What changed in this filing

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Item 1. Financial Statements

2020-11-09 compared with 2020-08-10 · 678 added, 655 removed, 585 unchanged (69% of the section changed)

2 unchanged sentences

thousands, except share data)

June 30, 2020

December 31, 2019

September 30,

Current assets

Cash and cash equivalents, including restricted cash of $ 200

Investment in Eton Pharmaceuticals

Accounts receivable, net

Prepaid expenses and other current assets

and cash equivalents, including restricted cash of $ 200

Investment in Eton

Pharmaceuticals

Accounts receivable,

expenses and other current assets

Total current assets

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Intangible assets, net

Investment in Surface Pharmaceuticals

Investment in Surface Ophthalmics

Investment in Melt Pharmaceuticals

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND

STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable and accrued expenses

Accrued payroll and related liabilities

Deferred revenue and customer deposits

Current portion of paycheck protection program loan payable

Current portion of loan payable, net of unamortized debt discount

Current portion of operating lease liabilities

Current portion of finance lease obligations

Accounts payable

and accrued expenses

Accrued payroll

and related liabilities

Deferred revenue

and customer deposits

Current portion

of paycheck protection program loan payable

Current portion

of loan payable, net of unamortized debt discount

Current portion

of operating lease liabilities

portion of finance lease obligations

Total current liabilities

Operating lease liabilities, net of current portion

Finance lease obligations, net of current portion

Operating lease liabilities, net of

current portion

Finance lease obligations, net of current

Accrued expenses, net of current portion

Paycheck protection program loan payable, net of current portion

Loan payable, net of current portion and unamortized debt discount

TOTAL LIABILITIES

Paycheck protection program loan payable,

net of current portion

Loan payable,

net of current portion and unamortized debt discount

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY

Common stock, $ 0.001

par value, 50,000,000 shares authorized,

25,649,171 and 25,526,931

shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

Accumulated deficit

TOTAL HARROW HEALTH STOCKHOLDERS’ EQUITY

Noncontrolling interests

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND 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

Additional paid-in

TOTAL HARROW HEALTH

STOCKHOLDERS’ EQUITY

Noncontrolling

STOCKHOLDERS’ EQUITY

LIABILITIES AND EQUITY

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

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thousands, except for share and per share data)

For the Three Months

Ended June 30 2020

For the Three Months

Ended June 30 2019

For the Six Months

Ended June 30 2020

For the Six Months

Ended June 30 2019

Product sales, net

Three Months Ended

Nine Months Ended

September 30,

Total revenues

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Operating expenses:

Selling, general and administrative

Selling, general

and administrative

Research and development

Impairment of intangible assets

Total operating expenses

Loss from operations

of long-lived assets

Total operating

Income (loss)

from operations

Other income (expense):

Interest expense, net

Investment (loss) gain from Melt Pharmaceuticals, net

Investment loss from Surface Pharmaceuticals, net

Investment gain (loss) from Eton Pharmaceuticals, net

Other income, net

Total other (expense) income, net

(Loss) income before income taxes

Income tax benefit, net

Total net (loss) income including noncontrolling interests

Net loss attributable to noncontrolling interest

Net (loss) income attributable to Harrow Health, Inc.

Basic net (loss) income per share of common stock

Diluted net (loss) income per share of common stock

Weighted average number of shares of common stock outstanding, basic

Weighted average number of shares of common stock outstanding, diluted

Interest expense,

Investment (loss)

gain from Melt Pharmaceuticals, net

Investment loss

from Surface Ophthalmics, net

Investment gain

(loss) from Eton Pharmaceuticals, net

Total other income (expense), net

Income (loss) before income taxes

tax benefit, net

Total net income (loss) including noncontrolling

loss attributable to noncontrolling interests

Net income (loss)

attributable to Harrow Health, Inc.

Basic net income

(loss) per share of common stock

Diluted net income

(loss) per share of common stock

average number of shares of common stock outstanding,

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

STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three

and Six Months Ended June 30, 2020 and 2019

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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

thousands, except for share data)

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Stockholders’

Balance at March 31, 2019

Issuance of common stock in connection with:

Balance at June 30, 2019

Issuance of common stock in connection

Exercise of warrants

Exercise of employee stock-based options

Exercise of employee

stock-based options, net of tax withholding

Stock-based payment

for services provided

Stock-based compensation expense

Vesting of RSUs

Vesting of RSUs, shares

Stock-based payment for services provided

Stock-based payment for services provided, shares

Stock-based compensation expense

Balance at June 30, 2019

Balance at September 30, 2019

Stockholders’

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Stockholders’

Balance at March 31, 2020

Issuance of common stock in connection with:

Exercise of employee stock-based options

Stock-based payment for services provided

Stock-based compensation expense

Balance at June 30, 2020

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

Issuance of common stock in connection

Exercise of employee

stock-based options, net of tax withholding

Stock-based compensation

Net income (loss)

Balance at September 30, 2020

Stockholders’

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Balance at December 31, 2018

Issuance of common stock in connection with:

Issuance of common stock in connection

Exercise of warrants

Exercise of employee stock-based options

Stock-based payment for services provided

Exercise of employee

stock-based options, net of tax withholding

Stock-based payment

for services provided

Stock-based compensation expense

Net income (loss)

Balance at June 30, 2019

Balance at September 30, 2019

Stockholders’

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Balance at December 31, 2019

Issuance of common stock in connection with:

Exercise of employee stock-based options

Issuance of common stock in connection

Exercise of employee

stock-based options, net of tax withholding

Vesting of RSUs

Stock-based payment for services provided

Stock-based payment

for services provided

Stock-based compensation expense

Balance at June 30, 2020

Balance at September 30, 2020

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months

Ended June 30 2020

For the Six Months

Ended June 30 2019

Nine Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss) income (including noncontrolling interests)

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Depreciation and amortization of property, plant and equipment

Amortization of intangible assets

Amortization of operating lease right-of-use assets

Amortization of debt issuance costs and discount

Provision for bad debt expense

Investment loss (gain) from Eton, net

Investment loss from Surface, net

Investment loss (gain) from Melt, net

Loss on sale and disposal of assets

Interest paid-in-kind on loan payable

Impairment of intangible assets

Stock-based payment of consulting services

loss (including noncontrolling interests)

Adjustments to reconcile

net loss to net cash used in operating activities:

Depreciation and

amortization of property, plant and equipment

Amortization of

intangible assets

Amortization of

operating lease right-of-use assets

Amortization of

debt issuance costs and discount

Provision for bad

Investment gain

from Eton, net

Investment loss

from Surface, net

Investment loss

(gain) from Melt, net

Loss on sale and

disposal of equipment

Interest paid-in-kind

on loan payable

Impairment of long-lived

Stock-based payment

of consulting services

Stock-based compensation

Changes in assets and liabilities:

Changes in assets

and liabilities:

Accounts receivable,

Prepaid expenses and other current assets

Accounts payable and accrued expenses

Accrued payroll and related liabilities

Deferred revenue and customer deposits

NET CASH USED IN OPERATING ACTIVITIES

net of provision for bad debt expense

Prepaid expenses

and other current assets

Accounts payable

and accrued expenses

Accrued payroll

and related liabilities

revenue and customer deposits

NET CASH USED

IN OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in patent and trademark assets

Purchases of property, plant and equipment

NET CASH USED IN INVESTING ACTIVITIES

Proceeds on sale

and disposal of assets

Investment in patent

and trademark assets

of property, plant and equipment

NET CASH USED

IN INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Payments on finance lease obligations

Proceeds from SWK debt

Principal payments on loan payable

Payments of costs related to amendment of loan payable

Net proceeds from Payroll Protection Program loan payable

Net proceeds from exercise of warrants

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Payments on finance

lease obligations

Proceeds from SWK

Principal payments

on loan payable

Payments of costs

related to amendment of note payable

Net proceeds from

Payroll Protection Program loan payable

proceeds from exercise of warrants and stock options, net of taxes remitted for RSU and options

NET CASH PROVIDED

BY (USED IN) FINANCING ACTIVITIES

NET CHANGE IN CASH, CASH EQUIVALENTS

AND RESTRICTED CASH

CASH, CASH EQUIVALENTS

AND RESTRICTED CASH, beginning of period

CASH, CASH EQUIVALENTS

AND RESTRICTED CASH, end of period

RECONCILIATION OF CASH, CASH EQUIVALENTS

AND RESTRICTED CASH

Cash and cash equivalents

Restricted cash

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

Cash paid for interest

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Right-of-use asset obtained in exchange for lease obligation

Acquisition of property, plant and equipment with finance lease obligations

Purchase of property, plant and equipment included in accounts payable and accrued expenses

accompanying notes are an integral part of these consolidated financial statements.

CASH, CASH EQUIVALENTS

AND RESTRICTED CASH AT END OF PERIOD

SUPPLEMENTAL DISCLOSURE OF CASH FLOW

Cash paid for

SUPPLEMENTAL DISCLOSURES OF NON-CASH

INVESTING AND FINANCING ACTIVITIES:

New and revaluation

of right-of-use asset obtained in exchange for lease obligation

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

TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three and

Six Months Ended June 30, 2020 and 2019

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

amounts in thousands, except share and per share data)

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In addition to wholly owning ImprimisRx, the Company also has equity positions in Eton Pharmaceuticals, Inc.

Surface Pharmaceuticals, Inc.

Surface Ophthalmics, Inc.

(“Surface”), and Melt Pharmaceuticals, Inc.

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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

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.

of Presentation

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Operating results for the

three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year

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.

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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 June 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

of Stowe is owned by TGV.

as well as Mayfield ( 79 % majority controlled) and Stowe ( 70 % majority controlled) each subsidiaries of Harrow as of September

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.

All inter-company

accounts and transactions have been eliminated in consolidation.

consolidates entities in which it has a controlling financial interest.

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consolidation.

condensed consolidated balance sheets at June 30, 2020 and December 31, 2019 and the condensed consolidated statements of operations,

stockholders’ equity and cash flows for the periods ended June 30, 2020 and 2019 include our accounts and those of our wholly

owned subsidiaries as well as Mayfield and Stowe.

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.

Uncertainties and Liquidity

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activities required to achieve regulatory clearance of products under development.

Company believes reductions in elective procedures in response to CMS guidance have had, and will continue to have, an adverse

impact, which may be material, on the Company’s financial condition, liquidity and results of operations.

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 issuance 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.

Company has incurred significant operating losses and negative cash flows from operations since its inception.

The Company incurred

operating losses of $ 3,838

for the six months ended June 30, 2020

and 2019, respectively, and had an accumulated deficit of $ 87,187

as of June 30, 2020 and December 31, 2019,

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.

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 $ 3,201

for the six months ended June 30, 2020

In addition, the Company used cash in operating activities of $ 534 and $ 702 for the nine months ended September

30, 2020 and 2019, respectively.

there is no assurance, management of the Company believes existing cash resources and restricted cash of $ 4,102

at June 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 and working capital requirements 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.

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.

Company may seek to increase liquidity and capital resources through a variety of means which may include, but are not limited

the sale of assets, investments and/or businesses, obtaining financing through the issuance of equity, debt, or convertible

the sale of assets, investments and/or businesses;

obtaining financing through the issuance of equity, debt, or convertible

and working to increase revenue growth through sales.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

following represents an update for the three and six months ended June 30, 2020 to the significant accounting policies described

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.

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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 and warrants, outstanding during the period.

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 restricted stock units (“RSUs”) and warrants were 5,414,504

and 5,331,883

at June 30, 2020 and 2019, respectively, and, except for the six months ended June 30, 2019, are excluded from the

calculation of diluted net income (loss) per share for the periods presented, because the effect is anti-dilutive.

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

June 30, 2020 and 2019 was 251,746

and 304,873 ,

respectively.

following table shows the computation of basic net income (loss) per share of common stock for the three and six months

ended June 30, 2020 and 2019:

shares, such as stock options, restricted stock units (“RSUs”) and warrants, outstanding during the period.

and diluted net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during

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.

of shares underlying vested RSUs at September 30, 2020 and 2019 was 281,507 and 314,588 , respectively.

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:

SCHEDULE OF BASIC EARNINGS PER COMMON SHARE

the Three Months Ended

the Six Months Ended

Numerator – net (loss) income attributable

to Harrow Health, Inc.

Denominator – weighted average number of shares outstanding, basic

Net (loss) income per share, basic

the six months ended June 30, 2019, 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 six months ended June 30, 2019, consisted of the following:

For the Three Months Ended

For the Nine Months Ended

– net income (loss) attributable to Harrow Health, Inc.

Denominator – weighted average

number of shares outstanding, basic

Net income (loss)

per share, basic

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:

SCHEDULE OF DILUTED COMMON EQUIVALENT SHARES

June 30, 2019

the Three months Ended

Diluted shares related to:

Stock options

Dilutive common equivalent shares

following table shows the computation of diluted net income (loss) per share of common stock for the three and six months ended

June 30, 2020 and 2019:

Dilutive common

equivalent shares

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:

SCHEDULE OF DILUTED EARNINGS PER COMMON SHARE

the Three Months Ended

the Six Months Ended

Numerator – net (loss) income attributable to

Harrow Health, Inc.

Denominator – weighted average number of shares outstanding, basic

Dilutive common equivalents

Number of shares used for diluted income (loss) per share computation

Net (loss) income per share, basic

For the Three Months Ended

For the Nine months Ended

– net income (loss) attributable to Harrow Health, Inc.

Denominator – weighted average number of shares outstanding,

Dilutive common

equivalent shares

Number of shares

used for diluted earnings per share computation

Net income (loss)

per share, diluted

in Eton Pharmaceuticals, Inc.

– Related Party

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 June 30, 2020.

At June 30, 2020 the fair market value of Eton’s common

stock was $ 5.45 per

In accordance with the Accounting Standards Update (“ASU”) 2016-01, Financial Instruments-Overall

(Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities , for the three and six

months ended June 30, 2020, the Company recorded an investment gain (loss) from its Eton common stock position of $ 4,725 and

respectively , related to the change

in fair market value of the Company’s investment in Eton during the measurement periods.

As of June 30, 2020, the fair

market value of the Company’s investment in Eton was $ 19,075 .

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.

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 .

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

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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

As a result, the Company lost

voting and ownership control of Melt and ceased consolidating Melt’s financial statements.

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.

January 2019, the Company deconsolidated Melt and recorded a gain of $ 5,810 and adjusted the carrying value in Melt to reflect

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(“ASC”) 810-10-40-4(c), Consolidation .

Company owns 3,500,000

common shares of Melt (which is approximately

of the equity interests as of June 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.

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 $690 and $ 1,236

during the three and six months ended

June 30, 2020, respectively.

The Company recorded equity in the net loss of Melt of $ 326

during the three and six months ended

June 30, 2019, respectively.

As of June 30, 2020, the carrying value of the Company’s investment in Melt was $ 2,732 .

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 .

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

in Surface Pharmaceuticals, Inc.

in Surface Ophthalmics, Inc.

– Related Party

Company owns 3,500,000

common shares (which is approximately

of the equity interests as of June 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

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.

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

Any intra-entity profits and losses are eliminated.

The Company recorded

equity in the net loss of Surface of $ 599

during the three and six months ended

June 30, 2020, respectively.

The Company recorded equity in the net loss of Surface of $ 261

during the three and six months ended

June 30, 2019, respectively.

As of June 30, 2020, the carrying value of the Company’s investment in Surface was $ 2,809 .

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 .

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

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The impairment charge will be limited to the amount of goodwill allocated to that reporting unit.

ASU 2017-04 is effective for

reporting periods beginning after December 31, 2019 on a prospective basis, and early adoption is permitted.

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.

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.

Issued Accounting Pronouncements

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Early adoption of the standard is permitted.

The Company does not expect ASU 2019-12 to have

a material impact on its consolidated financial position, results of operations and cash flows.

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.

Company accounts for contracts with customers in accordance with ASC 606, Revenues from Contracts with Customers .

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and the customer jointly determine that the product has been delivered and no refund will be required.

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.

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.

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.

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.

Non-refundable

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Guaranteed minimum annual royalties are recognized on a straight-line basis over the applicable term.

disaggregated by revenue source for the three and six months ended June 30, 2020 and 2019, consists of the following:

OF DISAGGREGATED REVENUE

the Three Months Ended

the Six Months Ended

revenue and customer deposits at June 30, 2020 and December 31, 2019, was $ 53 and $ 57 , respectively.

All deferred revenue and

customer deposit amounts at December 31, 2019 were recognized as revenue during the six months ended June 30, 2020.

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

SCHEDULE OF DISAGGREGATED REVENUE

For the Three Months Ended

For the Nine months Ended

Product sales, net

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.

INVESTMENT IN MELT PHARMACEUTICALS, INC.

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activities, and Melt pays the Company a monthly amount of $ 10 .

of June 30, 2020, the Company was due $ 785 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 six

months ended June 30, 2020, Melt paid the Company $ 0 .

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.

Company’s Chief Executive Officer, Mark L.

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SCHEDULE OF CONDENSED INCOME STATEMENT

Nine Months Ended

Revenues, net

Loss from operations

from operations

unaudited condensed balance sheet information of Melt is summarized below:

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Total liabilities

Total preferred stock and stockholders’ equity

Total liabilities and stockholders’ equity

INVESTMENT IN SURFACE PHARMACEUTICALS, INC.

Total preferred

stock and stockholders’ equity

Total liabilities

and stockholders’ equity

INVESTMENT IN SURFACE OPHTHALMICS, INC.

AND AGREEMENTS - RELATED PARTY TRANSACTIONS

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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.

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.

Company director, Richard L.

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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.

Lindstrom is also a principal

of Flying L Partners, an affiliate of the funding investor who purchased the Surface Series A Preferred Stock.

Lindstrom of 3 % of net sales of certain Surface Products while certain patent

rights remain outstanding.

Lindstrom is also a principal of Flying L Partners, an affiliate of the funding investor who purchased

the Surface Series A Preferred Stock.

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

OF CONDENSED INCOME STATEMENT

SUMMARY OF CONDENSED INCOME STATEMENT

Nine Months Ended

Revenues, net

Loss from operations

from operations

unaudited condensed balance sheet information of Surface is summarized below:

OF CONDENSED BALANCE SHEET

SUMMARY OF CONDENSED BALANCE SHEET

September 30,

Current assets

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Total liabilities

Total stockholders’ equity

Total liabilities and stockholders’ equity

Total stockholders’

Total liabilities

and stockholders’ equity

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 June 30, 2020

The composition of inventories as of September 30,

2020 and December 31, 2019 was as follows:

SCHEDULE OF INVENTORIES

September 30,

Raw materials

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SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

September 30,

Prepaid insurance

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Receivable due from Melt

Deposits and other current assets

Total prepaid expenses and other current assets

other current assets

Total prepaid

expenses and other current assets

PROPERTY, PLANT AND EQUIPMENT

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SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net:

Computer software and hardware

Furniture and equipment

Lab and pharmacy equipment

Leasehold improvements

September 30,

Property, plant and

equipment, net:

software and hardware

and equipment

and pharmacy equipment

Property, plant and equipment, gross

Accumulated depreciation and amortization

Property, plant and equipment, Net

the three and six months ended June 30, 2020, depreciation and amortization related to the property, plant and equipment was $ 465

respectively.

For the three and six months ended June 30, 2019, depreciation and amortization related to the property,

plant and equipment was $ 491

respectively.

depreciation and amortization

plant and equipment, net

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.

INTANGIBLE ASSETS AND GOODWILL

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

OF INTANGIBLE ASSETS

Carrying value

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

SCHEDULE OF INTANGIBLE ASSETS

17 - 19 years

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Non-competition clause

State pharmacy licenses

the three and six months ended June 30, 2020, the Company recorded impairment charges of $ 363

related to patent filings associated with

the products that the Company was no longer actively selling.

expense for intangible assets for the three and six months ended June 30, 2020 and 2019 was as follows:

State pharmacy

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.

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

SCHEDULE OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Customer relationships

State pharmacy licenses

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

State pharmacy

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

SCHEDULE OF ESTIMATED FUTURE AMORTIZATION EXPENSE

Remainder of 2020

Intangible assets

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

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

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

September 30,

Accounts payable

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Accrued interest

Accrued exit fee for note payable

fee for note payable

Total accounts payable and accrued expenses

Current portion

Non-current total accrued expenses

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.

Non-current total

accrued expenses

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.

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

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.

Amendment to SWK Loan

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principal amount loaned for the next payment (payments are due on a quarterly basis) following the SWK Amendment;

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.

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.

Protection Program Loan

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While the Company

intends to use 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 obtain forgiveness of the PPP Loan in whole or in part.

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

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.

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

SUMMARY OF FUTURE MINIMUM PAYMENTS

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Total minimum payments

amount representing estimated interest

representing estimated interest

Loans payable, gross

unamortized discount

Notes payable

current portion, net of unamortized discount

Loans payable, net of current portion and unamortized debt discount

the three and six months ended June 30, 2020, debt discount amortization related to the SWK Loan was $ 83 and

respectively.

For the three and six months ended June 30, 2019, debt discount amortization related to the SWK Loan was

portion, net of unamortized discount

Loans payable,

net of current portion and unamortized debt discount

the three and nine months ended September 30, 2020, debt discount amortization related to the SWK loan payable was $ 111 and $ 354 ,

respectively.

The Company leases 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.

For the three and nine months ended September 30, 2019, debt discount amortization related to the SWK loan payable

was $ 127 and $ 377 , respectively.

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.

operating lease for 10,200 square feet of office space in San Diego, California that expires in December 2021 , with an option

1 unchanged sentence

operating lease for 26,400

square feet of office and lab space

in Irvine, California that expires in December

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 up to two

five-year periods .

As part of the

Company’s restructuring of the Park Compounding, Inc.

(“Park”) business, the Company assessed its obligations

under this lease.

As of the date of this Quarterly Report, management expects the Company to sublease this space

and has determined that there is a practical ability to do so, and as a result did not recognize any impairment costs related

to this lease and the Company’s right to use the asset;

operating lease for 25,000 square feet of lab, warehouse and office space in Ledgewood, New Jersey that expires in July 2024 ,

with an option to extend the term for two additional five-year periods ;

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

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 .

March 2020, the Company amended its New Jersey lease for the expansion of an additional 1,400

square feet of space which is expected

to commence in September 2020 and expire in July

The March 2020 lease is not included

below since the new lease term has not commenced as of June 30, 2020.

June 30, 2020, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating

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 $ 4 which was recognized in other income (expense) on the condensed consolidated financial statements.

September 30, 2020, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating

leases held by the Company were 6.33 % and 11.38 years , respectively.

the three and six months ended June 30, 2020, cash paid for amounts included for the operating lease liabilities was $ 276

and the Company recorded operating lease

expense of $ 280 and

$ 555 included

in selling, general and administrative expenses, respectively.

lease payments under operating leases as of June 30, 2020 were as follows :

OF FUTURE LEASE PAYMENT UNDER OPERATING LEASES

the three and nine months ended September 30, 2020, cash paid for amounts included for the operating lease liabilities was $ 258

and $ 805 , respectively, and the Company recorded operating lease expense of $ 261 and $ 816 , respectively, included in selling,

general and administrative expenses.

lease payments under operating leases as of September 30, 2020 were as follows :

SCHEDULE OF FUTURE LEASE PAYMENT UNDER OPERATING LEASES

Remainder of 2020

Total minimum lease payments

amount representing interest payments

representing interest payments

Total operating lease liabilities

current portion, operating lease liabilities

Operating lease liabilities, net of current portion

Company also has a lease that is included in its lease accounting but is not considered significant.

lease payments under finance leases as of June 30, 2020 were as follows :

OF FUTURE LEASE PAYMENT UNDER FINANCE LEASE

portion, operating lease liabilities

Operating lease

liabilities, net of current portion

Company also has a finance lease that is included in its lease accounting but is not considered significant.

lease payments under finance leases as of September 30, 2020 were as follows :

SCHEDULE OF FUTURE LEASE PAYMENT UNDER FINANCE LEASE

Remainder of 2020

Total minimum lease payments

amount representing interest payments

Present value of future minimum lease payments

current portion, finance lease obligation

Finance lease obligation, net of current portion

June 30, 2020, the incremental borrowing rate and the remaining lease term for the finance lease

held by the Company were 6.36 % and 3.58 years, respectively.

the three and six months ended June 30, 2020, depreciation expense related to the equipment held under the finance lease obligation

respectively.

each of the three and six months ended June 30, 2020, cash paid and expense recognized for interest expense related to

the finance lease obligation was $ 0

representing interest payments

Present value of future minimum lease

portion, finance lease obligation

Finance lease

obligation, net of current portion

September 30, 2020, the incremental borrowing rate and the remaining lease term for the finance lease held by the Company were

6.36 % and 3.33 years , respectively.

the three and nine months ended September 30, 2020, depreciation expense related to the equipment held under the finance lease

obligation was $ 2 and $ 6 , respectively.

the three and nine months ended September 30, 2020, cash paid and expense recognized for interest expense related to the

finance lease obligation was $ 0

respectively.

1 unchanged sentence

May 2020, the Company issued 30,000 shares of its restricted common stock, with a fair value of $ 167 , as consideration for commission

expenses incurred during the year ended December 31, 2019 and the six months ended June 30, 2020.

the six months ended June 30, 2020, the Company issued 253

shares of its common stock upon the cashless

exercise of options to purchase 750 shares of common stock, with an exercise price of $ 3.04

per share, net of 69

shares of common stock withheld for payroll

expenses incurred during the year ended December 31, 2019 and the nine months ended September 30, 2020.

the nine months ended September 30, 2020, the Company issued 253 shares of its common stock upon the cashless exercise of 750

options to purchase common stock, with an exercise price of $ 3.04 per share, net of 69 shares of common stock withheld for payroll

tax withholdings.

the six months ended June 30, 2020, the Company issued 91,987 shares of its common stock underlying RSUs issued to a director

the nine months ended September 30, 2020, the Company issued 2,998 shares of its common stock upon the exercise of 2,998 options

to purchase common stock, with exercise prices ranging from $ 3.04 to $ 3.20 per share, and paid $ 8 related to payroll tax withholdings.

the nine months ended September 30, 2020, the Company issued 91,987 shares of its common stock underlying RSUs held by a director

that resigned.

The RSUs had previously vested, including 2,429 RSUs during the six months ended June 30, 2020, but the issuance

The RSUs had previously vested, including 2,429 RSUs during the nine months ended September 30, 2020, but the issuance

and delivery of the shares were deferred until the director resigned.

the six months ended June 30, 2020, 17,001 shares of the Company’s common stock underlying RSUs issued to directors vested,

but the issuance and delivery of these shares are deferred until the director resigns.

the nine months ended September 30, 2020, 46,762 shares of the Company’s common stock underlying RSUs issued to directors

vested, but the issuance and delivery of these shares are deferred until the resignation of a director.

September 17, 2007, the Company’s Board of Directors and stockholders adopted the Company’s 2007 Incentive Stock and

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adopted the Company’s 2017 Incentive Stock and Awards Plan (the “2017 Plan” together with the 2007 Plan, the

As of June 30, 2020, the 2017 Plan provides for the issuance of a maximum of 2,000,000 shares of the Company’s

common stock.

The purpose of the Plans are to attract and retain directors, officers, consultants, advisors and employees whose

services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons in

the Company’s development and financial success.

Under the Plans, the Company is authorized to issue incentive stock options

intended to qualify under Section 422 of the Internal Revenue Code, non-qualified stock options, restricted stock units and restricted

As of September 30, 2020, the 2017 Plan provides for the issuance of a maximum of 2,000,000 shares of the

Company’s common stock.

The purpose of the Plans are to attract and retain directors, officers, consultants, advisors and

employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of

such persons in the Company’s development and financial success.

Under the Plans, the Company is authorized to issue incentive

stock options intended to qualify under Section 422 of the Internal Revenue Code, non-qualified stock options, restricted stock

units and restricted stock.

The Plans are administered by the Compensation Committee of the Company’s Board of Directors.

The Company had 414,382

shares available for future issuances under the 2017 Plan at June 30, 2020.

summary of stock option activity under the Plans for the six months ended June 30, 2020 is as follows:

The Company had 342,882 shares available for future issuances under the 2017 Plan at September 30, 2020.

summary of stock option activity under the Plans for the nine months ended September 30, 2020 is as follows:

SCHEDULE OF STOCK OPTION PLAN ACTIVITY

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Intrinsic Value

outstanding - January 1, 2020

cancelled/forfeited

outstanding - June 30, 2020

exercisable – June 30, 2020

vested and expected to vest – June 30, 2020

Options outstanding - January 1, 2020

Options granted

Options exercised

Options cancelled/forfeited

Options outstanding - September

Options exercisable – September

Options vested

and expected to vest – September 30, 2020

aggregate intrinsic value in the table above represents the total pre-tax amount of the proceeds, net of exercise price, which

would have been received by option holders if all option holders had exercised and immediately sold all options with an exercise

price lower than the market price on June 30, 2020, based on the closing price of the Company’s common stock of $ 5.21 on

the six months ended June 30, 2020, the Company granted stock options to certain employees and a consultant.

price lower than the market price on September 30, 2020, based on the closing price of the Company’s common stock of $ 5.59

on that date.

the nine months ended September 30, 2020, the Company granted stock options to certain employees and a consultant.

The stock options

were granted with an exercise price equal to the current market price of the Company’s common stock, as reported by the

securities exchange on which the common stock was then listed, at the grant date and have contractual terms of 10

terms for options granted to employees and consultants during the three months ended June 30, 2020 generally included one of the

following vesting schedules:

25% of the shares subject to the option vest and become exercisable on the first anniversary of the

grant date and the remaining 75% of the shares subject to the option vest and become exercisable quarterly in equal installments

securities exchange on which the common stock was then listed, at the grant date and have contractual terms of 10 years.

terms for options granted to employees and consultants during the nine months ended September 30, 2020 generally included one

of the following vesting schedules:

25% of the shares subject to the option vest and become exercisable on the first anniversary

of the grant date and the remaining 75% of the shares subject to the option vest and become exercisable quarterly in equal installments

thereafter over three years;

and 100% of the shares subject to the option vest on a quarterly basis in equal installments over

Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plans)

and in the event of certain modifications to the option award agreement.

Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plans) and

in the event of certain modifications to the option award agreement.

July 31, 2015, the Company granted to its Chief Executive Officer, Mark Baum, an option (the “Baum Performance Option”)

to purchase 600,000

shares of the Company’s common stock

at an exercise price of $ 7.87

per share under the 2007 Plan subject

to purchase 600,000 shares of the Company’s common stock at an exercise price of $ 7.87 per share under the 2007 Plan subject

to the satisfaction of certain market-based vesting criteria.

The market-based vesting criteria are separated into five tranches

and require that the Company achieve and maintain certain average stock price targets ranging from $ 9

per share to $ 15

per share during the five year period

following the grant date.

On June 4, 2020, the Company amended the Baum Performance Option, to extend the vesting and contractual

The Company treated this amendment

as a modification to the Baum Performance Option for accounting purposes.

The fair value of the modification was $ 1 ,876

using a Monte Carlo Simulation with a five year life, 70 %

and require that the Company achieve and maintain certain average stock price targets ranging from $ 9 per share to $ 15 per share

during the five year period following the grant date.

On June 4, 2020, the Company amended the Baum Performance Option, to extend

the vesting and contractual term by 5 years.

The Company treated this amendment as a modification to the Baum Performance Option

for accounting purposes.

The fair value of the modification was $ 1,876 using a Monte Carlo Simulation with a five year life, 70 %

volatility and a risk-free interest rate of 0.40 % .

The fair value of the modification will be recognized as stock-based compensation expense over the service period.

the exception of the Baum Performance Option, the fair value of each option award is estimated on the date of grant using the

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SCHEDULE OF FAIR VALUE ASSUMPTIONS

Weighted-average fair value of options granted

Weighted-average fair value

of options granted

Expected terms (in years)

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Dividend yield

following table summarizes information about stock options outstanding and exercisable at June 30, 2020:

OF STOCK OPTION OUTSTANDING AND EXERCISABLE

$ 1.47 - $ 2.60

$ 2.76 - $ 4.66

$ 5.49 - $ 6.36

following table summarizes information about stock options outstanding and exercisable at September 30, 2020:

SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE

of Exercise Prices

$ 2.76 - $ 4.66

$ 5.49 - $ 6.36

of June 30, 2020, there was approximately $ 6,383

of total unrecognized compensation expense

related to unvested stock options granted under the Plans.

of September 30, 2020, there was approximately $ 6,021

of total unrecognized compensation

expense related to unvested stock options granted under the Plans.

That expense is expected to be recognized over the weighted-average

remaining vesting period of 4.03

The stock-based compensation

expense for all stock options was $ 271

during the three and six months ended

June 30, 2020, respectively.

The stock-based compensation expense

for all stock options was $ 559

during the three and nine months ended

September 30, 2020, respectively.

awards are granted subject to certain vesting requirements and other restrictions, including performance and market-based vesting

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common stock on the grant date, is expensed over the vesting period of the RSUs.

the three and six months ended June 30, 2020, the Company’s board of directors were granted 68,024 RSUs with a fair market

value $ 400 which vest on a quarterly basis, over one year in equal installments.

the three and six months ended June 30, 2020, 161,000 RSUs with a fair market value of $ 1,025 were issued to certain employees;

the RSUs vest in full on the third anniversary of the grant date.

During the six months ended June 30, 2020, the Company granted 10,000

RSUs to a new member of its board of directors,

with a fair market value of $ 39

which vest on the one-year anniversary

of the date granted.

summary of the Company’s RSU activity and related information for the six months ended June 30, 2020 is as

OF RESTRICTED STOCK UNITS ACTIVITY

the nine months ended September 30, 2020, the Company’s board of directors were granted 68,024

RSUs with a fair market value $ 400

which vest on a quarterly basis, over one year in equal installments.

During the nine months ended September 30, 2020, the Company granted 10,000 RSUs to a new member of its board of directors, with

a fair market value of $ 39 which vest on the one-year anniversary of the grant date.

During the three and nine months ended September 30, 2020, the Company granted 12,500 RSUs to a new member of its board of directors,

with a fair market value of $ 72 which vest on the one-year anniversary of the grant date.

the nine months ended September 30, 2020, 161,000 RSUs with a fair market value of $ 1,025 were issued to certain employees;

RSUs vest in full on the third anniversary of the grant date.

summary of the Company’s RSU activity and related information for the nine months ended September 30, 2020 is as follows:

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

Average Grant Date Fair Value

1 unchanged sentence

RSUs cancelled/forfeited

RSUs unvested at June 30, 2020

of June 30, 2020, the total unrecognized compensation expense related to unvested RSUs was approximately $ 1,967 , which is expected

to be recognized over a weighted-average period of 0.5 years, based on estimated and actual vesting schedules of the applicable

The stock-based compensation for RSUs during the three and six months ended June 30, 2020 was $ 268 and $ 527 , respectively.

RSUs unvested at September 30,

of September 30, 2020, the total unrecognized compensation expense related to unvested RSUs was approximately $ 1,610 , which is

expected to be recognized over a weighted-average period of 0.42 years, based on estimated and actual vesting schedules of the

applicable RSUs.

The stock-based compensation for RSUs during the three and nine months ended September 30, 2020 was $ 357 and

$ 884 , respectively.

time to time, the Company issues warrants to purchase shares of the Company’s common stock to investors, lenders, underwriters

and other non-employees for services rendered or to be rendered in the future, or pursuant to settlement agreements.

summary of warrant activity for the six months ended June 30, 2020 is as follows:

summary of warrant activity for the nine months ended September 30, 2020 is as follows:

SCHEDULE OF WARRANTS ACTIVITY

2 unchanged sentences

Warrants outstanding - January 1, 2020

Warrants outstanding and exercisable - June 30, 2020

Weighted average remaining contractual life of the outstanding warrants in years - June 30, 2020

outstanding and exercisable as of June 30, 2020 are as follows:

Warrants outstanding

and exercisable - September 30, 2020

Weighted average

remaining contractual life of the outstanding warrants in years - September 30, 2020

outstanding and exercisable as of September 30, 2020 are as follows:

SCHEDULE OF WARRANTS OUTSTANDING AND WARRANTS EXERCISABLE

Warrant Series

Lender warrants

3 unchanged sentences

Pharmaceuticals, Inc.

the six months ended June 30, 2020, Mayfield repurchased 650,000

shares of its common stock from Elle,

for an aggregate purchase price of $ 1 .

the six months ended June 30, 2020, Mayfield issued 475,000

shares of its restricted common stock,

with a fair value of $ 11 ,

the nine months ended September 30, 2020, Mayfield repurchased 650,000 shares of its common stock from Elle, for an aggregate

purchase price of $ 1 .

the nine months ended September 30, 2020, Mayfield issued 475,000 shares of its restricted common stock, with a fair value of

$ 11 , that vest upon various performance-based milestones and over a four-year service period to Mayfield’s Chief Executive

Officer candidate.

During the three and six months ended June 30, 2020, the Company recognized $ 6

respectively, in stock-based compensation tied to the Mayfield

stock options.

the six months ended June 30, 2020, 500,000 shares of Mayfield’s restricted common stock were forfeited by a consultant.

During the nine months ended September 30, 2020, the Company recognized $ 17 in stock-based compensation tied

to the Mayfield stock options.

the nine months ended September 30, 2020, 500,000 shares of Mayfield’s restricted common stock were forfeited by a consultant.

Compensation Summary

1 unchanged sentence

SCHEDULE OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES DIRECTORS CONSULTANTS

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Employees - selling, general and administrative

Employees - selling, general

and administrative

Directors - selling, general and administrative

Consultants - selling, general and administrative

Consultants -

selling, general and administrative

COMMITMENTS AND CONTINGENCIES

8 unchanged sentences

leaving only claims related to the scope of the post-termination obligations to be litigated.

NDS is seeking unspecified damages,

interest, attorney’s fees and other costs.

The Company believes the claims are meritless and has previously and will continue

to dispute all claims asserted against it and intends to vigorously defend against these allegations.

Nonetheless, the Company

cannot predict the eventual outcome of this litigation and it could result in substantial costs, losses and a diversion of management’s

resources and attention, which could harm the Company’s business and the value of its common stock.

On October 29, 2020, at a hearing

on the various dispositive motions before it, the Court found that there were triable issues of fact and reopened discovery for

limited purposes.

NDS is seeking unspecified damages, interest, attorney’s fees and other costs.

The Company believes

the claims are meritless and has previously and will continue to dispute all claims asserted against it and intends to vigorously

defend against these allegations.

Nonetheless, the Company cannot predict the eventual outcome of this litigation and it could

result in substantial costs, losses and a diversion of management’s resources and attention, which could harm the Company’s

business and the value of its common stock.

and Professional Liability

3 unchanged sentences

coverage at any given time reflects current market conditions, including cost and availability, when the policy is written.

January 2018, John Erick and Deborah Ferrell, successors-in-interest and heirs of Jade Erick, (collectively “Erick”)

filed a lawsuit in the San Diego County Superior against Kim Kelly, ND, MPH asserting claims related to the death of Jade Erick.

In April 2018, Erick filed an amendment to the lawsuit, naming us as a co-defendant.

In January 2018, John Erick and Deborah

Ferrell, successors-in-interest and heirs of Jade Erick, (collectively “Erick”) filed a lawsuit in the San Diego

County Superior against Kim Kelly, ND, MPH asserting claims related to the death of Jade Erick.

In April 2018, Erick filed an

amendment to the lawsuit, naming the Company as a co-defendant.

In September 2018, co-defendant Dr.

filed a cross-complaint against the Company and various entities affiliated with Spectrum Laboratory Products, Inc., Spectrum

Kelly filed a

cross-complaint against the Company and various entities affiliated with Spectrum Laboratory Products, Inc., Spectrum

Chemical Manufacturing Corp.

1 unchanged sentence

(collectively “Spectrum”).

The cross-complaint seeks

indemnity and contribution from the Company and Spectrum.

The cross-complaint

seeks indemnity and contribution from the Company and Spectrum.

The Company answered the claims filed by Dr.

Kelly in October

The case is currently in the discovery phase.

Erick is seeking unspecified damages, interest, attorney’s fees and other

The Company believes the claims are meritless and has previously and will continue to dispute all claims asserted against

it and intends to vigorously defend against these allegations.

Nonetheless, the Company cannot predict the eventual outcome of

this litigation, it could result in substantial costs, losses and a diversion of management’s resources and attention, which

The case is currently in the discovery phase and the Company’s motion for summary adjudication is pending

before the Court.

Erick is seeking unspecified damages, interest, attorney’s fees and other costs.

believes the claims are meritless and has previously and will continue to dispute all claims asserted against it and intends

to vigorously defend against these allegations.

Nonetheless, the Company cannot predict the eventual outcome of this

litigation, it could result in substantial costs, losses and a diversion of management’s resources and attention, which

could harm the Company’s business and the value of its common stock.

28 unchanged sentences

to 6% of net sales, dependent upon the final formulation of the Klarity Product sold.

addition, the Company is required to make certain milestone payments to Dr.

In addition, the Company is required to

make certain milestone payments to Dr.

Lindstrom including:

(i) an initial payment of $ 50

upon execution of the Klarity License

Agreement, (ii) a second payment of $ 50

following the first $ 50

in net sales of the Klarity Product;

(iii) a final payment of $ 50

following the first $ 100

in net sales of the Klarity Product.

of the above referenced milestone payments are payable at the Company’s election in cash or shares of the Company’s

restricted common stock.

Payments totaling $ 0

were made during the three and six months

ended June 30, 2020, respectively.

Royalty expense of $ 27

was incurred during the three and six

months ended June 30, 2020, respectively, and is included in accounts payable and is due to Dr.

Lindstrom at June 30, 2020.

(i) an initial payment of $ 50 upon execution of the Klarity License

Agreement, (ii) a second payment of $ 50 following the first $ 50 in net sales of the Klarity Product;

and (iii) a final payment

of $ 50 following the first $ 100 in net sales of the Klarity Product.

All of the above referenced milestone payments are payable

at the Company’s election in cash or shares of the Company’s restricted common stock.

Payments totaling $ 0 and $ 55

were made during the three and nine months ended September 30, 2020, respectively.

Royalty expense of $ 38 and $ 94 was incurred

during the three and nine months ended September 30, 2020, respectively, is included in accounts payable and is due to Dr.

Lindstrom at September 30, 2020.

Asset Purchase Agreement – Related Party

5 unchanged sentences

Lindstrom to develop, formulate, make, sell, and sub-license an ophthalmic injectable product (the “Lindstrom

the terms of the Lindstrom APA, the

Company is required to make royalty payments to Dr.

Lindstrom ranging from 2% to 3% of net sales, dependent upon the final

formulation and patent protection of the Lindstrom Product sold.

addition, the Company is required to make certain milestone payments to Dr.

Lindstrom including an initial payment of $ 33 upon

execution of the Lindstrom APA.

Lindstrom was paid $ 0 and

cash during the three and six months ended June 30, 2020, respectively, and an additional $ 42 was

payable to Dr.

Lindstrom at June 30, 2020.

The Company incurred royalty expense of $ 4 and

$ 42 related to the Lindstrom APA during the three and six months ended June 30, 2020, respectively.

the terms of the Lindstrom APA, the Company is required to make royalty payments to Dr.

Lindstrom ranging from 2% to 3% of net

sales, dependent upon the final formulation and patent protection of the Lindstrom Product sold.

In addition, the Company is required

to make certain milestone payments to Dr.

Lindstrom including an initial payment of $ 33 upon execution of the Lindstrom APA.

Lindstrom was paid $ 0 and $ 7 in cash during the three and nine months ended September 30, 2020, respectively, and an additional

$ 48 was payable to Dr.

Lindstrom at September 30, 2020.

The Company incurred royalty expense of $ 6 and $ 48 related to the Lindstrom

APA during the three and nine months ended September 30, 2020, respectively.

Commercial Alliance Agreement

August 2020, the Company, through its wholly-owned subsidiary ImprimisRx, LLC, entered into a Commercial Alliance Agreement (the

“Dexycu Agreement”) with Eyepoint Pharmaceuticals, Inc.

(“Eyepoint”), pursuant to which Eyepoint granted

the Company the non-exclusive right to co-promote DEXYCU ® (dexamethasone intraocular suspension) 9% for the treatment

of post-operative inflammation following ocular surgery in the United States.

to the Dexycu Agreement , Eyepoint will pay the Company a fee calculated based on

the quarterly sales of DEXCYU in excess of predefined volumes to specific customers of the Company in the U.S.

Under the terms

of the Dexycu Agreement , the Company shall use commercially reasonable efforts to

promote and market DEXCYU in the U.S.

to early termination, the Dexycu Agreement expires on August 1, 2025 , subject to

specified notice periods and specified limitations, either party may terminate the Dexycu

Agreement in the event of (i) uncured material breach by the other party or (ii) if DEXCYU ceases to have “pass-through”

payment status.

In addition, subject to certain limitations, the Company may terminate the Dexycu

Agreement (i) for convenience subject to an extended specified notice period or (ii) in the event Eyepoint undergoes a

change of control.

Eyepoint may terminate the Dexycu Agreement , subject to specified

notice periods and specified limitations, if the Company fails to achieve certain minimum sales levels during specified periods.

During the three and nine months ended September 30, 2020, the Company recorded $ 7 in commission revenues related to the Dexycu

and Marketing Agreements

1 unchanged sentence

representation services to Harrow in select geographies in the U.S., in connection with our ophthalmic compounded formulations.

the terms of the sales and marketing agreements, the

Company is required to make commission payments equal to 10% to 14% of net sales for products above and beyond the initial

existing sales amounts.

In addition, the

Company is required to issue shares of the Company’s restricted common stock to certain organizations if net

sales in the assigned territory reach certain future milestone levels by the end of their terms, as applicable.

expenses of $ 318

were incurred under these agreements during

the three and six months ended June 30, 2020, respectively, of which $ 0

were stock-based payments.

the terms of the sales and marketing agreements, the Company is required to make commission payments equal to 10% to 14% of net

sales for products above and beyond the initial existing sales amounts.

In addition, the Company is required to issue shares of

the Company’s restricted common stock to certain organizations if net sales in the assigned territory reach certain future

milestone levels by the end of their terms, as applicable.

Commission expenses of $ 741 and $ 1,745 were incurred under these agreements

during the three and nine months ended September 30, 2020, respectively, of which $ 0 and $ 83 were stock-based payments.

Purchase, License and Related Agreements

7 unchanged sentences

of first refusal on additional intellectual property and drug development opportunities presented by these Inventors.

In consideration for the acquisition of the

intellectual property rights, the Company is obligated to make payments to the Inventors based on the completion of certain milestones,

generally consisting of:

(1) a payment payable within 30 days after the issuance of the first patent in the United States arising

from the acquired intellectual property (if any);

(2) a payment payable within 30 days after the Company files the first investigational

new drug application (“IND”) with the U.S.

Food and Drug Administration (“FDA”) for the first product

arising from the acquired intellectual property (if any);

(3) for certain of the Inventors, a payment payable within 30 days after

the Company files the first new drug application with the FDA for the first product arising from the acquired intellectual property

and (4) certain royalty payments based on the net receipts received by the Company in connection with the sale or licensing

of any product based on the acquired intellectual property (if any), after deducting (among other things) the Company’s

development costs associated with such product.

If, following five years after the date of the applicable asset purchase agreement,

the Company either (a) for certain of the Inventors, has not filed an IND or, for the remaining Inventors, has not initiated a

study where data is derived, or (b) has failed to generate royalty payments to the Inventors for any product based on the acquired

intellectual property, the Inventors may terminate the applicable asset purchase agreement and request that the Company re-assign

the acquired technology to the Inventors.

consideration for the acquisition of the intellectual property rights, the Company is obligated to make payments to the Inventors

based on the completion of certain milestones, generally consisting of:

(1) a payment payable within 30 days after the issuance

of the first patent in the United States arising from the acquired intellectual property (if any);

(2) a payment payable within

30 days after the Company files the first investigational new drug application (“IND”) with the U.S.

Food and Drug

Administration (“FDA”) for the first product arising from the acquired intellectual property (if any);

(3) for certain

of the Inventors, a payment payable within 30 days after the Company files the first new drug application with the FDA for the

first product arising from the acquired intellectual property (if any);

and (4) certain royalty payments based on the net receipts

received by the Company in connection with the sale or licensing of any product based on the acquired intellectual property (if

any), after deducting (among other things) the Company’s development costs associated with such product.

If, following five

years after the date of the applicable asset purchase agreement, the Company either (a) for certain of the Inventors, has not

filed an IND or, for the remaining Inventors, has not initiated a study where data is derived, or (b) has failed to generate royalty

payments to the Inventors for any product based on the acquired intellectual property, the Inventors may terminate the applicable

asset purchase agreement and request that the Company re-assign the acquired technology to the Inventors.

Royalty expenses of

were incurred under these agreements for the three and six months ended June 30, 2020 and 2019, respectively, and

are included in accounts payable at June 30, 2020 and 2019, respectively.

were incurred under these agreements for

the three and nine months ended September 30, 2020 and 2019, respectively, and $ 590

are included in accounts payable at September

30, 2020 and 2019, respectively.

SEGMENT INFORMATION AND CONCENTRATIONS

15 unchanged sentences

initiatives primarily include integration, restructuring, acquisition and other shared costs.

select revenues and operating expenses including research and development expenses, amortization, and asset sales and impairments, net

as not all such information has been accounted for at the segment level, or such information has not been used by all segments.

select revenues and operating expenses including R&D expenses, amortization, and asset sales and impairments, net as not

all such information has been accounted for at the segment level, or such information has not been used by all segments.

assets including capital expenditures.

6 unchanged sentences

are general in nature and attributable to the segment.

net revenues, segment operating expenses and segment contribution information consisted of the following for the three and six

months ended June 30, 2020:

net revenues, segment operating expenses and segment contribution information consisted of the following for the three and nine

months ended September 30, 2020:

SCHEDULE OF SEGMENT NET REVENUES, SEGMENT OPERATING EXPENSES AND SEGMENT CONTRIBUTION

For the Three Months Ended June 30, 2020

the Three Months Ended September 30, 2020

Pharmaceutical

Pharmaceutical Drug

Pharmaceutical

Cost of sales

Operating expenses:

Selling, general and administrative

Selling, general

and administrative

Research and development

2 unchanged sentences

Asset sales and impairments, net

Operating loss

For the Six Months Ended June 30, 2020

Operating income

the Nine Months ended September 30, 2020

Pharmaceutical

Pharmaceutical Drug

Pharmaceutical

Cost of sales

Operating expenses:

Selling, general and administrative

general and administrative

Research and development

Segment contribution

Research and development

Asset sales and impairments, net

Asset sales and impairments,

Operating loss

For the Three Months Ended June 30, 2019

the Three Months Ended September 30, 2019

Pharmaceutical

Drug Development

Cost of sales

Operating expenses:

Selling, general and administrative

Selling, general

and administrative

Research and development

3 unchanged sentences

Operating loss

For the Six Months Ended June 30, 2019

the Nine Months Ended September 30, 2019

Pharmaceutical

Pharmaceutical Drug

Pharmaceutical

Cost of sales

Operating expenses:

Selling, general and administrative

Selling, general

and administrative

Research and development

1 unchanged sentence

Research and development

Asset sales and impairments, net

Operating loss

2 unchanged sentences

total revenues are attributed to the U.S.

All long-lived assets at June 30, 2020 and December 31, 2019 are located in the U.S.

All long-lived assets at September 30, 2020 and December 31, 2019 are located in the

Company sells its compounded formulations to a large number of customers.

No customer accounted for more than 10 % of the Company’s

total pharmacy sales for the three and six months ended June 30, 2020 and 2019.

The Company receives its active pharmaceutical ingredients from three main suppliers.

These suppliers collectively accounted

for 60 % and 70 % of active pharmaceutical ingredient purchases during the three and six months ended June 30, 2020, respectively,

and 69 % and 65 % during the three and six months ended June 30, 2019, respectively.

total pharmacy sales for the three and nine months ended September 30, 2020 and 2019.

Company receives its active pharmaceutical ingredients from three main suppliers.

These suppliers collectively accounted for 76 %

of active pharmaceutical ingredient purchases

during the three and nine months ended September 30, 2020, respectively, and 69 %

during the three and nine months ended

September 30, 2019, respectively.

SUBSEQUENT EVENTS

Company has performed an evaluation of events occurring subsequent to June 30, 2020 through the filing date of this Quarterly

Based on its evaluation, no events other than those described below need to be disclosed.

July 2020, the Company issued 500

shares of its common stock upon the exercise

of options to purchase 500 shares of common stock, with an exercise price of $ 3.20

per share, and received net proceeds of

Commercial Alliance Agreement

August 1, 2020, the Company, through its wholly-owned subsidiary ImprimisRx, LLC, entered into a Commercial Alliance Agreement

(the “Dexycu Agreement”) with Eyepoint Pharmaceuticals, Inc.

(“Eyepoint”), pursuant to which Eyepoint

granted the Company the non-exclusive right to co-promote DEXYCU ® (dexamethasone intraocular suspension) 9%

for the treatment of post-operative inflammation following ocular surgery in the United States.

to the Dexycu Agreement , Eyepoint will pay the Company a fee calculated based on

the quarterly sales of DEXCYU in excess of predefined volumes to specific customers of the Company in the U.S.

Under the terms

of the Dexycu Agreement , the Company shall use commercially reasonable efforts to

promote and market DEXCYU in the U.S.

to early termination, the Dexycu Agreement expires on August 1, 2025 , subject to

specified notice periods and specified limitations, either party may terminate the Dexycu

Agreement in the event of (i) uncured material breach by the other party or (ii) if DEXCYU ceases to have “pass-through”

payment status.

In addition, subject to certain limitations, the Company may terminate the Dexycu

Agreement (i) for convenience subject to an extended specified notice period or (ii) in the event Eyepoint undergoes a

change of control.

Eyepoint may terminate the Dexycu Agreement , subject to specified

notice periods and specified limitations, if the Company fails to achieve certain minimum sales levels during specified periods.

Company has performed an evaluation of events occurring subsequent to September 30, 2020 through the filing date of this Quarterly

Based on its evaluation, no events other than those described herein need to be disclosed.

October 2020, the Company issued 93,798 shares of its common stock underlying RSUs held by a director that resigned.

had previously vested during the nine months ended September 30, 2020, but the issuance and delivery of the shares were deferred

until the director resigned.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements