UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 19, 2014
NEPHROS, INC.
(Exact name of registrant as specified in its charter) |
Delaware |
(State or other jurisdiction of incorporation)
001-32288 | 13-3971809 | |||
(Commission File Number) | (IRS Employer ID Number) | |||
41 Grand Avenue, River Edge, New Jersey | 07661 | |||
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code (201) 343-5202
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 1.01. | Entry into a Material Definitive Agreement. |
On February 19, 2014, Nephros, Inc. (the “Company”) entered into the First Amendment to License Agreement (the “First Amendment”), by and between the Company and Bellco S.r.l. (“Bellco”), an Italy-based company focused on Dialysis and Extracorporeal Blood Purification, which amends the License Agreement, entered into as of July 1, 2011 by and between the Company and Bellco (the “License Agreement”).
Pursuant to the First Amendment, the parties agreed to extend the term of the License Agreement through December 31, 2021. The First Amendment also expands the territories covered by the License Agreement to include Sweden, Denmark, Norway, Finland, Korea, Mexico, Brazil, China and the Netherlands.
The First Amendment further provides new minimum sales targets which, if not satisfied, will, at the discretion of the Company, result in conversion of the license to non-exclusive status. The Company has agreed to reduce the fixed royalty payment payable to the Company for the period beginning on January 1, 2015 through and including December 31, 2021. The Company will receive a total of €450,000 in upfront fees in connection with the First Amendment, half of which are payable upon execution of the First Amendment and the other half of which are payable on March 31, 2014. In addition, the First Amendment provides that, in the event that the Company pursues a transaction to sell, assign or transfer all right, title and interest to the licensed patents to a third party, the Company will provide Bellco with written notice thereof and a right of first offer with respect to the contemplated transaction for a period of thirty (30) days.
The description of the First Amendment set forth above is not complete and is qualified in its entirety by reference to the First Amendment, which is attached as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference.
On February 25, 2014, the Company issued a press release announcing its entry into the First Amendment. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits. |
10.1 | First Amendment to License Agreement, dated as of February 19, 2014, by and between Nephros, Inc. and Bellco S.r.l. |
99.1 | Press Release of Nephros, Inc., dated February 25, 2014. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
Nephros, Inc. | |||
By: | /s/ John C. Houghton | ||
Dated: February 25, 2014 | John C. Houghton | ||
President, Chief Executive Officer and Acting Chief Financial Officer |
Exhibit 10.1
FIRST AMENDMENT TO LICENSE AGREEMENT
This FIRST AMENDMENT TO LICENSE AGREEMENT (this “First Amendment”) is entered into as of February 19, 2014 (the “Amendment Effective Date”) by and between Nephros, Inc., a Delaware corporation with its principal office at 41 Grand Ave, River Edge, NJ 07661 (“Nephros”), and Bellco S.r.l., with registered offices in via Camurana 1, Mirandola (MO), Italy, registered with the Companies’ Register of Modena under number 06157780963 (“Bellco”), and sometimes herein referred to individually as a “Party” and collectively, as the “Parties”.
RECITALS
A. Nephros and Bellco are parties to that certain License Agreement entered into as of July 1, 2011 (the “Agreement”).
B. Nephros and Bellco wish to amend the Agreement, subject to the terms and conditions set forth herein.
C. Capitalized terms used herein and not otherwise defined shall have the meanings given them in the Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual representations, warranties and covenants contained herein, the Parties agree as follows:
1. Authorized Territory. Exhibit 1 to the Agreement is hereby deleted in its entirety as of the Amendment Effective Date and replaced with Exhibit 1 attached hereto and made part hereof.
2. Minimum Sales Targets. Section 3.4 of the Agreement is hereby deleted in its entirety as of the Amendment Effective date and replaced with the following, including Exhibit 3 referenced therein which is attached hereto and made part hereof:
3.4 Minimum Sales Targets.
3.4.1 During the Royalty Term (defined in Section 4.2) Bellco shall comply with the quarterly sales targets set forth on Exhibit 3 attached hereto and made part hereof.
3.4.2 Solely the failure of Bellco to meet the stated minimum yearly sales targets (to be obtained by adding the minimum sales targets for each quarter as provided in Exhibit 3 hereto for each relevant year of the Agreement) in any given year of the Agreement will, at the discretion of Nephros, result in conversion of the license granted in Section 2.1 to non-exclusive status. Conversion of the license to non-exclusive status shall not alter the royalty rates to be paid by Bellco under Section 4.2 nor prejudice or otherwise serve to waive any other rights of Nephros under this Agreement.
3. Upfront Fees. In consideration of this Amendment, Section 4.1 of the Agreement is hereby amended to add the following additional upfront fees:
Date | Fee |
Amendment Effective Date | €225,000 |
March 31, 2014 | €225,000 |
Total | €450,000 |
4. Royalties. Section 4.2 of the Agreement is hereby deleted in its entirety and replaced with the following:
4.2 Royalties. As further consideration for the license and other rights granted to Bellco under this Agreement, for the period beginning on January 1, 2015 through and including December 31, 2021 (the “Royalty Term”), in addition to any payments set forth in this Section 4, Bellco shall pay to Nephros a royalty payment based upon the number of Units of Product sold or transferred in the Authorized Territory as follows:
Number of Units | Product Royalty |
1-125,000 | €1.75 |
Greater than 125,000 | €1.25 |
5. Representations and Warranties. The representations and warranties of the Parties set forth under Section 5 of the Agreement are true and correct as of the date hereof as though made on the date hereof and as though applied to the Agreement as amended by this First Amendment.
6. Section 6 of the Agreement is hereby amended by adding a new Section 6.3 and Section 6.4 as follows:
6.3 Right of First Offer- Licensed Patents. In the event that Nephros shall pursue a transaction to sell, assign or transfer all right, title and interest to some or all of the Licensed Patents to a third party (a “Licensed Patents Transfer Transaction”), Nephros will provide Bellco with written notice and provide Bellco with the right to make a first offer to Nephros with respect to the contemplated transaction for a period of thirty (30) calendar days. Any such notice by Nephros and any response to Bellco will be subject to a confidentiality agreement to be executed by Nephros and Bellco. If Bellco’s offer is acceptable to Nephros, Bellco and Nephros will seek to negotiate in good faith, a mutually agreeable definitive written agreement relating to the contemplated transaction acceptable to each of Bellco and Nephros in its sole and absolute discretion. In the event Bellco fails to exercise it right of first offer within the above referenced thirty (30) calendar day period, then Nephros shall be free to pursue a transaction with another party with respect to some or all of the Licensed Patents on such terms and conditions as Nephros shall determine in its sole and absolute discretion. In the event Bellco timely exercises it right of first offer but the Parties fall to execute and deliver a mutually agreeable definitive written agreement relating to the contemplated transaction within ninety (90) calendar days of Bellco’s receipt of Nephros’s initial written notice, then Nephros shall be free to pursue a transaction with another party with respect the Licensed Patents, provided that the terms of any such transaction shall not be any more favorable to such other party than the terms Bellco last offered to Nephros.
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6.4 Assumption of Obligations in Connection with a Change in Control or Licensed Patents Transfer. In the case Nephros enters into a Licensed Patents Transfer Transaction, it shall require the acquirer to expressly assume Nephros’s obligations under this Agreement in writing, except where the consummation of the Licensed Patents Transfer Transaction is effected by operation of law.
7. Ownership. Section 7.1.1 of the Agreement is hereby deleted in its entirety and replaced with the following:
7.1.1 Except as otherwise expressly provided in a transaction contemplated by Section 6, the Nephros Confidential Information and the Licensed Patents shall, at all times be and remain the property of Nephros, its Affiliates and/or licensors, which shall retain the sole and exclusive title and/or rights thereto. Bellco shall have no right to use the Nephros Confidential Information or the Licensed Patents except as expressly set forth in this Agreement.
8. Term. Section 11.1 of the Agreement is hereby deleted in its entirety and replaced with the following:
11.1 This Agreement shall commence on the Effective Date and shall continue in effect through December 31, 2021 (the “Term”), or until terminated by either Party in accordance with this Agreement.
9. Notices. The addresses for notices set forth in Section 12.3 of the Agreement are hereby deleted in their entirety and replaced with the following:
If to Nephros: | Nephros Inc. |
41 Grand Ave
River Edge, NJ 07661
Attention: John C. Houghton
Facsimile: +1.201.343.5207
If to Bellco: | Bellco S.r.l. |
Via Camurana 1
41037 – Mirandola (MO)
Attention: Carlo Medici
Facsimile: +39.0535.29204
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10. No Further Amendment. Except as expressly modified hereby, the Agreement remains in full force and effect. In the event that any provision of this First Amendment, or any provision of the Agreement as amended hereby, is or becomes legally ineffective, this shall not affect the validity of the remaining provisions hereof or thereof, and in lieu of the invalid provision, the Parties shall agree upon a valid provision that approaches best the commercial purpose of the intended provision.
11. Governing Law/Disputes. This First Amendment shall be construed and governed in all respects, and the respective rights of the Parties determined and disputes hereunder resolved consistent with, the governing law and dispute resolution procedures set forth in Section 12.13 of the Agreement.
12. Counterparts; Facsimile Signatures. This First Amendment may be executed in multiple counterparts, all of which, when executed, shall be deemed to be an original and all of which together shall constitute one and the same document. Signatures provided by facsimile transmission shall be deemed to be original signatures.
IN WITNESS WHEREOF, this First Amendment has been executed and made effective as of the Amendment Effective Date by duly authorized representative of the Parties.
BELLCO S.R.L. | NEPHROS, INC. | ||
/s/ Carlo Medici | /s/ John C. Houghton | ||
Name: Carlo Medici | Name: John C. Houghton | ||
Title: CEO, Managing Director | Title: President and CEO | ||
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Exhibits to First Amendment to License Agreement
EXHIBIT 1
AUTHORIZED TERRITORY
Exclusive:
· | Belgium |
· | Canada |
· | Denmark |
· | Finland |
· | France |
· | Italy |
· | Norway |
· | Spain |
· | Sweden |
Non-Exclusive:
· | Brazil |
· | China |
· | Greece |
· | Korea |
· | Mexico |
· | Netherlands |
· | United Kingdom |
EXHIBIT 3
MINIMUM SALES TARGETS
Year | Quarter | Minimum Units |
2015 | First | 20,000 |
Second | 20,000 | |
Third | 20,000 | |
Fourth | 20,000 | |
2016 | First | 37,500 |
Second | 37,500 | |
Third | 37,500 | |
Fourth | 37,500 | |
2017 | First | 50,000 |
Second | 50,000 | |
Third | 50,000 | |
Fourth | 50,000 | |
2018 | First | 62,500 |
Second | 62,500 | |
Third | 62,500 | |
Fourth | 62,500 | |
2019 | First | 62,500 |
Second | 62,500 | |
Third | 62,500 | |
Fourth | 62,500 | |
2020 | First | 62,500 |
Second | 62,500 | |
Third | 62,500 | |
Fourth | 62,500 | |
2021 | First | 62,500 |
Second | 62,500 | |
Third | 62,500 | |
Fourth | 62,500 |
Exhibit 99.1
PRESS RELEASE |
Nephros, Inc. 41 Grand Ave River Edge, NJ 07661 T: 201. 343. 5202 F: 201. 343. 5207 www.nephros.com |
Nephros and Bellco Extend and Expand License Agreement
RIVER EDGE, NJ, February 25, 2014 /PR Newswire-FirstCall/ -- Nephros, Inc. (OTCQB:NEPH), a commercial stage medical device company that develops and sells high performance liquid purification ultrafilters and Bellco S.r.l., an Italy-based company focused on Dialysis and Extracorporeal Blood Purification, announced today that the companies have signed an amendment to their existing license agreement.
The amendment extends the agreement by five years through 2021 and expands the territories covered by Bellco to include Sweden, Denmark, Norway, Finland, Korea, Mexico, Brazil, China and the Netherlands and grants Bellco a right of first offer in connection with a proposed sale of the Nephros patent licensed to Bellco under the agreement. In return Nephros will receive €450,000, half payable upon execution and half payable on March 31st, 2014. Nephros has also agreed to reduce the fixed royalty payment in return for a corresponding increase in the minimum sales volumes required to retain exclusivity. The royalty period begins on January 1, 2015 and extends through December 31, 2021.
“We are excited to strengthen our partnership with Nephros,” said Carlo Medici, Chief Executive Officer of Bellco S.r.l. “This agreement is a pivotal milestone in the continued expansion of hemodiafiltration (HDF) therapy based on mid-dilution with the MD220 dialyzer. Recent studies have confirmed the reduction of patient mortality of on-line HDF compared with standard treatments. We are convinced that this expanded agreement will enhance Bellco’s ability to provide the highest range of hemodiafiltration therapies in the world.”
“Bellco has extensive experience and expertise providing therapies and systems for the treatment of renal failure, in particular on-line HDF. We are very pleased about the prospect of the MD220 dialyzer being made available to an expanded group of territories which will enable more patients to benefit from on-line mid-dilution HDF,” said John C. Houghton, President and Chief Executive Officer of Nephros.
About Bellco S.r.l.
Bellco is one of the pioneers and protagonists of hemodialysis. Now, just as in the past, it focuses on satisfying the needs of patients and experts through innovation, research and the development of advanced Nephrology, Critical Care and Cardiology therapies.
Complex clinical conditions, such as the increasing number of elderly and critical patients, require an integrated and innovative approach. Bellco’s all-embracing offer provides a truly new outlook on Chronic and Critical patients.
Since 1972, Bellco has continually been developing highly reliable, sophisticated products aimed at renal treatments. The current product range for advanced hemodiafiltration treatments demonstrates the leadership in personalized products dedicated to specific renal conditions.
This vocation is recognized by the medical-scientific community and proven by major scientific publications and more than 30 international study protocols currently underway, both in chronic Hemodialysis and Critical care. Thanks to this commitment, the Company has reached remarkable milestones in increasing the quality of life of patients undergoing dialysis while containing healthcare cost.
Customized therapeutic options are available also on three new and unique devices:
AMPLYATM (Critical); FLEXYATM (Chronic); CARPE DIEMTM (Neonatal).
For more information about Bellco, please visit the company’s website at www.bellco.net.
About Nephros, Inc.
Nephros is a commercial stage medical device company that develops and sells high performance liquid purification filters. Our filters, which we call ultrafilters, are primarily used in dialysis centers for the removal of biological contaminants from water, bicarbonate concentrate and/or blood.
We were founded in 1997 by healthcare professionals affiliated with Columbia University Medical Center/New York-Presbyterian Hospital to develop and commercialize an alternative method to hemodialysis (HD). In 2009, we began to extend our filtration technologies to meet the demand for liquid purification in other areas, in particular water purification.
Presently, we offer ultrafilters for sale to customers in four markets:
· | Dialysis Centers - Water/Bicarbonate: Filtration of water or bicarbonate concentrate used in hemodialysis devices |
· | Dialysis Centers - Blood: Clearance of toxins from blood using an alternative method to HD in patients with chronic renal failure |
· | Hospitals and Other Commercial Facilities: Filtration of water for drinking and washing |
· | Military and Outdoor Recreation: Highly compact, individual water purification devices used by soldiers to produce drinking water in the field |
For more information about Nephros, please visit the company’s website at www.nephros.com.
Forward-Looking Statements
This press release contains certain “forward-looking statements.” Such statements include statements that are not historical facts, including statements which may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond our control. Actual results may differ materially from the expectations contained in the forward looking statements.
Factors that may cause such differences include, but are not limited to, the risks that:
· | we may not be able to continue as a going concern; |
· | a default under the terms of the secured note with Lambda Investors LLC would result in the lender foreclosing upon substantially all of our assets and could result in our inability to continue business operations; |
· | we may not be able to complete the contemplated rights offering which could result in our inability to continue business operations; |
· | even if we are able to complete the rights offering, we may not have sufficient capital to successfully implement our business plan; |
· | restrictions in the secured note and related security agreement which require the prior consent of the lender may restrict our ability to operate our business, sell the company or sell our assets; |
· | the voluntary recalls of point of use and DSU in-line ultrafilters used in hospital water treatment applications announced on October 30, 2013 and the related circumstances could subject us to claims or proceedings by consumers, the FDA or other regulatory authorities which may adversely impact our sales and revenues; |
· | we face significant challenges in obtaining market acceptance of our products, which could adversely affect our potential sales and revenues; |
· | there are product-related deaths or serious injuries or product malfunctions, which could trigger recalls, class action lawsuits and other events that could cause us to incur expenses and may also limit our ability to generate revenues from such products; |
· | we face potential liability associated with the production, marketing and sale of our products, and/or the expense of defending against claims of product liability, could materially deplete our assets and generate negative publicity which could impair our reputation; |
· | to the extent our products or marketing materials are found to violate any provisions of the FDC Act or any other statutes or regulations then we could be subject to enforcement actions by the FDA or other governmental agencies; |
· | we may not be able to obtain funding if and when needed or on terms favorable to us in order to continue operations; |
· | we may not have sufficient capital to successfully implement our business plan; |
· | we may not be able to effectively market our products; |
· | we may not be able to sell our water filtration products or chronic renal failure therapy products at competitive prices or profitably; |
· | we may encounter problems with our suppliers, manufacturers and distributors; |
· | we may encounter unanticipated internal control deficiencies or weaknesses or ineffective disclosure controls and procedures; |
· | we may not obtain appropriate or necessary regulatory approvals to achieve our business plan; |
· | products that appeared promising to us in research or clinical trials may not demonstrate anticipated efficacy, safety or cost savings in subsequent pre-clinical or clinical trials; |
· | we may not be able to secure or enforce adequate legal protection, including patent protection, for our products; and |
· | we may not be able to achieve sales growth in key geographic markets. |
More detailed information about the Company and the risk factors that may affect the realization of forward-looking statements, including the forward-looking statements in this press release, is set forth in our filings with the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and our other periodic reports filed with the SEC. We urge you to read those documents free of charge at the SEC’s web site at www.sec.gov. We do not undertake to publicly update or revise our forward-looking statements as a result of new information, future events or otherwise, except as required by law.