What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-05 · 239 added, 226 removed, 221 unchanged (68% of the section changed)

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and pharmacies;

general economic and business conditions;

regulatory and legal risks and uncertainties related to our pharmacy operations

and the pharmacy and pharmaceutical business in general;

physician interest in and market acceptance of our current and any future formulations

and compounding pharmacies generally;

and the other risks and uncertainties described under the heading “Risk Factors” in

Part II, Item 1A of this Quarterly Report and in our other filings with the SEC.

You should not place undue reliance on forward-looking

Forward-looking statements speak only as of the date they are made and, except as required by law, we undertake no obligation

to revise or publicly update any forward-looking statement for any reason.

are an ophthalmic-focused healthcare company.

Our business specializes in the development, production, sale, and distribution of innovative

prescription medications that offer unique competitive advantages and serve unmet needs in the marketplace through our subsidiaries and

deconsolidated companies.

We own and operate ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical businesses,

and Visionology, Inc.

(“Visionology”), a direct-to-consumer digital eyecare subsidiary.

In addition, we also have non-controlling

equity positions in Surface Ophthalmics, Inc.

general economic and business conditions, including inflation and supply chain challenges;

regulatory and legal risks

and uncertainties related to our pharmacy operations and the pharmacy and pharmaceutical business in general;

physician interest in and

market acceptance of our current and any future formulations and compounding pharmacies generally;

and the other risks and uncertainties

described under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report and in our other filings with the

You should not place undue reliance on forward-looking statements.

Forward-looking statements speak only as of the date they are

made and, except as required by law, we undertake no obligation to revise or publicly update any forward-looking statement for any reason.

are an eyecare pharmaceutical company focused on the development, production, sale, and distribution of accessible and affordable

innovative ophthalmic prescription medications.

Company owns non-controlling equity positions in Surface Ophthalmics, Inc.

(“Surface”) and Melt Pharmaceuticals, Inc.

(“Melt”), both companies

that began as subsidiaries of Harrow and were subsequently deconsolidated.

We also own royalty rights in various drug candidates being

developed by Surface and Melt.

is our ophthalmology-focused prescription pharmaceutical business.

From its inception in 2014, ImprimisRx, which consists of integrated

research and development, production, dispensing/distribution, sales, marketing, and customer serve capabilities, has offered physician

customers and their patients access to critical medicines to meet their clinical needs.

Initially, ImprimisRx focused exclusively on

compounded medications to serve needs unmet by commercially available drugs.

We make our formulations available at prices that are, in

most cases, lower than non-customized commercial drugs.

both companies that began as subsidiaries of Harrow.

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

is our ophthalmology-focused prescription pharmaceutical compounding business.

From its inception in 2014, ImprimisRx, which consists

of integrated research and development, production, dispensing/distribution, sales, marketing, and customer serve capabilities, has offered

physician customers and their patients access to critical medicines to meet their clinical needs.

Initially, ImprimisRx focused exclusively

on compounded medications to serve needs unmet by commercially available drugs.

We make our formulations available at prices that are,

in most cases, lower than non-customized commercial drugs.

ImprimisRx’s customer base has grown to include more than 10,000 U.S.

dedicated prescribers and institutions.

Our current ophthalmology formulary includes over twenty compounded formulations, many of which

are patented or patent-pending, and are customizable for the specific needs of a patient.

Some of our compounded medications are various

combinations of drugs formulated into one bottle and others are preservative free formulations.

Depending on the formulation, the regulations

of a specific state, and ultimately, the needs of the patient, ImprimisRx products may be dispensed as patient-specific medications from

our 503A pharmacy, or for in-office use, or made according to current good manufacturing practices (or “cGMPs”) or other

FDA-guidance documents, in our FDA-registered New Jersey outsourcing facility (“NJOF”).

the past two years, in order to more fully serve the needs of our growing customer base, we have invested in broadening ImprimisRx’s

product portfolio to include FDA-approved products.

Our investments in this regard have led to commercial partnerships to sell DEXYCU®

and Avenova, the acquisition of two later stage drug candidates, and the recent acquisition of U.S.

rights to four FDA-approved ophthalmic

These transactions, and those we are continuing to pursue, are focused in eyecare pharmaceuticals.

We believe that our continued

investments in these and other products will result in our ability to provide more physician prescribers and their patients with access

to a complete portfolio of affordable eyecare pharmaceuticals to address their clinical needs.

eyecare dedicated prescribers and institutions.

Our current ophthalmology formulary includes over twenty compounded formulations, many

of which are patented or patent-pending, and are customizable for the specific needs of a patient.

Some of our compounded medications

are various combinations of drugs formulated into one bottle and others are preservative free formulations.

Depending on the formulation,

the regulations of a specific state, and ultimately, the needs of the patient, ImprimisRx products may be dispensed as patient-specific

medications from our 503A pharmacy, or for in-office use, or made according to current good manufacturing practices (or “cGMPs”)

or other FDA-guidance documents, in our FDA-registered New Jersey outsourcing facility (“NJOF”).

In August 2020, ImprimisRx

entered into a Commercial Alliance Agreement (the “Dexycu Agreement”) with Eyepoint Pharmaceuticals, Inc.

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a fee that is calculated based on the quarterly sales of DEXYCU in the U.S.

Pharmaceuticals

the past two years, in order to more fully serve the needs of our growing customer base, we have invested in broadening our product portfolio

to include FDA-approved products.

Our investments in this regard have led to commercial partnerships to sell DEXYCU and Avenova, the

acquisition of two later stage drug candidates, and the recent acquisition of U.S.

rights to four FDA-approved ophthalmic products.

transactions, and those we are continuing to pursue, are focused in eyecare pharmaceuticals.

We believe that our continued investments

in these and other products will result in our ability to provide more physician prescribers and their patients with access to a complete

portfolio of affordable eyecare pharmaceuticals to address their clinical needs.

MAXITROL®, MOXEZA®

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with our other compounded product offerings.

the time of closing the acquisition of the four products, we agreed to a transitional period with the seller, which is expected to last

approximately six months following the closing of the transaction.

During the transition period, the seller will continue to sell the

products and transfer the net profit to us.

Following the transition period, we expect to have the products manufactured by third parties

and commercialize the products for the U.S.

the time of closing the acquisition of the four products, we agreed to a transitional period with the seller, which lasted six months

following the closing of the transaction.

During the transition period, the seller continued to sell the products and transferred the

net profit from those sales to us.

Following the transition period which ended in June 2022, we made IOPIDINE 1% and MAXITROL commercially

available, and expect to re-launch MOXEZA at a later date.

July 2021, we acquired the exclusive marketing and supply rights to AMP-100 in the U.S.

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MAQ-100 is a preservative-free triamcinolone acetonide ophthalmic injection drug candidate.

MAQ-100 is marketed and sold by Wakamoto

in Japan as MaQaid®.

Following Japan’s Ministry of Health Labor and Welfare (“MHLW”) approval, MaQaid was launched

in Japan in 2010, indicated as an intravitreal injection for visualization for vitrectomy.

Since its initial MHLW approval, the indication

for MaQaid was expanded to include (a) treatments for alleviation of diabetic macular edema, (b) macular edema associated with retinal

vein occlusion (or RVO), and (c) non-infectious uveitis.

We intend to leverage the clinical data used for Japanese market approval of

MaQaid to support a clinical program and U.S.

market NDA submission of MAQ-100 for visualization during vitrectomy.

We intend to request

a meeting with FDA during the first half of 2022 to discuss our planned clinical program for MAQ-100.

expect to acquire and/or develop additional FDA-approved/approvable ophthalmic products and product candidates that will allow us to

leverage our commercial infrastructure to promote, sell, and ultimately bring these products to market.

a direct-to-consumer digital eye health platform, leverages our experience in the ophthalmic pharmaceutical business as well as our relationships

with eyecare professionals across the United States.

marketed and sold by Wakamoto in Japan as MaQaid®.

Following Japan’s Ministry of Health Labor and Welfare

(“MHLW”) approval, MaQaid was launched in Japan in 2010, indicated as an intravitreal injection for visualization for

Since its initial MHLW approval, the indication for MaQaid was expanded to include (a) treatments for alleviation of

diabetic macular edema, (b) macular edema associated with retinal vein occlusion (or RVO), and (c) non-infectious uveitis.

to leverage the clinical data used for Japanese market approval of MaQaid to support a clinical program and U.S.

submission of MAQ-100 for visualization during vitrectomy.

In August 2022, we had a Type B meeting with the FDA to discuss our

planned clinical program for MAQ-100.

The FDA provided clarity on what would be required for a future NDA filing of MAQ-100, and

while we are still waiting on the release of the FDA’s minutes from the meeting, we remain optimistic about being able to

efficiently advance the clinical program of MAQ-100.

expect to continue to acquire and/or develop additional FDA-approved/approvable ophthalmic products and product candidates that will

allow us to leverage our commercial infrastructure to promote, sell, and ultimately bring these products to market.

Businesses (De-Consolidated Businesses)

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These companies are pursuing market approval for their drug candidates under the FDCA,

including in some instances under the abbreviated pathway described in Section 505(b)(2), which permits the submission of a new drug

application (“NDA”) where at least some of the information required for approval comes from studies not conducted by or for

the applicant and for which the applicant has not obtained a right of reference.

including in some instances under the abbreviated pathway described in Section 505(b)(2), which permits the submission of an NDA where

at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant

has not obtained a right of reference.

Noncontrolling

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is a clinical-stage pharmaceutical company focused on development and commercialization of innovative therapeutics for ocular surface

January 2021, Surface announced positive top-line results from a Phase 2 trial of its drug candidate SURF-201, a 0.2% betamethasone,

preservative-free ophthalmic solution in the Klarity delivery vehicle for the treatment of post cataract surgery pain and inflammation.

According to the Surface results, SURF-201 was dosed twice daily, met its primary endpoints of absence of inflammation at both Day 8

and Day 15 and was found to be safe and well-tolerated by the patient group.

In addition, a secondary endpoint showed almost 90% of patients

given SURF-201 were pain free at Day 15.

Also in January 2021, Surface announced the first patient dosed in a head-to-head Phase 2 trial

for its drug candidate SURF-100 (mycophenolate sodium and betamethasone in Klarity vehicle) for the treatment of chronic dry eye disease.

In February 2021, Surface announced the first patient dosed in a Phase 2 trial for its drug candidate SURF-200 (betamethasone in Klarity

vehicle) for the treatment of episodic dry eye flares.

for Chronic Dry Eye Disease:

Surface completed its 350-patient Phase 2 clinical trial,

comparing five active arms of SURF-100 study drugs with the current market-leading prescription

chronic dry eye treatments.

According to Surface, t he SURF-100 Phase 2 clinical trial

achieved positive results for both signs and symptoms of chronic dry eye disease, as well

as generating positive data on onset and duration of action.

for Acute Dry Eye:

Surface has completed enrollment of its Phase 2 clinical trial for

SURF-200 and expects to announce top-line results later this year.

for Pain and Inflammation Following Ocular Surgery:

According to the Surface results,

SURF-201 was dosed twice daily, met its primary endpoints of absence of inflammation at both

Day 8 and Day 15 and was found to be safe and well-tolerated by the patient group.

a secondary endpoint showed almost 90% of patients given SURF-201 were pain free at Day 15.

2018, Surface closed an offering of its Series A Preferred Stock.

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purchase price of $4.50 per share resulting in gross proceeds to Surface of approximately $25,000,000 (the “Surface Series B Offering”).

We own 3,500,000 shares of Surface common stock, which was approximately 20% of the equity and voting interests as of March 31, 2022.

We own 3,500,000 shares of Surface common stock, which was approximately 20% of Surface’s equity and voting interests as of June

Harrow owns mid-single digit royalty rights on net sales of SURF-100, SURF-200 and SURF-201.

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Melt from our consolidated financial statements.

We own 3,500,000 shares of Melt common stock, which was approximately 46% of the equity

and voting interests issued and outstanding as of March 31, 2022.

In September 2021, we provided Melt with a senior secured loan with

a principle amount of $13,500,000, which is intended to fund the Phase 2 program of MELT-300.

In connection with the loan, we were given

the right, but not the obligation, to match any offer received by Melt associated with the commercial rights to any of its drug candidates

for a period of five years.

Melt is required to make mid-single digit royalty payments to the Company on net sales of MELT-300, while

any patent rights remain outstanding, subject to other conditions.

Melt can require the Company to cease compounding like products at

the time of FDA approval of MELT-300.

We own 3,500,000 shares of Melt common stock, which was approximately 46% of Melt’s

equity and voting interests issued and outstanding as of June 30, 2022.

In September 2021, we provided Melt with a senior secured loan

with a principal amount of $13,500,000, which is intended to fund the Phase 2 program of MELT-300.

In connection with the loan, we were

given the right, but not the obligation, to match any offer received by Melt associated with the commercial rights to any of its drug

candidates for a period of five years.

Melt is required to make mid-single digit royalty payments to the Company on net sales of MELT-300,

while any patent rights remain outstanding, subject to other conditions.

Melt can require the Company to cease compounding like products

at the time of FDA approval of MELT-300.

If approved, we do not expect a cessation of compounding like products to have a material impact

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We own 1,982,000 shares of Eton common stock, which is less than 10% of the

equity and voting interests issued and outstanding of Eton as of March 31, 2022.

equity and voting interests issued and outstanding of Eton as of June 30, 2022.

Affecting Our Performance

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We believe that CMS will continue its separate payment policy for non-opioid pain management surgical drugs, which has been in effect

are working with outside consultants to potentially gain an extension to the transitional payment system, or to separate the drug payment

from the bundled cataract surgery payment after the three-year transitional payment ends and continue to be reimbursed separately for

a longer period of time, potentially through patent life.

Unless extended, Dexycu transitional pass-through reimbursement status will

expire on December 31, 2022, which will have an adverse impact on our commission revenues from this product.

July of 2022, CMS issued its Proposed CY 2023 Payment Rule for Hospital Outpatient Services and ASCs.

Based on the summary in

the proposed rule, Dexycu will no longer qualify as a separately payable product in an ASC or outpatient setting and will instead be

bundled into the general cataract procedure code effective January 1, 2023, when the final rule, if approved as currently proposed, will

go into effect.

As a result, we expect our commissions from sales of Dexycu to significantly decrease at the end of 2022 and in 2023;

however such effect will not have a material impact on our business, financial statements and cash flows.

proprietary ophthalmic compounded formulations are currently primarily available on a cash-pay basis.

However, we expect that MOXEZA,

MAXITROL and IOPIDINE are, and we expect that other drug candidates we are developing, if approved, will be eligible for reimbursement

by third-party payors.

We may devote time and other resources to seek reimbursement and patient pay opportunities for these and other

drug products and candidates.

However, we may be unsuccessful in achieving these goals, as many third-party payors have imposed significant

challenges for products to be eligible for reimbursement in recent years.

Moreover, third-party payors, including Medicare, are increasingly

attempting to contain health care costs by limiting coverage and the level of reimbursement for new drugs and by refusing, in some cases,

to provide coverage for uses of approved products for disease indications for which the FDA has not granted labeling approval.

the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010

(collectively, the “Health Care Reform Law”), may have a considerable impact on the existing U.S.

system for the delivery

and financing of health care and could conceivably have a material

adverse effect on our business.

As a result, reimbursement from Medicare, Medicaid and other third-party

payors may never be available for any of our products or, if available, may not be sufficient to allow us to sell the products on a competitive

basis and at desirable price points.

We are communicating with government and third-party payors in order to make our drug products and

candidates available to more patients and at optimized pricing levels.

However, if government and other third-party payors do not provide

adequate coverage and reimbursement levels for our drug products and candidates, the market acceptance and opportunity for them may be

However, MOXEZA, MAXITROL and IOPIDINE

are, and we expect that other drug candidates we are developing, if approved, will be eligible for reimbursement by third-party payors.

We are devoting time and resources to seek reimbursement and patient pay opportunities for these and other drug products and candidates.

However, we may be unsuccessful in achieving these goals, as many third-party payors have imposed significant challenges for products

to be eligible for reimbursement in recent years.

Moreover, third-party payors, including Medicare, are increasingly attempting to contain

health care costs by limiting coverage and the level of reimbursement for new drugs and by refusing, in some cases, to provide coverage

for uses of approved products for disease indications for which the FDA has not granted labeling approval.

Further, the Patient Protection

and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the “Health

Care Reform Law”), may have a considerable impact on the existing U.S.

system for the delivery and financing of health care and

could conceivably have a material adverse

effect on our business.

As a result, reimbursement from Medicare, Medicaid and other third-party payors may never be available for any

of our products or, if available, may not be sufficient to allow us to sell the products on a competitive basis and at desirable price

We are communicating with government and third-party payors in order to make our drug products and candidates available to more

patients and at optimized pricing levels.

However, if government and other third-party payors do not provide adequate coverage and reimbursement

levels for our drug products and candidates, the market acceptance and opportunity for them may be limited.

novel strain of coronavirus was first identified in Wuhan, China in December 2019.

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those restrictions related to elective procedures.

We have since seen sales of our products return to near historical norms and trends

as restrictions associated with elective procedures and the COVID-19 pandemic have continued to ease.

given the unprecedented and dynamic nature of the COVID-19 pandemic virus, including any mutations/variants, we may not be able to reasonably

We have since seen sales of our products return to historical norms and trends as

restrictions associated with elective procedures and the COVID-19 pandemic have eased.

given the unprecedented and dynamic nature of the COVID-19 pandemic, including any virus mutations/variants, we may not be able to reasonably

estimate the impacts it may have on our financial condition, results of operations or cash flows in the future, especially if there are

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profitability and cash flows.

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

into on September 1, 2021 with Melt.

April 2022, we entered into a First Amendment (the “Amendment”) to our loan and security agreement previously entered into

on September 1, 2021 with Melt.

The Amendment provides for the following:

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 us.

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.

is required to maintain a minimum cash balance of $7,000,000 for one year following the effective

date of the Amendment;

and 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 us.

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

of Operations

following period-to-period comparisons of our financial results for the three months ended March 31, 2022 and 2021, are not necessarily

indicative of results for the current period or any future period.

revenues include amounts recorded from sales of proprietary compounded formulations, commissions from third parties and revenues received

from royalty payments owed to us pursuant to out-license arrangements.

following presents our revenues for the three months ended March 31, 2022 and 2021:

Three Months Ended

following period-to-period comparisons of our financial results for the three and six months ended June 30, 2022 and 2021 are not necessarily

indicative of results for any future period.

revenues include amounts recorded from sales of proprietary compounded formulations, sales of branded products to wholesalers through

a third-party logistics facility, commissions from third parties and revenues received from royalty payments owed to us pursuant to out-license

arrangements.

following presents our revenues for the three and six months ended June 30, 2022 and 2021:

For the Three Months

For the Six Months

Product sales, net

Commission revenues

Transfer of profit

Transfer of profits

License revenues

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increase in revenues between periods was related to an increase in sales volumes of our ophthalmology products, an increase in commissions

attributable to sales of Dexycu® and transfer of profit from recently acquired products.

attributable to sales of Dexycu® and transfer of profits from recently acquired products.

In June of 2022, the Company completed

the transfer from Seller to Harrow of Iopidine and Maxitrol NDAs and relaunched those products, as a result, we will not record revenues

associated with the transfer of profits associated with those products in future periods.

cost of sales includes direct and indirect costs to manufacture formulations and sell products, including active pharmaceutical ingredients,

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the write-off of obsolete inventory and other related expenses.

following presents our cost of sales for the three months ended March 31, 2022 and 2021:

Three Months Ended

following presents our cost of sales for the three and six months ended June 30, 2022 and 2021:

For the Three Months

For the Six Months

Cost of sales

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Profit and Margin

Three Months Ended

decrease in gross margin between the three months ended March 31, 2022 and 2021 is primarily attributable to amortization of certain

intangible assets related to recently acquired products beginning in January 2022.

For the Three Months

For the Six Months

decrease in gross margin between the three and six months ended June 30, 2022 and 2021 is primarily attributable to amortization of acquired

NDAs beginning in January 2022, along with a production event in April 2022 that led to a one-time purge of inventory (and which had no impact on

quality of released product), and increased discounts provided

during 2022 associated with volume-based purchases.

General and Administrative Expenses

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our marketing activities and sales of our proprietary compounded formulations and other non-proprietary pharmacy products and formulations.

following presents our selling, general and administrative expenses for the three months ended March 31, 2022 and 2021:

Three Months Ended

Selling, general and administrative

increase in selling, general and administrative expenses between periods was primarily attributable to an increase in compensation

expense related to an increase in stock-based compensation associated with performance stock units that were granted in July 2021,

an increase in consulting expenses associated with regulatory improvements and to support the transition of recent product acquisitions,

and increase in sales and marketing expenses related to new employee costs to support current sales and expected future growth.

following presents our selling, general and administrative expenses for the three and six months ended June 30, 2022 and 2021:

For the Three Months

For the Six Months

Selling, general

and administrative

increase in selling, general and administrative expenses between periods was primarily attributable to an increase in consulting expense

related to an increase in stock-based compensation associated with performance stock units that were granted in July 2021, an increase

in consulting expenses associated with regulatory improvements and to support the transition of recent product acquisitions, and an increase

in expenses related to the addition of new employees in sales, marketing and other departments to support current and expected growth.

and Development Expenses

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acquired in-process R&D and other costs related to the clinical development of our assets.

following presents our research and development expenses for the three months ended March 31, 2022 and 2021:

Three Months Ended

following presents our research and development expenses for the three and six months ended June 30, 2022 and 2021:

For the Three Months

For the Six Months

Research and development

the three months ended March 31, 2022, research and development expenses increased compared to the same period in 2021 primarily as a

result of increased costs associated with the clinical programs for AMP-100 and MAQ-100.

expense, net was $1,792,000 for the three months ended March 31, 2022 compared to $513,000 for the same period in 2021.

during the period ended March 31, 2022 compared to the same period in 2021 was primarily due to an increase in the outstanding principal

amount of our debt obligations.

in Losses from Unconsolidated Entities

the three months ended March 31, 2022, we recorded a loss of $2,886,000 related to our share of losses in Melt compared to $1,319,000

for the same period last year.

Gain (Loss) from Eton

recorded an unrealized gain of $139,000 related to the change in fair market value of Eton’s common stock during the three

months ended March 31, 2022.

We recorded an unrealized loss of $2,835,000 related to the change in fair market value of Eton’s

common stock for the three months ended March 31, 2021.

the three and six months ended June 30, 2022, research and development expenses increased from the same periods in 2021 primarily as

a result of increased costs associated with the clinical programs for AMP-100 and MAQ-100 and program fees associated with Iopidine.

expense, net was $1,794,000 and $3,586,000 for the three and six months ended June 30, 2022 compared to $1,314,000 and $1,827,000 for

the same periods in 2021, respectively.

The increase during the period ended June 30, 2022 compared to the same period in 2021 was primarily

due to an increase in the outstanding principal amount of our debt obligations.

in Losses of Unconsolidated Entities

the three and six months ended June 30, 2022, we recorded a loss of $2,646,000 and $5,532,000, respectively, related to our share of

losses in Melt, compared to $942,000 and $2,261,000 for the same periods last year, respectively.

Loss from Eton

the three and six months ended June 30, 2022 we recorded a loss of $3,449,000 and $3,310,000, respectively, related to the change in

fair market value of Eton’s common stock compared to losses of $3,584,000 and $6,419,000 for the same periods last year, respectively.

on Forgiveness of PPP Loan

the three months ended March 31, 2021, we recorded gain on forgiveness of PPP (as defined below) loan of $1,967,000 related to the forgiveness

of our $1,967,000 loan received pursuant to the Paycheck Protection Program (“PPP”) under the Federal Coronavirus Aid, Relief,

and Economic Security Act.

(Loss) Income

following table presents our net (loss) income and per share net (loss) income for the three months ended March 31, 2022 and 2021:

Three Months Ended

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

the six months ended June 30, 2021, we recorded a gain $1,967,000 related to the forgiveness of our $1,967,000 loan received pursuant

to the Paycheck Protection Program (“PPP”) under the Federal Coronavirus Aid, Relief, and Economic Security Act.

following table presents our net loss and per share net loss for the three and six months ended June 30, 2022 and 2021:

For the Three Months Ended

the Six Months Ended

Numerator – net loss attributable

to Harrow Health, Inc.

common stockholders

$ (6,239,000 )

Net (loss) income per share, basic

Net (loss) income per share, diluted

$ (2,950,000 )

$ (8,677,000 )

$ (2,733,000 )

Net loss per share, basic and diluted

and Capital Resources

cash on hand at March 31, 2022 was $41,948,000, compared to $42,167,000 at December 31, 2021.

of the date of this Quarterly Report, we believe that cash and cash equivalents of $41,948,000 at March 31, 2022 will be sufficient to

cash on hand at June 30, 2022 was $46,438,000, compared to $42,167,000 at December 31, 2021.

of the date of this Quarterly Report, we believe that cash and cash equivalents of $46,438,000 at June 30, 2022 will be sufficient to

sustain our planned level of operations and capital expenditures for at least the next 12 months.

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following provides detailed information about our net cash flows:

Three Months Ended March 31,

For the Six Months Ended

Net cash provided by (used in):

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Net change in cash and cash equivalents

Cash, cash equivalents and restricted cash at beginning of the period

Cash, cash equivalents and restricted cash at end of the period

cash provided by operating activities during the three months ended March 31, 2022 was $967,000 compared to $3,208,000 during the same

period in the prior year.

The decrease in net cash provided by operating activities during the periods was mainly attributed to an increase

in our accounts receivable amounts and decrease in our accounts payable and accrued liabilities balances.

cash used in investing activities during the three months ended March 31, 2022 was $410,000 compared to $224,000, during the same

Cash and cash equivalents at beginning of the period

Cash and cash equivalents at end of the period

cash provided by operating activities during the six months ended June 30, 2022 was $5,827,000 compared to $8,648,000 during the same

period in the prior year.

Cash used in investing activities in 2022 and 2021 was primarily associated with equipment and software purchases

and upgrades along with investments in our intellectual property portfolio

cash used in financing activities during the three months ended March 31, 2022 and 2021 was $776,000 and $781,000, respectively.

Cash used in financing activities during the three months ended March 31, 2022 was primarily related to payment of taxes upon vesting

of RSUs and exercise of stock options and principal payments on loans outstanding during the same period in the prior year.

principal sources of cash consist of cash provided by operating activities from our ImprimisRx business, and recently, proceeds from

the sale of senior notes and a portion of our Eton common stock.

We may also sell some or all of our ownership interests in Surface,

Melt or our subsidiaries, along with the some or all of the remaining portion of our Eton common stock.

The decrease in net cash provided by operating activities between the periods was mainly attributed to an increase

in our accounts receivable amounts.

cash (used in) provided by investing activities during the six months ended June 30, 2022 was $(669,000) compared to $8,445,000 during

the same period in the prior year.

Cash used in investing activities in 2022 was primarily associated with equipment and software purchases.

Cash provided by investing activities in 2021 was primarily associated with the sale of a portion of our investment in Eton.

cash (used in) provided by financing activities during the six months ended June 30, 2022 and 2021 was $(887,000) and $51,457,000, respectively.

Cash used in financing activities during the six months ended June 30, 2022 was primarily related to payment of taxes upon vesting of

Cash provided by financing activities during the six months ended June 30, 2021 was primarily related to proceeds received from

the sale of notes, net of the payment of all outstanding obligations to the Company’s previous senior lender, SWK Funding, LLC

and its partners.

principal sources of cash consist of cash provided by operating activities from our ImprimisRx business, and in 2021, proceeds from the

sale of senior notes and a portion of our Eton common stock.

We may also sell some or all of our ownership interests in Surface, Melt

or our other subsidiaries, along with the some or all of the remaining portion of our Eton common stock.

changing trends and overall economic outlook in light of the COVID-19 pandemic, including the historic interim stay-at-home orders and

bans on elective surgeries, created uncertainty surrounding our operating outlook and may impact our future operating results if there

is a rise in COVID-19 related cases in the U.S.

In addition, we may acquire new products, product candidates and/or businesses and, as

a result, we may need significant additional capital to support our business plan and fund our proposed business operations.

We may receive

additional proceeds from the exercise of stock purchase warrants that are currently outstanding.

We may also seek additional financing

from a variety of sources, including other equity or debt financings, funding from corporate partnerships or licensing arrangements,

sales of assets or any other financing transaction.

If we issue equity or convertible debt securities to raise additional funds, our

existing stockholders may experience substantial dilution, and the newly issued equity or debt securities may have more favorable terms

or rights, preferences and privileges senior to those of our existing stockholders.

If we raise additional funds through collaboration

or licensing arrangements or sales of assets, we may be required to relinquish potentially valuable rights to our product candidates

or proprietary technologies or formulations, or grant licenses on terms that are not favorable to us.

If we raise funds by incurring

additional debt, we may be required to pay significant interest expenses and our leverage relative to our earnings or to our equity capitalization

may increase.

Obtaining commercial loans, assuming they would be available, would increase our liabilities and future cash commitments

and may impose restrictions on our activities, such as the financial and operating covenants.

Further, we may incur substantial costs

in pursuing future capital and/or financing transactions, including investment banking fees, legal fees, accounting fees, printing and

distribution expenses and other costs.

We may also be required to recognize non-cash expenses in connection with certain securities we

may issue, such as convertible notes and warrants, which would adversely impact our financial results.

bans on elective surgeries, created uncertainty surrounding our operating outlook and may impact our future operating results if the

COVID-19 pandemic worsens in the U.S.

In addition, we may acquire new products, product candidates and/or businesses and, as a result,

we may need significant additional capital to support our business plan and fund our proposed business operations.

We may receive additional

proceeds from the exercise of stock purchase warrants that are currently outstanding.

We may also seek additional financing from a variety

of sources, including other equity or debt financings, funding from corporate partnerships or licensing arrangements, sales of assets

or any other financing transaction.

If we issue equity or convertible debt securities to raise additional funds, our existing stockholders

may experience substantial dilution, and the newly issued equity or debt securities may have more favorable terms or rights, preferences

and privileges senior to those of our existing stockholders.

If we raise additional funds through collaboration or licensing arrangements

or sales of assets, we may be required to relinquish potentially valuable rights to our product candidates or proprietary technologies

or formulations, or grant licenses on terms that are not favorable to us.

If we raise funds by incurring additional debt, we may be required

to pay significant interest expenses and our leverage relative to our earnings or to our equity capitalization may increase.

commercial loans, assuming they would be available, would increase our liabilities and future cash commitments and may impose restrictions

on our activities, such as the financial and operating covenants.

Further, we may incur substantial costs in pursuing future capital

and/or financing transactions, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and

We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible

notes and warrants, which would adversely impact our financial results.

may be unable to obtain financing when necessary as a result of, among other things, our performance, general economic conditions, conditions

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What changed 10-Q

Item 2. Management’s Discussion and Analysis