ProPhase Labs, Inc. (NASDAQ: PRPH), a diversified biotech and
genomics company, today reported its financial and operational
results for the quarter ended June 30, 2021.
Financial highlights for the quarter ended June
30, 2021 include the following:
- Total revenue of
$9.1 million for the quarter ended June 30, 2021, as compared to
$3.6 million for the quarter ended June 30, 2020, an increase of
approximately 153%.
- Net loss for the
quarter ended June 30, 2021 of $1.4 million, or $(0.09) per share,
as compared to net income of $70,000, or $0.01 per share, for the
quarter ended June 30, 2020.
-
Cash and marketable securities balance of $35.8 million and net
working capital of $44.3 million at June 30, 2021 after paying $4.5
million special cash dividend.
Corporate highlights for the quarter ended June
30, 2021 and since June 30, 2021 include the following:
- Announced the
acquisition, through its wholly owned subsidiary ProPhase Precision
Medicine, of Nebula Genomics, a privately-owned personalized
medicine genomics company. The Company intends to integrate
Nebula’s whole genome sequencing services with the robust clinical
diagnostic testing services offered at its already established
CLIA-certified laboratories and expects to be able to offer
consumers a more comprehensive genome mapping alternative to many
of those currently available.
- Announced the
formation of two wholly owned subsidiaries, ProPhase Precision
Medicine, which will focus on genomics testing technologies, and
ProPhase Global Healthcare, which will seek to expand the Company’s
SARS-CoV2 testing into other countries and to pursue additional
healthcare related initiatives.
- Maintained
equivalent cash balances from the first quarter to the second
quarter even after paying a cash dividend in June 2021 of $4.5
million.
- Awarded
contracts with Dutchess County, New York and Township of Oyster Bay
to provide reliable COVID-19 testing to nearly 600,000 New York
residents. ProPhase Labs expects to play a key part in their plans
to continue reopening.
- Inclusion in the Russell Microcap
Index as of June 28, 2021, expanding awareness of the company to a
broader group of investors and further improving liquidity.
- Engaged
CORE IR, a leading investor relations, public relations and
strategic advisor firm, to assist the company in expanding market
awareness for ProPhase and conveying the company’s business model
and growth strategies to the institutional and retail investment
communities.
Ted Karkus, ProPhase’s Chief Executive Officer,
commented, “While we saw a decline in the incidence of COVID-19
from mid-January through mid- June, 2021, the country is now
experiencing a dramatic new wave of COVID-19, in part due to the
emergence of new COVID-19 variants. In the first week of August
alone, we processed more than 8,000 COVID-19 tests, which is one of
the highest weekly levels of testing that we have experienced in
the past five months. We anticipate continued growth through the
remainder of the year based on our earlier municipal contract wins,
and the opening of schools and other venues, many of which will
require either vaccinations or regular COVID testing. In addition,
we are in the midst of building a sizable customer base of
independent pharmacies that are providing consistent and growing
testing revenues.”
“While we expect to grow our COVID-19 testing
revenues as a result of this new wave, our long-term focus now also
includes the development of our Precision Medicine subsidiary. We
acquired Nebula, including net assets of approximately $3.7 million
(which included approximately $3.4 million in cash), for an
aggregate purchase price of approximately $14.6 million, subject to
post-closing adjustments. Nebula offers whole genome testing
services to consumers for approximately $300. We believe that we
will be able to significantly lower the price to consumers. This
could have a significant positive impact on future testing revenues
from our newly formed Precision Medicine subsidiary. We believe
that we will be able to improve on Nebula’s net pre-tax margins of
approximately 30% based on our existing infrastructure and retail
relationships.”
“We believe the future of medicine is in
precision, personalized and tailored therapies that are based on
each patient’s individual genetic makeup, and that we will be able
to offer whole genome sequencing services at a lower cost with
faster turnaround times based on our existing infrastructure. We
also believe that our relationships with approximately 40,000 food,
drug and mass retail stores will allow us to expand distribution
beyond the single website-based online model Nebula has employed to
date. We believe that we will be able to improve on Nebula’s
current estimated next 12-month revenues of $9 million given our
experience developing, manufacturing, distributing, marketing, and
selling other consumer healthcare products.”
“In addition to expanding our menu of available
testing services with Nebula’s genome sequencing technology, Nebula
has been working on launching a wide range of accessory tests
designed to complement the whole genome sequencing product. These
tests, if successfully implemented, will be non-genetic
(serum/plasma based or urine) designed to help increase the
long-term value of our genome sequencing services by providing
actionable follow-up testing that may be advisable based on a
customer’s genetic results. Additionally, we expect that many of
these tests could be provided on a recurring, subscription basis,
which could increase revenues. Potential new tests include food
sensitivity, heart health, cholesterol/lipids, HbA1c, inflammation,
Vitamin D, heavy metals, metabolism, sleep, stress, thyroid health,
ovarian reserve, premenopause, and testosterone.”
“Behind the raw numbers, the second quarter of
2021 was quite successful in a number of ways. Non-cash
charges exceeded the net loss reported for the second quarter.
These charges are partially attributed to one-time stock-based
compensation. Furthermore, although our expenses increased in
preparation for a new wave of COVID-19 testing that we expected
during the second quarter, which did not ultimately materialize, we
believe that we are now well positioned to handle the current surge
in testing going forward.”
“We continue to evaluate and pursue additional
strategic and synergistic acquisitions. In particular, we will be
looking to continue to build ProPhase Precision Medicine as well as
diversify ProPhase Diagnostics into other types of traditional CLIA
laboratory testing including pathology, blood, urine, toxicology,
etc. We look forward to speaking with our investors later this
morning and in future announcements.” concluded Mr. Karkus.
Financial Results
Quarter Ended June 30, 2021
For the three months ended June 30, 2021, net
revenue was $9.1 million compared to $3.6 million for the three
months ended June 30, 2020. The Company experienced higher net
revenue for the three months ended June 30, 2021, primarily as a
result of an increase of $7.5 million related to its new diagnostic
services business, which was offset by a decrease of $2.0 million
in customer orders from its consumer products business as a result
of the timing and demand of third-party customers.
Cost of revenues for the three months ended June
30, 2021 were $4.7 million compared to $2.3 million for the three
months ended June 30, 2020. For the three months ended June 30,
2021 and 2020, the Company realized a gross margin of 48.9% and
35.3%, respectively. The increase in gross margin from the prior
period was principally due to increased margins generally
associated with its new diagnostic services business.
Total operating expenses for the three months
ended June 30, 2021 were $5.9 million compared to $1.2 million for
the three months ended June 30, 2020. The increase of $4.7 million
in operating expenses was principally related to growth in
personnel expenses and professional fees associated with the
Company’s new diagnostic services business.
Net loss from operations for the three months
ended June 30, 2021 was $1.4 million, or ($0.09) per share,
compared to the net income for the three months ended June 30, 2020
of $70,000, or $0.01 per share.
Cash and cash equivalents and marketable debt
securities as of June 30, 2021 was $35.8 million compared to $8.5
million at December 31, 2020. Working capital was $44.3 million and
$9.6 million as of June 30, 2021 and December 31, 2020,
respectively. The increase of $27.3 million in cash and cash
equivalents and marketable debt securities balance for the six
months ended June 30, 2021 was principally due to the receipt of
aggregate net proceeds of $40.6 million from the issuance of common
stock and warrants in a registered direct offering and public
offering offset by (i) capital expenditures of $4.2 million, (ii)
cash dividend payments of $4.5 million, (iii) issuance of a
promissory note of $1.0 million, and (iv) cash used in operations
of $3.5 million.
Conference Call and Webcast
DetailsManagement will host a conference call at 11:00 AM
ET today, August 13, 2021, to review financial results and provide
an update on corporate developments. Following management’s
formal remarks, there will be a question-and-answer session.
Please note that registered participants will
receive their dial in number upon registration and will dial
directly into the call without delay. Those without internet access
or unable to pre-register may dial in by calling: 1-866-777-2509
(domestic), or 1-412-317-5413 (international). All callers should
dial in approximately 10 minutes prior to the scheduled start time
and ask to be joined into ProPhase Labs call.
The conference call will be broadcast live and
available for replay at
https://services.choruscall.com/mediaframe/webcast.html?webcastid=gZ64EDfs and
via the investor relations section of the Company's website at
www.ProPhaseLabs.com.
A webcast replay of the call will be available
approximately one hour after the end of the call through November
13, 2021, at the above links. A telephonic replay of the call will
be available through August 27, 2021 and may be accessed by calling
1-877-344-7529 (domestic) or 1-412-317-0088 (international) and
using access code 10159437.
About ProPhase Labs
ProPhase Labs (Nasdaq: PRPH) (“ProPhase”) is a
diversified biotech and genomics company that seeks to leverage its
CLIA lab services to provide whole genome sequencing and research
direct to consumers and build a genomics data base to be used for
further research. The Company continues to provide traditional CLIA
molecular laboratory services, including COVID-19 testing. ProPhase
Precision Medicine, Inc., focuses on genomics testing technologies,
a comprehensive method for analyzing entire genomes, including the
genes and chromosomes in DNA. The data obtained from genomic
testing can help to identify inherited disorders and tendencies,
help predict disease risk, help identify expected drug response,
and characterize genetic mutations, including those that drive
cancer progression.
ProPhase Diagnostics offers a broad array of
clinical diagnostic and testing services at its CLIA certified
laboratories. ProPhase Diagnostics serves patients who may have
SARS-CoV-2 (COVID-19) through both saliva and nasal swab methods.
Critical to COVID testing, results are provided in under 24 hours.
ProPhase Diagnostics also offers PCR (polymerase chain reaction)
testing for Influenzas A and B and RSV; as well as antigen and
antibody/immunity tests to broaden its COVID-19 testing beyond
RT-PCR testing.
ProPhase Global Healthcare, Inc. was formed to
seek to expand the Company’s SARS-CoV-2 (COVID-19) testing into
other countries and to pursue additional healthcare-related
initiatives.
ProPhase Labs has decades of experience
researching, developing, manufacturing, distributing, marketing,
and selling OTC consumer healthcare products and dietary
supplements, including dietary supplements under the TK
Supplements® brand. ProPhase actively pursues strategic
investments and acquisition opportunities for other companies,
technologies, and products. For more information,
visit www.ProPhaseLabs.com.
Forward Looking Statements
Except for the historical information contained
herein, this document contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding our strategy, plans and
objectives, including our plans to integrate Nebula’s whole genome
sequencing services with our already established CLIA-certified
laboratories, our ability to make personalized medicine genome
sequencing more financially accessible, our ability to offer
significantly faster turnaround times for DNA testing, our ability
to leverage our retail relationships to promote our genome
sequencing services, our ability to develop and commercialize
accessory tests that complement our genome sequencing services, our
expectations regarding the duration of the COVID-19 pandemic and
potential surges (including as a result of emerging variants), our
ability to grow diagnostic testing revenues, and our projections
for the remainder of the year with respect to both diagnostic
testing and genomic sequencing services, including our ability to
improve on Nebula’s net pre-tax margins and 12-month revenue
projections. Management believes that these forward-looking
statements are reasonable as and when made. However, such
forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause actual results to
differ materially from those projected in the forward-looking
statements. These risks and uncertainties include but are not
limited to the scale, scope and duration of the COVID-19 pandemic,
consumer demand for our lab processing services, the competitive
environment, challenges relating to entering into new business
lines, the failure to obtain and maintain certain regulatory
approvals, our ability to continue to ramp up our labs’ testing
capacity and execute on our business plan, and the risk factors
listed from time to time in our Annual Reports on Form 10-K,
Quarterly Reports on Form 10-Q and any other SEC filings.
Media Relations Contact: Jules Abraham Director
of Public Relations CORE IR 917-885-7378 julesa@coreir.com
ProPhase Labs,
Inc. and Subsidiaries Condensed
Consolidated Balance Sheets
(in
thousands, except share and per share
amounts)
|
|
June 30, |
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
|
|
|
(Unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
17,677 |
|
|
$ |
6,816 |
|
Marketable debt securities, available for sale |
|
|
18,095 |
|
|
|
1,639 |
|
Marketable equity securities, available for sale |
|
|
479 |
|
|
|
- |
|
Accounts receivable, net |
|
|
6,644 |
|
|
|
3,155 |
|
Inventory, net |
|
|
15,169 |
|
|
|
3,039 |
|
Prepaid expenses and other current assets |
|
|
428 |
|
|
|
1,238 |
|
Total current assets |
|
|
58,492 |
|
|
|
15,887 |
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment,
net |
|
|
6,914 |
|
|
|
3,578 |
|
Secured promissory note
receivable |
|
|
3,727 |
|
|
|
2,750 |
|
Prepaid expenses, net of
current portion |
|
|
460 |
|
|
|
2,084 |
|
Right-of-use asset, net |
|
|
4,564 |
|
|
|
4,731 |
|
Intangible asset, net |
|
|
1,017 |
|
|
|
1,234 |
|
Goodwill |
|
|
901 |
|
|
|
901 |
|
Other assets |
|
|
248 |
|
|
|
240 |
|
TOTAL
ASSETS |
|
$ |
76,323 |
|
|
$ |
31,405 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
7,114 |
|
|
$ |
3,771 |
|
Accrued advertising and other allowances |
|
|
214 |
|
|
|
463 |
|
Lease liabilities |
|
|
635 |
|
|
|
329 |
|
Other current liabilities |
|
|
6,211 |
|
|
|
1,731 |
|
Total current liabilities |
|
|
14,174 |
|
|
|
6,294 |
|
|
|
|
|
|
|
|
|
|
Non-current liabilities: |
|
|
|
|
|
|
|
|
Deferred revenue, net of current portion |
|
|
121 |
|
|
|
162 |
|
Unsecured convertible promissory notes, net |
|
|
9,994 |
|
|
|
9,991 |
|
Lease liabilities, net of current portion |
|
|
4,301 |
|
|
|
4,402 |
|
Total non-current
liabilities |
|
|
14,416 |
|
|
|
14,555 |
|
Total liabilities |
|
|
28,590 |
|
|
|
20,849 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND
CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
Preferred stock authorized 1,000,000, $.0005 par value, no shares
issued and outstanding |
|
|
- |
|
|
|
- |
|
Common stock authorized 50,000,000, $.0005 par value, issued
31,806,275 and 28,256,275 shares, respectively |
|
|
16 |
|
|
|
14 |
|
Additional paid-in capital |
|
|
99,265 |
|
|
|
61,674 |
|
Accumulated deficit |
|
|
(3,969 |
) |
|
|
(3,631 |
) |
Treasury stock, at cost, 16,652,022 and 16,652,022 shares,
respectively |
|
|
(47,490 |
) |
|
|
(47,490 |
) |
Accumulated other comprehensive loss |
|
|
(89 |
) |
|
|
(11 |
) |
Total stockholders’ equity |
|
|
47,733 |
|
|
|
10,556 |
|
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY |
|
$ |
76,323 |
|
|
$ |
31,405 |
|
ProPhase Labs,
Inc. and Subsidiaries Condensed
Consolidated Statements of Operations
(in thousands, except share
amounts)(unaudited)
|
|
For the three months ended |
|
|
For the six months ended |
|
|
|
June 30, 2021 |
|
|
June 30, 2020 |
|
|
June 30, 2021 |
|
|
June 30, 2020 |
|
Revenues, net |
|
$ |
9,142 |
|
|
$ |
3,623 |
|
|
$ |
24,413 |
|
|
$ |
5,511 |
|
Cost of revenues |
|
|
4,676 |
|
|
|
2,344 |
|
|
|
11,020 |
|
|
|
3,817 |
|
Gross profit |
|
|
4,466 |
|
|
|
1,279 |
|
|
|
13,393 |
|
|
|
1,694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diagnostic expenses |
|
|
830 |
|
|
|
- |
|
|
|
4,639 |
|
|
|
- |
|
General and administration |
|
|
4,993 |
|
|
|
1,155 |
|
|
|
8,775 |
|
|
|
2,323 |
|
Research and development |
|
|
93 |
|
|
|
65 |
|
|
|
208 |
|
|
|
124 |
|
Total operating
expenses |
|
|
5,916 |
|
|
|
1,220 |
|
|
|
13,622 |
|
|
|
2,447 |
|
Income (loss) from
operations |
|
|
(1,450 |
) |
|
|
59 |
|
|
|
(229 |
) |
|
|
(753 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income,
net |
|
|
214 |
|
|
|
11 |
|
|
|
301 |
|
|
|
14 |
|
Interest expense |
|
|
(323 |
) |
|
|
- |
|
|
|
(574 |
) |
|
|
- |
|
Change in fair value of
investment securities |
|
|
164 |
|
|
|
|
|
|
|
164 |
|
|
|
|
|
Net income
(loss) |
|
$ |
(1,395 |
) |
|
$ |
70 |
|
|
$ |
(338 |
) |
|
$ |
(739 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss)
on marketable debt securities |
|
|
(67 |
) |
|
|
(5 |
) |
|
|
(78 |
) |
|
|
6 |
|
Total comprehensive
income (loss) |
|
$ |
(1,462 |
) |
|
$ |
65 |
|
|
$ |
(416 |
) |
|
$ |
(733 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.09 |
) |
|
$ |
0.01 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.06 |
) |
Diluted |
|
$ |
(0.09 |
) |
|
$ |
0.01 |
|
|
$ |
(0.02 |
) |
|
$ |
(0.06 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
15,154 |
|
|
|
11,592 |
|
|
|
14,860 |
|
|
|
11,587 |
|
Diluted |
|
|
15,154 |
|
|
|
11,618 |
|
|
|
14,860 |
|
|
|
11,587 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ProPhase Labs,
Inc. and Subsidiaries Condensed
Consolidated Statements of Cash Flows (in
thousands) (unaudited)
|
|
For the six months ended |
|
|
|
June 30, 2021 |
|
|
June 30, 2020 |
|
Cash flows from
operating activities |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(338 |
) |
|
$ |
(739 |
) |
Adjustments to reconcile
net loss to net cash provided by (used in) operating
activities: |
|
|
|
|
|
|
|
|
Realized loss on marketable debt securities |
|
|
7 |
|
|
|
- |
|
Depreciation and amortization |
|
|
1,118 |
|
|
|
167 |
|
Amortization of debt discount |
|
|
3 |
|
|
|
- |
|
Amortization on right-of-use assets |
|
|
167 |
|
|
|
- |
|
Lower of cost or net realizable value inventory
adjustment |
|
|
- |
|
|
|
32 |
|
Stock-based compensation expense |
|
|
1,504 |
|
|
|
396 |
|
Change in fair value of investment securities |
|
|
(164 |
) |
|
|
- |
|
Non-cash interest income on secured promissory note
receivable |
|
|
(315 |
) |
|
|
- |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(3,466 |
) |
|
|
80 |
|
Escrow receivable |
|
|
- |
|
|
|
4,812 |
|
Inventory |
|
|
(12,130 |
) |
|
|
(620 |
) |
Prepaid and other assets |
|
|
2,434 |
|
|
|
91 |
|
Other assets |
|
|
(8 |
) |
|
|
- |
|
Accounts payable and accrued expenses |
|
|
3,343 |
|
|
|
412 |
|
Lease liabilities |
|
|
205 |
|
|
|
- |
|
Other liabilities |
|
|
4,190 |
|
|
|
26 |
|
Net cash (used in)
provided by operating activities |
|
|
(3,450 |
) |
|
|
4,657 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
Issuance of secured promissory note receivable |
|
|
(1,000 |
) |
|
|
- |
|
Purchase of marketable securities |
|
|
(16,841 |
) |
|
|
(3,436 |
) |
Proceeds from sale of marketable debt securities |
|
|
300 |
|
|
|
1,029 |
|
Capital expenditures |
|
|
(4,237 |
) |
|
|
(147 |
) |
Net cash used in
investing activities |
|
|
(21,778 |
) |
|
|
(2,554 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock from public offering,
net |
|
|
35,135 |
|
|
|
- |
|
Proceeds from issuance of common stock and warrants from
private offering |
|
|
5,500 |
|
|
|
- |
|
Payment of dividends |
|
|
(4,546 |
) |
|
|
|
|
Net cash provided by
financing activities |
|
|
36,089 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Increase in cash and
cash equivalents |
|
|
10,861 |
|
|
|
2,103 |
|
Cash and cash
equivalents, at the beginning of the period |
|
|
6,816 |
|
|
|
434 |
|
Cash and cash
equivalents, at the end of the period |
|
$ |
17,677 |
|
|
$ |
2,537 |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures: |
|
|
|
|
|
|
|
|
Cash paid for income
taxes |
|
$ |
- |
|
|
$ |
- |
|
Interest payment on the
promissory notes |
|
$ |
500 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of non-cash investing and financing
activities: |
|
|
|
|
|
|
|
|
Net unrealized gain
(loss), investments in marketable debt securities |
|
$ |
(78 |
) |
|
$ |
6 |
|
ProPhase Labs (NASDAQ:PRPH)
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