PROPHASE LABS, INC. (NASDAQ:PRPH) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.
On September 15, 2020, ProPhase Labs, Inc. (the “Company”) issued an unsecured, partially convertible, promissory note for an aggregate principal amount of $8 million to JXVII Trust (“JXVII”) and an unsecured, partially convertible, promissory note for an aggregate principal amount of $2 million to Justin J. Leonard (“Leonard,” and together with JXVII, the “Lenders”).
Each of the two unsecured, partially convertible, promissory notes (collectively, the “Notes”) is due and payable on the third anniversary of the date on which the Note was funded (for each Note, the “Closing Date”) and accrues interest at a rate of 10% per year from the Closing Date, payable on a quarterly basis, until the Note is repaid in full. The Company has the right to prepay the Notes at any time after the 13 month anniversary of the Closing Date upon providing written notice to the Lenders, and may prepay the Notes prior to such time with the consent of the Lenders. The Lenders have the right, at any time, and from time to time, on and after the 13 month anniversary of the Closing Date to convert up to an aggregate of $3 million of the Notes into common stock of the Company at a conversion price of $3.00 per share. Repayment of the Notes has been guaranteed by the Company’s wholly-owned subsidiary, Pharmaloz Manufacturing, Inc.
The Notes contain customary events of default. If a default occurs and is not cured within the applicable cure period or is not waived, any outstanding obligations under the Notes may be accelerated. The Notes also contain certain restrictive covenants which, among other things, restrict the Company’s ability to create, incur, assume or permit to exist, directly or indirectly, any lien (other than certain permitted liens described in the Notes) securing any indebtedness of the Company, and prohibits the Company from distributing or reinvesting the proceeds from any divestment of assets (other than in the ordinary course) without the prior approval of the Lenders.
The Company intends to use the proceeds from the Notes for working capital and general corporate purposes, which may include capital expenditures, product development and commercialization expenditures, and acquisitions of companies, businesses, technologies and products within and outside the consumer products industry.
The foregoing description of the Notes does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the full text of the Notes, which are attached as Exhibits 10.1 and 10.2 to this Current Report on Form 8-K, and are incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The disclosure provided in Item 1.01 of this Current Report on Form 8-K is hereby incorporated by reference into this Item 2.03.
Item 7.01 Regulation FD Disclosure.
On September 18, 2020, the Company issued a press release announcing the transaction described in Item 1.01 of this Current Report on Form 8-K. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Item 7.01 and Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall it be incorporated by reference in any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated by reference therein.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| No. | Description |
| 10.1 | Unsecured Convertible Promissory Note and Guaranty issued to JXVII Trust, dated September 15, 2020 |
| 10.2 | Unsecured Convertible Promissory Note and Guaranty issued Justin J. Leonard, dated September 15, 2020 |
| 99.1 | Press Release dated September 18, 2020 |
ProPhase Labs, Inc. Exhibit
EX-10.1 2 ex10-1.htm Exhibit 10.1 NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,…
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About PROPHASE LABS, INC. (NASDAQ:PRPH)
ProPhase Labs, Inc. is a manufacturer, marketer and distributor of a range of homeopathic and health products. The Company is also engaged in the research and development of over-the-counter (OTC) drugs, natural base health products along with supplements, personal care and cosmeceutical products. It is engaged in manufacturing, distributing, marketing and sale of OTC cold remedy products to consumers through national chain, regional, specialty and local retail stores. It also manufactures, markets and distributes an organic cough drop and a Vitamin C supplement, Organix, and performs contract manufacturing services of cough drop, dietary supplements, and other OTC cold remedy products for third parties. Its product pipeline includes Cold-EEZE Cold Remedy QuickMelts and Cold-EEZE Cold Remedy Oral Spray. It also produces Legendz XL for sexual health, Triple Edge XL, which is a daily energy booster plus testosterone support, and Super ProstaFlow Plus for prostate and urinary health.