What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-14 compared with 2024-08-07 · 465 added, 321 removed, 795 unchanged (50% of the section changed)

Financial Statements

Financial Statements (unaudited)

CONSOLIDATED BALANCE SHEETS

September 30,

Current assets

13 unchanged sentences

Accounts payable and accrued expenses

Contingent consideration payable

Accrued rebates and copay assistance

6 unchanged sentences

Deferred tax liability

Notes payable, net of unamortized debt discount

Notes payable, net of unamortized debt discounts

TOTAL LIABILITIES

1 unchanged sentence

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

Common stock, $ 0.001 par value, 50,000,000 shares authorized, 35,611,365 and 35,168,260 shares issued and outstanding at

September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

12 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Product sales, net

$ 132,398,000

Other revenues

19 unchanged sentences

( 3,171,000 )

Loss on extinguishment of debt

11 unchanged sentences

( 14,027,000 )

Income tax (expense) benefit

Provision for income taxes

( 1,539,000 )

2 unchanged sentences

$ ( 4,391,000 )

$ ( 24,258,000 )

$ ( 15,263,000 )

Basic and diluted net loss per share of common stock

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

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

the periods ended September 30, 2024 and 2023

Noncontrolling

6 unchanged sentences

Issuance of common stock in connection with:

Public offering, net of offering costs

Exercise of consultant stock-based options

9 unchanged sentences

( 15,263,000 )

Balance at June 30, 2023

Balance at September 30, 2023

$ 200,478,000

16 unchanged sentences

( 24,258,000 )

Balance at June 30, 2024

Balance at September 30, 2024

$ 216,103,000

4 unchanged sentences

Stockholders’

Balance at March 31, 2023

Balance at June 30, 2023

$ 142,742,000

2 unchanged sentences

Issuance of common stock in connection with:

Exercise of consultant stock-based options

Public offering, net of offering costs

Exercise of employee stock-based options

Vesting of RSUs

Vesting of PSUs

Shares withheld related to net share settlement of equity awards

( 11,272,000 )

( 11,273,000 )

Stock-based compensation expense

2 unchanged sentences

( 4,391,000 )

Balance at June 30, 2023

Balance at September 30, 2023

$ 200,478,000

1 unchanged sentence

$ ( 355,000 )

Balance at March 31, 2024

Balance at June 30, 2024

$ 212,439,000

6 unchanged sentences

Exercise of employee stock-based options

Vesting of RSUs

Shares withheld related to net share settlement of equity awards

( 1,205,000 )

Stock-based compensation expense

2 unchanged sentences

( 4,220,000 )

Balance at June 30, 2024

Balance at September 30, 2024

$ 216,103,000

6 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

For the Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

10 unchanged sentences

Loss on extinguishment of debt

Loss on disposal of intangible assets

Stock-based compensation

6 unchanged sentences

Prepaid expenses and other current assets

( 4,079,000 )

Accounts payable, accrued expenses, accrued rebates and copay assistance

5 unchanged sentences

CASH FLOWS FROM INVESTING ACTIVITIES

Net proceeds on sale of Eton Pharmaceuticals

Net proceeds from sale of investment in Eton Pharmaceuticals

Investment in patent and trademark assets

2 unchanged sentences

Purchases of property, plant and equipment

( 1,040,000 )

( 1,266,000 )

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

6 unchanged sentences

( 2,362,000 )

( 12,971,000 )

Proceeds from exercise of stock options

4 unchanged sentences

( 59,750,000 )

Proceeds from public offering of common stock, net of costs

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

( 1,457,000 )

NET CHANGE IN CASH AND CASH EQUIVALENTS

9 unchanged sentences

Accrual of exit fee related to Oaktree Loan

Purchase of property, plant and equipment included in

accounts payable and accrued expenses

Insurance premium financed

Purchase of product NDAs associated with contingent consideration payable

Purchase of property, plant and equipment included in

1 unchanged sentence

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

Income taxes owed for exercise of options

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

TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

the Three and Nine Months Ended September 30, 2024 and 2023

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

and Background

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

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

products for the U.S.

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

or “Harrow”) is a leading eyecare pharmaceutical company engaged in the discovery, development, and commercialization of

innovative ophthalmic pharmaceutical products for the U.S.

Harrow helps U.S.

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

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

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

eyecare professionals preserve the gift of sight

by making its comprehensive portfolio of prescription and non-prescription pharmaceutical products accessible and affordable to millions

of Americans each year.

The Company 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 businesses.

of Presentation

7 unchanged sentences

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

Operating results for the three and six months ended June

Operating results for the three and nine months ended September

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

11 unchanged sentences

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

following represents an update for the three and nine months ended September 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.

Company’s chief operating decision-maker is its Chief Executive Officer who makes resource allocation decisions and assesses performance

based on financial information presented as operating segments.

During the period ended September 30, 2024, the Company identified two

operating segments as reportable segments.

See Note 15 for more information regarding the Company’s reportable segments.

Uncertainties and Liquidity

24 unchanged sentences

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

accounts receivable balance on the Company’s condensed consolidated balance sheet as of June 30, 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:

accounts receivable balance on the Company’s condensed consolidated balance sheet as of September 30, 2024 was $ 53,734,000 , net

of $ 281,000 of allowances.

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

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

OF ACCOUNTS RECEIVABLE ALLOWANCE OF CREDIT LOSS

2 unchanged sentences

Write-offs, net of recoveries

Balance at June 30, 2024

Balance at September 30, 2024

Value Measurements

23 unchanged sentences

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.

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

After deducting

11 unchanged sentences

OF ESTIMATED FAIR VALUE

June 30, 2024

September 30, 2024

December 31, 2023

2 unchanged sentences

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

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

The carrying amount

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

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

their respective fair values.

accrued payroll and related liabilities, contingent consideration payable, deferred revenue and customer deposits and operating lease

The carrying amount of these financial instruments, except for operating lease liabilities, approximates fair value due

to the short-term maturities of these instruments.

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

the operating lease liabilities approximate their respective fair values.

and Diluted Net Loss per Common Share

5 unchanged sentences

Common equivalent shares (using the treasury stock method) from stock options, unvested RSUs, and unvested PSUs were 4,411,488 and 4,588,982

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 ceases providing services.

The number of

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

at September 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 ceases providing services.

number of shares underlying vested RSUs at September 30, 2024 and 2023 was 195,696 and 244,352 , 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 June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Numerator – net loss

5 unchanged sentences

Net loss per share, basic and diluted

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

Company’s effective tax rate was ( 2.95 ) % and ( 8.81 ) % for the nine months ended September 30, 2024 and 2023, respectively.

The Company’s

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

effective tax rate for the nine months ended September 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, Section 162(m) excess officer compensation

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

In the current period ended September 30, 2024, the Company met the exception to using the estimated annual effective

The current period income tax expense reflects year-to-date income tax expense.

The prior year third quarter income tax expense

was recorded using the estimated annual effective tax rate.

of September 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.

2 unchanged sentences

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.

46 % of Melt’s equity interests as of September 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.

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

9 unchanged sentences

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:

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

SCHEDULE OF INVESTMENT

5 unchanged sentences

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

Guidance Issued but Not Adopted at June 30, 2024

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

Business Combinations—Joint Venture Formations (Subtopic 805-60):

Recognition and Initial Measurement , which applies to

the formation of entities that meet the definition of a joint venture (or a corporate joint venture) and requires joint ventures to initially

measure all contributions received upon formation at fair value.

The new guidance does not impact accounting by the venturers.

guidance is applicable to joint venture entities with a formation date on or after January 1, 2025 on a prospective basis.

Joint ventures

formed prior to the effective date may elect to apply the new guidance retrospectively back to their original formation date.

will apply the guidance in ASU 2023-05 prospectively to any future arrangements meeting the definition of a joint venture.

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

Update and Simplification Initiative .

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

codification by aligning them with the SEC’s regulations.

The amendments to the various topics should be applied prospectively,

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

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

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

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

Early adoption of this

ASU is prohibited.

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

in its consolidated financial statements.

Guidance Issued but Not Adopted at September 30, 2024

October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-06, Disclosure Improvements—Codification Amendments

in Response to the SEC’s Disclosure Update and Simplification Initiative .

This ASU modifies the disclosure or presentation

requirements of a variety of topics in the codification by aligning them with the SEC’s regulations.

The amendments to the various

topics should be applied prospectively, and the effective date for the Company for each amendment will be determined based on the effective

date of the SEC’s removal of the related disclosure from Regulation S-X or Regulation S-K.

If the SEC has not removed the applicable

requirement by June 30, 2027, then the related amendment in ASU 2023-06 will be removed from the codification and will not become effective.

Early adoption of this ASU is prohibited.

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

or presentation on its consolidated financial statements.

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

4 unchanged sentences

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

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

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

Notably, this ASU requires entities

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

meet a quantitative threshold.

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

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

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

Notably, this ASU requires

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

items that meet a quantitative threshold.

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

prospective basis.

Early adoption and retrospective reporting are permitted.

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

consolidated financial statements.

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

on its consolidated financial statements.

November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation

Disclosures, to improve the disclosures by a public business entity about the types of expenses in commonly presented expense captions.

This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December

15, 2027, with early adoption permitted.

The Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial

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

3 unchanged sentences

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.

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.

Revenue from the Company’s

pharmacy services includes:

(i) the portion of the price the client pays directly to the Company, net of any volume-related or other

discounts paid back to the client, (ii) the price paid to the Company by individuals, and (iii) customer copayments made directly to

the pharmacy network.

pharmacy services include:

(i) the portion of the price the client pays directly to the Company, net of any volume-related or other discounts

paid back to the client, (ii) the price paid to the Company by individuals, and (iii) customer copayments made directly to the pharmacy

Sales taxes are not included in revenue.

Following the core principles of ASC 606, the Company has identified the

Following the core principles of ASC 606, the Company has identified the following:

the contract(s) with a customer:

46 unchanged sentences

Property License and Related Arrangements Revenues

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.

License arrangements may consist of non-refundable

upfront license fees, data transfer fees, research reimbursement payments, exclusive license rights to patented or patent pending compounds,

technology access fees, and various performance or sales milestones.

These arrangements can be multiple-element arrangements, the revenue

of which is recognized at the point in time that the performance obligation is met.

of September 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.

License arrangements may consist

of non-refundable upfront license fees, data transfer fees, research reimbursement payments, exclusive license rights to patented or

patent pending compounds, technology access fees, and various performance or sales milestones.

These arrangements can be multiple-element

arrangements, the revenue of which is recognized at the point in time that the performance obligation is met.

Non-refundable

17 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Product sales, net

$ 132,398,000

Other revenues

Total revenues

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 six months ended June 30, 2024.

$ 132,783,000

revenue and customer deposits at September 30, 2024 and December 31, 2023 were $ 137,000 and $ 75,000 , respectively.

All deferred revenue

and customer deposit amounts at December 31, 2023 were recognized as revenue during the nine months ended September 30, 2024.

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

10 unchanged sentences

The Melt MSA was terminated effective July 1, 2023.

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

During the three and nine months ended September 30, 2024, the Company did not

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

During the three and nine months ended

September 30, 2023, the Company recorded $ 0

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

of both September 30, 2024 and December 31, 2023, the Company was due $ 228,000

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

7 unchanged sentences

OF CONDENSED INCOME STATEMENT

For the Six Months Ended

For the Nine Months Ended

September 30,

Revenues, net

6 unchanged sentences

OF CONDENSED BALANCE SHEET

At September 30,

At December 31,

Current assets

Non-current assets

Total liabilities

13 unchanged sentences

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

At September 30, 2024

At December 31, 2023

1 unchanged sentence

Prepaid computer software licenses and related expenses

Prefunded co-pay assistance

Other prepaid expenses

7 unchanged sentences

OF PROPERTY, PLANT AND EQUIPMENT

At September 30, 2024

At December 31, 2023

Property, plant and equipment, net:

Property, plant and equipment:

Computer hardware

7 unchanged sentences

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.

the three and nine months ended September 30, 2024, depreciation related to property, plant and equipment was $ 351,000 and $ 948,000 ,

respectively, compared to $ 290,000 and $ 743,000 during the same periods in 2023, respectively.

CAPITALIZED SOFTWARE COSTS

1 unchanged sentence

SCHEDULE OF CAPITALIZED SOFTWARE COSTS

At September 30, 2024

At December 31, 2023

8 unchanged sentences

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.

Company recorded amortization expense of $ 146,000 and $ 434,000 related to capitalized software costs during the three and nine months

ended September 30, 2024, respectively, and $ 115,000 and $ 352,000 during the same periods in 2023, respectively.

INTANGIBLE ASSETS AND GOODWILL

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

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

SCHEDULE OF INTANGIBLE ASSETS

12 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Acquired NDAs

Customer relationships

State pharmacy licenses

expense of intangible assets

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

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

OF ESTIMATED FUTURE AMORTIZATION EXPENSE

1 unchanged sentence

$ 189,046,000

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

connection with an asset purchase agreement between Novartis and the Company, the Company is required to make a milestone payment

following the release of the first commercially available batch of TRIESENCE .

During the three months ended September 30, 2024, the

Company determined that it was probable the first commercial batch would be released and, as such, recognized the $ 37,000,000

milestone payment as an increase in the amount of intangible assets for Acquired NDAs.

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

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

1 unchanged sentence

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

At December 31,

September 30,

Accounts payable

8 unchanged sentences

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

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

LLC, as administrative agent for the lenders (together, “Oaktree”), providing for a senior secured term loan facility to

LLC, as administrative agent for the lenders (“Oaktree”), providing for a senior secured term loan facility to

the Company with a principal amount of up to $ 100,000,000 .

2 unchanged sentences

In July 2023, the Company drew an additional principal amount of $ 12,500,000 and entered into the First Amendment to the

Oaktree Loan (the “Oaktree Amendment”).

Under the Oaktree Amendment, the overall credit facility size was increased from

Oaktree Loan (the “First Amendment”).

Under the First Amendment, the overall credit facility size was increased from

$ 100,000,000 to $ 112,500,000 .

The additional principal loan amount of up to $ 35,000,000 available under the Oaktree Loan (“Tranche

B”) is made available to the Company upon the commercialization of TRIESENCE.

B”) was to be made available to the Company upon the commercialization of TRIESENCE.

Since Tranche B was not drawn by the Company on or

4 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 $ 2,944,000 and $ 5,897,000 for the three and six months ended June 30, 2024, respectively,

expense related to the Oaktree Loan totaled $ 3,026,000 and $ 8,923,000 for the three and nine months ended September 30, 2024, respectively,

and included the amortization of debt issuance costs and discount of $ 656,000 and $ 1,861,000 , 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.

to the Oaktree Loan totaled $ 2,995,000 and $ 5,660,000 for the three and nine months ended

September 30, 2023, respectively, and included the amortization of debt issuance costs and discount of $ 567,000

and $ 1,093,000 , respectively.

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 .

As of September 30, 2024

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

– 11.875% Senior Notes Due 2027

1 unchanged sentence

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.

Interest expense related to the 2027 Notes totaled $ 1,376,000

and $ 4,121,000 for the three and nine months ended September 30, 2024, respectively, and included amortization of debt issuance costs

and debt discount of $ 181,000 and $ 537,000 , respectively.

Interest expense related to the 2027 Notes totaled $ 1,375,000 and $ 4,141,000

for the three and nine months ended September 30, 2023, respectively, and included amortization of debt issuance costs and debt discount

of $ 180,000 and $ 556,000 , respectively.

– 8.625% Senior Notes Due 2026

April and September 2021, the Company closed offerings (including an over-allotment exercise in May 2021) of $ 75,000,000 aggregate principal

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

April and September 2021, the Company closed offerings (including an over-allotment exercise in May 2021) of $ 75,000,000

aggregate principal amount of 8.625 %

senior notes due April

2026 (the “2026 Notes”).

expense related to the 2026 Notes totaled $ 1,814,000

and $ 5,438,000

for the three and nine

months ended September 30, 2024, respectively, and included amortization of debt issuance costs and debt discount of $ 197,000

and $ 587,000 ,

respectively.

Interest expense related to the 2026 Notes totaled $ 1,814,000

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.

and $ 5,436,000

for the three and nine

months ended September 30, 2023, respectively, and included amortization of debt issuance costs and debt discount of $ 197,000

and $ 585,000 ,

respectively.

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

SCHEDULE OF LONG TERM DEBT

At December 31,

September 30,

8.625 % Senior Notes due April 2026

8 unchanged sentences

$ 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:

the three and nine months ended September 30, 2024, the total effective interest rate of the Company’s debt was 11.03 % and 11.17 %,

respectively, and 10.78 % and 10.91 % for the same periods in 2023, respectively .

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

SCHEDULE OF FUTURE MINIMUM PAYMENT UNDER NOTES PAYABLES

8 unchanged sentences

$ 186,057,000

Company leases office and laboratory space under non-cancelable operating leases listed below.

Company leases office and laboratory space under non-cancellable operating leases listed below.

These lease agreements have remaining

13 unchanged sentences

expire in September 2027 .

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

headquarters.

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

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

March 2024, the Company entered into an operating lease for 17,625 square feet of office space in Nashville, Tennessee that commenced

in August 2024 and has a seven -year term with an option to extend the term for two additional five-year periods .

This office space

serves as the Company’s new corporate headquarters.

Commensurate with the commencement date of the lease, the Company recognized

an operating right of use asset and liability of $ 2,853,000 .

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

held by the Company were 7.85 % and 10.4 years, respectively.

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 ,

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

$ 972,000 , respectively, and $ 310,000 and $ 921,000 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 June 30, 2024 were as follows :

During the three and nine months ended

September 30, 2024, the Company recorded operating lease expense of $ 414,000 and $ 1,053,000 , respectively, and $ 309,000 and $ 926,000

for the same periods in 2023, respectively, which is included in selling, general and administrative expenses.

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

OF FUTURE LEASE PAYMENTS UNDER OPERATING LEASES

8 unchanged sentences

STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

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 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 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 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 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.

the nine months ended September 30, 2024, the Company issued 141,628 shares of common stock and received proceeds of $ 1,005,000 upon the

exercise of options to purchase 141,628 shares of common stock with exercise prices ranging from $ 1.70 to $ 25.86 per share.

the nine months ended September 30, 2024, the Company issued 32,580

shares of common stock upon the cashless exercise of options to purchase 39,237

shares with exercise prices ranging from $ 1.70

to $ 8.00 per share.

During the nine months ended September 30, 2024, the Company issued 44,860

shares of common stock upon the cashless exercise of options to purchase 90,000 shares at an exercise price of $ 7.37 .

The Company withheld

29,107 shares of common stock for payroll tax withholdings totaling $ 1,205,000 .

the nine months ended September 30, 2024, 45,000 RSUs granted in February 2021 to Andrew R.

Boll, the Company’s Chief Financial

Officer, 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 nine months ended September 30, 2024, 150,000 RSUs granted in February 2021 to Mark L.

Baum, the Company’s Chief Executive

Officer, 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 nine months ended September 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 nine months ended September 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

the nine months ended September 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 nine months ended

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

the nine months ended September 30, 2024, 34,008 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.

During the nine months ended September 30, 2024, 3,667 shares of the Company’s

common stock underlying RSUs issued to consultants vested, but the issuance and delivery of these shares has not occurred.

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

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

shares of the Company’s common stock.

7 unchanged sentences

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:

53,344 shares available for future issuances under the 2017 Plan at September 30, 2024.

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

SCHEDULE OF STOCK OPTION PLAN ACTIVITY

1 unchanged sentence

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life

Weighted Average Remaining Contractual

Aggregate Intrinsic Value

3 unchanged sentences

Options cancelled/forfeited

Options outstanding – June 30, 2024

Options outstanding – September 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 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.

price lower than the market price on September 30, 2024, based on the closing price of the Company’s common stock of $ 44.96 on

the nine months ended September 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 nine months ended September 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.

10 unchanged sentences

factors could change in the future, which would affect the determination of stock-based compensation expense in future periods.

these assumptions, the fair value is determined at the date of grant.

table below illustrates the fair value per share determined using the Black-Scholes-Merton option pricing model with the following assumptions

1 unchanged sentence

SCHEDULE OF FAIR VALUE ASSUMPTIONS

Weighted-average fair value of options granted

Expected terms (in years)

Expected volatility

Risk-free interest rate

Weighted-average

fair value of options granted

terms (in years)

67.78 - 72.95 %

Dividend yield

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

interest rate

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

SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE

Options Outstanding

Options Exercisable

Range of Exercise Prices

Number Outstanding

Weighted Average Remaining Contractual Life in Years

$ 1.47 - $ 1.73

$ 2.40 - $ 2.60

$ 4.49 - $ 5.72

$ 6.75 - $ 7.26

$ 7.37 - $ 7.79

$ 7.87 - $ 25.86

$ 1.47 - $ 25.86

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

under the Plans.

That expense is expected to be recognized over the weighted-average remaining vesting period of 2.85 years.

of Exercise Prices

Average Remaining Contractual Life in Years

of September 30, 2024, there was approximately $ 2,071,000 of total unrecognized compensation expense related to unvested stock options

granted under the Plans which is expected to be recognized over the weighted-average remaining vesting period of 2.83 years.

The stock-based

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 .

compensation for all stock options was $ 160,000 and $ 416,000 during the three and nine months ended September 30, 2024, respectively,

and $ 154,000 and $ 617,000 during the same periods in 2023, respectively.

intrinsic value of options exercised during the nine months ended September 30, 2024 was $ 6,651,000 .

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

1 unchanged sentence

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:

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

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

3 unchanged sentences

RSUs cancelled/forfeited

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

RSUs unvested - September 30, 2024

of September 30, 2024, the total unrecognized compensation expense related to unvested RSUs was approximately $ 7,324,000 , which is expected

to be recognized over a weighted-average period of 2 years, based on estimated and actual vesting schedules of the applicable RSUs.

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:

The stock-based compensation for RSUs during the three and nine months ended September 30, 2024 was $ 587,000 and $ 1,494,000 , respectively,

and was $ 374,000 and $ 789,000 during the same periods in 2023, respectively.

Stock Units (Market-Based Vesting)

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

SCHEDULE OF PERFORMANCE STOCK UNITS ACTIVITY

3 unchanged sentences

PSUs cancelled/forfeited

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

PSUs unvested – September 30, 2024

of September 30, 2024, the total unrecognized compensation expense related to unvested PSUs was approximately $ 7,277,000 , which is expected

to be recognized over a weighted-average period of 0.51 years, based on estimated and actual vesting schedules of the applicable PSUs.

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,

The stock-based compensation for PSUs during the three and nine months ended September 30, 2024 was $ 3,638,000 and $ 10,915,000 , respectively,

and $ 3,948,000 and $ 10,115,000 during the same periods in 2023, respectively.

2 unchanged sentences

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

For the Three Months Ended

For the Six Months Ended

the Three Months Ended

the Nine Months Ended

Employees - selling, general and administrative

22 unchanged sentences

and OSRX, Inc.

(together, “OSRX”)

District Court for the Southern District of California, asserting claims for copyright infringement, trademark infringement,

unfair competition and false advertising (Lanham Act).

Since July 2021, the complaint has been amended and OSRX added counterclaims alleging

ImprimisRx, LLC is violating the Lanham Act with false advertising.

The Court granted cross motions for summary judgement on each party’s

Lanham Act claims thus leaving only ImprimisRx, LLC’s copyright infringement, trademark infringement and unfair competition claims

“OSRX”) in the U.S.

District Court for the Southern District of California, asserting claims for copyright infringement,

trademark infringement, unfair competition and false advertising (Lanham Act).

Since July 2021, the complaint has been amended and

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

The Court granted cross

motions for summary judgement on each party’s Lanham Act claims thus leaving only ImprimisRx, LLC’s copyright

infringement, trademark infringement and unfair competition claims for trial.

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.

trial associated with this matter began during the month of November 2024 and is ongoing as of the date of this Quarterly

and Professional Liability

23 unchanged sentences

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

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

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

and nine months ended September 30, 2024, $ 730,000

and $ 2,040,000 ,

respectively, were incurred under these agreements as royalty expenses, and $ 220,000

and $ 0 , respectively,

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.

and $ 705,000 ,

respectively, during the same periods in 2023.

During the three and nine months ended September 30, 2024, $ 0

was incurred under these agreements related to

upfront and milestone payments under these agreements.

During the three and nine months ended September 30, 2023, the Company amended

the Sintetica Agreement to allow for early payment of previously accrued amounts for commercial related milestones associated with sales

of IHEEZO in exchange for a $ 550,000 reduction in the milestone amounts due, and as a result of this amendment, the Company reduced

the intangible asset value associated with IHEEZO by $ 550,000 and paid the remaining commercial milestone amount of $ 4,450,000 .

As of September 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 nine months

ended September 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

6 unchanged sentences

consideration for the acquisition of these intellectual property rights, the Company is obligated to make payments to the Inventors based

on the completion of certain milestones, generally consisting of:

on the completion of a milestone, generally consisting of:

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

15 unchanged sentences

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.

During the three and nine months ended September 30, 2024, $ 453,000 and $ 949,000 , respectively, were incurred under these

agreements as royalty expenses and $ 300,000 and $ 951,000 , respectively, during the same periods in 2023.

and Marketing Agreements

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

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

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

7 unchanged sentences

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

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

expenses during the three and nine months ended September 30, 2023, respectively.

Manufacturing

4 unchanged sentences

SEGMENTS AND CONCENTRATIONS

Company operates its business on the basis of a single reportable segment, which is the business of discovery, development, and commercialization

of innovative ophthalmic therapies.

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.

to the three months ended September 30, 2024, the Company operated its business on the basis of a single reportable segment due to the

lack of discrete, precise financial information available to the chief operating decision maker (“CODM”).

The CODM does not

review segment assets when assessing segment performance and deciding how to allocate resources.

During the three months ended September

30, 2024, refinements were made to the financial reporting information and the Company began reporting on two reportable segments which

were generally determined based on the decision-making structure of the Company and the grouping of similar products and services:

and ImprimisRx.

Branded segment includes activities of our FDA approved ophthalmology pharmaceutical products, including the out-licensing

of rights to certain of our branded products.

ImprimisRx segment represents activities in our ophthalmology-focused pharmaceutical compounding business.

contribution for the segments represents net revenues less cost of sales, certain general and administrative expenses, selling and marketing

expenses, and research and development expenses.

The Company does not evaluate the following items at the segment level:

general and administrative expenses that result from shared infrastructure, including certain expenses associated with legal matters,

public company costs (e.g.

investor relations), board of directors and principal executive officers and other like shared expenses.

expenses within selling, general and administrative expenses that result from the impact of corporate initiatives.

Corporate initiatives

primarily include integration, restructuring, acquisition and other shared costs.

select revenues and operating expenses including research and development expenses, amortization, and asset sales and impairments, net as not all

such information has been accounted for at the segment level, or such information has not been used by all segments.

net revenues, segment operating expenses and segment contribution information consisted of the following:

OF SEGMENT NET REVENUES

Three Months Ended September 30, 2024

Product sales, net

Other revenues

Total revenues

Cost of sales

( 5,169,000 )

( 6,849,000 )

( 12,018,000 )

Operating expenses:

Selling, general and administrative

Research and development

Segment contribution

Research and development

Income from operations

Three Months Ended September 30, 2023

Product sales, net

Other revenues

Total revenues

Cost of sales

( 3,335,000 )

( 6,732,000 )

( 10,067,000 )

Operating expenses:

Selling, general and administrative

Research and development

Segment contribution

Research and development

Income from operations

Nine Months Ended September 30, 2024

Product sales, net

$ 132,398,000

Other revenues

Total revenues

Cost of sales

( 14,406,000 )

( 20,704,000 )

( 35,110,000 )

Operating expenses:

Selling, general and administrative

Research and development

Segment contribution

Research and development

Loss from operations

$ ( 4,077,000 )

Nine Months Ended September 30, 2023

Product sales, net

Other revenues

Total revenues

Cost of sales

( 8,396,000 )

( 19,942,000 )

( 28,338,000 )

Operating expenses:

Selling, general and administrative

Research and development

Segment contribution

Research and development

Income from operations

revenue is attributable to the United States.

All long-lived assets at September 30, 2024 and December 31, 2023 were located in the United

by segment are further described as follows:

OF REVENUES BY SEGMENT

For the Three Months Ended

For the Nine Months Ended

September 30,

Other products (Anterior Segment)

Other revenue, net

Branded revenue, net

ImprimisRx revenue, net

Total revenues, net

$ 132,783,000

than IHEEZO, VEVYE, and one ImprimisRx product, no other products accounted for more than 10% of total revenues for the periods

and Supplier Concentrations

Substantially

all of the Company’s Branded sales are made to a third-party logistics wholesaler who sells the products to the end-user.

were no customers who comprised more than 10 % of ImprimisRx revenues for the three and nine months ended September 30, 2024 and 2023.

of September 30, 2024 and December 31, 2023, accounts receivable from a single customer accounted for 64 % and 80 %, respectively, of

total consolidated accounts receivable.

For the three and nine months ended September 30, 2024, revenues from a single customer accounted

for 46 % and 42 %, respectively, of total consolidated revenues.

For the three and nine months ended September 30, 2023, revenues from

a single customer accounted for 35 % and 23 %, respectively, of total consolidated revenues.

Company receives its active pharmaceutical ingredients from three main suppliers.

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 %

These suppliers collectively accounted for 50 % and

51 % of active pharmaceutical ingredient purchases during the three and nine months ended September 30, 2024, respectively, and 96 % and

79 % during the same periods in 2023, respectively.

SUBSEQUENT EVENTS

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

Company has performed an evaluation of events occurring subsequent to September 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.

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.

October 2024, the Company entered into the Second Amendment to Credit Agreement and Guaranty with Oaktree (“Second Amendment”).

Upon satisfaction of certain conditions to funding, the Company drew down the principal amount of $ 30,000,000 (the “$ 30,000,000

Draw”) under a pre-existing commitment under the Oaktree Loan to partially fund a one-time milestone payment to Novartis Technology,

LLC and Novartis Innovative Therapies AG (together, “Novartis”).

Under its asset purchase agreement with Novartis, the Company

made a one-time milestone payment to Novartis equal to $ 37,000,000 upon the commercial availability of TRIESENCE, which the Company paid

in October 2024.

In connection with the Second Amendment, the Company incurred approximately $ 150,000 of costs.

In connection with the

Second Amendment and following the $ 30,000,000 Draw, the Company has drawn down a total principal loan amount of $ 107,500,000 under the

Oaktree Loan and no additional principal loan amount remains available to the Company under the Oaktree Loan.

In November 2024, the Company became aware of a cybersecurity incident that involved unauthorized access of an employee’s

email account.

Through this unauthorized access the threat actor was able to fraudulently divert Company funds to its bank account.

Company, along with its external cybersecurity experts, is continuing to work diligently to fully investigate and assess the impact of

the incident and has notified, and is cooperating with, federal law enforcement.

As the investigation of the incident is ongoing, the

full scope, nature and impact of the incident are not yet fully known.

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