ProPhase Labs, Inc. (NASDAQ:PRPH) has reported a change in its certifying accountant as of September 30, 2024. The company's previous independent registered public accounting firm, Morison Cogen LLP, has resigned from the PCAOB audit business, leading to this shift. This information comes directly from ProPhase Labs' recent SEC filing.
The resignation of Morison Cogen was not due to any disagreements over accounting principles or practices, financial statement disclosure, or auditing scope or procedures that, if unresolved, would have necessitated a reference in their report. However, it is noted that during the fiscal years ended December 31, 2023, and 2022, ProPhase Labs did receive an adverse opinion on internal control over financial reporting and acknowledged material weaknesses in its internal controls.
ProPhase Labs is currently finalizing the engagement of a new independent registered public accounting firm to replace Morison Cogen and expects to make an announcement soon. The company has provided Morison with the disclosures made in the SEC filing and has received a letter from Morison, dated October 4, 2024, agreeing with the statements made in the filing.
In other recent news, ProPhase Labs reported non-compliance with Nasdaq's audit committee requirements following the resignation of director Eleanor McBrier. The company disclosed this issue, which resulted from a vacancy on its audit committee, to Nasdaq. ProPhase Labs is actively seeking a new director with expertise in gastroenterology to aid in the development of its BE-Smart esophageal cancer test, aiming to regain compliance before the cure period expires.
Further, ProPhase Labs secured $10M in an amended note agreement with JXVII Trust. The funds from this agreement, which increased the principal from $7.6M to $10M and extended the maturity date to August 15, 2027, are slated for working capital and general corporate purposes, including potential acquisitions.
ProPhase Labs is also implementing measures to counterbalance the seasonality impacts on its Pharmaloz business. The company projects revenue of $14-16 million and profits of $5 million over the next 12 months. In addition, ProPhase Labs is bolstering its subsidiary, Nebula Genomics, with a new marketing strategy for its 1x whole genome sequencing product.
Lastly, ProPhase Labs is exploring strategic alternatives that could lead to a significant liquidity event in the first quarter of the following year. These recent developments underscore ProPhase Labs' commitment to innovation and growth, particularly in personalized precision medicine and genetic testing.
InvestingPro Insights
ProPhase Labs' recent change in its certifying accountant comes amid challenging financial circumstances for the company. According to InvestingPro data, ProPhase Labs has experienced a significant revenue decline, with a 77.12% decrease in the last twelve months as of Q2 2024. This steep drop in revenue aligns with an InvestingPro Tip indicating that analysts anticipate a sales decline in the current year.
The company's financial health appears precarious, as evidenced by its negative gross profit margin of -9.11% and an operating income margin of -188.93% for the same period. These figures support another InvestingPro Tip that highlights ProPhase Labs' weak gross profit margins.
Moreover, the stock price has taken a substantial hit, with a 6-month total return of -63.53% as of the latest data. This performance reflects the broader financial challenges faced by the company and underscores the importance of addressing the material weaknesses in internal controls mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips that could provide valuable insights into ProPhase Labs' financial situation and future prospects.
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