What changed in this filing

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Item 1. Financial Statements

2021-08-10 compared with 2021-05-11 · 735 added, 673 removed, 446 unchanged (76% of the section changed)

Financial Statements

HARROW HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

CONSOLIDATED BALANCE SHEETS

thousands, except share data)

Current assets

27 unchanged sentences

STOCKHOLDERS’ EQUITY

Common stock, $ 0.001 par value, 50,000,000 shares authorized, 25,983,676

and 25,749,875 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Common stock, $ 0.001 par value, 50,000,000 shares authorized, 26,893,896 and 25,749,875 shares issued

and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

3 unchanged sentences

TOTAL LIABILITIES AND EQUITY

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements

HARROW HEALTH, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for share and per share data)

For the Three Months Ended

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

thousands, except for share and per share data)

For the Three Months Ended

March 31, 2021

March 31, 2020

Product sales, net

For the Six Months Ended

Other revenues

4 unchanged sentences

Research and development

Impairment of intangible assets

Total operating expenses

Income (loss) from operations

Other income (expense):

Other (expense) income:

Interest expense, net

Investment loss from Melt Pharmaceuticals

Investment loss from Surface Ophthalmics

Investment loss from Eton Pharmaceuticals

Gain on forgiveness of debt

Total other (expense), net

Income (loss) before income taxes

Total net income (loss) including noncontrolling interests

Investment loss from Melt Pharmaceuticals, net

Investment loss from Surface Pharmaceuticals, net

Investment (loss) gain from Eton Pharmaceuticals, net

Investment loss

Loss from early extinguishment of loan

Gain on forgiveness of PPP loan

Other (expense) income, net

Total other (expense) income, net

Total net loss including noncontrolling interests

Net loss attributable to noncontrolling interests

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

Basic net income (loss) per share of common stock

Diluted net income (loss) per share of common stock

Weighted average number of shares of common stock outstanding, basic

Weighted average number of shares of common stock outstanding, diluted

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements

HARROW HEALTH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

For the three months ended March 31, 2021 and 2020

(In thousands, except for share data)

Net loss attributable to Harrow Health, Inc.

Preferred dividends and accretion of preferred stock discount

Net loss attributable to common stockholders

Basic and diluted net loss per share of common stock

Weighted average number of shares of common stock outstanding, basic and diluted

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

STATEMENTS OF STOCKHOLDERS’ EQUITY

the three and six months ended June 30, 2021 and 2020

thousands, except for share data)

Preferred Stock

Harrow Health, Inc.

Total Noncontrolling

Noncontrolling

Stockholders’

Balance at December 31, 2019

Stockholders’

Balance at March 31, 2020

Issuance of common stock in connection with:

Exercise of employee options

Issuance of common stock related to vesting of RSUs

Exercise of employee stock options

Exercise of warrants

Exercise of warrants, shares

Vesting of RSUs

Vesting of RSUs, shares

Stock-based payment for services provided

Shares withheld related to net share settlement of equity awards

Shares withheld related to net share settlement of equity awards, shares

Issuance of preferred shares, net of discount and issuance costs

Issuance of preferred shares, net of discount and issuance

costs, shares

Redemption of preferred shares

Redemption of preferred shares, shares

Payment of preferred dividends

Stock-based compensation expense

Balance at June 30, 2020

Preferred Stock

Harrow Health, Inc.

Noncontrolling

Stockholders’

Balance at March 31, 2021

Balance at December 31, 2020

Issuance of common stock in connection with:

Exercise of employee options

Issuance of common stock related to vesting of RSUs

Exercise of employee stock options

Exercise of warrants

Vesting of RSUs

Shares withheld related to net share settlement of equity awards

Issuance of preferred shares, net of discount and issuance costs

Redemption of preferred shares

Payment of preferred dividends

Stock-based compensation expense

Balance at March 31, 2021

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements

Balance at June 30, 2021

Preferred Stock

Harrow Health, Inc.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH

(In thousands)

March 31, 2021

March 31, 2020

Noncontrolling

Stockholders’

Balance at December 31, 2019

Issuance of common stock in connection with:

Exercise of employee stock options

Vesting of RSUs

Stock-based payment for services provided

Stock-based compensation expense

Balance at June 30, 2020

Preferred Stock

Harrow Health, Inc.

Total Noncontrolling

Stockholders’

Balance at December 31, 2020

Issuance of common stock in connection with:

Exercise of employee stock options

Exercise of warrants

Vesting of RSUs

Shares withheld related to net share settlement of equity awards

Issuance of preferred shares, net of discount and issuance costs

Redemption of preferred shares

Payment of preferred dividends

Stock-based compensation expense

Balance at June 30, 2021

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss) (including noncontrolling interests)

Adjustments to reconcile net income (loss) to net cash provided by (used in)

operating activities:

Net loss (including noncontrolling interests)

Adjustments to reconcile net loss to net cash provided by (used in) operating

Depreciation and amortization of property, plant and equipment

3 unchanged sentences

Amortization of debt issuance costs and discount

Gain on forgiveness of debt

Investment loss from Eton Pharmaceuticals

Investment loss from Surface Ophthalmics

Investment loss from Melt Pharmaceuticals

Gain on forgiveness of PPP loan

Investment loss from Eton Pharmaceuticals, net

Investment loss from Surface Opthalmics, net

Investment loss from Melt Pharmaceuticals, net

Loss on sale and disposal of assets

Interest paid-in-kind on loan payable

Impairment of long-lived assets

Loss on early extinguishment of loan

Stock-based payment of consulting services

Stock-based compensation

1 unchanged sentence

Accounts receivable

Prepaid expenses and other assets

Prepaid expenses and other current assets

Accounts payable and accrued expenses

3 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Net proceeds on sale investments

Investment in patent and trademark assets

Purchases of property, plant and equipment

NET CASH USED IN INVESTING ACTIVITIES

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Payments on finance lease obligations

Principal payments on SWK loan

Net proceeds from exercise of stock options, net of

taxes remitted upon vesting of RSU’s and options

NET CASH USED IN FINANCING ACTIVITIES

Net proceeds from 8.625% notes payable, net of costs

Principal and exit fee payments on SWK loan

Net proceeds from PPP loan

Proceeds from SWK debt, net of costs

Payment of taxes for vesting of RSUs

Proceeds from exercise of stock options

Sale of preferred stock, net of discount and issuance costs

Redemption of preferred stock

Payment of preferred stock dividends

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

8 unchanged sentences

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

Changes in accrued property and equipment purchases

The accompanying notes are an integral part of these

unaudited condensed consolidated financial statements

HARROW HEALTH, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

For the Three Months Ended March 31, 2021 and 2020

(All dollar amounts are expressed in thousands,

except share and per share data)

Net reduction in right-of-use assets and lease liabilities

in connection with lease modifications

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

TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the three and six months ended June 30, 2021 and 2020

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

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Company and Background

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.

and Melt Pharmaceuticals, Inc.

(“Melt”), all companies that began as subsidiaries of Harrow.

In 2020, Harrow created

Visionology, Inc.

(“Visionology”), which will launch an online eye health platform business.

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

Basis of Presentation

The Company has prepared the accompanying unaudited

condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America

(“GAAP”) for interim financial information and in accordance with the rules and regulations of the U.S.

Securities and Exchange

Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements.

the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation

have been included.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may

be expected for the year ending December 31, 2021 or for any other period.

For further information, refer to the Company’s audited

consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended

December 31, 2020.

The accompanying unaudited condensed consolidated

financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries.

All inter-company accounts

and transactions have been eliminated in consolidation.

Harrow consolidates entities in which it has a controlling

financial interest.

The Company consolidates subsidiaries in which it holds and/or controls, directly or indirectly, more than 50% of

the voting rights.

and Background

(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 non-controlling equity positions in Surface Ophthalmics, Inc.

(“Surface”) and Melt

Pharmaceuticals, Inc.

(“Melt”), both companies that began as subsidiaries of Harrow.

In 2020, Harrow created Visionology,

(“Visionology”), which recently launched an online eye health platform business.

Harrow also owns royalty rights in

various drug candidates being developed by Surface and Melt.

of Presentation

Company has prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles

generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the

rules and regulations of the U.S.

Securities and Exchange Commission.

Accordingly, they do not include all of the information and footnotes

required by GAAP for audited financial statements.

In the opinion of management, all adjustments (consisting of only normal recurring

adjustments) considered necessary for a fair presentation have been included.

Operating results for the three and six months ended June

30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or for any other period.

For further information, refer to the Company’s audited consolidated financial statements and footnotes thereto included in the

Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned

subsidiaries.

All intercompany accounts and transactions have been eliminated in consolidation.

The condensed consolidated balance sheets

at March 31, 2021 and December 31, 2020 and the condensed consolidated statements of operations, stockholders’ equity and

cash flows for the periods ended March 31, 2021 and 2020 include our accounts and those of our wholly owned subsidiaries, as well

as our inactive majority owned subsidiaries Mayfield Pharmaceuticals, Inc.

consolidates entities in which it has a controlling financial interest.

The Company consolidates subsidiaries in which it holds and/or

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

All intercompany accounts and transactions have been eliminated

in consolidation.

condensed consolidated balance sheets at June 30, 2021 and December 31, 2020 and the condensed consolidated statements of operations,

stockholders’ equity and cash flows for the periods ended June 30, 2021 and 2020 include our accounts and those of our wholly owned

subsidiaries, as well as our majority owned subsidiaries Mayfield Pharmaceuticals, Inc.

and Stowe Pharmaceuticals, Inc.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following represents an update for the three months

ended March 31, 2021 to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended

December 31, 2020.

following represents an update for the six months ended June 30, 2021 to the significant accounting policies described in the Company’s

Annual Report on Form 10-K for the year ended December 31, 2020.

Uncertainties and Liquidity

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.

The Company’s chief operating decision-maker

is its Chief Executive Officer who makes resource allocation decisions and assesses performance based on financial information of our

operating segments.

Company is subject to certain regulatory standards, approvals, 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.

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

based on financial information of our operating segments.

The Company has identified two operating segments as reportable segments.

See Note 16 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 condensed 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 income (loss) attributable to noncontrolling interests in

consolidated net income (loss) on the face of the condensed consolidated statements of operations.

The Company provides in the condensed consolidated

statements of stockholders’ equity a reconciliation at the beginning and the end of the period of the carrying amount of total equity,

equity attributable to the parent, and equity attributable to the noncontrolling interest that separately discloses:

Net income or loss;

transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners;

each component of other income or loss.

Basic and Diluted Net Income (Loss) per Common

Basic net income (loss) per common share is

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

shares outstanding during the period.

Diluted net income (loss) per share is computed by dividing the net income (loss) attributable

to common stockholders for the period by the weighted average number of common and common equivalent shares, such as stock options,

unvested restricted stock units (“RSUs”) 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 equivalent shares (using the treasury

stock or “if converted” method) from stock options, RSUs and warrants were

5,486,678 and 5,253,638 at March 31, 2021 and 2020, respectively.

For the three months ended March 31, 2020, the common equivalent shares

are excluded in the calculation of diluted net loss per share because the effect is anti-dilutive.

Included in the basic and diluted net

income (loss) per share calculation were RSUs awarded to directors that had vested, but the issuance and delivery of the shares are deferred

until the director resigns.

The number of shares underlying vested RSUs at March 31, 2021 and 2020 was 223,219 and 244,460 , respectively.

The following table shows the computation of basic

net income (loss) per share of common stock for the three months ended March 31, 2021 and 2020:

SCHEDULE OF BASIC EARNINGS PER COMMON SHARE

For the Three Months

Ended March 31,

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

Denominator – weighted average number of shares outstanding, basic

Net income (loss) per share, basic

For the three months ended March 31, 2021, the Company

computed diluted net income per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding

during the period.

Diluted common equivalent shares for the three months ended March 31, 2021, consisted of the following:

SCHEDULE OF DILUTED COMMON EQUIVALENT SHARES

March 31, 2021

Diluted shares related to:

Stock options

Dilutive common equivalent shares

The following table shows the computation of diluted

net income (loss) per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding for the

three months ended March 31, 2021 and 2020:

SCHEDULE OF DILUTED EARNINGS PER COMMON SHARE

For the Three Months

Ended March 31,

Numerator – net income (loss)

Weighted average number of shares outstanding, basic

Dilutive common equivalent shares

Denominator – number of shares used for diluted earnings per share computation

Net income (loss) per share, diluted

Investment in Eton Pharmaceuticals, Inc.

As of March 31, 2021, the Company owned 3,500,000

shares of Eton common stock, which represented approximately 14.3 % of the equity interests of Eton.

At March 31, 2021, the fair market

value of Eton’s common stock was $ 7.32 per share.

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

Financial Instruments-Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities , the

Company recorded an unrealized investment loss from its Eton common stock position of $ 2,835 and $ 10,850 during the three months ended

March 31, 2021 and 2020, respectively, related to the change in fair market value of its investment in Eton during the measurement period.

As of March 31, 2021, the fair market value of the Company’s investment in Eton was $ 25,620 .

During the three months ended March 31, 2021, Mark

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

In April 2021, the Company

sold 1,518,000 shares of its Eton common stock (see Note 17 for more information related to this subsequent event).

In light of these

events, the Company has determined that Eton is no longer a related party.

Investment in Melt Pharmaceuticals, Inc.

Note 16 for more information regarding the Company’s reportable segments.

Noncontrolling

Company recognizes any noncontrolling interest as a separate line item in equity in the condensed 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;

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 condensed consolidated statements of operations.

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

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

interest that separately discloses:

income or loss;

with owners acting in their capacity as owners, showing separately contributions from and distributions to owners;

component of other income or loss.

and Diluted Net Loss per Common Share

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

number of common shares outstanding during the period.

Diluted net loss per share is computed by dividing the net 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 loss per share is computed using the weighted average number of shares of common

stock outstanding during the period.

Common equivalent shares (using the treasury stock or “if converted” method) from stock

options, unvested restricted stock units (“RSUs”) and warrants were 4,121,398 and 5,414,504 at June 30, 2021 and 2020, respectively.

For the three and six months ended June 30, 2021 and 2020, the common equivalent shares are excluded in the calculation of diluted net

loss per share because the effect is anti-dilutive.

Included in the basic and diluted net loss per share calculation were RSUs awarded

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

The number of shares

underlying vested RSUs at June 30, 2021 and 2020 was 235,973 and 251,746 , respectively.

following table shows the computation of basic and diluted net loss per share of common stock for the three and six months ended June

30, 2021 and 2020:

OF BASIC AND DILUTED EARNINGS PER COMMON SHARE

For the Three Months Ended

For the Six Months Ended

Numerator – net loss attributable to Harrow Health, Inc.

common stockholders

Denominator - weighted average number of shares outstanding, basic and diluted

Net loss per share, basic and diluted

in Eton Pharmaceuticals, Inc.

the three and six months ended June 30, 2021, the Company sold 1,518,000 shares of its Eton Pharmaceuticals, Inc.

common stock through an underwritten public offering at a public offering price of $ 7.00 per share

(the “Eton Stock Sale”).

The gross proceeds to the Company from the Eton Stock Sale were $ 10,626 , before deducting underwriting

discounts and commissions and other offering expenses payable by the Company of $ 799 .

During the three and six months ended June 30,

2021, the Company recorded a realized loss of $ 1,406 related to the sale of 1,518,000 shares of its Eton common stock.

the Eton Stock Sale and as of June 30, 2021, the Company owns 1,982,000 shares of Eton common stock, which represents less than 10 % of

the equity interests of Eton.

At June 30, 2021, the fair market value of Eton’s common stock was $ 6.16 per share.

In accordance

with the Accounting Standards Update (“ASU”) 2016-01, Financial Instruments-Overall (Subtopic 825-10):

Recognition and

Measurement of Financial Assets and Financial Liabilities , the Company recorded an unrealized investment gain (loss) from its Eton

common stock position of $ ( 2,178 ) and $ ( 5,013 ) and $ 4,725 and $ ( 6,125 ) during the three and six months ended June 30, 2021 and 2020,

respectively, related to the change in fair market value of its investment in Eton during the measurement period.

As of June 30, 2021,

the fair market value of the Company’s investment in Eton was $ 12,209 .

part of the Eton Stock Sale, the Company also agreed, for a period of 180 days, not to conduct any further sales of shares of its common

stock of Eton or otherwise dispose of, directly or indirectly, any common stock of Eton (or any securities convertible into, or exercisable

or exchangeable for, the common stock of Eton).

in Melt Pharmaceuticals, Inc.

– Related Party

The Company owns 3,500,000 common shares (which is

approximately 44 % of the equity interests as of March 31, 2021) of Melt and uses the equity method of accounting for this investment,

as management has determined that the Company has the ability to exercise significant influence over the operating and financial decisions

Under this method, the Company recognizes earnings and losses in Melt in its condensed consolidated financial statements and

adjusts the carrying amount of its investment in Melt accordingly.

The Company’s share of earnings and losses are based on the Company’s

ownership interest of Melt.

Company owns 3,500,000 common shares (which is approximately 44 % of the equity interests as of June 30, 2021) of Melt and uses the equity

method of accounting for this investment, as management has determined that the Company has the ability to exercise significant influence

over the operating and financial decisions of Melt.

Under this method, the Company recognizes earnings and losses in Melt in its condensed

consolidated financial statements and adjusts the carrying amount of its investment in Melt accordingly.

The Company’s share of

earnings and losses are based on the Company’s ownership interest of Melt.

Any intra-entity profits and losses are eliminated.

During the three months ended March 31, 2021 and 2020,

the Company recorded equity in the net losses of Melt of $ 470 and $ 546 , respectively.

As of March 31, 2021 and December 31, 2020, the

Company’s investment in Melt was $ 2,056 and $ 2,506 , respectively, which includes $ 881 and $ 851 , respectively, due from Melt for

reimbursable expenses and amounts due under a Management Services Agreement between the Company and Melt (the “Melt MSA”).

See Note 4 for more information and related party

disclosure regarding Melt.

Investment in Surface Ophthalmics, Inc.

During the three months ended June 30, 2021 and 2020, the Company recorded equity in the net losses of Melt of $ 477 and $ 690 , and $ 947

and $ 1,236 during the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021 and December 31, 2020, the Company’s

investment in Melt was $ 1,594 and $ 2,506 , respectively, which includes $ 885 and $ 851 , respectively, due from Melt for reimbursable expenses

and amounts due under a Management Services Agreement between the Company and Melt (the “Melt MSA”).

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

in Surface Ophthalmics, Inc.

– Related Party

The Company owns 3,500,000 common shares (which is

approximately 30 % of the equity interests as of March 31, 2021) 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

Under this method, the Company recognizes earnings and losses in Surface in its condensed consolidated financial statements

and adjusts the carrying amount of its investment in Surface accordingly.

The Company’s share of earnings and losses are based on

the Company’s ownership interest of Surface.

Company owns 3,500,000

common shares (which is approximately 20 %

of the equity interests following the close of

a round of financing completed by Surface at various dates from May 2021 to July 2021) of Surface and uses the equity method

of accounting for this investment, as management has determined that the Company has the ability to exercise significant influence over

the operating and financial decisions of Surface.

Under this method, the Company recognizes earnings and losses in Surface in its condensed

consolidated financial statements and adjusts the carrying amount of its investment in Surface accordingly.

The Company’s share

of earnings and losses are based on the Company’s ownership interest of Surface.

Any intra-entity profits and losses are eliminated.

The Company recorded equity in

the net losses of Surface of $ 849 and $ 339 during the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021 and

December 31, 2020, the Company’s investment in Surface was $ 465 and $ 1,314 , respectively.

See Note 5 for more information and related party

disclosure regarding Surface.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income

Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes.

This guidance became effective

for the Company on January 1, 2021 on a prospective basis.

Adoption of this ASU did not have a material impact on the Company’s

condensed consolidated financial statements.

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:

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.

Product Revenues from Pharmacy Services

The Company sells prescription drugs directly through

our pharmacy and outsourcing facility network.

Revenue from our pharmacy services division 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 principle

of ASC 606, we have identified the following:

Identify the contract(s) with a customer:

The Company recorded equity in the net losses of Surface of $ 465

during the three months and $ 1,314

during the six months ended June 30, 2021 and

2020, respectively.

As of June 30, 2021 and December 31, 2020, the Company’s investment in Surface was $ 0

and $ 1,314 ,

respectively.

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

Plant and Equipment

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.

Software costs during the application development

stage used to meet the Company’s internal needs are generally capitalized.

Computer software and hardware and furniture and equipment

are depreciated over three to five years .

Adopted Accounting Pronouncements

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 became effective for the Company on January 1, 2021 on a prospective basis.

Adoption of this ASU did

not have a material impact on the Company’s condensed consolidated financial statements.

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

has three primary streams of revenue:

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

from a commission agreement with a third party and (3) revenue recognized from intellectual property license and asset purchase agreements.

Revenues from Pharmacy Services

Company sells prescription drugs directly through our pharmacy and outsourcing facility network.

Revenue from our pharmacy services division

(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:

the contract(s) with a customer:

A contract exists with a customer at the time the prescription or order is received by the Company.

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.

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 meet the performance obligation, the customer is notified.

Determine the transaction price:

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.

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.

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

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

As of March 31, 2021, we are party to four intellectual

property licenses and asset purchase agreements in which we have agreed to grant a license and which provide 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

in time at which 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.

Revenue disaggregated by revenue source for the three

months ended March 31, 2021 and 2020, consists of the following:

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.

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.

following revenue recognition policy has been established for the pharmacy services division:

generated from prescription or office use drugs sold by our pharmacies and outsourcing facility are recognized when the prescription

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.

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.

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.

Property License Revenues

of June 30, 2021, we are party to four intellectual property licenses and asset purchase agreements in which we have agreed to grant

a license and which provide 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 in time at which 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.

disaggregated by revenue source for the three and six months ended June 30, 2021 and 2020, consists of the following:

SCHEDULE OF DISAGGREGATED REVENUE

For the Three Months

Ended March 31,

For the Three Months Ended

For the Six Months Ended

Product sales, net

Commission revenues

License revenues

Total revenues

Deferred revenue and customer deposits at March 31,

2021 and December 31, 2020, were $ 3 and $ 66 , respectively.

All deferred revenue and customer deposit amounts at December 31, 2020 were

recognized as revenue during the three months ended March 31, 2021.

revenue and customer deposits at June 30, 2021 and December 31, 2020, were $ 56 and $ 66 , respectively.

All deferred revenue and customer

deposit amounts at December 31, 2020 were recognized as revenue during the six months ended June 30, 2021.

INVESTMENT IN MELT PHARMACEUTICALS, INC.

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

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 March 31, 2021 and December 31, 2020, the Company

was due $ 881 and $ 851 , respectively, from Melt for reimbursable expenses and amounts due under the Melt MSA.

Melt did not make any payments

to the Company during the three months ended March 31, 2021.

The Company’s Chief Executive Officer, Mark

Baum, and Chief Medical Officer, Larry Dillaha, M.D.

are members of the Melt board of directors, and several employees of the Company

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

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.

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

See also Note 2, under the subheading

in Melt Pharmaceuticals, Inc.

February 2019, the Company and Melt entered into 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 .

of June 30, 2021 and December 31, 2020, the Company was due $ 885 and $ 851 , respectively, from Melt for reimbursable expenses and amounts

due under the Melt MSA.

Melt did not make any payments to the Company during the three and six months ended June 30, 2021.

Company’s Chief Executive Officer, Mark L.

Baum is a member of the Melt board of directors, and several employees of the Company

(including Mr.

Dillaha and the Company’s Chief Financial Officer, Andrew R.

Boll) entered into consulting agreements and

provide consulting services to Melt.

The unaudited condensed results of operations information

of Melt is summarized below:

OF CONDENSED INCOME STATEMENT

For the Three Months

March 31, 2021

March 31, 2020

Baum and the Company’s Chief Financial Officer, Andrew R.

Boll) entered into consulting agreements and provide consulting

services to Melt.

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

SCHEDULE OF CONDENSED INCOME STATEMENT

For the Six Months Ended

Revenues, net

Loss from operations

The unaudited condensed balance sheet information

of Melt is summarized below:

unaudited condensed balance sheet information of Melt is summarized below:

SCHEDULE OF CONDENSED BALANCE SHEET

3 unchanged sentences

Total liabilities

Total stockholders equity

Total stockholders’ (deficit) equity

Total liabilities and stockholders’ equity

1 unchanged sentence

- 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 March 31, 2021, 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.

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

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”).

is required to make mid-single-digit royalty payments to the Company on net sales of the Surface Products while any patent rights remain

of June 30, 2021, the Company owned 3,500,000

shares of Surface common stock.

A Company director,

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

Baum, are directors of Surface.

Surface is required to make royalty payments

Lindstrom of 3 % of net sales of certain Surface products while certain patent rights remain outstanding.

Lindstrom is also

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

employees and a director of the Company (including Mr.

Lindstrom) entered into consulting agreements and provide consulting

services to Surface.

The unaudited condensed results of operations information

of Surface is summarized below:

OF CONDENSED INCOME STATEMENT

For the Three Months Ended

March 31, 2021

March 31, 2020

Surface is required to

make royalty payments to Dr.

Lindstrom of net sales of certain Surface products while certain patent rights remain outstanding.

is also a minority owner of Flying L Partners, an affiliate of the funding investor who purchased the Surface Series A Preferred Stock.

Several employees and a director of the Company (including Mr.

Lindstrom) entered into consulting agreements and provide

consulting services to Surface.

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

SUMMARY OF CONDENSED INCOME STATEMENT

For the Six Months Ended

Revenues, net

Loss from operations

The unaudited condensed balance sheet information

of Surface is summarized below:

OF CONDENSED BALANCE SHEET

unaudited condensed balance sheet information of Surface is summarized below:

SUMMARY OF CONDENSED BALANCE SHEET

At December 31,

5 unchanged sentences

RESTRICTED CASH

The restricted cash at March 31, 2021 and December

31, 2020 consisted of funds held in a money market account.

At March 31, 2021 and December 31, 2020, the restricted cash was recorded

at amortized cost, which approximates fair value.

At March 31, 2021 and December 31, 2020, 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.

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 March 31, 2021 and December 31, 2020 was as follows:

OF INVENTORIES

March 31, 2021

December 31, 2020

restricted cash at June 30, 2021 and December 31, 2020 consisted of funds held in a money market account.

At June 30, 2021 and December

31, 2020, the restricted cash was recorded at amortized cost, which approximates fair value.

June 30, 2021 and December 31, 2020, 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.

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

products, related laboratory supplies and active pharmaceutical ingredients.

The composition of inventories as of June 30, 2021 and December

31, 2020 was as follows:

SCHEDULE OF INVENTORIES

Raw materials

3 unchanged sentences

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets at March

31, 2021 and December 31, 2020, consisted of the following:

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

March 31, 2021

December 31, 2020

expenses and other current assets at June 30, 2021 and December 31, 2020, consisted of the following:

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid insurance

2 unchanged sentences

Total prepaid expenses and other current assets

PLANT AND EQUIPMENT

Property, plant and equipment at March 31, 2021 and

December 31, 2020, consisted of the following:

OF PROPERTY, PLANT AND EQUIPMENT

March 31, 2021

December 31, 2020

PROPERTY, PLANT AND EQUIPMENT

plant and equipment at June 30, 2021 and December 31, 2020, consisted of the following:

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net:

Computer software and hardware

Internal use software costs in development

Furniture and equipment

4 unchanged sentences

plant and equipment, net

For the three months ended March 31, 2021 and 2020,

depreciation and amortization related to the property, plant and equipment was $ 464 and $ 448 , respectively.

the three and six months ended June 30, 2021, depreciation and amortization related to the property, plant and equipment was $ 412 and

$ 876 , respectively.

For the three and six months ended June 30, 2020, depreciation and amortization related to the property, plant and

equipment was $ 465 and $ 913 , respectively.

INTANGIBLE ASSETS AND GOODWILL

Company’s intangible assets at March 31, 2021 consisted of the following:

OF INTANGIBLE ASSETS

Accumulated amortization

Net carrying value

17 - 19 years

Company’s intangible assets at June 30, 2021 consisted of the following:

SCHEDULE OF INTANGIBLE ASSETS

Customer relationships

Non-competition clause

State pharmacy licenses

expense for intangible assets for the three months ended March 31, 2021 and 2020 was as follows:

OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

For the Three Months Ended

Customer relationships

State pharmacy licenses

future amortization expense for the Company’s intangible assets at March 31, 2021 is as follows:

OF ESTIMATED FUTURE AMORTIZATION EXPENSE

pharmacy licenses

expense for intangible assets for the three and six months ended June 30, 2021 and 2020 was as follows:

SCHEDULE OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

relationships

future amortization expense for the Company’s intangible assets at June 30, 2021 is as follows:

SCHEDULE OF ESTIMATED FUTURE AMORTIZATION EXPENSE

Remainder of 2021

Intangible assets

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

4 unchanged sentences

Accrued interest

Accrued exit fee for note payable

Accrued exit fee for loan payable

Total accounts payable and accrued expenses

1 unchanged sentence

Non-current total accrued expenses

Senior Note – 2017

Senior Notes Due 2026

April 2021, the Company closed an offering of $ 50,000 aggregate principal amount of 8.625% senior notes due in April 2026 and in May

2021 issued an additional $ 5,000 of such notes pursuant to the full exercise of the underwriters’ option to purchase additional

notes (collectively, the “April Notes”).

The April Notes were sold to investors at a par value of $ 25.00 per April Note and

the offering resulted in net proceeds to the Company of approximately $ 51,909 after deducting underwriting discounts and commissions

and expenses of $ 3,091 .

In June 2021, in a further issuance of the April Notes, the Company sold an additional $ 20,000 aggregate principal

amount of such notes (the “June Notes,” and together with the April Notes, the “Notes”), at a price of $ 25.75

per June Note, with interest of $ 278 on the June Notes being accrued from April 20, 2021 as of the date of issuance.

The June offering

resulted in net proceeds to the Company of approximately $ 19,164 after deducting underwriting discounts and commissions and expenses

of $ 1,158 and a premium on note issuance of $ 322 .

The June Notes are treated as a single series with the April Notes under the indenture

governing the April Notes, dated as of April 20, 2021, and have the same terms as the April Notes (other than the initial offering price

and issue date).

T he Notes are senior unsecured obligations of the Company and rank equally

in right of payment with all of our other existing and future senior unsecured and unsubordinated indebtedness.

The Notes are effectively

subordinated in right of payment to all of the Company’s existing and future secured indebtedness and structurally subordinated

to all existing and future indebtedness of the Company’s subsidiaries, including trade payables.

The Notes bear interest at a rate

of 8.625 % per annum.

Interest on the Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year,

commencing on July 31, 2021.

The Notes will mature on April 30, 2026.

The issuance costs were recorded

as a debt discount and are being amortized as interest expense, net of the amortization of the premium on note issuance, over the term

of the Notes using the effective interest rate method.

to February 1, 2026, the Company may, at its option, redeem the Notes, in whole at any time or in part from time to time, at a redemption

price equal to 100% of the principal amount of the Notes to be redeemed, plus a make-whole amount, if any, plus accrued and unpaid interest

to, but excluding, the date of redemption.

The Company may redeem the Notes for cash in whole or in part at any time at our option on

or after February 1, 2026 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest

to, but excluding, the date of redemption.

On and after any redemption date, interest will cease to accrue on the redeemed Notes.

expense related to the Notes totaled $ 1,466 for the three and six months ended June 30, 2021, and included amortization of debt issuance

costs and discount of $ 192 for the three and six months ended June 30, 2021.

Senior Note – Paid in April 2021

July 2017, the Company and several of its wholly owned subsidiaries entered into a term loan and security agreement in the principal

2 unchanged sentences

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 were not achieved.

The SWK Loan was

secured by substantially all of the Company’s assets, including its intellectual property rights.

The SWK Loan was subsequently

amended in May 2019 and again in April 2020.

The SWK Loan bore an interest rate that was 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 provided SWK evidence that the Company has achieved a

leverage ratio as of such date of less than 4.00:1:00, the Margin Rate shall equal 9.00%;

and if the Company has achieved a leverage

ratio as of such date of less than 3.00:1:00, the Margin Rate shall equal 7.00%.

The leverage ratio means, as of any date of determination,

the ratio of:

(a) indebtedness as of such date to (b) EBITDA (as defined in the SWK Loan), of the Company for the immediately

preceding 12-month period, adding-back (i) actual litigation expenses for the immediately preceding 12-month period,

minus (ii) actual litigation expenses for the immediately preceding 3 month period multiplied by four.

Subsequent to

March 31, 2021, the Company completed an offering of unsecured senior notes in the aggregate principal amount of $ 55,000 and used

a portion of the proceeds to pay off all outstanding obligations and indebtedness related to the SWK Loan (see Note 17 for additional

information).

expense related to the SWK Loan Agreement, as amended, amounted to $ 509 and $ 560 for the three months ended March 31, 2021 and

2020, respectively, and included amortization of debt issuance costs and discount of $ 96 and $ 160 for the three months

ended March 31, 2021 and 2020, respectively.

Protection Program Loan

such term could be reduced to four years if certain revenue requirements were not achieved.

The SWK Loan was secured by substantially

all of the Company’s assets, including its intellectual property rights.

The SWK Loan was subsequently amended in May 2019 and

again in April 2020.

The SWK Loan bore an interest rate 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 provided 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 had achieved a leverage ratio as of such date of less than 3.00:1:00, the Margin Rate shall equal

The leverage ratio means, as of any date of determination, the ratio of:

(a) indebtedness as of such date to (b) EBITDA (as defined

in the SWK Loan), of the Company for the immediately preceding 12 month period, adding-back (i) actual litigation expenses for the immediately

preceding 12 month period, minus (ii) actual litigation expenses for the immediately preceding 3 month period multiplied by 4.

summary of the material changes contained in the amendment entered into with SWK in April 2020 was as follows:

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

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

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

interest payment of $ 358 due May 14, 2020 was paid in-kind by increasing the principal amount of the term loans by an amount equal

to the interest accrued as of such date.

expense related to the SWK Loan Agreement, as amended, amounted to $ 138 and $ 647 for the three and six months ended June 30, 2021, respectively,

and $ 505 and $ 1,065 for the three and six months ended June 30, 2020, respectively, and included amortization of debt issuance costs

and discount of $ 0 and $ 96 for the three and six months ended June 30, 2021, respectively, and $ 83 and $ 243 for the three and six months

ended June 30, 2020, respectively.

April 2021, the Company paid $ 15,540 related to all outstanding obligations to SWK under the SWK Loan, including outstanding principal,

accrued interest, accrued exit fee and related expenses and recorded a loss from early extinguishment of $ 756 related to the SWK Loan

during the three and six months ended June 30, 2021.

Protection Program Loan – Forgiven in March 2021

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.

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”).

On March 30, 2021, the Company received a notice of forgiveness of the full balance of the PPP Loan, including all accrued interest,

in accordance with the terms and conditions of the CARES Act.

Related to the forgiveness, the Company recorded a gain on the forgiveness

of debt for the loan balance of $ 1,967 in the accompanying condensed consolidated statement of operations for the period ended March

March 31, 2021, future minimum payments under the Company’s debt were as follows:

OF FUTURE MINIMUM PAYMENTS

Small Business Administration

On March 30, 2021, the Company received a notice of forgiveness of the full balance of the PPP Loan, including

all accrued interest, in accordance with the terms and conditions of the CARES Act.

Related to the forgiveness, the Company recorded

a gain on the forgiveness of the PPP Loan for the loan balance of $ 1,967

in the accompanying condensed consolidated statement

of operations for the six months ended June 30, 2021.

June 30, 2021, future minimum payments under the Company’s debt were as follows:

SUMMARY OF FUTURE MINIMUM PAYMENTS

Remainder of 2021

Total minimum payments

amount representing interest

amount representing interest payments

Notes payable, gross

unamortized discount

Notes payable

current portion, net of unamortized discount

Note payable, net of current portion and unamortized debt discount

unamortized discount, net of premium

Notes payable, net of unamortized discount

Company leases office and laboratory space under non-cancelable operating leases listed below.

1 unchanged sentence

terms between one to four years and contain various clauses for renewal at the Company’s option.

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 ;

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

operating lease for 26,400 square feet of lab, warehouse and office space in Ledgewood, New Jersey that expires in July 2026 , with

1 unchanged sentence

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;

extended the term of the original lease and added 1,400 of additional square footage to the lease and another amendment entered into

in May 2021 that extended the term of the lease to July 2027 ;

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 .

lease payments under operating leases as of March 31, 2021 were as follows :

May 2021, the Company amended its New Jersey lease to include the addition of 8,926 square feet of space (the “May Lease Amendment”),

which will expire in July 2027 .

The Company expects to take possession of this additional space in September 2021, which will trigger

the commencement of the May Lease Amendment.

Since the commencement date of the May Lease Amendment is expected to occur after June 30,

2021, right-of-use assets and operating lease liabilities associated with the May Lease Amendment are not included in the Company’s

condensed consolidated balance sheets as of June 30, 2021.

June 30, 2021, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases

held by the Company were 6.32 % and 14.08 years, respectively.

the three and six months ended June 30, 2021, cash paid for amounts included for the operating lease liabilities was $ 251 and $ 502 , respectively,

and the Company recorded operating lease expense of $ 241 and $ 502 included in selling, general and administrative expenses, respectively.

lease payments under operating leases as of June 30, 2021 were as follows :

SCHEDULE OF FUTURE LEASE PAYMENTS UNDER OPERATING LEASES

Operating Leases

Remainder of 2021

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Operating lease liabilities, net of current portion

March 31, 2021, the weighted-average discount rate and the weighted-average remaining lease term for the operating leases held by the

Company were 6.33 % and 11.02 years, respectively.

the three months ended March 31, 2021 and 2020, cash paid for amounts included for the operating lease liabilities was $ 251 and $ 271 ,

respectively, and the Company recorded operating lease expense of $ 261 and $ 278 , respectively, included in selling, general and administrative

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

lease payments under the non-cancelable finance lease as of March 31, 2021 were as follows :

lease payments under the non-cancelable finance lease as of June 30, 2021 were as follows :

SCHEDULE OF FUTURE LEASE PAYMENTS UNDER FINANCE LEASE

Finance Leases

Remainder of 2021

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Finance lease obligation, net of current portion

March 31, 2021, the weighted average incremental borrowing rate and the weighted average remaining lease term for the finance lease held

June 30, 2021, the weighted average incremental borrowing rate and the weighted average remaining lease term for the finance lease held

by the Company were 6.36 % and 2.58 years, respectively.

the three months ended March 31, 2021, depreciation expense related to the equipment held under the finance lease obligation was $ 2 .

the three months ended March 31, 2021, cash paid and expense recognized for interest expense related to the finance lease obligation

the three and six months ended June 30, 2021, depreciation expense related to the equipment held under the finance lease obligation was

$ 2 and $ 4 , respectively.

the three and six months ended June 30, 2021, cash paid and expense recognized for interest expense related to the finance lease obligation

was $ 0 and $ 1 , respectively.

STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

the three months ended March 31, 2021, the Company issued 11,301 shares of its common stock upon the exercise of options to purchase

11,301 shares of common stock, with exercise prices ranging between $ 1.70 to $ 3.96 per share and received net proceeds of $ 27 .

the three months ended March 31, 2021, the Company issued 200,000 shares of its common stock to Mark L.

Baum, its CEO, related to the

vesting of 200,000 performance-based restricted stock units.

the three months ended March 31, 2021, the Company issued 22,500 shares of common stock to Andrew R.

June 30, 2021 and 2020, the Company had 5,000,000 shares of preferred stock, $ 0.001 par value, authorized and no shares of preferred

stock issued and outstanding.

B Cumulative Preferred Stock – Redeemed

May 2021, the Company sold 440,000

shares of the Company’s Series B Cumulative

Preferred Stock, par value $ 0.001

per share and liquidation preference of $ 25.00

per share (the “Series B Preferred Stock”),

for a net purchase price of approximately $ 10,655 .

B Preferred Stock was not convertible into our common stock, had no voting rights ,

except as required by Delaware law, and was redeemable by the Company at any time.

Holders of Series B Preferred Stock were entitled

to cumulative cash dividends at the rate of 9.50 %

of the $ 25.00

liquidation preference per year;

provided, however,

that for each thirty (30) day period following May 5, 2021, the dividend rate increased at various rates, except as otherwise limited

by applicable law.

Dividends were payable quarterly in arrears, on or about the 15th of January, April, July and October, beginning on

or about July 15, 2021.

June 2021, the Company redeemed all of the outstanding shares of the Company’s Series B Preferred Stock, par value $ 0.001 per share.

The redemption price for the 440,000 shares of Series B Preferred Stock outstanding was equal to $ 25.00 per share, plus accrued and unpaid

dividends, which in aggregate totaled $ 11,127 .

During the three and six months ended June 30, 2021, the Company recorded preferred stock

cash dividends and deemed dividends equal to $ 472 .

the six months ended June 30, 2021, the Company issued 311,369 shares of its common stock upon the cashless exercise of warrants to purchase

406,539 shares of common stock with exercise prices between $ 1.79 and $ 3.75 per share.

the six months ended June 30, 2021, the Company issued 16,613 shares of its common stock upon the exercise of options to purchase 16,613

shares of common stock with exercise prices between $ 1.70 and $ 4.29 per share and received net proceeds of $ 48 .

the six months ended June 30, 2021, the Company issued 715,871 shares of its common stock to Mark L.

Baum, its CEO, related to the vesting

of 1,050,000 performance-based restricted stock units.

The Company withheld issuance of 334,129 shares of common stock valued at $ 2,760

for payroll tax purposes.

the six months ended June 30, 2021, the Company issued 100,168 shares of common stock to Andrew R.

Boll, its CFO, related to the vesting

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tax purposes valued at $ 468 .

the three months ended March 31, 2021, 22,755 shares of the Company’s common stock underlying RSUs issued to directors vested,

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

March 31, 2021 and 2020, the Company had 5,000,000 shares of preferred stock, $ 0.001 par value, authorized and no shares of preferred

stock issued and outstanding.

to March 31, 2021, the Company sold 440,000 shares of Series B Cumulative Preferred Stock for gross proceeds of $ 11,000 (see Note 17

for additional information).

the six months ended June 30, 2021, 35,510 shares of the Company’s common stock underlying RSUs issued to directors vested, but

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

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

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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”).

31, 2021, 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

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 4,077 shares available for future issuances under the 2017 Plan

at March 31, 2021.

summary of stock option activity under the Plans for the three months ended March 31, 2021 is as follows:

2017 Incentive Stock and Awards Plan which was subsequently amended on June 3, 2021 (as amended, the “2017 Plan” together

with the 2007 Plan, the “Plans”).

As of June 30, 2021, the 2017 Plan provides for the issuance of a maximum of 6,000,000

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

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

The Company had 3,967,251

shares available for future issuances under the 2017 Plan at June 30, 2021.

summary of stock option activity under the Plans for the six months ended June 30, 2021 is as follows:

SCHEDULE OF STOCK OPTION PLAN ACTIVITY

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Weighted Avg.

Exercise Price

Weighted Avg.

Remaining Contractual Life

Aggregate Intrinsic Value

Remaining Contractual

Options outstanding - January 1, 2021

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Options cancelled/forfeited

Options outstanding - March 31, 2021

Options outstanding - June 30, 2021

Options exercisable

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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 March 31, 2021, based on the closing price of the Company’s common stock of $ 6.75 on that date.

the three months ended March 31, 2021, 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

Vesting terms for options granted to employees

and consultants during the three months ended March 31, 2021 were as follows:

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.

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.

than the market price on June 30, 2021, based on the closing price of the Company’s common stock of $ 9.29 on that date.

the six months ended June 30, 2021, 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 six months ended June 30, 2021 included 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.

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.

fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model.

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Dividend yield

following table summarizes information about stock options outstanding and exercisable at March 31, 2021:

following table summarizes information about stock options outstanding and exercisable at June 30, 2021:

SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE

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Range of Exercise Prices

Life in Years

Weighted Average Exercise Price

Number Exercisable

Weighted Average Exercise Price

$ 1.47 - $ 2.60

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$ 1.47 - $ 8.99

of March 31, 2021, there was approximately $ 2,582 of total unrecognized compensation expense related to unvested stock options granted

of June 30, 2021, there was approximately $ 2,012 of total unrecognized compensation expense related to unvested stock options granted

under the Plans.

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The stock-based

compensation for all stock options was $ 452 and $ 263 during the three months ended March 31, 2021 and 2020, respectively.

intrinsic value of options exercised during the three months ended March 31, 2021 was $ 63 .

compensation for all stock options was $ 569 and $ 1,021 during the three and six months ended June 30, 2021, respectively.

intrinsic value of options exercised during the three and six months ended June 30, 2021 was $ 14 and $ 77 , respectively.

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

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

the three months ended March 31, 2021, 300,000 RSUs with a fair market value of $ 2,670 were issued to certain employees;

the RSUs vest

in full on the third anniversary of the grant date.

summary of the Company’s RSU activity and related information for the three months ended March 31, 2021 is as follows:

the six months ended June 30, 2021, 300,000 RSUs with a fair market value of $ 2,670 were issued to certain employees;

the RSUs vest in

full on the third anniversary of the grant date.

the six months ended June 30, 2021, the Company’s board of directors were granted 38,576 RSUs with a fair market value of $ 400

which vest in equal quarterly installments over one year.

summary of the Company’s RSU activity and related information for the six months ended June 30, 2021 is as follows:

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

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RSUs unvested - January 1, 2021

( 1,243,009 )

RSUs cancelled/forfeited

RSUs unvested at March 31, 2021

of March 31, 2021, the total unrecognized compensation expense related to unvested RSUs was approximately $ 3,687 , which is expected to

RSUs unvested at June 30, 2021

of June 30, 2021, the total unrecognized compensation expense related to unvested RSUs was approximately $ 3,606 , which is expected to

be recognized over a weighted-average period of 1.74 years, based on estimated and actual vesting schedules of the applicable RSUs.

stock-based compensation for RSUs during the three months ended March 31, 2021 and 2020 was $ 346 and $ 259 , respectively.

stock-based compensation for RSUs during the three and six months ended June 30, 2021 was $ 481 and $ 827 , respectively.

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

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

summary of warrant activity for the three months ended March 31, 2021 is as follows:

summary of warrant activity for the six months ended June 30, 2021 is as follows:

SCHEDULE OF WARRANTS ACTIVITY

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Warrants outstanding - January 1, 2021

Warrants outstanding and exercisable - March 31, 2021

Weighted average remaining contractual life of the outstanding warrants in years - March 31, 2021

outstanding and exercisable as of March 31, 2021 are as follows:

Warrants outstanding and exercisable - June 30, 2021

Weighted average remaining contractual life of the outstanding warrants in years - June 30, 2021

outstanding and exercisable as of June 30, 2021 are as follows:

SCHEDULE OF WARRANTS OUTSTANDING AND WARRANTS EXERCISABLE

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Lender warrants

Settlement warrants

Lender warrants

Stock-Based Transactions

Company recognized $57 in stock-based compensation expense related to subsidiary stock options during the three months ended March 31,

Company recognized $ 28 and $ 85 in stock-based compensation expense related to subsidiary stock options during the three and six months

ended June 30, 2021, respectively.

Compensation Summary

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SCHEDULE OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES DIRECTORS CONSULTANTS

For the Three Months

Ended March 31,

For the Three Months Ended

For the Six Months Ended

Employees - selling, general and administrative

Employees - R&D

Directors - selling, general and administrative

Consultants - selling, general and administrative

COMMITMENTS AND CONTINGENCIES

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April 2018, Novel Drug Solutions, LLC and Eyecare Northwest, PA (collectively “NDS”) filed a lawsuit against the Company

District Court of Delaware asserting claims for breach of contract.

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.

District Court of Delaware asserting various claims, including 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 claims related

to its purported termination of the APA.

In October 2019, NDS voluntarily dismissed all but two claims, leaving only claims related to

the scope and performance of the post-termination obligations to be litigated.

Trial is currently set to begin in November 2021.

is seeking damages, interest, attorneys’ 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.

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

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

and Professional Liability

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In April 2018,

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

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

In September 2018, co-defendant Dr.

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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.

Trial is currently set to begin October 2021.

Erick is seeking unspecified damages, interest, attorneys’ 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.

The Company’s insurance carrier has reserved its rights to seek contribution from

the Company if the plaintiffs prevail on certain claims which the carrier alleges are uncovered.

The Company believes the policy covers

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

the ordinary course of business, the Company may face various claims brought by third parties and it may, from time to time, make claims

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of the Company’s restricted common stock.

Payments totaling $ 35 and $ 55 were made during the three months ended March 31, 2021

and 2020, respectively.

$ 35 and $ 29 was incurred as royalty expense during the three months ended March 31, 2021 and 2020, respectively,

and included in accounts payable to Dr.

Payments totaling $ 35 and $ 70 were made during the three and six months ended June 30,

2021, respectively.

Payments totaling $ 0 and $ 55 were made during the three and six months ended June 30, 2020, respectively.

expense of $ 44 and $ 79 was incurred during the three and six months ended June 30, 2021, respectively, and $ 44 is included in accounts

payable to Dr.

Lindstrom as of June 30, 2021.

Royalty expense of $ 27 and $ 56 was incurred during the three and six months ended June

30, 2020, respectively.

Asset Purchase Agreement – Related Party

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Lindstrom was

paid $ 7 and $ 7 in cash during the three months ended March 31, 2021 and 2020, respectively.

The Company incurred $ 7 and $ 38 for royalty

expenses related to the Lindstrom APA during the three months ended March 31, 2021 and 2020.

paid $ 7 and $ 14 in cash during the three and six months ended June 30, 2021, respectively.

Lindstrom was paid $ 0 and $ 7 in cash during

the three and six months ended June 30, 2020, respectively.

The Company incurred royalty expense of $ 7 and $ 14 and $ 4 and $ 42 related

to the Lindstrom APA during the three and six months ended June 30, 2021, and 2020, respectively.

Commercial Alliance Agreement

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if the Company fails to achieve certain minimum sales levels during specified periods.

During the three months ended March 31, 2021,

the Company recorded $ 485 in commission revenues related to the Dexycu Agreement.

During the three and six months ended June 30,

2021, the Company recorded $ 827 and $ 1,312 , respectively, in commission revenues related to the Dexycu Agreement.

and Marketing Agreements

Company has entered various sales and marketing agreements with certain organizations to provide exclusive and non-exclusive sales and

marketing representation services to Harrow in select geographies in the U.S., in connection with the Company’s ophthalmic pharmaceutical

marketing representation services to Harrow in select geographies in the U.S.

in connection with the Company’s ophthalmic pharmaceutical

compounded formulations or related products.

3 unchanged sentences

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.

$ 0 and $ 83 of stock-based payments were recorded and $ 804 and $ 603 were

incurred under these agreements for commission expenses during the three months ended March 31, 2021 and 2020, respectively.

certain future levels by the end of their terms.

Commission expenses of $ 1,032 and $ 1,836 and $ 318 and $ 921 were incurred under these

agreements during the three and six months ended June 30, 2021, and 2020, respectively.

Purchase, License and Related Agreements

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the Inventors.

$ 232 and $ 144 were incurred under these agreements as royalty expenses and included in accounts payable at March 31, 2021

and 2020, respectively.

Royalty expenses of $ 261 and $ 493 and $ 117 and $ 261 were incurred under these agreements for the three and six months

ended June 30, 2021 and 2020, respectively, and $ 272 and $ 431 are included in accounts payable at June 30, 2021 and 2020, respectively.

Pharmaceuticals MAY-66 License Termination

May 2021, Mayfield terminated the License Agreement (the “TGV License”) with TGV-Health, LLC and affiliated entities (collectively,

“TGV”), pursuant to which it acquired intellectual property rights for use in the women’s health field, related to

Mayfield’s proprietary drug candidate MAY-66.

Concurrent with the termination, TGV returned to Mayfield 300,000 shares of Mayfield’s

common stock, constituting all of the equity held by TGV.

Mayfield has no outstanding or remaining obligations under the TGV License.

Pharmaceuticals MAY-44 APA Termination

May 2021, Mayfield and Harrow terminated their asset purchase agreement dated January 2020 for intellectual property rights associated

with Mayfield’s drug candidate MAY-44 with Elle Pharmaceutical LLC (the “MAY-44 APA”).

As part of the termination,

Mayfield re-acquired 350,000 shares of its common stock from Elle.

Mayfield has no outstanding or remaining obligations related to the

License Termination

May 2021, Stowe terminated the License Agreement (the “Stowe License”) with TGV, pursuant to which it acquired intellectual

property rights for use in the ophthalmic field, related to Stowe’s proprietary drug candidate STE-006.

Concurrent with the termination,

TGV returned to Stowe 1,750,000 shares of Stowe’s common stock, constituting all of the equity held by TGV.

Stowe has no outstanding

or remaining obligations under the Stowe License.

SEGMENT INFORMATION AND CONCENTRATIONS

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and attributable to the segment.

net revenues, segment operating expenses and segment contribution information consisted of the following for the three months ended March

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

ended June 30, 2021:

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

For the Three Months Ended

March 31, 2021

Three Months Ended

June 30, 2021

Pharmaceutical Drug Development

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Operating income

For the Three Months Ended

March 31, 2020

Six Months Ended

June 30, 2021

Pharmaceutical Drug Development

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Research and development

Operating income

Three Months Ended

June 30, 2020

Pharmaceutical Drug Development

Cost of sales

Operating expenses:

Selling, general and administrative

Research and development

Segment contribution

Research and development

Asset sales and impairments, net

Operating loss

Six Months Ended

June 30, 2020

Pharmaceutical

Drug Development

Cost of sales

Operating expenses:

Selling, general and administrative

Research and development

Segment contribution

Research and development

Asset sales and impairments, net

Operating loss

Company categorizes revenues by geographic area based on selling location.

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total revenues are attributed to the U.S.

All long-lived assets at March 31, 2021 and December 31, 2020 were located in the U.S.

All long-lived assets at June 30, 2021 and December 31, 2020 were located in the U.S.

Concentrations

Company has two products that each comprised more than 10% of total revenues during the quarter.

These products collectively accounted

for 36 % of revenues during each of the three and six months ended June 30, 2021.

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 three months ended March 31, 2021 and 2020.

Company’s total pharmacy sales for the three and six months ended June 30, 2021 and 2020.

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

These suppliers collectively accounted for 85 %

and 78 % of active pharmaceutical ingredient purchases during the three months ended March 31, 2021 and 2020, respectively.

and 79 % of active pharmaceutical ingredient purchases during the three and six months ended June 30, 2021, respectively, and 60 % and

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

SUBSEQUENT EVENTS

Company has performed an evaluation of events occurring subsequent to March 31, 2021 through the filing date of this Quarterly Report.

Company has performed an evaluation of events occurring subsequent to June 30, 2021 through the filing date of this Quarterly Report.

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

and Exercise of Equity Awards

April 2021, the Company issued 515,871 shares of its common stock to Mark L.

Baum, its Chief Executive Officer, upon the vesting of 850,000

performance-based restricted stock units.

The Company withheld issuance of 334,129 shares of common stock valued at $ 2,760 for payroll

tax purposes.

April 2021, the Company issued 77,668 shares of common stock to Andrew R.

Boll, its Chief Financial Officer, upon the vesting of 127,500

performance-based restricted stock units.

The Company withheld issuance of 49,832 shares of common stock valued at $ 411 for payroll tax

April 2021, the Company issued 5,000 shares of its common stock upon the exercise of options to purchase 5,000 shares of common stock,

with an exercise price of $ 4.29 per share, and received net proceeds of $ 21 .

of Eton Stock

In April 2021, the Company closed the underwritten public offering of 1,518,000 shares of its Eton common stock at a public offering

price of $ 7.00 per share (the “Eton Stock Sale”).

The gross proceeds to the Company from the Eton Stock Sale were $ 10,626 ,

before deducting underwriting discounts and commissions and other offering expenses payable by the Company.

Following such sale, the

Company owns 1,982,000 shares of Eton common stock, which represented approximately 8.1 % of the equity and voting interests issued and

outstanding of Eton as of April 12, 2021.

part of the Eton Stock Sale, the Company also agreed, for a period of 180 days, not to conduct any further sales of shares of its common

stock of Eton or otherwise dispose of, directly or indirectly, any common stock of Eton (or any securities convertible into, or exercisable

or exchangeable for, the common stock of Eton).

Senior Notes Due 2026

April 2021, we closed an offering of $ 50,000 aggregate principal amount of 8.625 % Senior Notes due 2026 (the

“Notes”) and in May 2021, the underwriters exercised their option to purchase an additional $ 5,000 aggregate

principal amount of the Notes ($ 55,000 in total).

T he Notes are senior unsecured

obligations of the Company and rank equally in right of payment with all of our other existing and future senior unsecured

and unsubordinated indebtedness.

The Notes are effectively subordinated in right of payment to all of the Company’s

existing and future secured indebtedness and structurally subordinated to all existing and future indebtedness of the

Company’s subsidiaries, including trade payables.

The Notes bear interest at the rate of 8.625% per annum.

the Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing on July

The Notes will mature on April 30, 2026 .

Prior to February 1, 2026, the Company may, at its option, redeem the

Notes, in whole at any time or in part from time to time, at a redemption price equal to 100 % of the principal amount of the

Notes to be redeemed, plus a make-whole amount, if any, plus accrued and unpaid interest to, but excluding, the date of

The Company may redeem the Notes for cash in whole or in part at any time at our option on or after February 1,

2026 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but

excluding, the date of redemption.

On and after any redemption date, interest will cease to accrue on the redeemed

Loan Repayment

April 2021, the Company paid $ 15,540 related to all outstanding obligations to SWK under the SWK Loan, including outstanding principal,

accrued interest, accrued exit fee and related expenses.

B Cumulative Preferred Stock

May 2021, the Company issued 440,000

shares of the Company’s Series B

Cumulative Preferred Stock, par value $ 0.001

per share and liquidation preference of

per share (the “Series B Preferred

Stock”), for a net purchase price of approximately $ 10,670 .

The Series B Preferred Stock is not convertible into our common stock, has no voting rights, except as required by Delaware law,

and is redeemable by the Company at any time.

Holders of Series B Preferred Stock, when and as authorized by the

Company’s Board of Directors, are entitled to cumulative cash dividends at the rate of 9.50 % of the $25.00 liquidation preference per year (equivalent to $2.375 per share per year);

provided, however, that for each thirty

(30) day period following May 5, 2021, the dividend rate shall be increased in increments of fifty (50) basis points, and effective

September 30, 2021, the dividend rate shall be set at 12%, and for each thirty (30) day period thereafter, the dividend rate shall

be increased in increments of one hundred (100) basis points except as otherwise limited by applicable law.

Dividends will be

payable quarterly in arrears, on or about the 15th of January, April, July and October, beginning on or about July 15, 2021.

In the event of any liquidation, dissolution or winding-up of the Company, the holders of the Series B Preferred Stock will have

preference to holders of our common stock at $ 25.00 per share plus any accrued and unpaid dividends (whether or not authorized

or declared).

Pharmaceuticals MAY-66 License Termination

May 2021, Mayfield terminated the License Agreement (the “TGV License”) with TGV-Health, LLC and affiliated entities (collectively,

“TGV”), pursuant to which it acquired intellectual property rights for use in the women’s health field, related to

Mayfield’s proprietary drug candidate MAY-66.

Concurrent with the termination, TGV returned to Mayfield 300,000 shares of Mayfield’s

common stock, constituting all of the equity held by TGV.

Mayfield has no outstanding or remaining obligations under the TGV License.

Pharmaceuticals MAY-44 APA Termination

May 2021, Mayfield and Harrow terminated their asset purchase agreement dated January 2020 for intellectual property rights associated

with Mayfield’s drug candidate MAY-44 with Elle Pharmaceutical LLC (the “MAY-44 APA”).

As part of the termination,

Mayfield re-acquired 350,000 shares of its common stock from Elle.

Mayfield has no outstanding or remaining obligations related to the

License Termination

May 2021, Stowe terminated the License Agreement (the “Stowe License”) with TGV, pursuant to which it acquired intellectual

property rights for use in the ophthalmic field, related to Stowe’s proprietary drug candidate STE-006.

Concurrent with the termination,

TGV returned to Stowe 1,750,000 shares of Stowe’s common stock, constituting all of the equity held by TGV.

Stowe has no outstanding

or remaining obligations under the Stowe License.

July 2021, the Company entered into a License and Supply Agreement (the “Sintetica Agreement”) with Sintetica S.A.

(“Sintetica”),

pursuant to which Sintetica granted the Company the exclusive license and marketing rights to its patented ophthalmic drug candidate

(“AMP-100”) in the U.S.

to the Sintetica Agreement, the Company will pay Sintetica a per unit transfer price to supply AMP-100, along with a per unit royalty

for units sold.

The Company is required to pay Sintetica up to $ 18,000 in one-time milestone payments including a $ 5,000 payment due

within 30 days of signing the Sintetica Agreement and the balance of payments due upon achievement of certain regulatory and commercial

Under the terms of the Sintetica Agreement, Sintetica will be responsible for regulatory filings for AMP-100 in the U.S.

to certain limitations, the term of the Sintetica Agreement is ten years, and allows for a ten-year extension if certain sales thresholds

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

What changed 10-Q

Item 1. Financial Statements