Item
1.01. Entry into a Material Definitive Agreement.
On
January 18, 2021, ProPhase Labs, Inc. (the “Company”) entered into an underwriting agreement (the “Underwriting
Agreement”) with ThinkEquity, a division of Fordham Financial Management, Inc., as representative of the underwriters (the
“Underwriters”), relating to the public offering (the “Offering”) of 3 million shares of common stock
of the Company, $0.0005 par value per share, at a price to the public of $12.50 per share. The net proceeds to the Company from
the Offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company,
are expected to be approximately $35.1 million. The Offering is expected to close on or about January 21, 2021, subject
to customary closing conditions.
Under
the terms of the Underwriting Agreement, the Company has also granted the Underwriters a 30-day option to purchase up to an additional
450,000 shares of common stock at the public offering price, less the underwriting discounts and commissions. The Company agreed
to reimburse the Underwriters for certain expenses relating to the Offering, not to exceed $115,000, and to issue to the Underwriters
warrants to purchase up to an aggregate of 180,000 shares of common stock (6% of the shares of common stock sold in the Offering)
at an exercise price of $15.625 per share (equal to 125% of the public offering price per share). A 5% cash tail fee will be payable
to the Underwriters if any investor introduced to the Company in connection with the Offering provides the Company with additional capital in any public
or private offering or other financing or capital raising transaction during the period ending on January 21, 2022.
The
Company intends to use the net proceeds from the offering for working capital and general corporate purposes.
The
shares are being offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-225875)
(the “Registration Statement”), which was declared effective by the Securities and Exchange Commission (the “Commission”)
on July 5, 2018, including the prospectus contained therein, as supplemented by a preliminary prospectus supplement, dated January
15, 2021, and a final prospectus supplement, dated January 19, 2021, each filed with the Commission pursuant to Rule 424(b) under
the Securities Act of 1933, as amended.
The
Underwriting Agreement contains customary representations, warranties and agreements by the Company. Under the terms of the Underwriting
Agreement, the Company has agreed to indemnify the Underwriters against certain liabilities. The Company and all of the Company’s
directors and executive officers have also agreed not to sell or transfer any ordinary shares held by them for a period of 90
days (with respect to the Company) and 30 days (with respect to the Company’s directors and executive officers) from January
18, 2021 without first obtaining the written consent of the Underwriters, subject to certain exceptions.
The
foregoing summary of the Underwriting Agreement does not purport to be complete and is qualified in its entirety by reference
to the full text of the Underwriting Agreement, a copy of which is attached as Exhibit 1.1 hereto and incorporated herein by reference.
The Underwriting Agreement contains representations and warranties that the parties made to, and solely for the benefit of, the
other in the context of all of the terms and conditions of the Underwriting Agreement and in the context of the specific relationship
between the parties. The provisions of the Underwriting Agreement, including the representations and warranties contained therein,
are not for the benefit of any party other than the parties to the Underwriting Agreement and are not intended as a document for
investors and the public to obtain factual information about the current state of affairs of the parties to those documents and
agreements. Rather, investors and the public should look to other disclosures contained in the Company’s filings with the
Commission.