What changed in this filing

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Item 1. Financial Statements

2023-11-13 compared with 2023-08-09 · 643 added, 581 removed, 941 unchanged (57% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

September 30,

Current assets

7 unchanged sentences

Deferred financing costs

Deferred tax asset

Operating lease right-of-use assets, net

16 unchanged sentences

Common stock, $ 0.001 par value, 50,000,000 shares authorized, 35,117,621 and 29,901,530

shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

2 unchanged sentences

( 109,493,000 )

TOTAL HARROW HEALTH STOCKHOLDERS’ EQUITY

TOTAL HARROW, INC.

STOCKHOLDERS’ EQUITY

Noncontrolling interests

3 unchanged sentences

$ 157,378,000

The accompanying notes are

an integral part of these unaudited condensed consolidated financial statements

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Product sales, net

10 unchanged sentences

Total operating expenses

Income from operations

Income (loss) from operations

Other (expense) income:

7 unchanged sentences

( 9,036,000 )

Investment (loss) gain from Eton Pharmaceuticals

Investment gain (loss) from Eton Pharmaceuticals

( 1,031,000 )

13 unchanged sentences

( 15,066,000 )

Income tax benefit (expense)

Net loss attributable to Harrow Health, Inc.

Income tax expense

( 1,539,000 )

( 1,236,000 )

Net loss attributable to Harrow, Inc.

$ ( 4,391,000 )

$ ( 6,464,000 )

$ ( 15,263,000 )

$ ( 15,141,000 )

Basic and diluted net loss per share of common stock

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

the periods ended June 30, 2023 and 2022

Harrow Health, Inc.

Stockholders’

the periods ended September 30, 2023 and 2022

Noncontrolling

Stockholders’

Balance at December 31, 2021

3 unchanged sentences

Issuance of common stock in connection with:

Exercise of consultant stock-based options

Exercise of employee stock-based options

5 unchanged sentences

( 15,141,000 )

Balance at June 30, 2022

Balance at September 30, 2022

$ 111,738,000

6 unchanged sentences

Issuance of common stock in connection with:

Public offering, net of offering costs

Exercise of consultant stock-based options

Exercise of employee stock-based options

Vesting of RSUs

Vesting of RSUs and PSUs

Shares withheld related to net share settlement of equity awards

6 unchanged sentences

( 15,263,000 )

Balance at June 30, 2023

Balance at September 30, 2023

$ 200,478,000

1 unchanged sentence

$ ( 355,000 )

Harrow Health, Inc.

Stockholders’

Noncontrolling

Stockholders’

Balance at March 31, 2022

Stockholders’

Balance at June 30, 2022

$ 109,806,000

2 unchanged sentences

Issuance of common stock in connection with:

Exercise of consultant stock-based options

Exercise of employee stock-based options

Vesting of RSUs

Shares withheld related to net share settlement of equity awards

Stock-based compensation expense

2 unchanged sentences

( 6,464,000 )

Balance at June 30, 2022

Balance at September 30, 2022

$ 111,738,000

1 unchanged sentence

$ ( 355,000 )

Balance at March 31, 2023

Balance at June 30, 2023

$ 142,742,000

2 unchanged sentences

Issuance of common stock in connection with:

Exercise of consultant stock-based options

Public offering, net of offering costs

Exercise of employee stock-based options

Vesting of RSUs

Vesting of PSUs

Shares withheld related to net share settlement of equity awards

( 11,272,000 )

( 11,273,000 )

Stock-based compensation expense

2 unchanged sentences

( 4,391,000 )

Balance at June 30, 2023

Balance at September 30, 2023

$ 200,478,000

2 unchanged sentences

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

7 unchanged sentences

Amortization of debt issuance costs and debt discount

Investment (gain) loss from investment in Eton Pharmaceuticals

Investment (gain) loss from investment in Eton

( 2,676,000 )

1 unchanged sentence

Loss on extinguishment of debt

Loss on disposal of intangible assets

Stock-based compensation

Deferred income taxes

Changes in assets and liabilities:

3 unchanged sentences

( 2,383,000 )

( 1,066,000 )

Prepaid expenses and other current assets

( 4,079,000 )

Accounts payable and accrued expenses

5 unchanged sentences

Investment in patent and trademark assets

Purchase of product NDAs and patents

Purchase of product NDAs, marketing authorizations and patents

( 151,084,000 )

Purchases of property, plant and equipment

( 1,266,000 )

( 1,719,000 )

NET CASH USED IN INVESTING ACTIVITIES

( 152,350,000 )

( 1,738,000 )

CASH FLOWS FROM FINANCING ACTIVITIES:

1 unchanged sentence

Proceeds from Oaktree Loan, net of costs

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

Payment of payroll taxes upon vesting of PSUs, RSUs and exercise of stock options

( 12,971,000 )

Proceeds from exercise of stock options

4 unchanged sentences

( 59,750,000 )

Proceeds from public offering of common stock, net of costs

Payments on finance lease obligations

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

NET CHANGE IN CASH, CASH EQUIVALENTS

NET CHANGE IN CASH AND CASH EQUIVALENTS

( 30,660,000 )

CASH, CASH EQUIVALENTS, beginning of period

CASH, CASH EQUIVALENTS, end of period

CASH AND CASH EQUIVALENTS, beginning of period

CASH AND CASH EQUIVALENTS, end of period

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

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SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Purchase of property, plant and equipment included in accounts payable and accrued expenses

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

Accrual of exit fee related to Oaktree Loan

Reclassification of deferred financing costs

Income taxes owed for exercise of options

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

Accrual of exit fee related to Oaktree Loan

Insurance premium financed

Purchase of intangible asset included in accounts payable and accrued expenses

Purchase of property, plant and equipment included in accounts payable and accrued

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

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

TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the Three and Six Months Ended June 30, 2023 and 2022

the Three and Nine Months Ended September 30, 2023 and 2022

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

and Background

(together with its subsidiaries, partially owned companies and royalty arrangements unless the context indicates or otherwise

requires, the “Company” or “Harrow”) is a leading eyecare pharmaceutical company engaged in the discovery, development,

and commercialization of innovative ophthalmic pharmaceutical products for the U.S.

(together with its consolidated subsidiaries, unless the context indicates or otherwise requires, the “Company” or “Harrow”)

is a leading eyecare pharmaceutical company engaged in the discovery, development, and commercialization of innovative ophthalmic pharmaceutical

products for the U.S.

Harrow helps U.S.

eyecare professionals preserve

the gift of sight by making its comprehensive portfolio of prescription and non-prescription pharmaceutical products accessible and affordable

to millions of Americans each year.

The Company own commercial rights to one of the largest portfolios of branded ophthalmic pharmaceutical

products in the U.S.

that are marketed under its Harrow name.

The Company also owns and operates ImprimisRx, one of the nation’s

leading ophthalmology-focused pharmaceutical-compounding businesses.

eyecare professionals preserve the gift of sight by making its comprehensive portfolio

of prescription and non-prescription pharmaceutical products accessible and affordable to millions of Americans each year.

owns commercial rights to one of the largest portfolios of branded ophthalmic pharmaceutical products in the U.S.

that are marketed under

its Harrow name.

The Company also owns and operates ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical-compounding

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

2 unchanged sentences

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

September 29, 2023, the Company changed its corporate name from Harrow Health, Inc.

to Harrow, Inc.

pursuant to a Certificate of Amendment

to the Company’s Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware.

of Presentation

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

Operating results for the three and six months ended June

Operating results for the three and nine months ended September

30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or for any other period.

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

Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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

Annual Report on Form 10-K for the year ended December 31, 2022.

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

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

following represents an update for the three and six months ended June 30, 2023 to the significant accounting policies described in the

Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

following represents an update for the three and nine months ended September 30, 2023 to the significant accounting policies described

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Uncertainties and Liquidity

24 unchanged sentences

the appropriate provision for customers that have a higher probability of default.

accounts receivable balance on the Company’s condensed consolidated balance sheet as of June 30, 2023 was $ 18,258,000 , net of $ 75,000

of allowances.

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost

basis of accounts receivable to present the net amount expected to be collected at June 30, 2023:

accounts receivable balance on the Company’s condensed consolidated balance sheet as of September 30, 2023 was $ 18,468,000 , net

of $ 108,000 of allowances.

The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized

cost basis of accounts receivable to present the net amount expected to be collected at September 30, 2023:

OF ACCOUNTS RECEIVABLE ALLOWANCE OF CREDIT LOSS

2 unchanged sentences

Write-offs, net of recoveries

Balance at June 30, 2023

Balance at September 30, 2023

Combinations and Asset Acquisitions

8 unchanged sentences

accounts for the transaction under the acquisition method of accounting as indicated in Financial Accounting Standards Board (“FASB”)

Standards Codification (“ASC”) 805, Business Combinations , requires the acquiring entity in a business combination

to recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling interest in the acquiree and establishes

the acquisition date as the fair value measurement point.

Accordingly, the Company recognizes assets acquired and liabilities assumed

in business combinations, including any contingent assets and liabilities, and any non-controlling interest in the acquiree based on

the fair value estimates as of the date of acquisition.

The Company recognizes and measures goodwill as of the acquisition date, as the

excess of the fair value of the consideration paid over the fair value of the identified net assets acquired.

Accounting Standards Codification (“ASC”).

805, Business Combinations , requires the acquiring entity in a business combination to recognize the fair value of all assets

acquired, liabilities assumed, and any non-controlling interest in the acquiree and establishes the acquisition date as the fair value

measurement point.

Accordingly, the Company recognizes assets acquired and liabilities assumed in business combinations, including any

contingent assets and liabilities, and any non-controlling interest in the acquiree based on the fair value estimates as of the date

of acquisition.

The Company recognizes and measures goodwill as of the acquisition date, as the excess of the fair value of the consideration

paid over the fair value of the identified net assets acquired.

consideration for the Company’s business acquisitions may include future payments that are contingent upon the occurrence of a

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or other inputs that are observable or can

be corroborated by observable market data.

be corroborated by observable market data for substantially the full term of the assets or liabilities.

Applies to assets or liabilities for which there are significant unobservable inputs that reflect a reporting entity’s own

2 unchanged sentences

would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.

June 30, 2023 and December 31, 2022, the Company measured its investment in Eton Pharmaceuticals, Inc.

(“Eton”) on a recurring

The Company’s investment in Eton is classified as Level 1 as the fair value is determined using quoted market prices in

active markets for the same securities.

As of June 30, 2023 and December 31, 2022, the fair market value of the Company’s investment

in Eton was $ 6,917,000 and $ 5,589,000 , respectively.

Company carries the 2026 Notes at face value, including the unamortized premium, less unamortized debt issuance costs, the 2027

Notes are carried at face value less unamortized debt issuance costs, and the Oaktree Loan (as defined in Note 13) is carried at

face value less the original issue discount and unamortized debt issuance costs on the condensed consolidated balance sheets and the

Company presents fair value for disclosure purposes only.

The 2026 Notes and 2027 Notes are classified as Level 1 instruments as the

fair value is determined using quoted market prices in active markets for the same securities.

The Oaktree Loan is classified as a Level 2 instrument and its fair value is determined through an income approach

that considers collateral coverage, yield calibration, yield analysis and any adjustments to implied yield associated with the Company’s

fundamental measures.

September 30, 2023 and December 31, 2022, the Company measured its investment in Eton Pharmaceuticals, Inc.

(“Eton”) on a

recurring basis.

The Company’s investment in Eton is classified as Level 1 as the fair value is determined using quoted market

prices in active markets for the same securities.

As of September 30, 2023 and December 31, 2022, the fair market value of the Company’s

investment in Eton was $ 8,265,000 and $ 5,589,000 , respectively.

Company’s 2026 Notes (as defined in Note 13) are carried at face value, including the unamortized premium, less unamortized debt

issuance costs, the 2027 Notes (as described in Note 13) are carried at face value less unamortized debt issuance costs, and the Oaktree

Loan (as defined in Note 13) is carried at face value less the original issue discount and unamortized debt issuance costs on the condensed

consolidated balance sheets and the Company presents fair value for disclosure purposes only.

The 2026 Notes and 2027 Notes are classified

as Level 1 instruments as the fair value is determined using quoted market prices in active markets for the same securities.

Loan is classified as a Level 2 instrument and its fair value is determined through an income approach that considers collateral coverage,

yield calibration, yield analysis and any adjustments to implied yield associated with the Company’s fundamental measures.

following table presents the estimated fair values and the carrying values:

SCHEDULE OF ESTIMATED FAIR VALUE

June 30, 2023

September 30, 2023

December 31, 2022

15 unchanged sentences

shares (using the treasury stock method) from stock options, unvested RSUs, unvested PSUs and warrants were 4,588,982 and 5,622,997 at

June 30, 2023 and 2022, respectively, and are excluded in the calculation of diluted net loss per common share for the periods presented,

September 30, 2023 and 2022, respectively, and are excluded in the calculation of diluted net loss per common share for the periods presented,

because the effect is anti-dilutive.

2 unchanged sentences

The number of shares underlying

vested RSUs at June 30, 2023 and 2022 was 234,027 and 287,049 , respectively.

following table shows the computation of basic net loss per share of common stock for the three and six months ended June 30, 2023 and

vested RSUs at September 30, 2023 and 2022 was 244,352 and 303,454 , respectively.

following table shows the computation of basic net loss per share of common stock for the three and nine months ended September 30, 2023

SCHEDULE OF BASIC AND DILUTED EARNINGS PER COMMON SHARE

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

For the Three Months Ended

For the Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Numerator – net loss

5 unchanged sentences

Net loss per share, basic and diluted

Company’s effective tax rate was ( 2.71 ) % and 0.46 % for the six months ended June 30, 2023 and 2022, respectively.

Company’s effective tax rate was ( 8.81 ) % and ( 0.50 ) % for the nine months ended September 30, 2023 and 2022, respectively.

The Company’s

effective tax rate for the six months ended June 30, 2023 and 2022 differs from the U.S.

federal statutory tax rate of 21 % due to state

taxes, permanent book-tax differences related to Internal Revenue Code of 1986, as amended (“IRC”), Section 162(m) excess

officer compensation limitation and share-based compensation and the change in valuation allowance.

of June 30, 2023 and December 31, 2022, there were no unrecognized tax benefits included in the condensed consolidated balance sheets

effective tax rate for the nine months ended September 30, 2023 and 2022 differs from the U.S.

federal statutory tax rate of 21 % due

to state taxes, permanent book-tax differences related to Internal Revenue Code of 1986, as amended (“IRC”), Section 162(m)

excess officer compensation limitation and share-based compensation and the change in valuation allowance.

Company’s effective tax rate was ( 53.96 ) % and ( 0.54 ) % for the three months ended September 30, 2023, and 2022, respectively.

Company’s effective tax rate for the three months ended September 30, 2023, and 2022 differs from the U.S.

federal statutory tax

rate of 21 % due to state taxes, permanent book-tax differences related to IRC Section 162(m) excess officer compensation limitation and

share-based compensation and change in valuation allowance.

of September 30, 2023 and December 31, 2022, there were no unrecognized tax benefits included in the condensed consolidated balance sheets

that would, if recognized, affect the effective tax rate.

in Eton Pharmaceuticals, Inc .

of June 30, 2023, the Company owned 1,982,000 shares of Eton common stock, which represents less than 10 % of the equity interests of

At June 30, 2023, the fair market value of Eton’s common stock was $ 3.49 per share.

In accordance with ASC 321, Investments

— Equity Securities , the Company recorded unrealized holding gains and (losses) from its Eton common stock position of

$ ( 714,000 ) and $ 1,328,000 during the three and six months ended June 30, 2023, respectively, and $ ( 3,449,000 ) and $ ( 3,310,000 )

during the same periods in 2022, respectively, related to the change in fair market value of its investment in Eton during the

measurement period.

As of June 30, 2023, the fair market value of the Company’s investment in Eton was $ 6,917,000 .

of September 30, 2023, the Company owned 1,982,000 shares of Eton common stock (representing less than 10 % of the equity interests of

Eton as of such date).

At September 30, 2023, the fair market value of Eton’s common stock was $ 4.17 per share.

In accordance with

ASC 321, Investments — Equity Securities , the Company recorded unrealized holding gains (losses) from its Eton common stock

position of $ 1,348,000 and $ 2,676,000 during the three and nine months ended September 30, 2023, respectively, and $ ( 1,031,000 ) and $ ( 4,341,000 )

during the same periods in 2022, respectively, related to the change in fair market value of its investment in Eton during the measurement

As of September 30, 2023, the fair market value of the Company’s investment in Eton was $ 8,265,000 .

in Melt Pharmaceuticals, Inc.

– Related Party

Company owns 3,500,000 shares of common stock of Melt (representing approximately 46 % of the equity interests of Melt as of June 30,

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.

of September 30, 2023, the Company owns 3,500,000 shares of common stock of Melt (representing approximately 36 % of the equity interests

of Melt as of such date).

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

of variable interests in Melt.

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

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.

Any intra-entity profits and losses are eliminated.

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 June 30, 2023, and at the time of entering into the Melt Loan Agreement

(see Note 5), 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 June 30, 2023:

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 September 30, 2023, and at the time of

entering into the Melt Loan Agreement (see Note 5), 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

The Company has no other requirements to advance funds to Melt.

following table summarizes the Company’s investments in Melt as of September 30, 2023:

SCHEDULE OF INVESTMENT

2 unchanged sentences

Contributions

Carrying value

$ ( 5,810,000 )

7 unchanged sentences

– Related Party

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 of Surface.

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

the carrying amount of its investment in Surface accordingly.

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

ownership interest of Surface.

of September 30, 2023, the Company owned 3,500,000 common shares of Surface (representing approximately 20 % of the equity interests of

Surface as of such date) and uses the equity method of accounting for this investment, as management has determined that the Company

has the ability to exercise significant influence over the operating and financial decisions of Surface.

Under this method, the Company

recognizes earnings and losses in Surface in its condensed consolidated financial statements and adjusts the carrying amount of its investment

in Surface accordingly.

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

Any intra-entity profits and losses are eliminated.

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 and no other requirements to advance funds to Surface.

following table summarizes the Company’s investment in Surface as of June 30, 2023:

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.

The Company has no other investments in

Surface and no other requirements to advance funds to Surface.

following table summarizes the Company’s investment in Surface as of September 30, 2023:

SCHEDULE OF INVESTMENT

1 unchanged sentence

Method Losses

Carrying value

$ ( 5,320,000 )

1 unchanged sentence

Adopted Accounting Pronouncements

June 2016, FASB issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments .

September 2016, FASB issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments .

This ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and

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financial statements or disclosures.

Specifically, the Company’s estimate of expected credit losses as of June 30, 2023, using

Specifically, the Company’s estimate of expected credit losses as of September 30, 2023, using

its expected credit loss evaluation process described above, resulted in no adjustments to the provision for credit losses and no cumulative-effect

adjustment to accumulated deficit on the adoption date of the standard.

Guidance Issued but Not Adopted at September 30, 2023

August 2023, FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60):

Recognition and Initial

Measurement , which applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture)

and requires joint ventures to initially measure all contributions received upon formation at fair value.

The new guidance does not impact

accounting by the venturers.

The new guidance is applicable to joint venture entities with a formation date on or after January 1, 2025

on a prospective basis.

Joint ventures formed prior to the effective date may elect to apply the new guidance retrospectively back to

their original formation date.

We will apply the guidance in ASU 2023-05 prospectively to any future arrangements meeting the definition

of a joint venture.

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

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the performance obligations in the contract:

Obligations for fulfillment of the Company’s

contracts consist of delivering the product to customers at their specified destination.

For shipping and handling activities under ASC 606, if the customer takes control of the

goods after shipment, shipping and handling activities would always be considered a fulfillment

activity and not treated as a separate performance obligation.

If the customer takes control

of the goods before shipment, entities must make an accounting policy election to treat shipping

and handling activities as either a fulfillment cost or as a separate performance obligation.

The Company has elected to treat its shipping and handling activities as a fulfillment cost.

Obligations for fulfillment of the Company’s contracts consist of delivering

the product to customers at their specified destination.

For shipping and handling activities under ASC 606, if the customer takes

control of the goods after shipment, shipping and handling activities would always be considered a fulfillment activity and not treated

as a separate performance obligation.

If the customer takes control of the goods before shipment, entities must make an accounting

policy election to treat shipping and handling activities as either a fulfillment cost or as a separate performance obligation.

Company has elected to treat its shipping and handling activities as a fulfillment cost.

the transaction price:

The transaction price is based on an amount that reflects the

consideration to which the Company expects to be entitled, net of accruals for estimated

rebates, wholesaler chargebacks, discounts and other deductions (collectively, sales deductions)

and an estimate for returns and replacements established at the time of sale.

utilizes the services of a third-party professional services firm to estimate rebates and

chargebacks associated with sales of its branded products.

The transfer of promised goods

is satisfied within a year, and therefore there are no significant financing components.

There is no non-cash consideration related to product sales.

The transaction price is based on an amount that reflects the consideration to which the Company expects

to be entitled, net of accruals for estimated rebates, wholesaler chargebacks, discounts and other deductions (collectively, sales

deductions) and an estimate for returns and replacements established at the time of sale.

The Company utilizes the services of a

third-party professional services firm to estimate rebates and chargebacks associated with sales of its branded products.

of promised goods is satisfied within a year, and therefore there are no significant financing components.

There is no non-cash consideration

related to product sales.

the transaction price to the performance obligations in the contract:

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obligation required by the Company and no consequential continuing involvement on the Company’s part to recognize the associated

From Transfer of Acquired Product Profit

Company 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, transition period, the Seller continues to manufacture

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

The revenue recognized by the Company

from the transfer of net profit was recognized at the time profit from the product sales were 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.

On a quarterly basis, the Seller

invoices the Company for all credits and reimbursements (“Chargebacks”) made to customers related to the products.

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

The 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.

From Transfer of Acquired Product Sales and Profits

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

products from other pharmaceutical companies (the “Sellers”).

During a temporary, transition period, the Sellers continue

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

The revenue recognized

by the Company from the transfer of net profit was recognized at the time profit from the product sales were calculated by the Sellers

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.

On a quarterly basis,

the Sellers invoice 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 sales and profit transferred.

The estimated

Chargebacks are recorded as a reduction in revenues from transfer of acquired product sales and profits in the Company’s condensed

consolidated statements of operations, and recorded as a reduction to accounts receivable in the condensed consolidated balance sheets,

at the time the revenue is recognized.

Property License Revenues

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of the Company are recognized as revenue when the license term commences and the licensed data, technology, compounded drug preparation

and/or other deliverable is delivered.

Such deliverables may include physical quantities of compounded drug preparations, design of the

compounded drug preparations and structure-activity relationships, the conceptual framework and mechanism of action, and rights to the

patents or patent applications for such compounded drug preparations.

The Company defers recognition of non-refundable fees if it has

continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable

and/or other deliverables are delivered.

Such deliverables may include physical quantities of compounded drug preparations, design of

the compounded drug preparations and structure-activity relationships, the conceptual framework and mechanism of action, and rights to

the patents or patent applications for such compounded drug preparations.

The Company defers recognition of non-refundable fees if it

has continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable

fee has no utility to the licensee and that are separate and independent of the Company’s performance under the other elements

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

disaggregated by revenue source for the three and six months ended June 30, 2023 and 2022 consisted of the following:

disaggregated by revenue source for the three and nine months ended September 30, 2023 and 2022 consisted of the following:

SCHEDULE OF DISAGGREGATED REVENUE

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Product sales, net

Commission revenues

Transfer of acquired product profit

Transfer of acquired product sales/profit

Total revenues

revenue and customer deposits at June 30, 2023 and December 31, 2022 were $ 132,000 and $ 113,000 , respectively.

All deferred revenue and

customer deposit amounts at December 31, 2022 were recognized as revenue during the six months ended June 30, 2023.

revenue and customer deposits at September 30, 2023 and December 31, 2022 were $ 153,000 and $ 113,000 , respectively.

All deferred revenue

and customer deposit amounts at December 31, 2022 were recognized as revenue during the nine months ended September 30, 2023.

RECENT PRODUCT ACQUISITIONS, LICENSES AND DIVESTITURES

of VEVYE TM U.S.

and Canadian Commercial Rights

July 2023, the Company acquired commercial rights of VEVYE (cyclosporine ophthalmic solution) 0.1 %, an ophthalmic drug product, for the

and Canadian markets (the “VEVYE Acquisition”).

The Company acquired the commercial rights to VEVYE by entering into

a license agreement with Novaliq GmbH (“Novaliq”).

As consideration, the Company made initial payments to Novaliq totaling

$ 8,000,000 and will pay low double-digit royalties on net sales of VEVYE along with potential commercial milestone payments.

Company accounted for the VEVYE Acquisition as an acquisition of assets and capitalized the initial payments of $ 8,000,000 and costs

of $ 70,000 associated with the transaction.

of Certain U.S.

and Canadian Commercial Rights to Santen and Eyevance Products

July 2023, the Company entered into an Asset Purchase Agreement with Eyevance Pharmaceuticals, LLC and a License Agreement with Santen

(collectively, the “Santen Agreements”), each a subsidiary of Santen Pharmaceuticals Co., Ltd.

(collectively, “Santen”).

Pursuant to the Santen Agreements, the Company acquired the exclusive commercial rights to assets associated with the following ophthalmic

products (collectively, the “Santen Products”):

FLAREX, NATACYN, ZERVIATE, VERKAZIA and FRESHKOTE in the US, and VERKAZIA

and CATIONORM PLUS in Canada.

transactions pursuant to the Santen Agreements are referred to in these notes as the “Santen Products Acquisition.”

the terms of the Santen Agreements, the Company made an initial one-time payment of $ 8,000,000 .

In addition, the Santen Agreements provide

for various one-time contingent milestone payments associated with certain manufacturing-related events as well as low-double digit royalty

payments on net sales of VERKAZIA and high-single digit royalty payments on net sales of CATIONORM PLUS.

Under the Santen Agreements,

the Company also assumed certain obligations associated with other third parties that require mid-single digit royalties on sales of

FRESHKOTE and ZERVIATE.

Immediately following the closing and subject to certain conditions, prior to the transfer of the Santen Products

new drug applications (“NDAs”) and other marketing authorizations to the Company, Santen continued to sell the Santen Products

on the Company’s behalf and transfer the net profit from the sale of the Santen Products to the Company.

See Note 18 regarding

the transfer of certain marketing authorizations of the Santen Products.

assets acquired in the Santen Products Acquisition are identifiable intangible asset groups in similar asset classes and all directly

related to the product NDAs and marketing authorizations acquired.

The developed technology is within one major intangible asset class.

No workforce/employees were included in the Santen Products Acquisition and the Company is required to utilize its own business inputs/processes

to transfer and commercialize the Santen Products.

Company incurred $ 139,000 in costs associated with the Santen Products Acquisition, and including such acquisition costs, the payment

of $ 8,000,000 at closing and a near term milestone of $ 500,000 .

The total purchase price of the Santen Products Acquisition was $ 8,639,000

and was accounted for as an asset acquisition.

At the time of the Santen Products Acquisition and as of September 30, 2023, the remaining

contingent consideration due was not considered probable and reasonably estimable and therefore, no amount was included in the purchase

price of the Santen Products Acquisition.

At the time the contingent consideration due becomes probable and reasonably estimable the

additional consideration, if any, paid will be allocated to all of the assets on a pro rata basis based on their initial estimated fair

values as a percent of the total purchase price.

of ILEVRO, NEVANAC, VIGAMOX, MAXIDEX, and TRIESENCE

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Pursuant to the Fab 5 APA and various ancillary

agreements, immediately following the closing and subject to certain conditions and prior to the transfer of the Fab 5 Products new drug

applications (the “NDAs”) to the Company, Novartis will continue to sell the Fab 5 Products on the Company’s behalf

and transfer the net profit from the sale of the Fab 5 Products to the Company.

Novartis has agreed to supply certain Fab 5 Products

to the Company for a period of time after the NDAs are transferred and to assist with technology transfer of the Fab 5 Products manufacturing

to other third-party manufacturers, if needed.

agreements, immediately following the closing and subject to certain conditions and prior to the transfer of the Fab 5 Products NDAs

to the Company, Novartis will continue to sell the Fab 5 Products on the Company’s behalf and transfer the net profit from the

sale of the Fab 5 Products to the Company.

Novartis has agreed to supply certain Fab 5 Products to the Company for a period of time after

the NDAs are transferred and to assist with technology transfer of the Fab 5 Products manufacturing to other third-party manufacturers,

assets acquired in the Fab 5 Acquisition are identifiable intangible asset groups in similar asset classes and all directly related to

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5 Products and NDAs.

Company incurred $ 558,000 in costs associated with the Fab 5 Acquisition, including the acquisition costs and the payment of $ 130,000,000

at closing, the total purchase price of the Fab 5 Acquisition was $ 130,558,000 and was accounted for as an asset acquisition.

time of the Fab 5 Acquisition and as of June 30, 2023, the contingent consideration due related to the commercial availability of TRIESENCE

was not considered probable and reasonably estimable, therefore no amount was included in the purchase price of the Fab 5 Acquisition.

At the time the contingent consideration due related to the commercial availability of TRIESENCE becomes probable and reasonably estimable

the additional consideration, if any, paid will be allocated to all of the assets on a pro rata basis based on their initial estimated

fair values as a percent of the total purchase price.

The Company does not consider any amounts related to TRIESENCE to be in-process

research and development (IPR&D) as considered within the scope of ASC 730, Research and Development .

Company incurred $ 558,000 in costs associated with the Fab 5 Acquisition and including such acquisition costs and the payment of $ 130,000,000

The total purchase price of the Fab 5 Acquisition was $ 130,558,000 and was accounted for as an asset acquisition.

time of the Fab 5 Acquisition and as of September 30, 2023, the contingent consideration due related to the commercial availability of

TRIESENCE was not considered probable and reasonably estimable and, therefore, no amount was included in the purchase price of the Fab

5 Acquisition.

At the time the contingent consideration due related to the commercial availability of TRIESENCE becomes probable and

reasonably estimable the additional consideration, if any, paid will be allocated to all of the assets on a pro rata basis based on their

initial estimated fair values as a percent of the total purchase price.

The Company does not consider any amounts related to TRIESENCE

to be in-process research and development (IPR&D) as considered within the scope of ASC 730, Research and Development .

of Non-Ophthalmic Assets

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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

The Buyer agreed to make offers of employment to nine of the Company’s employees that were responsible for the sales activities

associated with the RPC Assets.

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The Company will recognize a gain related to the Contingent Amount if/when the contingency

(in this case, revenue thresholds for 2023) become likely and reasonably estimated.

connection with the RPC Agreement, Imprimis entered into a separate transition services agreement with the Buyer related to providing

ongoing services associated with the RPC Assets, such as procuring and dispensing prescription orders, providing accounting and billing

services and collecting accounts receivable.

Imprimis provided transition services to the Buyer for approximately nine months following

the effective date of the RPC Agreement and expects to wind down transition services in subsequent periods.

The Company collected and

will continue to collect cash on behalf of the Buyer for revenue generated by sales of RPC Assets from October 2022 through the transition

period and the Company is obligated to transfer cash generated by such sales to the Buyer.

The Company’s condensed consolidated

balance sheet as of June 30, 2023 reflected $ 74,000 of cash collected on behalf of the Buyer and a receivable within accounts receivable

of $ 59,000 for cash to be collected on behalf of the Buyer for sales of RPC Assets sold through June 30, 2023.

amount due from the Buyer for reimbursement of services performed under the transition services agreement was $ 27,000 as of June 30,

Such amount was netted against the amounts collected on behalf of the Buyer and was unpaid within accrued expenses on the condensed

consolidated balance sheet as of June 30, 2023.

The combined total of $ 106,000 was recorded within accrued expenses on the condensed

consolidated balance sheet as of June 30, 2023, and represents a payable to the Buyer.

The Company recorded a loss from the transition

services agreement and disposition and sale of certain related assets and unusable inventory of $ 203,000 and $ 171,000 during the three

and six months ended June 30, 2023, respectively, which is presented in other expense, net on the condensed consolidated statement of

Note 18 for additional information regarding recent product acquisitions and licenses.

(in this case, revenue thresholds for 2023) become likely and reasonably estimable.

connection with the RPC Agreement, Imprimis entered into a separate transition services agreement (the “RPC TSA”) with the

Buyer related to providing ongoing services associated with the RPC Assets, such as procuring and dispensing prescription orders, providing

accounting and billing services and collecting accounts receivable.

Imprimis provided transition services to the Buyer for approximately

nine months following the effective date of the RPC Agreement and expects to wind down transition services in subsequent periods.

Company collected and will continue to collect cash on behalf of the Buyer for revenue generated by sales of RPC Assets from October

2022 through the transition period and the Company is obligated to transfer cash generated by such sales to the Buyer.

The Company’s

condensed consolidated balance sheet as of September 30, 2023 includes accounts receivable of $ 59,000 for cash to be collected on behalf

of the Buyer for sales of RPC Assets sold through September 30, 2023.

were no amount due from the Buyer for reimbursement of services performed under the RPC TSA as of September 30, 2023.

The receivable

amount of $ 59,000 was additionally recorded

within accrued expenses on the condensed consolidated balance sheet as of September 30, 2023, and represents a payable to the Buyer.

The Company recorded a loss from the RPC TSA and disposition and sale of certain related assets and unusable inventory of $ 159,000

and $ 330,000 during the three and nine months ended

September 30, 2023, respectively, which is presented in other expense, net on the condensed consolidated statements of

INVESTMENT IN AND NOTE RECEIVABLE FROM MELT PHARMACEUTICALS, INC.

- RELATED PARTY TRANSACTIONS

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

to the terms of the Melt Asset Purchase Agreement, Melt was assigned certain intellectual property and related rights from the Company

to develop, formulate, make, sell, and sub-license certain Company conscious sedation and analgesia related formulations (collectively,

the “Melt Products”).

Under the terms of the Melt Asset Purchase Agreement, Melt is required to make mid-single digit royalty

payments to the Company on net sales of the Melt Products while any patent rights remain outstanding, as well as other conditions.

February 2019, the Company and Melt entered into a Management Service Agreement between the Company and Melt (the “Melt MSA”),

whereby the Company provides to Melt certain administrative services and support, including bookkeeping, web services and human resources

related activities, and Melt is required to pay the Company a monthly amount of $ 10,000 .

During the three and six months ended June 30,

2023 and 2022, the Company recorded $ 30,000 and $ 89,000 and $ 40,000 and $ 70,000 , respectively, due from Melt for reimbursable expenses

and amounts payable pursuant to the Melt MSA, which are included in prepaid expenses and other current assets in the accompanying condensed

consolidated balance sheets.

In addition, during the three and six months ended June 30, 2023, the Company advanced Melt $ 500,000 , which

amount was repaid to the Company by Melt subsequent to June 30, 2023.

As of June 30, 2023 and December 31, 2022, the Company was due

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

Pursuant to the terms of

the Melt APA, Melt was assigned certain intellectual property and related rights from the Company to develop, formulate, make, sell,

and sub-license certain Company conscious sedation and analgesia related formulations (collectively, the “Melt Products”).

Under the terms of the Melt APA, Melt is required to make mid-single digit royalty payments to the Company on net sales of the Melt Products

while any patent rights remain outstanding, as well as other conditions.

February 2019, the Company entered into a Management Service Agreement with Melt (the “Melt MSA”), whereby the Company provided

to Melt certain administrative services and support, including bookkeeping, web services and human resources related activities, and

Melt was required to pay the Company a monthly amount of $ 10,000 .

The Melt MSA was terminated effective July 1, 2023.

During the three

and nine months ended September 30, 2023 and 2022, the Company recorded $ 0 and $ 89,000 , and $ 30,000 and $ 100,000 , respectively, due from

Melt for reimbursable expenses and amounts payable pursuant to the Melt MSA, which are included in prepaid expenses and other current

assets in the accompanying condensed consolidated balance sheets.

As of September 30, 2023 and December 31, 2022, the Company was due

$ 228,000 and $ 139,000 , 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 six months ended June 30, 2023.

The Company made a cash

advance to Melt of $ 500,000 and Melt repaid the $ 500,000 cash advance during the nine months ended September 30, 2023.

the nine months ended September 30, 2023, Melt sold approximately 2,000,000 shares of its Series B Preferred Stock and raised over $ 17,000,000

in gross proceeds from third party investors.

Company’s Chief Executive Officer, Mark L.

4 unchanged sentences

Baum re-joined, the

Melt board of directors consists of five total board members, including Mr.

Melt board of directors consisted of five members, including Mr.

Baum, who is the only representative of the Company on Melt’s

2 unchanged sentences

OF CONDENSED INCOME STATEMENT

For the Six Months Ended

For the Nine Months Ended

September 30,

Revenues, net

6 unchanged sentences

OF CONDENSED BALANCE SHEET

At September 30,

At December 31,

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to the Melt Loan Agreement.

The Amendments (i) extended the maturity date of the Melt Loan Agreement to June 1, 2023, which can be extended

further to September 1, 2026 upon Melt completing a qualifying financing of a minimum amount of $ 10,000,000 from third-party investors,

(ii) added conditions related to minimum cash amounts following a qualifying financing, and (iii) clarified the definition of material

adverse effects.

Melt may elect to prepay all, but not less than all, of the amounts owed prior to the maturity date at any time without

The Amendments (i) extended the maturity date of the Melt Loan Agreement to September 1, 2023, which can

be extended further to September 1, 2026 upon Melt completing a qualifying financing of a minimum amount of $ 10,000,000 from third-party

investors, (ii) added conditions related to minimum cash amounts following a qualifying financing, and (iii) clarified the definition

of material adverse effects.

Melt may elect to prepay all, but not less than all, of the amounts owed prior to the maturity date at any

time without penalty.

has granted the Company a security interest in substantially all of its personal property, rights and assets, including intellectual

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by 3 % per annum.

The Melt Loan Agreement is currently in default due to non-payment on June 1, 2023 and the Company and Melt are involved

The Melt Loan Agreement is currently in default due to non-payment on September 1, 2023.

The Company and Melt are involved

in ongoing discussions to resolve the default.

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the effective date of the note receivable.

As of June 30, 2023 and December 31, 2022, aggregate principal and accrued interest payable

As of September 30, 2023 and December 31, 2022, aggregate principal and accrued interest payable

to the Company pursuant to the Melt Loan Agreement amounted to $ 17,765,000 and $ 15,984,000 , respectively.

1 unchanged sentence

Investments – Equity Method and Joint Ventures , the carrying amount of the note receivable has been reduced by the Company’s

allocated share of Melt’s losses based on its ownership of total debt owed by Melt (see Note 2).

allocated share of Melt’s losses based on its ownership of Melt’s total indebtedness (see Note 2).

INVESTMENT IN SURFACE OPHTHALMICS, INC.

- RELATED PARTY TRANSACTIONS

Company entered into an asset purchase and license agreement with Surface in 2017 and amended it in April 2018 (the “Surface License

Agreements”).

Pursuant to the terms of the Surface License Agreements, the Company assigned and licensed to Surface certain intellectual

property and related rights associated with Surface’s drug candidates (collectively, the “Surface Products”).

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

of June 30, 2023, the Company owned 3,500,000 shares of Surface common stock.

Sternberg, a director of the Company, is a director

Baum, who is the Company’s Chief Executive Officer, was previously a member of the Surface board of directors

and resigned from his position as a director of Surface on March 31, 2023.

Company entered into an asset purchase and license agreement with Surface in 2017 and amended it in April 2018 (together, the “Surface

License Agreements”).

Pursuant to the terms of the Surface License Agreements, the Company assigned and licensed to Surface certain

intellectual property and related rights associated with Surface’s drug candidates (collectively, the “Surface Products”).

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

remain outstanding.

of September 30, 2023, the Company owned 3,500,000 shares of Surface common stock.

Sternberg, a director of the Company, is

a director of Surface.

Baum, who is the Company’s Chief Executive Officer, was previously a member of the Surface board

of directors and resigned from his position as a director of Surface on March 31, 2023.

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

OF CONDENSED INCOME STATEMENT

the Six Months Ended

For the Nine Months Ended

September 30,

Revenues, net

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OF CONDENSED BALANCE SHEET

At September 30,

At December 31,

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Total liabilities and stockholders’ equity

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

products, including those held at a 3PL, related laboratory supplies and active pharmaceutical ingredients.

The composition of inventories

as of June 30, 2023 and December 31, 2022 was as follows:

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

products, including those held at the Company’s 3PL partner, related laboratory supplies and active pharmaceutical ingredients.

The composition of inventories as of September 30, 2023 and December 31, 2022 was as follows:

OF INVENTORIES

June 30, 2023

September 30, 2023

December 31, 2022

4 unchanged sentences

PREPAID EXPENSES AND OTHER CURRENT ASSETS

expenses and other current assets at June 30, 2023 and December 31, 2022 consisted of the following:

expenses and other current assets at September 30, 2023 and December 31, 2022 consisted of the following:

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

June 30, 2023

September 30, 2023

December 31, 2022

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Other prepaid expenses

Prepaid Prescription Drug User fees

Deposits and other current assets

1 unchanged sentence

PROPERTY, PLANT AND EQUIPMENT

plant and equipment at June 30, 2023 and December 31, 2022 consisted of the following:

plant and equipment at September 30, 2023 and December 31, 2022 consisted of the following:

OF PROPERTY, PLANT AND EQUIPMENT

June 30, 2023

September 30, 2023

December 31, 2022

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plant and equipment, net

the three and six months ended June 30, 2023, depreciation related to the property, plant and equipment was $ 228,000 and $ 453,000 , respectively,

compared to $ 381,000 and $ 757,000 during the same periods in 2022, respectively.

the three and nine months ended September 30, 2023, depreciation related to the property, plant and equipment was $ 290,000 and $ 743,000 ,

respectively, compared to $ 171,000 and $ 928,000 during the same periods in 2022, respectively.

CAPITALIZED SOFTWARE COSTS

software costs at June 30, 2023 and December 31, 2022 consisted of the following:

software costs at September 30, 2023 and December 31, 2022 consisted of the following:

OF FINITE LIVED INTANGIBLE ASSETS

June 30, 2023

September 30, 2023

December 31, 2022

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Total finite lived intangible

Company recorded amortization expense of $ 170,000 and $ 237,000 related to capitalized software costs during the three and six months

ended June 30, 2023, respectively, and $ 43,000 and $ 86,000 during the same periods in 2022, respectively.

Company recorded amortization expense of $ 115,000 and $ 352,000 related to capitalized software costs during the three and nine months

ended September 30, 2023, respectively, and $ 76,000 and $ 162,000 during the same periods in 2022, respectively.

INTANGIBLE ASSETS AND GOODWILL

Company’s intangible assets at June 30, 2023 consisted of the following:

Company’s intangible assets at September 30, 2023 consisted of the following:

OF INTANGIBLE ASSETS

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$ 162,703,000

expense for intangible assets for the three and six months ended June 30, 2023 and 2022 was as follows:

expense for intangible assets for the three and nine months ended September 30, 2023 and 2022 was as follows:

OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Acquired NDAs

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Amortization of intangible

future amortization expense for the Company’s intangible assets at June 30, 2023 is as follows:

future amortization expense for the Company’s intangible assets at September 30, 2023 was as follows:

OF ESTIMATED FUTURE AMORTIZATION EXPENSE

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$ 162,435,000

were no changes to the carrying value of the Company’s goodwill during the three and six months ended June 30, 2023 and 2022.

were no changes to the carrying value of the Company’s goodwill during the three and nine months ended September 30, 2023 and 2022.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

payable and accrued expenses at June 30, 2023 and December 31, 2022 consisted of the following:

payable and accrued expenses at September 30, 2023 and December 31, 2022 consisted of the following:

OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

September 30,

Accounts payable

Income tax payable

Accrued insurance premium

2 unchanged sentences

Accrued RPC transition payments (see Note 4)

Accrued managed care commercial rebates

Accrued interest (see Note 13)

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Non-current total accrued expenses

Company financed all insurance policies for the policy term of August 17, 2022 through August 16, 2023.

The financing agreement has an

interest rate of 4.13 % per annum and requires eight monthly payments of $ 114,000 .

Company financed all insurance policies for the policy terms of August 17, 2022 through August 16, 2023 and August 17, 2023 through August

The financing agreements have an interest rate of 4.13 % and 7.48 % per annum, respectively, and require eight monthly payments

of $ 114,000 and nine monthly payments of $ 169,000 , respectively.

Loan Due 2026

March 2023, the Company entered into a Credit Agreement and Guaranty, (the “Oaktree Loan”) with Oaktree Fund Administration,

6 unchanged sentences

Riley Loan”) – see subheading B.

Riley Loan and Security Agreement – Paid in Full within this footnote.

The additional principal loan amount of up to $ 35,000,000 available under the Oaktree Loan (“Tranche B”) will be made available

to the Company upon the commercialization of TRIESENCE.

If Tranche B is not drawn by the Company on or before March 27, 2024, the amount

available under Tranche B decreases to $ 30,000,000 .

Riley Loan and Security Agreement – Paid in Full within this Note

The additional principal loan amount of up to $ 35,000,000 available under the Oaktree Loan (“Tranche B”) will be made

available to the Company upon the commercialization of TRIESENCE.

If Tranche B is not drawn by the Company on or before March 27, 2024,

the amount available under Tranche B will be decreased to $ 30,000,000 .

Oaktree Loan is secured by nearly all of the assets, including intellectual property, of the Company and its material subsidiaries.

Oaktree Loan has a maturity date of January 19, 2026 and carries an interest rate equal to the Secured Overnight Financing Rate (SOFR)

plus 6.5 % per annum (totaling 11.77 % at June 30, 2023).

From proceeds, the Company paid fees, offering expenses, and the Oaktree Loan

was issued at an original issue discount of $ 3,415,000 , in aggregate.

The Oaktree Loan also carries an exit fee equal to 3.50 % of the

aggregate principal amount owed and the Company accrued $ 2,275,000 related to the exit fee.

The original issue discount, fees and expenses

(including the exit fee) are being amortized over the term of the Oaktree Loan using the effective interest rate method.

Loan requires quarterly interest-only payments with all of the unpaid principal, interest and fees due on the maturity date, January

Oaktree Loan has a maturity date of January 19, 2026 and carries an interest rate equal to the Secured Overnight Financing Rate plus

6.5 % per annum (totaling 11.90 % at September 30, 2023).

From proceeds, the Company paid fees, and offering expenses, and the Oaktree

Loan was issued at an original issue discount of $ 3,415,000 , in aggregate.

The Oaktree Loan also carries an exit fee equal to 3.5 % of

the aggregate principal amount owed and the Company accrued $ 2,275,000 related to the exit fee.

The original issue discount, fees and

expenses (including the exit fee) are being amortized over the term of the Oaktree Loan using the effective interest rate method.

Oaktree Loan requires quarterly interest-only payments with all of the unpaid principal, interest and fees due on the maturity date,

January 19, 2026.

July 2023, the Company entered into the First Amendment to Credit Agreement and Guaranty and Consent (the “Oaktree Amendment”)

to the Oaktree Loan.

Under the Oaktree Amendment, the overall credit facility size was increased from $ 100,000,000 to $ 112,500,000 , and

the Company made other changes related to the Santen Products Acquisition (see Note 4).

Upon satisfaction of certain conditions to funding,

the Company drew down a principal amount of $ 12,500,000 (the “Loan Increase”) to fund the initial one-time payment associated

with the Santen Products Acquisition and for other working capital and general corporate purposes.

No other material changes to the Oaktree

Loan were made pursuant to the Oaktree Amendment.

Following entry into the Oaktree Amendment and the funding of the Loan Increase upon

closing of the Santen Products Acquisition, the Company has drawn down a total principal loan amount of $ 77,500,000 under the Oaktree

Loan and an additional principal loan amount of up to $ 35,000,000 remains available to the Company upon the commercialization of TRIESENCE.

The Oaktree Loan exit fee was increased from $ 2,275,000 to $ 2,713,000 pursuant to the Oaktree Amendment.

The exit fee is equal to 3.50 %

of the amended aggregate principal amount owed and the Company accrued an additional $ 438,000 in the three months ended September 30,

2023 related to the exit fee.

Oaktree Loan contains customary guarantees and covenants, including financial covenants related to minimum liquidity and minimum net

As of the end of the fiscal quarter ending December 31, 2024, if the Company’s Total Leverage Ratio (as defined in the

Oaktree Loan) is greater than or equal to five times, but less than seven times, the Company will be required to issue to Oaktree warrants

to purchase 375,000 shares of the Company’s common stock, and if the Total Leverage Ratio is greater than or equal to seven times,

the Company will be required to issue to Oaktree warrants to purchase an additional 375,000 shares of the Company’s common stock

(equaling 750,000 shares in aggregate).

If the Total Leverage Ratio as of the end of the fiscal quarter ending December 31, 2024 is less

than five times, no warrants will be issued to Oaktree.

At September 30, 2023, the Company was in compliance with these covenants.

As of the end of the fiscal quarter ending

December 31, 2024, if the Company’s Total Leverage Ratio (as defined in the Oaktree Loan) is greater than or equal to five

times, but less than seven times, the Company will be required to issue to Oaktree warrants to purchase 375,000

shares of the Company’s common stock, and if the Total Leverage Ratio is greater than or equal to seven times, the Company

will be required to issue to Oaktree warrants to purchase an additional 375,000

shares of the Company’s common stock (equaling 750,000

shares in aggregate).

If the Total Leverage Ratio as of the end of the fiscal quarter ending December 31, 2024 is less than five

times, no warrants will be issued to Oaktree.

Based on current projections, the Company does not expect to issue any warrants

related to the Oaktree Loan.

expense related to the Oaktree Loan totaled $ 2,570,000 and $ 2,665,000 for the three and six months ended June 30, 2023, respectively,

expense related to the Oaktree Loan totaled $ 2,995,000 and $ 5,660,000 for the three and nine months ended September 30, 2023, respectively,

and included the amortization of debt issuance costs and discount of $ 567,000 and $ 1,093,000 , respectively.

Note 18 for additional information and an amendment made to the Oaktree Loan subsequent to June 30, 2023.

- 11.875% Senior Notes Due 2027

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$ 25.00 per 2027 Note, and the offering resulted in net proceeds to the Company of approximately $ 36,699,000 after deducting underwriting

discounts and commissions and expenses of $ 3,551,000 .

discounts and commissions and other offering expenses of $ 3,551,000 .

2027 Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the Company’s other

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on the Nasdaq Stock Market LLC under the symbol “HROWM.”

expense related to the 2027 Notes totaled $ 1,371,000 and $ 2,766,000 for the three and six months ended June 30, 2023, respectively, and

included amortization of debt issuance costs and debt discount of $ 176,000 and $ 376,000 , respectively.

expense related to the 2027 Notes totaled $ 1,375,000 and $ 4,141,000 for the three and nine months ended September 30, 2023, respectively,

and included amortization of debt issuance costs and debt discount of $ 180,000 and $ 556,000 , respectively.

Chief Executive Officer, Mark L.

Baum, Chief Financial Officer, Andrew R.

Boll along with director R.

Lawrence Van Horn and former director

Richard Lindstrom, in the aggregate, own $ 950,000 in principal amount of the 2027 Notes.

Boll, and former directors R.

Lawrence Van Horn and Dr.

Lindstrom, in the aggregate, purchased $ 950,000 in principal amount of the 2027 Notes at the time of their offering.

– 8.625% Senior Notes Due 2026

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the offering resulted in net proceeds to the Company of approximately $ 51,909,000 after deducting underwriting discounts and commissions

and expenses of $ 3,091,000 .

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 “2026 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.

The 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 2026 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 2026 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 2026 Notes bear interest at a rate of 8.625 %

Interest on the 2026 Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing

on July 31, 2021.

and other offering expenses of $ 3,091,000 .

In September 2021, in a further issuance of the April Notes, the Company sold an additional

$ 20,000,000 aggregate principal amount of such notes (the “September Notes,” and together with the April Notes, the “2026

Notes”), at a price of $ 25.75 per September Note, with interest of $ 278,000 on the September Notes being accrued from April 20,

2021, the date of issuance of the April Notes.

The September offering resulted in net proceeds to the Company of approximately $ 19,164,000

after deducting underwriting discounts and commissions and other offering expenses of $ 1,158,000 and a premium on note issuance of $ 322,000 .

The September 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 2026 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 2026 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 2026 Notes bear interest at a rate of 8.625 % per annum.

Interest on the 2026 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 2026 Notes will mature on April

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 2026 Notes using the effective interest

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 2026 Notes using the effective interest rate method .

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

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The 2026 Notes trade on the Nasdaq Stock Market LLC under the symbol “HROWL”.

expense related to the 2026 Notes totaled $ 1,812,000 and $ 3,622,000 and $ 1,812,000 and $ 3,622,000 for the three and six months ended

June 30, 2023 and 2022, respectively, and included amortization of debt issuance costs and discount of $ 195,000 and $ 388,000 and $ 195,000

and $ 388,000 for three and six months ended June 30, 2023 and 2022, respectively.

expense related to the 2026 Notes totaled $ 1,814,000 and $ 5,436,000 and $ 1,814,000 and $ 5,436,000 for the three and nine months ended

September 30, 2023 and 2022, respectively, and included amortization of debt issuance costs and discounts of $ 197,000 and $ 585,000 and

$ 197,000 and $ 585,000 for three and nine months ended September 30, 2023 and 2022, respectively.

Riley Loan and Security Agreement – Paid in Full

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or prepayment fees were paid as a result of the payoff of the BR Loan pursuant to a side letter agreement among the parties.

expense related to the BR Loan totaled $ 1,565,000 for the six months ended June 30, 2023, and included amortization of debt issuance

expense related to the BR Loan totaled $ 1,565,000 for the nine months ended September 30, 2023, and included amortization of debt issuance

costs and debt discount of $ 356,000 .

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with the BR Loan.

summary of the Company’s debt is described as follows:

summary of the Company’s debt at September 30, 2023 and December 31, 2022 is described as follows:

OF LONG TERM DEBT

September 30,

8.625% Senior Notes, due April 2026

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$ 104,174,000

the three and six months ended June 30, 2023 the total effective interest rate of the Company’s debt was 10.71 %, and 10.81 %, respectively,

and 8.88 % and 8.94 % for the same periods in the prior year, respectively.

June 30, 2023, future minimum payments under the Company’s debt were as follows:

the three and nine months ended September 30, 2023, the total effective interest rate of the Company’s debt was 10.78 %, and 10.91 %,

respectively, and 8.88 % and 8.96 % for the same periods in the prior year, respectively .

September 30, 2023, future minimum payments under the Company’s debt were as follows:

OF FUTURE MINIMUM PAYMENT UNDER NOTES PAYABLES

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( 10,564,000 )

Notes payable, net of unamortized discount

Notes payable, net of unamortized debt issuance costs

$ 182,186,000

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

operating lease for 5,789 square feet of office space in Carlsbad, California, which commenced

in January 2022 and will expire in March 2025 .

operating lease for 35,326 square feet of lab, warehouse and office space in Ledgewood, New

Jersey that expires in July 2027 , with an option to extend the term for two additional five-year

This includes an amendment, which was made effective July 2020, that extended the

term of the original lease and added 1,400 of additional square footage to the lease, and

another amendment entered into 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, which commended

in January 2020 and will expire in December 2024 , with an option to extend the term for two

additional five-year periods.

operating lease for 11,552 square feet of lab and office space in Nashville, Tennessee which

commenced in June 2022 and will expire in June 2027 .

June 30, 2023, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases

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 2027 , with

an option to extend the term for two additional five-year periods.

This includes an amendment, which was made effective July 2020,

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

into 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, which commenced in January 2020 and will expire in

December 2024 , with an option to extend the term for two additional five-year periods.

operating lease for 11,552 square feet of lab and office space in Nashville, Tennessee which commenced in September 2022 and will

expire in September 2027 .

September 30, 2023, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases

held by the Company were 6.60 % and 10.54 years, respectively.

the three and six months ended June 30, 2023, cash paid for amounts included for the operating lease liabilities was $ 306,000 and $ 611,000 ,

the three and nine months ended September 30, 2023, cash paid for amounts included for the operating lease liabilities was $ 310,000 and

$ 921,000 , respectively, and $ 249,000 and $ 622,000 during the same periods in 2022, respectively.

During the three and six months ended June 30,

2023 and 2022, the Company recorded operating lease expense of $ 308,000 and $ 617,000 and $ 262,000 and $ 500,000 , respectively, which is

included in selling, general and administrative expenses.

lease payments under operating leases as of June 30, 2023 were as follows :

During the three and nine months ended

September 30, 2023 and 2022, the Company recorded operating lease expense of $ 309,000 and $ 926,000 and $ 309,000 and $ 809,000 , respectively,

which is included in selling, general and administrative expenses.

lease payments under operating leases as of September 30, 2023 were as follows :

OF FUTURE LEASE PAYMENT UNDER OPERATING LEASES

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STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

the six months ended June 30, 2023, the Company issued 131,760 shares of its common stock underlying RSUs held by a director that ceased

providing services to the Company.

The RSUs had previously vested, including 13,123 RSUs during the six months ended June 30, 2023, but

the issuance and delivery of the shares were deferred until the director terminated all service to the Company.

the six months ended June 30, 2023, the Company issued 59,504 shares of common stock and received proceeds of $ 337,000 upon the exercise

of options to purchase 59,504 shares of common stock with exercise prices ranging from $ 1.70 to $ 8.50 per share.

the six months ended June 30, 2023, the Company issued 62,367 shares of common stock to Mark L.

Baum, the Company’s Chief Executive

Officer, upon the cashless exercise of options to purchase 180,000 shares at an exercise price of $ 8.99 per share.

The Company withheld

Baum 77,167 shares as consideration for the cashless exercise and an additional 40,466 shares for payroll tax obligations totaling

the six months ended June 30, 2023, the Company issued 55,558 shares of common stock to Andrew R.

Boll, the Company’s Chief Financial

Officer, upon the cashless exercise of options to purchase 90,000 shares at an exercise price of $ 6.00 per share.

The Company withheld

Boll 25,521 shares as consideration for the cashless exercise and an additional 8,921 shares for payroll tax obligations totaling

the six months ended June 30, 2023, upon vesting of 23,000 RSUs granted in January 2020 to Andrew R.

July 2023, the Company closed a public offering of shares of its common stock at an offering price of $ 17.75 per share (the “Offering”).

The Company sold 3,887,324 shares of its common stock in the Offering, resulting in the Company receiving aggregate net proceeds of $ 64,520,000 ,

after deducting underwriting discounts and commissions and other offering expenses of $ 4,480,000 .

July 2023, the Company settled 1,567,913 outstanding PSUs as a result of the achievement of the total stockholder returns (“TSR”)

targets set forth in equity incentive awards (the “PSU Agreements”) previously issued to members of the Company’s management

team in 2021 (the “2021 Awards”).

The 2021 Awards were separated into four tranches and required that the Company achieve

and maintain certain levels of TSR ranging from 50 % to 175 % per share during the five-year period following the grant date.

TSR was based

on the aggregate of:

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

dividends or like stockholder distributions as specified in the PSU Agreements.

In connection with the settlement of the 2021 Awards,

an aggregate of 616,984 shares of the Company’s common stock was withheld by Harrow for payroll tax obligations totaling $ 11,273,000 .

the nine months ended September 30, 2023, the Company issued 131,760 shares of its common stock underlying RSUs held by a director that

ceased providing services to the Company.

The RSUs had previously vested, including 13,123 RSUs during the nine months ended September

30, 2023, but the issuance and delivery of the shares were deferred until the director ceased providing services to the Company.

the nine months ended September 30, 2023, the Company issued 61,934 shares of common stock and received proceeds of $ 355,000 upon the

exercise of options to purchase 61,934 shares of common stock with exercise prices ranging from $ 1.70 to $ 8.50 per share.

the nine months ended September 30, 2023, the Company issued 62,367 shares of common stock to Mark L.

Baum, the Company’s Chief

Executive Officer, upon the cashless exercise of options to purchase 180,000 shares at an exercise price of $ 8.99 per share.

withheld from Mr.

Baum 77,167 shares as consideration for the cashless exercise and an additional 40,466 shares for payroll tax obligations

totaling $ 849,000 .

the nine months ended September 30, 2023, the Company issued 55,558 shares of common stock to Andrew R.

Boll, the Company’s Chief

Financial Officer, the Company issued 13,398 shares of common stock to Mr.

Boll, net of 9,602 shares of common stock withheld for payroll

Financial Officer, upon the cashless exercise of options to purchase 90,000 shares at an exercise price of $ 6.00 per share.

withheld from Mr.

Boll 25,521 shares as consideration for the cashless exercise and an additional 8,921 shares for payroll tax obligations

totaling $ 189,000 .

the nine months ended September 30, 2023, upon vesting of 23,000 RSUs granted in January 2020 to Andrew R.

Boll, the Company’s

Chief Financial Officer, the Company issued 13,398 shares of common stock to Mr.

Boll, net of 9,602 shares of common stock withheld for

payroll tax withholdings totaling $ 142,000 .

the nine months ended September 30, 2023, upon vesting of 88,000 RSUs granted in January 2020 to Mark L.

Baum, the Company’s Chief

Executive Officer, the Company issued 52,821 shares of common stock to Mr.

Baum, net of 35,179 shares of common stock withheld for payroll

tax withholdings totaling $ 519,000 .

the six months ended June 30, 2023, upon vesting of 88,000 RSUs granted in January 2020 to Mark L.

Baum, the Company’s Chief Executive

Officer, the Company issued 52,821 shares of common stock to Mr.

Baum, net of 35,179 shares of common stock withheld for payroll tax

withholdings totaling $ 519,000 .

the six months ended June 30, 2023, 32,810 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 ceased providing services to the Company.

the nine months ended September 30, 2023, 43,130 shares of the Company’s common stock underlying RSUs issued to directors vested,

but the issuance and delivery of these shares were deferred until the applicable director ceased providing services to the Company.

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

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are otherwise cancelled/forfeited.

On June 13, 2017, the Company’s Board of Directors and stockholders adopted the Company’s

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

with the 2007 Plan, the “Plans”).

As of June 30, 2023, the 2017 Plan provides for the issuance of a maximum of 6,000,000

shares of the Company’s common stock.

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

persons in the Company’s development and financial success.

Under the Plans, the Company is authorized to issue incentive stock

options intended to qualify under Section 422 of the IRC of 1986, as amended, non-qualified stock options, restricted stock units, performance

stock units and restricted stock.

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

The Company had 529,117 shares available for future issuances under the 2017 Plan at June 30, 2023.

summary of stock option activity under the Plans for the six months ended June 30, 2023 is as follows:

On September 13, 2017, the Company’s Board of Directors and stockholders adopted the Company’s

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

together with the 2007 Plan, the “Plans”).

As of September 30, 2023, the 2017 Plan provided for the issuance of a maximum

of 6,000,000 shares of the Company’s common stock.

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 persons in the Company’s development and financial success.

Under the Plans, the Company is authorized to issue incentive

stock options intended to qualify under Section 422 of the IRC of 1986, as amended, non-qualified stock options, restricted stock units,

performance stock units and restricted stock.

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

The Company had 490,493 shares available for future issuances under the 2017 Plan at September 30, 2023 .

summary of stock option activity under the Plans for the nine months ended September 30, 2023 is as follows:

OF STOCK OPTION PLAN ACTIVITY

Number of Shares

Weighted Average Exercise Price

Weighted Average

Weighted Average Remaining Contractual Life

Aggregate Intrinsic Value

Aggregate Intrinsic

Options outstanding – January 1, 2023

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Options cancelled/forfeited

Options outstanding – June 30, 2023

Options outstanding – September 30, 2023

Options exercisable

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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 June 30, 2023, based on the closing price of the Company’s common stock of $ 19.04 on that

the six months ended June 30, 2023, the Company granted stock options to certain employees.

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 ten years.

Vesting terms for options granted to employees during

the six months ended June 30, 2023 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.

price lower than the market price on September 30, 2023, based on the closing price of the Company’s common stock of $ 14.37 on

the nine months ended September 30, 2023, the Company granted stock options to certain employees.

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 ten years.

Vesting terms for options granted to employees

during the nine months ended September 30, 2023 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:

OF FAIR VALUE ASSUMPTIONS

SCHEDULE OF FAIR VALUE ASSUMPTIONS

Weighted-average fair value of options granted

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Dividend yield

following table summarizes information about stock options outstanding and exercisable at June 30, 2023:

following table summarizes information about stock options outstanding and exercisable at September 30, 2023:

SCHEDULE OF STOCK

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$ 1.47 - $ 25.86

of June 30, 2023, there was approximately $ 1,464,000 of total unrecognized compensation expense related to unvested stock options granted

under the Plans.

of September 30, 2023, there was approximately $ 1,781,000 of total unrecognized compensation expense related to unvested stock options

granted under the Plans.

That expense is expected to be recognized over the weighted-average remaining vesting period of 2.82 years.

The stock-based

compensation for all stock options was $ 122,000 and $ 463,000 during the three and six months ended June 30, 2023, respectively, and $ 258,000

and $ 530,000 during the same periods in 2022, respectively.

intrinsic value of options exercised during the six months ended June 30, 2023 was $ 4,377,000 .

The stock-based compensation for all stock options was $ 154,000 and $ 617,000 during the three and nine months ended September 30, 2023,

respectively, and $ 241,000 and $ 771,000 during the same periods in 2022, respectively.

intrinsic value of options exercised during the nine months ended September 30, 2023 was $ 4,399,000 .

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

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

the six months ended June 30, 2023, the Company’s board of directors were granted 41,301 time-vesting RSUs with a fair market value

of $ 800,000 , which vest in equal quarterly installments over one year.

the nine months ended September 30, 2023, the Company’s board of directors were granted an aggregate 41,301 time-based vesting

RSUs with a fair market value of $ 800,000 , which vest in equal quarterly installments over one year.

summary of the Company’s RSU activity and related information for the nine months ended September 30, 2023 is as follows:

OF RESTRICTED STOCK UNITS ACTIVITY

Number of Shares

Weighted Average Grant Date Fair Value

RSUs unvested - January 1, 2023

RSUs cancelled/forfeited

RSUs unvested - September 30, 2023

of September 30, 2023, the total unrecognized compensation expense related to unvested RSUs was approximately $ 1,041,000 , which is expected

to be recognized over a weighted-average period of 0.40 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, 2023 was $ 374,000 and $ 789,000 , respectively,

and $ 427,000 and $ 1,378,000 during the same periods in 2022, respectively.

April 2023, the Company granted an aggregate of 1,567,913 PSUs to members of its senior management including Mark Baum, Chief Executive

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two-year service period, and (ii) during a five-year term, the achievement and maintenance of Company common stock price targets ranging

between $ 25 to $ 50 , broken out into four separate tranches as described further in the table below.

between $ 25.00 to $ 50.00 per share, separated into four separate tranches as described further in the table below.

OF PERFORMANCE STOCK UNITS

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Target Share Price*

* Target Share Price assumes

that no dividends or like distributions are made to stockholders 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 of the Target

Share Price assumes that no dividends or like distributions are made to stockholders 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 of the Target Share Price.

aggregate fair value of the 2023 PSUs was $ 29,106,000 using a Monte Carlo Simulation with a five-year life, 65 % volatility and a risk

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

summary of the Company’s RSU and PSU activity and related information for the six months ended June 30, 2023 is as follows:

OF RESTRICTED STOCK UNITS AND PERFORMANCE STOCK UNITS ACTIVITY

summary of the Company’s PSU activity and related information for the nine months ended September 30, 2023 is as follows:

OF PERFORMANCE STOCK UNITS ACTIVITY

Number of Shares

Weighted Average Grant Date Fair Value

RSUs and PSUs unvested - January 1, 2023

RSUs cancelled/forfeited

RSUs and PSUs unvested - June 30, 2023

of June 30, 2023, the total unrecognized compensation expense related to unvested RSUs and unvested PSUs was approximately $ 27,192,000 ,

which is expected to be recognized over a weighted-average period of 0.89 years, based on estimated and actual vesting schedules of the

applicable RSUs and PSUs.

The stock-based compensation for RSUs and PSUs during the three and six months ended June 30, 2023 was $ 5,290,000

and $ 6,582,000 , respectively, and $ 1,735,000 and $ 3,479,000 during the same periods in 2022, respectively.

PSUs unvested – January 1, 2023

( 1,567,913 )

PSUs cancelled/forfeited

PSUs unvested – September 30, 2023

of September 30, 2023, the total unrecognized compensation expense related to unvested PSUs was approximately $ 21,829,000 , which is expected

to be recognized over a weighted-average period of 1.51 years, based on estimated and actual vesting schedules of the applicable PSUs.

The stock-based compensation for PSUs during the three and nine months ended September 30, 2023 was $ 3,948,000 and $ 10,115,000 , respectively,

and $ 1,264,000 and $ 3,792,000 during the same periods in 2022, respectively.

Compensation Summary

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OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES DIRECTORS CONSULTANTS

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

For the Three Months Ended

For the Six Months Ended

June 30, 2023

June 30, 2022

June 30, 2023

June 30, 2022

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Employees – selling, general and administrative

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Typically, a number of the matters pending against the Company are at early stages of the legal

process, which in complex proceedings of the sort the Company face often extend for several years.

process, which in complex proceedings of the sort the Company faces often extend for several years.

While it is not possible to accurately

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damages from the other.

Trial is set to take place in the fourth quarter of 2023.

The Company expects the trial to take place in 2024.

and Professional Liability

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election in cash or shares of the Company’s restricted common stock.

Payments totaling $ 75,000 and $ 146,000 were made during the

three and six months ended June 30, 2023, respectively, compared to $ 92,000 and $ 122,000 during the same periods in 2022, respectively.

Royalty expenses were $ 74,000 and $ 149,000 during the three and six months ended June 30, 2023, respectively, compared to $ 106,000 and

$ 177,000 during the same periods in 2022, respectively, and were included in accounts payable to Dr.

Payments totaling $ 0 and $ 146,000 were made during the three

and nine months ended September 30, 2023, respectively, compared to $ 77,000 and $ 199,000 during the same periods in 2022, respectively.

Royalty expenses were $ 71,000 and $ 220,000 during the three and nine months ended September 30, 2023, respectively, compared to $ 67,000

and $ 244,000 during the same periods in 2022, respectively, and were included in accounts payable to Dr.

Asset Purchase Agreement – Related Party

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certain milestone payments to Dr.

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

was paid $ 8,000 and $ 17,000 in cash during the three and six months ended June 30, 2023, respectively, and $ 7,000 and $ 15,000 during

the same periods in 2022, respectively.

The Company incurred $ 9,000 and $ 17,000 for royalty expenses related to the Lindstrom APA during

the three and six months ended June 30, 2023, respectively, and $ 8,000 and $ 15,000 during the same periods in 2022, respectively.

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

Lindstrom was paid $ 0 and $ 17,000 in cash during the three and nine months ended September 30, 2023, respectively, and $ 8,000 and

$ 23,000 during the same periods in 2022, respectively.

The Company incurred $ 9,000 and $ 26,000 for royalty expenses related to the Lindstrom

APA during the three and nine months ended September 30, 2023, respectively, and $ 9,000 and $ 24,000 during the same periods in 2022,

respectively.

Asset Purchase, License and Related Agreements

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the Inventors.

During the three and six months ended June 30, 2023, $ 192,000 and $ 485,000 were incurred under these agreements as royalty

expenses, respectively, and $ 297,000 and $ 510,000 during the same periods in 2022, respectively.

During the three and nine months ended September 30, 2023, $ 220,000 and $ 705,000 were incurred under these agreements

as royalty expenses, respectively, and $ 185,000 and $ 695,000 during the same periods in 2022, respectively.

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

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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.

Under the terms of the Sintetica Agreement, Sintetica was responsible for regulatory

filings for IHEEZO in the U.S.

As of June 30, 2023 and December 31, 2022, the Company had accrued $ 5,000,000 under the Sintetica Agreement

related to a milestone payment, which was capitalized as an intangible asset.

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

achievement of certain regulatory and commercial milestones.

Under the terms of the Sintetica Agreement, Sintetica was responsible for

regulatory filings for IHEEZO in the U.S.

As of September 30, 2023, the Company had paid all milestone amounts due under the Sintetica

Agreement, and all commercial milestones were previously capitalized as an intangible asset.

August 2023, the Company amended the Sintetica Agreement to allow for early payment of previously accrued amounts for commercial related

milestones associated with sales of IHEEZO in exchange for a $ 550,000 reduction in the milestone amounts due, and as a result of this

amendment, the Company reduced the intangible asset value associated with IHEEZO by $ 550,000 and paid the remaining commercial milestone

amount of $ 4,450,000 during the three and nine months ended September 30, 2023.

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

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upon the achievement of certain regulatory milestones and up to $ 6,200,000 upon the achievement of certain commercial milestones.

the terms of the Agreements, the Company will be responsible for regulatory filings and fees for MAQ-100 in the U.S.

June 30, 2023, no amounts have been paid or accrued under the Wakamoto Agreements.

the terms of the Wakamoto Agreements, the Company will be responsible for regulatory filings and fees for MAQ-100 in the U.S.

Through September 30, 2023, no amounts have been paid or accrued under the Wakamoto Agreements.

to certain limitations, the term of the Wakamoto 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.

and may be extended for a five-year period if certain unit sales thresholds are met.

Commercial Alliance Agreement – Terminated

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(“Eyepoint”), pursuant to which Eyepoint granted the Company the non-exclusive

right to co-promote DEXYCU ® (dexamethasone intraocular suspension) 9% for the treatment of post-operative inflammation

following ocular surgery in the United States.

Pursuant to the Dexycu Agreement, Eyepoint pays the Company a fee calculated based on

the quarterly sales of DEXYCU in excess of predefined volumes to specific customers of the Company in the U.S.

Under the terms of the

Dexycu Agreement, the Company agreed to use commercially reasonable efforts to promote and market DEXYCU in the U.S.

right to co-promote DEXYCU ® (dexamethasone intraocular suspension) 9% (“DEXYCU”) for the treatment of post-operative

inflammation following ocular surgery in the United States.

Pursuant to the Dexycu Agreement, Eyepoint pays the Company a fee calculated

based on the quarterly sales of DEXYCU in excess of predefined volumes to specific customers of the Company in the U.S.

Under the terms

of the Dexycu Agreement, the Company agreed to use commercially reasonable efforts to promote and market DEXYCU in the U.S.

to a mutual termination agreement entered into on October 7, 2022, the Dexycu Agreement terminated on January 1, 2023.

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Company entered into a Mutual Termination Agreement (the “Termination Agreement”) with Eyepoint on October 7, 2022, pursuant

to which Eyepoint and the Company agreed (a) that the Company will continue to support the sale of Dexycu through the fourth quarter

of 2022, consistent with the Company’s level of effort during the January through June 2022 period, (b) to decrease the required

to which Eyepoint and the Company agreed (a) that the Company would continue to support the sale of DEXYCU through the fourth quarter

of 2022, consistent with the Company’s level of effort during the January through September 2022 period, (b) to decrease the required

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

along with ancillary letter agreements, effective January 1, 2023.

the three and six months ended June 30, 2022, the Company recorded $ 1,212,000 and $ 2,532,000 , respectively, in commission revenues related

to the Dexycu Agreement.

the three and nine months ended September 30, 2022, the Company recorded $ 1,044,000 and $ 3,576,000 , respectively, in commission revenues

related to the Dexycu Agreement.

and Marketing Agreements

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

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

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

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compounded formulations or related products.

the terms of the sales and marketing agreements, the Company is generally required to make commission payments equal to 10% to 14% of

the terms of the sales and marketing agreements, the Company was generally required to make commission payments equal to 10% to 14% of

net sales for products above and beyond the initial existing sales amounts.

In addition, the Company is required to make periodic milestone

In addition, the Company was required to make periodic milestone

payments to certain organizations in shares of the Company’s restricted common stock if net sales in the assigned territory reach

certain future levels by the end of their terms.

Commission expenses of $ 0 and $ 130,000 were incurred under these agreements

for commission expenses during the three and six months ended June 30, 2023, respectively, and $ 1,100,000 and $ 2,147,000 during the same

periods in 2022, respectively.

Commission expenses of $ 0 and $ 130,000 were incurred under these agreements for commission

expenses during the three and nine months ended September 30, 2023, respectively, and $ 1,041,000 and $ 3,188,000 during the same periods

in 2022, respectively.

SEGMENTS AND CONCENTRATIONS

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the Company as a single operating segment.

Company has four products that each accounted for more than 10% of total revenues during the three months ended June 30, 2023 and three

products that each accounted for more that 10% of total revenues during the six months ended June 30, 2023.

The Company had two products

that each accounted for more than 10% of total revenues during the three and six months ended June 30, 2022.

These products collectively

accounted for 48 %

of revenues during the three and six months ended June 30, 2023, respectively, and 32 %

Company has two products that each accounted for more than 10% of total revenues during the three and nine months ended September

The Company had two and three products that each accounted for more than 10% of total revenues during the three and nine

months ended September 30, 2022, respectively.

These products collectively accounted for 32 %

of revenues during the three and nine months ended September 30, 2023, respectively, and 34 %

during the same periods in 2022, respectively.

of June 30, 2023 and December 31, 2022, accounts receivable from a single customer accounted for 49 % and 0 % of total accounts receivable,

respectively.

For the three and six months ended June 30, 2023, revenues from a single customer accounted for 27 % and 16 % of total revenues,

of September 30, 2023 and December 31, 2022, accounts receivable from a single customer accounted for 48 % and 0 % of total accounts receivable,

respectively.

For the three and six months ended June 30, 2022 no customer exceeded 10% of total revenues.

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

These suppliers collectively

accounted for 80 % and 85 % of active pharmaceutical ingredient purchases during the three and six months ended June 30, 2023,

respectively, and 72 % and 73 % during the same periods in 2022, respectively.

For the three and nine months ended September 30, 2023, revenues from a single customer accounted for 35 % and 23 % of total

revenues, respectively.

For the three and nine months ended September 30, 2022, no customer exceeded 10% of total revenues.

Company receives its active pharmaceutical ingredients from three main suppliers.

These suppliers collectively accounted for 96 % and

79 % of active pharmaceutical ingredient purchases during the three and nine months ended September 30, 2023, respectively, and 52 % and

66 % during the same periods in 2022, respectively.

SUBSEQUENT EVENTS

Company has performed an evaluation of events occurring subsequent to June 30, 2023 through the filing date of this Quarterly Report.

Company has performed an evaluation of events occurring subsequent to September 30, 2023 through the filing date of this Quarterly Report

on Form 10-Q.

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

August 2023, the Company issued 63 shares of common stock and received proceeds of $ 1,000 upon the exercise of options to purchase 63

November 2023, the Company issued 125 shares of common stock and received proceeds of $ 1,000 upon the exercise of options to purchase

125 shares of common stock with exercise price of $ 6.75 per share.

of Performance Stock Units

as of July 18, 2023, the Company settled 1,567,913 outstanding PSUs as a result of the achievement of the total stockholder returns (“TSR”)

targets set forth in equity incentive awards previously issued to members of the Company’s management team in 2021 (the “2021

The 2021 Awards were separated into four tranches and required that the Company achieve and maintain certain levels of

TSR ranging from 50 % to 175 % per share during the five-year period following the grant date.

TSR was based on the aggregate of:

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

and (ii) any dividends or like stockholder

distributions as specified in the PSU agreements.

In connection with the settlement of the 2021 Awards, an aggregate of 616,984 shares

of the Company’s common stock were withheld by Harrow for payroll tax obligations totaling $ 11,272,000 .

of VEVYE TM U.S.

and Canadian Commercial Rights

July 2023, the Company acquired commercial rights of VEVYE (cyclosporine ophthalmic solution) 0.1%, an ophthalmic drug product, for

and Canadian markets (the “VEVYE Acquisition”).

The Company acquired the commercial rights to VEVYE by entering

into a license agreement with Novaliq GmbH (“Novaliq”).

As consideration, the Company has made initial payments to

Novaliq totaling $ 8,000,000

and will pay low double-digit royalties on net sales of VEVYE along with potential commercial milestone payments.

of Certain U.S.

and Canadian Commercial Rights to Santen and Eyevance Products

July 2023, the Company entered into an Asset Purchase Agreement with Eyevance Pharmaceuticals, LLC and a License Agreement with Santen

(collectively, the “Santen Agreements”), each a subsidiary of Santen Pharmaceuticals Co., Ltd.

(collectively, “Santen”).

Pursuant to the Santen Agreements, the Company acquired the exclusive commercial rights to assets associated with the following ophthalmic

products (collectively, the “Santen Products”):

(fluorometholone acetate ophthalmic suspension) 0.1%, a corticosteroid prepared as a sterile topical ophthalmic suspension indicated

for use in the treatment of steroid-responsive inflammatory conditions of the palpebral and bulbar conjunctiva, cornea, and anterior

segment of the eye.

(natamycin ophthalmic suspension) 5%, a sterile, antifungal drug for the treatment of fungal blepharitis, conjunctivitis, and keratitis

caused by susceptible organisms, including Fusarium solani keratitis.

ST (tobramycin and dexamethasone ophthalmic suspension) 0.3%/0.05%, a topical antibiotic and corticosteroid combination for steroid-responsive

inflammatory ocular conditions for which a corticosteroid is indicated and where superficial bacterial ocular infection or a risk

of bacterial ocular infection exists.

(cetirizine ophthalmic solution) 0.24%, a histamine-1 (H1) receptor antagonist indicated for treatment of ocular itching associated

with allergic conjunctivitis.

a preservative-free formulation for temporary relief of symptoms of dry eye.

(cyclosporine ophthalmic emulsion) 0.1%, an orphan designated drug that is a calcineurin inhibitor immunosuppressant indicated for

the treatment of vernal keratoconjunctivitis.

PLUS, a preservative-free formulation for dry eye or allergy relief.

transactions pursuant to the Santen Agreements are referred to in these footnotes as the “Santen Products Acquisition.”

the terms of the Santen Agreements, the Company made an initial one-time payment of $ 8,000,000 .

In addition, the agreements provide for

various one-time milestone payments associated with certain manufacturing-related events as well as low-double digit royalty payments

on net sales of Verkazia and high-single digit royalty payments on net sales of Cationorm Plus.

Under the Santen Agreements, the Company

also assumed certain obligations associated with other third parties that require mid-single digit royalties on sales of Freshkote and

Immediately following the closing and subject to certain conditions, for a period that the Company expects to last approximately

four months, and prior to the transfer of the Santen Product NDAs and other marketing authorizations to the Company, Santen will continue

to sell the Santen Products on the Company’s behalf and transfer the net profit from the sale of the Santen Products to the Company.

Credit Agreement Amendment

July 2023, the Company entered into the First Amendment to Credit Agreement and Guaranty and Consent (the “Oaktree Amendment”)

to the Oaktree Loan (see Note 13).

Under the Oaktree Amendment, the overall credit facility size was increased from $ 100,000,000 to $ 112,500,000 ,

and the Company made other changes related to the Santen Products Acquisition.

Upon satisfaction of certain conditions to funding, the

Company drew down a principal amount of $ 12,500,000 (the “Loan Increase”) to fund the initial one-time payment associated

with the Santen Products Acquisition and for other working capital and general corporate purposes.

No other material changes to the Oaktree

Loan were provided in the Oaktree Amendment.

Following entry into the Oaktree Amendment and the funding of the Loan Increase upon closing

of the Santen Products Acquisition, the Company has drawn down a total principal loan amount of $ 77,500,000 under the Oaktree Loan and

an additional principal loan amount of up to $ 35,000,000 remains available to the Company upon the commercialization of TRIESENCE.

Stock Offering

July 2023, the Company closed a public offering of shares of its common stock at an offering price of $ 17.75 per share (the “Offering”).

The Company sold 3,887,324 shares of its common stock in the Offering, resulting in the Company receiving aggregate gross proceeds of

$ 69,000,000 , before commissions and other offering expenses.

October 2023, the Company transferred the NDAs and marketing authorizations for all of the Santen Products in the U.S.

The Company expects

Santen to transfer the Canadian marketing authorizations for VERKAZIA and CATIONORM PLUS by March 31, 2024.

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