ProPhase Labs, Inc. completed a conversion of $3.3 million of its outstanding convertible debt into common stock at a floor price of $0.76 per share, a level well above the company’s then‑trading price. The transaction eliminated the majority of the company’s $3.8 million principal debt, leaving an unconverted balance of less than $500,000 and improving the debt‑to‑equity ratio.
The conversion reduces ProPhase’s leverage and increases shareholders’ equity, providing a stronger balance sheet for future financing or operational initiatives. Management noted that the floor price was set above the market price, which limits dilution for existing shareholders while still providing liquidity to debt holders.
CEO Ted Karkus explained that the conversion, along with a 1‑for‑10 reverse stock split and the company’s transition from Nasdaq to the OTC market, are technical factors that have contributed to short‑term selling pressure. He emphasized that the debt conversion “reduced liabilities and strengthened the balance sheet” and that the company’s underlying value remains intact.
ProPhase’s capital‑structure improvement comes amid a broader restructuring effort. The company has been pursuing the commercialization of its BE‑Smart esophageal cancer test, recovering over $150 million in Crown Medical receivables, and has entered a non‑binding letter of intent for a reverse merger with Advanced Biological Laboratories. Earlier in 2025, ProPhase divested its Pharmaloz manufacturing unit for approximately $23 million.
Investors have noted the technical nature of the conversion and related corporate actions. While the market reaction has been driven by these structural changes, management maintains confidence in the company’s strategic initiatives and the long‑term value of its core assets.
The debt reduction positions ProPhase to better manage cash constraints, pursue strategic opportunities, and potentially improve financial stability. The conversion is a key step in the company’s ongoing effort to strengthen its balance sheet and support future growth initiatives.
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