QHSLab, Inc. CEO Addresses Current Market Conditions & Recent Quarterly Earnings

Dear Valued Shareholders and Friends of QHSLab, Inc.

Recent headlines undoubtedly caused concern for investors across all industries. However, at QHSLab, Inc., we are confident in our ability to weather the market volatility with our sound fundamental point of care and digital healthcare business focus. Since our inception, we have been focused on achieving earnings and positive cash flow and have steadily moved towards those goals. Despite these challenging times, we have been generating growing revenue over the past six quarters and see continuing progress, while keeping our expenses down.

• Highlights From Our Q122 Quarterly Report Include:

  • Revenue increased by 17% to $355,330 compared to Q1 2021 and increased 7% sequentially compared to Q421.

  • Gross profit increased by 41% to $188,688 compared to Q121 due to the acquisition of the AllergiEnd® assets and a decrease in the cost of goods due to the acquisition.

  • Net Operating Loss (NOL) of $61,127 in Q122 decreased by 20% compared to Q121 due to increases in gross profit margin and top line revenue.

If you review our Q122 financials and notice the “other expenses” relating to interest expenses, I’d like to explain this entry. The increase of $116,728 compared to Q121 reflects non-cash amortization costs of $83,041 related to warrants issued in 2021. Let me repeat this, this is a non-cash expense. We did not pay the $83,041 out in actual cash during Q122; this was US GAAP accounting for expenses associated with and warrants issued in Q321 in connection with a significant financing for the Company. These warrants have been registered with the SEC and, if exercised by the investor, at the strike price of $1.25 per share would result in $1,162,500 of capital flowing into the Company at a low dilution impact to our recent share price. These warrants are described in Note 6 of our financial statements.

Items Impacting Q122 Growth:

Recent industry-wide shipping delays, unfortunately, impacted our ability to expand our physician base due to limited available inventory. As supplies were delayed, we chose to prioritize the needs of our existing physician accounts to maintain profitable relationships. Our supplier has reported that shipping delays and freight costs are coming down, although slowly. While we expect to see the return to more timely shipments, we have nonetheless taken steps to compensate for any further delays. As such we don’t expect any further inventory shortages for the remainder of 2022. Accordingly, we are resuming our aggressive solicitation of new accounts.

Like many leading technology companies, we employ a handful of excellent software developers, some of whom were formerly located in Ukraine and Russia. They have worked with us for the past two years under the direction of our U.S.-based team. Russia’s invasion of Ukraine temporarily interrupted the work of these individuals involved in the expansion of our systems. I can thankfully report that we have been in daily contact with these talented people, and they have all safely relocated to various countries out of harm’s way. While the war pushed out some of our production timelines, these dedicated professionals continued to work throughout and are now back full-time. We are very grateful for their efforts and professionalism during this crisis. Rest assured that our U.S. software engineers are highly proficient, competent software development professionals, as well, and there has been no impact on our live production systems.

The Future

The summer months have typically been slower for most physician offices, due to staff and patient vacations. We anticipate that our physician clients will take advantage of the revenue-generating opportunity presented by our innovative QHSLab clinical decision support and patient monitoring system to sustain revenues for their practices during the otherwise slow summer months. We are also thrilled to announce that we began charging subscriptions for QHSLab this May. In addition, we validated the current Medicare reimbursement for our non-face-to-face digital medical assessments at approximately $100 per encounter.

Physicians are not immune from current economic conditions. Supply chain, labor shortages, and logistics also heavily affect the allergy-specialist market, providing an opportunity for us to disrupt the traditional supply lines used by these allergy and ENT specialists for much-needed allergy testing equipment. We are in preliminary discussions with our contract manufacturer about the license or acquisition of the technologies and intellectual properties necessary for us to enter this market, enabling us to offer significant cost advantages to these allergy specialist physicians.

While we focus on the vast primary care market, which accounts for 52% of all healthcare utilization in the U.S. each year, we believe the niche market for allergy skin testing equipment to be around $40M annually in the U.S. alone. I believe that we could take a nice ‘chunk’ of this annual revenue by targeting allergy specialists with these newer and improved skin testing devices, the first such industry innovation in some three decades.

We also announced the pending launch of our new product, the Allergy Quick Test, branded AllergiQT™, that addresses a projected a near term $90M annual market. The Allergy Quick Test enables the primary care physician’s office for the first time to administer a simple pain-free allergy skin test, that does not require drawing blood or needing an outside laboratory to provide the test results. The AllergiQT™ involves only the forearms, no needles, and provides results in 15 minutes or less, reducing healthcare costs while providing a reimbursable revenue source for the physician office. This product could prove to be a major change in the management of allergies in primary care.

Additionally, we have been in discussions with our lender about extending the maturity of our debt due to mature in August and are confident that we will come to an accommodation. We are also preparing for an additional capital raise to strengthen our cash and inventory balances. Both of these steps should support long-term growth in our stock price.

I won’t make any forward earnings projections here; the recent and current market conditions provide too many uncertainties relating to customer buying patterns in the near term. Likewise, whether we can achieve the milestones referenced in this letter is subject to various risks and uncertainties. However, our expenses are modest compared to our peers, and we continue to look for alternatives where appropriate to lower costs while navigating growth opportunities. I believe this is evident from our Q122 earnings report and fiscal year 2021 financial statements.

I believe that QHSLab, Inc. (USAQ)’s current market cap is not reflective of the Company’s true value, prospects, or addressable market opportunities. I stand in the same shoes as you as a shareholder, and I remain dedicated to our mission. I am confident in our innovative products and services and in our ability to move forward and flourish as we create the tools needed to shape the future of medicine.

To view our most recent investor presentation, click here and for complete information regarding our Q122 financial results, please refer to our quarterly filing by clicking here.

While there is no guarantee of future success or that any of the developments described in this letter will be achieved, I remain highly confident in the Company’s future.

Sincerely,
Troy Grogan
President and CEO QHSLab, Inc.