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Item 1. Financial Statements

2024-08-07 compared with 2024-05-13 · 444 added, 304 removed, 672 unchanged (53% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

and cash equivalents

in Eton Pharmaceuticals

receivable, net

expenses and other current assets

Current assets

plant and equipment, net

software costs, net

lease right-of-use assets, net

Cash and cash equivalents

Investment in Eton Pharmaceuticals

Accounts receivable, net

Prepaid expenses and other current assets

Total current assets

Property, plant and equipment, net

Capitalized software costs, net

Operating lease right-of-use assets, net

Intangible assets, net

$ 306,630,000

$ 312,164,000

AND STOCKHOLDERS’ EQUITY

payable and accrued expenses

rebates and copay assistance

payroll and related liabilities

revenue and customer deposits

portion of operating lease obligations

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

lease obligations, net of current portion

expenses, net of current portion

payable, net of unamortized debt discount

and contingencies

STOCKHOLDERS’

stock, $ 0.001 par value, 50,000,000 shares authorized, 35,380,955 and 35,168,260 shares issued and outstanding at March 31, 2024

and December 31, 2023, respectively

paid-in capital

Accounts payable and accrued expenses

Accrued rebates and copay assistance

Accrued payroll and related liabilities

Deferred revenue and customer deposits

Current portion of operating lease obligations

Total current liabilities

Operating lease obligations, net of current portion

Accrued expenses, net of current portion

Deferred tax liability

Notes payable, net of unamortized debt discount

TOTAL LIABILITIES

Commitments and contingencies

STOCKHOLDERS’ EQUITY

Common stock, $ 0.001 par value, 50,000,000 shares authorized, 35,479,492 and 35,168,260 shares issued

and outstanding at June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

Accumulated deficit

( 153,942,000 )

( 133,904,000 )

STOCKHOLDERS’ EQUITY

Noncontrolling

TOTAL HARROW, INC.

STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

Noncontrolling interests

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$ 306,630,000

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

UNAUDITED CONDENSED

CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Six Months Ended

Product sales, net

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( 10,000,000 )

( 23,092,000 )

( 18,271,000 )

Operating expenses:

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Total operating expenses

(Loss)income from operations

Income (loss) from operations

( 5,398,000 )

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( 5,704,000 )

( 10,886,000 )

( 10,451,000 )

Investment (loss) gain from Eton Pharmaceuticals

( 1,923,000 )

( 3,171,000 )

Loss on extinguishment of debt

( 5,465,000 )

Other income, net

Other income (expenses), net

Total other expense, net

1 unchanged sentence

( 6,596,000 )

Loss before income tax expense

( 13,985,000 )

( 14,737,000 )

Income tax benefit

Loss before income taxes

( 5,818,000 )

( 4,244,000 )

( 19,383,000 )

( 11,175,000 )

Income tax (expense) benefit

$ ( 6,473,000 )

$ ( 4,229,000 )

$ ( 20,038,000 )

$ ( 10,872,000 )

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 unaudited condensed consolidated financial statements

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended March 31, 2024 and 2023

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

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

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

the periods ended June 30, 2024 and 2023

Noncontrolling

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Issuance of common stock in connection with:

Exercise of consultant stock-based options

Exercise of employee stock-based options

Vesting of RSUs

Vesting of RSUs and PSUs

Shares withheld related to net share settlement of equity awards

( 1,698,000 )

Stock-based compensation expense

2 unchanged sentences

( 10,872,000 )

Balance at March 31, 2023

Balance at June 30, 2023

$ 142,742,000

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$ ( 355,000 )

Noncontrolling

Stockholders’

Balance at December 31, 2023

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$ ( 355,000 )

Issuance of common stock in connection with:

Exercise of employee stock-based options

Vesting of RSUs

Shares withheld related to net share settlement of equity awards

( 1,157,000 )

1 unchanged sentence

( 1,157,000 )

Stock-based compensation expense

( 20,038,000 )

Balance at June 30, 2024

$ 212,439,000

$ ( 153,942,000 )

$ ( 355,000 )

Noncontrolling

Stockholders’

Balance at March 31, 2023

$ 137,989,000

$ ( 116,136,000 )

$ ( 355,000 )

Issuance of common stock in connection with:

Exercise of consultant stock-based options

Exercise of employee stock-based options

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Shares withheld related to net share settlement of equity awards

Stock-based compensation expense

( 4,229,000 )

1 unchanged sentence

( 4,229,000 )

Stock-based compensation expense

Balance at June 30, 2023

$ 142,742,000

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$ ( 355,000 )

Issuance of common stock in connection with:

Exercise of employee stock-based options

Vesting of RSUs

Stock-based compensation expense

( 6,473,000 )

Balance at June 30, 2024

$ 212,439,000

$ ( 153,942,000 )

$ ( 355,000 )

$ 212,439,000

$ ( 153,942,000 )

$ ( 355,000 )

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

For the Six Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

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( 12,038,000 )

( 2,014,000 )

Prepaid expenses and other current assets

Accounts payable, accrued expenses, accrued rebates and copay assistance

( 8,939,000 )

Accrued payroll and related liabilities

( 1,111,000 )

Deferred revenue and customer deposits

3 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Net proceeds on sale of Eton Pharmaceuticals

Investment in patent and trademark assets

2 unchanged sentences

Purchases of property, plant and equipment

NET CASH USED IN INVESTING ACTIVITIES

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

( 132,219,000 )

2 unchanged sentences

Proceeds from Oaktree Loan, net of costs

Payment of debt issuance costs

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

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( 73,516,000 )

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS AT END OF PERIOD

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accounts payable and accrued expenses

Purchase of property, plant and equipment included in

accounts payable and accrued expenses

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

Income taxes owed for exercise of options

Insurance premium financed

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

TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the Three Months Ended March 31, 2024 and 2023

the Three and Six Months Ended June 30, 2024 and 2023

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

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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.

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

both companies that began as subsidiaries of Harrow.

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

of Presentation

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

Operating results for the three months ended March 31,

Operating results for the three and six months ended June

30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other period.

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Annual Report on Form 10-K for the year ended December 31, 2023.

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

subsidiaries.

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

owned subsidiaries.

consolidates entities in which it has a controlling financial interest.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

following represents an update for the three months ended March 31, 2024 to the significant accounting policies described in the Company’s

Annual Report on Form 10-K for the year ended December 31, 2023.

following represents an update for the three and six months ended June 30, 2024 to the significant accounting policies described in the

Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Uncertainties and Liquidity

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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 for 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.

accounts receivable balance on the Company’s condensed consolidated balance sheet as of June 30, 2024 was $ 52,727,000 , net of $ 235,000

of allowances.

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

basis of accounts receivable to present the net amount expected to be collected at June 30, 2024:

OF ACCOUNTS RECEIVABLE ALLOWANCE OF CREDIT LOSS

Balance at January 1, 2024

Change in expected credit losses

Write-offs, net of recoveries

Balance at June 30, 2024

Value Measurements

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

March 31, 2024 and December 31, 2023, the Company measured its investment in Eton Pharmaceuticals, Inc.

(“Eton”) on a recurring

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

active markets for the same securities.

As of March 31, 2024 and December 31, 2023, the fair market value of the Company’s investment

in Eton was $ 7,433,000 and $ 8,681,000 , respectively.

The Company sold its remaining interest in April 2024 (see Note 16).

December 31, 2023, the Company measured its investment in Eton Pharmaceuticals, Inc.

(“Eton”) on a recurring basis.

The Company’s

investment in Eton was classified as a Level 1 as the fair value was determined using quoted market prices in active markets for the

same securities.

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

In April 2024,

the Company sold all 1,982,000 shares of common stock it held of Eton in a block trade at a gross price of $ 3.00 per share.

After deducting

trading expenses and commissions of approximately $ 436,000 , the Company received net proceeds of $ 5,510,000 and recorded a loss of $ 3,171,000

related to the sale of its investment in Eton.

Company’s 2026 Notes (as defined in Note 11) are carried at face value, including the unamortized premium, less unamortized debt

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OF ESTIMATED FAIR VALUE

March 31, 2024

June 30, 2024

December 31, 2023

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

stock units (“RSUs”), performance stock units (“PSUs”), and warrants, outstanding during the period.

Common equivalent

shares (using the treasury stock method) from stock options, unvested RSUs, unvested PSUs and warrants were 4,318,057 and 4,750,340 at

March 31, 2024 and 2023, respectively, and are excluded in the calculation of diluted net loss per common share for the periods presented,

stock units (“RSUs”), and market-based vesting performance stock units (“PSUs”) outstanding during the period.

Common equivalent shares (using the treasury stock method) from stock options, unvested RSUs, and unvested PSUs were 4,488,940 and 6,131,026

at June 30, 2024 and 2023, respectively, and are excluded in the calculation of diluted net loss per common share for the periods presented

because the effect is anti-dilutive.

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 March 31, 2024 and 2023 was 223,928 and 336,264 , respectively.

following table shows the computation of basic net loss per share of common stock for the three months ended March 31, 2024 and 2023:

that had vested, but the issuance and delivery of the shares are deferred until the director ceases providing services.

The number of

shares underlying vested RSUs at June 30, 2024 and 2023 was 181,038 and 234,027 , respectively.

following table shows the computation of basic and diluted net loss per share of common stock:

OF BASIC NET LOSS PER SHARE OF COMMON STOCK

For the Three Months Ended

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Numerator – net loss

1 unchanged sentence

$ ( 4,229,000 )

$ ( 20,038,000 )

$ ( 10,872,000 )

Denominator – weighted average number of shares outstanding, basic and diluted

Net loss per share, basic and diluted

Company’s effective tax rate was ( 0.11 )% and 4.16 % for the three months ended March 31, 2024 and 2023, respectively.

Company’s effective tax rate was 3.38 % and ( 2.71 ) % for the six months ended June 30, 2024 and 2023, respectively.

The Company’s

effective tax rate for the three months ended March 31, 2024 and 2023 differs from the U.S.

federal statutory tax rate of 21 % due to

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

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

of March 31, 2024 and December 31, 2023, there were no unrecognized tax benefits included in the condensed consolidated balance sheets

effective tax rate for the six months ended June 30, 2024 and 2023 differs from the U.S.

federal statutory tax rate of 21 % due to state

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

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

of June 30, 2024 and December 31, 2023, there were no unrecognized tax benefits included in the condensed consolidated balance sheets

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

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– Related Party

Company owns 3,500,000

shares of common stock and 2,334,256

shares of preferred stock of Melt (representing in aggregate approximately 46 %

of Melt’s equity interests as of March 31, 2024).

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 its portion of earnings and

losses in Melt in its consolidated financial statements and adjusts the carrying amount of its investment in Melt accordingly.

intra-entity profits and losses are eliminated.

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

46 % of Melt’s equity interests as of June 30, 2024).

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.

Therefore the

Company uses the equity method of accounting for the Melt 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.

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

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

Company has no other investments other than its common stock and preferred stock positions in Melt and no other requirements to advance

funds to Melt.

following table summarizes the Company’s investments in Melt as of March 31, 2024:

Company has no investments other than its common stock and preferred stock positions in Melt and no other requirements to advance funds

following table summarizes the Company’s investments in Melt as of June 30, 2024:

SCHEDULE OF INVESTMENT

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Note 4 for more information and related party disclosure regarding Melt.

Guidance Issued but Not Adopted at March 31, 2024

Guidance Issued but Not Adopted at June 30, 2024

August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05,

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consolidated financial statements.

Reclassifications

prior period items and amounts have been reclassified to conform to the classifications used to prepare the condensed consolidated financial

statements for the current period.

These reclassifications had no material impact on the Company’s condensed consolidated financial

position, results of operations, or cash flows as previously reported.

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

has three primary streams of revenue:

(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 transfer of acquired product sales and profits in 2023, and (3) revenue recognized from intellectual property

licenses and related arrangements.

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

The Company has

three primary streams of revenue:

(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 transfer of acquired product sales and profits, and (3) revenue recognized from intellectual property licenses

and related arrangements.

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

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Property License and Related Arrangements Revenues

of March 31, 2024, the Company holds five intellectual property licenses and related arrangements pursuant to which the Company has agreed

of June 30, 2024, the Company held five intellectual property licenses and related arrangements pursuant to which the Company has agreed

to license or sell to a customer the right to access the Company’s intellectual property.

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

disaggregated by revenue source for the three months ended March 31, 2024 and 2023 consisted of the following:

disaggregated by revenue source consisted of the following:

SCHEDULE OF DISAGGREGATED REVENUE

For the Three Months Ended

For the Six Months Ended

Product sales, net

Other revenues (including transfer of acquired product sales/profit)

Other revenues

Total revenues

revenue and customer deposits at March 31, 2024 and December 31, 2023 were $ 112,000 and $ 75,000 , respectively.

revenue and customer deposits at June 30, 2024 and December 31, 2023 were $ 248,000 and $ 75,000 , respectively.

All deferred revenue and

customer deposit amounts at December 31, 2023 were recognized as revenue during the three months ended March 31, 2024.

customer deposit amounts at December 31, 2023 were recognized as revenue during the six months ended June 30, 2024.

INVESTMENT IN, AND NOTE RECEIVABLE FROM MELT PHARMACEUTICALS, INC.

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

February 2019, the Company entered into a Management Services Agreement (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 .

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

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

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

The Melt MSA was terminated effective July 1, 2023.

During the three months

ended March 31, 2024 and 2023, the Company recorded $ 0 and $ 59,000 , respectively, due from Melt for reimbursable expenses and amounts

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

balance sheets.

As of March 31, 2024 and December 31, 2023, the Company was due $ 228,000 , from

Melt for reimbursable expenses and amounts due under the Melt MSA

During the three and six months ended June 30, 2024, the Company did not record

any reimbursable expenses and amounts payable by Melt pursuant to the Melts MSA.

During the three and six months ended June 30,

2023, the Company recorded $ 30,000

due from Melt for reimbursable expenses and amounts payable by Melt pursuant to the Melt MSA, which amounts are included in prepaid

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

As of each of June 30, 2024 and

December 31, 2023, the Company was due $ 228,000

from Melt for reimbursable expenses and amounts payable under the Melt MSA.

March 2024, Melt completed its Series B Preferred Stock financing which raised gross proceeds of approximately $ 23,900,000 .

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.

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

At the time Mr.

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.

Baum, is a member of the Melt board of directors.

The Melt board of directors consists

of five members, including Mr.

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

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

OF CONDENSED INCOME STATEMENT

the Three Months Ended

from operations

For the Six Months Ended

Revenues, net

Loss from operations

$ ( 5,631,000 )

$ ( 2,448,000 )

$ ( 5,344,000 )

$ ( 3,551,000 )

unaudited condensed balance sheet information of Melt is summarized below:

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Total liabilities

Total preferred stock and stockholders’ equity

Total stockholders’ equity

Total liabilities and stockholders’ equity

1 unchanged sentence

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

The composition of inventories as of March 31, 2024

and December 31, 2023 was as follows:

The composition of inventories was as follows:

OF INVENTORIES

March 31, 2024

December 31, 2023

At December 31,

Raw materials

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PREPAID EXPENSES AND OTHER CURRENT ASSETS

expenses and other current assets at March 31, 2024 and December 31, 2023 consisted of the following:

expenses and other current assets consisted of the following:

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

March 31, 2024

December 31, 2023

At December 31,

Prepaid insurance

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PROPERTY, PLANT AND EQUIPMENT

plant and equipment at March 31, 2024 and December 31, 2023 consisted of the following:

plant and equipment consisted of the following:

OF PROPERTY, PLANT AND EQUIPMENT

plant and equipment, net:

and equipment

and pharmacy equipment

plant and equipment, gross

At December 31,

Property, plant and equipment, net:

Computer hardware

Furniture and equipment

Lab and pharmacy equipment

Leasehold improvements

Property, plant and equipment, gross

Accumulated depreciation

( 10,669,000 )

plant and equipment, net

the three months ended March 31, 2024 and 2023, depreciation related to the property, plant and equipment was $ 296,000 and $ 225,000 ,

respectively.

( 10,072,000 )

Property, plant and equipment,

the three and six months ended June 30, 2024, depreciation related to property, plant and equipment was $ 301,000 and $ 597,000 , respectively,

compared to $ 228,000 and $ 453,000 during the same periods in 2023, respectively.

CAPITALIZED SOFTWARE COSTS

software costs at March 31, 2024 and December 31, 2023 consisted of the following:

software costs consisted of the following:

SCHEDULE OF CAPITALIZED SOFTWARE COSTS

March 31, 2024

December 31, 2023

At December 31,

Capitalized software costs

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Capitalized internal-use software in process

Total capitalized software costs net

the three months ended March 31, 2024 and 2023, the Company recorded amortization expense related to capitalized software costs of $ 136,000

and $ 67,000 , respectively.

Total capitalized software

Company recorded amortization expense of $ 152,000 and $ 288,000 related to capitalized software costs during the three and six months

ended June 30, 2024, respectively, and $ 170,000 and $ 237,000 during the same periods in 2023, respectively.

INTANGIBLE ASSETS AND GOODWILL

Company’s intangible assets at March 31, 2024 consisted of the following:

Company’s intangible assets at June 30, 2024 consisted of the following:

SCHEDULE OF INTANGIBLE ASSETS

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$ ( 188,000 )

Acquired new drug applications (“NDAs”)

Acquired NDAs

( 16,352,000 )

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$ 154,884,000

expense for intangible assets for the three months ended March 31, 2024 and 2023 was as follows:

expense for intangible assets was as follows:

SCHEDULE OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

For the Three Months Ended

For the Six Months Ended

Acquired NDAs

Customer relationships

Amortization of intangible

future amortization expense for the Company’s intangible assets at March 31, 2024 was as follows:

SCHEDULE OF ESTIMATED FUTURE AMORTIZATION EXPENSE

Intangible assets

were no changes to the carrying value of the Company’s goodwill during the three months ended March 31, 2024 and 2023.

expense of intangible assets

future amortization expenses for the Company’s intangible assets at June 30, 2024 was as follows:

OF ESTIMATED FUTURE AMORTIZATION EXPENSE

Remainder of 2024

$ 154,650,000

were no changes to the carrying value of the Company’s goodwill during the three and six months ended June 30, 2024 and 2023.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

payable and accrued expenses at March 31, 2024 and December 31, 2023 consisted of the following:

payable and accrued expenses consisted of the following:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

insurance premium

accrued payments

interest (see Note 11)

exit fee for Oaktree Loan (see Note 11)

accounts payable and accrued expenses

At December 31,

Accounts payable

Accrued insurance premium

Other accrued payments

Accrued interest (see Note 11)

Accrued exit fee for Oaktree Loan (see Note 11)

Total accounts payable and accrued expenses

current portion

( 22,264,000 )

total accrued expenses

Company financed all insurance policies for the policy term of August 2023 through August 2024.

The financing agreement has an interest

rate of 7.48 % per annum and requires nine monthly payments of $ 150,000 , of which we have three payments remaining as of March 31, 2024.

( 24,581,000 )

Non-current total accrued expenses

Company financed insurance policies for the policy terms of August 2023 through August 2024.

The financing agreement had an interest

rate of 7.48 % per annum and required nine monthly payments of $ 150,000 all of which had been paid as of June 30, 2024.

Loan Due 2026

16 unchanged sentences

and other current assets and is being amortized on a straight-line basis over the access period.

expense related to the Oaktree Loan totaled $ 2,953,000 and $ 95,000 for the three months ended March 31, 2024 and 2023, respectively,

expense related to the Oaktree Loan totaled $ 2,944,000 and $ 5,897,000 for the three and six months ended June 30, 2024, respectively,

and included the amortization of debt issuance costs and discount of $ 602,000 and $ 1,205,000 , respectively.

Interest expense related

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

amortization of debt issuance costs and discount of $ 514,000 and $ 526,000 , respectively.

Oaktree Loan carries an exit fee equal to 3.5 % of the aggregate principal amount owed, payable at maturity.

As of June 30, 2024 and December

31, 2023, the Company had recorded in accrued expenses the total exit fee liability of $ 2,713,000 .

– 11.875% Senior Notes Due 2027

December 2022 and in January 2023, the Company closed offerings of $ 40,250,000 aggregate principal amount of 11.875 % senior notes due

December 2027 (the “2027 Notes”).

Interest expense related to the 2027 Notes totaled

$ 1,373,000 and $ 1,395,000 for the three months ended March 31, 2024 and 2023, respectively, and included the amortization of debt issuance

costs and discount of $ 178,000 and $ 200,000 , respectively.

December 2022 and January 2023, the Company closed offerings of $ 40,250,000 aggregate principal amount of 11.875 % senior notes due December

2027 (the “2027 Notes”).

Interest expense related to the 2027 Notes totaled $ 1,373,000 and $ 2,746,000 for the three and six

months ended June 30, 2024, respectively, and included amortization of debt issuance costs and debt discount of $ 178,000 and $ 356,000 ,

respectively.

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

2023, respectively, and included amortization of debt issuance costs and debt discount of $ 176,000 and $ 376,000 , respectively.

– 8.625% Senior Notes Due 2026

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amount of 8.625 % senior notes due April 2026 (the “2026 Notes”).

In terest expense related

to the 2026 Notes totaled $ 1,812,000 and $ 1,810,000 for the three months ended March 31, 2024 and 2023, respectively, and included amortization

of debt issuance costs and debt discount of $ 195,000 and $ 193,000 , respectively.

summary of the Company’s debt at March 31, 2024 and December 31, 2023 is described as follows:

Interest expense related to the 2026 Notes totaled $ 1,812,000

and $ 3,624,000 for the three and six months ended June 30, 2024, respectively, and included amortization of debt issuance costs and debt

discount of $ 195,000 and $ 390,000 , respectively.

Interest expense related to the 2026 Notes totaled $ 1,812,000 and $ 3,622,000 for the

three and six months ended June 30, 2023, respectively, and included amortization of debt issuance costs and debt discount of $ 195,000

and $ 388,000 , respectively.

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

SCHEDULE OF LONG TERM DEBT

At December 31,

8.625 % Senior Notes due April 2026

11.875 % Senior Notes due December 2027

Loan, due January 2026

Oaktree Loan due January 2026

Notes payable gross

Unamortized debt issuance costs

Unamortized debt issuance costs, net of premium

( 7,727,000 )

( 9,578,000 )

Notes payable net

the three months ended March 31, 2024 and 2023, the total effective interest rate of the Company’s debt was 10.78 % .

March 31, 2024, future minimum payments under the Company’s debt were as follows:

$ 185,023,000

$ 183,172,000

the three and six months ended June 30, 2024, the total effective interest rate of the Company’s debt was 10.78 % and 10.88 %, respectively,

and 10.71 % and 10.81 % for the same periods in 2023, respectively.

June 30, 2024, future minimum payments under the Company’s debt were as follows:

SCHEDULE OF FUTURE MINIMUM PAYMENT UNDER NOTES PAYABLES

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expire in September 2027 .

March 2024, we entered in a new operating lease for 17,625 square feet of office space in Nashville, Tennessee which is expected

to commence in July 2024 and has a seven year term (target expiration date of June 30, 2032 ) with an option to extend the term for

two additional five-year terms.

March 2024, the Company entered into an operating lease for 17,625 square feet of office space in Nashville, Tennessee which is expected to

commence in August 2024 and has a seven year term (target expiration date of June 30, 2032 ) with an option to extend the term for

two additional five-year periods .

Once occupied, the Company expects this office space to serve as the Company’s new corporate

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Any operating lease right-of-use assets and liabilities related to this lease will be recognized at its commencement

March 31, 2024, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases

June 30, 2024, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases

held by the Company were 6.60 % and 11.2 years, respectively.

the three months ended March 31, 2024 and 2023, cash paid for amounts included for the operating lease liabilities was $ 327,000 and $ 306,000 ,

respectively.

During the three months ended March 31, 2024 and 2023, the Company recorded operating lease expense of $ 319,000 and $ 309,000 ,

the three and six months ended June 30, 2024, cash paid for amounts included for the operating lease liabilities was $ 327,000 and $ 650,000 ,

respectively, and $ 306,000 and $ 611,000 for the same periods in 2023, respectively.

During the three and six months ended June 30, 2024,

the Company recorded operating lease expense of $ 319,000 and $ 638,000 , respectively, and $ 308,000 and $ 617,000 for the same periods in

2023, respectively, which is included in selling, general and administrative expenses.

lease payments under operating leases as of March 31, 2024 were as follows :

SCHEDULE OF FUTURE LEASE PAYMENTS UNDER OPERATING LEASES

lease payments under operating leases as of June 30, 2024 were as follows :

OF FUTURE LEASE PAYMENTS UNDER OPERATING LEASES

Operating Leases

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STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

the three months ended March 31, 2024, the Company issued 46,175 shares of common stock and received proceeds of $ 348,000 upon the exercise

the six months ended June 30, 2024, the Company issued 86,996 shares of common stock and received proceeds of $ 521,000 upon the exercise

of options to purchase 86,996 shares of common stock with exercise prices ranging from $ 1.70 to $ 12.38 per share.

the three months ended March 31, 2024, 45,000 RSUs granted in February 2021 to Andrew R.

the six months ended June 30, 2024, the Company issued 199 shares of common stock upon the cashless exercise of options to purchase 700

shares at an exercise price of $ 7.60 per share.

the six months ended June 30, 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 .

the three months ended March 31, 2024, 150,000 RSUs granted in February 2021 to Mark L.

vested, and 26,520 shares of 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 .

the six months ended June 30, 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 .

the three months ended March 31, 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.

vested, and 90,164 shares of 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 .

the six months ended June 30, 2024, 30,000 RSUs granted in February 2021 to John Saharek, the Company’s Chief Commercial Officer,

vested, and 17,384 shares of 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 .

the three months ended March 31, 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 .

the three months ended March 31, 2024, 8,389 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 ceases providing services to the Company.

the six months ended June 30, 2024, 50,000 RSUs granted in February 2021 to various other employees, vested, and 32,452 shares of the

Company’s common stock were issued, net of 17,548 shares of common stock withheld for payroll tax withholdings totaling $ 187,000 .

the six months ended June 30, 2024, the Company issued 57,517 shares of its common stock underlying RSUs held by directors that ceased

providing services to the Company.

The RSUs had previously vested, including 3,872 RSUs that vested during the six months ended June

30, 2024, but the issuance and delivery of the shares were deferred until the director ceased providing services to the Company.

the six months ended June 30, 2024, 23,016 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 directors cease providing services to the Company.

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

7 unchanged sentences

with the 2007 Plan, the “Plans”).

As of December 31, 2023, the 2017 Plan provides for the issuance of a maximum of 6,000,000

As of June 30, 2024, the 2017 Plan provides for the issuance of a maximum of 6,000,000

shares of the Company’s common stock.

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

options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, restricted

stock units and restricted stock.

options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, RSUs and

restricted stock.

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

The Company had 400,250 shares available for future issuances under the 2017 Plan at March 31, 2024.

summary of stock option activity under the Plans for the three months ended March 31, 2024 is as follows:

The Company had

173,219 shares available for future issuances under the 2017 Plan at June 30, 2024.

summary of stock option activity under the Plans for the six months ended June 30, 2024 is as follows:

SCHEDULE OF STOCK OPTION PLAN ACTIVITY

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Options cancelled/forfeited

Options outstanding – March 31, 2024

Options outstanding – June 30, 2024

Options exercisable

2 unchanged sentences

have been received by option holders if all option holders had exercised and immediately sold all shares underlying options with an exercise

price lower than the market price on March 31, 2024, based on the closing price of the Company’s common stock of $ 13.23 on that

the three months ended March 31, 2024, the Company granted stock options to certain employees.

The stock options were granted with an

exercise price equal to the current market price of the Company’s common stock, as reported by the securities exchange on which

the common stock was then listed, at the grant date and have contractual terms of ten years.

Vesting terms for options granted to employees

during the three months ended March 31, 2024 included the following vesting schedule:

25% of the shares subject to the option vest and

become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and become

exercisable quarterly in equal installments thereafter over three years.

Certain option awards provide for accelerated vesting if there

is a change in control (as defined in the Plans) and in the event of certain modifications to the option award agreement.

price lower than the market price on June 28, 2024, based on the closing price of the Company’s common stock of $ 20.89 on that

the six months ended June 30, 2024, the Company granted stock options to certain employees.

The stock options were granted with an exercise

price equal to the current market price of the Company’s common stock, as reported by the securities exchange on which the common

stock was then listed, at the grant date and have contractual terms of ten years.

Vesting terms for options granted to employees during

the six months ended June 30, 2024 included the following vesting schedule:

25% of the shares subject to the option vest and become exercisable

on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and become exercisable quarterly

in equal installments thereafter over three years .

Certain option awards provide for accelerated vesting if there is a change in control

(as defined in the Plans) and in the event of certain modifications to the option award agreement.

fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model.

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Dividend yield

following table summarizes information about stock options outstanding and exercisable at March 31, 2024:

following table summarizes information about stock options outstanding and exercisable at June 30, 2024:

SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE

11 unchanged sentences

$ 1.47 - $ 25.86

of March 31, 2024, there was approximately $ 1,815,000 of total unrecognized compensation expense related to unvested stock options granted

of June 30, 2024, there was approximately $ 1,723,000 of total unrecognized compensation expense related to unvested stock options granted

under the Plans.

1 unchanged sentence

The stock-based

compensation for all stock options was $ 126,000 and $ 341,000 during the three months ended March 31, 2024 and 2023, respectively.

intrinsic value of options exercised during the three months ended March 31, 2024 was $ 139,000 .

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

vesting criteria.

The grant date fair value of the RSUs, which has been determined based upon the market value of the Company’s

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

summary of the Company’s RSU activity and related information for the three months ended March 31, 2024 is as follows:

compensation for all stock options was $ 130,000 and $ 256,000 during the three and six months ended June 30, 2024, respectively, and $ 122,000

and $ 463,000 during the same periods in 2023, respectively.

intrinsic value of options exercised during the six months ended June 30, 2024 was $ 694,000 .

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

The grant date fair value of the RSUs, which has been determined based upon the market value of the Company’s common

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

summary of the Company’s RSU activity and related information for the six months ended June 30, 2024 is as follows:

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

3 unchanged sentences

RSUs cancelled/forfeited

RSUs unvested - March 31, 2024

of March 31, 2024, the total unrecognized compensation expense related to unvested RSUs was approximately $ 859,000 , which is expected

RSUs unvested - June 30, 2024

of June 30, 2024, the total unrecognized compensation expense related to unvested RSUs was approximately $ 3,945,000 , which is expected

to be recognized over a weighted-average period of 2.2 years, based on estimated and actual vesting schedules of the applicable RSUs.

The stock-based compensation for RSUs during the three months ended March 31, 2024 and 2023 was $ 405,000 and $ 29,000 , respectively.

summary of the Company’s PSU activity and related information for the three months ended March 31, 2024 is as follows:

The stock-based compensation for RSUs during the three and six months ended June 30, 2024 was $ 502,000 and $ 907,000 , respectively, and

was $ 122,000 and $ 463,000 during the same periods in 2023, respectively.

summary of the Company’s PSU activity and related information for the six months ended June 30, 2024 is as follows:

SCHEDULE OF PERFORMANCE STOCK UNITS ACTIVITY

3 unchanged sentences

PSUs cancelled/forfeited

PSUs unvested – March 31, 2024

of March 31, 2024, the total unrecognized compensation expense related to unvested PSUs was approximately $ 14,553,000 , which is expected

PSUs unvested – June 30, 2024

of June 30, 2024, the total unrecognized compensation expense related to unvested PSUs was approximately $ 14,553,000 , which is expected

to be recognized over a weighted-average period of 0.76 years, based on estimated and actual vesting schedules of the applicable PSUs.

The stock-based compensation for PSUs during the three months ended March 31, 2024 and 2023 was $ 3,638,000 and $ 1,263,000 , respectively.

The stock-based compensation for PSUs during the three and six months ended June 30, 2024 was $ 3,638,000 and $ 7,276,000 , respectively,

and $ 5,290,000 and $ 6,582,000 during the same periods in 2023, respectively.

Compensation Summary

1 unchanged sentence

SCHEDULE OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES, DIRECTORS AND CONSULTANTS

For the Three Months Ended March 31,

For the Three Months Ended

For the Six Months Ended

Employees - selling, general and administrative

6 unchanged sentences

The Company describes legal proceedings and other matters that

are/were significant or that it believes could become significant in this footnote.

are/were significant or that it believes could become significant in this note.

Company records accruals for loss contingencies to the extent that it concludes it is probable that a liability has been incurred and

8 unchanged sentences

predict or determine the eventual outcomes of matters that have not concluded, an adverse determination in one or more of the matters

(whether discussed in this footnote or not) currently pending may have a material adverse effect on the Company’s condensed consolidated

(whether discussed in this note or not) currently pending may have a material adverse effect on the Company’s condensed consolidated

results of operations, financial position or cash flows.

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unfair competition and false advertising (Lanham Act).

ImprimisRx is seeking damages from OSRX.

Since July 2021, the complaint has been

amended and OSRX added counterclaims alleging ImprimisRx, LLC is violating the Lanham Act with false advertising.

Both parties are seeking

damages from the other.

The Company expects the trial to take place in August 2024.

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 matter was expected to go to trial in August 2024, however, due to scheduling

conflicts with the Court, the trial will be re-scheduled to a later date that has not yet been determined.

and Professional Liability

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Approved Product Acquisitions

recent years, the Company has acquired commercial and product rights to various FDA approved ophthalmic medications and products through

asset purchase, licenses, supply and/or other related agreements.

In general, in exchange for product and commercial rights these agreements

provide the counterparties with certain upfront and contingent milestone payments typically related to certain annual sales amounts and

manufacturing events, and in certain cases, per unit transfer prices and royalties on sales of some of the products.

During the three

months ended March 31, 2024 and 2023, $ 274,000 and $ 0 were incurred under these agreements as royalty expenses, respectively.

Company incurred $ 0 and $ 5,000,000 related to upfront and milestone payments under these agreements during the three months ended March 31,

recent years, the Company has acquired commercial and product rights to various FDA approved ophthalmic medications and products

through asset purchase, licenses, supply and/or other related agreements.

In general, in exchange for product and commercial rights

these agreements provide the counterparties with certain upfront and contingent milestone payments typically related to certain

annual sales amounts and manufacturing events, and in certain cases, per unit transfer prices and royalties on sales of some of the

During the three and six months ended June 30, 2024, $ 1,036,000

and $ 1,310,000 ,

respectively, were incurred under these agreements as royalty expenses, and $ 0

and $ 0 , respectively,

As of March 31, 2024, the remaining contingent consideration payable pursuant to these agreements were not

considered probable and reasonably estimable and therefore, no amount was accrued related to these contingent obligations during the

three months ended March 31, 2024.

At the time contingent consideration payable becomes probable and reasonably estimable the additional

consideration, if any, paid will be allocated to the assets based on their initial estimated fair values as a percent of the total purchase

during the same periods in 2023.

During the three and six months ended June 30, 2024, $ 0

were incurred under these agreements related to upfront and milestone payments under these agreements, respectively, and $ 0

and $ 5,000,000 , respectively,

during the same periods in 2023.

As of June 30, 2024, the remaining contingent consideration payable pursuant to these

agreements were not considered probable and reasonably estimable and therefore, no amount was accrued related to these contingent

obligations during the three and six months ended June 30, 2024.

At the time contingent consideration payable becomes probable and

reasonably estimable the additional consideration, if any, paid will be allocated to the assets based on their initial estimated

fair values as a percent of the total purchase price.

Company has acquired and sourced intellectual property rights related to certain proprietary innovations from certain inventors, innovator

7 unchanged sentences

on the completion of certain milestones, generally consisting of:

(1) a payment payable within 30 to 45 days after the issuance

of the first patent in the United States arising from the acquired intellectual property (if any);

(2) a payment payable within 30 days

after the Company files the first investigational new drug application (“IND”) with the U.S.

Food and Drug Administration

(“FDA”) for the first product arising from the acquired intellectual property (if any);

(3) for certain of the Inventors,

a payment payable within 30 days after the Company files the first new drug application with the FDA for the first product arising from

the acquired intellectual property (if any);

and (4) certain royalty payments based on the net receipts received by the Company in connection

with the sale or licensing of any product based on the acquired intellectual property (if any), after deducting (among other things)

the Company’s development costs associated with such product.

If, following five years after the date of the applicable asset purchase

agreement, the Company either (a) for certain of the Inventors, has not filed an IND or, for the remaining Inventors, has not initiated

a study where data is derived, or (b) has failed to generate royalty payments to the Inventors for any product based on the acquired

intellectual property, the Inventors may terminate the applicable asset purchase agreement and request that the Company re-assign the

acquired technology to the Inventors.

During the three months ended March 31, 2024 and 2023, $ 180,000 and $ 376,000 were incurred under

these agreements as royalty expenses, respectively.

(1) a payment payable within 30 to 45 days after the issuance of the

first patent in the United States arising from the acquired intellectual property (if any);

(2) a payment payable within 30 days after

the Company files the first investigational new drug application (“IND”) with the U.S.

Food and Drug Administration (“FDA”)

for the first product arising from the acquired intellectual property (if any);

(3) for certain of the Inventors, a payment payable within

30 days after the Company files the first new drug application with the FDA for the first product arising from the acquired intellectual

property (if any);

and (4) certain royalty payments based on the net receipts received by the Company in connection with the sale or

licensing of any product based on the acquired intellectual property (if any), after deducting (among other things) the Company’s

development costs associated with such product.

If, following five years after the date of the applicable asset purchase agreement, the

Company either (a) for certain of the Inventors, has not filed an IND or, for the remaining Inventors, has not initiated a study where

data is derived, or (b) has failed to generate royalty payments to the Inventors for any product based on the acquired intellectual property,

the Inventors may terminate the applicable asset purchase agreement and request that the Company re-assign the acquired technology to

the Inventors.

During the three and six months ended June 30, 2024, $ 316,000 and $ 496,000 , respectively, were incurred under these agreements as royalty

expenses and $ 275,000 and $ 651,000 , respectively, during the same periods in 2023.

and Marketing Agreements

9 unchanged sentences

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

expenses during the three months ended March 31, 2024 and 2023, respectively.

expenses during the three and six months ended June 30, 2023, respectively.

Manufacturing

Company had entered into manufacturing agreements with respect to third-party contract manufacturers for its FDA approved pharmaceutical

Company has entered into manufacturing agreements with respect to third-party contract manufacturers for its FDA approved pharmaceutical

Some of these contract manufacturing agreements require minimum annual order amounts.

4 unchanged sentences

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.

Company had one and two products that accounted for more than 10% of total revenues during the three months ended March 31, 2024 and

2023, respectively.

These products accounted for 11 % and 36 % of revenues during the three months ended March 31, 2024 and 2023, respectively.

of March 31, 2024 and December 31, 2023, accounts receivable from a single customer accounted for 68 % and 80 % of total accounts receivable,

respectively.

For the three months ended March 31, 2024, revenues from a single customer accounted for 27 % of total revenues.

three months ended March 31, 2023, no customer exceeded 10% of total revenues.

An operating segment is defined as a component of an entity that engages in business activities from which it may

recognize revenues and incur expense, its operating results are regularly reviewed by the entity’s chief operating decision maker

(“CODM”) to make decisions about resources to be allocated to the segment and assess its performance, and its discrete financial

information is available.

The Company’s CODM, who is the Chief Executive Officer, evaluates

the Company as a single operating segment, consistent with internal management reporting.

Company had one product that accounted for more than 10 % of total revenues during the three and six months ended June 30, 2024.

The Company had four products that each accounted for more than 10 % of total revenues during the three months

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

These products collectively accounted for 23 % and 14 % of revenues during the three and six months ended June 30, 2024, respectively.

For the same periods in the prior year these products collectively accounted for 48 % and 38 % of revenues during the three and six months

ended June 30, 2023.

of June 30, 2024 and December 31, 2023, accounts receivable from a single customer accounted for 67 %

of total accounts receivable, respectively.

For the three and six months ended June 30, 2024, revenues from a single customer

accounted for 45 %

and 40 % of total revenues, respectively.

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

of total revenues, respectively.

Company receives its active pharmaceutical ingredients from three main suppliers.

These suppliers collectively accounted for 85 % of active

pharmaceutical ingredient purchases during the three months ended March 31, 2024, and 90 % during the same period in 2023.

These suppliers collectively accounted for 61 %

and 62 % of active pharmaceutical ingredient purchases during the three and six months ended June 30, 2024, respectively, and 80 %

during the same periods in 2023, respectively.

SUBSEQUENT EVENTS

Company has performed an evaluation of events occurring subsequent to March 31, 2024 through the filing date of this Quarterly Report

Company has performed an evaluation of events occurring subsequent to June 30, 2024 through the filing date of this Quarterly Report

on Form 10-Q.

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

April 2024, the Company issued 1,481 shares of common stock and received proceeds of $ 11,000 upon the exercise of options to purchase

1,481 shares of common stock with exercise prices between $ 10.62 and $ 12.72 per share.

April 2024, the Company sold all 1,982,000 shares of common stock it held of Eton in a block trade at a gross price of $ 3.00 per share.

After deducting trading expenses and commissions of approximately $ 436,000 , the Company received net proceeds of $ 5,510,000 related to

July 2024, the Company issued 2,563

shares of common stock and received proceeds of $ 53,000

upon the exercise of options to purchase 2,563

shares of common stock with exercise prices between $ 7.60 and $ 20.97

In July 2024, the Company issued 889 shares of common stock upon the cashless exercise of options to purchase 1,000

shares at an exercise price of $ 2.60 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-Q

Item 1. Financial Statements