Business Context and Reporting Period
Harrow Health, Inc. (HROW) filed a Current Report on Form 8-K dated April 1, 2020. The filing addresses material changes to the company's debt structure and potential new financing initiatives in response to the COVID-19 pandemic.
Key Financial Metrics and Debt
- Debt Financing: The Company drew down an additional $1,000,000 in principal under its existing term loan agreement with SWK Funding LLC.
- Amortization Schedule: The first amortization date was extended to August 14, 2020, allowing for interest-only payments on the principal for the immediate quarter.
- Interest Payment Terms: The interest payment due May 14, 2020, will be paid in kind (PIK), increasing the principal balance by the accrued interest amount.
- Liquidity and Revenue: The filing text does not provide specific values for revenue, profit, cash flow, margins, or overall liquidity positions.
Material Changes Versus Prior Period
The primary material change is the Second Amendment to the Loan and Security Agreement dated July 19, 2017. This amendment modifies the repayment structure to provide short-term cash flow relief by deferring principal amortization and capitalizing the next interest payment.
Outlook, Risks, and Contingencies
- Government Assistance: The Company has applied for a loan under the SBA Economic Injury Disaster Loan (EIDL) program and intends to apply for the Paycheck Protection Program (PPP).
- Contingencies: The existing lender has consented to these applications. However, the filing explicitly states there is no assurance that the Company will qualify for or receive proceeds from either program.
- Risk Factors: The filing highlights the ongoing impact of the coronavirus (COVID-19) pandemic as the driver for seeking additional liquidity.
Investor Verification Checklist
- Verify the total outstanding principal balance of the SWK Loan after the $1,000,000 drawdown and the PIK interest addition.
- Confirm the status of the EIDL and PPP loan applications and whether funding has been secured.
- Review the full text of the Second Amendment (Exhibit 10) for any additional covenants or restrictions triggered by the amendment.
- Assess the company's cash runway given the deferral of principal payments and the uncertainty of government loan approval.