ProPhase Labs(PRPH) - 2025 Q2 - Quarterly Results

Q2 2025 Financial Results and Strategic Update 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 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] - The company achieved significant operational and financial improvements, advancing multiple non-dilutive liquidity initiatives aimed at transformative growth[1] - The company will host a virtual conference call on Wednesday, August 13, 2025, at 2:00 PM ET[1][2] Key Highlights and Subsequent Events 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][6] - 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] - 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] - 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] BE-Smart™ Esophageal Pre-Cancer Diagnostic Test 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] - ProPhase Labs owns the entire intellectual property portfolio behind BE-Smart™[4] - BE-Smart™ is accelerating market entry following favorable regulatory changes and continues development under the CLIA framework[6] Nebula Genomics Operations Streamlining 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] - 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] - Nebula is prepared for its next growth phase, whether through a strategic sale or continued expansion over the next 9 to 12 months[5] Financial & Operational Achievements 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] - Stockholders' equity increased from $7.4 million at year-end 2024 to $11.5 million as of June 30, 2025[6] - Year-to-date operating expenses decreased by over 35% through rigorous portfolio optimization and cost controls[6] - Repaid most commercial cash advance debt, reducing overhead and increasing financial flexibility[6] - Gross margins improved in Q2 2025, with losses narrowing compared to Q2 2024[6] Strategic Growth Initiatives 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][8] - The company is actively pursuing non-dilutive financing strategies, including Debtor-in-Possession (DIP) or similar funding, to support core business development[7][8][11] - 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] - 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][11] Crown Medical Collections Opportunity 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] - The company anticipates Crown Medical's efforts will begin generating significant cash flow in the coming months, potentially sooner[8] - Management is actively pursuing non-dilutive financing strategies, such as Debtor-in-Possession (DIP) financing, to support core business development[7] Crypto Treasury Strategy & Share Issuance Guardrails 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] - The company is not pursuing a reverse merger but seeks collaboration with leading cryptocurrency players while advancing its core business[9] - 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] - 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] CEO Commentary 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] - These measures significantly improved the balance sheet and sharpened the company's focus on high-potential opportunities in diagnostics and consumer health[13] - Operationally, the company achieved positive gross margins and nearly halved operating losses year-over-year[14] - The FDA's recent non-enforcement stance on LDTs enables a faster market launch for the BE-Smart™ test[14] - The company is committed to advancing the commercial potential of its core businesses while actively exploring new cryptocurrency treasury initiatives[14] Detailed Financial Performance 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 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] - 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] - Research and development expenses decreased by $0.136 million, reflecting streamlined focus and efforts due to reduced product development and field testing activities[21] Financial Position and Liquidity 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] - Stockholders' equity increased from $7.4 million as of December 31, 2024, to $11.4 million as of March 31, 2025[23] Non-GAAP Financial Measures 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 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] - Adjusted EBITDA further excludes acquisition costs, other non-cash items, and non-recurring expenses[36] - The company uses EBITDA and Adjusted EBITDA to evaluate and manage operations, considering them useful supplemental information regarding ongoing economic performance[38] 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 This section provides essential company information, forward-looking statements, and investor relations contacts About ProPhase Labs Inc. 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] - The company's mission is to build a healthier world through bold innovation and actionable insights[24] - 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] - In August 2025, the company's BE-Smart™ esophageal adenocarcinoma risk assessment test received a key U.S. patent[24] Forward-Looking Statements 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] - Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from projections[25] - The company undertakes no obligation to update forward-looking statements unless required by applicable securities laws[25] Media and Investor Relations 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] - Retail investor relations contact: Renmark Financial Communications, John Boidman, jboidman@renmarkfinancial.com, Phone: (416) 644-2020 or (212) 812-7680[26] Condensed Consolidated Financial Statements This section presents the company's condensed consolidated balance sheets, statements of operations and comprehensive income (loss), and cash flows Condensed Consolidated Balance Sheets 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) 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 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 | $ — |