Material Agreement (Form 8-K)

Item 1.01. Entry into a Material Definitive Agreement.

On July 22, 2025, ProPhase Labs, Inc. (the "Company") entered into a Securities Purchase Agreement (the "Purchase Agreement"), Convertible Notes (the "Notes"), Warrants (the "Warrants"), Security Agreement, Registration Rights Agreement, and Transfer Agent Reservation Letter with two investors (the "Investors") for a private placement of senior secured convertible notes and warrants. To protect the interests of the Company and its shareholders, the Company reserved the right to prepay the loan at any time without penalty.

All material terms of the transaction are set forth in the exhibits filed herewith, and this summary is qualified in its entirety by reference to those exhibits.

The Purchase Agreement with the two Investors is for the sale and issuance of an aggregate principal cash investment amount of $3,000,000 of 20% Original Issue Discount Senior Secured Convertible Notes and common stock purchase warrants to acquire up to 5,250,000 shares of common stock. After the OID, the two Notes have a combined principal face amount of $3,750,000. After repayment of certain obligations from the flow of funds, net proceeds to the Company were $2,251,343.20 from the lead investor and $500,000 from the second investor.

The net proceeds are for working capital, general corporate purposes, debt repayment, and as otherwise described in the Purchase Agreement.

The Notes mature on July 22, 2026, bear interest at 10% per annum on the original principal face amount and provide for other customary terms and covenants. The Notes are not convertible for four months after execution and may be prepaid at any time without penalty.

The Warrants are exercisable at an exercise price of $0.50 per share (subject to adjustment) and expire five years from their date of issuance.

After the Note conversion waiting period of four months, the Notes permit holders to convert outstanding principal and accrued interest into shares of common stock at a conversion price that is the lower of 80% of the trailing ten-day volume weighted average price (VWAP) or a fixed maximum price, but with a set floor price and certain caps on conversion to prevent excessive dilution. Unlike so-called "death spiral" or toxic convertible structures, the conversion price cannot fall indefinitely, large block conversions are limited, and investors do not have unrestricted rights to convert at deepening discounts regardless of market price - meaning the structure is designed to protect long-term shareholder value and avoid downward price spirals, subject to continued listing on the Nasdaq.

The transaction involves the potential issuance of shares of common stock upon conversion of the Notes or exercise of the Warrants, subject to Nasdaq and charter limitations, including a 19.99% cap pending stockholder approval.

The parties agreed to reserve 1.0 million shares now, and upon shareholder approval of the amendment of the certificate of incorporation to authorize additional shares, the Transfer Agent will increase the reserve to 226,310,704 shares. Any failure by the Company to get the additional shares authorized would be resolved in a cash settlement.

Until stockholder approval of theissuance of shares in excess of 19.99% of the outstanding common stock, issuances will not exceed this threshold.

Under the agreements, theCompany has until November 22, 2025 to authorize, register, and reserve the additional shares.