Harrow Health, Inc. - Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K was filed by Harrow Health, Inc. (HROW) on March 27, 2023. The filing details a material definitive agreement entered into on the same date to refinance existing debt and secure additional liquidity.
Key Financial Metrics and Debt Structure
- New Financing: Entered into a Credit and Guaranty Agreement ("Oaktree Loan") with a principal capacity of up to $100,000,000.
- Initial Drawdown: Immediately drew $65,000,000 to repay the prior B. Riley Loan in full.
- Available Capacity: An additional $35,000,000 (Tranche B) is available upon the commercialization of Triesence®.
- Interest Rate: SOFR plus 6.5% per annum.
- Maturity Date: January 19, 2026.
- Payment Terms: Interest-only payments; no principal amortization or excess cash flow sweeps during the term.
- Costs: Paid $3,100,000 in fees, expenses, and original issue discount charges at closing.
- Collateral: Secured by nearly all assets, including intellectual property, of the Company and material subsidiaries.
Material Changes Versus Prior Period
The Company terminated its previous Loan and Security Agreement with B. Riley Commercial Capital, LLC (dated December 14, 2022). The B. Riley Loan was fully repaid using proceeds from the Oaktree Loan. No exit or prepayment fees were incurred on the B. Riley Loan payoff.
Outlook, Covenants, and Risks
- Financial Covenants: The agreement includes minimum cash balance and minimum revenue covenants.
- Warrant Issuance Trigger: Based on the Total Leverage Ratio for the year ended December 31, 2024:
- If ratio is ≥ 5x but < 7x: Issue warrants for 375,000 shares.
- If ratio is ≥ 7x: Issue warrants for an additional 375,000 shares (750,000 total).
- If ratio is < 5x: No warrants issued.
- Management Commentary: Based on current projections, the Company does not expect to issue any warrants related to this loan.
- Contingency: Tranche B funding is contingent on the commercialization of Triesence®.
Investor Verification Checklist
- Verify the full text of the Oaktree Loan agreement when filed as an exhibit to the Form 10-Q for the quarter ended March 31, 2023.
- Monitor the commercialization status of Triesence® to determine eligibility for the $35,000,000 Tranche B.
- Track the Company's Total Leverage Ratio leading up to December 31, 2024, to assess potential dilution from warrant issuance.
- Review future cash flow statements to ensure compliance with minimum cash balance and revenue covenants.