders on a long-term basis not to get a pop-in-the-stock short-term.

Ted William Karkus: Thank you, Ted. Next, a viewer asked, can you provide additional information on the valuation process and failed licensing transactions for CDMO?

Ted William Karkus: Thank you, Ted. Next, if you

Ted William Karkus: Thank you, Ted. Next, if you were asked, can you provide additional information on the valuation seeing in failed licensing transactions for CDMO?

Ted William Karkus: I don't understand the question. I don't know what a subsidiary is.

Ted William Karkus: Don't understand the question. I don't know what's sincere. I apologize. I don't understand the context. If the person asked a question wants to send a question in clarifying, I'm happy to take the question if you want to put them back in the queue.

Ted William Karkus: I apologize. I don't understand the context. If the person who asked the question wants to send a question for clarification, I'm happy to take the question if you want to put it back in. If we go to the next question, please. Absolutely.

Ted William Karkus: Your next question is, regarding pharmaceutical laws, are we in the early stage of negotiating a sale or the late stage?

Ted William Karkus: If we go the next question, please? That's certainly. Your next question is, regarding farm laws, are we in the early stage of negotiation, negotiating a sale or a late stage?

Ted William Karkus: It's a great question. I have to be very careful and sensitive. You never know who's watching these presentations. I don't want to say or do anything inappropriate.

Ted William Karkus: It's a great question.

Ted William Karkus: I have to be very careful and sensitive.

Ted William Karkus: You never know who's watching these presentations. I don't want to say or do anything inappropriate. So I'm not sure how to answer the question except to tell you.

Ted William Karkus: So I'm not sure how to answer the question except to tell you that there isn't anything I put in our press releases to hype up the stock or to pump people up. Everything I say in our press releases is true. It's what I truly believe. And so if I put a statement, which is one of our headlines, of our earnings rules, that formalizes exploring strategic alternatives, we're not at the beginning stages of exploring strategic alternatives, if that's the headline of our presentation. I think that answers your question; if it didn't, then replay this tape, because I'm pretty sure I answered the question.

Ted William Karkus: There's anything I put in our press releases to hype the stock or to pump people up. Everything I say in our press releases is real. That's what I truly believe.

Ted William Karkus: And so if I put a statement, which is one of our headlines,

Ted William Karkus: of our earnings release that formalizes exploring strategic alternatives

Ted William Karkus: We're not at the beginning stages of exploring strategic alternatives, if that's the headline of our press release.

Ted William Karkus: I think that answers your question if it didn't then replay this case because I'm pretty sure I answered the question.

Ted William Karkus: Next, when can we expect meaningful revenue from Nebula? We keep hearing about all the potential, yet have yet to see anything being sold. Yeah, so

Noel: Noel, what's next, please?

Ted William Karkus: Next, when can we expect meaningful revenue from Nebula? Keep hearing about all the potential yet to see anything being sold. Yes, so I addressed that in the presentation. We have completely

Ted William Karkus: Yeah, so I addressed that in the presentation. We have completely transitioned our go-to-market strategy, including hiring some great people, a new management team, some great people, as I said, who are podcasters and social media experts. We are..., putting together a plan. The assets are there at Nebula.

Ted William Karkus: transitioned our go-to-market strategy, including hiring some great people, a new management team, some great people, as I said, who are podcasts and social media experts. We are

Ted William Karkus: We've developed them, all right? As I said, the database, the reporting system, we've continually fine-tuned the reporting system, building out the lab. We have all the right pieces.

Ted William Karkus: putting together a plan. The assets are there at Nebula. We've developed them, all right? As I said, you know, the database, the reporting system, we've continually fine-tuned the reporting system, building out the lab. We have all the right pieces.

Ted William Karkus: But as I said, there's no such thing as an overnight success, and I'm pretty sure I addressed, I know I addressed in my presentation a short while ago, that it's gonna take a couple of quarters, and we're gonna lose money at Nebula for a couple of quarters. The money being lost on the company right now is a combination of the overhead of the company and the cost of running the lab. If I didn't think that the potential was enormous and that the lab was a part of that. I would just shut down the lab. I can do that tomorrow.

Ted William Karkus: But as I said, there's no such thing as an overnight success.

Ted William Karkus: And I'm pretty sure I addressed, I know I addressed in my presentation a short while ago, it's going to take a couple of courts. And we're going to lose money at Nebula for a couple of courts. The money being lost in the company right now is the combination of the overhead of the company and the cost of running the lap.

Ted William Karkus: If I didn't think that the potential was enormous,

Ted William Karkus: But I believe we have liquidity events that are going to dwarf the cost of keeping the lab. So I'd rather keep the lab for a year and see how that plays out. But as far as generating revenues, we have multiple avenues or paths to success. We're working on all of them. And But It will take time. And, you know, I feel like I'd say, I'm sorry, it's going to take an extra two or three quarters.

Ted William Karkus: and that the lab was a part of that, I would just suck down the lab. I can do that tomorrow. But I believe we have liquidity events that are going to dwarf

Ted William Karkus: the cost of keeping the lab. So I'd rather keep the lab for a year and see how that plays out. But as far as generating the revenues, we have multiple

Ted William Karkus: avenues or paths to success. We're working on all of them and

Ted William Karkus: But it will take time. And I feel like I'd say, I'm sorry it's going to take an extra two or three quarters.

Ted William Karkus: But as I said, I built the value of the company long term for shareholders, not short term. And in the meantime, you know, people should be really excited about what we're doing with Formalabs today, which then gives us the flexibility without wiping out the shareholders with big dilutive rounds of financing. It gives us the flexibility to develop these other assets, Nebula being one of them.

Ted William Karkus: But as I said, I build the value of the company long term for shareholders, not short term. And in the meantime, you know, people should be really excited about what we're doing with formal ads today, which then gives us the flexibility without wiping out the shareholders with big dilutive brands of financing.

Ted William Karkus: It gives us the flexibility to develop these other assets, Nebula being one of them.

Ted William Karkus: Excellent. Thank you, Ted. Next question. With the Equivir study coming to completion, can you share with us what claims you expect to put on the package?

Speaker Change: Excellent, thank you, Ted. Next question. With the Equivier study coming to completion, can you share with us what claims you expect to put on the package?

Ted William Karkus: The products are actually a work in progress. I'd rather not misstate that. I mean, I can just imagine a class action attorney, you know, six or nine months from now, when we commercialize the product, and they say, oh, Ted said on a conference call nine months ago that it could do such and such. So I have to be very careful.

Ted William Karkus: Those are actually a work

Ted William Karkus: in progress, I'd rather not misstate that. I mean, I can just imagine a class action attorney, you know, six or nine months from now, we commercialized the product, and they say, ooh, Ted said on a conference call nine months ago that it could do such and such,

Ted William Karkus: It's premature to talk about the claims, but what I can tell you is our study. It was a really great study that was done over a long period of time with more than 300 patients, which is an enormous study for a dietary supplement. And we tested it all through the entire cough, cold season, the entire viral season. And we tested and compared people who got COVID, cough, cold, and flu, with people that didn't, people that took our product versus taking a placebo.

Ted William Karkus: So I have to be very careful. It's premature to talk about the claims. What I can tell you is our study

Ted William Karkus: It was a really great study that was done over a long period of time with more than 300 patients, which is an enormous study.

Ted William Karkus: for a dietary supplement.

Ted William Karkus: and we tested it all through the entire cough cold season, the entire viral season,

Ted William Karkus: and we tested and compared

Ted William Karkus: People who got COVID, cough, cold, flu, with people that didn't, people that took our product versus took a placebo. And the results so far have been fantastic. Now, it doesn't mean we can make a COVID claim. Doesn't mean we can make an RSV claim. Doesn't mean we can make a flu claim.

Ted William Karkus: And the results so far have been fantastic. Now, it doesn't mean we can make a COVID claim, doesn't mean we can make an RSV claim, doesn't mean we can make a flu claim, but the results are palpable. You know, if you have 150 people over here and 150 people over here and randomly, and they're in one group versus the other, and the group that took our product got significantly less sick, and the group that didn't take the placebo got significantly more sick with all of these viruses, flus, COVIDs, and so forth. The results are pretty impressive. What we can say is claims on the packaging; we're gonna work that out with the attorneys.

Ted William Karkus: But the results are palpable. You know, if you have 150 people over here and 150 people over here, and randomly, and they're in one group versus the other, and the group that took our product,

Ted William Karkus: got significantly less sick, and the group that didn't take a product, took the placebo, got significantly more sick with all of these viruses, flus, COVIDs, and so forth.

Ted William Karkus: The results are pretty impressive. What we can say is claims on the packaging. We're going to work that out with the attorneys. We want to complete the study first. Then work with the attorneys, get the right claims of the packaging, create the packaging, and then we're up to the races. And so to get to the market quickly, we will go online first.

Ted William Karkus: We want to complete the study first, then work with the attorneys, get the right claims on the packaging, create the packaging, and then we're off to the races. And so, to get to the market quickly, we will go online first with our product. It will take longer to get into the stores, but we will demonstrate the success of the product online, and then, ultimately, we anticipate distribution in the stores thereafter.

Ted William Karkus: with our product, it will take longer to get into the stores, but we will demonstrate the success of the product online, and then ultimately we anticipate distribution in the stores thereafter.

Ted William Karkus: Excellent. Thank you, Ted, for that response. Next, since we're almost halfway through the second quarter, what growth and revenue do you expect in Q2 as compared to Q1?

Speaker Change: Excellent, thank you, Ted for that response. Next is, since we're almost halfway through the second quarter, what growth and revenue do you expect in Q2 as compared to Q1?

Ted William Karkus: So I can't comment on Q2 today. I haven't even looked at the Q2 numbers, you know. Consider Nebula, the esophageal cancer test, Equivir, are all in the development stage.

Speaker Change: So I can't comment on Q2 today. I haven't even looked at Q2 numbers. You know, consider nebula, esophageal cancer test, Equivir,

Ted William Karkus: As I mentioned, Nebula really isn't going to ramp up, you know, maybe fourth, maybe third quarter. Hopefully, you know, maybe fourth quarter. I can't tell you; that's all guessing.

Ted William Karkus: are all development stage. As I mentioned, Nebula really isn't gonna ramp up

Ted William Karkus: you know, maybe fourth, maybe third quarter, hopefully, you know, maybe fourth quarter. I can't tell you, that's all guessing. Farm Lodge is really going to start to ramp up third quarter. So second quarter, um,

Ted William Karkus: PharmaLabs is really going to start to ramp up in the third quarter. So second quarter. You know, and I'm not putting out projections. I never put out projections.

Ted William Karkus: And I have to be careful what I say on this conference call right now. But based on what I just said, I wouldn't expect much in our second quarter. I will tell you that our adjusted EBITDA, our cash flow, improved dramatically in the first quarter versus the fourth quarter of last year. But the next significant jump, also understand FarmLabs; we're in our seasonally weakest period right now. But then come the third quarter, it starts getting, it starts heating up.

Ted William Karkus: You know, and I'm not putting, I never put out projections, and I have to be careful what I say on this conference call right now, but based on what I just said, I wouldn't expect much

Ted William Karkus: in our second quarter. I will tell you that our adjusted eBedat, cash flow improved dramatically in the first quarter versus fourth quarter of last year. But the next significant jump also understand formulas, we're in our seasonally weakest period.

Ted William Karkus: right now, but then come third quarter, it starts getting, it starts heating up. I believe that for our first line of manufacturing, formalized,

Ted William Karkus: We, I believe that for our first line of manufacturing, Pharmalaz will, you know, we built the capacity on the first line. I believe we'll be running at full capacity. I believe we already have the demand for full capacity for the third quarter. And then it's just a question of how quickly we open up the second line and bring customers to the second line. And again, we're in strategic discussions right now, and so it's a little complicated. I'm not sure how the second line plays out or when it plays out.

Ted William Karkus: We built the capacity on the first line. I believe we'll be running at full capacity. I believe we already have the demand for full capacity for the third quarter, and then it's just quickly, a question of how quickly we open up the second line.

Ted William Karkus: and bringing customers for the second line. And again, we're in strategic discussions right now, and so it's a little complicated, not sure how the second line plays out or when it plays out. But the number of the formalized,

Ted William Karkus: But the numbers of pharma labs are improving now, certainly from the fourth quarter last year. I mean, they're going to improve. But the real improvement of pharma labs is going to occur in the second half. I hope that it is.

Ted William Karkus: are improving now, certainly from the fourth quarter last year, I mean, they're going to improve, but the real improvement of farm laws is going to occur the second half of the year.

Ted William Karkus: Thank you, Ted, for coming up on your last two questions. The first one is in the earnings release; the share count jumped from 18 million last year to 90 million this year. I missed the 72 million share insurance. Please explain.

Speaker Change: Hope that answers your question.

Speaker Change: Thank you, Ted, for coming up on your last two questions. The first one is, in the earnings release, share count jumped from 18 million last year to 90 million this year. I missed the 72 million share insurance. Please explain.

Ted William Karkus: I'm not going to get into the specifics of ShareCount. Changes, I appreciate the question, you know, shares changed, you know, insignificantly over time. Let's just leave it at that.

Ted William Karkus: I'm not going to get into specifics of sharecount.

Ted William Karkus: changes, I appreciate the question, you know, shares change, you know, insignificantly over time, let's just leave it at that.

Ted William Karkus: We actually have another question that came in, so I'll do the first one. Ted, I have two questions regarding BeSmart. Have we filed for the insurance code? And how expensive will our advertising campaign, Educating the Doctors, be?

Speaker Change: Thank you, Ted. We actually have another question that came in, so I'll do the first one. Ted, I have two questions regarding Be Smart. Have we filed for the insurance code? How expensive will our advertising campaign educating the doctors?

Ted William Karkus: Yeah, so the CPT codes, we're working on that right now. We're working with consultants, we're making sure we get all the information in at the right time correctly. The application of the CPT codes is coming soon. There's only a window one month out of every three months. So there's another window in.

Ted William Karkus: Yeah, so the CPT codes, we're working on that right now. We're working with consultants. We're making sure we get all the information in...

Ted William Karkus: at the right time correctly. The application of CPT codes is coming soon. There's only a window one month out of every three months. So there's another window in...

Ted William Karkus: I wanna say in about six weeks and our goal, I think it's, don't quote me on that, but sometime soon, there's a window to submit, and then it's just a question of how quickly we get a response. But at the same time, we're working on the CPT codes. We are also working with several different groups towards a game plan for commercialization, so we're not waiting for the CPT codes. We have other things in progress. We've even talked to a very large company in the past about potentially partnering.

Ted William Karkus: I want to say in about six weeks and our goal, I think, it's, don't quote me on that, but sometime soon there's a window to submit and then it's just a question of how quickly we get a response. But at the same time that we're working on the CPT codes,

Ted William Karkus: We are also working

Ted William Karkus: several different groups.

Ted William Karkus: towards a game plan for commercialization. So we're not waiting for the CPP codes. We have other things in progress. We've even talked to...

Ted William Karkus: But again, all of that is premature, but there's a lot that goes into this, and there's a lot behind the scenes, but we're working on several strategies at the same time, one of which is the CPT codes. At the end of the day, you need the CPT codes to go to the next steps. We're planning to get the CPT codes, and we're already planning for the next steps after the CPT codes. But the gating issue right now is the CPT codes. Thank you, Ted, and this will be your last.

Ted: We've talked to a very large company in the past about potentially partnering, but again, all that is premature, but there's a lot that goes into this and there's a lot behind the scenes, but we're working.

Ted William Karkus: on several strategies at the same time, one of which is the CPT codes. At the end of the day, you need the CPT codes to go to next steps, but

Ted William Karkus: We're planning for getting the CPT codes, and we're already planning for the next steps after the CPT code. But the gaining issue right now are the CPT codes.

Ted William Karkus: Thank you, Ted. And this will be your last question. Speaking of partnering, a viewer says, what are the odds of partnering with someone on Be Smart or doing it in-house?

Speaker Change: Thank you, Ted. And this will be your last question. Speaking of partnering, a viewer says, what are the odds of partnering with someone on Be Smart or doing it in-house?

Ted William Karkus: That's interesting. I think I already addressed that. The odds, I can't give you the odds.

Ted William Karkus: That's interesting. I think I already addressed that. The odds, I can't give odds who are open to exploring all possibilities. I simply look at risk reward.

Ted William Karkus: We're open to exploring all possibilities. I simply look at risk and reward and what's best for the shareholders long term. I mean, if the esophageal cancer test is that test, I really believe it has multi-billion dollar potential.

Ted William Karkus: and what's best for the shareholders long term. I mean, if the esophageal cancer test, if that test,

Ted William Karkus: It's just hard when you're sitting here and you haven't even commercialized it yet to say, yeah, we're going to generate two billion dollars in year three. I have no idea what we're going to do with it. I would hate to sell it short and partner with somebody and get a block of money up front. And I don't know what that block of money would look like, but it could be very meaningful to the shareholder in the short term. But it could leave 90% of the value of Be Smart on the table for somebody else just because we weren't patient for a year or two.

Ted William Karkus: I really believe it has multi-billion dollar potential. It's just hard when you're sitting here and you haven't even commercialized it yet to say, yeah, we're going to generate $2 billion in year three. I have no idea what we're going to do with this customer.

Ted William Karkus: I would hate to sell it short and partner with somebody and get a block of money out front

Ted William Karkus: And I don't know what that block of money would look like, but it could be very meaningful to the shareholders short term, but it could leave 90% of the value of Beesmart on the table for somebody else just because we weren't patient for a year or two.

Ted William Karkus: So I really have to see how this plays out. I have to see what the dynamics are. I have to see what the acceptance is of the insurance companies, what the acceptance is, what the reception is of the GIs that would actually order the test. All those dynamics until we actually start to sell the test or try to sell the test or commercialize the test, all those dynamics; you don't know how people, how companies are really going to respond until we're actually out there and actually commercializing it.

Ted William Karkus: So I really have to see how this plays out. I have to see what the dynamics are. I have to see what the acceptance is of the insurance companies, what the acceptance is,

Ted William Karkus: what the reception is of the GIs that would actually order the test. All those dynamics, until we actually start to sell the test, or try to sell the test, or commercialize the test, all those dynamics. You don't know how people, how companies are really going to respond until we're actually out there.

Ted William Karkus: So I think it's really premature to make a decision on that. If I told you I knew which way I was going to go, that, to me, wouldn't be prudent. I wouldn't be doing a great job as our CEO and guiding the company. So these are decisions to be made later in the year.

Ted William Karkus: and actually commercializing it. So I think it's really premature to make a decision on that. If I told you I knew which way I was going to go, that to me wouldn't be prudent, I wouldn't be doing

Ted William Karkus: a great job as our CEO in guiding the company. So these are decisions to be made later in the year.

Ted William Karkus: Well, thank you very much, Ted, for your responses. That concludes the Q&A session, but before we go, I will turn back the floor to Ted for final remarks.

Ted William Karkus: Excellent. Well, thank you very much, Ted, for your responses. That concludes the Q&A session. But before we go, I will turn back to Ted for final remarks.

Ted William Karkus: Thank you, Noella. Thank you all for joining us. Again, we do these virtual non-deal roadshows with Redmark once a month, so feel free next month to sign in, even if it's not an earnings call, to sign up with Renmark. And look, I say it in the press release, and I mean it when I say the best is yet to come. I truly believe the best is yet to come. We're at an interesting turning point in our company.

Ted William Karkus: Thank you, Noella. Thank you all for joining. Again, we do these virtual non-deal road shows with Redmark once a month, so feel free.

Ted William Karkus: next month to sign and even if it's not an earnings call.

Ted William Karkus: to sign up with Renmark. And look, I say it in the press release, and I mean it, when I say the best is yet to come, I truly believe the best is yet to come. We're at an interesting turning point in our company.

Ted William Karkus: I can't tell you which month the stock is going to be at its lowest, which month it's going to go up, but I can tell you, in terms of the value of the company, right now, we're at an interesting juncture given the most recent developments in pharma laws and from the recent developments in pharma laws as they progress, that could lead to very significant developments with our esophageal cancer test, with Nebula So I appreciate all of you joining me today and sitting with me for an hour, and for those that are shareholders, I, of course, always appreciate your support.

Ted William Karkus: I can't tell you which month the stock is going to be at its bottom, which month it's going to go up, but I can tell you in terms of the value of the company,

Ted William Karkus: Right now, we're at an interesting juncture.

Ted William Karkus: given the most recent developments of Farmelize, and from the recent developments of Farmilize, as those progressed,

Ted William Karkus: that could lead into very significant developments with our topageal cancer test, with Nebula, with our AI initiative, with the rollout of Equivir, and so on and so forth. So I appreciate

Ted William Karkus: All of you joining me today and sitting with me for an hour. And for those who are shareholders, of course, always appreciate your support. We're on the same side. We're on the same team. And the one thing I can tell you, I am working my butt off.

Ted William Karkus: We're on the same side, we're on the same team, and the one thing I can tell you is that I am working my butt off to make sure we have a world-class management team, that we're working on world-class subsidiaries, and that we're doing everything to the best of our ability to really kill it for all of you. Thank you, have a great day. Thanks again, Noella.

Speaker Change: to make sure we have a world-class management team, that we're working on world-class subsidiaries, and that we're doing everything to the best of our ability to really kill it for all of you. Thank you. Have a great day. Thanks again, Noelle.

Noella: Thank you very much, Ted, and thank you everyone for joining us today for Prophase Lab's first quarter 2024 results. Prophase is trading on the NASDAQ under the ticker symbol PRPH. The playback for this presentation will be available on our website 24 to 48 hours after this presentation under the V&DR library tab. Please stay tuned for other presentations and see you next time.

Noella: Thank you very much, Ted.

Noella: And thank you everyone for joining us today for Profase Labs' first quarter, 2024 results.

Noella: Profase of trading on the NASDAQ under the ticker symbol PRPH. To play back for this presentation will be available on our website 24 to 48 hours after this presentation under the VNDR Library tab. Please stay tuned for other presentations and see next time.

Q1 2024 ProPhase Labs Inc Earnings Call

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