What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-03-08 compared with 2020-03-13 · 1257 added, 1136 removed, 934 unchanged (72% of the section changed)

1 unchanged sentence

Controls and Procedures

management, under the supervision and with the participation of our Chief Executive Officer (“CEO”), our principal

executive officer, and our Chief Financial Officer (“CFO”), our principal financial and accounting officer, conducted

management, under the supervision and with the participation of our Chief Executive Officer (“CEO”), our principal

executive officer, and our Chief Financial Officer (“CFO”), our principal financial and accounting officer, conducted

an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2020, the end of the period covered

by this Annual Report, pursuant to Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange

connection with that evaluation, our CEO and CFO concluded that, as of December 31, 2020, our disclosure controls and procedures

2 unchanged sentences

that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed,

summarized and reported within the time periods specified in the SEC’s rules and forms.

These disclosure controls and procedures

2 unchanged sentences

officer, principal financial officer and principal accounting officer, as appropriate to allow timely decisions regarding required

Management’s

Annual Report on Internal Control over Financial Reporting

7 unchanged sentences

our CEO and CFO, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework

in Internal Control —

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations.

in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations.

Based on such

evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2020.

independent registered public accounting firm also reported on the effectiveness of internal control over financial reporting.

The independent registered public accounting firm ‘s attestation report is included in our consolidated financial statements

beginning on page F-2 of this report under the caption entitled “Report of Independent Registered Public Accounting Firm.”

report does not include an attestation report of our independent registered public accounting firm regarding internal control

over financial reporting, in accordance with applicable SEC rules that permit us to provide only management’s report in

the annual report.

in Internal Control over Financial Reporting

6 unchanged sentences

A control system, no matter how well designed and operated, can provide only

reasonable, not absolute, assurance that the control system’s objectives will be met.

The design of a control system must

15 unchanged sentences

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

information required by this item is incorporated by reference to the information set forth under the captions “Election

of Directors,”

“Executive Officers,”

“Corporate Governance,”

“Corporate Governance —

Delinquent Section 16(a) Reports,”

and “Corporate Governance —

Code of Business Conduct and Ethics”

the Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders.

information required by this item is incorporated by reference to the information set forth under the captions “Election

of Directors,” “Executive Officers,” “Corporate Governance,” “Corporate Governance —

Delinquent Section 16(a) Reports,” and “Corporate Governance — Code of Business Conduct and Ethics” in

the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders.

EXECUTIVE COMPENSATION

information required by this item is incorporated by reference to the information set forth under the captions “Executive

Compensation”

and “Director Compensation”

in the Company’s Proxy Statement for the 2020 Annual Meeting

information required by this item is incorporated by reference to the information set forth under the captions “Executive

Compensation” and “Director Compensation” in the Company’s Proxy Statement for the 2021 Annual Meeting

of Stockholders.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

information required by this item is incorporated by reference to the information set forth under the captions “Security

Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters”

and “Executive Compensation

Securities Authorized for Issuance Under Equity Compensation Plans”

in the Company’s Proxy Statement for the

information required by this item is incorporated by reference to the information set forth under the captions “Security

Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Executive Compensation

— Securities Authorized for Issuance Under Equity Compensation Plans” in the Company’s Proxy Statement for the

2021 Annual Meeting of Stockholders.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

information required by this item is incorporated by reference to the information set forth under the captions “Corporate

Governance —

Transactions with Related Persons”

and “Corporate Governance —

Director Independence”

in the Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders.

information required by this item is incorporated by reference to the information set forth under the captions “Corporate

Governance — Transactions with Related Persons” and “Corporate Governance — Director Independence”

in the Company’s Proxy Statement for the 2021 Annual Meeting of Stockholders.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

information required by this item is incorporated by reference to the information set forth under the caption “Ratification

of Selection of Independent Registered Public Accounting Firm”

in the Company’s Proxy Statement for the 2020 Annual

information required by this item is incorporated by reference to the information set forth under the caption “Ratification

of Selection of Independent Registered Public Accounting Firm” in the Company’s Proxy Statement for the 2021 Annual

Meeting of Stockholders.

21 unchanged sentences

filed with the Securities and Exchange Commission on December 31, 2018)

Description of the Company’s Securities

of the Company’s Securities

Form of Directors and Officers Indemnification Agreement (incorporated herein by reference to Exhibit 10.8 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

14 unchanged sentences

Stand-alone Restricted Stock Unit Agreement, dated July 18, 2012, granted by Imprimis Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.40 to the Company’s Registration Statement on Form S-1 (File No.

333-182846) filed on July 25, 2012)

Stand-alone Restricted Stock Unit Agreement, dated July 18, 2012, granted by Imprimis Pharmaceuticals, Inc.

Kammer (incorporated herein by reference to Exhibit 10.41 to the Company’s Registration Statement on Form S-1 (File No.

333-182846) filed on July 25, 2012)

Form of Underwriter’s Warrant (incorporated herein by reference to Exhibit 10.41 to the Company’s Registration Statement on Form S-1 (File No.

333-182846) filed on October 26, 2012)

5 unchanged sentences

filed with the Securities and Exchange Commission on August 14, 2013)

Asset Purchase Agreement, dated June 11, 2013, by and between Imprimis Pharmaceuticals, Inc.

and Buderer Drug Company, Inc.

(incorporated herein by reference to Exhibit 10.5 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on August 14, 2013)

Asset Purchase Agreement, dated August 8, 2013, by and among Imprimis Pharmaceuticals, Inc., Novel Drug Solutions, LLC and Eye Care Northwest, PA (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on November 6, 2013)

Amendment to Asset Purchase Agreement, dated as of October 14, 2013, by and among Imprimis Pharmaceuticals, Inc., Novel Drug Solutions, LLC and EyeCare Northwest, PA (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on November 6, 2013)

Asset Purchase Agreement, dated October 8, 2013, by and between Imprimis Pharmaceuticals, Inc.

and Novel Drug Solutions, LLC (incorporated herein by reference to Exhibit 10.27 to the Annual Report on Form 10-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on March 28, 2014)

Amendment to Asset Purchase Agreement, dated as of October 21, 2013, by and between Imprimis Pharmaceuticals, Inc.

and Buderer Drug Company, Inc.

(incorporated herein by reference to Exhibit 10.28 to the Annual Report on Form 10-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on March 28, 2014)

Amendment to Asset Purchase Agreement, dated as of October 21, 2013, by and between Imprimis Pharmaceuticals, Inc.

and Novel Drug Solutions, LLC and EyeCare Northwest, PA (incorporated herein by reference to Exhibit 10.29 to the Annual Report on Form 10-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on March 28, 2014)

Amended and Restated Employment Agreement, effective as of February 1, 2015, by and between Imprimis Pharmaceuticals, Inc.

12 unchanged sentences

filed with the Securities and Exchange Commission on May 12, 2015)

Loan and Security Agreement, dated May 11, 2015, by and between Imprimis Pharmaceuticals and IMMY Funding LLC.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-Kof Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on May 12, 2015)

License Agreement dated as of August 11, 2015, between Imprimis Pharmaceuticals, Inc.

and Advance Dosage Forms, Inc.

and John DiGenova (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on August 12, 2015)

Controlled Equity Offering SM Sales Agreement, dated November 27, 2015, by and between Imprimis Pharmaceuticals, Inc.

and Cantor Fitzgerald & Co (incorporated herein by reference to Exhibit 1.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on November 27, 2015)

PCCA Commission Agreement, dated December 21, 2015, by and between Imprimis Pharmaceuticals, Inc.

and Professional Compounding Centers of America, Inc.

8.00% Convertible Senior Secured Note issued on January 22, 2016 by Imprimis Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on January 25, 2016)

Note Purchase Agreement dated January 22, 2016 between Imprimis Pharmaceuticals, Inc.

and IMMY Funding LLC (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on January 25, 2016)

Second Amendment to Loan and Security Agreement dated January 22, 2016 between Imprimis Pharmaceuticals, Inc.

and IMMY Funding LLC (incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on January 25, 2016)

Amendment to Warrant to Purchase Stock dated January 22, 2016 between Imprimis Pharmaceuticals, Inc.

and IMMY Funding LLC (incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on January 25, 2016)

Third Amendment to Loan and Security Agreement, dated December 27, 2016, by and between Imprimis Pharmaceuticals and IMMY Funding LLC (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on December 29, 2016)

Exchange and Discharge Agreement, dated December 27, 2016, by and between Imprimis Pharmaceuticals and IMMY Funding LLC (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on December 29, 2016)

Warrant Amendment to Purchase Stock, dated December 27, 2016, issued by Imprimis Pharmaceuticals, Inc.

38 unchanged sentences

filed with the Securities and Exchange Commission on June 20, 2017)

Loan and Security Agreement, dated July 19, 2017, by and between Imprimis Pharmaceuticals, Inc.

and SWK Funding LLC (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on July 20, 2017)

Imprimis Pharmaceuticals, Inc.

2017 Incentive Stock and Awards Plan (incorporated herein by reference to Exhibit 10.1 to the Registration Statement on Form S-8 of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on August 25, 2017)

Form of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on June 16, 2017)

Form of Non-Statutory Stock Option Agreement (incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on June 16, 2017)

Form of Restricted Stock Award Agreement (incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on June 16, 2017)

Form of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on June 16, 2017)

Consulting Agreement dated October 27, 2017 between Surface Pharmaceuticals, Inc.

48 unchanged sentences

filed with the Securities and Exchange Commission on May 9, 2019)

Joinder and Amendment to Loan and Security Agreement, dated May 24, 2019, by and between Harrow Health, Inc., each of its wholly owned subsidiaries and SWK Funding LLC.

Joinder and First Amendment to Loan and Security Agreement, dated May 24, 2019, by and between Harrow Health, Inc., each of its wholly-owned subsidiaries and SWK Funding LLC.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Harrow Health, Inc.

10 unchanged sentences

filed with the Securities and Exchange Commission on August 14, 2019)

Asset Purchase Agreement, dated July 26, 2019, by and between Park Compounding, Inc.

and Noice Rx, LLC (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

filed with the Securities and Exchange Commission on November 13, 2019)

Loan Agreement, dated July 26, 2019, by and between Park Compounding, Inc.

and Noice Rx, LLC (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

filed with the Securities and Exchange Commission on November 13, 2019)

License Agreement, dated July 28, 2019, among Mayfield Pharmaceuticals, Inc., TGV-Health, LLC and TGV-Gyneconix, LLC (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

3 unchanged sentences

Consulting Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.64 to the Annual Report on Form 10-K of Harrow Health, Inc.

filed with the Securities and Exchange Commission on March 13, 2020)

Consulting Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc.

and Andrew R.

Boll (incorporated herein by reference to Exhibit 10.65 to the Annual Report on Form 10-K of Harrow Health, Inc.

filed with the Securities and Exchange Commission on March 13, 2020)

Consulting Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc.

List of Subsidiaries

Consent of Independent Registered Public Accounting Firm

Saharek (incorporated herein by reference to Exhibit 10.66 to the Annual Report on Form 10-K of Harrow Health, Inc.

filed with the Securities and Exchange Commission on March 13, 2020)

Second Amendment, dated as of April 1, 2020, to the Loan and Security Agreement by and among Harrow Health, Inc., several of its wholly-owned subsidiaries and the Lenders named therein (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Harrow Health, Inc.

filed with the Securities and Exchange Commission on April 4, 2020)

Business Loan Agreement with Renasant Bank pursuant to the Paycheck Protection Program, dated April 27, 2020 (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

filed with the Securities and Exchange Commission on August 10, 2020)

Agreement dated July 1, 2020 between Visionology, Inc.

and Andrew R.

Commercial Alliance Agreement between Eyepoint Pharmaceuticals, Inc.

and ImprimisRx, LLC dated August 1, 2020.

(incorporated herein by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q of Harrow Health, Inc.

filed with the Securities and Exchange Commission on November 9, 2020)

Amendment to Commercial Alliance Agreement between Eyepoint Pharmaceuticals, Inc.

ImprimisRx, LLC dated November 13, 2020.

of Subsidiaries

of Independent Registered Public Accounting Firm

Power of Attorney (included on the signature page to this Annual Report)

Certification of Mark L.

Baum, Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Andrew R.

Boll, Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Mark L.

Certification

Baum, Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934,

as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification

Boll, Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of

1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification

pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Mark

Baum, Chief Executive Officer.

Certification pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Andrew R.

Certification

pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Andrew

Boll, Chief Financial Officer.

6 unchanged sentences

XBRL Taxonomy Extension Presentation Linkbase Document

cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 has been formatted in

cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 has been formatted in

contract or compensatory plan or arrangement.

3 unchanged sentences

the redacted terms, has been separately filed with the Securities and Exchange Commission.

of this exhibit have been omitted in compliance with item 601 of Regulation S-K

FORM 10-K SUMMARY

1 unchanged sentence

to be signed on its behalf by the undersigned, thereunto duly authorized.

Chief Executive Officer (Principal Executive Officer)

March 13, 2020

Executive Officer (Principal Executive Officer)

ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark L.

14 unchanged sentences

of the Board of Directors

Lawrence Van Horn

to Consolidated Financial Statements

Reports of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2019 and 2018

Consolidated Statements of Operations for the years ended December 31, 2019 and 2018

Consolidated Statements of Stockholders’

Equity for the years ended December 31, 2019 and 2018

Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018

Notes to the Consolidated Financial Statements

of Independent Registered Public Accounting Firm

the Board of Directors and Stockholders of

Balance Sheets at December 31, 2020 and 2019

Statements of Operations for the years ended December 31, 2020 and 2019

Statements of Stockholders’ Equity for the years ended December 31, 2020 and 2019

Statements of Cash Flows for the years ended December 31, 2020 and 2019

to the Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Stockholders and Board of Directors

Harrow Health, Inc.

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Harrow Health, Inc.

and subsidiaries (the “Company”)

as of December 31, 2019 and 2018, the related consolidated statements of operations, stockholders’

equity and cash

flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as

the “consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above

present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the

results of their operations and their cash flows for each of the two years in the period ended December 31, 2019, in conformity

with accounting principles generally accepted in the United States of America.

also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),

the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal

Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission

(“COSO”) and our report dated March 13, 2020 expressed an unqualified opinion on the Company’s internal control

over financial reporting.

of New Accounting Standard

discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases as of January

1, 2019 due to the adoption of ASU No.

2016-02, Leases (Topic 842).

consolidated financial statements are the responsibility of the Company’s management.

and subsidiaries (the “Company”)

as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’ equity and cash flows

for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated

financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material

respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash

flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted

in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an

1 unchanged sentence

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the

Company in accordance with the U.S.

5 unchanged sentences

due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over

financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting

but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

6 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

KMJ Corbin & Company LLP

have served as the Company’s auditor since 2007.

Mesa, California

March 13, 2020

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders of

on Internal Control over Financial Reporting

have audited Harrow Health, Inc.

and subsidiaries’

(the “Company”) internal control over financial reporting

as of December 31, 2019, based on criteria established in Internal Control –

Integrated Framework (2013) issued by

the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained,

in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO

also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),

the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations,

stockholders’

equity and cash flows for each of the two years in the period ended December 31, 2019, and the related notes

(collectively referred to as the “consolidated financial statements”), and our report dated March 13, 2020 expressed

an unqualified opinion on those consolidated financial statements.

Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment

of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal

Control over Financial Reporting included in Item 9A.

Our responsibility is to express an opinion on the Company’s internal

control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required

to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material

Our audit of internal control over financial reporting included obtaining an understanding of internal control over

financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness

of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary

in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

and Limitations of Internal Control over Financial Reporting

company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting

principles generally accepted in the United States of America.

A company’s internal control over financial reporting includes

those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly

reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are

recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted

in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations

of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized

acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections

of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes

in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

KMJ Corbin & Company LLP

Mesa, California

critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements

that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that

are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements,

taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical

audit matter or on the accounts or disclosures to which it relates.

Compensation – Modified Stock Option

Audit Matter Description

described further in Note 14 to the consolidated financial statements, during the year ended December 31, 2020, the Company amended

an employee option to purchase 600,000 shares of the Company’s common stock, which is subject to the satisfaction of certain

market-based vesting criteria, by extending the vesting term and contractual term.

Management performed a valuation of the stock

option at the date of modification with the assistance of a third-party valuation specialist, which involved estimation

of the fair value of the modified option.

The Company estimated the fair value of the modified stock option using the Monte-Carlo

simulation and Black-Scholes option pricing models.

management’s valuation of the modified stock option required auditor judgment and required a high degree of subjectivity

as estimates underlying the determination of fair value were based on various inputs and significant assumptions used in the Monte-Carlo

simulation and Black-Scholes option pricing models, including the probability of triggering the market-based targets, and the

number of shares to be vested.

the Critical Audit Matter Was Addressed in the Audit

audit procedures included, among others, reading the relevant Board of Directors minutes and modified stock option agreement for

accuracy and completeness of the modified stock option terms.

We involved our valuation specialist to assist in the evaluation

of the Company’s determination of the fair value of the modified stock option, which included testing the appropriateness

of the methodologies and underlying assumptions used, and whether the methods used for determining fair value were applied consistently

with the valuation of similar grants in prior periods.

We evaluated the significant assumptions used by management to calculate

the fair value of the modified stock option, which included the expected option term and an independent calculation of the expected

volatility based upon actual historical stock price movements over a period equal to the expected option term.

We developed an

independent estimate of the fair value for the modified stock option with the assistance of our valuation specialist and compared

our estimate of fair value to the fair value determined by management.

KMJ Corbin & Company

have served as the Company’s auditor since 2007.

March 8, 2021

3 unchanged sentences

and cash equivalents, including restricted cash of $ 200

in Eton Pharmaceuticals

receivable, net

expenses and other current assets

current assets

Property, plant and

equipment, net

Operating lease right-of-use

Intangible assets,

Investment in Surface

Pharmaceuticals

Investment in Melt

Investment in Eton

Pharmaceuticals

LIABILITIES AND EQUITY

Accounts receivable,

expenses and other current assets

Total current assets

Property, plant and equipment, net

Operating lease right-of-use assets

Intangible assets, net

Investment in Surface Ophthalmics

Investment in Melt Pharmaceuticals

LIABILITIES AND STOCKHOLDERS’

Current liabilities

payable and accrued expenses

payroll and related liabilities

Accounts payable

and accrued expenses

Accrued payroll

and related liabilities

revenue and customer deposits

portion of note payable, net of unamortized debt discount

portion of operating lease obligations

portion of finance lease obligations, net of unamortized discount

current liabilities

Operating lease obligations,

Current portion

of paycheck protection program loan payable

portion of loan payable, net of unamortized debt discount

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

Accrued expenses, net of current portion

Paycheck protection program loan payable,

net of current portion

Finance lease obligations,

net of current portion and unamortized discount

Accrued expenses, net

of current portion

payable, net of current portion and unamortized debt discount

Loan payable,

net of current portion and unamortized debt discount

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’

stock, $0.001 par value, 50,000,000 shares authorized, 25,526,931 and 24,339,610 shares issued and outstanding

at December 31, 2019 and 2018, respectively

paid-in capital

HARROW HEALTH, INC STOCKHOLDERS’

STOCKHOLDERS’ EQUITY

Common stock, $ 0.001

par value, 50,000,000

shares authorized, 25,749,875

and 25,526,931

shares issued and outstanding at December 31, 2020

and December 31, 2019, respectively

Additional paid-in

TOTAL HARROW HEALTH

STOCKHOLDERS’ EQUITY

Noncontrolling

5 unchanged sentences

Total revenues

Cost of sales

Operating expenses:

general and administrative

and development

Selling, general

and administrative

Research and development

of long-lived assets

operating expenses

Total operating

Income (loss)

from operations

Other income (expense):

Interest expense,

Investment (loss)

gain from Melt Pharmaceuticals, net

(loss) gain from Surface Pharmaceuticals, net

gain from Eton Pharmaceuticals, net

on sale of assets

Total other income,

Income (loss) before

tax benefit, net

Total net income (loss)

including noncontrolling interests

Investment loss

from Surface Ophthalmics, net

Investment gain

from Eton Pharmaceuticals, net

(loss) income, net

Total other (loss)

Loss before income tax provision

tax provision

Total net loss including

noncontrolling interests

loss attributable to noncontrolling interests

income attributable to Harrow Health, Inc.

net income per share of common stock

average number of shares of common stock Outstanding, basic

average number of shares of common stock Outstanding, diluted

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 common

shares outstanding, basic

Weighted average number of common

shares outstanding, diluted

accompanying notes are an integral part of these consolidated financial statements

STATEMENTS OF STOCKHOLDERS’

STATEMENTS OF STOCKHOLDERS’ EQUITY

the Years Ended December 31, 2020 and 2019

1 unchanged sentence

Harrow Health, Inc.

Stockholders’

Noncontrolling

Stockholders’

Balance at January 1, 2019

Issuance of common stock in connection with:

Issuance of common stock in connection

Exercise of warrants

Vesting of RSUs, net of tax withholding

Sale of stock, net of costs (ATM)

Stock-based payment for services provided

Exercise of employee

options, net of tax withholding

Issuance of common stock related to vesting of RSUs

Stock-based payment

for services provided

Stock-based compensation expense

Net income (loss)

Balance at December 31, 2019

Issuance of common stock in connection with:

Exercise of warrants

Exercise of employee stock options, net of tax withholding

Stock-based payment for services provided

Balance at December 31, 2019

Issuance of common stock in connection

Exercise of employee

options, net of tax withholding

Issuance of common stock related

to vesting of RSUs

Stock-based payment

for services provided

Stock-based compensation expense

Net income (loss)

Balance at December 31, 2020

2 unchanged sentences

the Years Ended December 31,

CASH FLOWS FROM OPERATING

(loss) income (includes non-controlling interests)

to reconcile net income (loss) to net cash provided by operating activities:

and amortization of property, plant and equipment

of intangible assets

of operating lease right-of-use assets

of debt issuance costs and discount

gain from Eton, net

(gain)/loss from Surface, net

gain from Melt, net

on sale, impairments and disposal of assets

based payment for services provided

in assets and liabilities, net of impairments and disposals:

expenses and other current assets

payable and accrued expenses

payroll and related liabilities

CASH FLOWS FROM OPERATING ACTIVITIES

loss (including noncontrolling interests)

Adjustments to reconcile

net loss to net cash (used in) provided by operating activities:

Depreciation and

amortization of property, plant and equipment

Amortization of

intangible assets

Amortization of

operating lease right-of-use assets

Provision for bad

Interest paid-in-kind

Amortization of

debt issuance costs and discount

Investment gain

from Eton Pharmaceuticals, net

Investment loss

from Surface Ophthalmics, net

Investment loss

(gain) from Melt Pharmaceuticals, net

Loss on disposal

Impairment of long-lived

Stock-based payment

of consulting services

Stock-based compensation

Changes in assets

and liabilities:

Accounts receivable

Prepaid expenses

and other current assets

Accounts payable

and accrued expenses

Accrued payroll

and related liabilities

revenue and customer deposits

CASH PROVIDED BY OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING

of note receivable

on sale and disposal of assets

in patent and trademark assets

NET CASH (USED

IN) PROVIDED BY OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds on sale

and disposal of assets

Investment in patent

and trademark assets

of property, plant and equipment

CASH USED IN INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING

on finance lease obligations

on Park deferred acquisition obligation

payments on note payable

of costs related to amendment of note payable

proceeds from ATM sales of common stock

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

CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

NET (DECREASE) INCREASE

IN, CASH EQUIVALENTS AND RESTRICTED CASH

CASH EQUIVALENTS AND RESTRICTED CASH, beginning of year

CASH EQUIVALENTS AND RESTRICTED CASH, end of year

RECONCILIATION OF CASH,

CASH EQUIVALENTS AND RESTRICTED CASH

and cash equivalents

CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

NET CASH USED

IN INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Payments on finance

lease obligations

Proceeds from SWK

Principal payments

Payments of costs

related to amendment of SWK loan

Proceeds from Paycheck

protection program loan payable

Net proceeds from

exercise of warrants and stock options, net of taxes remitted for RSU’s and options

NET CASH PROVIDED

BY (USED IN) FINANCING ACTIVITIES

NET CHANGE IN CASH, CASH EQUIVALENTS

AND RESTRICTED CASH

CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

CASH EQUIVALENTS AND RESTRICTED CASH, end of period

RECONCILIATION OF CASH, CASH EQUIVALENTS

AND RESTRICTED CASH

Cash and cash equivalents

CASH, CASH EQUIVALENTS

AND RESTRICTED CASH AT END OF PERIOD

SUPPLEMENTAL DISCLOSURE

2 unchanged sentences

paid for interest

DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

of property and equipment included in accounts payable

asset obtained in exchange for lease obligation

SUPPLEMENTAL DISCLOSURES

OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Purchase of property,

plant and equipment included in accounts payable and accrued expenses

and revaluation of right-of-use assets obtained in exchange for lease obligation

accompanying notes are an integral part of these consolidated financial statements

TO THE CONSOLIDATED FINANCIAL STATEMENTS

the years ended December 31, 2019 and 2018

the Year Ended December 31, 2020 and 2019

dollar amounts are expressed in thousands, except share and per share data)

(together with its subsidiaries, partially owned companies and royalty arrangements unless the context indicates

or otherwise requires, the “Company”

or “Harrow”) specializes in the development, production and sale

or otherwise requires, the “Company” or “Harrow”) specializes in the development, production and sale

of innovative medications that offer unique competitive advantages and serve unmet needs in the marketplace through its subsidiaries

and deconsolidated companies.

The Company owns one of the nation’s leading ophthalmology pharmaceutical businesses, ImprimisRx.

The Company owns one of the nation’s leading ophthalmology-focused pharmaceutical businesses,

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

(“Eton”),

Surface Pharmaceuticals, Inc.

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

(“Melt”), all companies that

began as subsidiaries of Harrow.

More recently, the Company founded drug development subsidiaries Mayfield Pharmaceuticals, Inc.

(“Mayfield”), Radley Pharmaceuticals, Inc.

(“Radley”), and Stowe Pharmaceuticals, Inc.

(“Stowe”).

Harrow also owns royalty rights in various drug candidates being developed by Surface, Melt, Radley and Mayfield.

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.

December 2018, the Company amended its restated certificate of incorporation to change its corporate name from “Imprimis

Pharmaceuticals, Inc.”

to “Harrow Health, Inc.”.

Surface Ophthalmics, Inc.

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

(“Melt”), all companies that began

as subsidiaries of Harrow.

In 2020, Harrow created Visionology, Inc.

(“Visionology”), which intends to launch an online

eye health platform business.

Harrow also owns royalty rights in various drug candidates being developed by Surface and Melt.

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.

and subsequent to the year ended December 31, 2020, the Company discontinued the majority of operational efforts related to its

subsidiaries Stowe Pharmaceuticals, Inc.

(“Stowe”), Radley Pharmaceuticals, Inc.

(“Radley”) and Mayfield

Pharmaceuticals, Inc.

(“Mayfield”) to allocate resources to other areas of the Company’s business.

does not expect the suspension of these operations to have a material impact on the financial results of the Company.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1 unchanged sentence

has prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in

the United States (“GAAP”).

The accompanying consolidated financial statements include the accounts of the Company

and its wholly owned subsidiaries, as well as Mayfield and Stowe, 70% majority controlled subsidiaries of Harrow as of December

The remaining 30% 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.

the United States of America (“GAAP”).

The accompanying 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 as of December 31, 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 and urological focused drug candidates.

The remaining 30 %

of Stowe was owned by TGV.

Stowe was organized to develop ophthalmic drug candidates.

All inter-company

accounts and transactions have been eliminated in consolidation.

The Company controls 100 %

of the equity interests in Visionology.

All inter-company accounts and transactions have been eliminated in consolidation.

consolidates entities in which we have a controlling financial interest.

We consolidate subsidiaries in which we hold and/or control,

directly or indirectly, more than 50% of the voting rights.

All intercompany accounts and transactions have been eliminated in

consolidation.

consolidate subsidiaries in which we hold and/or control, directly or indirectly, more than 50% of the voting rights .

All intercompany accounts and transactions have been eliminated in consolidation.

preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the

3 unchanged sentences

others, allowance for doubtful accounts and contractual adjustments, renewal periods and discount rates for leases, realizability

of inventories, valuation of investments in equity securities, deferred taxes, goodwill and intangible assets, recoverability

of long-lived assets and goodwill, valuation of contingent acquisition obligations and deferred acquisition obligations, valuation

of notes payable, and valuation of stock-based transactions with employees and non-employees.

Actual results could differ from

those estimates.

there is no assurance, the Company believes cash generated from its operations, along with its existing cash resources, restricted

cash and marketable securities of approximately $30,149 at December 31, 2019, 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.

Company may seek to increase liquidity and capital resources by one or more of the following which may include, but are not limited

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

of inventories, valuation of investments, realizability of deferred taxes, recoverability of goodwill and long-lived assets,

valuation of contingent acquisition obligations and deferred acquisition obligations, fair value of loans payable, and valuation

of stock-based transactions with employees and non-employees.

Actual results could differ from those estimates.

Uncertainties and Liquidity

Company is subject to risks and uncertainties as a result of the COVID-19 pandemic.

On March 18, 2020, the Centers for Medicare

& Medicaid Services (“CMS”) released guidance for U.S.

healthcare providers to limit all elective medical procedures

in order to conserve personal protective equipment and limit exposure to COVID-19 during the pendency of the pandemic.

to limiting elective medical procedures, many hospitals and other healthcare providers have strictly limited access to their facilities

during the pandemic.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and healthcare

delivery, led to social distancing recommendations, stay-at-home orders and other restrictive measures, and created significant

volatility in financial markets.

of the Company’s customers use its drugs in procedures impacted by the CMS guidance to limit elective procedures.

the Company and our business partners need access to healthcare providers and facilities to conduct clinical trials and other

activities required to achieve regulatory clearance of products under development.

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.

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 the filing of this Annual Report on Form 10-K, the extent to which the COVID-19 pandemic

may materially impact the Company’s financial condition, liquidity or results of operations is uncertain.

In addition, the

Company is subject to certain regulatory standards, guidelines and inspections which could impact the Company’s ability

to make, dispense, and sell certain products.

If the Company was required to cease compounding and selling certain products as

a result of regulatory guidelines or inspections, this may have a material impact on the Company’s financial condition,

liquidity and results of operations.

to 2020, the Company had incurred significant operating losses and negative cash flows from operations since its inception.

Company recorded operating income of $ 385

for the year ended December 31, 2020 and

recorded an operating loss of $ 4,795

for the year ended December 31, 2019.

The Company has an accumulated deficit of $ 77,400

as of December 31, 2020 and 2019, respectively.

In addition, the Company used cash in operating activities of $ 1,100

for the year ended December 31, 2020 and

cash provided by operating activities was $ 950

for the year ended December 31, 2019.

there is no assurance, management of the Company believes existing cash resources and restricted cash of $ 4,301

at December 31, 2020 together with cash

generated from operations, 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 and the future impact of the COVID-19

pandemic on its business could be incorrect.

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

and working to increase revenue growth through sales.

There is no guarantee that the Company will be able to obtain capital when

needed on terms it deems as acceptable, or at all.

Company’s chief operating decision-maker is its Chief Executive Officer who makes resource allocation decisions and assesses

performance based on financial information presented on as operating segments.

The Company has identified two operating segments

as reportable segments.

See Note 18 for more information regarding the Company’s reportable segments.

There is no guarantee that the Company will be able to obtain

capital when needed on terms management deems acceptable, or at all.

Company’s chief operating decision-maker is its Chief Executive Officer who makes resource allocation decisions and assesses

performance based on financial information presented as operating segments.

The Company has identified two

operating segments as reportable segments.

See Note 18 for more information regarding the Company’s reportable segments.

Noncontrolling

5 unchanged sentences

are other factors, such as decision-making rights, that are considered as well.

The Company includes the amount of net income

(loss) attributable to noncontrolling interests in consolidated net income (loss) on the face of the consolidated statements of

Company provides in the consolidated statements of stockholders’

equity a reconciliation at the beginning and the end of

Company includes the amount of net loss attributable to noncontrolling interests in consolidated net loss on the face of the consolidated

statements of operations.

Company provides in the consolidated statements of stockholders’ equity a reconciliation at the beginning and the end of

the period of the carrying amount of total equity, equity attributable to the parent, and equity attributable to the noncontrolling

interest that separately discloses:

interests that separately discloses:

income or loss;

12 unchanged sentences

Issuance Costs and Debt Discount

issuance costs and the debt discount are recorded net of notes payable and finance lease obligations in the consolidated balance

Amortization expense of debt issuance costs and the debt discount is calculated using the effective interest method over

the term of the debt and is recorded in interest expense in the accompanying consolidated statements of operations.

issuance costs and the debt discount are recorded net of loans payable and finance lease obligations in the consolidated balance

Amortization of debt issuance costs and the debt discount is calculated using the effective interest method over the term

of the related debt and is recorded in interest expense in the accompanying consolidated statements of operations.

costs of acquiring intellectual property rights to be used in the research and development process, including licensing fees and

3 unchanged sentences

Patents and trademarks are recorded at cost and capitalized at a time when the future economic benefits

of such patents and trademarks become more certain (see “—Goodwill and Intangible Assets”

of such patents and trademarks become more certain (see “—Goodwill and Intangible Assets” below).

began capitalizing certain costs associated with acquiring intellectual property rights during 2015;

1 unchanged sentence

they are expensed as incurred.

part of the process of preparing the Company’s consolidated financial statements, the Company must estimate the actual current

tax liabilities and assess permanent and temporary differences that result from differing treatment of items for tax and accounting

The temporary differences result in deferred tax assets and liabilities, which are included within the consolidated

balance sheets.

The Company must assess the likelihood that the deferred tax assets will be recovered from future taxable income

and, to the extent the Company believes that recovery is not more likely than not, a valuation allowance must be established which

reduces the amount of deferred tax assets recorded on the consolidated balance sheets.

To the extent the Company establishes a

valuation allowance or increase or decrease this allowance in a period, the impact will be included in income tax expense in the

consolidated statement of operations.

Company accounts for income taxes under the provisions of Financial Accounting Standards Board (the “FASB”) Accounting

Standards Codification (“ASC”) 740, Income Taxes .

As of December 31, 2019 and 2018, there were no unrecognized

tax benefits included in the consolidated balance sheets that would, if recognized, affect the effective tax rate.

The Company’s

practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

The Company had no accrual

for interest or penalties in its consolidated balance sheets at December 31, 2019 and 2018, and has not recognized interest and/or

penalties in the consolidated statements of operations for the years ended December 31, 2019 and 2018.

The Company is subject

to taxation in the United States, California, Florida, Georgia, Illinois, New Jersey, New York, Tennessee, and Wisconsin.

Company’s tax years since 2000 may be subject to examination by the federal and state tax authorities due to the carryforward

of unutilized net operating losses.

Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting

Standards Codification (“ASC”) 740, Income Taxes .

As part of the process of preparing the Company’s consolidated financial statements, the Company

must estimate the actual current tax assets and liabilities and assess permanent and temporary differences that result from differing

treatment of items for tax and accounting purposes.

The temporary differences result in deferred tax assets and liabilities, which

are included within the consolidated balance sheets.

The Company must assess the likelihood that the deferred tax assets will

be recovered from future taxable income and, to the extent the Company believes that recovery is not more likely than not, a valuation

allowance must be established which reduces the amount of deferred tax assets recorded on the consolidated balance sheets.

the extent the Company establishes a valuation allowance or increase or decrease this allowance in a period, the impact will be

included in income tax expense in the consolidated statements of operations.

and Cash Equivalents

4 unchanged sentences

The Federal Deposit Insurance

Corporation (“FDIC”) provides basic deposit coverage with limits up to $250 per owner.

Corporation (“FDIC”) provides basic deposit coverage with limits up to $ 250

From time to time the Company

1 unchanged sentence

in Eton Pharmaceuticals, Inc.

April 2017, the Company formed Eton as a wholly owned subsidiary.

In June 2017 the Company lost voting and ownership control of

Eton and it ceased consolidating Eton’s financial statements.

At the time of deconsolidation, the Company recorded a gain

of $5,725 and adjusted the carrying value in Eton to reflect the increased valuation of Eton and the Company’s new ownership

percent in accordance with ASC 810-10-40-4(c), Consolidation .

At the time of deconsolidation, the Company used the equity

method of accounting as management determined that the Company had the ability to exercise significant influence over the operating

and financial decisions of Eton.

Under this method, the Company recognized earnings and losses of Eton in its consolidated financial

statements and adjusted the carrying amount of its investment in Eton accordingly.

During the years ended December 31, 2019 and

2018, the Company recorded equity in net loss of Eton of $0 and $3,507, respectively.

November 2018, Eton closed on an initial public offering of 4,140,000 shares of its common stock at $6.00 per share for gross

proceeds of approximately $24,800 (the “Eton IPO”).

Following the close of the Eton IPO, the Company estimated its

common stock position in Eton equaled 19.98% of the equity and voting interests issued and outstanding of Eton, and it ceased

using the equity method of accounting for its investment in Eton.

The Company recognizes earnings and losses of Eton in its consolidated

financial statements based on the fair market value of the shares owned and adjust the carrying amount of the Company’s

investment in Eton accordingly.

Eton’s common stock currently trades on the NASDAQ Global Market exchange.

At December 31,

2019, the fair market value of Eton’s common stock was $7.20 per share, the closing share price of Eton common stock on

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

Recognition and Measurement of Financial Assets and Financial Liabilities , for the year ended December 31, 2019,

the Company recorded an investment gain from its Eton common stock position of $3,780 related to the change in fair market value

of the Company’s investment in Eton during the measurement period.

For the year ended December 31, 2018, the Company recorded

an investment gain from its Eton common stock position of $21,420 related to the change in fair market value of the Company’s

investment in Eton during the measurement period.

As of December 31, 2019, the fair market value of the Company’s investment

in Eton was $25,200.

and the Company signed licensing agreements for two products developed by the Company whereby the Company assigned the product

rights to Eton.

Eton would pay the Company a $50 milestone payment upon patent issuance for each product and a royalty fee at

a rate of six percent on the net sales of those two products.

On December 26, 2017, one of the products had its patent issued

and a $50 milestone fee was received by the Company in January 2018.

In July 2018, Eton and the Company agreed to cancel the licensing

agreement for one of the products and retain the product rights at the Company, in exchange of the Company paying Eton $50.

May 6, 2019, the Company entered into an Asset Purchase Agreement (the “CT-100 Asset Purchase Agreement”) with Eton.

Pursuant to the CT-100 Asset Purchase Agreement, Eton sold all of its right, title and interest in CT-100 back to the Company.

Pursuant to the CT-100 Asset Purchase Agreement, the Company will make certain payments to Eton upon the achievement of certain

development and commercial milestones.

In addition, the Company is required to pay Eton a royalty in the low-single digit percentage

range worldwide on a country-by-country basis on net sales for a period of the longer of 15 years from the date of the first commercial

sale of a product subject to certain conditions.

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

– Related Party

Company owns 3,500,000

shares of Eton common stock, which represents

approximately 14.4 %

of the equity and voting interests of Eton as of December 31, 2020.

At December 31, 2020, the fair market value of Eton’s

common stock was $ 8.13

In accordance with Accounting

Standard Update (“ASU”) 2016-01, Financial Instruments-Overall (Subtopic 825-10):

Recognition and Measurement of

Financial Assets and Financial Liabilities , for the years ended December 31, 2020 and 2019, the Company recorded investment

gains from its Eton common stock position of $ 3,255

and $ 3,780 ,

respectively, related to the change in fair market value of the Company’s investment in Eton during the measurement periods.

As of December 31, 2020 and 2019, the fair market value of the Company’s investment in Eton was $ 28,455

and $ 25,200 ,

respectively.

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

receivable are stated net of allowances for doubtful accounts and contractual adjustments.

5 unchanged sentences

Accounts receivable are presented net of allowances for doubtful accounts and contractual adjustments

in the amount of $76 and $270 as of December 31, 2019 and 2018, respectively.

in the amount of $ 98 and

of December 31, 2020 and 2019, respectively.

are stated at the lower of cost or net realizable value.

11 unchanged sentences

in Melt Pharmaceuticals, Inc.

– Related Party

April 2018, the Company formed Melt as a wholly-owned subsidiary.

In January and March of 2019, Melt entered into definitive stock

purchase agreements (collectively, the “Melt Series A Preferred Stock Agreement”) with certain investors and closed

on the purchase and 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.

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

In connection

with the Melt Series A Preferred Stock Agreement, Melt also entered into a Registration Rights Agreement and agreed to use commercially

reasonable efforts to file, or confidentially submit, a registration statement on Form S-1 with the United States Securities and

Exchange Commission by September 30, 2020 relating to an initial public offering of its common stock.

the time of deconsolidation, the Company recorded a gain of $5,810 and adjusted the carrying value in Melt to reflect the increased

valuation of Melt and the Company’s new ownership interest in accordance with ASC 810-10-40-4(c), Consolidation .

Company owns 3,500,000 common shares (which is approximately 44% of the equity interest as of December 31, 2019) of Melt 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 of Melt in its 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.

During the year ended December 31, 2019, the Company recorded equity in net loss of Melt of

As of December 31, 2019, the carrying value of the Company’s investment in Melt was $3,968.

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.

January 2019, the Company deconsolidated Melt and recorded a gain of $ 5,810

and adjusted the carrying value in Melt

to reflect the increased valuation of Melt and the Company’s new ownership interest in accordance with 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 December 31, 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 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 gain of

Melt of $ 3,968

during the year ended December 31, 2019.

The Company recorded equity in the net loss of Melt of $ 2,313

during the year ended December 31, 2020.

As of December 31, 2020 and 2019, the Company’s investment in Melt was $ 2,506

and $ 4,690 ,

respectively, which includes $ 851

respectively, due from Melt for reimbursable expenses and amounts due under the Melt Master Services Agreement (“MSA”).

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

in Surface Pharmaceuticals, Inc.

April 2017, the Company formed Surface as a wholly owned subsidiary.

In May and July 2018, Surface entered into and closed on

definitive stock purchase agreements with an institutional investor for the purchase of Surface’s Series A Preferred Stock

(the “Surface Series A Stock”) that resulted in total proceeds to Surface of approximately $21,000.

At the time of

the first closing in May 2018, the Company lost voting and ownership control of Surface and it ceased consolidating Surface’s

financial statements.

The Surface Series A Stock (i) was issued at a purchase price of $3.30 per share;

(ii) will vote together

with the common stock and all other shares of stock of Surface having general voting power;

(iii) will be entitled to the number

of votes equal to the number of shares of preferred stock held;

(iv) will hold liquidation preference over all other equity interests

and (v) will have mandatory conversion requirements into Surface common stock upon events including an underwritten

initial public offering of Surface common stock or similar transaction.

the time of deconsolidation, the Company recorded a gain of $5,320 and adjusted the carrying value in Surface to reflect the increased

valuation of Surface and the Company’s new ownership percent in accordance with ASC 810-10-40-4(c).

Company owns 3,500,000 common shares (which is approximately 30% of the equity interest as of December 31, 2019, and calculated

after the second closing of the sale Series A Preferred Stock in July 2018) 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 of Surface in its

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 shares of common stock and in-substance common stock of Surface held by the Company.

in Surface Ophthalmics, Inc.

– Related Party

Company owns 3,500,000

common shares (which is approximately

of the equity interests as of December 31, 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 consolidated financial statements and

adjusts the carrying amount of its investment in Surface accordingly.

The Company’s share of earnings and losses are based

on the Company’s ownership interest of Surface.

Any intra-entity profits and losses are eliminated.

During the years ended December 31, 2019 and 2018, the Company recorded equity

in net loss of Surface of $1,200 and $373, respectively.

As of December 31, 2019, the carrying value of the Company’s investment

in Surface was $3,747.

The Company recorded

equity in the net loss of Surface of $ 1,200

during the year ended December 31, 2019.

The Company recorded equity in the net loss of Surface of $ 2,433

during the year ended December 31, 2020.

As of December 31, 2020 and 2019, the carrying value of the Company’s investment in Surface was $ 1,314

and $ 3,747 ,

respectively.

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

6 unchanged sentences

Computer software and hardware and

furniture and equipment are depreciated over three to five years.

furniture and equipment are depreciated over three

to five years .

Company accounts for business combinations by recognizing the assets acquired, liabilities assumed, contractual contingencies,

23 unchanged sentences

Once the patents have been issued, the Company amortizes these costs

over the shorter of the legal life of the patent or its estimated economic life, generally 20 years, using the straight-line method.

over the shorter of the legal life of the patent or its estimated economic life, generally 20

years, using the straight-line method.

Trademarks are an indefinite life intangible asset and are assessed for impairment based on future projected cash flows as further

4 unchanged sentences

in circumstances considered as impairment indicators include but are not limited to the following:

underperformance of the Company’s business relative to expected operating results;

adverse economic and industry trends;

decline in the Company’s market capitalization for an extended period of time relative to net book value;

that a reporting unit will be sold or otherwise disposed.

6 unchanged sentences

If the carrying amount of a reporting unit exceeds its

fair value, an indication exists that the reporting unit’s goodwill may be impaired and the Company then performs the second

step of the impairment test.

If the fair value of a reporting unit exceeds its carrying amount, no further analysis is required.

If further analysis is required, the Company compares the implied fair value of the reporting unit’s goodwill, determined

by allocating the reporting unit’s fair value to all of its assets and its liabilities in a manner similar to a purchase

If further analysis is required, the Company compares the implied fair value of the reporting unit’s goodwill, determined

by allocating the reporting unit’s fair value to all of its assets and its liabilities in a manner similar to a purchase

price allocation, to its carrying amount.

If the carrying amount of the reporting unit’s goodwill exceeds its fair value,

an impairment loss will be recognized in an amount equal to the excess.

10 unchanged sentences

classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated

balance sheet, if material (See Note 9).

balance sheet, if material.

Restructuring

August 2019, the Company’s subsidiary, Park Compounding, Inc.

(“Park”), and Noice Rx, LLC (“Noice”)

terminated an Asset Purchase Agreement dated July 26, 2019 (the “Park Purchase Agreement”), between the parties.

August 2019, the Company’s subsidiary, Park Compounding, Inc.

(“Park”), and Noice Rx, LLC (“Noice”)

terminated an Asset Purchase Agreement dated July 26, 2019 (the “Park Purchase Agreement”), between the parties.

the terms of the Park Purchase Agreement, Park had agreed to sell substantially all its assets associated with its non-ophthalmology

4 unchanged sentences

As a result, the Company restructured its Park business, ceased operations at its Irvine, California-based

pharmacy, and facilitated the transition of certain compounded formulations and related equipment from Park to the Company’s

New Jersey-based compounded pharmaceutical production facilities (the “Park Restructuring”).

pharmacy, and facilitated the transition of certain compounded formulations and related equipment from Park to the Company’s

New Jersey-based compounded pharmaceutical production facilities (the “Park Restructuring”).

As a result of the Park

Restructuring, the Company incurred non-cash impairment costs of approximately $3,781 related to assets held at Park, primarily

associated with property, plant, equipment, inventory, goodwill and other intangible assets, and $480 in one-time costs related

to severance packages and other costs associated with the Park Restructuring during the year ended December 31, 2019.

Restructuring, the Company incurred non-cash impairment costs of approximately $ 3,781

related to assets held at Park, primarily

associated with property, plant, equipment, inventory, goodwill and other intangible assets, and $ 480

in one-time costs related to severance

packages and other costs associated with the Park Restructuring during the year ended December 31, 2019.

Company has reduced the Park compounded product formulary to seven base formulations, based on factors including unit order volumes,

revenues and gross margin percentages, and ImprimisRx expects to have re-acquired approximately half of Park’s historical

revenues during the first quarter of 2020.

revenues and gross margin percentages, and ImprimisRx retained approximately half of Park’s historical revenues during

the first quarter of 2020.

Value Measurements

13 unchanged sentences

observable or can be corroborated by observable market data.

Applies to assets or liabilities for which there are significant unobservable inputs that reflect a reporting entity’s

own assumptions about the assumptions that market participants would use in pricing an asset or liability.

2 unchanged sentences

December 31, 2020 and 2019, the Company measured its investment in Eton on a recurring basis.

The Company’s investment in

Eton is classified as Level 1 as the fair value is determined using quoted market prices in active markets for the same securities.

As of December 31, 2019, the fair market value of the Company’s investment in Eton was $25,200.

Company’s financial instruments included cash and cash equivalents, investment in Eton, accounts receivable, accounts payable

and accrued expenses, accrued payroll and related liabilities, deferred revenue and customer deposits, notes payable and operating

and finance leases.

The carrying amount of these financial instruments, except for notes payable and finance leases, approximates

fair value due to the short-term maturities of these instruments.

The Company’s restricted short-term investments are carried

at amortized cost, which approximates fair value.

Based on borrowing rates currently available to the Company, the carrying values

of the notes payable and operating and finance leases approximate their respective fair values.

As of December 31, 2020 and 2019, the fair market value of the Company’s investment in Eton was $ 28,455

and $ 25,200 ,

respectively.

Company’s financial instruments include cash and cash equivalents, restricted cash, investment in Eton, accounts receivable,

accounts payable and accrued expenses, accrued payroll and related liabilities, deferred revenue and customer deposits, loans

payable and operating and finance lease liabilities.

The carrying amount of these financial instruments, except for loans payable

and operating and finance lease liabilities, approximates fair value due to the short-term maturities of these instruments.

Company’s restricted cash which is comprised of short-term investments are carried at amortized cost, which approximates

Based on borrowing rates currently available to the Company, the carrying values of the loans payable and operating

and finance lease liabilities approximate their respective fair values.

stock-based payments to employees, directors and consultants, including grants of stock options, warrants, restricted stock units

(“RSUs”) and restricted stock, are recognized in the consolidated financial statements based upon their estimated

The Company uses the Black-Scholes-Merton option pricing model and Monte Carlo Simulation to estimate the fair value

of stock-based awards.

(“RSUs”) and restricted stock, are recognized in the consolidated financial statements based upon their estimated

The Company uses the Black-Scholes-Merton option pricing model and Monte Carlo simulation model to estimate the fair

value of stock-based awards.

The estimated fair value is determined at the date of grant.

1 unchanged sentence

is estimated at the time of grant and revised, if necessary, if the actual effect differs from those estimates.

and Diluted Net Income per Common Share

net income per common share is computed by dividing income attributable to common stockholders for the period by the weighted

average number of common shares outstanding during the period.

Diluted income per share is computed by dividing the income 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 per share is computed using the weighted average number of shares of common stock outstanding during the

Common stock equivalents (using the treasury stock or “if converted”

method) from stock options, unvested

restricted stock units (“RSUs”) and warrants were 4,848,459 and 6,201,355 at December 31, 2019 and 2018, respectively,

and are excluded in the calculation of diluted net income per share for the periods presented, because the effect is anti-dilutive

and Diluted Net Income (Loss) per Common Share

net income (loss) per common share is computed by dividing income (loss) attributable to common stockholders for the period by

the weighted average number of common shares outstanding during the period.

Diluted income (loss) per share is computed

by dividing the income (loss) attributable to common stockholders for the period by the weighted average number of common

and common equivalent shares, such as stock options 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

restricted stock units (“RSUs”) and warrants were 5,411,929

and 4,848,459

at December 31, 2020 and 2019, respectively,

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

for that time period.

Included in the basic and diluted net income 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 December 31, 2019 and 2018 was 324,303 and 236,693, respectively.

following table shows the computation of basic net income per share of common stock for the years ended December 31, 2019 and

weighted average number of shares outstanding, basic

income per share, basic

the years end December 31, 2019 and 2018, the Company computed diluted net income per share using the weighted-average number

of common shares and dilutive common equivalent shares outstanding during that period.

Diluted common equivalent shares for the

years ended December 31, 2019 and 2018, respectively,consisted of the following:

shares related to:

common equivalent shares

Included in the basic and diluted net income (loss) per share calculation were RSUs awarded to directors

that had vested, but the issuance and delivery of the shares are deferred until the director resigns.

The number of shares underlying

vested RSUs at December 31, 2020 and 2019 was 200,463

and 324,303 ,

respectively.

following table shows the computation of basic net income (loss) per share of common stock for the years ended December 31, 2020

and 2019 (in 000’s, except share and per share amounts):

OF BASIC EARNINGS PER COMMON SHARE

the Year Ended December 31,

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

Denominator – weighted average

number of shares outstanding, basic

(loss) income per share, basic

the year end December 31, 2019, the Company computed diluted net income per share using the weighted-average number of common

shares and dilutive common equivalent shares outstanding during that period.

Diluted common equivalent shares for the year ended

December 31, 2019 consisted of the following (in 000’s, except share and per share amounts):

OF DILUTED COMMON EQUIVALENT SHARES

the Year Ended

Diluted shares related to:

Dilutive common

equivalent shares

following table shows the computation of diluted net income per share using the weighted-average number of common shares and dilutive

common equivalent shares outstanding for the years ended December 31, 2019 and 2018:

Weighted average number of shares outstanding,

common equivalents

common equivalent shares outstanding for the year ended December 31, 2019 (in 000’s, except share and per share amounts):

OF DILUTED EARNINGS PER COMMON SHARE

the Year Ended

Weighted average number of shares outstanding, basic

Dilutive common

Denominator –

number of shares used for diluted earnings per share computation

income per share, diluted

Net income per

share, diluted

Adopted Accounting Pronouncements

February 2016, the FASB issued new lease accounting guidance in ASU 2016-02, Leases (Topic 842).

This new guidance was

initiated as a joint project with the International Accounting Standards Board to simplify lease accounting and improve the quality

of and comparability of financial information for users.

This new guidance would eliminate the concept of off-balance sheet treatment

for “operating leases”

for lessees for the vast majority of lease contracts.

Under ASU 2016-02, at inception, a lessee

must classify all leases with a term of over one year as either finance or operating, with both classifications resulting in the

recognition of a defined “right-of-use”

asset and a lease liability on the balance sheet.

However, recognition in

the income statement will differ depending on the lease classification, with finance leases recognizing the amortization of the

right-of-use asset separate from the interest on the lease liability and operating leases recognizing a single total lease expense.

Lessor accounting under ASU 2016-02 is substantially unchanged from the previous lease requirements under GAAP.

ASU 2016-02 took

effect for public companies in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

On January 1, 2019, the Company adopted Topic 842 using the modified retrospective transition method with no impact to stockholders’

As of December 31, 2019, the Company held on its consolidated balance sheet $6,559 for the right-of-use asset and $6,967

for the related lease liability related to operating and finance leases.

The difference between the right of use asset and related

lease liability is predominantly deferred rent and other related lease expenses under the new lease accounting standard.

For additional

information regarding how the Company is accounting for leases under Topic 842, refer to Note 13.

Issued Accounting Pronouncements

June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses:

3 unchanged sentences

recognition of credit losses.

The Company will adopt the new standard effective January 1, 2020 and does not expect the adoption

of this guidance to have a material impact on its consolidated financial statements.

The Company adopted ASU 2016-13 on January 1, 2020, and adoption of the standard did not have a

material effect on the Company’s consolidated financial position, results of operations and cash flows.

January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other .

3 unchanged sentences

The updated standard eliminates the requirement to calculate a goodwill impairment charge using Step 2.

a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference.

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

ASU 2017-04 is effective for

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

The Company does

not expect ASU 2017-04 to have a material effect on the Company’s 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.

August 2018, the FASB issued ASU 2018-13, Changes to Disclosure Requirements for Fair Value Measurements , which improved

2 unchanged sentences

and adds certain disclosure requirements.

The Company will adopt the new standard effective January 1, 2020 and does not expect

the adoption of this guidance to have a material impact on its consolidated financial statements.

The Company adopted ASU 2018-13 on January 1, 2020, and adoption of the standard did

not have a material effect on the Company’s consolidated financial position, results of operations and cash flows.

Issued Accounting Pronouncements

December 2019, the FASB issued ASU 2019-12, Income Taxes :

3 unchanged sentences

basis, and early adoption is permitted.

The Company is currently evaluating the impact of the new guidance on its consolidated

The Company does not expect a material impact of the new guidance on its consolidated

financial statements.

January 1, 2018, the Company adopted ASU 2014-09, using the modified retrospective transition method.

There was no effect for

any adjustments to retained earnings upon adoption of the standard on January 1, 2018.

The Company has two primary streams of

(1) revenue recognized from our sale of products within our pharmacy services and (2) revenue recognized from intellectual

property license and asset purchase agreements.

Reclassifications

prior period items and amounts have been reclassified to conform to the classifications used to prepare the consolidated financial

statements for the year ended December 31, 2020.

These reclassifications had no material impact on the Company’s consolidated

financial position, results of operations, or cash flows as previously reported.

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

has three primary streams of revenue:

(1) revenue recognized from our sale of products within our pharmacy services (2)

revenue recognized from a commission agreement with a third party and (3) revenue recognized from intellectual property

license and asset purchase agreements.

Revenues from Pharmacy Services

5 unchanged sentences

Sales taxes are not included in revenue.

Following the core principle of ASU 2014-09, we have identified the following:

Following the core principles of ASC 606, we have identified the following:

the contract(s) with a customer:

18 unchanged sentences

Determination of criteria (3) and (4)

is based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability

of those amounts.

10 unchanged sentences

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

the year ended December 31, 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

Company currently holds four intellectual property license and related agreements in which the Company has promised to grant a

license or sale which provides a customer with the right to access the Company’s intellectual property.

Company currently holds five intellectual property license and related agreements in which the Company has promised to grant a

license or sale which provides a customer with the right to access the Company’s intellectual property.

License arrangements

12 unchanged sentences

fees if it has continuing performance obligations without which the technology, right, product or service conveyed in conjunction

with the non-refundable fee has no utility to the licensee and that are separate and independent of the Company’s performance

under the other elements of the arrangement.

In addition, if the Company’s continued involvement is required, through research

and development services that are related to its proprietary know-how and expertise of the delivered technology or can only be

2 unchanged sentences

disaggregated by revenue source for the years ended December 31, 2020 and 2019, consists of the following:

the year ended

revenue and customer deposits at December 31, 2019 and 2018, were $57 and $119, respectively.

All deferred revenue and

customer deposit amounts at December 31, 2018 were recognized as revenue during the year ended December 31, 2019.

OF DISAGGREGATED REVENUE

the Years Ended December 31,

revenue and customer deposits at December 31, 2020 and 2019, were $ 66

respectively.

All deferred revenue and customer deposit amounts at December 31, 2019 were recognized as revenue during the year

ended December 31, 2020.

INVESTMENT IN MELT PHARMACEUTICALS, INC.

AND AGREEMENTS - RELATED PARTY TRANSACTIONS

December 2018, the Company entered into an asset purchase agreement with Melt (the “Melt Asset Purchase Agreement”).

Pursuant to the terms of the Melt Asset Purchase Agreement, Melt was assigned certain intellectual property and related rights

from the Company to develop, formulate, make, sell, and sub-license certain Company conscious sedation and analgesia related formulations

(collectively, the “Melt Products”).

Under the terms of the Melt Asset Purchase Agreement, Melt is required to make

royalty payments to the Company of 5% of net sales of the Melt Products while any patent rights remain outstanding, as well as

other conditions.

In January and March 2019, the Company entered into the Melt Series A Preferred Stock Agreement, see also Note

2, under the subheading Investment in Melt Pharmaceuticals, Inc .

February 2019, the Company and Melt entered into a Management Services Agreement (the “Melt MSA”), whereby the Company

mid-single digit royalty payments to the Company on net sales of the Melt Products while any patent rights remain outstanding,

as well as other conditions.

In January and March 2019, the Company entered into the Melt Series A Preferred Stock Agreement,

see also Note 2, under the subheading Investment in Melt Pharmaceuticals, Inc .

February 2019, the Company and Melt entered into a Management Services Agreement (the “Melt MSA”), whereby the Company

provides to Melt certain administrative services and support, including bookkeeping, web services and human resources related

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

of December 31, 2019, the Company was due $722 from Melt for reimbursable expenses and amounts due under the Melt MSA and included

in prepaid expenses and other current assets on the accompanying consolidated balance sheets.

activities, and Melt is required to pay the Company a monthly amount of $ 10 .

of December 31, 2020 and 2019, the Company was due $ 851

respectively, from Melt for reimbursable expenses and amounts due under the Melt MSA.

Melt did no t

make any payments to the Company during the year ended December 31, 2020 and paid the Company $ 50

during the year ended December 31, 2019.

2019, Melt paid the Company $50.

Company’s Chief Executive Officer, Mark L.

Baum, and Chief Medical Officer, Larry Dillaha, are members of the Melt board

of directors, and several employees of the Company (including Mr.

Dillaha and the Company’s Chief Financial Officer,

Andrew Boll) entered into consulting agreements and provide consulting services to Melt.

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

OF CONDENSED INCOME STATEMENT

the Years Ended December 31,

Revenues, net

1 unchanged sentence

unaudited condensed balance sheet information of Melt is summarized below:

OF CONDENSED BALANCE SHEET

Current assets

Total liabilities

preferred stock and stockholders’

liabilities and stockholders’

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

2017 and amended in April 2018, the Company entered into two asset purchase and license agreements (the “Surface License

Agreements”) with its previously wholly owned subsidiary, Surface.

Pursuant to the terms of the Surface License Agreements,

the Company assigned and licensed to Surface certain intellectual property and related rights associated with Surface’s

drug candidates (collectively, the “Surface Products”).

Surface is required to make royalty payments to the Company

of four to six percent (4%-6%) of net sales of the Surface Products while any patent rights remain outstanding.

Certain of the

Surface License Agreements were conditioned upon Surface receiving net proceeds of the sale of its equity securities of not less

than $10,000, which occurred in May 2018.

See also Note 2, under the subheading Investment in Surface Pharmaceuticals, Inc .

January 2018, the Company and Surface entered into an amended Management Services Agreement (the “MSA”), whereby the

Company provided to Surface certain administrative services and support, including bookkeeping, web services and human resources

related activities, and Surface paid the Company a monthly amount of $10.

The MSA was terminated effective July 31, 2018.

the year ended December 31, 2019, the Company was paid $50 from Surface for amounts due under the Surface MSA.

There are no amounts

due from Surface to the Company as of December 31, 2019.

of December 31, 2019, the Company owned 3,500,000 shares of Surface common stock (approximately 30% of the issued and outstanding

equity interests).

Company entered into an asset purchase and license agreement with Surface in 2017 and amended it in April 2018 (the “Surface

License Agreements”).

Pursuant to the terms of the Surface License Agreements, the Company assigned and licensed to Surface

certain intellectual property and related rights associated with Surface’s drug candidates (collectively, the “Surface

Surface is required to make mid-single-digit royalty payments to the Company on net sales of the Surface

Products while any patent rights remain outstanding.

of December 31, 2020, the Company owned 3,500,000

shares of Surface common stock (approximately

of the issued and outstanding equity interests).

A Company director, Richard L.

Lindstrom, and the Company’s Chief Executive Officer, Mark L.

directors of Surface.

In addition, the Company’s Chief Financial Officer, Andrew R.

Boll, was a director of Surface and

resigned as a director of Surface concurrent with the sale of the Surface Series A Stock.

Several employees and a director of

the Company (including Mr.

Lindstrom and Mr.

Boll) entered into consulting agreements and provided consulting services

Lindstrom, and the Company’s Chief Executive

Officer, Mark L.

Baum, are directors of Surface.

Surface is required to make royalty payments to Dr.

Lindstrom of 3% of net sales of certain Surface products while

certain patent rights remain outstanding.

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

investor who purchased the Surface Series A 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.

Several employees

and a director of the Company (including Mr.

Lindstrom) entered into consulting agreements and provided consulting

services to Surface.

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

OF CONDENSED INCOME STATEMENT

the Year s Ended December 31,

Revenues, net

1 unchanged sentence

unaudited condensed balance sheet information of Surface is summarized below:

OF CONDENSED BALANCE SHEET

Current assets

Total liabilities

stockholders equity

liabilities and stockholders’

Total stockholders’

liabilities and stockholders’ equity

RESTRICTED CASH

2 unchanged sentences

the restricted cash was recorded at amortized cost, which approximates fair value.

December 31, 2019 and 2018, the funds held in a money market account of $200 were classified as a current asset.

The money market

account funds are required as collateral as additional security for the Company’s New Jersey facility lease.

December 31, 2020 and 2019, the funds held in a money market account of $ 200

were classified as a current asset.

money market account funds are required as collateral as additional security for the Company’s New Jersey facility lease.

are comprised of finished compounded formulations, over-the-counter and prescription retail pharmacy products, commercial pharmaceutical

2 unchanged sentences

2020 and 2019 was as follows:

OF INVENTORIES

Raw materials

Work in progress

Finished goods

Total inventories

PREPAID EXPENSES AND OTHER CURRENT ASSETS

expenses and other current assets consisted of the following:

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid insurance

Other prepaid expenses

Receivable due from

and other current assets

prepaid expenses and other current assets

other current assets

Total prepaid

expenses and other current assets

PROPERTY, PLANT AND EQUIPMENT

plant and equipment at December 31, 2019 and 2018 consisted of the following:

Property, plant and

equipment, net:

plant and equipment, net at December 31, 2020 and 2019 consisted of the following:

OF PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net:

software and hardware

and equipment

and pharmacy equipment

Furniture and

Lab and pharmacy

Property, plant

and equipment, gross

depreciation and amortization

Company recorded depreciation and amortization expense of $1,936 and $1,608 during the years ended December 31, 2019 and 2018,

respectively.

plant and equipment, net

the year ended December 31, 2020, the Company disposed of property, plant and equipment with a net book value of $ 105

related to the discontinued use of certain

computer software and hardware and was included within other (loss) income of the consolidated statements of operations.

The Company recorded depreciation and amortization expense of $ 1,880

during the years ended December 31, 2020

and 2019, respectively.

INTANGIBLE ASSETS AND GOODWILL

Company’s intangible assets at December 31, 2019 consisted of the following:

OF INTANGIBLE ASSETS

Customer relationships

Non-competition clause

pharmacy licenses

the year ended December 31, 2019 the Company incurred impairment charges of $612 related to intangible assets, including customer

relationships, trade name, and state pharmacy licenses as a part of the Park Restructuring and $259 of impairment charges related

to patents associated with the termination of an asset agreement.

expense for intangible assets for the year ended December 31 was as follows:

State pharmacy

the year ended December 31, 2019, the Company incurred impairment charges of $ 612

related to intangible assets, including

customer relationships, trade name, and state pharmacy licenses as a part of the Park Restructuring and $ 259

of impairment charges related to patents

associated with the termination of an asset agreement.

Company’s intangible assets at December 31, 2020 consisted of the following:

Customer relationships

Non-competition clause

pharmacy licenses

future amortization expense for the Company’s intangible assets at December 31, 2019 is as follows:

State pharmacy

the year ended December 31, 2020, the Company recorded impairment charges of $ 363

related to patent filings and trademarks

that were abandoned and/or were associated with products the Company was no longer actively selling.

expense for intangible assets for the years ended December 31, 2020 and 2019 were as follows:

OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

the Years Ended

Customer relationships

State pharmacy

future amortization expense for the Company’s intangible assets at December 31, 2020 is as follows:

OF ESTIMATED FUTURE AMORTIZATION EXPENSE

ending December 31,

in the carrying value of the Company’s goodwill during the year ended December 31, 2019 were:

Intangible assets

changes in the carrying value of the Company’s

goodwill during the year ended December 31, 2020.

Changes in the carrying value of the Company’s goodwill during the year

ended December 31, 2019 were as follows:

Balance at December 31,

of Park goodwill (see Note 2)

Balance at December

December 31, 2019

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

payable and accrued expenses at December 31, 2020 and 2019 consisted of the following:

OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable

Other accrued expenses

Deferred rent

Accrued interest (see

exit fee for note payable (see Note 12)

Total accounts payable

and accrued expenses

Current portion

Accrued interest (see Note 12)

fee for note payable (see Note 12)

Total accounts payable and accrued

total accrued expenses

Senior Note –

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 (“SWK”), as lender and collateral

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 nearly all of the Company’s assets, including

its intellectual property rights.

to the loan refinance in May 2019 (see below), the SWK Loan was bearing interest at a variable rate equal to the three-month London

Inter-Bank Offered Rate (subject to a minimum of 1.50% and maximum of 3.00%), plus an applicable margin of 10.50%.

Agreement permitted the Company to pay interest only on the principal amount loaned thereunder for the first six payments (payments

are due on a quarterly basis), which interest-only period could have been reduced to four payments if the Company had not met

certain minimum revenue requirements.

Following the interest-only period, the Company was required to pay interest, plus repayments

of the principal amount loaned under the SWK Loan Agreement, in quarterly payments, which shall not exceed $750 per quarter.

amounts owed under the SWK Loan Agreement, including a final fee equal to 5% of the aggregate principal amount loaned thereunder,

were previously due and payable on July 19, 2022.

The Company is obligated under the SWK Loan Agreement to pay for certain expenses

incurred by the SWK Lender through and after the date of the SWK Loan Agreement, including certain fees and expenses relating

to the preparation and administration of the SWK Loan Agreement.

The Company incurred expenses and final fee of approximately

Senior Note – 2017

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 (“SWK”), as lender and collateral agent.

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.

to the loan refinance in May 2019 (see below), the SWK Loan bore interest at a variable rate equal to the three-month London Inter-Bank

Offered Rate (subject to a minimum of 1.50 %

and maximum of 3.00 %),

plus an applicable margin of 10.50 %.

The SWK Loan Agreement permitted the Company

to pay interest only on the principal amount borrowed thereunder for the first six payments (payments are due on a quarterly basis),

which interest-only period could have been reduced to four payments if the Company had not met certain minimum revenue requirements.

Following the interest-only period, the Company was required to pay interest, plus repayments of the principal amount borrowed

under the SWK Loan Agreement, in quarterly payments, which shall not exceed $ 750

amounts owed under the SWK Loan Agreement, including an exit fee equal to 5% of the aggregate principal amount loaned thereunder,

were originally due and payable on July 19, 2022.

Company is obligated under the SWK Loan Agreement to pay for certain expenses incurred by SWK through and after the date of the

SWK Loan Agreement, including certain fees and expenses relating to the preparation and administration of the SWK Loan Agreement.

The Company incurred expenses and an exit fee of approximately $ 1,282

in connection with the SWK Loan Agreement.

The final fee and expenses are being amortized as interest expense over the

term of the SWK Loan using the effective interest rate method and the related liability of $800 for the final fee is included

in accrued expenses (see Note 11) in the accompanying consolidated balance sheets as of December 31, 2019 and 2018.

connection with the SWK Loan Agreement, the Company issued to SWK warrants to purchase up to 415,586 shares of the Company’s

common stock (the “Lender Warrants”) with an exercise price of $3.08.

In August 2017, the Company and SWK amended

the warrants, to allow for the purchase up to 615,386 warrants with an exercise price of $2.08.

The Lender Warrants are exercisable

immediately, and have a term of 7 years.

The Lender Warrants are subject to a cashless exercise feature, with the exercise price

and number of shares issuable upon exercise subject to change in connection with stock splits, dividends, reclassifications and

other conditions.

The relative fair value of the Lender Warrants was approximately $982 and was estimated using the Black-Scholes-Merton

option pricing model with the following assumptions:

fair value of the Company’s common stock at issuance of $2.08 per share;

The exit fee and expenses were recorded as a debt discount and are being amortized as interest expense over the term of the SWK

Loan using the effective interest rate method and the related liability of $ 800

for the exit fee is included in accrued

expenses (see Note 11) in the accompanying consolidated balance sheets as of December 31, 2020 and 2019.

connection with the SWK Loan Agreement, the Company issued to SWK warrants to purchase up to 415,586

shares of the Company’s common stock

(the “Lender Warrants”) with an exercise price of $ 3.08 .

In August 2017, the Company and SWK amended the warrants, to allow for the purchase of up to 615,386

warrants with an exercise price of $ 2.08 .

The Lender Warrants are exercisable immediately, and have a term of seven

The Lender Warrants are subject

to a cashless exercise feature, with the exercise price and number of shares issuable upon exercise subject to change in connection

with stock splits, dividends, reclassifications and other conditions.

The relative fair value of the Lender Warrants was approximately

was estimated using the Black-Scholes-Merton option pricing model with the following assumptions:

fair value of the Company’s

common stock at issuance of $ 2.08

seven-year contractual term;

113.5% volatility;

dividend rate;

and a risk-free interest rate of 1.77 %.

Refinance –

May 2019, the Company entered into a joinder and amendment (the “Amendment”) to the SWK Loan and SWK, as lender and

collateral agent.

The relative fair value of the Lender Warrants was recorded as a debt discount which is being amortized as interest expense over

the term of the SWK Loan using the effective interest rate method.

Refinance – May 2019

May 2019, the Company entered into a joinder and amendment (the “Amendment”) to the SWK Loan and with SWK, as lender

and collateral agent.

A summary of the material changes contained in the Amendment are as follows:

interest rate calculation that the loan bears is now 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%;

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%;

ratio in the Amendment means, as of any date of determination, the ratio of:

7 unchanged sentences

to the Company an additional principal amount of up to $ 5,000 ;

addition to the terms described above, the Amendment joined the Company’s recently created subsidiaries to the SWK Loan

maturity date was changed to July

to the Amendment, the Company incurred expenses related to legal and lender costs of $ 282

that are included in debt discount and

will be amortized over the remaining term of the SWK Loan.

addition to the terms described above, the Amendment joined the Company’s recently created subsidiaries to the SWK Loan

and added definitions related to excluded subsidiaries that are not considered co-borrowers and are subsidiaries of the Company

which the Company believes it will eventually deconsolidate from its financials and lose 50% or more of the equity interests of

the subsidiary.

to the Amendment, the Company incurred expenses related to legal and lender costs of $282 that are included in debt discount and

will be amortized over the term of the SWK Loan.

December 31, 2019, future minimum payments under the Company’s note payable were as follows:

which the Company believes it will eventually deconsolidate from its financial statements and lose 50 %

or more of the equity interests of the subsidiary.

Amendment to SWK Loan

April 1, 2020, the Company and several of its wholly owned subsidiaries entered into a second amendment (the “SWK Second

Amendment”) to the SWK Loan with SWK.

A summary of the material changes contained in the SWK Second Amendment are as follows:

agreed to make available to the Company, and the Company drew down on, an additional principal amount of $ 1,000 ;

definition of the first amortization date was changed to August 14, 2020, permitting the Company to pay interest only on the

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

interest payment of $ 358

due May 14, 2020 was paid in-kind

by increasing the principal amount of the term loans by an amount equal to the interest accrued as of such date.

expense related to the SWK Loan Agreement, as amended, amounted to $ 1,768

for the years ended December 31, 2020

and 2019, respectively, and included amortization of debt issuance costs and discount of $ 457

for the years ended December 31, 2020

and 2019, respectively.

Protection Program Loan

April 2020, the Company entered into an unsecured promissory note and related Business Loan Agreement with Renasant Bank, as lender,

for a loan (the “PPP Loan”) in the principal amount of $ 1,967

and received cash proceeds of the same

amount, pursuant to the Paycheck Protection Program (the “PPP”) under the Federal Coronavirus Aid, Relief, and Economic

Security Act (the “CARES Act”), which was enacted March 27, 2020.

The PPP is administered by the U.S.

Small Business

Administration (the “SBA”).

the terms of the PPP Loan, interest accrues on the outstanding principal at the rate of 1.0 %

The term of the PPP Loan is two years, unless payment is sooner required in connection with an event of default under

the PPP Loan.

To the extent the PPP Loan amount is not forgiven under the PPP, the Company is obligated to make equal monthly

payments of principal and interest, beginning seven months from the date of the PPP Loan, until the maturity date.

CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed.

Under the PPP, the Company applied

for forgiveness for all of the PPP Loan during the year ended December 31, 2020, however the SBA has not made a decision related

to the Company’s application for forgiveness.

The amount of loan proceeds eligible for forgiveness is based on a formula

that takes into account a number of factors, including the amount of loan proceeds used by the Company during the 24-week period

after the loan origination for certain purposes including payroll costs, interest on certain mortgage obligations, rent payments

on certain leases, and certain qualified utility payments ( it

being anticipated that at least 75% of the loan amount will be required to be used for eligible payroll costs );

the employer maintaining or rehiring employees and maintaining salaries at certain levels;

and other factors.

Subject to the other

requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible expenses during the covered

twenty-four-week period will qualify for forgiveness.

While the Company has used proceeds from the PPP Loan for such qualifying

expenses, in particular maintaining continuity of its payroll and workforce (including staff critical to the timely production

and dispensing of medicines the Company produces), no assurance can be provided that the Company will obtain forgiveness of the

PPP Loan in whole or in part.

interest expense was recognized for the

year ended December 31, 2020 related to the PPP Loan.

December 31, 2020, future minimum payments under the Company’s debt were as follows:

OF FUTURE MINIMUM PAYMENTS

Total minimum payments

amount representing interest

representing interest

Notes payable, gross

unamortized discount

current portion, net of unamortized discount

payable, net of current portion and unamortized debt discount

the years ended December 31, 2019 and 2018, debt discount amortization related to the note payable was $495 and $520, respectively.

Company adopted Topic 842 on January 1, 2019.

Topic 842 allows the Company to elect a package of practical expedients, which include:

(i) an entity need not reassess whether any expired or existing contracts are or contain leases;

(ii) an entity need not reassess

the lease classification for any expired or existing leases;

and (iii) an entity need not reassess any initial direct costs for

any existing leases.

Another practical expedient allows the Company to use hindsight in determining the lease term when considering

lessee options to extend or terminate the lease and to purchase the underlying asset.

The Company has elected to utilize the package

of practical expedients and has not elected the hindsight methodology in its implementation of Topic 842.

Company elected to adopt this standard using the modified retrospective transition method and recognized a cumulative-effect adjustment

to the consolidated balance sheet on the date of adoption.

Comparative periods have not been restated.

With the adoption of Topic

842, the Company’s consolidated balance sheet now contains the following line items:

Right-of-use assets, Operating lease

liabilities—short-term and Operating lease liabilities—long-term.

Company determined that it held the following significant operating leases of office and laboratory space as of December 31, 2019

(square footage is not described in thousands):

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

Notes payable

portion, net of unamortized discount

Note payable,

net of current portion and unamortized debt discount

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 the Company’s option.

operating lease for 10,200

of office space in San Diego, California, that expires in December

to extend the term for a five-year period ;

operating lease for 4,500 square feet of office and lab space in Irvine, California that expires in December 2020, with an option

to extend the term for up to two five-year periods.

As part of the Park Restructuring, the Company assessed its obligations under

As of the date of this Annual Report, the Company expects 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 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;

operating lease for 5,500 square feet of office space in Nashville, Tennessee that expires in December 2024, with an option

operating lease for 26,400

of lab, warehouse and office space in Ledgewood, New Jersey, that expires in July

option to extend the term for two additional five-year periods .

This includes an amendment that was made effective July 2020 that extended the term of the original lease and added 1,400

of additional

square footage to the lease;

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 .

extensions within the San Diego, California and Ledgewood, New Jersey operating lease agreements were included within the Company’s

calculation of the new lease standard as the Company is reasonably certain it will exercise its option to extend these leases.

The extensions within the Nashville lease were not included within the Company’s calculation of the new lease standards

as the Company is not reasonably certain it will exercise its option to extend that lease.

The Company has elected to not recognize

right-of-use assets and lease liabilities arising from short-term leases, which are leases that, at the commencement date, have

a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably

certain to exercise.

previously classified capital leases are now classified as finance leases under the new standard.

The Company has determined that

the identified finance leases did not contain non-lease components and require no further allocation of the total lease cost.

The Company has determined that the identified operating leases did contain non-lease components and elected an accounting policy

to combine non-lease and lease components to determine the total lease cost.

Additionally, the operating agreements in place did

not contain information to determine the rate implicit in the leases.

As such, the Company calculated the incremental borrowing

rate based on the assumed remaining lease term for each lease in order to calculate the present value of the remaining lease payments.

At December 31, 2019, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating

leases held by the Company were 6.3% and 10.21 years, respectively.

adoption of Topic 842, the Company recorded a $6,325 increase in operating lease right-of-use assets, a $388 decrease in accounts

payable and accrued expenses and a $6,712 increase in operating lease liability.

The Company did not record any cumulative effect

adjustments to opening stockholders’

In October 2019 the Company signed a new operating lease for 5,500 square feet

of office space in Nashville, Tennessee.

Upon the execution of the lease, the Company recorded a $753 increase in operating lease

right-of-use assets and operating lease liability.

As of December 31, 2019, right-of-use assets and liabilities arising from operating

leases were $6,559 and $6,967, respectively.

During the year ended December 31, 2019, cash paid for amounts included for the operating

lease liabilities totaled $905 and the Company recorded operating lease expense of $892 included in selling,

general and administrative expenses, respectively.

lease payments under operating leases as of December 31, 2019 were as follows :

Total minimum lease

amount representing

interest payments

operating lease liabilities

current portion,

operating lease liabilities

Operating lease liabilities,

net of current portion

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

lease payments under non-cancelable finance leases as of December 31, 2019 were as follows :

Total minimum lease

amount representing interest payments

Present value of future

minimum lease payments

current portion, finance lease obligation

lease obligation, net of current portion

December 31, 2019, the weighted average incremental borrowing rate and the weighted average remaining lease term for the finance

leases held by the Company were 6.36% and 4.08 years, respectively.

the year ended December 31, 2019, debt discount amortization related to a finance lease obligation was $17, and included in interest

expense, net.

the year ended December 31, 2019, depreciation expense related to the equipment held under the finance lease obligations was $150.

the year ended December, 2019, cash paid and expense recognized for interest expense related to finance lease obligations was

minimum lease payments under operating leases and future minimum capital lease payments as of December 31, 2018 were as follows:

Amounts representing

Amounts representing unamortized discount

obligation under capital leases

Current portion of capital leases

term capital lease obligation

STOCKHOLDERS’

EQUITY AND STOCK-BASED COMPENSATION

the year ended December 31, 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 consolidated statements of operations.

December 31, 2020 and 2019, the weighted-average discount rate and the weighted-average remaining lease term for the operating

leases held by the Company were 6.3 %

years, respectively.

the years ended December 31, 2020 and 2019, cash paid for amounts included for the operating lease liabilities was $ 1,052

respectively, and the Company recorded operating lease expense of $ 1,066

respectively, included in selling, general and administrative expenses.

lease payments under operating leases (including options to extend) as of December 31, 2020 were as follows :

OF FUTURE LEASE PAYMENT UNDER OPERATING LEASES

Total minimum lease payments

representing interest payments

Total operating

lease liabilities

portion, operating lease liabilities

lease liabilities, net of current portion

Company also has a finance lease for equipment which requires monthly payments of $ 1

through January 2024.

lease payments under the finance lease as of December 31, 2020 were as follows :

OF FUTURE LEASE PAYMENT UNDER FINANCE LEASE

Total minimum lease payments

representing interest payments

Present value of future minimum lease

portion, finance lease obligation

Finance lease

obligation, net of current portion

December 31, 2020 and 2019, the weighted-average discount rate and the weighted-average remaining lease term for the finance lease

held by the Company were 6.36 %

years, respectively.

the years ended December 31, 2020 and 2019:

discount amortization related to a finance lease obligation was $ 0

respectively;

expense related to the equipment held under the finance lease obligations was $ 8

respectively;

paid and expense recognized for interest expense related to the finance lease obligation was $ 2

respectively.

STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

December 31, 2020 and 2019, the Company had 50,000,000 shares of common stock, $ 0.001 par value, authorized, respectively.

July 10, 2018, the Company amended its amended and restated certificate of incorporation to reduce the number of authorized shares

of common stock from 90,000,000 to 50,000,000.

During the Year Ended December 31, 2019

January 2018, the Company issued 25,273 shares of its restricted common stock, with a fair value of $44, in lieu of a cash payment

for accrued royalty expenses.

granted in February 2015 to Andrew R.

Boll, the Company’s Chief Financial Officer, vested, and in February 2018, 30,000

shares the Company’s common stock were issued to Mr.

granted in February 2015 to John P.

Saharek, the President of ImprimisRx (formerly, the Company’s Chief Commercial Officer),

vested, and in February 2018, 30,000 shares the Company’s common stock were issued to Mr.

March 2018, the Company issued 35,427 shares of its restricted common stock, with a fair value of $64, in lieu of a cash payment

for accrued royalty expenses.

December 2018, the Company issued 15,000 shares of its restricted common stock, with a fair value of $42, related to a milestone

payment due under a sales and marketing agreement.

Company sold 305,619 shares of common stock and received net proceeds of $642, after deducting $20 for sales commission and offering

expenses, under the Sales Agreement during the year ended December 31, 2018.

In November 2018, the Company terminated the Sales

the year ended December 31, 2018, the Company issued 2,364,889 shares of its common stock related to the exercise of common stock

warrants with an exercise price of $1.79, and received net proceeds of $4,233.

the year ended December 31, 2018, the Company issued 910,273 shares of its common stock related to the cashless exercise of 1,576,665

common stock warrants with an exercise price of $1.79.

the year ended December 31, 2018, 99,626 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 year ended December 31, 2019:

Company issued 15,000 shares of its restricted common stock, with a fair value of $ 75 , as consideration for commission expenses

incurred during the year ended December 31, 2018;

Company issued 27,671 shares of its common stock upon the cashless exercise of options to purchase 82,929 shares of common

stock, with exercise prices ranging from $ 1.70 to $ 4.17 per share, net of 8,806 shares of common stock withheld for payroll

tax withholdings totaling $ 50 ;

Company issued 2,122 shares of its common stock upon the exercise of options to purchase 2,122 shares of common stock, with

exercise prices ranging from $ 1.70 to $ 3.20 per share, and received net proceeds of $ 6 ;

Company issued 688,473 shares of its common stock upon the cashless exercise of warrants to purchase 964,532 shares of common

stock with an exercise price of $ 1.79 per share;

Company issued 454,055 shares of its common stock upon the exercise of warrants to purchase 454,055 shares of common stock

with an exercise price of $ 1.79 per share, and received net proceeds of $ 813 ;

Company issued 87,610 shares of its

common stock underlying RSUs issued to directors vested, but the issuance and delivery of these shares are deferred until

the director resigns.

During the Year Ended December 31, 2020

March 2019, the Company issued 15,000 shares of its restricted common stock, with a fair value of $75, as consideration for commission

expenses incurred during the year ended December 31, 2018.

the year ended December 31, 2019, the Company issued 27,671 shares of its common stock upon the cashless exercise of 82,929 options

to purchase common stock, with exercise prices ranging from $1.70 to $4.17 per share, net of 8,806 shares of common stock withheld

for payroll tax withholdings totaling $50.

the year ended December 31, 2019, the Company issued 2,122 shares of its common stock upon the exercise of 2,122 options to purchase

common stock, with exercise prices ranging from $1.70 to $3.20 per share, and received net proceeds of $6.

the year ended December 31, 2019, the Company issued 688,473 shares of its common stock upon the cashless exercise of 964,532

warrants to purchase common stock with an exercise price of $1.79 per share.

the year ended December 31, 2019, the Company issued 454,055 shares of its common stock upon the exercise of 454,055 warrants

to purchase common stock with an exercise price of $1.79 per share, and received net proceeds of $813.

the year ended December 31, 2019, 87,610 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 year ended December 31, 2020:

Company issued 30,000 shares of its restricted common stock, with an initial fair value of $ 167 , as consideration for commission

expenses incurred during the year ended December 31, 2019 and the year ended December 31, 2020;

Company issued 4,161 shares of its common stock upon the cashless exercise of options to purchase 16,750 shares of common

stock, with exercise prices ranging from $ 1.70 to $ 4.05 per share, net of 3,564 shares of common stock withheld for payroll

tax withholdings;

Company issued 2,998 shares of its common stock upon the exercise of options to purchase 2,998 shares of common stock, with

exercise prices ranging from $ 3.04 to $ 3.20 per share, and paid $ 8 related to payroll tax withholdings;

Company issued 185,785 shares of its common stock underlying RSUs held by directors that resigned.

The RSUs had previously

vested, including 26,721 RSUs during the year ended December 31, 2020, but the issuance and delivery of the shares

were deferred until the director resigned;

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.

December 31, 2020 and 2019, the Company had 5,000,000 shares of preferred stock, $ 0.001 par value, authorized and no shares of

preferred stock issued and outstanding.

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

Awards Plan, which was subsequently amended on November 5, 2008, February 26, 2012, July 18, 2012, May 2, 2013 and September 27,

2013 (as amended, the “2007 Plan”).

The 2007 Plan reached its term in September 2017, and we can no longer issue additional

1 unchanged sentence

reach their maturity or are otherwise cancelled/forfeited.

On June 13, 2017, the Company’s Board of Directors and stockholders

adopted the Company’s 2017 Incentive Stock and Awards Plan (the “2017 Plan”

together with the 2007 Plan, the

“Plans”).

On June 13, 2017, the Company’s Board of Directors and stockholders

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

As of December 31, 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

1 unchanged sentence

units and restricted stock.

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

The Company had 342,882 shares available for future issuances under the 2017 Plan at December 31, 2020.

summary of stock option activity under the Plan for the year ended December 31, 2020 is as follows:

SCHEDULE OF STOCK OPTION PLAN ACTIVITY

Exercise Price

1 unchanged sentence

Intrinsic Value

Options outstanding - January

Options outstanding -

January 1, 2020

Options granted

Options exercised

cancelled/forfeit

Options cancelled/forfeited

Options outstanding

- December 31, 2020

vested and expected to vest

Options exercisable

Options vested

and expected to vest

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 December 31, 2019, based on the closing price of the Company’s common stock of $7.78

price lower than the market price on December 31, 2020, based on the closing price of the Company’s common stock of $ 6.86

on that date.

intrinsic value of the options exercised in 2020 was $ 50 .

2019 and 2018, the Company granted stock options to certain employees, directors and consultants.

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 ranging from five to ten years.

terms for options granted in 2019 and 2018 to employees and consultants typically 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;

quarterly vesting over three years;

and 90% of the shares subject to the option vest and become exercisable on the second month

after the grant date and the remaining 10% of the shares subject to the option vest and become exercisable quarterly in equal

installments thereafter over the next 11 months.

Certain option awards provide for accelerated vesting if there is a change in

control (as defined in the Plan) and in the event of certain modifications to the option award agreement.

fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model.

on April 1, 2018, the Company began calculating expected volatility based solely on the historical volatilities of the common

stock of the Company.

In the past, the expected volatility was based on the historical volatilities of the common stock of the

Company and comparable publicly traded companies, the Company previously utilized this methodology based on its estimate that

it had limited relevant historical data regarding the volatility of its stock price on which to base a meaningful estimate of

expected volatility.

The expected volatility is based on the historical volatilities of the common stock of the Company and comparable

publicly traded companies based on the Company’s belief that it currently has limited relevant historical data regarding

the volatility of its stock price on which to base a meaningful estimate of expected volatility.

The expected term of options

granted was determined in accordance with the “simplified approach,”

as the Company has limited, relevant, historical

data on employee exercises and post-vesting employment termination behavior.

The expected risk-free interest rate is based on

Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant.

The financial

statement effect of forfeitures is estimated at the time of grant and revised, if necessary, if the actual effect differs from

those estimates.

For option grants to employees and directors, the Company assigns a forfeiture factor of 10%.

These factors could

change in the future, which would affect the determination of stock-based compensation expense in future periods.

Utilizing these

assumptions, the fair value is determined at the date of grant.

the year ended December 31, 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 years.

Vesting terms for

options granted to employees and consultants during the year ended December 31, 2020 generally included one of the following vesting

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

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

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 to purchase 600,000 shares of the Company’s

common stock (the “Baum Performance Option”) 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 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 model with a five-year life,

70 % volatility and a risk-free interest rate of 0.40 % .

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

Black-Scholes-Merton option pricing model.

Beginning on April 1, 2019, the Company began calculating expected volatility based

solely on the historical volatilities of the common stock of the Company.

Prior to April 1, 2019, the expected volatility was

based on the historical volatilities of the common stock of the Company and comparable publicly traded companies.

previously utilized this methodology based on its estimate that it had limited relevant historical data regarding the volatility

of its stock price on which to base a meaningful estimate of expected volatility.

The expected term of options granted was determined

in accordance with the “simplified approach,” as the Company has limited, relevant, historical data on employee exercises

and post-vesting employment termination behavior.

The expected risk-free interest rate is based on the U.S.

Treasury yield for

a period consistent with the expected term of the option in effect at the time of the grant.

The financial statement effect of

forfeitures is estimated at the time of grant and revised, if necessary, if the actual effect differs from those estimates.

option grants to employees and directors, the Company assigns a forfeiture factor of 10 % .

These factors could change in the future,

which would affect the determination of stock-based compensation expense in future periods.

Utilizing these assumptions, the fair

value is determined at the date of grant.

table below illustrates the fair value per share determined using the Black-Scholes-Merton option pricing model with the following

assumptions used for valuing options granted to employees:

Weighted-average

fair value of options granted

Expected terms (in

SCHEDULE OF FAIR VALUE ASSUMPTIONS

Weighted-average fair

value of options granted

Expected terms (in years)

Expected volatility

Risk-free interest

Risk-free interest rate

Dividend yield

following table summarizes information about stock options outstanding and exercisable at December 31, 2020:

SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE

of Exercise Prices

8 unchanged sentences

The stock-based compensation for all stock options was $ 1,579 and $ 889 during the years ended December 31, 2020 and 2019, respectively.

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

The grant-date fair value of the RSUs, which has been determined based upon the market value of the Company’s

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

vesting criteria.

The grant-date fair value of the RSUs, which has been determined based upon the market value of the Company’s

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

Unvested portions of RSUs issued to consultants

are remeasured on an interim basis until vesting criteria is met.

During the Year Ended December 31, 2019

the year ended December 31, 2018, the Company granted an aggregate of 136,360 RSUs to its non-employee directors valued at $300.

These RSUs vest in equal quarterly installments over a one-year period subject to the director’s continued service at the

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

summary of the Company’s RSU activity and related information for the year ended December 31, 2018 is as follows:

Average Grant Date

the year ended December 31, 2019, 185,000 RSUs with a fair market value of $ 1,139 were issued to certain employees;

the RSUs vest

in full on the third anniversary of the grant date.

the year ended December 31, 2019, the Company’s board of directors were granted 38,860 RSUs with a fair market value of

$ 300 which vests on a quarterly basis, over a one-year term in equal installments, subject to the director’s

continued service at the vesting date, but the issuance and delivery of these shares are deferred until the director resigns.

summary of the Company’s RSU activity and related information for the year ended December 31, 2019 is as follows:

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

Average Grant

Date Fair Value

RSUs unvested - January

cancelled/forfeit

RSUs cancelled/forfeited

RSUs unvested

4 unchanged sentences

in full on the third anniversary of the grant date.

the year ended December 31, 2019, the Company’s board of directors were granted 38,860 RSUs with a fair market value $300

which vests on a quarterly basis, over one year in equal installments, subject to the director’s continued service at the

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

summary of the Company’s RSU activity and related information for the year ended December 31, 2019 is as follows:

Average Grant Date

the year ended December 31, 2020, the Company’s board of directors were granted 90,524 RSUs with a fair market value $ 511

which vest on a quarterly basis, over a one-year term in equal installments, subject to the director’s continued

service at the vesting date, but the issuance and delivery of these shares are deferred until the director resigns.

summary of the Company’s RSU activity and related information for the year ended December 31, 2020 is as follows:

Average Grant

Date Fair Value

RSUs unvested - January

cancelled/forfeit

RSUs cancelled/forfeited

RSUs unvested

6 unchanged sentences

Pharmaceuticals, Inc.

and Melt Pharmaceuticals, Inc.

the year ended December 31, 2018 the Company recognized $21 in stock-based compensation related to equity instruments granted

by Surface and Melt to consultants, the Company’s employees and directors, including its CEO, Mark Baum, CFO, Andrew Boll,

and a director, Richard Lindstrom.

the year ended December 31, 2019:

issued 1,000,000 shares of its common stock to Elle in connection with the acquisition of certain drug candidate intellectual

property and rights in February 2019;

issued 300,000 shares of its common stock to TGV in connection with the acquisition of certain drug candidate intellectual

property and rights in July 2019;

Company recognized $ 26 in stock-based compensation related to equity instruments granted by Mayfield for 2,450,000 shares

of its restricted common stock that vest upon various performance based milestones and service periods to consultants of Mayfield,

including Mayfield’s CEO candidate and to Harrow employees, including 725,000 shares to Mark Baum, CEO of the Company,

and 362,500 shares to Andrew Boll, CFO of the Company.

Pharmaceuticals, Inc.

issued 1,000,000 shares of its common stock to Elle in connection with acquisition of certain drug candidate intellectual property

and rights in February 2019.

issued 300,000 shares of its common stock to TGV in connection with acquisition of certain drug candidate intellectual property

and rights in July 2019.

the year ended December 31, 2019, the Company recognized $26 in stock-based compensation related to equity instruments granted

by Mayfield for 2,450,000 shares of its restricted common stock that vest upon various performance based milestones and service

periods to consultants of Mayfield, including Mayfield’s CEO candidate and to Harrow employees, including 725,000 shares

to Mark Baum, CEO of the Company, and 362,500 shares to Andrew Boll, CFO of the Company.

the year ended December 31, 2020:

repurchased 650,000 shares of its common stock from Elle, for an aggregate purchase price of $ 1 ;

shares of Mayfield’s restricted common stock were forfeited by a consultant;

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.

the year ended December 31, 2020, the Company recognized $ 20 in stock-based compensation for Mayfield stock options.

Pharmaceuticals, Inc.

July 2019, Stowe agreed to issue 1,750,000 shares of its common stock to TGV in connection with acquisition of certain drug candidate

intellectual property and rights.

July 2019, Stowe agreed to issue 1,750,000 shares of its common stock to TGV in connection with the acquisition of certain drug

candidate intellectual property and rights.

the year ended December 31, 2020, Visionology granted 2,000,000 shares of its restricted common stock, with a fair value of $ 96

that vest upon various performance based milestones and service periods to consultants of Visionology, including Visionology’s

CEO candidate and to Harrow employees, including 700,000 shares to Mark Baum, CEO of the Company, and 350,000 shares to Andrew

Boll, CFO of the Company.

Company recorded stock-based compensation (including issuance of common stock for services and accrual for stock-based compensation)

related to equity instruments granted to employees, directors and consultants as follows:

selling, general and administrative

Directors –

SCHEDULE OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES DIRECTORS CONSULTANTS

the Years Ended December 31,

Employees – selling,

general and administrative

Directors – selling, general

and administrative

– selling, general and administrative

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

12), underwriters and other non-employees for services rendered or to be rendered in the future.

summary of warrant activity during the year ended December 31, 2020 is as follows:

SCHEDULE OF WARRANTS ACTIVITY

of Shares Subject to Warrants Outstanding

Exercise Price

Warrants outstanding - January

outstanding and exercisable - December 31, 2019

average remaining contractual life of the outstanding warrants in years - December 31, 2019

Warrants outstanding

- January 1, 2020

Warrants outstanding

and exercisable - December 31, 2020

Weighted average

remaining contractual life of the outstanding warrants in years - December 31, 2020

warrants outstanding as of December 31, 2020 are included in the following table:

SCHEDULE OF WARRANTS OUTSTANDING AND WARRANTS EXERCISABLE

Lender warrants

Settlement warrants

warrants (see Note 12)

Company is subject to taxation in the United States, California, New Jersey, Texas and Pennsylvania.

The provision for income

taxes for the years ended December 31, 2019 and 2018 are summarized below:

Lender warrants

(see Note 12)

Company is subject to taxation in the United States, California, Florida, Georgia, Illinois, New Jersey, New York, Tennessee and

The Company’s income tax provision consists of the following:

SCHEDULE OF PROVISION FOR INCOME TAXES

Total current

in valuation allowance

tax provision (benefit)

tax expense for the years ended December 31, 2019 and 2018, are recorded in the general and administrative expenses line item

in the accompanying consolidated statements of operations.

Total deferred

Income tax provision

reconciliation of income taxes computed by applying the statutory U.S.

income tax rate to the Company’s loss before income

taxes to the income tax provision is as follows:

statutory tax rate

Benefit of lower tax

State tax benefit,

Research and development

Employee stock-based

Loss on debt conversion

Capitalization of Subsidiary

Change in Rate

income tax rate

income tax rate to the Company’s loss before income

tax provision to the income tax provision is as follows:

SCHEDULE OF INCOME TAX RECONCILIATION

federal statutory tax

State tax benefit, net

Valuation allowance

Effective income

tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities

for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred

tax assets are as follows:

Deferred tax assets

(liabilities):

and amortization

development credits

stock compensation

Difference in Melt

Difference in Surface

Difference in Eton

stock purchase identifiable intangibles

842 Lease Liability

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets (liabilities):

Depreciation and

Research and development

Deferred stock-based

Basis difference

Capital losses

Park stock purchase

identifiable intangibles

Limitation under

ASC 842 lease

842 ROU asset

deferred tax assets, net

deferred tax liabilities

deferred tax assets

of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.

1 unchanged sentence

net deferred tax assets have been fully offset by a valuation allowance.

The valuation allowance decreased by approximately

$500 and $3,700 during 2019 and 2018, respectively.

of December 31, 2019, the Company had net operating loss carryforwards for federal income tax purposes of approximately $65,874

and federal research and development tax credits of approximately $354.

Under new tax law, federal NOLs can be carried forward

indefinitely.

The federal research credits will expire beginning in the year 2026.

As of December 31, 2019, the Company had net

operating loss carryforwards for state income tax purposes of approximately $67,538 which expire beginning in the year

2017 and state research and development tax credits of approximately $305 which do not expire.

March 2016, the FASB issued ASU 2016-09, Improvement to Employee Share –

Based Payment Accounting .

The new standard

contains several amendments that will simplify the accounting for employee share-based payment transactions.

The changes in the

new standard eliminate the accounting for excess tax benefits to be recognized in additional paid-in capital and tax deficiencies

recognized either in income tax provision or in additional paid-in capital.

The Company’s deferred tax asset at December

31, 2018 did not include any excess tax benefits from employee stock option exercises, which are a component of the federal and

state net operating loss carryforwards and on a go forward basis the excess tax benefits will be recognized as a component of

income tax expense.

of the net operating losses may be subject to substantial annual limitation due to federal and state ownership change limitations

provided by the Internal Revenue Code and similar state provisions.

Such annual limitations could result in the expiration of

the net operating losses ad credits before their utilization.

June 2006, the FASB issued interpretation ASC 740-10-50, Accounting for Uncertainty in Income Tax .

This pronouncement clarifies

the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with ASC

740-10-50, Accounting for Income Taxes .

This interpretation prescribes a recognition threshold and measurement attribute

for the financial statement recognition and measurement of a tax position taken or expected to be taken in the tax return.

740 also provides guidance on derecognition of tax benefits, classification on the balance sheet, interest and penalties, accounting

in interim periods, disclosure and transaction.

The Company adopted ASC 740-10-50 effective January 1, 2009.

In accordance with

ASC 740-10-50, the Company is classifying interest and penalties as a component of tax expense.

Company did not have any unrecognized tax benefits as of December 31, 2019 and 2018, all of which is offset by a full valuation

These unrecognized tax benefits, if recognized, would not affect the effective tax rate.

There was no interest or penalties

accrued at the adoption date and at December 31, 2019.

reconciliation of the change in the UTB balance from January 1, 2019 to December 31, 2019 is as follows:

Balance at January 1, 2019

Additions for tax positions

related to current year

Additions/(reductions)

for tax positions related to prior years

Balance at December

Total unrecognized

tax benefits as of December 31, 2019

The valuation allowance increased by $ 633 and

decreased by $ 521 during 2020 and 2019, respectively.

December 31, 2020, the Company has federal and state net operating loss carryforwards of approximately $ 62,856 and $ 60,908 which

will begin to expire in 2027 , unless previously utilized, and will begin to expire for state purposes in 2026.

In addition, the

Company has federal net operating loss carryforwards of $3,865 generated after 2017 that can be carried over indefinitely and

may be used to offset up to 80% of federal taxable income.

At December 31, 2020, the Company has federal and state research

and development tax credits of approximately $ 354 and $ 305 , respectively.

The federal research tax credit begins to expire in

2026 , unless previously utilized, and the state research and development tax credit has no expiration date.

of the net operating loss (“NOL”) and research and development (“R&D”) carryforwards maybe subject

to a substantial annual limitation due to ownership change limitations that might have occurred or that could occur in the future,

as required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar

state and foreign provisions.

These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be

utilized annually to offset future taxable income and tax, respectively.

In general, an “ownership change” as defined

by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an

ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public

Since the Company’s formation, the Company has raised capital through the issuance of capital stock on several occasions

which, combined with the purchasing stockholders’ subsequent disposition of those shares, may have resulted in such an ownership

change, or could result in an ownership change in the future upon subsequent disposition.

Company has not completed a study to assess whether an ownership change or changes have occurred.

If the Company has experienced

an ownership change, utilization of the NOL or R&D credit carryforwards would be subject to an annual limitation under Section 382

of the Code, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change

by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.

Any limitation

may result in expiration of a portion of the NOL or R&D credit carryforwards before utilization.

Further, until a study is

complete and any limitation is known, no amounts are being considered as an uncertain tax position or disclosed as an unrecognized

Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred

tax assets with a corresponding reduction of the valuation allowance.

of December 31, 2020 and 2019, there were no unrecognized tax benefits included in the consolidated balance sheets that would,

if recognized, affect the effective tax rate.

The Company’s practice is to recognize interest and/or penalties related to

income tax matters in income tax expense.

The Company had no accrual for interest or penalties in its consolidated balance sheets

at December 31, 2020 and 2019, and has not recognized interest and/or penalties in the consolidated statements of operations for

the years ended December 31, 2020 and 2019.

The Company’s tax years since 2000 may be subject to examination by the federal

and state tax authorities due to the carryforward of unutilized net operating losses.

EMPLOYEE SAVINGS PLAN

2 unchanged sentences

to annual limits.

The Company makes certain matching contributions to the plan in amounts up to 4% of the participants’

The Company makes certain matching contributions to the plan in amounts up to 4 % of the participants’

annual cash compensation, subject to annual limits.

3 unchanged sentences

December 2016, Louis L.

(“Sobol”) filed a lawsuit in the U.S.

District Court for the Eastern District

1 unchanged sentence

The claims allege violations under the Telephone Consumer Protection Act, 47 U.S.C.

227 via the Company’s alleged

§ 227 via the Company’s alleged

transmittal of advertisements to its clients via facsimile.

The Court approved the parties’

proposed settlement agreement

The Court approved the parties’ proposed settlement agreement

in the spring of 2019.

1 unchanged sentence

matter and the proposed settlement amount.

As a result of the low claim rate of approximately 1.4%, the Company’s total

As a result of the low claim rate of approximately 1.4 % , the Company’s total

damages were $ 571 , which was paid in October 2019.

1 unchanged sentence

September 2017, Allergan USA, Inc.

(“Allergan”) filed a lawsuit in the U.S.

District Court for the Central District

of California against the Company, primarily claiming violations under the federal Lanham Act and California’s Sherman Act.

The Court granted in part and denied in part each parties’

motions for summary judgement, resolving all issues except for

whether Allergan was entitled to damages related to the Company’s purported Lanham Act violations.

of California against the Company, primarily claiming violations under the federal Lanham Act and California’s Sherman Act.

The Court granted in part and denied in part each parties’ motions for summary judgement, resolving all issues except for

whether Allergan was entitled to damages related to the Company’s purported Lanham Act violations.

The parties went to trial

in May 2019 to litigate damages related to the Lanham Act, and a jury found the Company liable for only $ 49 in lost profit damages,

which was accrued as an expense during the period ended December 31, 2019 (see Note 11).

which was accrued as an expense during the year ended December 31, 2019 (see Note 11).

In July 2019, the Court entered a permanent

1 unchanged sentence

The injunction requires the Company to:

(1) only dispense drugs from a 503(a) facility with a “Valid Prescription Order”;

(2) abide by the FDA’s anticipatory compounding guidelines;

(1) only dispense drugs from a 503(a) facility with a “Valid Prescription Order”;

(2) abide by the FDA’s anticipatory compounding guidelines;

and (3) only use bulk drug substances identified on a list established

by the Secretary of Health and Human Services or FDA’s interim “Category 1”

by the Secretary of Health and Human Services or FDA’s interim “Category 1” list.

The Company believes it was

1 unchanged sentence

On October 2, 2019, Allergan and the Company filed

a joint stipulation to voluntarily dismiss each parties’

respective pending appeals arising out of the lawsuit.

a joint stipulation to voluntarily dismiss each parties’ respective pending appeals arising out of the lawsuit.

consideration was exchanged between the parties related to the filing of the joint stipulation.

7 unchanged sentences

In April 2019, Park

agreed to, and the California State Board of Pharmacy approved terms of a settlement agreement (the “Settlement Agreement”)

that became effective on May 29, 2019.

3 unchanged sentences

Drug Solutions et al.

April 2018, Novel Drug Solutions, LLC and Eyecare Northwest, PA (collectively “NDS”) filed a lawsuit against the Company

District Court of Delaware asserting claims for breach of contract.

5 unchanged sentences

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

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

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.

4 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 death of Jade Erick.

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

In September 2018, co-defendant Dr.

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

Manufacturing Corp.

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

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

Spectrum Chemical Manufacturing Corp.

and Spectrum Pharmacy Products, Inc.

(collectively “Spectrum”).

The cross-complaint seeks indemnity

and contribution from the Company and Spectrum.

(collectively “Spectrum”).

The cross-complaint

seeks indemnity and contribution from the Company and Spectrum.

The Company answered the claims filed by Dr.

Kelly in October

currently in the discovery phase.

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

The case is currently in the discovery phase.

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

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

Sue Gaukel et al.

2 unchanged sentences

asserting class action allegations and product liability claims related to Mrs.

Gaukel’s doctor’s

use of a compounded drug injection in each of her eyes.

8 unchanged sentences

Any of these claims could subject the Company to litigation.

addition to the indemnification provisions contained in the Company’s charter documents, the Company generally enters into

separate indemnification agreements with each of the Company’s directors and officers.

addition to the indemnification provisions contained in the Company’s charter documents, the Company generally enters into

separate indemnification agreements with each of the Company’s directors and officers.

These agreements require the Company,

among other things, to indemnify the director or officer against specified expenses and liabilities, such as attorneys’

fees, judgments, fines and settlements, paid by the individual in connection with any action, suit or proceeding arising out of

the individual’s status or service as the Company’s director or officer, other than liabilities arising from willful

misconduct or conduct that is knowingly fraudulent or deliberately dishonest, and to advance expenses incurred by the individual

8 unchanged sentences

and Marketing Agreements

2017 through 2019, the Company entered various sales and marketing agreements with certain organizations, to provide sales and

marketing representation services to ImprimisRx in select geographies in the U.S., in connection with the Company’s ophthalmic

compounded formulations.

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

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

In addition, the Company is required to make periodic

milestone payments to certain organizations in shares of the Company’s restricted common stock if net sales in the assigned

territory reach certain future levels by the end of their terms, as applicable.

The Company accrued and recorded in additional

paid in capital $159 and $42 related to stock-based payments for these agreements during the year ended December 31, 2019

and 2018, respectively, and $2,700 and $1,511 were incurred under these agreements for commission expenses during the years

ended December 31, 2019 and 2018, respectively.

Company has entered various sales and marketing agreements with certain organizations, to provide sales and marketing representation

services to ImprimisRx in select geographies in the U.S., in connection with the Company’s ophthalmic compounded formulations.

the terms of the sales and marketing agreements, the Company is required to make commission payments generally 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 make

periodic milestone payments to certain organizations in shares of the Company’s restricted common stock if net sales in

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

The Company accrued and recorded

in additional paid in capital $ 83 and $ 159 related to stock-based payments for these agreements during the year ended December

31, 2020 and 2019, respectively, and $ 2,434 and $ 2,700 were incurred under these agreements for commission expenses during the

years ended December 31, 2020 and 2019, respectively.

Purchase, License and Related Agreements

Company has acquired and sourced intellectual property rights related to certain proprietary innovations from certain inventors

and related parties (the “Inventors”) through multiple asset purchase agreements, license agreements, strategic agreements

and commission agreements.

9 unchanged sentences

(2) a payment payable within

30 days after the Company files the first investigational new drug application (“IND”) with the FDA for the first

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

3 unchanged sentences

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.

7 unchanged sentences

expenses for the years ended December 31, 2020 and 2019, respectively.

July 2019, Mayfield entered into a License Agreement (the “TGV License”) with TGV to acquire intellectual property

rights for use in the women’s health field, related to Mayfield’s proprietary drug candidate MAY-66.

July 2020, Mayfield entered into a License Agreement (the “TGV License”) with TGV to acquire intellectual property

rights for use in the women’s health field, related to Mayfield’s proprietary drug candidate MAY-66.

The TGV License

6 unchanged sentences

to TGV over the development of MAY-66 and any related products based on the licensed intellectual property.

July 2019, Stowe entered into a License Agreement (the “Stowe License”) with TGV, to acquire intellectual property

rights for use in the ophthalmology and otic health field, related to Stowe’s proprietary drug candidate STE-006.

July 2020, Stowe entered into a License Agreement (the “Stowe License”) with TGV, to acquire intellectual property

rights for use in the ophthalmology and otic health field, related to Stowe’s proprietary drug candidate STE-006.

License provides that TGV will cooperate with Stowe in transferring all embodiments of the intellectual property (including know-how)

5 unchanged sentences

to TGV over the development of STE-006 and any related products based on the licensed intellectual property.

License Agreement –

Related Party

April 2017, the Company entered into a license agreement (the “Klarity License Agreement”) with Richard L.

License Agreement – Related Party

April 2017, the Company entered into a license agreement (the “Klarity License Agreement”) with Richard L.

M.D., a member of its Board of Directors.

2 unchanged sentences

Lindstrom to develop, formulate, make, sell, and sub-license the topical ophthalmic

solution Klarity designed to protect and rehabilitate the ocular surface (the “Klarity Product”).

the terms of the Klarity License Agreement, the Company is required to make royalty payments to Dr.

1 unchanged sentence

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

In addition, the Company is required to

make certain milestone payments to Dr.

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;

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 were payable

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

(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 were payable at the Company’s election in cash or shares of the Company’s

restricted common stock.

Lindstrom was paid $ 149

and $122 in cash during the years ended December 31, 2019 and 2018, respectively, and was due an additional $55 and

in cash during the years ended December

31, 2020 and 2019, respectively, and was due an additional $ 35

at December 31, 2020 and 2019, respectively.

The Company incurred $103 and $118 for royalty expenses related to the Klarity

The Company incurred $ 129

for royalty expenses related to the Klarity

License Agreement during the years ended December 31, 2020 and 2019, respectively.

Asset Purchase Agreement –

Related Party

December 2019, the Company entered into an asset purchase agreement (the “Lindstrom APA”) with Dr.

a member of its Board of Directors.

Pursuant to the terms of the Lindstrom APA, the Company acquired certain intellectual property

and related rights from Dr.

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

“Lindstrom Product”).

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

Asset Purchase Agreement – Related Party

December 2019, the Company entered into an asset purchase agreement (the “Lindstrom APA”) with Dr.

Lindstrom, a member

of its Board of Directors.

Pursuant to the terms of the Lindstrom APA, the Company acquired certain intellectual property and

related rights from Dr.

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

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

Lindstrom ranging from 2% to 3% of net

3 unchanged sentences

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

Lindstrom was paid $0 in cash during the year ended December 31, 2019, and was due $40 at December 31, 2019.

The Company incurred

$40 for royalty expenses related to the Lindstrom Agreement during the year ended December 31, 2019.

Asset Purchase Agreement –

Related Party

December 2019, the Company entered into an asset purchase agreement (the “Presbyopia APA”) with Dr.

Lindstrom, a member of its Board of Directors.

Lindstrom was paid $ 55 and $ 0 in cash during the years ended December 31, 2020 and 2019, respectively, and was due $ 7 and

$ 40 at December 31, 2020 and 2019, respectively.

The Company incurred $ 55 and $ 40 for royalty expenses related to the Lindstrom

APA during the years ended December 31, 2020 and 2019, respectively.

Asset Purchase Agreement – Related Party

December 2019, the Company entered into an asset purchase agreement (the “Presbyopia APA”) with Richard L.

M.D., a member of its Board of Directors.

Pursuant to the terms of the Presbyopia APA, the Company acquired certain intellectual

1 unchanged sentence

Lindstrom to develop, formulate, make, sell, and sub-license an ophthalmic topical product

to treat presbyopia (the “Presbyopia Product”).

the terms of the Presbyopia Product, the Company is required to make royalty payments to Dr.

Lindstrom ranging from 2% to 4% of

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

Lindstrom was paid $0

in cash during the year ended December 31, 2019, and was due $0 at December 31, 2019.

The Company incurred $0 for royalty expenses

related to the Presbyopia APA during the year ended December 31, 2019.

to treat presbyopia (the “Presbyopia Product”).

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

Lindstrom ranging from 2% to 4% of net

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

Lindstrom was paid $ 0 in

cash during the years ended December 31, 2020 and 2019, and was due $ 0 at December 31, 2020 and 2019.

The Company incurred $ 0

for royalty expenses related to the Presbyopia APA during the years ended December 31, 2020 and 2019.

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 year ended December 31, 2020, the Company recorded $ 357 in commission revenues related to the Dexycu Agreement.

SEGMENT INFORMATION AND CONCENTRATIONS

2 unchanged sentences

its two operating segments are based on segment contribution.

The Company’s reportable segments consist of (i) its commercial

stage pharmaceutical compounding business (Pharmaceutical Compounding), generally including the operations of ImprimisRx and the

22 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 year ended December

net revenues, segment operating expenses and segment contribution information consisted of the following for the years ended December

31, 2020 and 2019:

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

the Year Ended December 31, 2020

3 unchanged sentences

Operating expenses:

general and administrative

Selling, general

and administrative

and development

Research and development

sales and impairments, net

Asset sales and

impairments, net

the Year Ended December 31, 2019

Pharmaceutical

Cost of sales

Operating expenses:

Selling, general

and administrative

Research and development

Asset sales and

impairments, net

Company categorizes revenues by geographic area based on selling location.

2 unchanged sentences

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

Concentrations

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

There were no customers who comprised more than 10 %

of the Company’s total pharmacy sales for the year ended December 31, 2019 and 2018.

of the Company’s total pharmacy sales for the years ended December 31, 2020 and 2019.

Company receives its active pharmaceutical ingredients from three main suppliers.

2 unchanged sentences

SUBSEQUENT EVENTS

March 2021, the Company issued 10,989

shares of its common stock upon the exercise

of options to purchase 10,989

common stock, with exercise prices ranging between $ 1.70

per share, and received net proceeds of

stock units granted in February 2015 to Andrew R.

Boll, the Company’s Chief Financial Officer, vested, and in February 2021,

22,500 shares the Company’s common stock were issued to Mr.

Boll, net of 7,500 shares of common stock withheld for payroll

tax withholdings totaling $ 58 .

stock units granted in February 2015 to Mark L.

Baum, the Company’s Chief Executive Officer, vested, and in February 2021,

200,000 shares the Company’s common stock were issued to Mr.

Company has performed an evaluation of events occurring subsequent to December 31, 2020 through the filing date of this Annual

Report and determined that no subsequent events have occurred that would require recognition in the financial statements or disclosures

in the notes thereto.

Report and determined that no subsequent events have occurred that would require recognition in the consolidated financial

statements or disclosures in the notes thereto, other than as disclosed in the accompanying notes.

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-K

Item 9A. Controls and Procedures