Harrow Health, Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K covers events occurring on April 30, 2021, and May 5, 2021. Harrow Health, Inc. (HROW) is a Delaware corporation headquartered in Nashville, Tennessee, reporting on material definitive agreements, debt terminations, and equity issuances.
Key Financial Metrics and Transactions
- Preferred Stock Issuance: Sold 440,000 shares of Series B Cumulative Preferred Stock to B. Riley Securities, Inc. for net proceeds of approximately $10.7 million. The stock has a liquidation preference of $25.00 per share.
- Senior Notes Offering: Completed the sale of an additional $5.0 million in 8.625% Senior Notes due 2026 following the full exercise of an underwriters' option. This brings the total offering to $55.0 million ($50.0 million original + $5.0 million additional).
- Debt Repayment: Repaid in full a senior secured term loan with an outstanding principal of approximately $14.4 million.
- Transaction Costs: Paid approximately $325,000 in accrued interest and an $850,000 exit fee to terminate the term loan.
- Dividend Obligations: Series B Preferred Stock carries a cumulative cash dividend rate starting at 9.50% annually, increasing to 12% by September 30, 2021, with further step-ups thereafter.
Material Changes Versus Prior Period
The filing details a significant restructuring of the company's capital structure. The company eliminated approximately $14.4 million in variable-rate debt (LIBOR + 10.00%) and replaced it with fixed-rate senior notes and preferred equity. This action removes the maturity date of July 19, 2023, associated with the term loan and introduces new fixed dividend obligations on the preferred stock.
Guidance, Outlook, and Risks
Use of Proceeds: Net proceeds from the Series B Preferred Stock sale are designated for general corporate purposes, including strategic product acquisitions, capital expenditures, and working capital.
Capital Structure Risks: The Series B Preferred Stock ranks senior to common stock but junior to all existing and future indebtedness. The dividend rate is variable and increases over time, which may impact future cash flow flexibility. The company retains the right to redeem the preferred stock at any time.
Unusual Items: The filing includes an Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2020, reflecting the impact of these transactions.
Investor Verification Checklist
- Verify the exact terms of the dividend step-up mechanism for the Series B Preferred Stock in the Certificate of Designation (Exhibit 3.1).
- Review the Unaudited Pro Forma Consolidated Balance Sheet (Exhibit 99.3) to assess the immediate impact on leverage and liquidity.
- Confirm the total outstanding principal of the 8.625% Senior Notes due 2026 is now $55.0 million.
- Check for any covenants in the new Senior Notes or Preferred Stock that may restrict future financing or operational flexibility.