What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-09 · 215 added, 179 removed, 281 unchanged (58% of the section changed)

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and its consolidated subsidiaries, consisting of ImprimisRx, LLC,

ImprimisRx NJ, LLC dba ImprimisRx, Imprimis NJOF, LLC, and Imprimis Pharmaceuticals USA, LLC.

In this discussion and analysis, we refer

to our consolidated subsidiaries ImprimisRx, LLC, ImprimisRx NJ, LLC and Imprimis NJOF, LLC collectively as “ImprimisRx.”

ImprimisRx NJ, LLC dba ImprimisRx, Imprimis NJOF, LLC, and Harrow Eye, LLC.

In this discussion and analysis, we refer to our consolidated

subsidiaries ImprimisRx, LLC, ImprimisRx NJ, LLC and Imprimis NJOF, LLC collectively as “ImprimisRx.”

addition to historical information, the following discussion contains forward-looking statements regarding future events and our future

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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.

are an eyecare pharmaceutical company exclusively focused on the discovery, development, and commercialization of innovative ophthalmic

therapies that are accessible and affordable.

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

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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.

From its inception in 2014, ImprimisRx, which

consists of integrated research and development, production, dispensing/distribution, sales, marketing, and customer service

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 medications.

also make these unique formulations available at prices that are, in most cases, lower than non-customized commercial medications.

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

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”).

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 (a) as patient-specific medications from our 503A

or, (b) for in-office use 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.

(“Eyepoint”),

pursuant to which Eyepoint granted ImprimisRx the right to promote DEXYCU® (dexamethasone intraocular suspension) 9% for the treatment

of post-operative inflammation following ocular surgery in the United States.

Pursuant to the Dexycu Agreement, Eyepoint pays ImprimisRx

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.

(“Eyepoint”), pursuant to which Eyepoint granted ImprimisRx the right to promote DEXYCU® (dexamethasone intraocular

suspension) 9% for the treatment of post-operative inflammation following ocular surgery in the United States.

Pursuant to the

Dexycu Agreement, Eyepoint pays ImprimisRx a fee that is calculated based on the quarterly sales of DEXYCU in the U.S.

2022, we entered into a mutual termination agreement with Eyepoint, pursuant to which we agreed to (a) continue to support the sale

of DEXYCU through the fourth quarter of 2022, consistent with our level of effort during the January through June 2022 period, (b)

decrease the required minimum quarterly sales levels based on DEXYCU unit demand for the fourth quarter of 2022, and (c) terminate

the Dexycu Agreement, along with ancillary letter agreements, effective January 1, 2023.

a result, we expect our commissions from sales of DEXYCU to decrease through the end of

2022 and cease in 2023;

however such effect is not expected to have a material impact on our business, financial statements and cash

Pharmaceuticals and Drug Candidates

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 the pursuit and completion of several

announced transactions, and others we are continuing to pursue, all of which 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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We believe by expanding

our product portfolio to include branded FDA-approved products, we will be uniquely positioned to leverage our ImprimisRx platform to

our product portfolio to include branded FDA-approved products, we will be uniquely positioned to leverage our commercial platform to

introduce unique lifecycle management strategies that could grow sales and address needs of our customers that we are unable to meet

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 lasted six months

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

following the closing of the transaction.

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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.

and Canada from Sintetica S.A.

July 2021, we acquired the exclusive marketing and supply rights to IHEEZO (chloroprocaine hydrochloride ophthalmic gel) 3% in the U.S.

and Canada for ocular surface anesthesia from Sintetica S.A.

(“Sintetica”).

AMP-100 is a patented, ophthalmic topical anesthetic drug candidate.

If FDA-approved, the active ingredient used in AMP-100 will be the

first approved use of this active ingredient in the U.S.

ophthalmic market.

A new drug application (“NDA”) for AMP-100 was

submitted by Sintetica to the FDA in the fourth quarter of 2021 and the FDA has assigned the application standard review and a Prescription

Drug User Fee Act (PDUFA) target action date of October 16, 2022.

The FDA approved IHEEZO for ocular surface anesthesia

in September 2022.

IHEEZO is protected by an Orange Book listed patent that is valid until 2038.

We expect to commercially launch IHEEZO

market during 2023.

August 2021, we acquired the exclusive marketing rights to MAQ-100 in the U.S.

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

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.

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.

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 we are working with Wakamoto accordingly in an effort to efficiently advance the clinical program

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

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Surface’s and Melt’s drug candidates.

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

These companies are pursuing market approval for their drug candidates under the Food Drug and Cosmetic Act,

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

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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.

According to Surface, the 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 :

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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 Surface’s equity and voting interests as of June

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

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

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Melt began enrolling patients in its Phase 2 study for MELT-300

during the fourth quarter of 2021.

during the fourth quarter of 2021, and we expect Melt to release top-line data related to this study sometime during the fourth quarter

January 2019, Melt closed an offering of its Series A Preferred Stock.

At that time, we gave up our controlling interest and deconsolidated

Melt from our consolidated financial statements.

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

on our operations and financial performance.

At that time, we gave up our controlling interest and

deconsolidated Melt from our consolidated financial statements.

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 September 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

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.

In September 2022, Melt filed a

registration statement on Form S-1 with the United States Securities and Exchange Commission related to an initial public offering

of Melt’s common stock in an underwritten offering (the “Melt IPO”).

The registration statement contains, among

other things, a description of Melt’s business, financial statements and strategic plans.

If the Melt IPO is completed, we

expect to settle ten million dollars ($10,000,000) of the principal balance of our loan to Melt in exchange for Melt common stock at

the price of the Melt IPO, net of any underwriting discounts.

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 on our operations and financial performance.

Pharmaceuticals, Inc.

is a commercial-stage orphan-disease focused pharmaceutical company developing and commercializing innovative drug products.

portfolio and pipeline includes several products and drug candidates in various stages of development across a variety of dosage forms.

In May 2017, we gave up our controlling interest in Eton.

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 June 30, 2022.

is an innovative pharmaceutical company focused on developing, acquiring, and commercializing treatments for rare diseases.

currently commercializes ALKINDI SPRINKLE® and Carglumic Acid tablets and has four additional rare disease products under

development, including dehydrated alcohol injection and the ZENEO® hydrocortisone autoinjector.

In May 2017, we gave up our

controlling interest in Eton.

We own 1,982,000 shares of Eton common stock, which was less than 10% of the equity and voting

interests issued and outstanding of Eton as of September 30, 2022.

Affecting Our Performance

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Reimbursement

is covered under Medicare Part B, and we are developing drug candidates that we believe will be covered under Medicare Part B.

approved by the FDA that are used in surgeries performed in a hospital outpatient departments or ambulatory surgical centers may receive

a transitional pass-through reimbursement under Medicare, provided they meet certain criteria, including a “not insignificant”

cost criterion.

Pass-through status allows for separate payment (i.e., outside the packaged payment rate for the surgical procedure)

under Medicare Part B, which consists of Medicare reimbursement for a drug based on a defined formula for calculating the minimum fee

that a manufacturer may charge for the drug.

Under current regulations of the Centers for Medicare & Medicaid Services (“CMS”),

pass-through status applies for a period of three years;

that is measured from the date Medicare makes its first pass-through payment

for the product, following which the product would be incorporated into the cataract bundled payment system, which could significantly

reduce the pricing for that product.

Following expiration of pass-through status, under current CMS policy, non-opioid pain management

surgical drugs when used on Medicare Part B patients in an outpatient setting can qualify for ongoing separate payment.

non-opioid separate payment policy, like other CMS policies, can be changed by CMS through its annual rulemaking and comment process.

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

believe IHEEZO and possibly other drug candidates that we may develop will also be covered under Medicare Part B.

New drugs approved

by the FDA that are used in surgeries performed in a hospital outpatient departments or ambulatory surgical centers may receive a

transitional pass-through reimbursement under Medicare, provided they meet certain criteria, including a “not

insignificant” cost criterion.

Pass-through status allows for separate payment (i.e., outside the packaged payment rate for

the surgical procedure) under Medicare Part B, which consists of Medicare reimbursement for a drug based on a defined formula for

calculating the minimum fee that a manufacturer may charge for the drug.

Under current regulations of CMS, pass-through status

applies for a period of three years;

which is measured from the date Medicare makes its first pass-through payment for the product.

Following the three-year period, the product would be incorporated into the cataract bundled payment system, which could

significantly reduce the pricing for that product.

We intend to apply for temporary pass-through reimbursement for IHEEZO during

Following expiration of pass-through status, under current CMS policy, non-opioid pain management surgical drugs when used on

Medicare Part B patients in an outpatient setting can qualify for ongoing separate payment.

CMS’ current non-opioid separate

payment policy, like other CMS policies, can be changed by CMS through its annual rulemaking and comment process.

We believe that

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

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.

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.

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

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profitability and cash flows.

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:

of Non-Ophthalmic Revenues

October 2022, we entered into an Asset Purchase Agreement (the “RPC Agreement”) with Innovation Compounding Pharmacy,

LLC (the “Buyer”).

The closing of the RPC Agreement was made effective on September 30, 2022.

Under the terms of the RPC

Agreement, the Company agreed to sell substantially all its assets associated with its non-ophthalmology related compounding

business, including but not limited to, certain intellectual property rights, customer lists, databases, and formulations (the

“RPC Assets”).

The Buyer agreed to make offers of employment to six of the Company’s employees that were

responsible for the sales activities associated with the RPC Assets.

In connection with the RPC Agreement, the Company entered into

a separate transition services agreement with the Buyer related to providing on going services, such as procuring and dispensing

prescription orders associated with RPC Assets.

The Company expects to provide transition services to the Buyer for up to six months

following the effective date of the RPC Agreement.

Under the terms of the RPC Agreement, the Buyer paid to the Company an aggregate

cash amount of $6,000,000 on October 5, 2022.

In addition, the Buyer is obligated to pay up to $4,500,000 to the Company based on

mutually agreed upon revenue milestones during the calendar year 2023.

Loan Amendments

April and September 2022, we entered into a First Amendment and Second Amendment (collectively the “Amendments”) to our

loan and security agreement previously entered into on September 1, 2021 with Melt.

The Amendments provide for the

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.

date of the Second Amendment;

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

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.

to June 1, 2023, which can be extended further to September 1, 2026 following

a qualified financing of at least $10,000,0000, 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

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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 and six months ended June 30, 2022 and 2021 are not necessarily

indicative of results for any future period.

following period-to-period comparisons of our financial results for the three and nine months ended September 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

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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

following presents our revenues for the three and nine months ended September 30, 2022 and 2021:

For the Three Months Ended

For the Nine Months Ended

Product sales, net

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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

the transfer from the 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.

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

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

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

For the Three Months Ended

For the Nine Months Ended

Cost of sales

increase in our cost of sales between periods was largely attributable to an increase in unit volumes sold.

increase in our cost of sales between periods was largely attributable to an increase in unit volumes sold and increased direct and indirect

costs associated with production of our products.

Profit and Margin

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.

For the Three Months Ended

For the Nine Months Ended

decrease in gross margin between the three and nine months ended September 30, 2022 and 2021 is primarily attributable to

amortization of acquired NDAs beginning in January 2022, along with a one-time adverse production related event in April 2022,

increased discounts provided during 2022 associated with volume-based purchases and increased (direct and indirect) production costs incurred during 2022.

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 and six months ended June 30, 2022 and 2021:

For the Three Months

For the Six Months

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

For the Three Months Ended

For the Nine Months Ended

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.

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

associated with regulatory improvements, 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, including the anticipated

commercial launch of IHEEZO in 2023.

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 and six months ended June 30, 2022 and 2021:

For the Three Months

For the Six Months

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

For the Three Months Ended

For the Nine Months Ended

Research and development

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.

$ (5,350,000 )

$ (4,795,000 )

the three and nine months ended September 30, 2022, research and development expenses decreased from the same periods in 2021 primarily

as a result of a one-time payment for acquired research and development incurred in 2021 related to the acquisition of IHEEZO.

expense, net was $1,800,000 and $5,386,000 for the three and nine months ended September 30, 2022, respectively, compared to $1,685,000 and $3,512,000

for the same periods in 2021, respectively.

The increase during the period ended September 30, 2022 compared to the same periods in 2021

was primarily the result of 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.

the three and nine months ended September 30, 2022, we recorded a loss of $3,504,000 and $9,036,000, respectively, related to our share

of losses in Melt, compared to $706,000 and $2,967,000 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.

the three and nine months ended September 30, 2022, we recorded a loss of $1,031,000 and $4,341,000, respectively, related to the change

in fair market value of Eton’s common stock compared to losses of $2,220,000 and $8,639,000 for the same periods last year, respectively.

on Forgiveness of PPP Loan

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

the nine months ended September 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 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 nine months ended September 30, 2022 and 2021:

the Three Months Ended

September 30,

the Nine Months Ended

September 30,

Numerator – net loss attributable

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and Capital Resources

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.

In addition, we may consider the sale

of certain assets including, but not limited to, part of, or all of, our investments in Eton, Surface, Melt, and/or any of our consolidated

cash on hand at September 30, 2022 was $44,959,000, compared to $42,167,000 at December 31, 2021.

of the date of this Quarterly Report, we believe that cash and cash equivalents of $44,959,000 at September 30, 2022 will be sufficient

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

In addition, we may consider the

sale of certain assets including, but not limited to, part of, or all of, our investments in Eton, Surface, Melt, and/or any of our consolidated

subsidiaries.

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following provides detailed information about our net cash flows:

For the Six Months Ended

For the Nine Months Ended

Net cash provided by (used in):

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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.

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 provided by operating activities during the nine months ended September 30, 2022 was $5,417,000 compared to $6,572,000 during the

same period in the prior year.

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

increased operating expenses associated with planned 2023 commercial launch of IHEEZO and increased costs of goods sold.

cash used in investing activities during the nine months ended September 30, 2022 was $(1,738,000) compared to $(4,489,000) 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.

Cash used in investing activities in 2021 was primarily associated with the issuance of a note receivable to Melt and partially offset

by cash provided by the sale of a portion of our investment in Eton.

cash (used in) provided by financing activities during the nine months ended September 30, 2022 and 2021 was $(887,000) and $51,472,000,

respectively.

Cash used in financing activities during the nine months ended September 30, 2022 was primarily related to payment of payroll

taxes upon vesting of RSUs in exchange for shares withheld from the employees.

Cash provided by financing activities during the nine months

ended September 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 and branded pharmaceutical 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

28 unchanged sentences

acceptable to us.

If we are unable to raise funds to satisfy our capital needs when needed, then we may need to forego pursuit of potentially

If we are unable to raise funds to satisfy our capital needs when needed, we may need to forego pursuit of potentially

valuable development or acquisition opportunities, we may not be able to continue to operate our business pursuant to our business plan,

6 unchanged sentences

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 2. Management’s Discussion and Analysis