Prophase Labs - Earnings Call - Q3 2025

Executive Summary

• Q3 2025 revenue was $0.88M, down 38% year over year and 29% quarter over quarter; overall gross margin turned negative on product mix and timing effects, with net loss from continuing operations of $6.84M ($0.16 per share). Interest expense rose to $1.55M on higher debt balances.
• Management emphasized near‑term catalysts: Crown Medical Collections now appointed as Special Counsel in Chapter 11 proceedings to pursue ~$150M in COVID testing claims, with “meaningful settlements” anticipated in coming months; one first settlement completed.
• BE‑Smart esophageal cancer test achieved independent validation and journal acceptance, and a commercialization roadmap is underway (EHR, KOLs, reimbursement, early-access program); management reiterated clinical launch preparations following Mayo Clinic validation.
• Liquidity remains constrained: cash was $0.41M with a working capital deficit of $47.5M; the quarter included multiple high‑cost financing arrangements and embedded derivative liabilities from July convertible notes.
• Stock reaction catalysts: concrete settlements under Crown Medical, formal BE‑Smart commercialization updates, and clarity on NASDAQ compliance/reverse split authorization could shift narrative; management repeatedly cited potential buybacks contingent on collections and strategic deals.

What Went Well and What Went Wrong

What Went Well

• Independent Mayo Clinic validation and journal acceptance for BE‑Smart strengthen clinical credibility and support commercialization in 2026; “the gastroenterology market has spoken” and BE‑Smart is “accurate, highly sensitive, and requires no additional tissue”.
• Crown Medical Special Counsel appointment enables expedited litigation (skipping months of pleadings) and commencement of “meet and confer” with insurers; first claim already settled; management expects “meaningful settlements within the next few months”.
• Nebula Genomics restructuring: management states Nebula is “now profitable on a pro‑forma basis” with subscription renewals driving high incremental margins; DTC sales continue despite minimal marketing.

What Went Wrong

• Consumer products margins whipsawed: overall gross margin fell to (13.9)% and consumer products margin dropped to (13.1)% vs 65.3% prior year on volume fluctuations, overhead absorption, raw ingredient costs, mark‑to‑market write‑downs, and shipment timing.
• Interest burden increased to $1.55M in Q3 (vs $0.99M YoY), reflecting higher debt balances and multiple merchant‑cash advance/future receivables financings; derivative liability ($2.69M) recognized from July convertible notes.
• Liquidity tightness and working capital deficit of $47.5M underscored financial pressure; cash at period end $0.41M, with substantial accounts payable and payables to unconsolidated affiliates on deconsolidation of lab subsidiaries.

Transcript

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

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

Ted Karkus (Chairman and CEO)

Okay. Greetings all. Thank you, Noella, as always. Thank you, shareholders and others, for joining the call. This is our Q3 ProPhase Labs presentation to review results and what we're going to be doing going forward. First of all, I have to thank Renmark, who does a phenomenal job of hosting these calls. We do a call like this about once a month so that I can keep investors up to date. I also want to acknowledge RedChip, who we also hired for investor relations. They work in a collaborative effort with Renmark, and I'm really pleased to have RedChip on board as well now. Let's just hop to the forward-looking statement very quickly. I'm going to assume that you have all read this. Bottom line, everything I'm going to say today is accurate as of today. It doesn't mean that things can't change in the future.

If they do, there's no guarantee that you'll be updated in the future. All right, but I'll assume that everybody's read the forward-looking statement. With that, and by the way, this entire presentation is available on our corporate website, so you can review it at any time. As most of you know, these are the verticals of ProPhase Labs. I'm going to go into each one of them. Before I do that, and I'll probably remind everybody at the end, it is critically important we have a proxy out there. It is critically important that you vote. If you do not vote for our proxy, you are putting our company in harm's way. It makes no sense if you're an investor and you do not vote your proxy. It's really that simple.

I can understand why shorts do not want you to vote the proxy, but there are a number of reasons for this that I am going to go into. I am going to go into the various subsidiaries of the company. Why do I not just tell you at the outset, we are working on some strategic initiatives. The strategic initiatives may be impacted if you do not vote the proxy. The strategic initiatives could recognize significant underlying value in our company. This would be good for all of us as investors. Please vote your proxy. We do have a lot of positive voting going on, but we do need a quorum and we need everybody to vote. All right, I will remind everybody at the end of this call too, just because it is so important.

We can talk about it a little bit, about the reverse stock split and all that other stuff or the potential reverse stock split. Why don't I just clarify a couple of things upfront? We talked about a crypto treasury strategy previously. That is not off the table. To be clear, I will not do anything that does not significantly recognize the underlying value and assets of our company and is accretive for shareholders so that we have a stock price potentially or theoretically, based on the deal, will go up significantly. That is the goal. Otherwise, what is the point of doing it? With regards to a reverse crypto treasury strategy or any crypto treasury strategy, we do have a potential massive cash influx coming in over the next year. As that happens, we could certainly develop a crypto treasury strategy around it.

By the same token, at the moment, crypto treasury stocks are not in favor. Crypto is not in favor. I believe it's somewhat cyclical. The long-term trend is clearly up if you look at the macro trends over the next several years. Timing on a short-term basis may affect the strategy. In any event, it's still on the table. It's not my number one objective, though. Separate from this, and just recently, we are working on another strategy that will recognize significant underlying value in our company. I don't want to talk more about it today. Again, it's critically important that you vote your shares. If you don't vote your shares and we don't get the votes, it could impact a very bullish strategy. I hope to update you very soon on the strategy. Let's just leave it at that.

I don't want to talk out of line. I don't want to get too far ahead of myself. I want to go through the various subsidiaries of the company and where we're at right now. By the end of this call, I think that you will all realize that there is a disconnect between the market cap and the underlying assets in the company. My job is to recognize some of that underlying value and build the company for the long run so that the stock price goes up in the long run. We all make money in the long run. That's what I did before. I turned around the company once before when I first took over. We had a $0.65 stock company potentially going bankrupt.

I paid out $2.40 in cash, special dividends to the shareholders, and our stock flew and we went into all these great businesses. It's like a déjà vu because right now I'm working on exactly the same thing. The only difference is back then all I had was a Cold-EEZE brand with declining sales that looked like I was going out of business. Now we have several assets, each one of which by itself individually has significantly more upside and potential than what Cold-EEZE had at the time. With that, let's get into the various businesses. The very first asset I want to talk about is Crown Medical Collections. Everybody knows I was talking about that earlier in the year. And everyone's like, "Okay, Ted, are you getting tired of talking about it?

We're beginning not to believe." We went through a critically important process that took longer than anyone would have liked, and it was bankrupting the COVID Lab subs that aren't really doing anything now anyway. It made sense to bankrupt them. It turned out to be a significantly more complicated and cumbersome procedure than I certainly expected. A critical component of that was hiring the right bankruptcy attorney who was independent of Crown Medical to actually be the bankruptcy attorney of record. We found the perfect person to do that. He's done a phenomenal job. I can't believe the amount of work he did. Finally, just in like the last week, the judge gave the green light. We bankrupted the lab subs. I reported that. Critically important, Crown Medical has now been appointed special counsel.

The reason that's so important, Crown Medical was already reaching out to the roughly 1,000 insurance companies that owe us money. We're talking about like $150 million of uncollected COVID testing that at one point in time, the prior government guaranteed we would get reimbursed for. Part of what got us in this mess in the first place, we built out businesses thinking that money was going to continue to flow, and all of a sudden it just stopped. All of a sudden we had overhead, which seemed like a rounding error at the time, but became significant when we got cut off from this funding. In any event, Crown is now going after that. To be clear, a big part of what we're going after are underpaid claims. These are COVID tests where we submitted to the insurance companies. They paid us, but they underpaid us.

Let's suppose legally they were supposed to pay us $125. Companies for the balance. We're talking about many tens of millions of dollars, a significant portion of this $150 million. For not paying what they were supposed to pay, they already reimbursed the claim. They already acknowledged that the patient was a real patient of theirs. They acknowledged that the doctor's requisition order was proper, that we turned around the COVID test properly, et cetera, et cetera. Now, if they have no defense, and in some cases, Crown Medical may be representing four or five laboratories in four or five states going after the same insurance company. If this insurance company happened to underpay five of these labs in five different states, it shows a pattern of fraudulent behavior. No insurance company wants to defend a lawsuit that they're not.

They could spend $500,000 or more, even $1,000,000 just defending a lawsuit they're going to lose. Crown comes to them and says, "Hey, we'll give you," and I don't know what the exact % discount is, "we'll give you a 25% discount to settle right now." They have a choice of taking a 25% discount of paying now, or they can spend money on a lawsuit that they're going to lose, spend an enormous amount of money in litigation, and then lose the full amount and potentially treble damages if we can prove fraudulent behavior. We're in a situation where certainly out of the 1,000 labs, 1,000 insurance companies, half of them, let's call them the low-hanging fruit, we think that they're going to settle quickly. The key point of all this was appointing Crown Medical as special counsel.

That just happened. While Crown has been preparing to go after these 1,000 insurance companies and in fact scrubbed our data clean, they said we had one of the best, if not the best data set of any lab that they are representing. They said that we had world-class IT that collected our data the right way. We are pristine and Crown Medical means business. The bottom line is Crown was approaching the insurance companies before, but their attitude is when you actually get court approval and you are ready to serve litigation, that is when we will talk. Now the last part of this in bankruptcy court, what is interesting, because in theory, the idea is to get the bankrupt company out of bankruptcy and operating again, they have what is called expedited litigation. You skip over months of pleadings. You go right to meet and confirm meetings.

If they're not successful, you go right to delivery and discovery. Crown Medical has, I don't know, a stack this thick of discovery items to serve the insurance companies. We believe the insurance companies are going to start settling right away now that Crown has been appointed special counsel. That's where we're at today. Yes, it has been frustrating. Did I think it could have happened months ago? Absolutely. This was the hurdle we had to get over, and now things should move quickly. In fact, we have one small settlement. I'm not going to go into details. It doesn't matter, it's a small amount of money. The point is, now that Crown has been appointed special counsel, we believe settlements are going to start happening. It's going to change our financial structure pretty quickly. I'm talking about it a few months.

I'm not talking about it a few days. We're still going to have to get through the next few months. After that, once that money starts coming in, if our market cap is anywhere near where it is right now, you can, and I don't know if I'm allowed to say this or not, so I'll just say I have a history when we have significant cash and an undervalued stock of buying back stock. That's what I did the last time around, the last cycle around. I bought back a ton of stock. I did two Dutch auctions where we took out everybody that wanted to sell, and we paid dividends. We could be in a very similar déjà vu type situation again once the Crown Medical cash flow starts to flow in.

We'll pay off debt first, then maybe we'll buy back stock, hypothetically, and then we'll be in a very sweet position. Now we have to put that all into perspective of the fact that I don't know what we have, a $12 million market cap. We're estimating, Crown is estimating, and they're actually telling me they're somewhat conservative. They absolutely believe we're going to collect at least $50 million net. That's net of the $150 million we're going after, giving discounts. They're not going to go after all the claims. Some of them probably aren't clean or whatever. They're going to give big discounts to the insurance companies. They're taking their contingency fees. The last piece of this, Crown is not getting paid a penny. They have dozens of attorneys, dozens of attorneys working on this. None of them get paid a penny except out of the collections.

They have been working on this all year for free for us. They would not be doing it if we were not going to collect a lot of money. That is Crown. When you look at it from the perspective of I am trying to figure out strategically what to do with our company, I see all this cash coming in. I am funding the company principally with debt right now. That does not mean we will not issue some shares. The goal right now, we have an ATM. I have never used it. I have not used the ATM. We have a new ATM. We canceled the ELOC months ago, which we announced. We signed up for an ATM. We have not used the ATM yet. I cannot guarantee I am not going to, but it is based on stock price, based on our cash needs, it is based on debt availability, et cetera.

We have several companies willing to fund us as needed, especially because the ones that do their due diligence into Crown are very confident that cash will be flowing into the company. The other aspect of this is we have two or three other subsidiaries that are very valuable. Let's get into that a little bit. I think we're going to jump to our BE-Smart Esophageal Cancer Test That's in our ProPhase Biopharma subsidiary. I'm going to go just straight to this page. I'm not going to do a long detailed presentation of this. I'm sure most of you have heard this before. The bottom line is esophageal cancer is one of the deadliest cancers. We have what we believe is the best diagnostic test in the world for one of the deadliest cancers. It's that simple.

The reason it's one of the deadliest cancers is because it's not diagnosed accurately. We take an inaccurate diagnosis and make it accurate. It's that simple. That's the beauty of it. We are basically enhancing the endoscopy. The standard of care when you're at risk of cancer, of esophageal cancer, is an endoscopy. An endoscopy is where they stick a tube down your throat and remove tissue specimens and study them under a microscope. Two pathologists study the same specimen under the same microscope. One will tell you you have esophageal cancer. One will tell you you don't. All we're doing is we're taking that specimen, running through our mass spec machine with the associated AI, et cetera. We have patented the key eight proteins that are virtually always expressed when you're developing esophageal cancer. So it's a no-brainer. Take one of those specimens.

The interesting, this is such a convenient test and it's critically important to physicians and broad-scale commercialization is the convenience of it. There's nothing more convenient than our test because this is for patients already getting the endoscopy. There are roughly 67 million endoscopies just in the United States alone. This is a global problem. This is a growing problem around the world. There are 7 million of those endoscopies that are just for people at high risk of esophageal cancer. We believe every one of those 7 million endoscopies should add our test onto it. If they did, they will get a significantly more accurate diagnosis. It would make no sense not to. If we get reimbursed, hypothetically, $1,000-$2,000, that would make our test a $7 billion-$14 billion target market test. It's that simple.

The last piece of this is we're partnered, ventured with Mayo Clinic. We own the test. We have Dr. Chris Hartley, and he indicated he wants to get more involved. He's at Mayo Clinic. We have Dr. Joe Abdo, one of the scientists who invented the test. We have James McCullough. He's the CEO of another biotech company with significant experience with commercialization. These are all people working with us now. We have others. As the cash flow comes in from our Crown Medical initiative, we'll be able to fund this, no problem. We're not talking about a big budget. I'm looking at a small budget just to develop the test for the next year, get it to a point where a multi-billion dollar cancer testing company wants to take us over or joint venture partner with us.

Why build out a huge sales force if someone else already has one and just sort of a plug and play plugs in our test? All of a sudden, it's doing hundreds of millions of dollars a year. We got a 7% royalty. We get, I don't know, we got a block of money upfront. We can get a block of money upfront 12 months from now that's five times the current market cap of our company. That gives you a little bit about our BE-Smart Esophageal Cancer Test The key point is we just highlighted a press release in the last week or so. We got into a major journal. The reason the major journal was important is that's where the key opinion leaders in the industry study our clinical study and gave it a thumbs up and said, "Hey, we're all in.

This is a great test. It should be commercialized. Now that we got their good seal of approval, so to speak, we can now work on commercialization as what's called the laboratory developed test or LDT. FDA decided that they were not going to oversee laboratory developed tests. So we've cleared the FDA hurdle. We're good to go. I'm really excited about this test. Let's move on. Our next opportunity would be our Nebula Genomics DNA Complete. We completely turned the business around. George Church founded it. I'm not going to do a lot on this except to say that we completely cleaned up the business led by Jason Karkus. We shut down the laboratory. We cut out such a large percentage of our expenses and overhead. As I said, we shut down the lab.

Jason found a highly efficient lab to do our testing now, which makes our business a, it's primarily a direct-to-consumer business now. We went from a lifetime subscription to you buy a one-year and then you renew it the next year. We found that the conversion rates were virtually identical to the lifetime. By selling a one-year, it means next year most people renew. That's a subscription. That's revenue for us that we don't have to pay anything for. We already have the data. We're already doing the reporting. We already have the IT. The profit margin on the subscriptions that come in in year two, the subscription renewals, is probably like 95%. We're roughly a break-even business now that on a pro forma basis will be profitable.

As we clean up our finances, we will be able to grow this business dramatically because we have one of the best reporting systems in the world. We have one of the biggest databases in the world to leverage. We tested in over 130 countries, over 60,000 or 70,000 whole genome sequencings. It's the equivalent of 150 million ancestry tests. Our database alone is worth more than the market cap of our company, although we could not sell it by itself for political reasons because you can't sell somebody's data. Of course, somebody could buy the company. What I want to do right now is build this business. It gives you a little bit about our businesses. We have a dietary supplement business that we could potentially develop. We'll see.

I'm trying to keep our company as clean and mean as possible, as lean as possible, not going too many different directions. I am not looking to go in more directions. Crown Medical, collect a lot of money, pay off our debt, develop our Esophageal Cancer Test, grow our nebula business. Our company could be worth 10x or 20x where it's trading right now. That's the opportunity. With that said, I'll go to the investment highlights. Again, earlier this year, we completely restructured the company. We sold our Pharmaloz manufacturing facility, shut down our Nebula Genomics laboratory. We dramatically reduced headcount. We significantly reduced IT and related overhead. We're now working on not just a reverse crypto treasury strategy, but we have another initiative that could be very exciting that recognizes the underlying value of our company.

I promise you, if I do a deal like this, I'm going to do this because it's going to make all of us as shareholders a lot of money. Otherwise, there would be no reason to do it. That's where we're at. I reviewed the Crown Medical Collections Initiative. I am looking forward to when that cash flow starts. Once that cash flow starts, we're a different company. If you're worried about the stock price now, we have shorts in there. I think we have a lot of shorts in our stock right now. It's really sort of silly. All that changes as soon as the Crown Medical starts to flow. As I mentioned, we did already get one small check. It's not worth talking about. The point, though, is we've turned the corner. We've gotten over the last hurdle with the bankruptcy courts.

We went through BE-Smart, DNA Complete. Nebula Genomics is well positioned. We do have potential with our dietary supplements, but I want the cash flow if we're going to develop that business. Now, I have some other things that I want to mention. In fact, we'll get to the questions. Before we get to the questions, I wanted to mention somebody talked about our working capital deficit. To be clear, that is an accounting item. When we bankrupted the lab subs, the accounting for those lab subs changed. The assets and liabilities, the timing changed between what's current and what's non-current. It created this ridiculous amount of negative working capital. Obviously, it's ridiculous. We're not losing tens of millions of dollars. That was an accounting. It's a balance sheet item. It's not affecting us in real terms.

It's just accounting terms for bankrupting a sub. The other thing I'll mention to you is that a lot of the negatives in the quarter, that's related to amortization, depreciation, stock-based compensation. For those of you who question whether I get stock options and that kind of thing, to be clear, for most of the year, I voluntarily, and Jason did too, deferred most of our salary just to help the company. I didn't collect an interest rate on it. All right. I did make one loan to the company earlier in the year that somebody questioned me about. To be clear, I borrowed that money to make the loan to the company just so I could get others to invest in the company and make them senior secured to my loan so that they would feel good. I did that to help the company.

People questioned, "Oh, you got a high interest rate on a loan." Number one, I borrowed the money. Number two, I put myself at risk. Number three, I did that for the company. Number four, I deferred a significant amount of my salary this year. Nobody's paying me to do that. Okay? I am doing this all for the company. I'm all in. I hope those that are listening are all in too. I hope that addresses that. I do want to get back one more time about the voting. We may do a reverse stock split. We may have to. Understand, our stock price just went from trading at $0.50-$0.60 to $0.25. We have a market cap. I do not even know what the market cap is. It is just over like $12 million or something like that. Let's see.

Yes, it's some kind of number around $12 million. Where's the stock going if we do a reverse stock split? What you have to understand is sometimes with reverse stock splits, the stock price actually goes up afterwards because the only reason it's fully discounted before you do the reverse stock split, and then all the shorts have to start to cover because there's no reason to be short anymore because reverse stock split happened. Also, you have to put it in the context of the value of the company. With companies, most companies, the reason why their stock prices may go down after the reverse stock split is because they were going down anyway. If a company is going bankrupt and they're going out of business, then sure, their stock price is going to go down. They're going to do a reverse.

The stock is going to continue down. See, it happened all the time. Real companies like ours that have enormous underlying asset value, they do not have to go down after the reverse stock split. In fact, if we do a—and there is not a guarantee—if we do a reverse stock split, it is quite possible our stock goes up. I was talking to one large shareholder who is involved in a company. The stock symbol is OESX. They did a reverse stock split, and the stock has done nothing but go up afterwards, even during this correction in the bull market over the last couple of months. The stock has been doing nothing but going up after the reverse stock split. In our case, we have a market cap of $12 million. Our stock has just been cut in half after filing the proxy.

We now have crossed the hurdle with Crown Medical with the collections. It's now visible. We can now see that the collections are actually going to start to happen. After the reverse, understand whatever the number of the reverse is, we're going to have the same market value. Your shares are still going to own the same percentage of the company. If Crown Medical starts to kick in, if the stock's anywhere near these prices, I'll buy back stock and take it up dramatically higher than where it is now. After the reverse stock split, whatever the equivalent is, I'll take the stock up from there with buybacks once enough cash comes in and we're paying off our debt and we have excess cash.

I shouldn't say definitively I will do that, but it would be a no-brainer to do that if the stock's not undervalued. As I said, I have a history last time around when I did this. I sold the Cold-EEZE brand. I did exactly the same thing. Our stock was $0.65. We sold the Cold-EEZE brand, and I did two Dutch auctions. Exact same thing. This is a day's invalue. I don't mind doing that again. Don't be so scared of a reverse. Now, if you want to be scared of a reverse stock split when our stock's at $0.75 maybe or $0.80 or $1, oh, is he going to do a reverse or not? Our stock's trading under $0.30 a share. It's got a $12 million market cap. It's silly. I just want to put it in that perspective.

The other thing, critically important, I'm working on strategic deals. Besides the crypto treasury strategy, I'm working on another deal. We have to maintain Nasdaq compliance or the likelihood of doing a deal that's going to attract and increase the value of our company and make our shareholders' money. It's going to be difficult to get a deal done if we aren't Nasdaq compliant. It would be silly not to be Nasdaq compliant. I need every person listening to this call to please vote for the proxy. Otherwise, don't own the stock. What's the point of owning the stock and then not voting to help the company do well? That's the point of voting. Please, please, please vote. Okay? I'm sorry I have to do this, but the voting ends at the end of the week. We're close, but we're not there yet.

Every last year makes a difference. I feel like I'm a politician now. All right. That's it on the voting. That's it on talking about the reverse stock split. Let me just see. Why don't I turn it over to questions? Actually, it's exactly 2:30, so that's when I normally turn it over to questions anyway. Noella, please, I hand it off to you. Thank you all for your time.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you very much, Ted, for the presentation. We'll now begin the Q&A. Your first question is, based on your press release, it sounds like you're potentially working on two or more different major deals that could increase shareholder value. Can you clarify this?

Ted Karkus (Chairman and CEO)

Yeah. By the way, it's potentially more than two. We have the reverse crypto strategy. Understand, cryptos are so volatile right now, and crypto treasury stocks that did reverse mergers are somewhat out of favor. There's no hurry to do something like that. As I mentioned, though, if significant cash comes in, when significant cash comes in from the Crown Medical Initiative, we could use that cash. That would be non-dilutive. If we develop the crypto treasury strategy around that, where we generate income off of the crypto, and I'm telling you, there's no question Bitcoin is going up in the long run. It's not even a question. I don't need to be a gambler with the company either. I don't need to do a reverse crypto strategy right now. We'll see. That was on the table.

With the crypto market where it is right now, we'll see. There's potentially a very attractive deal that we could do when crypto was higher. We'll see. In the meantime, another—this is relatively recent—has developed. I just don't want to talk more about it today, but I will be updating shareholders. If I do that deal, it will be very positive for the shareholders. All right? We'll see where it goes. I don't want to get out of line and say too much too soon. There's no guarantee I'm going to do the deal. It's certainly interesting. It's something we're pursuing. Number three, now that we were published in the journal for our BE-Smart Esophageal Cancer Test, our scientists are being approached by a variety of companies, cancer testing companies, and others that want to either get involved, joint venture, acquire, whatever. All right?

We have that going on with the subsidiary. And then I have the deals I just described going on with the whole company. There is a lot of potential there. I'm going to do what's best for the shareholders. Even though I got diluted with everybody else, I'm still a large shareholder. I care about the value of our shares ultimately. Thanks for the question. What's the next one?

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you, Ted. Next, if you were asked, it looks like you may do a reverse stock split. If you do it, is it possible that the stock price will go up or down?

Ted Karkus (Chairman and CEO)

Exactly. If the stock price was a lot higher right now, could it have a little risk? I guess it would still be undervalued even if it was double, right? With where the stock price is, what's the downside? What is it going to do? It's going to go from a $12 million cap to an $11 million market cap. The Crown Medical $20 million is going to come in, and I'm going to buy back half the shares outstanding in the company. My stock will be twice or three times where it's trading on a split-adjusted basis. This is all silly. A reverse stock split in and of itself is not something to be scared of. What's more to be scared of is if we were not Nasdaq compliant. We have a lot of value in the fact that we're a Nasdaq company.

I want to stay a Nasdaq company. We'll see what happens. Earlier in the year, if Crown Medical had kicked in earlier in the year, my guess is we might not have had to do the reverse. We might be trading around a dollar or more. It's quite possible or probable. That did not play out that way. Having said that, even at a dollar, we might have done a reverse. When we are talking about the reverse, I am sorry, the crypto treasury strategy, they were thinking that they wanted a higher stock price, and they might want us to do a reverse anyway, even if we did not need to. I do not want to go more into it than that. Stock prices sometimes go up after the reverses. I gave you one example of that. I like to think ours would be one of them.

If nothing else, all the shorts out there, they would probably be running for the hills afterwards when they see there's nobody left to sell or the market cap is so low. Again, that's not a guarantee. I don't know what's going to happen. I can just tell you the reverse stock split in and of itself, your percentage of share ownership doesn't change. The market value of the company at that moment doesn't change. The upside from here for our market value is incredible. Thank you.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you for the clarity, Ted. The next question is, from the recently released financial earnings reports and statements, I see that M&A discussions unrelated to the crypto treasury strategy are being explored. Does this mean the crypto treasury strategy remains part of the company's strategic vision going forward?

Ted Karkus (Chairman and CEO)

Sure. I think I just answered all of those questions. I do not think we need to spend too much time on that. Again, everything is possible. I only want to do something that is accretive for the shareholders. That is the goal. I happen to have another deal that could be very accretive for the current shareholders. I think everybody would—I just do not like talking too much about it because it is premature. I just want you to know, though, we have to be Nasdaq compliant. That is why everybody has to vote. All right. Thank you.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you, Ted. Your next question is, $400,000 in the till, unable to use shares for cash. How do you plan to pay employees and board going forward?

Ted Karkus (Chairman and CEO)

Sure. The amount of cash we have on hand right now is about the same amount of cash we've had on hand every month and every quarter, all year long. I have multiple investors, large investors that want to support us with various types of funding options. We did a $3.8 million debt deal once before. We can always take on more debt. We definitely have a number of options out there, people that want—there are definitely large investors out there that see the underlying value. I will use all potential financing strategies to support our company, whether it's debt or equity or combination or what have you. We're in really good shape from the point of view that we have such a strong underlying asset value. Financing until the Crown Medical comes in, that's not the issue.

The issue is what form we take, debt or equity, what the terms are, etc., etc., etc.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you, Ted, for that response. Next, if you want to.

Ted Karkus (Chairman and CEO)

I just want to add to that. Whatever we do right now, once Crown Medical comes in, even if we hypothetically issued shares, my goal would be to buy back all the shares. If the stock price is anywhere near stock price, I'll buy back. I wouldn't be afraid to buy back 10% or 20% or 30% or 50% of the shares outstanding in the entire company. I really do think that way. If our stock's undervalued and the cash is coming in, that all gets fixed as the cash comes in. That is separate from the fact that, as I said, our BE-Smart Esophageal Cancer Test could be worth 10x our market cap 12 months from now, literally or less, 9 months, 12 months from now. Just our Esophageal Cancer Test alone could be worth 10 times the current market cap of our company.

Think of that as a concept. You got Lucid as a $120 million-150 million market cap. They're a test. If you test positive on their test, you then have to—the next step is to go get an endoscopy. They're not even competition. It's kind of like I compare it to COVID testing, where you get the rapid antigen test. If you test positive on the rapid antigen test, the next step is to go get the higher, more accurate reading from the PCR test. This is the same kind of thing. On their test, the next step is to get an endoscopy. We make the endoscopy diagnosis significantly more accurate. They have a market cap. Once we commercialize, we should have a significantly greater market cap than they do.

If we achieve their market cap, it would be more than 10x the current value of our company. Thank you.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you, Ted. Next, if you were asking, how are you going to prevent delisting from stock exchange without a reverse stock split? What needs to happen to get the price above $1 for a month?

Ted Karkus (Chairman and CEO)

Sure. First of all, it does not have to be above for a month. It is for 10 trading days. Number two, this deal I am working on, quite frankly, I could take the stock over $1 very, very quickly. Number three, I would like to have it in my back pocket if we need it, doing the reverse stock split, which is why you have to vote. Number four, we need the vote because I need to give the other companies and bankers that I am working with confidence that we will remain on Nasdaq and be Nasdaq compliant. We need the vote for that. Even if we do not do a reverse stock split, we need to show that we have the votes to do a reverse stock split if necessary. Otherwise, that could derail some of these potential deals. It could be great.

Again, I don't know how to emphasize this strongly enough because I don't know the random people out there that own stock. If it's in a brokerage name, we don't get those lists. If we get the list, we don't get the contact information. You have to vote your shares. Please do it through the brokerage firms. They typically will send you an email or you just go online, and you can vote very easily. All right. Thank you.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you, Ted. Your next question is, when will pro fees go up, stay up, and what might be the ceiling?

Ted Karkus (Chairman and CEO)

I think I've answered that question so many times. People are going to be upset with me if I answer it again.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

No problem. You want the next question?

Ted Karkus (Chairman and CEO)

I think the ceiling is the company could be worth 10x where it's trading today in 18 months. Okay? And that's not the ceiling. I was thinking about this because I was thinking about it for myself with all the shares that were issued in the last year and how I got diluted. I was just thinking, our Esophageal Cancer Test in three or four years should be worth $1 billion. So easily, that means that this could be like a $20, even with a little more dilution, even if we have 50 million shares outstanding. $1 billion means we'd have a $20 stock price. We currently have a $0.26 stock price, $0.27. I don't know what the stock's trading today. All right. Could you imagine that we're trading under $0.30 and we could be at $20?

Understand, if we do a reverse stock split, the ratio of where we are, that potential percentage, it would still be the same. If we do a reverse stock split, it does not change. The market cap, the value of it will still go up by a multiple of 20 if we go to a billion-dollar market cap one day. That may sound like a pipe dream today. By the same token, once before, when I took over, I turned around a company that was $0.65 and went over $10 a share. Actually, it went over $13 a share. Actually, that went up 20x. Do not think that I cannot do the same thing with the company that we have now, especially since the underlying assets of our company are much more valuable now than they were before.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you for the clarity on that, Ted. The next question is, what is the accurate share count/market cap of the company presently?

Ted Karkus (Chairman and CEO)

Sure. You have to go by the reported numbers. I believe there are 46.1 million shares outstanding that's reported. I don't know what the stock price is today. At $0.25-$0.30, we're talking about around a $12 million market cap.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you, Ted. Next, if you were asking, the share price keeps slipping despite shareholders' patience. When will management take decisive action to protect and grow shareholder value? How do you plan to address the ongoing decline?

Ted Karkus (Chairman and CEO)

I think I've already answered that question ad nauseam. Look, at the end of the day, I don't control the stock price. I think shorts are having fun with it right now. I think it's selly. Any portfolio manager out there that likes to invest in penny stocks, I don't see how they don't buy this stock right now. Having said that, the bottom line is you just have to be patient until cash flow starts coming in from Crown Medical Initiative, or we partner on our BE-Smart Esophageal Cancer Test, or we do a strategic initiative, an M&A type transaction, whether that's a reverse merger or similar, that brings out the value in our company. Any of those things would drive our stock price significantly higher, in my opinion.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you for that response. Next question. When will the company stop mentioning the possibility of collecting $25 million in accounts receivables?

Ted Karkus (Chairman and CEO)

I think that's a question out of frustration. We did not anticipate it would take that long to bankrupt the labs sub and get going. Now we've done it. We crossed that hurdle. However long it took, it took. Now we're in expedited litigation going forward. Crown is skipping pleadings. They're going right to meet and confers. They already have hundreds of insurance companies lined up. They're going right into meet and confers right now. All of a sudden, it's like a hockey stick. We're going to start seeing some settlements in a couple of months. Don't know the exact time frame. Then it's going to go like a hockey stick, I believe. It's just going to ramp up. We're going to have significant cash flow. We're going to be a different company once it happens. You want to wait for that to happen?

You can wait for that to happen. Maybe the stock is double or triple where it is now once you see the visibility of that happening. I mean, where are we going on the downside here? It's kind of silly. I hope that answered your question.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you for that response, Ted. Next question. Given the need for capital to fund BE-Smart, is it realistic to use a go-it-alone strategy with regards to BE-Smart? Does it make sense to consider partnering the asset?

Ted Karkus (Chairman and CEO)

That's a good question. My thought is, as some cash flow comes in from Crown, I don't ever want to be in this financial position again. It's not fun. Honestly, it's been the worst year of my life in terms of managing a company with the financial pressure I've been under, with the pressure the stock price has been under. I have no intention of ever being in that type of situation again. I'm not going to spend a lot of money developing our Esophageal Cancer Test. The idea is to kick it off the ground, do sort of a grassroots. I told you we have some world-class scientists and commercialization experts that we're working with. We're going to get more key opinion leaders involved. We're going to get physician networks to sign up.

If we find one decent-sized physician network, we'll get them using our tests with the great results they're going to get. It then will spread like a hockey stick. As it spreads like a hockey stick, the goal would be to join venture. Look, I might be able to join venture now. I don't know what they pay us. They might give us $25 million or $50 million in cash plus a royalty. Wouldn't be so bad. By the same token, they might give us a couple of hundred million dollars and a bigger royalty if I wait 12 months. We will see. There is interest now. I think that the interest is going to, as we start penetrating the market even a little bit, all these other cancer testing companies that have an Esophageal Cancer Test or are developing one are going to be very nervous.

In fact, to be honest with you, I already know they're getting nervous because the day we published in the journal, that very day, one of them contacted us and said, "Hey, let's talk." We'll see where it all goes. No guarantees that I'm going to do anything short term. I don't think it's necessary. By the same token, I'm not going to break the bank and spend a lot of money to develop this right now. It's just not necessary.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you for that response, Ted. Next question. Do you anticipate that the recent weakness in virtual currencies provides an opportunity to the company's strategic initiatives, given you have not yet purchased a significant amount of virtual currencies?

Ted Karkus (Chairman and CEO)

Yeah. So obviously, you're talking about the cryptocurrencies. If we're not going to do a deal, see, we've been talking to crypto asset managers where we would do sort of, I don't want to go into details on it. If we don't do a deal like that, but instead we were just going to invest long-term with a crypto treasury strategy, we have to wait until the Crown Medical collections come in. I would want to pay off debt first, get the company financially sound, and then with excess capital, maybe put together a long-term strategy. There's a lot to go before we would, there's a lot to be done before we would go it alone with that type of strategy. For now, is it possible? Yes, it's always possible. Right now, also, the markets aren't excited.

If you're not the number one leader in a particular crypto, then you're struggling. For instance, and even the ones that are the leaders are struggling from the point of view that when the crypto goes down in price, the stock price is going down. In terms of a multiple to net asset value, if you go back at the beginning of the year, they were trading at two or three times net asset value. Now they're trading at net asset value. If you're not one of the leaders, they're often trading at a discount to net asset value. I pay attention to that. I'm not going to do a deal just for the sake of doing a deal. There's no reason. We have so much underlying value in our company. We have so much potential that we can also go it alone.

We can do a different type of deal that's not a crypto-related deal. That's what I was trying to explain in my press release. It's not that we might not do a crypto-related deal, but that's not our number one focus right now. We have better opportunities out there, we believe. Doesn't mean that that can't change in the future, but we believe we have better opportunities right now.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you for clarifying that, Ted. Your next question is, any update with respect to Linebacker? Is there any potential value or future updates with regards to Linebacker expected?

Ted Karkus (Chairman and CEO)

Wow, that's an interesting question. We have not been doing much with Linebacker. Again, I'm not looking to break the bank on something that is so early stage that in very early studies has potential. That was exciting to me. That is very different from something that's at late stage ready to be commercialized. I don't want to say more about that. I'm surprised somebody even asked that question. Let's just leave it at that on that topic for now.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you for the response nonetheless, Ted. Your next question is, has there been any insider stock purchases this year?

Ted Karkus (Chairman and CEO)

Have there been insider? I don't know. That would probably have to be filed, obviously, and by insiders. The one person that's really an insider is me and the directors. Quite frankly, I deferred a lot of my compensation. It didn't put me in a great financial position to also be buying stock. In fact, I loaned money to the company. That was my way of supporting the company. As far as the directors are concerned, sort of the same thing. They're actually, rather than taking cash compensation, they primarily—I don't want to speak out of turn, I don't know the exact numbers—but they took a lot of stock compensation or stock option compensation in lieu of some of their cash compensation. I think that's putting their best foot forward and also showing support for the company and belief in the company.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you, Ted, for that response. Your next question is, how many DNA test kits have you processed so far in 2025?

Ted Karkus (Chairman and CEO)

Oh, I don't know the number off the top of my head. I'm not going to look that up now. What I will tell you is, since we've been on a tight budget, without us virtually doing any advertising at all, we have such a strong SEO presence. That's called search engine optimization. We've been in the business eight years. We did this the right way. We did a lot of great marketing. Frankly, right now, we're on a very tight budget. I don't want to dilute shareholders unnecessarily to grow a business. I'm sort of laying low until we get more capital in. With virtually no advertising, we're still selling the product. We're selling the product. The beauty is it's on a pro forma base. It's actually profitable now. We've restructured it that much, and we've made it that clean.

It's great business for us to grow as soon as we get a little excess cap. I want excess capital to really grow that business. In a few months, I think we're really going to start growing the business in a nice way.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Thank you, Ted, for shedding some light on that. I think we have time for one more question here. The question is, what do you think is the disconnect between the market's valuation of the company and the underlying assets? You've referenced the value of the underlying assets and the disconnect. What do you think specifically is the main cause of this disconnect?

Ted Karkus (Chairman and CEO)

That's an excellent—I was going to say, I hope it's a good question. That's an excellent question. That's not a snowball question either, but it's a really good one. I believe the disconnect is because we're tight on cash. Every time I go to potential investors, quite frankly, there are a lot of sleazy people in the investment world, and it's really disappointing. If I talk to three potential investors, one of them is going to short the stock and then make me an offer a week later. Everybody knows that we're tight on cash. We've been tight on cash all year. That all changes. Frankly, we're a development stage company tight on cash. It makes us an easy short target, especially if we go to investors and some of them want to fool around with the stock price.

That all changes as soon as the Crown Medical starts flowing. That plus our stock price has been under a dollar. The stock's just been under pressure. You got to understand, are you a trader or are you an investor? If you're an investor, look at the underlying value. Even if there was a little more dilution, so what? Our market cap is so low that once the Crown Medical starts to flow in, or even without the Crown Medical, if I do a deal for our BE-Smart Esophageal Cancer Tests, we'll get a block of cash upfront. I'll probably start buying back stock immediately. Our stock would explode on that if I do a deal like that. Separately, I'm working on a potential deal right now. Again, it's preliminary. I don't want to talk about it more. That disconnect will start to go away.

The fact that there's a disconnect creates an opportunity for potential M&A strategists and bankers who recognize that underlying value in that disconnect. It actually creates an opportunity. Because it creates an opportunity, that's why we're getting inquiries, both not only to me but to scientists at BE-Smart Esophageal Cancer Tests, etc.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Excellent. Thank you very much, Ted, for all of your responses today. That concludes the Q&A session. Before we go, I will turn back the floor to Ted for final remarks.

Ted Karkus (Chairman and CEO)

Noella, thanks so much. Again, thank you, Renmark, for hosting. Thank you to the shareholders. I know he said it 6x today. I feel like a politician today. If you're a shareholder in the company, if you're an investor in the company, and you don't vote the shares, then don't complain to me if we have an issue because you didn't vote your shares. Vote your shares, all right, so that we have the flexibility to do what we need to do if we need to do it. It's not just the flexibility for a reverse stock split. It's also based on potential deals we're working on. The bankers are going to want to see that there isn't a risk that we're always going to be Nasdaq compliant. It's possible we do a big deal, and the stock price will go over a dollar anyway.

Whatever I'm working on, we need you to vote the proxy in order to pass. We wouldn't have put the proxy out there if we didn't need to. There's no guarantee we're going to or not going to do a reverse stock split. Even if we do, quite frankly, I think there's a good probability that our stock price goes up after we do the reverse. It doesn't necessarily have to go down. It's not a bad thing. Guarantees, knock on wood, that we remain Nasdaq compliant. Being Nasdaq compliant is a value to the company. Look, if we got delisted, it's not going to change the value of the company. It's not going to change the value of what we're doing. When we go back above a buck, we do a deal, we'll go back on Nasdaq again. Why go through all that?

At the same time, I'm working on some deals, some things that could be very, very exciting for the company where all the shareholders make a lot of money. It's silly not to vote. I can't stress that strongly enough. Beyond that, I appreciate everybody joining the call and listening to me today. Everything I say is from the heart. It's from living and breathing our company 24/7. I am a fighter. I did this once before, a dozen years ago with the very same company when I inherited it. When I say inherited, I did this—I won a proxy contest, two years of litigation. It was a serious fight just to win control of the company. Finally, I was in control of a company that was virtually going bankrupt, turned it around. It took a number of years. I've done it before.

I can do it again. I'm going to do it again. We're in a similar position. The assets in the company are multiples of what they were the last time I did it. I'm going to do this. If you guys are patient with me, I think that I and our company, and not just me, it's Jason. He built the COVID testing business into a multi-$100 million business. He's now cleaned up the Nebula Genomics business. We have these great businesses. I'm just looking forward to the future. I don't have more to say than that. Everybody, have a great day. Thanks for all your questions. Thanks for listening for the hour. Noella.

Noella Alexander-Young (Media Relations Coordinator and Virtual Event Moderator)

Sorry, I cut you off there, Ted. All righty. Thank you, everyone, for joining us today for the ProPhase Labs third quarter 2025 results. ProPhase is trading on the Nasdaq under the ticker symbol PRPH. The playback will be available on our website 24 to 48 hours after this presentation under the VNDR Library tab. Stay tuned for the next quarterly call and see you next time.