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Item 9A. Controls and Procedures

2025-03-27 compared with 2024-03-19 · 2371 added, 1916 removed, 422 unchanged (91% of the section changed)

CONTROLS AND PROCEDURES

Controls and Procedures

management, under the supervision and with the participation of our Chief Executive Officer (“CEO”), our principal executive

officer, and our Chief Financial Officer (“CFO”), our principal financial and accounting officer, conducted an evaluation

of the effectiveness of our disclosure controls and procedures as of December 31, 2023, the end of the period covered by this Annual

Report, pursuant to Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

connection with that evaluation, our CEO and CFO concluded that, as of December 31, 2023, our disclosure controls and procedures were

For the purpose of this review, disclosure controls and procedures means controls and procedures designed to ensure that information

required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported

within the time periods specified in the SEC’s rules and forms.

These disclosure controls and procedures include, without limitation,

controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under

the Exchange Act is accumulated and communicated to management, including our principal executive officer, principal financial officer

and principal accounting officer, as appropriate to allow timely decisions regarding required disclosure.

Annual Report on Internal Control over Financial Reporting

management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f)

and 15d-15(f) under the Exchange Act.

Internal control over financial reporting is a process designed by, or under the supervision of,

our CEO and CFO and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted

accounting principles.

Our management, under the supervision and with the participation of our CEO and CFO, conducted an evaluation of

the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework

(2013) issued by the Committee of Sponsoring Organizations.

Based on such evaluation, management concluded that our internal control

over financial reporting was effective as of December 31, 2023.

Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control

over financial reporting, in accordance with applicable SEC rules that permit us to provide only management’s report in the annual

in Internal Control over Financial Reporting

has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the

year ended December 31, 2023, that has materially affected, or is reasonably likely to materially affect our internal control over financial

Limitations on Effectiveness of Controls

management, including our CEO and CFO, do not expect that our disclosure controls or our internal control over financial reporting will

prevent or detect all errors and all fraud.

A control system, no matter how well designed and operated, can provide only reasonable,

not absolute, assurance that the control system’s objectives will be met.

The design of a control system must reflect the fact

that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Further, because of the

inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error

or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.

These inherent limitations include

the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the

The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there

can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Projections of

any evaluation of controls effectiveness to future periods are subject to risks.

Over time, controls may become inadequate because of

changes in conditions or deterioration in the degree of compliance with policies or procedures.

Disclosure Controls and Procedures

Our management, under the supervision

and with the participation of our Chief Executive Officer (“CEO”), our principal executive officer, and our Chief Financial

Officer (“CFO”), our principal financial and accounting officer, conducted an evaluation of the effectiveness of our disclosure

controls and procedures as of December 31, 2024, the end of the period covered by this Annual Report, pursuant to Rules 13a-15(b) and

15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

In connection with that evaluation,

our CEO and CFO concluded that, as of December 31, 2024, our disclosure controls and procedures were effective.

For the purpose of this

review, disclosure controls and procedures mean controls and procedures designed to ensure that information required to be disclosed

by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods

specified in the SEC’s rules and forms.

These disclosure controls and procedures include, without limitation, controls and procedures

designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated

and communicated to management, including our principal executive officer, principal financial officer and principal accounting officer,

as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control

over Financial Reporting

Our management is responsible

for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under

the Exchange Act.

Internal control over financial reporting is a process designed by, or under the supervision of, our CEO and CFO and

effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial

reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our management, under the supervision and with the participation of our CEO and CFO, conducted an evaluation of the effectiveness of

our internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued

by the Committee of Sponsoring Organizations.

Based on such evaluation, management concluded that our internal control over financial

reporting was effective as of December 31, 2024.

Crowe LLP, the independent registered

public accounting firm who also audited our Consolidated Financial Statements, has issued an attestation report on the Company’s

effectiveness of internal controls over financial reporting which is included herein.

The report by Crowe LLP is included in our consolidated

financial statements beginning on page F-1 of this report.

Changes in Internal Control over Financial Reporting

There has been no change in our

internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the year ended December 31, 2024,

that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Our management, including our

CEO and CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors

and all fraud.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that

the control system’s objectives will be met.

The design of a control system must reflect the fact that there are resource constraints,

and the benefits of controls must be considered relative to their costs.

Further, because of the inherent limitations in all control

systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all

control issues and instances of fraud, if any, have been detected.

These inherent limitations include the realities that judgments in

decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

Controls can also be circumvented by

the individual acts of some persons, by collusion of two or more people, or by management override of the controls.

The design of any

system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that

any design will succeed in achieving its stated goals under all potential future conditions.

Projections of any evaluation of controls

effectiveness to future periods are subject to risks.

Over time, controls may become inadequate because of changes in conditions or deterioration

in the degree of compliance with policies or procedures.

OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

information required by this item is incorporated by reference to the information set forth under the captions “Election of Directors,”

“Executive Officers,” “Corporate Governance,” “Corporate Governance — Delinquent Section 16(a) Reports,”

and “Corporate Governance — Code of Business Conduct and Ethics” in the Company’s Proxy Statement for the 2024

Annual Meeting of Stockholders.

From time to time, certain

of our executive officers and directors may enter into, amend or terminate written trading arrangements pursuant to Rule 10b5-1 of the

Exchange Act or otherwise.

During the three months ended December 31, 2024, none of our directors or officers adopted or terminated any

Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K).

DISCLOSURE REGARDING FOREIGN JURISDICTIONS

THAT PREVENT INSPECTIONS

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE

The information required by this

item is incorporated by reference to the information set forth under the captions “Election of Directors,” “Executive

Officers,” “Corporate Governance,” “Corporate Governance — Delinquent Section 16(a) Reports,” and

“Corporate Governance — Code of Business Conduct and Ethics” in the Company’s Proxy Statement for the 2025 Annual

Meeting of Stockholders.

We have adopted an Insider

Trading Policy governing transactions in our securities by all officers of the Company and its subsidiaries, all members of the Company’s

Board of Directors and all employees of the Company and its subsidiaries, and we believe such policy is reasonably designed to promote

compliance with insider trading laws, rules and regulations, and the exchange listing standards applicable to us.

A copy of our Insider

Trading Policy is filed as Exhibit 19 to this Annual Report on Form 10-K.

It is our policy to comply with all applicable securities laws

and regulations (including appropriate approvals by our Board of Directors, if required) when engaging in transactions in our securities.

EXECUTIVE COMPENSATION

information required by this item is incorporated by reference to the information set forth under the captions “Executive Compensation”

and “Director Compensation” in the Company’s Proxy Statement for the 2024 Annual Meeting of Stockholders.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

information required by this item is incorporated by reference to the information set forth under the captions “Security Ownership

of Certain Beneficial Owners and Management and Related Stockholder Matters” and “Executive Compensation — Securities

Authorized for Issuance Under Equity Compensation Plans” in the Company’s Proxy Statement for the 2024 Annual Meeting of

Stockholders.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

information required by this item is incorporated by reference to the information set forth under the captions “Corporate Governance

— Transactions with Related Persons” and “Corporate Governance — Director Independence” in the Company’s

Proxy Statement for the 2024 Annual Meeting of Stockholders.

The information required by this

item is incorporated by reference to the information set forth under the captions “Executive Compensation” and “Director

Compensation” in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this

item is incorporated by reference to the information set forth under the captions “Security Ownership of Certain Beneficial Owners

and Management and Related Stockholder Matters” and “Executive Compensation — Securities Authorized for Issuance Under

Equity Compensation Plans” in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,

AND DIRECTOR INDEPENDENCE

The information required by this

item is incorporated by reference to the information set forth under the captions “Corporate Governance — Transactions with

Related Persons” and “Corporate Governance — Director Independence” in the Company’s Proxy Statement for

the 2025 Annual Meeting of Stockholders.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

information required by this item is incorporated by reference to the information set forth under the caption “Ratification of

Selection of Independent Registered Public Accounting Firm” in the Company’s Proxy Statement for the 2024 Annual Meeting

of Stockholders.

The information required by this

item is incorporated by reference to the information set forth under the caption “Ratification of Selection of Independent Registered

Public Accounting Firm” in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

of the following documents filed as part of the report:

the index to our consolidated financial statements on page F-1 for a list of the financial statements being filed in this Annual

financial statement schedules are omitted because they are not applicable or the required information is shown in the consolidated

financial statements or the notes thereto.

Item 15(b) below for all exhibits being filed or incorporated by reference herein.

List of the following documents filed as part of the report:

See the index to our consolidated financial statements on page F-1

for a list of the financial statements being filed in this Annual Report.

All financial statement schedules are omitted because they are not

applicable or the required information is shown in the consolidated financial statements or the notes thereto.

See Item 15(b) below for all exhibits being filed or incorporated by

reference herein.

EXHIBIT INDEX

Agreement and Plan of Merger, dated as of September 17, 2007, by and among Imprimis Pharmaceuticals, Inc., Transdel Pharmaceuticals Holdings, Inc.

2 unchanged sentences

filed with the Securities and Exchange Commission on September 21, 2007).

Amended and Restated Certificate of Incorporation, as amended (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form 8-K of Harrow, Inc.

and Restated Certificate of Incorporation, as amended (incorporated herein by reference to Exhibit 3.1 to the Current Report on Form

8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on September 29, 2023) .

2 unchanged sentences

filed with the Securities and Exchange Commission on September 29, 2023).

Description of the Company’s Securities

Indenture dated April 20, 2021, between Harrow, Inc.

Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.1 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on April 20, 2021).

First Supplemental Indenture dated April 20, 2021 between Harrow, Inc.

Bank National Association, as Trustee (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K of Harrow, Inc.

Description of the Company’s Securities (incorporated herein by reference to Exhibit 4.1 to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 19, 2024).

dated April 20, 2021, between Harrow, Inc.

Bank National Association, as Trustee (incorporated herein by reference to Exhibit

4.1 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on April 20, 2021).

Form of 8.625% Senior Note due 2026 (incorporated herein by reference to Exhibit 4.3 to the Current Report on Form 8-K of Harrow, Inc.

First Supplemental

Indenture dated April 20, 2021 between Harrow, Inc.

Bank National Association, as Trustee (incorporated herein by reference

to Exhibit 4.2 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on April 20, 2021) .

Second Supplemental Indenture dated December 20, 2022 between Harrow, Inc.

Bank Trust Company, National Association (incorporated herein by reference to Exhibit 4.2 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on December 20, 2022).

Form of 11.875% Senior Note due 2027 (incorporated herein by reference to Exhibit 4.3 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on December 20, 2022).

Form of Directors and Officers Indemnification Agreement (incorporated herein by reference to Exhibit 10.8 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

of 8.625% Senior Note due 2026 (included as Exhibit A in Exhibit 4.3).

Supplemental Indenture dated December 20, 2022 between Harrow, Inc.

Bank Trust Company, National Association (incorporated

herein by reference to Exhibit 4.2 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission

on December 20, 2022).

of 11.875% Senior Note due 2027 (included as Exhibit A in Exhibit 4.5).

of Directors and Officers Indemnification Agreement (incorporated herein by reference to Exhibit 10.8 to the Current Report on Form

8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on September 21, 2007).

Imprimis Pharmaceuticals, Inc.

Amended and Restated 2007 Stock Incentive and Awards Plan (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

Pharmaceuticals, Inc.

Amended and Restated 2007 Stock Incentive and Awards Plan (incorporated herein by reference to Exhibit 10.3

to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on May 8,

Amendment No.

1 to Imprimis Pharmaceuticals, Inc.

Amended and Restated 2007 Incentive Stock and Awards Plan (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on November 6, 2013)

Form of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 10.12 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

Amended and Restated 2007 Incentive Stock and Awards Plan (incorporated herein by reference

to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission

on November 6, 2013) .

of Incentive Stock Option Agreement (incorporated herein by reference to Exhibit 10.12 to the Current Report on Form 8-K of Imprimis

Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on September 21, 2007).

Form of Non-Qualified Stock Option Agreement (incorporated herein by reference to Exhibit 10.13 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

of Non-Qualified Stock Option Agreement (incorporated herein by reference to Exhibit 10.13 to the Current Report on Form 8-K of Imprimis

Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on September 21, 2007).

Form of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

of Restricted Stock Unit Agreement (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Imprimis

Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on May 8, 2013) .

Employment Agreement, dated as of April 25, 2016, by and between Imprimis Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2016)

Employment Agreement, dated as of April 25, 2016, by and between Imprimis Pharmaceuticals, Inc.

Agreement, dated as of April 25, 2016, by and between Imprimis Pharmaceuticals, Inc.

Baum (incorporated herein by reference

to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26,

Agreement, dated as of April 25, 2016, by and between Imprimis Pharmaceuticals, Inc.

and Andrew R.

Boll (incorporated herein by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2016)

Employment Agreement, dated as of April 25, 2016, by and between Imprimis Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2016)

License Agreement dated April 1, 2017 between Imprimis Pharmaceuticals, Inc.

Boll (incorporated herein by reference

to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26,

Agreement, dated as of April 25, 2016, by and between Imprimis Pharmaceuticals, Inc.

Saharek (incorporated herein by

reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on

April 26, 2016) .

Agreement dated April 1, 2017 between Imprimis Pharmaceuticals, Inc.

and Richard L.

Lindstrom, M.D.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on April 6, 2017)

Consulting Agreement dated May 1, 2017 between Eton Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.8 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

(incorporated herein by reference

to Exhibit 10.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission

on April 6, 2017) .

Agreement dated May 1, 2017 between Eton Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.8

to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on August

Consulting Agreement dated May 1, 2017 between Eton Pharmaceuticals, Inc.

Agreement dated May 1, 2017 between Eton Pharmaceuticals, Inc.

and Andrew R.

Boll (incorporated herein by reference to Exhibit 10.9 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

Boll (incorporated herein by reference to Exhibit 10.9

to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on August

Consulting Agreement dated May 1, 2017 between Eton Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit 10.10 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

Agreement dated May 1, 2017 between Eton Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit 10.10

to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on August

Consulting Agreement dated October 27, 2017 between Surface Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.53 to the Annual Report on Form 10-K of Imprimis Pharmaceuticals, Inc.

Agreement dated October 27, 2017 between Surface Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit

10.53 to the Annual Report on Form 10-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on March

Consulting Agreement dated October 27, 2017 between Surface Pharmaceuticals, Inc.

Agreement dated October 27, 2017 between Surface Pharmaceuticals, Inc.

and Andrew R.

Boll (incorporated herein by reference to Exhibit 10.54 to the Annual Report on Form 10-K of Imprimis Pharmaceuticals, Inc.

Boll (incorporated herein by reference to Exhibit

10.54 to the Annual Report on Form 10-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on March

Consulting Agreement dated October 27, 2017 between Surface Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit 10.55 to the Annual Report on Form 10-K of Imprimis Pharmaceuticals, Inc.

Agreement dated October 27, 2017 between Surface Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit

10.55 to the Annual Report on Form 10-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on March

Asset Purchase and License Agreement dated September 28, 2017 between Imprimis Pharmaceuticals, Inc.

Purchase and License Agreement dated September 28, 2017 between Imprimis Pharmaceuticals, Inc.

and Surface Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on May 15, 2018)

Amended and Restated Asset Purchase and License Agreement dated April 10, 2018 between Imprimis Pharmaceuticals, Inc.

and Surface Pharmaceuticals, Inc.

the Securities and Exchange Commission on May 15, 2018) .

and Restated Asset Purchase and License Agreement dated April 10, 2018 between Imprimis Pharmaceuticals, Inc.

and Surface Pharmaceuticals,

(incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 8-K of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on May 15, 2018)

Amended and Restated License Agreement dated April 10, 2018 between Imprimis Pharmaceuticals, Inc.

with the Securities and Exchange Commission on May 15, 2018) .

and Restated License Agreement dated April 10, 2018 between Imprimis Pharmaceuticals, Inc.

and Richard L.

Lindstrom, M.D.

(incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on August 6, 2018)

Consulting Agreement dated March 1, 2018 between Surface Pharmaceuticals, Inc.

(incorporated

herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities

and Exchange Commission on August 6, 2018) .

Agreement dated March 1, 2018 between Surface Pharmaceuticals, Inc.

and Richard L.

Lindstrom, M.D.

(incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on August 6, 2018)

Consulting Agreement dated May 1, 2018 between Melt Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

(incorporated herein by reference

to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission

on August 6, 2018) .

Agreement dated May 1, 2018 between Melt Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.1

to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on November

Consulting Agreement dated May 1, 2018 between Melt Pharmaceuticals, Inc.

Agreement dated May 1, 2018 between Melt Pharmaceuticals, Inc.

and Andrew R.

Boll (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

Boll (incorporated herein by reference to Exhibit 10.2

to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on November

Consulting Agreement dated May 1, 2018 between Melt Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

Agreement dated May 1, 2018 between Melt Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit 10.3

to the Quarterly Report on Form 10-Q of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on November

Asset Purchase Agreement dated December 11, 2018 between Harrow, Inc.

Purchase Agreement dated December 11, 2018 between Harrow, Inc.

(fka Imprimis Pharmaceuticals, Inc.) and Melt Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on February 5, 2019)

Consulting Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and

Exchange Commission on February 5, 2019) .

Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit

10.3 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on August 14, 2019) .

Consulting Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc.

Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc.

and Andrew R.

Boll (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow, Inc.

Boll (incorporated herein by reference to Exhibit

10.2 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on August 14, 2019) .

Consulting Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Harrow, Inc.

Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit

10.4 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on August 14, 2019) .

Consulting Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit 10.64#* to the Annual Report on Form 10-K of Harrow, Inc.

Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc.

Baum (incorporated herein by reference to Exhibit

10.64 to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 13, 2020).

Consulting Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc.

Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc.

and Andrew R.

Boll (incorporated herein by reference to Exhibit 10.65#* to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 13, 2020).

Consulting Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit 10.66#* to the Annual Report on Form 10-K of Harrow, Inc.

Boll (incorporated herein by reference to Exhibit

10.65 to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 13, 2020).

Commercial Alliance Agreement between Eyepoint Pharmaceuticals, Inc.

and ImprimisRx, LLC dated August 1, 2020 (incorporated herein by reference to Exhibit 10.1*# to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on November 9, 2020).

Expansion Term Letter Agreement dated December 6, 2021 between Eyepoint Pharmaceuticals, Inc.

and ImprimisRx, LLC (incorporated herein by reference to Exhibit 10.50 to the Annual Report on Form 10-K of Harrow, Inc.

Agreement dated February 13, 2020 between Stowe Pharmaceuticals, Inc.

Saharek (incorporated herein by reference to Exhibit

10.66 to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 13, 2020).

Mutual Termination Agreement dated October 7, 2022 between ImprimisRx and EyePoint Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on November 14, 2022)

License and Supply Agreement dated July 25, 2021 between Harrow, Inc.

and Supply Agreement dated July 25, 2021 between Harrow, Inc.

and Sintetica, S.A.

(incorporated herein by reference to Exhibit 10.2 to the Current Report on Form 10-Q of Harrow, Inc.

(incorporated herein by reference to Exhibit 10.2

to the Current Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on August 10, 2021) .

2017 Incentive Stock and Awards Plan (incorporated herein by reference to Exhibit 10.1 to the Registration Statement on Form S-8 of Imprimis Pharmaceuticals, Inc.

2017 Incentive Stock and Awards Plan (incorporated herein by reference to Exhibit 10.1 to the Registration Statement on Form

S-8 of Imprimis Pharmaceuticals, Inc.

filed with the Securities and Exchange Commission on August 25, 2017) .

First Amendment to the Harrow, Inc.

2017 Incentive Stock and Awards Plan (incorporated herein by reference to Appendix A to Harrow, Inc.’s Definitive Proxy Statement filed with the Securities and Exchange Commission on April 23, 2021)

Loan and Security Agreement dated September 1, 2021 among Harrow, Inc.

Amendment to the Harrow, Inc.

2017 Incentive Stock and Awards Plan (incorporated herein by reference to Appendix A to Harrow, Inc.’s

Definitive Proxy Statement filed with the Securities and Exchange Commission on April 23, 2021) .

and Security Agreement dated September 1, 2021 among Harrow, Inc.

and Melt Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Harrow, Inc.

(incorporated herein by reference

to Exhibit 10.1 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on September

First Amendment to Loan and Security Agreement dated April 8, 2022 between Harrow, Inc.

Amendment to Loan and Security Agreement dated April 8, 2022 between Harrow, Inc.

and Melt Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on November 14, 2022)

Second Amendment to Loan and Security Agreement dated September 21, 2022 between Harrow, Inc.

(incorporated herein

by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission

on November 14, 2022) .

Amendment to Loan and Security Agreement dated September 21, 2022 between Harrow, Inc.

and Melt Pharmaceuticals, Inc.

(incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on November 14, 2022)

Asset Purchase Agreement dated December 17, 2021 between Harrow, Inc.

and Novartis Technology, LLC and Novartis Ophthalmics AG (incorporated herein by reference to Exhibit 10.51 to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 10, 2022).

Asset Purchase Agreement dated December 13, 2022 between Harrow, Inc.

and Novartis Technology, LLC and Novartis Innovative Therapies AG (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Harrow, Inc.

filed with the Securities and Exchange Commission on December 14, 2022).

Loan and Security Agreement dated December 14, 2022 between Harrow, Inc.

Riley Commercial Capital LLC (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Harrow, Inc.

(incorporated

herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission

on November 14, 2022) .

Purchase Agreement dated December 17, 2021 between Harrow, Inc.

and Novartis Technology, LLC and Novartis Ophthalmics AG (incorporated

herein by reference to Exhibit 10.51 to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission

on March 10, 2022) .

Purchase Agreement dated December 13, 2022 between Harrow, Inc.

and Novartis Technology, LLC and Novartis Innovative Therapies AG

(incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 10-K of Harrow, Inc.

filed with the Securities and

Exchange Commission on December 14, 2022).

and Security Agreement dated December 14, 2022 between Harrow, Inc.

Riley Commercial Capital LLC (incorporated herein by reference

to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on May 11,

Credit and Guaranty Agreement dated March 27, 2023 between Harrow, Inc.

and Oaktree Fund Administration, LLC (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow, Inc.

and Guaranty Agreement dated March 27, 2023 between Harrow, Inc.

and Oaktree Fund Administration, LLC (incorporated herein by reference

to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on May 11,

First Amendment to Credit Agreement and Guaranty dated July 18, 2023 to the Credit Agreement and Guaranty dated March 27, 2023 between Harrow, Inc.

and Oaktree Fund Administration, LLC (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Harrow, Inc.

Amendment to Credit Agreement and Guaranty dated July 18, 2023 to the Credit Agreement and Guaranty dated March 27, 2023 between

and Oaktree Fund Administration, LLC (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form

10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on August 9, 2023).

Second Amendment to License and Supply Agreement dated August 4, 2023 between Harrow IP, LLC and Sintetica S.A (incorporated herein by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow, Inc.

Amendment to License and Supply Agreement dated August 4, 2023 between Harrow IP, LLC and Sintetica S.A (incorporated herein by reference

to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on November

Third Amendment to License and Supply Agreement dated February 6, 2024 between Harrow IP, LLC and Sintetica S.A.

List of Subsidiaries

Consent of Independent Registered Public Accounting Firm

Power of Attorney (included on the signature page to this Annual Report)

Certification of Mark L.

Baum, Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Andrew R.

Boll, Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification pursuant to 18 U.S.C.

(incorporated herein by reference to Exhibit 10.46 to the Annual Report on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 19, 2024).

Amendment to the Credit Agreement and Guaranty dated October 25, 2024 to the Credit Agreement and Guaranty dated March 27, 2023 between

and Oaktree Fund Administration, LLC (incorporated herein by reference to Exhibit 10.1 to the Quarterly Report on Form

10-Q of Harrow, Inc.

filed with the Securities and Exchange Commission on November 14, 2024).

Offer Letter Agreement, dated as of November 18, 2024, by and between Harrow, Inc.

from KMJ Corbin & Company LLP (incorporated herein by reference to Exhibit 16 to Current Report on Form 8-K of Harrow, Inc.

with the Securities and Exchange Commission on June 26, 2024) .

Insider Trading Policy

of Subsidiaries

Consent of Independent

Registered Public Accounting Firm - Crowe LLP

Consent of Independent

Registered Public Accounting Firm - KMJ Corbin & Company LLP

of Attorney (included on the signature page to this Annual Report)

Certification

Baum, Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as

adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification

Boll, Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as

adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification

pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Mark L.

Baum, Chief Executive Officer.

Certification pursuant to 18 U.S.C.

Chief Executive Officer.

Certification

pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Andrew R.

Boll, Chief Financial Officer.

Policy Regarding the Mandatory Recovery of Compensation.

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cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 has been formatted in Inline

contract or compensatory plan or arrangement.

treatment has been granted with respect to portions of this exhibit pursuant to Rule 24b-2 of the Exchange Act and these confidential

portions have been redacted from the filing that is incorporated herein by reference.

A complete copy of this exhibit, including

the redacted terms, has been separately filed with the Securities and Exchange Commission.

Chief Financial Officer.

Policy Regarding the Mandatory Recovery of Compensation (incorporated herein by reference to Exhibit 97 to the Annual Report

on Form 10-K of Harrow, Inc.

filed with the Securities and Exchange Commission on March 19, 2024).

following financial information from the Company’s Annual Report on Form 10-K for the

year ended December 31, 2024, formatted in Inline Extensible Business Reporting Language

(i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statement of

Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit), (iv)

the Statements of Cash Flows and (v) Notes to Financial Statements.

The cover page from the

Company’s Annual Report on Form 10-K for the year ended December 31, 2024 has been formatted in Inline XBRL (included as Exhibit

Management contract or compensatory plan or arrangement.

Filed herewith.

Furnished herewith.

Confidential treatment has been granted with respect to portions of

this exhibit pursuant to Rule 24b-2 of the Exchange Act and these confidential portions have been redacted from the filing that is

incorporated herein by reference.

A complete copy of this exhibit, including the redacted terms, has been separately filed with the

Securities and Exchange Commission.

FORM 10-K SUMMARY

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed

on its behalf by the undersigned, thereunto duly authorized.

Executive Officer (Principal Executive Officer)

ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark L.

Pursuant to the requirements

of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf

by the undersigned, thereunto duly authorized.

Chief Executive Officer (Principal Executive Officer)

March 27, 2025

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS,

that each person whose signature appears below constitutes and appoints Mark L.

Baum and Andrew R.

and each of them individually, as his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution,

for him and in his name, place and stead, in any and all capacities to any or all amendments to this Annual Report, and to file the same,

with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said

attorneys-in-fact and agents or any of them the full power and authority to do and perform each and every act and thing requisite and

necessary to be done in and about the foregoing, as full to all intents and purposes as he might or could do in person, hereby ratifying

and confirming all that said attorneys-in-fact and agents or any of them, or his substitutes, may lawfully do or cause to be done by

virtue thereof.

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

registrant and in the capacities and on the dates indicated.

Executive Officer and Chairman of the Board

Executive Officer)

Financial Officer and Corporate Secretary

Accounting and Financial Officer)

Martin Makary

to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

Boll, and each of them individually,

as his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place

and stead, in any and all capacities to any or all amendments to this Annual Report, and to file the same, with all exhibits thereto,

and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents

or any of them the full power and authority to do and perform each and every act and thing requisite and necessary to be done in and

about the foregoing, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that

said attorneys-in-fact and agents or any of them, or his substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements

of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in

the capacities and on the dates indicated.

Chief Executive Officer and Chairman of the Board

March 27, 2025

(Principal Executive Officer)

/s/ Andrew R.

Chief Financial Officer and Corporate Secretary

March 27, 2025

(Principal Accounting and Financial Officer)

/s/ Adrienne L.

March 27, 2025

/s/ Lauren P.

March 27, 2025

FINANCIAL STATEMENTS

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB

Consolidated Balance Sheets at December 31, 2024 and 2023

Consolidated Statements of Operations for the years ended December 31, 2023 and 2022

Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023 and 2022

Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022

Consolidated Statements of Operations for the years ended December 31, 2024

Consolidated Statements of Stockholders’ Equity for the years ended December

31, 2024 and 2023

Consolidated Statements of Cash Flows for the years ended December 31, 2024

Notes to the Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Stockholders and Board of Directors

and the Board of Directors of Harrow, Inc.

on the Financial Statements and Internal Control over Financial Reporting

have audited the accompanying consolidated balance sheet of Harrow, Inc.

(the “Company”) as of December 31, 2024, the related

consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively

referred to as the “financial statements”).

We also have audited the Company’s internal control over financial reporting

as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee

of Sponsoring Organizations of the Treadway Commission (COSO).

our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company

as of December 31, 2024, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles

generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective

internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated

(2013) issued by COSO.

Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting,

and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s

Annual Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s financial

statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We are a public accounting

firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent

with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether

effective internal control over financial reporting was maintained in all material respects.

audit of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements,

whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis,

evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing

the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based

on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

that our audits provide a reasonable basis for our opinions.

and Limitations of Internal Control Over Financial Reporting

company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability

of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in

accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance

with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection

of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of

any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,

or that the degree of compliance with the policies or procedures may deteriorate.

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated

or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit

matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical

audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sales Deductions – Branded Products

Audit Matter Description

described in Note 3 to the consolidated financial statements, sales of branded pharmaceutical products are subject to variable consideration

due to chargebacks, government rebates, returns, administrative fees and other rebates, co-pay assistance and prompt pay discounts (collectively,

“sales deductions”).

Management estimates the sales deductions by product using information related to patient usage, sales

mix, wholesale acquisition cost, calculated average manufacturer price or best price, inventory levels in the distribution channel, expected

claims, actual returns experience, contracted rates, estimate of program participation and redemption and invoices outstanding.

estimate can be affected by changes in customer mix, changes in terms with customers, changes in volume of off contract purchases and

change in the wholesale acquisition cost, among other items.

Management utilizes the services of a third-party professional services

firm to estimate rebates and chargebacks associated with sales of its branded pharmaceutical products.

identified auditing the estimates of product sales deductions for certain branded pharmaceutical products related to chargebacks, government

rebates, administrative fees and other rebates and co-pay assistance as a critical audit matter given the significant judgment required

by management in determining assumptions such as inventory levels in the distribution channel and estimated patient usage.

estimating the product sales deductions for government rebates requires significant judgment related to the estimates of outstanding

and expected future claims for end customer sales.

Auditing these assumptions required a high degree of auditor judgment and subjectivity

and extensive audit effort.

the Critical Audit Matter Was Addressed in the Audit

the assumptions used in determining the product sales deductions included testing the design and operating effectiveness of management’s

controls over the product sales deductions, including controls over the relevance and reliability of external data, the assumptions used

to estimate these sales deductions, and management’s retrospective review of the estimates.

Our procedures also included testing

management’s estimation process for determining accruals for these sales deductions, including evaluating the significant assumptions

by comparing the estimated accrual rates used in management’s analysis to inventory in the distribution channel and estimated sales

to end customers utilizing external third-party data and actual claims received.

We assessed the relevance and reliability of the external

data used in management’s analysis and verified the mathematical accuracy of the calculations used in management’s analysis.

We evaluated management’s ability to accurately estimate the sales deduction accruals by retrospectively comparing historically

recorded accruals to the actual claims amounts.

In addition, we assessed subsequent events to determine whether there was any new information

that would require adjustment to the accruals.

have served as the Company’s auditor since 2024.

Mesa, California

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

the Board of Directors and Stockholders

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Harrow, Inc.

and subsidiaries (the “Company”) as of December

31, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years

in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position

of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the

period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

have audited the accompanying consolidated balance sheet of Harrow, Inc.

(the “Company”) as of December

31, 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31,

2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated

financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the

results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally

accepted in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting

Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

1 unchanged sentence

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether

due to error or fraud, and performing procedures that respond to those risks.

audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due

to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that

was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material

to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication

of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we

are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts

or disclosures to which it relates.

Sales Deductions – Branded Products

Audit Matter Description

described in Note 3 to the consolidated financial statements, revenues from branded product sales are recognized net of accruals for

estimated rebates, wholesaler chargebacks, discounts, copay assistance and other deductions (collectively, “sales deductions”), which are established

at the time of sale.

Management’s estimate of sales deductions for branded products is based on the inventory levels in the distribution

channel as provided by wholesalers, as well as the actual average selling price for each product which is impacted by changes in customer

mix, changes in negotiated terms with customers, and changes in the volume of purchases.

In addition, management utilizes the services

of a third-party professional services firm to estimate rebates and chargebacks associated with sales of its branded products.

identified the estimates of accruals for sales deductions as a critical audit matter given the limited sales history of the Company’s

branded products and the significant judgment required by management with respect to the measurement uncertainty, as the calculation

of the sales deductions includes assumptions such as average selling price, purchasing trends of wholesalers and historical branded product

sales used to predict future sales.

This required a high degree of auditor judgment and an increased extent of audit effort in applying

the procedures related to management’s assumptions.

the Critical Audit Matter Was Addressed in the Audit

test management’s estimated branded product sales deductions, we obtained management’s calculations for the respective estimates

and performed the following procedures, among others.

We tested management’s estimation process for determining accruals for product

sales deductions by developing an independent expectation of the estimated accrual rates, including comparison of rates used in management’s

analysis to external industry data, historical actual information, and executed third-party contracts.

We evaluated management’s

historic ability to accurately estimate the sales deduction accruals by retrospectively comparing historically recorded accruals to the

actual amounts that were ultimately claimed by the wholesalers.

In addition, we assessed subsequent events to determine whether there

was any new information that would require adjustment to the accruals.

KMJ Corbin & Company LLP

have served as the Company’s auditor since 2007.

BALANCE SHEETS

We believe that our audit provides a reasonable basis for our opinion.

/s/ KMJ Corbin & Company LLP

We served as the Company’s auditor from 2007 to 2024.

Glendora, California

March 19, 2024 (March 27, 2025 as to Note 19)

CONSOLIDATED BALANCE SHEETS

Current assets

Cash and cash

Cash and cash equivalents

Investment in Eton Pharmaceuticals

Accounts receivable, net

expenses and other current assets

Prepaid expenses and other current assets

Total current assets

1 unchanged sentence

Capitalized software costs, net

Deferred financing costs

Operating lease right-of-use assets, net

4 unchanged sentences

Current liabilities

Accounts payable and accrued

Accrued rebates and copay

Accrued payroll and related

Deferred revenue and customer

portion of operating lease obligations

Accounts payable and accrued expenses

Accrued rebates and copay assistance

Accrued payroll and related liabilities

Deferred revenue and customer deposits

Current portion of operating lease obligations

Total current liabilities

Operating lease obligations, net of current

Accrued expenses, net of current portion

Notes payable, net of

unamortized debt discount and issuance costs

Operating lease obligations, net of current portion

Notes payable, net of unamortized debt discounts

TOTAL LIABILITIES

Commitments and contingencies

STOCKHOLDERS’ EQUITY

Common stock, $ 0.001 par value, 50,000,000

shares authorized, 35,168,260 and 29,901,530 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively

Common stock, $ 0.001 par value, 50,000,000 shares authorized, 35,622,214 and 35,168,260 shares issued and outstanding at December 31, 2024 and 2023, respectively

Additional paid-in capital

Accumulated deficit

( 151,385,000 )

1 unchanged sentence

TOTAL HARROW, INC.

STOCKHOLDERS’

Noncontrolling

STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY

Noncontrolling interests

TOTAL STOCKHOLDERS’ EQUITY

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$ 388,971,000

$ 312,164,000

accompanying notes are an integral part of these consolidated financial statements

STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these

consolidated financial statements

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended

Product sales,

Product sales, net

$ 198,619,000

$ 117,447,000

Other revenues

Total revenues

5 unchanged sentences

Research and development

of intangible assets

Impairment of long-lived assets

Total operating expenses

4 unchanged sentences

( 21,324,000 )

Equity in losses of unconsolidated

( 11,133,000 )

Investment gain (loss)

from Eton Pharmaceuticals

Investment (loss) gain from Eton Pharmaceuticals

( 3,171,000 )

Loss on extinguishment

Loss on extinguishment of debt

( 5,465,000 )

Gain on sale of non-ophthalmology

(expense) income, net

Total other expense,

Other expense, net

Total other expense, net

( 26,142,000 )

( 24,141,000 )

Loss before income tax provision

Loss before income taxes

( 17,320,000 )

( 23,710,000 )

tax provision

Net loss attributable

to Harrow, Inc.

Income tax expense

( 17,481,000 )

( 24,411,000 )

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 consolidated financial statements

STATEMENTS OF STOCKHOLDERS’ EQUITY

the Years Ended December 31, 2023 and 2022

Noncontrolling

Basic and diluted net loss per share of common stock

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

The accompanying notes are an integral part

of these consolidated financial statements

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

For the Years Ended December 31, 2024 and 2023

Stockholders’

Noncontrolling

Stockholders’

Balance at December 31, 2021

Balance at January 1, 2023

$ 137,058,000

2 unchanged sentences

Issuance of common stock in connection with:

Public offering, net of offering costs

Exercise of consultant stock-based options

Exercise of employee stock-based options

Exercise of warrants

Vesting of RSUs

Shares withheld related

to net share settlement of equity awards

Issuance of common shares from public offering,

net of offering costs

Stock-based compensation expense

( 14,086,000 )

Vesting of RSUs and PSUs

Shares withheld related to net share settlement of equity awards

( 13,012,000 )

( 13,013,000 )

Balance at December 31, 2022

( 13,013,000 )

Stock-based compensation expense

( 24,411,000 )

1 unchanged sentence

( 24,411,000 )

Balance at December 31, 2023

( 133,904,000 )

1 unchanged sentence

Issuance of common stock in connection with:

Public offering, net of

offering costs

Exercise of consultant stock-based options

Exercise of employee stock-based options

Vesting of RSUs and PSUs

Shares withheld related

to net share settlement of equity awards

Shares withheld related to net share settlement of equity awards

( 2,362,000 )

12 unchanged sentences

$ ( 355,000 )

accompanying notes are an integral part of these consolidated financial statements

STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these

consolidated financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended

2 unchanged sentences

$ ( 24,411,000 )

Adjustments to reconcile

net loss to net cash provided by operating activities:

Depreciation and amortization

of property, plant and equipment and software development costs

Amortization of intangible

Amortization of operating

lease right-of-use assets

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

Amortization of operating lease right-of-use assets

Provision for credit losses

Amortization of debt issuance

costs and debt discount

Investment (gain) loss

from investment in Eton

Amortization of debt issuance costs and debt discount

Investment loss (gain) from investment in Eton

( 3,092,000 )

Equity in losses of unconsolidated

Loss on disposal of equipment

Impairment of intangible

Loss on extinguishment

Loss on impairment of intangible assets

Loss on extinguishment of debt

Stock-based compensation

Gain on sale of non-ophthalmology

( 5,259,000 )

Changes in assets and liabilities:

3 unchanged sentences

( 4,326,000 )

Prepaid expenses and other current assets

( 6,072,000 )

Prepaid expenses and other

current assets

( 5,647,000 )

Accounts payable, accrued expenses, accrued rebates and copay assistance

Accrued payroll and related liabilities

Deferred revenue

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

( 22,202,000 )

Accounts payable, accrued

expenses, accrued rebates and copay assistance

Accrued payroll and related

revenue and customer deposits

NET CASH PROVIDED BY

OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of non-ophthalmology

Investment in patent and

trademark assets

Proceeds from sale of property,

plant and equipment

Purchase of product NDAs,

marketing authorizations and patents

Net proceeds on sale of investments

Investment in patent and trademark assets

Purchase of product NDAs and patents

( 37,000,000 )

( 151,075,000 )

of property, plant and equipment

Purchases of property, plant and equipment

( 1,595,000 )

( 1,460,000 )

NET CASH USED IN INVESTING

NET CASH USED IN INVESTING ACTIVITIES

( 33,164,000 )

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from 11.875% notes

payable, net of costs

Proceeds from Oaktree Loan,

Payment of payroll taxes

upon vesting of PSUs, RSUs and exercise of stock options

Net proceeds from 11.875 % notes payable, net of costs

Proceeds from Oaktree credit facility debt, net of costs

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

( 2,362,000 )

Proceeds from exercise

of stock options

Proceeds from B Riley senior

secured note, net of costs

( 13,013,000 )

Proceeds from exercise of stock options

Proceeds from B Riley senior secured note, net of costs

Repayment of B.

Riley senior secured note

( 59,750,000 )

Proceeds from public offering

of common stock, net of offering costs

on finance lease obligations

NET CASH PROVIDED BY

FINANCING ACTIVITIES

Proceeds from public offering of common stock, net of offering costs

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET CHANGE IN CASH AND CASH EQUIVALENTS

( 26,838,000 )

AND CASH EQUIVALENTS, beginning of year

AND CASH EQUIVALENTS, end of year

SUPPLEMENTAL DISCLOSURE

OF CASH FLOW INFORMATION:

paid for income taxes

paid for interest

SUPPLEMENTAL DISCLOSURES

OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Reclassification

of deferred financing costs

of exit fee related to Oaktree Loan

premium financed

of intangible asset included in accounts payable and accrued expenses

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

assets obtained in exchange for new operating lease obligations

accompanying notes are an integral part of these consolidated financial statements

TO THE CONSOLIDATED FINANCIAL STATEMENTS

the Years Ended December 31, 2023 and 2022

(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.

( 22,185,000 )

CASH AND CASH EQUIVALENTS, beginning of period

CASH, CASH EQUIVALENTS, end of period

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for income taxes

Cash paid for interest

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING

AND FINANCING ACTIVITIES:

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Reclassification of deferred financing costs

Accrual of exit fee related to Oaktree Loan

Insurance premium financed

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

Change in extension assumptions of right-of-use assets for operating lease obligations

$ ( 557,000 )

Reclassification of deferred commitment fees from prepaid expenses into

debt issuance costs

The accompanying notes are an integral part

of these consolidated financial statements

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2024 and 2023

(together with its consolidated subsidiaries,

unless the context indicates or otherwise requires, the “Company” or “Harrow”) is a leading eyecare pharmaceutical

company engaged in the discovery, development, and commercialization of innovative ophthalmic pharmaceutical products for the U.S.

Harrow helps U.S.

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

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

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

that are marketed under

its Harrow name.

The Company also owns and operates ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical-compounding

Company owns non-controlling equity interests in Surface Ophthalmics, Inc.

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.

also owns and operates ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical-compounding businesses.

The Company owns non-controlling equity interests

in Surface Ophthalmics, Inc.

(“Surface”) and Melt Pharmaceuticals, Inc.

both companies that began as subsidiaries of Harrow.

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

September 29, 2023, the Company changed its corporate name from Harrow Health, Inc.

(“Melt”), both companies that began as

subsidiaries of Harrow.

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

Effective September 29, 2023, the Company changed

its corporate name from Harrow Health, Inc.

to Harrow, Inc.

pursuant to a Certificate of Amendment

to the Company’s Amended and Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Presentation

has prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United

States of America (“GAAP”).

The accompanying consolidated financial statements include the accounts of the Company and its

wholly owned and majority-owned subsidiaries.

consolidates entities in which it has a controlling financial interest.

The Company assesses control under the variable interest entity

(“VIE”) model to determine whether the Company is the primary beneficiary of that entity.

The Company consolidates (i) entities

in which it holds and/or controls, directly or indirectly, more than 50% of the voting rights, and (ii) VIEs for which the Company is

deemed to be the primary beneficiary.

All intercompany accounts and transactions have been eliminated in consolidation.

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

Company is subject to certain regulatory standards, approvals, guidelines and inspections which could impact the Company’s ability

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

of operations.

Company estimates and records a provision for its expected credit losses related to its financial instruments, including its trade receivables.

Management considers historical collection rates, the current financial status of the Company’s customers, macroeconomic factors,

and other industry-specific factors when evaluating current expected credit losses.

Forward-looking information is also considered in

the evaluation of current expected credit losses.

However, because of the short time to the expected receipt of accounts receivable,

management believes that the carrying value, net of expected losses, approximates fair value and therefore, relies more on historical

and current analysis of such financial instruments, including its trade receivables.

determine the provision for credit losses for accounts receivable, the Company has disaggregated its accounts receivable by class of

customer at the business component level, as management determined that risk profile of the Company’s customers is consistent based

on the type and industry in which they operate, mainly in the pharmaceuticals industry.

Each business component is analyzed for estimated

credit losses individually.

In doing so, the Company establishes a historical loss matrix, based on the previous collections of accounts

receivable by the age of such receivables, and evaluates the current and forecasted financial position of its customers, as available.

Further, the Company considers macroeconomic factors and the status of the pharmaceuticals industry to estimate if there are current

expected credit losses within its trade receivables based on the trends of the Company’s expectation of the future status of such

economic and industry-specific factors.

Also, specific allowance amounts are established based on review of outstanding invoices to record

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

receivable at December 31, 2023 and 2022 are net of allowances for credit losses of $ 371,000 and $ 73,000 , respectively.

The following

table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable

to present the net amount expected to be collected at December 31, 2023 and 2022:

pursuant to a Certificate of Amendment to the Company’s Amended and

Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware.

OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Harrow has prepared the accompanying consolidated

financial statements in accordance with accounting principles generally accepted in the U.S.

The accompanying

consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries.

Harrow consolidates entities in which it has a controlling

financial interest.

The Company assesses control under the variable interest entity (“VIE”) model to determine whether the

Company is the primary beneficiary of that entity.

The Company consolidates (i) entities in which it holds and/or controls, directly

or indirectly, more than 50% of the voting rights, and (ii) VIEs for which the Company is deemed to be the primary beneficiary.

All intercompany

accounts and transactions have been eliminated in consolidation.

Use of Estimates

The 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.

and Uncertainties

The Company is subject to certain regulatory

standards, approvals, guidelines and inspections which could impact the Company’s ability to make, dispense, and sell certain

products or subject the Company to enforcement actions.

The Company’s 503B facility was inspected in 2024.

The Company has

been in discussions with the U.S.

Food and Drug Administration (“FDA”) regarding the 2024 and other past FDA inspections

of its 503B facility and has developed action plans to address observations made by FDA during these inspections and has communicated

those plans to FDA.

If the Company was required to cease

compounding and selling certain products as a result of regulatory guidelines or inspections, it could have a material impact on the

Company’s financial condition, liquidity and results of operations.

January 2026 the Oaktree Loan (see Note 13) becomes due which totals $ 107,500,000 principal amount outstanding at December 31, 2024.

The maturity of this debt obligation without a refinancing event could raise substantial doubt about the Company’s ability to continue

as a going concern.

The Company is currently in discussions with its

current senior lender, Oaktree Fund Administration, LLC, as administrative agent for the lenders (together, “Oaktree”),

and other potential lenders about refinancing the Oaktree Loan.

Management expects to move into more definitive discussions and

negotiations with Oaktree and potential lenders in the summer and fall of 2025.

Management believes it is probable that the Company

will be able to refinance the Oaktree Loan based on the Company’s collateral strength and expected cash flows from operations;

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

If the Company

is unable to successfully refinance the Oaktree Loan, the Company does not expect to have the ability to repay the Oaktree Loan in

The Company believes that one of the other alternatives

available to it in lieu of refinancing the Oaktree Loan is the sale of one or more of the Company’s assets.

There can be no assurance

that any sale could be completed on a timely basis or on terms acceptable to the Company.

The accompanying consolidated financial statements

are prepared on a going concern basis and do not include any adjustments that might result from the outcome of the uncertainty regarding

the Company’s ability to refinance the Oaktree Loan or sell some of its assets to meet its obligations.

Credit Losses

The Company estimates and records a provision for

its expected credit losses related to its financial instruments, including its trade receivables.

Management considers historical collection

rates, the current financial status of the Company’s customers, macroeconomic factors, and other industry-specific factors when

evaluating current expected credit losses.

Forward-looking information is also considered in the evaluation of current expected credit

However, because of the short time to the expected receipt of accounts receivable, management believes that the carrying value,

net of expected losses, approximates fair value and therefore, relies more on historical and current analysis of such financial instruments,

including its trade receivables.

To determine the provision for credit losses for

accounts receivable, the Company has disaggregated its accounts receivable by class of customer at the business component level, as management

determined that risk profile of the Company’s customers is consistent based on the type and industry in which they operate, mainly

in the pharmaceuticals industry.

Each business component is analyzed for estimated credit losses individually.

In doing so, the Company

establishes a historical loss matrix, based on the previous collections of accounts receivable by the age of such receivables, and evaluates

the current and forecasted financial position of its customers, as available.

Further, the Company considers macroeconomic factors and

the status of the pharmaceuticals industry to estimate if there are current expected credit losses within its trade receivables based

on the trends of the Company’s expectation of the future status of such economic and industry-specific factors.

Also, specific

allowance amounts are established based on review of outstanding invoices to record the appropriate provision for customers that have

a higher probability of default.

Accounts receivable at December 31, 2024 and 2023

are net of allowances for credit losses of $ 416,000 and $ 371,000 , respectively.

The following table provides a roll-forward of the allowance

for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected

at December 31, 2024 and 2023:

OF ACCOUNTS RECEIVABLE ALLOWANCE OF CREDIT LOSS

Balance at January 1, 2023

Change in expected credit

net of recoveries

Change in expected credit losses

Write-offs, net of recoveries

Balance at December 31, 2023

Combinations and Asset Acquisitions

Company evaluates acquisitions of assets and other similar transactions to assess whether the transaction should be accounted for as

a business combination or asset acquisition by first applying a screen to determine if substantially all of the fair value of the gross

assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

If the screen is met, the transaction

is accounted for as an asset acquisition.

If the screen is not met, further determination is required as to whether the Company has acquired

inputs, process, and output, which would meet the requirements of a business.

If determined to be a business combination, the Company

accounts for the transaction under the acquisition method of accounting as indicated in Financial Accounting Standards Board (“FASB”)

Accounting Standards Codification (“ASC”).

805, Business Combinations , requires the acquiring entity in a business combination to recognize the fair value of all assets

acquired, liabilities assumed, and any non-controlling interest in the acquiree and establishes the acquisition date as the fair value

measurement point.

Accordingly, the Company recognizes assets acquired and liabilities assumed in business combinations, including any

contingent assets and liabilities, and any non-controlling interest in the acquiree based on the fair value estimates as of the date

of acquisition.

The Company recognizes and measures goodwill as of the acquisition date, as the excess of the fair value of the consideration

paid over the fair value of the identified net assets acquired.

consideration for the Company’s business acquisitions may include future payments that are contingent upon the occurrence of a

particular event or events.

The obligation for such contingent consideration payments are recorded at fair value on the acquisition date.

The contingent consideration obligations are then evaluated each reporting period.

Changes in the fair value of contingent consideration,

other than changes due to payments, would be recognized as a gain or loss and recorded in the consolidated statement of operations.

determined to be an asset acquisition, the Company accounts for the transaction under ASC 805-50, Business Combinations – Related

Issues , which requires the acquiring entity in an asset acquisition to recognize assets acquired and liabilities assumed based on

the cost to the acquiring entity or a relative fair value basis, which includes transaction costs in addition to consideration given.

No gain or loss is recognized as of the date of acquisition unless the fair value of non-cash assets given as consideration differs from

the assets’ carrying amounts on the acquiring entity’s financial statements.

Consideration transferred that is non-cash will

be measured based on either the cost (which shall be measured based on the fair value of the consideration given) or the fair value of

the assets acquired, and liabilities assumed, whichever is more clearly evident and more reliably measurable.

The obligation for contingent

consideration payments is recorded when probable and reasonably estimable.

Contingent consideration recognized is included in the initial

cost of the assets acquired and any subsequent changes in the recorded amount of contingent consideration are recognized as an adjustment

to the cost basis of the acquired assets and allocated to the acquired assets based on the relative fair value at the date of acquisition.

Goodwill is not recognized in an asset acquisition and any excess consideration transferred over the fair value of the net assets acquired

is allocated to the identifiable assets based on relative fair values.

Noncontrolling

Company recognizes any noncontrolling interest as a separate line item in equity in the consolidated financial statements.

A noncontrolling

interest represents the portion of equity ownership in a less-than-wholly-owned subsidiary not attributable to the Company.

any interest that holds less than 50% of the outstanding voting shares is deemed to be a noncontrolling interest;

however, there are

other factors that are considered as well, such as decision-making rights.

When applicable, and in prior periods, the Company includes

the amount of net loss attributable to noncontrolling interests in consolidated net loss on the face of the consolidated statements of

Company provides in the consolidated statements of stockholders’ equity a reconciliation at the beginning and the end of the period

of the carrying amount of total equity, equity attributable to the parent, and equity attributable to the noncontrolling interests that

separately discloses:

income or loss;

with owners acting in their capacity as owners, showing separately contributions from and distributions to owners;

component of other income or loss.

noncontrolling interests in the consolidated balance sheets as of December 31, 2023 and 2022, relate to consolidated subsidiaries that

the Company owns a controlling interest in, but not 100% of the equity interests, and that no longer have active operations, assets and

related financial activity.

Recognition and Deferred Revenue

Company recognizes revenue at the time of transfer of promised goods or services to customers in an amount that reflects the consideration

to which the Company expects to be entitled in exchange for those goods or services (see Note 3).

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

personnel costs, packaging, storage, royalties, shipping and handling costs, depreciation and amortization of certain intangible assets

and the write-off of obsolete inventory.

and Development

and development (“R&D”) expenses consist of expenses incurred in performing research and development activities, including

salaries and benefits, other overhead expenses, and costs related to clinical trials, contract services and outsourced contracts.

expense all costs related to R&D as they are incurred.

and milestone payments related to the acquisition and licensing of technology for drug and product candidates that are not yet approved

by the FDA are considered acquisition of in process R&D and expensed as R&D in the period in which the expense occurs.

Issuance Costs and Debt Discount

issuance costs and the debt discount are recorded net of notes payable in the consolidated balance sheets.

Amortization of debt issuance

costs and the debt discount is calculated using the effective interest method over the term of the related debt and is recorded in interest

expense in the accompanying consolidated statements of operations.

At December 31, 2022, the Company recorded deferred financing costs

of $ 1,950,000 related to the B.

Riley Loan and Security Agreement (the “BR Loan”), which was recorded as a debt issuance

cost and net of the related BR Loan when it funded in January 2023 (see Note 13).

costs of acquiring intellectual property rights to be used in the research and development process, including licensing fees and milestone

payments, are charged to research and development expense as incurred in situations where the Company has not identified an alternative

future use for the acquired rights, and are capitalized in situations where we have identified an alternative future use for the acquired

Patents and trademarks are recorded at cost and capitalized at a time when the future economic benefits of such patents and trademarks

become more certain (see “Goodwill and Intangible Assets” below).

Change in expected credit losses

Write-offs, net of recoveries

Balance at December 31, 2024

Business Combinations and Asset Acquisitions

The Company evaluates acquisitions of assets and

other similar transactions to assess whether the transaction should be accounted for as a business combination or asset acquisition by

first applying a screen to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single

identifiable asset or group of similar identifiable assets.

If the screen is met, the transaction is accounted for as an asset acquisition.

If the screen is not met, further determination is required as to whether the Company has acquired inputs, process, and output, which

would meet the requirements of a business.

If determined to be a business combination, the Company accounts for the transaction under

the acquisition method of accounting as indicated in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification

ASC 805, Business Combinations , requires the

acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed, and any non-controlling

interest in the acquiree and establishes the acquisition date as the fair value measurement point.

Accordingly, the Company recognizes

assets acquired and liabilities assumed in business combinations, including any contingent assets and liabilities, and any non-controlling

interest in the acquiree based on the fair value estimates as of the date of acquisition.

The Company recognizes and measures goodwill

as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets

The consideration for the Company’s business

acquisitions may include future payments that are contingent upon the occurrence of a particular event or events.

The obligations for

such contingent consideration payments are recorded at fair value on the acquisition date.

The contingent consideration obligations are

then evaluated each reporting period.

Changes in the fair value of contingent consideration, other than changes due to payments, would

be recognized as a gain or loss and recorded in the consolidated statement of operations.

If determined to be an asset acquisition, the Company

accounts for the transaction under ASC 805-50, Business Combinations – Related Issues , which requires the acquiring entity

in an asset acquisition to recognize assets acquired and liabilities assumed based on the cost to the acquiring entity or a relative

fair value basis, which includes transaction costs in addition to consideration given.

No gain or loss is recognized as of the date of

acquisition unless the fair value of non-cash assets given as consideration differs from the assets’ carrying amounts on the acquiring

entity’s financial statements.

Consideration transferred that is non-cash will be measured based on either the cost (which shall

be measured based on the fair value of the consideration given) or the fair value of the assets acquired, and liabilities assumed, whichever

is more clearly evident and more reliably measurable.

The obligation for contingent consideration payments is recorded when probable

and reasonably estimable.

Contingent consideration recognized is included in the initial cost of the assets acquired and any subsequent

changes in the recorded amount of contingent consideration are recognized as an adjustment to the cost basis of the acquired assets and

allocated to the acquired assets based on the relative fair value at the date of acquisition.

Goodwill is not recognized in an asset

acquisition and any excess consideration transferred over the fair value of the net assets acquired is allocated to the identifiable

assets based on relative fair values.

Noncontrolling Interests

The Company recognizes any noncontrolling interest

as a separate line item in equity in the consolidated financial statements.

A noncontrolling interest represents the portion of equity

ownership in a less-than-wholly-owned subsidiary not attributable to the Company.

Generally, any interest that holds less than 50%

of the outstanding voting shares is deemed to be a noncontrolling interest;

however, there are other factors that are considered as well,

such as decision-making rights.

When applicable, and in prior periods, the Company includes the amount of net loss attributable

to noncontrolling interests in consolidated net loss on the face of the consolidated statements of operations.

The Company provides in the consolidated statements

of stockholders’ equity a reconciliation at the beginning and the end of the period of the carrying amount of total equity, equity

attributable to the parent, and equity attributable to the noncontrolling interests that separately discloses:

net income or loss;

transactions with owners acting in their capacity as owners, showing

separately contributions from and distributions to owners;

each component of other income or loss.

The noncontrolling interests in the consolidated

balance sheets as of December 31, 2024 and 2023, relate to consolidated subsidiaries for which the Company does not own 100% of the equity

interests, and that no longer have active operations, assets and related financial activity.

Revenue Recognition and Deferred Revenue

The Company recognizes revenue at the time of transfer

of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in

exchange for those goods or services (see Note 3).

Cost of Sales

Cost of sales includes direct and indirect costs

to manufacture formulations and other products sold, including active pharmaceutical ingredients, personnel costs, packaging, storage,

royalties, shipping and handling costs, depreciation and amortization of certain intangible assets and the write-off of obsolete inventory.

Research and Development

Research and development (“R&D”)

expenses consist of expenses incurred in performing research and development activities, including salaries and benefits, other overhead

expenses, and costs related to clinical trials, contract services and outsourced contracts.

The Company expenses all costs related to

R&D as they are incurred.

Upfront and milestone payments related to the acquisition

and licensing of technology for drug and product candidates that are not yet approved by the FDA are considered acquisition of in process

R&D and expensed as R&D in the period in which the expense occurs.

Debt Issuance Costs and Debt Discount

Debt issuance costs and the debt discount are recorded

net of notes payable in the consolidated balance sheets.

Amortization of debt issuance costs and the debt discount is calculated using

the effective interest method over the term of the related debt and is recorded in interest expense in the accompanying consolidated

statements of operations.

Intellectual Property

The costs of acquiring intellectual property rights

to be used in the research and development process, including licensing fees and milestone payments, are charged to research and development

expense as incurred in situations where the Company has not identified an alternative future use for the acquired rights, and are capitalized

in situations where the Company has identified an alternative future use for the acquired rights.

Patents and trademarks are recorded

at cost and capitalized at a time when the future economic benefits of such patents and trademarks become more certain (see “Goodwill

and Intangible Assets” below).

If costs are not capitalized, they are expensed as incurred.

part of the process of preparing the Company’s consolidated financial statements, the Company must estimate the actual current

tax assets and liabilities and assess permanent and temporary differences that result from differing treatment of items for tax and accounting

The temporary differences result in deferred tax assets and liabilities, which are included within the consolidated balance

The Company must assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the

extent the Company believes that recovery is not more likely than not, a valuation allowance must be established which reduces the amount

of deferred tax assets recorded on the consolidated balance sheets.

To the extent the Company establishes a valuation allowance or increase

or decrease this allowance in a period, the impact will be included in income tax expense in the consolidated statements of operations.

Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting

Standards Codification (“ASC”) 740, Income Taxes .

As part of the process of preparing the Company’s

consolidated financial statements, the Company must estimate the actual current tax assets and liabilities and assess permanent and temporary

differences that result from differing treatment of items for tax and accounting purposes.

The temporary differences result in deferred

tax assets and liabilities, which are included within the consolidated balance sheets.

The Company must assess the likelihood that the

deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery is not more likely

than not, a valuation allowance must be established which reduces the amount of deferred tax assets recorded on the consolidated balance

To the extent the Company establishes a valuation allowance or increase or decrease this allowance in a period, the impact will

be included in income tax expense in the consolidated statements of operations.

The Company accounts for income taxes under the

provisions of ASC 740, Income Taxes .

As of December 31, 2024 and 2023, there was $ 2,858,000

and $ 2,822,000 ,

respectively, of unrecognized tax benefits included in the consolidated balance sheets that would, if recognized, affect the

1 unchanged sentence

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income

The Company had no accrual for interest or penalties in its consolidated balance sheets at December 31, 2023 and 2022,

and has not recognized interest and/or penalties in the consolidated statements of operations for the years ended December 31, 2023

The Company is subject to taxation in the United States, California,

The Company had an accrual for interest or penalties of $ 69,000 and $ 40,000 in the consolidated balance sheets at

December 31, 2024 and 2023, respectively, and have recognized interest and/or penalties in the consolidated statements of operations

for the years ended December 31, 2024 and 2023 of $ 69,000 and $ 40,000 , respectively.

The Company is subject to taxation in the U.S.,

New Jersey, Tennessee, and various other states.

1 unchanged sentence

federal and state tax authorities due to the carryforward of unutilized net operating losses.

and Cash Equivalents

equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.

Concentrations

of Credit Risk

Company places its cash with financial institutions deemed by management to be of high credit quality.

The Federal Deposit Insurance

Corporation (“FDIC”) provides basic deposit coverage with limits up to $ 250,000 per owner.

The Company believes the majority

of its cash deposits are covered under FDIC limits, however there are various accounts in which the Company has deposits in excess of

in Eton Pharmaceuticals, Inc.

Company’s investment in Eton Pharmaceuticals, Inc.

(“Eton”) consists of common stock with a readily determinable fair

value which is carried at fair value with changes in fair value recognized in earnings.

In accordance with ASC 321, Investments —

Equity Securities , the Company recorded an unrealized holding gain/(loss) from its Eton common stock position of $ 3,092,000 and $ ( 2,914,000 ) ,

during the years ended December 31, 2023 and 2022, respectively, related to the change in fair market value of its investment in Eton

during the measurement period.

of December 31, 2023 and 2022, the Company owned 1,982,000 shares of Eton common stock, which represents less than 10 % of the equity

interests of Eton.

At December 31, 2023 and 2022, the fair market value of Eton’s common stock was $ 4.38 and $ 2.82 per share, respectively.

As of December 31, 2023 and 2022, the fair market value of the Company’s investment in Eton was $ 8,681,000 and $ 5,589,000 , respectively.

receivable are stated net of allowances for credit losses and contractual adjustments.

The accounts receivable balance primarily includes

amounts due from customers the Company has invoiced or from third-party providers (e.g., insurance companies and governmental agencies),

but for which payment has not been received.

Our gross product revenues are subject to a variety of contractual deductions, which generally

are estimated and recorded in the same period that the revenues are recognized.

These deductions represent estimates of the related obligations

and, as such, knowledge and judgment are required when estimating the impact of these revenue deductions on gross sales for a reporting

Cash and Cash Equivalents

Cash equivalents include short-term, highly liquid

investments with maturities of three months or less at the time of acquisition.

Concentrations of Credit Risk

The Company places its cash with financial institutions

deemed by management to be of high credit quality.

The Federal Deposit Insurance Corporation (“FDIC”) provides basic deposit

coverage with limits up to $ 250,000 per owner.

The Company believes the majority of its cash deposits are covered under FDIC limits,

however there are various accounts in which the Company has deposits in excess of FDIC limits.

Investment in Eton Pharmaceuticals, Inc.

The Company’s investment in Eton Pharmaceuticals,

(“Eton”) consisted of common stock with a readily determinable fair value which was carried at fair value with changes

in fair value recognized in earnings.

In accordance with ASC 321, Investments — Equity Securities , the Company recorded

an unrealized holding gain from its Eton common stock position of $ 3,092,000 during the year ended December 31, 2023 related to the change

in fair market value of its investment in Eton during the measurement period.

At December 31, 2023, the Company owned 1,982,000 shares

of Eton common stock, which represented less than 10 % of the equity interests of Eton.

In April 2024, the Company sold all

of its shares for $ 5,510,000 and recognized a loss of $ 3,171,000 .

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

investment in Eton was $ 0 and $ 8,681,000 , respectively.

Accounts Receivable

Accounts receivable is stated net of allowances for

credit losses and contractual adjustments.

The accounts receivable balance primarily includes amounts due from customers the Company

has invoiced or from third-party providers (e.g., insurance companies and governmental agencies), but for which payment has not been

The Company’s gross product revenues are subject to a variety of contractual deductions, which generally are estimated

and recorded in the same period that the revenues are recognized.

These deductions represent estimates of the related obligations and,

as such, knowledge and judgment are required when estimating the impact of these revenue deductions on gross sales for a reporting period.

Accounts receivable at December 31, 2024 are presented net of allowances for credit losses of $ 416,000 and $ 19,731,000 for contractual

adjustments (in aggregate $ 15,146,000 ) and at December 31, 2022, net of allowances for credit losses of $ 73,000 and $ 706,000 for contractual

adjustments (in aggregate $ 779,000 ).

are stated at the lower of cost or net realizable value.

adjustments (in aggregate $ 20,147,000 ) and at December 31, 2023, net of allowances for credit losses of $ 371,000 and $ 14,875,000 for

contractual adjustments (in aggregate $ 15,246,000 ).

Inventories are stated at the lower of cost or net

realizable value.

Cost is determined on a first-in, first-out basis.

The Company evaluates the

carrying value of inventories on a regular basis, based on the price expected to be obtained for products in their respective markets

compared with historical cost.

Write-downs of inventories are considered to be permanent reductions in the cost basis of inventories.

Company also regularly evaluates its inventories for excess quantities and obsolescence (expiration), taking into account such factors

as historical and anticipated future sales or use in production compared to quantities on hand and the remaining shelf life of products

and active pharmaceutical ingredients on hand.

The Company establishes reserves for excess and obsolete inventories as required based

on its analyses.

in Melt Pharmaceuticals, Inc.

The Company evaluates the carrying value of inventories on a regular

basis, based on the price expected to be obtained for products in their respective markets compared with historical cost.

of inventories are considered to be permanent reductions in the cost basis of inventories.

The Company also regularly evaluates its inventories

for excess quantities and obsolescence (expiration), taking into account such factors as historical and anticipated future sales or use

in production compared to quantities on hand and the remaining shelf life of products and active pharmaceutical ingredients on hand.

The Company establishes reserves for excess and obsolete inventories as required based on its analyses.

Investment in Melt Pharmaceuticals, Inc.

Related Party

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

47 % of the equity interests as of December 31, 2023).

The Company analyzes its investment in Melt and related agreements on a regular

basis to evaluate its position of variable interests in Melt.

The Company has determined that it does not have the ability to control

Melt, however it has the ability to exercise significant influence over the operating and financial decisions of Melt and uses the equity

method of accounting for this investment.

Under this method, the Company recognizes earnings and losses in Melt in its consolidated financial

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

The Company owns 3,500,000 shares of common stock

and 2,334,256 shares of preferred stock of Melt (representing in aggregate approximately 45 % of the equity interests as of December 31,

The Company analyzes its investment in Melt and related agreements on a regular basis to evaluate its position of variable interests

The Company has determined that it does not have the ability to control Melt, however it has the ability to exercise significant

influence over the operating and financial decisions of Melt and uses the equity method of accounting for this investment.

method, the Company recognizes earnings and losses in Melt in its consolidated financial statements and adjusts the carrying amount of

its investment in Melt accordingly.

Any intra-entity profits and losses are eliminated.

During the year ended December 31, 2021, the Company reduced the carrying value of its investment in Melt to $ 0 as a result of the Company

recording its share of equity losses in Melt since its deconsolidation in 2019.

As of December 31, 2022, and at the time of entering

into the Melt Loan Agreement (see Note 5), the Company owned 100 % of Melt’s indebtedness.

Following the reduction of the carrying

value of the Company’s common stock investment in Melt to $ 0 , the Company began recording 100 % of the equity method losses of Melt,

based on its ownership of Melt’s total indebtedness.

In addition, the Company treated interest paid in kind on the Melt Loan Agreement

as an in-substance capital contribution and reduced its investment in Melt accordingly, rather than recording interest income.

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

investments may be other than temporarily impaired.

Indicators include financial condition, operating performance, and near-term prospects

of the investee.

To the extent indicators suggest that a loss in value may have occurred, the Company will evaluate both quantitative

and qualitative factors to determine if the loss in value is other than temporary.

If a potential loss in value is determined to be other

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

the year ended December 31, 2023, the Melt Loan Agreement (as defined in Note 5) was settled in exchange for Melt preferred stock (see

Note 5 for loan settlement disclosure).

The Company reduced the Melt Loan Agreement and subsequent preferred stock investment in Melt

to $ 0 as a result of the Company recording its share of equity losses of Melt.

The Company has no other investments in Melt and no other

requirements to advance funds to Melt.

following table summarizes the Company’s investments in Melt as of December 31, 2023:

During the year ended December 31, 2021, the

Company reduced the carrying value of its investment in Melt to $ 0 as a result of the Company recording its share of equity losses in

Melt since its deconsolidation in 2019.

As of December 31, 2022, and at the time of entering into the Melt Loan Agreement (see Note 5),

the Company owned 100 % of Melt’s indebtedness.

Following the reduction of the carrying value of the Company’s common stock

investment in Melt to $ 0 , the Company began recording 100 % of the equity method losses of Melt, based on its ownership of Melt’s

total indebtedness.

In addition, the Company treated interest paid in kind on the Melt Loan Agreement as an in-substance capital contribution

and reduced its investment in Melt accordingly, rather than recording interest income.

On a quarterly basis, management assesses whether

there are any indicators that the carrying value of the Company’s equity method investments may be other than temporarily impaired.

Indicators include financial condition, operating performance, and near-term prospects of the investee.

To the extent indicators suggest

that a loss in value may have occurred, the Company will evaluate both quantitative and qualitative factors to determine if the loss

in value is other than temporary.

If a potential loss in value is determined to be other than temporary, the Company will recognize an

impairment loss based on the estimated fair value of the equity method investments.

During the year ended December 31, 2023, the Melt

Loan Agreement (as defined in Note 5) was settled in exchange for Melt preferred stock (see Note 5 for loan settlement disclosure).

Company reduced the Melt Loan Agreement and subsequent preferred stock investment in Melt to $ 0 as a result of the Company recording

its share of equity losses of Melt.

The Company has no other investments in Melt and no other requirements to advance funds to Melt.

The following table summarizes the Company’s

investments in Melt as of December 31, 2024 and 2023:

SCHEDULE OF INVESTMENT

Share of Equity

Method Losses

4 unchanged sentences

$ ( 24,207,000 )

following table summarizes the Company’s investments in Melt as of December 31, 2022:

Method Losses

Capital Contributions

Carrying value

$ ( 5,810,000 )

( 13,500,000 )

( 2,484,000 )

$ ( 19,310,000 )

$ ( 2,484,000 )

December 31, 2023 and 2022, the Company recorded $ 89,000 and $ 139,000 , respectively, due from Melt for reimbursable expenses and amounts

due under a Management Services Agreement between the Company and Melt (the “Melt MSA”), which are included in prepaid expenses

and other current assets in the accompanying consolidated balance sheets.

Note 5 for more information and related party disclosure regarding Melt.

in Surface Ophthalmics, Inc.

At December 31, 2024 and 2023, the Company recorded

$ 0 and $ 89,000 , respectively, due from Melt for reimbursable expenses and amounts due under a Management Services Agreement between

the Company and Melt (the “Melt MSA”), which are included in prepaid expenses and other current assets in the accompanying

consolidated balance sheets.

See Note 5 for more information and related party

disclosure regarding Melt.

Investment in Surface Ophthalmics, Inc.

Related Party

Company owns 3,500,000 common shares of Surface (representing approximately 20 % of Surface’s equity interests following the closing

of a round of financing completed by Surface in July 2021) and uses the equity method of accounting for this investment, as management

has determined that the Company has the ability to exercise significant influence over the operating and financial decisions of Surface.

Under this method, the Company recognizes earnings and losses in Surface in its consolidated financial statements and adjusts the carrying

amount of its investment in Surface accordingly.

The Company’s share of earnings and losses are based on the Company’s ownership

interest of Surface.

Any intra-entity profits and losses are eliminated.

During the year ended December 31, 2021, the Company reduced

its common stock investment in Surface to $ 0 as a result of the Company recording its share of equity losses of Surface.

has no other investments in Surface and no other requirements to advance funds to Surface.

following table summarizes the Company’s investment in Surface as of December 31, 2023 and 2022:

The Company owns 3,500,000 common shares of Surface

(representing approximately 20 % of Surface’s equity interests following the closing of a round of financing completed by Surface

in July 2021) and uses the equity method of accounting for this investment, as management has determined that the Company has the ability

to exercise significant influence over the operating and financial decisions of Surface.

Under this method, the Company recognizes earnings

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

The Company’s share of earnings and losses are based on the Company’s ownership interest of Surface.

Any intra-entity profits

and losses are eliminated.

During the year ended December 31, 2021, the Company reduced its common stock investment in Surface to $ 0

as a result of the Company recording its share of equity losses of Surface.

The Company has no other investments in Surface and no other

requirements to advance funds to Surface.

The following table summarizes the Company’s

investment in Surface as of December 31, 2024 and 2023:

SCHEDULE OF INVESTMENT

of Equity Method Losses

Share of Equity Method Losses

Carrying value

$ ( 5,320,000 )

Note 6 for more information and related party disclosure regarding Surface.

Plant and Equipment

plant and equipment is stated at cost less accumulated depreciation and amortization.

Depreciation and amortization is calculated using

the straight-line method over the estimated useful life of the asset.

Leasehold improvements and finance lease equipment are amortized

over the estimated useful life or remaining lease term, whichever is shorter.

Computer hardware and furniture and equipment are depreciated

over three to five years .

Software Costs

Company capitalizes certain costs related to the development of internal-use software.

Costs incurred during the application development

phase are capitalized only when the Company believes it is probable the development will result in new or additional functionality.

types of costs capitalized during the application development phase include consulting fees for third-party developers working on these

Costs related to the preliminary project stage and post-implementation activities are expensed as incurred.

Internal-use software

is amortized on a straight-line basis over the estimated useful life of the asset, which ranges from two to five years .

When internal-use

software that was previously capitalized is abandoned, the cost less the accumulated amortization, if any, is recorded as amortization

Fully amortized capitalized internal-use software costs are removed from their respective accounts.

and Intangible Assets

and trademarks are recorded at cost and capitalized at a time when the future economic benefits of such patents and trademarks become

more certain.

At that time, the Company capitalizes third-party legal costs and filing fees associated with obtaining and prosecuting

claims related to its patents and trademarks.

Once the patents have been issued, the Company amortizes these costs over the shorter of

the legal life of the patent or its estimated economic life, generally 20 years, using the straight-line method.

Acquired product rights,

including new drug applications (“NDAs”), are amortized over their estimated useful lives, generally 4 - 15 years, based on

a straight-line method.

Trademarks are an indefinite-lived intangible asset and are assessed for impairment based on future projected

cash flows as further described below.

Company reviews its goodwill and indefinite-lived intangible assets for impairment as of January 1 of each year and when an event or

a change in circumstances indicates the fair value of a reporting unit may be below its carrying amount.

Events or changes in circumstances

considered as impairment indicators include but are not limited to the following:

underperformance of the Company’s business relative to expected operating results;

adverse economic and industry trends;

decline in the Company’s market capitalization for an extended period of time relative to net book value;

that a reporting unit will be sold or otherwise disposed.

goodwill impairment test consists of a two-step process as follows:

The Company compares the fair value of each reporting unit to its carrying amount, including the existing goodwill.

The fair value

of each reporting unit is determined using a discounted cash flow valuation analysis.

The carrying amount of each reporting unit is determined

by specifically identifying and allocating the assets and liabilities to each reporting unit based on headcount, relative revenues or

other methods as deemed appropriate by management.

If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered

impaired and the Company then performs the second step of the impairment test to measure the impairment loss.

If the fair value of a

reporting unit exceeds its carrying amount, no further analysis is required.

If the carrying amount of the reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to the

excess, limited to the total amount of goodwill allocated to that reporting unit.

a result of its assessment in 2023, the Company concluded that goodwill is not impaired as of December 31, 2023.

of Other Long-Lived Assets

long-lived assets, such as property, plant and equipment, purchased intangibles subject to amortization and patents and trademarks, are

reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Such circumstances could include, but are not limited to (1) a significant decrease in the market value of an asset, (2) a significant

adverse change in the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount

originally expected for the acquisition of an asset.

Recoverability of assets to be held and used is measured by a comparison of the

carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount

of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying

amount of the asset exceeds the fair value of the asset.

The fair value of the asset is based on the discounted value of its estimated

future cash flows.

Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower

of the carrying amount or fair value less costs to sell, and are no longer depreciated.

The assets and liabilities of a disposal group

classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance

See Note 6 for more information and related party

disclosure regarding Surface.

Property, Plant and Equipment

Property, plant and equipment is stated at cost less

accumulated depreciation and amortization.

Depreciation and amortization is calculated using the straight-line method over the estimated

useful life of the asset.

Leasehold improvements and finance lease equipment are amortized over the estimated useful life or remaining

lease term, whichever is shorter.

Computer hardware and furniture and equipment are depreciated over three to five years .

Capitalized Software Costs

The Company capitalizes certain costs related to

the development of internal-use software.

Costs incurred during the application development phase are capitalized only when the Company

believes it is probable the development will result in new or additional functionality.

The types of costs capitalized during the application

development phase include consulting fees for third-party developers working on these projects.

Costs related to the preliminary project

stage and post-implementation activities are expensed as incurred.

Internal-use software is amortized on a straight-line basis over the

estimated useful life of the asset, which ranges from two to five years .

When internal-use software that was previously capitalized is

abandoned, the cost less the accumulated amortization, if any, is recorded as amortization expense.

Fully amortized capitalized internal-use

software costs are removed from their respective accounts.

Goodwill and Intangible Assets

Patents and trademarks are recorded at cost and

capitalized at a time when the future economic benefits of such patents and trademarks become more certain.

At that time, the

Company capitalizes third-party legal costs and filing fees associated with obtaining and successfully prosecuting claims related to

its patents and trademarks.

Once the patents have been issued, the Company amortizes these costs over the shorter of the legal life

of the patent or its estimated economic life, generally 20

years, using the straight-line method.

Acquired product rights, including new drug applications (“NDAs”), are amortized

over their estimated useful lives, generally 4 - 15

years, based on a straight-line method.

Trademarks are an indefinite-lived intangible asset and are assessed for impairment based on

future projected cash flows as further described below.

The Company reviews its goodwill and indefinite-lived

intangible assets for impairment as of January 1 of each year and when an event or a change in circumstances indicates the fair value

of a reporting unit may be below its carrying amount.

Events or changes in circumstances considered as impairment indicators include

but are not limited to the following:

significant underperformance of the Company’s business relative

to expected operating results;

significant adverse economic and industry trends;

significant decline in the Company’s market capitalization for

an extended period of time relative to net book value;

expectations that a reporting unit will be sold or otherwise disposed.

The goodwill impairment test consists of a two-step

process as follows:

The Company compares the fair value of each

reporting unit to its carrying amount, including the existing goodwill.

The fair value of each reporting unit is determined using a discounted

cash flow valuation analysis.

The carrying amount of each reporting unit is determined by specifically identifying and allocating the

assets and liabilities to each reporting unit based on headcount, relative revenues or other methods as deemed appropriate by management.

If the carrying amount of a reporting unit exceeds its fair value, goodwill is considered impaired and the Company then performs the

second step of the impairment test to measure the impairment loss.

If the fair value of a reporting unit exceeds its carrying amount,

no further analysis is required.

If the carrying amount of the reporting unit

exceeds its fair value, an impairment loss will be recognized in an amount equal to the excess, limited to the total amount of goodwill

allocated to that reporting unit.

As a result of its assessment in 2024, the Company

concluded that goodwill is not impaired as of December 31, 2024.

Impairment of Other Long-Lived Assets

Other long-lived assets,

such as property, plant and equipment, purchased intangibles subject to amortization and patents and trademarks, are reviewed for impairment

whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Such circumstances

could include, but are not limited to (1) a significant decrease in the market value of an asset, (2) a significant adverse change in

the extent or manner in which an asset is used, or (3) an accumulation of costs significantly in excess of the amount originally expected

for the acquisition of an asset.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an

asset to estimated undiscounted future cash flows expected to be generated by the asset.

If the carrying amount of an asset exceeds its

estimated undiscounted future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset

exceeds the fair value of the asset.

The fair value of the asset is based on the discounted value of its estimated future cash flows .

Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at

the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated.

The assets and liabilities of a disposal

group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance

sheet, if material.

a result of its assessment in 2023, the Company recorded an impairment charge of $ 380,000 related to the impairment of certain licenses,

trademarks, patents and patent applications (see Note 11).

the inception of a contract the Company determines if the arrangement is, or contains, a lease.

Operating lease right-of-use (“ROU”)

assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation

to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date based on

the present value of lease payments over the lease term.

Lease expense is recognized on a straight-line basis over the lease term.

Company has made certain accounting policy elections whereby it (i) does not recognize ROU assets or lease liabilities for short-term

leases (those with original terms of 12-months of less) and (ii) combines lease and non-lease elements of its operating leases as a single

lease component.

As of December 31, 2023 and 2022, the Company did not have any finance leases.

Value Measurements

value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability.

establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of

unobservable inputs by requiring that the most observable inputs be used when available.

The established fair value hierarchy prioritizes

the use of inputs used in valuation methodologies into the following three levels:

Applies to assets or liabilities for which there are quoted prices (unadjusted) for identical assets or liabilities in active

A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value

whenever available.

Applies to assets or liabilities for which there are significant other observable inputs other than Level 1 prices, such as quoted

prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can

be corroborated by observable market data for substantially the full term of the assets or liabilities.

Applies to assets or liabilities for which there are significant unobservable inputs that reflect a reporting entity’s own

assumptions about the assumptions that market participants would use in pricing an asset or liability.

For example, Level 3 inputs

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

December 31, 2023 and 2022, the Company measured its investment in Eton on a recurring basis.

The Company’s investment in Eton

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

December 31, 2023 and 2022, the fair market value of the Company’s investment in Eton was $ 8,681,000 and $ 5,589,000 , respectively.

Company’s 2026 Notes (as defined in Note 13) are carried at face value, including the unamortized premium, less unamortized debt

issuance costs, the 2027 Notes (as described in Note 13) are carried at face value less unamortized debt issuance costs, and the Oaktree

At the inception of a contract the Company determines

if the arrangement is, or contains, a lease.

Operating lease right-of-use (“ROU”) assets represent the Company’s right

to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over

the lease term, discounted using the Company’s incremental borrowing rate of the debt outstanding.

Lease expense is recognized on

a straight-line basis over the lease term.

The Company has made certain accounting policy elections

whereby it (i) does not recognize ROU assets or lease liabilities for short-term leases (those with original terms of 12-months of less)

and (ii) combines lease and non-lease elements of its operating leases as a single lease component.

As of December 31, 2024 and 2023,

the Company did not have any finance leases.

Fair Value Measurements

Fair value measurements are determined based on the

assumptions that market participants would use in pricing an asset or liability.

GAAP establishes a hierarchy for inputs used in measuring

fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable

inputs be used when available.

The established fair value hierarchy prioritizes the use of inputs used in valuation methodologies into

the following three levels:

Applies to assets or liabilities for which there are quoted

prices (unadjusted) for identical assets or liabilities in active markets.

A quoted price in an active market provides the most reliable

evidence of fair value and must be used to measure fair value whenever available.

Applies to assets or liabilities for which there are significant

other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;

quoted prices in markets

that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full

term of the assets or liabilities.

Applies to assets or liabilities for which there are significant

unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would

use in pricing an asset or liability.

For example, Level 3 inputs would relate to forecasts of future earnings and cash flows used

in a discounted future cash flows method.

At December 31, 2023, the Company measured its investment

in Eton on a recurring basis.

The Company’s investment in Eton was classified as Level 1 as the fair value was determined using

quoted market prices in an active market for the same securities.

As of December 31, 2023, the fair market value of the Company’s

investment in Eton was $ 8,681,000 .

The Company’s 2026 Notes (as defined in Note 13) are carried at face value, including the unamortized premium, less unamortized

debt issuance costs, the 2027 Notes (as defined in Note 13) are carried at face value less unamortized debt issuance costs, and the Oaktree

Loan (as defined in Note 13) is carried at face value less the original issue discount and unamortized debt issuance costs on the consolidated

5 unchanged sentences

yield calibration, yield analysis and any adjustments to implied yield associated with the Company’s fundamental measures.

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

The following table presents the estimated fair values

and the carrying values:

OF ESTIMATED FAIR VALUE

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

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

The carrying amount

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

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

their respective fair values.

stock-based payments to employees, directors and consultants, including grants of stock options, warrants, restricted stock units (“RSUs”),

performance stock units (“PSUs) and restricted stock, are recognized in the consolidated financial statements based upon their

estimated fair values.

The Company uses the Black-Scholes-Merton option pricing model and Monte Carlo simulation model to estimate the

fair value of stock-based awards.

The estimated fair value is determined at the date of 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.

and Diluted Net Loss per Common Share

net loss per common share is computed by dividing net loss attributable to Harrow, Inc.

for the year by the weighted average number of

common shares outstanding during the year.

Diluted net loss per share is computed by dividing the net loss attributable to Harrow, Inc.

for the year by the weighted average number of common and common equivalent shares, such as stock options, RSUs, PSUs, and warrants,

outstanding during the year.

stock equivalents (using the treasury stock or “if converted” method) from stock options, unvested RSUs, and unvested PSUs

were 4,642,259 and 5,089,420 at December 31, 2023 and 2022, respectively, and are excluded in the calculation of diluted net loss per

share for the periods presented, because the effect is anti-dilutive for that time period.

Included in the basic and diluted net loss

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

the director resigns.

The number of shares underlying vested RSUs at December 31, 2023 and 2022 was 215,539 and 319,859 , respectively.

following table shows the computation of basic and diluted net loss per share of common stock for the years ended December 31, 2023 and

OF BASIC AND DILUTED EARNINGS PER COMMON SHARE

the Years Ended December 31,

Carrying Value

$ 107,407,000

$ 112,932,000

The Company’s other financial instruments include

cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, accrued payroll and related liabilities, deferred

revenue and customer deposits and operating lease liabilities.

The carrying amount of these financial instruments, except for operating

lease liabilities, approximates fair value due to the short-term maturities of these instruments.

Based on borrowing rates currently

available to the Company, the carrying values of the operating lease liabilities approximate their respective fair values.

Stock-Based Compensation

All stock-based payments to employees, directors

and consultants, including grants of stock options, warrants, restricted stock units (“RSUs”), performance stock units (“PSUs)

and restricted stock, are recognized in the consolidated financial statements based upon their estimated fair values.

The Company uses

the Black-Scholes-Merton option pricing model and Monte Carlo simulation model to estimate the fair value of stock-based awards.

estimated fair value is determined at the date of 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.

The Company provides newly issued shares of common stock

to satisfy the exercise and vesting for stock-based compensation awards.

Basic and Diluted Net Loss per Common Share

Basic net loss per common share is computed by dividing

net loss attributable to Harrow, Inc.

for the year by the weighted average number of common shares outstanding during the year.

net loss per share is computed by dividing the net loss attributable to Harrow, Inc.

for the year by the weighted average number of common

and common equivalent shares, such as stock options, RSUs, PSUs, and warrants, outstanding during the year.

Common stock equivalents (using the treasury stock

or “if converted” method) from stock options, unvested RSUs, and unvested PSUs were 4,390,124 and 4,642,259 at December 31,

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

effect is anti-dilutive for that time period.

Included in the basic and diluted net loss per share calculation were RSUs awarded to directors

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

The number of shares underlying

vested RSUs at December 31, 2024 and 2023 was 211,020 and 215,539 , respectively.

The following table shows the computation of basic

and diluted net loss per share of common stock for the years ended December 31, 2024 and 2023:

OF BASIC AND DILUTED EARNINGS PER COMMON SHARE

For the Years Ended December 31,

Numerator – net loss

$ ( 17,481,000 )

$ ( 24,411,000 )

Denominator –

weighted average number of shares outstanding, basic and diluted

loss per share, basic and diluted

Adopted Accounting Pronouncements

September 2016, FASB issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments .

This ASU replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and

requires consideration of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial

instruments, including trade receivables.

In addition, new disclosures are required.

The ASU, as subsequently amended, is effective for

the Company for the fiscal years beginning after December 15, 2022.

The Company adopted ASU 2016-13 on January 1, 2023.

composition of the Company’s accounts receivable, investment portfolio, and other financial assets, including current market conditions

and historical credit loss activity, the adoption of this standard did not have a material impact on the Company’s consolidated

financial statements or disclosures.

Specifically, the Company’s estimate of expected credit losses as of January 1, 2023, using

its expected credit loss evaluation process described above, resulted in no adjustments to the provision for credit losses and no cumulative-effect

adjustment to accumulated deficit on the adoption date of the standard.

Guidance Issued but Not Adopted at December 31, 2023

August 2023, FASB issued ASU 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60):

Recognition and Initial

Measurement , which applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture)

and requires joint ventures to initially measure all contributions received upon formation at fair value.

The new guidance does not impact

accounting by the venturers.

The new guidance is applicable to joint venture entities with a formation date on or after January 1, 2025

on a prospective basis.

Joint ventures formed prior to the effective date may elect to apply the new guidance retrospectively back to

their original formation date.

The Company will apply the guidance in ASU 2023-05 prospectively to any future arrangements meeting the

definition of a joint venture.

October 2023, the 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.

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

enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements.

ASU 2023-07 is effective for the Company in our annual reporting for fiscal 2024 and for interim period reporting beginning in fiscal

2025 on a retrospective basis, with all required disclosures to be made for all prior periods presented in the consolidated financial

Early adoption is permitted.

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

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

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

Notably, this ASU requires entities

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

meet a quantitative threshold.

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

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

Net loss per share, basic and diluted

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standards update (“ASU”) 2023-07, Segment Reporting (Topic 280) - Improvements

to Reportable Segment Disclosures , which enhances the disclosures required for operating segments in the Company’s annual and

interim consolidated financial statements.

The Company adopted ASU 2023-07 on a retrospective basis as of December 31, 2024.

did not impact the Company’s financial statements, other than with respect to expanded disclosures.

Accounting Guidance Issued but Not Adopted at December 31, 2024

In August 2023, FASB issued ASU 2023-05, Business

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

Recognition and Initial Measurement , which applies to the formation

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

all contributions received upon formation at fair value.

The new guidance does not impact accounting by the venturers.

The new guidance

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

Joint ventures formed

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

The Company will

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

In October 2023, the FASB issued ASU 2023-06, Disclosure

Improvements—Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative .

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.

In 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 2025 on a prospective basis.

Early adoption and retrospective reporting are permitted.

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

financial statements.

Reclassifications

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

for the current period.

These reclassifications had no material impact on the Company’s consolidated financial position, results

of operations, or cash flows as previously reported.

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

has three primary streams of revenue (four in 2022):

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

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

partner, (2) revenue recognized from a commission agreement with a third party in 2022, (3) revenue recognized from transfer of acquired

product sales and profits, and (4) revenue recognized from intellectual property licenses.

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

Revenue from the Company’s

pharmacy services includes:

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

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

the pharmacy network.

Sales taxes are not included in revenue.

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

the contract(s) with a customer:

A contract is deemed to exist when the customer places an order through receipt of a prescription,

via an online order or via receipt of a purchase order from a customer.

For branded products, orders are received through the Company’s

3PL partner, and the customer takes title of the products via formal purchase orders placed and fulfilled.

the performance obligations in the contract:

Obligations for fulfillment of the Company’s contracts consist of delivering

the product to customers at their specified destination.

For shipping and handling activities under ASC 606, if the customer takes

control of the goods after shipment, shipping and handling activities would always be considered a fulfillment activity and not treated

as a separate performance obligation.

If the customer takes control of the goods before shipment, entities must make an accounting

policy election to treat shipping and handling activities as either a fulfillment cost or as a separate performance obligation.

Company has elected to treat its shipping and handling activities as a fulfillment cost.

the transaction price:

The transaction price is based on an amount that reflects the consideration to which the Company expects

to be entitled, net of accruals for estimated rebates, wholesaler chargebacks, discounts, copay assistance and other deductions (collectively, sales

deductions) and an estimate for returns and replacements established at the time of sale.

The Company utilizes the services of a

third-party professional services firm to estimate rebates and chargebacks associated with sales of its branded products.

of promised goods is satisfied within a year, and therefore there are no significant financing components.

There is no non-cash consideration

related to product sales.

the transaction price to the performance obligations in the contract:

Because there is only one performance obligation for product

sales, no allocation is necessary.

revenue when (or as) the entity satisfies a performance obligation:

Revenue from products is recognized upon transfer of control

of a product to a customer.

This generally occurs upon shipment unless contractual terms with a customer state that transfer of control

occurs at delivery.

Company has entered into an agreement whereby it is paid a fee calculated based on sales the Company generates from a pharmaceutical

product that is owned by a third party.

The revenue earned from this arrangement is recognized, at which point there is no future performance

obligation required by the Company and no consequential continuing involvement on the Company’s part to recognize the associated

From Transfer of Acquired Product Sales and Profits

Company has entered into agreements whereby it purchased the exclusive commercial rights to assets associated with certain ophthalmic

products from other pharmaceutical companies (the “Sellers”).

During a temporary, transition period, the Sellers continue

to manufacture and market these products and transfer the net profit from the sale of the products to the Company.

The revenue recognized

by the Company from the transfer of net profit was recognized at the time profit from the product sales were calculated by the Sellers

and confirmed by the Company, typically on a monthly basis, at which point there is no future performance obligation required by the

Company and no consequential continuing involvement on the Company’s part to recognize the associated revenue.

On a quarterly basis,

the Sellers invoice the Company for all credits and reimbursements (“Chargebacks”) made to customers related to the products.

The Company uses historical actual experience to estimate Chargebacks associated with the net sales and profit transferred.

The estimated

Chargebacks are recorded as a reduction in revenues from transfer of acquired product sales and profits in the Company’s consolidated

statements of operations, and recorded as a reduction to accounts receivable in the consolidated balance sheets, at the time the revenue

is recognized.

Property License Revenues

Company currently holds five intellectual property licenses and related agreements pursuant to which the Company has agreed to license

or sell to a customer with 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 years ended December 31, 2023 and 2022, consists of the following:

The Company is currently evaluating the impact of ASU 2023-09 on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Income

Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures , to improve the disclosures by a public

business entity about the types of expenses in commonly presented expense captions.

This ASU is effective for annual reporting periods

beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted.

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

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified

for consistency with the current year presentation.

These reclassifications had no effect on the reported results of operations.

A reclassification

has been made to the consolidated balance sheet at December 31, 2023, to reclassify the Oaktree Loan exit fee to

be included in the net debt amount (see Note 13).

The Company accounts for contracts with customers

in accordance with ASC 606, Revenues from Contracts with Customers .

The Company has three primary streams of revenue:

revenues, including revenue recognized from sales of products through its pharmacy and outsourcing facility and sales of branded products

to wholesalers through a third-party logistics (“3PL”) partner, (2) revenue recognized from transfer of acquired product

sales and profits, and (3) revenue recognized from intellectual property licenses.

Product Revenues

The Company sells prescription medications directly

through its pharmacy, outsourcing facility and 3PL partner.

Revenue from the Company’s pharmacy services includes:

(i) the portion

of the price the client pays directly to the Company, net of any volume-related or other discounts paid back to the client, (ii) the

price paid to the Company by individuals, and (iii) customer copayments made directly to the pharmacy network.

Sales taxes are not included

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

Identify the contract(s) with a customer:

A contract is deemed

to exist when the customer places an order through receipt of a prescription, via an online order or via receipt of a purchase order

from a customer.

For branded products, orders are received through the Company’s 3PL partner, and the customer takes title

of the products via formal purchase orders placed and fulfilled.

Identify the performance obligations in the contract:

for fulfillment of the Company’s contracts consist of delivering the product to customers at their specified destination.

shipping and handling activities under ASC 606, if the customer takes control of the goods after shipment, shipping and handling

activities would always be considered a fulfillment activity and not treated as a separate performance obligation.

If the customer

takes control of the goods before shipment, entities must make an accounting policy election to treat shipping and handling activities

as either a fulfillment cost or as a separate performance obligation.

The Company has elected to treat its shipping and handling

activities as a fulfillment cost.

Determine the transaction price:

The transaction price is based

on an amount that reflects the consideration to which the Company expects to be entitled, net of accruals for estimated rebates,

wholesaler chargebacks, discounts, copay assistance and other deductions (collectively, sales deductions) and an estimate for returns

and replacements established at the time of sale.

The Company utilizes the services of a third-party professional services firm to

estimate rebates and chargebacks associated with sales of its branded products.

The transfer of promised goods is satisfied within

a year, and therefore there are no significant financing components.

There is no non-cash consideration related to product sales.

Allocate the transaction price to the performance obligations in

the contract:

Because there is only one performance obligation for product sales, no allocation is necessary.

Recognize revenue when (or as) the entity satisfies a performance

Revenue from products is recognized upon transfer of control of a product to a customer.

This generally occurs upon

shipment unless contractual terms with a customer state that transfer of control occurs at delivery.

Variable Consideration

Sales of branded pharmaceutical products are

subject to variable consideration due to chargebacks, government rebates, returns, administrative fees, co-pay assistance and other

rebates, and prompt pay discounts.

Estimates for these elements of variable consideration require significant judgment.

Chargebacks, primarily from distributors and wholesalers,

result from arrangements with indirect customers establishing prices for products which the indirect customer purchases through a wholesaler.

Alternatively, the Company may pre-authorize wholesalers to offer specified contract pricing to other indirect customers.

arrangement, the Company provides a chargeback credit to the wholesaler for any difference between the contracted price with the indirect

customer and the wholesaler’s invoice price, typically Wholesale Acquisition Cost (“WAC”).

Prior period chargebacks claimed by wholesalers are

analyzed to determine the actual net price per package (“NPP”) for each product.

This calculation is performed by product,

by wholesaler.

NPPs can be affected by several factors such as:

in customer mix

in negotiated terms with customers

in the volume of off-contract purchases

As necessary, NPPs are adjusted based on anticipated

changes in the factors above.

The difference between NPP and WAC is recorded as

a reduction in both gross revenues in the consolidated statements of operations and accounts receivable in the consolidated balance sheets,

at the time revenue is recognized from the product sale.

The Company continually monitors chargeback activity and adjusts NPPs when the

Company believes that actual selling prices will differ from current NPPs.

Government Rebates

Government rebates reserve consists of estimated

payments due to governmental agencies for utilization of the Company’s products by beneficiaries under such governmental programs.

The two largest government programs are Medicaid and Medicare.

The Company participates in the Medicaid Drug Rebate

Program and pays rebates to the states related to Medicaid beneficiary utilization of the Company’s products.

Medicaid rebates are billed

within 60-90 days of the end of the quarter in which the product was dispensed to a Medicaid beneficiary.

Medicaid rebate amounts per

product unit are established by law, based on the Average Manufacturer Price (“AMP”), which is reported on a monthly and

quarterly basis, and, in the case of branded products, best price, which is reported on a quarterly basis.

Medicaid reserves are based

on expected claims from state Medicaid programs.

Estimates for expected claims are driven by patient usage, sales mix, calculated AMP

or best price, as well as inventory in the distribution channel that will be subject to a Medicaid rebate.

As a result of the delay between

selling the products, dispensing the products and rebate billing, the Medicaid 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 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 under NDAs.

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 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 Part D participants.

To 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.

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.

A returns policy is in place that allows customers

to return product within a specified period prior to and subsequent to the expiration date.

Generally, product may be returned for a

period beginning six months prior to its expiration date to up to one year after its expiration date.

Product returns

are settled through the issuance of a credit to the customer.

The estimate for returns is based upon historical experience with actual

While such experience has allowed for reasonable estimation in the past, history may not always be an accurate indicator of

future returns.

The Company continually monitors estimates for returns and adjusts when it is expected that actual product returns may

differ from the established accruals.

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.

Administrative Fees and Other Rebates

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.

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

The Company records contra-revenue

for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party

administrators.

An accrued liability is recorded on unredeemed co-payment assistance related to products for which control has been transferred

to the customer.

Prompt Payment Discounts

Sales discounts may be granted

to customers for prompt payment.

The reserve for prompt payment discounts is based on invoices outstanding.

Based on past experience,

it is assumed that all available discounts will be taken.

Accruals for prompt payment discounts are recorded as a reduction in both gross

revenues in the consolidated statements of operations and accounts receivable in the consolidated balance sheets.

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

financial statements for the years ended December 31, 2024, and 2023:

OF ACCRUALS AND ALLOWANCES

Government Rebates

Administrative Fees and Other Rebates

Co-Pay Assistance

Prompt Pay Discounts

Accruals for Chargebacks, Returns, and Other Allowances

Government Rebates

Administrative Fees and Other Rebates

Co-Pay Assistance

Prompt Pay Discounts

Balance at December 31, 2022 (1)

Accruals/Adjustments

Credits Taken Against Reserve

( 3,539,000 )

( 1,568,000 )

( 9,799,000 )

( 16,571,000 )

Balance at December 31, 2023 (1)

Beginning, balance (1)

Accruals/Adjustments

Credits Taken Against Reserve

( 10,457,000 )

( 3,193,000 )

( 8,411,000 )

( 72,918,000 )

( 189,055,000 )

Balance at December 31, 2024 (1)

Ending, balance (1)

(1) Chargebacks and other allowances are included as an offset to accounts

receivable in the 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

consolidated balance sheets.

Government Rebates are included in accrued government rebates and copay assistance in the consolidated

balance sheets.

Revenues From Transfer of Acquired Product Sales and Profits

The Company has entered into agreements whereby it

purchased the exclusive commercial rights to assets associated with certain ophthalmic products from other pharmaceutical companies (the

During a temporary, transition period, the Sellers continue to manufacture and market these products and transfer

the net profit from the sale of the products to the Company.

The revenue recognized by the Company from the transfer of net profit was

recognized at the time profit from the product sales were calculated by the Sellers and confirmed by the Company, typically on a monthly

basis, at which point there is no future performance obligation required by the Company and no consequential continuing involvement on

the Company’s part to recognize the associated revenue.

On a quarterly basis, the Sellers invoice the Company for all credits and

reimbursements (“Chargebacks”) made to customers related to the products.

The Company uses historical actual experience to

estimate Chargebacks associated with the net sales and profit transferred.

The estimated Chargebacks are recorded as a reduction in revenues

from transfer of acquired product sales and profits in the Company’s consolidated statements of operations, and recorded as a reduction

to accounts receivable in the consolidated balance sheets, at the time the revenue is recognized.

Intellectual Property License Revenues

The Company currently holds five intellectual property

licenses and related agreements pursuant to which the Company has agreed to license or sell to a customer with 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.

Revenue disaggregated by revenue source for the years

ended December 31, 2024 and 2023, consists of the following:

SCHEDULE OF DISAGGREGATED REVENUE

the Years Ended

Product sales,

For the Years Ended December 31,

Product sales, net

$ 198,619,000

of acquired product sales/profits

$ 117,447,000

revenue and customer deposits at December 31, 2023 and 2022, were $ 75,000 and $ 113,000 , respectively.

All deferred revenue and customer

deposit amounts at December 31, 2022 were recognized as revenue during the year ended December 31, 2023.

RECENT PRODUCT ACQUISITIONS, LICENSES AND DIVESTITURES

of VEVYE TM U.S.

and Canadian Commercial Rights

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

Transfer of acquired product sales/profits

Total revenues

$ 199,614,000

$ 130,193,000

Deferred revenue and customer deposits at December

31, 2024 and 2023, were $ 44,000 and $ 75,000 , respectively.

All deferred revenue and customer deposit amounts at December 31, 2023 were

recognized as revenue during the year ended December 31, 2024.

RECENT PRODUCT ACQUISITIONS AND LICENSES

Acquisition of VEVYE TM U.S.

and Canadian Commercial

In July 2023, the Company acquired commercial rights

of VEVYE (cyclosporine ophthalmic solution) 0.1 %, an ophthalmic drug product, for the U.S.

and Canadian markets (the “VEVYE Acquisition”).

The Company acquired the commercial rights to VEVYE by entering into

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

As consideration, the Company made initial payments to Novaliq totaling

$ 8,000,000 and will pay low double-digit royalties on net sales of VEVYE along with potential commercial milestone payments.

Company accounted for the VEVYE Acquisition as an acquisition of assets and capitalized the initial payments of $ 8,000,000 and costs

of $ 70,000 associated with the transaction.

of Certain U.S.

and Canadian Commercial Rights to Santen and Eyevance Products

July 2023, the Company entered into an Asset Purchase Agreement with Eyevance Pharmaceuticals, LLC and a License Agreement with Santen

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

The Company acquired the commercial rights to VEVYE by entering into a license agreement with Novaliq GmbH (“Novaliq”).

consideration, the Company made initial payments to Novaliq totaling $ 8,000,000 and will pay low double-digit royalties on net sales

of VEVYE along with potential commercial milestone payments.

The Company accounted for the VEVYE Acquisition as

an acquisition of assets and capitalized the initial payments of $ 8,000,000 and costs of $ 70,000 associated with the transaction.

Acquisition of Certain U.S.

and Canadian Commercial Rights to Santen

and Eyevance Products

In July 2023, the Company entered into an Asset Purchase

Agreement with Eyevance Pharmaceuticals, LLC and a License Agreement with Santen S.A.S.

(collectively, the “Santen Agreements”),

each a subsidiary of Santen Pharmaceuticals Co., Ltd.

(collectively, “Santen”).

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

products (collectively, the “Santen Products”):

FLAREX, NATACYN, ZERVIATE, VERKAZIA and FRESHKOTE in the U.S., and VERKAZIA

and CATIONORM PLUS in Canada.

transactions pursuant to the Santen Agreements are referred to in these notes as the “Santen Products Acquisition.”

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

In addition, the Santen Agreements provide

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

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

Under the Santen Agreements,

the Company also assumed certain obligations associated with other third parties that require mid-single digit royalties on sales of

FRESHKOTE and ZERVIATE.

Immediately following the closing and subject to certain conditions, prior to the transfer of the Santen Products

NDAs and other marketing authorizations to the Company, Santen continued to sell the Santen Products on the Company’s behalf and

transfer the net profit from the sale of the Santen Products to the Company.

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

and rights of the Santen Products.

assets acquired in the Santen Products Acquisition are identifiable intangible asset groups in similar asset classes and all directly

related to the product NDAs and marketing authorizations acquired.

The developed technology is within one major intangible asset class.

No workforce/employees were included in the Santen Products Acquisition and the Company is required to utilize its own business inputs/processes

to transfer and commercialize the Santen Products.

Company incurred $ 139,000 in costs associated with the Santen Products Acquisition, and including such acquisition costs, the payment

of $ 8,000,000 at closing and a near term milestone of $ 500,000 .

The total purchase price of the Santen Products Acquisition was $ 8,639,000

and was accounted for as an asset acquisition.

At the time of the Santen Products Acquisition and as of December 31, 2023, the remaining

contingent consideration due was not considered probable and reasonably estimable and therefore, no amount was included in the purchase

price of the Santen Products Acquisition.

At the time the contingent consideration due becomes probable and reasonably estimable the

additional consideration, if any, paid will be allocated to all of the assets on a pro rata basis based on their initial estimated fair

values as a percent of the total purchase price.

of ILEVRO, NEVANAC, VIGAMOX, MAXIDEX, and TRIESENCE

December 2022, the Company entered into an Asset Purchase Agreement (the “NVS 5 APA”) with Novartis Technology, LLC and Novartis

Innovative Therapies AG (together, “Novartis”), pursuant to which the Company agreed to purchase from Novartis the exclusive

commercial rights to assets associated with the following ophthalmic products (collectively the “NVS 5 Products”) in the

(the “NVS 5 Acquisition”):

ILEVRO, NEVANAC, VIGAMOX, MAXIDEX, and TRIESENCE.

the terms of the NVS 5 APA, the Company made a one-time payment of $ 130,000,000 at closing in January 2023, with up to another $ 45,000,000

due in a milestone payment related to the timing of the commercial availability of TRIESENCE.

The milestone payment due upon commercial

availability for TRIESENCE decreased from $ 45,000,000 to $ 37,000,000 on January 20, 2024.

Pursuant to the NVS 5 APA and various ancillary

agreements, immediately following the closing and subject to certain conditions and prior to the transfer of the NVS 5 Products NDAs

to the Company, Novartis continued to sell the NVS 5 Products on the Company’s behalf and transfer the net profit from the sale

of the NVS 5 Products to the Company.

Novartis has agreed to supply certain NVS 5 Products to the Company for a period of time after

the NDAs are transferred and to assist with technology transfer of the NVS 5 Products manufacturing to other third-party manufacturers,

assets acquired in the NVS 5 Acquisition are identifiable intangible asset groups in similar asset classes and all directly related to

the five product NDAs acquired.

Pursuant to the Santen Agreements, the Company

acquired the exclusive commercial rights to assets associated with the following ophthalmic products (collectively, the “Santen

FLAREX, NATACYN, ZERVIATE, VERKAZIA and FRESHKOTE in the U.S., and VERKAZIA and CATIONORM PLUS in Canada.

The transactions pursuant to the Santen Agreements

are referred to in these notes as the “Santen Products Acquisition.”

Under the terms of the Santen Agreements, the Company

made an initial one-time payment of $ 8,000,000 .

In addition, the Santen Agreements provide for various one-time contingent milestone

payments associated with certain manufacturing-related events as well as low-double digit royalty payments on net sales of VERKAZIA and

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

Under the Santen Agreements, the Company also assumed certain obligations

associated with other third parties that require mid-single digit royalties on sales of FRESHKOTE and ZERVIATE.

Immediately following

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

the Company, Santen continued to sell the Santen Products on the Company’s behalf and transfer the net profit from the sale of

the Santen Products to the Company.

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

NDAs and rights of the Santen Products.

The assets acquired in the Santen Products Acquisition

are identifiable intangible asset groups in similar asset classes and all directly related to the product NDAs and marketing authorizations

The developed technology is within one major intangible asset class.

No workforce/employees were included

in the NVS 5 Acquisition and the Company is required to utilize its own business inputs/processes to transfer and commercialize the NVS

5 Products and NDAs.

Company incurred $ 558,000 in costs associated with the NVS 5 Acquisition and including such acquisition costs and the payment of $ 130,000,000

The total purchase price of the NVS 5 Acquisition was $ 130,558,000 and was accounted for as an asset acquisition.

time of the NVS 5 Acquisition and as of December 31, 2023, the contingent consideration due related to the commercial availability of

TRIESENCE was not considered probable and reasonably estimable and, therefore, no amount was included in the purchase price of the NVS

No workforce/employees were included in the Santen Products

Acquisition and the Company is required to utilize its own business inputs/processes to transfer and commercialize the Santen Products.

The Company incurred $ 139,000 in costs associated

with the Santen Products Acquisition, the payment of $ 8,000,000 at closing and a near term milestone

of $ 500,000 .

The total purchase price of the Santen Products Acquisition was $ 8,639,000 and was accounted for as an asset acquisition.

At the time of the Santen Products Acquisition and as of December 31, 2023 and 2024, the remaining contingent consideration due was not

considered probable and reasonably estimable and therefore, no amount was included in the purchase price of the Santen Products Acquisition.

At the time the contingent consideration due becomes probable and reasonably estimable the additional consideration, if any, paid will

be allocated to all of the assets on a pro rata basis based on their initial estimated fair values as a percent of the total purchase

Acquisition of ILEVRO, NEVANAC, VIGAMOX, MAXIDEX,

and TRIESENCE

In December 2022, the Company

entered into an Asset Purchase Agreement (the “NVS 5 APA”) with Novartis Technology, LLC and Novartis Innovative Therapies

AG (together, “Novartis”), pursuant to which the Company agreed to purchase from Novartis the exclusive commercial rights

to assets associated with the following ophthalmic products (collectively the “NVS 5 Products”) in the U.S.

5 Acquisition”):

At the time the contingent consideration due related to the commercial availability of TRIESENCE becomes probable and

reasonably estimable the additional consideration, if any, paid will be allocated to all of the assets on a pro rata basis based on their

initial estimated fair values as a percent of the total purchase price.

The Company does not consider any amounts related to TRIESENCE

to be in-process research and development (IPR&D) as considered within the scope of ASC 730, Research and Development .

of Non-Ophthalmic Assets

October 2022, wholly-owned subsidiaries of the Company (collectively, “Imprimis”) entered into an Asset Purchase Agreement

(the “RPC Agreement”) with Innovation Compounding Pharmacy, LLC (the “Buyer”).

Under the terms of the RPC Agreement,

Imprimis agreed to sell substantially all of its assets associated with its non-ophthalmology related compounding product line, including

but not limited to, certain intellectual property rights, customer lists, databases, and formulations (the “RPC Assets”).

The Buyer agreed to make offers of employment to nine of the Company’s employees that were responsible for the sales activities

associated with the RPC Assets.

Under the terms of the RPC Agreement, the Buyer paid Imprimis an aggregate cash amount of $ 6,000,000

in October 2022.

In addition, the Buyer is obligated to pay up to $ 4,500,000 to Imprimis based on mutually agreed upon revenue milestones

during the calendar year 2023 (the “Contingent Amount”).

During the year ended December 31, 2022, no amount related to the

Contingent Amount was recognized by the Company.

The Company will recognize a gain related to the Contingent Amount if/when the contingency

(in this case, revenue thresholds for 2023) become likely and reasonably estimable.

The Company is currently engaged in discussions with

RPC related to the contingent payment amount, if any.

connection with the RPC Agreement, Imprimis entered into a separate transition services agreement (the “RPC TSA”) with the

Buyer related to providing ongoing services associated with the RPC Assets, such as procuring and dispensing prescription orders, providing

accounting and billing services and collecting accounts receivable.

Imprimis provided transition services to the Buyer for approximately

nine months following the effective date of the RPC Agreement and expects to wind down transition services in subsequent periods.

Company collected and will continue to collect cash on behalf of the Buyer for revenue generated by sales of RPC Assets from October

2022 through the transition period and the Company is obligated to transfer cash generated by such sales to the Buyer.

The Company’s

consolidated balance sheet as of December 31, 2023 includes accounts receivable of $ 49,000 for cash to be collected on behalf of the

Buyer for sales of RPC Assets through December 31, 2023.

were no amounts due from the Buyer for reimbursement of services performed under the RPC TSA as of December 31, 2023.

The receivable

amount of $ 49,000 along with $ 8,000 of payments received from accounts receivable but not yet paid were recorded within accounts payable

and accrued expenses on the consolidated balance sheet as of December 31, 2023, and represents a payable to the Buyer of $ 57,000 .

Company recorded a loss from the RPC TSA and disposition and sale of certain related assets and unusable inventory of $ 330,000 during

the year ended December 31, 2023, which is presented in other expense, net on the consolidated statements of operations.

Company determined that the disposal of the related net assets does not qualify for reporting as discontinued operations because it does

not represent a strategic shift that has or will have a major effect on the Company’s operations and financial results.

the year ended December 31, 2022, the Company recognized a net gain on the sale of the non-ophthalmology related compounding assets as

OF NET GAIN ON SALE OF ASSETS

Gross consideration

Closing and transaction

Book value of assets transferred:

relations intangible asset

on sale of non-ophthalmology assets

and Supply Agreement for IHEEZO

July 2021, the Company entered into a License and Supply Agreement (the “Sintetica Agreement”) with Sintetica S.A.

(“Sintetica”),

pursuant to which Sintetica granted the Company the exclusive license and marketing rights to its patented ophthalmic drug candidate

(“IHEEZO”) in the U.S.

to the Sintetica Agreement, the Company agreed to pay Sintetica a per unit transfer price to supply IHEEZO, along with a per unit royalty

for units sold.

The Company is required to pay Sintetica up to $ 18,000,000 in one-time milestone payments including a $ 5,000,000 payment

(the “Upfront Payment”) due within 30 days of signing the Sintetica Agreement and the balance of payments due upon achievement

of certain regulatory and commercial milestones.

Under the terms of the Sintetica Agreement, Sintetica is responsible for regulatory

filings for IHEEZO in the U.S.

The Upfront Payment along with an additional milestone payment of $ 3,117,000 was paid and recorded as

R&D expenses during the year ended December 31, 2021.

During the year ended December 31, 2022, $ 10,000,000 was paid or accrued under

the Sintetica Agreement following the FDA approval of the United States NDA for IHEEZO, and was capitalized as an intangible asset.

August 2023, the Company amended the Sintetica Agreement to allow for early payment of commercial related milestones associated with

sales of IHEEZO in exchange for a $ 550,000 reduction in all of the remaining milestone amounts due.

The Company then paid Sintetica $ 4,450,000 .

As of December 31, 2023, no milestone amounts are due under the Sintetica Agreement.

to certain limitations, the Sintetica Agreement has a ten-year term, and allows for a ten-year extension if certain sales thresholds

ILEVRO, NEVANAC, VIGAMOX, MAXIDEX, and TRIESENCE.

Under the terms of the NVS

5 APA, the Company made a one-time payment of $ 130,000,000 at closing in January 2023, with up to another $ 45,000,000 due in a milestone

payment related to the timing of the commercial availability of TRIESENCE.

The milestone payment due upon commercial availability for

TRIESENCE decreased from $ 45,000,000 to $ 37,000,000 on January 20, 2024.

Pursuant to the NVS 5 APA and various ancillary agreements,

immediately following the closing and subject to certain conditions and prior to the transfer of the NVS 5 Products NDAs to the Company,

Novartis continued to sell the NVS 5 Products on the Company’s behalf and transfer the net profit from the sale of the NVS 5 Products

to the Company.

Novartis has agreed to supply certain NVS 5 Products to the Company for a period of time after the NDAs are transferred

and to assist with technology transfer of the NVS 5 Products manufacturing to other third-party manufacturers, if needed.

The assets acquired in the NVS 5 Acquisition are

identifiable intangible asset groups in similar asset classes and all directly related to the five product NDAs acquired.

The developed

technology is within one major intangible asset class.

No workforce/employees were included in the NVS 5 Acquisition, and the Company

is required to utilize its own business inputs/processes to transfer and commercialize the NVS 5 Products and NDAs.

The Company incurred $ 558,000 in costs associated

with the NVS 5 Acquisition.

Including such acquisition costs and the payment of $ 130,000,000 at closing, the total purchase price of

the NVS 5 Acquisition was $ 130,558,000 and was accounted for as an asset acquisition.

At the time of the NVS 5 Acquisition and as of

December 31, 2023, the contingent consideration due related to the commercial availability of TRIESENCE was not considered probable and

reasonably estimable and, therefore, no amount was included in the purchase price of the NVS 5 Acquisition.

In 2024, the Company determined

the milestone related to the commercial availability of TRIESENCE was probable of being achieved, and recognized the $ 37,000,000 milestone

payment as an increase in the amount of intangible assets and allocated to all of the assets on a pro rata basis based on their initial

estimated fair values as a percent of the total purchase price.

The Company does not consider any amounts related to TRIESENCE to be

in-process research and development (IPR&D) as considered within the scope of ASC 730, Research and Development .

INVESTMENT IN MELT PHARMACEUTICALS, INC.

AND AGREEMENTS – RELATED PARTY TRANSACTIONS

December 2018, the Company entered into an asset purchase agreement with Melt (the “Melt APA”).

Pursuant to the terms of

the Melt APA, Melt was assigned certain intellectual property and related rights from the Company to develop, formulate, make, sell,

and sub-license certain Company conscious sedation and analgesia related formulations (collectively, the “Melt Products”).

Under the terms of the Melt APA, Melt is required to make mid-single digit royalty payments to the Company on net sales of the Melt Products

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

February 2019, the Company entered into the Melt MSA, whereby the Company provided to Melt certain administrative services and support,

including bookkeeping, web services and human resources related activities, and Melt was required to pay the Company a monthly amount

of $ 10,000 .

The Melt MSA was terminated effective July 1, 2023.

During the year ended December 31, 2023, and 2022, the Company recorded

$ 89,000 and $ 91,000 , respectively, due from Melt for reimbursable expenses and amounts payable pursuant to the Melt MSA, which are included

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

of December 31, 2023 and 2022, the Company was due $ 228,000 and $ 139,000 , respectively, from Melt for reimbursable expenses and amounts

due under the Melt MSA.

Melt did not make any payments to the Company during the year ended December 31, 2022.

The Company made

a cash advance to Melt of $ 500,000 and Melt repaid the $ 500,000 cash advance during the year ended December 31, 2023.

the year ended December 31, 2023, Melt sold 2,421,904 shares of its Series B Preferred Stock and raised over $ 20,586,000 in gross proceeds

from third party investors.

Company’s Chief Executive Officer, Mark L.

Baum, was previously a member of the Melt board of directors until his resignation during

the year ended December 31, 2021.

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

At the time Mr.

Baum re-joined, the

Melt board of directors consisted of five members, including Mr.

Baum, who is the only representative of the Company on Melt’s

board of directors.

Note Receivable – Settled and Terminated in 2023

September 1, 2021, the Company entered into a loan and security agreement in the principal amount of $ 13,500,000 (the “Melt Loan

Agreement”), as lender, with Melt, as borrower.

Amounts borrowed under the Melt Loan Agreement bore interest at 12.50 % per annum,

which interest could have been paid in-kind at the option of Melt until the maturity date.

The Melt Loan Agreement permitted Melt to

pay interest only on the principal amount loaned thereunder through the term and all amounts owed were previously due and payable on

September 1, 2022.

In April 2022, the Company entered into a First Amendment and in September 2022, a Second Amendment (together, the

“Amendments”) to the Melt Loan Agreement.

The Amendments (i) extended the maturity date of the Melt Loan Agreement to September

1, 2023, which could have been extended further to September 1, 2026 upon Melt completing a qualifying financing of a minimum amount

of $ 10,000,000 from third-party investors, (ii) added conditions related to minimum cash amounts following a qualifying financing, and

(iii) clarified the definition of material adverse effects.

Melt could have elected to prepay all, but not less than all, of the amounts

owed prior to the maturity date at any time without penalty.

The net funds received by Melt excluded $ 908,000 owed to the Company for

reimbursable expenses and amounts due under the Melt MSA prior to the effective date of the note receivable.

connection with the Melt Loan Agreement, the Company and Melt entered into a Right of First Refusal Agreement providing the Company with

the right, but not the obligation, to match any offer received by Melt associated with the commercial rights to any of Melt’s drug

candidates for a period of five years following the effective date of the Melt Loan Agreement.

December 28, 2023, the Company terminated the Melt Loan Agreement.

As of the date of termination, approximately $ 18,395,000 remained

In December 2018, the Company

entered into an asset purchase agreement with Melt (the “Melt APA”).

Pursuant to the terms of the Melt APA, Melt was assigned

certain intellectual property and related rights from the Company to develop, formulate, make, sell, and sub-license certain Company

conscious sedation and analgesia related formulations (collectively, the “Melt Products”).

Under the terms of the Melt APA,

Melt is required to make mid-single digit royalty payments to the Company on net sales of the Melt Products while any patent rights remain

outstanding, as well as other conditions.

In February 2019, the Company

entered into the Melt MSA, whereby the Company provided to Melt certain administrative services and support, including bookkeeping, web

services and human resources related activities, and Melt was required to pay the Company a monthly amount of $ 10,000 .

The Melt MSA was

terminated effective July 1, 2023.

During the years ended December 31, 2024, and 2023, the Company recorded $ 0 and $ 89,000 , respectively, due

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

assets in the accompanying consolidated balance sheets.

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

Melt for reimbursable expenses and amounts due under the Melt MSA.

Melt did not make any payments to the Company during the year ended

December 31, 2024.

The Company made a cash advance to Melt of $ 500,000 and Melt repaid the $ 500,000 cash advance during the year ended

December 31, 2023.

During the years ended December

31, 2024 and 2023, Melt raised over $ 3,300,000 and $ 20,586,000 , respectively, in gross proceeds from third party investors related to

its Series B Preferred Stock offerings.

The Company’s Chief

Executive Officer, Mark L.

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

The Melt board of directors consists of five members, including

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

Melt Note Receivable – Settled and Terminated

On September 1, 2021, the Company entered into a

loan and security agreement in the principal amount of $ 13,500,000 (the “Melt Loan Agreement”), as lender, with Melt, as

Amounts borrowed under the Melt Loan Agreement bore interest at 12.50 % per annum, which interest could have been paid in-kind

at the option of Melt until the maturity date.

The Melt Loan Agreement permitted Melt to pay interest only on the principal amount loaned

thereunder through the term and all amounts owed were previously due and payable on September 1, 2022.

In April 2022, the Company entered

into a First Amendment and in September 2022, a Second Amendment (together, the “Amendments”) to the Melt Loan Agreement.

The Amendments (i) extended the maturity date of the Melt Loan Agreement to September 1, 2023, which could have been extended further

to September 1, 2026 upon Melt completing a qualifying financing of a minimum amount of $ 10,000,000 from third-party investors, (ii)

added conditions related to minimum cash amounts following a qualifying financing, and (iii) clarified the definition of material adverse

Melt could have elected to prepay all, but not less than all, of the amounts owed prior to the maturity date at any time without

The net funds received by Melt excluded $ 908,000 owed to the Company for reimbursable expenses and amounts due under the Melt

MSA prior to the effective date of the note receivable.

In connection with the Melt Loan Agreement, the Company

and Melt entered into a Right of First Refusal Agreement providing the Company with the right, but not the obligation, to match any offer

received by Melt associated with the commercial rights to any of Melt’s drug candidates for a period of five years following the

effective date of the Melt Loan Agreement.

On December 28, 2023, the Company terminated the

Melt Loan Agreement.

As of the date of termination, approximately $ 18,395,000 remained outstanding under the Melt Loan Agreement.

to the terms of a Settlement and Payoff Agreement, dated as of December 28, 2023, by and between the Company and Melt (the “Settlement

Agreement”), the Company received 2,260,000 shares of Melt’s Series B-1 Preferred Stock and 74,256 shares of Melt’s

Series B Preferred Stock (which both series have similar rights and preferences) in consideration for the full payment of all amounts

outstanding under the Melt Loan Agreement.

Pursuant to the terms of a Settlement and Payoff Agreement, dated as of December 28, 2023,

by and between the Company and Melt (the “Settlement Agreement”), the Company received 2,260,000 shares of Melt’s Series

B-1 Preferred Stock and 74,256 shares of Melt’s Series B Preferred Stock (which both series have similar rights and preferences)

in consideration for the full payment of all amounts outstanding under the Melt Loan Agreement.

The Settlement Agreement contains customary

representations, warranties and releases of the parties and requires the parties to enter into a registration rights agreement providing

the Company with rights consistent with other holders of preferred stock of Melt.

The Company concluded the Settlement Agreement is in

substance a funding of the Company’s share of prior unrecorded losses and, therefore, those suspended losses must be recognized

first against the value of the new preferred stock investments.

This resulted in reducing the carrying value of the Company’s investment

in Melt, including the carrying value of the Preferred Stock received, to zero (the consideration received in the form of an equivalent

fair value of Melt’s Preferred Stock to settle the full outstanding note receivable balance of $ 18,400,000 is essentially offset

by an equal amount of the funding of prior unrecorded losses).

Accordingly, this settlement transaction had no quantitative effect on

either the Company’s consolidated balance sheet or consolidated statement of operations for the year ended December 31, 2023.

accordance with ASC 323, Investments – Equity Method and Joint Ventures , the carrying amount of the note receivable and

other investments in Melt have been reduced by the Company’s allocated share of Melt’s losses based on its ownership of Melt

and its total indebtedness (see Note 2).

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

The Settlement Agreement contains customary representations, warranties and releases of the

parties and requires the parties to enter into a registration rights agreement providing the Company with rights consistent with other

holders of preferred stock of Melt.

The Company concluded the Settlement Agreement is in substance a funding of the Company’s share

of prior unrecorded losses and, therefore, those suspended losses must be recognized first against the value of the new preferred stock

This resulted in reducing the carrying value of the Company’s investment in Melt, including the carrying value of

the Preferred Stock received, to zero (the consideration received in the form of an equivalent fair value of Melt’s Preferred Stock

to settle the full outstanding note receivable balance of $ 18,400,000 is offset by an equal amount of the funding of prior unrecorded

Accordingly, this settlement transaction had no quantitative effect on either the Company’s consolidated balance sheet

or consolidated statement of operations for the year ended December 31, 2023.

In accordance with ASC 323, Investments –

Equity Method and Joint Ventures , the carrying amount of the note receivable and other investments in Melt have been reduced by the

Company’s allocated share of Melt’s losses based on its ownership of Melt and its total indebtedness (see Note 2).

The unaudited condensed results of operations information

of Melt is summarized below:

OF CONDENSED INCOME STATEMENT

the Years Ended

For the Years Ended December 31,

Revenues, net

4 unchanged sentences

$ ( 11,271,000 )

unaudited condensed balance sheet information of Melt is summarized below:

The unaudited condensed balance sheet information

of Melt is summarized below:

OF CONDENSED BALANCE SHEET

Current assets

Non-current assets

Total liabilities

Total preferred stock

and stockholders’ equity (deficit)

( 18,294,000 )

Total liabilities

and stockholders’ equity

Total preferred stock and stockholders’ equity

Total liabilities and stockholders’ equity

INVESTMENT IN SURFACE OPHTHALMICS, INC.

AND AGREEMENTS - RELATED PARTY TRANSACTIONS

Company entered into an asset purchase and license agreement with Surface in 2017 and amended it in April 2018 (the “Surface License

Agreements”).

Pursuant to the terms of the Surface License Agreements, the Company assigned and licensed to Surface certain intellectual

property and related rights associated with Surface’s drug candidates (collectively, the “Surface Products”).

is required to make mid-single digit royalty payments to the Company on net sales of the Surface Products while any patent rights remain

of December 31, 2023, the Company owned 3,500,000 shares of Surface common stock.

The Company entered into an asset purchase and license

agreement with Surface in 2017 and amended it in April 2018 (the “Surface License Agreements”).

Pursuant to the terms of

the Surface License Agreements, the Company assigned and licensed to Surface certain intellectual property and related rights associated

with Surface’s drug candidates (collectively, the “Surface Products”).

Surface is required to make mid-single digit

royalty payments to the Company on net sales of the Surface Products while any patent rights remain outstanding.

As of December 31, 2024 and 2023, the Company owned 3,500,000 shares

of Surface common stock.

Adrienne Graves and Perry J.

Sternberg, directors of

the Company, also are directors of Surface.

Baum, who is the Company’s Chief Executive Officer, was previously a member

of the Surface board of directors and resigned from his position as a director of Surface on March 31, 2023.

the year ended December 31, 2021, the Company reduced its common stock investment in Surface to $ 0 as a result of the Company recording

its share of equity losses of Surface.

The Company has no requirements to advance funds to Surface and no obligations to fund its future

operating losses, if any.

Therefore, the Company’s future financial results will not be negatively affected by Surface’s

ongoing operations.

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 December 31, 2023 and 2022 was as follows:

Sternberg, directors of the Company, also are directors of Surface.

who is the Company’s Chief Executive Officer, was previously a member of the Surface board of directors and resigned from his position

as a director of Surface on March 31, 2023.

Inventories 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

December 31, 2024 and 2023 was as follows:

OF INVENTORIES

4 unchanged sentences

PREPAID EXPENSES AND OTHER CURRENT ASSETS

expenses and other current assets at December 31, 2023 and 2022 consisted of the following:

Prepaid expenses and other current assets at December

31, 2024 and 2023 consisted of the following:

OF PREPAID EXPENSES AND OTHER CURRENT ASSETS

1 unchanged sentence

Prepaid computer software related expenses

Prefunded co-pay assistance

Other prepaid expenses

Receivable due from Melt

Prepaid PDUFA fees

Annual user fees (PDUFA)

Deferred Oaktree commitment fee (see Note 13)

Deposits and other

current assets

prepaid expenses and other current assets

PROPERTY, PLANT AND EQUIPMENT

plant and equipment, net at December 31, 2023 and 2022 consisted of the following:

Deposits and other current assets

Total prepaid expenses and other current assets

PLANT AND EQUIPMENT

Property, plant and equipment, net at December 31,

2024 and 2023 consisted of the following:

OF PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net:

Computer hardware

Furniture and equipment

Lab and pharmacy equipment

Property, plant and equipment,

Accumulated depreciation

and amortization

Leasehold improvements

Property, plant and equipment, gross

Accumulated depreciation and amortization

( 11,014,000 )

( 10,072,000 )

plant and equipment, net

the years ended December 31, 2023 and 2022, the Company disposed of property, plant and equipment with a net book value of $ 168,000 and

$ 69,000 , respectively, related to the discontinued use of certain lab equipment, which is included in other expense, net in the consolidated

statements of operations.

The Company recorded depreciation and amortization expense of $ 1,055,000 and $ 1,253,000 during the years ended

December 31, 2023 and 2022, respectively.

Property, plant and equipment,

During the year ended December 31, 2023, the Company

disposed of property, plant and equipment with a net book value of $ 168,000 related to the discontinued use of certain lab equipment,

which is included in other expense, net in the consolidated statement of operations.

The Company recorded depreciation and amortization

expense of $ 1,269,000 and $ 1,055,000 during the years ended December 31, 2024 and 2023, respectively.

CAPITALIZED SOFTWARE COSTS

software costs at December 31, 2023 and 2022 consisted of the following:

OF CAPITALIZED SOFTWARE COSTS

Capitalized software costs at December 31, 2024 and

2023 consisted of the following:

SCHEDULE OF CAPITALIZED SOFTWARE COSTS

Capitalized software costs

internal-use software development costs

third-party software license for internal-use

Total gross capitalized

software for internal-use

Capitalized internal-use software development costs

Acquired third-party software license for internal-use

Total gross capitalized software for internal-use

Accumulated amortization

( 1,849,000 )

Capitalized internal-use

software in process

Total capitalized software costs net

Company recorded amortization expense of $ 475,000 and $ 224,000 during the years ended December 31, 2023 and 2022, respectively.

( 1,268,000 )

Capitalized internal-use software in process

Total capitalized software

The Company recorded amortization expense of $ 581,000

and $ 475,000 during the years ended December 31, 2024 and 2023, respectively.

INTANGIBLE ASSETS AND GOODWILL

Company’s intangible assets at December 31, 2023 consisted of the following:

OF INTANGIBLE ASSETS

The Company’s intangible assets at December

31, 2024 consisted of the following:

SCHEDULE OF INTANGIBLE ASSETS

Weighted-average

$ ( 216,000 )

9 unchanged sentences

$ 184,949,000

the year ended December 31, 2023, the Company recorded a charge of $ 380,000 related to the impairment of certain licenses, trademarks,

patents and patent applications.

The Company’s intangible assets at December

31, 2023 consisted of the following:

Weighted-average

$ ( 253,000 )

$ ( 276,000 )

Acquired NDAs

( 11,300,000 )

Customer relationships

Non-competition clause

State pharmacy licenses

$ 172,447,000

$ ( 12,161,000 )

$ ( 380,000 )

$ 159,906,000

During the years ended December 31, 2024 and 2023,

the Company recorded a charge of $ 253,000 and $ 380,000 , respectively, related to the impairment of certain licenses, trademarks, patents

and patent applications.

The Company determined that the sum of the expected undiscounted cash flows attributable to these intangible

7 unchanged sentences

The estimates and assumptions used

in our assessment represent a Level 3 measurement because they are supported by little or no market activity and reflect the Company’s

own assumptions in measuring fair value.

The assumptions used in the impairment analysis are inherently subject to uncertainty and, therefore,

changes in these assumptions could have a significant impact on the concluded fair value.

Company’s intangible assets at December 31, 2022 consisted of the following:

$ ( 161,000 )

Acquired NDAs

( 1,363,000 )

Customer relationships

Non-competition clause

State pharmacy licenses

$ ( 2,368,000 )

$ ( 626,000 )

the year ended December 31, 2022, the Company recorded a net reduction to customer relationships intangible assets of $ 626,000 related

to customer relationships that were associated with the non-ophthalmology assets sold by the Company.

The amount was reflected net of

the gross proceeds received related to the sale of the Company’s non-ophthalmology assets (see Note 4).

Note 4 related to other intangible assets acquired and divested during the years ended December 31, 2023 and 2022.

expense for intangible assets for the years ended December 31, 2023 and 2022 were as follows:

OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

the Years Ended

in the Company’s assessment represent a Level 3 measurement because they are supported by little or no market activity and reflect

the Company’s own assumptions in measuring fair value.

The assumptions used in the impairment analysis are inherently subject to

uncertainty and, therefore, changes in these assumptions could have a significant impact on the concluded fair value.

See Note 4 related to other intangible assets acquired

during the year ended December 31, 2023.

Amortization expense for intangible assets for the

years ended December 31, 2024 and 2023 were as follows:

SCHEDULE OF AMORTIZATION EXPENSES FOR INTANGIBLE ASSETS

For the Years Ended December 31,

Acquired NDAs

Customer relationships

Amortization of intangible

future amortization expense for the Company’s intangible assets at December 31, 2023 is as follows:

expense of intangible assets

Estimated future amortization expense for the Company’s

intangible assets at December 31, 2024 is as follows:

OF ESTIMATED FUTURE AMORTIZATION EXPENSE

Intangible assets

Years ending December 31,

$ 184,719,000

were no changes in the carrying value of the Company’s goodwill during the years ended December 31, 2023 and 2022.

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

payable and accrued expenses at December 31, 2023 and 2022 consisted of the following:

OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

In connection with an asset purchase agreement between

Novartis and the Company, the Company recognized a $ 37,000,000 milestone payment during 2024 following the release of the first commercially

available batch of TRIESENCE.

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

There were no changes in the carrying value of the

Company’s goodwill during the years ended December 31, 2024 and 2023.

PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses at December

31, 2024 and 2023 consisted of the following:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable

Accrued insurance premium

Accrued IHEEZO milestone payments (see Note

Accrued RPC transition payments (see Note

Accrued exit fee for note payable (see Note

Accrued litigation settlements

Accrued interest

(see Note 13)

Accrued interest (see Note 13)

Other accrued expenses

Total accounts payable and accrued expenses

current portion

( 24,581,000 )

( 13,771,000 )

Non-current total

accrued expenses

Company financed all insurance policies for the policy terms of August 17, 2023 through August 16, 2024 and August 17, 2022 through August

The financing agreements have an interest rate of 7.48 % and 4.13 % per annum, respectively, and require nine monthly payments

of $ 169,000 and eight monthly payments of $ 114,000 , respectively.

Loan Due 2026

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

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

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

Upon entering into the Oaktree Loan, the Company drew a principal amount of

$ 65,000,000 (“Tranche A”) from the Oaktree Loan and used the net proceeds to repay all amounts owed by the Company pursuant

to the Loan and Security Agreement the Company previously entered into with B.

Riley Commercial Capital, LLC on December 14, 2022 (the

The Company financed all insurance policies for the

policy terms of August 17, 2023 through August 16, 2024.

The financing agreements had an interest rate of 7.48 % per annum and required

eight monthly payments of $ 169,000 .

Oaktree Loan Due 2026

In March 2023, the Company

entered into a Credit Agreement and Guaranty, (the “Oaktree Loan”) with Oaktree, providing for a senior secured term loan

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

Upon entering into the Oaktree Loan, the Company drew a principal

amount of $ 65,000,000 (“Tranche A”) from the Oaktree Loan and used the net proceeds to repay all amounts owed by the Company

pursuant to the Loan and Security Agreement the Company previously entered into with B.

Riley Commercial Capital, LLC on December 14,

2022 (the “B.

Riley Loan”) – see subheading B.

Riley Loan and Security Agreement – Paid in Full within this Note

The additional principal loan amount of up to $ 35,000,000 available under the Oaktree Loan (“Tranche B”) will be made

Riley Loan and Security Agreement – Paid in Full within

this Note 13.

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

available to the Company upon the commercialization of TRIESENCE.

If Tranche B is not drawn by the Company on or before March 27, 2024,

the amount available under Tranche B will be decreased to $ 30,000,000 .

While undrawn, the Company is required to pay a commitment fee

Since Tranche B was not drawn by the Company on or before March 27,

2024, the amount available under Tranche B was reduced to $ 30,000,000 .

While undrawn, the Company was required to pay a commitment fee

related to Tranche B amount equal to 2 % per annum, payable quarterly.

This fee is recorded within prepaid expenses and other current

This fee was recorded within prepaid expenses and other current

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

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

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

6.5 % per annum (totaling 11.83 % at December 31, 2023).

From proceeds, the Company paid fees, offering expenses, and the Oaktree Loan

was issued at an original issue discount, resulting in an aggregate discount of $ 3,415,000 .

The Oaktree Loan also carries an exit fee

equal to 3.5 % of the aggregate principal amount owed, payable at maturity, and the Company accrued $ 2,275,000 related to the exit fee.

The original issue discount, fees and expenses (including the exit fee) are being amortized over the term of the Oaktree Loan using the

effective interest rate method.

The Oaktree Loan requires quarterly interest-only payments with all of the unpaid principal, interest

and fees due on the maturity date, January 19, 2026.

July 2023, the Company entered into the First Amendment to the Oaktree Loan (the “Oaktree Amendment”).

Under the Oaktree

Amendment, the overall credit facility size was increased from $ 100,000,000 to $ 112,500,000 , and the Company made other changes related

to the Santen Products Acquisition (see Note 4).

Upon satisfaction of certain conditions to funding, the Company drew down a principal

amount of $ 12,500,000 (the “Loan Increase”) to fund the initial one-time payment associated with the Santen Products Acquisition

and for other working capital and general corporate purposes.

No other material changes to the Oaktree Loan were made pursuant to the

Oaktree Amendment.

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

Acquisition, the Company has drawn down a total principal loan amount of $ 77,500,000 under the Oaktree Loan.

The Oaktree Loan exit fee

was increased from $ 2,275,000 to $ 2,713,000 pursuant to the Oaktree Amendment.

As of December 31, 2023, the Company has recorded in accrued

expenses the total exit fee liability of $ 2,713,000 .

Oaktree Loan contains customary guarantees and covenants, including financial covenants related to minimum liquidity and minimum net

As of December 31, 2023, the Company was in compliance with the financial covenants.

As of the end of the fiscal quarter ending

December 31, 2024, if the Company’s Total Leverage Ratio (as defined in the Oaktree Loan) is greater than or equal to five times,

but less than seven times, the Company will be required to issue to Oaktree warrants to purchase 375,000 shares of the Company’s

common stock, and if the Total Leverage Ratio is greater than or equal to seven times, the Company will be required to issue to Oaktree

warrants to purchase an additional 375,000 shares of the Company’s common stock (equaling 750,000 shares in aggregate).

Total Leverage Ratio as of the end of the fiscal quarter ending December 31, 2024 is less than five times, no warrants will be issued

Based on current projections, the Company does not expect to issue any warrants related to the Oaktree Loan.

expense related to the Oaktree Loan totaled $ 8,804,000 for the year ended December 31, 2023, and included the amortization of debt issuance

costs and discount of $ 1,680,000 and amortization of deferred commitment fees of $ 543,000 .

- 11.875% Senior Notes Due 2027

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 in December 2027 (the “2027 Notes”).

The 2027 Notes were sold to investors at a par value of

$ 25.00 per 2027 Note, and the offering resulted in net proceeds to the Company of approximately $ 36,699,000 after deducting underwriting

discounts and commissions and other offering expenses of $ 3,551,000 .

2027 Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the Company’s other

existing and future senior unsecured and unsubordinated indebtedness.

The 2027 Notes are effectively subordinated in right of payment

to all of the Company’s existing and future secured indebtedness and structurally subordinated to all existing and future indebtedness

of the Company’s subsidiaries, including trade payables.

In July 2023, the Company entered into the First

Amendment to the Oaktree Loan (the “Oaktree Amendment”).

Under the Oaktree Amendment, the overall credit facility size was

increased from $ 100,000,000 to $ 112,500,000 , and the Company made other changes related to the Santen Products Acquisition (see Note

The Company drew down a principal amount of $ 12,500,000 (the “Loan Increase”) to fund the initial one-time payment associated

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

No other material changes to the Oaktree

Loan were made pursuant to the Oaktree Amendment.

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

closing of the Santen Products Acquisition, the Company had drawn down a total principal loan amount of $ 77,500,000 under the Oaktree

In October 2024, the Company entered into the Second

Amendment to Credit Agreement and Guaranty with Oaktree (“Second Amendment”).

Upon satisfaction of certain conditions to

funding, the Company drew down the principal amount of the Tranche B commitment of $ 30,000,000 (the “$ 30,000,000 Draw”) to

partially fund a one-time milestone payment to Novartis.

Under its asset purchase agreement with Novartis, the Company made a one-time

milestone payment to Novartis equal to $ 37,000,000 upon the commercial availability of TRIESENCE, which the Company paid in October 2024.

In connection with the Second Amendment, the Company incurred approximately $ 120,000 of costs.

In connection with the Second Amendment

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

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

The Oaktree Loan is secured

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

The Oaktree Loan has a maturity

date of January 19, 2026 and carries an interest rate equal to the Secured Overnight Financing Rate plus 6.5 % per annum (totaling 11.2 %

at December 31, 2024).

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

The total exit fee of $ 3,763,000 has been recorded as a debt discount.

The original issue discount, fees and expenses (including the

exit fee) are being amortized over the term of the Oaktree Loan using the effective interest rate method.

The Oaktree Loan requires quarterly

interest-only payments with all of the unpaid principal, interest and fees due on the maturity date, January 19, 2026.

The Oaktree Loan contains

customary guarantees and covenants, including financial covenants related to minimum liquidity and minimum net revenues.

As of December

31, 2024, the Company was in compliance with the financial covenants.

Interest expense related

to the Oaktree Loan totaled $ 12,568,000 and $ 8,804,000 for the years ended December 31, 2024 and 2023, respectively, and included the

amortization of debt issuance costs and discount of $ 2,705,000 and $ 1,680,000 , respectively.

Also included in interest expense is the

amortization of deferred commitment fees of $ 601,000 and $ 543,000 , respectively.

HROWM - 11.875% Senior Notes Due 2027

In 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 in December 2027 (the “2027 Notes”).

The 2027 Notes were sold to investors at a par value of $ 25.00 per 2027 Note,

and the offering resulted in net proceeds to the Company of approximately $ 36,699,000 after deducting underwriting discounts and commissions

and other offering expenses of $ 3,551,000 .

The 2027 Notes are senior

unsecured obligations of the Company and rank equally in right of payment with all of the Company’s other existing and future senior

unsecured and unsubordinated indebtedness.

The 2027 Notes are effectively subordinated in right of payment to all of the Company’s

existing and future secured indebtedness and structurally subordinated to all existing and future indebtedness of the Company’s

subsidiaries, including trade payables.

The 2027 Notes bear interest at the rate of 11.875 % per annum.

on the 2027 Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing on January

The 2027 Notes will mature on December 31, 2027 .

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

as interest expense over the term of the 2027 Notes using the effective interest rate method .

any time prior to December 31, 2024, the Company may, at its option, redeem the 2027 Notes, in whole at any time or in part from time

to time, at a redemption price equal to 100% of the principal amount of the 2027 Notes to be redeemed, plus a make-whole amount, if any,

Interest on the 2027 Notes is

payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing on January 31, 2023.

The 2027 Notes

will mature on December 31, 2027 .

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

the term of the 2027 Notes using the effective interest rate method.

The Company may redeem the

2027 Notes for cash in whole or in part at any time at its option (i) on or after December 31, 2024 and 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, (ii) on or after December

31, 2025 and prior to December 31, 2026, at a price equal to $25.25 per note, plus accrued and unpaid interest to, but excluding, the

date of redemption, and (iii) on or after December 31, 2026 and prior to maturity, at a price equal to 100% of their principal amount,

plus accrued and unpaid interest to, but excluding, the date of redemption.

The Company may redeem the 2027 Notes for cash in whole or

in part at any time at its option (i) on or after December 31, 2024 and 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, (ii) on or after December 31, 2025 and prior to December

31, 2026, at a price equal to $25.25 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iii)

on or after December 31, 2026 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest

to, but excluding, the date of redemption.

In addition, the Company is required to redeem the 2027 Notes, for cash, in whole but not

in part, at the price of $25.50 per note, plus accrued and unpaid interest to, but excluding, the date of redemption, upon occurrence

of certain events including the occurrence of a Material Change, as defined in the Second Supplemental Indenture.

The 2027 Notes trade

on the Nasdaq Stock Market LLC under the symbol “HROWM.”

expense related to the 2027 Notes totaled $ 5,516,000 and $ 140,000 for the years ended December 31, 2023 and 2022, respectively, and included

the amortization of debt issuance costs and discount of $ 736,000 and $ 0 , respectively.

Chief Executive Officer, Mark L.

In addition, the Company is required to redeem the 2027 Notes,

for cash, in whole but not in part, at the price of $25.50 per note , plus accrued and unpaid interest to, but excluding, the date of

redemption, upon occurrence of certain events including the occurrence of a Material Change, as defined in the Second Supplemental Indenture.

The 2027 Notes trade on the Nasdaq Stock Market LLC under the symbol “HROWM.”

Interest expense related

to the 2027 Notes totaled $ 5,496,000 and $ 5,516,000 for the years ended December 31, 2024 and 2023, respectively, and included the amortization

of debt issuance costs and discount of $ 716,000 and $ 736,000 , respectively.

The Company’s Chief

Executive Officer, Mark L.

Baum, Chief Financial Officer, Andrew R.

1 unchanged sentence

Lawrence Van Horn and Dr.

Lindstrom, in the aggregate, purchased $ 950,000 in principal amount of the 2027 Notes at the time of their offering.

– 8.625% Senior Notes Due 2026

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

2021 issued an additional $ 5,000,000 of such notes pursuant to the full exercise of the underwriters’ option to purchase additional

notes (collectively, the “April Notes”).

The April Notes were sold to investors at a par value of $ 25.00 per April Note and

the offering resulted in net proceeds to the Company of approximately $ 51,909,000 after deducting underwriting discounts and commissions

and other offering expenses of $ 3,091,000 .

In September 2021, in a further issuance of the April Notes, the Company sold an additional

$ 20,000,000 aggregate principal amount of such notes (the “September Notes,” and together with the April Notes, the “2026

Notes”), at a price of $ 25.75 per September Note, with interest of $ 278,000 on the September Notes being accrued from April 20,

2021, the date of issuance of the April Notes.

The September offering resulted in net proceeds to the Company of approximately $ 19,164,000

after deducting underwriting discounts and commissions and other offering expenses of $ 1,158,000 and a premium on note issuance of $ 322,000 .

The September Notes are treated as a single series with the April Notes under the indenture governing the April Notes, dated as of April

Richard Lindstrom,

in the aggregate, purchased $ 950,000 in principal amount of the 2027 Notes at the time of their offering.

HROWL – 8.625% Senior Notes Due 2026

In April 2021, the Company

closed an offering of $ 50,000,000 aggregate principal amount of 8.625 % senior notes due April 2026, and in May 2021 issued an additional

$ 5,000,000 of such notes pursuant to the full exercise of the underwriters’ option to purchase additional notes (collectively,

the “April Notes”).

The April Notes were sold to investors at a par value of $ 25.00 per April Note and the offering resulted

in net proceeds to the Company of approximately $ 51,909,000 after deducting underwriting discounts and commissions and other offering

expenses of $ 3,091,000 .

In September 2021, in a further issuance of the April Notes, the Company sold an additional $ 20,000,000 aggregate

principal amount of such notes (the “September Notes,” and together with the April Notes, the “2026 Notes”),

at a price of $ 25.75 per September Note, with interest of $ 278,000 on the September Notes being accrued from April 20, 2021, the date

of issuance of the April Notes.

The September offering resulted in net proceeds to the Company of approximately $ 19,164,000 after deducting

underwriting discounts and commissions and other offering expenses of $ 1,158,000 and a premium on note issuance of $ 322,000 .

The September

Notes are treated as a single series with the April Notes under the indenture governing the April Notes, dated as of April 20, 2021,

and have the same terms as the April Notes (other than the initial offering price and issue date).

The 2026 Notes are senior

unsecured obligations of the Company and rank equally in right of payment with all of our other existing and future senior unsecured

The 2026 Notes are senior unsecured

obligations of the Company and rank equally in right of payment with all of the Company’s other existing and future senior unsecured

and unsubordinated indebtedness.

8 unchanged sentences

the premium on note issuance, over the term of the 2026 Notes using the effective interest rate method.

to February 1, 2026, the Company may, at its option, redeem the 2026 Notes, in whole at any time or in part from time to time, at a redemption

price equal to 100% of the principal amount of the 2026 Notes to be redeemed , plus a make-whole amount, if any, plus accrued and unpaid

interest to, but excluding, the date of redemption.

The Company may redeem the 2026 Notes for cash in whole or in part at any time at

our option on or after February 1, 2026 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid

interest to, but excluding, the date of redemption.

Prior to February 1, 2026,

the Company may, at its option, redeem the 2026 Notes, in whole at any time or in part from time to time, at a redemption price equal

to 100% of the principal amount of the 2026 Notes to be redeemed , plus a make-whole amount, if any, plus accrued and unpaid interest

to, but excluding, the date of redemption.

The Company may redeem the 2026 Notes for cash in whole or in part at any time at its option

on or after February 1, 2026 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest

to, but excluding, the date of redemption.

On and after any redemption date, interest will cease to accrue on the redeemed Notes.

The 2026 Notes trade on the Nasdaq Stock Market LLC under the symbol “HROWL”.

expense related to the 2026 Notes totaled $ 7,251,000 and $ 7,238,000 for the years ended December 31, 2023 and 2022, respectively, and

included amortization of debt issuance costs and discount of $ 782,000 , and $ 782,000 for the years ended December 31, 2023 and 2022, respectively.

Riley Loan and Security Agreement – Paid in Full

December 14, 2022 (the “Effective Date”), the Company entered into a Loan and Security Agreement (the “BR Loan”)

Riley Commercial Capital, LLC, as administrative agent for the lenders.

The BR Loan provided for a loan facility of up to $ 100,000,000

to the Company with a maturity date of December 14, 2025 (the “Maturity Date”), at an interest rate of 10.875 % per annum.

January 2023, $ 59,750,000 of principal amount was funded pursuant to the BR Loan simultaneously with the consummation of the NVS 5 Acquisition

(see Note 4).

In March 2023, the Company repaid all amounts owed under the BR Loan, in connection with the Oaktree Loan, and no exit

or prepayment fees were paid as a result of the payoff of the BR Loan pursuant to a side letter agreement among the parties.

expense related to the BR Loan totaled $ 1,565,000 for the year ended December 31, 2023, and included amortization of debt issuance costs

and debt discount of $ 356,000 .

The Company recorded a loss of $ 5,465,000 related to the early extinguishment of debt associated with

summary of the Company’s debt at December 31, 2023 and 2022 is described as follows:

OF LONG TERM DEBT

2026 Notes trade on the Nasdaq Stock Market LLC under the symbol “HROWL”.

Interest expense related to the 2026 Notes totaled

$ 7,253,000 and $ 7,251,000 for the years ended December 31, 2024 and 2023, respectively, and included amortization of debt issuance

costs and discount of $ 784,000 , and $ 782,000 for the years ended December 31, 2024 and 2023, respectively.

Riley Loan and Security

Agreement – Paid in Full

On December 14, 2022 (the

“Effective Date”), the Company entered into a Loan and Security Agreement (the “BR Loan”) with B.

Riley Commercial

Capital, LLC, as administrative agent for the lenders.

The BR Loan provided for a loan facility of up to $ 100,000,000 to the Company

with a maturity date of December 14, 2025 (the “Maturity Date”), at an interest rate of 10.875 % per annum.

In January 2023, $ 59,750,000

of principal amount was funded pursuant to the BR Loan simultaneously with the consummation of the NVS 5 Acquisition (see Note 4).

March 2023, the Company repaid all amounts owed under the BR Loan, in connection with the Oaktree Loan, and no exit or prepayment fees

were paid as a result of the payoff of the BR Loan pursuant to a side letter agreement among the parties.

Interest expense related

to the BR Loan totaled $ 1,565,000 for the year ended December 31, 2023, and included amortization of debt issuance costs and debt discount

of $ 356,000 .

The Company recorded a loss of $ 5,465,000 related to the early extinguishment of debt associated with the BR Loan.

A summary of the Company’s

debt at December 31, 2024 and 2023 is described as follows:

SCHEDULE OF LONG TERM DEBT

8.625 % Senior Notes due April 2026

2 unchanged sentences

Notes payable gross

Unamortized debt

discount and issuance costs

Unamortized debt discount and issuance costs

( 6,974,000 )

3 unchanged sentences

$ 185,885,000

the years ended December 31, 2023 and 2022, the total effective interest rate of the Company’s debt was 10.93 %, and 8.97 %, respectively .

December 31, 2023, future minimum payments under the Company’s debt were as follows:

OF FUTURE MINIMUM PAYMENT UNDER NOTES PAYABLES

For the years ended December 31, 2024 and 2023,

the total effective interest rate of the Company’s debt was 10.74 %, and 10.58 %, respectively.

At December 31, 2024, future minimum payments under

the Company’s debt were as follows:

SCHEDULE OF FUTURE MINIMUM PAYMENT UNDER NOTES PAYABLES

Total minimum payments

amount representing

interest payments

amount representing interest payments

( 36,224,000 )

Notes payable, gross

unamortized discount,

net of premium

unamortized discount, net of premium

( 6,974,000 )

Notes payable, net of

unamortized discount

Notes payable, net of unamortized discount

$ 219,539,000

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

These lease agreements have remaining

terms between one to five years and contain various clauses for renewal at the Company’s option.

operating lease for 5,789 square feet of office space in Carlsbad, California, which commenced in January 2022 that expires in March

operating lease for 38,153 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.

This lease was amended, effective July 2020, to extend the term

of the original lease and add 1,400 of additional square footage to the lease, amended again in May 2021 to extend the term of the

lease to July 2027 and add 8,900 square feet of space, and amended in May 2023 to add another 2,861 square feet of space to the existing

lease, which the Company took possession of in January 2024.

operating lease for 5,500 square feet of office space in Nashville, Tennessee that expires in December 2024 .

operating lease for 11,552 square feet of lab and office space in Nashville, Tennessee which commenced in September 2022 and expires

in September 2027 .

December 31, 2023 and 2022, the weighted-average discount rate and the weighted-average remaining lease term for the operating leases

held by the Company were 6.6 % and 6.6 % and 10.4 years and 10.9 years, respectively.

the years ended December 31, 2023 and 2022, cash paid for amounts included for the operating lease liabilities was $ 1,231,000 and $ 925,000 ,

respectively, and the Company recorded operating lease expense of $ 1,232,000 and $ 1,117,000 , respectively, included in selling, general

and administrative expenses.

lease payments under operating leases as of December 31, 2023 were as follows (excluding lease transactions entered into in 2024) :

OF FUTURE LEASE PAYMENT UNDER OPERATING LEASES

The Company leases office and laboratory space under

the non-cancelable operating leases listed below.

These lease agreements have remaining terms between one to five years and

contain various clauses for renewal at the Company’s option.

An operating lease for 5,800 square feet of office space

in Carlsbad, California, which commenced in January 2022 that expires in March 2025 .

An 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

This lease was amended, effective July 2020, to extend the term of the original lease and add 1,400 of additional

square footage to the lease, amended again in May 2021 to extend the term of the lease to July 2027 and add 8,900 square

feet of space, and amended in May 2023 to add another 2,861 square feet of space to the existing lease, which the Company took possession

of in January 2024.

An 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.

An 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 .

At December 31, 2024 and 2023, the weighted-average

discount rate and the weighted-average remaining lease term for the operating leases held by the Company were 8.0 % and 6.6 %, respectively,

and 10.2 years and 10.4 years, respectively.

During the years ended December 31, 2024 and 2023,

cash paid for amounts included for the operating lease liabilities was $ 1,301,000 and $ 1,231,000 , respectively, and the Company

recorded operating lease expense of $ 1,515,000 and $ 1,232,000 , respectively, included in selling, general and administrative expenses.

Future lease payments under operating leases as of

December 31, 2024 were as follows :

OF FUTURE LEASE PAYMENTS UNDER OPERATING LEASES

Operating Leases

Total minimum lease payments

amount representing

imputed interest payments

( 2,940,000 )

amount representing imputed interest payments

Total operating lease liabilities

current portion,

operating lease liabilities

Operating lease obligations,

net of current portion

STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

December 31, 2023 and 2022, the Company had 5,000,000 shares of preferred stock, $ 0.001 par value, authorized and no shares of preferred

stock issued and outstanding.

each of December 31, 2023 and 2022, the Company had 50,000,000 shares of common stock, $ 0.001 par value, authorized.

current portion, operating lease liabilities

Operating lease obligations, net of current portion

STOCKHOLDERS’

EQUITY AND STOCK-BASED COMPENSATION

Preferred Stock

At December 31, 2024 and 2023, the Company had 5,000,000 shares

of preferred stock, $ 0.001 par value, authorized and no shares of preferred stock issued and outstanding.

At each of December 31, 2024 and 2023, the Company

had 50,000,000 shares of common stock, $ 0.001 par value, authorized.

Issuances During the Year Ended December 31, 2024

During the year ended December 31, 2024:

the year ended December 31, 2023:

Company closed a public offering of shares of its common stock at an offering price of $ 17.75 per share (the “Offering”).

The Company sold 3,887,324 shares of its common stock in the Offering, resulting in the Company receiving aggregate net proceeds

of $ 64,520,000 , after deducting underwriting discounts and commissions and other offering expenses of $ 4,480,000 ;

Company settled 1,567,913 outstanding PSUs as a result of the achievement of the total stockholder returns (“TSR”) targets

set forth in equity incentive awards (the “PSU Agreements”) previously issued to members of the Company’s management

team in 2021 (the “2021 Awards”).

The 2021 Awards were separated into four tranches and required that the Company achieve

and maintain certain levels of TSR ranging from 50 % to 175 % per share during the five-year period following the grant date.

based on the aggregate of:

(i) the percent increase of the closing price of the Company’s common stock from July 22, 2021;

and (ii) any dividends or like stockholder distributions as specified in the PSU Agreements.

In connection with the settlement of

the 2021 Awards, an aggregate of 616,984 shares of the Company’s common stock was withheld by Harrow for payroll tax obligations

Company issued 152,102 shares of common stock and received proceeds of $ 1,110,000 upon

the exercise of options to purchase 152,102 shares of common stock with exercise

prices ranging from $ 1.70 to $ 25.86 per share.

Company issued 32,955 shares of common stock upon the cashless exercise of options

to purchase 39,710 shares with exercise prices ranging from $ 1.70 to $ 8.00 per

· The Company issued 44,860 shares

of common stock to John Saharek, the Company’s Chief Commercial Officer, upon the cashless exercise of options to

purchase 90,000 shares

at an exercise price of $ 7.37 .

The Company withheld 29,107 shares

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

· 45,000 RSUs

granted in February 2021 to Andrew R.

Boll, the Company’s Chief Financial Officer,

vested, and 26,520 shares of the Company’s common stock were issued to Mr.

Boll, net of 18,480 shares of common stock withheld for payroll tax withholdings

totaling $ 197,000 .

Company issued 168,963 shares of its common stock underlying RSUs held by directors that ceased providing services to the Company.

The RSUs had previously vested, including 21,620 RSUs during the year ended December 31, 2023, but the issuance and delivery of the

· 150,000 RSUs

granted in February 2021 to Mark L.

Baum, the Company’s Chief Executive Officer, vested,

and 90,164 shares of the Company’s common stock were issued to Mr.

net of 59,836 shares of common stock withheld for payroll tax withholdings totaling

· 30,000 RSUs

granted in February 2021 to John Saharek, the Company’s Chief Commercial Officer, vested,

and 17,384 shares of the Company’s common stock were issued to Mr.

net of 12,616 shares of common stock withheld for payroll tax withholdings totaling

· 50,000 RSUs

granted in February 2021 to various other employees, vested, and 32,452 shares

of the Company’s common stock were issued, net of 17,548 shares of common

stock withheld for payroll tax withholdings totaling $ 187,000 .

Company issued 57,517 shares of its common stock underlying RSUs held by a director

that ceased providing services to the Company.

The RSUs had previously vested, including 3,872 RSUs

that vested during the year ended December 31, 2024, but the issuance and delivery of the

shares were deferred until the director ceased providing services to the Company.

Company issued 65,148 shares of common stock and received proceeds of $ 379,000 upon the exercise of options to purchase 65,148 shares

of common stock with exercise prices ranging from $ 1.70 to $ 8.50 per share;

Company issued 62,367 shares of common stock to Mark L.

Baum, the Company’s Chief Executive Officer, upon the cashless exercise

of options to purchase 180,000 shares at an exercise price of $ 8.99 per share.

The Company withheld from Mr.

Baum 77,167 shares as

consideration for the cashless exercise and an additional 40,466 shares for payroll tax obligations totaling $ 849,000 ;

Company issued 55,558 shares of common stock to Andrew R.

Boll, the Company’s Chief Financial Officer, upon the cashless exercise

of options to purchase 90,000 shares at an exercise price of $ 6.00 per share.

· 41,126 shares

of the Company’s common stock underlying RSUs issued to directors vested, but the issuance

and delivery of these shares are deferred until the applicable directors cease providing

services to the Company.

· 8,000 shares

of the Company’s common stock underlying RSUs issued to consultants vested, but the

issuance and delivery of these shares has not occurred.

Issuances During the Year Ended December 31, 2023

During the year ended December 31, 2023:

the Company closed a public offering of shares of its common stock

at an offering price of $ 17.75 per share (the “Offering”).

The Company sold 3,887,324 shares of its common

stock in the Offering, resulting in the Company receiving aggregate net proceeds of $ 64,520,000 , after deducting underwriting discounts

and commissions and other offering expenses of $ 4,480,000 ;

the Company settled 1,567,913 outstanding PSUs as a result

of the achievement of the total stockholder returns (“TSR”) targets set forth in equity incentive awards (the “PSU

Agreements”) previously issued to members of the Company’s management team in 2021 (the “2021 Awards”).

2021 Awards were separated into four tranches and required that the Company achieve and maintain certain levels of TSR ranging from 50 % to 175 % per

share during the five-year period following the grant date.

TSR was based on the aggregate of:

(i) the percent increase of the closing

price of the Company’s common stock from July 22, 2021;

and (ii) any dividends or like stockholder distributions as specified

in the PSU Agreements.

In connection with the settlement of the 2021 Awards, an aggregate of 616,984 shares of the Company’s

common stock was withheld by Harrow for payroll tax obligations totaling $ 11,273,000 ;

the Company issued 168,963 shares of its common stock underlying RSUs

held by directors that ceased providing services to the Company.

The RSUs had previously vested, including 21,620 RSUs during the

year ended December 31, 2023, but the issuance and delivery of the shares were deferred until the director ceased providing services

to the Company;

the Company issued 65,148 shares of common stock and received proceeds

of $ 379,000 upon the exercise of options to purchase 65,148 shares of common stock with exercise prices ranging from $ 1.70 to $ 8.50

the Company issued 62,367 shares of common stock to Mark L.

Company’s Chief Executive Officer, upon the cashless exercise of options to purchase 180,000 shares at an exercise price of

$ 8.99 per share.

The Company withheld from Mr.

Boll 25,521 shares as

consideration for the cashless exercise and an additional 8,921 shares for payroll tax obligations totaling $ 189,000 ;

Company issued 10,222 shares of common stock to John Saharek, the Company’s Chief Commercial Officer, upon the cashless exercise

of options to purchase 20,000 shares at an exercise price of $ 4.16 per share.

Baum 77,167 shares as consideration for the cashless exercise and an additional 40,466

shares for payroll tax obligations totaling $ 849,000 ;

the Company issued 55,558 shares of common stock to Andrew R.

the Company’s Chief Financial Officer, upon the cashless exercise of options to purchase 90,000 shares at an exercise price

of $ 6.00 per share.

The Company withheld from Mr.

Saharek 6,485 shares

as consideration for the cashless exercise and an additional 3,293 shares for payroll tax obligations totaling $ 41,000 ;

vesting of 23,000 RSUs granted in January 2020 to Andrew R.

Boll, the Company’s Chief Financial Officer, the Company issued

13,398 shares of common stock to Mr.

Boll, net of 9,602 shares of common stock withheld for payroll tax withholdings totaling $ 142,000 ;

vesting of 88,000 RSUs granted in January 2020 to Mark L.

Baum, the Company’s Chief Executive Officer, the Company issued 52,821

shares of common stock to Mr.

Baum, net of 35,179 shares of common stock withheld for payroll tax withholdings totaling $ 519,000 ;

shares of the Company’s common stock underlying RSUs issued to directors vested, but the issuance and delivery of these shares

were deferred until the applicable director ceased providing services to the Company.

During the Year Ended December 31, 2022

the year ended December 31, 2022:

Company issued 53,594 shares of common stock to Mark L.

Baum, the Company’s Chief Executive Officer, upon the cashless exercise

of options to purchase 125,000 shares at an exercise price of $ 2.40 per share.

Boll 25,521 shares as consideration for the cashless exercise and an additional

8,921 shares for payroll tax obligations totaling $ 189,000 ;

the Company issued 10,222 shares of common stock to John Saharek, the

Company’s Chief Commercial Officer, upon the cashless exercise of options to purchase 20,000 shares at an exercise price of

$ 4.16 per share.

The Company withheld from Mr.

Baum 36,014 shares as

consideration for the cashless exercise and an additional 35,392 shares for payroll tax obligations totaling $ 295,000 ;

Company issued 306,347 shares of its common stock upon the cashless exercise of warrants to purchase 373,847 shares of common stock

with an exercise price of $ 2.08 per share;

Company issued 4,054 shares of common stock to a consultant upon the cashless exercise of options to purchase 15,995 shares at an

exercise price of $ 7.07 per share.

The Company withheld 11,941 shares as consideration for the cashless exercise ;

Company issued 15,625 shares of common stock to a consultant and received net proceeds of $ 55,000 upon the exercise of options to

purchase 15,625 shares of common stock at an exercise price of $ 3.50 per share ;

Company issued 132,100 shares of common stock and received net proceeds of $ 587,000 upon the exercise of options to purchase 132,100

shares of common stock with exercise prices between $ 1.70 to $ 8.40 per share ;

RSUs granted at various dates to employees of the Company vested, and the Company issued 110,621 shares of common stock to the employees,

net of 74,379 shares of common stock withheld for payroll tax withholdings totaling $ 581,000 ;

shares of the Company’s common stock underlying RSUs issued to directors vested, but the issuance and delivery of these shares

are deferred until the applicable director resigns .

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

2017 Incentive Stock and Awards Plan which was subsequently amended on June 3, 2021 (as amended, the “2017 Plan” together

with the 2007 Plan, the “Plans”).

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

shares of the Company’s common stock.

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

Saharek 6,485 shares as consideration for the cashless exercise and an additional

3,293 shares for payroll tax obligations totaling $ 41,000 ;

upon vesting of 23,000 RSUs granted in January 2020 to Andrew R.

the Company’s Chief Financial Officer, the Company issued 13,398 shares of common stock to Mr.

Boll, net of 9,602 shares of

common stock withheld for payroll tax withholdings totaling $ 142,000 ;

upon vesting of 88,000 RSUs granted in January 2020 to Mark L.

the Company’s Chief Executive Officer, the Company issued 52,821 shares of common stock to Mr.

Baum, net of 35,179 shares of

common stock withheld for payroll tax withholdings totaling $ 519,000 ;

43,023 shares of the Company’s common stock underlying RSUs issued

to directors vested, but the issuance and delivery of these shares were deferred until the applicable director ceased providing services

to the Company.

On September 17, 2007, the Company’s Board

of Directors and stockholders adopted the Company’s 2007 Incentive Stock and Awards Plan, as subsequently amended (the “2007

The 2007 Plan reached its term in September 2017, and the Company 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 Board of Directors and stockholders adopted the Company’s 2017 Incentive

Stock and Awards Plan which was subsequently amended on June 3, 2021 (as amended, the “2017 Plan” together with the 2007

Plan, the “Plans”).

As of December 31, 2024, the 2017 Plan provides for the issuance of a maximum of 6,000,000 shares

of the Company’s common stock.

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.

4 unchanged sentences

The Company had 38,968 shares available for future issuances under the 2017 Plan at December 31, 2024.

summary of stock option activity under the Plan for the year ended December 31, 2023 is as follows:

OF STOCK OPTION PLAN ACTIVITY

Options outstanding –

January 1, 2023

Stock Options

A summary of stock option activity under the Plan

for the year ended December 31, 2024 is as follows:

SCHEDULE OF STOCK OPTION PLAN ACTIVITY

Number of shares

Weighted Avg.

Exercise Price

Weighted Avg.

Contractual Life

Intrinsic Value

Options outstanding – January 1, 2024

Options granted

1 unchanged sentence

Options cancelled/forfeited

Options outstanding

– December 31, 2023

Options outstanding – December 31, 2024

Options exercisable

Options vested and

expected to vest

summary of stock option activity under the Plan for the year ended December 31, 2022 is as follows:

Options outstanding –

January 1, 2022

Options vested and expected to vest

A summary of stock option activity under the Plan

for the year ended December 31, 2023 is as follows:

Number of shares

Weighted Avg.

Exercise Price

Weighted Avg.

Contractual Life

Intrinsic Value

Options outstanding – January 1, 2023

Options granted

1 unchanged sentence

Options cancelled/forfeited

Options outstanding

– December 31, 2022

Options outstanding – December 31, 2023

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 options with an exercise price lower

than the market price on December 31, 2023 and 2022, based on the closing price of the Company’s common stock of $ 11.20 and $ 14.76 ,

respectively, on that date.

intrinsic value of the options exercised in 2023 and 2022 was $ 4,580,000 and $ 2,008,000 , respectively.

the year ended December 31, 2023, 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 10 years.

Vesting terms for options granted to employees during

the year ended December 31, 2023 generally included one of the following vesting schedules:

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;

and 100% of the shares subject to the option vest on

a quarterly basis in equal installments 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 Company calculates

expected volatility based solely on the historical volatilities of the common stock of the Company.

The expected term of options granted

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.

Options vested and expected to vest

The aggregate intrinsic value in the tables 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 options with an exercise price lower than the market price on December 31, 2024 and 2023,

based on the closing price of the Company’s common stock of $ 33.55 and $ 11.20 , respectively, on that date.

The intrinsic value of the options exercised in 2024

and 2023 was $ 7,011,000

and $ 4,580,000 ,

respectively.

During 2024 and 2023, the Company recognized no tax benefit from stock options exercised during these periods.

During the year ended December 31, 2024, the Company

granted stock options to certain employees.

The stock options were granted with an exercise price equal to the current market price of

the Company’s common stock, as reported by the securities exchange on which the common stock was then listed, at the grant date

and have contractual terms of 10 years.

Vesting terms for options granted to employees during the year ended December

31, 2024 generally included one of the following vesting schedules:

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;

and 100% of the shares subject to the option vest on a quarterly basis in equal installments

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.

The fair value of each option award is estimated

on the date of grant using the Black-Scholes-Merton option pricing model.

The Company calculates expected volatility based solely on

the historical volatilities of the common stock of the Company.

The expected term of options granted 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 %.

These factors could change in the future, which would affect

the determination of stock-based compensation expense in future periods.

Utilizing 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:

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 %.

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

expense in future periods.

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

The 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:

SCHEDULE OF FAIR VALUE ASSUMPTIONS

Weighted-average fair value of

options granted

Weighted-average fair value of options granted

Expected terms (in years)

1 unchanged sentence

Risk-free interest rate

3.72 – 4.48 %

3.59 – 4.80 %

Dividend yield

following table summarizes information about stock options outstanding and exercisable at December 31, 2023:

SCHEDULE OF STOCK

OPTION OUTSTANDING AND EXERCISABLE

The following table

summarizes information about stock options outstanding and exercisable at December 31, 2024:

SCHEDULE OF STOCK OPTION OUTSTANDING AND EXERCISABLE

Options Outstanding

Options Exercisable

Exercise Prices

Life in Years

of December 31, 2023, there was approximately $ 1,966,000 of total unrecognized compensation expense related to unvested stock options

granted under the Plan.

That expense is expected to be recognized over the weighted-average remaining vesting period of 2.77 years.

stock-based compensation for all stock options was $ 782,000 and $ 1,130,000 during the years ended December 31, 2023 and 2022, respectively.

During the Year Ended December 31, 2023

April 2023, the Company granted an aggregate of 1,567,913 PSUs to members of its senior management including Mark Baum, Chief Executive

Officer, Andrew Boll, Chief Financial Officer, and John Saharek, Chief Commercial Officer, which are subject to the satisfaction of certain

market-based and continued service conditions (the “2023 PSUs”).

The vesting of the 2023 PSUs require (i) a minimum of a

two-year service period, and (ii) during a five-year term, the achievement and maintenance of Company common stock price targets for

ten consecutive trading days ranging between $ 25.00 to $ 50.00 per share, separated into four separate tranches as described further in

the table below.

1.47 - $ 1.70

2.40 - $ 2.60

4.49 - $ 5.72

6.75 - $ 7.26

7.60 - $ 45.64

1.47 - $ 45.64

As of December 31, 2024, there was approximately

$ 2,158,000 of total unrecognized compensation expense related to unvested stock options granted under the Plan.

That expense is expected

to be recognized over the weighted-average remaining vesting period of 2.73 years.

The stock-based compensation for all stock options

was $ 624,000 and $ 782,000 during the years ended December 31, 2024 and 2023, respectively.

Performance Stock Units

Grants During the Year Ended December 31, 2023

In April 2023, the Company

granted an aggregate of 1,567,913 PSUs to members of its senior management including Mark Baum, Chief Executive Officer, Andrew

Boll, Chief Financial Officer, and John Saharek, Chief Commercial Officer, which are subject to the satisfaction of certain market-based

and continued service conditions (the “2023 PSUs”).

The vesting of the 2023 PSUs require (i) a minimum of a two-year service

period and (ii) during a five-year term, the achievement and maintenance of Company common stock price targets for ten consecutive trading

days ranging between $ 25.00 to $ 50.00 per share, separated into four separate tranches as described further in the table below.

OF PERFORMANCE STOCK UNITS

1 unchanged sentence

Target Share Price*

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

If such distributions are made,

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

part of the Target Share Price.

aggregate fair value of the 2023 PSUs was $ 29,106,000 using a Monte Carlo Simulation with a five-year life, 65 % volatility and a risk

free interest rate of 10.34 %.

This amount is being amortized over a two-year derived service period.

summary of the Company’s PSU activity and related information for the year ended December 31, 2023 is as follows:

OF PERFORMANCE STOCK UNITS ACTIVITY

Average Grant Date Fair Value

Target Share Price assumes that no dividends or like distributions

are made to stockholders of the Company.

If such distributions are made, the Target Share Price would decrease accordingly, to the

benefit of the employee, to account for the dividend/distribution as a part of the Target Share Price.

The aggregate fair value of the 2023 PSUs was $ 29,106,000

using a Monte Carlo Simulation with a five -year life, 65 % volatility and a risk-free interest rate of 10.34 %.

This amount is being amortized

over a two -year derived service period.

A summary of the Company’s PSU activity and

related information for the year ended December 31, 2024 is as follows:

SCHEDULE OF PERFORMANCE STOCK UNITS ACTIVITY

Number of PSUs

Weighted Average Grant Date Fair Value

PSUs unvested – January 1, 2024

( 1,567,913 )

PSUs cancelled/forfeited

PSUs unvested – December 31, 2024

During the Year Ended December 31, 2022

PSUs were issued during the year ended December 31, 2022.

A summary of the Company’s PSU

activity and related information for the year ended December 31, 2022 is as follows:

Average Grant

Date Fair Value

A summary of the Company’s PSU activity and

related information for the year ended December 31, 2023 is as follows:

Number of PSUs

Weighted Average Grant Date Fair Value

PSUs unvested – January 1, 2023

( 1,567,913 )

PSUs cancelled/forfeited

PSUs unvested – December 31, 2023

of December 31, 2023, the total unrecognized compensation expense related to unvested PSUs was approximately $ 18,191,000 which is expected

to be recognized over a weighted-average period of 1.26 years, based on estimated vesting schedules.

The stock-based compensation for

PSUs was $ 13,753,000 and $ 5,056,000 during the years ended December 31, 2023 and 2022, respectively.

awards are granted subject to certain vesting requirements and other restrictions, including 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.

During the Year Ended December 31, 2023

the year ended December 31, 2023, the Company’s board of directors were granted 41,301 time-based vesting RSUs with a fair market

value of $ 800,000 , which vest in equal quarterly installments over one year.

The Company also granted 86,873 time-based vesting RSUs

with a fair market value of $ 697,000 to certain employees, which vest in full on the third anniversary of the grant date.

summary of the Company’s RSU activity and related information for the year ended December 31, 2023 is as follows:

OF RESTRICTED STOCK UNITS ACTIVITY

As of December 31, 2024, the total unrecognized compensation

expense related to unvested PSUs was approximately $ 7,276,000

which is expected to be recognized over a weighted-average period of 0.25

years, based on estimated vesting schedules.

The stock-based compensation for PSUs was $ 14,553,000

and $ 13,753,000

during the years ended December 31, 2024 and 2023, respectively.

During 2024 and 2023, the Company recognized no tax benefit from the

vesting of PSUs during these periods.

Restricted Stock

RSU awards are granted subject to certain vesting

requirements and other restrictions, including 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.

Grants During the Year Ended December 31, 2024

During the year ended December 31, 2024, the Company’s

non-employee members of the Board of Directors were granted 43,961 time-based vesting RSUs with a fair market value of $ 790,000 , which vest

in equal quarterly installments over one year.

The Company also granted 283,870 time-based vesting RSUs with a fair market value of $ 7,286,000

to certain employees and consultants.

Vesting terms for RSUs granted to employees and consultants during the year ended December 31,

2024 generally vest in equal installments over three or four years and vest in equal quarterly installments over one year.

Grants During the Year Ended December 31, 2023

During the year ended December 31, 2023, the Company’s

non-employee members of the Board of Directors were granted 41,301 time-based vesting RSUs with a fair market value of $ 800,000 , which vest in equal quarterly

installments over one year.

The Company also granted 86,873 time-based vesting RSUs with a fair market value of $ 697,000 to certain employees,

which vest in full on the third anniversary of the grant date.

A summary of the Company’s RSU activity and

related information for the year ended December 31, 2024 is as follows:

SCHEDULE OF RESTRICTED STOCK UNITS ACTIVITY

Number of RSUs

Weighted Average

Grant Date Fair Value

RSUs unvested – January 1, 2024

RSUs cancelled/forfeited

RSUs unvested at

December 31, 2023

During the Year Ended December 31, 2022

the year ended December 31, 2022, the Company’s board of directors were granted 65,615 RSUs with a fair market value of $ 500,000 ,

which vest in equal quarterly installments over one year.

summary of the Company’s RSU activity and related information for the year ended December 31, 2022 is as follows:

RSUs unvested at December 31, 2024

A summary of the Company’s RSU activity and

related information for the year ended December 31, 2023 is as follows:

Number of RSUs

Weighted Average

Grant Date Fair Value

RSUs unvested – January 1, 2023

RSUs cancelled/forfeited

RSUs unvested at

December 31, 2022

of December 31, 2023, the total unrecognized compensation expense related to unvested RSUs was approximately $ 1,234,000 which is expected

to be recognized over a weighted-average period of 0.68 years, based on estimated vesting schedules.

The stock-based compensation for

RSUs was $ 1,161,000 and $ 1,788,000 during the years ended December 31, 2023 and 2022, respectively.

Company recorded total stock-based compensation (including issuance of common stock for services and accrual for 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

Ended December 31,

Employees – selling, general

and administrative

RSUs unvested at December 31, 2023

As of December 31, 2024, the total unrecognized compensation

expense related to unvested RSUs was approximately $ 7,703,000 which is expected to be recognized over a weighted-average period of 1.85

years, based on estimated vesting schedules.

The stock-based compensation for RSUs was $ 2,442,000 and $ 1,161,000 during the years ended

December 31, 2024 and 2023, respectively.

During 2024 and 2023, the Company recognized a tax benefit of $ 12,000 and $ 0 , respectively,

from the vesting of RSUs during the period.

The Company recorded total stock-based compensation

(including issuance of common stock for services and accrual for stock-based compensation) related to equity instruments granted to employees,

directors and consultants as follows:

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

For the Years Ended December 31,

Employees – selling, general and administrative

Employees – R&D

Directors – selling, general and administrative

Consultants –

selling, general and administrative

Company is subject to taxation in the United States, California, New Jersey, Tennessee and various other states.

Consultants – selling, general and administrative

The Company is subject to taxation in the U.S., New

Jersey, Tennessee, and various other states.

The Company’s income tax provision consists of the following for the years ended December

31, 2023 and 2022 are summarized below:

31, 2024 and 2023:

OF PROVISION FOR INCOME TAXES

2 unchanged sentences

Income tax provision

reconciliation of income taxes computed by applying the statutory U.S.

income tax rate to the Company’s loss before income tax provision

to the income tax provision is as follows:

A reconciliation of income taxes computed by applying

the statutory U.S.

income tax rate to the Company’s loss before income tax provision to the income tax provision is as follows:

OF INCOME TAX PROVISION

8 unchanged sentences

Other true-ups

Change in valuation

Effective income

tax assets and liabilities reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities

for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred

tax assets are as follows:

Change in valuation allowance

Effective income tax rate

Deferred tax assets and liabilities reflect the net

tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the

amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets are as follows:

OF DEFERRED TAX ASSETS AND LIABILITIES

1 unchanged sentence

Depreciation and amortization

Research and development

Research and development credits

Deferred stock compensation

Basis difference in

( 1,684,000 )

Basis difference in

Melt investments

Federal benefit of state

ASC740-10 reserves

Basis difference in Eton

Basis difference in Melt investments

Federal benefit of state ASC740-10 reserves

Limitation Under 163(j)

Section 174 capitalized

Section 174 capitalized expenses

ASC 842 lease liability

842 ROU asset

ASC 842 ROU asset

( 2,121,000 )

( 1,582,000 )

deferred tax assets, net

Total deferred tax assets, net

Valuation allowance

1 unchanged sentence

( 15,631,000 )

Net deferred tax

of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.

Accordingly, the net

deferred tax assets have been fully offset by a valuation allowance.

The valuation allowance decreased by approximately $ 1,391,000 and

$ 1,182,000 during 2023 and 2022, respectively.

of December 31, 2023, the Company had federal and state net operating loss carryforwards of approximately $ 8,596,000 and $ 26,134,000 ,

respectively, which will begin to expire in 2036 , unless previously utilized, and will begin to expire for state purposes in 2028.

addition, the Company has federal net operating loss carryforward of $4,936,000 generated after 2017 that can be carried over indefinitely

and may be used to offset up to 80% of federal taxable income .

of December 31, 2023 the Company had federal and state research and development credit carryforwards of approximately $ 177,000 and $ 54,000 ,

respectively, which will begin to expire in 2031 , unless previously utilized.

For state purposes, the state research and development

credit carryforwards can be carried over indefinitely.

of the net operating losses and research and development carryforwards may be subject to a substantial annual limitation due to ownership

change limitations that might have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code

of 1986, as amended (the “Code”), as well as similar state and foreign provisions.

These ownership changes may limit the

amount of NOL and R&D credit carryforward that can be utilized annually to offset future taxable income and tax.

Respectively.

general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions

over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by

certain stockholders or public groups.

Since the Company’s formation, the Company has raised capital through the issuance of capital

stock on several occasions which, combined with the purchasing stockholders’ subsequent disposition of those shares, may have resulted

in such an ownership change, or could result in an ownership change in the future upon subsequent disposition.

of December 31, 2023, the Company determined that it had net operating loss carryforwards of approximately $ 12,500,000

Net deferred tax assets

Realization of deferred tax assets is dependent

upon future earnings, if any, the timing and amount of which are uncertain.

Accordingly, the net deferred tax assets have been fully

offset by a valuation allowance.

The valuation allowance increased by approximately $ 1,979,000

during 2024 and decreased by $ 1,391,000

As of December 31, 2024, the Company had federal

and state net operating loss carryforwards of approximately $ 27,669,000 ,

restricted under IRC Section 382 of the Internal Revenue Code related to a 2011 change in ownership.

Section 382 of the Internal

Revenue Code limits the utilization of net operating losses when ownership changes, as defined by that section, occur.

Section 382 limitation, and the length of time available to fully utilize the net operating loss carryforwards, the Company removed

these NOLs from deferred tax assets with a corresponding reduction of the valuation allowance.

Similarly, under IRC Section 383

which limits the utilization of credits when ownership changes occur, the Company removed approximately $ 300,000

of federal credit and $ 300,000

of state credits from deferred tax assets with a corresponding reduction of the valuation allowance.

of December 31, 2023, the Company had approximately $ 2,853,000

of unrecognized tax benefits of which $ 2,853,000

if fully recognized, would decrease its effective

There were interest or penalties accrued of $ 40,000

relating to unrecognized tax benefits as of December

reconciliation of the change in the unrecognized tax benefits balance from January 1, 2023 to December 31, 2023 is as follows:

which will begin to expire in 2036 for federal purposes,

unless previously utilized, and will begin to expire for state purposes in 2028.

In addition, the

Company has federal net operating loss carryforward of $2,875,000 generated after 2017 that can be carried over indefinitely and may

be used to offset up to 80% of federal taxable income .

As of December 31, 2024, the Company had federal

and state research and development credit carryforwards of approximately $ 577,000 and $ 99,000 , respectively, which will begin to expire

in 2031 , unless previously utilized.

For state purposes, the state research and development credit carryforwards can be carried over

indefinitely.

Utilization of the net operating losses and

research and development carryforwards may be subject to a substantial annual limitation due to ownership change limitations that

might have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended

(the “Code”), as well as similar state and foreign provisions.

These ownership changes may limit the amount of NOL and

R&D credit carryforward that can be utilized annually to offset future taxable income and tax liabilities.

In general, an “ownership

change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period

resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or

public groups.

Since the Company’s formation, the Company has raised capital through the issuance of capital stock on several

occasions which, combined with the purchasing stockholders’ subsequent disposition of those shares, may have resulted in such

an ownership change, or could result in an ownership change in the future upon subsequent disposition.

As of December 31, 2024 and 2023, the Company

had approximately $ 2,858,000 and $ 2,822,000 ,

respectively of unrecognized tax benefits which, if fully recognized, would decrease its effective tax rate.

Interest or penalties

and $ 40,000 were accrued relating to unrecognized tax benefits as of December 31, 2024 and 2023, respectively.

A reconciliation of the change in the unrecognized

tax benefits balance for the years ended December 31, 2024 and 2023 is as follows:

OF UNRECOGNIZED TAX BENEFITS

Federal & State Tax

Balance at January 1, 2024

Additions for tax positions

related to current year

Additions for tax positions

related to prior years

Additions for tax positions related to current year

Additions/(reductions) for tax positions related to prior years

Balance at December 31, 2024

EMPLOYEE SAVINGS PLAN

Company has established an employee savings plan pursuant to Section 401(k) of the Internal Revenue Code, effective January 1, 2014.

The plan allows participating employees to deposit into tax deferred investment accounts up to 100 % of their salary, subject to annual

The Company makes certain matching contributions to the plan in amounts up to 4 % of the participants’ annual cash compensation,

subject to annual limits.

The Company contributed approximately $ 594,000 and $ 397,000 to the plan during the years ended December 31,

2023 and 2022, respectively.

COMMITMENTS AND CONTINGENCIES

the ordinary course of business, the Company is involved in various legal proceedings, government investigations and other matters that

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

Federal & State Tax

Balance at January 1, 2023

Additions for tax positions related to current year

Additions/(reductions) for tax positions related to prior years

Balance at December 31, 2023

The Company has established an employee savings plan

pursuant to Section 401(k) of the Internal Revenue Code, effective January 1, 2014.

The plan allows participating employees to deposit

into tax deferred investment accounts up to 100 % of their salary, subject to annual limits.

The Company makes certain matching contributions

to the plan in amounts up to 4 % of the participants’ annual cash compensation, subject to annual limits.

The Company contributed

approximately $ 953,000 and $ 594,000 to the plan during the years ended December 31, 2024 and 2023, respectively.

AND CONTINGENCIES

General and Other

In the ordinary course of business, the Company is

involved in various legal proceedings, government investigations and other matters that are complex in nature and have outcomes that

are difficult to predict.

What changed 10-K

Item 9A. Controls and Procedures