HARROW, INC. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Disclosure Controls and Procedures Our 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 Act”). In connection with that evaluation, our CEO and CFO concluded that, as of December 31, 2020, our disclosure controls and procedures were effective. For the purpose of this review, disclosure controls and procedures means controls and procedures designed to ensure 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 include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our principal executive officer, principal financial officer and principal accounting officer, as appropriate to allow timely decisions regarding required disclosure. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our management, under the supervision and with the participation of 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. Based on such evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2020. This 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. Changes in Internal Control over Financial Reporting There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the year ended December 31, 2020, that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting. Inherent Limitations on Effectiveness of Controls Our management, including our CEO and CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. 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 reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. ITEM 9B. OTHER INFORMATION None. 48 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The 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. ITEM 11. EXECUTIVE COMPENSATION The 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. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 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. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The 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. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The 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. 49 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) List of the following documents filed as part of the report: (1) See the index to our consolidated financial statements on page F-1 for a list of the financial statements being filed in this Annual Report. (2) All financial statement schedules are omitted because they are not applicable or the required information is shown in the consolidated financial statements or the notes thereto. (3) See Item 15(b) below for all exhibits being filed or incorporated by reference herein. (b) Exhibits: EXHIBIT INDEX Exhibit No. Description 2.1 Agreement and Plan of Merger, dated as of September 17, 2007, by and among Imprimis Pharmaceuticals, Inc., Transdel Pharmaceuticals Holdings, Inc. and Trans-Pharma Acquisition Corp. Incorporation (incorporated herein by reference to Exhibit 2.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on September 21, 2007) 3.1 Amended and Restated Certificate of Incorporation, as amended by the Certificate of Amendment to Amended and Restated Certificate of Incorporation effective February 28, 2012, as further amended by the Certificate of Amendment to Amended and Restated Certificate of Incorporation effective February 7, 2013, and as further amended by the Certificate of Amendment to Amended and Restated Certificate of Incorporation effective September 10, 2014 3.2 Amended and Restated Bylaws of Imprimis Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 3.2 to the Annual Report on Form 8-K of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on March 28, 2014) 3.3 Certificate of Designation of Series A Convertible Preferred Stock of Imprimis Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on December 20, 2011) 3.4 Amended and Restated Certificate of Incorporation, filed July 2, 2018 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on July 2, 2018) 3.5 Amendment to the Restated Certificate of Incorporation for the name change, filed as of December 27, 2018 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on December 31, 2018) 4.1* Description of the Company’s Securities 10.1 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. filed with the Securities and Exchange Commission on September 21, 2007) 10.2# Imprimis Pharmaceuticals, Inc. Amended and Restated 2007 Stock Incentive and Awards Plan (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on May 8, 2013) 10.3# Amendment No. 1 to Imprimis Pharmaceuticals, Inc. Amended and Restated 2007 Incentive Stock and Awards Plan (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on November 6, 2013) 10.4# Form of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 10.12 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on September 21, 2007) 10.5# Form of Non-Qualified Stock Option Agreement (incorporated herein by reference to Exhibit 10.13 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on September 21, 2007) 50 10.6# Form of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on May 8, 2013) 10.7# Stand-alone Restricted Stock Unit Agreement, dated July 18, 2012, granted by Imprimis Pharmaceuticals, Inc. to Mark L. 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) 10.8# Stand-alone Restricted Stock Unit Agreement, dated July 18, 2012, granted by Imprimis Pharmaceuticals, Inc. to Robert J. 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) 10.9 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) 10.10# Amended and Restated Employment Agreement, dated May 2, 2013, by and between Imprimis Pharmaceuticals, Inc. and Mark L. Baum (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 May 8, 2013) 10.11# Performance Stock Units Agreement, dated May 2, 2013, by and between Imprimis Pharmaceuticals, Inc. and Mark L. Baum (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on August 14, 2013) 10.12# Amended and Restated Employment Agreement, effective as of February 1, 2015, by and between Imprimis Pharmaceuticals, Inc. and Andrew R. Boll (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 February 2, 2015) 10.13# Performance Stock Units Award Agreement, effective as of February 1, 2015, by and between Imprimis Pharmaceuticals, Inc. and Andrew R. Boll (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 February 2, 2015) 10.14# Employment Agreement, effective as of February 1, 2015, by and between Imprimis Pharmaceuticals, Inc. and John P. Saharek (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 February 2, 2015) 10.15 Warrant to Purchase Stock, dated May 11, 2015, issued by Imprimis Pharmaceuticals, Inc. (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 May 12, 2015) 10.16 Warrant Amendment to Purchase Stock, dated December 27, 2016, issued by Imprimis Pharmaceuticals, Inc. (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 December 29, 2016) 10.17 Form of Securities Purchase Agreement, dated March 21, 2017, between the Registrant and the Investors (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 March 22, 2017) 10.18 License Agreement dated April 1, 2017 between Imprimis Pharmaceuticals, Inc. and Richard L. Lindstrom, M.D. (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 April 6, 2017) 10.19 Strategic Sales & Marketing Agreement dated April 13, 2017 between Imprimis Pharmaceuticals, Inc. and Cameron Ehlen Group, 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 April 17, 2017) 10.20 Strategic Sales & Marketing Agreement dated April 28, 2017 between Imprimis Pharmaceuticals, Inc. and SightLife Surgical, 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 May 2, 2017) 10.21# Consulting Agreement dated May 1, 2017 between Eton Pharmaceuticals, Inc. and Mark L. Baum (incorporated herein by reference to Exhibit 10.8 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on August 10, 2017) 10.22# Consulting Agreement dated May 1, 2017 between Eton Pharmaceuticals, Inc. and Andrew R. Boll (incorporated herein by reference to Exhibit 10.9 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on August 10, 2017) 10.23# Consulting Agreement dated May 1, 2017 between Eton Pharmaceuticals, Inc. and John P. Saharek (incorporated herein by reference to Exhibit 10.10 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on August 10, 2017) 51 10.24 Asset Purchase and License Agreement (pentoxifylline) dated May 9, 2017 between Imprimis Pharmaceuticals, Inc. and Eton 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 June 20, 2017) 10.25 Asset Purchase and License Agreement (corticotropin) dated May 9, 2017 between Imprimis Pharmaceuticals, Inc. and Eton Pharmaceuticals, Inc. (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 20, 2017) 10.26 Management Services Agreement dated May 1, 2017 between Imprimis Pharmaceuticals, Inc. and Eton Pharmaceuticals, Inc. (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 20, 2017) 10.27 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) 10.28 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) 10.29 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) 10.30 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) 10.31 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) 10.32 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) 10.33# Consulting Agreement dated October 27, 2017 between Surface Pharmaceuticals, Inc. and Mark L. Baum (incorporated herein by reference to Exhibit 10.53 to the Annual Report on Form 10-K of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on March 8, 2018) 10.34# Consulting Agreement dated October 27, 2017 between Surface Pharmaceuticals, Inc. and Andrew R. Boll (incorporated herein by reference to Exhibit 10.54 to the Annual Report on Form 10-K of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on March 8, 2018) 10.35# Consulting Agreement dated October 27, 2017 between Surface Pharmaceuticals, Inc. and John P. Saharek (incorporated herein by reference to Exhibit 10.55 to the Annual Report on Form 10-K of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on March 8, 2018) 10.36 Asset Purchase and License Agreement dated September 28, 2017 between Imprimis Pharmaceuticals, Inc. and Surface 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 May 15, 2018) 10.37 Amended and Restated Asset Purchase and License Agreement dated April 10, 2018 between Imprimis Pharmaceuticals, Inc. and Surface Pharmaceuticals, Inc. (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 May 15, 2018) 10.38 Amended and Restated License Agreement dated April 10, 2018 between Imprimis Pharmaceuticals, Inc. and Richard L. Lindstrom, M.D. (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on August 6, 2018) 10.39 Consulting Agreement dated March 1, 2018 between Surface Pharmaceuticals, Inc. and Richard L. Lindstrom, M.D. (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on August 6, 2018) 10.40# Consulting Agreement dated May 1, 2018 between Melt Pharmaceuticals, Inc. and Mark L. Baum (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 13, 2018) 10.41# Consulting Agreement dated May 1, 2018 between Melt Pharmaceuticals, Inc. and Andrew R. Boll (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 13, 2018) 52 10.42# Consulting Agreement dated May 1, 2018 between Melt Pharmaceuticals, Inc. and John P. Saharek (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc. filed with the Securities and Exchange Commission on November 13, 2018) 10.43 Asset Purchase Agreement dated December 11, 2018 between Harrow Health, Inc. (fka Imprimis Pharmaceuticals, Inc.) and Melt Pharmaceuticals, Inc. (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 February 5, 2019) 10.44 Asset Purchase Agreement dated February 1, 2019 between Harrow Health, Inc. and Mayfield Pharmaceuticals, Inc. (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 May 9, 2019) 10.45 Asset Purchase Agreement dated February 1, 2019 between Harrow Health, Inc. and Elle Pharmaceuticals, Inc. (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Harrow Health, Inc. filed with the Securities and Exchange Commission on May 9, 2019) 10.46 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. filed with the Securities and Exchange Commission on May 29, 2019) 10.47# Consulting Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc. and Mark L. Baum (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Harrow Health, Inc. filed with the Securities and Exchange Commission on August 14, 2019) 10.48# Consulting Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc. and Andrew R. Boll (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 August 14, 2019) 10.49# Consulting Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc. and John P. Saharek (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Harrow Health, Inc. filed with the Securities and Exchange Commission on August 14, 2019) 10.50 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. filed with the Securities and Exchange Commission on November 13, 2019) 10.51 License Agreement, dated July 29, 2019, among Stowe Pharmaceuticals, Inc., TGV-Health, LLC and TGV-Ophthalnix, LLC (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Harrow Health, Inc. filed with the Securities and Exchange Commission on November 13, 2019) 10.52# Consulting Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc. and Mark L. 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) 10.53# 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) 10.54# Consulting Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc. and John P. 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) 10.55 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) 10.56 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) 10.57#* Consulting Agreement dated July 1, 2020 between Visionology, Inc. and Mark L. Baum 10.58#* Consulting Agreement dated July 1, 2020 between Visionology, Inc. and Andrew R. Boll 10.59++ 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) 10.60*++ First Amendment to Commercial Alliance Agreement between Eyepoint Pharmaceuticals, Inc. and ImprimisRx, LLC dated November 13, 2020. 21.1* List of Subsidiaries 53 23.1* Consent of Independent Registered Public Accounting Firm 24.1* Power of Attorney (included on the signature page to this Annual Report) 31.1* 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. 31.2* 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. 32.1** 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. Baum, Chief Executive Officer. 32.2** 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. Boll, Chief Financial Officer. 101.INS* XBRL Instant Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH* Inline XBRL Taxonomy Extension Schema Document 101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 has been formatted in Inline XBRL # Management contract or compensatory plan or arrangement. * Filed herewith. ** Furnished herewith. + Confidential treatment has been granted with respect to portions of this exhibit pursuant to Rule 24b-2 of the Exchange Act and these confidential portions have been redacted from the filing that is incorporated herein by reference. A complete copy of this exhibit, including the redacted terms, has been separately filed with the Securities and Exchange Commission. ++ Portions of this exhibit have been omitted in compliance with item 601 of Regulation S-K ITEM 16. FORM 10-K SUMMARY None. 54 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HARROW HEALTH, INC. By: /s/ Mark L. Baum Name: Mark L. Baum Title: Chief Executive Officer (Principal Executive Officer) Date: March 8, 2021 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark L. Baum and Andrew R. Boll, and each of them individually, as his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to any or all amendments to this Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents or any of them the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the foregoing, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Mark L. Baum Chief Executive Officer and Director March 8, 2021 Mark L. Baum (Principal Executive Officer) /s/ Andrew R. Boll Chief Financial Officer March 8, 2021 Andrew R. Boll (Principal Accounting and Financial Officer) /s/ Robert J. Kammer Chairman of the Board of Directors March 8, 2021 Robert J. Kammer /s/ Teresa F. Sparks Director March 8, 2021 Teresa F. Sparks /s/ Richard L. Lindstrom Director March 8, 2021 Richard L. Lindstrom /s/ R. Lawrence Van Horn Director March 8, 2021 R. Lawrence Van Horn 55 FINANCIAL STATEMENTS Harrow Health, Inc. Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets at December 31, 2020 and 2019 F-3 Consolidated Statements of Operations for the years ended December 31, 2020 and 2019 F-4 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2020 and 2019 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2020 and 2019 F-6 Notes to the Consolidated Financial Statements F-7 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Harrow Health, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Harrow Health, Inc. 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. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether 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. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The 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. Stock-Based Compensation – Modified Stock Option Critical Audit Matter Description As 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. Auditing 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. How the Critical Audit Matter Was Addressed in the Audit Our 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. /s/ KMJ Corbin & Company LLP We have served as the Company’s auditor since 2007. Irvine, California March 8, 2021 F- 2 HARROW HEALTH, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) 2020 2019 December 31, 2020 2019 ASSETS Current assets Cash and cash equivalents, including restricted cash of $ 200 $ 4,301 $ 4,949 Investment in Eton Pharmaceuticals 28,455 25,200 Accounts receivable, net 2,662 2,009 Inventories 3,962 3,301 Prepaid expenses and other current assets 751 586 Total current assets 40,131 36,045 Property, plant and equipment, net 4,453 5,375 Operating lease right-of-use assets 6,799 6,559 Intangible assets, net 1,939 2,337 Investment in Surface Ophthalmics 1,314 3,747 Investment in Melt Pharmaceuticals 2,506 4,690 Goodwill 332 332 TOTAL ASSETS $ 57,474 $ 59,085 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities Accounts payable and accrued expenses $ 3,932 $ 7,702 Accrued payroll and related liabilities 2,315 2,117 Deferred revenue and customer deposits 66 57 Current portion of paycheck protection program loan payable 1,259 - Current portion of loan payable, net of unamortized debt discount 2,639 1,772 Current portion of operating lease liabilities 580 629 Current portion of finance lease obligations 8 7 Total current liabilities 10,799 12,284 Operating lease liabilities, net of current portion 6,652 6,338 Finance lease obligations, net of current portion 17 26 Accrued expenses, net of current portion 800 800 Paycheck protection program loan payable, net of current portion 708 - Loan payable, net of current portion and unamortized debt discount 11,670 12,219 TOTAL LIABILITIES 30,646 31,667 COMMITMENTS AND CONTINGENCIES 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 26 26 Additional paid-in capital 104,557 101,728 Accumulated deficit ( 77,400 ) ( 74,043 ) TOTAL HARROW HEALTH STOCKHOLDERS’ EQUITY 27,183 27,711 Noncontrolling interests ( 355 ) ( 293 ) TOTAL EQUITY 26,828 27,418 TOTAL LIABILITIES AND EQUITY $ 57,474 $ 59,085 The accompanying notes are an integral part of these consolidated financial statements F- 3 HARROW HEALTH, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except for share and per share data) 2020 2019 For the Years Ended December 31, 2020 2019 Revenues: Product sales, net $ 48,479 $ 51,137 Other revenues 392 28 Total revenues 48,871 51,165 Cost of sales ( 14,463 ) ( 16,749 ) Gross profit 34,408 34,416 Operating expenses: Selling, general and administrative 31,247 33,088 Research and development 2,413 2,083 Impairment of long-lived assets 363 4,040 Total operating expenses 34,023 39,211 Income (loss) from operations 385 ( 4,795 ) Other income (expense): Interest expense, net ( 2,236 ) ( 2,500 ) Investment (loss) gain from Melt Pharmaceuticals, net ( 2,313 ) 3,968 Investment loss from Surface Ophthalmics, net ( 2,433 ) ( 1,200 ) Investment gain from Eton Pharmaceuticals, net 3,255 3,780 Other (loss) income, net ( 73 ) 630 Total other (loss) income, net ( 3,800 ) 4,678 Loss before income tax provision ( 3,415 ) ( 117 ) Income tax provision 4 8 Total net loss including noncontrolling interests ( 3,419 ) ( 125 ) Net loss attributable to noncontrolling interests 62 293 Net (loss) income attributable to Harrow Health, Inc. $ ( 3,357 ) $ 168 Basic net (loss) income per share of common stock $ ( 0.13 ) $ 0.01 Diluted net (loss) income per share of common stock $ ( 0.13 ) $ 0.01 Weighted average number of common shares outstanding, basic 25,895,352 25,323,159 Weighted average number of common shares outstanding, diluted 25,895,352 26,466,098 The accompanying notes are an integral part of these consolidated financial statements F- 4 HARROW HEALTH, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the Years Ended December 31, 2020 and 2019 (In thousands, except for share data) Shares Value Capital Deficit Equity Interest Equity Common Stock Additional Total Harrow Health, Inc. Total Noncontrolling Total Par Paid-in Accumulated Stockholders’ Equity Stockholders’ Shares Value Capital Deficit Equity Interest Equity Balance at January 1, 2019 24,339,610 $ 24 $ 98,938 $ ( 74,211 ) $ 24,751 $ - $ 24,751 Issuance of common stock in connection with: Exercise of warrants 1,142,528 2 811 - 813 - 813 Exercise of employee options, net of tax withholding 29,793 - ( 44 ) - ( 44 ) - ( 44 ) Issuance of common stock related to vesting of RSUs - - - - - - - Stock-based payment for services provided 15,000 - 234 - 234 - 234 Stock-based compensation expense - - 1,789 - 1,789 - 1,789 Net income (loss) - - - 168 168 ( 293 ) ( 125 ) Balance at December 31, 2019 25,526,931 26 101,728 ( 74,043 ) 27,711 ( 293 ) 27,418 Balance at December 31, 2019 25,526,931 $ 26 $ 101,728 $ ( 74,043 ) $ 27,711 $ ( 293 ) $ 27,418 Issuance of common stock in connection with: Exercise of employee options, net of tax withholding 7,159 - ( 29 ) - ( 29 ) - ( 29 ) Issuance of common stock related to vesting of RSUs 185,785 - - - - - - Stock-based payment for services provided 30,000 - 83 - 83 - 83 Stock-based compensation expense - - 2,775 - 2,775 - 2,775 Net loss - - - ( 3,357 ) ( 3,357 ) ( 62 ) ( 3,419 ) Balance at December 31, 2020 25,749,875 $ 26 $ 104,557 $ ( 77,400 ) $ 27,183 $ ( 355 ) $ 26,828 The accompanying notes are an integral part of these consolidated financial statements F- 5 HARROW HEALTH, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) 2020 2019 For the Years Ended December 31, 2020 2019 CASH FLOWS FROM OPERATING ACTIVITIES Net loss (including noncontrolling interests) $ ( 3,419 ) $ ( 125 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization of property, plant and equipment 1,880 1,936 Amortization of intangible assets 167 209 Amortization of operating lease right-of-use assets 696 518 Provision for bad debt expense 213 - Interest paid-in-kind on SWK Loan 358 - Amortization of debt issuance costs and discount 457 512 Investment gain from Eton Pharmaceuticals, net ( 3,255 ) ( 3,780 ) Investment loss from Surface Ophthalmics, net 2,433 1,200 Investment loss (gain) from Melt Pharmaceuticals, net 2,313 ( 3,968 ) Loss on disposal of equipment 105 108 Impairment of long-lived assets 363 4,040 Stock-based payment of consulting services 83 234 Stock-based compensation 2,775 1,789 Changes in assets and liabilities: Accounts receivable ( 866 ) ( 95 ) Inventories ( 661 ) ( 2,271 ) Prepaid expenses and other current assets ( 294 ) ( 471 ) Accounts payable and accrued expenses ( 4,655 ) 1,342 Accrued payroll and related liabilities 198 ( 166 ) Deferred revenue and customer deposits 9 ( 62 ) NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES ( 1,100 ) 950 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds on sale and disposal of assets 13 4 Investment in patent and trademark assets ( 132 ) ( 369 ) Purchases of property, plant and equipment ( 862 ) ( 1,468 ) NET CASH USED IN INVESTING ACTIVITIES ( 981 ) ( 1,833 ) CASH FLOWS FROM FINANCING ACTIVITIES Payments on finance lease obligations ( 8 ) ( 743 ) Proceeds from SWK loan 1,000 - Principal payments on SWK loan ( 1,497 ) ( 750 ) Payments of costs related to amendment of SWK loan - ( 282 ) Proceeds from Paycheck protection program loan payable 1,967 - Net proceeds from exercise of warrants and stock options, net of taxes remitted for RSU’s and options ( 29 ) 769 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,433 ( 1,006 ) NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 648 ) ( 1,889 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period 4,949 6,838 CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period $ 4,301 $ 4,949 RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH Cash and cash equivalents $ 4,101 $ 4,749 Restricted cash 200 200 CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD $ 4,301 $ 4,949 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for income taxes $ 4 $ 17 Cash paid for interest $ 1,791 $ 1,967 SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Purchase of property, plant and equipment included in accounts payable and accrued expenses $ 214 $ 39 New and revaluation of right-of-use assets obtained in exchange for lease obligation $ 936 $ 753 The accompanying notes are an integral part of these consolidated financial statements F- 6 HARROW HEALTH, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended December 31, 2020 and 2019 (all dollar amounts are expressed in thousands, except share and per share data) NOTE 1. ORGANIZATION Harrow Health, Inc. (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 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-focused pharmaceutical businesses, ImprimisRx. In addition to wholly owning ImprimisRx, the Company also has equity positions in Eton Pharmaceuticals, Inc. (“Eton”), 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. During 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. The Company does not expect the suspension of these operations to have a material impact on the financial results of the Company. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Harrow has prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in 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. The Company controls 100 % of the equity interests in Visionology. All inter-company accounts and transactions have been eliminated in consolidation. Harrow 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. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Significant estimates made by management are, among others, allowance for doubtful accounts and contractual adjustments, renewal periods and discount rates for leases, realizability 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. Risks, Uncertainties and Liquidity The 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. In addition 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. F- 7 Many of the Company’s customers use its drugs in procedures impacted by the CMS guidance to limit elective procedures. In addition, 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. Management 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. Prior to 2020, the Company had incurred significant operating losses and negative cash flows from operations since its inception. The 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 and $ 74,043 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. While 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. The Company may seek to increase liquidity and capital resources through a variety of means which may include, but are not limited to: the sale of assets, investments and/or businesses, obtaining financing through the issuance of equity, debt, or convertible securities; 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 management deems acceptable, or at all. Segments The 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 Interests The Company recognizes any noncontrolling interest as a separate line item in equity in the consolidated financial statements. A noncontrolling interest represents the portion of equity ownership in a less-than-wholly-owned subsidiary not attributable to the Company. Generally, any interest that holds less than 50% of the outstanding voting shares is deemed to be a noncontrolling interest; however, there are other factors, such as decision-making rights, that are considered as well. The Company includes the amount of net loss attributable to noncontrolling interests in consolidated net loss on the face of the consolidated statements of operations. The 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 interests that separately discloses: (1) net income or loss; (2) transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and (3) each component of other income or loss. Revenue Recognition and Deferred Revenue The Company recognizes revenue at the time of transfer of promised goods to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services (see Note 3). F- 8 Cost of Sales Cost of sales includes direct and indirect costs to manufacture formulations and other products sold, including active pharmaceutical ingredients, personnel costs, packaging, storage, royalties, shipping and handling costs and the write-off of obsolete inventory. Research and Development The Company expenses all costs related to research and development as they are incurred. Research and development expenses consist of expenses incurred in performing research and development activities, including salaries and benefits, other overhead expenses, and costs related to clinical trials, contract services and outsourced contracts. Debt Issuance Costs and Debt Discount Debt issuance costs and the debt discount are recorded net of loans payable and finance lease obligations in the consolidated balance sheets. 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. Intellectual Property The costs of acquiring intellectual property rights to be used in the research and development process, including licensing fees and milestone payments, are charged to research and development expense as incurred in situations where the Company has not identified an alternative future use for the acquired rights, and are capitalized in situations where we have identified an alternative future use for the acquired rights. 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” below). The Company began capitalizing certain costs associated with acquiring intellectual property rights during 2015; if costs are not capitalized they are expensed as incurred. Income Taxes The 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. 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 statements of operations. Cash and Cash Equivalents Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition. Concentrations of Credit Risk The Company places its cash with financial institutions deemed by management to be of high credit quality. The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit coverage with limits up to $ 250 per owner. From time to time the Company has cash deposits in excess of FDIC limits. F- 9 Investment in Eton Pharmaceuticals, Inc. – Related Party The 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 per share. 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. Mark Baum, the Company’s Chief Executive Officer, is a member of the board of directors of Eton. Accounts Receivable Accounts receivable are stated net of allowances for doubtful accounts and contractual adjustments. The accounts receivable balance primarily includes amounts due from customers the Company has invoiced or from third-party providers (e.g., insurance companies and governmental agencies), but for which payment has not been received. Charges to bad debt are based on both historical write-offs and specifically identified receivables. Accounts receivable are presented net of allowances for doubtful accounts and contractual adjustments in the amount of $ 98 and $ 76 as of December 31, 2020 and 2019, respectively. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. The Company evaluates the carrying value of inventories on a regular basis, based on the price expected to be obtained for products in their respective markets compared with historical cost. Write-downs of inventories are considered to be permanent reductions in the cost basis of inventories. The Company also regularly evaluates its inventories for excess quantities and obsolescence (expiration), taking into account such factors as historical and anticipated future sales or use in production compared to quantities on hand and the remaining shelf life of products and active pharmaceutical ingredients on hand. The Company establishes reserves for excess and obsolete inventories as required based on its analyses. Investment in Melt Pharmaceuticals, Inc. – Related Party In 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 sale of Melt’s Series A Preferred Stock (the “Melt Series A Stock”), totaling approximately $ 11,400 of proceeds (collectively, the “Melt Series A Round”) at a purchase price of $ 5.00 per share. As a result, the Company lost voting and ownership control of Melt and ceased consolidating Melt’s financial statements. In 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 . The Company owns 3,500,000 common shares of Melt (which is approximately 44 % 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 and $ 722 , respectively, due from Melt for reimbursable expenses and amounts due under the Melt Master Services Agreement (“MSA”). See Note 4 for more information and related party disclosure regarding Melt. Investment in Surface Ophthalmics, Inc. – Related Party The Company owns 3,500,000 common shares (which is approximately 30 % 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 Surface. 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. 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. See Note 5 for more information and related party disclosure regarding Surface. F- 10 Property, Plant and Equipment Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization is calculated using the straight-line method over the estimated useful life of the asset. Leasehold improvements and capital lease equipment are amortized over the estimated useful life or remaining lease term, whichever is shorter. Computer software and hardware and furniture and equipment are depreciated over three to five years . Business Combinations The Company accounts for business combinations by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples of critical estimates in valuing certain of the intangible assets the Company has acquired or may acquire in the future include but are not limited to: ● future expected cash flows from product sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies and patents; and ● discount rates utilized in valuation estimates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated financial position, statements of operations or cash flows in the period of the change in the estimate. Goodwill and Intangible Assets 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. At that time, the Company capitalizes third-party legal costs and filing fees associated with obtaining and prosecuting claims related to its patents and trademarks. 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. Trademarks are an indefinite life intangible asset and are assessed for impairment based on future projected cash flows as further described below. The Company reviews its goodwill and indefinite-lived intangible assets for impairment as of January 1 of each year and when an event or a change in circumstances indicates the fair value of a reporting unit may be below its carrying amount. Events or changes in circumstances considered as impairment indicators include but are not limited to the following: ● significant underperformance of the Company’s business relative to expected operating results; ● significant adverse economic and industry trends; ● significant decline in the Company’s market capitalization for an extended period of time relative to net book value; and ● expectations that a reporting unit will be sold or otherwise disposed. The goodwill impairment test consists of a two-step process as follows: Step 1. The Company compares the fair value of each reporting unit to its carrying amount, including the existing goodwill. The fair value of each reporting unit is determined using a discounted cash flow valuation analysis. The carrying amount of each reporting unit is determined by specifically identifying and allocating the assets and liabilities to each reporting unit based on headcount, relative revenues or other methods as deemed appropriate by management. 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. F- 11 Step 2. 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. Impairment of Long-Lived Assets Long-lived assets, such as property, plant and equipment, purchased intangibles subject to amortization and patents and trademarks, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material. Park Restructuring In 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. Under the terms of the Park Purchase Agreement, Park had agreed to sell substantially all its assets associated with its non-ophthalmology pharmaceutical compounding business to Noice, including its pharmacy facility and equipment located in Irvine, California. The closing of the sale transaction was dependent on the California State Board of Pharmacy approving of the sale and issuing a temporary pharmacy and sterile license permit to Noice, which did not occur and led to Park ceasing operations at the close of business on August 27, 2019. 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”). 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. The 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 retained approximately half of Park’s historical revenues during the first quarter of 2020. Fair Value Measurements Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The established fair value hierarchy prioritizes the use of inputs used in valuation methodologies into the following three levels: ● Level 1: Applies to assets or liabilities for which there are quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available. ● Level 2: Applies to assets or liabilities for which there are significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. ● Level 3: 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. For example, Level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method. At 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, 2020 and 2019, the fair market value of the Company’s investment in Eton was $ 28,455 and $ 25,200 , respectively. F- 12 The 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. The Company’s restricted cash which is comprised of 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 loans payable and operating and finance lease liabilities approximate their respective fair values. Stock-Based Compensation All 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 fair values. 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. 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. Basic and Diluted Net Income (Loss) per Common Share Basic 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. Basic and diluted net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period. Common stock equivalents (using the treasury stock or “if converted” method) from stock options, unvested restricted stock units (“RSUs”) and warrants were 5,411,929 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 (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. The 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): SCHEDULE OF BASIC EARNINGS PER COMMON SHARE 2020 2019 For the Year Ended December 31, 2020 2019 Numerator – net (loss) income attributable to Harrow Health, Inc. $ ( 3,357 ) $ 168 Denominator – weighted average number of shares outstanding, basic 25,895,352 25,323,159 Net (loss) income per share, basic $ ( 0.13 ) $ 0.01 For 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): SCHEDULE OF DILUTED COMMON EQUIVALENT SHARES For the Year Ended December 31, 2019 Diluted shares related to: Warrants 488,498 Stock options 654,441 Dilutive common equivalent shares 1,142,939 F- 13 The 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 year ended December 31, 2019 (in 000’s, except share and per share amounts): SCHEDULE OF DILUTED EARNINGS PER COMMON SHARE   December 31, 2019 For the Year Ended   December 31, 2019 Numerator – net income $ 168 Weighted average number of shares outstanding, basic 25,323,159 Dilutive common equivalents 1,142,939 Denominator – number of shares used for diluted earnings per share computation 26,466,098 Net income per share, diluted $ 0.01 Recently Adopted Accounting Pronouncements In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments , which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model which will result in earlier recognition of credit losses. 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. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other . This guidance simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the current two-step impairment test under ASC 350. The updated standard eliminates the requirement to calculate a goodwill impairment charge using Step 2. If 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. 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. In August 2018, the FASB issued ASU 2018-13, Changes to Disclosure Requirements for Fair Value Measurements , which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements. The standard removes, modifies, and adds certain disclosure requirements. 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. Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Income Taxes : Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes. This guidance will be effective for the Company in the first quarter of 2021 on a prospective basis, and early adoption is permitted. The Company does not expect a material impact of the new guidance on its consolidated financial statements. Reclassifications Certain 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. NOTE 3. REVENUES The Company accounts for contracts with customers in accordance with ASC 606, Revenues from Contracts with Customers. The Company 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. F- 14 Product Revenues from Pharmacy Services The Company sells prescription drugs directly through our pharmacy and outsourcing facility network. Revenue from our pharmacy services divisions includes: (i) the portion of the price the client pays directly to us, net of any volume-related or other discounts paid back to the client, (ii) the price paid to us by individuals, and (iii) customer copayments made directly to the pharmacy network. Sales taxes are not included in revenue. Following the core principles of ASC 606, we have identified the following: 1. Identify the contract(s) with a customer: A contract exists with a customer at the time the prescription or order is received by the Company. 2. Identify the performance obligations in the contract: The order received contains the performance obligations to be met, in almost all cases the product the customer is wishing to receive. If we are unable to be meet the performance obligation the customer is notified. 3. Determine the transaction price: the transaction price is based on the product being sold to the customer, and any related customer discounts. These amounts are pre-determined and built into our order management software. 4. Allocate the transaction price to the performance obligations in the contract: The transaction price associated with the product(s) being ordered is allocated according to the pre-determined amounts. 5. Recognize revenue when (or as) the entity satisfies a performance obligation: At the time of shipment from the pharmacy or outsourcing facility the performance obligation has been met. The following revenue recognition policy has been established for the pharmacy services division: Revenues generated from prescription or office use drugs sold by our pharmacies and outsourcing facility are recognized when the prescription is shipped. At the time of shipment, the pharmacy services division has performed substantially all of its obligations under its client contracts and does not experience a significant level of returns or reshipments. 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. The Company records reductions to revenue for discounts at the time of the initial sale. Estimated returns and allowances and other adjustments are provided for in the same period during which the related sales are recorded and are based on actual returns history. The rate of returns is analyzed annually to determine historical returns experience. If the historical data we use to calculate these estimates do not properly reflect future returns, then a change in the allowance would be made in the period in which such a determination is made and revenues in that period could be materially affected. The Company will defer any revenues received for a product that has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered and no refund will be required. Commission Revenues During 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. The revenue 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. Intellectual Property License Revenues The 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 may consist of non-refundable upfront license fees, data transfer fees, research reimbursement payments, exclusive license rights to patented or patent pending compounds, technology access fees, and various performance or sales milestones. These arrangements can be multiple-element arrangements, the revenue of which is recognized at the point of time the performance obligation is met. Non-refundable fees that are not contingent on any future performance by the Company and require no consequential continuing involvement on the part of the Company are recognized as revenue when the license term commences and the licensed data, technology, compounded drug preparation and/or other deliverable is delivered. Such deliverables may include physical quantities of compounded drug preparations, design of the compounded drug preparations and structure-activity relationships, the conceptual framework and mechanism of action, and rights to the patents or patent applications for such compounded drug preparations. The Company defers recognition of non-refundable 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 performed by the Company, then such non-refundable fees are deferred and recognized over the period of continuing involvement. Guaranteed minimum annual royalties are recognized on a straight-line basis over the applicable term. F- 15 Revenue disaggregated by revenue source for the years ended December 31, 2020 and 2019, consists of the following: SCHEDULE OF DISAGGREGATED REVENUE 2020 2019 For the Years Ended December 31, 2020 2019 Product sales, net $ 48,479 $ 51,137 Commissions 356 - License 36 28 Total revenues $ 48,871 $ 51,165 Deferred revenue and customer deposits at December 31, 2020 and 2019, were $ 66 and $ 57 , respectively. All deferred revenue and customer deposit amounts at December 31, 2019 were recognized as revenue during the year ended December 31, 2020. NOTE 4. INVESTMENT IN MELT PHARMACEUTICALS, INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS In 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 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 . In 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 is required to pay the Company a monthly amount of $ 10 . As of December 31, 2020 and 2019, the Company was due $ 851 and $ 722 , 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. The 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. Baum, Mr. Dillaha and the Company’s Chief Financial Officer, Andrew Boll) entered into consulting agreements and provide consulting services to Melt. The unaudited condensed results of operations information of Melt is summarized below: SCHEDULE OF CONDENSED INCOME STATEMENT For the Years Ended December 31, 2020 2019 Revenues, net $ - $ - Loss from operations 5,019 4,381 Net loss $ ( 5,019 ) $ ( 4,381 ) The unaudited condensed balance sheet information of Melt is summarized below: SCHEDULE OF CONDENSED BALANCE SHEET December 31, 2020 2019 Current assets $ 2,947 $ 7,449 Non current assets 11 5 Total assets $ 2,958 $ 7,454 Total liabilities $ 1,778 $ 1,691 Total preferred stock and stockholders’ equity 1,180 5,763 Total liabilities and stockholders’ equity $ 2,958 $ 7,454 F- 16 NOTE 5. INVESTMENT IN SURFACE OPHTHALMICS, INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS The 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 Products”). 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. As of December 31, 2020, the Company owned 3,500,000 shares of Surface common stock (approximately 30 % of the issued and outstanding equity interests). A Company director, Richard L. 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. Dr. 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. Baum and Dr. Lindstrom) entered into consulting agreements and provided consulting services to Surface. The unaudited condensed results of operations information of Surface is summarized below: SUMMARY OF CONDENSED INCOME STATEMENT For the Year s Ended December 31, 2020 2019 Revenues, net $ - $ - Loss from operations 8,109 4,000 Net loss $ ( 8,109 ) $ ( 4,000 ) The unaudited condensed balance sheet information of Surface is summarized below: SUMMARY OF CONDENSED BALANCE SHEET December 31, 2020 2019 Current assets $ 9,074 $ 15,942 Non current assets 45 47 Total assets 9,119 15,989 Total liabilities $ 1,666 $ 619 Total stockholders’ equity 7,453 15,370 Total liabilities and stockholders’ equity $ 9,119 $ 15,989 NOTE 6. RESTRICTED CASH The restricted cash at December 31, 2020 and 2019 consisted of funds held in a money market account. At December 31, 2020 and 2019, the restricted cash was recorded at amortized cost, which approximates fair value. At December 31, 2020 and 2019, 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. NOTE 7. INVENTORIES Inventories are comprised of finished compounded formulations, over-the-counter and prescription retail pharmacy products, commercial pharmaceutical products, related laboratory supplies and active pharmaceutical ingredients. The composition of inventories as of December 31, 2020 and 2019 was as follows: SCHEDULE OF INVENTORIES 2020 2019 December 31, 2020 2019 Raw materials $ 2,501 $ 2,405 Work in progress 17 20 Finished goods 1,444 876 Total inventories $ 3,962 $ 3,301 F- 17 NOTE 8. PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets consisted of the following: SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS 2020 2019 December 31, 2020 2019 Prepaid insurance $ 160 $ 123 Other prepaid expenses 401 358 Deposits and other current assets 190 105 Total prepaid expenses and other current assets $ 751 $ 586 NOTE 9. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net at December 31, 2020 and 2019 consisted of the following: SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT 2020 2019 December 31, 2020 2019 Property, plant and equipment, net: Computer software and hardware $ 1,707 $ 1,732 Furniture and equipment 418 363 Lab and pharmacy equipment 3,426 3,164 Leasehold improvements 5,720 5,510 Property, plant and equipment, gross 11,271 10,769 Accumulated depreciation and amortization ( 6,818 ) ( 5,394 ) Property, plant and equipment, net $ 4,453 $ 5,375 During 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 and $ 1,936 during the years ended December 31, 2020 and 2019, respectively. NOTE 10. INTANGIBLE ASSETS AND GOODWILL The Company’s intangible assets at December 31, 2019 consisted of the following: SCHEDULE OF INTANGIBLE ASSETS Amortization periods Accumulated Net (in years) Cost amortization Impairment Carrying value Patents 17 - 19 years $ 1,102 $ ( 97 ) $ ( 259 ) $ 746 Licenses 20 years 50 ( 5 ) - 45 Trademarks Indefinite 340 - - 340 Customer relationships 3 - 15 years 3,000 ( 1,165 ) ( 630 ) 1,205 Trade name 5 years 16 ( 14 ) ( 2 ) - Non-competition clause 3 - 4 years 294 ( 274 ) ( 20 ) - State pharmacy licenses 25 years 45 ( 9 ) ( 35 ) 1 $ 4,847 $ ( 1,564 ) $ ( 946 ) $ 2,337 During 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. F- 18 The Company’s intangible assets at December 31, 2020 consisted of the following: Amortization periods Accumulated Net (in years) Cost amortization Impairment Carrying value Patents 17 - 19 years $ 929 $ ( 93 ) $ ( 363 ) $ 473 Licenses 20 years 50 ( 6 ) - 44 Trademarks Indefinite 356 - - 356 Customer relationships 3 - 15 years 1,519 ( 454 ) - 1,065 Trade name 5 years 5 ( 5 ) - - Non-competition clause 3 - 4 years 50 ( 50 ) - - State pharmacy licenses 25 years 8 ( 7 ) - 1 $ 2,917 $ ( 615 ) $ ( 363 ) $ 1,939 During 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. Amortization expense for intangible assets for the years ended December 31, 2020 and 2019 were as follows: SCHEDULE OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS For the Years Ended December 31, 2020 2019 Patents $ 32 $ 48 Licenses 1 5 Customer relationships 134 151 Trade name - 1 State pharmacy licenses - 4 $ 167 $ 209 Estimated future amortization expense for the Company’s intangible assets at December 31, 2020 is as follows: SCHEDULE OF ESTIMATED FUTURE AMORTIZATION EXPENSE Years ending December 31, Dec 2021 187 2022 187 2023 187 2024 160 2025 147 Thereafter 715 Intangible assets $ 1,583 There were no 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: SCHEDULE OF GOODWILL Dec Balance at December 31, 2018 $ 2,227 Impairment of Park goodwill (see Note 2) ( 1,895 ) Balance at December 31, 2019 $ 332 NOTE 11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses at December 31, 2020 and 2019 consisted of the following: SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES 2020 2019 December 31, 2020 2019 Accounts payable $ 3,645 $ 7,409 Other accrued expenses 49 49 Accrued interest (see Note 12) 238 244 Accrued exit fee for note payable (see Note 12) 800 800 Total accounts payable and accrued expenses 4,732 8,502 Less: Current portion ( 3,932 ) ( 7,702 ) Non-current total accrued expenses $ 800 $ 800 F- 19 NOTE 12. DEBT SWK Senior Note – 2017 In 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. 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. Prior 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 per quarter. All 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. The 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 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. In 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 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; seven-year contractual term; 113.5 % volatility; 0 % dividend rate; and a risk-free interest rate of 1.77 %. 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. SWK Refinance – May 2019 In 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: ● The 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%; ● Leverage ratio in the Amendment means, as of any date of determination, the ratio of: (a) indebtedness as of such date to (b) EBITDA (as defined in the SWK Loan), of the Company for the immediately preceding twelve (12) month period, adding-back (i) actual litigation expenses for the immediately preceding twelve (12) month period, minus (ii) actual litigation expenses for the immediately preceding three (3) month period multiplied by four (4); ● The definition of the first amortization date was changed to May 14, 2020, permitting the Company to pay interest only on the principal amount loaned for the next four payments (payments are due on a quarterly basis) following the Amendment; ● Subject to the satisfaction of certain revenue and market capitalization requirements and conditions, SWK agreed to make available to the Company an additional principal amount of up to $ 5,000 ; and ● The maturity date was changed to July 19, 2023 . F- 20 Related 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. In 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 financial statements and lose 50 % or more of the equity interests of the subsidiary. Second Amendment to SWK Loan On 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: ● SWK agreed to make available to the Company, and the Company drew down on, an additional principal amount of $ 1,000 ; ● The 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; and ● The 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. Interest expense related to the SWK Loan Agreement, as amended, amounted to $ 1,768 and $ 1,960 for the years ended December 31, 2020 and 2019, respectively, and included amortization of debt issuance costs and discount of $ 457 and $ 512 for the years ended December 31, 2020 and 2019, respectively. Paycheck Protection Program Loan In 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”). Under the terms of the PPP Loan, interest accrues on the outstanding principal at the rate of 1.0 % per annum. 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. The 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. No interest expense was recognized for the year ended December 31, 2020 related to the PPP Loan. F- 21 At December 31, 2020, future minimum payments under the Company’s debt were as follows: SUMMARY OF FUTURE MINIMUM PAYMENTS Amount 2021 $ 5,794 2022 4,700 2023 9,511 Total minimum payments 20,005 Less: amount representing interest ( 2,927 ) Notes payable, gross 17,078 Less: unamortized discount ( 802 ) Notes payable 16,276 Less: current portion, net of unamortized discount ( 3,898 ) Note payable, net of current portion and unamortized debt discount $ 12,378 NOTE 13. LEASES The Company leases office and laboratory space under the non-cancelable operating leases listed below. These lease agreements have remaining lease terms between one to four years and contain various clauses for renewal at the Company’s option. ● An operating lease for 10,200 square feet of office space in San Diego, California, that expires in December 2021 , with an option to extend the term for a five-year period ; ● An operating lease for 26,400 square feet of lab, warehouse and office space in Ledgewood, New Jersey, that expires in July 2026 , with an option to extend the term for 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; and ● An 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 . During 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. At 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 % and 6.3 % and 11.2 and 10.21 years, respectively. During the years ended December 31, 2020 and 2019, cash paid for amounts included for the operating lease liabilities was $ 1,052 and $ 905 , respectively, and the Company recorded operating lease expense of $ 1,066 and $ 892 , respectively, included in selling, general and administrative expenses. Future lease payments under operating leases (including options to extend) as of December 31, 2020 were as follows : SCHEDULE OF FUTURE LEASE PAYMENT UNDER OPERATING LEASES Dec 31, 2020 Operating Leases 2021 $ 1,017 2022 1,038 2023 1,064 2024 1,090 2025 916 Thereafter 5,141 Total minimum lease payments 10,266 Less: amount representing interest payments ( 3,034 ) Total operating lease liabilities 7,232 Less: current portion, operating lease liabilities ( 580 ) Operating lease liabilities, net of current portion $ 6,652 The Company also has a finance lease for equipment which requires monthly payments of $ 1 through January 2024. F- 22 Future lease payments under the finance lease as of December 31, 2020 were as follows : SCHEDULE OF FUTURE LEASE PAYMENT UNDER FINANCE LEASE Dec 31, 2020 Finance Lease 2021 $ 9 2022 9 2023 9 2024 1 Total minimum lease payments 28 Less: amount representing interest payments ( 3 ) Present value of future minimum lease payments 25 Less: current portion, finance lease obligation ( 8 ) Finance lease obligation, net of current portion $ 17 At 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 % and 6.36 % and 3.08 and 4.08 years, respectively. For the years ended December 31, 2020 and 2019: ● debt discount amortization related to a finance lease obligation was $ 0 and $ 17 , respectively; ● amortization expense related to the equipment held under the finance lease obligations was $ 8 and $ 150 , respectively; and ● cash paid and expense recognized for interest expense related to the finance lease obligation was $ 2 and $ 18 , respectively. NOTE 14. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION Common Stock At December 31, 2020 and 2019, the Company had 50,000,000 shares of common stock, $ 0.001 par value, authorized, respectively. Issuances During the Year Ended December 31, 2019 During the year ended December 31, 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 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 ; ● the 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 ; ● the 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; ● the 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 ; and ● the 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. F- 23 Issuances During the Year Ended December 31, 2020 During the year ended December 31, 2020: ● the 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; ● the 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; ● the 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; ● the 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; and ● 35,224 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. Preferred Stock At 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. Stock Option Plan On 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 awards under this plan, however, options previously issued under the 2007 Plan will remain outstanding until they are exercised, 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”). 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 stock options intended to qualify under Section 422 of the Internal Revenue Code, non-qualified stock options, restricted stock units and restricted stock. The Plans are administered by the Compensation Committee of the Company’s Board of Directors. The Company had 342,882 shares available for future issuances under the 2017 Plan at December 31, 2020. Stock Options A summary of stock option activity under the Plan for the year ended December 31, 2020 is as follows: SCHEDULE OF STOCK OPTION PLAN ACTIVITY Number of shares Weighted Avg. Exercise Price Weighted Avg. Remaining Contractual Life Aggregate Intrinsic Value Options outstanding - January 1, 2020 2,656,683 $ 5.31 Options granted 414,500 $ 6.44 Options exercised ( 19,748 ) $ 3.19 Options cancelled/forfeited ( 21,402 ) $ 12.77 Options outstanding - December 31, 2020 3,030,033 $ 5.43 5.72 $ 5,569 Options exercisable 1,908,849 $ 4.49 5.25 $ 5,051 Options vested and expected to vest 2,918,298 $ 5.37 5.69 $ 5,519 The 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, 2020, based on the closing price of the Company’s common stock of $ 6.86 on that date. The intrinsic value of the options exercised in 2020 was $ 50 . F- 24 During 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 schedules: 25% of the shares subject to the option vest and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over three years; and 100% of the shares subject to the option vest on a quarterly basis in equal installments over three years. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plans) and in the event of certain modifications to the option award agreement. On 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 % . With 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. 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 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. 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 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: SCHEDULE OF FAIR VALUE ASSUMPTIONS 2020 2019 Weighted-average fair value of options granted $ 3.86 $ 3.72 Expected terms (in years) 0.50 - 6.11 5.07 - 7.00 Expected volatility 67 – 71 % 64 - 78 % Risk-free interest rate 0.34 – 1.64 % 1.83 – 2.68 % Dividend yield - - The following table summarizes information about stock options outstanding and exercisable at December 31, 2020: SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE Weighted Average Weighted Weighted Remaining Average Average Number Contractual Exercise Number Exercise Range of Exercise Prices Outstanding Life in Years Price Exercisable Price $ 1.47 - $ 2.60 770,440 5.64 $ 2.06 745,255 $ 2.06 $ 3.04 - $ 4.50 517,002 5.75 $ 3.98 438,873 $ 3.98 $ 5.49 - $ 6.36 496,350 7.22 $ 6.10 291,919 $ 6.13 $ 6.64 - $ 8.99 1,246,241 5.17 $ 7.85 432,802 $ 8.09 $ 1.47 - $ 8.99 3,030,033 5.72 $ 5.43 1,908,849 $ 4.49 As of December 31, 2020, there was approximately $ 2,794 of total unrecognized compensation expense related to unvested stock options granted under the Plan. That expense is expected to be recognized over the weighted-average remaining vesting period of 3.96 years. The stock-based compensation for all stock options was $ 1,579 and $ 889 during the years ended December 31, 2020 and 2019, respectively. Restricted Stock Units RSU 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. F- 25 Grants During the Year Ended December 31, 2019 During 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. During 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. A 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 Number of RSUs Weighted Average Grant Date Fair Value RSUs unvested - January 1, 2019 1,275,680 $ 2.16 RSUs granted 223,860 $ 6.43 RSUs vested ( 87,610 ) $ 3.42 RSUs cancelled/forfeited - RSUs unvested at December 31, 2019 1,411,930 $ 2.76 Grants During the Year Ended December 31, 2020 During the year ended December 31, 2020, 161,000 RSUs with a fair market value of $ 1,025 were issued to certain employees; the RSUs vest in full on the third anniversary of the grant date. During the 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. A summary of the Company’s RSU activity and related information for the year ended December 31, 2020 is as follows: Number of RSUs Weighted Average Grant Date Fair Value RSUs unvested - January 1, 2020 1,411,930 $ 2.76 RSUs granted 251,524 $ 6.11 RSUs vested ( 61,945 ) $ 6.46 RSUs cancelled/forfeited - RSUs unvested at December 31, 2020 1,601,509 $ 3.14 As of December 31, 2020, the total unrecognized compensation expense related to unvested RSUs was approximately $ 1,363 which is expected to be recognized over a weighted-average period of 3.14 years, based on estimated vesting schedules. The stock-based compensation for RSUs was $ 1,167 and $ 879 during the years ended December 31, 2020 and 2019, respectively. Subsidiary Stock-Based Transactions Mayfield Pharmaceuticals, Inc. - 2019 During the year ended December 31, 2019: ● Mayfield 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; ● Mayfield 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; and ● 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. F- 26 Mayfield Pharmaceuticals, Inc. - 2020 During the year ended December 31, 2020: ● Mayfield repurchased 650,000 shares of its common stock from Elle, for an aggregate purchase price of $ 1 ; ● 500,000 shares of Mayfield’s restricted common stock were forfeited by a consultant; and ● Mayfield issued 475,000 shares of its restricted common stock, with a fair value of $ 11 , that vest upon various performance-based milestones and over a four-year service period to Mayfield’s Chief Executive Officer candidate. During the year ended December 31, 2020, the Company recognized $ 20 in stock-based compensation for Mayfield stock options. Stowe Pharmaceuticals, Inc. - 2019 In 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. Visionology, Inc. - 2020 During 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. The 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: SCHEDULE OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES DIRECTORS CONSULTANTS For the Years Ended December 31, 2020 2019 Employees – selling, general and administrative $ 2,289 $ 1,464 Directors – selling, general and administrative 473 300 Consultants – selling, general and administrative 96 259 Total $ 2,858 $ 2,023 Warrants From 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. A summary of warrant activity during the year ended December 31, 2020 is as follows: SCHEDULE OF WARRANTS ACTIVITY Number of Shares Subject to Warrants Outstanding Weighted Avg. Exercise Price Warrants outstanding - January 1, 2020 780,386 $ 2.12 Granted - Exercised - - Expired - - Warrants outstanding and exercisable - December 31, 2020 780,386 $ 2.12 Weighted average remaining contractual life of the outstanding warrants in years - December 31, 2020 3.53 All warrants outstanding as of December 31, 2020 are included in the following table: SCHEDULE OF WARRANTS OUTSTANDING AND WARRANTS EXERCISABLE Warrants Outstanding Warrants Exercisable Warrants Exercise Warrants Expiration Warrant Series Issue Date Outstanding Price Exercisable Date Lender warrants 5/11/2015 125,000 $ 1.79 125,000 5/11/2025 Settlement warrants 8/16/2016 40,000 $ 3.75 40,000 8/16/2021 Lender warrants (see Note 12) 7/19/2017 615,386 $ 2.08 615,386 7/19/2024 780,386 $ 2.12 780,386 F- 27 NOTE 15. INCOME TAXES The Company is subject to taxation in the United States, California, Florida, Georgia, Illinois, New Jersey, New York, Tennessee and Wisconsin. The Company’s income tax provision consists of the following: SCHEDULE OF PROVISION FOR INCOME TAXES December 31, 2020 2019 Current: Federal $ - $ - State 4 8 Total current expense 4 8 Deferred: Federal ( 771 ) 669 State 138 ( 148 ) Change in valuation allowance 633 ( 521 ) Total deferred expense - - Income tax provision $ 4 $ 8 A reconciliation of income taxes computed by applying the statutory U.S. 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 December 31, 2020 2019 U.S. federal statutory tax rate 21.00 % 21.00 % State tax benefit, net ( 0.11 )% ( 6.73 )% Stock-based compensation 5.52 % 3.10 % Other ( 0.38 )% ( 358.67 )% Valuation allowance ( 26.14 )% 334.57 % Effective income tax rate ( 0.11 )% ( 6.73 )% Deferred 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: SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES 2020 2019 December 31, 2020 2019 Deferred tax assets (liabilities): NOL’s $ 19,685 $ 19,827 Depreciation and amortization 528 224 Other 413 641 Research and development credits 596 596 Deferred stock-based compensation 4,024 3,533 Basis difference in Melt ( 398 ) ( 1,119 ) Basis difference in Surface ( 502 ) ( 1,185 ) Basis difference in Eton ( 8,626 ) ( 7,528 ) Capital losses 63 63 Park stock purchase identifiable intangibles ( 274 ) ( 270 ) Limitation under 163(j) 195 299 ASC 842 lease liability 2,192 2,082 ASC 842 ROU asset ( 2,061 ) ( 1,959 ) Total deferred tax assets, net 15,835 15,202 Valuation allowance ( 15,835 ) ( 15,202 ) Net deferred tax assets $ - $ - F- 28 Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $ 633 and decreased by $ 521 during 2020 and 2019, respectively. At 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. Utilization 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 groups. 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. The 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 tax benefit. 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. As 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. F- 29 NOTE 16. EMPLOYEE SAVINGS PLAN The Company has established an employee savings plan pursuant to Section 401(k) of the Internal Revenue Code, effective January 1, 2014. The plan allows participating employees to deposit into tax deferred investment accounts up to 100 % of their salary, subject to annual limits. The Company makes certain matching contributions to the plan in amounts up to 4 % of the participants’ annual cash compensation, subject to annual limits. The Company contributed approximately $ 272 and $ 312 to the plan during the years ended December 31, 2020 and 2019, respectively. NOTE 17. COMMITMENTS AND CONTINGENCIES Legal Dr. Sobol In December 2016, Louis L. Sobol, M.D. (“Sobol”) filed a lawsuit in the U.S. District Court for the Eastern District of Michigan, Southern Division against the Company, asserting claims on behalf of himself and an as-yet-uncertified class of consumers. The claims allege violations under the Telephone Consumer Protection Act, 47 U.S.C. § 227 via the Company’s alleged transmittal of advertisements to its clients via facsimile. The Court approved the parties’ proposed settlement agreement in the spring of 2019. During the year ended December 31, 2018, the Company accrued $ 640 for expected damages related to this matter and the proposed settlement amount. 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. This formally resolved all known disputes between the parties. Allergan USA In 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. 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 year ended December 31, 2019 (see Note 11). In July 2019, the Court entered a permanent injunction, the scope of which is limited to compounded drugs prepared in, dispensed from within, or shipped to the state of California. 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; 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” list. The Company believes it was already in compliance with the order, prior to the injunction being ordered. 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. No economic consideration was exchanged between the parties related to the filing of the joint stipulation. This formally resolved all known disputes between the parties. California Board of Pharmacy In March 2018, the California Board of Pharmacy filed an accusation against Park related to a compounded formulation the Company believes was legally dispensed and was, without its knowledge, inappropriately administered to a patient unknown to Park, by the prescribing healthcare professional. Park filed a response to the accusation and requested a formal hearing. 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. Pursuant to the terms of the Settlement Agreement, Park was required to, and did, surrender its California pharmacy license by August 27, 2019. This formally resolved all known disputes between the parties. Novel Drug Solutions et al. In April 2018, Novel Drug Solutions, LLC and Eyecare Northwest, PA (collectively “NDS”) filed a lawsuit against the Company in the U.S. District Court of Delaware asserting claims for breach of contract. The claims stem from an asset purchase agreement between the Company and NDS entered into in 2013. In July 2019, NDS filed a second amended complaint which added a claim related to its purported termination of the APA. In October 2019, NDS voluntarily dismissed all claims related to breach of contract, leaving only claims related to the scope of the post-termination obligations to be litigated. 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. F- 30 Product and Professional Liability Product and professional liability litigation represents an inherent risk to all firms in the pharmaceutical and pharmacy industry. We utilize traditional third-party insurance policies with regard to our product and professional liability claims. Such insurance coverage at any given time reflects current market conditions, including cost and availability, when the policy is written. John Erick et al. In January 2018, John Erick and Deborah Ferrell, successors-in-interest and heirs of Jade Erick, (collectively “Erick”) filed a lawsuit in the San Diego County Superior against Kim Kelly, ND, MPH asserting claims related to the death of Jade Erick. In April 2018, Erick filed an amendment to the lawsuit, naming the Company as a co-defendant. In September 2018, co-defendant Dr. 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. The Company answered the claims filed by Dr. Kelly in October 2018. The case is currently in the discovery phase. Erick 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, 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. Anna Sue Gaukel et al. In June 2019, Anna Sue Gaukel and Lawrence Gaukel served the Company with a lawsuit filed in state court in Idaho against Imprimis Pharmaceuticals, Inc. 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. In June 2019, the Company removed the case to Federal Court and subsequently answered the complaint. On January 24, 2019, the plaintiffs and the Company filed a joint stipulation, and the case was dismissed with prejudice. No economic consideration was exchanged between the parties related to the filing of the joint stipulation. This formally resolved all known disputes between the parties as connected to this matter. General and Other In the ordinary course of business, the Company may face various claims brought by third parties and it may, from time to time, make claims or take legal actions to assert its rights, including intellectual property disputes, contractual disputes and other commercial disputes. Any of these claims could subject the Company to litigation. Indemnities In 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 in connection with any proceeding against the individual with respect to which the individual may be entitled to indemnification by the Company. The Company also indemnifies its lessors in connection with its facility leases for certain claims arising from the use of the facilities. These indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities in the accompanying consolidated balance sheets. Sales and Marketing Agreements The 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. Under 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. F- 31 Asset Purchase, License and Related Agreements The 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. In general, these agreements provide that the Inventors will cooperate with the Company in obtaining patent protection for the acquired intellectual property and that the Company will use commercially reasonable efforts to research, develop and commercialize a product based on the acquired intellectual property. In addition, the Company has acquired a right of first refusal on additional intellectual property and drug development opportunities presented by these Inventors. In consideration for the acquisition of the intellectual property rights, the Company is obligated to make payments to the Inventors based on the completion of certain milestones, generally consisting of: (1) a payment payable within 30 days after the issuance of the first patent in the United States arising from the acquired intellectual property (if any); (2) a payment payable within 30 days after the Company files the first investigational new drug application (“IND”) with the FDA for the first product arising from the acquired intellectual property (if any); (3) for certain of the Inventors, a payment payable within 30 days after the Company files the first new drug application with the FDA for the first product arising from the acquired intellectual property (if any); and (4) certain royalty payments based on the net receipts received by the Company in connection with the sale or licensing of any product based on the acquired intellectual property (if any), after deducting (among other things) the Company’s development costs associated with such product. If, following five years after the date of the applicable asset purchase agreement, the Company either (a) for certain of the Inventors, has not filed an IND or, for the remaining Inventors, has not initiated a study where data is derived, or (b) has failed to generate royalty payments to the Inventors for any product based on the acquired intellectual property, the Inventors may terminate the applicable asset purchase agreement and request that the Company re-assign the acquired technology to the Inventors. $ 224 and $ 371 were accrued in accounts payable and accrued expenses under these agreements during the years ended December 31, 2020 and 2019, respectively, and $ 682 and $ 846 were incurred under these agreements as royalty expenses for the years ended December 31, 2020 and 2019, respectively. Mayfield License In 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 provides that TGV will cooperate with Mayfield in transferring all embodiments of the intellectual property (including know-how) related to the TGV License, assist in obtaining and protecting its patent rights for the acquired intellectual property and that Mayfield will use commercially reasonable efforts to research, develop and commercialize products based on the acquired intellectual property. In connection with the TGV License, Mayfield is obligated to make royalty payments to TGV equal to a low single digit percentage of net sales received by Mayfield in connection with the sale or licensing of any product based on the licensed intellectual property. In addition, Mayfield issued 300,000 shares of its common stock to TGV and is required to make certain milestone payments to TGV over the development of MAY-66 and any related products based on the licensed intellectual property. Stowe License In 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. The Stowe License provides that TGV will cooperate with Stowe in transferring all embodiments of the intellectual property (including know-how) related to the Stowe License, assist in obtaining and protecting its patent rights for the acquired intellectual property and that Stowe will use commercially reasonable efforts to research, develop and commercialize products based on the acquired intellectual property. In connection with the Stowe License, Stowe is obligated to make royalty payments to TGV equal to a low single digit percentage of net sales received by Stowe in connection with the sale or licensing of any product based on the licensed intellectual property. In addition, Stowe issued 1,750,000 shares of its common stock to TGV and is required to make certain milestone payments to TGV over the development of STE-006 and any related products based on the licensed intellectual property. Klarity License Agreement – Related Party In April 2017, the Company entered into a license agreement (the “Klarity License Agreement”) with Richard L. Lindstrom, M.D., a member of its Board of Directors. Pursuant to the terms of the Klarity License Agreement, the Company licensed certain intellectual property and related rights from Dr. 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”). Under the terms of the Klarity License Agreement, the Company is required to make royalty payments to Dr. Lindstrom ranging from 3% 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. 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. Dr. Lindstrom was paid $ 149 and $ 63 in cash during the years ended December 31, 2020 and 2019, respectively, and was due an additional $ 35 and $ 55 at December 31, 2020 and 2019, respectively. The Company incurred $ 129 and $ 103 for royalty expenses related to the Klarity License Agreement during the years ended December 31, 2020 and 2019, respectively. F- 32 Injectable Asset Purchase Agreement – Related Party In 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 Product”). Under 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 sales, dependent upon the final formulation and patent protection of the Lindstrom Product sold. In addition, the Company is required to make certain milestone payments to Dr. Lindstrom including an initial payment of $ 33 upon execution of the Lindstrom APA. Dr. 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. Presbyopia Asset Purchase Agreement – Related Party In December 2019, the Company entered into an asset purchase agreement (the “Presbyopia APA”) with Richard L. Lindstrom, M.D., a member of its Board of Directors. Pursuant to the terms of the Presbyopia APA, the Company acquired certain intellectual property and related rights from Dr. Lindstrom to develop, formulate, make, sell, and sub-license an ophthalmic topical product to treat presbyopia (the “Presbyopia Product”). Under 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. Dr. 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. Eyepoint Commercial Alliance Agreement In 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. Pursuant 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. Subject 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. NOTE 18. SEGMENT INFORMATION AND CONCENTRATIONS Beginning on January 1, 2019, the Company began evaluating performance of the Company based on operating segments. Segment performance for 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 former Park businesses; and (ii) its start-up operations associated with pharmaceutical drug development business (Pharmaceutical Drug Development). Segment contribution for the segments represents net revenues less cost of sales, research and development, selling and marketing expenses, and select general and administrative expenses. The Company does not evaluate the following items at the segment level: ● Selling, general and administrative expenses that result from shared infrastructure, including certain expenses associated with legal matters, public company costs (e.g. investor relations), board of directors and principal executive officers and other like shared expenses; F- 33 ● Operating expenses within selling, general and administrative expenses that result from the impact of corporate initiatives. Corporate initiatives primarily include integration, restructuring, acquisition and other shared costs; ● Other select revenues and operating expenses including R&D expenses, amortization, and asset sales and impairments, net as not all such information has been accounted for at the segment level, or such information has not been used by all segments; and ● Total assets including capital expenditures. The Company defines segment net revenues as pharmaceutical compounded drug sales, licenses and other revenue derived from related agreements. Cost of sales within segment contribution includes direct and indirect costs to manufacture formulations and sell products, including active pharmaceutical ingredients, personnel costs, packaging, storage, royalties, shipping and handling costs, manufacturing equipment and tenant improvements depreciation, the write-off of obsolete inventory and other related expenses. Selling, general and administrative expenses consist mainly of personnel-related costs, marketing and promotion costs, distribution costs, professional service costs, insurance, depreciation, facilities costs, transaction costs, and professional services costs which are general in nature and attributable to the segment. Segment 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 For the Year Ended December 31, 2020 Pharmaceutical Pharmaceutical Drug Compounding Development Total Net revenues $ 48,871 $ - $ 48,871 Cost of sales ( 14,463 ) - ( 14,463 ) Gross profit 34,408 - 34,408 Operating expenses: Selling, general and administrative 22,691 144 22,835 Research and development 759 88 847 Segment contribution $ 10,958 $ ( 232 ) 10,726 Corporate ( 8,245 ) Research and development ( 1,566 ) Amortization ( 167 ) Asset sales and impairments, net (363 ) Operating income $ 385 For the Year Ended December 31, 2019 Pharmaceutical Pharmaceutical Drug Compounding Development Total Net revenues $ 51,165 $ - $ 51,165 Cost of sales ( 16,749 ) - ( 16,749 ) Gross profit 34,416 - 34,416 Operating expenses: Selling, general and administrative 24,460 174 24,634 Research and development 1,006 361 1,367 Segment contribution $ 8,934 $ ( 535 ) 8,399 Corporate ( 8,245 ) Research and development ( 716 ) Amortization ( 209 ) Asset sales and impairments, net ( 4,040 ) Operating loss $ ( 4,795 ) The Company categorizes revenues by geographic area based on selling location. All operations are currently located in the U.S.; therefore, total revenues are attributed to the U.S. All long-lived assets at December 31, 2020 and December 31, 2019 are located in the U.S. F- 34 Concentrations The 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 years ended December 31, 2020 and 2019. The Company receives its active pharmaceutical ingredients from three main suppliers. These suppliers collectively accounted for 77 % of active pharmaceutical ingredient purchases during the year ended December 31, 2020, and 73 % during the year ended December 31, 2019. NOTE 19. SUBSEQUENT EVENTS In March 2021, the Company issued 10,989 shares of its common stock upon the exercise of options to purchase 10,989 shares of common stock, with exercise prices ranging between $ 1.70 to $ 3.96 per share, and received net proceeds of $ 27 . Restricted 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 . Restricted 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. Baum. The 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 consolidated financial statements or disclosures in the notes thereto, other than as disclosed in the accompanying notes. F- 35