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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to _____________

 

Commission File Number: 001-35814

 

Harrow Health, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   45-0567010
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)

 

102 Woodmont Blvd., Suite 610

Nashville, Tennessee

  37205
(Address of principal executive offices)   (Zip code)

 

(615) 733-4730

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company, or an emerging growth company.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name on exchange on which registered
Common Stock, $0.001 par value per share   HROW   The NASDAQ Global Market

 

As of November 6, 2020, there were 25,745,967 shares of the registrant’s common stock, $0.001 par value, outstanding.

 

 

 

   
 

 

HARROW HEALTH, INC.

 

Table of Contents

 

      Page
Part I   FINANCIAL INFORMATION  
       
Item 1.   Financial Statements (unaudited) 3
       
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations 30
       
Item 3.   Quantitative and Qualitative Disclosures About Market Risk 41
       
Item 4.   Controls and Procedures 41
       
Part II   OTHER INFORMATION  
       
Item 1.   Legal Proceedings 42
       
Item 1A.   Risk Factors 42
       
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds 45
       
Item 3.   Defaults Upon Senior Securities 45
       
Item 4.   Mine Safety Disclosures 45
       
Item 5.   Other Information 45
       
Item 6.   Exhibits 45
       
    Signatures 46

 

2

 

 

PART I

FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

HARROW HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

   2020   2019 
   September 30,   December 31, 
   2020   2019 
   (unaudited)     
ASSETS        
Current assets          
Cash and cash equivalents, including restricted cash of $200  $5,727   $4,949 
Investment in Eton Pharmaceuticals   27,650    25,200 
Accounts receivable, net   2,195    2,009 
Inventories   3,974    3,301 
Prepaid expenses and other current assets   1,431    1,308 
Total current assets   40,977    36,767 
Property, plant and equipment, net   4,773    5,375 
Operating lease right-of-use assets   6,945    6,559 
Intangible assets, net   1,958    2,337 
Investment in Surface Ophthalmics   2,053    3,747 
Investment in Melt Pharmaceuticals   2,432    3,968 
Goodwill   332    332 
TOTAL ASSETS  $59,470   $59,085 
LIABILITIES AND STOCKHOLDERS’ EQUITY          
Current liabilities          
Accounts payable and accrued expenses  $5,691   $7,702 
Accrued payroll and related liabilities   3,692    2,117 
Deferred revenue and customer deposits   63    57 
Current portion of paycheck protection program loan payable   1,138    - 
Current portion of loan payable, net of unamortized debt discount   2,612    1,772 
Current portion of operating lease liabilities   579    629 
Current portion of finance lease obligations   7    7 
Total current liabilities   13,782    12,284 
Operating lease liabilities, net of current portion   6,780    6,338 
Finance lease obligations, net of current portion   20    26 
Accrued expenses, net of current portion   800    800 
Paycheck protection program loan payable, net of current portion   829    - 
Loan payable, net of current portion and unamortized debt discount   12,331    12,219 
TOTAL LIABILITIES   34,542    31,667 
COMMITMENTS AND CONTINGENCIES   -     -  
STOCKHOLDERS’ EQUITY          
Common stock, $0.001 par value, 50,000,000 shares authorized, 25,652,169 and 25,526,931 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively   26    26 
Additional paid-in capital   103,798    101,728 
Accumulated deficit   (78,549)   (74,043)
TOTAL HARROW HEALTH STOCKHOLDERS’ EQUITY   25,275    27,711 
Noncontrolling interests   (347)   (293)
TOTAL STOCKHOLDERS’ EQUITY   24,928    27,418 
TOTAL LIABILITIES AND EQUITY  $59,470   $59,085 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 3 
 

 

HARROW HEALTH, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for share and per share data)

 

   2020   2019   2020   2019 
   For the   For the   For the   For the 
   Three Months Ended   Three Months Ended   Nine Months Ended   Nine Months Ended 
   September 30,   September 30,   September 30,   September 30, 
   2020   2019   2020   2019 
Revenues:                
Product sales, net  $14,385   $12,748   $34,244   $38,540 
Other revenues   14    7    32    21 
Total revenues   14,399    12,755    34,276    38,561 
Cost of sales   (3,696)   (4,061)   (10,526)   (13,184)
Gross profit   10,703    8,694    23,750    25,377 
Operating expenses:                    
Selling, general and administrative   8,436    8,608    23,806    25,399 
Research and development   670    444    1,822    1,659 
Impairment of long-lived assets   -    4,040    363    4,040 
Total operating expenses   9,106    13,092    25,991    31,098 
Income (loss) from operations   1,597    (4,398)   (2,241)   (5,721)
Other income (expense):                    
Interest expense, net   (498)   (620)   (1,563)   (1,939)
Investment (loss) gain from Melt Pharmaceuticals, net   (300)   (682)   (1,536)   4,517 
Investment loss from Surface Ophthalmics, net   (756)   (400)   (1,694)   (904)
Investment gain (loss) from Eton Pharmaceuticals, net   8,575    (5,530)   2,450    700 
Other income, net   5    -    24    630 
Total other income (expense), net   7,026    (7,232)   (2,319)   3,004 
Income (loss) before income taxes   8,623    (11,630)   (4,560)   (2,717)
Income tax benefit, net   -    -    -    - 
Total net income (loss) including noncontrolling interests   8,623    (11,630)   (4,560)   (2,717)
Net loss attributable to noncontrolling interests   15    161    54    228 
Net income (loss) attributable to Harrow Health, Inc.  $8,638   $(11,469)  $(4,506)  $(2,489)
Basic net income (loss) per share of common stock  $0.33   $(0.45)  $(0.17)  $(0.10)
Diluted net income (loss) per share of common stock  $0.32   $(0.45)  $(0.17)  $(0.10)
Weighted average number of shares of common stock outstanding, basic   25,921,573    25,583,998    25,880,554    25,205,215 
Weighted average number of shares of common stock outstanding, diluted   27,090,060    25,583,998    25,880,554    25,205,215 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 4 
 

 

HARROW HEALTH, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three and Nine Months Ended September 30, 2020 and 2019

(In thousands, except for share data)

 

   Shares   Value   Capital   Deficit   Equity   Interest   Equity 
                   Total         
   Common Stock   Additional       Harrow Health, Inc.   Total   Total 
       Par   Paid-in   Accumulated   Stockholders’   Noncontrolling   Stockholders’ 
   Shares   Value   Capital   Deficit   Equity   Interest   Equity 
Balance at June 30, 2019   25,138,958   $25   $100,271   $(65,231)  $35,065   $(67)  $34,998 
                                    
Issuance of common stock in connection with:                                   
Exercise of warrants   25,135    -    -    -    -    -    - 
Exercise of employee stock-based options, net of tax withholding   4,748    -    (44)   -    (44)   -    (44)
Stock-based payment for services provided   -    -    75    -    75    -    75 
Stock-based compensation expense   -    -    328    -    328    -    328 
Net loss   -    -    -    (11,469)   (11,469)   (161)   (11,630)
Balance at September 30, 2019   25,168,841   $25   $100,630   $(76,700)  $23,955   $(228)  $23,727 
                                    
                        Total           
    Common Stock    Additional         Harrow Health, Inc.    Total    Total 
         Par    Paid-in    Accumulated    Stockholders’    Noncontrolling    Stockholders’ 
    Shares    Value    Capital    Deficit    Equity     Interest     Equity  
Balance at June 30, 2020   25,649,171   $26   $102,889   $(87,187)  $15,728   $(332)  $15,396 
                                    
Issuance of common stock in connection with:                                   
Exercise of employee stock-based options, net of tax withholding   2,998    -    (8)   -    (8)   -    (8)
Stock-based compensation expense   -    -    917    -    917    -    917 
Net income (loss)   -    -    -    8,638    8,638    (15)   8,623 
Balance at September 30, 2020   25,652,169   $26   $103,798   $(78,549)  $25,275   $(347)  $24,928 
                                    
                        Total           
    Common Stock    Additional         Harrow Health, Inc.    Total    Total 
         Par    Paid-in    Accumulated    Stockholders’    Noncontrolling    Stockholders’ 
    Shares    Value    Capital    Deficit    Equity     Interest     Equity  
Balance at December 31, 2018   24,339,610   $24   $98,938   $(74,211)  $24,751   $-   $24,751 
                                    
Issuance of common stock in connection with:                                   
Exercise of warrants   788,528    1    178    -    179    -    179 
Exercise of employee stock-based options, net of tax withholding   25,703    -    (44)   -    (44)   -    (44)
Stock-based payment for services provided   15,000    -    150    -    150    -    150 
Stock-based compensation expense   -    -    1,408    -    1,408    -    1,408 
Net loss   -    -    -    (2,489)   (2,489)   (228)   (2,717)
Balance at September 30, 2019   25,168,841   $25   $100,630   $(76,700)  $23,955   $(228)  $23,727 
                                    
                        Total           
    Common Stock    Additional         Harrow Health, Inc.    Total    Total 
         Par    Paid-in    Accumulated    Stockholders’    Noncontrolling    Stockholders’ 
    Shares    Value    Capital    Deficit    Equity     Interest    Equity  
Balance at December 31, 2019   25,526,931   $26   $101,728   $(74,043)  $27,711   $(293)  $27,418 
                                    
Issuance of common stock in connection with:                                   
Exercise of employee stock-based options, net of tax withholding   3,251    -    (8)   -    (8)   -    (8)
Vesting of RSUs   91,987    -    -    -    -    -    - 
Stock-based payment for services provided   30,000    -    83    -    83    -    83 
Stock-based compensation expense   -    -    1,995    -    1,995    -    1,995 
Net loss   -    -    -    (4,506)   (4,506)   (54)   (4,560)
Balance at September 30, 2020   25,652,169   $26   $103,798   $(78,549)  $25,275   $(347)  $24,928 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 5 
 

 

HARROW HEALTH, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

   2020   2019 
   For the 
   Nine Months Ended 
   September 30, 
   2020   2019 
         
CASH FLOWS FROM OPERATING ACTIVITIES          
Net loss (including noncontrolling interests)  $(4,560)  $(2,717)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization of property, plant and equipment   1,377    1,365 
Amortization of intangible assets   127    175 
Amortization of operating lease right-of-use assets   550    386 
Amortization of debt issuance costs and discount   354    394 
Provision for bad debt expense   221    - 
Investment gain from Eton, net   (2,450)   (700)
Investment loss from Surface, net   1,694    904 
Investment loss (gain) from Melt, net   1,536    (4,517)
Loss on sale and disposal of equipment   5    - 
Interest paid-in-kind on loan payable   348    - 
Impairment of long-lived assets   363    4,013 
Stock-based payment of consulting services   83    150 
Stock-based compensation   1,995    1,408 
Changes in assets and liabilities:          
Accounts receivable, net of provision for bad debt expense   (407)   (901)
Inventories   (673)   (1,413)
Prepaid expenses and other current assets   (123)   (528)
Accounts payable and accrued expenses   (2,555)   1,721 
Accrued payroll and related liabilities   1,575    (371)
Deferred revenue and customer deposits   6    (71)
NET CASH USED IN OPERATING ACTIVITIES   (534)   (702)
CASH FLOWS FROM INVESTING ACTIVITIES          
Proceeds on sale and disposal of assets   -    4 
Investment in patent and trademark assets   (111)   (279)
Purchases of property, plant and equipment   (780)   (589)
NET CASH USED IN INVESTING ACTIVITIES   (891)   (864)
CASH FLOWS FROM FINANCING ACTIVITIES          
Payments on finance lease obligations   (6)   (744)
Proceeds from SWK debt   1,000    - 
Principal payments on loan payable   (750)   (750)
Payments of costs related to amendment of note payable   -    (282)
Net proceeds from Payroll Protection Program loan payable   1,967    - 
Net proceeds from exercise of warrants and stock options, net of taxes remitted for RSU and options   (8)   135 
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES   2,203    (1,641)
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH   778    (3,207)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period   4,949    6,838 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period  $5,727   $3,631 
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH          
Cash and cash equivalents  $5,527   $3,431 
Restricted cash   200    200 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD  $5,727   $3,631 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:          
Cash paid for income taxes  $-   $11 
Cash paid for interest  $1,222   $1,546 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:          
New and revaluation of right-of-use asset obtained in exchange for lease obligation  $936   $- 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

 6 
 

 

HARROW HEALTH, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and nine months ended September 30, 2020 and 2019

(Dollar amounts in thousands, except share and per share data)

 

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

Company and Background

 

Harrow Health, Inc. (together with its subsidiaries, partially owned companies and royalty arrangements unless the context indicates or otherwise requires, the “Company” or “Harrow”) specializes in the development, production and sale of innovative medications that offer unique competitive advantages and serve unmet needs in the marketplace through its subsidiaries and deconsolidated companies. The Company owns one of the nation’s leading ophthalmology-focused pharmaceutical businesses, ImprimisRx. In addition to wholly owning ImprimisRx, the Company also has equity positions in Eton Pharmaceuticals, Inc. (“Eton”), Surface Ophthalmics, Inc. (“Surface”), and Melt Pharmaceuticals, Inc. (“Melt”), all companies that began as subsidiaries of Harrow. More recently, the Company founded drug development subsidiaries Mayfield Pharmaceuticals, Inc. (“Mayfield”) and Stowe Pharmaceuticals, Inc. (“Stowe”), among others. In 2020, Harrow created Visionology, Inc., which intends to launch an online eye health platform business. Harrow also owns royalty rights in various drug candidates being developed by Surface, Melt and Mayfield. The Company intends to continue to create, and hold equity and royalty rights in, new businesses that commercialize drug candidates that are internally developed or otherwise acquired or licensed from third parties.

 

Basis of Presentation

 

The Company has prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020 or for any other period. For further information, refer to the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

 

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, as well as Mayfield (79% majority controlled) and Stowe (70% majority controlled) each subsidiaries of Harrow as of September 30, 2020. The remaining 21% of Mayfield is owned by Elle Pharmaceutical, LLC (“Elle”), TGV-Health, LLC and its affiliated entities (collectively “TGV”) or other consultants. Mayfield was organized to develop women’s health-focused drug candidates. The remaining 30% of Stowe is owned by TGV. Stowe was organized to develop ophthalmic drug candidates. All inter-company accounts and transactions have been eliminated in consolidation.

 

Harrow consolidates entities in which it has a controlling financial interest. We consolidate subsidiaries in which we hold and/or control, directly or indirectly, more than 50% of the voting rights. All intercompany accounts and transactions have been eliminated in consolidation.

 

The condensed consolidated balance sheets at September 30, 2020 and December 31, 2019 and the condensed consolidated statements of operations, stockholders’ equity and cash flows for the periods ended September 30, 2020 and 2019 include our accounts and those of our wholly owned subsidiaries as well as Mayfield and Stowe.

 

 7 
 

 

Risks, Uncertainties and Liquidity

 

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. On March 18, 2020, the Centers for Medicare & Medicaid Services (“CMS”) released guidance for U.S. healthcare providers to limit all elective medical procedures in order to conserve personal protective equipment and limit exposure to COVID-19 during the pendency of the pandemic. In addition to limiting elective medical procedures, many hospitals and other healthcare providers have strictly limited access to their facilities during the pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and healthcare delivery, led to social distancing recommendations, stay-at-home orders and other restrictive measures, and created significant volatility in financial markets.

 

Many of the Company’s customers use its drugs in procedures impacted by the CMS guidance to limit elective procedures. In addition, the Company and our business partners need access to healthcare providers and facilities to conduct clinical trials and other activities required to achieve regulatory clearance of products under development.

 

The Company believes reductions in elective procedures in response to CMS guidance have had, and may in the future have, an adverse impact, which may be material, to the Company’s financial condition, liquidity and results of operations. The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on its customers, all of which are uncertain and cannot be predicted. As of the date of filing of this Quarterly Report, the extent to which the COVID-19 pandemic may materially impact the Company’s financial condition, liquidity or results of operations is uncertain. For further information, refer to “Risk Factors” in Part II, Item 1A of this Quarterly Report and information in the Company’s other filings with the Securities and Exchange Commission.

 

During certain periods, including those impacted by the COVID-19 pandemic, the Company has incurred operating losses and negative cash flows from operations. The Company incurred operating losses of $2,241 and $5,721 for the nine months ended September 30, 2020 and 2019, respectively, and had an accumulated deficit of $78,549 and $74,043 as of September 30, 2020 and December 31, 2019, respectively. In addition, the Company used cash in operating activities of $534 and $702 for the nine months ended September 30, 2020 and 2019, respectively.

 

While there is no assurance, management of the Company believes existing cash resources and restricted cash of $5,727 at September 30, 2020 together with cash generated from revenues, will be sufficient to sustain the Company’s planned level of operations for at least the next twelve months. However, estimates of operating expenses, working capital requirements and the future impact of the COVID-19 pandemic on its business could be incorrect, and the Company could use its cash resources faster than anticipated. Further, some or all of the ongoing or planned activities may not be successful and could result in further losses.

 

The Company may seek to increase liquidity and capital resources through a variety of means which may include, but are not limited to: the sale of assets, investments and/or businesses; obtaining financing through the issuance of equity, debt, or convertible securities; and working to increase revenue growth through sales. There is no guarantee that the Company will be able to obtain capital when needed on terms management deems acceptable, or at all.

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The following represents an update for the three and nine months ended September 30, 2020 to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

 

Segments

 

The Company’s chief operating decision-maker is its Chief Executive Officer who makes resource allocation decisions and assesses performance based on financial information presented as operating segments. The Company has identified two operating segments as reportable segments. See Note 15 for more information regarding the Company’s reportable segments.

 

Noncontrolling Interests

 

The Company recognizes any noncontrolling interest as a separate line item in equity in the condensed consolidated financial statements. A noncontrolling interest represents the portion of equity ownership in a less-than-wholly owned subsidiary not attributable to the Company. Generally, any interest that holds less than 50% of the outstanding voting shares is deemed to be a noncontrolling interest; however, there are other factors, such as decision-making rights, that are considered as well. The Company includes the amount of net income (loss) attributable to noncontrolling interests in consolidated net income (loss) on the face of the condensed consolidated statements of operations.

 

 8 
 

 

The Company provides in the condensed consolidated statements of stockholders’ equity a reconciliation at the beginning and the end of the period of the carrying amount of total equity, equity attributable to the parent, and equity attributable to the noncontrolling interests that separately discloses:

 

  (1) net income or loss;
  (2) transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and
  (3) each component of other income or loss.

 

Basic and Diluted Net Income (Loss) per Common Share

 

Basic net income (loss) per common share is computed by dividing income (loss) attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is computed by dividing the income (loss) attributable to common stockholders for the period by the weighted average number of common and common equivalent shares, such as stock options, restricted stock units (“RSUs”) and warrants, outstanding during the period.

 

Basic and diluted net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period. Common stock equivalents (using the treasury stock or “if converted” method) from stock options, unvested RSUs and warrants were 5,447,716 and 5,263,131 at September 30, 2020 and 2019, respectively, and, except for the three months ended September 30, 2020, are excluded from the calculation of diluted net income (loss) per share for the periods presented, because the effect is anti-dilutive. Included in the basic and diluted net income (loss) per share calculation were RSUs awarded to directors that had vested, but the issuance and delivery of the shares are deferred until the director resigns. The number of shares underlying vested RSUs at September 30, 2020 and 2019 was 281,507 and 314,588, respectively.

 

The following table shows the computation of basic net income (loss) per share of common stock for the three and nine months ended September 30, 2020 and 2019:

 

 

   2020   2019   2020   2019 
   For the Three Months Ended   For the Nine Months Ended 
   September 30,   September 30, 
   2020   2019   2020   2019 
Numerator – net income (loss) attributable to Harrow Health, Inc.  $8,638   $(11,469)  $(4,506)  $(2,489)
Denominator – weighted average number of shares outstanding, basic   25,921,573    25,583,998    25,880,554    25,205,215 
Net income (loss) per share, basic  $0.33   $(0.45)  $(0.17)  $(0.10)

 

For the three months ended September 30, 2020, the Company had net income. As a result, the Company computed diluted net income per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding during the period. Diluted common equivalent shares for the three months ended September 30, 2020, consisted of the following:

 

 

   For the Three months Ended 
   September 30, 2020 
     
Diluted shares related to:     
Warrants   504,742 
Stock options   663,745 
Dilutive common equivalent shares   1,168,487 

 

 9 
 

 

The following table shows the computation of diluted net income (loss) per share of common stock for the three and nine months ended September 30, 2020 and 2019:

 

 

   2020   2019   2020   2019 
   For the Three Months Ended   For the Nine months Ended 
   September 30,   September 30, 
   2020   2019   2020   2019 
Numerator – net income (loss) attributable to Harrow Health, Inc.  $8,638   $(11,469)  $(4,506)  $(2,489)
Denominator – weighted average number of shares outstanding, basic   25,921,573    25,583,998    25,880,554    25,205,215 
Dilutive common equivalent shares   1,168,487    -    -    - 
Number of shares used for diluted earnings per share computation   27,090,060    25,583,998    25,880,554    25,205,215 
Net income (loss) per share, diluted  $0.32   $(0.45)  $(0.17)  $(0.10)

 

Investment in Eton Pharmaceuticals, Inc. – Related Party

 

The Company owns 3,500,000 shares of Eton common stock, which represents approximately 16.7% of the equity and voting interests of Eton as of September 30, 2020. At September 30, 2020 the fair market value of Eton’s common stock was $7.90 per share. In accordance with Accounting Standard’s Update (“ASU”) 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, for the three and nine months ended September 30, 2020, the Company recorded an investment gain (loss) from its Eton common stock position of $8,575 and $2,450, respectively, related to the change in fair market value of the Company’s investment in Eton during the measurement periods. As of September 30, 2020, the fair market value of the Company’s investment in Eton was $27,650.

 

Mark Baum, the Company’s Chief Executive Officer, is a member of the board of directors of Eton.

 

Investment in Melt Pharmaceuticals, Inc. – Related Party

 

In April 2018, the Company formed Melt as a wholly owned subsidiary. In January and March of 2019, Melt entered into definitive stock purchase agreements (collectively, the “Melt Series A Preferred Stock Agreement”) with certain investors and closed on the sale of Melt’s Series A Preferred Stock (the “Melt Series A Stock”), totaling approximately $11,400 of proceeds (collectively, the “Melt Series A Round”) at a purchase price of $5.00 per share. As a result, the Company lost voting and ownership control of Melt and ceased consolidating Melt’s financial statements.

 

In January 2019, the Company deconsolidated Melt and recorded a gain of $5,810 and adjusted the carrying value in Melt to reflect the increased valuation of Melt and the Company’s new ownership interest in accordance with Accounting Standard Codification (“ASC”) 810-10-40-4(c), Consolidation.

 

The Company owns 3,500,000 common shares of Melt (which is approximately 44% of the equity interests as of September 30, 2020) and uses the equity method of accounting for this investment, as management has determined that the Company has the ability to exercise significant influence over the operating and financial decisions of Melt. Under this method, the Company recognizes earnings and losses in Melt in its condensed consolidated financial statements and adjusts the carrying amount of its investment in Melt accordingly. The Company’s share of earnings and losses are based on the Company’s ownership interest of Melt. Any intra-entity profits and losses are eliminated. The Company recorded equity in the net loss of Melt of $300 and $1,536 during the three and nine months ended September 30, 2020, respectively. The Company recorded equity in the net loss of Melt of $682 and $1,293 during the three and nine months ended September 30, 2019, respectively. As of September 30, 2020, the carrying value of the Company’s investment in Melt was $2,432.

 

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See Note 4 for more information and related party disclosure regarding Melt.

 

Investment in Surface Ophthalmics, Inc. – Related Party

 

The Company owns 3,500,000 common shares (which is approximately 30% of the equity interests as of September 30, 2020) of Surface and uses the equity method of accounting for this investment, as management has determined that the Company has the ability to exercise significant influence over the operating and financial decisions of Surface. Under this method, the Company recognizes earnings and losses in Surface in its condensed consolidated financial statements and adjusts the carrying amount of its investment in Surface accordingly. The Company’s share of earnings and losses are based on the Company’s ownership interest of Surface. Any intra-entity profits and losses are eliminated. The Company recorded equity in the net loss of Surface of $756 and $1,694 during the three and nine months ended September 30, 2020, respectively. The Company recorded equity in the net loss of Surface of $400 and $904 during the three and nine months ended September 30, 2019, respectively. As of September 30, 2020, the carrying value of the Company’s investment in Surface was $2,053.

 

See Note 5 for more information and related party disclosure regarding Surface.

 

Recently Adopted Accounting Pronouncements

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. The Company adopted ASU 2016-13 on January 1, 2020, and adoption of the standard did not have a material effect on the Company’s consolidated financial position, results of operations and cash flows.

 

In August 2018, the FASB issued ASU 2018-13, Changes to Disclosure Requirements for Fair Value Measurements, which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. The Company adopted ASU 2018-13 on January 1, 2020, and adoption of the standard did not have a material effect on the Company’s consolidated financial position, results of operations and cash flows.

 

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other. This guidance simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the current two-step impairment test under ASC 350. The updated standard eliminates the requirement to calculate a goodwill impairment charge using Step 2. If a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The Company adopted ASU 2017-04 on January 1, 2020, and adoption of the standard did not have a material effect on the Company’s consolidated financial position, results of operations and cash flows.

 

Recently Issued Accounting Pronouncements

 

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, as part of its initiative to reduce complexity in accounting standards. The amendments in the ASU are effective for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted. The Company is currently assessing the impact of this standard and does not expect ASU 2019-12 to have a material impact on its consolidated financial position, results of operations and cash flows.

 

NOTE 3. REVENUES

 

The Company accounts for contracts with customers in accordance with ASC 606, Revenues from Contracts with Customers. The Company has two primary streams of revenues: (1) revenues recognized from our sale of products within our pharmacy services and (2) revenues recognized from intellectual property license and asset purchase agreements.

 

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Product Revenues from Pharmacy Services

 

The Company sells prescription drugs directly through our pharmacy and outsourcing facility network. Revenues from our pharmacy services division includes: (i) the portion of the price the client pays directly to us, net of any volume-related or other discounts paid back to the client, (ii) the price paid to us by individuals, and (iii) customer copayments made directly to the pharmacy network. Sales taxes are not included in revenue. Following the core principle of ASC 606, we have identified the following:

 

  1. Identify the contract(s) with a customer: A contract exists with a customer at the time the prescription or order is received by the Company.
     
  2. Identify the performance obligations in the contract: The order received contains the performance obligations to be met, in almost all cases the product the customer is wishing to receive. If we are unable to be meet the performance obligation, the customer is notified.
     
  3. Determine the transaction price: the transaction price is based on the product being sold to the customer, and any related customer discounts. These amounts are pre-determined and built into our order management software.
     
  4. Allocate the transaction price to the performance obligations in the contract: The transaction price associated with the product(s) being ordered is allocated according to the pre-determined amounts.
     
  5. Recognize revenue when (or as) the entity satisfies a performance obligation: At the time of shipment from the pharmacy or outsourcing facility, the performance obligation has been met.

 

The following revenue recognition policy has been established for the pharmacy services division:

 

Revenues generated from prescription or office use drugs sold by our pharmacies and outsourcing facility are recognized when the prescription is shipped. At the time of shipment, the pharmacy services division has performed substantially all of its obligations under its client contracts and does not experience a significant level of returns or reshipments. Determination of criteria (3) and (4) is based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. The Company records reductions to revenue for discounts at the time of the initial sale. Estimated returns and allowances and other adjustments are provided for in the same period during which the related sales are recorded and are based on actual returns history. The rate of returns is analyzed annually to determine historical returns experience. If the historical data we use to calculate these estimates do not properly reflect future returns, then a change in the allowance would be made in the period in which such a determination is made and revenues in that period could be materially affected. The Company will defer any revenues received for a product that has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered and no refund will be required.

 

Commission Revenues

 

During the third quarter of 2020, the Company entered into an agreement whereby it is paid a fee calculated based on sales it generates from a pharmaceutical product that is owned by a third party. The revenue earned from this arrangement is recognized at the time a customer has ordered the pharmaceutical product and it has shipped from the third party (or one of its distributors or affiliates), at which point there is no future performance obligation required by the Company and no consequential continuing involvement on the part of the Company to recognize the associated revenue.

 

Intellectual Property License Revenues

 

The Company currently holds five intellectual property license and related agreements in which the Company has sold or granted a license which provides a customer with the right to access the Company’s intellectual property. License arrangements may include or require non-refundable upfront license fees, data transfer fees, research reimbursement payments, exclusive license rights to patented or patent pending compounds, technology access fees, and various performance or sales milestones. These arrangements can be multiple-element arrangements, the revenue of which is recognized at the point of time the performance obligation is met.

 

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Non-refundable fees that are not contingent on any future performance by the Company and require no consequential continuing involvement on the part of the Company are recognized as revenue when the license term commences and the licensed data, technology, compounded drug preparation and/or other deliverable is delivered. Such deliverables may include physical quantities of compounded drug preparations, design of the compounded drug preparations and structure-activity relationships, the conceptual framework and mechanism of action, and rights to the patents or patent applications for such compounded drug preparations. The Company defers recognition of non-refundable fees if it has continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee and that are separate and independent of the Company’s performance under the other elements of the arrangement. In addition, if the Company’s continued involvement is required, through research and development services that are related to its proprietary know-how and expertise of the delivered technology or can only be performed by the Company, then such non-refundable fees are deferred and recognized over the period of continuing involvement. Guaranteed minimum annual royalties are recognized on a straight-line basis over the applicable term.

 

Revenue disaggregated by revenue source for the three and nine months ended September 30, 2020 and 2019, consists of the following:

 

 

   For the Three Months Ended   For the Nine months Ended 
   September 30,   September 30, 
   2020   2019   2020   2019 
Product sales, net  $14,385   $12,748   $34,244   $38,540 
Commissions   7    -    7    - 
License   7    7    25    21 
Total revenues  $14,399   $12,755   $34,276   $38,561 

 

Deferred revenue and customer deposits at September 30, 2020 and December 31, 2019, was $63 and $57, respectively. All deferred revenue and customer deposit amounts at December 31, 2019 were recognized as revenue during the nine months ended September 30, 2020.

 

NOTE 4. INVESTMENT IN MELT PHARMACEUTICALS, INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS

 

In December 2018, the Company entered into an asset purchase agreement with Melt (the “Melt Asset Purchase Agreement”). Pursuant to the terms of the Melt Asset Purchase Agreement, Melt was assigned certain intellectual property and related rights from the Company to develop, formulate, make, sell, and sub-license certain Company conscious sedation and analgesia related formulations (collectively, the “Melt Products”). Under the terms of the Melt Asset Purchase Agreement, Melt is required to make royalty payments to the Company up to 5% of net sales of the Melt Products while any patent rights remain outstanding, as well as other conditions. In January and March 2019, the Company entered into the Melt Series A Preferred Stock Agreement.

 

In February 2019, the Company and Melt entered into a Management Services Agreement (the “Melt MSA”), whereby the Company provides to Melt certain administrative services and support, including bookkeeping, web services and human resources related activities, and Melt pays the Company a monthly amount of $10.

 

As of September 30, 2020, the Company was due $815 from Melt for reimbursable expenses and amounts due under the Melt MSA and are included in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets. During the three and nine months ended September 30, 2020, Melt did not make any payments to the Company.

 

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The Company’s Chief Executive Officer, Mark L. Baum, and Chief Medical Officer, Larry Dillaha, are members of the Melt board of directors.

 

The unaudited condensed results of operations information of Melt is summarized below:

 

 

   For the 
   Nine Months Ended 
   September 30, 2020 
Revenues, net  $- 
Loss from operations   3,261 
Net loss  $(3,261)

 

The unaudited condensed balance sheet information of Melt is summarized below:

 

 

   September 30, 
   2020 
Current assets  $4,072 
Non current assets   12 
Total assets  $4,084 
      
Total liabilities  $1,452 
Total preferred stock and stockholders’ equity   2,632 
Total liabilities and stockholders’ equity  $4,084 

 

NOTE 5. INVESTMENT IN SURFACE OPHTHALMICS, INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS

 

The Company entered into an asset purchase and license agreement with Surface in 2017, and amended it in April 2018 (the “Surface License Agreements”). Pursuant to the terms of the Surface License Agreements, the Company assigned and licensed to Surface certain intellectual property and related rights to develop, formulate, make, sell, and sub-license ophthalmic formulations (collectively, the “Surface Products”). Surface is required to make royalty payments to the Company of 4%-6% of net sales of the Surface Products while any patent rights remain outstanding.

 

A Company director, Richard L. Lindstrom, and the Company’s Chief Executive Officer, Mark L. Baum, are directors of Surface. Surface is required to make royalty payments to Dr. Lindstrom of 3% of net sales of certain Surface Products while certain patent rights remain outstanding. Dr. Lindstrom is also a principal of Flying L Partners, an affiliate of the funding investor who purchased the Surface Series A Preferred Stock.

 

The unaudited condensed results of operations information of Surface is summarized below:

 

   For the 
   Nine Months Ended 
   September 30, 2020 
Revenues, net  $- 
Loss from operations   5,647 
Net loss  $(5,647)

 

The unaudited condensed balance sheet information of Surface is summarized below:

 

 

   September 30, 
   2020 
Current assets  $11,547 
Non current assets   45 
Total assets  $11,592 
      
Total liabilities  $1,754 
Total stockholders’ equity   9,838 
Total liabilities and stockholders’ equity  $11,592 

 

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NOTE 6. INVENTORIES

 

Inventories are comprised of finished compounded formulations, over-the-counter and prescription retail pharmacy products, commercial pharmaceutical products, related laboratory supplies and active pharmaceutical ingredients. The composition of inventories as of September 30, 2020 and December 31, 2019 was as follows:

 

 

   2020   2019 
   September 30,   December 31, 
   2020   2019 
Raw materials  $2,838   $2,405 
Work in progress   4    20 
Finished goods   1,132    876 
Total inventories  $3,974   $3,301 

 

NOTE 7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consisted of the following:

 

 

   September 30,   December 31, 
   2020   2019 
Prepaid insurance  $149   $123 
Other prepaid expenses   378    358 
Receivable due from Melt   815    722 
Deposits and other current assets   89    105 
Total prepaid expenses and other current assets  $1,431   $1,308 

 

NOTE 8. PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment, net consisted of the following:

 

 

   2020   2019 
   September 30,   December 31, 
   2020   2019 
Property, plant and equipment, net:          
Computer software and hardware  $1,902   $1,732 
Furniture and equipment   463    363 
Lab and pharmacy equipment   3,464    3,164 
Leasehold improvements   5,720    5,510 
 Property, plant and equipment, gross   11,549    10,769 
Accumulated depreciation and amortization   (6,776)   (5,394)
Property, plant and equipment, net   $4,773   $5,375 

 

For the three and nine months ended September 30, 2020, depreciation and amortization related to the property, plant and equipment was $464 and $1,377, respectively. For the three and nine months ended September 30, 2019, depreciation related to the property, plant and equipment was $397 and $1,365, respectively. During the three and nine months ended September 30, 2019, the Company impaired $445 of property, plant and equipment related to the Park Restructuring.

 

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NOTE 9. INTANGIBLE ASSETS AND GOODWILL

 

The Company’s intangible assets at September 30, 2020 consisted of the following:

 

 

   Amortization                
   periods      Accumulated       Net 
   (in years)  Cost   amortization   Impairment   Carrying value 
Patents  17-19 years  $911   $(86)  $(363)  $462 
Licenses  20 years   50    (6)   -    44 
Trademarks  Indefinite   353    -    -    353 
Customer relationships  3-15 years   1,519    (421)   -    1,098 
Trade name  5 years   5    (5)   -    - 
Non-competition clause  3-4 years   50    (50)   -    - 
State pharmacy licenses  25 years   8    (7)   -    1 
      $2,896   $(575)  $(363)  $1,958 

 

During the nine months ended September 30, 2020, the Company recorded impairment charges of $363 related to patent filings associated with products that the Company was no longer actively selling.

 

Amortization expense for intangible assets for the three and nine months ended September 30, 2020 and 2019 was as follows:

 

 

   For the   For the 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2020   2019   2020   2019 
Patents  $6   $22   $25   $37 
Licenses   -    -    1    5 
Customer relationships   33    26    101    128 
Trade name   -    1    -    1 
State pharmacy licenses   -    3    -    4 
   $39   $52   $127   $175 

 

Estimated future amortization expense for the Company’s intangible assets at September 30, 2020 is as follows:

 

    2020 
Remainder of 2020  $47 
2021   173 
2022   173 
2023   173 
2024   146 
Thereafter   893 
Intangible assets  $1,605 

 

There have been no changes in the carrying value of the Company’s goodwill during the three and nine months ended September 30, 2020.

 

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NOTE 10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consisted of the following:

 

 

   2020   2019 
   September 30,   December 31, 
   2020   2019 
Accounts payable  $5,511   $7,409 
Other accrued expenses   -    49 
Accrued interest   180    244 
Accrued exit fee for note payable   800    800 
Total accounts payable and accrued expenses   6,491    8,502 
Less: Current portion   (5,691)   (7,702)
Non-current total accrued expenses  $800   $800 

 

NOTE 11. DEBT

 

In July 2017, the Company entered into a term loan and security agreement in the principal amount of $16,000 (the “SWK Loan Agreement” or “SWK Loan”) with SWK Funding LLC and its partners (collectively, “SWK”), as lender and collateral agent. The SWK Loan Agreement was fully funded at closing with a five-year term; however, such term could be reduced to four years if certain revenue requirements are not achieved. The SWK Loan is secured by substantially all of the Company’s assets, including its intellectual property rights. The SWK Loan was subsequently amended in May 2019 and again in April 2020 (see below). The SWK Loan bears an interest rate that is equal to the three-month London Inter-Bank Offered Rate (subject to a minimum of 2.00%), plus an applicable margin of 10.00% (the “Margin Rate”); provided that, if, two days prior to a payment date, the Company provides SWK evidence that the Company has achieved a leverage ratio as of such date of less than 4.00:1:00, the Margin Rate shall equal 9.00%; and if the Company has achieved a leverage ratio as of such date of less than 3.00:1:00, the Margin Rate shall equal 7.00%. The leverage ratio means, as of any date of determination, the ratio of: (a) indebtedness as of such date to (b) EBITDA (as defined in the SWK Loan), of the Company for the immediately preceding 12 month period, adding-back (i) actual litigation expenses for the immediately preceding 12 month period, minus (ii) actual litigation expenses for the immediately preceding 3 month period multiplied by 4.

 

Second Amendment to SWK Loan

 

On April 1, 2020, the Company and several of its wholly owned subsidiaries entered into a second amendment (the “SWK Amendment”) to the SWK Loan, with SWK. A summary of the material changes contained in the SWK Amendment are as follows:

 

  SWK agreed to make available to the Company, and the Company drew down on, an additional principal amount of $1,000;
     
  The definition of the first amortization date was changed to August 14, 2020, permitting the Company to pay interest only on the principal amount loaned for the next payment (payments are due on a quarterly basis) following the SWK Amendment; and
     
  The interest payment due May 14, 2020 will be paid in kind by increasing the principal amount of the term loans by an amount equal to the interest accrued as of such date.

 

Paycheck Protection Program Loan

 

In April 2020, the Company entered into an unsecured promissory note and related Business Loan Agreement with Renasant Bank, as lender, for a loan (the “PPP Loan”) in the principal amount of $1,967 and received cash proceeds of the same amount, pursuant to the Paycheck Protection Program (the “PPP”) under the Federal Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted March 27, 2020. The PPP is administered by the U.S. Small Business Administration.

 

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Under the terms of the PPP Loan, interest accrues on the outstanding principal at the rate of 1.0% per annum. The term of the PPP Loan is two years, unless sooner required in connection with an event of default under the PPP Loan. To the extent the PPP Loan amount is not forgiven under the PPP, the Company is obligated to make equal monthly payments of principal and interest, beginning seven months from the date of the PPP Loan, until the maturity date.

 

The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. Under the PPP, the Company may apply for and be granted forgiveness for all or part of the PPP Loan. The amount of loan proceeds eligible for forgiveness is based on a formula that takes into account a number of factors, including the amount of loan proceeds used by the Company during the eight-week period after the loan origination for certain purposes including payroll costs, interest on certain mortgage obligations, rent payments on certain leases, and certain qualified utility payments (it being anticipated that at least 75% of the loan amount will be required to be used for eligible payroll costs); the employer maintaining or rehiring employees and maintaining salaries at certain levels; and other factors. Subject to the other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible expenses during the covered eight-week period will qualify for forgiveness. While the Company has used proceeds from the PPP Loan for such qualifying expenses, in particular maintaining continuity of its payroll and workforce (including staff critical to the timely production and dispensing of medicines the Company produces), no assurance can be provided that the Company will apply for and subsequently obtain forgiveness of the PPP Loan in whole or in part.

 

At September 30, 2020, future minimum payments under the Company’s debt agreements were as follows:

 

 

   2020 
   Amount 
Remainder of 2020  $1,299 
2021   5,430 
2022   4,437 
2023   9,669 
Total minimum payments   20,835 
Less: amount representing estimated interest   (3,020)
Loans payable, gross   17,815 
Less: unamortized discount   (905)
Notes payable   16,910 
Less: current portion, net of unamortized discount   (3,750)
Loans payable, net of current portion and unamortized debt discount  $13,160 

 

For the three and nine months ended September 30, 2020, debt discount amortization related to the SWK loan payable was $111 and $354, respectively. For the three and nine months ended September 30, 2019, debt discount amortization related to the SWK loan payable was $127 and $377, respectively.

 

NOTE 12. LEASES

 

The Company’s leases of office and laboratory space under the non-cancelable operating leases listed below. These lease agreements have remaining lease terms between one to four years and contain various clauses for renewal at our option.

 

  An operating lease for 10,200 square feet of office space in San Diego, California that expires in December 2021, with an option to extend the term for a five-year period;
     
  An operating lease for 26,400 square feet of lab, warehouse and office space in Ledgewood, New Jersey, that expires in July 2026, with an option to extend the term for two additional five-year periods. This includes an amendment that was made effective July 2020 that extended the term of the original lease and added 1,400 of additional square footage to the lease; and
     
  An operating lease for 5,500 square feet of office space in Nashville, Tennessee, that expires in December 2024, with an option to extend the term for two additional five-year periods.

 

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During the three months ended September 30, 2020, the Company terminated its operating lease for 4,500 square feet of office and lab space in Irvine, California that had an expiration date in December 2020. In connection with the termination, the Company recorded a gain of $