What changed in this filing

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Item 1. Financial Statements

2026-05-11 compared with 2025-11-10 · 289 added, 843 removed, 486 unchanged (70% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

September 30,

Current assets

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STOCKHOLDERS’ EQUITY

Common stock, $ 0.001 par value, 50,000,000 shares authorized, 37,034,582 and 35,622,214 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively

Common stock, $ 0.001 par value, 50,000,000 shares authorized, 37,269,400 and 37,229,159 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively

Additional paid-in capital

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Nine Months Ended

September 30,

For the Three Months Ended March 31,

Product sales, net

$ 182,899,000

$ 132,398,000

Other revenues

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( 15,524,000 )

( 49,466,000 )

( 35,110,000 )

Operating expenses:

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Total operating expenses

Income (loss) from operations

( 4,077,000 )

Other (expense) income:

Interest expense, net

( 6,038,000 )

( 5,525,000 )

( 18,994,000 )

( 16,411,000 )

Investment loss from Eton Pharmaceuticals

( 3,171,000 )

Loss on extinguishment of debt

( 7,750,000 )

Other income, net

Total other expense, net

( 13,727,000 )

Loss from operations

( 22,080,000 )

( 11,232,000 )

Interest expense, net

( 5,497,000 )

Income (loss) before income taxes

( 6,548,000 )

Loss before income taxes

( 27,577,000 )

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Income tax expense

Net income (loss)

$ ( 27,602,000 )

$ ( 17,780,000 )

$ ( 24,258,000 )

Basic net income (loss) per share of common stock

Diluted net income (loss) per share of common stock

Weighted average number of shares of common stock

outstanding, basic

Weighted average number of shares of common stock outstanding, diluted

Basic and diluted net loss per share of common stock

Weighted average number of shares of common stock outstanding,

basic and diluted

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

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

the periods ended September 30, 2025 and 2024

the Three Months Ended March 31, 2026 and 2025

Noncontrolling

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Stockholders’

Balance at December 31, 2023

$ 204,635,000

$ ( 133,904,000 )

$ ( 355,000 )

Issuance of common stock in connection with:

Exercise of employee stock-based options

Vesting of RSUs and PSUs

Shares withheld related to net share settlement of equity awards

( 2,362,000 )

Stock-based compensation expense

( 24,258,000 )

Balance at September 30, 2024

$ 216,103,000

$ ( 158,162,000 )

$ ( 355,000 )

Balance at December 31, 2024

Balance at January 1, 2025

$ 221,002,000

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Exercise of employee stock-based options

Vesting of PSUs and RSUs

Shares withheld related to net share settlement of equity awards

( 19,859,000 )

( 19,860,000 )

Vesting of RSUs

Stock-based compensation expense

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( 17,780,000 )

Balance at September 30, 2025

Balance at March 31, 2025

$ 225,581,000

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Stockholders’

Balance at June 30, 2024

$ 212,439,000

$ ( 153,942,000 )

$ ( 355,000 )

Issuance of common stock in connection with:

Exercise of employee stock-based options

Shares withheld related to net share settlement of equity awards

( 1,205,000 )

Stock-based compensation expense

( 4,220,000 )

Balance at September 30, 2024

$ 216,103,000

$ ( 158,162,000 )

$ ( 355,000 )

Balance at June 30, 2025

Balance at January 1, 2026

$ 208,933,000

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Exercise of employee stock-based options

Vesting of PSUs and RSUs

Shares withheld related to net share settlement of equity awards

Stock-based compensation expense

( 27,602,000 )

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( 27,602,000 )

Stock-based compensation expense

Net income (loss)

Balance at September 30, 2025

Balance at March 31, 2026

$ 212,795,000

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES

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$ ( 17,780,000 )

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization of property, plant and equipment and software development costs

Amortization of intangible assets

Non-cash lease expense

Provision for (recovery of) credit losses

Noncash lease expense

(Recovery of) Provision for credit losses

Amortization of debt issuance costs and debt discount

Investment loss from investment in Eton Pharmaceuticals

Loss on extinguishment of debt

Stock-based compensation

Deferred income tax

Changes in assets and liabilities:

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( 2,973,000 )

( 2,132,000 )

Prepaid expenses and other current assets

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Accrued payroll and related liabilities

( 1,201,000 )

( 1,891,000 )

Deferred revenue and customer deposits

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

( 8,992,000 )

CASH FLOWS FROM INVESTING ACTIVITIES

Net proceeds on sale of investment in Eton Pharmaceuticals

Investment in patent and trademark assets

Purchase of product rights and related patents

Purchase of product rights

( 18,000,000 )

Purchases of property, plant and equipment

NET CASH USED IN INVESTING ACTIVITIES

( 18,203,000 )

NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from new debt, net of costs

Net proceeds from 8.625% notes payable, net of commissions

Payment of debt issuance costs

( 1,581,000 )

Repayment of notes payable, including exit costs

( 230,901,000 )

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

( 19,860,000 )

( 2,362,000 )

Proceeds from exercise of stock options

NET CASH USED IN FINANCING ACTIVITIES

( 7,680,000 )

( 1,457,000 )

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET CHANGE IN CASH AND CASH EQUIVALENTS

( 1,484,000 )

CASH AND CASH EQUIVALENTS, beginning of period

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SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

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

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

Purchase of product rights associated with contingent consideration payable

Unpaid debt issuance costs

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

TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

the Three and Nine Months Ended September 30, 2025 and 2024

the Three Months Ended March 31, 2026 and 2025

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 provider of ophthalmic disease management solutions in North America, offering a comprehensive portfolio of products that

address conditions affecting both the front and back of the eye, such as dry eye disease, wet (or neovascular) age-related macular degeneration,

cataracts, refractive errors, glaucoma and a range of other ocular surface conditions and retina diseases.

Harrow was founded with a

commitment to deliver safe, effective, accessible, and affordable medications that enhance patient compliance and improve clinical outcomes.

(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.

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

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

Operating results for the three and nine months ended September

Operating results for the three months ended March 31,

2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026 or for any other period.

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deemed to be the primary beneficiary.

All intercompany accounts and transactions have been eliminated in consolidation.

All material intercompany accounts and transactions have been eliminated in consolidation.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

following represents an update for the nine months ended September 30, 2025 to the significant accounting policies described in the Company’s

following represents an update for the three months ended March 31, 2026 to the significant accounting policies described in the Company’s

Annual Report on Form 10-K for the year ended December 31, 2025.

preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported

amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported

amounts of revenues and expenses during the reporting periods.

Significant estimates made by management are, among others, allowance

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

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

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

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

and non-employees.

Actual results could differ from those estimates.

Uncertainties and Liquidity

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to make, dispense, and sell certain products.

If the Company was required to cease compounding and selling certain products as a result

of regulatory guidelines or inspections, this may have a material impact on the Company’s financial condition, liquidity and results

If the Company was required to cease compounding and selling certain products because of

regulatory guidelines or inspections, this may have a material impact on the Company’s financial condition, liquidity and results

of operations.

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

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, 2025:

following table provides a roll-forward of the allowance for credit losses that is deducted from accounts receivable to present the net

amount expected to be collected at March 31, 2026:

OF ACCOUNTS RECEIVABLE ALLOWANCE OF CREDIT LOSS

Balance at January 1, 2025

Balance, January 1, 2026

Change in expected credit losses

Write-offs, net of recoveries

Balance at September 30, 2025

Balance, March 31, 2026

Value Measurements

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

2030 Notes (as defined in Note 10) are carried at face value less unamortized debt issuance costs.

The Company fully repaid

principal balances under the Oaktree Loan and the 2026 and 2027 Notes in September.

The Company’s 2026 Notes (as defined in

Note 10) were carried at face value, including the unamortized premium, less unamortized debt issuance costs, the 2027 Notes (as

defined in Note 10) were carried at face value less unamortized debt issuance costs, and the Oaktree Loan (as defined in Note 10)

was carried at face value less the original issue discount and unamortized debt issuance costs on the condensed consolidated balance

sheets and the Company presents fair value for disclosure purposes only.

The 2026 Notes and the 2027 Notes were classified as Level

1 instruments as the fair value is determined using quoted market prices in active markets for the same securities.

The 2030 Notes

are classified, and the Oaktree Loan was classified as Level 2 instruments and the fair value is determined through an income

approach that considers collateral coverage, yield calibration, yield analysis and any adjustments to implied yield associated with

the Company’s fundamental measures.

Company’s 2030 Notes (as defined in Note 8) are carried at face value, including the unamortized premium, less unamortized debt

issuance costs on the condensed consolidated balance sheets and the Company presents fair value for disclosure purposes only.

Notes are classified as Level 1 instruments as the fair value is determined using quoted market prices in active markets for the same

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

OF ESTIMATED FAIR VALUE

September 30, 2025

March 31, 2026

December 31, 2025

Carrying Value

$ 292,087,000

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The carrying amount

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

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

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 Income (Loss) per Common Share

net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders for the period by the

weighted average number of common shares outstanding during the period.

Diluted net income (loss) per share is computed by dividing the

net income (loss) attributable to common stockholders for the period by the weighted average number of common and common equivalent shares,

such as stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”), and warrants, outstanding

during the period.

Common equivalent shares (using the treasury stock method) from stock options, unvested RSUs, unvested PSUs and warrants

were 1,911,979 and 4,411,488 at September 30, 2025 and 2024, 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 income (loss) per

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

director ceases providing services to the Company.

The number of shares underlying vested RSUs at September 30, 2025 and 2024 was 216,483

and 195,696 , respectively.

following table shows the computation of basic net income (loss) per share of common stock:

OF BASIC EARNINGS PER COMMON SHARE

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

Numerator – net income (loss)

$ ( 4,220,000 )

$ ( 11,765,000 )

$ ( 24,258,000 )

Denominator – weighted average number of shares outstanding, basic

Net income (loss) per share, basic

the three months ended September 30, 2025, the Company computed diluted net income per share using the weighted-average number of common

shares and dilutive common equivalent shares outstanding during that period.

Diluted common equivalent shares for the three months ended

September 30, 2025 consisted of the following:

OF DILUTED NET INCOME PER SHARE

September 30,

Diluted shares related to:

Restricted stock units

Stock options

Dilutive common equivalent shares

The following table shows the computation of diluted net income per share using the weighted-average number of common shares and dilutive

common equivalent shares outstanding for the three months ended September 30, 2025:

OF BASIC AND DILUTED EARNINGS PER COMMON SHARE

September 30,

Numerator - net income

Weighted average number of shares outstanding, basic

Dilutive common equivalents

Weighted average number of shares outstanding, diluted

Net income per share, diluted

Company’s effective tax rate was ( 3.66 )% and ( 2.95 )% for the nine months ended September 30, 2025 and 2024, respectively.

The Company’s

effective tax rate for the nine months ended September 30, 2025 and 2024 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 September 30, 2025 and December 31, 2024, there were $ 2,860,000 and $ 2,858,000 , respectively, of unrecognized tax benefits included

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

July 4, 2025, the United States enacted the One Big Beautiful Bill Act (“OBBBA”), which, among other provisions, permanently

restores 100% bonus depreciation and modifies the limitation on business-interest expense under §163(j) to be based on taxable income

before interest, amortization, and depreciation.

Based on preliminary analysis, management expects OBBBA to reduce U.S.

cash income-tax

There is not expected to be any impact on the effective tax rate.

The Company is continuing to evaluate OBBA’s impacts,

including potential effects on deferred-tax balances, and will refine these estimates as additional guidance becomes available.

Guidance Issued but Not Adopted at September 30, 2025

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.

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

Early adoption and retrospective reporting are permitted.

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

consolidated financial statements.

and Diluted Net Loss per Common Share

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

number of common shares outstanding during the period.

Diluted net loss per share is computed by dividing the net loss attributable to

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

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

Common equivalent

shares (using the treasury stock or “if converted” method) from stock options, unvested RSUs, unvested PSUs were 1,556,232

and 4,367,766 at March 31, 2026 and 2025, 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

to the Company.

The number of shares underlying vested RSUs at March 31, 2026 and 2025 was 195,785 and 199,216 , respectively.

Guidance Issued but Not Adopted at March 31, 2026

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

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

If the SEC has not removed the applicable requirement by June 30, 2027, then the related amendment in ASU 2023-06 will be removed

from the codification and will not become effective.

Early adoption of this ASU is prohibited.

The Company does not expect the amendments

in this ASU to have a material impact on the disclosures or presentation in its consolidated financial statements.

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

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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, Revenues from Contracts with Customers .

has two primary streams of revenue:

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

outsourcing facility and sales of branded products to wholesalers through a third-party logistics (“3PL”) partner, and (2)

revenue recognized from intellectual property licenses and related arrangements.

Except for expanded footnote disclosure, the Company does not expect the adoption of ASU 2024-03

will have a material effect on its consolidated financial statements.

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

The Company has two primary streams of revenue:

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

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

and (2) revenue recognized from intellectual property licenses and related arrangements.

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

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chargeback activity and adjusts NPPs when the Company believes that actual selling prices will differ from current NPPs.

rebates reserve consists of estimated payments due to governmental agencies for utilization of the Company’s products by beneficiaries

under such governmental programs.

for chargebacks, distribution service fees, wholesaler fees, and other commercial deductions may also be affected by timing differences,

duplicate deductions, incorrect unit data, misapplied contractual rates, and other reconciliation matters, and the Company adjusts such

estimates as claims are reconciled, disputed, settled, credited, refunded, offset, recouped, recovered, or otherwise resolved.

include estimated amounts payable to certain group purchasing organizations (“GPOs”) and under government rebate

GPO rebates are generally based on contractual rebate arrangements and are estimated using eligible sales volume,

customer and channel mix, and available purchasing or utilization information.

Rebates reserve consists of estimated payments due to

governmental agencies or their administrators for utilization of the Company’s products by beneficiaries under such

governmental programs.

The two largest government programs are Medicaid and Medicare.

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as well as an estimate for future claims that will be made when inventory in the distribution channel is sold through to plan participants.

Many of the Company’s branded products are also covered under Medicare.

The Company participates in the Coverage Gap Discount Program

in order for its branded products to be covered by Medicare Part D and must provide a rebate for any products sold under NDAs dispensed

to Medicare Part D beneficiaries while the beneficiaries are in the Coverage Gap phase of the benefit.

This applies to all products sold

Estimates for these discounts are based on historical experience with Medicare rebates for products.

Medicare rebates are

billed quarterly for drugs dispensed to Medicare beneficiaries in the prior quarter, which is typically 120 days after the product is

As a result of the delay between selling the products, dispensing the products and rebate billing, Medicare rebate reserve includes

both an estimate of outstanding claims for end-customer sales that have occurred but for which the related claim has not been billed,

as well as an estimate for future claims that will be made when inventory in the distribution channel is sold through to Medicare Part

D participants.

evaluate the adequacy of the government rebate reserves, reserves are reviewed on a quarterly basis against actual claims data to ensure

the liability is fairly stated.

The Company continually monitors the government rebate reserve and adjusts estimates if it is expected

that actual government rebates may differ from established accruals.

Accruals for government rebates are recorded as a reduction to gross

revenues in the consolidated statements of operations and as an increase to accrued rebates in the consolidated balance sheets.

of the Company’s branded products are also covered under Medicare.

Beginning in 2025, the Medicare Part D benefit was redesigned

under the Inflation Reduction Act, and the Coverage Gap Discount Program was replaced by the Medicare Part D Manufacturer Discount Program.

To the extent the Company’s applicable branded products are covered under Medicare Part D, the Company is required to provide manufacturer

discounts under that program during the applicable phases of the redesigned Part D benefit.

The Company may also be subject to Medicare

Part B and Medicare Part D inflation rebates and other statutory government pricing obligations, including under the Inflation Reduction

Act, as applicable.

Estimates for these rebates and discounts are based on historical experience with Medicare rebates for products available

utilization data, applicable statutory formulas and program guidance, and other information available at the time the reserve is estimated.

Medicare rebates and discounts are billed quarterly for drugs dispensed to Medicare beneficiaries in the prior quarter, which is typically

120 days after the product is shipped.

As a result of the delay between selling the products, dispensing the products and rebate billing,

Medicare rebate reserve includes both an estimate of outstanding claims for end-customer sales that have occurred but for which the related

claim has not been billed, as well as an estimate for future claims that will be made when inventory in the distribution channel is sold

through to Medicare beneficiaries.

rebate reserves require significant judgment and may be affected by incomplete or delayed claims data, changes in utilization or payor

mix, channel inventory levels, labeler-code or product attribution, statutory or regulatory interpretations, and claims submitted by

governmental agencies, customers, former product owners, or other third parties.

From time to time, the Company may receive claims, invoices,

or rebate demands that it believes are unsupported, duplicative, overstated, not attributable to the Company or its products, or otherwise

inconsistent with applicable program requirements.

The Company evaluates such matters as part of its estimate of variable consideration

under ASC 606 and adjusts reserves when additional information becomes available or when claims are validated, settled, credited, refunded,

offset, recouped, or otherwise resolved.

evaluate the adequacy of the government rebate reserves, reserves are reviewed on a quarterly basis against actual claims data and other

available information to assess whether the liability is appropriately stated.

The Company continually monitors the government rebate

reserve and adjusts estimates if it is expected that actual government rebates may differ from established accruals.

Accruals for government

rebates are recorded as a reduction to gross revenues in the consolidated statements of operations and as an increase to accrued rebates

in the consolidated balance sheets.

returns policy is in place that allows customers to return product within a specified period prior to and subsequent to the expiration

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Accruals for returns are recorded as a reduction to gross revenues in the consolidated

statements of operations and as an increase to the accrued expenses in the consolidated balance sheets.

statements of operations and as a decrease to accounts receivable in the consolidated balance sheets.

Administrative

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Administrative

fees or rebates are offered to wholesalers, group purchasing organizations, and indirect customers.

Fees and rebates are accrued, by

product by wholesaler, at the time of sale based on contracted rates and NPP.

To evaluate the adequacy of the administrative fee accruals,

on-hand inventory counts are obtained from the wholesalers.

The Company continually monitors administrative fee activity and adjusts

accruals when it is expected that actual administrative fees may differ from the accruals.

Accruals for administrative fees and other

rebates are recorded as a reduction in both gross revenues in the consolidated statements of operations and accounts receivable or accrued

expenses in the consolidated balance sheets.

fees and/or rebates are offered to wholesalers and indirect customers.

Fees and rebates are

accrued, by product by wholesaler, at the time of sale based on contracted rates and NPP.

To evaluate the adequacy of the

administrative fee accruals, on-hand inventory counts are obtained from the wholesalers.

The Company continually monitors

administrative fee activity and adjusts accruals when it is expected that actual administrative fees may differ from the accruals.

Accruals for administrative fees and other rebates are recorded as a reduction in both gross revenues in the consolidated statements

of operations and accounts receivable or accrued expenses in the consolidated balance sheets.

who meet certain eligibility requirements may receive co-payment assistance funded by the Company.

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Accruals for prompt payment discounts are recorded

as a reduction in both gross revenues in the condensed consolidated statements of operations and accounts receivable in the condensed

consolidated balance sheets.

following table summarizes activity and ending balances of the Company’s variable consideration provisions in the condensed consolidated

financial statements for the nine months ended September 30, 2025, and 2024:

as a reduction in both gross revenues in the consolidated statements of operations and accounts receivable in the condensed consolidated

balance sheets.

following table summarizes activity and ending balances of the Company’s variable consideration provisions in the consolidated

financial statements for the three months ended March 31, 2026 and 2025:

OF ACCRUALS AND ALLOWANCES

Administrative

Other Rebates

Administrative Fees and Other Rebates

Co-Pay Assistance

Prompt Pay Discounts

Accruals for Chargebacks, Returns, and Other Allowances

Administrative

Other Rebates

Administrative Fees and Other Rebates

Co-Pay Assistance

Prompt Pay Discounts

Balance at December 31, 2024 (1)

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( 1,943,000 )

Balance at September 30, 2024

( 67,163,000 )

Balance at March 31, 2025 (1)

Balance at December 31, 2025 (1)

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( 51,880,000 )

Balance at September 30, 2025

Intellectual Property License and Related Arrangements

Company holds multiple 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

fees that are not contingent on any future performance by the Company and require no consequential continuing involvement on the part

of the Company are recognized as revenue when the license term commences and the licensed data, technology, compounded drug preparation

and/or other deliverables are delivered.

Such deliverables may include physical quantities of compounded drug preparations, design of

the compounded drug preparations and structure-activity relationships, the conceptual framework and mechanism of action, and rights to

the patents or patent applications for such compounded drug preparations.

The Company defers recognition of non-refundable fees if it

has continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable

fee has no utility to the licensee and that are separate and independent of the Company’s performance under the other elements

of the arrangement.

In addition, if the Company’s continued involvement is required, through research and development services

that are related to its proprietary know-how and expertise of the delivered technology or can only be performed by the Company, then

such non-refundable fees are deferred and recognized over the period of continuing involvement.

Guaranteed minimum annual royalties are

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

disaggregated by revenue source for the three and nine months ended September 30, 2025 and 2024 consisted of the following:

SCHEDULE OF DISAGGREGATED REVENUE

For the Three Months Ended

For the Nine Months Ended

September 30,

Product sales, net

$ 182,899,000

$ 132,398,000

Other revenues

Total revenues

$ 183,211,000

$ 132,783,000

revenue and customer deposits at September 30, 2025 and December 31, 2024 were $ 345,000 and $ 44,000 , respectively.

Balance at March 31, 2026 (1)

and other allowances are included as an offset to accounts receivable in the condensed consolidated balance sheets.

Administrative

Fees and Other Rebates, Prompt Payment Discounts and Returns are included as a reduction to accounts receivable, net of chargebacks

and other allowances or accrued expenses and other in the condensed consolidated balance sheets.

Government rebates are included

in accrued government rebates and copay assistance in the condensed consolidated balance sheets.

revenue and customer deposits at March 31, 2026 and December 31, 2025 were $ 149,000 and $ 788,000 , respectively.

All deferred revenue

and customer deposit amounts at December 31, 2024 were recognized as revenue during 2025.

and customer deposit amounts at December 31, 2025 were recognized as revenue during the three months ended March 31, 2026.

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

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

The composition of inventories as of September 30, 2025

The composition of inventories as of March 31, 2026

and December 31, 2025 was as follows:

OF INVENTORIES

September 30,

March 31, 2026

December 31, 2025

Raw materials

3 unchanged sentences

PREPAID EXPENSES AND OTHER CURRENT ASSETS

expenses and other current assets at September 30, 2025 and December 31, 2024 consisted of the following:

expenses and other current assets at March 31, 2026 and December 31, 2025 consisted of the following:

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

September 30,

March 31, 2026

December 31, 2025

Prepaid insurance

2 unchanged sentences

Other prepaid expenses

Receivable due from Melt

Annual Prepaid Prescription Drug User (“PDUFA”) fees

1 unchanged sentence

Total prepaid expenses and other current assets

PROPERTY, PLANT AND EQUIPMENT

plant and equipment at September 30, 2025 and December 31, 2024 consisted of the following:

OF PROPERTY, PLANT AND EQUIPMENT

September 30,

Property, plant and equipment, net:

Computer hardware

Furniture and equipment

Lab and pharmacy equipment

Leasehold improvements

Property, plant and equipment, gross

Accumulated depreciation

( 11,999,000 )

( 11,014,000 )

Property, plant and equipment,

the three and nine months ended September 30, 2025, depreciation expense related to the property, plant and equipment was $ 326,000 and

$ 985,000 , respectively, compared to $ 351,000 and $ 948,000 during the same periods in 2024, respectively.

CAPITALIZED SOFTWARE COSTS

software costs at September 30, 2025 and December 31, 2024 consisted of the following:

SCHEDULE OF CAPITALIZED SOFTWARE COSTS

September 30,

Capitalized software costs

Capitalized internal-use software development costs

Acquired third-party software license for internal-use

Total gross capitalized software for internal-use

Accumulated amortization

( 2,299,000 )

( 1,849,000 )

Total capitalized software

the three and nine months ended September 30, 2025, amortization expense related to capitalized software costs was $ 148,000 and $ 450,000 ,

respectively, and $ 146,000 and $ 434,000 during the same periods in 2024, respectively.

INTANGIBLE ASSETS AND GOODWILL

Company’s intangible assets at September 30, 2025 consisted of the following:

Company’s intangible assets at March 31, 2026 consisted of the following:

SCHEDULE OF INTANGIBLE ASSETS

Weighted-average

Weighted-average useful life

Carrying Value

Acquired NDAs

Definite-lived Intangibles

Acquired product rights

( 45,042,000 )

1 unchanged sentence

State pharmacy licenses

Indefinite-lived Intangibles

$ 226,365,000

1 unchanged sentence

$ 181,054,000

expense for intangible assets for the three and nine months ended September 30, 2025 and 2024 was as follows:

expense for intangible assets for the three months ended March 31, 2026 and 2025 was as follows:

SCHEDULE OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

For the Three Months Ended

For the Nine Months Ended

September 30,

Acquired product rights

State pharmacy license

For the Three Months Ended March 31,

Acquired NDAs

Customer relationships

Amortization expense of intangible assets

future amortization expense for the Company’s intangible assets at September 30, 2025 was as follows:

expense of intangible assets

future amortization expense for the Company’s intangible assets at March 31, 2026 was as follows:

OF ESTIMATED FUTURE AMORTIZATION EXPENSE

1 unchanged sentence

$ 180,726,000

were no changes to the carrying value of the Company’s goodwill during the three and nine months ended September 30, 2025 and 2024.

January 2026, the Company amended the Asset Purchase Agreement with Eyevance Pharmaceuticals, LLC and License Agreement with Santen S.A.S.

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

(collectively, “Santen”).

Pursuant to the amendment, the parties agreed to a full and final settlement of all contingent milestone obligations related to specified

manufacturing-related events for the Santen products in exchange for a one-time lump sum payment by the Company of $ 7,000,000 .

this payment, no further milestone payments will be due under the Santen Agreements.

The Company capitalized this payment as an intangible

asset within acquired product rights.

February 2026, the Company made a one-time upfront payment of $ 4,000,000 to Samsung Bioepis Co., Ltd.

(“Samsung”) upon the

license effective date related to the development and commercialization agreement with Samsung entered into in July 2025.

The milestone

was capitalized as an intangible asset within acquired product rights.

March 2026, the Company paid a commercial milestone payment of $ 7,000,000 related to the sales of VEVYE during 2025.

The milestone payment

was included in accounts payable and accrued expenses on the December 31, 2025 condensed consolidated balance sheet and was capitalized

in acquired product rights.

were no changes to the carrying value of the Company’s goodwill during the three months ended March 31, 2026 and 2025.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

payable and accrued expenses at September 30, 2025 and December 31, 2024 consisted of the following:

payable and accrued expenses at March 31, 2026 and December 31, 2025 consisted of the following:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

September 30,

Accounts payable

Accrued interest (see Note 10)

Income taxes payable

Accrued interest

Other accrued expenses

Total accounts payable and accrued expenses

Third Revolving Credit Facility - Undrawn

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

Association as administrative agent for itself and the other lenders, 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, the Company is 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.

financing costs of $ 611,000 were recorded and will be amortized to interest expense over the term of agreement.

The commitment fee related

to the unused line of credit will be expensed as incurred.

of September 30, 2025, there were no borrowings drawn or outstanding under the 5/3 Revolver.

The Company was in compliance with all covenants

as of September 30, 2025.

Senior Notes Due 2030

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

“2030 Notes”).

The 2030 Notes offering resulted in net proceeds to the Company of approximately $ 242,794,000 after deducting

underwriting discounts of $ 5,625,000 and commissions and other offering expenses of $ 1,581,000 .

2030 Notes are senior unsecured obligations of the Company.

The 2030 Notes are effectively subordinated to any of the Company’s

secured indebtedness to the extent of the value of the assets securing such indebtedness.

The 2030 Notes will be guaranteed on a senior

unsecured basis by the Company, subject to certain exceptions.

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

on the 2030 Notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing March 15, 2026.

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.

Company may redeem all or part of the 2030 Notes prior to September 15, 2027, at a price equal to 100% of the principal amount of the

2030 Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make-whole”

premium, as described in the indenture.

The Company may redeem all or part of the 2030 Notes on or after September 15, 2027 at the applicable

redemption prices described in the indenture.

The Company may also redeem up to 40% of the aggregate principal amount of the 2030 Notes

at any time prior to September 15, 2027, at a redemption price equal to 108.625 % of the principal amount of the 2030 Notes redeemed,

plus accrued and unpaid interest, if any, to, but excluding, the redemption date, with the net cash proceeds from certain equity offerings.

If a change in control triggering event occurs, unless the Company has previously exercised or substantially concurrently exercise its

optional redemption right, the Company will be required to offer to repurchase the 2030 Notes from holders at 101% of the principal amount

thereof, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

expense related to the 2030 Notes totaled $ 1,063,000 for the three and nine months ended September 30, 2025, and included the amortization

of debt issuance costs and discount of $ 80,000

Loan Due 2026 – Paid in Full

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”).

Including through subsequent amendments to the Oaktree

Loan, the Company had drawn down a total principal loan amount of $ 107,500,000 .

The Oaktree Loan carried an interest rate equal to SOFR

plus 6.5 % per annum, and included an exit fee equal to 3.5 % of the aggregate principal amount owed, payable at maturity.

to the exit fee, the Oaktree Loan required a make-whole premium to be paid on early principal amount payments prior to its maturity in

January 2026.

The exit fee of $ 3,763,000 was recorded as a debt discount.

September 2025, the Company repaid the $ 107,500,000 principal balance owed under the Oaktree Loan and all accrued interest as of the

date the loan was repaid.

In connection with the loan repayment, the Company agreed to pay an exit fee and a make-whole premium to Oaktree.

During the three and nine months ended September 30, 2025, the Company recorded the unaccrued exit fee of $ 268,000 , make-whole premium

of $ 1,861,000 , and write-off of unamortized debt issuance costs of $ 1,289,000 as a loss on debt extinguishment of $ 3,418,000

in the aggregate.

expense related to the Oaktree Loan totaled $ 3,141,000 and $ 10,826,000 for the three and nine months ended September 30, 2025, respectively,

and included the amortization of debt issuance costs and discount of $ 745,000 and $ 2,567,000 , respectively.

Interest 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.

– 8.625% Senior Notes Due 2026 – Paid in Full

April 2021, the Company closed an offering of $ 50,000,000 aggregate principal amount of 8.625 % senior notes due 2026.

In May 2021, the

Company issued an additional $ 5,000,000 of such notes pursuant to the full exercise of the underwriters’ option to purchase additional

notes, and in September 2021, the Company sold an additional $ 20,000,000 aggregate principal amount of such notes (collectively, the

“2026 Notes”).

September 2025, the Company fully repaid the principal balance of $ 75,000,000 , along with all accrued interest owed under the 2026 Notes.

through US Bank Trust Company National Association as Trustee.

The notes were considered legally extinguished upon such repayment.

connection with the 2026 Notes repayment, the Company paid a make-whole premium of $ 907,000 , recorded $ 449,000 of unaccrued interest

and wrote off $ 452,000 of unamortized debt issuance costs.

During the three and nine months ended September 30, 2025, the make-whole

premium, unaccrued interest paid after the redemption notice date, and unamortized debt issuance costs were recorded as a loss on debt

extinguishment equal to $ 1,808,000 in the aggregate.

The 2026 Notes listed on The Nasdaq Stock Market under the symbol “HROWL”

were delisted on October 10, 2025.

expense related to the 2026 Notes totaled $ 1,452,000 and $ 5,074,000 for the three and nine months ended September 30, 2025, respectively,

and included amortization of debt issuance costs and discount of $ 159,000 and $ 546,000 , respectively.

Interest 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.

- 11.875% Senior Notes Due 2027 – Paid in Full

December 2022 and in January 2023, the Company closed an offering of $ 35,000,000 and $ 5,250,000 , respectively, aggregate principal amount

of 11.875 % senior notes due 2027 (the “2027 Notes”).

The 2027 Notes could be redeemed for cash in whole or in part prior

to December 31, 2025, at a price equal to $ 25.50 per note, plus accrued and unpaid interest to, but excluding, the date of redemption.

September 2025, the Company fully repaid the principal balance of $ 40,250,000 , along with all accrued interest owed under the 2027 Notes

through US Bank Trust Company National Association as Trustee.

The notes were considered legally extinguished upon such repayment.

connection with the 2027 Notes repayment, the Company paid a prepayment penalty of $ 805,000 , recorded unaccrued interest of $ 98,000 and

wrote off $ 1,621,000 of unamortized debt issuance costs.

During the three and nine months ended September 30, 2025, the prepayment penalty,

unaccrued additional interest paid after the redemption notice date and the unamortized debt issuance costs were recorded as a loss on

debt extinguishment equal to $ 2,524,000 in the aggregate.

The 2027 Notes listed on The Nasdaq Stock Market under the symbol “HROWM”

were delisted on October 8, 2025.

expense related to the 2027 Notes totaled $ 1,101,000 and $ 3,845,000 for the three and nine months ended September 30, 2025, respectively,

and included the amortization of debt issuance costs and discount of $ 145,000 and $ 499,000 , 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.

loss on extinguishment of debt equal to $ 7,750,000 was recorded during the three months ending September 30, 2025.

summary of the Company’s non-current portion of debt at September 30, 2025 and December 31, 2024 is described as follows:

OF LONG TERM DEBT

September 30,

8.625% Senior Notes due April 2026

11.875% Senior Notes due December 2027

Oaktree Loan due January 2026

March 2026, the Company entered into the First Supplemental Indenture to the Indenture dated September 12, 2025 pursuant to which

the Company issued $ 50,000,000

aggregate principal amount of additional 8.625 %

Senior Notes due 2030 (the “New Notes”).

The New Notes were issued at 100.25 %

of par value and resulted in net proceeds to the Company of $ 48,526,000

after deducting underwriting discounts, commissions and other unpaid offering expenses of $ 1,474,000 .

The New Notes, together with the 8.625 %

Senior Notes due 2030 issued in September 2025 (the “Existing Notes”) (together, the “2030 Notes”) are

treated as a single series and have the same terms as the Existing Notes.

The issuance costs and premium relating to the 2030 Notes

were deferred and will be recognized to interest expense using the effective-interest method ( 9.35 %)

over the remaining term of the debt.

expense totaled $ 5,992,000 for the three months ended March 31, 2026, and included the amortization of debt

issuance costs and premium of $ 451,000 .

summary of the Company’s debt at March 31, 2026 and December 31, 2025 is as follows:

SCHEDULE OF LONG TERM DEBT

8.625 % Senior Notes due September 2030

Notes payable current, gross

Unamortized debt issuance costs

$ 300,000,000

$ 250,000,000

payable current, net

$ 242,874,000

Unamortized debt issuance costs

( 7,913,000 )

the three and nine months ended September 30, 2025, the total effective interest rate of the Company’s debt was 10.29 % and 10.41 %,

respectively, and 11.03 % and 11.17 % for the same periods in 2024, respectively.

September 30, 2025, future minimum payments under the Company’s debt were as follows:

SCHEDULE OF FUTURE MINIMUM PAYMENT UNDER NOTES PAYABLES

Remainder of 2025

Total minimum payments

amount representing interest payments

( 6,816,000 )

Notes payable, gross principal amount due

unamortized debt issuance costs, net of premium

Notes payable net

$ 292,087,000

Notes payable, net of unamortized discount

$ 243,184,000

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

Except as indicated, these lease agreements

have remaining terms between two 2 to

years and contain various clauses for renewal

at the Company’s option.

operating lease for 38,200 square feet of lab, warehouse and office space in Ledgewood, New Jersey that expires in July 2027 , with

an option to extend the term for two additional five-year periods.

operating lease for 17,700 square feet of office space in Nashville, Tennessee that expires in June 2032 , and includes options to

extend the lease term to June 2042.

operating lease for 11,600 square feet of lab and office space in Nashville, Tennessee which commenced in September 2022 and expires

in September 2027 .

September 30, 2025, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases

held by the Company were 8.08 % and 9.5 years, respectively.

the three and nine months ended September 30, 2025, cash paid for amounts included for the operating lease liabilities was $ 332,000 and

$ 840,000 , respectively, and $ 327,000 and $ 972,000 for the same periods in 2024, respectively.

During the three and nine months ended

September 30, 2025, the Company recorded operating lease expense of $ 365,000 and $ 1,116,000 , respectively, and $ 414,000 and $ 1,053,000

for the same periods in 2024, respectively.

Operating lease expense is included in selling, general and administrative expenses within

the condensed consolidated statements of operations.

lease payments under operating leases as of September 30, 2025 were as follows :

OF FUTURE LEASE PAYMENTS UNDER OPERATING LEASES

March 31, 2026, future minimum principal payments under the Company’s debt were as follows:

SCHEDULE OF FUTURE MINIMUM PAYMENT UNDER NOTES PAYABLES

Remainder of 2026

Total minimum lease payments

amount representing interest payments

( 3,620,000 )

Total operating lease obligations

current portion, operating lease obligations

Operating lease obligations, net of current portion

STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

the nine months ended September 30, 2025, upon vesting of 346,500 PSUs granted in April 2023 to Andrew R.

Boll, the Company’s President

and Chief Financial Officer, the Company issued 209,755 shares of common stock to Mr.

Boll, net of 136,745 shares of common stock withheld

for payroll tax withholdings totaling $ 3,157,000 .

the nine months ended September 30, 2025, upon vesting of 762,300 PSUs granted in April 2023 to Mark L.

Baum, the Company’s Chief

Executive Officer, the Company issued 461,937 shares of common stock to Mr.

Baum, net of 300,363 shares of common stock withheld for

payroll tax withholdings totaling $ 6,935,000 .

During the nine months ended September 30, 2025, 277,200 PSUs granted in April 2023 to John P.

Saharek, the President of ImprimisRx,

vested, and the Company issued 167,725 shares of common stock to Mr.

Saharek, net of 109,475 shares of common stock withheld for payroll

tax withholdings totaling $ 2,528,000 .

July 2025, the Company issued 286,662 shares of common stock to Mark L.

Baum, Chief Executive Officer, upon the cashless exercise of

options to purchase 600,000 shares at an exercise price of $ 7.87 per share.

The Company withheld 127,345 shares from Mr.

Baum as consideration

for the cashless exercise and an additional 185,993 shares for payroll tax obligations totaling $ 6,897,000 .

During the nine months ended September 30, 2025, 42,500 RSUs granted in prior periods vested, and the Company issued 32,672 shares of

common stock, net of 9,828 shares of common stock withheld for payroll tax withholdings totaling $ 343,000 .

the nine months ended September 30, 2025, 198,795 RSUs and PSUs granted in prior periods vested, and the Company issued 198,795 shares

of common stock.

the nine months ended September 30, 2025, the Company issued 28,108 shares of common stock and received proceeds of $ 287,000 upon the

exercise of options to purchase 28,146 shares of common stock with exercise prices ranging from $ 4.66 to $ 25.86 per share.

the nine months ended September 30, 2025, the Company issued 29,214 shares of its common stock underlying RSUs held by a director that

ceased providing services to the Company.

The RSUs had previously vested, including 4,173 RSUs that vested during the nine months ended

September 30, 2025, 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, 2025, 17,806 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 person ceases providing services to the Company.

the nine months ended September 30, 2025, 13,000 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 stockholders adopted the Company’s 2007 Incentive Stock and Awards Plan, which was subsequently

amended on November 5, 2008, February 26, 2012, July 18, 2012, May 2, 2013 and September 27, 2013 (as amended, the “2007 Plan”).

The 2007 Plan reached its term in September 2017, and we can no longer issue additional awards under this plan, however, options previously

issued under the 2007 Plan will remain outstanding until they are exercised, reach their maturity or are otherwise cancelled/forfeited.

On June 13, 2017, the Company’s stockholders adopted the Company’s 2017 Incentive Stock and Awards Plan which was subsequently

amended on June 3, 2021 (as amended, the “2017 Plan”).

On June 18, 2025, the Company’s stockholders adopted the Company’s

2025 Incentive Stock and Awards Plan (the “2025 Plan” together with the 2007 Plan and 2017 Plan, the “Plans”).

The purpose of the Plans are to attract and retain directors, officers, consultants, advisors and employees whose services are considered

valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons in the Company’s development

and financial success.

Under the Plans, the Company is authorized to issue incentive stock options intended to qualify under Section

422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options, restricted stock units, restricted stock and performance

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

summary of stock option activity under the Plans for the nine months ended September 30, 2025 is as follows:

OF STOCK OPTION PLAN ACTIVITY

Exercise Price

Intrinsic Value

Options outstanding – January 1, 2025

Options granted

Options exercised

Options cancelled/forfeited

Options outstanding – September 30, 2025

Options exercisable

Options vested and expected to vest

aggregate intrinsic value in the table above represents the total pre-tax amount of the proceeds, net of exercise price, which would

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

price lower than the market price on September 30, 2025, based on the closing price of the Company’s common stock of $ 48.18 on

the nine months ended September 30, 2025, the Company granted stock options to certain employees.

The stock options were granted with

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

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

Vesting terms for options granted to employees

during the three and nine months ended September 30, 2025 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.

The expected term

of options granted to employees and directors was determined in accordance with the “simplified approach,” as the Company

has limited, relevant, historical data on employee exercises and post-vesting employment termination behavior.

The expected risk-free

interest rate is based on the U.S.

Treasury yield for a period consistent with the expected term of the option in effect at the time

of the grant.

The financial statement effect of forfeitures is estimated at the time of grant and revised, if necessary, if the actual

effect differs from those estimates.

For option grants to employees and directors, the Company assigns a forfeiture factor of 10 %.

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

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

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

used for valuing options granted to employees:

OF FAIR VALUE ASSUMPTIONS

Weighted-average fair value of options granted

Expected terms (in years)

Expected volatility

71.02 %- 71.30 %

Risk-free interest rate

3.84 %- 4.53 %

Dividend yield

following table summarizes information about stock options outstanding and exercisable at September 30, 2025:

OF STOCK OPTION OUTSTANDING AND EXERCISABLE

Options Outstanding

Options Exercisable

of Exercise Prices

Life in Years

$ 1.47 - $ 1.70

$ 2.40 - $ 2.60

$ 4.49 - $ 5.72

$ 6.75 - $ 7.26

$ 7.60 - $ 48.18

Total minimum principal payments

unamortized issue costs and premium

( 7,913,000 )

of September 30, 2025, there was approximately $ 6,307,000 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 3.31 years.

The stock-based compensation for all stock options was $ 281,000 and $ 666,000 during the three and nine months ended September 30, 2025,

respectively, and $ 160,000 and $ 416,000 during the same periods in 2024, respectively.

intrinsic value of options exercised during the nine months ended September 30, 2025 was $ 18,232,000 .

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

vesting criteria.

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

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

summary of the Company’s RSU activity and related information for the nine months ended September 30, 2025 is as follows:

OF RESTRICTED STOCK UNITS ACTIVITY

RSUs unvested - January 1, 2025

RSUs cancelled/forfeited

RSUs unvested – September 30, 2025

of September 30, 2025, the total unrecognized compensation expense related to unvested RSUs was approximately $ 6,431,000 , which is expected

to be recognized over a weighted-average period of 1.56 years, based on estimated and actual vesting schedules of the applicable RSUs.

The stock-based compensation for RSUs during the three and nine months ended September 30, 2025 was $ 284,000 and $ 1,692,000 , respectively,

and was $ 587,000 and $ 1,494,000 during the same periods in 2024, respectively.

July 2025, the Company granted an aggregate of 1,295,250 performance stock units to Mark L.

Baum, Chief Executive Officer, and Andrew

Boll, President and Chief Financial Officer, which are subject to the satisfaction of certain market-based and continued service conditions

(the “2025 PSUs”).

The vesting of the 2025 PSUs require (i) a minimum of a three-year service period, and (ii) during a five-year

term, the achievement and maintenance of Company common stock price targets ranging between $ 50 to $ 100 per share, broken out into four

separate tranches as described further in the table below.

OF PERFORMANCE STOCK UNITS

Stock Price assumes that no dividends or like distributions are made to stockholders of the Company.

If such distributions are made,

the Target Stock Price would decrease accordingly, to the benefit of the employee, to account for the dividend/distribution as a

part of the Target Stock Price.

aggregate fair value of the 2025 PSUs was $ 32,465,000

using a Monte Carlo Simulation with a five 5 -year

volatility and a risk-free interest rate of 3.8 %.

This amount is being amortized over a three 3 -year

derived service period.

summary of the Company’s PSU activity and related information for the nine months ended September 30, 2025 is as follows:

OF PERFORMANCE STOCK UNITS ACTIVITY

Number of Shares

Weighted Average

PSUs unvested – January 1, 2025

Notes payable, net

$ 292,087,000

PSUs cancelled/forfeited

PSUs unvested – September 30, 2025

of September 30, 2025, the total unrecognized compensation expense related to unvested PSUs was approximately $ 29,759,000 , which is expected

to be recognized over a weighted-average period of 2.75 years, based on estimated and actual vesting schedules of the applicable PSUs.

The stock-based compensation for PSUs during the three and nine months ended September 30, 2025 was $ 2,705,000 and $ 6,344,000 , respectively,

and $ 3,638,000 and $ 10,915,000 during the same periods in 2024, respectively.

Compensation Summary

Company recorded stock-based compensation related to equity instruments granted to employees, directors and consultants as follows:

OF STOCK BASED COMPENSATION GRANTED TO EMPLOYEES, DIRECTORS AND CONSULTANTS

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

Employees - selling, general and administrative

Employees - R&D

Directors - selling, general and administrative

Consultants - selling, general and administrative

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

are complex in nature and have outcomes that are difficult to predict.

The Company describes legal proceedings and other matters that

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

What changed 10-Q

Item 1. Financial Statements