Quarterly report pursuant to Section 13 or 15(d)


9 Months Ended
Sep. 30, 2021

Note 11 – Leases


On October 23, 2020, we completed the acquisition of CPM, which included the acquisition of a 4,000 square foot CLIA accredited laboratory located in Old Bridge, New Jersey, which was owned by CPM (which is now known as ProPhase Diagnostics NJ, Inc.). The lease is for a term of 24 months with a monthly base lease payment of $5,950.


On December 8, 2020, we entered into a Lease Agreement (the “New York Lease”) pursuant to which the Company has agreed to lease certain premises located on the second floor (the “Leased Premises”) of 711 Stewart Avenue, Garden City, New York (the “Building”). The Leased Premises serve as the Company’s second laboratory location, offering a wide range of laboratory testing services for diagnosis, screening and evaluation of diseases, including COVID-19 and Respiratory Pathogen Panel Molecular tests.


The New York Lease was effective as of December 8, 2020 and commenced in December 2020 when the facility was made available to us by the landlord. The initial term of the New York Lease is 10 years and seven months (the “Initial Term”), unless sooner terminated as provided in the New York Lease. We may extend the term of the New York Lease for one additional option period of five years. We have the option to terminate the New York Lease on the sixth anniversary of the Commencement Date, provided that we give the landlord written notice not less than nine months and not more than 12 months in advance and that we pay the landlord a termination fee.


For the first year of the New York Lease, the base rent is $56,963 per month (subject to a seven month abatement period), with a gradual rental rate increase of 2.75% for each 12 month period, culminating in a monthly base rent of $74,716 during the final months of the Initial Term. In addition to the monthly base rent, we are responsible for our proportionate share of real estate tax escalations in accordance with the terms of the New York Lease.


We also have a right of first refusal to lease certain additional space located on the ground floor of the Building containing 4,500 square feet and 4,600 square feet, as more particularly described in the New York Lease. We also have a right of first offer to purchase the Building during the term of the New York Lease.


At September 30, 2021, we had operating lease liabilities for the New York and New Jersey leases of approximately $4.9 million and right of use assets of approximately $4.5 million, which were included in the condensed consolidated balance sheet.



ProPhase Labs, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements



The following summarizes quantitative information about our operating leases (amounts in thousands): 



For the Nine Months Ended

September 30, 2021

Operating leases        
Operating lease cost   $ 611  
Variable lease cost     -  
Operating lease expense     611  
Short-term lease rent expense     -  
Total rent expense   $ 611  


    For the Nine Months Ended September 30, 2021  
Operating cash flows used in operating leases   $ (168 )
Right-of-use assets obtained in exchange for operating lease liabilities   $ -  
Weighted-average remaining lease term – operating leases (in years)     9.7  
Weighted-average discount rate – operating leases     10.00 %


Maturities of the Company’s operating leases, excluding short-term leases, are as follows (amounts in thousands):


Remaing Months Ended December 31, 2021   $ 190  
Year Ended December 31, 2022     774  
Year Ended December 31, 2023     738  
Year Ended December 31, 2024     747  
Year Ended December 31, 2025     768  
Thereafter     4,659  
Total     7,876  
Less present value discount     (2,948 )
Operating lease liabilities   $ 4,928