What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-11 compared with 2025-05-08 · 245 added, 254 removed, 40 unchanged (93% of the section changed)

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations

following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited

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10-Q (this “Quarterly Report”).

Our condensed consolidated financial statements have been prepared and, unless otherwise stated,

the information derived therefrom as presented in this discussion and analysis is presented, in accordance with accounting principles

Our condensed consolidated financial statements have been prepared and, unless otherwise

stated, the information derived therefrom as presented in this discussion and analysis is presented, in accordance with accounting principles

generally accepted in the United States of America (“GAAP”).

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in our common stock.

We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our

other reports filed with the U.S.

Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K

for the fiscal year ended December 31, 2024 and subsequent reports, which discuss our business in greater detail.

As used in this discussion

and analysis, unless the context indicates otherwise, the terms the “Company,” “Harrow,” “we,” “us”

and “our” refer to Harrow, Inc.

and its consolidated subsidiaries, including ImprimisRx, LLC, ImprimisRx NJ, LLC dba ImprimisRx,

Imprimis NJOF, LLC, Harrow IP, LLC and Harrow Eye, LLC.

In this discussion and analysis, we refer to our consolidated subsidiaries ImprimisRx,

LLC, ImprimisRx NJ, LLC and Imprimis NJOF, LLC collectively as “ImprimisRx.”

addition to historical information, the following discussion contains forward-looking statements regarding future events and our

future performance.

In some cases, you can identify forward-looking statements by terminology such as “will,”

“may,” “should,” “expects,” “plans,” “anticipates,”

“believes,” “estimates,” “predicts,” “forecasts,” “potential” or

“continue” or the negative of these terms or other comparable terminology.

All statements made in this Quarterly Report

other than statements of historical fact are forward-looking statements.

These forward-looking statements involve risks and

uncertainties and reflect only our current views, expectations and assumptions with respect to future events and our future

If risks or uncertainties materialize or assumptions prove incorrect, actual results or events could differ materially

from those expressed or implied by such forward-looking statements.

Risks that could cause actual results to differ from those

expressed or implied by the forward-looking statements we make include, among others, risks related to:

liquidity or results of

our ability to successfully implement our business plan, develop and commercialize our products, product candidates and

proprietary formulations in a timely manner or at all, identify and acquire additional products, manage our pharmacy operations,

refinance and otherwise service our debt, obtain financing necessary to operate our business, recruit and retain qualified

personnel, manage any growth we may experience and successfully realize the benefits of our previous acquisitions and any other

acquisitions and collaborative arrangements we may pursue;

the ongoing communications with the U.S.

Food and Drug Administration

relating to compliance and quality plans at our outsourcing facility in New Jersey;

competition from pharmaceutical companies,

outsourcing facilities and pharmacies;

We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in

our other reports filed with the U.S.

Securities and Exchange Commission (the “SEC”), including our Annual Report on Form

10-K for the fiscal year ended December 31, 2024 and subsequent reports, which discuss our business in greater detail.

As used in this

discussion and analysis, unless the context indicates otherwise, the terms the “Company,” “Harrow,” “we,”

“us” and “our” refer to Harrow, Inc.

and its consolidated subsidiaries, including ImprimisRx, LLC, ImprimisRx

NJ, LLC dba ImprimisRx, Imprimis NJOF, LLC, Harrow IP, LLC and Harrow Eye, LLC.

In this discussion and analysis, we refer to our consolidated

subsidiaries ImprimisRx, LLC, ImprimisRx NJ, LLC and Imprimis NJOF, LLC collectively as “ImprimisRx.”

addition to historical information, the following discussion contains forward-looking statements regarding future events and our future

In some cases, you can identify forward-looking statements by terminology such as “will,” “may,”

“should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,”

“predicts,” “forecasts,” “potential” or “continue” or the negative of these terms or

other comparable terminology.

All statements made in this Quarterly Report other than statements of historical fact are forward-looking

These forward-looking statements involve risks and uncertainties and reflect only our current views, expectations and assumptions

with respect to future events and our future performance.

If risks or uncertainties materialize or assumptions prove incorrect, actual

results or events could differ materially from those expressed or implied by such forward-looking statements.

Risks that could cause

actual results to differ from those expressed or implied by the forward-looking statements we make include, among others, risks related

liquidity or results of operations;

our ability to successfully implement our business plan, develop and commercialize our products,

product candidates and proprietary formulations in a timely manner or at all, identify and acquire additional products, manage our pharmacy

operations, refinance and otherwise service our debt, obtain financing necessary to operate our business, recruit and retain qualified

personnel, manage any growth we may experience and successfully realize the benefits of our previous acquisitions and any other acquisitions

and collaborative arrangements we may pursue;

any enforcement action by the U.S.

Food and Drug Administration relating to compliance

and quality plans at our outsourcing facility in New Jersey;

competition from pharmaceutical companies, outsourcing facilities and pharmacies;

general economic and business conditions, including inflation and supply chain challenges;

regulatory and legal risks and uncertainties related to our pharmacy operations and the pharmacy and pharmaceutical business in

physician interest in and market acceptance of our current and any future formulations and compounding pharmacies

and the other risks and uncertainties described under the heading “Risk Factors” in Part II, Item 1A of this

Quarterly Report and in our other filings with the SEC.

You should not place undue reliance on forward-looking statements.

Forward-looking statements speak only as of the date they are made and, except as required by law, we undertake no obligation to

revise or publicly update any forward-looking statement for any reason.

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

pharmaceutical products for the U.S.

eyecare professionals preserve the gift of sight by making our

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

Americans each year.

We own commercial rights to one of the largest portfolios of branded ophthalmic pharmaceutical products in

North America, all of which are marketed under the Harrow name.

We also own and operate ImprimisRx, one of the nation’s

leading ophthalmology-focused pharmaceutical-compounding businesses.

Factors Affecting Our Performance

We believe the primary factors

affecting our performance are our ability to increase revenues of our branded pharmaceutical products, proprietary compounded formulations

and certain non-proprietary products, grow and gain operating efficiencies in our operations, avoid or mitigate any potential regulatory-related

restrictions, optimize pricing and obtain reimbursement options for our drug products, and continue to pursue development and commercialization

opportunities for certain of our ophthalmology and other assets that we have not yet made commercially available.

We believe we have built

a tangible and intangible infrastructure that will allow us to scale revenues efficiently in the near and long-term.

All of these activities

may require significant costs and other resources, which we may not have or be able to obtain from operations or other sources.

See “Liquidity

and Capital Resources” below.

Recent Developments

regulatory and legal risks and uncertainties

related to our pharmacy operations and the pharmacy and pharmaceutical business in general;

physician interest in and market acceptance

of our current and any future formulations and compounding pharmacies generally;

and the other risks and uncertainties described under

the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report and in our other filings with the SEC.

not place undue reliance on forward-looking statements.

Forward-looking statements speak only as of the date they are made and, except

as required by law, we undertake no obligation to revise or publicly update any forward-looking statement for any reason.

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

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

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

Harrow was founded with a

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

Affecting Our Performance

believe the primary factors affecting our performance are our ability to increase revenues of our branded pharmaceutical products, proprietary

compounded formulations and certain non-proprietary products, grow and gain operating efficiencies in our operations, avoid or mitigate

any potential regulatory-related restrictions, optimize pricing and obtain reimbursement options for our drug products, and continue

to pursue development and commercialization opportunities for certain of our ophthalmology and other assets that we have not yet made

commercially available.

We believe we have built a tangible and intangible infrastructure that will allow us to scale revenues efficiently

in the near and long-term.

All of these activities may require significant costs and other resources, which we may not have or be able

to obtain from operations or other sources.

See “Liquidity and Capital Resources” below.

following describes certain developments in 2025 to date that are important to understand our financial condition and results of operations.

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about each of these developments.

and OPUVIZ TM – Commercialization Agreement

July 2025, we entered into a development and commercialization agreement (the “Samsung Agreement”) with Samsung Bioepis Co.,

Under the terms of the Samsung Agreement, following completion of the transition of commercial rights from

back to Samsung, Samsung will develop, manufacture, and supply BYOOVIZ (ranibizumab-nuna) and OPUVIZ (aflibercept-yszy)

(individually, a “Product” and together, the “Products”) for Harrow to commercialize in the U.S.

In consideration of such Rights, we will make a one-time upfront payment to Samsung, and Samsung will be eligible

to receive additional one-time payments based on the achievement of net sales-based milestones of the Products.

In addition to other

mutually agreed terms, we shall pay to Samsung a share of net sales from the Products generated in the U.S.

of Commercial Rights to BYQLOVI TM

June 2025, we announced a licensing agreement whereby we acquired the exclusive U.S.

commercial rights to BYQLOVI (clobetasol propionate

ophthalmic suspension) 0.05% from Taiwan-based Formosa Pharmaceuticals.

BYQLOVI was recently approved by the FDA for the treatment of

post-operative inflammation and pain following ocular surgery and is the first new ophthalmic steroid in its class in over 15 years.

Harrow expects BYQLOVI to be available in the fourth quarter of 2025.

VEVYE® Access for All

In March 2025, we announced

a patient access program called VEVYE Access for All.

The program is designed to increase patient access to VEVYE at an out-of-pocket

cost of $59 or below and, in many cases, reduce the need for prior authorizations, step edits, and other treatment obstacles facing dry

eye patients and their prescribers.

Project Beagle

During the first quarter of

2025 we initiated a 360-degree review of opportunities to offer ImprimisRx customers a Harrow-owned FDA-approved product alternative to

a compounded formulation.

March 2025, we announced a patient access program called VEVYE Access for All.

The program is designed to increase patient access to

VEVYE at an out-of-pocket cost of $59 or below and, in many cases, reduce the need for prior authorizations, step edits, and other treatment

obstacles facing dry eye patients and their prescribers.

the first quarter of 2025 we initiated a 360-degree review of opportunities to offer ImprimisRx customers a Harrow-owned FDA-approved

product alternative to a compounded formulation.

We call this initiative Project Beagle.

In that vein, we began implementing a continuity of care program to

transition approximately 25,000 ImprimisRx patients from our Klarity-C (0.1% cyclosporine) compounded formulation to VEVYE (0.1% cyclosporine),

and we expect to discontinue compounding Klarity-C by June 30, 2025.

We are also discontinuing another related compounded formulation

called Klarity PF.

Klarity PF is primarily purchased by a concentrated group of customers who we anticipate will accept our FRESHKOTE

In that vein, we began implementing a continuity

of care program to transition approximately 25,000 ImprimisRx patients from our Klarity-C (0.1% cyclosporine) compounded formulation

to VEVYE (0.1% cyclosporine), and we discontinued compounding Klarity-C on June 30, 2025.

We also discontinued another related compounded

formulation called Klarity PF.

Klarity PF was primarily purchased by a concentrated group of customers who have accepted our FRESHKOTE

product as an alternative.

As we work through Project Beagle, we will continue to review opportunities to reduce the size of our compounded

formulary, improve and simplify our compounding capabilities, and transition other ImprimisRx customers from compounded formulations to

Harrow’s FDA-approved products.

Results of Operations

The following period-to-period

comparisons of our financial results for the three months ended March 31, 2025 and 2024 are not necessarily indicative of results for

any future period.

Our revenues include amounts

recorded from sales of proprietary compounded formulations, sales of branded products to wholesalers through a third-party logistics facility,

commissions from third parties and revenues received from royalty payments owed to us pursuant to out-license arrangements.

The following presents our

revenues for the three months ended March 31, 2025 and 2024:

For the Three Months Ended

We continue to review opportunities to reduce the size of our compounded formulary, improve and simplify our

compounding capabilities, and transition other ImprimisRx customers from compounded formulations to Harrow’s FDA-approved products.

of Operations

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

indicative of results for any future period.

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

a third-party logistics facility, commissions from third parties and revenues received from royalty payments owed to us pursuant to out-license

arrangements.

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

Three Months Ended

Six Months Ended

Other branded products

(14,384,000 )

Other revenues

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Total revenues, net

increase in revenues between periods was related to an increase in sales of our branded ophthalmology products.

During the three months

ended March 31, 2025, revenues from branded products totaled $27,780,000, compared to $13,869,000 during the same period in the prior

Cost of Sales, Gross Profit and Gross Margin

Our cost of sales includes

direct and indirect costs to manufacture formulations and sell products, including active pharmaceutical ingredients, personnel costs,

packaging, storage, royalties, shipping and handling costs, manufacturing equipment and tenant improvements depreciation, the write-off

of obsolete inventory, amortization of acquired product NDAs, and other related expenses.

Three Months Ended March 31,

$ 111,573,000

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

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

of Sales, Gross Profit and Gross Margin

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

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

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

Three Months Ended June 30,

Six Months Ended June 30,

Cost of Sales

The increase in cost of

sales was primarily attributable to an increase in units sold during the three months ended March 31, 2025 compared to the prior

year period and an increase in our fixed expenses.

The decrease in Branded gross margin between the three months ended March 31,

2025 and 2024 was primarily attributable to an increase of our fixed expenses, in particular, acquired product NDA amortizations

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

Three Months Ended March 31,

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

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

The decrease in Branded gross margin between the three

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

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

quarter of 2024.

Three Months Ended June 30,

Six Months Ended June 30,

Cost of Sales

$ (1,763,000 )

The increase in ImprimisRx

costs of sales between the three months ended March 31, 2025 and 2024 was primarily attributable to an increase in units sold during the

three months ended March 31, 2025 compared to the same period in 2024.

However, due to product mix during the three months ended March

31, 2025 that included more sales of lower gross margin products and sales discounts, ImprimisRx gross

margin decreased during the 2025 period compared to the prior year period.

Selling, General and Administrative Expenses

Our selling, general and administrative

expenses include personnel costs, including wages and stock-based compensation, corporate facility expenses, and investor relations, consulting,

insurance, filing, legal and accounting fees and expenses as well as costs associated with our marketing activities and sales of our proprietary

compounded formulations and other non-proprietary pharmacy products and formulations.

The following presents our

selling, general and administrative expenses for the three months ended March 31, 2025 and 2024:

For the Three Months Ended

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

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

However, due to product

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

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

General and Administrative Expenses

selling, general and administrative (“SG&A”) expenses include personnel costs, including wages and stock-based compensation,

corporate facility expenses, and investor relations, consulting, insurance, filing, legal and accounting fees and expenses as well as

costs associated with our marketing activities and sales of our proprietary compounded formulations and other non-proprietary pharmacy

products and formulations.

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

Three Months Ended

Six Months Ended

Selling, general and administrative

The increase in selling, general

and administrative expenses between periods was primarily attributable to an increase in certain seasonal expenses, such

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

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

and other departments to support current and expected growth, which when combined contributed to a $4,375,000 increase in SG&A expenses

between the periods.

These increases were offset by a $2,957,000 decrease in stock-based compensation expense between periods.

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

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

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

and other departments to support current and expected growth, which when combined contributed to a $11,700,000 increase in SG&A between

Research and Development Expenses

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

between the periods.

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

and Development Expenses

research and development (“R&D”) expenses primarily include personnel costs, including wages and stock-based compensation,

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

following presents our research and development expenses for the three months ended March 31, 2025 and 2024:

For the Three Months Ended

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

Three Months Ended

Six Months Ended

Research and development

The increase in R&D expenses

between periods was primarily attributable to increased activity related to our expanded branded product portfolio, product acquisitions,

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

Interest Expense, Net

Interest expense, net was

$6,548,000 for the three months ended March 31, 2025, compared to $5,415,000 for the same period in 2024.

The increase during the period

ended March 31, 2025 compared to the same period in 2024 was primarily the result of an increase in the outstanding principal amount

of our debt obligations.

Investment Loss from Eton

During the three months

ended March 31, 2024, we recorded a loss of $(1,248,000), related to the change in fair market value of Eton Pharmaceuticals, Inc’s common stock.

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

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

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

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

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

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

Loss from Eton

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

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

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

and commissions of approximately $436,000.

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

Liquidity and Capital Resources

Our cash on hand at March

31, 2025 was $66,726,000, compared to $47,247,000 at December 31, 2024.

As of the date of this Quarterly

Report, we believe that cash and cash equivalents of $66,726,000 at March 31, 2025 will be sufficient to sustain our planned level of

operations and capital expenditures for at least the next 12 months.

Management expects to refinance the Oaktree Loan (as defined in Note

10 of our unaudited condensed consolidated financial statements included in this Quarterly Report) during 2025 and the 2026 Notes (as

defined in Note 10 of our unaudited condensed consolidated financial statements included in this Quarterly Report) at the same time or

soon thereafter.

Management believes it is probable that we will be able to refinance the Oaktree Loan and 2026 Notes;

however, there

can be no assurance that we will obtain the refinancing on terms acceptable to us, or at all - see the subheading Sources of Capital below

for additional discussion regarding the Oaktree Loan, 2026 Notes and refinancing plans.

In addition, we may consider the sale of certain

assets including, but not limited to, part of, or all of, our investment in Melt Pharmaceuticals, Inc.

(“Melt”) and any of

our consolidated subsidiaries.

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

large expenditures or we may experience growth more rapidly or on a larger scale than we expect, any of which could result in the depletion

of capital resources more rapidly than anticipated and could require us to seek additional financing to support our operations.

We expect to use our current

cash position and funds generated from our operations and any financing to pursue our business plan, which includes developing and commercializing

drug candidates, compounded formulations and technologies, integrating and developing our operations, pursuing potential future strategic

transactions as opportunities arise, including potential acquisitions of additional drug products, drug candidates, and/or assets or technologies,

pharmacies, outsourcing facilities, drug company and manufacturers, and otherwise fund our operations.

We may also use our resources to

conduct clinical trials or other studies in support of our formulations or any drug candidate for which we pursue FDA approval, to pursue

additional development programs or to explore other development opportunities.

Net Cash Flow

The following provides detailed information about

our net cash flows for the three months ended March 31, 2025 and 2024:

For the Three Months Ended

and Capital Resources

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

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

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

Management expects to refinance the

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

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

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

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

Oaktree Loan and 2026 Notes;

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

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

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

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

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

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

financing to support our operations.

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

includes developing and commercializing drug candidates, compounded formulations and technologies, integrating and developing our operations,

pursuing potential future strategic transactions as opportunities arise, including potential acquisitions of additional drug products,

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

our operations.

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

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

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

For the Six Months Ended

Net cash provided by (used in):

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Financing activities

(12,644,000 )

Net change in cash and cash equivalents

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Cash and cash equivalents at end of the period

Operating Activities

Net cash provided by (used

in) operating activities during the three months ended March 31, 2025 was $19,668,000 compared to $(4,628,000) during the same period

in the prior year.

The increase in net cash provided by operating activities between the periods was mainly attributed to a decrease of

$39,196,000 in accounts receivable due to collections during the three months ended March 31, 2025 compared to a decrease of $8,396,000

during the same period in 2024.

Investing Activities

Net cash used in investing

activities during the three months ended March 31, 2025 was $(212,000) compared to $(110,000) during the same period in the prior year.

Cash used in investing activities in 2025 and 2024 was primarily related to equipment and software purchases.

Financing Activities

Net cash provided by (used

in) financing activities during the three months ended March 31, 2025 and 2024 was $23,000 and $(809,000), respectively.

Cash provided

by financing activities during the three months ended March 31, 2025 was related to proceeds received from the exercise of stock options.

Cash used in financing activities during the three months ended March 31, 2024 was primarily related to payment of payroll taxes upon

vesting of RSUs in exchange for shares withheld from employees.

Sources of Capital

During the three months ended

March 31, 2025, our principal sources of cash came from proceeds from our operating activities.

We expect future cash needs to be provided

by operating activities, but our forecasts may not be accurate, and our plans may change.

We may also sell some of our assets, or all

of our ownership interests in Melt or our other subsidiaries.

In January 2026 the Oaktree

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

As of March 31, 2025, there was $107,500,000 principal amount outstanding under

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

The maturity of these debt obligations could raise

substantial doubt about our ability to continue as a going concern.

We are currently in discussions with our current senior secured lender,

Oaktree, and other potential lenders about refinancing the Oaktree Loan and the 2026 Notes.

Management expects to engage in more definitive

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

Management believes it is probable

that we will be able to refinance the Oaktree Loan and the 2026 Notes based on our collateral strength and expected cash flows from operations;

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

the same period in the prior year.

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

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

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

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

the same period in the prior year.

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

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

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

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

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

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

We expect future

cash needs to be provided by operating activities, but our forecasts may not be accurate, and our plans may change.

We may also sell

some of our assets.

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

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

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

The maturity of these

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

We are currently in discussions with

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

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

cash flows from operations;

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

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

If we are unable to successfully

refinance the Oaktree Loan and the 2026 Notes, we do not expect to have the ability to repay the Oaktree Loan and the 2026 Notes in full.

We may acquire new products,

product candidates and/or businesses and, as a result, we may need significant additional capital to support our business plan and fund

our proposed business operations.

We may also seek additional financing from a variety of sources, including other equity or debt financings, funding from corporate partnerships

or licensing arrangements, sales of assets or any other financing transaction.

If we issue equity or convertible debt securities to raise

additional funds, our existing stockholders may experience substantial dilution, and the newly issued equity or debt securities may have

more favorable terms or rights, preferences and privileges senior to those of our existing stockholders.

If we raise additional funds

through collaboration or licensing arrangements or sales of assets, we may be required to relinquish potentially valuable rights to our

product candidates or proprietary technologies or formulations, or grant licenses on terms that are not favorable to us.

If we raise funds

by incurring additional debt, we may be required to pay significant interest expenses and our leverage relative to our earnings or to

our equity capitalization may increase.

Obtaining commercial loans, assuming they would be available, would increase our liabilities and

future cash commitments and may impose restrictions on our activities, such as the financial and operating covenants.

Further, we may

incur substantial costs in pursuing future capital and/or financing transactions, including investment banking fees, legal fees, accounting

fees, printing and distribution expenses and other costs.

We may also be required to recognize non-cash expenses in connection with certain

securities we may issue, such as convertible notes and warrants, which would adversely impact our financial results.

We may be unable to obtain

financing when necessary as a result of, among other things, our performance, general economic conditions, conditions in the pharmaceuticals

and pharmacy industries, or our operating history.

In addition, the fact that we have a limited history of profitability could further

impact the availability or cost to us of future financings.

As a result, sufficient funds may not be available when needed from any source

or, if available, such funds may not be available on terms that are acceptable to us.

If we are unable to raise funds to satisfy our capital

needs when needed, then we may need to forego pursuit of potentially valuable development or acquisition opportunities, we may not be

able to continue to operate our business pursuant to our business plan, which would require us to modify our operations to reduce spending

to a sustainable level by, among other things, delaying, scaling back or eliminating some or all of our ongoing or planned investments

in corporate infrastructure, business development, sales and marketing and other activities, or we may be forced to discontinue our operations

Recently Issued and Adopted Accounting Pronouncements

See Note 2 to our unaudited

condensed consolidated financial statements included in this Quarterly Report.

If we are unable to successfully refinance the Oaktree Loan

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

2026 Notes in full.

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

our business plan and fund our proposed business operations.

We may also seek additional financing from a variety of sources, including

other equity or debt financings, funding from corporate partnerships or licensing arrangements, sales of assets or any other financing

If we issue equity or convertible debt securities to raise additional funds, our existing stockholders may experience substantial

dilution, and the newly issued equity or debt securities may have more favorable terms or rights, preferences and privileges senior to

those of our existing stockholders.

If we raise additional funds through collaboration or licensing arrangements or sales of assets,

we may be required to relinquish potentially valuable rights to our product candidates or proprietary technologies or formulations, or

grant licenses on terms that are not favorable to us.

If we raise funds by incurring additional debt, we may be required to pay significant

interest expenses and our leverage relative to our earnings or to our equity capitalization may increase.

Obtaining commercial loans,

assuming they would be available, would increase our liabilities and future cash commitments and may impose restrictions on our activities,

such as the financial and operating covenants.

Further, we may incur substantial costs in pursuing future capital and/or financing transactions,

including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs.

We may also be required

to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which would

adversely impact our financial results.

may be unable to obtain financing when necessary as a result of, among other things, our performance, general economic conditions, conditions

in the pharmaceuticals and pharmacy industries, or our operating history.

In addition, the fact that we have a limited history of profitability

could further impact the availability or cost to us of future financings.

As a result, sufficient funds may not be available when needed

from any source or, if available, such funds may not be available on terms that are acceptable to us.

If we are unable to raise funds

to satisfy our capital needs when needed, then we may need to forego pursuit of potentially valuable development or acquisition opportunities,

we may not be able to continue to operate our business pursuant to our business plan, which would require us to modify our operations

to reduce spending to a sustainable level by, among other things, delaying, scaling back or eliminating some or all of our ongoing or

planned investments in corporate infrastructure, business development, sales and marketing and other activities, or we may be forced

to discontinue our operations entirely.

Issued and Adopted Accounting Pronouncements

Note 2 to our unaudited condensed consolidated financial statements included in this Quarterly Report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis