ProPhase Labs Stockholders Deliver Strong Mandate at Special Meeting UNIONDALE, NY, Sept. 12, 2025 (GLOBE NEWSWIRE) -- ProPhase Labs, Inc. (NASDAQ: PRPH) (“ProPhase” or the “Company”), a next generation biotech, genomics and consumer products company, today announced that stockholders delivered a strong mandate at the Company’s September 9, 2025 Special Meeting, approving all proposals on the agenda. With each proposal receiving more than 75% support, ProPhase received clear authorization to move forward wi ...

Prophase Labs (PRPH) Conference Summary Company Overview - Prophase Labs is currently focusing on several business verticals, including a significant initiative with Crown Medical Collections, which is projected to generate $50 million in cash collections, potentially exceeding the company's current market cap of $15 million [6][7][19] - The company has a history of successful ventures, including COVID testing, which generated $100 million in annual revenue [8][10] Key Initiatives Crown Medical Collections - The company is pursuing $153 million in collections related to COVID testing, with a conservative estimate of $50 million expected to be collected [14][15] - Legal representation is on a contingency basis, indicating confidence in the collection process [16][17] - Potential securitization of receivables is being explored to secure upfront funding [18] Esophageal Cancer Test (BSmart) - The clinical study results for the esophageal cancer test have been promising, with expectations for publication in a major journal [37][38] - The target market for the test is estimated to be between $7 billion and $14 billion, based on the number of endoscopies performed annually [45] - The test aims to improve diagnostic accuracy for esophageal cancer, which has a high mortality rate due to late diagnosis [41][42] Nebula Genomics - The company has restructured its genomics business, which is now breakeven to profitable after significant overhead reductions [54][60] - The focus is on providing comprehensive DNA analysis and health-related reports, with a strong emphasis on customer retention through subscription models [55][59] Crypto Treasury Strategy - Prophase Labs is developing a crypto treasury strategy, aiming to leverage Bitcoin as a store of value and generate yield without diluting shareholders [69][75] - The strategy involves working with experienced investment bankers and crypto managers to ensure a conservative approach [70][94] - The company plans to raise capital at higher stock prices and invest in Bitcoin, potentially generating significant earnings [81][99] Financial Position and Market Cap - The current market cap of Prophase Labs is approximately $14 million, with a potential net asset value estimated at $100 million or more [85] - The company has faced challenges with high-interest debt but has made significant strides in cleaning up its balance sheet [28][29][64] Management's Vision - The CEO emphasizes a commitment to protecting shareholder value and executing on growth strategies without unnecessary dilution [105][106] - The management team is focused on building value through strategic initiatives and leveraging past successes in the COVID testing space [104][107] Conclusion - Prophase Labs is positioned to capitalize on multiple growth opportunities, including significant cash collections, innovative medical testing, and a strategic entry into the cryptocurrency market, all while maintaining a focus on shareholder value and operational efficiency [19][20][21]

Core Points - ProPhase Labs Inc. will participate in a live Virtual Non-Deal Roadshow on September 4, 2025, to discuss its latest investor presentation [2][3] - The presentation will cover a general overview of the company, its crypto treasury strategy, significant liquidity events, and the cancellation of the Equity Line of Credit (ELOC) [3] Company Overview - ProPhase Labs Inc. is a next-generation biotech, genomics, and consumer products company focused on healthcare innovation [5] - The company aims to revolutionize healthcare through Whole Genome Sequencing solutions and diagnostic developments, including a test for early detection of esophageal cancer [5] - ProPhase Labs is committed to executional excellence, smart diversification, and a synergistic omni-channel approach to health and wellness solutions [5]

Core Viewpoint - ProPhase Labs, Inc. is positioning itself for innovative growth through a series of proposals aimed at enhancing its financial flexibility and strategic resources, particularly in the biotech, genomics, and digital asset sectors [3][4][9] Group 1: Proxy Statement and Shareholder Meeting - ProPhase filed a definitive proxy statement with the SEC on August 15, 2025, and received a "no further comments" letter from the SEC on August 18, 2025, indicating the completion of the review process [1] - The Special Meeting of Shareholders has been rescheduled from August 29, 2025, to September 9, 2025, to ensure proper dissemination of definitive proxy materials [2] Group 2: Proposals and Strategic Initiatives - The Board of Directors recommends shareholders vote 'FOR' all proposals, which include advancing a crypto treasury strategy and supporting the commercialization of the BE-Smart™ Esophageal Cancer test [3][4] - Key proposals include increasing authorized shares from 50 million to 1 billion and authorizing a $15 million share repurchase program, aimed at providing flexibility for the crypto treasury strategy [4][5] - The increase in authorized shares is intended to attract major players in the crypto industry and facilitate the establishment of new crypto-related verticals [5] Group 3: Financial Strategy and Future Outlook - The management is exploring a crypto treasury strategy that could leverage potential liquidity events, including a projected $50 million from the Crown Medical Collections initiative and a possible sale of Nebula Genomics [6] - CEO Ted Karkus highlighted the company's previous success in raising capital without diluting shareholder value and emphasized the commitment to building shareholder value through strategic financing [7] - The company aims to utilize potential liquidity events to invest in a crypto treasury strategy that could generate yield and earnings for shareholders [6][7] Group 4: Shareholder Engagement - ProPhase emphasizes the importance of proactive shareholder engagement and encourages shareholders to review the definitive proxy statement for detailed information on the proposals [9][10]

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited financial statements reflect a reduced net loss from discontinued operations gain and active financing efforts Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $24,571 | $30,637 | | **Total Assets** | **$42,041** | **$63,200** | | **Total Current Liabilities** | $25,626 | $32,134 | | **Total Liabilities** | **$30,605** | **$55,847** | | **Total Stockholders' Equity** | **$11,436** | **$7,353** | - The **significant decrease in total assets and liabilities** from December 2024 to June 2025 is primarily due to the reclassification and subsequent sale of the Pharmaloz Manufacturing Inc. (PMI) business, which is presented as discontinued operations[11](index=11&type=chunk)[33](index=33&type=chunk) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Statement of Operations Summary (in thousands, except per share amounts) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues, net | $1,247 | $1,504 | $2,678 | $3,860 | | Gross profit (loss) | $734 | $(155) | $1,260 | $(215) | | Loss from continuing operations | $(4,472) | $(5,463) | $(9,150) | $(10,987) | | Income (loss) from discontinued operations | $0 | $(690) | $8,644 | $(1,431) | | **Net income (loss)** | **$(4,472)** | **$(6,153)** | **$(506)** | **$(12,418)** | | Net loss per share, basic and diluted | $(0.11) | $(0.33) | $(0.01) | $(0.67) | - The **net loss for the six months ended June 30, 2025, was significantly reduced** due to an **$8.7 million gain** from the disposal of discontinued operations (PMI and PREH)[15](index=15&type=chunk)[182](index=182&type=chunk) - The company recognized **$1.9 million in Employee Retention Tax Credit income** during Q2 2025, which partially offset the loss from operations[15](index=15&type=chunk) Condensed Consolidated Statements of Stockholders' Equity - **Total stockholders' equity increased from $7.4 million at the beginning of 2025 to $11.4 million at June 30, 2025**. This was primarily driven by the issuance of common and treasury shares for cash, which raised **net proceeds of $3.6 million**, offsetting the net loss for the period[19](index=19&type=chunk)[104](index=104&type=chunk) Condensed Consolidated Statements of Cash Flows Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(3,628) | $(9,982) | | Net cash provided by investing activities | $920 | $2,559 | | Net cash provided by financing activities | $2,199 | $7,594 | | **Decrease in cash and cash equivalents** | **$(509)** | **$171** | | Cash and cash equivalents at end of period | $169 | $1,780 | - **Financing activities in the first six months of 2025 provided $2.2 million in cash**, primarily from the issuance of common shares ($3.6 million) and new notes payable ($1.2 million), offset by repayment of other notes ($2.5 million)[22](index=22&type=chunk) Notes to Condensed Consolidated Financial Statements Notes detail corporate structure, $8.7 million gain from discontinued operations, complex financing, and a subsequent private placement - **Discontinued Operations:** On January 16, 2025, the company **sold its manufacturing subsidiaries, PMI and PREH**. The transaction involved cash payments, debt extinguishment, and assumption of liabilities, resulting in a recognized **gain on sale of approximately $8.7 million**[33](index=33&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) - **Debt Financing:** The company has **multiple outstanding debt facilities**, including agreements for the sale of future receipts, a collateralized loan, and loans from the CEO and an unaffiliated investor, which included the issuance of warrants[68](index=68&type=chunk)[70](index=70&type=chunk)[81](index=81&type=chunk) - **Equity Financing:** Through its Equity Line of Credit with Keystone Capital, the company **sold 11.3 million shares of common stock for net proceeds of $3.6 million** in the first six months of 2025[101](index=101&type=chunk)[104](index=104&type=chunk) - **Lease Termination:** In March 2025, the company terminated its New York office leases, resulting in a **recognized loss on lease termination of $1.4 million**, which included writing off assets and a settlement payment[154](index=154&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk) - **Subsequent Event:** On July 22, 2025, the company entered into a **private placement for an aggregate principal cash investment of $3.0 million** in senior secured convertible notes and warrants[190](index=190&type=chunk)[191](index=191&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strategic shift, revenue decline, improved gross margin, reduced G&A, and tight liquidity with reliance on capital access Results of Continuing Operations Q2 2025 vs Q2 2024 Performance (in thousands) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $1,247 | $1,504 | $(257) | | Gross Profit (Loss) | $734 | $(155) | $889 | | General & Admin Expenses | $4,624 | $6,933 | $(2,309) | | Net Loss from Continuing Ops | $(4,472) | $(5,463) | $991 | Six Months 2025 vs Six Months 2024 Performance (in thousands) | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $2,678 | $3,860 | $(1,182) | | Gross Profit (Loss) | $1,260 | $(215) | $1,475 | | General & Admin Expenses | $8,716 | $14,232 | $(5,516) | | Net Loss from Continuing Ops | $(9,150) | $(10,987) | $1,837 | - The **improvement in gross margin** was attributed to a better product mix in the consumer products segment. The **decrease in G&A expenses** was mainly due to lower personnel costs, overhead, and professional fees following the divestiture of PMI[214](index=214&type=chunk)[216](index=216&type=chunk)[223](index=223&type=chunk) Non-GAAP Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | GAAP loss from continuing operations | $(4,472) | $(5,463) | $(9,150) | $(10,987) | | **Adjusted EBITDA from continuing operations** | **$(807)** | **$(4,829)** | **$(2,421)** | **$(9,182)** | Liquidity and Capital Resources - As of June 30, 2025, the company had **cash and cash equivalents of $169,000**, down from $678,000 at year-end 2024. The **working capital deficit was $1.1 million**[232](index=232&type=chunk) - Management states that despite the low cash balance and ongoing losses, it estimates it has **enough cash and liquidity to finance operations for at least 12 months**, relying on access to existing and other financing sources like its at-the-market facility[233](index=233&type=chunk) - The primary sources of capital have been diagnostic services, product sales, equity offerings, and promissory notes. The company **anticipates continued losses and will need additional capital** to fund operations and R&D[233](index=233&type=chunk)[235](index=235&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company reports no material exposure to market risks, including foreign currency, interest rates, or commodity prices - The company does not believe it has **no material exposure to market risks** such as interest rates, foreign currency fluctuations, or commodity prices[253](index=253&type=chunk)[254](index=254&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management deemed disclosure controls effective, while actively remediating previously identified material internal control weaknesses - Management concluded that **disclosure controls and procedures were effective** as of June 30, 2025[258](index=258&type=chunk) - The company is continuing to work on **remediating a previously disclosed material weakness in internal controls**[259](index=259&type=chunk) [PART II. OTHER INFORMATION](index=44&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - As of the filing date, the company is **not involved in any material legal proceedings**[263](index=263&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) Key risks include significant debt, potential Nasdaq delisting, and the need for shareholder approval for recent financing - **Debt Service Risk:** The company may **not generate sufficient cash flow to service its approximately $3.3 million of outstanding indebtedness** as of June 30, 2025[266](index=266&type=chunk) - **Nasdaq Delisting Risk:** The company is **not in compliance with Nasdaq's minimum $1.00 bid price rule**. It has been granted an **extension until December 22, 2025**, to regain compliance[267](index=267&type=chunk)[270](index=270&type=chunk) - **Financing and Shareholder Approval Risk:** A recent private placement of convertible notes and warrants is subject to Nasdaq shareholder approval rules and the company's authorized share limit. **Failure to obtain approval to increase authorized shares could restrict conversions and warrant exercises**, potentially requiring cash settlement[273](index=273&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued 1,000,000 unvested warrants to lenders in connection with secured loan agreements, exempt from registration - On June 22, 2025, the company **issued two unvested warrants, each to purchase 500,000 shares**, in connection with loan agreements. The warrants vest upon shareholder approval of an increase in authorized shares[274](index=274&type=chunk)[275](index=275&type=chunk) [Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the period [Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations [Other Information](index=46&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter [Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including various agreements and certifications

Financial Data and Key Metrics Changes - The company is currently valued at approximately $15 million, which is significantly lower than the potential value of its esophageal cancer test, estimated to be worth hundreds of millions within a year [44] - The anticipated cash recovery from Crown Medical Collections is around $50 million, which is more than three times the company's current market cap [10][27] Business Line Data and Key Metrics Changes - Prophase Biopharma is focusing on the esophageal cancer test, which has recently been awarded a critical patent for eight key protein biomarkers associated with esophageal cancer [30][38] - Nebula Genomics has undergone significant restructuring, including shutting down its lab and changing its business model to focus on subscription renewals, which is expected to lead to profitability [48][49] Market Data and Key Metrics Changes - The esophageal cancer test market is substantial, with approximately 67 million endoscopies performed annually in the U.S., leading to a potential reimbursement of up to $28 billion from insurance companies [33][34] - The company is targeting a network of gastroenterologists to adopt its test, leveraging relationships with key opinion leaders and institutions like Mayo Clinic [64][103] Company Strategy and Development Direction - The company is pursuing a crypto treasury strategy, aiming to attract significant partners and raise capital through authorized shares, which is seen as crucial for future growth [67][78] - The management is focused on commercializing the esophageal cancer test and plans to publish studies in major journals to gain legitimacy and acceptance in the medical community [92][94] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in recovering funds from insurance companies through legal action, anticipating a court date within four to eight weeks [106] - The CEO highlighted the importance of shareholder support for the proposed increase in authorized shares to facilitate future capital raises and attract large partners [87][90] Other Important Information - The company has a history of success in the lab business, previously outperforming 95% of labs during the COVID testing phase, and aims to replicate that success with the new initiatives [15][28] - The management emphasized the need for clinical studies to support product claims, particularly for the Equivir product, which is currently awaiting final results [60] Q&A Session Summary Question: What are the next steps for BSmart? - The next steps include publishing a study in a major journal and engaging key opinion leaders to promote the test [92][93] Question: When will the esophageal cancer test hit the retail markets? - The test will be integrated into existing endoscopy procedures, requiring no additional steps from patients or doctors [99][100] Question: Can you provide an update on the timing for collecting from Crown? - The company expects to start collecting within four to eight weeks after the bankruptcy court proceedings begin [106] Question: What line of crypto investing opportunities are being considered? - The focus is primarily on Bitcoin, with aspirations to model the company's strategy after MicroStrategy [108]

Investor FORWARD LOOKING STATEMENTS Except for the historical information contained herein, this document contains forward tooking statements within the meaning of the Privates Securities Litigation Reform A stakements regarding our stralegy, plans, objectives and intitatives, including our expectations regarding the tubue revenue growth potential of each of our substitiance, for commercializing our BE-Smart Esophageal Cancer Test, our expectations regarding future liquidity events, the success of our effor ...

[Q2 2025 Financial Results and Strategic Update](index=1&type=section&id=Q2%202025%20Financial%20Results%20%26%20Strategic%20Update) ProPhase Labs announced its Q2 2025 financial and operational results, highlighting significant improvements and advancing non-dilutive liquidity initiatives for transformative growth [Company Announcement & Overview](index=1&type=section&id=Company%20Announcement%20%26%20Overview) ProPhase Labs announced its Q2 2025 financial and operational results, highlighting significant improvements and advancing non-dilutive liquidity initiatives for transformative growth - ProPhase Labs announced its financial and operational results for the three and six months ended June 30, 2025[1](index=1&type=chunk) - The company achieved significant operational and financial improvements, advancing multiple non-dilutive liquidity initiatives aimed at transformative growth[1](index=1&type=chunk) - The company will host a virtual conference call on Wednesday, August 13, 2025, at 2:00 PM ET[1](index=1&type=chunk)[2](index=2&type=chunk) [Key Highlights and Subsequent Events](index=1&type=section&id=Key%20Highlights%20and%20Subsequent%20Events) The company achieved key Q2 and year-to-date milestones, including BE-Smart™ patent approval, Nebula Genomics reaching breakeven, and significant financial and operational improvements - The BE-Smart™ esophageal pre-cancer diagnostic test received a key U.S. patent, strengthening the IP portfolio and accelerating commercialization[4](index=4&type=chunk)[6](index=6&type=chunk) - Nebula Genomics transitioned from sustained losses to **breakeven** with a clear path to profitability by streamlining operations, exiting in-house labs, and optimizing cost structures[5](index=5&type=chunk) - Achieved significant profitability turnaround, with stockholders' equity increasing to **$11.5 million** as of June 30, 2025, operating expenses decreasing by **over 35%** year-over-year, and most high-cost debt repaid[6](index=6&type=chunk) - Completed strategic portfolio adjustments, generating **$8.7 million** from the sale of PMI and Pharmaloz real estate and eliminating **over $20 million** in debt/liabilities[6](index=6&type=chunk) [BE-Smart™ Esophageal Pre-Cancer Diagnostic Test](index=1&type=section&id=BE-Smart%E2%84%A2%20Esophageal%20Pre-Cancer%20Diagnostic%20Test) The BE-Smart™ test received a key U.S. patent, strengthening its IP portfolio and accelerating market entry under favorable regulatory conditions - In August 2025, the U.S. Patent and Trademark Office granted a key U.S. patent for the company's BE-Smart™ esophageal adenocarcinoma risk assessment test[4](index=4&type=chunk) - ProPhase Labs owns the entire intellectual property portfolio behind BE-Smart™[4](index=4&type=chunk) - BE-Smart™ is accelerating market entry following favorable regulatory changes and continues development under the CLIA framework[6](index=6&type=chunk) [Nebula Genomics Operations Streamlining](index=1&type=section&id=Nebula%20Genomics%20Operations%20Streamlining) Nebula Genomics successfully transformed into a leaner, more scalable business, achieving breakeven profitability through operational streamlining and cost optimization - Nebula Genomics has successfully transformed into a leaner, stronger, and more scalable business[5](index=5&type=chunk) - Through streamlined operations, exiting in-house labs, and optimizing team and technology expenses, Nebula transitioned from historical losses to **breakeven** with a clear path to sustained profitability[5](index=5&type=chunk) - Nebula is prepared for its next growth phase, whether through a strategic sale or continued expansion over the next 9 to 12 months[5](index=5&type=chunk) [Financial & Operational Achievements](index=1&type=section&id=Financial%20%26%20Operational%20Achievements) The company achieved a clear profitability turnaround, significantly increasing stockholders' equity and reducing operating expenses and high-cost debt - Achieved a clear turnaround in profitability, including significant positive impacts from subsequent events[6](index=6&type=chunk) - Stockholders' equity increased from **$7.4 million** at year-end 2024 to **$11.5 million** as of June 30, 2025[6](index=6&type=chunk) - Year-to-date operating expenses decreased by **over 35%** through rigorous portfolio optimization and cost controls[6](index=6&type=chunk) - Repaid most commercial cash advance debt, reducing overhead and increasing financial flexibility[6](index=6&type=chunk) - Gross margins improved in Q2 2025, with losses narrowing compared to Q2 2024[6](index=6&type=chunk) [Strategic Growth Initiatives](index=2&type=section&id=Strategic%20Growth%20Initiatives) ProPhase Labs is pursuing strategic growth initiatives, including recovering **$50 million** in insurance claims via Crown Medical Collections and a board-approved crypto treasury strategy for non-dilutive funding - Crown Medical Collections is expected to recover approximately **$50 million** in insurance receivables for ProPhase (net of contingency fees), with significant cash flow anticipated in the coming months[7](index=7&type=chunk)[8](index=8&type=chunk) - The company is actively pursuing non-dilutive financing strategies, including Debtor-in-Possession (DIP) or similar funding, to support core business development[7](index=7&type=chunk)[8](index=8&type=chunk)[11](index=11&type=chunk) - The Board has approved a strategic treasury initiative to acquire and hold selected digital assets, including Bitcoin, as a complementary growth lever for the core diagnostic and consumer health businesses[9](index=9&type=chunk) - The Board is exploring share issuance guardrails to prevent unnecessary dilution and ensure agile action to raise substantial capital with minimal dilution during significant stock price appreciation[10](index=10&type=chunk)[11](index=11&type=chunk) [Crown Medical Collections Opportunity](index=2&type=section&id=Crown%20Medical%20Collections%20Opportunity) Crown Medical Collections is projected to recover approximately **$50 million** in insurance receivables for ProPhase, with significant cash flow expected in the coming months - Crown Medical Collections is estimated to recover approximately **$50 million** in insurance receivables for ProPhase, net of contingency fees[7](index=7&type=chunk) - The company anticipates Crown Medical's efforts will begin generating significant cash flow in the coming months, potentially sooner[8](index=8&type=chunk) - Management is actively pursuing non-dilutive financing strategies, such as Debtor-in-Possession (DIP) financing, to support core business development[7](index=7&type=chunk) [Crypto Treasury Strategy & Share Issuance Guardrails](index=2&type=section&id=Crypto%20Treasury%20Strategy%20%26%20Share%20Issuance%20Guardrails) The Board approved a strategic crypto treasury plan to acquire digital assets and is evaluating share issuance guardrails to prevent dilution while enabling future capital raises - The Board has approved a strategic treasury initiative involving the acquisition and long-term holding of selected digital assets, including Bitcoin, as a complementary growth lever for core operations[9](index=9&type=chunk) - The company is not pursuing a reverse merger but seeks collaboration with leading cryptocurrency players while advancing its core business[9](index=9&type=chunk) - The Board is evaluating share issuance guardrails to avoid unnecessary dilution and ensure flexibility to raise hundreds of millions of dollars with minimal dilution if the stock price significantly appreciates[10](index=10&type=chunk) - The goal is to fund the crypto treasury strategy through Crown Medical Collections and other potential liquidity events, such as a possible sale of Nebula Genomics, without issuing new shares[11](index=11&type=chunk) [CEO Commentary](index=2&type=section&id=CEO%20Commentary) CEO Ted Karkus highlighted H1 2025 as a transformative period, marked by non-core asset divestitures, debt reduction, streamlined costs, positive gross margins, and accelerated BE-Smart™ market entry - H1 2025 was a transformative period for ProPhase, marked by the divestiture of non-core businesses, a reduction of **over $10 million** in liabilities, significant gains, and continued cost structure streamlining[13](index=13&type=chunk) - These measures significantly improved the balance sheet and sharpened the company's focus on high-potential opportunities in diagnostics and consumer health[13](index=13&type=chunk) - Operationally, the company achieved positive gross margins and nearly halved operating losses year-over-year[14](index=14&type=chunk) - The FDA's recent non-enforcement stance on LDTs enables a faster market launch for the BE-Smart™ test[14](index=14&type=chunk) - The company is committed to advancing the commercial potential of its core businesses while actively exploring new cryptocurrency treasury initiatives[14](index=14&type=chunk) [Detailed Financial Performance](index=3&type=section&id=Detailed%20Financial%20Results) This section provides a comprehensive overview of the company's financial performance, including comparative results for the three months ended June 30, 2025, and its financial position and liquidity [Three Months Ended June 30, 2025 vs. 2024](index=3&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20vs.%202024) For Q2 2025, net revenue decreased year-over-year, but improved product mix and cost controls led to positive gross margins and reduced operating losses Q2 2025 Key Financial Data (vs. Q2 2024) | Metric | June 30, 2025 (USD Thousands) | June 30, 2024 (USD Thousands) | Change (USD Thousands) | Change (%) | | :--------------------------------- | :---------------------------- | :---------------------------- | :--------------------- | :--------- | | Net Revenue | 1,247 | 1,504 | (257) | -17.1% | | Cost of Revenues | 513 | 1,659 | (1,146) | -69.1% | | Gross Profit (Loss) | 734 | (155) | 889 | 573.5% | | General and Administration | 4,624 | 6,933 | (2,309) | -33.3% | | Research and Development | 4 | 140 | (136) | -97.1% | | Net Loss from Continuing Operations | (4,472) | (5,463) | 991 | -18.1% | | Diluted Loss Per Share from Continuing Operations | (0.11) | (0.29) | 0.18 | -62.1% | - Gross margin significantly improved from **(10.3)%** in Q2 2024 to **58.9%** in Q2 2025, primarily due to a better product mix in consumer products[19](index=19&type=chunk) - General and administrative expenses decreased by **$2.3 million**, mainly due to reduced personnel, management, and professional service fees, along with the removal of PMI-related costs[20](index=20&type=chunk) - Research and development expenses decreased by **$0.136 million**, reflecting streamlined focus and efforts due to reduced product development and field testing activities[21](index=21&type=chunk) [Financial Position and Liquidity](index=3&type=section&id=Financial%20Position%20and%20Liquidity) As of June 30, 2025, cash and equivalents decreased, but working capital deficit improved, and shareholder equity significantly increased due to equity issuance and asset sales H1 2025 Financial Position Overview | Metric | June 30, 2025 (USD Thousands) | December 31, 2024 (USD Thousands) | Change (USD Thousands) | | :--------------------- | :---------------------------- | :-------------------------------- | :--------------------- | | Cash and Cash Equivalents | 169 | 678 | (509) | | Working Capital Deficit | (1,100) | (1,500) | 400 | | Stockholders' Equity | 11,400 | 7,400 | 4,000 | - Cash and cash equivalents decreased by approximately **$0.5 million**, primarily due to **$4.2 million** cash used in operations and **$2.5 million** in note repayments, partially offset by **$4.7 million** from common stock and note issuances and **$0.8 million** from PMI sale[23](index=23&type=chunk) - Stockholders' equity increased from **$7.4 million** as of December 31, 2024, to **$11.4 million** as of March 31, 2025[23](index=23&type=chunk) [Non-GAAP Financial Measures](index=10&type=section&id=Non-GAAP%20Financial%20Measures) This section presents the reconciliation of non-GAAP financial metrics, including EBITDA and Adjusted EBITDA, to their most directly comparable GAAP measures [Reconciliation of EBITDA and Adjusted EBITDA](index=10&type=section&id=Reconciliation%20of%20EBITDA%20and%20Adjusted%20EBITDA) The company provides EBITDA and Adjusted EBITDA as non-GAAP metrics to offer supplemental insights into ongoing operational performance, excluding specific non-cash and non-recurring items - EBITDA is defined as net income (loss) before net interest expense, income taxes, depreciation, and amortization[36](index=36&type=chunk) - Adjusted EBITDA further excludes acquisition costs, other non-cash items, and non-recurring expenses[36](index=36&type=chunk) - The company uses EBITDA and Adjusted EBITDA to evaluate and manage operations, considering them useful supplemental information regarding ongoing economic performance[38](index=38&type=chunk) EBITDA and Adjusted EBITDA Reconciliation (USD Thousands) | Metric | June 30, 2025 | June 30, 2024 | | :--------------------------------- | :------------ | :------------ | | GAAP Loss from Continuing Operations | (4,472) | (5,463) | | Net Interest | 587 | 522 | | Income Tax Benefit | 779 | (2,287) | | Depreciation and Amortization | 1,349 | 1,536 | | **EBITDA** | **(1,757)** | **(5,692)** | | Stock-Based Compensation Expense | 508 | 796 | | Non-Cash Rent Expense | 442 | 67 | | **Adjusted EBITDA from Continuing Operations** | **(807)** | **(4,829)** | [Corporate Information and Disclosures](index=4&type=section&id=Corporate%20Information%20%26%20Disclosures) This section provides essential company information, forward-looking statements, and investor relations contacts [About ProPhase Labs Inc.](index=4&type=section&id=About%20ProPhase%20Labs%20Inc.) ProPhase Labs Inc. is a next-generation biotechnology, genomics, and consumer products company focused on building a healthier world through innovative and actionable insights - ProPhase Labs (Nasdaq: PRPH) is a next-generation biotechnology, genomics, and consumer products company[24](index=24&type=chunk) - The company's mission is to build a healthier world through bold innovation and actionable insights[24](index=24&type=chunk) - Key businesses include industry-leading whole genome sequencing solutions, breakthrough diagnostic development like esophageal cancer early detection, and a world-class direct-to-consumer OTC dietary supplement platform[24](index=24&type=chunk) - In August 2025, the company's BE-Smart™ esophageal adenocarcinoma risk assessment test received a key U.S. patent[24](index=24&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This document contains forward-looking statements under the Private Securities Litigation Reform Act of 1995, involving risks and uncertainties that may cause actual results to differ materially from projections - This document contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995[25](index=25&type=chunk) - Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from projections[25](index=25&type=chunk) - The company undertakes no obligation to update forward-looking statements unless required by applicable securities laws[25](index=25&type=chunk) [Media and Investor Relations](index=4&type=section&id=Media%20and%20Investor%20Relations) Contact information for ProPhase Labs Inc.'s media relations, institutional investors, and retail investor relations is provided - Media and institutional investor relations contact: investorrelations@prophaselabs.com[26](index=26&type=chunk) - Retail investor relations contact: Renmark Financial Communications, John Boidman, jboidman@renmarkfinancial.com, Phone: (416) 644-2020 or (212) 812-7680[26](index=26&type=chunk) [Condensed Consolidated Financial Statements](index=5&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the company's condensed consolidated balance sheets, statements of operations and comprehensive income (loss), and cash flows [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed consolidated balance sheets for ProPhase Labs Inc. and its subsidiaries detail assets, liabilities, and stockholders' equity as of June 30, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (USD Thousands, except share and per share amounts) | | | June 30, 2025 | | December 31, 2024 | | --- | --- | --- | --- | --- | | | | (Unaudited) | | | | **ASSETS** | | | | | | **Current assets** | | | | | | Cash and cash equivalents | $ | 169 | $ | 678 | | Accounts receivable, net | | 20,086 | | 20,058 | | Inventory, net | | 830 | | 1,143 | | Prepaid expenses and other current assets | | 3,484 | | 2,615 | | Current assets in discontinued operations | | — | | 6,143 | | **Total current assets** | | **24,571** | | **30,637** | | Property, plant and equipment, net | | 3,581 | | 7,501 | | Prepaid expenses, net of current portion | | 151 | | 217 | | Operating lease right-of-use asset, net | | 45 | | 4,115 | | Intangible assets, net | | 8,459 | | 9,750 | | Goodwill | | 5,231 | | 5,231 | | Other assets | | 3 | | 310 | | Non-current assets in discontinued operations | | — | | 5,439 | | **TOTAL ASSETS** | **$** | **42,041** | **$** | **63,200** | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | | | **Current liabilities** | | | | | | Accounts payable | $ | 15,032 | $ | 13,717 | | Accrued diagnostic services | | 75 | | 31 | | Accrued advertising and other allowances | | 151 | | 151 | | Finance lease liabilities | | 2,625 | | 2,147 | | Operating lease liabilities | | 102 | | 1,214 | | Short-term loan payable, net of discount of $304 and $237 | | 2,425 | | 3,207 | | Deferred revenue | | 1,418 | | 1,698 | | Income tax payable | | 1,374 | | 1,987 | | Other current liabilities | | 1,765 | | 2,115 | | Current liabilities in discontinued operations | | — | | 5,867 | | **Total current liabilities** | | **25,626** | | **32,134** | | **Non-current liabilities:** | | | | | | Unsecured promissory notes, net of discount of $127 | | — | | 9,873 | | Unsecured long-term debt, net of discount of $216 and $423 | | 436 | | 1,779 | | Due to sellers (see Note 3) | | 2,000 | | 2,000 | | Deferred revenue, net of current portion | | 654 | | 784 | | Operating lease liabilities, net of current portion | | — | | 3,762 | | Finance lease liabilities, net of current portion | | 1,889 | | 2,591 | | Non-current liabilities in discontinued operations | | — | | 2,924 | | **Total non-current liabilities** | | **4,979** | | **23,713** | | **Total liabilities** | | **30,605** | | **55,847** | | **COMMITMENTS AND CONTINGENCIES** | | | | | | **Stockholders' equity** | | | | | | Preferred stock authorized 1,000,000, $0.0005 par value, no shares issued and outstanding | | — | | — | | Common stock authorized 50,000,000, $0.0005 par value, 41,541,205 and 29,874,029 shares outstanding, respectively | | 29 | | 23 | | Additional paid-in capital | | 120,145 | | 129,921 | | Subscription receivable | | — | | — | | Accumulated deficit | | (58,899) | | (58,393) | | Treasury stock, at cost, 8,692,005 and 12,940,967 shares , respectively | | (49,643) | | (64,000) | | Accumulated other comprehensive loss | | (196) | | (198) | | **Total stockholders' equity** | | **11,436** | | **7,353** | | **TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY** | **$** | **42,041** | **$** | **63,200** | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) Condensed consolidated statements of operations and comprehensive income (loss) for ProPhase Labs Inc. and subsidiaries compare revenues, costs, expenses, and net income (loss) for the three months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (USD Thousands, except per share amounts) | | | For the three months ended | | | --- | --- | --- | --- | | | | June 30, 2025 | June 30, 2024 | | Revenues, net | $ | 1,247 | $ 1,504 | | Cost of revenues | | 513 | 1,659 | | Gross profit (loss) | | 734 | (155) | | Operating expenses: | | | | | General and administration | | 4,624 | 6,933 | | Research and development | | 4 | 140 | | Total operating expenses | | 4,628 | 7,073 | | Loss from operations | | (3,894) | (7,228) | | Debt extinguishment loss | | (287) | — | | Interest expense | | (587) | (522) | | Loss from disposal of fixed assets | | (823) | — | | Loss from operations before income taxes | | (3,693) | (7,750) | | Income tax (expense) benefit | | (779) | 2,287 | | Loss from continuing operations after income taxes | | (4,472) | (5,463) | | Discontinued operations: | | | | | Loss from discontinued operations, net of tax | | — | (690) | | Gain from disposal of discontinued operations | | — | — | | Income (loss) from discontinued operations | | — | (690) | | Net income (loss) | $ | (4,472) | $ (6,153) | | Other comprehensive income: | | | | | Unrealized gain on marketable securities | | 2 | (58) | | Total comprehensive loss | $ | (4,470) | $ (6,211) | | Net earnings (loss) per share: | | | | | Loss from continuing operations, basic and diluted | $ | (0.11) | $ (0.29) | | Income (loss) from discontinued operations, basic and diluted | $ | — | $ (0.04) | | Net loss per share, basic and diluted | $ | (0.11) | $ (0.33) | | Weighted average common shares outstanding: | | | | | Basic | | 41,541 | 18,888 | | Diluted | | 41,541 | 18,888 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed consolidated statements of cash flows for ProPhase Labs Inc. and subsidiaries detail cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (USD Thousands) | | | For the six months ended | | | --- | --- | --- | --- | | | | June 30, 2025 | June 30, 2024 | | **Cash flows from operating activities** | | | | | Net loss | $ | (506) | $ (12,418) | | Less: Gain (loss) from discontinued operations, net of tax | | 8,644 | (1,431) | | Net loss from continuing operations | | (9,150) | (10,987) | | Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | | | | | Realized loss on marketable debt securities | | — | 18 | | Depreciation and amortization | | 2,831 | 3,141 | | Amortization of debt discount | | 849 | 369 | | Amortization on operating lease right-of-use assets | | 210 | 222 | | Stock-based compensation expense | | 1,029 | 2,385 | | Inventory reserve | | — | (63) | | Loss (gain) from disposal of fixed assets | | 868 | (19) | | Debt extinguishment loss | | 718 | — | | Changes in operating assets and liabilities: | | | | | Accounts receivable | | (28) | 3,322 | | Inventory | | 313 | 394 | | Prepaid expenses and other current assets | | (803) | (777) | | Deferred tax asset | | — | (4,900) | | Other assets | | — | 847 | | Accounts payable and accrued expenses | | 448 | 3,896 | | Accrued diagnostic services | | 44 | (87) | | Accrued advertising and other allowances | | — | (13) | | Deferred revenue | | (410) | (768) | | Deferred tax liability | | — | — | | Lease liabilities | | (29) | (927) | | Income tax payable | | (613) | (618) | | Other liabilities | | (350) | (1,181) | | Net cash used in operating activities - continuing operations | | (4,225) | (5,746) | | Net cash provided by (used in) operating activities - discontinued operations | | 597 | (4,236) | | **Net cash used in operating activities** | | **(3,628)** | **(9,982)** | | **Cash flows from investing activities** | | | | | Proceeds from sales of marketable securities | | — | 3,374 | | Proceeds from sales of fixed assets | | 120 | 150 | | Capital expenditures | | — | (867) | | Net cash provided by investing activities - continuing operations | | 120 | 2,657 | | Net cash provided by (used in) investing activities - discontinued operations | | 800 | (98) | | **Net cash provided by investing activities** | | **920** | **2,559** | | **Cash flows from financing activities** | | | | | Proceeds from issuance of note payable, net | | 687 | 3,868 | | Proceeds from issuance of common shares, net | | 3,558 | 4,624 | | Repayment of note payable | | (2,511) | (888) | | Net cash provided by financing activities - continuing operations | | 2,234 | 7,604 | | Net cash used in financing activities - discontinued operations | | (35) | (10) | | **Net cash provided by financing activities** | | **2,199** | **7,594** | | **Decrease in cash and cash equivalents** | | **(509)** | **171** | | Cash and cash equivalents at the beginning of the period | | 678 | 1,609 | | **Cash and cash equivalents at the end of the period** | **$** | **169** | **$ 1,780** | | **Supplemental disclosures:** | | | | | Cash paid for income taxes | $ | 347 | $ 454 | | Interest payments | $ | 672 | $ 1,237 | | Supplemental disclosure of non-cash investing and financing activities: | | | | | Issuance of common stock as commitment fee for future financing | $ | 158 | $ — |

Core Insights - ProPhase Labs has reported significant operational and financial improvements, including a strengthened equity position and a focus on transformational growth catalysts [1][7][11] - The company has been granted a key U.S. patent for its BE-Smart Esophageal Adenocarcinoma Risk Assessment test, which is expected to accelerate its commercialization pathway [4][12] - ProPhase is actively pursuing non-dilutive funding strategies, including a $50 million opportunity with Crown Medical Collections, which could provide significant cash flow in the second half of 2025 [6][10] Financial Performance - For the three months ended June 30, 2025, net revenue was $1.2 million, a decrease from $1.5 million in the same period in 2024 [15] - The cost of revenues for the same period was $0.5 million, down from $1.7 million in Q2 2024, resulting in a gross margin profit of $0.7 million compared to a loss of $0.2 million in the prior year [16][17] - General and administrative expenses decreased to $4.6 million from $6.9 million year-over-year, primarily due to reduced personnel expenses and overhead costs [18] Operational Improvements - The company has streamlined operations, reducing operating expenses by over 35% year-to-date through disciplined portfolio optimization and cost controls [7][11] - ProPhase eliminated high-cost debt, repaying the majority of its merchant cash advance debt, which has increased financial flexibility [7] - The strategic portfolio realignment, including the sale of PMI and Pharmaloz Real Estate, generated an $8.7 million gain and eliminated over $20 million in debt/liabilities [7] Future Strategies - ProPhase is exploring a new Crypto Treasury Strategy to capture upside without sacrificing shareholder value, involving the acquisition and long-term holding of select digital assets [8][9] - The Board is evaluating guardrails for share issuance to protect shareholder interests while allowing flexibility for potential capital raises [9][10] - The company aims to leverage liquidity events, including the Crown Medical Collections initiative and a possible sale of Nebula Genomics, to fund its crypto treasury strategy without issuing new shares [10]

U.S. Patent No. 12379378-B2, originally filed on December 7, 2023, was developed by inventors Joe Abdo, Sumeet K. Mittal, and Devendra K. Agrawal. The patent covers systems and methods for assessing the risk of Barrett's esophagus pathogenesis and esophageal adenocarcinoma progression by detecting key biomarkers such as ISG15, LTF, CNDP2, DAD1, SET, UBE2N, S100P, and GPI, and it underpins the Company's BE-Smart test platform. Issuance of this patent underscores the strong scientific foundation and clinical ...