Prophase Labs Inc (PRPH) 2021 Q1 法說會逐字稿

Thank you, and good afternoon. I would like to thank you all for taking time to join us for ProPhase Labs' First Quarter 2021 Financial Results Conference Call. Your host today is Prophase Labs' CEO and Chairman of the Board of Directors, Ted Karkus. A press release detailing these results crossed the wires today and is available on the company's website, prophaselabs.com.

Before we begin the formal presentation, I'd like to remind everyone that statements made on the call and webcast, including those regarding future financial results and future operational goals and industry prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company's SEC filings for a list of associated risks.

Finally, this conference call is being webcast. The webcast link is available in the Investor Relations section of prophaselabs.com.

At this time, I would like to turn the call over to ProPhase Labs' Chief Executive Officer, Ted Karkus. Ted, the floor is yours.

Awesome. Thank you, Jen. And thank you, everyone, for joining me and our company, ProPhase Labs. This is the first full quarter that we've reported testing revenues and earnings. And to put this in perspective, this was nothing more than an idea 6 months ago. And in 6 months, we went from not even being in the CLIA laboratory testing business to having 2 significant labs and generating in the first quarter this year a significant amount of revenues and earnings, and I'll get into the numbers a little bit now.

And just to remind everybody, Jen did read the forward-looking statement. I'd like to be very careful in terms of projections. This is a volatile business that we're in. In general, we do not give earnings guidance, but to the extent that I say anything that sounds like guidance, understand the volatility and nature of the business and it's a dynamic world that we live in, in this industry. And I'll get more into that, but please be cognizant of that. I am going to do the best I can to give everybody a full picture of what's going on. But again, that's as of today, and things change better and worse. It doesn't necessarily mean it's new risk. It could be a lot better, too.

So with that said, I'm going to review a little bit of the numbers, and then I'm going to get more into the actual ongoings of our company and the strategy going forward. We reported revenues of $15.3 million versus $1.9 million a year ago and net income of $1.1 million versus a loss. Just to break that out a little bit, our lab actually had a profit of $2.8 million. Typically, our manufacturing and dietary supplement business have a loss in the first quarter. This quarter was no different. So that might bring a drag down on the total company numbers. But to be clear, the vast majority of our revenues and earnings are currently and going forward are in our diagnostic testing business.

So our lab, pretty nice, maybe not what I would have expected in January when things were really hot. But still, I'm really pleased with the quarter to generate $2.8 million profit in lab. And also to be clear, we had significant start-up expenses in the first quarter that have hit our first quarter. By the very nature of the word start-up, I mean, these will not be ongoing expenses. And so if we were to do hypothetically even just the same numbers that we did in the second quarter as the first quarter without the start-up expenses, we would be well ahead of the game. We also had noncash items in the first quarter of about $1 million. That was a combination of depreciation and options and warrants. And again, these are noncash items. So overall, when you look at the quarter, I'm really pleased with the quarter.

This also provided us the opportunity for a $0.30 cash dividend. This is a special cash dividend. I have a history of doing these. It's a nice way to reward our long-term shareholders. We currently have enormous cash flowing in from insurance. And I think I described this on our year-end conference call about 6 weeks ago that, and also going back to December and January when I was talking with institutional investors, that in the October through February time frame, we were investing heavily not only in purchasing our first lab and in building out our second lab in Garden City and purchasing all of the Thermo Fisher state-of-the-art equipment that we have. We have an enormous amount of equipment now. We were also purchasing reagents and consumables used in lab processing. And of course, we started testing at the end of December. We really started to ramp-up in January.

All of that testing, we had dollars going out the door, virtually no dollars coming in. So we had enormous negative cash outflows. This is aside from earnings and losses, but just cash flowing out of the company for the personnel, new equipment and the consumables. And insurance really wasn't even set up yet. And I think, as I indicated, even when all the insurance was set up properly and all the billing was set up properly, it can still take 60 days. And we were purchasing consumables 30 and 60 days before processing and then getting paid 30 to 60 days later, plus in some instances, it's taken longer to get the insurances set up, to get the billing properly. All that takes time, especially when you're in a new business.

And so we're now, in the last 6 weeks, an enormous amount of cash is flowing into the company from insurance companies. And quite frankly, that cash flowing in has more than covered. Just what's coming in the last 6 weeks has more than covered the $0.30 dividend, which is ballpark about $4.5 million. More cash than that flowed into the company in the last 6 weeks. So we are a very strong company financially at the moment. And as I've told people in the past, those that have been shareholders for a long period of time, I am extremely careful in how our company manages its cash. Our CFO, Monica Brady is even more conservative than I am. At the end of the day, I'm the largest shareholder in the company. And frankly, I care about our long-term shareholders even more than myself. I would never do anything to take advantage of them. And so you can be rest assured that we are not going to all of a sudden burn through the cash.

To the contrary, we have the strong cash flow flowing into the company from insurance payments. And I'm looking forward to all sorts of strategic initiatives. And given the platform that we have of being a Nasdaq public company, having a very strong balance sheet. We have about $49 million of net working capital. We have just over $36 million of cash and cash equivalents and I guess, marketable securities. So that puts us in a fantastic position to take advantage of opportunities opportunistically. And I'm going to get more into that in a little while.

But suffice it to say, I told everyone that initially, we were going to get into the COVID testing. We're going to get it. We pivoted from being simply a dietary supplement company and manufacturing company to pivoting into owning CLIA labs for COVID testing. And then the next step will be to pivot into other types of testing. And so I'm going to get into that a little bit more now. But understand that now we have the cash. We have the balances. We have growing revenues and cash flow and earnings. It puts us in a great position when I'm talking to these other companies that are now eager to join our company and to do deals with us.

All right. Let's get into the COVID landscape, which is complicated. As I highlighted about 6 weeks ago, the incidence of COVID dropped in the February to April time period. We peaked in January. I mean, the testing was out of control. The amount of incidence of COVID was out of control. And then all of a sudden there was, as I mentioned, we were doing testing, one of our largest customers tested across the State of Texas. We had terrible weather. All the main sites in Texas for testing were actually shut down. And that was from one of our largest customers. But then at the same time across the country, the incidence of COVID started to drop and the amount of COVID testing began to drop. And it appears that it's leveled off now, although, again, I can't guess which way it's going to go. But at the same time that the incidence of COVID dropped and the amount of testing dropped, you now have a situation where people are burned out. They're tired of COVID. They're tired of thinking about COVID. They want to get back to work. They want to get back to going to sports events. They want to go back to all these different things.

And the standards are constantly changing and relaxing so that initially, you had to have a PCR test to get into an arena, then it became a PCR test or you could just be double vaccinated. And now in some cases or in many cases, an antigen test will suffice. Now an antigen test, sometimes it's also called a rapid test. And a rapid test, in general, they give you rapid results, often very quickly. But at the same time, in most instances, those results are not nearly as reliable as the gold standard, which is PCR testing, which is what we do in our lab.

And so it's interesting, while there's been a drop in COVID and the standards have been relaxed, there's more antigen testing. So overall, there's less COVID. There's less testing overall. And now a piece of the testing that would normally have gone for PCR testing is going for antigen testing. So it's a very dynamic world that we're living in with regard to COVID testing as a laboratory.

Now having said that, at some point, invariably, I at least believe, in my humble opinion, there will be another wave of COVID. In India, it's out of control at the moment. And as we all know, COVID goes in waves. It's no different than the flu, which goes in waves every season. And right now, we're in the down season for COVID. We are still doing COVID testing, but that then leads into strategy. And that's where we have enormous flexibility with our strategy. Again, our PCR is the gold standard, particularly with the tests that we do, it's about as close to 100% as you can get for specificity and sensitivity. We're talking about 99.7%. Some of the antigen tests out there, the reliability is as low as 65% or 70%, which means if you get tested positive or negative, this is like a 70% chance, a little more than 2/3 probability that you're going to have an accurate result.

Now if you have COVID, does it really even make sense to know that there's a 70% probability that, that's an accurate test or that your negative is 70%, and all the people that actually have COVID that come back with a negative result and then think that they're safe and that they're safe with those around. So the antigen test, quite frankly, to me, it's more psychological than anything else. It's possible we're going to go through a wave where right now antigen tests are popular and it's possible they're not going to be 4 months from now, especially if we have a new wave of COVID. That's to be seen. In any event, because it's a dynamic situation that's always evolving, we have to be aggressive in terms of our offerings. So we are currently working on a couple of different antigen tests and immunity tests. There are those on the market that we could actually purchase from other distributors, if we want to, to complement our testing. There's also an antigen and immunity test, at least one if not 2, that we're looking at that we could potentially license, develop further in our lab, sell as a laboratory developed test.

I don't want to get too complicated here, except suffice it to say, our next step in the evolution of Prophase Labs is to introduce other types of COVID tests that go beyond just PCR testing. And that would be the antigen test that provides you with a fast, a much faster result. One in particular I'm working on is a saliva-based antigen test that provides results in 7 to 15 minutes.

Saliva-based is great. I mean, it's really easy to use. You don't need somebody to take blood from you or stick a swab up your nose. It can be self-administered. It makes it really efficient, particularly if you're dealing with a large crowd of people that want to get into an arena. So there are some great positives. Plus, the antigen test, in particular, I'm working with has particularly high sensitivity and specificity results. We're still doing research in that regard. But I'm really excited about potential antigen and immunity tests that we could be introducing in the future. And then once you get beyond COVID testing, the next step is to diversify beyond just COVID testing offers. And that's when we get into all the other types of testing that labs do.

Before I get into that, I just want to cover a little bit about the COVID side, but I want you to know that COVID testing with PCR and antigen and immunity testing is just the first, sort of the antigen and immunity testing is the next step in our diversification strategy. But then our next diversification strategy is to become a full-blown lab with all the other types of testing. So that no matter what happens with COVID, it doesn't necessarily have to be the end-all, be-all to our revenues and our earnings. That's more for looking further ahead.

Within just COVID testing, we've announced recently a couple of really big wins. The first one was with the Township of Oyster Bay. That was an aggressively competed RFP. We beat out some of the largest labs in the country. The reason why we won, well, actually, they won't tell us the #1 reason or if there's only one reason. But the fact of the matter is, we have tremendous capacity. We have consistently fast turnaround times. And quite frankly, that's a matter of having the right management in place and the right employees in the right place and doing things the right way. And that's critically important to us.

And so we really pride ourselves in having those 24-hour turnaround time. The lab industry in general doesn't have a great reputation, particularly when it comes to COVID testing. Some of the larger labs focus more on their longtime customers who do more than just COVID testing. So when you have a new customer looking for COVID, you're a lot less worried about them. And the turnaround times, again, tend to be 3 to 7 days. Maybe they're a little bit faster because there's a little less COVID testing going on. But we've always prided ourselves on the 24-hour turnaround time.

The other thing critically important in the lab business is customer service. Invariably, there are issues. We have great technology, which I've reviewed in the past. I'm not going to discuss that again with the acquisition of VaccTrack and our ability to report results directly to your smartphones. So we have great technology. We have great customer service and a fast turnaround time. So when people ask me, and they've asked the question, how do you compete with the large labs? I always respond, they can't compete with us. So it's a question of, can we get the customers?

And so we had this crazy explosion of business back in the end of December and January and then all of a sudden the amount of testing dropped. But you have to understand, we're new to the business and we're still building our customer base. So while our total testing dropped after January, which it has, the fact is, we're just starting to see evidence that all the customers we've been working on for the last 3 or 4 months that they're going to be building business with us. I don't know the exact timing of that business building, but I can tell you that we have some tremendous potential with some very large potential awards. And the fact that we just won Township of Oyster Bay, and that was followed a couple of weeks later with Dutchess County, there's a lot of potential in both places, almost 300,000 residents in each of these 2 areas of New York. We are going to be building the marketing in those areas to build up the testing.

And then we also have a situation where schools, we're now getting closer to summer. So there's less testing in the school, but now we have graduations and prom. We also have weddings coming. So there are all of these different factors at work. And then also, there's still much larger initiatives out there, like the administration wanting all schools opened next September and nationwide initiatives for testing. We are working to be involved in these nationwide programs. And if any of them hit, I can tell you that the numbers are going to be explosive. I can't guarantee that we're going to win. But I can tell you, we are extremely well positioned given our state-of-the-art equipment, our major capacity and our fast turnaround times. So we are really well positioned as a COVID testing company. And to the extent that there is COVID, I expect us to continue to win customers and win RFPs.

All right. That covers COVID. And of course, as I mentioned, COVID is out of control in India. I'm talking to people who say there's no question that some of what's going on in India is going to come over here. And it's a question of when, not if. But that's to be seen. In the meantime, I do believe, regardless of the waves of COVID, there's always going to be some COVID testing. And our goal is to be diversified between PCR testing, antigen testing and immunity testing. So to the extent that there's some testing, we expect to be a part of it. All right. That's COVID.

Now our first initiative for diversification is antigen and immunity testing. That's still obviously COVID-related. Our next step is to look at acquiring labs. And understand, we could build labs or apply for licenses and insurances, but that can take 1, 2, 3 years. I don't have that much time. That's just not the way I think. When we decided to get into the CLIA lab business, 4 weeks later, we acquired our first lab. And 8 weeks, 6 weeks, 8 weeks, I don't know, 10 weeks after that, we had built out a major new lab and we were doing major testing.

I'm not waiting around. As I mentioned earlier on this call, we have the platform. We have the capital. We have the resources. We're going after acquiring other labs. They vary in size. I've been working on this now for months. They vary in size from as small as about $0.5 million lab, to a $10 million lab, to a $50 million lab. I can't tell you what we're going to acquire or when. But I can tell you, at least our goal is to acquire one or more labs that give us instant diversification into other types of testing. We are currently doing business with customers who would bring us the other types of testing if we provided it. We then have other customers who would love to do business with us but don't want to until we provide the other types of testing.

One small example, I talked to an owner of 13 nursing homes. He said, Ted, I love you. I'd love to do business with you. I would love to move from my other lab, but I'm not going to just split up my COVID business. The other businesses is much greater than the COVID business. But when you diversify, please make me your first call. That's just an example. But then we have other customers that we currently do business with. And when I say customers, these often are companies who provide the specimen collection services. There are the ones on the ground actually going to the nursing homes to test them. And so in those cases, we're already doing business with these types of customers. And they'd be happy to bring us if there are other types of testing if we were in your traditional blood and urine and so forth.

So we're looking at several different labs. I can make no guarantees about whether we're going to acquire one lab. I can only tell you that, that's the focus of the company and it's very real. And judging by the recent past. If I tell you I'm going to do something, you can assume I'm going to make every effort to actually make it happen. And we certainly have the capital and the wherewithal and the revenues and cash flow, so capital is not an issue.

So once we get beyond potentially acquiring one or more labs, and we start building up the other types of testing. And by the way, there's at least 2 groups of sales organizations that would love to join ProPhase Labs as soon as we acquire another lab and start building out all your traditional types of testing. What's interesting in the industry is that a lot of these labs, the managers, the people in charge, they're just very cheap. And it's funny. People laugh all the time when I say this. People in the lab industry laugh all the time because they say, Ted, you're absolutely right. And it's just amazing to me that they don't understand how to motivate salespeople. And the way you motivate salespeople is by paying them and not shortchanging them. And I've actually attracted and we have attracted a couple of different groups of salespeople who could build up our business in a very significant way if and when we diversify. So know that, that's very serious. It's a very serious initiative for us to work on.

Additionally, we are working on 2 genomics companies. One is more consumer-oriented, where potentially we would be doing the whole genome sequencing in our lab. But the goal would be to build out and leverage our infrastructure in food, drug and mass retail stores. As you might recall, we used to sell Cold-EEZE in 40,000 food, drug and mass retail stores. We currently have a line of dietary supplements. Our lead product is now in CVS and Walgreens and Rite Aid and Walmart. So we have tremendous distribution to leverage, and we could actually marry research and science with the end consumer. And so that's one genomics company we're looking at.

Then we're looking at another one that's more on the research side towards doing diagnostic testing for different types of cancers. And I don't want to go into too much detail right now because, obviously, this is all hypothetical at the moment. But know that I'm very interested in working towards diversifying first into labs that do all the other types of testing and then the higher level use of a lab for research to get into more sophisticated types of diagnostic testing from the point of view of health-related issues and diseases. That's an awful lot.

The last thing I'd tell you is, I'm also looking at a telemedicine company and a health care company. The health care company, actually, they both have access to large groups of nursing homes, physicians and patients. And again, that would leverage our lab testing services. I said an awful lot in, I think, a relatively short period of time. In fact, I finished a little faster than I have in the past. So that will leave time for plenty of questions.

Again, I thank everybody for joining the call. Frankly, I'm really pleased with the results. Maybe they're less than what I might have anticipated in January. But by the same token, and actually it was one of our investment bankers who pointed this out to me who said, Ted, nothing goes up in a straight line, and you can't grow your revenues every week or even necessarily every month. And he's absolutely right. But the bottom line is, we've had tremendous success over the years. And within the lab business, we've had tremendous success over the last 3 to 6 months. And I hope to continue to bring everyone positive results in the future.

And with that, Jen, why don't we open it up to questions.

(Operator Instructions) Our first question comes from the line of Jason Kolbert with Dawson James.

Ted, congratulations, you certainly beat my expectations on the quarter. The thing that strikes me the most about your comments is bidding on potential national contracts. And if you were lucky enough to win something like that, that it actually could be transformative. Can you go into a little bit more detail about what those prospects might look like?

Sure. First of all, Jason, I really appreciate your support, and I also appreciate your comments. The tricky part of this is, when you go back to January, I was talking to companies, even some of the companies, some of our customers. And a couple of our customers were talking about doing 3 to 5x the amount of business they were doing in January, only it didn't come through. And I regularly am talking to potential customers and potential initiatives that could be really, really large that don't come to fruition. And what I don't want to do is get shareholders excited about something and then it doesn't come to fruition. I would really much rather just consistently build our company. And if we get surprised by a major win, that would be fantastic. What I can tell you, though, is that we have a lot of really positive initiatives we're working on. The first of which is very real and could get our business going again, more similar to what we were doing in January and grow beyond that.

The second initiative, when we start talking about national initiatives, again, the Biden administration wants schools open. And they're not just sending money to the states, but there's actually a national initiative with RFPs that went out. And we partnered with a couple of major companies that submitted for the RFPs. And we are optimistic that one of those companies that we work with is going to win. And if they win a part of the country, they're going to give us an enormous amount of business. What I can tell you is we are perfectly situated for a major initiative because we have state-of-the-art equipment, 24-hour turnaround times, state-of-the-art technology. So there would be no reason for anybody involved with a major win of a national initiative not to use us at least like in the Northeast.

And with the national initiative, it's broken up into 4 quarters of the country. But even having said that, as I said, one of our largest customers was testing throughout Texas and it was nothing for us to FedEx. They'd collect specimens until 6 p.m., put them on FedEx. We'd get them 8:00 in the morning. They'd have the results by 6:00 that night. So they were still getting 24-hour turnaround times even across the country. So there is no question that there are national initiatives to open up schools. There's also no question if that initiative is followed through on, and I believe that it is going to be followed through on, there's going to be an overwhelming enormous amount of business. And if one of the companies that submitted the RFP, which we've partnered with. And we partnered with 2. If one of them wins even one of the quarters, it will be a transformative amount of business to our company.

But I can't guarantee that, that's going to happen, and I can't spend my time right now. We already filled out all the paperwork. We did all the RFPs. I mean, to give you an idea when we won Oyster Bay, I don't even know if that was 50 pages we filled out of information and data. We already did all that work. I can't spend my time and days thinking about it. And quite frankly, I don't, but that type of initiative is very real and it's in the background.

And what's interesting is when our stock sold off, and I really don't want to talk about stock price. But I start thinking about our stock getting down to liquidating values that put 0 value on our laboratory testing business when we have an enormous amount of state-of-the-art equipment and we're doing business and we're generating revenues and cash flow positive. So I can't control what the stock price does. But you're talking about a situation with very little risk and huge potential rewards either from winning the national initiative for COVID and/or as we diversify and build the company.

And as I've told investors all along, if you're going to invest in our company, invest long term, I have a history of building value longer term. It doesn't mean I can do it on a monthly basis. I mean, that's literally impossible to do. And so every move that we're going to make going forward is going to be to continue to build the company longer term for long-term shareholders. And that's why something like the dividend that we just paid today, I do that for long-term shareholders. It's sort of a small payback for their loyalty and let it go. And frankly, and that dividend, that came out of 6 weeks of cash flow, literally.

Just amazing. Rarely have I seen a dividend paid like that. I'd also like to focus a little bit on something you said, which is, there were some, your expenses actually came in below my estimates. And so for me, that means that your COGS were below my estimates, which means your margins were higher than my estimates. And you also said that expenses would kind of normalize as some of the build-out costs go away associated with the lab that occurred in the first quarter. So I know you don't want to give guidance, but how should we be thinking about those expenses for the rest of the year?

Sure. And I've discussed this on past calls. Our margins are a tremendously complicated beast. And the reason is because we have so many different types of customers that we pay different ways. There are even issues within our numbers with whether or not a payment to a customer should go into COGS, should go into the cost of goods sold or whether it should go into a sales and marketing expense. And in some cases, it's a combination of the 2. It's really complicated. And so all I can really do in guiding you is to talk about trends.

And so far, for out-of-network insurance, the numbers haven't changed in terms of reimbursement rates. And then also for those without insurance, it's an automatic $100. Those numbers have not changed. I heard about one lab that was in network somewhere where they cut it below $100, but that hasn't affected us at all. And in general, I just don't, so far, I don't see the revenue side of the picture changing very much. At the same time, we've gotten more sophisticated in the business. And in many instances, our customers who are the companies that are going out and collecting the specimen, in many instances, what we're paying them is less than what we were paying the first customers that we do business with.

And then the last part of this is that there was, it was a tremendous backlog of back ordering of consumables back in December and January, I was really concerned that we were going to have a major customer come in and that we were going to run out of consumables. And I thought that would be the worst thing of all time. So we loaded up on consumables. But what's interesting is the cost of reagents is coming down. And so, if anything, the trend in the cost of reagents is coming down, we're getting more sophisticated in terms of how we pay our customers. And so far, insurance rates have not been coming down. So it's possible that you could see margin expansion going forward. I don't want to guarantee it, but that's the current trend.

I know you reported $16 million in inventory. So that's a big number. And so I would assume that what you're really saying is, between accounts receivable and inventory, as those numbers come down, we could even see better numbers on the top line.

Yes. Yes. Absolutely.

Thank you. Ladies and gentlemen, at this time, there are no further questions, and I would like to turn it back to Ted Karkus for closing comments.

Great. Well, listen, I really want to, actually, I see there's one more question. If you want to take that, Jen, a question just came in.

Yes. We do have a question from the line of Robert Danaher, private investor.

I just had a couple of questions regarding the date of ownership for the dividend and whether there's any personnel changes since the beginning of the year? And the last one is, I like to think if you can make any comments regarding how you feel about the consulting agreement and how that's working out for you?

I'm sorry, what? In reverse order, what consulting agreement are you referring to?

The one that's in the 10-K report, the consulting agreement back in September 25, 2020?

Yes. I apologize. We have so many consulting agreements. I think you're talking about the one with the major laboratory. That one, we actually, that's a complicated question. I would almost rather you contact me individually for that. But what I can tell you is actually, it's pretty straightforward. That's with the laboratory that as they do testing, they pay back. They have a debt to us. And as they do testing, they pay back to us. And so far, everything has been status quo.

With regard to the timing of payment of the dividend, if you actually look in the, I believe it's in the press release, the actual date. I don't want to misquote it. Let's see, I'll just tell you very quickly. I'm pretty sure it's actually...

Okay. If it's in the report, I'll catch it.

No, it's definitely in the press release. And then, in fact, it says here, the dividend is payable on June 3 to stockholders of record as of May 25. So you have time if you want to get your hands on the dividend.

As far as employees, we ramped up employees in a dramatic way back in December and January as we were building out our second lab. And what you got to understand, I don't know, I think we might have hired 100 employees in the span of about 8 weeks. Any time you hire 100 employees over a short period of time, you're always going to have some attrition. And so a number of people weeded themselves out. And of course, we also had a drop-off in revenues and actually, more importantly, expected revenues, which, therefore, fit in well with the fact that we had a number of employees that didn't work out.

So you put those 2 together, we're more efficient now. Our overhead is less now than it was 3 months ago. And that's just smart business. If our numbers ramp-up in the future, for instance, as Jason Kolbert was asking about the national initiative. If we hit on a national initiative, we'll actually be hiring more people. Right now, we're happy with the headcount the way it is. I certainly wouldn't comment on any employee, in particular, whether they were let go for disciplinary reasons. But in general, there's also a natural attrition just from the fact that we hired so many people. And some people, it just doesn't work out for them.

And looks like we have one more question, Jen? I'm happy to take it. We still have a little time.

Our next question comes from Lee Alper with Hammock Investors.

I hope you can clear this up. There was some rumor on one of the Internet boards that the Old Bridge lab was closed for equipment problems and that people were laid off.

Yes. Okay. So that was all blown out of proportion. I assume that, that's either somebody short the stock. Somebody actually brought that to my attention. And interestingly, the person was related to 2 people who were fired from the lab. So it doesn't surprise me when rumors start related to disgruntled employees and people related. And for the people listening, if you're talking to former employees and trading in the stock, you probably want to think twice about doing that. It's just not smart, especially when people know who you are and know the people that were let go.

What I can tell you is, hypothetically, there are inspections that take place in labs, the same way that we've had a manufacturing facility, and we do FDA inspections. I don't report on FDA inspections or on lab inspections. But to blow it out of proportion, I can tell you that we have never had a hiccup in terms of accepting specimens. And you can see by the numbers, we just had a tremendous quarter. So I will be happy. I really don't like to address rumors, especially when it's faulty information in there, but I hope that, that clears up your question. And Jen, are there any more? I think I see one more question.

We do have a question from the line of Pat Patterson, private investor.

My question is about the antigen test because what you were talking about and being unreliable and whatnot, maybe they won't be really popular 6 months or a year from today. I don't know. But what I was curious about is, since you're going to get into the antigen testing business, how do you go about actually putting the antigen test in the hands of people? I mean, can you address that? Like how will the distribution work?

Yes. Yes. So there's 2 ways, really 3 ways for us to potentially distribute antigen test. Number one, when the FDA became overwhelmed last year with various different types of tests coming to market, those that were developed by CLIA labs, which are called laboratory developed tests or LDTs, the process for approval for selling them is very different if you want to sell in a store. So as an LDT, you can sell to health care practitioners, medical doctors' offices and so forth. We can also, in our testing, since we actually have health care providers working for us and our customers are oftentimes health care providers that are doing a specimen collection, we can sell to them or partner with them. So for all the testing that we're doing in schools and potentially events, we can. If we introduce an LDT antigen test, we can roll that out very, very quickly, and that's what we're working on right now.

In addition to that, we can also purchase distribution companies who can purchase antigen tests. And again, those we can distribute in our testing, obviously, the margins are going to be better in an antigen test that we develop ourselves. Also, in the one that we're working on ourselves, the reliability results, the sensitivity and specificity are fantastically better than most of the antigen tests out there and it's saliva-based. So if we can introduce that to complement our PCR testing, then the testing that we're currently losing to antigen testing, we'll be able to bring that back in-house because we'll be able to provide the same customers with both PCR testing and antigen testing.

And for instance, with schools, a lot of the schools now are really into doing the antigen testing. It's just easier for them. The results are faster. A lot of this also have to do with politics and with psychology of doing an antigen test because it's easier, it's quick. And all they care about is having a negative result reported. They don't even care how accurate it is. So because we're dealing with that type of psychology, it's important that we provide both PCR test and antigen test. But what's nice is the one that we're working on has excellent reliability result.

And I really don't want to go into that in too much detail because we haven't finalized any antigen test deals, but we are able to right now offer antigen testing through a third-party who provides us with the antigen test that we then provide as a part of our testing right now. But the goal ultimately is to introduce our own.

And then also not only as an LDT, but what you do is you apply to the FDA for an EUA for at-home or point-of-care testing. That's a bigger hurdle, but that's something that we would be working on as well. If we get the point-of-care testing on our antigen test, forget about it, the same way that Jason Kolbert asked about something transformative. If we got point-of-care testing for antigen test, that would be transformative too. Again, I'm getting way ahead of the game in even talking about it, but those are the kinds of things that we're working on for the future. I hope that answers your question.

Yes. It does.

There are now no further questions.

All right. Awesome. So listen, I just want to tell everyone how much I appreciate you joining the call today. And to tell you, I really am working on behalf of the shareholders, and it's not just me. And something I didn't mention on this call, but I have in the others, we have a fantastic management team, led by our COO, Steve Kamalic and our CFO; Monica Brady. And we have a fantastic Head of IT in Sergio Miralles. And our 2 heads, our high complexity molecular lab tech, the Head of R&D, Carlos Brewster and Amanda Vasquez. We just hired a fantastic person to head up lab operations, who officially started working for us yesterday. Her name is [Alix Wright]. And then also Jason Karkus, who heads up our sales.

I'm really, really pleased with our team. We just had a major potential customer sit in. We just all sat in with them today, and they were so impressed. In fact, everybody that comes into our company is so impressed with our management team. It almost makes it easy for us to win awards and bids, RFPs when potential customers come and visit us in person. I couldn't be more pleased. When you have a strong management team, you have a strong financial base, fantastic equipment, the sky is the limit on what we can do. I can't guarantee success in advance, but we have all the right pieces in place and all the right infrastructure in place. And the strategic initiatives that we're working on, I'm so excited about.

And I'm hoping to transform our company from, we transformed it last year into a COVID lab testing business. I expect to quickly transform that into a COVID lab, not only PCR, but also antigen and immunity testing company. And then I expect to transform it once again by diversifying it with other labs into other types of lab testing. And then be on the lookout down the road if and when we get into the field of genomics. So there's some really exciting things ahead for our company. And for those of you that are patient, I'm going to do my best to provide returns for all of you.

Have a great day. Thanks so much for your time. And thank you, Jen. This can end the call.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.