Welcome, everyone. This is the ProPhase Labs webinar. We'll be getting started in three minutes at a quarter after the hour. This is the ProPhase Labs webinar with RedChip. We'll be getting started in one minute.
This is the ProPhase Labs webinar. We'll be getting started shortly. Thank you for your patience.
Yeah, Ted, if we could do a quick video and mic check, please.
Ted Karkus here, CEO of ProPhase Labs. How's that?
Thank you very much. Let us get started.
Recording in progress.
Hi, this is Craig with RedChip Companies. Thank you for joining today's event with ProPhase Labs, which trades on the Nasdaq under the ticker PRPH. With us today, we have Ted Karkus, the Chairman and CEO of ProPhase. We will begin with a brief presentation in a moment, and then we will answer your questions. Users may submit a question at any time by using the Q&A tool at the bottom of the Zoom window. Before we begin, please allow me to read the Safe Harbor Statement. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements pertaining to future financial and/or operating results, along with other statements about the future expectations, beliefs, goals, plans, or prospects expressed by management, constitute forward-looking statements. Any statements that are not historical fact should also be considered forward-looking statements.
Of course, forward-looking statements involve risks and uncertainties. I now turn this webinar over to Ted. Please go ahead.
Great. Thank you, Craig, and thank you all for joining. I am going to assume that most of you are new to the story of ProPhase Labs and to me, that's the approach I'm going to. I do other presentations throughout the year, usually monthly, where it's mostly for shareholders that know the company well. The approach I'm going to take today, it's going to be a fast presentation. Craig told me I only have about 15 minutes for the presentation then we get into the Q&A. This presentation, obviously, I don't have time to go into detail on it, but you can go to prophaselabs.com and you can go through the presentation yourself. It's obviously on our website. Craig read the forward-looking statement. Just very quickly, just a quick little overview here. The key focus of the company, number one, is our Crown Medical Collections.
That's the first thing I'm going to go into, where we're going up to $50 million. I mean, we have a market cap around $10 million, and we anticipate collecting over $50 million in COVID accounts receivable. I'm going to go into that. ProPhase BioPharma, that has our BE-Smart esophageal cancer test. It's unlike any other esophageal cancer test in the world. It's desperately needed. It has multi-billion dollar potential. It's ready to be commercialized. Finally, DNA Complete and Nebula Genomics. That's our genomics business that does whole genome sequencing. Think ancestry tests on steroids. That's what a whole genome sequencing test is. It's a neat business. We cleaned it up, and it's growing now and has tremendous potential. Finally, historically, we've had ProPhase supplements. That's a business we could build out if we have the capital, but I don't want to dilute our efforts right now.
That's a business that we can build based on our capital availability, etc. This gives you a brief overview. I'm going to go into each of these subsidiaries. Just very quick background on me. Graduated the top of my class from Tufts University, graduated the top of my class from Columbia University Business School, where I got an MBA. Worked on Wall Street, have been an activist shareholder, have consulted to and helped microcap companies basically for 40 years between Wall Street, working with these companies, becoming an investor, my friends investing with me, turning around companies, etc., etc. I've had friends get involved in companies with me for literally 20, 30 years. I've never asked anybody for a penny. It sounds hokey. I like helping people. One of the ways I help people is to try and help them make money. Historically, I have done that.
Even in our company, I've done that. This past year has not been fun. I will get into that. Before I do, just quick background. I was a shareholder in our company, and then the prior management did some things that were not too friendly for shareholders. I launched a proxy contest, won control of a company. When I won control, I found out most of the businesses in it were worthless. There was a chance the whole company was going to go bankrupt. In 2012, the stock price bottomed at $0.65. I turned the company around, and it is like a déjà vu. I only discuss this because we have a penny stock again, but now the underlying value in our company is so many multiples more than when I turned it around last time in 2012.
I went on to turn around and build the Cold-EEZE Cold Remedy brand, sold it for $50 million. In the ensuing years, I paid out to our shareholders $2.40 in cash and special dividends. I'm a shareholder-friendly CEO. I like to do what's best for shareholders. I am a large shareholder myself, and I've owned these shares for many, many years. Now I'm looking to build the company again. On a 65-cent stock, we paid out $2.40 in special dividends. We went on, we expanded into doing COVID-19 testing. This is myself and my son, Jason. We built a business from scratch, did hundreds of millions of dollars. We then acquired Nebula Genomics. We then acquired our BE-Smart esophageal cancer test. The issue was we built out our genomics business with a world-class lab.
Took the same approach we did with COVID-19 testing, where we built out a world-class lab. The only difference is we did it with debt because I thought that the COVID-19 testing receivables were still going to come into the company. All of a sudden, the government runs out of money. We have debt, and the company is not getting any money from the government. We're not getting reimbursed for our testing. We went in a downward spiral for the past year. It has not been fun. In a million years, I never anticipated anything like this, nor obviously planned for it. Now we're coming out the other end, and it's a perfect time for you all to be looking at our company. With that, let's talk Crown Medical first. All right.
Again, the approach I wanted to take in presenting all this to you is we have this ridiculously small market cap that does not make any sense to me. At the same time, we have three assets, basically, each one of which are worth multiples more than the whole market cap of the company. The first one is our Crown Medical Collections. Everybody is focused on it. The bottom line is we did several hundred million dollars' worth of COVID-19 testing. We did not collect on approximately $150 million. Crown Medical Collections is just a group of attorneys. This is all they do. They work completely on contingency. We have not paid them a penny. They are representing 40 labs in a similar situation to us that did not collect on the testing that they should have collected on.
They said that our data set was amongst the best of all 40 labs. I do not want to say that they said it was the best, but I believe actually it was the best. We have very strong data. They then took our $150 million of data. They whittled it down to the collections that they thought they were most highly likely to collect on. This is with insurance companies. What I did not realize at the time when we were doing the testing, not only did the government have a program called HRSA, H-R-S-A, which was funding the laboratories, HRSA was also funding the insurance companies. HRSA ran out of money to fund us and to fund the insurance companies at the same time.
At the same time, insurance companies were reimbursing us, but if we hypothetically were supposed to be reimbursed, let's say $125, they might pay us $85 or $75, even though legally they were required to pay the higher amount. Those aren't the exact numbers. I'm only using these as examples. The point being, they would pay for the claim, but they would underpay what they were legally supposed to pay. These are the prime initial targets of Crown Medical because these are insurance companies that don't have a defense because they already reimbursed the claim. They already acknowledge that it's a legitimate claim, a legitimate patient, a legitimate doctor's requisition order, but they just underpaid it. Now, let's suppose hypothetically they did this with four or five different labs in four or five different states. Here we have a case where Crown is representing 40 labs.
They may bring a lawsuit or threaten a lawsuit against an insurance company and say, "Hey, we're going to bring five lawsuits against you in five states, or you can just settle it with us now. We will give you a discount to settle." They calculated in this $150 million, those claims that they think they're going to collect on quickly and easily. They took what they estimated will be the discount that they have to provide to the insurance companies, and they subtracted out their contingency fees. When you subtract that all out net to ProPhase Labs, they believe they're going to collect over $50 million for us. Now, timing is important. All the shareholders want to know when is this money going to start to flow in. I would have liked it to have started to flow in already.
A gating issue was we bankrupted the lab subsidiaries. These were lab subsidiaries not doing much now anyway. We bankrupt them in court, in bankruptcy court. We just accomplished that a few weeks ago. The next critical step was that the bankruptcy court, the bankruptcy judge and the trustee appointed Crown Medical to be special counsel, which then gives them the right to go approach aggressively the insurance companies with litigation. Now, the last piece of this, and then I'll move on because we don't have a lot of time. In bankruptcy court, it's considered expedited litigation. What's meant by that, there aren't months of pleadings because the theory is if you're a bankrupt company, you want to come out of bankruptcy and be operating again. You want to get out of litigation as quickly as possible.
In that scenario, the bankruptcy court does away with pleadings and all these months of other things that can go on and goes straight to what's called meet and confers. Crown Medical is meeting with hundreds of insurance companies on these meet and confers, where they're already talking about settlements. We're already at that stage. Either they settle or Crown is going to bring documents this thick of discovery that they can serve on everybody at each of the insurance companies, all the way up to the CEO. The insurance companies don't want to deal with this. They also don't want to deal with the publicity, the negative publicity, if they underpay five labs in five states.
This is the point in time that is critically important where now we believe, Crown Medical believes in the next 8-12 weeks, settlements, a lot of settlements are going to start to happen. Once that happens, I can't tell you the exact timing on you go from settlement to writing up the settlement documents to actually sending the checks in. They go into the bankruptcy court and then they get released to us. All that's happening, but several months from now, an enormous amount of money we believe is going to start flowing into the company, ultimately significantly more, multiples more than the entire market cap of the company. That's the future of the financing of our company. All right. ProPhase BioPharma, and I just want to look onto them. All right. Okay. BE-Smart esophageal cancer diagnostic test. We are ready for commercialization.
This is a test that does not require FDA approval. It's called a laboratory developed test or LDT. What makes this unique is that roughly 80% of people diagnosed with esophageal cancer will die of esophageal cancer. It's an awful, one of the deadliest diseases right up there with pancreatic cancer. The reason so many people die is because they are diagnosed too late. The reason they're diagnosed too late is there's no great diagnostic test out there. Right now, the standard of care is to get an endoscopy from your GI. Our test makes the endoscopy significantly more accurate. It's that simple. We have tremendous IP. We know our scientists discovered the eight proteins that get expressed when you're developing esophageal cancer. What happens is in endoscopy, they remove seven or eight tissue specimens from your esophagus.
A pathologist studies them under a microscope and then gives you the diagnosis. The problem, as I said, is two pathologists can look at the same specimen in the same microscope. One will tell you you have esophageal cancer. One will tell you you don't. Where we come is just take one of those specimens, send it to our lab or our partner lab. It runs through a mass spectrometry machine with all the AI and all the bells and whistles. It looks for the proteins that we have the IP on to be expressed. Based on that, we can give you a diagnosis, not only whether or not you have esophageal cancer, but whether you're at high risk or low risk. The reason why that's so important is if you're at high risk, you can go get a procedure called an ablation that saves your life.
If you're at low risk, you don't have to get endoscopies every year or every other year. Right now, there's 67 million endoscopies in the United States alone, and this is a global problem, by the way. Just for people at high risk of esophageal cancer, there's 7 million endoscopies per year. They're being reimbursed $3,000-$4,000 in endoscopy. That's up to, that's $21 billion-$28 billion in reimbursed endoscopies. With our test, we will save lives and we'll save money. If you're at low risk, you don't have to get endoscopies as often. It will save billions of dollars. Obviously, if we save lives, that also saves billions of dollars to the insurance companies. So our test, we believe every single one of these 7 million endoscopies should include our test to make it a more accurate test.
If we get reimbursed $1,000-$2,000, that's a $7 billion-$14 billion addressable market that we're going after, where we believe we have virtually no competition. By the way, there is a test out there. If you test positive, they then tell you to go get an endoscopy, which actually will build our business. We are not even competition with them. This is a phenomenal test. We're ready to commercialize it. I'm looking forward to when the Crown Medical Collections start to come in, which will fund the commercialization of this test. The other thing I'll tell you, I'm not interested in spending a lot of money on anything. I want to be very careful about this. This is such an incredible test with so much upside potential that there should be a very large cancer testing company that will want to partner with us.
Now, I could probably partner on this test today, but the question is, do I want to partner it today and get a block of money and a small royalty, or do I want to partner it in 9 to 12 months and get 10 times the block of money upfront and double the royalty that I would get today? These are the types of decisions that we're making every day. The test has phenomenal upside potential. It has no value in our market cap today, and we're ready to commercialize it. We have some world-class key opinion leaders that are working with us on it. We got Mayo Clinic right by our side. They did a lot of the clinical testing and worked with us. They supplied the specimens. One of the scientists there is really excited to work on this with us.
We also got published in a major journal, which gives us the authority and the credibility that the GIs, the physicians are looking for, so that now we can work on commercialization. All right. Finally, I do not have time to go into this more. Finally, I will just tell you Nebula Genomics, founded by George Church, world-renowned in the field of genomics over the last 20 years, professor up at Harvard. The bottom line, whole genome sequencing. It is like a steroid. I apologize. It is like an ancestry test on steroids. What I mean by that is an ancestry test studies a very little bit of your DNA, less than 1%. Whole genome studies your entire DNA. If you want ancestry information, go get an ancestry test.
It's relatively cheap, but for a couple hundred bucks more, if you get a whole genome sequencing test that studies your whole DNA, you're going to get dramatically more information about your health. Everybody is basically based on their genetic makeup, is predisposed to various diseases. Everybody has genetic mutations. If you learn about those genetic mutations, it tells you, we can tell you which diseases you're potentially at high risk and low risk. This is primarily a direct-to-consumer business. It's got phenomenal potential. We built it. We acquired it three or four years ago. It was being built for three or four years before that. The SEO, search engine optimization on this, is incredible with us doing no advertising at all. We're doing several million dollars a year of business. With a little marketing dollars, we can grow this business dramatically.
Also, Jason Karkus took over, cleaned up the business. We shut down the expensive lab and all the overhead. Going forward, it's actually a break-even business that's profitable on a pro forma basis. With a few marketing dollars, we can grow this business dramatically. It will be very valuable. We were thinking about selling it a few months ago, but we decided if we just grow this for 6 or 9 or 12 months, we believe we can sell it for a lot more than the entire market cap of the company. Those are the key assets of the company to pay attention to. I don't have more time to go into this now. I think we're about to go into questions. We have our management team, investment highlights. Again, you can look at that on the website.
Last thing I'll tell you, a lot of people were asking about the ATM. We do not have an ATM. We have set up for one at Investment Bank. It is not currently active, and we have not used an ATM the entire year. Just be aware of that. I know there were a lot of questions about that. With that, why don't I turn over to questions? I have a feeling some of the things that I haven't covered yet, I will cover in the Q&A. Craig, over to you, please.
Thank you very much, Ted. Yes, we are going to be taking only your written-in questions today. Use the middle button on the bottom of your Zoom window. Click it. A text box will appear. Write and submit your question. Please do not use the raise hand button nearby there.
We can only take your spoken, sorry, your written-in questions today.
Hi, Craig. While you're waiting to read those questions are coming in, I would just like to cover one thing in our investment highlights at the top paragraph. We have completely transformed the company from a year ago. We downsized significantly. We sold our Pharmaloz Manufacturing facility, which cleaned up a lot of debt in the company. We shut down our Nebula Genomics Laboratory, which had tremendous overhead. I would have loved to have kept it. Unfortunately, the overhead was too great, and the Crown Medical Collections did not come in, etc. It just made a lot of business sense. Everything I'm doing right now, we dramatically reduced the overhead in the company, the headcount, the IT. We are a much cleaner company now.
The operating overhead is significantly less, even right now today from even just a few months ago. I just thought I'd share that with you. We're set. As this Crown Medical Collections comes in, we're going to be a dramatically different company three and six months from now. All right, Craig, over to you. I'm assuming some good questions are coming in.
Yes, they sure are. Thank you. What is a reasonable timeframe to expect the initial collection of cash from Crown Medical? He follows up with the company appears to be increasingly reliant on short-term debt and borrowings until Crown Medical cash arrives. When is a reasonable timeframe for cash to actually come into the company, given we are now near the end of 2025 and it's been nearly a year?
Great. Oh, that was a long but very good question. All right.
The answer is we anticipate, and don't quote me on this, but given that Crown Medical has now been appointed as special counsel, see, going into bankruptcy court was the most important thing. That was the gating part that took so much longer than anybody anticipated. The key is that once you're in bankruptcy court, we can approach a thousand insurance companies from the same court, the same one judge, the same expedited discovery, etc. We are now in a place where they can efficiently, we're talking about dozens of attorneys. They've already reached out to hundreds of insurance companies. We anticipate in the next 8-12 weeks, settlements. You have to deal with the timing of the actual cash coming into our bank account. That might be another four weeks to eight weeks after that.
It could be sooner, but once those settlements start to happen, it will be very easy to finance the settlements anyway. If, you know, all of a sudden we have $10 million in settlements on the horizon that are coming in four to eight weeks, anybody will lend me the money for the four to eight weeks if we need it. Having said that, there are institutional investors out there where this is all they do. We are talking to a very large, respected institutional investor that may finance our Crown Medical Collections. If they do that, we're home free with financings for the company forever. I think our stock price will, well, I don't want to talk about a stock price, but things will be very different if that happens. That could happen soon.
Can't guarantee it, but it's one approach I am taking amongst others to figure out the best way to finance the company. I'm doing everything I can, you know, to avoid equity, to do debt over equity. At the same time, one tricky part about this is we take on debt. You pay back the debt. When you pay back the debt, you end up with more debt because you paid it back and paid interest on it. You end up with the original debt plus interest on it. It's not a fun way to operate your business. I am juggling between debt, equity, financing, Crown Medical Collections, partnering, etc. There's one other thing I didn't even go into on this call, and I'm remiss for not doing that. I apologize because it's not in our presentation. We talked about a crypto treasury strategy.
Since that time, obviously, the cryptos crashed, you know, over the last couple of months. It's still a possibility, but we have something much higher. By the way, our proxy passed everything. We have something much higher on the list. A crypto strategy, it's an M&A strategy that would value our company at dramatically more than the current market cap. Stay tuned. I don't want to talk more about it now, but I anticipate updating shareholders in the near future. I believe I said that on the quarterly conference call, so I don't think that that's anything new that I'm saying right now, but I'm really looking forward to updating shareholders who could be in for a very positive surprise in the near future. All right. I will leave it at that for now. Great question. Next one, please, Craig. Thank you.
Again, Ted, tell us, what do you think the disconnect is between how you value the business and the market cap of the company?
It's honestly, it's very simple. Any company that didn't go through our financial issues of this past year that has the assets that we have would have a market cap of 10 or 15 or 20 times our market cap right now. Our esophageal cancer test alone should have a market cap by itself. If it was in a clean company with no debt and had a little capital, it could have a market cap of $50 million today, right now. Once it develops for a year, it could have a market cap of $150 million. Two or three years, it could have a market cap of $300-$500 million. It ultimately has multi-billion dollar potential.
We have a test that's dramatically better than tests that are out there in these small companies that have market caps of $150-$450 million, and our test is significantly better than their test. I could go into it on a separate call or with our scientists or whatever. The point is there's zero value. There's nothing but upside in our BE-Smart esophageal cancer test. I already went through, you know, our Crown Medical speaks for itself. They said that our data was amongst the best data of any lab that they're working with. They're working with 40 labs, and we're in bankruptcy court, and they're already approaching the insurance companies, and there's no question in their mind. I want to quote them.
I can tell you that Crown Medical has written paragraphs for our press releases where they specifically said they are confident they're going to collect more than $50 million from the COVID-19 accounts receivable. If we potentially have $50 million, that might be over 12 months, but if we even have $25 million of cash come in over the 12 months, forget about $50 million. If we have $25 million of net cash come in, we got a $10 million market cap and a potential multi-billion dollar esophageal cancer test and a world-class genomics business that we can grow into something that could be very valuable. By the way, our genomics business has data that we've collected over eight years, 130 countries of whole genome sequencing data. A whole genome sequencing test has 1,000-5,000 times more data than an ancestry test.
The database that we have, the genomics database we have, which is so valuable, so sought after, is the equivalent of like 150 million ancestry tests. It is just this incredible database. We could not sell it by itself for political and legal reasons, but somebody potentially could acquire all of Nebula Genomics and would get that database included in it. We have so much underlying value in the company, and that is why there is a disconnect. It is only because we are tight on cash, and people are scared because we are tight on cash, but that is not always going to be the case. As I said, we may do a financing against our COVID crown receivables. If we do that, we are home fiery. I am working with different financing opportunities right now, and we will see what comes from it. Thank you for that question.
Tons of great questions just flowing in. Thank you, everyone, for your great interest. We're going to try to get as many answered as possible. How is the company going to overcome the risk of delisting?
Thankfully, first of all, I was hoping that we didn't even need to do a reverse stock split. It looks like we probably will have to do a reverse stock split. Thankfully, the shareholders voted for it overwhelmingly in favor of it. You know, I've said this before, a large investor who was involved in another company actually pointed it out to me. I don't know if I should be quoting other stock symbols. I think it was OESX, but he said he was working on that company. They did a reverse stock split. The stock went up afterwards. What's interesting here is we filed the proxy. Everyone gets scared.
The stock sells off. The combination of end-of-year tax selling and the prospects of a reverse stock split, everybody's scared. They run for the hills. The stock sells off. I mean, I'd like to think it's more than fully discounted in the price of the stock. We have like a $10 million market cap. We do a reverse stock split. Understand your shares on a ratio basis, we will still have the same market cap. Your shares will still represent the same percentage of the company. In round terms, if we did a one for ten, you have one tenth the number of shares, we will also have one tenth the number of shares outstanding in the company. Nothing's changed. Now the threat or fear of a reverse stock split is gone. The threat or fear of being delisted is gone.
Then we go into either I do a financing against Crown Medical, and/or at some point Crown Medical Collections actually starts to come in, and then we're home free. All of a sudden we could have a market cap five or ten times what it is today. I hope that answers the question.
Thanks, Ted. Yes, it surely does. Are you going to wait for Bitcoin to recover before announcing that strategy? What are the main considerations to decide to do the crypto strategy?
Sure. It is very simple. At the end of the day, I want to do what's best for shareholders. I want to do the best deal for shareholders. We have opportunities here. We may have an M&A strategy that values just a portion of our company, not even the whole thing, just a portion of our company.
I do not want to go too much into this, at multiples of the current market cap. That is something I am working on right now that is not related to the crypto strategy. Is it possible? Yes, we could do a crypto strategy, but I am not going to do that unless it adds, it is accretive, it adds value to the company today. At the same time, what is interesting is the Crown Medical, when those collections start to come in, we may have so much cash coming in that we do not know what to do with it. At that point, we might be able to do a crypto treasury strategy without diluting shareholders by doing a capital raise. A lot of these companies do reverse crypto treasury strategies, and then they go out and raise tons of money diluting the shareholders to buy the crypto.
Imagine we have the cash that comes into the company to buy the crypto, and then we have these world-class crypto asset managers who could manage it and actually generate a return. You hold the Bitcoin. Bitcoin is going to go up over the next one, two, three, five years, ten years. Forget about one year. Over the next two, five, ten years, it has to go up. I strongly believe that. So many governments around the world that are now looking into that, and I mean, including the U.S., there is no question there is a place for Bitcoin. We will see. That is something that could happen. I am not in a rush to do it. We will see how this all plays out. We have opportunities. For the Bitcoin strategy, we will see. That is not front and center right now.
What is, is this M&A strategy that would bring enormous value, enormous capital to the company, enormous value to the company. The shareholders would love that deal. The Crown Medical Collections kicking in. Those are enormous opportunities, either one of which our shareholders will make a lot of money and be very happy. The other thing I'm working on, as I said, is potentially an upfront financing of a portion of the Crown Medical Collections. We have all these things going in our favor.
Going to conflate various writers having similar ideas here. Would the company be open to strategic M&A opportunities for a complementary genomic test once the Crown cash comes in? Are there partnerships on the horizon for the DNA testing? Seems like a great product, but also a product that will only take off through marketing or falling into a niche.
Sure.
We have tremendous SEO for our Nebula Genomics business. We've cleaned it up so that it's basically the way we built it, and I have to give Jason Karkus all the credit for this. He's built it now so that we took what used to be a lifetime subscription, and we found if we sell a one-year subscription, we're getting the same conversion rates. It costs with the same amount of advertising and selling at the same price, we can sell just as much product with a one-year instead of a lifetime. With a one-year, most of the consumers want to renew the following year. They pay a subscription price to renew. That's almost all profit. It's an incredible business. This has been transformed into a business that could be highly profitable, that could have legs and really go places.
Everybody more and more wants to know about their health and how their genetic makeup plays a role in their health. For example, if you're at high risk of breast cancer, it might motivate you to get more checkups more often. Or if you're at risk of esophageal cancer, you know, esophageal cancer, it might motivate you to get more endoscopies or more checkups or colonoscopies. If you're at high risk of colon cancer, you know, the insurance companies tell you get your first colonoscopy at age 50. If you're at high risk, why would you wait till 50 and listen to the insurance company? You'd probably want to get one at 40 or 35. There are all these different ways.
If you know that you're at high risk of a very deadly disease or a cancer, knowing that there are healthy options that you, you know, paths that you can take to help avoid those very deadly diseases and cancers. You get a wealth of information. We have literally one of the best tests, one of the best reporting systems in the world, as well as one of the, you know, largest databases. It is really a valuable business. Yes, with a few dollars, we could ramp this business up in a big way, and we're looking forward to do that once the Crown Medical Collection starts to come in, or even if I get this deal done for financing the Crown Medical Collection, or if we do an M&A strategy for the whole company. To sell Nebula Genomics now, could we?
Yes, we could probably sell it now. In fact, I just met with a banker who thinks he could bring a buyer in very quickly. I'm just not excited to sell it for a little bit of money if in nine or twelve months we can sell it for five times as much. It is all a matter of what is best for the shareholders over the next twelve, twenty-four months, not what is best over the next three or four weeks.
Ted, what other—go ahead. Thank you. What other strategic initiatives are you pursuing apart from a reverse stock split to reassure shareholders that this is not the only option being considered to meet compliance by December 2025?
Yeah. Look, we are in December right now. We are running out of time. I could do an M&A strategy, which I discussed, the reverse stock split.
The one thing I have to tell you, though, sincerely, where's the market cap going after the reverse? Based on everything I described today, is the market cap, because we do a reverse, really going to go down? That would be silly. If Crown Medical comes in, if $15 million of the $50 million comes in from Crown Medical and we have a $10 million market cap, I'm like, I'd want to buy back every single share in the company. Literally, buy back, you know, 80% of the shares in the company. It's silly if the stock was there. It doesn't make logical sense. You have to put that in some kind of perspective. You know, it's one thing if we had a $150 million market cap, you know, because we have billions of shares outstanding right now.
You know, then could you say, oh, maybe the stock's going to go down after the reverse? We have a $10 million market cap, $50 million or more in accounts receivable that we expect to collect, a multi-billion dollar potential esophageal cancer test, and a world-class genomics business. I'm like, what other company out there has as small a market cap as we do and that much potential? Thank you. Next question, please, Craig.
Love this turnaround story here, he writes. If no ATM, would you consider a share rollback in the near future?
That's interesting. I worked on Wall Street starting 40 years ago. I don't even know what you mean by a share rollback. When, not now. Look, right now we have to raise capital. You only have two choices: debt, equity, combination of debt and equity.
Okay, I'm looking at all ATM, working with a couple of different financiers. One who really wants to partner with us has deep pockets, who might, who wants to do a deal with us, and then somebody else who wants to finance our Crown Medical Collections. I have all these different opportunities that we have to weigh and we have to figure it out. Having said that, if you mean by share rollback, if you mean buy back stock, I don't believe I am allowed to state until we actually do it whether or not I'm going to buy back stock. I can tell you historically, when we sold the Cold-EEZE Cold Remedy brand for $50 million and we had an undervalued stock, I bought back stock.
I did two what are called Dutch auctions where we bought back stock from everybody that wanted to sell. I'm a big believer if we have an undervalued stock, buy back stock. Okay, let's see what happens. That's not a question for today, but let's see what happens when the Crown Medical Collection starts to come in. In the meantime, again, there are players out there that are recognizing how much underlying value is in our company. They're not waiting for Crown Medical Collections to come in. Like I said, I have an M&A opportunity in hand right now that we're negotiating right now.
I can't make any promises what's going to happen, but as I said, I expect to update shareholders at least to let them know where we are in the process and a few more details, which could be quite interesting in the not too distant future.
Keeping with that theme, assuming the company is as deeply undervalued as you say, why have we not seen any insider buying over the last twelve months?
Honestly, I'm really the only insider. To be honest with you, I am very tight on cash at the same time that the company is. Having said that, a part of me is saying, I want to go buy stock anyway. I actually, for most of this year, deferred two-thirds of my salary for most of this year. I didn't even get a benefit for doing that.
I did that to help the shareholders. My son Jason did the same thing. He's sort of second in command. He's running Nebula Genomics. The bottom line is we want to do what was best for the shareholders. I'm deferring taking in money. The other part of this is really complicated. A side of me says, I really want to buy a block of stock just to tell everybody this is silly. The only problem is I can't buy stock. The only windows I can buy stock, like right after we report earnings, but not even though I'm in the middle of an M&A transaction. If I announce an M&A transaction, if stock doubles or triples, I can't buy stock just before that. I'll get sued.
There are so many issues involved with me buying stock right now, but I'm doing everything I can to be supportive of the company. I made a loan to the company, and it's separate from making a loan to the company. By the way, I borrowed money to make a loan to the company just to help out the company. I did that. That's kind of complicated. I'm not going to go into that, but we have secured debt out there that is senior to my loan to the company. I did that to help the company. I deferred my salary to help the company. Frankly, my hands are tied. I can't buy stock even if I want to right now. It's not even a possibility. With all the things that I just described, it's not even a possibility.
It may be in the future if there's a window that opens up and the stock's trading around these prices, then absolutely I could be interested in it. Not even a question.
Why should long-term shareholders believe this management team can successfully pivot the company during one of the most complex periods ProPhase Labs has ever faced?
That's a great question because I've done it for 40 years, and I just did it with this very same company a dozen years ago. It was in virtually the exact same shape a dozen years ago. We are going to work out of this over the next few months. The second you see that we're working out of our current situation, which is what stock price is magically going to go up.
I'm not, I don't think I'm supposed to talk stock price, but like we're close to the finish line of turning around the company. We already cut out all the overhead. You can go back and look at one of the very first slides and you'll see. We already cut out all the overhead. In fact, you can also see here at the top of this slide, sold the manufacturing facilities, shut down the genomics laboratory, reduced the headcount, all these things we did over the course of this year. We're now a much cleaner company. The biggest issue we have is that, you know, we have some debt on the books. We just have to get through the next few months till Crown Medical comes in.
Two key ways of doing that: do financing against the Crown Medical, do a separate financing in the company, do an M&A strategic deal, any of those things, and we're home free. I think you'll see the stock trading quite differently than it does today.
How many employees does the company have?
I don't know that number off the top of my head, but we went from hundreds to, and it also depends in the main company. You know, I don't want to speak out of turn. It's not a lot of, it's not a lot of employees. We really, really whittled down, like, you know, less than two dozen, maybe a lot less. I don't, I honestly don't recall off the top of my head the exact number, but it's not a lot.
In fact, actually, in my, you know, I do not want to be misquoted and I do not have the number off the top of my head. I apologize. I can certainly get back to you with that number, you know, but off the top of my head, key employees is, you know, maybe it is a dozen. Of course, it is less. That includes the whole finance department.
Thanks, Ted. Good time to tell everyone, write us at prph@redchip.com. We will forward your email to Ted. You will get your answer. Ted, a personal question for you. What is the most valuable lesson you have learned during this process? He does not say what process, but
It is a great question. I have been severely humbled over the last year. Frankly, I did not have an ego before. It does not make it any easier.
I'm shocked that the company got into the position it got into. It's funny, I watched how other companies went through and there were these hot stocks five years ago and they crash and they go to zero. There were companies that wanted to do deals with us and I just watched and the stocks went to zero and the companies went out of business and they just took the money for granted. They took what they were doing for granted. I never took anything for granted. Back when we built out the genomics lab, we acquired Nebula Genomics, built out the lab, you know, all of that combined was tens of millions of dollars. In a million years, I wouldn't have done that if I didn't think more than tens of millions of dollars was going to continue to flow into the company.
All of a sudden, it got cut out. You know, all of a sudden, the government just ran out of money, even though they guaranteed the testing. We had this debt, we had this overhead. It put me in an incredibly difficult position, but I never took anything for granted. That's the disappointing part, is I ended up in the same position with our company as other CEOs who manage their companies poorly do. I did the opposite. I've now completely restructured the company, cleaned it up. I've turned it around before. I turned around other companies. There's a company called ID Biomedical, biotech company up in Vancouver, Canada. Ended up flying up there a couple of times, forced out the CEO, fought with the board to promote the two guys underneath, did two financings for them.
I primarily did that because I was a large shareholder and my friends were large shareholders. I forced a restructuring of a company that was heading the same direction, you know, for bankruptcy. They turned around. Ultimately, they were sold to GlaxoSmithKline for $1.4 billion. I do not take credit for the sale. I was long gone a couple of years before that. Instead of my friends and I losing our investment, we probably made a triple or quadruple. Take our company, which originally was called the Quigley Corporation. Stock was $0.65. By the time I took control of a company, we had to write off most of the assets. The company looked like it was going out of business. It had one asset, Cold-EEZE Cold Remedy, that had declining sales for four or five years. All the retailers wanted to kick it off the shelves.
It looked like we had a business that literally was going out of business. I immediately cut from 27 people in the headquarters to four. We built it up ultimately with about seven people in the headquarters, turned around the brand, sold it for $50 million, turned around the company, bought back stock, went into COVID testing, built out a whole new business. I have done this multiple times before. To be honest with you, if I was not the CEO, the first thing I would tell you is hire me as the CEO to turn around this company. That is what we are doing. Thanks. Craig, back to you.
Yep. Will the reverse split limit how many shares we can sell within the stock when this is going on?
I do not think there is any issue. There is a certain date.
You know, people are so focused on the reverse stock split. That's, I'm just being honest with you. Because a lot of people ask me that question in recent months. You have to understand the market value compared to the underlying value doesn't change. The ratio, however many shares you own, you own the same percentage of the company before or after reverse stock split. If you own 10 shares of stock at $0.20 or one share of stock at $2, you own the same amount of value in the company. All right. The difference is no one will be scared of a reverse stock split anymore. Also, there are companies that don't like to finance and/or can't buy penny stocks. If we do a reverse stock split, there are new institutional investors who actually really like our company, really like our story.
They're not allowed to buy it in their portfolios. So believe it or not, this could be a good thing. The stock could actually go up and not down after we do the reverse. Don't quote me on this, but there's no reason for the market cap to go any lower. There's no reason for the market cap to be here. I feel like it's already fully discounted in the price of the stock. Plus, we already just went through, you know, tax loss selling for the year. To be honest with you, this is the time to be looking for low-priced stocks that have sold off for value investors. Here you get a situation where we have tremendous potential growth, tremendous value and growth. We've just gone through the tax loss selling. The reverse stock split itself by itself is not something to be scared of.
Five or 10%, I don't know the exact number, don't quote me, of companies who do reverse stock splits, your stocks actually go up afterwards. Ours should be perfectly positioned just based on all the good things going on with our company. Again, stay tuned. I don't want to hype anybody, but I told you that I'm going to be following up with you on an important initiative. I am going to be following up with you on an important initiative. I can't say more than that sitting here today. It is up to you whether you want to listen to what I'm saying right now. I wish you the best of luck.
Thanks, Ted. We are over time, but if it's all right with you, Ted, we can go a few more minutes.
If you have a really good question, otherwise we're way over time, but go ahead. I leave that to your discretion.
Yeah. I can easily forward you all of today's questions.
Sure.
I think there are some good ones. The question of the stock split is on everyone's minds if today's questions are any indication. Can I give you a few more on that?
Okay. Thank you.
When would you have to perform the reverse stock split in order to maintain Nasdaq compliance? What if the stock goes below a dollar after the split?
If it goes, it doesn't make any fundamental sense for it to go below a dollar after the split.
Once you do the split, as long as it stays above a dollar, look, if we do a one for ten reverse stock split right now, our stock's going to be trading around $2. Okay. You know, and it'll be around $10 million. What's it going to do? It's going to go to a $5 million market cap. I mean, this is silly. One wealthy guy could buy up the whole market cap of the company. This is silly. All right. People that are asking these questions don't quite understand. If we do the reverse, we would do it relatively soon in order to stay Nasdaq compliant. Once it's above a dollar for 10 days, it doesn't matter. We're set. Even if it goes below a dollar, it doesn't matter. You have another year before it's an issue.
In the meantime, we have all these things that are happening in the next few months, not in the next year. Crown Medical is happening soon. God forbid, if we did not do the reverse and we got delisted from Nasdaq, we would just be over the counter. Once some of this $50 million comes in from Crown Medical, we will go right back above anyway. I do not think that would be an issue at all. I will buy back stock to get us back over and we will go right back on Nasdaq again. Even if we went off Nasdaq, we could go right back on it again. That, to me, is not a big deal. You know, to be honest with you, I hate having a penny stock anyway.
We want to make sure we stay on Nasdaq and we don't want it to be at risk. If the reverse stock split is something we would do relatively soon. Again, I think the fear is already in the stock. It's already discounted. We do a reverse stock, might actually go up on it. Plus, as I said, we may have some other very important updates, which would dramatically outweigh any concerns for a reverse stock split.
Final question, Ted, are you at all concerned about facing a scalability issue regarding BE-Smart? If you do not receive the Crown Medical Collections, how will ProPhase support and scale BE-Smart in a way that would be beneficial to the shareholder?
Right. First of all, I don't see a scenario where we don't collect anything on the Crown Medical. It doesn't even make sense to me.
We have dozens of attorneys that have worked on our company for literally six to nine months to get to this point right now. We have insurance companies that reimbursed for our patients that came to us for testing and underpaid that are legally liable for that payment. We have Crown Medical whose whole focus is on collecting that. We're not paying a penny. They're doing it completely on contingency. We expect an enormous amount of money, not just some, an enormous amount of money to come in. We have somebody who short-term may finance and give us a big block of money. If we do that, we're home free. I'm working on that literally today, right now. Having said all that, with the BE-Smart esophageal cancer, I will go out and partner it sooner rather than later.
What's interesting is when we got published recently, that was about two weeks ago in a major journal, we now have other companies reaching out to us saying, "Hey, this is really interesting." They also see our market cap. They're like, "Hey, maybe we should do a deal with you right now." The other thing I'll tell you is I have no interest in doing a grassroots build-out from scratch, build-out 20 or 30 salesmen. That would be very expensive. It would take a lot of time. What we really want to do is we want to get a consortium of hospitals, of physician groups. You got to understand our scientists and our advisors, they all have relationships with these groups. Get them to sign on and just start using our test as a cash-based test, not to make money, but just to gather momentum.
We do that and then we partner. We might get five or ten times the offer that we would get today. Could we partner today? Yes. My personal choice is, as long as we have money coming in, we get financed, is to wait a year, not spend a lot of money, get the momentum going, and then get a big company who already has the reach to all the physician companies, you know, all the physicians and all the hospital networks around the country. It would be a no-brainer to do some sort of a partnership. They give us a big block of money upfront. Plus, they give us a royalty. The royalty could be more than what we can generate ourselves owning 100% of the test. We have tremendous potential with the test. I am not bankrupting the company over the test.
I don't want to spend any money on this test other than enough to get the momentum going. You know, like our initial budget on it for the next 12 months, like $2 million. So we think we have $50 million coming in. I want to spend $2 million of it to develop esophageal cancer. Maybe it would go to $4 million. I want to pay off, I want to pay off all the debt in the company. All right. I'd want to spend $1 million on marketing for a Nebula Genomics business. What am I going to do with the other, you know, $10-$20-$30 million of cash? Of course, stock price is anywhere near these prices. Guess what I'm likely to do?
All I have to do is look at my history of what I've done in the past between paying out cash dividends, buying back stock, things of that nature. Those are fun things to do. We'll see. That's in the future. First, the money has to come in. There are several ways it can come in, including a financing short term. Separately, we also have some M&A activity that I'd like to share with shareholders in the not too distant future as well. A lot going on with our company.
Absolutely, Ted. Thank you very much for going over time, Ted. Thanks to everyone for your many, many questions. I have already forwarded to Ted the ones that we have not been able to use today. For more information on ProPhase, reach us at 1-800-REDCHIP or email us at prph@redchip.com.
Please visit the information page created by RedChip for ProPhase Labs. It's prphinfo.com. There you can view and download the investor presentation and fact sheet and sign up for news alerts on ProPhase. Watch Small Stocks Big Money, RedChip's program featuring exciting small cap companies every Saturday night at 7:00 P.M. Eastern on Bloomberg, U.S.A. Finally, please join RedChip's next webinar with Jackpot Digital on Wednesday, December 3 at 4:15 P.M. U.S. Eastern. Register for all RedChip webinars at redchip.com/events. Thanks again to our many participants today. Thank you, Ted.
You're quite welcome, Craig. Thanks everybody for joining. I actually, I really enjoyed the presentation. The Q&A was first class, and it just shows that there really wasn't a lot of interest. I thank RedChip. You did a great job of generating that interest today. I'm very impressed.
I'm looking forward to doing more presentations in the future. I wish you all good luck. Investing in microcaps is not an easy business. All I can tell you is we have an enormous amount of underlying value, an incredibly, you know, microcap valuation, and short term, a lot of potential positives ahead of us. I appreciate all your interest, and I look forward to the questions that you've been asking. If you become large shareholders in the company, I'm happy. I'm shareholder friendly. I'm happy to begin a conversation with you in the future. Craig, thank you. I'm looking forward to the next presentation.