Harrow Health, Inc. - 8-K Summary
Business Context and Reporting Period
This Form 8-K was filed by Harrow Health, Inc. (the "Company") on February 7, 2019, reporting events occurring on February 1, 2019. The filing details the entry into a Material Definitive Agreement regarding the acquisition of intellectual property for lidocaine-based gel formulations.
Key Financial Metrics and Transaction Terms
The filing does not provide standard financial metrics such as revenue, profit, cash flow, margins, or debt levels. The financial terms of the reported transaction are as follows:
- Upfront Payment: $25,000 paid to Elle Pharmaceutical, LLC ("Elle") at signing.
- Royalty Obligations: Up to 7.5% of net sales of the Products as compounded drug formulations and commercially available drugs (while patent rights remain outstanding).
- Contingent Payment: $175,000 payable to Elle upon the Company's subsidiary, Mayfield Pharmaceuticals, Inc., securing third-party financing of at least $10,000,000 in gross proceeds.
- Equity Issuance: Mayfield Pharmaceuticals, Inc. issued 1,000,000 shares of its common stock to Elle.
Material Changes
The primary material change is the acquisition of intellectual property and related rights from Elle Pharmaceutical, LLC to develop, formulate, make, sell, and sub-license lidocaine-based gel formulations. These assets were assigned to the Company's subsidiary, Mayfield Pharmaceuticals, Inc.
Outlook, Risks, and Contingencies
The transaction creates a contingent liability of $175,000 dependent on the subsidiary raising $10 million in financing. Future profitability of the acquired products will be impacted by royalty payments of up to 7.5% of net sales. The filing notes that the description provided is brief and does not purport to be a complete description of the rights and obligations under the agreements.
Key Facts for Investor Verification
- Verify the status of the $10 million financing threshold for Mayfield Pharmaceuticals, Inc. to determine if the $175,000 contingent payment is imminent.
- Confirm the valuation and patent status of the acquired lidocaine-based gel formulations.
- Review the full Asset Purchase Agreement and Royalty Agreement for additional covenants or obligations not detailed in this summary.
- Assess the impact of the 1,000,000 share issuance on Mayfield Pharmaceuticals, Inc.'s capital structure.