What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-10 compared with 2025-08-11 · 178 added, 90 removed, 195 unchanged (58% of the section changed)

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and collaborative arrangements we may pursue;

any enforcement action by the U.S.

the ongoing communications with the U.S.

Food and Drug Administration relating to compliance

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about each of these developments.

Third Revolving Credit Facility

September 2025, we entered into a Credit Agreement (the “5/3 Revolver”) with Fifth Third Bank, National Association, as administrative

agent for itself and the other lenders (collectively, “Fifth Third”) providing for a senior secured revolving credit facility

in the initial principal amount of $40,000,000, together with an uncommitted incremental revolving line of credit in the principal amount

of up to $20,000,000.

The 5/3 Revolver will mature on September 26, 2030, or, if earlier, the date that is 91 days prior to the earliest

maturity date of the Company’s 2030 Notes (as defined below).

under the 5/3 Revolver bear interest at a floating rate equal to, at the Company’s option, either (i) a base rate plus a margin

ranging from 0.25% to 0.75%, or (ii) a Secured Overnight Financing Rate (“SOFR”) based rate plus a margin ranging from 1.25%

In addition, an unused fee of 0.25% per annum is payable monthly in arrears based on the undrawn portion of the commitments

in respect of the 5/3 Revolver.

Borrowings under the 5/3 Revolver are secured by a first priority lien in substantially all of the present

and future property and assets, real and personal, of the Company, subject to customary exceptions.

the 5/3 Revolver, we are subject to certain customary affirmative and negative covenants.

In addition, the 5/3 Revolver contains certain

financial covenants requiring the Company to maintain, on a consolidated basis as of the last day of each month, a fixed charge coverage

ratio of at least 1.10 to 1.0.

Access for All

September 2025, we announced Harrow Access For All (“HAFA”) to expand our proprietary patient access model from a single

product to encompass Harrow’s comprehensive ophthalmic portfolio of branded, authorized generics (AGx), and compounded ophthalmic

Beginning in late 2025 and expanding into 2027, HAFA will provide a single, unified access point for prescribers and patients,

offering affordability, streamlined prescribing, and predictable access.

The platform creates a simpler, more predictable path to treatment—supporting

better outcomes for patients and greater efficiency for physicians.

of Remaining Interests in Melt Pharmaceuticals, Inc.

September 2025, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among us, Harrow Acquisition

Sub, Inc., a wholly owned subsidiary of Harrow, Melt Pharmaceuticals, Inc.

(“Melt”), and D.

Brad Osborne, as stockholder

representative.

Under the terms of the Merger Agreement and related milestone payment agreement, the Company agreed to acquire the remaining

equity interests of Melt in exchange for an initial cash payment of approximately $4,300,000 at closing, and contingent consideration

consisting of cash and Company equity upon achievement of (i) U.S.

Food and Drug Administration (“FDA”) approval of the MELT-300

product candidate, (ii) coding and reimbursement of the MELT-300 product candidate, and (iii) various one-time sales milestones, as follows:

FDA approval of MELT-300, the Company shall pay an aggregate amount in cash of approximately $87,200,000.

receipt of pass-through status awarded and J-Code (or any other similar designation) issued by the Center for Medicare & Medicaid

Services for MELT-300 the Company shall issue an aggregate of approximately 1,112,000 shares of the Company’s common stock.

achievement of various annual net sales milestones ranging from $100,000,000 to $1,000,000,000 per year, the Company shall make one-time

cash payments that in the aggregate may total up to approximately $261,000,000 if all annual net sales milestones are achieved.

regulatory and commercial milestones must be achieved, if at all, on or before December 31, 2035.

Merger Agreement includes representations and warranties and covenants of the parties customary for such a transaction.

Until the earlier

of the termination of the Merger Agreement and the effective time of the acquisition, Melt has agreed to operate its business in the

ordinary course and has agreed to certain other operating covenants.

In addition, Melt has agreed to use reasonable best efforts to obtain

approval of the Merger Agreement and the transactions contemplated thereby by the requisite Melt stockholders needed for approval.

closing of this acquisition has not yet occurred and is subject to certain customary closing conditions, including the approval of the

requisite stockholders of Melt, the continued accuracy of representations and warranties and performance of covenants, and the absence

of any material adverse effect.

We expect to close this acquisition before December 31, 2025.

Senior Notes Due 2030 and Payoff of Prior Debt

September 2025, we closed a private offering of $250,000,000, aggregate principal amount of 8.625% senior notes due 2030 (the “2030

The 2030 Notes offering resulted in net proceeds to us of approximately $242,794,000 after deducting underwriting discounts

and commissions and other offering expenses of $7,206,000

2030 Notes are senior unsecured obligations and are effectively subordinated to any of our secured indebtedness to the extent of the

value of the assets securing such indebtedness.

The 2030 Notes are guaranteed on a senior unsecured basis by us, subject to certain exceptions.

The 2030 Notes bear interest at the rate of 8.625% per annum.

Interest on the 2030 Notes is payable semi-annually in arrears on March

15, and September 15 of each year.

The issuance costs were recorded as a debt discount and are being amortized as interest expense over

the term of the 2030 Notes using the effective interest rate method.

used the net proceeds from the 2030 Notes offering to prepay all then outstanding senior debt borrowings, exit costs, and accrued interest

including $107,500,000 in total principal loan amount borrowed under the Credit Agreement and Guaranty (the “Oaktree Loan”)

with Oaktree Fund Administration, LLC, as administrative agent for the lenders (together, “Oaktree”), $75,000,000 in total

principal amount senior notes due 2026 (the “2026 Notes), and $40,250,000 in total principal amount senior notes due 2027 (the

“2027 Notes”).

The 2026 Notes and 2027 Notes were listed on The Nasdaq Stock Market under the symbols “HROWL”

and “HROWM”, respectively.

The 2026 Notes were delisted on October 10, 2025 and the 2027 Notes were delisted on October 8,

and OPUVIZ TM – Commercialization Agreement

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of Operations

following period-to-period comparisons of our financial results for the three and six months ended June 30, 2025 and 2024 are not necessarily

indicative of results for any future period.

following period-to-period comparisons of our financial results for the three and nine months ended September 30, 2025 and 2024 are not

necessarily indicative of results for any future period.

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

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arrangements.

following presents our revenues for the three and six months ended June 30, 2025 and 2024:

following presents our revenues for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended

Six Months Ended

For the Year Ended

September 30,

Other branded products

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$ 183,211,000

increase in revenues between periods was related to an increase in sales of our branded ophthalmology products, primarily due to the

increase of units sold of IHEEZO and VEVYE during the three and six months ended June 30, 2025 compared to the prior year periods.

$ 132,783,000

increase in revenues between periods was related to an increase in sales and units sold of IHEEZO and VEVYE during the three and nine

months ended September 30, 2025 compared to the prior year periods.

of Sales, Gross Profit and Gross Margin

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personnel costs, packaging, storage, royalties, shipping and handling costs, manufacturing equipment and tenant improvements depreciation,

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

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of Sales

increase in Branded cost of sales was primarily attributable to an increase in units sold during the three and six months ended June

increase in Branded cost of sales was primarily attributable to an increase in units sold during the three and nine months ended September

30, 2025 compared to the prior year periods and an increase in our fixed expenses.

The decrease in Branded gross margin between the three

and six months ended June 30, 2025 and 2024 was primarily attributable to an increase in our fixed expenses, in particular, acquired

product NDA amortizations related to the launch of TRIESENCE and a related contingent milestone payment that was capitalized in the fourth

quarter of 2024.

Three Months Ended June 30,

Six Months Ended June 30,

and nine months ended September 30, 2025 and 2024 was primarily attributable to an increase in our fixed expenses, in particular, acquired

product rights amortizations related to the launch of TRIESENCE and a related contingent milestone payment that was capitalized in the

fourth quarter of 2024.

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of Sales

$ (2,021,000 )

increase in ImprimisRx costs of sales between the three and six months ended June 30, 2025 and 2024 was primarily attributable to an

increase in units sold during the three and six months ended June 30, 2025 compared to the same periods in 2024.

However, due to product

mix during the three and six months ended June 30, 2025 that included more sales of lower gross margin products and sales discounts,

ImprimisRx gross margin decreased during the 2025 periods compared to the prior year period.

$ (3,784,000 )

increase in ImprimisRx costs of sales between the three and nine months ended September 30, 2025 and 2024 was primarily attributable

to product mix that included more sales of lower gross margin products and sales discounts.

ImprimisRx gross margin decreased during

the 2025 periods compared to the prior year period due to the previously mentioned product mix as related well as one-time costs

that impacted our efficiency.

General and Administrative Expenses

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products and formulations.

following presents our SG&A expenses for the three and six months ended June 30, 2025 and 2024:

following presents our SG&A expenses for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Selling, general and administrative

$ 109,604,000

increase in SG&A expenses between the three-month periods was primarily attributable to the addition of new employees in sales, marketing

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These increases were offset by a $1,223,000 decrease in stock-based compensation expense between periods.

increase in SG&A expenses between the six-month periods was primarily attributable to an increase in certain seasonal expenses, such

as increased costs associated with our annual audit and a special project that totaled $3,629,000 during the six months ended June 30,

In addition, the increase in SG&A expenses between periods was attributable to the addition of new employees in sales, marketing

and other departments to support current and expected growth, which when combined contributed to a $12,042,000 increase in SG&A expenses

between the periods.

These increases were offset by a $2,553,000 decrease in stock-based compensation expense between periods.

increase in SG&A expenses between the nine-month periods was primarily attributable to an increase in certain seasonal expenses,

such as increased costs associated with our annual audit and a special project that totaled $3,629,000 during the nine months ended September

In addition, the increase in SG&A expenses between periods was attributable to the addition of new employees in sales,

marketing and other departments to support current and expected growth, which when combined contributed to a $15,933,000 increase in

SG&A expenses between the periods.

These increases were offset by a $4,233,000 decrease in stock-based compensation expense between

and Development Expenses

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

following presents our research and development expenses for the three and six months ended June 30, 2025 and 2024:

following presents our research and development expenses for the three and nine months ended September 30, 2025 and 2024:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Research and development

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

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

expense, net was $6,408,000 and $12,956,000 for the three and six months ended June 30, 2025, respectively, compared to $5,471,000 and

$10,886,000 for the same periods in 2024, respectively.

The increase during the three and six months ended June 30, 2025 compared to

the same periods in 2024 was primarily the result of an increase in the outstanding principal amount of our debt obligations.

increase in R&D expenses between the three and nine month periods was primarily attributable to increased development activity related

to our branded product portfolio, new product candidate development efforts, and clinical and medical support.

expense, net was $6,038,000 and $18,994,000 for the three and nine months ended September 30, 2025, respectively, compared to $5,525,000

and $16,411,000 for the same periods in 2024, respectively.

The increase during the three and nine months ended September 30, 2025 compared

to the same periods in 2024 was primarily the result of an increase in the outstanding principal amount of our debt obligations.

Loss from Eton

the three and six months ended June 30, 2024, we recorded a loss of $(1,923,000) and $(3,171,000), respectively, related to the change

in fair market value of common stock of Eton Pharmaceuticals, Inc.

(“Eton”) at the time of its sale, including trading expenses

and commissions of approximately $436,000.

the three and nine months ended September 30, 2024, we recorded a loss of $0 and $3,171,000, respectively, related to the change in fair

market value of common stock of Eton Pharmaceuticals, Inc.

(“Eton”) at the time of its sale, including trading expenses and

commissions of approximately $436,000.

In April 2024, we sold all of our shares of Eton.

on Early Extinguishment of Debt

the three and nine months ended September 30, 2025 we recorded a loss on extinguishment of debt of $7,750,000, related to the payoff

of the 2026 Notes and 2027 Notes along with the Oaktree Loan.

There were no extinguishments of debt during the three and nine months

ended September 30, 2024.

and Capital Resources

cash on hand at June 30, 2025 was $52,963,000, compared to $47,247,000 at December 31, 2024.

of the date of this Quarterly Report, we believe that cash and cash equivalents of $52,963,000 at June 30, 2025 will be sufficient to

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

Management expects to refinance the

Oaktree Loan (as defined in Note 10 of our unaudited condensed consolidated financial statements included in this Quarterly Report) during

2025 and to refinance the 2026 Notes (as defined in Note 10 of our unaudited condensed consolidated financial statements included in

this Quarterly Report) at the same time or soon thereafter.

Management believes it is probable that we will be able to refinance the

Oaktree Loan and 2026 Notes;

however, there can be no assurance that we will obtain the refinancing on terms acceptable to us, or at

all - see the subheading Sources of Capital below for additional discussion regarding the Oaktree Loan, 2026 Notes and refinancing

In addition, we may consider the sale of certain assets.

However, we may pursue acquisitions of products, drug candidates or other

strategic transactions that involve large expenditures or we may experience growth more rapidly or on a larger scale than we expect,

any of which could result in the depletion of capital resources more rapidly than anticipated and could require us to seek additional

financing to support our operations.

cash on hand at September 30, 2025 was $74,290,000, compared to $47,247,000 at December 31, 2024.

of the date of this Quarterly Report, we believe that cash and cash equivalents of $74,290,000 at September 30, 2025 will be sufficient

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

addition, we may consider the sale of certain assets.

However, we may pursue acquisitions of products, drug candidates or other strategic

transactions that involve large expenditures or we may experience growth more rapidly or on a larger scale than we expect, any of which

could result in the depletion of capital resources more rapidly than anticipated and could require us to seek additional financing to

support our operations.

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

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drug candidates, and/or assets or technologies, pharmacies, outsourcing facilities, drug company and manufacturers, and otherwise fund

our operations.

We may also use our resources to conduct clinical trials or other studies in support of our formulations or any drug

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

following provides detailed information about our net cash flows for the six months ended June 30, 2025 and 2024:

For the Six Months Ended

our operations and potential future milestone payments.

We may also use our resources to conduct clinical trials or other studies in

support of our formulations or any drug candidate for which we pursue FDA approval, to pursue additional development programs or to explore

other development opportunities.

following provides detailed information about our net cash flows for the nine months ended September 30, 2025 and 2024:

For the Nine Months Ended

September 30,

Net cash provided by (used in):

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Financing activities

(12,644,000 )

Net change in cash and cash equivalents

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Cash and cash equivalents at end of the period

cash provided by (used in) operating activities during the six months ended June 30, 2025 was $18,865,000 compared to $(7,374,000) during

the same period in the prior year.

cash provided by (used in) operating activities during the nine months ended September 30, 2025 was $35,453,000 compared to $(4,423,000)

during the same period in the prior year.

The increase in net cash provided by operating activities between the periods was mainly attributed

to a decrease of $37,211,000 in accounts receivable as a result of collections during the six months ended June 30, 2025, compared to

an increase in accounts receivable of $15,631,000 during the same period in 2024.

cash (used in) provided by investing activities during the six months ended June 30, 2025 was $(505,000) compared to $4,993,000 during

the same period in the prior year.

Cash used in investing activities in 2025 was primarily related to equipment and software purchases.

to a decrease of $38,225,000 in accounts receivable as a result of collections during the nine months ended September 30, 2025, compared

to an increase in accounts receivable of $17,453,000 during the same period in 2024.

cash provided by (used in) provided by investing activities during the nine months ended September 30, 2025 was $(730,000) compared to

$4,396,000 during the same period in the prior year.

Cash used in investing activities in 2025 was primarily related to equipment and

software purchases.

Cash provided by investing activities in 2024 was primarily related to the sale of our investment position in Eton.

cash used in financing activities during the six months ended June 30, 2025 and 2024 was $(12,644,000) and $(736,000), respectively.

Cash used in financing activities during the six months ended June 30, 2025 and 2024 was primarily related to payment of payroll taxes

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

the six months ended June 30, 2025, our principal sources of cash came from proceeds from our operating activities.

cash used in financing activities during the nine months ended September 30, 2025 and 2024 was $(7,680,000) and $(1,457,000), respectively.

Cash used in financing activities during the nine months ended September 30, 2025 was primarily due to repayment of debt and payment

of payroll taxes upon vesting of stock compensation mostly offset by proceeds from issuance of new debt.

Cash used in financing activities

in 2024, was primarily related to payment of payroll taxes upon vesting of PSUs in exchange for shares withheld from employees.

the nine months ended September 30, 2025, our principal sources of cash came from proceeds from our operating activities.

We expect future

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some of our assets.

January 2026 the Oaktree Loan matures and in April 2026, the 2026 Notes become due.

As of June 30, 2025, there was $107,500,000 principal

amount outstanding under the Oaktree Loan and $75,000,000 principal amount of the 2026 Notes were outstanding.

The maturity of these

debt obligations could raise substantial doubt about our ability to continue as a going concern.

We are currently in discussions with

our current senior secured lender, Oaktree, and other potential lenders about refinancing the Oaktree Loan and the 2026 Notes.

believes it is probable that we will be able to refinance the Oaktree Loan and the 2026 Notes based on our collateral strength and expected

cash flows from operations;

however, there can be no assurance that we will obtain the refinancing on terms acceptable to us, or at all.

We believe that one of the other alternatives available to us is the sale of one or more of our assets.

There can be no assurance that

any sale could be completed on a timely basis or on terms acceptable to us.

If we are unable to successfully refinance the Oaktree Loan

and the 2026 Notes or sell assets to raise sufficient capital, we do not expect to have the ability to repay the Oaktree Loan and the

2026 Notes in full.

September 2025, we completed the sale of the 2030 Notes in a private offering and received net proceeds of $242,794,000.

net proceeds from the 2030 Notes to prepay all outstanding borrowings under the Oaktree Loan, the 2027 Notes, and the 2026 Notes, and

to pay certain exit costs related thereto.

The remaining funds will be used for general corporate purposes, which may include funding

future strategic business development opportunities and related investments.

We also entered into the 5/3 Revolver with Fifth Third in

September 2025, which provided the Company with a secured revolving credit facility of $40,000,000, with an additional $20,000,000 of

uncommitted incremental revolving line of credit.

We have not drawn down any amounts under the 5/3 Revolver.

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

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to discontinue our operations entirely.

of September 8, 2025, Moody’s Investors Service assigned a Long-Term Corporate Family Rating of B3 to Harrow, Inc.

a Stable outlook.

As of October 9, 2025, Fitch Ratings assigned a Long-Term Issuer Default Rating of B- (Outlook Stable) to Harrow, Inc.,

and a rating of B to our senior unsecured notes due September 2030.

Credit ratings are subject to revision or withdrawal at any time

by the issuing agencies and should not be construed as a recommendation to purchase, hold or sell securities or as a guarantee of our

future performance.

To the best of our knowledge, there have been no further changes to these ratings as of the date of this filing.

Any downgrade in our corporate or senior unsecured debt rating may increase our cost of borrowing and may negatively impact our ability

to raise additional debt capital.

Issued and Adopted Accounting Pronouncements

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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 2. Management’s Discussion and Analysis