What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2021-11-09 · 593 added, 814 removed, 429 unchanged (77% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

thousands, except share data)

and cash equivalents, including restricted cash of $ 200

in Eton Pharmaceuticals

receivable - Melt Pharmaceuticals

receivable, net

expenses and other current assets

Current assets

plant and equipment, net

lease right-of-use assets

in Surface Ophthalmics

in Melt Pharmaceuticals

AND STOCKHOLDERS’ EQUITY

payable and accrued expenses

payroll and related liabilities

revenue and customer deposits

portion of paycheck protection program loan payable

portion of loan payable, net of unamortized debt discount

portion of operating lease liabilities

portion of finance lease obligations

Cash and cash equivalents

Investment in Eton Pharmaceuticals

Accounts receivable, net

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Capitalized software costs, net

Operating lease right-of-use assets

Intangible assets, net

Investment in Melt Pharmaceuticals

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

lease liabilities, net of current portion

lease obligations

expenses, net of current portion

protection program loan payable, net of current portion

payable, net of current portion and unamortized debt discount

AND CONTINGENCIES

STOCKHOLDERS’

Common stock, $ 0.001 par value,

50,000,000 shares authorized, 26,902,763 and 25,749,875 shares issued and outstanding at

September 30, 2021 and December 31, 2020, respectively

paid-in capital

HARROW HEALTH STOCKHOLDERS’ EQUITY

Noncontrolling

LIABILITIES AND EQUITY

Accounts payable and accrued expenses

Accrued payroll and related liabilities

Deferred revenue and customer deposits

Current portion of operating lease obligations

Current portion of finance lease obligations

Total current liabilities

Operating lease obligations, net of current portion

Finance lease obligations, net of current portion

Loans payable, net of current portion and unamortized debt discount

TOTAL LIABILITIES

Commitments and contingencies

STOCKHOLDERS’ EQUITY

Common stock, $ 0.001 par value, 50,000,000 shares authorized, 27,031,127 and 26,902,763 shares issued

and outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

Accumulated deficit

( 97,845,000 )

( 95,407,000 )

TOTAL HARROW HEALTH STOCKHOLDERS’ EQUITY

Noncontrolling interests

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

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)

the Three Months Ended

the Nine Months Ended

general and administrative

and development

of intangible assets

Three Months Ended

Product sales, net

Other revenues

Total revenues

Cost of sales

( 5,963,000 )

( 3,770,000 )

Operating expenses:

Selling, general and administrative

Research and development

Total operating expenses

Income from operations

(expense) income:

in losses of unconsolidated entities

(loss) gain from Eton Pharmaceuticals, net

from early extinguishment of loan

on forgiveness of PPP loan

(expense) income, net

other (expense) income, net

net (loss) income including noncontrolling interests

loss attributable to noncontrolling interest

(loss) income attributable to Harrow Health, Inc.

dividends and accretion of preferred stock issuance costs

(loss) income attributable to common stockholders

net (loss) income per share of common stock

average number of shares of common stock outstanding, basic

average number of shares of common stock outstanding, diluted

Other (expense) income:

Interest expense, net

( 1,792,000 )

Equity in losses of unconsolidated entities

( 2,886,000 )

( 1,319,000 )

Investment gain (loss) from Eton Pharmaceuticals

( 2,835,000 )

Gain on forgiveness of PPP loan

Total other expense, net

( 4,539,000 )

( 2,700,000 )

(Loss) income before income taxes

( 2,438,000 )

Net (loss) income attributable to common stockholders

$ ( 2,438,000 )

Basic net (loss) income per share of common stock

Diluted net (loss) income per share of common stock

Weighted average number of shares of common stock

outstanding, basic

Weighted average number of shares of common stock outstanding, diluted

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

STATEMENTS OF STOCKHOLDERS’ EQUITY

the period ended September 30, 2021 and 2020

thousands, except for share data)

Noncontrolling

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

the Three Months Ended March 31, 2022 and 2021

Stockholders’

at June 30, 2020

of common stock in connection with:

of employee stock-based options

of warrants , shares

of common stock related to vesting of RSUs

of common stock related to vesting of RSUs , shares

Balance at December 31, 2020

$ 104,557,000

$ ( 77,400,000 )

$ ( 355,000 )

Issuance of common stock in connection with:

Exercise of employee options

Vesting of RSUs

Shares withheld related to net share settlement of equity awards

Stock-based compensation expense

Balance at March 31, 2021

$ 105,382,000

$ ( 77,183,000 )

$ ( 355,000 )

Balance at December 31, 2021

$ 106,666,000

$ ( 95,407,000 )

$ ( 355,000 )

Issuance of common stock in connection with:

Exercise of employee options

Vesting of RSUs

Shares withheld related to net share settlement of equity awards

of preferred shares, net of discount and issuance costs

of preferred shares

of preferred dividends

payment for services provided

of RSUs, shares

payment for services provided

compensation expense

at September 30, 2020

Noncontrolling

Stockholders’

at June 30, 2021

of common stock in connection with:

of employee stock-based options

compensation expense

at September 30, 2021

Noncontrolling

Stockholders’

at December 31, 2019

of common stock in connection with:

of employee stock-based options

of common stock related to vesting of RSUs

payment for services provided

compensation expense

at September 30, 2020

Noncontrolling

Stockholders’

at December 31, 2020

of common stock in connection with:

of employee stock-based options

withheld related to net share settlement of equity awards

of preferred shares, net of discount and issuance costs

of preferred shares

of preferred dividends

compensation expense

at September 30, 2021

Stock-based compensation expense

( 2,438,000 )

Balance at March 31, 2022

$ 107,909,000

$ ( 97,845,000 )

$ ( 355,000 )

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FLOWS FROM OPERATING ACTIVITIES

loss (including noncontrolling interests)

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

and amortization of property, plant and equipment

of intangible assets

of operating lease right-of-use assets

for bad debt expense

of debt issuance costs and discount

on forgiveness of PPP loan

loss from Eton, net

in losses of unconsolidated entities

income paid-in-kind from note receivable

on sale and disposal of assets

paid-in-kind on loan payable

of long-lived assets

on early extinguishment of loan

payment of consulting services

in assets and liabilities:

expenses and other current assets

payable and accrued expenses

payroll and related liabilities

revenue and customer deposits

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

FLOWS FROM INVESTING ACTIVITIES

proceeds on sale investments

of note receivable, Melt Pharmaceuticals

in patent and trademark assets

of property, plant and equipment

CASH USED IN INVESTING ACTIVITIES

FLOWS FROM FINANCING ACTIVITIES

on finance lease obligations

proceeds from 8.625% notes payable, net of costs

and exit fee payments on SWK loan

proceeds from PPP loan payable

from SWK debt, net of costs

of taxes upon vesting of RSUs

from exercise of stock options

of preferred stock, net of discount and issuance costs

of preferred stock

of preferred stock dividends

CASH PROVIDED BY FINANCING ACTIVITIES

CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

CASH EQUIVALENTS AND RESTRICTED CASH, end of period

RECONCILIATION

OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH

and cash equivalents

CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

DISCLOSURE OF CASH FLOW INFORMATION:

paid for income taxes

paid for interest

DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

asset obtained in exchange for lease obligation

reduction in right-of-use assets and lease obligations due to

modifications

of common stock upon vesting of RSUs

accounts receivable transferred to note receivable

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

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss) income

$ ( 2,438,000 )

Adjustments to reconcile net (loss) income to net cash provided by operating

Depreciation and amortization

Amortization of intangible assets

Amortization of operating lease right-of-use assets

Provision for bad debt expense

Amortization of debt issuance costs and discount

Gain on forgiveness of PPP loan

( 1,967,000 )

Investment (gain) loss from investment in Eton

Equity in losses of unconsolidated entities

Stock-based compensation

Changes in assets and liabilities:

Accounts receivable

( 1,535,000 )

Prepaid expenses and other current assets

Accounts payable and accrued expenses

Accrued payroll and related liabilities

( 1,141,000 )

Deferred revenue and customer deposits

NET CASH PROVIDED BY OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Investment in patent and trademark assets

Purchases of property, plant and equipment and capitalized software development costs

NET CASH USED IN INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Payments on finance lease obligations

Principal payment on SWK loan

Proceeds from the exercise of stock options

Payment of taxes upon vesting of RSUs and exercise of stock options

NET CASH USED IN FINANCING ACTIVITIES

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Cash and cash equivalents

Restricted cash

CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

Cash paid for interest

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Right-of-use assets obtained in exchange for new operating

lease obligations

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

TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the three and nine months ended September 30, 2021 and 2020

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

the Three Months Ended March 31, 2022 and 2021

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

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In 2020, Harrow created Visionology, Inc.

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

(“Visionology”), which launched a digital eye health platform business during 2021.

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

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

Operating results for the three and nine months ended September

Operating results for the three months ended March 31,

2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or for any other period.

5 unchanged sentences

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 September 30, 2021 and December 31, 2020 and the condensed consolidated statements of operations,

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

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

(“Mayfield”) and Stowe Pharmaceuticals,

The Company assesses control under the variable interest entity

(“VIE”) model to determine whether the Company is the primary beneficiary of that entity’s operations.

is not deemed to be a VIE, the Company consolidates entities 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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

following represents an update for the three months ended March 31, 2022 to the significant accounting policies described in the Company’s

Annual Report on Form 10-K for the year ended December 31, 2021.

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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.

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 Income (Loss) per Common Share

to shifts in the Company’s strategic plans to further focus on growing the Company’s ImprimisRx business and suspension of

activities related to starting up development-stage pharmaceutical companies, along with changes to the Company’s organizational

and internal reporting structure, beginning in January 2022 management no longer evaluates the Company’s business in two segments

and instead focuses on the performance of the business as a single operating business.

and Diluted Net (Loss) Income per Common Share

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

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net (loss) income attributable to common stockholders for the period by the weighted average number of common and common equivalent shares,

such as stock options and warrants, outstanding during the period.

Common equivalent shares (using the treasury stock method) from stock

options, unvested restricted stock units (“RSUs”) and warrants were 5,657,046 and 5,447,716 at September 30, 2021 and September

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

Common equivalent shares

(using the treasury stock method) from stock options, unvested RSUs and warrants were 5,546,200 and 5,486,678 at March 31, 2022 and 2021,

respectively.

For the three and nine months ended September 30, 2021 and the nine months ended September 30, 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) income per share calculation were RSUs awarded to directors that had vested, but the issuance and delivery

of the shares are deferred until the director resigns.

The number of shares underlying vested RSUs at September 30, 2021 and 2020 was

258,117 and 281,507 , respectively.

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

ended September 30, 2021 and 2020:

For the three months ended March 31, 2022, 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) income per share calculation were RSUs

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

of shares underlying vested RSUs at March 31, 2022 and 2021 was 277,405 and 223,219 , respectively.

following table shows the computation of basic net (loss) income per share of common stock for the three months ended March 31, 2022

SCHEDULE OF BASIC AND DILUTED EARNINGS PER COMMON SHARE

For the Three

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

For the Three Months Ended

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

common stockholders

Denominator - weighted average number

of shares outstanding, basic

(loss) income per share, basic

the three months ended September 30, 2020, the Company had net income.

As a result, the Company computed diluted net income per share

using the weighted-average number of common shares and dilutive common equivalent shares outstanding during the period.

Diluted common

equivalent shares for the three months ended September 30, 2020, consisted of the following:

OF DILUTED COMMON EQUIVALENT SHARES

the Three Months Ended

$ ( 2,438,000 )

Denominator - weighted average number of shares outstanding, basic

Net (loss) income per share, basic

the three months ended March 31, 2021, the Company had net income.

As a result, the Company computed diluted net income per share using

the weighted-average number of common shares and dilutive common equivalent shares outstanding during the period.

Diluted common equivalent

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

SCHEDULE OF DILUTED COMMON EQUIVALENT SHARES

For the Three Months Ended

March 31, 2021

Diluted shares related to:

Stock options

Dilutive common equivalent

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

30, 2021 and 2020:

OF DILUTED NET INCOME LOSS PER SHARES

For the Three

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

Dilutive common equivalent shares

following table shows the computation of diluted net (loss) income per share of common stock for the three months ended March 31, 2022

SCHEDULE OF DILUTED NET INCOME LOSS PER SHARES

For the Three Months Ended

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

$ ( 2,438,000 )

Denominator – weighted average number of shares outstanding, basic

Dilutive common equivalent

Number of shares used

for diluted earnings per share computation

Net (loss) income per

share, diluted

in Eton Pharmaceuticals, Inc.

the nine months ended September 30, 2021, the Company sold 1,518,000 shares of its Eton Pharmaceuticals, Inc.

(“Eton”) 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 nine months ended September 30, 2021,

the Company recorded a realized loss of $ 1,406 related to the Eton Stock Sale.

the Eton Stock Sale and as of September 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 September 30, 2021, the fair market value of Eton’s common stock was $ 5.04 per share.

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

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

Eton common stock position of $ ( 2,220 ) and $ ( 7,233 ) , during the three and nine months ended September 30, 2021, respectively, and $ 8,575

and $ 2,450 during the three and nine months ended September 30, 2020, respectively, related to the change in fair market value of its

Dilutive common equivalent shares

Number of shares used for diluted earnings per share computation

Net (loss) income per share, diluted

Investment in Eton Pharmaceuticals, Inc.

of March 31, 2022, the Company owned 1,982,000 shares of Eton common stock, which represents less than 10 % of the equity interests of

At March 31, 2022, the fair market value of Eton’s common stock was $ 4.36 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 $ 139,000

and $( 2,835,000 ) during the three months ended March 31, 2022 and 2021, respectively, related to the change in fair market value of its

investment in Eton during the measurement period.

As of September 30, 2021, the fair market value of the Company’s investment in

Eton was $ 9,989 .

part of the Eton Stock Sale, the Company 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).

As of March 31, 2022, the fair market value of the Company’s investment in Eton

was $ 8,642,000 .

in Melt Pharmaceuticals, Inc.

– Related Party

Company owns 3,500,000 common shares (which is approximately 46 % of the equity interests as of September 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.

Company owns 3,500,000 shares of common stock of Melt (representing approximately 46 % of the equity interests as of March 31, 2022).

The Company analyzes its investment in Melt and related agreements on a regular basis to evaluate its position of variable interests

The Company has determined that it does not have the ability to control Melt, however it has the ability to exercise significant

influence over the operating and financial decisions of Melt and uses the equity method of accounting for this investment.

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.

Any intra-entity profits and losses are eliminated.

During the three months ended September 30, 2021 and 2020, the Company recorded equity in the net losses of Melt of $ 706 and $ 300 , and

$ 1,653 and $ 1,536 during the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021 and December 31, 2020,

the Company’s investment in Melt was $ 0 and $ 1,655 .

At September 30, 2021 and December 31, 2020, the Company recorded $ 8 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”), which are included in prepaid expenses and other current assets in the accompanying consolidated balance

During the year ended December 31,

2021, the Company reduced the carrying value of its common stock investment in Melt to $ 0 as a result of the Company recording its share

of equity losses in Melt since its deconsolidation in 2019.

As of March 31, 2022 and at the time of entering into the Melt Loan Agreement

(see Note 4), the Company owned 100 % of Melt’s indebtedness.

Following the reduction of the carrying value of the Company’s

common stock investment in Melt to $ 0 , the Company began recording 100 % of the equity method losses of Melt, based on its ownership of

Melt’s total indebtedness.

In addition, the Company treats interest paid in kind on the Melt Loan Agreement as an in-substance

capital contribution and reduces its investment in Melt accordingly, rather than recording interest income.

The Company has no other

requirements to advance funds to Melt.

following table summarizes the Company’s investments in Melt as of March 31, 2022:

SCHEDULE OF INVESTMENT

Share of Equity

In-substance Capital

Method Losses

Contributions

Carrying value

$ ( 5,810,000 )

( 5,253,000 )

( 1,021,000 )

$ ( 11,063,000 )

$ ( 1,021,000 )

the three months ended March 31, 2022 and 2021, the Company recorded $ 30,000

due from Melt for reimbursable expenses and

amounts payable pursuant to a Management Services Agreement between the Company and Melt (the “Melt MSA”), which are included

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

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

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– Related Party

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 in 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.

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 of Surface (representing approximately 20 % of Surface’s equity interests following the closing

of a round of financing completed by Surface in July 2021) 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 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

$ 0 and $ 756 during the three months ended September 30, 2021 and 2020, respectively, and $ 1,314 and $ 1,694 during the nine months ended

September 30, 2021 and 2020, respectively.

As of September 30, 2021 and December 31, 2020, the Company’s investment in Surface

was $ 0 and $ 1,314 , respectively.

During the year ended December 31, 2021, the Company

reduced its common stock investment in Surface to $ 0 as a result of the Company recording its share of equity losses of Surface.

Company has no other investments in Surface.

following table summarizes the Company’s investment in Surface as of March 31, 2022:

SCHEDULE OF INVESTMENT

Share of Equity

Method Losses

Carrying value

$ ( 5,320,000 )

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

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method investments and note receivable.

At September 30, 2021 and December 31, 2020, no indicators of impairment existed.

and Development

and development (“R&D”) expenses consist of expenses incurred in performing research and development activities, including

salaries and benefits, other overhead expenses, and costs related to clinical trials, contract services and outsourced contracts.

expense all costs related to R&D as they are incurred.

and milestone payments related to the acquisition and licensing of technology for drug and product candidates that are not yet approved

by the FDA are considered acquisition of in process R&D and expensed as R&D in the period in which the expense occurs.

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.

Reclassifications

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

for the current period.

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

results of operations, or cash flows as previously reported.

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

has three primary streams of revenue:

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

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

Revenues from Pharmacy Services

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:

At March 31, 2022 and December 31, 2021, no indicators of impairment existed.

Company accounts for contracts with customers in accordance with Accounting Standards Codification (“ASC”) 606, Revenues

from Contracts with Customers.

The Company has two primary streams of revenue:

(1) revenue recognized from its sale of products within

pharmacy services and (2) revenue recognized from intellectual property license and asset purchase agreements.

Company sells prescription drugs directly through its pharmacy and outsourcing facility.

Revenue from the Company’s pharmacy services

(i) the portion of the price the client pays directly to the Company, net of any volume-related or other discounts paid back

to the client, (ii) the price paid to the Company 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, the Company has identified the following:

the contract(s) with a customer:

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the product the customer is wishing to receive.

If we are unable to meet the performance obligation, the customer is notified.

If we are unable to be meet the performance obligations the customer is notified.

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.

These amounts are pre-determined and built into the Company’s order management software.

the transaction price to the performance obligations in the contract:

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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.

following revenue recognition policy has been established for the Company’s pharmacy services:

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

prescription is shipped.

At the time of shipment, the pharmacy services 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

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.

Company has entered into an agreement whereby it is paid a fee calculated based on sales the Company 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 Company’s part to recognize

the associated revenue.

of Acquired Product Profit Revenues

Company has entered into an agreement whereby it purchased the exclusive commercial rights to assets associated with certain ophthalmic

products from another pharmaceutical company (the “Seller”).

During a temporary, six month transition period, the Seller

will continue to manufacture and market these products and transfer the net profit from the sale of the products to the Company.

revenue recognized by the Company from the transfer of net profit is recognized at the time profit from the products sales has been calculated

by the Seller and confirmed by the Company, typically on a monthly basis, at which point there is no future performance obligation required

by the Company and no consequential continuing involvement on the Company’s part to recognize the associated revenue.

a quarterly basis, the Seller invoices the Company for all credits and reimbursements (“Chargebacks”) made to customers related

to the products.

The Company uses historical actual experience to estimate Chargebacks associated with the net profit transferred.

estimate is recorded as a reduction in revenues in the Company’s condensed consolidated statements of operations and

accounts receivable in the condensed consolidated balance sheets, at the time the revenue is recognized.

Property License Revenues

of September 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.

Company currently holds five intellectual property licenses and related agreements in which the Company has agreed to license or sell

to 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 that the performance obligation is met.

Non-refundable

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recognized on a straight-line basis over the applicable term.

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

SCHEDULE OF DISAGGREGATED REVENUE

For the Three

Product sales,

Commission revenues

revenue and customer deposits at September 30, 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 nine months ended September 30, 2021.

disaggregated by revenue source for the three months ended March 31, 2022 and 2021, consists of the following:

OF DISAGGREGATED REVENUE

For the Three Months Ended March 31,

Product sales, net

Transfer of profit

Total revenues

revenue and customer deposits at March 31, 2022 and December 31, 2021 were $ 23,000 and $ 16,000 , respectively.

All deferred revenue and

customer deposit amounts at December 31, 2021 were recognized as revenue during the three months ended March 31, 2022.

INVESTMENT IN, AND NOTE RECEIVABLE FROM MELT PHARMACEUTICALS, INC.

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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 Note 2).

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

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amount of $ 10,000 .

As of September 30, 2021 and December 31, 2020, the Company was due $ 8 and $ 851 , respectively, from Melt for reimbursable

As of March 31, 2022 and December 31, 2021, the Company was due $ 70,000 and $ 48,000 , 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 nine months ended September

The net funds received by Melt excluded $ 908 for amounts owed to the Company for reimbursable expenses and amounts due under

the Melt MSA prior to the effective date of the note receivable (see Note 2).

Melt did not make any payments to the Company during the three months ended March 31, 2022.

Company’s Chief Executive Officer, Mark L.

Baum, was previously a member of the Melt board of directors until his resignation in

September 2021.

Baum, was previously a member of the Melt board of directors until his resignation during

the year ended December 31, 2021.

Following Mr.

Baum’s departure, the Company no longer has any representation on Melt’s board of directors.

Baum’s departure, the Company no longer has any representation on Melt’s

board of directors.

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

SUMMARY OF CONDENSED INCOME STATEMENT

SCHEDULE OF CONDENSED INCOME STATEMENT

For the Three Months Ended

Revenues, net

Loss from operations

( 3,337,000 )

( 1,099,000 )

$ ( 3,337,000 )

$ ( 1,099,000 )

unaudited condensed balance sheet information of Melt is summarized below:

SUMMARY OF CONDENSED BALANCE SHEET

At September 30,

SCHEDULE OF CONDENSED BALANCE SHEET

At December 31,

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Total liabilities

Total stockholders’

(deficit) equity

liabilities and stockholders’ equity

Total preferred stock and stockholders’ deficit

( 7,928,000 )

( 4,454,000 )

Total liabilities and stockholders’ deficit

Note Receivable

September 2021, the Company entered into a loan and security agreement in the principal amount of $ 13,500,000 (the “Melt Loan Agreement”),

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by three percent ( 3 %) per annum.

See Note 17 regarding an Amendment to the Melt Loan Agreement entered into in April 2022.

connection with the Melt Loan Agreement, the Company and Melt entered into a Right of First Refusal Agreement providing the Company with

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candidates for a period of five years following the effective date of the Melt Loan Agreement.

net funds received by Melt excluded $ 908 for amounts owed to the Company for reimbursable expenses and amounts due under the Melt MSA

prior to the effective date of the note receivable (see Note 2).

net funds received by Melt excluded $ 908,000 for amounts owed to the Company for reimbursable expenses and amounts due under the Melt

MSA prior to the effective date of the note receivable.

INVESTMENT IN SURFACE OPHTHALMICS, INC.

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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 September 30, 2021, the Company owned 3,500,000 shares of Surface common stock (approximately 20 % of the equity interests).

director, Richard L.

of March 31, 2022, the Company owned 3,500,000 shares of Surface common stock (representing approximately 20 % of Surface’s issued

and outstanding equity interests).

A Company director, Richard L.

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

Baum, are directors of Surface.

Surface is required

to make royalty payments to Dr.

Lindstrom of 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

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

Lindstrom) entered into consulting agreements and

provide consulting services to Surface.

Lindstrom is a principal of Flying L Partners, an affiliate of an investor who purchased Surface

Series A Preferred Stock.

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

SUMMARY OF CONDENSED INCOME STATEMENT

For the Three Months Ended March 31,

Revenues, net

Loss from operations

( 1,996,000 )

( 2,831,000 )

$ ( 1,996,000 )

$ ( 2,831,000 )

unaudited condensed balance sheet information of Surface is summarized below:

SUMMARY OF CONDENSED BALANCE SHEET

At September 30,

At December 31,

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Total liabilities

Total stockholders’

Total liabilities and

stockholders’ equity

RESTRICTED CASH

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

At September 30, 2021

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

September 30, 2021 and December 31, 2020, the funds held in a money market account of $ 200 were classified as a current asset.

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

Total preferred stock and stockholders’ deficit

Total liabilities and stockholders’ equity

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

products, related laboratory supplies and active pharmaceutical ingredients.

The composition of inventories as of September 30, 2021

and December 31, 2020 was as follows:

The composition of inventories as of March 31, 2022 and

December 31, 2021 was as follows:

SCHEDULE OF INVENTORIES

March 31, 2022

Raw materials

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PREPAID EXPENSES AND OTHER CURRENT ASSETS

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

expenses and other current assets at March 31, 2022 and December 31, 2021, consisted of the following:

SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

March 31, 2022

December 31, 2021

Prepaid insurance

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Other prepaid expenses

Deposits and other current

Total prepaid expenses

and other current assets

Deposits and other current assets

Total prepaid expenses and other current assets

PROPERTY, PLANT AND EQUIPMENT

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

plant and equipment at March 31, 2022 and December 31, 2021, consisted of the following:

SCHEDULE OF PROPERTY, PLANT AND EQUIPMENT

March 31, 2022

Property, plant and equipment, net:

Computer software

Computer hardware

Furniture and equipment

Lab and pharmacy equipment

Leasehold improvements

Property, plant and equipment, gross

Accumulated depreciation

and amortization

( 8,209,000 )

( 7,833,000 )

plant and equipment, net

the three and nine months ended September 30, 2021, depreciation and amortization related to the property, plant and equipment was $ 399

and $ 1,275 , respectively.

For the three and nine months ended September 30, 2020, depreciation and amortization related to property,

plant and equipment was $ 464 and $ 1,377 , respectively.

the three months ended March 31, 2022 and 2021, depreciation related to the property, plant and equipment was $ 376,000 and $ 436,000 ,

respectively.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

software development costs at March 31, 2022 and December 31, 2021 consisted of the following:

SCHEDULE OF FINITE LIVED INTANGIBLE ASSETS

March 31, 2022

December 31, 2021

Capitalized internal-use software development costs

Acquired third-party software license for internal-use

Total gross capitalized software for internal-use

Accumulated amortization

Capitalized internal-use software in process

finite lived intangible assets net

Company recorded amortization expense of $ 43,000 and $ 28,000 related to capitalized software development costs during the three months

ended March 31, 2022 and 2021, respectively.

INTANGIBLE ASSETS AND GOODWILL

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

Company’s intangible assets at March 31, 2022 consisted of the following:

SCHEDULE OF INTANGIBLE ASSETS

Carrying Value

Acquired NDAs

Customer relationships

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State pharmacy licenses

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

$ ( 1,134,000 )

expense for intangible assets for the three months ended March 31, 2022 and 2021 was as follows:

SCHEDULE OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

Three Months Ended

Acquired NDAs

Customer relationships

Amortization of intangible assets

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

of intangible assets

future amortization expense for the Company’s intangible assets at March 31, 2022 is as follows:

SCHEDULE OF ESTIMATED FUTURE AMORTIZATION EXPENSE

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

payable and accrued expenses consisted of the following:

payable and accrued expenses at March 31, 2022 and December 31, 2021 consisted of the following:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

March 31, 2022

Accounts payable

Other accrued expenses

Accrued litigation settlement (see Note 15)

Accrued interest

Accrued exit fee for

Total accounts payable and accrued expenses

Current portion

Non-current total accrued

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

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

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

3 unchanged sentences

and expenses of $ 3,091,000 .

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.

In June 2021, in a further issuance of the April Notes, the Company sold an additional $ 20,000,000 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 $ 278,000 on the June Notes being accrued from April 20, 2021 as of the date of issuance.

June offering resulted in net proceeds to the Company of approximately $ 19,164,000 after deducting underwriting discounts and commissions

and expenses of $ 1,158,000 and a premium on note issuance of $ 322,000 .

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).

The 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

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.

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

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

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

expense related to the Notes totaled $ 1,464 and $ 2,930 for the three and nine months ended September 30, 2021, and included amortization

of debt issuance costs and discount of $ 197 and $ 389 for the three and nine months ended September 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

amount of $ 16,000 (the “SWK Loan Agreement” or “SWK Loan”) with SWK Funding LLC and its partners (collectively,

“SWK”), as lender and collateral agent.

The SWK Loan Agreement was fully funded at closing with a five-year term;

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 $ 0 and $ 647 for the three and nine months ended September 30, 2021,

respectively, and $ 501 and $ 1,566 for the three and nine months ended September 30, 2020, respectively, and included amortization of

debt issuance costs and discounts of $ 0 and $ 96 for the three and nine months ended September 30, 2021, respectively, and $ 111 and $ 354

for the three and nine months ended September 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 nine months ended September 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.

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 the PPP Loan for the loan balance of $ 1,967 in the accompanying condensed consolidated statement of operations for the nine months

ended September 30, 2021.

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

expense related to the Notes totaled $ 1,810,000 for the three months ended March 31, 2022, and included amortization of debt issuance

costs and discount of $ 193,000 for three months ended March 31, 2022.

March 31, 2022, future minimum payments under the Company’s debt were as follows:

SUMMARY OF FUTURE MINIMUM PAYMENTS

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Total minimum payments

amount representing

interest payments

amount representing interest payments

( 26,417,000 )

Notes payable, gross

unamortized discount,

net of premium

Notes payable, net of

unamortized discount

unamortized discount, net of premium

( 3,153,000 )

Notes payable, net of unamortized discount

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

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terms between one to five 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 ;

operating lease for 5,789 square feet of office space in Carlsbad, California, which commenced in January 2022 and will expire in

operating lease for 35,326 square feet of lab, warehouse and office space in Ledgewood, New Jersey that expires in July 2026 , with

2 unchanged sentences

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 ;

in May 2021 that extended the term of the lease to July 2027 and added 8,900 square feet of space.

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.

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 November 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 September

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 sheet as of September 30, 2021.

May 2021, the Company entered into an operating lease for 5,789

square feet of office space (the “1000

Aviara Lease”) in Carlsbad, California, which will expire in March

The Company expects to take possession

of this space in December 2021, which will trigger the commencement of the 1000 Aviara Lease.

Since the commencement date of the 1000

Aviara Lease is expected to occur after September 30, 2021, right-of-use assets and operating lease liabilities associated with the 1000

Aviara Lease is not included in the Company’s condensed consolidated balance sheet as of September 30, 2021.

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

March 31, 2022, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases

held by the Company were 6.34 % and 13.45 years, respectively.

the three and nine months ended September 30, 2021, cash paid for amounts included for the operating lease liabilities was $ 250 and $ 752 ,

respectively, and the Company recorded operating lease expense of $ 203 and $ 705 , included in selling, general and administrative expenses,

respectively.

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

SCHEDULE OF FUTURE LEASE PAYMENTS UNDER OPERATING LEASES

the three months ended March 31, 2022 and 2021, cash paid for amounts included for the operating lease liabilities was $ 166,000 and $ 251,000 ,

respectively, and the Company recorded operating lease expense of $ 238,000 and $ 261,000 , included in selling, general and administrative

expenses, respectively.

lease payments under operating leases as of March 31, 2022 were as follows :

SCHEDULE OF FUTURE LEASE PAYMENT UNDER OPERATING LEASES

Operating Leases

Remainder of 2022

Total minimum lease payments

amount representing

interest payments

amount representing interest payments

( 3,555,000 )

Total operating lease liabilities

current portion,

operating lease liabilities

Operating lease liabilities,

net of current portion

current portion, operating lease liabilities

Operating lease liabilities, net of current portion

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

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

SCHEDULE OF FUTURE LEASE PAYMENTS UNDER FINANCE LEASE

lease payments under the non-cancelable finance lease as of March 31, 2022 were as follows :

SCHEDULE OF FUTURE LEASE PAYMENT UNDER FINANCE LEASE

Finance Lease

Remainder of 2022

Total minimum lease payments

amount representing

interest payments

amount representing interest payments

Present value of future minimum lease payments

current portion,

finance lease obligation

Finance lease obligation,

net of current portion

September 30, 2021, the incremental borrowing rate and the remaining lease term for the finance lease held by the Company were 6.36 %

and 2.33 years, respectively.

the three and nine months ended September 30, 2021, depreciation expense related to the equipment held under the finance lease obligation

current portion, finance lease obligation

Finance lease obligation, net of current portion

March 31, 2022, the incremental borrowing rate and the remaining lease term for the finance lease held by the Company were 6.36 % and

1.83 years, respectively.

the three months ended March 31, 2022 and 2021, depreciation expense related to the equipment held under the finance lease obligation

was $ 2,000 and $ 2,000 , respectively.

the three and nine months ended September 30, 2021, cash paid and expense recognized for interest expense related to the finance lease

obligation was $ 0 and $ 1 , respectively.

the three months ended March 31, 2022 and 2021, cash paid and expense recognized for interest expense related to the finance lease obligation

was $ 0 and $ 1,000 , respectively.

STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

September 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 in June 2021

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 net proceeds of approximately $ 10,655 .

Series 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 Series B Preferred Stock.

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

During the three and nine months ended September 30, 2021, the Company recorded preferred stock cash dividends and deemed dividends

equal to $ 0 and $ 472 , respectively.

the nine months ended September 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 nine months ended September 30, 2021, the Company issued 25,480 shares of its common stock upon the exercise of options to purchase

25,480 shares of common stock with exercise prices between $ 1.70 and $ 4.29 per share and received net proceeds of $ 65 .

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

Baum, its Chief Executive

Officer, 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 nine months ended September 30, 2021, the Company issued 100,168 shares of common stock to Andrew R.

Boll, its Chief Financial Officer,

related to the vesting of 157,500 performance-based restricted stock units.

The Company withheld issuance of 57,332 shares of common

Boll for payroll tax purposes valued at $ 468 .

the nine months ended September 30, 2021, 57,654 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 applicable director resigns.

March 31, 2022 and December 31, 2021, the Company had 5,000,000 shares of preferred stock, $ 0.001 par value, authorized and no shares

of preferred stock issued and outstanding.

the three months ended March 31, 2022, the Company issued 53,594 shares of common stock to Mark L.

Baum, the Company’s Chief Executive

Officer, upon the cashless exercise of options to purchase 125,000 shares at an exercise price of $ 2.40 per share.

The Company withheld

Baum 36,014 shares as consideration for the cashless exercise and an additional 35,392 shares for payroll tax obligations totaling

RSUs granted in February 2019 to Andrew R.

Boll, the Company’s Chief Financial Officer, vested, and in February 2022, the Company

issued 29,395 shares of common stock to Mr.

Boll, net of 20,605 shares of common stock withheld for payroll tax withholdings totaling

RSUs granted in February 2019 to John P.

Saharek, the President of ImprimisRx, vested, and in February 2022, the Company issued 24,077

shares of common stock to Mr.

Saharek, net of 25,923 shares of common stock withheld for payroll tax withholdings totaling $ 204,000 .

RSUs granted in February 2019 vested, and in February 2022, the Company issued 20,298 shares of common stock, net of 14,702 shares of

common stock withheld for payroll tax withholdings totaling $ 116,000 .

the three months ended March 31, 2022, the Company issued 1,000 shares of common stock and received net proceeds of $ 4,000 upon the exercise

of options to purchase 1,000 shares of common stock with exercise price of $ 3.95 per share.

the three months ended March 31, 2022, 9,644 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 applicable 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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The 2007 Plan reached its term in September 2017, and we can no longer issue additional awards under this

plan, however, options previously issued under the 2007 Plan will remain outstanding until they are exercised, reach their maturity or

however, options previously issued under the 2007 Plan will remain outstanding until they are exercised, reach their maturity or

are otherwise cancelled/forfeited.

2 unchanged sentences

with the 2007 Plan, the “Plans”).

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

As of March 31, 2022, 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

The purposes 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

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

The Company had 2,400,592 shares available for future issuances under the 2017 Plan at September 30, 2021.

summary of stock option activity under the Plans for the three and nine months ended September 30, 2021 is as follows:

SCHEDULE OF STOCK OPTION PLAN ACTIVITY

Exercise Price

Remaining Contractual Life

Intrinsic Value

The Company had 2,229,399 shares available for future issuances under the 2017 Plan at March 31, 2022.

summary of stock option activity under the Plans for the three months ended March 31, 2022 is as follows:

OF STOCK OPTION PLAN ACTIVITY

Number of Shares

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life

Aggregate Intrinsic Value

Options outstanding – January 1, 2022

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Options cancelled/forfeited

Options outstanding – September

Options outstanding – March 31, 2022

Options exercisable

Options vested and expected

Options vested and expected to vest

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

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

price lower than the market price on September 30, 2021, based on the closing price of the Company’s common stock of $ 9.09 on that

the nine months ended September 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 nine months ended September 30, 2021, generally 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.

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 .

price lower than the market price on March 31, 2022, based on the closing price of the Company’s common stock of $ 6.82 on that

the three months ended March 31, 2022, 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 during the three months ended March 31, 2022 included the following vesting schedule:

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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used for valuing options granted to employees:

SCHEDULE OF FAIR VALUE ASSUMPTIONS

Weighted-average

fair value of options granted

terms (in years)

interest rate

0.39 - 0.45 %

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

SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE

OF FAIR VALUE ASSUMPTIONS

Weighted-average fair value of options granted

Expected terms (in years)

Expected volatility

Risk-free interest rate

Dividend yield

following table summarizes information about stock options outstanding and exercisable at March 31, 2022:

SCHEDULE OF STOCK OPTION

OUTSTANDING AND EXERCISABLE

Options Outstanding

Options Exercisable

of Exercise Prices

Average Exercise Price

Range of Exercise Prices

Life in Years

Weighted Average Exercise Price

$ 2.23 - $ 2.60

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$ 7.52 - $ 7.79

of September 30, 2021, there was approximately $ 1,656 of total unrecognized compensation expense related to unvested stock options granted

$ 7.89 - $ 8.98

$ 1.47 - $ 8.99

of March 31, 2022, there was approximately $ 1,806,000 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 $ 355 and $ 1,376 during the three and nine months ended September 30, 2021, respectively.

intrinsic value of options exercised during the three and nine months ended September 30, 2021 was $ 69 and $ 146 , respectively.

compensation for all stock options was $ 272,000 and $ 452,000 during the three months ended March 31, 2022 and 2021, respectively.

intrinsic value of options exercised during the three months ended March 31, 2022 was $ 745,000 .

Stock Units/Performance Stock Units

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

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

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

the nine months ended September 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.

the three and nine months ended September 30, 2021, the Company granted 1,567,913

performance stock units (“PSUs”)

to members of its senior management including Mark Baum, Chief Executive Officer, Andrew Boll, Chief Financial Officer, and John Saharek,

President of ImprimisRx , which are subject to the satisfaction of certain market-based and continued service conditions (the “2021

The 2021 PSUs are separated into four tranches and require that the Company achieve and maintain certain levels of total

stockholder returns (“TSR”) ranging from 50% to 175% per share during the five-year period following the grant date.

is based on the aggregate of:

(i) the percent increase of the closing price of the Company’s common stock from July 22, 2021;

(ii) any dividends or like stockholder distributions as specified in the table below.

With certain limited exceptions, in addition to

reaching the TSR targets, the employee must be employed with the Company on the second anniversary of the grant date in order for the

2021 PSUs to vest.

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

100% or greater

150% or greater

175% or greater

Share Price assumes that no dividends or like distributions are made to shareholders of the Company.

If such distributions are made,

the Target Share Price would decrease accordingly, to the benefit of the employee, to account for the dividend/distribution as a part

fair value of the 2021 PSUs was $ 10,113 using a Monte Carlo Simulation with a five-year life, 75 % volatility and a risk free interest

rate of 0.72 % .

This amount is being amortized over a two-year derived service period.

summary of the Company’s RSU activity (including PSUs) and related information for the nine months ended September 30, 2021 is

SCHEDULE OF WARRANTS ACTIVITY

Average Grant Date Fair Value

summary of the Company’s RSU activity (including performance stock units) and related information for the three months ended March

31, 2022 is as follows:

OF RESTRICTED STOCK UNITS ACTIVITY

Number of RSUs

Weighted Average Grant Date Fair Value

RSUs unvested - January 1, 2022

( 1,265,153 )

RSUs cancelled/forfeited

RSUs unvested at September 30, 2021

of September 30, 2021, the total unrecognized compensation expense related to unvested RSUs was approximately $ 12,379 , which is expected

RSUs unvested at March 31, 2022

of March 31, 2022, the total unrecognized compensation expense related to unvested RSUs was approximately $ 8,756,000 , which is expected

to be recognized over a weighted-average period of 1.33 years, based on estimated and actual vesting schedules of the applicable RSUs.

The stock-based compensation for RSUs during the three and nine months ended September 30, 2021 was $ 1,340 and $ 2,167 , respectively.

The stock-based compensation for RSUs during the three months ended March 31, 2022 and 2021 was $ 1,744,000 and $ 346,000 , 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 nine months ended September 30, 2021 is as follows:

SCHEDULE OF WARRANTS OUTSTANDING AND WARRANTS EXERCISABLE

of Shares Subject to Warrants Outstanding

Average Exercise Price

summary of warrant activity for the three months ended March 31, 2022 is as follows:

OF WARRANTS ACTIVITY

Shares Subject

to Warrants Outstanding

Exercise Price

Warrants outstanding - January 1, 2022

Warrants outstanding

and exercisable - September 30, 2021

Weighted average remaining

contractual life of the outstanding warrants in years - September 30, 2021

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

Warrants outstanding and exercisable - March 31, 2022

Weighted average remaining contractual life of the outstanding warrants in years - March 31, 2022

outstanding and exercisable as of March 31, 2022 are as follows:

OF WARRANTS OUTSTANDING AND WARRANTS EXERCISABLE

Warrant Series

Lender warrants

Stock-Based Transactions

Company recognized $ 2 and $ 87 in stock-based compensation expense related to subsidiary stock options during the three and nine months

ended September 30, 2021, respectively.

Company recognized $ 0 and $ 57,000 in stock-based compensation expense related to subsidiary stock options during the three months ended

March 31, 2022 and 2021.

Compensation Summary

Company recorded stock-based compensation related to equity instruments granted to employees, directors and consultants as follows:

SCHEDULE OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES DIRECTORS CONSULTANTS

For the Three

Employees - selling, general and

administrative

Employees - R&D

OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES DIRECTORS CONSULTANTS

For the Three Months Ended

Employees - selling, general and administrative

Employees – research and development

Directors - selling, general and administrative

Consultants - selling,

general and administrative

Consultants – research and development

COMMITMENTS AND CONTINGENCIES

Drug Solutions et al.

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

District Court for the District 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 asset purchase agreement.

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.

8, 2021, following a jury trial, the Company and NDS entered into a voluntary settlement agreement (the “Settlement Agreement”)

to resolve all claims and pending matters related to this lawsuit.

The Company estimates the Settlement Agreement will result in a single

one-time payment of $ 1,500 to NDS.

Except for the one-time payment, the Company does not expect the Settlement Agreement will have any

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

As of September

30, 2021, the Company had accrued an estimate of $ 1,500 in selling, general and administrative expenses owed to NDS as a result of the

Settlement Agreement.

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

or take legal actions to assert its rights, including intellectual property disputes, contractual disputes and other commercial disputes.

Any of these claims could subject the Company to litigation.

and Professional Liability

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

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

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

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

In September 2018, co-defendant Dr.

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

and Spectrum Pharmacy Products, Inc.

(collectively “Spectrum”).

The cross-complaint sought indemnity and contribution

from the Company and Spectrum.

In November 2021, the lawsuit involving the Company was resolved.

There was no impact to the Company’s

consolidated financial position and results of operations as a result of the resolution of the case for the Company.

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

or take legal actions to assert its rights, including intellectual property disputes, contractual disputes and other commercial disputes.

Any of these claims could subject the Company to litigation.

addition to the indemnification provisions contained in the Company’s governing documents, the Company generally enters into separate

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

In addition, the Company is required to make certain milestone

In addition, the Company was required to make certain milestone

payments to Dr.

Lindstrom including:

(i) an initial payment of $ 50 upon execution of the Klarity License Agreement, (ii) a second payment

of $ 50 following the first $ 50 in net sales of the Klarity Product;

and (iii) a final payment of $ 50 following the first $ 100 in net

sales of the Klarity Product.

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

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

of the Company’s restricted common stock.

Payments totaling $ 44 and $ 114 were made during the three and nine months ended September

30, 2021, respectively.

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

Royalty expense of $ 51 and $ 130 was incurred during the three and nine months ended September 30, 2021, respectively, and $ 51 is included

in accounts payable to Dr.

Lindstrom as of September 30, 2021.

Royalty expense of $ 38 and $ 94 was incurred during the three and nine

months ended September 30, 2020, respectively.

Payments totaling $ 30,000 and $ 35,000 were made during the three months ended March 31,

2022 and 2021, respectively.

$ 71,000 and $ 35,000 were incurred as royalty expenses during the three months ended March 31, 2022 and 2021,

respectively, and was included in accounts payable to Dr.

Asset Purchase Agreement – Related Party

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

the terms of the Lindstrom APA, the

Company is required to make royalty payments to Dr.

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

and patent protection of the Lindstrom Product sold.

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

Lindstrom including an initial payment of $ 33

upon execution of the Lindstrom APA.

in cash during the three and nine months ended

September 30, 2021, respectively.

Lindstrom was paid $ 0

in cash during the three and nine months ended

September 30, 2020, respectively.

The Company incurred royalty expense of $ 7

and $ 6 and $ 48 related to the Lindstrom APA during

the three and nine months ended September 30, 2021, and 2020, respectively.

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

Lindstrom ranging from 2% to 3% of net sales,

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

In addition, the Company is required to make

certain milestone payments to Dr.

Lindstrom including an initial payment of $ 33,000 upon execution of the Lindstrom APA.

was paid $ 8,000 and $ 7,000 in cash during the three months ended March 31, 2022 and 2021, respectively.

The Company incurred $ 7,000 and

$ 7,000 for royalty expenses related to the Lindstrom APA during the three months ended March 31, 2022 and 2021.

Commercial Alliance Agreement

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

During the three and

nine months ended September 30, 2021, the Company recorded $900 and $2,212, respectively, in commission revenues related to the Dexycu

During the three months

ended March 31, 2022 and 2021, the Company recorded $ 1,320,000 and $ 485,000 , respectively, in commission revenues related to the Dexycu

and Marketing Agreements

8 unchanged sentences

certain future levels by the end of their terms.

Commission expenses of $ 953 and $ 2,766 and $ 741 and $ 1,745 were incurred under these

agreements during the three and nine months ended September 30, 2021, and 2020, respectively.

Commission expenses of $ 1,047,000 and $ 804,000 were incurred under these agreements during the three months ended March 31, 2022 and 2021, respectively.

Purchase, License and Related Agreements

25 unchanged sentences

the Inventors.

Royalty expenses of $ 285 and $ 778 and $ 159 and $ 420 were incurred under these agreements for the three and nine months

ended September 30, 2021 and 2020, respectively, and $ 285 and $ 590 are included in accounts payable at September 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 (the “MAY-44 APA”) for intellectual

property rights associated with Mayfield’s drug candidate MAY-44 with Elle Pharmaceutical LLC (“Elle”).

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

Mayfield has no outstanding or remaining obligations

related to the MAY-44 APA.

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.

During the three months ended March 31, 2022 and 2021, $ 213,000 and $ 232,000 were incurred under these agreements as royalty

expenses, respectively.

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

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for units sold.

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

“Upfront Payment”) due within 30 days of signing the Sintetica Agreement and the balance of payments due upon achievement

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

(the “Upfront Payment”) due within 30 days of signing the Sintetica Agreement and the balance of payments due upon achievement

of certain regulatory and commercial milestones.

1 unchanged sentence

filings for AMP-100 in the U.S.

The Upfront Payment was paid and recorded as R&D expense during the three and nine months ended September

The Upfront Payment along with an additional milestone payment of $ 3,117,000 was paid and recorded as

a R&D expenses during the year ended December 31, 2021.

For the three months ended March 31, 2022, no amounts have been paid or accrued

under the Sintetica agreement.

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

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for MAQ-100 in the U.S.

Through September 30, 2021, no amounts have been paid or accrued under the Wakamoto agreement.

Through March 31, 2022, no amounts have been paid or accrued under the Wakamoto agreement.

to certain limitations, the term of the Agreements is for five years from the date of the FDA’s market approval of MAQ-100 and

allows for a five-year extension if certain unit sales thresholds are met.

SEGMENT INFORMATION AND CONCENTRATIONS

evaluates performance of the Company based on operating segments.

Segment performance for its two operating segments is based on segment

contribution.

The Company’s reportable segments consist of (i) its commercial stage pharmaceutical business known as ImprimisRx;

and (ii) its start-up operations associated with its pharmaceutical drug development business (“Pharmaceutical Drug Development”).

Segment contribution for the segments represents net revenues less cost of sales, research and development, selling and marketing expenses,

and select general and administrative expenses.

The Company does not evaluate the following items at the segment level:

general and administrative expenses that result from shared infrastructure, including certain expenses associated with legal matters,

public company costs (e.g.

investor relations), board of directors and principal executive officers and other like shared expenses.

expenses within selling, general and administrative expenses that result from the impact of corporate initiatives.

Corporate initiatives

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

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

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

assets including capital expenditures.

Company defines segment net revenues as pharmaceutical compounded drug sales, licenses, commissions and other revenue derived from related

of sales within segment contribution includes direct and indirect costs to manufacture formulations and sell products, including active

pharmaceutical ingredients, personnel costs, packaging, storage, royalties, shipping and handling costs, manufacturing equipment and

tenant improvements depreciation, the write-off of obsolete inventory and other related expenses.

general and administrative expenses consist mainly of personnel-related costs, marketing and promotion costs, distribution costs, professional

service costs, insurance, depreciation, facilities costs, transaction costs, and professional services costs which are general in nature

and attributable to the segment.

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

ended September 30, 2021 and 2020:

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

the Three Months Ended September 30, 2021

Pharmaceutical

Drug Development

Cost of sales

Operating expenses:

Selling, general and administrative

and development

Research and development

the Nine Months Ended September 30, 2021

Pharmaceutical

Drug Development

Cost of sales

Operating expenses:

Selling, general and administrative

and development

Research and development

the Three Months Ended September 30, 2020

Pharmaceutical

Drug Development

Cost of sales

Operating expenses:

Selling, general and administrative

and development

Research and development

Asset sales and impairments,

the Nine Months Ended September 30, 2020

Pharmaceutical

Cost of sales

Operating expenses:

Selling, general and administrative

and development

Research and development

Asset sales and impairments,

Company categorizes revenues by geographic area based on selling location.

All operations are currently located in the U.S.;

total revenues are attributed to the U.S.

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

Asset Purchase Agreement – Related Party

December 2019, the Company entered into an asset purchase agreement (the “Presbyopia APA”) with Richard L.

Lindstrom, M.D.,

a member of its Board of Directors.

Pursuant to the terms of the Presbyopia APA, the Company acquired certain intellectual property and

related rights from Dr.

Lindstrom to develop, formulate, make, sell, and sub-license an ophthalmic topical product to treat presbyopia

(the “Presbyopia Product”).

the terms of the Presbyopia Product, the Company is required to make royalty payments to Dr.

Lindstrom ranging from 2% to 4% of net sales,

dependent upon the final formulation and patent protection of the Presbyopia Product sold .

Lindstrom was paid $ 0 in cash during the

periods ended March 31, 2022 and 2021, and was due $ 0 at March 31, 2022 and 2021.

The Company incurred $ 0 for royalty expenses related

to the Presbyopia APA during the periods ended March 31, 2022 and 2021.

CONCENTRATIONS

Company has two products

that each comprised more than 10% of total revenues during the quarter.

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

These products collectively accounted for 32 %

of revenues during each of the three and nine months ended September

of revenues during the three months ended March

31, 2022 and 2021, respectively.

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 and nine months ended September 30, 2021 and 2020.

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

These suppliers collectively accounted for 59 %

and 71 % of active pharmaceutical ingredient purchases during the three and nine months ended September 30, 2021, respectively, and 76 %

and 72 % of active pharmaceutical ingredient purchases during the three and nine months ended September 30, 2020, respectively.

Company’s total pharmacy sales during the three months ended March 31, 2022 and 2021.

Company receives its active pharmaceutical ingredients from three main suppliers.

These suppliers collectively accounted for 74 % and

82 % of active pharmaceutical ingredient purchases during the three months ended March 31, 2022 and 2021, respectively.

SUBSEQUENT EVENTS

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

Based on its evaluation, no events other than those described in the notes hereto need to be disclosed.

Company has performed an evaluation of events occurring subsequent to March 31, 2022 through the filing date of this Quarterly Report.

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

Melt Loan Amendment

In April 2022, the Company entered into a First Amendment (the “Amendment”) to its loan and security agreement previously

entered into on September 1, 2021 with Melt.

The Amendment provides for:

is required to maintain a minimum cash balance of $7,000,000 for one (1) year following the effective date of the Amendment;

a minimum cash balance of $5,000,000 at all times after the one year anniversary of the effective date of the Amendment .

maturity date by which all amounts owed under the loan agreement are payable was extended to September 1, 2026, unless otherwise

accelerated pursuant to the terms of the loan agreement.

definition of Material Adverse Effect was amended so that such an effect will be deemed to have occurred if the data from the phase

2 study of MELT-300 fails to demonstrate the benefit of the combination MELT-300 study drug versus the individual components of the

same MELT-300 study drug, as reasonably determined by the Company.

effectiveness of the Amendment is subject to, among other conditions, Melt consummating a qualifying financing of a minimum amount

of $ 15,000,000 from third party investors by August 31, 2022.

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