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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 22, 2006
PACIFICHEALTH LABORATORIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 000-23495 22-3367588
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
100 MATAWAN ROAD, SUITE 420, MATAWAN, NJ 07747-3913
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (732) 739-2900
N/A
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(Former name or former address, if changed since last report.)
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 (see General Instruction A.2. below):
|_| 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))
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ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On February 22, 2006, PacificHealth Laboratories, Inc. (the "Company"),
pursuant to an Asset Purchase Agreement of the same date, sold to Mott's LLP
("Mott's") the patents, trademarks, web sites and other intellectual property
related to the Company's Accelerade(R) and Endurox(R) sports nutrition product
lines. Simultaneously, the Company and Mott's entered into a License Agreement
giving the Company the exclusive, royalty free right to continue to sell these
products in powder, gel and pill form. Consequently, the Company will continue
to market its current sports nutrition products in the same manner as prior to
the sale of the intellectual property assets.
Under the Asset Purchase Agreement, the Company received $4,000,000 at
closing and, if Mott's launches a product using the purchased assets, the
Company will receive royalty payments for a finite period following such launch,
subject to an annual limitation on the amount of the royalty. There are no
minimum royalties and there is no specific time by which Mott's must launch a
product, but the Company will have the option to repurchase the assets if a
product is not launched within a time specified in the Asset Purchase Agreement.
The Asset Purchase Agreement grants Mott's a right of first negotiation
through the sixth year following the first launch of a product by Mott's, with
respect to any new products, inventions or other intellectual property which the
Company determines to license or commercialize with a commercial partner. The
right of first negotiation will not affect any products which the Company will
commercialize itself.
Under the Asset Purchase Agreement, the Company is significantly
limited in its ability to engage in the research, development, testing,
marketing, sale or distribution of sports drinks, except with respect to the
Company's rights under the License Agreement or on behalf of Mott's.
Under the License Agreement, the Company is required to meet certain
sales performance standards based on the Company's 2005 powder and gel sales,
with a 5% annual growth rate. During this period, the Company's sales
performance obligation will be waived in any year in which Mott's does not
expend a specified minimum annual amount to support the brands. After March 31,
2017, the Company's sales of powder and gel are required to be at least an
amount determined every five years as the sales amount for the year preceding
such five year period. In the event the Company does not meet these minimums,
Mott's will have the option to terminate the Company's rights under the License
Agreement. The License will terminate upon a change in control of the Company if
Mott's determines, in its reasonable discretion, that the Company's transferee,
successor or new controlling person could be detrimental to the value or
usefulness of the assets transferred to Mott's by the Company. The License is
effective in all countries in which the Company now markets these products and
certain other countries.
In connection with these transactions, the Company's President, Dr.
Robert Portman, has entered into a Consulting, License and Non-Competition
Agreement ("Consulting Agreement") for a period ending on the later of the
second anniversary of launch of a product by Mott's or three years after closing
under the Asset Purchase Agreement. Under the Consulting Agreement, Dr. Portman
will consult with Mott's with respect to research, development, enhancement,
testing, marketing and sale of products related to the transferred intellectual
property. Dr. Portman will not receive any compensation for these services,
other than for personal appearances at certain speaking engagements and media
opportunities. Dr. Portman is significantly limited in his ability to engage in
the research, development, testing, marketing, sale or distribution of sports
drinks, except with respect to the Company's activities under the License
Agreement or on behalf of Mott's.
Under the Consulting Agreement, Dr. Portman has licensed, for no
additional compensation, the non-exclusive right to use his name, in connection
with the packaging, marketing and sale of any products by Mott's under the
Accelerade and Endurox brands. In the License Agreement, the Company has granted
Mott's similar rights to use the Company's name. The breach of certain covenants
by Dr. Portman in the Consulting Agreement may give Mott's the right to
terminate the Company's rights under the License Agreement or the royalty
payments under the Asset Purchase Agreement.
SIGNATURE
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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.
PACIFICHEALTH LABORATORIES, INC.
Dated: February 22, 2006 By: /s/ Stephen P. Kuchen
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Stephen P. Kuchen
Chief Financial Officer
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