0001140361-17-004119.txt : 20170202 0001140361-17-004119.hdr.sgml : 20170202 20170202125027 ACCESSION NUMBER: 0001140361-17-004119 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20170202 DATE AS OF CHANGE: 20170202 GROUP MEMBERS: BRADEN M. LEONARD (1) SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ProPhase Labs, Inc. CENTRAL INDEX KEY: 0000868278 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 232577138 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-84809 FILM NUMBER: 17567564 BUSINESS ADDRESS: STREET 1: 621 N. SHADY RETREAT ROAD CITY: DOYLESTOWN STATE: PA ZIP: 18901 BUSINESS PHONE: 2153450919 MAIL ADDRESS: STREET 1: 621 N. SHADY RETREAT ROAD CITY: DOYLESTOWN STATE: PA ZIP: 18901 FORMER COMPANY: FORMER CONFORMED NAME: QUIGLEY CORP DATE OF NAME CHANGE: 19930328 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BML Investment Partners, L.P. CENTRAL INDEX KEY: 0001373604 IRS NUMBER: 383708345 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 156 S. FIRST STREET CITY: ZIONSVILLE STATE: IN ZIP: 46077 BUSINESS PHONE: 317-344-6689 MAIL ADDRESS: STREET 1: 156 S. FIRST STREET CITY: ZIONSVILLE STATE: IN ZIP: 46077 SC 13D/A 1 doc1.htm NONE Schedule 13D
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. N/A )*

ProPhase Labs, Inc.
(Name of Issuer)


Common Stock, $.0005 per share
(Title of Class of Securities)


74345W108
(CUSIP Number)


Braden M. Leonard,  BML Capital Management, LLC  65 E Cedar - Suite 2  Zionsville,  Indiana  46077  Phone : 3173442447
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)


January 31, 2017
(Date of Event which Requires Filing of this Statement)



If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box.    x

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
 

1
NAMES OF REPORTING PERSONS
   
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
   
BML Investment Partners, L.P. (1)
    
   
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
o
 
(b)
x
   
3
SEC USE ONLY
   
     
   
4
SOURCE OF FUNDS
   
WC
    
   
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(e) or 2(f)
 
o
 
   
   
6
CITIZENSHIP OR PLACE OF ORGANIZATION
   
Delaware
    
   
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7
SOLE VOTING POWER
   
0
    
   
8
SHARED VOTING POWER
   
2,322,627 (1)
    
   
9
SOLE DISPOSITIVE POWER
   
0
    
   
10
SHARED DISPOSITIVE POWER
   
2,322,627 (1)
    
   
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
   
2,322,627 (1)
    
   
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
 
o
 
   
   
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
   
13.6 (2)%
   
   
14
TYPE OF REPORTING PERSON
   
PN
    
   
 
(1) BML Investment Partners, L.P. is a Delaware limited partnership whose sole general partner is BML Capital Management, LLC. The managing member of BML Capital Management, LLC is Braden M. Leonard. As a result, Braden M. Leonard is deemed to be the indirect owner of the shares held directly by BML Investment Partners, L.P. Despite such shared beneficial ownership, the reporting persons disclaim that they constitute a statutory group within the meaning of Rule 13d-5(b)(1) of the Act.

(2) Calculated based on 17,080,776 shares of ProPhase Labs, Inc.(the “Issuer’s”) common stock, par value $0.0005 per share, as reported on the Issuer’s Form 10-Q filed with the Securities and Exchange Commission on November 15, 2016.
 
1
NAMES OF REPORTING PERSONS
   
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
   
Braden M. Leonard (1)
    
   
2
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)
o
 
(b)
x
   
3
SEC USE ONLY
   
     
   
4
SOURCE OF FUNDS
   
OO
    
   
5
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(e) or 2(f)
 
o
 
   
   
6
CITIZENSHIP OR PLACE OF ORGANIZATION
   
United States
    
   
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH
7
SOLE VOTING POWER
   
0
    
   
8
SHARED VOTING POWER
   
2,322,627 (1)
    
   
9
SOLE DISPOSITIVE POWER
   
0
    
   
10
SHARED DISPOSITIVE POWER
   
2,322,627 (1)
    
   
11
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
   
2,322,627 (1)
    
   
12
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
 
o
 
   
   
13
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
   
13.6 (2)%
   
   
14
TYPE OF REPORTING PERSON
   
IN
    
   
 
(1) BML Investment Partners, L.P. is a Delaware limited partnership whose sole general partner is BML Capital Management, LLC. The managing member of BML Capital Management, LLC is Braden M. Leonard. As a result, Braden M. Leonard is deemed to be the indirect owner of the shares held directly by BML Investment Partners, L.P. Despite such shared beneficial ownership, the reporting persons disclaim that they constitute a statutory group within the meaning of Rule 13d-5(b)(1) of the Act.

(2) Calculated based on 17,080,776 shares of ProPhase Labs, Inc.(the “Issuer’s”) common stock, par value $0.0005 per share, as reported on the Issuer’s Form 8K filed with the Securities and Exchange Commission on November 15, 2016.
 
 
 
Item 1.
Security and Issuer
  
 
 
This Schedule 13D relates to common stock, par value $0.0005 per share (the “Common Stock”) of ProPhase Labs, Inc. (the “Issuer”). The Issuer’s principal executive offices are located at 621 N. Shady Retreat Road, Doylestown, PA, United States.
 
Item 2.
Identity and Background
  
 
 
(a)
This statement is being filed by BML Investment Partners, L.P., a Delaware limited partnership. BML Capital Management,LLC, an Indiana limited liability company, is the general partner to BML Investment Partners, L.P. Braden M. Leonard is the sole managing member of the general partner

 
(b)
BML Investment Partners, L.P. - The business address of BML Investment Partners, L.P., is 65 E Cedar – Suite 2, Zionsville, IN 46077.

BML Capital Management, LLC. - The business address of BML Capital Management, LLC, is 65 E Cedar – Suite 2, Zionsville, IN 46077.

Braden M. Leonard - Mr. Leonard’s business address is 65 E Cedar – Suite 2, Zionsville, IN 46077.

 
(c)
BML Investment Partners, L.P. - The principal business of BML Investment Partners, L.P. is to purchase, sell, trade and invest in securities.

BML Capital Management, LLC. - The principal business of BML Capital Management, LLC is to serve as the general partner to BML Investment Partners, L.P.

Braden M. Leonard - Mr. Leonard’s principal business is to serve as managing member of BML Capital Management, LLC.

 
(d)
During the past five years, none of BML Investment Partners, L.P., BML Capital Management, LLC or Braden M. Leonard have been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or a party to a civil proceeding of a judicial or administrative body of competent jurisdiction where as a result of such proceeding BML Investment Partners, L.P., BML Capital Management, LLC or Braden M. Leonard was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

 
(e)
During the past five years, none of BML Investment Partners, L.P., BML Capital Management, LLC or Braden M. Leonard have been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or a party to a civil proceeding of a judicial or administrative body of competent jurisdiction where as a result of such proceeding BML Investment Partners, L.P., BML Capital Management, LLC or Braden M. Leonard was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws.

 
(f)
Braden M. Leonard is a citizen of the United States of America.
 
Item 3.
Source and Amount of Funds or Other Consideration
  
 
 
BML Investment Partners, L.P. holds 2,322,627 shares of Common Stock which were acquired using working capital for a total purchase price (including commissions) of approximately $3,574,760.
 
Item 4.
Purpose of Transaction
  
 
BML Investment Partners, L.P. (the "Reporting Person") acquired the Common Stock beneficially owned by the Reporting Person in the ordinary course of purchasing, selling and investing in securities.

On January 31, 2017 ProPhase Labs, Inc. (the Company) filed its preliminary proxy on form PRE 14A.

The Reporting Person has thoroughly reviewed the preliminary proxy filed by the company and has several concerns.

First, the section titled “Background of the Sale of the Acquired Assets” is inadequate in describing the sale process. At this point, shareholders have no idea if any bidders offered to buy the entire company, or at what price any of the losing bidders offered to buy the Cold-EEZE assets. Typically, the negotiating process is spelled out in great detail in this section of the proxy, informing investors of exactly what the Board was thinking throughout the entire process. In this case, we could find very little that indicated the Board exhausted every option to maximize shareholder value, including a sale of the entire company. For instance, on January 5, the Board learned a new bidder had recently emerged, yet decided to sign a definitive contract with Mylan on January 6.

Second, the preliminary proxy statement has done nothing to ease our concerns about the deal structure. In fact, it raises our level of concern that shareholders will be left with little more than the illiquid stock of a company whose only source of revenue is derived from a tiny contract manufacturing business that is not nearly big enough to support the company’s overhead structure. For example, the document indicates that on a pro forma basis, after adjusting for the sale of the Cold-EEZE assets, the business’s operating loss totaled more than $4 million for the 9 months ended September 30, 2016, and $7 million for the year ended December 2015. Nowhere could we find any language indicating that the company is committed to expense reductions commensurate with the amount of revenue lost through the transaction. At this pace, all of the excess value created from the transaction will be quickly destroyed by current and future operating losses. Even worse, management has hinted in its conference calls with investors that it’s looking at other ways in which to spend the cash, such as acquisitions. This comes just a few months after the same management team indicated its eagerness to sell assets into a “sellers’ market”.

BML believes Shareholders would have been far better off if the entire company were sold, even if it was for less than $50 million. A deal for the entire business at a price of, say, $45 million would net shareholders somewhere north of $2.40-$2.50 per share assuming full dilution, an amount BML believes is far higher than shareholders will ever receive under the current deal. The buyer would be able to sell the headquarters and manufacturing facility, likely more than offsetting severance costs, while shareholders would get paid in a timely manner. As of February 2, 2017, the stock trades roughly 35% below its $3.05 per share pro-forma book value for good reason.

As mentioned in prior filings, BML believes the sale of the Cold-EEZE asset is good for shareholders. But without concrete indication that the full and fair value will ultimately accrue to shareholders, BML can NOT support the transaction as it’s currently constructed and therefore will be voting NO.

However, ProPhase management has publicly indicated it might consider some sort of liquidity option for shareholders that didn’t want to participate after Cold-EEZE was sold. BML would be more supportive of the current deal if it was presented in conjunction with a formal liquidity event struck at a fair price.


All of the shares of Common Stock reported herein as being beneficially owned by the Reporting Person were acquired for investment purposes. Except as set forth herein, the Reporting Person does not have any plans or proposals that relate to or would result in any of the transactions described in Item 4 of Schedule 13D.

The Reporting Person reserves the right to acquire, or cause to be acquired, additional securities of the Issuer, to dispose of, or cause to be disposed, such securities at any time or to formulate other purposes, plans or proposals regarding the Issuer or any of its securities, to the extent deemed advisable in light of general investment and trading policies of the Reporting Person, market conditions or other factors.

 
(a)
None

 
(b)
None

 
(c)
None

 
(d)
None

 
(e)
None

 
(f)
None

 
(g)
None

 
(h)
None

 
(i)
None

 
(j)
None
 
Item 5.
Interest in Securities of the Issuer
  
 
(a)
As of January 31, 2017, BML Investment Partners, L.P., beneficially owned 2,322,327 shares of the Issuer's Common Stock.

As of January 31, 2017, Braden M. Leonard, beneficially owned 2,322,327 shares of the Issuer's Common Stock.

As of January 31, 2017, BML Investment Partners, L.P., beneficially owned 13.6% of the Issuer's Common Stock.

As of January 31, 2017, Braden M. Leonard, beneficially owned 13.6% of the Issuer's Common Stock.

 
(b)
BML Investment Partners, L.P. has sole voting power over 0 shares, sole dispositive power over 0 shares, shared voting power over 2,322,627 shares and shared dispositive power over 2,322,627 shares.

Braden M. Leonard has sole voting power over 0 shares, sole dispositive power over 0 shares, shared voting power over 2,322,627 shares and shared dispositive power over 2,322,627 shares.

 
(c)
None

 
 
Transaction Date Shares or Units Purchased (Sold) Price Per Share or Unit 
 
 

 
 
 

 
 

 
(d)
None

 
(e)
Not Applicable
 
Item 6.
Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
  
 
 
None
 
Item 7.
Material to Be Filed as Exhibits
  
 
 
None
 
Signature
 
After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 
BML Investment Partners, L.P., a Delaware limited partnership By: BML Capital Management, LLC, its general partner and an Indiana limited liability company
  
       
February 02, 2017
By:
/s/ Braden M. Leonard
  
   
Managing Member
  
       
 
 
       
February 02, 2017
By:
/s/ Braden M. Leonard
  
   
Braden M. Leonard
  
       
 
The original statement shall be signed by each person on whose behalf the statement is filed or his authorized representative. If the statement is signed on behalf of a person by his authorized representative (other than an executive officer or general partner of the filing person), evidence of the representative’s authority to sign on behalf of such person shall be filed with the statement: provided, however, that a power of attorney for this purpose which is already on file with the Commission may be incorporated by reference. The name and any title of each person who signs the statement shall be typed or printed beneath his signature.

Footnotes: 
 
Attention: Intentional misstatements or omissions of fact constitute Federal criminal violations (See 18 U.S.C. 1001)