ProPhase Labs(PRPH) - 2021 Q2 - Quarterly Report

Financial Performance - For the three months ended June 30, 2021, net revenue was $9.1 million, up from $3.6 million for the same period in 2020, primarily due to a $7.5 million increase from the new diagnostic services business [172]. - Gross margin for the three months ended June 30, 2021 was 48.9%, compared to 35.3% for the same period in 2020, driven by increased margins from the diagnostic services business [173]. - For the six months ended June 30, 2021, net revenue was $24.4 million, compared to $5.5 million for the same period in 2020, with $20.3 million attributed to the new diagnostic services business [180]. - Gross margin for the six months ended June 30, 2021 was 54.9%, up from 30.7% in the same period in 2020, reflecting improved margins from the diagnostic services [181]. Expenses - Diagnostic expenses for the three months ended June 30, 2021 were $830,000, reflecting costs associated with the new diagnostic services business [174]. - Sales, general and administration expenses for the three months ended June 30, 2021 were $5.0 million, an increase of $3.8 million from $1.2 million in the same period in 2020, mainly due to growth in personnel expenses [175]. - Diagnostic expenses for the six months ended June 30, 2021 totaled $4.6 million, compared to no diagnostic expenses in the same period in 2020 [182]. Cash and Financing - As of June 30, 2021, cash and cash equivalents and marketable debt securities were $35.8 million, up from $8.5 million at December 31, 2020, primarily due to net proceeds of $40.6 million from stock offerings [189]. - In the six months ended June 2021, the company used $3.5 million in cash from operations, indicating a potential decline in cash balances if sufficient cash generation does not occur [194]. - The company may need to incur indebtedness or issue common stock to finance growth plans if available cash is insufficient for exploring or acquiring new product technologies and opportunities [194]. Market and Economic Conditions - The COVID-19 pandemic has not materially adversely impacted the company’s business to date, with increased revenue from the diagnostic services business offering COVID-19 testing [190]. - Inflation has not had a material effect on the company's business, and any increased costs are anticipated to be passed on to customers [196]. - Current economic conditions may lead to a decline in business and consumer spending, adversely affecting financial performance and asset recoverability [201]. - There have been no material changes to the company's market risk exposures since December 31, 2020, aside from the broad effects of COVID-19 [202]. Strategic Initiatives - The company continues to pursue acquisition opportunities for other companies, technologies, and products within and outside the consumer products industry [170]. - The company does not have any off-balance sheet arrangements that could materially affect its financial condition or results of operations [195]. - The company does not expect material losses from its investment portfolio or excessive exposure to market risks associated with interest rates [200].