What changed in this filing

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Item 9A. Controls and Procedures

2024-03-19 compared with 2023-03-23 · 1325 added, 1325 removed, 1013 unchanged (72% of the section changed)

82 unchanged sentences

filed with the Securities and Exchange Commission on September 21, 2007).

Amended and Restated Certificate of Incorporation, as amended by the Certificate of Amendment to Amended and Restated Certificate of Incorporation effective February 28, 2012, as further amended by the Certificate of Amendment to Amended and Restated Certificate of Incorporation effective February 7, 2013, and as further amended by the Certificate of Amendment to Amended and Restated Certificate of Incorporation effective September 10, 2014

Amended and Restated Bylaws of Imprimis Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 3.2 to the Annual Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on March 28, 2014)

Certificate of Designation of Series A Convertible Preferred Stock of Imprimis Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on December 20, 2011)

Amended and Restated Certificate of Incorporation, filed July 2, 2018 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on July 2, 2018)

Amendment to the Restated Certificate of Incorporation for the name change, filed as of December 27, 2018 (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on December 31, 2018)

Certificate of Designation of Series B Cumulative Preferred Stock of Harrow Health, Inc.

(incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of Harrow Health, Inc.

filed with the Securities and Exchange Commission on May 5, 2021)

Amended and Restated Certificate of Incorporation, as amended (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on September 29, 2023).

Amended and Restated Bylaws of Harrow, Inc.

(incorporated herein by reference to Exhibit 3.2 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on September 29, 2023).

Description of the Company’s Securities

Indenture dated April 20, 2021 between Harrow Health, Inc.

Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of Harrow Health, Inc.

Indenture dated April 20, 2021, between Harrow, Inc.

Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on April 20, 2021).

First Supplemental Indenture dated April 20, 2021 between Harrow Health, Inc.

Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K of Harrow Health, Inc.

First Supplemental Indenture dated April 20, 2021 between Harrow, Inc.

Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on April 20, 2021).

Form of 8.625% Senior Note due 2026 (incorporated herein by reference to Exhibit 4.3 to the Current Report on Form 8-K of Harrow Health, Inc.

Form of 8.625% Senior Note due 2026 (incorporated herein by reference to Exhibit 4.3 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on April 20, 2021).

Second Supplemental Indenture dated December 20, 2022 between Harrow Health, Inc.

Bank Trust Company, National Association (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K of Harrow Health, Inc.

Second Supplemental Indenture dated December 20, 2022 between Harrow, Inc.

Bank Trust Company, National Association (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on December 20, 2022).

Form of 11.875% Senior Note due 2027 (incorporated herein by reference to Exhibit 4.3 to the Current Report on Form 8-K of Harrow Health, Inc.

Form of 11.875% Senior Note due 2027 (incorporated herein by reference to Exhibit 4.3 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on December 20, 2022).

14 unchanged sentences

filed with the Securities and Exchange Commission on May 8, 2013)

Stand-alone Restricted Stock Unit Agreement, dated July 18, 2012, granted by Imprimis Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.40 to the Company’s Registration Statement on Form S-1 (File No.

333-182846) filed on July 25, 2012)

Stand-alone Restricted Stock Unit Agreement, dated July 18, 2012, granted by Imprimis Pharmaceuticals, Inc.

Kammer (incorporated herein by reference to Exhibit 10.41 to the Company’s Registration Statement on Form S-1 (File No.

333-182846) filed on July 25, 2012)

Form of Underwriter’s Warrant (incorporated herein by reference to Exhibit 10.41 to the Company’s Registration Statement on Form S-1 (File No.

333-182846) filed on October 26, 2012)

Employment Agreement, dated as of April 25, 2016, by and between Imprimis Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2016)

Stock Units Agreement, dated May 2, 2013, by and between Imprimis Pharmaceuticals, Inc.

Baum (incorporated herein by

reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q filed with the

Securities and Exchange Commission on August 14, 2013)

Employment Agreement, dated as of April 25, 2016, by and between Imprimis Pharmaceuticals, Inc.

1 unchanged sentence

Boll (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2016)

Performance Stock Units Award Agreement, effective as of February 1, 2015, by and between Imprimis Pharmaceuticals, Inc.

and Andrew R.

Boll (incorporated herein by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 2, 2015)

Employment Agreement, dated as of April 25, 2016, by and between Imprimis Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2016)

Warrant to Purchase Stock, dated May 11, 2015, issued by Imprimis Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on May 12, 2015)

Warrant Amendment to Purchase Stock, dated December 27, 2016, issued by Imprimis Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.3 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on December 29, 2016)

Form of Securities Purchase Agreement, dated March 21, 2017, between the Registrant and the Investors (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on March 22, 2017)

License Agreement dated April 1, 2017 between Imprimis Pharmaceuticals, Inc.

3 unchanged sentences

filed with the Securities and Exchange Commission on April 6, 2017)

Strategic Sales & Marketing Agreement dated April 13, 2017 between Imprimis Pharmaceuticals, Inc.

and Cameron Ehlen Group, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on April 17, 2017)

Strategic Sales & Marketing Agreement dated April 28, 2017 between Imprimis Pharmaceuticals, Inc.

and SightLife Surgical, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on May 2, 2017)

Consulting Agreement dated May 1, 2017 between Eton Pharmaceuticals, Inc.

8 unchanged sentences

filed with the Securities and Exchange Commission on August 10, 2017)

Asset Purchase and License Agreement (pentoxifylline) dated May 9, 2017 between Imprimis Pharmaceuticals, Inc.

and Eton Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on June 20, 2017)

Asset Purchase and License Agreement (corticotropin) dated May 9, 2017 between Imprimis Pharmaceuticals, Inc.

and Eton Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on June 20, 2017)

Management Services Agreement dated May 1, 2017 between Imprimis Pharmaceuticals, Inc.

and Eton Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.4 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on June 20, 2017)

Consulting Agreement dated October 27, 2017 between Surface Pharmaceuticals, Inc.

36 unchanged sentences

filed with the Securities and Exchange Commission on November 13, 2018)

Asset Purchase Agreement dated December 11, 2018 between Harrow Health, Inc.

Asset Purchase Agreement dated December 11, 2018 between Harrow, Inc.

(fka Imprimis Pharmaceuticals, Inc.) and Melt Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Harrow Health, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on February 5, 2019)

Asset Purchase Agreement dated February 1, 2019 between Harrow Health, Inc.

and Mayfield Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

filed with the Securities and Exchange Commission on May 9, 2019)

Asset Purchase Agreement dated February 1, 2019 between Harrow Health, Inc.

and Elle Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

filed with the Securities and Exchange Commission on May 9, 2019)

Joinder and Amendment to Loan and Security Agreement, dated May 24, 2019, by and between Harrow Health, Inc., each of its wholly-owned subsidiaries and SWK Funding LLC.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Harrow Health, Inc.

filed with the Securities and Exchange Commission on May 29, 2019)

Consulting Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

Baum (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on August 14, 2019)

1 unchanged sentence

and Andrew R.

Boll (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

Boll (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on August 14, 2019)

Consulting Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

Saharek (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on August 14, 2019)

License Agreement, dated July 28, 2019, among Mayfield Pharmaceuticals, Inc., TGV-Health, LLC and TGV-Gyneconix, LLC (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

filed with the Securities and Exchange Commission on November 13, 2019).

License Agreement, dated July 29, 2019, among Stowe Pharmaceuticals, Inc., TGV-Health, LLC and TGV-Ophthalnix, LLC (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

filed with the Securities and Exchange Commission on November 13, 2019).

Consulting Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.65#* to the Annual Report on Form 10-K of Harrow Health, Inc.

Baum (incorporated herein by reference to Exhibit 10.64#* to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 13, 2020).

1 unchanged sentence

and Andrew R.

Boll (incorporated herein by reference to Exhibit 10.65#* to the Annual Report on Form 10-K of Harrow Health, Inc.

Boll (incorporated herein by reference to Exhibit 10.65#* to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 13, 2020).

Consulting Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit 10.65#* to the Annual Report on Form 10-K of Harrow Health, Inc.

Saharek (incorporated herein by reference to Exhibit 10.66#* to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 13, 2020).

Business Loan Agreement with Renasant Bank pursuant to the Paycheck Protection Program, dated April 27, 2020 (incorporated herein by reference to Exhibit 10.1* to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

filed with the Securities and Exchange Commission on August 10, 2020).

Second Amendment, dated as of April 1, 2020, to the Loan and Security Agreement by and among Harrow Health, Inc., several of its wholly-owned subsidiaries and the Lenders named therein (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

filed with the Securities and Exchange Commission on August 10, 2020).

Commercial Alliance Agreement between Eyepoint Pharmaceuticals, Inc.

and ImprimisRx, LLC dated August 1, 2020 (incorporated herein by reference to Exhibit 10.1*# to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

and ImprimisRx, LLC dated August 1, 2020 (incorporated herein by reference to Exhibit 10.1*# to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on November 9, 2020).

Expansion Term Letter Agreement dated December 6, 2021 between Eyepoint Pharmaceuticals, Inc.

and ImprimisRx, LLC (incorporated herein by reference to Exhibit 10.50 to the Annual Report on Form 10-K of Harrow Health, Inc.

and ImprimisRx, LLC (incorporated herein by reference to Exhibit 10.50 to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 10, 2022)

Mutual Termination Agreement dated October 7, 2022 between ImprimisRx and EyePoint Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

(incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on November 14, 2022)

License and Supply Agreement dated July 25, 2021 between Harrow Health, Inc.

License and Supply Agreement dated July 25, 2021 between Harrow, Inc.

and Sintetica, S.A.

(incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 10-Q of Harrow Health, Inc.

(incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on August 10, 2021)

Harrow Health, Inc.

2017 Incentive Stock and Awards Plan (incorporated herein by reference to Exhibit 10.1 to the Registration Statement on Form S-8 of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on August 25, 2017)

First Amendment to the Harrow Health, Inc.

2017 Incentive Stock and Awards Plan (incorporated herein by reference to Appendix A to Harrow Health, Inc.’s Definitive Proxy Statement filed with the Securities and Exchange Commission on April 23, 2021)

Loan and Security Agreement dated September 1, 2021 among Harrow Health, Inc.

First Amendment to the Harrow, Inc.

2017 Incentive Stock and Awards Plan (incorporated herein by reference to Appendix A to Harrow, Inc.’s Definitive Proxy Statement filed with the Securities and Exchange Commission on April 23, 2021)

Loan and Security Agreement dated September 1, 2021 among Harrow, Inc.

and Melt Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Harrow Health, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on September 2, 2021)

First Amendment to Loan and Security Agreement dated April 8, 2022 between Harrow Health, Inc.

First Amendment to Loan and Security Agreement dated April 8, 2022 between Harrow, Inc.

and Melt Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on November 14, 2022)

Second Amendment to Loan and Security Agreement dated September 21, 2022 between Harrow Health, Inc.

Second Amendment to Loan and Security Agreement dated September 21, 2022 between Harrow, Inc.

and Melt Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

filed with the Securities and Exchange Commission on November 14, 2022)

Basic Sale and Purchase Agreement dated August 18, 2021 between Harrow Health, Inc.

and Wakamoto Pharmaceutical Co., Ltd.

(incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

filed with the Securities and Exchange Commission on November 9, 2021)

License Agreement dated August 18, 2021 between Harrow Health, Inc.

and Wakamoto Pharmaceutical Co., Ltd.

(incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Harrow Health, Inc.

(incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on November 14, 2022)

Asset Purchase Agreement dated December 17, 2021 between Harrow Health, Inc.

and Novartis Technology, LLC and Novartis Ophthalmics AG (incorporated herein by reference to Exhibit 10.51 to the Annual Report on Form 10-K of Harrow Health, Inc.

Asset Purchase Agreement dated December 17, 2021 between Harrow, Inc.

and Novartis Technology, LLC and Novartis Ophthalmics AG (incorporated herein by reference to Exhibit 10.51 to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 10, 2022).

Asset Purchase Agreement dated December 13, 2022 between Harrow Health, Inc.

and Novartis Technology, LLC and Novartis Innovative Therapies AG (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 10-K of Harrow Health, Inc.

Asset Purchase Agreement dated December 13, 2022 between Harrow, Inc.

and Novartis Technology, LLC and Novartis Innovative Therapies AG (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on December 14, 2022).

Loan and Security Agreement dated December 14, 2022 between Harrow, Inc.

Riley Commercial Capital LLC (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on May 11, 2023).

Credit and Guaranty Agreement dated March 27, 2023 between Harrow, Inc.

and Oaktree Fund Administration, LLC (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on May 11, 2023).

First Amendment to Credit Agreement and Guaranty dated July 18, 2023 to the Credit Agreement and Guaranty dated March 27, 2023 between Harrow, Inc.

and Oaktree Fund Administration, LLC (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on August 9, 2023).

Second Amendment to License and Supply Agreement dated August 4, 2023 between Harrow IP, LLC and Sintetica S.A (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on November 13, 2023).

Third Amendment to License and Supply Agreement dated February 6, 2024 between Harrow IP, LLC and Sintetica S.A

List of Subsidiaries

11 unchanged sentences

Boll, Chief Financial Officer.

Policy Regarding the Mandatory Recovery of Compensation.

Instant Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the

30 unchanged sentences

Accounting and Financial Officer)

Lawrence Van Horn

Martin Makary

7 unchanged sentences

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors

Harrow Health, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance

sheets of Harrow Health, Inc.

and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated

statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022,

and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated

financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31,

2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in

conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

the Stockholders and Board of Directors

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Harrow, Inc.

and subsidiaries (the “Company”) as of December

31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years

in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position

of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the

period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is

a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated

to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter

in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Product Sales Deductions – Branded Products

Critical Audit Matter Description

As described in Note 3 to the consolidated financial

statements, revenues from branded product sales are recognized net of accruals for estimated rebates, wholesaler chargebacks, discounts

and other deductions (collectively, “sales deductions”), which are established at the time of sale.

Management’s estimate

of sales deductions for branded products is based on the inventory levels in the distribution channel as provided by wholesalers, as well

as the actual average selling price for each product which is impacted by changes in customer mix, changes in negotiated terms with customers,

and changes in the volume of purchases.

In addition, management utilizes the services of a third-party professional services firm to estimate

rebates and chargebacks associated with sales of its branded products.

We identified the estimates of accruals for sales

deductions as a critical audit matter given the limited sales history of the Company’s branded products and the significant judgment

required by management with respect to the measurement uncertainty, as the calculation of the sales deductions includes assumptions such

as average selling price, purchasing trends of wholesalers and historical branded product sales used to predict future sales.

This required

a high degree of auditor judgment and an increased extent of audit effort in applying the procedures related to management’s assumptions.

How the Critical Audit Matter Was Addressed in

To test management’s estimated branded product

sales deductions, we obtained management’s calculations for the respective estimates and performed the following procedures, among

We tested management’s estimation process for determining accruals for product sales deductions by developing an independent

expectation of the estimated accrual rates, including comparison of rates used in management’s analysis to external industry data,

historical actual information, and executed third-party contracts.

We evaluated management’s historic ability to accurately estimate

the sales deduction accruals by retrospectively comparing historically recorded accruals to the actual amounts that were ultimately claimed

by the wholesalers.

In addition, we assessed subsequent events to determine whether there was any new information that would require adjustment

to the accruals.

/s/ KMJ Corbin & Company LLP

We have served as the Company’s auditor since 2007.

Irvine, California

March 23, 2023

HARROW HEALTH, INC.

CONSOLIDATED BALANCE SHEETS

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that

was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material

to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication

of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we

are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts

or disclosures to which it relates.

Sales Deductions – Branded Products

Audit Matter Description

described in Note 3 to the consolidated financial statements, revenues from branded product sales are recognized net of accruals for

estimated rebates, wholesaler chargebacks, discounts, copay assistance and other deductions (collectively, “sales deductions”), which are established

at the time of sale.

Management’s estimate of sales deductions for branded products is based on the inventory levels in the distribution

channel as provided by wholesalers, as well as the actual average selling price for each product which is impacted by changes in customer

mix, changes in negotiated terms with customers, and changes in the volume of purchases.

In addition, management utilizes the services

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

identified the estimates of accruals for sales deductions as a critical audit matter given the limited sales history of the Company’s

branded products and the significant judgment required by management with respect to the measurement uncertainty, as the calculation

of the sales deductions includes assumptions such as average selling price, purchasing trends of wholesalers and historical branded product

sales used to predict future sales.

This required a high degree of auditor judgment and an increased extent of audit effort in applying

the procedures related to management’s assumptions.

the Critical Audit Matter Was Addressed in the Audit

test management’s estimated branded product sales deductions, we obtained management’s calculations for the respective estimates

and performed the following procedures, among others.

We tested management’s estimation process for determining accruals for product

sales deductions by developing an independent expectation of the estimated accrual rates, including comparison of rates used in management’s

analysis to external industry data, historical actual information, and executed third-party contracts.

We evaluated management’s

historic ability to accurately estimate the sales deduction accruals by retrospectively comparing historically recorded accruals to the

actual amounts that were ultimately claimed by the wholesalers.

In addition, we assessed subsequent events to determine whether there

was any new information that would require adjustment to the accruals.

KMJ Corbin & Company LLP

have served as the Company’s auditor since 2007.

BALANCE SHEETS

Current assets

Cash and cash equivalents

Cash and cash

Investment in Eton Pharmaceuticals

Accounts receivable, net

Prepaid expenses and other current assets

expenses and other current assets

Total current assets

4 unchanged sentences

Intangible assets, net

Investment in Melt Pharmaceuticals

$ 312,164,000

$ 157,378,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable and accrued expenses

Accrued payroll and related liabilities

Deferred revenue and customer deposits

Current portion of operating lease obligations

Current portion of finance lease obligations

Accounts payable and accrued

Accrued rebates and copay

Accrued payroll and related

Deferred revenue and customer

portion of operating lease obligations

Total current liabilities

Operating lease obligations, net of current portion

Finance lease obligations, net of current portion

Notes payable, net of unamortized debt discount

TOTAL LIABILITIES

Operating lease obligations, net of current

Accrued expenses, net of current portion

Notes payable, net of

unamortized debt discount and issuance costs

Commitments and contingencies

STOCKHOLDERS’ EQUITY

Common stock, $ 0.001 par value, 50,000,000 shares authorized, 29,901,530 and 26,902,763

shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively

Common stock, $ 0.001 par value, 50,000,000

shares authorized, 35,168,260 and 29,901,530 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated deficit

( 133,904,000 )

( 109,493,000 )

TOTAL HARROW HEALTH STOCKHOLDERS’ EQUITY

Noncontrolling interests

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

TOTAL HARROW, INC.

STOCKHOLDERS’

Noncontrolling

STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

$ 312,164,000

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

HARROW HEALTH, INC.

$ 157,378,000

accompanying notes are an integral part of these consolidated financial statements

STATEMENTS OF OPERATIONS

Product sales, net

Other revenues

For the Years Ended

Product sales,

$ 117,447,000

Total revenues

5 unchanged sentences

Research and development

Impairment of long-lived assets

of intangible assets

Total operating expenses

Income from operations

Other income (expense):

Other (expense) income:

Interest expense, net

1 unchanged sentence

( 7,244,000 )

Equity in losses of unconsolidated entities

( 11,133,000 )

Equity in losses of unconsolidated

( 11,133,000 )

Investment loss from Eton Pharmaceuticals

Investment gain (loss)

from Eton Pharmaceuticals

( 2,914,000 )

Loss on extinguishment

( 5,465,000 )

Loss on early extinguishment of debt

Gain on forgiveness of PPP loan

Gain on sale of non-ophthalmology assets

Other income, net

Total other expense, net

Gain on sale of non-ophthalmology

(expense) income, net

Total other expense,

( 24,141,000 )

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( 14,011,000 )

Income tax provision

( 14,086,000 )

( 18,007,000 )

Preferred dividends and accretion of preferred stock issuance costs

Net loss attributable to common stockholders

tax provision

Net loss attributable

to Harrow, Inc.

$ ( 24,411,000 )

$ ( 14,086,000 )

Basic and diluted net loss per share of common stock

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

The accompanying notes are

an integral part of these consolidated financial statements

HARROW HEALTH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the years ended December 31, 2022 and 2021

Preferred Stock

Harrow Health, Inc.

Basic and diluted net

loss per share of common stock

Weighted average number

of shares of common stock outstanding, basic and diluted

accompanying notes are an integral part of these consolidated financial statements

STATEMENTS OF STOCKHOLDERS’ EQUITY

the Years Ended December 31, 2023 and 2022

Noncontrolling

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Issuance of common stock in connection with:

Exercise of consultant stock-based options

Exercise of employee stock-based options

1 unchanged sentence

Vesting of RSUs

Shares withheld related to net share settlement of equity awards

( 3,228,000 )

Issuance of preferred shares, net of discounts and issuance costs

Redemption of preferred shares

( 11,000,000 )

Payment of preferred dividends

Shares withheld related

to net share settlement of equity awards

Issuance of common shares from public offering,

net of offering costs

Stock-based compensation expense

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$ ( 355,000 )

Beginning balance

$ 137,058,000

2 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

Exercise of warrants

Vesting of RSUs

Shares withheld related to net share settlement of equity awards

Issuance of common shares from public offering, net of offering costs

Vesting of RSUs and PSUs

Shares withheld related

to net share settlement of equity awards

( 13,012,000 )

( 13,013,000 )

Stock-based compensation expense

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$ ( 355,000 )

Ending balance

$ 204,635,000

1 unchanged sentence

$ ( 355,000 )

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

HARROW HEALTH, INC.

accompanying notes are an integral part of these consolidated financial statements

STATEMENTS OF CASH FLOWS

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$ ( 14,086,000 )

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization of property, plant and equipment

Amortization of intangible assets

Amortization of operating lease right-of-use assets

Provision for bad debt expense

Amortization of debt issuance costs and discount

Gain on forgiveness of PPP loan

Adjustments to reconcile

net loss to net cash provided by operating activities:

Depreciation and amortization

of property, plant and equipment and software development costs

Amortization of intangible

Amortization of operating

lease right-of-use assets

Provision for credit losses

Amortization of debt issuance

costs and debt discount

Investment (gain) loss

from investment in Eton

( 3,092,000 )

Investment loss from Eton Pharmaceuticals

Equity in losses of unconsolidated entities

Equity in losses of unconsolidated

Loss on disposal of equipment

Loss on early extinguishment of loan

Impairment of long-lived assets

Impairment of intangible

Loss on extinguishment

Stock-based compensation

Gain on sale of non-ophthalmology assets

Gain on sale of non-ophthalmology

( 5,259,000 )

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( 4,326,000 )

Prepaid expenses and other current assets

( 2,324,000 )

Accounts payable and accrued expenses

Accrued payroll and related liabilities

Deferred revenue and customer deposits

NET CASH PROVIDED BY OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Net proceeds from sale of investments

Issuance of note receivable, Melt Pharmaceuticals

Prepaid expenses and other

current assets

( 5,647,000 )

Proceeds from sale of non-ophthalmology assets

Proceeds from sale of property, plant and equipment

Investment in patent and trademark assets

Purchase of licenses, product NDAs and patents

( 3,350,000 )

Accounts payable, accrued

expenses, accrued rebates and copay assistance

Accrued payroll and related

revenue and customer deposits

NET CASH PROVIDED BY

OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of non-ophthalmology

Investment in patent and

trademark assets

Proceeds from sale of property,

plant and equipment

Purchase of product NDAs,

marketing authorizations and patents

( 151,075,000 )

Purchases of property, plant and equipment

( 5,000,000 )

of property, plant and equipment

( 1,460,000 )

NET CASH USED IN INVESTING ACTIVITIES

( 2,597,000 )

NET CASH USED IN INVESTING

( 152,553,000 )

CASH FLOWS FROM FINANCING ACTIVITIES

Payments on finance lease obligations

Proceeds from 8.625% notes payable, net of costs

Proceeds from 11.875% notes payable, net of costs

Principal and exit fee payments on SWK loan

( 1,743,000 )

Proceeds from common stock, net of offering costs

Payment of taxes upon vesting of RSUs

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from 11.875% notes

payable, net of costs

Proceeds from Oaktree Loan,

Payment of payroll taxes

upon vesting of PSUs, RSUs and exercise of stock options

( 13,013,000 )

Proceeds from exercise of stock options

Sale of preferred stock, net of discount and issuance costs

Repayment of preferred stock

Proceeds from exercise

of stock options

Proceeds from B Riley senior

secured note, net of costs

Repayment of B.

( 59,750,000 )

Payment of preferred stock dividends

NET CASH PROVIDED BY FINANCING ACTIVITIES

Proceeds from public offering

of common stock, net of offering costs

on finance lease obligations

NET CASH PROVIDED BY

FINANCING ACTIVITIES

NET CHANGE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, beginning of year

CASH AND CASH EQUIVALENTS, end of year

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

Cash paid for interest

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING

Purchase of property, plant and equipment included in

accounts payable and accrued expenses

Purchase of intangible asset included in accounts payable and accrued expenses

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

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

Melt accounts receivable transferred to note receivable

The accompanying notes are

an integral part of these consolidated financial statements

( 22,185,000 )

AND CASH EQUIVALENTS, beginning of year

AND CASH EQUIVALENTS, end of year

SUPPLEMENTAL DISCLOSURE

OF CASH FLOW INFORMATION:

paid for income taxes

paid for interest

SUPPLEMENTAL DISCLOSURES

OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Reclassification

of deferred financing costs

of exit fee related to Oaktree Loan

premium financed

of intangible asset included in accounts payable and accrued expenses

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

assets obtained in exchange for new operating lease obligations

accompanying notes are an integral part of these consolidated financial statements

TO THE CONSOLIDATED FINANCIAL STATEMENTS

the Years Ended December 31, 2023 and 2022

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

requires, the “Company” or “Harrow”) is an eyecare pharmaceutical company exclusively focused on the discovery,

development, and commercialization of innovative ophthalmic therapies that are accessible and affordable.

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

(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.

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.

(“Surface”) and Melt Pharmaceuticals, Inc.

1 unchanged sentence

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.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 unchanged sentences

The Company assesses control under the variable interest entity

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

consolidates (i) entities in which it holds and/or controls, directly or indirectly, more than 50% of the voting rights , and (ii) entities

that the Company deems to be a VIE.

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

The Company consolidates (i) entities

in which it holds and/or controls, directly or indirectly, more than 50% of the voting rights, and (ii) VIEs for which the Company is

deemed to be the primary beneficiary.

All intercompany accounts and transactions have been eliminated in consolidation.

3 unchanged sentences

Significant estimates made by management are, among others, allowance

for doubtful accounts, variable consideration determined based on accruals for chargebacks, administrative fees and rebates, government

rebates, returns and other allowances, renewal periods and discount rates for leases, realizability of inventories, recoverability of

investments, realizability of deferred taxes, goodwill and intangible assets, recoverability of long-lived assets and goodwill, fair

value of loans payable, and valuation of stock-based transactions with employees and non-employees.

Actual results could differ from

those estimates.

for credit losses, variable consideration determined based on accruals for chargebacks, administrative fees and rebates, government rebates,

returns and other allowances, renewal periods and discount rates for leases, realizability of inventories, recoverability of investments,

realizability of deferred tax assets, recoverability of long-lived assets and goodwill, valuations and purchase price allocations related

to business combinations and asset acquisitions, fair value of loans payable, and valuation of stock-based transactions with employees

and non-employees.

Actual results could differ from those estimates.

Uncertainties and Liquidity

4 unchanged sentences

of operations.

Company estimates and records a provision for its expected credit losses related to its financial instruments, including its trade receivables.

Management considers historical collection rates, the current financial status of the Company’s customers, macroeconomic factors,

and other industry-specific factors when evaluating current expected credit losses.

Forward-looking information is also considered in

the evaluation of current expected credit losses.

However, because of the short time to the expected receipt of accounts receivable,

management believes that the carrying value, net of expected losses, approximates fair value and therefore, relies more on historical

and current analysis of such financial instruments, including its trade receivables.

determine the provision for credit losses for accounts receivable, the Company has disaggregated its accounts receivable by class of

customer at the business component level, as management determined that risk profile of the Company’s customers is consistent based

on the type and industry in which they operate, mainly in the pharmaceuticals industry.

Each business component is analyzed for estimated

credit losses individually.

In doing so, the Company establishes a historical loss matrix, based on the previous collections of accounts

receivable by the age of such receivables, and evaluates the current and forecasted financial position of its customers, as available.

Further, the Company considers macroeconomic factors and the status of the pharmaceuticals industry to estimate if there are current

expected credit losses within its trade receivables based on the trends of the Company’s expectation of the future status of such

economic and industry-specific factors.

Also, specific allowance amounts are established based on review of outstanding invoices to record

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

receivable at December 31, 2023 and 2022 are net of allowances for credit losses of $ 371,000 and $ 73,000 , respectively.

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 December 31, 2023 and 2022:

OF ACCOUNTS RECEIVABLE ALLOWANCE OF CREDIT LOSS

Balance at January 1, 2023

Change in expected credit

net of recoveries

Balance at December 31, 2023

Combinations and Asset Acquisitions

Company evaluates acquisitions of assets and other similar transactions to assess whether the transaction should be accounted for as

a business combination or asset acquisition by first applying a screen to determine if substantially all of the fair value of the gross

assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

If the screen is met, the transaction

is accounted for as an asset acquisition.

If the screen is not met, further determination is required as to whether the Company has acquired

inputs, process, and output, which would meet the requirements of a business.

If determined to be a business combination, the Company

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

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

particular event or events.

The obligation for such contingent consideration payments are recorded at fair value on the acquisition date.

The contingent consideration obligations are then evaluated each reporting period.

Changes in the fair value of contingent consideration,

other than changes due to payments, would be recognized as a gain or loss and recorded in the consolidated statement of operations.

determined to be an asset acquisition, the Company accounts for the transaction under ASC 805-50, Business Combinations – Related

Issues , which requires the acquiring entity in an asset acquisition to recognize assets acquired and liabilities assumed based on

the cost to the acquiring entity or a relative fair value basis, which includes transaction costs in addition to consideration given.

No gain or loss is recognized as of the date of acquisition unless the fair value of non-cash assets given as consideration differs from

the assets’ carrying amounts on the acquiring entity’s financial statements.

Consideration transferred that is non-cash will

be measured based on either the cost (which shall be measured based on the fair value of the consideration given) or the fair value of

the assets acquired, and liabilities assumed, whichever is more clearly evident and more reliably measurable.

The obligation for contingent

consideration payments is recorded when probable and reasonably estimable.

Contingent consideration recognized is included in the initial

cost of the assets acquired and any subsequent changes in the recorded amount of contingent consideration are recognized as an adjustment

to the cost basis of the acquired assets and allocated to the acquired assets based on the relative fair value at the date of acquisition.

Goodwill is not recognized in an asset acquisition and any excess consideration transferred over the fair value of the net assets acquired

is allocated to the identifiable assets based on relative fair values.

Noncontrolling

Company recognizes any noncontrolling interest as a separate line item in equity in the consolidated financial statements.

noncontrolling interest represents the portion of equity ownership in a less-than-wholly-owned subsidiary not attributable to the

A noncontrolling

interest represents the portion of equity ownership in a less-than-wholly-owned subsidiary not attributable to the Company.

any interest that holds less than 50% of the outstanding voting shares is deemed to be a noncontrolling interest;

1 unchanged sentence

other factors that are considered as well, such as decision-making rights.

When applicable, and in prior periods, the

Company includes the amount of net loss attributable to noncontrolling interests in consolidated net loss on the face of the

consolidated statements of operations.

When applicable, and in prior periods, the Company includes

the amount of net loss attributable to noncontrolling interests in consolidated net loss on the face of the consolidated statements of

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

2 unchanged sentences

income or loss;

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

distributions to owners;

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

component of other income or loss.

noncontrolling interests in the consolidated balance sheets as of December 31, 2023 and 2022, relate to consolidated subsidiaries that

the Company owns a controlling stake in, but not 100 % of the equity interests, and that no longer have active operations, assets and

the Company owns a controlling interest in, but not 100% of the equity interests, and that no longer have active operations, assets and

related financial activity.

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

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

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

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

Recognition and Deferred Revenue

1 unchanged sentence

to which the Company expects to be entitled in exchange for those goods or services (see Note 3).

of sales includes direct and indirect costs to manufacture formulations

and other products sold, including active pharmaceutical ingredients, personnel costs, packaging, storage, royalties, shipping and handling

costs, depreciation and amortization of certain intangible assets and the write-off of obsolete inventory.

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

personnel costs, packaging, storage, royalties, shipping and handling costs, depreciation and amortization of certain intangible assets

and the write-off of obsolete inventory.

and Development

5 unchanged sentences

Issuance Costs and Debt Discount

issuance costs and the debt discount are recorded net of loans payable in the consolidated balance sheets.

issuance costs and the debt discount are recorded net of notes payable in the consolidated balance sheets.

Amortization of debt issuance

1 unchanged sentence

expense in the accompanying consolidated statements of operations.

At December 31, 2022, the Company recorded deferred financing costs of $ 1,950,000 related to the B.

Riley Loan and

Security Agreement, which will be recorded as a debt issuance cost and net of the related BR Loan in January 2023 (see Notes 13 and 20).

At December 31, 2022, the Company recorded deferred financing costs

of $ 1,950,000 related to the B.

Riley Loan and Security Agreement (the “BR Loan”), which was recorded as a debt issuance

cost and net of the related BR Loan when it funded in January 2023 (see Note 13).

costs of acquiring intellectual property rights to be used in the research and development process, including licensing fees and milestone

3 unchanged sentences

become more certain (see “Goodwill and Intangible Assets” below).

If costs are not capitalized they are expensed as

If costs are not capitalized they are expensed as incurred.

part of the process of preparing the Company’s consolidated financial statements, the Company must estimate the actual current

6 unchanged sentences

or decrease this allowance in a period, the impact will be included in income tax expense in the consolidated statements of operations.

Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards

Codification (“ASC”) 740, Income Taxes .

As of December 31, 2022 and 2021, there were no unrecognized tax benefits

included in the consolidated balance sheets that would, if recognized, affect the effective tax rate.

The Company’s practice is

to recognize interest and/or penalties related to income tax matters in income tax expense.

The Company had no accrual for interest or

penalties in its consolidated balance sheets at December 31, 2022 and 2021, and has not recognized interest and/or penalties in the consolidated

statements of operations for the years ended December 31, 2022 and 2021.

Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting

Standards Codification (“ASC”) 740, Income Taxes .

As of December 31, 2023 and 2022, there was $ 2,853,000

respectively, of unrecognized tax benefits included in the consolidated balance sheets that would, if recognized, affect the

effective tax rate.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income

The Company had no accrual for interest or penalties in its consolidated balance sheets at December 31, 2023 and 2022,

and has not recognized interest and/or penalties in the consolidated statements of operations for the years ended December 31, 2023

The Company is subject to taxation in the United States, California,

Florida, Georgia, Illinois, New Jersey, New York, Tennessee, and Wisconsin.

The Company’s tax years since 2000 may be subject to

examination by the federal and state tax authorities due to the carryforward of unutilized net operating losses.

New Jersey, Tennessee, and various other states.

The Company’s tax years since 2000 may be subject to examination by the

federal and state tax authorities due to the carryforward of unutilized net operating losses.

and Cash Equivalents

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Corporation (“FDIC”) provides basic deposit coverage with limits up to $ 250,000 per owner.

In various accounts the Company

has cash deposits in excess of FDIC limits.

Investment in Eton Pharmaceuticals, Inc.

– Related Party

The Company believes the majority

of its cash deposits are covered under FDIC limits, however there are various accounts in which the Company has deposits in excess of

in Eton Pharmaceuticals, Inc.

Company’s investment in Eton Pharmaceuticals, Inc.

1 unchanged sentence

value which is carried at fair value with changes in fair value recognized in earnings.

In accordance with the Accounting Standards Update

(“ASU”) 2016-01, Financial Instruments-Overall (Subtopic 825-10):

Recognition and Measurement of Financial Assets

and Financial Liabilities , the Company recorded an unrealized investment loss from its Eton common stock position of $( 2,914,000 ) and

$( 8,720,000 ), during the years ended December 31, 2022 and 2021, respectively, related to the change in fair market value of its investment

in Eton during the measurement period.

the year ended December 31, 2021, the Company sold 1,518,000 shares of its Eton common stock through an underwritten

public offering at a public offering price of $ 7.00 per share (the “Eton Stock Sale”).

The gross proceeds to the Company

from the Eton Stock Sale were $ 10,626,000 , before deducting underwriting discounts and commissions and other offering expenses payable

by the Company of $ 799,000 .

During the year ended December 31, 2021, the Company recorded a realized loss of $ 1,406,000 related

to the Eton Stock Sale.

Following the Eton Stock Sale and as of December 31, 2022, the Company owns 1,982,000 shares

of Eton common stock, which represents less than 10 % of the equity interests of Eton.

At December 31, 2022, the fair market

value of Eton’s common stock was $ 2.82 per share.

As of December 31, 2022 and 2021, the fair market value of the Company’s

investment in Eton was $ 5,589,000 and $ 8,503,000 , respectively.

receivable are stated net of allowances for doubtful accounts and contractual adjustments.

The accounts receivable balance primarily

includes amounts due from customers the Company has invoiced or from third-party providers (e.g., insurance companies and governmental

agencies), but for which payment has not been received.

Charges to bad debt are based on both historical write-offs and specifically

identified receivables.

Accounts receivable are presented net of allowances for doubtful accounts and contractual adjustments in the

amount of $ 779,000 and $ 40,000 as of December 31, 2022 and 2021, respectively.

In accordance with ASC 321, Investments —

Equity Securities , the Company recorded an unrealized holding gain/(loss) from its Eton common stock position of $ 3,092,000 and $ ( 2,914,000 ) ,

during the years ended December 31, 2023 and 2022, respectively, related to the change in fair market value of its investment in Eton

during the measurement period.

of December 31, 2023 and 2022, the Company owned 1,982,000 shares of Eton common stock, which represents less than 10 % of the equity

interests of Eton.

At December 31, 2023 and 2022, the fair market value of Eton’s common stock was $ 4.38 and $ 2.82 per share, respectively.

As of December 31, 2023 and 2022, the fair market value of the Company’s investment in Eton was $ 8,681,000 and $ 5,589,000 , respectively.

receivable are stated net of allowances for credit losses and contractual adjustments.

The accounts receivable balance primarily includes

amounts due from customers the Company has invoiced or from third-party providers (e.g., insurance companies and governmental agencies),

but for which payment has not been received.

Our gross product revenues are subject to a variety of contractual deductions, which generally

are estimated and recorded in the same period that the revenues are recognized.

These deductions represent estimates of the related obligations

and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on gross sales for a reporting

Accounts receivable at December 31, 2023 are presented net of allowances for credit losses of $ 371,000 and $ 14,875,000 for contractual

adjustments (in aggregate $ 15,146,000 ) and at December 31, 2022, net of allowances for credit losses of $ 73,000 and $ 706,000 for contractual

adjustments (in aggregate $ 779,000 ).

are stated at the lower of cost or net realizable value.

11 unchanged sentences

– Related Party

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

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

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

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

method, the Company recognizes earnings and losses in Melt in its consolidated financial statements and adjusts the carrying amount of

its investment in Melt accordingly.

Company owns 3,500,000 shares of common stock and 2,334,256 shares of preferred stock of Melt (representing in aggregate approximately

47 % of the equity interests as of December 31, 2023).

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 investment.

Under this method, the Company recognizes earnings and losses in Melt in its 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 December 31, 2022 and 2021, 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

During the year ended December 31, 2021, the Company reduced the carrying value of its 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 December 31, 2022, 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 treated interest paid in kind on the Melt Loan Agreement

as an in-substance capital contribution and reduced its investment in Melt accordingly, rather than recording interest income.

a quarterly basis, management assesses whether there are any indicators that the carrying value of the Company’s equity method

investments may be other than temporarily impaired.

Indicators include financial condition, operating performance, and near-term prospects

of the investee.

To the extent indicators suggest that a loss in value may have occurred, the Company will evaluate both quantitative

and qualitative factors to determine if the loss in value is other than temporary.

If a potential loss in value is determined to be other

than temporary, the Company will recognize an impairment loss based on the estimated fair value of the equity method investments.

the year ended December 31, 2023, the Melt Loan Agreement (as defined in Note 5) was settled in exchange for Melt preferred stock (see

Note 5 for loan settlement disclosure).

The Company reduced the Melt Loan Agreement and subsequent preferred stock investment in Melt

to $ 0 as a result of the Company recording its share of equity losses of Melt.

The Company has no other investments in Melt and no other

requirements to advance funds to Melt.

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SCHEDULE OF INVESTMENT

Share of Equity

Method Losses

Capital Contributions

Carrying value

$ ( 5,810,000 )

( 13,500,000 )

( 2,484,000 )

Preferred stock

( 18,397,000 )

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

Share of Equity

Method Losses

5 unchanged sentences

$ ( 19,310,000 )

December 31, 2022 and 2021, the Company recorded $ 139,000 and $ 48,000 , respectively, due from Melt for reimbursable expenses and

amounts due under a Management Services Agreement between the Company and Melt (the “Melt MSA”), which are included in prepaid

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

$ ( 2,484,000 )

December 31, 2023 and 2022, the Company recorded $ 89,000 and $ 139,000 , respectively, due from Melt for reimbursable expenses and amounts

due under a Management Services Agreement between the Company and Melt (the “Melt MSA”), which are included in prepaid expenses

and other current assets in the accompanying consolidated balance sheets.

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

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

has no other investments in Surface.

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 December 31, 2023 and 2022:

SCHEDULE OF INVESTMENT

Share of Equity Method Losses

of Equity Method Losses

Carrying value

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Note 6 for more information and related party disclosure regarding Surface.

of Equity Method Investment and Note Receivable

a quarterly basis, management assesses whether there are any indicators that the carrying value of the Company’s equity method

investments and note receivable may be other than temporarily impaired.

Indicators include financial condition, operating performance,

and near-term prospects of the investee.

To the extent indicators suggest that a loss in value may have occurred, the Company will evaluate

both quantitative and qualitative factors to determine if the loss in value is other than temporary.

If a potential loss in value is

determined to be other than temporary, the Company will recognize an impairment loss based on the estimated fair value of the equity

method investments and note receivable.

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

Plant and Equipment

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the straight-line method over the estimated useful life of the asset.

Leasehold improvements and capital lease equipment are amortized

Leasehold improvements and finance lease equipment are amortized

over the estimated useful life or remaining lease term, whichever is shorter.

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Acquired product rights,

including new drug applications (“NDAs”), are amortized over their estimated useful lives, generally 10 years, based on a

straight-line method.

Trademarks are an indefinite-lived intangible asset and are assessed for impairment based on future projected cash

flows as further described below.

including new drug applications (“NDAs”), are amortized over their estimated useful lives, generally 4 - 15 years, based on

a straight-line method.

Trademarks are an indefinite-lived intangible asset and are assessed for impairment based on future projected

cash flows as further described below.

Company reviews its goodwill and indefinite-lived intangible assets for impairment as of January 1 of each year and when an event or

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underperformance of the Company’s business relative to expected operating results;

significant adverse economic and industry trends;

significant decline in the Company’s market capitalization for an extended period of time relative to net book value;

expectations that a reporting unit will be sold or otherwise disposed.

adverse economic and industry trends;

decline in the Company’s market capitalization for an extended period of time relative to net book value;

that a reporting unit will be sold or otherwise disposed.

goodwill impairment test consists of a two-step process as follows:

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other methods as deemed appropriate by management.

If the carrying amount of a reporting unit exceeds its fair value, an indication exists

that the reporting unit’s goodwill may be impaired and the Company then performs the second step of the impairment test.

fair value of a reporting unit exceeds its carrying amount, no further analysis is required.

If further analysis is required, the Company compares the implied fair value of the reporting unit’s goodwill, determined by

allocating the reporting unit’s fair value to all of its assets and its liabilities in a manner similar to a purchase price allocation,

to its carrying amount.

If the carrying amount of the reporting unit’s goodwill exceeds its fair value, an impairment loss will

be recognized in an amount equal to the excess.

of Long-Lived Assets

assets, such as property, plant and equipment, purchased intangibles subject to amortization and patents and trademarks, are reviewed

for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability

of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows

expected to be generated by the asset.

If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge

is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Assets to be disposed of would

be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to

sell, and are no longer depreciated.

The assets and liabilities of a disposal group classified as held-for-sale would be presented separately

in the appropriate asset and liability sections of the consolidated balance sheet, if material.

If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered

impaired and the Company then performs the second step of the impairment test to measure the impairment loss.

If the fair value of a

reporting unit exceeds its carrying amount, no further analysis is required.

If the carrying amount of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to the

excess, limited to the total amount of goodwill allocated to that reporting unit.

a result of its assessment in 2023, the Company concluded that goodwill is not impaired as of December 31, 2023.

of Other Long-Lived Assets

long-lived assets, such as property, plant and equipment, purchased intangibles subject to amortization and patents and trademarks, are

reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Such circumstances could include, but are not limited to (1) a significant decrease in the market value of an asset, (2) a significant

adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount

originally expected for the acquisition of an asset.

Recoverability of assets to be held and used is measured by a comparison of the

carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount

of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying

amount of the asset exceeds the fair value of the asset.

The fair value of the asset is based on the discounted value of its estimated

future cash flows.

Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower

of the carrying amount or fair value less costs to sell, and are no longer depreciated.

The assets and liabilities of a disposal group

classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance

sheet, if material.

a result of its assessment in 2023, the Company recorded an impairment charge of $ 380,000 related to the impairment of certain licenses,

trademarks, patents and patent applications (see Note 11).

the inception of a contract the Company determines if the arrangement is, or contains, a lease.

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the present value of lease payments over the lease term.

Rent expense is recognized on a straight-line basis over the lease term.

Lease expense is recognized on a straight-line basis over the lease term.

Company has made certain accounting policy elections whereby it (i) does not recognize ROU assets or lease liabilities for short-term

leases (those with original terms of 12-months of less) and (ii) combines lease and non-lease elements of its operating leases.

December 31, 2022, the Company did not have any finance leases.

leases (those with original terms of 12-months of less) and (ii) combines lease and non-lease elements of its operating leases as a single

lease component.

As of December 31, 2023 and 2022, the Company did not have any finance leases.

Value Measurements

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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

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December 31, 2023 and 2022, the fair market value of the Company’s investment in Eton was $ 8,681,000 and $ 5,589,000 , respectively.

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

are carried at face value less unamortized debt issuance costs on the consolidated balance sheets and 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.

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 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.

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

OF ESTIMATED FAIR VALUE

Carrying Value

Company’s other financial instruments include cash and cash equivalents, accounts receivable, accounts payable

and accrued expenses, accrued payroll and related liabilities, deferred revenue and customer deposits and operating and finance lease

The carrying amount of these financial instruments, except for operating and finance lease liabilities, approximates fair

value due to the short-term maturities of these instruments.

Based on borrowing rates currently available to the Company, the carrying

values of the operating and finance lease liabilities approximate their respective fair values.

Company’s other financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses,

accrued payroll and related liabilities, deferred revenue and customer deposits and operating lease liabilities.

The carrying amount

of these financial instruments, except for operating lease liabilities, approximates fair value due to the short-term maturities of these

Based on borrowing rates currently available to the Company, the carrying values of the operating lease liabilities approximate

their respective fair values.

stock-based payments to employees, directors and consultants, including grants of stock options, warrants, restricted stock units (“RSUs”),

and restricted stock, are recognized in the consolidated financial statements based upon their estimated fair values.

The Company uses

the Black-Scholes-Merton option pricing model and Monte Carlo simulation model to estimate the fair value of stock-based awards.

estimated fair value is determined at the date of grant.

The financial statement effect of forfeitures is estimated at the time of grant

and revised, if necessary, if the actual effect differs from those estimates.

performance stock units (“PSUs) and restricted stock, are recognized in the consolidated financial statements based upon their

estimated fair values.

The Company uses the Black-Scholes-Merton option pricing model and Monte Carlo simulation model to estimate the

fair value of stock-based awards.

The estimated fair value is determined at the date of grant.

The financial statement effect of forfeitures

is estimated at the time of grant and revised, if necessary, if the actual effect differs from those estimates.

and Diluted Net Loss per Common Share

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

number of common shares outstanding during the period.

Diluted income per share is computed by dividing the income attributable to common

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

outstanding during the period.

and diluted net loss per share is computed using the weighted average number of shares of common stock outstanding during the period.

Common stock equivalents (using the treasury stock or “if converted” method) from stock options, unvested restricted stock

units (“RSUs”) and warrants were 5,089,420 and 5,646,594 at December 31, 2022 and 2021, respectively, and are excluded in

the calculation of diluted net income per share for the periods presented, because the effect is anti-dilutive for that time period.

Included in the basic and diluted net income (loss) per share calculation were RSUs awarded to directors that had vested, but the issuance

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

The number of shares underlying vested RSUs at December 31, 2022

and 2021 was 319,859 and 267,761 , respectively.

following table shows the computation of basic net loss per share of common stock for the years ended December 31, 2022 and 2021:

net loss per common share is computed by dividing net loss attributable to Harrow, Inc.

for the year by the weighted average number of

common shares outstanding during the year.

Diluted net loss per share is computed by dividing the net loss attributable to Harrow, Inc.

for the year by the weighted average number of common and common equivalent shares, such as stock options, RSUs, PSUs, and warrants,

outstanding during the year.

stock equivalents (using the treasury stock or “if converted” method) from stock options, unvested RSUs, and unvested PSUs

were 4,642,259 and 5,089,420 at December 31, 2023 and 2022, respectively, and are excluded in the calculation of diluted net loss per

share for the periods presented, because the effect is anti-dilutive for that time period.

Included in the basic and diluted net loss

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

the director resigns.

The number of shares underlying vested RSUs at December 31, 2023 and 2022 was 215,539 and 319,859 , respectively.

following table shows the computation of basic and diluted net loss per share of common stock for the years ended December 31, 2023 and

OF BASIC AND DILUTED EARNINGS PER COMMON SHARE

For the Years Ended December 31,

Numerator – net loss attributable to Harrow Health, Inc.

common stockholders

the Years Ended December 31,

– net loss attributable to Harrow, Inc.

$ ( 24,411,000 )

$ ( 14,086,000 )

Denominator – weighted average number of shares outstanding, basic

Net loss per share, basic and diluted

Accounting Pronouncements Not Yet Adopted

June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments .

This ASU replaces the incurred

loss impairment methodology in current U.S.

GAAP with a methodology that reflects expected credit losses and requires consideration of

a broader range of reasonable and supportable information for credit loss estimates on certain types of financial instruments, including

trade receivables.

Denominator –

weighted average number of shares outstanding, basic and diluted

loss per share, basic and diluted

Adopted Accounting Pronouncements

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

requires consideration of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial

instruments, including trade receivables.

In addition, new disclosures are required.

The ASU, as subsequently amended, is effective for the Company for fiscal

years beginning after December 15, 2022, as the Company was a smaller reporting company as of November 15, 2019, the determination date.

The Company plans to adopt ASU 2016-13 on January 1, 2023 and has evaluated the effect that this guidance will have on its consolidated

The ASU, as subsequently amended, is effective for

the Company for the fiscal years beginning after December 15, 2022.

The Company adopted ASU 2016-13 on January 1, 2023.

composition of the Company’s accounts receivable, investment portfolio, and other financial assets, including current market conditions

and historical credit loss activity, the adoption of this standard did not have a material impact on the Company’s consolidated

financial statements or disclosures.

Specifically, the Company’s estimate of expected credit losses as of January 1, 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 December 31, 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.

The Company will apply the guidance in ASU 2023-05 prospectively to any future arrangements meeting the

definition of a joint venture.

October 2023, the FASB issued ASU 2023-06, Disclosure Improvements—Codification Amendments in Response to the SEC’s Disclosure

Update and Simplification Initiative .

This ASU modifies the disclosure or presentation requirements of a variety of topics in the

codification by aligning them with the SEC’s regulations.

The amendments to the various topics should be applied prospectively,

and the effective date for the Company for each amendment will be determined based on the effective date of the SEC’s removal of

the related disclosure from Regulation S-X or Regulation S-K.

If the SEC has not removed the applicable requirement by June 30, 2027,

then the related amendment in ASU 2023-06 will be removed from the codification and will not become effective.

Early adoption of this

ASU is prohibited.

The Company does not expect the amendments in this ASU to have a material impact on the disclosures or presentation

in its consolidated financial statements.

November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures , which

enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements.

ASU 2023-07 is effective for the Company in our annual reporting for fiscal 2024 and for interim period reporting beginning in fiscal

2025 on a retrospective basis, with all required disclosures to be made for all prior periods presented in the consolidated financial

Early adoption is permitted.

The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial

December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures , which enhances the

disclosures required for income taxes in the Company’s annual consolidated financial statements.

Notably, this ASU requires entities

to disclose specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that

meet a quantitative threshold.

ASU 2023-09 is effective for the Company in its annual reporting for fiscal 2025 on a prospective basis.

Early adoption and retrospective reporting are permitted.

The Company is currently evaluating the impact of ASU 2023-09 on its consolidated

financial statements.

Based on the composition of the Company’s accounts receivable and other financial assets, including current

market conditions and historical credit loss activity, the adoption of this standard is not expected to have a material impact on the

Company’s consolidated financial statements.

March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage

Disclosures , which addresses and amends areas identified by the FASB as part of its post-implementation review of the accounting

standard that introduced the current expected credit losses (“CECL”) model.

The amendments eliminate the accounting guidance

for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings

and restructurings made with borrowers experiencing financial difficulty.

In addition, the amendments require disclosure of current-period

gross write offs for financing receivables and net investment in leases by year of origination in the vintage disclosures.

For entities,

such as the Company, that have not yet adopted the CECL accounting model in ASU 2016-13, the effective date for the amendments in ASU

2022-02 is the same as the effective date in ASU 2016-13 (i.e., fiscal years beginning after December 15, 2022 including interim periods

within those fiscal years).

The Company plans to adopt ASU 2022-02 on January 1, 2023.

The Company has evaluated the effect of this guidance

and does not expect it to have a material impact on its consolidated financial statements.

Reclassifications

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

has three primary streams of revenue:

(1) revenue recognized from sales of products through its pharmacy and outsourcing facility and

sales of branded products to wholesalers through a third-party logistics (“3PL”) partner, (2) revenue recognized from a commission

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

has three primary streams of revenue (four in 2022):

(1) product revenues, including revenue recognized from sales of products through

its pharmacy and outsourcing facility and sales of branded products to wholesalers through a third-party logistics (“3PL”)

partner, (2) revenue recognized from a commission agreement with a third party in 2022, (3) revenue recognized from transfer of acquired

product sales and profits, and (4) revenue recognized from intellectual property licenses.

Company sells prescription medications directly through its pharmacy, outsourcing facility and 3PL partner.

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the product to customers at their specified destination.

ASU 2016-10 was issued in April 2016 and amended ASC 606 for shipping and

handling activities as follows:

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.

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

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

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

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the transaction price to the performance obligations in the contract:

Given that there is only one performance obligation for

product sales, no allocation is necessary.

Because there is only one performance obligation for product

sales, no allocation is necessary.

revenue when (or as) the entity satisfies a performance obligation:

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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,

six month transition period, the Seller continued 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 was 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 invoiced the Company for all credits and reimbursements (“Chargebacks”)

made to customers related to the products.

The Company used 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 consolidated statements of operations

and accounts receivable in the 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 consolidated

statements of operations, and recorded as a reduction to accounts receivable in the 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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SCHEDULE OF DISAGGREGATED REVENUE

For the Years Ended December 31,

Product sales, net

Transfer of profit

Total revenues

the Years Ended

Product sales,

$ 117,447,000

of acquired product sales/profits

$ 130,193,000

revenue and customer deposits at December 31, 2023 and 2022, were $ 75,000 and $ 113,000 , respectively.

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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 U.S., 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

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.

In October 2023, we completed the transfer of the U.S.

and rights 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 December 31, 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

December 2022, the Company entered into an Asset Purchase Agreement (the “Fab 5 APA”) with Novartis Technology, LLC and Novartis

December 2022, the Company entered into an Asset Purchase Agreement (the “NVS 5 APA”) with Novartis Technology, LLC and Novartis

Innovative Therapies AG (together, “Novartis”), pursuant to which the Company agreed to purchase from Novartis the exclusive

commercial rights to assets associated with the following ophthalmic products (collectively the “Fab 5 Products”) in the

(the “Fab 5 Acquisition”):

commercial rights to assets associated with the following ophthalmic products (collectively the “NVS 5 Products”) in the

(the “NVS 5 Acquisition”):

ILEVRO, NEVANAC, VIGAMOX, MAXIDEX, and TRIESENCE.

Subsequent to December 31, 2022, the Company

closed the Fab 5 Acquisition in January 2023 (see Note 20).

the terms of the Fab 5 APA, the Company made a one-time payment of $ 130,000,000 at closing in January 2023, with up to another $ 45,000,000

the terms of the NVS 5 APA, the Company made a one-time payment of $ 130,000,000 at closing in January 2023, with up to another $ 45,000,000

due in a milestone payment related to the timing of the commercial availability of TRIESENCE.

Pursuant to the Fab 5 APA and various ancillary

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

six months, 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

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.

The milestone payment due upon commercial

availability for TRIESENCE decreased from $ 45,000,000 to $ 37,000,000 on January 20, 2024.

Pursuant to the NVS 5 APA and various ancillary

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

to the Company, Novartis continued to sell the NVS 5 Products on the Company’s behalf and transfer the net profit from the sale

of the NVS 5 Products to the Company.

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

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

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

the five product NDAs acquired.

The developed technology is within one major intangible asset class.

No workforce/employees were included

in the NVS 5 Acquisition and the Company is required to utilize its own business inputs/processes to transfer and commercialize the NVS

5 Products and NDAs.

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

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

time of the NVS 5 Acquisition and as of December 31, 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 NVS

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

October 2022, wholly-owned subsidiaries of the Company (“Imprimis”) entered into an Asset Purchase Agreement (the “RPC

Agreement”) with Innovation Compounding Pharmacy, LLC (the “Buyer”).

Under the terms of the RPC Agreement, Imprimis

agreed to sell substantially all of its assets associated with its non-ophthalmology related compounding product line, including but

not limited to, certain intellectual property rights, customer lists, databases, and formulations (the “RPC Assets”).

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

with the RPC Assets.

Under the terms of the RPC Agreement, the Buyer paid Imprimis an aggregate cash amount of $ 6,000,000 in October

In addition, the Buyer is obligated to pay up to $ 4,500,000 to Imprimis based on mutually agreed upon revenue milestones during

the calendar year 2023 (the “Contingent Amount”).

During the year ended December 31, 2022, no amount related to the Contingent

Amount was recognized by the Company.

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

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

services and collecting accounts receivable.

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

nine months following the effective date of the RPC Agreement.

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 consolidated balance sheet as of December 31, 2022 reflected $ 579,000

of cash collected on behalf of the Buyer and a receivable within accounts receivable of $ 128,000 for cash to be collected on behalf of

the Buyer for sales of RPC Assets sold through December 31, 2022.

amount due from the Buyer for reimbursement of services performed under the transition services agreement was $ 254,000 as of December 31, 2022.

Such amount was netted

against the amounts collected on behalf of the Buyer and was unpaid within accrued expenses on the consolidated balance sheet as of

December 31, 2022.

The combined total of $ 453,000 was recorded within accrued expenses on the consolidated balance sheet as of December

31, 2022 and represents a payable to the Buyer.

The Company recorded income from the transition services agreement of $ 102,000 which

is presented in other income on the consolidated statement of operations for the year ended December 31, 2022.

October 2022, wholly-owned subsidiaries of the Company (collectively, “Imprimis”) entered into an Asset Purchase Agreement

(the “RPC Agreement”) with Innovation Compounding Pharmacy, LLC (the “Buyer”).

Under the terms of the RPC Agreement,

Imprimis agreed to sell substantially all of its assets associated with its non-ophthalmology related compounding product line, including

but not limited to, certain intellectual property rights, customer lists, databases, and formulations (the “RPC Assets”).

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

associated with the RPC Assets.

Under the terms of the RPC Agreement, the Buyer paid Imprimis an aggregate cash amount of $ 6,000,000

in October 2022.

In addition, the Buyer is obligated to pay up to $ 4,500,000 to Imprimis based on mutually agreed upon revenue milestones

during the calendar year 2023 (the “Contingent Amount”).

During the year ended December 31, 2022, no amount related to the

Contingent Amount was recognized by the Company.

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 estimable.

The Company is currently engaged in discussions with

RPC related to the contingent payment amount, if any.

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

consolidated balance sheet as of December 31, 2023 includes accounts receivable of $ 49,000 for cash to be collected on behalf of the

Buyer for sales of RPC Assets through December 31, 2023.

were no amounts due from the Buyer for reimbursement of services performed under the RPC TSA as of December 31, 2023.

The receivable

amount of $ 49,000 along with $ 8,000 of payments received from accounts receivable but not yet paid were recorded within accounts payable

and accrued expenses on the consolidated balance sheet as of December 31, 2023, and represents a payable to the Buyer of $ 57,000 .

Company recorded a loss from the RPC TSA and disposition and sale of certain related assets and unusable inventory of $ 330,000 during

the year ended December 31, 2023, which is presented in other expense, net on the consolidated statements of operations.

Company determined that the disposal of the related net assets does not qualify for reporting as discontinued operations because it does

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Gross consideration

Closing and transaction costs

Closing and transaction

Book value of assets transferred:

Customer relations intangible asset

Gain on sale of non-ophthalmology assets

of IOPIDINE, MAXITROL and MOXEZA

December 2021, the Company entered into an Asset Purchase Agreement (the “NVS Agreement”) with Novartis Technology, LLC and

Novartis Ophthalmics AG (together, “NVS”), pursuant to which the Company purchased from NVS the exclusive commercial rights,

including the NDAs, to assets associated with ophthalmic products Moxeza, Iopidine 1% and 0.5%, and Maxitrol eyedrops suspension (collectively

the “NVS Products”) in the United States of America (“U.S.”) .

The Company made a one-time payment of $ 14,050,000

to NVS for the U.S.

rights to the NVS Products and their related intellectual property.

to the NVS Agreement and various ancillary agreements, immediately following the Closing

Date and subject to certain conditions, for a period of up to six months, and prior to the transfer of the NVS

Products NDAs (the “ NVS NDAs”) to the Company, NVS sold the NVS

Products on the Company’s behalf and transferred the net profit from the sale of the NVS

Products to the Company.

NVS has agreed to supply certain NVS Products to the Company

for a period of time after the NVS NDAs are transferred to the Company and to assist with

technology transfer of the NVS Products manufacturing to other third-party manufacturers,

Company accounted for this transaction as an asset acquisition, as the Company only acquired the rights and related intellectual property

for the NVS Products and the cost was allocated to the acquired patents and NDAs based on their relative fair values.

relations intangible asset

on sale of non-ophthalmology assets

and Supply Agreement for IHEEZO

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filings for IHEEZO in the U.S.

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

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

During the year ended December 31, 2022, $ 10,000,000 was paid or accrued

under the Sintetica Agreement following the FDA approval of the United States NDA for IHEEZO, and was capitalized as an intangible asset.

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

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

During the year ended December 31, 2022, $ 10,000,000 was paid or accrued under

the Sintetica Agreement following the FDA approval of the United States NDA for IHEEZO, and was capitalized as an intangible asset.

August 2023, the Company amended the Sintetica Agreement to allow for early payment of commercial related milestones associated with

sales of IHEEZO in exchange for a $ 550,000 reduction in all of the remaining milestone amounts due.

The Company then paid Sintetica $ 4,450,000 .

As of December 31, 2023, no milestone amounts are due under the Sintetica Agreement.

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

and Purchase of MAQ-100

August 2021, the Company entered into a License Agreement and a Basic Sale and Purchase Agreement (together, the “Wakamoto Agreements”)

with Wakamoto Pharmaceutical Co., Ltd.

(“Wakamoto”), pursuant to which Wakamoto granted the Company the exclusive license

and marketing rights to its ophthalmic drug candidate (“MAQ-100”) in the U.S.

to the Wakamoto Agreements, Wakamoto will supply MAQ-100 to the Company, and the

Company will pay Wakamoto a per unit transfer price to supply MAQ-100.

In addition, the Company is required to pay Wakamoto various one-time

milestone payments totaling up to $ 2,000,000 upon the achievement of certain regulatory milestones and up to $ 6,200,000 upon

the achievement of certain commercial milestones.

Under the terms of the Agreements, the Company will be responsible for regulatory filings

and fees for MAQ-100 in the U.S.

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

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.

INVESTMENT IN MELT PHARMACEUTICALS, INC.

AND AGREEMENTS – 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 .

the year ended December 31, 2022, the Company recorded $ 91,000 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.

of December 31, 2022 and December 31, 2021, the Company was due $ 139,000 and $ 48,000 , respectively, from Melt for reimbursable expenses

and amounts due under the Melt MSA.

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

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 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 year ended December 31, 2023, and 2022, the Company recorded

$ 89,000 and $ 91,000 , 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 consolidated balance sheets.

of December 31, 2023 and 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 year ended December 31, 2022.

The Company made

a cash advance to Melt of $ 500,000 and Melt repaid the $ 500,000 cash advance during the year ended December 31, 2023.

the year ended December 31, 2023, Melt sold 2,421,904 shares of its Series B Preferred Stock and raised over $ 20,586,000 in gross proceeds

from third party investors.

Company’s Chief Executive Officer, Mark L.

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

during the year ended December 31, 2021.

Following Mr.

Baum’s departure, the Company did not have any representation on

Melt’s board of directors until January 2023, when Mr.

Baum re-joined the Melt

board of directors.

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

the year ended December 31, 2021.

Baum re-joined the Melt board of directors in January 2023.

At the time Mr.

Baum re-joined, the Melt board of directors consists of five total board members, including Mr.

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

Baum re-joined, the

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

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

board of directors.

Note Receivable – Settled and Terminated in 2023

September 1, 2021, the Company entered into a loan and security agreement in the principal amount of $ 13,500,000 (the “Melt Loan

Agreement”), as lender, with Melt, as borrower.

Amounts borrowed under the Melt Loan Agreement bore interest at 12.50 % per annum,

which interest could have been paid in-kind at the option of Melt until the maturity date.

The Melt Loan Agreement permitted Melt to

pay interest only on the principal amount loaned thereunder through the term and all amounts owed were previously due and payable on

September 1, 2022.

In April 2022, the Company entered into a First Amendment and in September 2022, a Second Amendment (together, the

“Amendments”) to the Melt Loan Agreement.

The Amendments (i) extended the maturity date of the Melt Loan Agreement to September

1, 2023, which could have been 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 could have elected to prepay all, but not less than all, of the amounts

owed prior to the maturity date at any time without penalty.

The net funds received by Melt excluded $ 908,000 owed to the Company for

reimbursable expenses and amounts due under the Melt MSA prior to the effective date of the note receivable.

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

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

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

December 28, 2023, the Company terminated the Melt Loan Agreement.

As of the date of termination, approximately $ 18,395,000 remained

outstanding under the Melt Loan Agreement.

Pursuant to the terms of a Settlement and Payoff Agreement, dated as of December 28, 2023,

by and between the Company and Melt (the “Settlement Agreement”), the Company received 2,260,000 shares of Melt’s Series

B-1 Preferred Stock and 74,256 shares of Melt’s Series B Preferred Stock (which both series have similar rights and preferences)

in consideration for the full payment of all amounts outstanding under the Melt Loan Agreement.

The Settlement Agreement contains customary

representations, warranties and releases of the parties and requires the parties to enter into a registration rights agreement providing

the Company with rights consistent with other holders of preferred stock of Melt.

The Company concluded the Settlement Agreement is in

substance a funding of the Company’s share of prior unrecorded losses and, therefore, those suspended losses must be recognized

first against the value of the new preferred stock investments.

This resulted in reducing the carrying value of the Company’s investment

in Melt, including the carrying value of the Preferred Stock received, to zero (the consideration received in the form of an equivalent

fair value of Melt’s Preferred Stock to settle the full outstanding note receivable balance of $ 18,400,000 is essentially offset

by an equal amount of the funding of prior unrecorded losses).

Accordingly, this settlement transaction had no quantitative effect on

either the Company’s consolidated balance sheet or consolidated statement of operations for the year ended December 31, 2023.

accordance with ASC 323, Investments – Equity Method and Joint Ventures , the carrying amount of the note receivable and

other investments in Melt have been reduced by the Company’s allocated share of Melt’s losses based on its ownership of Melt

and its total indebtedness (see Note 2).

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

OF CONDENSED INCOME STATEMENT

For the Years Ended December 31,

the Years Ended

Revenues, net

2 unchanged sentences

$ ( 12,443,000 )

$ ( 11,271,000 )

$ ( 14,446,000 )

unaudited condensed balance sheet information of Melt is summarized below:

3 unchanged sentences

Total liabilities

Total preferred stock and stockholders’ deficit

( 18,294,000 )

Total preferred stock

and stockholders’ equity (deficit)

( 18,294,000 )

Total liabilities and stockholders’ equity

Note Receivable

September 1, 2021, the Company entered into a loan and security agreement in the principal amount of $ 13,500,000 (the “Melt

Loan Agreement”), as lender, with Melt, as borrower.

Amounts borrowed under the Melt Loan Agreement bear interest at 12.50 %

per annum, which interest can be paid in-kind at the option of Melt until the maturity date.

The Melt Loan Agreement permits Melt to

pay interest only on the principal amount loaned thereunder through the term and all amounts owed were previously due and payable on

September 1, 2022.

In April 2022, the Company entered into a First Amendment and in September 2022, a Second Amendment (together, the

“Amendments”) 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 penalty.

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

property rights, to secure the payment of all amounts owed under the Melt Loan Agreement.

The Melt Loan Agreement contains customary

representations, warranties and covenants, including covenants by Melt limiting additional indebtedness, liens, mergers and acquisitions,

dispositions, investments, distributions, subordinated debt, and transactions with affiliates.

The Melt Loan Agreement includes customary

events of default, and upon the occurrence of an event of default (subject to cure periods for certain events of default), all amounts

owed by Melt thereunder may be declared immediately due and payable by the Company, and the interest rate on the loan may be increased

by 3 % per annum.

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

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

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

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

to the effective date of the note receivable.

As of December 31, 2022 and 2021, aggregate principal and accrued interest payable to the

Company pursuant to the Melt Loan Agreement amounted to $ 15,984,000 and $ 14,076,000 , respectively.

In accordance with ASC 328, Investments

– Equity Method and Joint Ventures , the carrying amount of the notes 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).

Total liabilities

and stockholders’ equity

INVESTMENT IN SURFACE OPHTHALMICS, INC.

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of December 31, 2023, the Company owned 3,500,000 shares of Surface common stock.

Company directors Richard L.

Lindstrom, Perry

Sternberg and Mark L.

Baum, who is also the Company’s Chief Executive Officer, are directors of Surface.

Lindstrom is a

principal of Flying L Partners, an affiliate of an investor who purchased Surface Series A Preferred Stock.

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

OF CONDENSED INCOME STATEMENT

For the Years Ended December 31,

Revenues, net

Loss from operations

$ ( 6,719,000 )

$ ( 6,579,000 )

$ ( 10,143,000 )

unaudited condensed balance sheet information of Surface is summarized below:

OF CONDENSED BALANCE SHEET

Current assets

Non-current assets

Total liabilities

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

products, related laboratory supplies and active pharmaceutical ingredients.

The composition of inventories as of December 31, 2022 and

2021 was as follows:

Adrienne Graves and Perry J.

Sternberg, directors of

the Company, also are directors 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.

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 requirements to advance funds to Surface and no obligations to fund its future

operating losses, if any.

Therefore, the Company’s future financial results will not be negatively affected by Surface’s

ongoing operations.

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 December 31, 2023 and 2022 was as follows:

OF INVENTORIES

4 unchanged sentences

PREPAID EXPENSES AND OTHER CURRENT ASSETS

expenses and other current assets consisted of the following:

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

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

3 unchanged sentences

Receivable due from Melt

Deposits and other current assets

Total prepaid expenses and other current assets

Prepaid PDUFA fees

Deferred Oaktree commitment fee (see Note

Deposits and other

current assets

prepaid expenses and other current assets

PROPERTY, PLANT AND EQUIPMENT

2 unchanged sentences

Property, plant and equipment, net:

Computer hardware

Furniture and equipment

Lab and pharmacy equipment

Leasehold improvements

Property, plant and equipment,

Accumulated depreciation and amortization

Accumulated depreciation

and amortization

( 10,072,000 )

2 unchanged sentences

the years ended December 31, 2023 and 2022, the Company disposed of property, plant and equipment with a net book value of $ 168,000 and

$ 41,000 , respectively, and during the year ended December 31, 2021 the Company recorded an impairment charge of $ 150,000 related to the

discontinued use of certain lab equipment, which is included in other expense, net in the consolidated statements of operations.

Company recorded depreciation and amortization expense of $ 1,253,000 and $ 1,580,000 during the years ended December 31, 2022 and 2021,

respectively.

the year ended December 31, 2021, the Company purchased lab and pharmacy equipment at a cost of $ 753,000 from Eton.

$ 69,000 , respectively, related to the discontinued use of certain lab equipment, which is included in other expense, net in the consolidated

statements of operations.

The Company recorded depreciation and amortization expense of $ 1,055,000 and $ 1,253,000 during the years ended

December 31, 2023 and 2022, respectively.

CAPITALIZED SOFTWARE COSTS

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

OF FINITE LIVED INTANGIBLE ASSETS

OF CAPITALIZED SOFTWARE COSTS

Capitalized software costs

Capitalized internal-use software development costs

Acquired third-party software license for internal-use

Total gross capitalized software for internal-use

internal-use software development costs

third-party software license for internal-use

Total gross capitalized

software for internal-use

Accumulated amortization

Capitalized internal-use software in process

Total finite lived intangible

( 1,268,000 )

Capitalized internal-use

software in process

Total capitalized software costs net

Company recorded amortization expense of $ 475,000 and $ 224,000 during the years ended December 31, 2023 and 2022, respectively.

2 unchanged sentences

OF INTANGIBLE ASSETS

7 - 19 years Indefinite

$ ( 253,000 )

$ ( 276,000 )

Acquired NDAs

5 unchanged sentences

$ ( 12,161,000 )

the year ended December 31, 2022, the Company recorded a net reduction to customer relationships intangible assets of $ 626,000

related to customer relationships that were associated with the non-ophthalmology assets sold by the Company.

The amount was

reflected net of the gross proceeds received related to the sale of the Company’s non-ophthalmology assets (see Note

$ ( 380,000 )

$ 159,906,000

the year ended December 31, 2023, the Company recorded a charge of $ 380,000 related to the impairment of certain licenses, trademarks,

patents and patent applications.

The Company determined that the sum of the expected undiscounted cash flows attributable to these intangible

assets was less than their carrying value and that an impairment charge was required.

Accordingly, the Company calculated the estimated

fair value of the intangible assets based on the present value of the expected cash flows over their estimated lives.

The impairment

amount was calculated by deducting the present value of the expected cash flows from the carrying value.

Significant estimates and assumptions

used by the Company included sales and expense growth rates, and discounted projected cash flows.

The estimates and assumptions used

in our assessment represent a Level 3 measurement because they are supported by little or no market activity and reflect the Company’s

own assumptions in measuring fair value.

The assumptions used in the impairment analysis are inherently subject to uncertainty and, therefore,

changes in these assumptions could have a significant impact on the concluded fair value.

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

$ ( 161,000 )

Acquired NDAs

( 1,363,000 )

Customer relationships

2 unchanged sentences

$ ( 2,368,000 )

the year ended December 31, 2021, the Company recorded impairment charges of $ 99,000 related to patent filings and trademarks that were

abandoned and/or were associated with products the Company was no longer actively selling.

Note 4 related to intangible assets acquired and divested during the years ended December 31, 2022 and 2021.

$ ( 626,000 )

the year ended December 31, 2022, the Company recorded a net reduction to customer relationships intangible assets of $ 626,000 related

to customer relationships that were associated with the non-ophthalmology assets sold by the Company.

The amount was reflected net of

the gross proceeds received related to the sale of the Company’s non-ophthalmology assets (see Note 4).

Note 4 related to other intangible assets acquired and divested during the years ended December 31, 2023 and 2022.

expense for intangible assets for the years ended December 31, 2023 and 2022 were as follows:

OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

For the Years Ended December 31,

the Years Ended

Acquired NDAs

3 unchanged sentences

OF ESTIMATED FUTURE AMORTIZATION EXPENSE

Years ending December 31,

Intangible assets

$ 159,707,000

were no changes in the carrying value of the Company’s goodwill during the years ended December 31, 2023 and 2022.

6 unchanged sentences

Accrued RPC transition payments (see Note

Accrued exit fee for note payable (see Note

Accrued litigation settlements

Accrued interest (see Note 13)

Accrued interest

(see Note 13)

Total accounts payable and accrued expenses

Note 20 related to debt transactions that occurred subsequent to December 31, 2022.

current portion

( 24,581,000 )

( 13,771,000 )

Non-current total

accrued expenses

Company financed all insurance policies for the policy terms of August 17, 2023 through August 16, 2024 and August 17, 2022 through August

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

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

Loan Due 2026

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

LLC, as administrative agent for the lenders (together, “Oaktree”), providing for a senior secured term loan facility to

the Company with a principal amount of up to $ 100,000,000 .

Upon entering into the Oaktree Loan, the Company drew a principal amount of

$ 65,000,000 (“Tranche A”) from the Oaktree Loan and used the net proceeds to repay all amounts owed by the Company pursuant

to the Loan and Security Agreement the Company previously entered into with B.

Riley Commercial Capital, LLC on December 14, 2022 (the

Riley Loan”) – see subheading B.

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 .

While undrawn, the Company is required to pay a commitment fee

related to Tranche B amount equal to 2 % per annum, payable quarterly.

This fee is recorded within prepaid expenses and other current

assets and is being amortized on a straight-line basis over the access period.

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 plus

6.5 % per annum (totaling 11.83 % at December 31, 2023).

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

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

The Oaktree Loan also carries an exit fee

equal to 3.5 % of the aggregate principal amount owed, payable at maturity, 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.

The 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 the Oaktree Loan (the “Oaktree Amendment”).

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.

The Oaktree Loan exit fee

was increased from $ 2,275,000 to $ 2,713,000 pursuant to the Oaktree Amendment.

As of December 31, 2023, the Company has recorded in accrued

expenses the total exit fee liability of $ 2,713,000 .

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

As of December 31, 2023, the Company was in compliance with the financial 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).

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

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 $ 8,804,000 for the year ended December 31, 2023, and included the amortization of debt issuance

costs and discount of $ 1,680,000 and amortization of deferred commitment fees of $ 543,000 .

- 11.875% Senior Notes Due 2027

December 2022, the Company closed an offering of $ 35,000,000 aggregate principal amount of 11.875% senior notes due in December 2027

(the “2027 Notes”).

The 2027 Notes were sold to investors at a par value of $ 25.00 per 2027 Note, and the offering resulted

in net proceeds to the Company of approximately $ 31,738,000 after deducting underwriting discounts and commissions and expenses

of $ 3,626,000 .

December 2022 and in January 2023, the Company closed an offering of $ 35,000,000 and $ 5,250,000 , respectively, aggregate principal amount

of 11.875 % senior notes due in December 2027 (the “2027 Notes”).

The 2027 Notes were sold to investors at a par value of

$ 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 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

6 unchanged sentences

The 2027 Notes will mature on December 31, 2027 .

The issuance costs were recorded as a debt discount and are being amortized

as interest expense over the term of the 2027 Notes using the effective interest rate method .

any time prior to December 31, 2024, the Company may, at its option, redeem the 2027 Notes, in whole at any time or in part from time

9 unchanged sentences

in part, at the price of $25.50 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, upon occurrence

of certain events including (i) a failure by the Company to complete the Fab 5 Acquisition), subject to certain exceptions, within 180

calendar days after December 20, 2022, or (ii) the occurrence of a Material Change, as defined in the Second Supplemental Indenture.

of certain events including the occurrence of a Material Change, as defined in the Second Supplemental Indenture.

The 2027 Notes trade

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

expense related to the 2027 Notes totaled $ 5,516,000 and $ 140,000 for the years ended December 31, 2023 and 2022, respectively, and included

the amortization of debt issuance costs and discount of $ 736,000 and $ 0 , respectively.

Chief Executive Officer, Mark L.

Baum, Chief Financial Officer, Andrew R.

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

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

2026, and in May 2021 issued an additional $ 5,000,000 of such notes pursuant to the full exercise of the underwriters’ option

to purchase additional notes (collectively, the “April Notes”).

The April Notes were sold to investors at a par value of

$ 25.00 per April Note and the offering resulted in net proceeds to the Company of approximately $ 51,909,000 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 .

Notes are treated as a single series with the April Notes under the indenture governing the April Notes, dated as of April 20, 2021,

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

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

notes (collectively, the “April Notes”).

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

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

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).

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 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 30, 2026 .

The issuance costs were recorded as a debt discount and are

being amortized as interest expense, net of the amortization of the premium on note issuance, over the term of the 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 price equal to 100% of the principal amount of the 2026 Notes to be redeemed , plus a make-whole amount, if any, plus accrued

and unpaid interest to, but excluding, the date of redemption.

The Company may redeem the 2026 Notes for cash in whole or in part at

any time at our option on or after February 1, 2026 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued

and unpaid interest to, but excluding, the date of redemption.

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

redeemed 2026 Notes.

expense related to the 2026 Notes and 2027 Notes totaled $ 7,378,000 and $ 5,132,000 for the years ended December 31, 2022 and

2021, respectively, and included amortization of debt issuance costs and discount of $ 782,000 , and $ 581,000 for the years ended

December 31, 2022 and 2021, respectively.

Riley Loan and Security Agreement

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 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

price equal to 100% of the principal amount of the 2026 Notes to be redeemed , plus a make-whole amount, if any, plus accrued and unpaid

interest to, but excluding, the date of redemption.

The Company may redeem the 2026 Notes for cash in whole or in part at any time at

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

interest to, but excluding, the date of redemption.

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

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

expense related to the 2026 Notes totaled $ 7,251,000 and $ 7,238,000 for the years ended December 31, 2023 and 2022, respectively, and

included amortization of debt issuance costs and discount of $ 782,000 , and $ 782,000 for the years ended December 31, 2023 and 2022, respectively.

Riley Loan and Security Agreement – Paid in Full

December 14, 2022 (the “Effective Date”), the Company entered into a Loan and Security Agreement (the “BR Loan”)

2 unchanged sentences

to the Company with a maturity date of December 14, 2025 (the “Maturity Date”), at an interest rate of 10.875 % per annum.

BR Loan is secured by an intellectual property security agreement entered into in connection with the BR Loan, and by all assets of the

Company and its material subsidiaries.

The outstanding balance of the BR Loan is due in full on the Maturity Date.

The BR Loan provides

for voluntary prepayment subject to a prepayment fee of $ 0 if no Loan had been funded or the prepayment or repayment occurs (other than

as a result of acceleration of the BR Loan) on or prior to the date that is 90 days following the Effective Date and up to 3.00 % of the

amount of the Loan based on other payment dates.

BR Loan also provides for mandatory and customary prepayments, along with customary representations and warranties, covenants and events

The covenants set forth in the BR Loan included certain affirmative and negative operational and financial covenants, including,

among other things, restrictions on the Company’s ability to incur certain liens, make fundamental changes to its business or engage

in transactions with affiliates.

amounts were outstanding under the BR Loan as of December 31, 2022.

In January 2023, $ 59,750,000 of principal amount was funded pursuant

to the BR Loan simultaneously with the consummation of the Fab 5 Acquisition (see Note 20).

Senior Note – Paid in April 2021

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

amount of $ 16,000,000 (the

“SWK Loan Agreement” or “SWK Loan”) with SWK Funding LLC and its partners (collectively, “SWK”),

as lender and collateral agent.

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

however, such term could be

reduced to four years if certain revenue requirements were not achieved.

The SWK Loan was secured by substantially all of the Company’s

assets, including its intellectual property rights.

The SWK Loan was subsequently amended in May 2019 and again in April 2020.

Loan bore an interest rate equal to the three-month London Inter-Bank Offered Rate (subject to a minimum of 2.00 % ),

plus an applicable margin of 10.00 % (the

“Margin Rate”);

provided that, if, two days prior to a payment date, the Company provided SWK evidence that the Company

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

and if the Company had achieved

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

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

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

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

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

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

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

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

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

interest payment of $ 358,000 due May 14, 2020 was paid in-kind by increasing the principal amount of the term loans by an amount

equal to the interest accrued as of such date.

expense related to the SWK Loan Agreement, as amended, amounted to $ 647,000 for the year ended December 31, 2021, and included amortization

of debt issuance costs and discounts of $ 96,000 for the year ended December 31, 2021.

April 2021, the Company paid $ 15,540,000 related to all outstanding obligations to SWK under the SWK Loan, including outstanding

principal, accrued interest, accrued exit fee and related expenses and recorded a loss from early extinguishment of $ 756,000 related

to the SWK Loan during the year ended December 31, 2021.

Protection Program Loan – Forgiven in March 2021

April 2020, the Company entered into an unsecured promissory note and related Business Loan Agreement with Renasant Bank, as lender,

for a loan (the “PPP Loan”) in the principal amount of $ 1,967,000 and received cash proceeds of the same amount, pursuant

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

“CARES Act”), which was enacted March 27, 2020.

The PPP is administered by the U.S.

Small Business Administration (the “SBA”).

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

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

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

of the PPP Loan for the loan balance of $ 1,967,000 in the accompanying consolidated statement of operations for the year ended December

December 31, 2022, future minimum payments under the Company’s debt were as follows (excluding debt transactions that occurred

subsequent to December 31, 2022):

OF FUTURE MINIMUM PAYMENTS UNDER NOTES PAYABLES

January 2023, $ 59,750,000 of principal amount was funded pursuant to the BR Loan simultaneously with the consummation of the NVS 5 Acquisition

(see Note 4).

In March 2023, the Company repaid all amounts owed under the BR Loan, in connection with the Oaktree Loan, and no exit

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 year ended December 31, 2023, and included amortization of debt issuance costs

and debt discount of $ 356,000 .

The Company recorded a loss of $ 5,465,000 related to the early extinguishment of debt associated with

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

OF LONG TERM DEBT

8.625% Senior Notes due April 2026

11.875% Senior Notes due December 2027

Oaktree Loan due January

Notes payable gross

Unamortized debt

discount and issuance costs

( 9,578,000 )

( 5,826,000 )

Notes payable net

$ 183,172,000

$ 104,174,000

the years ended December 31, 2023 and 2022, the total effective interest rate of the Company’s debt was 10.93 %, and 8.97 %, respectively .

December 31, 2023, future minimum payments under the Company’s debt were as follows:

OF FUTURE MINIMUM PAYMENT UNDER NOTES PAYABLES

Total minimum payments

amount representing interest payments

amount representing

interest payments

( 53,967,000 )

Notes payable, gross

unamortized discount, net of premium

unamortized discount,

net of premium

( 9,578,000 )

Notes payable, net of unamortized discount

Notes payable, net of

unamortized discount

$ 183,172,000

2 unchanged sentences

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 that expires in March 2025, with an option to extend the term through March 2028 .

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

2026 , with an option to extend the term for two additional five-year periods.

This lease was amended, effective July 2020, to extend

the term of the original lease and add 1,400 of additional square footage to the lease, and amended again in May 2021 to

extend the term of the lease to July 2027 and add 8,900 square feet of space.

operating lease for 5,500 square feet of office space in Nashville, Tennessee that expires in December 2024 , with

operating lease for 5,789 square feet of office space in Carlsbad, California, which commenced in January 2022 that expires in March

operating lease for 38,153 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.

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

expires in June 2027 .

This lease was amended, effective July 2020, to extend the term

of the original lease and add 1,400 of additional square footage to the lease, amended again in May 2021 to extend the term of the

lease to July 2027 and add 8,900 square feet of space, and amended in May 2023 to add another 2,861 square feet of space to the existing

lease, which the Company took possession of in January 2024.

operating lease for 5,500 square feet of office space in Nashville, Tennessee that expires in December 2024 .

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

in September 2027 .

December 31, 2023 and 2022, the weighted-average discount rate and the weighted-average remaining lease term for the operating leases

held by the Company were 6.6 %

years, respectively.

held by the Company were 6.6 % and 6.6 % and 10.4 years and 10.9 years, respectively.

the years ended December 31, 2023 and 2022, cash paid for amounts included for the operating lease liabilities was $ 1,231,000 and $ 925,000 ,

$ 1,000,000 , respectively, and the Company recorded operating lease expense of $ 1,117,000 and $ 912,000 , respectively, included in

selling, general and administrative expenses.

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

respectively, and the Company recorded operating lease expense of $ 1,232,000 and $ 1,117,000 , respectively, included in selling, general

and administrative expenses.

lease payments under operating leases as of December 31, 2023 were as follows (excluding lease transactions entered into in 2024) :

OF FUTURE LEASE PAYMENT UNDER OPERATING LEASES

Operating Leases

Total minimum lease payments

amount representing interest payments

amount representing

imputed interest payments

( 2,940,000 )

Total operating lease liabilities

current portion, operating lease liabilities

Operating lease liabilities, net of current portion

current portion,

operating lease liabilities

Operating lease obligations,

net of current portion

STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

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

of preferred stock issued and outstanding.

B Cumulative Preferred Stock – Redeemed in June 2021

May 2021, the Company sold 440,000 shares of the Company’s Series B Cumulative Preferred Stock, par value $ 0.001 per

share and liquidation preference of $ 25.00 per share (the “Series B Preferred Stock”), for net proceeds of approximately

$ 10,655,000 .

The Series B Preferred Stock was not convertible into our common stock, had no voting rights , except as required by

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

Holders of Series B Preferred Stock were entitled to cumulative cash dividends

at the rate of 9.50 % of the $ 25.00 liquidation preference per year;

provided, however, that for each thirty (30) day period

following May 5, 2021, the dividend rate increased at various rates, except as otherwise limited by applicable law.

Dividends were payable

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

June 2021, the Company redeemed all of the outstanding shares of the Series B Preferred Stock.

The redemption price for the 440,000 shares

of Series B Preferred Stock outstanding was equal to $ 25.00 per share, plus accrued and unpaid dividends, which in aggregate totaled

$ 11,127,000 .

During the year ended December 31, 2021, the Company recorded preferred stock cash dividends and deemed dividends equal

to $ 472,000 .

December 31, 2023 and 2022, the Company had 5,000,000 shares of preferred stock, $ 0.001 par value, authorized and no shares of preferred

stock issued and outstanding.

each of December 31, 2023 and 2022, the Company had 50,000,000 shares of common stock, $ 0.001 par value, authorized.

1 unchanged sentence

the year ended December 31, 2023:

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 ;

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.

based on the aggregate of:

(i) the 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 was withheld by Harrow for payroll tax obligations

totaling $ 11,273,000 ;

Company issued 168,963 shares of its common stock underlying RSUs held by directors that ceased providing services to the Company.

The RSUs had previously vested, including 21,620 RSUs during the year ended December 31, 2023, but the issuance and delivery of the

shares were deferred until the director ceased providing services to the Company;

Company issued 65,148 shares of common stock and received proceeds of $ 379,000 upon the exercise of options to purchase 65,148 shares

of common stock with exercise prices ranging from $ 1.70 to $ 8.50 per share;

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 125,000 shares

at an exercise price of $ 2.40 per share.

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 from Mr.

Baum 36,014 shares

as consideration for the cashless exercise and an additional 35,392 shares for

payroll tax obligations totaling $ 295,000 ;

Company issued 306,347 shares of its common stock upon the cashless exercise of

warrants to purchase 373,847 shares of common stock with an exercise price of $ 2.08 per

Company issued 4,054 shares of common stock to a consultant upon the cashless exercise

Baum 77,167 shares as

consideration for the cashless exercise and an additional 40,466 shares for payroll tax obligations totaling $ 849,000 ;

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 11,941 shares as consideration for the cashless exercise ;

Company issued 15,625 shares of common stock to a consultant and received net proceeds

of $ 55,000 upon the exercise of options to purchase 15,625 shares of common stock

at an exercise price of $ 3.50 per share ;

Company issued 132,100 shares of common stock and received net proceeds of $ 587,000 upon

the exercise of options to purchase 132,100 shares of common stock with exercise

prices between $ 1.70 to $ 8.40 per share ;

RSUs granted at various dates to employees of the Company vested, and the Company issued

110,621 shares of common stock to the employees, net of 74,379 shares of common stock withheld

for payroll tax withholdings totaling $ 581,000 ;

● 35,693 shares

of the Company’s common stock underlying RSUs issued to directors vested, but the issuance

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

The Company 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 ;

Company issued 10,222 shares of common stock to John Saharek, the Company’s Chief Commercial Officer, upon the cashless exercise

of options to purchase 20,000 shares at an exercise price of $ 4.16 per share.

The Company withheld from Mr.

Saharek 6,485 shares

as consideration for the cashless exercise and an additional 3,293 shares for payroll tax obligations totaling $ 41,000 ;

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 ;

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 ;

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.

During the Year Ended December 31, 2022

the year ended December 31, 2022:

Company issued 311,369 shares of its common stock upon the cashless exercise of

warrants to purchase 406,539 shares of common stock with exercise prices between

$ 1.79 and $ 3.75 per share;

Company issued 25,480 shares of its common stock and received net proceeds of $ 65,000

upon the exercise of options to purchase 25,480 shares of common stock with exercise

prices between $ 1.70 and $ 4.29 per share;

Company issued 715,871 shares of its common stock to Mark L.

Baum, its Chief Executive

Officer, upon the vesting of 1,050,000 performance-based restricted stock units.

The Company withheld 334,129 shares of common stock to Mr.

Baum valued at $ 2,760,000 for

payroll tax purposes;

Company issued 100,168 shares of common stock to Andrew R.

Boll, its Chief Financial

Officer, upon the vesting of 157,500 performance-based restricted stock units.

The Company withheld 57,332 shares of common stock to Mr.

Boll valued at $ 468,000 for

payroll tax purposes;

● 67,297 shares

of the Company’s common stock underlying RSUs issued to directors vested, but the issuance

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

Company issued 53,594 shares of common stock to Mark L.

Baum, the Company’s Chief Executive Officer, upon the cashless exercise

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

The Company withheld from Mr.

Baum 36,014 shares as

consideration for the cashless exercise and an additional 35,392 shares for payroll tax obligations totaling $ 295,000 ;

Company issued 306,347 shares of its common stock upon the cashless exercise of warrants to purchase 373,847 shares of common stock

with an exercise price of $ 2.08 per share;

Company issued 4,054 shares of common stock to a consultant upon the cashless exercise of options to purchase 15,995 shares at an

exercise price of $ 7.07 per share.

The Company withheld 11,941 shares as consideration for the cashless exercise ;

Company issued 15,625 shares of common stock to a consultant and received net proceeds of $ 55,000 upon the exercise of options to

purchase 15,625 shares of common stock at an exercise price of $ 3.50 per share ;

Company issued 132,100 shares of common stock and received net proceeds of $ 587,000 upon the exercise of options to purchase 132,100

shares of common stock with exercise prices between $ 1.70 to $ 8.40 per share ;

RSUs granted at various dates to employees of the Company vested, and the Company issued 110,621 shares of common stock to the employees,

net of 74,379 shares of common stock withheld for payroll tax withholdings totaling $ 581,000 ;

shares of the Company’s common stock underlying RSUs issued to directors vested, but the issuance and delivery of these shares

are deferred until the applicable director resigns .

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

7 unchanged sentences

with the 2007 Plan, the “Plans”).

As of December 31, 2021, the 2017 Plan provides for the issuance of a maximum of 6,000,000 shares

of the Company’s common stock.

The purpose of the Plans are to attract and retain directors, officers, consultants, advisors and

employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such

As of December 31, 2023, the 2017 Plan provides for the issuance of a maximum of 6,000,000

shares of the Company’s common stock.

The purpose of the Plans are to attract and retain directors, officers, consultants, advisors

and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such

persons in the Company’s development and financial success.

6 unchanged sentences

OF STOCK OPTION PLAN ACTIVITY

Number of shares

Weighted Avg.

Exercise Price

Weighted Avg.

Contractual Life

Intrinsic Value

Options outstanding – January 1, 2022

Options outstanding –

January 1, 2023

Options granted

1 unchanged sentence

Options cancelled/forfeited

Options outstanding – December 31, 2022

Options outstanding

– December 31, 2023

Options exercisable

Options vested and expected to vest

Options vested and

expected to vest

summary of stock option activity under the Plan for the year ended December 31, 2022 is as follows:

Options outstanding –

January 1, 2022

Options granted

Options exercised

Options cancelled/forfeited

Options outstanding

– December 31, 2022

Options exercisable

Options vested and

expected to vest

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

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

than the market price on December 31, 2022, based on the closing price of the Company’s common stock of $ 14.76 on that date.

intrinsic value of the options exercised in 2022 was $ 2,008,000 .

the year ended December 31, 2022, the Company granted stock options to certain employees and a consultant.

The stock options were granted

with an exercise price equal to the current market price of the Company’s common stock, as reported by the securities exchange

on which the common stock was then listed, at the grant date and have contractual terms of 10 years.

Vesting terms for

options granted to employees and consultants during the year ended December 31, 2022 generally included one of the following vesting

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 ;

100% of the shares subject to the option vest on a quarterly basis in equal installments 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.

July 31, 2015, the Company granted to its Chief Executive Officer, Mark Baum, an option (the “Baum Performance Option”) to

purchase 600,000 shares of the Company’s common stock at an exercise price of $ 7.87 per share under the 2007 Plan

subject to the satisfaction of certain market-based vesting criteria.

The market-based vesting criteria are separated into five tranches

and require that the Company achieve and maintain certain average stock price targets ranging from $ 9 per share to $ 15 per

share during the five year period following the grant date.

On June 4, 2020, the Company amended the Baum Performance Option, to extend

the vesting and contractual term by 5 years.

The Company treated this amendment as a modification to the Baum Performance Option

for accounting purposes.

The fair value of the modification was $ 1,876,000 using a Monte Carlo simulation model with a five-year

life, 70 % volatility and a risk-free interest rate of 0.40 % .

the exception of the Baum Performance Option, the fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton

option pricing model.

Beginning on April 1, 2019, the Company began calculating expected volatility based solely on the historical volatilities

of the common stock of the Company.

Prior to April 1, 2019, the expected volatility was based on the historical volatilities of the common

stock of the Company and comparable publicly traded companies.

The Company previously utilized this methodology based on its estimate

that it had limited relevant historical data regarding the volatility of its stock price on which to base a meaningful estimate of expected

The expected term of options granted was determined in accordance with the “simplified approach,” as the Company

has limited, relevant, historical data on employee exercises and post-vesting employment termination behavior.

The expected risk-free

interest rate is based on the U.S.

Treasury yield for a period consistent with the expected term of the option in effect at the time

of the grant.

The financial statement effect of forfeitures is estimated at the time of grant and revised, if necessary, if the actual

effect differs from those estimates.

For option grants to employees and directors, the Company assigns a forfeiture factor of 10 % .

factors could change in the future, which would affect the determination of stock-based compensation expense in future periods.

these assumptions, the fair value is determined at the date of grant.

than the market price on December 31, 2023 and 2022, based on the closing price of the Company’s common stock of $ 11.20 and $ 14.76 ,

respectively, on that date.

intrinsic value of the options exercised in 2023 and 2022 was $ 4,580,000 and $ 2,008,000 , respectively.

the year ended December 31, 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 10 years.

Vesting terms for options granted to employees during

the year ended December 31, 2023 generally included one of the following vesting schedules:

25% of the shares subject to the option vest

and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and

become exercisable quarterly in equal installments thereafter over three years;

and 100% of the shares subject to the option vest on

a quarterly basis in equal installments 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.

The Company calculates

expected volatility based solely on the historical volatilities of the common stock of the Company.

The expected term of options granted

was determined in accordance with the “simplified approach,” as the Company has limited, relevant, historical data on employee

exercises and post-vesting employment termination behavior.

The expected risk-free interest rate is based on the U.S.

Treasury yield

for a period consistent with the expected term of the option in effect at the time of the grant.

The financial statement effect of forfeitures

is estimated at the time of grant and revised, if necessary, if the actual effect differs from those estimates.

For option grants to

employees and directors, the Company assigns a forfeiture factor of 10 %.

These factors could change in the future, which would affect

the determination of stock-based compensation expense in future periods.

Utilizing these assumptions, the fair value is determined at

the date of grant.

table below illustrates the fair value per share determined using the Black-Scholes-Merton option pricing model with the following assumptions

used for valuing options granted to employees:

OF FAIR VALUE ASSUMPTIONS

Weighted-average fair value of options granted

SCHEDULE OF FAIR VALUE ASSUMPTIONS

Weighted-average fair value of

options granted

Expected terms (in years)

1 unchanged sentence

Risk-free interest rate

1.54 – 3.70 %

0.39 – 0.45 %

Dividend yield

following table summarizes information about stock options outstanding and exercisable at December 31, 2023:

OF STOCK OPTION OUTSTANDING AND EXERCISABLE

Options Outstanding

Options Exercisable

Exercise Prices

SCHEDULE OF STOCK

OPTION OUTSTANDING AND EXERCISABLE

Life in Years

$ 1.47 - $ 2.23

$ 2.40 - $ 3.50

$ 4.08 - $ 6.30

$ 6.75 - $ 7.30

$ 7.37 - $ 7.79

$ 7.89 - $ 8.98

$ 1.47 - $ 12.38

of December 31, 2023, there was approximately $ 1,966,000 of total unrecognized compensation expense related to unvested stock options

1 unchanged sentence

That expense is expected to be recognized over the weighted-average remaining vesting period of 2.77 years.

The stock-based compensation for all stock options was $ 1,130,000 and $ 1,636,000 during the years ended December 31, 2022 and 2021, respectively.

Stock Units/Performance Stock Units

stock-based compensation for all stock options was $ 782,000 and $ 1,130,000 during the years ended December 31, 2023 and 2022, respectively.

During the Year Ended December 31, 2023

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

Officer, Andrew Boll, Chief Financial Officer, and John Saharek, Chief Commercial Officer, which are subject to the satisfaction of certain

market-based and continued service conditions (the “2023 PSUs”).

The vesting of the 2023 PSUs require (i) a minimum of a

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

ten consecutive trading days ranging between $ 25.00 to $ 50.00 per share, separated into four separate tranches as described further in

the table below.

OF PERFORMANCE STOCK UNITS

Number of Shares

Target Share Price*

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

free interest rate of 10.34 %.

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

summary of the Company’s PSU activity and related information for the year ended December 31, 2023 is as follows:

OF PERFORMANCE STOCK UNITS ACTIVITY

Average Grant Date Fair Value

PSUs unvested – January 1, 2023

( 1,567,913 )

PSUs cancelled/forfeited

PSUs unvested – December 31, 2023

During the Year Ended December 31, 2022

PSUs were issued during the year ended December 31, 2022.

A summary of the Company’s PSU

activity and related information for the year ended December 31, 2022 is as follows:

Average Grant

Date Fair Value

PSUs unvested – January 1, 2022

PSUs cancelled/forfeited

PSUs unvested – December 31, 2022

of December 31, 2023, the total unrecognized compensation expense related to unvested PSUs was approximately $ 18,191,000 which is expected

to be recognized over a weighted-average period of 1.26 years, based on estimated vesting schedules.

The stock-based compensation for

PSUs was $ 13,753,000 and $ 5,056,000 during the years ended December 31, 2023 and 2022, respectively.

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

2 unchanged sentences

During the Year Ended December 31, 2023

the year ended December 31, 2022, the Company’s board of directors were granted 65,615 RSUs with a fair market value

of $ 500,000 , which vest in equal quarterly installments over one year.

the year ended December 31, 2023, the Company’s board of directors were granted 41,301 time-based vesting RSUs with a fair market

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

The Company also granted 86,873 time-based vesting RSUs

with a fair market value of $ 697,000 to certain employees, which vest in full on the third anniversary of the grant date.

summary of the Company’s RSU activity and related information for the year ended December 31, 2023 is as follows:

OF RESTRICTED STOCK UNITS ACTIVITY

Number of RSUs

Weighted Average

Grant Date Fair Value

RSUs unvested – January

RSUs cancelled/forfeit

RSUs unvested at December 31, 2022

RSUs cancelled/forfeited

RSUs unvested at

December 31, 2023

During the Year Ended December 31, 2022

the year ended December 31, 2022, the Company’s board of directors were granted 65,615 RSUs with a fair market value of $ 500,000 ,

which vest in equal quarterly installments over one year.

summary of the Company’s RSU activity and related information for the year ended December 31, 2022 is as follows:

RSUs unvested – January

RSUs cancelled/forfeited

RSUs unvested at

December 31, 2022

of December 31, 2023, the total unrecognized compensation expense related to unvested RSUs was approximately $ 1,234,000 which is expected

2 unchanged sentences

RSUs was $ 1,161,000 and $ 1,788,000 during the years ended December 31, 2023 and 2022, respectively.

During the Year Ended December 31, 2021

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

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

the year ended December 31, 2021, the Company’s board of directors were granted 38,576 RSUs with a fair market value

of $ 400,000 , which vest in equal quarterly installments over one year.

the year ended December 31, 2021, the Company granted 1,567,913 performance stock units (“PSUs”) to members of

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

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

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

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

TSR is 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 table below.

With certain limited exceptions, in addition to reaching

the TSR targets, the employee must be employed with the Company on the second anniversary of the grant date in order for the 2021 PSUs

OF SHARE BASED COMPENSATION PERFORMANCE STOCK UNITS AWARD ACTIVITY

Number of Shares

Target Share Price*

50% or greater

100% or greater

150% or greater

175% or greater

* Target Share Price assumes

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

If such distributions are made, the Target Share

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

fair value of the 2021 PSUs was $ 10,113,000 using a Monte Carlo Simulation with a five-year life, 75 % volatility

and a risk free interest rate of 0.72 % .

The fair value amount is being amortized over a two-year derived service period.

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

Number of RSUs

Weighted Average

Grant Date Fair Value

RSUs unvested - January 1, 2021

( 1,274,797 )

RSUs cancelled/forfeit

RSUs unvested at December 31, 2021

Stock-Based Transactions

Company recognized $ 0 and $ 87,000 in stock-based compensation expense related to subsidiary stock options during the years

ended December 31, 2022 and 2021, respectively.

Company recorded stock-based compensation (including issuance of common stock for services and accrual for stock-based compensation)

Company recorded total stock-based compensation (including issuance of common stock for services and accrual for stock-based compensation)

related to equity instruments granted to employees, directors and consultants as follows:

OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES DIRECTORS CONSULTANTS

For the Year Ended December 31,

Employees – selling, general and administrative

OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES, DIRECTORS AND CONSULTANTS

Ended December 31,

Employees – selling, general

and administrative

Employees – R&D

Directors – selling, general and administrative

Consultants – selling, general and administrative

Stock-based compensation

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

and other non-employees for services rendered or to be rendered in the future.

summary of warrant activity during the year ended December 31, 2022 is as follows:

OF WARRANTS ACTIVITY

Number of Shares Subject to Warrants Outstanding

Weighted Avg.

Exercise Price

Warrants outstanding - January 1, 2022

Warrants outstanding - December 31, 2022

Company is subject to taxation in the United States, California, Florida, Georgia, Illinois, New Jersey, New York, Tennessee and Wisconsin.

The Company’s income tax provision consists of the following for the years ended December 31, 2022 and 2021 are summarized below:

Consultants –

selling, general and administrative

Company is subject to taxation in the United States, California, New Jersey, Tennessee and various other states.

The Company’s income tax provision consists of the following for the years ended December

31, 2023 and 2022 are summarized below:

OF PROVISION FOR INCOME TAXES

Total current

$ ( 425,000 )

( 1,944,000 )

Change in valuation allowance

( 1,182,000 )

Total deferred

1 unchanged sentence

reconciliation of income taxes computed by applying the statutory U.S.

income tax rate to the Company’s loss before income taxes

income tax rate to the Company’s loss before income tax provision

to the income tax provision is as follows:

OF INCOME TAX RECONCILIATION

OF INCOME TAX PROVISION

federal statutory tax rate

2 unchanged sentences

Excess employee remuneration

W/O of IRC Sec 382 Limited NOLs

W/O of IRC Sec 383 Limited Credits

Reduction of VA for IRC Sec 382 and 383 W/O

Valuation allowance

Effective income tax rate

Melt loan settlement

Uncertain tax positions

Research and development tax credit

Provision-to-return true-ups

Other true-ups

Change in valuation

Effective income

tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities

5 unchanged sentences

Depreciation and amortization

Research and development credits

Research and development

Deferred stock compensation

Basis Difference in Eton

( 1,684,000 )

Basis difference in

( 1,684,000 )

Sintetica License Agreement

Sparcs License Agreement

Novartis License Agreement

Basis difference in Melt Loan Value

Park stock purchase identifiable intangibles

Basis difference in

Melt investments

Federal benefit of state

ASC740-10 reserves

Limitation Under 163(j)

Section 174 Capital Expenses

Section 174 capitalized

ASC 842 lease liability

ASC 842 ROU Asset

842 ROU asset

( 1,582,000 )

( 2,263,000 )

Total deferred tax assets, net

deferred tax assets, net

Valuation allowance

1 unchanged sentence

( 17,022,000 )

Net deferred tax liabilities

Net deferred tax

of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.

2 unchanged sentences

The valuation allowance decreased by approximately $ 1,391,000 and

increased by approximately $ 2,369,000 during 2022 and 2021, respectively.

$ 1,182,000 during 2023 and 2022, respectively.

of December 31, 2023, the Company had federal and state net operating loss carryforwards of approximately $ 8,596,000 and $ 26,134,000 ,

18 unchanged sentences

in such an ownership change, or could result in an ownership change in the future upon subsequent disposition.

of December 31, 2022, the Company determined that it had net operating loss carryforwards of approximately $ 12,500,000 and state net

operating loss carryforwards of approximately $ 9,400 ,000 restricted under IRC Section 382 of the Internal Revenue Code related to a 2011

change in ownership.

Section 382 of the Internal Revenue Code limits the utilization of net operating losses when ownership changes,

as defined by that section, occur.

Due to the Section 382 limitation, and the length of time available to fully utilize the net operating

loss carryforwards, the Company removed these NOLs from deferred tax assets with a corresponding reduction of the valuation allowance.

Similarly, under IRC Section 383 which limits the utilization of credits when ownership changes occur, the Company removed approximately

$ 300,000 of federal credit and $ 300,000 of state credits from deferred tax assets with a corresponding reduction of valuation allowance.

Company did not have any unrecognized tax benefits as of December 31, 2022 and 2021.

These unrecognized tax benefits, if recognized, would not affect the effective tax rate.

There was no interest or penalties accrued at

the adoption date and at December 31, 2022.

reconciliation of the change in the UTB balance from January 1, 2022 to December 31, 2022 is as follows:

of December 31, 2023, the Company determined that it had net operating loss carryforwards of approximately $ 12,500,000

and state net operating loss carryforwards of approximately $ 9,400,000

restricted under IRC Section 382 of the Internal Revenue Code related to a 2011 change in ownership.

Section 382 of the Internal

Revenue Code limits the utilization of net operating losses when ownership changes, as defined by that section, occur.

Section 382 limitation, and the length of time available to fully utilize the net operating loss carryforwards, the Company removed

these NOLs from deferred tax assets with a corresponding reduction of the valuation allowance.

Similarly, under IRC Section 383

which limits the utilization of credits when ownership changes occur, the Company removed approximately $ 300,000

of federal credit and $ 300,000

of state credits from deferred tax assets with a corresponding reduction of the valuation allowance.

of December 31, 2023, the Company had approximately $ 2,853,000

of unrecognized tax benefits of which $ 2,853,000

if fully recognized, would decrease its effective

There were interest or penalties accrued of $ 40,000

relating to unrecognized tax benefits as of December

reconciliation of the change in the unrecognized tax benefits balance from January 1, 2023 to December 31, 2023 is as follows:

OF UNRECOGNIZED TAX BENEFITS

Fed & State Tax

Balance at January 1, 2023

Additions for tax positions related to current year

Additions/(reductions) for tax positions related to prior years

Additions for tax positions

related to current year

Additions for tax positions

related to prior years

Balance at December

Total unrecognized tax benefits as of December 31, 2022

Tax Cuts and Jobs Act of 2017 (TCJA) included changes to the treatment of research and development expenses under IRC Section 174.

Formerly, a company could deduct research and development expenses under IRC Section 174 as incurred.

Effective for tax years

beginning after December 31, 2021, research and development expenses under IRC Section 174 are required to be capitalized, with an

amortization period of five years for costs incurred un the US and 15

years for costs incurred in a non-US jurisdiction.

The Company has incurred approximately $ 2,191,000

of US research and development costs during the year ended December 31, 2022.

EMPLOYEE SAVINGS PLAN

10 unchanged sentences

Risk Factors .

describes legal proceedings and other matters that are/were significant or that it believes could become significant in this footnote.

The Company describes

legal proceedings and other matters that are/were significant or that it believes could become significant in this footnote.

Company records accruals for loss contingencies to the extent that it concludes it is probable that a liability has been incurred and

12 unchanged sentences

are discussed below:

Drug Solutions et al.

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

District Court for the District of Delaware asserting various claims, including breach of contract.

The claims stem from

an asset purchase agreement between the Company and NDS entered into in 2013.

In July 2019, NDS filed a second amended complaint which

added claims related to its purported termination of the asset purchase agreement.

In October 2019, NDS voluntarily dismissed all but

two claims, leaving only claims related to the scope and performance of the post-termination obligations to be litigated.

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

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

During the year ended December 31, 2021, the Company recorded $ 1,500,000 in

selling, general and administrative expenses related to the Settlement Agreement.

Except for the one-time payment of $ 1,500,000 the Company

does not expect the Settlement Agreement will have any future material impact on the Company’s consolidated cash flows, financial

position, and results of operations.

Science, Inc.

July 2021, ImprimisRx, LLC, a subsidiary of the Company, filed a lawsuit against Ocular Science, Inc.

and OSRX, Inc.

(together, “OSRX”)

District Court for the Southern District of California, asserting claims for copyright infringement, trademark infringement,

unfair competition and false advertising (Lanham Act).

Since July 2021, the complaint has been amended and OSRX added counterclaims alleging

ImprimisRx, LLC is violating the Lanham Act with false advertising.

The Court granted cross motions for summary judgement on each party’s

Lanham Act claims thus leaving only ImprimisRx, LLC’s copyright infringement, trademark infringement and unfair competition claims

ImprimisRx, LLC is seeking damages from OSRX.

The Company expects the trial to take place in August 2024.

and Professional Liability

3 unchanged sentences

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

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

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

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

In September 2018, co-defendant Dr.

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

and Spectrum Pharmacy Products, Inc.

(collectively “Spectrum”).

The cross-complaint sought indemnity and contribution

from the Company and Spectrum.

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

There was no impact to the Company’s

consolidated financial position and results of operations as a result of the resolution of this matter.

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

6 unchanged sentences

individual with respect to which the individual may be entitled to indemnification by the Company.

The Company also indemnifies its lessors

in connection with its facility leases for certain claims arising from the use of the facilities.

These indemnities do not provide for

any limitation of the maximum potential future payments the Company could be obligated to make.

Historically, the Company has not incurred

any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities in the accompanying consolidated

balance sheets.

Several of the Company’s asset

purchase and license agreements contain customary representations, warranties, covenants and confidentiality provisions, and also contain

mutual indemnification obligations related primarily to performance under the respective agreements.

The Company also indemnifies its

lessors in connection with its facility leases for certain claims arising from the use of the facilities.

These indemnities do not provide

for any limitation of the maximum potential future payments the Company could be obligated to make.

Historically, the Company has not

incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities in the accompanying

consolidated balance sheets.

and Marketing Agreements

6 unchanged sentences

certain future levels by the end of their terms, as applicable.

The Company incurred $ 4,274,000 and $ 3,640,000 under these agreements

for commission expenses during the years ended December 31, 2022 and 2021, respectively, which are included in selling, general and administrative

The Company incurred $ 196,000 and $ 4,274,000 under these agreements for

commission expenses during the years ended December 31, 2023 and 2022, respectively, which are included in selling, general and administrative

Asset Purchase, License and Related Agreements

25 unchanged sentences

the Inventors.

At December 31, 2022 and 2021, $ 228,000 and $ 251,000 were accrued in accounts payable and accrued expenses

related to these agreements.

During the years ended December 31, 2022 and 2021 $ 910,000 and $ 991,000 , respectively, were incurred

under these agreements as royalty expenses.

At December 31, 2023 and 2022, $ 106,000 and $ 228,000 were accrued in accounts payable and accrued expenses related to

these agreements.

During the years ended December 31, 2023 and 2022, $ 811,000 and $ 910,000 , respectively, were incurred under these agreements

as royalty expenses, which are included in selling, general and administrative expenses.

License Agreement – Related Party

1 unchanged sentence

Lindstrom, M.D.,

a member of its Board of Directors.

a former member of its Board of Directors.

Pursuant to the terms of the Klarity License Agreement, the Company licensed certain intellectual

18 unchanged sentences

The Company incurred $ 287,000 and $ 315,000 for royalty expenses related to the Klarity License Agreement during the years

ended December 31, 2022 and 2021, respectively.

ended December 31, 2023 and 2022, respectively, which are included in selling, general and administrative expenses.

Asset Purchase Agreement – Related Party

December 2019, the Company entered into an asset purchase agreement (the “Lindstrom APA”) with Dr.

Lindstrom, a member of

its Board of Directors.

Pursuant to the terms of the Lindstrom APA, the Company acquired certain intellectual property and related rights

Lindstrom, a former member

of its Board of Directors.

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

rights from Dr.

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

5 unchanged sentences

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

was paid $ 32,000 and $ 28,000 in cash during the year ended December 31, 2022 and 2021, respectively, and was due $ 9,000 and $ 8,000 at

was paid $ 35,000 and $ 32,000 in cash during the years ended December 31, 2023 and 2022, respectively, and was due $ 6,000 and $ 9,000 at

December 31, 2023 and 2022, respectively.

The Company incurred $ 33,000 and $ 29,000 for royalty expenses related to the Lindstrom Agreement

during the year ended December 31, 2022 and 2021, respectively.

The Company incurred $ 32,000 and $ 33,000 for royalty expenses related to the Lindstrom APA

during the years ended December 31, 2023 and 2022, respectively, which are included in selling, general and administrative expenses.

Asset Purchase Agreement – Related Party

1 unchanged sentence

Lindstrom, M.D.,

a member of its Board of Directors.

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

related rights from Dr.

a former member of its Board of Directors.

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

and related rights from Dr.

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

12 unchanged sentences

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

following ocular surgery in the United States.

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.

following ocular surgery in the U.S.

Pursuant to the

Dexycu Agreement , Eyepoint paid 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.

Following the preliminary Hospital Outpatient Prospective Payment

System (HOPPS) rule proposed by the Centers for Medicare & Medicaid Services (CMS) in July of 2022, which did not contain an extension

of the pass-through payment period for Dexycu beyond December 31, 2022, the 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 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

the years ended December 31, 2022 and 2021, the Company recorded $ 3,866,000 and $ 3,253,000 , respectively, in commission revenues

related to the Dexycu Agreement.

Pharmaceuticals MAY-66 License Termination

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

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

Mayfield’s proprietary drug candidate MAY-66.

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

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

Mayfield has no outstanding or remaining obligations under

the TGV License.

Pharmaceuticals MAY-44 APA Termination

May 2021, Mayfield and Harrow terminated their asset purchase agreement dated January 2020 (the “MAY-44 APA”) for intellectual

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

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

Mayfield has no outstanding or remaining

obligations related to the MAY-44 APA.

License Termination

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

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

Concurrent with the termination,

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

no outstanding or remaining obligations under the Stowe License.

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

on January 1, 2023.

During the years ended December 31, 2023 and 2022, the Company recorded $ 0 and $ 3,866,000 , respectively, in commission

revenues related to the Dexycu Agreement.

SEGMENTS AND CONCENTRATIONS

evaluated the Company’s 2021 performance based on operating segments.

Segment performance for its two operating segments was based

on segment contribution.

Our reportable segments consisted of (i) our commercial stage pharmaceutical business (Pharmaceutical Compounding),

generally including the operations of our ImprimisRx business;

and (ii) our start-up operations associated with our pharmaceutical drug

development business (Pharmaceutical Drug Development).

Segment contribution for our segments represented net revenues less cost of sales,

R&D expenses, selling and marketing expenses, and select general and administrative expenses.

Management did not evaluate the following

items at the segment level:

expenses within selling, general and administrative expenses that result from the impact

of corporate initiatives.

Corporate initiatives primarily include integration, restructuring,

acquisition and other shared costs;

general and administrative expenses that result from shared infrastructure, including certain

expenses associated with legal matters, our board of directors and principal executive officers,

investor relations and other like shared expenses;

select revenues and operating expenses including R&D expenses, amortization, and asset

sales and impairments, net as not all such information has been accounted for at the segment

level, or such information has not been used by both segments;

assets including capital expenditures.

defined segment net revenues as pharmaceutical compounded drug sales, revenues from licenses and other revenues derived from related

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

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

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

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

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

and attributable to the segment.

Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the years ended

December 31, 2021:

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

For the Year Ended December 31, 2021

Pharmaceutical

Drug Development

Cost of sales

( 18,214,000 )

Operating expenses:

Selling, general and administrative

Research and development

Segment contribution

( 8,674,000 )

( 13,689,000 )

Research and development

( 1,322,000 )

Asset sales and impairments, net

Operating income

in 2022, due to shifts in the Company’s strategic plans and its organizational structure, management no longer evaluates the Company’s

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

Company operates its business on the basis of a single reportable segment, which is the business of discovery, development, and commercialization

of innovative ophthalmic therapies.

The Company’s chief operating decision-maker is the Chief Executive Officer, who evaluates

the Company as a single operating segment.

Concentrations

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

These products collectively

accounted for 34 % and 35 % of revenues during the years ended December 31, 2022 and 2021, respectively.

Company sells its compounded formulations to a large number of customers.

There were no customers who comprised more than 10% of the

Company’s total pharmacy sales for the years ended December 31, 2022 and 2021 , respectively .

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

These suppliers collectively accounted for 61 %

of active pharmaceutical ingredient purchases during the year ended December 31, 2022, and 74 % during the year ended December 31, 2021.

Company has three and two products that each comprised more than 10% of total revenues during the years ended December 31, 2023 and 2022,

respectively.

These products collectively accounted for 38 % and 34 % of revenues, respectively.

of December 31, 2023 and 2022, accounts receivable from a single customer accounted for 80 % and 0 % of total accounts receivable, respectively.

For the years ended December 31, 2023 and 2022, revenues from a single customer accounted for 29 % and 0 % of total revenues, respectively.

Company receives its active pharmaceutical ingredients from three main suppliers.

These suppliers collectively accounted for 64 % of active

pharmaceutical ingredient purchases during the year ended December 31, 2023, and 61 % during the year ended December 31, 2022.

SUBSEQUENT EVENTS

January 2023, 23,000 RSUs granted in January 2020 to Andrew R.

Boll, the Company’s Chief Financial Officer, vested, and 13,398 shares

the Company’s common stock were issued to Mr.

February 2024, 45,000 RSUs granted in February 2021 to Andrew R.

Boll, the Company’s Chief Financial Officer, vested, and 26,520

shares the Company’s common stock were issued to Mr.

Boll, net of 18,480 shares of common stock withheld for payroll tax withholdings

totaling $ 197,000 .

January 2023, 88,000 RSUs granted in January 2020 to Mark L.

Baum, the Company’s Chief Executive Officer, vested, and 52,821 shares

the Company’s common stock were issued to Mr.

February 2024, 150,000 RSUs granted in February 2021 to Mark L.

Baum, the Company’s Chief Executive Officer, vested, and 90,164

shares the Company’s common stock were issued to Mr.

Baum, net of 59,836 shares of common stock withheld for payroll tax withholdings

totaling $ 638,000 .

of BR Loan and Fab 5 Acquisition - ILEVRO, NEVANAC, VIGAMOX, MAXIDEX, and TRIESENCE

January 2023, the Company closed the Fab 5 Acquisition.

At the time of closing the Company made a one-time payment of $ 130,000,000 ,

with up to another $ 45,000,000 due in a milestone payment related to the timing of the commercial availability of TRIESENCE.

At closing the Company entered into a transition period, where 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 until the time the

Fab 5 Products at transferred to the Company.

Company funded the initial purchase price payable at closing of the Fab 5 Acquisition with (i) proceeds of a $ 59,750,000

principal amount borrowing pursuant to the BR Loan (see Note 13), which was drawn at closing of the Fab 5 Acquisition, along with cash on hand

(including cash provided by certain financing activities during 2022).

Overallotment

Exercise of 2027 Notes

January 2023, the Company issued an additional $ 5,250,000

aggregate principal amount of the 2027 Notes (see Note 13) upon the exercise in full of the underwriters’ option to purchase

the additional notes.

As of the closing of the issuance of the additional 2027 Notes, a total of $ 40,250,000

aggregate principal amount of the 2027 Notes have been issued.

Company has performed an evaluation of events occurring subsequent to December 31, 2022 through the filing date of this Annual Report

and determined that no subsequent events have occurred that would require recognition in the consolidated financial statements or disclosures

in the notes thereto, other than as disclosed in the accompanying notes.

February 2024, 30,000 RSUs granted in February 2021 to John Saharek, the Company’s Chief Commercial Officer, vested, and 17,384

shares the Company’s common stock were issued to Mr.

Saharek, net of 12,616 shares of common stock withheld for payroll tax withholdings

totaling $ 135,000 .

February 2024, 50,000 RSUs granted in February 2021 to employees, vested, and 32,452 shares the Company’s common stock were issued,

net of 17,548 shares of common stock withheld for payroll tax withholdings totaling $ 187,000 .

February and March 2024, the Company issued 27,862 shares of common stock and received proceeds of $ 220,000 upon the exercise of options

to purchase 27,862 shares of common stock with exercise prices between $ 6.75 to $ 8.75 per share.

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-K

Item 9A. Controls and Procedures