ProPhase Labs, Inc. Q2 FY2021 Earnings Call

Good day and welcome to the ProPhase Labs’ Second Quarter 2021 Financial Results and Corporate Update Conference Call. All participants will be in a listen-only mode. I would like to turn the conference over to Jules Abraham with CORE IR. Please go ahead.

Thank you, Cole. And good morning everyone. Welcome to the ProPhase Labs second quarter 2021 financial results and corporate update conference call. Before we begin today, I’d like to remind everybody that the conference call will contain forward-looking statements including statements relating to the Company’s plans, expectations, future performance and future events, including with respect to the company’s new genome sequencing business, which was recently announced. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Additional information concerning factors that could cause results to differ materially from those forward-looking statements are contained in the earnings release that was issued earlier today as well as in the company’s public filings with the SEC. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required by applicable law. Finally, the conference call is being webcast and the web link is available on the Investor Relations section of the ProPhase Labs website. At this time, I’d like to turn the call over to ProPhase Labs’ Chief Executive Officer, Ted Karkus. Ted, the floor is yours.

Thanks, Jules. Welcome everybody. Thank you so much for joining me and taking the time out of your day to listen to me talk. I love to talk, and this is I guess the one time that I am actually allowed to without feeling guilty about it. I should start by highlighting that we recently hired CORE IR as our IR firm. Jules from CORE, I can tell you that this is a phenomenal firm. They did not ask me to say this, but it just occurred to me. I’m doing weekly calls with many people on their call and I’m really pleased. I believe they will help get the word out about our company to a lot more institutional investors, investment banks, and analysts, and so forth. So, I'm about to talk about some things that are transformational for our company. By coincidence or by design, I hired CORE IR to support us in these efforts as we move forward. We announced the other day what I believe is going to be a transformational acquisition for the company, which is Nebula Genomics. I always try to keep our shareholders up on what our company is doing. I announced a couple of months ago that we had formed two new wholly owned subsidiaries, ProPhase Global Health Care to attempt to move into other companies with diagnostic testing, COVID testing, and vaccines. We have a partnership with the Sputnik vaccine, one of the leading vaccines in the world, certainly outside of the United States. So that’s ProPhase Global Health Care. I’m not going to spend a lot of time on that unless or until we actually consummate a transaction. I just want you to know behind the scenes we are working on that division. I also announced that we had formed ProPhase Precision Medicine. I don’t do these things by accident. I told everyone that we were planning for acquisitions in that division, and now we have just announced our first acquisition, Nebula Genomics. I truly believe it’s going to be transformational for our company. And I’m going to get into that. I do think that I should review the second quarter numbers first and then we’ll get back to that. By way of background, I also announced in addition to ProPhase Precision Medicine and ProPhase Global Healthcare, that we’re also planning on acquiring other laboratories to diversify outside of COVID testing and do all of the more traditional testing that you see at Clear Labs. So, I’m going to get into all that. That’s sort of the big picture. Let’s talk about the second quarter a little bit. Going back to December, we got into the COVID testing business very quickly, within a matter of weeks, we were probably doing more COVID testing than 95% of labs in the country. The reason I pointed that out is because I and our management team have a history of executing on behalf of the company. We are going in some new directions now, and I can give you my word, I’m going to do everything I can to execute. And our management team is going to execute on these new directions. They’re all synergistic to what we’re doing now, and I’ll explain that to you shortly. But going back to December, we got into the COVID testing world very quickly. By January we had ramped up. I mean, the third weekend in December, we started testing, and we were doing about a thousand tests a day based on five days a week. On December 31, I think we had 1500 tests that day, and then in January we had 2000 tests. By mid-January, we had over 2,500 tests by the end of the month. I think we averaged about 2,500 tests a day based on five days a week in January. Our numbers were exploding. It looked like they were going to go through the roof. We built out a lab in Garden City, a state-of-the-art lab, all state-of-the-art equipment. If any of you are ever in the New York or Long Island area, I welcome you to come visit our lab. It’s incredibly impressive. I don’t talk about inspections and things of that nature; we rushed and asked New York to come inspect our lab. We wanted it done quickly. The inspector was incredibly impressed and surprised. The reason I say that is because now that I’m in this business, I have visited a lot of other labs, labs that we’re looking to acquire, and I just cannot believe they tend to be small in nature. None of them are 25,000 square feet. They’re usually more like 1,000 to 4,000 square feet. They don’t have state-of-the-art equipment. So, I can’t tell you how proud I am of our lab. We built this out with the idea that we literally could process 50,000 tests per day. I was very bullish on the company, very bullish on revenues and earnings growth going forward. We had one of our largest customers testing across the State of Texas at the time, in February with the bad weather. While their testing sites got shut down, they kept telling us that they were going to reopen. I kept expecting them to, and then they didn’t. The incidents of COVID just kept dropping. Now, interestingly, at that time, I told everybody that vaccinations typically only have about a 70% uptake in the population. In fact, they said 50% to 70% effectiveness. And so, even with both numbers being around 70%, only about 49% would be protected. With COVID, maybe the numbers were going to be a little higher, but it was going to be the same kind of situation. Interestingly, while everybody thought that our vaccines were so effective, we now find out—I just read yesterday—that the Pfizer vaccine is only 49% effective against the new Delta variant. In fact, we have people in our office vaccinated with Pfizer who got COVID. So, I see it all around us. We don’t know exactly how effective the vaccines are, but they’re clearly looking a lot less effective than people thought just a couple of months ago. Part of it is COVID comes in waves the same way that flu comes in waves. We haven’t even reached the tough cold flu season yet. We now have COVID that is ramping up. So now let’s focus on the second quarter a little bit. We built out a tremendous lab with tremendous capacity, and all our customers back in March and April said that they were about to ramp up, but the incidents of COVID were dropping faster than the initiatives that we were working on. We built tremendous initiatives. We won some big RFPs; we won the Township Awards with Bay’s 300,000 residents—twelve labs competed for this RFP, some of the largest labs in the country. We beat them all because we have a state-of-the-art lab and extremely effective IT. IT is even more important. I learned that once your processing is the best, which is actually more difficult as IT is the collection of patient data and the reporting of results. We have fantastic IT, fantastic customer service. The truth is, when we win a customer, we have found that once they do business with us, they leave the other labs and give us all of their business. I’m really proud of our team for what we built here, but I have no control over macro-level issues that affect our business. Of course, COVID was dropping dramatically. We were well-positioned to do a significant amount of business with proms, graduations, and weddings, and just before these were about to take place—primarily in the state of New York—the Governor changed the rules and said, you don’t have to test. Interestingly, the timing of why they did that caused COVID testing to collapse, resulting in the second quarter being a disappointment from a revenue standpoint because I expected to see even with the drop in COVID, we had the potential for significantly more revenue. However, even that one regulatory rule change dramatically impacted the amount of business that we could have done with the proms, weddings, and graduations. That said, we have all that overhead set up, and even with that, we reported a loss. But if you take out the non-cash charges, it would have actually been a profit. We paid out a $4.5 million special stock dividend. We paid that out of about six weeks of cash flow. The numbers were just ridiculous for a while there, so I was happy to do that. Our cash levels actually increased by $4 million if you factor in the dividend payout, and our net working capital would have been around the same. For a quarter that I was told was disastrous, we still provided value for long-term shareholders. One person even criticized me, claiming my quarter was a disaster and the revenues were a disaster. Well, guess what? For a quarter that was considered a disaster, we didn’t lose money on a non-GAAP basis when you exclude non-cash charges. I would love to communicate that in the press release, but I’ll get in trouble for it because I shouldn’t talk about non-GAAP metrics. I think I can address it during this call, but Monica Brady, our CFO, insisted that it cannot go into the press release. So in our disaster quarter, we paid out a $4.5 million stock dividend, our cash levels remain fantastic, our net working capital remains fantastic, and we did not lose any money on a non-GAAP basis. Most of those non-cash charges are from stock options that we issued during the year. Last year we had no activity in our Employee Stock Option Plan. Though we awarded the options, we could not record them until they were issued, and they could not be issued until the shareholders approved expanding the Employee Stock Option Plan. So what happened is that in the second quarter, all the options from last year were expensed, while all the ones that vested in the first half of the year also got expensed in the second quarter. So, our big disaster was a non-cash charge due to the timing of increasing our Employee Stock Option Plan. Now, having said that, I don’t want to make light of the situation. Obviously, I’m disappointed with the second quarter revenues, but they did increase dramatically year-over-year. Historically, our second quarter is the weakest quarter of the year in our manufacturing and dietary supplement businesses. However, our dietary supplement business is actually growing nicely as I pointed out, and we have widespread distribution of our dietary supplements. That’s actually really important now not only for our dietary supplement business but also for the businesses we’re entering because our dietary supplement business is strong and growing. We have full distribution in food, drug, and mass stores, meaning anything else we introduce to the marketplace that we want to put in these stores, we are in an excellent position to do so now. All the major retailers are asking us what else we have up our sleeve—what else we’re developing. We have a reputation for developing fantastic dietary supplements because we perform clinical studies. Our products have clinical claims, which other dietary supplements do not, and thus, our lead product has been very successful with very little advertising. Retailers are eager to know what our next big product is. So regarding our second quarter, I will be happy to answer questions about it at the end, but if you look forward, we’re in the exact same position—it’s like déjà vu all over again. We announced that we did over 8,000 tests last week, which even surprised me because I didn’t know we were really ramping up yet. We significantly cut back on our overhead. So, it’s the opposite situation from the second quarter where we had tremendous overhead, numerous people working here, and very little business. Our testing revenues were dropping almost every week in the entire quarter. And as I said, I thought we would secure business from proms, weddings, and graduations, but then that disappeared. The quarter ended and it felt like, wow. Even so, we still had significant revenue against a backdrop of very little COVID out there. Now we are cutting back our overhead significantly, and I’m proud that on a non-cash basis if you exclude non-cash charges we’re actually above breakeven—a $1.4 million loss and about $1.7 million in non-cash charges. Dramatic overhead for a major ramp-up in COVID testing while employing over 80 or 100 employees in our lab. Now it’s the opposite situation. We’ve cut our overhead back drastically and suddenly COVID is ramping up again. As I previously mentioned, the Pfizer vaccine is proving less effective for the Delta variant. People are contracting COVID all over the place. A couple of weeks ago, I shared that positivity rates had increased fourfold over the past few weeks. In reality, the positivity rates have surged significantly more than just fourfold. The amount of COVID in the United States has escalated dramatically. The demand for testing and inquiries is spiking. Understand we have a base of customers who are returning from last December and January. That 8,000 tests performed last week came primarily from our largest customer, who was hardly doing any testing at all, and our second largest customer just starting to ramp up. We also have the township of Oyster Bay and Dutchess County, each with a 300,000 resident demographic. We won those huge RFPs. I mentioned earlier; they should generate substantial business for us. We should have exploded in business, but previously, we received virtually no business from either because COVID had dropped off too low, right when we were about to activate. Yet we still won those RFPs, and indications are now coming from the township of Oyster Bay and Dutchess County that they are beginning to require testing again. This leads to tremendous potential going forward. I am a little gun shy regarding estimating our revenues and earnings for the rest of the year, but the possibility is promising. To be honest, I’m primarily focused on our long-term objectives. I am an investor with over 40 years of experience having invested in hundreds, if not thousands, of companies. There’s one rule I live by: it’s terminal value on a per-share basis. What is our company worth today, and what will it likely be worth in three or five years divided by the number of shares outstanding? That value better be increasing over time. My long-term shareholders who have stayed with me through ups and downs are like family to me. These are individuals I've known for 5, 10, 15, or even 20 years, who have invested with me across various companies. They stood by me when our stock hit $0.65 to $1. After turning around the company, I pulled it out of bankruptcy to a valuation of around $50 million. They stuck with me, and many bought additional shares. Since then, we’ve paid a total of $1.80 in dividends based on a stock that we turned around when it was $0.65 to $1. Today, the stock is trading, I don’t know—it might be around $6 or so. Long-term shareholders, we have built value over time, and I intend to continue doing that. I’m the largest shareholder in the company. In fact, I want to note that after the last dividend, additional shares were brought into my account. The bottom line is my goal is to potentially sell the company in a few years for a lot more than its current trading price. So, in terms of your long-term perspective, the stock came down from $16 due to the reduced incidents of COVID. There was a widespread assumption that COVID had disappeared entirely. Now, the situation is the opposite. COVID is returning and, additionally, over the past few months, I indicated that we would diversify and this diversification strategy is now coming to fruition. Within the realm of COVID, I remind you we are also offering antigen tests and antibody tests alongside our PCR tests. Additionally, we are exploring acquiring other labs to perform various testing methods, including pathology, bloodwork, toxicology, urine analysis, etc. I've been working on this for several months. The challenge we face is that we’re a public company, and many of these companies are private with no audited financials, which complicates matters. We are focused on navigating this before completing any further deals, but I assure you, I’ve been diligently pursuing these deals for months, and you can anticipate more news later this year. Regarding diversification, I do not intend for our company to be solely a COVID testing lab in the long run, although our revenue and earnings are likely to see substantial growth over the remaining five months of the year. My aspiration is to build a strong lab business that companies like Quest or LabCorp or BioReference will wish to buy from us at significantly higher valuations in two years. This is a long-term methodical approach to building shareholder value, and we are actively executing on this strategy. We have hired exceptional key executives with 20 to 30 years of experience in founding, building, and selling labs, and I am thrilled with the caliber of talent we have onboard. We’re well-positioned for laboratory growth. Furthermore, our stock underwent a decline from $16 to around $6 amidst a generally strengthening COVID testing landscape, evidenced by our report of over 8,000 tests last week—an impressive figure even before engaging our largest customer from last year. We also have ample agreements with schools. We were testing around 75 to 80 schools last year, and that number could scale massively this year. Now it’s not dire to question whether there’s COVID within testing. Rather, it’s about whether schools will indeed open, which is critical. We expect to generate significant revenue through school testing. Alongside all these initiatives within COVID, I apologize if I’m spending too much time discussing it—it’s not solely my focus. Now let’s shift towards the company’s future during the Q&A. If you’d like to discuss either the second quarter or COVID testing, I’d be happy to. We recently announced a transformational acquisition—Nebula. I don’t think the market fully understood its implications. It may be a case of ‘buy on rumor, sell on news.’ As I’ve stated in prior calls, we intend to make genomics acquisitions. To clarify, we acquired the business at around $14 million, with approximately $4 million in net assets. Most of those net assets are cash. Therefore, we’re looking at a net acquisition cost of approximately $10 million, of which part was cash and part stock. The revenue potential of this business is substantial. I don’t want to make direct comparisons to ancestry.com and 23andMe, but I believe these exciting businesses have revenue models compatible with ours. The internal estimates of Nebula, when we acquired them, suggested they could run at a rate of $8 million to $10 million in revenues. That’s based on providing customers with $300 whole genome sequencing. Let me go back a step; George Church is a recognized founder of Nebula and is also among the pioneers in the field of genomic research. The more I delve into his expertise, the more exciting opportunities arise. We’re in the process of building an Advisory Board, and many superstars in the genomics world express genuine interest in joining. I’m not referring to figureheads—George Church wanted ProPhase Labs stock instead of cash. Those investing institutions sold stock at a price above $7 per share and cannot sell for a period of six months. Our stock traded at roughly $6. If you evaluate that situation, it’s clear that these seasoned entities are betting on ProPhase’s future. George’s insights are poised to guide our company’s trajectory and facilitate collaboration with additional advisors. As we build ProPhase Precision Medicine, we have the potential to connect with startups in genomics that boast incredible potential. I reference that Google’s success involved continuously identifying promising technology startups and acquiring them. Our aim at ProPhase Labs follows that model. Nebula is just the first step. Now, let’s delve further into Nebula’s capabilities. Nebula focuses on whole genome sequencing (WGS), which explores the entire genetic composition rather than only analyzing select segments, as seen with 23andMe and ancestry.com. I’m not a scientist, but in layman’s terms, whole genome sequencing provides between 100 to 1,000 times more genetic information. Companies previously prioritized methods because WGS was prohibitively costly—initially costing $3 billion, reducing to tens of thousands a few years ago, and now common rates are around $1,000. Currently, Nebula effectively manages WGS pricing at just $300 through special partnerships with overseas companies, offering services to consumers such as Quest. They’ve tested their model virtually without advertising, establishing a commendable business generating a run rate of $8 to $10 million. However, I'd like to clarify that GAAP does not recognize revenue until we've provided the service, meaning if a consumer purchases the $300 WGS service, their submission timeline is uncertain. They’re permitted six months to send the specimen, causing ambiguity in immediate revenue recognition. Why sell through Quest? Nebula already demonstrated consumer interest driven by a library of ongoing information, providing monthly updates based on their genetic data. About 50% of Nebula’s customers engage in a subscription service, whether one-time, annually, or monthly. This subscription model is where we see tremendous upside. In short, whole genome sequencing enables the discovery of rare genetic mutations. While DNA tests such as 23andMe identify only common mutations, there are around 7,000 rare genetic mutations that play significant roles in disease risk assessment and drug targeting. The Nebula report includes web-based tools for customers to search genes of interest alongside annotated genetic variants. Clients also benefit from a library of research detailing the implications of their genetic data—this information focuses on categories such as sleep and nutrition. The Nebula library assists customers in evaluating their genetic predisposition to various traits. The critical takeaway here is that genetic research is the future of medicine. We label our division ProPhase Precision Medicine or personalized medicine. When studying genetic data, if researchers correlate it with conditions like breast cancer, lung cancer, or eye melanoma, it enhances our understanding of diagnoses and treatment modalities. Research has suggested that certain genetic mutations influence the efficacy of various treatments, such as chemotherapy. If we could deploy genomic testing effectively, we could identify which treatments offer the best odds of success based on genetic profiles and save lives. Historical costs of whole genome sequencing limited its usage, but they are plummeting, leading us to a tipping point for acceptance. Nebula has shown extraordinary growth primarily on a budget without extensive marketing. Once we pair their robust product line with our food, drug, and mass distribution strategy, utilizing effective advertising methodologies, we expect rapid expansion. Our infrastructure enables us to market Nebula's products effectively and capitalize on existing relationships with major retail players. Whole genome sequencing results yield invaluable health insights, particularly concerning rare genetic mutations tied to numerous conditions. In practical terms, Nebula decodes the entire genome, allowing for a more comprehensive understanding of genetic influences on health. So, in essence, this acquisition is transformational. We intend to leverage the existing food, drug, and mass retail outlets, along with our lab capabilities, which we envisage will secure us a unique market position. Our goal is to exceed current bottlenecks—addressing issues of price complaints and turnaround delays, which have held back consumer uptake. We will expedite turnaround times through our lab and enhance pricing, making it accessible. If, hypothetically, we can push prices below $200, we might see revenues double or even triple. The model’s profitability hinges not just on one-time sales, but ongoing subscriptions based on consumer engagement with tested information. This acquisition represents the foundation for several more strategic implementations in the future. Ultimately, our objective encompasses a dual-driven consumer access approach and research collaboration using the insights generated through genetic testing. The information we're compiling will aid in advancing our understanding of various diseases leading to significant developments in treatment protocols. After 40 years of experience, I can unequivocally state that I aim to build a multibillion-dollar company. I have never had a clear path to realize that until the advent of our CLIA lab along with the COVID testing business bolstering our position and enhancing our capital base. Our lab’s infrastructure equips us to succeed in this evolving market of genomics. We are pursuing significant acquisitions, and we have expert advisors eager to join our Board and help shape our future endeavors. While we are micro-cap in size, we hold substantial assets that speak volumes. During our worst quarter, despite the $4.5 million dividend and in light of the current pandemic appetite for testing services, we are well-positioned moving forward. Like déjà vu all over again, you will see that we can feasibly achieve notable testing through the customer base we’ve established. I have answered multiple questions regarding our past quarter and the exciting trajectory that lies ahead. I’m eager to field any questions during the Q&A. If there are further inquiries regarding the second quarter or COVID testing, I’m here to help. We recently executed our transformational acquisition of Nebula. It’s critical to assess the market’s understanding of this acquisition and its potential. I believe understanding will unfold in the coming months. We are committed to genomics and have various targeted growth initiatives in motion. We are excited and prepared to capture the current momentum in the realm of genetic testing. Thank you for your time; I appreciate your support.

And our first question today will come from Patrick Patterson, Private Investor. Please go ahead.

Okay. Thank you very much. Ted, thank you very much. This is a great job. It’s so exciting. Just hearing you talk, I think you’re going to be a billion-dollar company before the end of the year. I have two questions.

Pat, your lips to God’s ears. It might take me two years, but that’s the goal.

Well, I’ll tell you this: Nebula Genomics is really the key to getting there. My first question is: there’s enough known about genomic sequencing already; it’s been proven highly effective in pharmacogenomics for determining the best medications for patients. For example, people given the wrong antidepressant medicine and similar misprescriptions for asthma or high blood pressure. It’s certainly expensive for insurance companies to miss-prescribe these treatments. What do you know about whether insurance companies will realize the importance of genomic sequencing and whether they will adopt it as a standard and begin paying for it? When will insurance companies start covering it?

Yes, that’s a great question. It’s inevitable, but you’ve got to understand that whole genome sequencing was incredibly expensive just years ago, and insurance companies didn’t want to touch it. Research must keep pace with sequencing efforts. The wonderful aspect with Nebula is they’ve significantly dropped the price below anything else on the market. We’re committed to making that price even more appealing. Insurance companies will eventually come around; it’s just an issue of time. I can’t tell you whether it’ll be one, two, or three years, but the price lowering trend will make it more common. I think consumers will start purchasing this service themselves in greater numbers. It’s a growing industry and calls our company to grow concurrently. Just remember that George Church's vision 10 to 15 years ago has now materialized. We are operating at a cusp of exploding awareness because of genetic advancements. So we’re well-positioned.

A second one, if you will, Ted. Could you give a brief overview of how you see using the 40,000 retail outlets in connection with Nebula Genomics?

Sure. Just briefly about Nebula— they’re new to marketing and haven’t engaged heavily in advertising. They’re primarily an online retailer. We possess a rich history in selling products into food, drug, and mass retail stores. Our relationships with retail franchises have been built over 30 years. This exciting product like Nebula’s is launching at precisely the right moment. If we can lower the price effectively, which I’m confident we can, we will have an easy pathway to push into the food, drug, and mass retail markets. This is just the first step, what they’ve achieved thus far pales in comparison to our growth plans moving forward.

And our next question will come from Fred MacDonald, Private Investor. Please go ahead.

Hey, Ted, great job. I’m kind of mixed; it’s a sort of apples and oranges comparison, but there are two companies that are publicly traded, namely 23andMe and others that are deeply engaged in DNA and ancestry work. If I examine 23andMe, for instance, they have a $3 billion market cap, and $400 million in revenues this year, while we are trading at liquidation value. Can you comment on that?

The bottom line is, through my time as CEO, my primary focus has been to build the company’s value. The share price will eventually reflect that. We have sufficient capital, and I do not currently have to worry overly about the stock price, and I am not concerned about it psychologically. My principal concern became prominent because of the capital raise we accomplished at $12.50 when we failed to enjoy the benefits of it. The past stock performance does impact some long-term shareholders, and it saddens me. However, what I can do is carry on with developing value for this company. Consider how, at $12.50, say a year from now, investors will regard that price as an excellent investment. When evaluating stock performance, keep in mind the difference in investors who trade stock and those who invest long-term.

Good. I received my full cash dividends, so I’m looking forward to more down the line. Thank you very much.

Have a great day! Next question, please.

And our next question will come from Dennis Waldman, Private Investor. Please go ahead.

Hi, Ted. Despite the market reaction, I’m very excited and bullish on the acquisition of Nebula. This is going to allow ProPhase to partake in the exploding market of genetic medicine. I’m a subscriber to Ancestry.com, 23andMe, and Family Tree DNA, each having its advantages. When I heard about the Nebula acquisition, I downloaded my DNA from 23andMe, and I discovered something amazing. What I see is that Nebula’s offering is a superior product; nobody comes close to what they provide for consumers. Could Nebula work with companies like 23andMe to enhance service offerings?

Yes, absolutely. Honestly, I could see 23andMe wanting to acquire us in six months to a year. Given their market cap, it would be financially sensible for them to acquire solid budding genomics companies like ours. But conversely, we have customers currently moving toward Nebula from these competitors because they’re seeking more comprehensive information. The difference primarily resides in the cost of whole genome sequencing—historically, it was far more expensive. Advertising discrepancies also played a significant role. Yet now, whole genome sequencing through Nebula offers substantial advantages. Our goals include closing pricing gaps and improving service turnaround times. We are motivated to scale Nebula for maximum growth.

Our next question will come from George Jane Kens, Private Investor. Please go ahead.

Yes. Thank you, Ted. How are you?

Good, thanks. We’ve run over time. I apologize. If you can keep the question brief, I’d appreciate it.

Are there any plans to strike deals with cities or California where they have a mass vaccine mandate or weekly testing?

Yes, indeed. Look, California is experiencing a scenario that is being echoed around the nation. There’s substantial demand for COVID testing, catching everyone by surprise, especially since we just navigated through a quiet period. There’s heightened awareness since most people feel secure post-vaccination, but that hasn't materialized as only 50% of citizens receive the vaccine. Compounding matters, the vaccination efficiency has diminished, with the Pfizer vaccine showing only limited effectiveness against variants. The situation is evolving; I don’t want to appear pessimistic, but we are witnessing a new wave of COVID with various variants surfacing. There is increased incoming inquiries as schools across the nation express interest in conducting testing. I’m experiencing a strong influx in inquiries from prospective customers—this is already happening in real-time. We hired extensively to meet this demand.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines at this time.