NowRx, a California-based startup, recently announced that it sold patient files to Alto Pharmacy and Capsule Corp. According to NowRx, the company's inability to raise additional capital has resulted in the company's inability to raise additional capital because of the current economic climate.
On Nov. 30, Alto Pharmacy acquired patient files for NowRx's California business. On December 1, Capsule acquired patient files for NowRx's Arizona business. The move will allow NowRx to satisfy regulatory requirements with the DEA and the California and Arizona Board of Pharmacies, as well as the California and Arizona Board of Pharmacies, according to the company's statement.
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NowRx, which provides on-demand prescription delivery, has struggled in recent months because of war in Ukraine, high inflation, continued supply chain issues, Fed rate hikes, and a substantial loss of value in NASDAQ, according to the company.
NowRx still owns other assets including furniture, equipment, vehicles and its proprietary software QuickFill, which it is trying to sell, the company said. More information about the sale of these assets as well as the company's financial situation and the status of its shareholders will be provided in the coming weeks.
NowRx raised a total of $27 million, closing one of the biggest raises in equity crowdfunding history. A few short months after closing the record round, some potentially troubling news suggests it has gone into a fire. The company is selling assets to the highest bidder to be able to recover as many funds as possible to pay off creditors and potentially return funds to preferred shareholders.
NowRx announced the sale of its patient files to Alto Pharmacy on December 1, but the press release left more questions than answers. If a startup is exiting, its entire business is acquired and a public announcement is made. The sale of NowRx's patient lists was not notified by investors until about four days later. The negative messaging around environmental factors and the ceasing of operations is starting to appear like a firesale, given the continued sell-off of assets in pieces rather than a whole.
This loophole lets regular Americans invest alongside Silicon Valley Insiders for 79 years, as well as illegal for 79 years.
What Does This Mean for Investors?
It doesn't look great, but all hope is not lost. People who invested in NowRx's SeedInvest rounds purchased preferred shares, which tend to be structured more like debt and include a liquidation preference. NowRX had $15 million in liabilities as of its most recent Security and Exchange Commission filings, which isn't much for a company this size. Anything above the $15 million paid back to creditors will be turned over to pay off preferred shareholders.
The two previous rounds were both preferred shareholders with a preference for liquidation at their respective share prices. If there is not enough money to buy out of the share price, everyone holding preferred shares will split the remaining money and get their pro-rata share of the remaining funds.
Nobody is certain to see a return on investment, but it is unlikely that anyone will lose their entire investment. It is important to understand the investment terms of each offering and do your own research when investing in startups.
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