What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-13 compared with 2023-11-13 · 118 added, 274 removed, 140 unchanged (74% of the section changed)

15 unchanged sentences

“us” and “our” refer to Harrow, Inc.

and its consolidated subsidiaries, consisting of ImprimisRx, LLC, ImprimisRx

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

In this discussion and analysis, we refer to our consolidated subsidiaries

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

and its consolidated subsidiaries, including ImprimisRx, LLC, ImprimisRx

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

In this discussion and analysis, we refer to our consolidated

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

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

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We own commercial

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

that are marketed under our Harrow

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

In addition, we have non-controlling equity interests in Surface Ophthalmics, Inc.

(“Surface”) and Melt Pharmaceuticals,

(“Melt”), both companies that began as subsidiaries of Harrow and were subsequently carved-out of our corporate structure

and deconsolidated from our financial statements.

We also own royalty rights in certain drug candidates being developed by Surface and

rights to one of the largest portfolios of branded ophthalmic pharmaceutical products in North America, all of which are marketed under

the Harrow name.

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

In addition, we have a non-controlling equity interest in Melt Pharmaceuticals, Inc.

(“Melt”), and two other

companies that began as subsidiaries of Harrow and were subsequently carved-out of our corporate structure and deconsolidated from our

financial statements.

Affecting Our Performance

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about each of these developments.

Reimbursement, Launch and Studies

February 2023, we announced that the Centers for Medicare & Medicaid Services (“CMS”) had issued a permanent, product

specific J-code for IHEEZO (J2403) which became effective under the Healthcare Procedure Coding System (HCPCS) on April 1, 2023, which

physicians can use for reimbursement purposes of that product.

New drugs approved by the U.S.

Food and Drug Administration (“FDA”)

that are used in surgeries performed in hospital outpatient departments or ambulatory surgical centers may receive a transitional pass-through

reimbursement under Medicare, provided they meet certain criteria, including a “not insignificant” cost criterion.

status allows for separate payment (i.e., outside the packaged payment rate for the surgical procedure) under Medicare Part B, which

consists of Medicare reimbursement for a drug based on a defined formula for calculating the minimum fee that a manufacturer may charge

for the drug.

Under current regulations of CMS, pass-through status applies for a period of three years;

which is measured from the date

Medicare makes its first pass-through payment for the product.

Following the three-year period, the product would be incorporated into

the cataract bundled payment system, which could significantly reduce the pricing for that product.

Temporary pass-through reimbursement

for IHEEZO was awarded by CMS and made effective in April 2023.

are also working to ensure our continued access to the Medicare market for the ambulatory surgery center (ASC), hospital and outpatient

department (HOPD), and in-office use market for IHEEZO.

In this regard, we are designing and intend to execute, during 2024, clinical

studies to build data sets that could be presented to Centers for Medicare & Medicaid Services (CMS) to extend our temporary pass-through

period for IHEEZO in ASCs and HOPDs.

We are also meeting with CMS to clarify policy on anesthesia billing policy which has historically

not allowed for the separate billing of anesthesia services in the physician’s office.

We intend to request that CMS clarify that

J-Code 2403, IHEEZO’s permanent J-Code, is appropriate to be billed for the anesthesia product itself (i.e., IHEEZO in our case)

in the physician’s office setting.

the beginning of April 2023, we initiated a regional and targeted launch of IHEEZO (chloroprocaine HCL ophthalmic gel) 3%.

2023, our full commercial launch of IHEEZO occurred, with the product being highlighted by our commercial team at the ASCRS (American

Society of Cataract and Refractive Surgery) Annual Meeting.

we sponsored an in-vivo (in human) study to compare the effects of IHEEZO with povidone-iodine (PVI) compared to a low-viscosity tetracaine

ophthalmic solution with PVI.

The primary intent of the study is to show that IHEEZO does not act as a “barrier” to PVI,

which had otherwise been shown with other ocular anesthetic gels.

Findings from the study are positive showing that IHEEZO demonstrated

a similar barrier risk to tetracaine (e.g., a non-gel anesthetic).

of ILEVRO, NEVANAC, VIGAMOX, MAXIDEX and TRIESENCE

December 2022, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) 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”):

(nepafenac ophthalmic suspension) 0.3%, a non-steroidal, anti-inflammatory eye drop indicated for pain and inflammation associated

with cataract surgery.

(nepafenac ophthalmic suspension) 0.1%, a non-steroidal, anti-inflammatory eye drop indicated for pain and inflammation associated

with cataract surgery.

(moxifloxacin hydrochloride ophthalmic solution) 0.5%, a fluoroquinolone antibiotic eye drop for the treatment of bacterial conjunctivitis

caused by susceptible strains of organisms.

(dexamethasone ophthalmic suspension) 0.1%, a steroid eye drop for steroid-responsive inflammatory conditions of the palpebral and

bulbar conjunctiva, cornea, and anterior segment of the globe.

(triamcinolone acetonide injectable suspension) 40 mg/ml, a steroid injection for the treatment of certain ophthalmic diseases and

for visualization during vitrectomy.

closed the Fab 5 Acquisition on January 20, 2023.

Under the terms of the Purchase Agreement, we made a one-time payment of $130,000,000

at closing, with up to another $45,000,000 due in a milestone payment related to the timing of the commercial availability of TRIESCENCE.

Pursuant to the Purchase Agreement and various ancillary agreements, immediately following the closing and subject to certain conditions,

for a period that lasted approximately nine months, and prior to the transfer of the Fab 5 Products new drug applications (the “NDAs”)

to us, Novartis continued to sell the Products on our behalf and transferred the net profit from the sale of the Products to us.

has agreed to supply certain Products to the Company for a period of time after the NDAs are transferred to us and to assist with technology

transfer of the Products manufacturing to other third-party manufacturers, if needed.

April 28, 2023, we transferred the NDAs for ILEVRO, NEVANAC and MAXIDEX.

In July 2023, we transferred the NDA for VIGAMOX, and the NDA

for TRIESENCE is expected to transfer upon around the timing of its commercial availability.

Credit and Guaranty Agreement

March 27, 2023, we 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 loan to us with a principal amount of up to

$100,000,000.

Upon entering into the Oaktree Loan, we drew a principal amount of $65,000,000 from the Oaktree Loan and used the net proceeds

to repay all amounts owed by us pursuant to the BR Loan (as defined below).

No remaining amounts are due under the BR Loan, and no exit

or prepayment fees were paid as a result of the payoff of the BR Loan.

The additional principal loan amount of up to $35,000,000 available

under the Oaktree Loan (the “Tranche B”) will be made available to the Company upon the commercialization of TRIESENCE.

July 18, 2023, we entered into the First Amendment to Credit Agreement and Guaranty and Consent (the “Oaktree Amendment”)

to the Oaktree Loan.

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

we made other changes related to the Santen Products Acquisition.

Upon satisfaction of certain conditions to funding, we drew down a

principal amount of $12,500,000 (the “Loan Increase”) on August 1, 2023 to fund the initial one-time payment associated with

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

No other material changes to the Oaktree

Loan were provided in the Oaktree Amendment.

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

of the Santen Products Acquisition, we have drawn down a total principal loan amount of $77,500,000 under the Oaktree Loan and an additional

Tranche B loan amount of up to $35,000,000 remains available to us upon the commercialization of TRIESENCE, provided, that if Tranche

B is not drawn by the Company on or before March 27, 2024, the amount available under Tranche B will decrease to $30,000,000.

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

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

6.5% per annum.

The Oaktree Loan requires interest-only payments through its term (there is no amortization of the principal amount or

excess cash flow sweeps during the term of the Oaktree Loan).

– Senior Notes Offering

December 2022, the Company entered into an underwriting agreement with B.

Riley Securities, Inc., as representative of the several underwriters

named therein, pursuant to which we agreed to sell $35,000,000 aggregate principal amount of 11.875% Senior Notes due 2027 (the “2027

Notes”) plus up to an additional $5,250,000 aggregate principal amount of 2027 Notes pursuant to the option to purchase additional

In January 2023, the underwriters exercised their option to purchase the additional $5,250,000 aggregate principal amount

of 2027 Notes.

of VEVYE TM U.S.

and Canadian Commercial Rights

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

Canadian markets (the “VEVYE Acquisition”).

VEVYE, which is dispensed topically in a unique ten microliter per one drop and

is labeled for twice-daily (BID) dosing, is the first and only cyclosporine-based product indicated for the treatment of both signs and

symptoms of dry eye disease (DED).

VEVYE was approved on May 30, 2023 by the FDA.

We acquired the commercial rights to VEVYE by entering

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

As consideration, we made initial payments to Novaliq totaling $8,000,000

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

of Certain U.S.

and Canadian Commercial Rights to Santen and Eyevance Products

July 2023, we entered into an Asset Purchase Agreement with Eyevance Pharmaceuticals, LLC and a License Agreement with Santen S.A.S.

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

(collectively, “Santen”).

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

(collectively, the “Santen Products”):

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

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

segment of the eye.

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

caused by susceptible organisms, including Fusarium solani keratitis.

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

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

of bacterial ocular infection exists.

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

with allergic conjunctivitis.

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

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

the treatment of vernal keratoconjunctivitis.

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

transactions pursuant to the Santen Agreements are referred to in this Quarterly Report as the “Santen Products Acquisition.”

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

In addition, the Santen Agreements provide for

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

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

Under the Santen Agreements, we also

assumed certain obligations associated with other third parties that require royalties on sales of FRESHKOTE and ZERVIATE.

following the closing and subject to certain conditions, prior to the transfer of the Santen Product NDAs and other marketing authorizations

to us, Santen continued to sell the Santen Products on our behalf and transfer the net profit from the sale of the Santen Products to

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

NDAs and rights of the Santen Products, and expect Santen to transfer the

Canadian marketing authorizations of VERKAZIA and CATIONORM PLUS by March 31, 2024.

Stock Offering

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

We sold 3,887,324 shares of our common stock in the Offering, resulting in us receiving aggregate net proceeds of $64,520,000, after

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

Riley Loan and Security Agreement – Paid

December 14, 2022, we entered into a Loan and Security Agreement (the “BR Loan”) with B.

Riley Commercial Capital, LLC, as

administrative agent for the lenders from time to time party thereto.

The proceeds of the Loan were used to finance the Fab 5 Acquisition.

BR Loan provided for a loan facility of up to $100,000,000 to the Company with a maturity date of December 14, 2025, at an interest rate

of 10.875% per annum.

The BR Loan was secured by an intellectual property security agreement and by all assets of the Company and its

material subsidiaries.

In January 2023, the Company drew $59,750,000 of the BR Loan simultaneously with the consummation of the Fab 5

Acquisition, and subsequently paid back the BR Loan in March 2023 at the time of closing the Oaktree Loan.

No remaining amounts are due

under the BR Loan, and no exit or prepayment fees were paid as a result of the payoff of the BR Loan .

Apotex - Canadian Out-License

February 2024, we entered into a license and supply agreement with Apotex Inc.

Under the terms of the agreement,

Apotex licensed exclusive rights and marketing authorizations of the following products in the Canadian market from Harrow:

(cyclosporine ophthalmic emulsion) 0.1% and Cationorm PLUS.

Apotex was also granted a license for products Apotex will pursue approval

for in Canada:

VEVYE (cyclosporine ophthalmic solution) 0.1%, IHEEZO (chloroprocaine hydrochloride ophthalmic gel) 3%, and ZERVIATE (cetirizine

ophthalmic solution) 0.24% (with VERKAZIA and Cationorm Plus, collectively, the “Apotex Products”).

In exchange, Apotex will

make payments to Harrow for milestones related to manufacturing arrangements, regulatory and commercial achievements, in addition to

royalties on net sales of the Apotex Products.

IHEEZO Reimbursement

January 2024, we met with the Centers for Medicare & Medicaid Services (“CMS”)to request clarification related to its

anesthesia billing policy which has historically not allowed for the separate billing of anesthesia services in the physician’s

During the meeting we requested that CMS clarify that J-Code 2403, IHEEZO’s permanent J-Code, is appropriate to be billed

for the anesthesia product itself (i.e., IHEEZO in our case) in the physician office setting.

In March 2024, we received communication

from a representative at CMS that the inclusion of J-Code 2403 in CMS’s April 2024 quarterly drug pricing file of the average sales

prices (ASP) of some Medicare Part B-covered drugs and biologicals confirms that IHEEZO is separately payable in the physician office

February 2024, we made a request to CMS to consider increasing the Medically Unlikely Edits (“MUE”) for IHEEZO’s J-Code

This request was made because the limitation of one MUE only allowed a single IHEEZO administration (equal to one single-use

vial) to be used and billed, while many ophthalmologists perform bilateral ocular procedures, which would require two vials of IHEEZO

On March 20, 2024, the Company received communication from the National Correct Coding Initiative (NCCI) program of CMS stating

that CMS decided to increase the MUE for IHEEZO’s J-Code (J2403) from 1 to 2.

While not final until published, CMS stated in its

communication to the Company that the MUE edit will be (1) effective in July 2024, and (2) made retroactive for procedures dating to

January 1, 2024.

January 2024, we launched VEVYE (cyclosporine ophthalmic solution) 0.1%, the first and only water-free cyclosporine dissolved in a semifluorinated

alkane approved to treat both the signs and symptoms of dry eye disease in the U.S.

We partnered with various entities including PhilRx,

Apollo Care and PARx Solutions to enhance our market and patient access program for VEVYE.

of Operations

following period-to-period comparisons of our financial results for the three and nine months ended September 30, 2023 and 2022 are not

necessarily indicative of results for any future period.

following period-to-period comparisons of our financial results for the three months ended March 31, 2024 and 2023 are not necessarily

indicative of results for any future period.

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

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arrangements.

following presents our revenues for the three and nine months ended September 30, 2023 and 2022:

following presents our revenues for the three months ended March 31, 2024 and 2023:

For the Three Months Ended

For the Nine Months Ended

September 30,

Product sales, net

Commission revenues

Transfer of profits/sales

Other revenues

Total revenues

increase in revenues between periods was related to an increase in sales of our branded ophthalmology products, as well as an increase

in the transfer of acquired products sales and profits related to the Fab 5 Acquisition and Santen Products Acquisition.

This increase

in 2023 was offset slightly by a decrease in commissions attributable to sales of DEXYCU® (which agreement terminated January 1,

2023) and a decrease in sales from our non-ophthalmology compounded products as a result of our sale of those assets in the fourth quarter

During the three and nine months ended September 30, 2023, revenues, including transfer of acquired product sales and profits,

from branded products totaled $14,496,000 and $33,863,000, respectively, as compared to $654,000 and $1,896,000 during the same periods

in the prior year, respectively.

increase in revenues between periods was related to an increase in sales of our branded ophthalmology products.

During 2023, the Company

recorded $5,650,000 in revenues associated with the transfer of profits of recently acquired products where the product new drug applications

(“NDAs”) had not yet transferred to Harrow.

During the three months ended March 31, 2024, revenues from branded products

totaled $13,868,000, compared to $6,272,000 (which included revenues from the transfer of profits) during the same period in the prior

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

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the write-off of obsolete inventory, amortization of acquired product NDAs, and other related expenses.

following presents our cost of sales for the three and nine months ended September 30, 2023 and 2022:

following presents our cost of sales for the three months ended March 31, 2024 and 2023:

For the Three Months Ended

For the Nine Months Ended

September 30,

Cost of sales

increase in our cost of sales was largely attributable to the amortization of acquired product NDAs and product licenses which

totaled $2,480,000 and $7,174,000 for the three and nine months ended September 30, 2023, respectively, compared to $341,000 and

$1,023,000 during the prior year periods, respectively, offset by lesser increases in expenses associated with unit volumes sold and

increased direct and indirect costs associated with production of our products.

increase in our cost of sales was largely attributable to expenses associated with unit volumes sold and increased direct and indirect

costs associated with production of our products.

Profit and Margin

For the Three Months Ended

For the Nine Months Ended

September 30,

decrease in gross margin between the nine months ended September 30, 2023 and 2022 was primarily attributable to amortization of acquired

NDAs from the Fab 5 Acquisition, beginning in January 2023.

increase in gross margin between the three months ended March 31, 2024 and 2023 was primarily attributable to an increase in sales associated

with our branded ophthalmology products, which generally have a higher gross margin profile than our compounded products.

General and Administrative Expenses

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

following presents our selling, general and administrative expenses for the three and nine months ended September 30, 2023 and 2022:

For the Three Months Ended

For the Nine Months Ended

September 30,

Selling, general and administrative

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

expense of $4,476,000 and $11,521,000 for the three and nine months ended September 30, 2023, respectively, compared to the prior year

periods, including new expenses associated with performance stock units granted in April 2023.

Other areas of increased expenses included

following presents our selling, general and administrative expenses for the three months ended March 31, 2024 and 2023:

the Three Months Ended

general and administrative

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

regulatory enhancements, costs to support the transition of recent product acquisitions, and an increase in expenses related to the addition

of new employees in sales, marketing and other departments to support current and expected growth, including the commercial launch of

IHEEZO in April 2023.

VEVYE in December 2023.

In addition, stock-based compensation expense increased by $2,260,000 for the three months ended March 31, 2024,

compared to the prior year period represented another notable increase.

and Development Expenses

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

following presents our research and development expenses for the three and nine months ended September 30, 2023 and 2022:

For the Three Months Ended

For the Nine Months Ended

September 30,

Research and development

increase in R&D expenses between periods was primarily attributable to increased activity related to product acquisitions, product

launches, clinical and medical support.

expense, net was $5,749,000 and $16,200,000 for the three and nine months ended September 30, 2023, respectively, compared to $1,800,000

and $5,386,000 for the same periods in 2022, respectively.

The increase during the periods ended September 30, 2023 compared to the same

periods in 2022 was primarily due to an increase in the outstanding principal amount of our debt obligations and amortization of debt issuance costs.

in Losses of Unconsolidated Entities

the three and nine months ended September 30, 2023, we recorded a loss of $0, related to our share of losses in Melt, compared to $3,504,000

and $9,036,000 for the same periods in 2022, respectively, as the Company reduced the carrying value of its investment in Melt to $0

at the end of 2022.

Gain (Loss) from Eton

the three and nine months ended September 30, 2023, we recorded a gain of $1,348,000 and $2,676,000, respectively, related to the change

in fair market value of Eton’s common stock compared to losses of $(1,031,000) and $(4,341,000) for the same periods in 2022, respectively.

following presents our research and development expenses for the three months ended March 31, 2024 and 2023:

the Three Months Ended

and development

increase in R&D expenses between periods was primarily attributable to increased activity related to our expanded branded product

portfolio, product acquisitions, product development efforts, product launches, clinical and medical support.

expense, net was $5,415,000 for the three months ended March 31, 2024, compared to $4,747,000 for the same period in 2023.

during the period ended March 31, 2024 compared to the same period in 2023 was primarily to the result of an increase in the outstanding

principal amount of our debt obligations.

(Loss) Gain from Eton

the three months ended March 31, 2024, we recorded a loss of $(1,248,000), related to the change in fair market value of Eton’s

common stock compared to a gain of $2,042,000 for the same period in 2023.

on Extinguishment of Debt

the nine months ended September 30, 2023, we recorded a loss on extinguishment of debt of $5,465,000, related to the payoff of the BR

the three and nine months ended September 30, 2023, we recorded other expense, net of $195,000 and $344,000, respectively, related primarily

to transition services and write-off of inventories associated with the divestment of our non-ophthalmology business.

During the three and nine months

ended September 30, 2023, we recorded income tax expense of $1,539,000 and $1,236,000, respectively, and $35,000 and $75,000, during the

same periods in 2022, respectively.

the three months ended March 31, 2023, we recorded a loss on extinguishment of debt of $5,465,000, related to the payoff of a loan.

the three months ended March 31, 2024, we recorded other income of $26,000, related to our sublease at our lab and office space in Nashville.

and Capital Resources

cash and cash equivalents on hand at September 30, 2023 was $65,610,000, compared to $96,270,000 at December 31, 2022.

of the date of this Quarterly Report, we believe that cash and cash equivalents of $65,610,000 at September 30, 2023 will be sufficient

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

In addition, we may consider the

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

However, we may

pursue acquisitions of revenue generating products, or drug candidates or other strategic transactions that involve large expenditures

or we may experience growth more rapidly or on a larger scale than we expect, any of which could result in the depletion of capital resources

more rapidly than anticipated and could require us to seek additional financing to support our operations.

cash on hand at March 31, 2024 was $68,538,000, compared to $74,085,000 at December 31, 2023.

of the date of this Quarterly Report, we believe that cash and cash equivalents of $68,538,000 at March 31, 2024, in addition to net

proceeds received from the sale of our Eton investment in April 2024, will be sufficient to sustain our planned level of operations and

capital expenditures for at least the next 12 months.

In addition, we may consider the sale of certain assets including, but not limited

to, part of, or all of, our investments in Surface Ophthalmics, Inc.

(“Surface”) and Melt and any of our consolidated subsidiaries.

However, we may pursue acquisitions of revenue generating products, or drug candidates or other strategic transactions that involve large

expenditures or we may experience growth more rapidly or on a larger scale than we expect, any of which could result in the depletion

of capital resources more rapidly than anticipated and could require us to seek additional financing to support our operations.

expect to use our current cash position and funds generated from our operations and any financing to pursue our business plan, which

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candidate for which we pursue FDA approval, to pursue additional development programs or to explore other development opportunities.

following provides detailed information about our net cash flows for the nine months ended September 30, 2023 and 2022:

For the Nine Months Ended September 30,

Net cash (used in) provided by operating activities

following provides detailed information about our net cash flows for the three months ended March 31, 2024 and 2023:

For the Three Months Ended

Net cash (used in)provided by:

Operating activities

$ (4,628,000 )

Net cash used in investing activities

$ (8,214,000 )

Net cash provided by (used in) financing activities

Net (decrease) increase in cash and cash equivalents

Investing activities

(130,970,000 )

Financing activities

Net change in cash and cash equivalents

(77,022,000 )

Cash and cash equivalents at beginning of the period

Cash and cash equivalents at end of the period

cash (used in) provided by operating activities during the nine months ended September 30, 2023 was $(4,856,000) compared to cash provided

by operating activities of $5,417,000 during the same period in the prior year.

The increase in net cash used in operating activities

between the periods was mainly attributed to an increase of $12,287,000 in accounts receivable related to payment terms for our branded

product sales during the nine months ended September 30, 2023 compared to an increase of $2,309,000 during the same period in 2022.

increase in net cash used in operating activities was also attributed to an increase in inventory levels, coupled with operating expenses

associated with the commercial launch of IHEEZO, product acquisitions and integrations and increased costs of goods sold.

cash used in investing activities during the nine months ended September 30, 2023 was $(152,350,000) compared to $(1,738,000) during

the same period in the prior year.

Cash used in investing activities in 2023 was primarily associated with the Fab 5 Acquisition, Santen

Products Acquisition and VEVYE Acquisition.

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

cash provided by (used in) financing activities during the nine months ended September 30, 2023 and 2022 was $126,546,000 and $(887,000),

cash used in operating activities during the three months ended March 31, 2024 was $(4,628,000) compared to $(8,214,000) during the same

period in the prior year.

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

in revenues during 2023 and a decrease of $8,396,000 in accounts receivable due to collections during the three months ended March 31,

2024 compared to an increase of $5,882,000 during the same period in 2023.

The net cash used in operating activities in 2023 was also

impacted due to an increase in inventory levels, coupled with operating expenses associated with the commercial launch of IHEEZO, product

acquisitions and integrations and increased costs of goods sold.

cash used in investing activities during the three months ended March 31, 2024 was $(110,000) compared to $(130,970,000) during the same

period in the prior year.

Cash used in investing activities in 2023 was primarily related to the acquisition of five branded products

which closed in January 2023.

Cash used in investing activities in 2024 was primarily related to equipment and software purchases.

cash (used in) provided by financing activities during the three months ended March 31, 2024 and 2023 was $(809,000) and $62,162,000,

respectively.

Cash provided by financing activities during the nine months ended September 30, 2023 was primarily related to proceeds

received from the sale of the 2027 Notes, the Oaktree Loan and Oaktree Amendment, and the Offering, offset by payment of payroll taxes

upon vesting of PSUs in exchange for shares withheld from employees.

Cash used in financing activities during the nine months ended September

30, 2022 was primarily related to payment of payroll taxes upon vesting of RSUs in exchange for shares withheld from the employee.

principal sources of cash consist of cash provided by operating activities, and in 2022 and 2023, proceeds from the sale of the 2027

Notes, the Offering and the Oaktree Loan and Oaktree Amendment.

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

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

Cash used in financing activities during the three months ended March 31, 2024 was primarily related to payment of payroll

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

Cash provided by financing activities during the three

months ended March 31, 2023 was primarily related to proceeds received from the sale of the notes and entering into loan arrangements,

offset by payment of payroll taxes upon vesting and exercise of equity instruments in exchange for shares withheld from employees.

principal sources of cash consist of cash provided by operating activities.

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

Surface, Melt or our other subsidiaries.

may acquire new products, product candidates and/or businesses and, as a result, we may need significant additional capital to support

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What changed 10-Q

Item 2. Management’s Discussion and Analysis