# HARROW, INC. (HROW)

Informational only - not investment advice.

CIK: 0001360214
SIC: 2834 Pharmaceutical Preparations
SIC breadcrumb: [Manufacturing](/division/D/) > [Chemicals And Allied Products](/major-group/28/) > [SIC 2834 Pharmaceutical Preparations](/industry/2834/)
Latest 10-K filed: 2026-03-02
SEC page: https://www.sec.gov/edgar/browse/?CIK=1360214
Filing source: https://www.sec.gov/Archives/edgar/data/1360214/000149315226008562/form10-k.htm

## Selected Fundamentals
| Metric | Value | Unit | FY | Filed |
| --- | ---: | --- | ---: | --- |
| Revenue | 272303000 | USD | 2025 | 2026-03-02 |
| Net income | -5139000 | USD | 2025 | 2026-03-02 |
| Assets | 399482000 | USD | 2025 | 2026-03-02 |

## Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-02. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001360214.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

| Metric | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue |  |  | 26,774,000 | 41,372,000 | 51,165,000 | 48,871,000 | 72,476,000 | 88,595,000 | 130,193,000 | 199,614,000 | 272,303,000 |
| Net income |  | -19,087,000 | -11,985,000 | 14,625,000 | 168,000 | -3,357,000 | -18,007,000 | -14,086,000 | -24,411,000 | -17,481,000 | -5,139,000 |
| Operating income |  | -15,882,000 | -12,163,000 | -5,217,000 | -4,795,000 | 385,000 | 1,614,000 | 1,919,000 | 431,000 | 8,822,000 | 30,515,000 |
| Gross profit |  | 10,111,000 | 13,269,000 | 24,851,000 | 34,416,000 | 34,408,000 | 54,262,000 | 63,212,000 | 90,553,000 | 150,369,000 | 204,369,000 |
| Diluted EPS |  |  | -0.60 | 0.61 | 0.01 | -0.13 |  | -0.51 | -0.75 | -0.49 | -0.14 |
| Operating cash flow |  | -11,215,000 | -8,803,000 | 687,000 | 950,000 | -1,100,000 | 5,082,000 | 1,705,000 | 3,840,000 | -22,202,000 | 43,864,000 |
| Capital expenditures |  | 6,887,000 | 772,000 | 1,768,000 | 1,468,000 | 862,000 | 1,786,000 | 2,597,000 | 1,460,000 | 1,595,000 | 887,000 |
| Assets |  | 27,247,000 | 23,917,000 | 49,451,000 | 59,085,000 | 57,474,000 | 98,329,000 | 157,378,000 | 312,164,000 | 388,971,000 | 399,482,000 |
| Liabilities |  | 20,815,000 | 21,302,000 | 24,700,000 | 31,667,000 | 30,646,000 | 87,398,000 | 130,138,000 | 241,753,000 | 319,674,000 | 347,391,000 |
| Stockholders' equity |  | 6,432,000 | 2,615,000 | 24,751,000 | 27,711,000 | 27,183,000 | 11,286,000 | 27,595,000 | 70,766,000 | 69,652,000 | 52,446,000 |
| Cash and cash equivalents | 2,685,000 | 8,853,000 | 4,019,000 |  | 4,749,000 | 4,101,000 | 42,167,000 | 96,270,000 | 74,085,000 | 47,247,000 | 72,927,000 |
| Free cash flow |  | -18,102,000 | -9,575,000 | -1,081,000 | -518,000 | -1,962,000 | 3,296,000 | -892,000 | 2,380,000 | -23,797,000 | 42,977,000 |

### Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

| Metric | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Net margin |  |  | -44.76% | 35.35% | 0.33% | -6.87% | -24.85% | -15.90% | -18.75% | -8.76% | -1.89% |
| Operating margin |  |  | -45.43% | -12.61% | -9.37% | 0.79% | 2.23% | 2.17% | 0.33% | 4.42% | 11.21% |
| Return on equity |  | -296.75% | -458.32% | 59.09% | 0.61% | -12.35% | -159.55% | -51.05% | -34.50% | -25.10% | -9.80% |
| Return on assets |  | -70.05% | -50.11% | 29.57% | 0.28% | -5.84% | -18.31% | -8.95% | -7.82% | -4.49% | -1.29% |
| Liabilities / equity |  | 3.24 | 8.15 | 1.00 | 1.14 | 1.13 | 7.74 | 4.72 | 3.42 | 4.59 | 6.62 |
| Current ratio |  | 1.49 | 1.53 | 2.76 | 2.93 | 3.79 | 6.24 | 6.35 | 2.83 | 2.08 | 2.20 |

## Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-11. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001360214.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

| Quarter | End date | Revenue | Net income | Diluted EPS | Method |
| --- | --- | ---: | ---: | ---: | --- |
| 2021-Q1 | 2021-03-31 |  |  | 0.01 | reported discrete quarter |
| 2021-Q3 | 2021-09-30 |  |  | -0.31 | reported discrete quarter |
| 2022-Q1 | 2022-03-31 |  |  | -0.09 | reported discrete quarter |
| 2023-Q2 | 2023-06-30 | 33,470,000 | -4,229,000 | -0.14 | reported discrete quarter |
| 2023-Q3 | 2023-09-30 | 34,265,000 | -4,391,000 | -0.13 | reported discrete quarter |
| 2023-Q4 | 2023-12-31 | 36,355,000 | -9,148,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2024-Q1 | 2024-03-31 | 34,587,000 | -13,565,000 | -0.38 | reported discrete quarter |
| 2024-Q2 | 2024-06-30 | 48,939,000 | -6,473,000 | -0.18 | reported discrete quarter |
| 2024-Q3 | 2024-09-30 | 49,257,000 | -4,220,000 | -0.12 | reported discrete quarter |
| 2024-Q4 | 2024-12-31 | 66,831,000 | 6,777,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2025-Q1 | 2025-03-31 | 47,831,000 | -17,780,000 | -0.50 | reported discrete quarter |
| 2025-Q2 | 2025-06-30 | 63,742,000 | 4,995,000 | 0.13 | reported discrete quarter |
| 2025-Q3 | 2025-09-30 | 71,638,000 | 1,020,000 | 0.03 | reported discrete quarter |
| 2025-Q4 | 2025-12-31 | 89,092,000 | 6,626,000 |  | derived Q4 = FY annual - nine-month YTD |
| 2026-Q1 | 2026-03-31 | 44,203,000 | -27,602,000 | -0.74 | reported discrete quarter |

## Macro Cross-References
- [CPIAUCSL](/indicator/CPIAUCSL/): Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
- [UNRATE](/indicator/UNRATE/): Unemployment Rate
- [FEDFUNDS](/indicator/FEDFUNDS/): Federal Funds Effective Rate
- [CES0500000003](/indicator/CES0500000003/): Average Hourly Earnings of All Employees, Total Private
- [DFEDTARU](/indicator/DFEDTARU/): Federal Funds Target Range - Upper Limit
- [DFEDTARL](/indicator/DFEDTARL/): Federal Funds Target Range - Lower Limit
- [DGS3MO](/indicator/DGS3MO/): Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
- [DGS2](/indicator/DGS2/): Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
- [DGS10](/indicator/DGS10/): Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
- [DGS30](/indicator/DGS30/): Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
- [T10Y2Y](/indicator/T10Y2Y/): 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
- [CPILFESL](/indicator/CPILFESL/): Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
- [CPIUFDSL](/indicator/CPIUFDSL/): Consumer Price Index for All Urban Consumers: Food
- [CPIENGSL](/indicator/CPIENGSL/): Consumer Price Index for All Urban Consumers: Energy
- [CUSR0000SAH1](/indicator/CUSR0000SAH1/): Consumer Price Index for All Urban Consumers: Shelter
- [PCEPI](/indicator/PCEPI/): Personal Consumption Expenditures: Chain-type Price Index
- [PCEPILFE](/indicator/PCEPILFE/): Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
- [PPIACO](/indicator/PPIACO/): Producer Price Index by Commodity: All Commodities
- [T10YIE](/indicator/T10YIE/): 10-Year Breakeven Inflation Rate
- [U6RATE](/indicator/U6RATE/): Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
- [PAYEMS](/indicator/PAYEMS/): All Employees, Total Nonfarm
- [CIVPART](/indicator/CIVPART/): Labor Force Participation Rate
- [EMRATIO](/indicator/EMRATIO/): Employment-Population Ratio
- [UNEMPLOY](/indicator/UNEMPLOY/): Unemployed
- [CE16OV](/indicator/CE16OV/): Employment Level
- [ICSA](/indicator/ICSA/): Initial Claims
- [JTSJOL](/indicator/JTSJOL/): Job Openings: Total Nonfarm
- [JTSQUR](/indicator/JTSQUR/): Quits: Total Nonfarm
- [GDPC1](/indicator/GDPC1/): Real Gross Domestic Product
- [A191RL1Q225SBEA](/indicator/A191RL1Q225SBEA/): Real Gross Domestic Product: Percent Change from Preceding Period
- [INDPRO](/indicator/INDPRO/): Industrial Production: Total Index
- [TCU](/indicator/TCU/): Capacity Utilization: Total Index
- [HOUST](/indicator/HOUST/): New Privately-Owned Housing Units Started: Total Units
- [PERMIT](/indicator/PERMIT/): New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
- [RSAFS](/indicator/RSAFS/): Advance Retail Sales: Retail Trade
- [PCE](/indicator/PCE/): Personal Consumption Expenditures
- [DSPIC96](/indicator/DSPIC96/): Real Disposable Personal Income
- [PSAVERT](/indicator/PSAVERT/): Personal Saving Rate
- [M2SL](/indicator/M2SL/): M2
- [BOPGSTB](/indicator/BOPGSTB/): U.S. International Trade in Goods and Services: Balance
- [MSPUS](/indicator/MSPUS/): Median Sales Price of Houses Sold for the United States
- [HSN1F](/indicator/HSN1F/): New One Family Houses Sold: United States
- [RHORUSQ156N](/indicator/RHORUSQ156N/): Homeownership Rate in the United States
- [TTLCONS](/indicator/TTLCONS/): Total Construction Spending: Total Construction in the United States
- [RRVRUSQ156N](/indicator/RRVRUSQ156N/): Rental Vacancy Rate in the United States
- [TOTALSL](/indicator/TOTALSL/): Total Consumer Credit Owned and Securitized
- [REVOLSL](/indicator/REVOLSL/): Revolving Consumer Credit Owned and Securitized
- [DRCCLACBS](/indicator/DRCCLACBS/): Delinquency Rate on Credit Card Loans, All Commercial Banks
- [GDP](/indicator/GDP/): Gross Domestic Product
- [GPDI](/indicator/GPDI/): Gross Private Domestic Investment
- [GCE](/indicator/GCE/): Government Consumption Expenditures and Gross Investment
- [PCEC](/indicator/PCEC/): Personal Consumption Expenditures
- [NETEXP](/indicator/NETEXP/): Net Exports of Goods and Services
- [GFDEBTN](/indicator/GFDEBTN/): Federal Debt: Total Public Debt
- [GFDEGDQ188S](/indicator/GFDEGDQ188S/): Federal Debt: Total Public Debt as Percent of Gross Domestic Product
- [FYFSD](/indicator/FYFSD/): Federal Surplus or Deficit
- [FGRECPT](/indicator/FGRECPT/): Federal Government Current Receipts
- [FGEXPND](/indicator/FGEXPND/): Federal Government: Current Expenditures
- [MANEMP](/indicator/MANEMP/): All Employees, Manufacturing
- [USCONS](/indicator/USCONS/): All Employees, Construction
- [USTRADE](/indicator/USTRADE/): All Employees, Retail Trade
- [USFIRE](/indicator/USFIRE/): All Employees, Financial Activities
- [USGOVT](/indicator/USGOVT/): All Employees, Government
- [AWHAETP](/indicator/AWHAETP/): Average Weekly Hours of All Employees, Total Private
- [DGORDER](/indicator/DGORDER/): Manufacturers' New Orders: Durable Goods
- [NEWORDER](/indicator/NEWORDER/): Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
- [BUSINV](/indicator/BUSINV/): Total Business Inventories
- [EXPGS](/indicator/EXPGS/): Exports of Goods and Services
- [IMPGS](/indicator/IMPGS/): Imports of Goods and Services
- [IR](/indicator/IR/): Import Price Index (End Use): All Commodities
- [PPIFIS](/indicator/PPIFIS/): Producer Price Index by Commodity: Final Demand

## Latest quarter (10-Q)

Latest 10-Q source: https://www.sec.gov/Archives/edgar/data/1360214/000149315226022254/form10-q.htm

Extracted from Part I Item 2 to the first post-MD&A boundary after HTML sanitization.
Confidence: high
Filing date: 2026-05-11
Report date: 2026-03-31

Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited
condensed consolidated financial statements and the related notes thereto contained in Part I, Item 1 of this Quarterly Report on Form
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 GAAP.

The
information contained in this Quarterly Report is not a complete description of our business or the risks associated with an investment
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 year ended December 31, 2025 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.”

In
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 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
to: 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; 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;
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 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. 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.

Overview

We
are a leading eyecare pharmaceutical company engaged in the discovery, development, and commercialization of innovative ophthalmic pharmaceutical
products for the U.S. market. We help 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.

19

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

The
following 2026 activity is important to understanding our financial condition and results of operations. See the notes to our unaudited
condensed consolidated financial statements included in this Quarterly Report for additional information about each of these developments.

8.625%
Senior Notes Due 2030

In
March 2026, we entered into the First Supplemental Indenture to the Indenture dated September 12, 2025 pursuant to which we issued
$50,000,000 aggregate principal amount of additional 8.625% Senior Notes due 2030 (the “New Notes”). The New Notes were
issued at 100.25% of par value and resulted in net proceeds to us of $48,526,000 after deducting underwriting discounts, commissions
and other unpaid offering expenses of $1,474,000. The New Notes, together with the 8.625% Senior Notes due 2030 issued in September
2025 (the “Existing Notes”) (together, the “2030 Notes”) are treated as a single series and have the same
terms as the Existing Notes. The issuance costs and premium relating to the New Notes were deferred and will be recognized to
interest expense using the effective-interest method over the remaining term of the debt.

Results
of Operations

The
following period-to-period comparisons of our financial results for the three months ended March 31, 2026 and 2025 are not necessarily
indicative of results for any future period.

Revenues

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. Revenues are recognized net of estimates for variable consideration, including government rebates, commercial rebates,
chargebacks, wholesaler and distribution service fees, returns, patient assistance programs and other revenue deductions, and these estimates
may be affected by delayed or incomplete claims data, channel inventory, product utilization, payor mix, labeler-code or product attribution,
government program requirements, contractual interpretation, and disputed or reconciled deductions. From time to time, we receive claims,
invoices or deductions from government agencies, wholesalers, distributors, customers, former product owners or other third parties that
we believe are unsupported, overstated, duplicative, attributable to another party or product, or otherwise inconsistent with applicable
requirements, and if our estimates differ from actual results or disputed amounts are resolved adversely to us, we may be required to
record adjustments to net revenues, gross margin, operating income, cash flows or related balance sheet accounts in future periods.

20

The
following presents our revenues for the three months ended March 31, 2026 and 2025:

For the Three Months Ended

March 31,

2026

2025

Variance

IHEEZO

$

1,851,000

$

5,222,000

$

(3,371,000

)

VEVYE

20,947,000

21,516,000

(569,000

)

Other branded products

7,833,000

956,000

6,877,000

Other revenue, net

73,000

86,000

(13,000

)

Branded revenue, net

30,704,000

27,780,000

2,924,000

Compounding revenue, net

13,499,000

20,051,000

(6,552,000

)

Total revenues, net

$

44,203,000

$

47,831,000

$

(3,628,000

)

The
increase in Branded revenues from product sales was primarily related to a change in our customer mix, offset by a decrease in IHEEZO
volume. The decrease in compounding revenue was primarily due to a decrease in volume and the discontinuation of sales of our Klarity-C
compounded formulation which occurred during the second quarter of 2025. Our revenue for VEVYE decreased slightly from the three
months ended March 31, 2025 as we recognized an increase in the gross-to-net revenue deductions associated with our recent coverage wins
and our cash pay program. 

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 rights, and other related expenses.

Branded

Three Months Ended March 31,

2026

2025

$ Variance

Cost of sales

$

10,954,000

$

8,181,000

$

2,773,000

Gross profit

$

19,750,000

$

19,599,000

$

151,000

Gross margin

64.3

%

70.6

%

(6.3

)%

The
increase in Branded cost of sales was primarily attributable to an increase in units sold during the three months ended March 31, 2026
compared to the prior year period and an increase in our fixed expenses. The decrease in the gross margin as a percent of revenue was
primarily due to a decrease in sales of products that have a higher gross margin profile and an increase in gross-to-net revenue deductions associated with VEVYE as a result of our recent coverage wins and our cash pay program
which reduced the gross margin profile for the product.

Compounding

Three Months Ended March 31,

2026

2025

$ Variance

Cost of sales

$

6,204,000

$

7,343,000

$

(1,139,000

)

Gross profit

$

7,295,000

$

12,708,000

$

(5,413,000

)

Gross margin

54.0

%

63.4

%

(9.4

)%

The
decrease in Compounding costs of sales between the three months ended March 31, 2026 and 2025 was primarily attributable to a decrease
in units sold. The decrease in the gross margin as a percent of revenue was largely due to a decrease in the utilization of our compounding
facility during the three months ended March 31, 2026 compared to the same period in 2025.

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 marke

[Excerpt truncated for page length; source filing is linked above.]

## Latest 10-K MD&A

Extracted from Item 7 to the first post-MD&A boundary after HTML sanitization.
Confidence: high

ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated
financial statements and the related notes contained in this Annual Report on Form 10-K (this “Annual Report”). Our 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 U.S. (GAAP). In addition to historical
information, the following discussion contains forward-looking statements based upon our current views, expectations and assumptions
that are subject to risks and uncertainties. Actual results may differ substantially from those expressed or implied by any forward-looking
statements due to a number of factors, including, among others, the risks described in the “Risk Factors” section and elsewhere
in this Annual Report. Additional information related to the comparison of our results of operations and liquidity and capital resources
between the years 2024 and 2023 is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations of our 2024 Form 10-K filed with the SEC and is incorporated by reference herin.

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

51

Overview

We
are a leading provider of ophthalmic disease management solutions in North America, and were founded with a commitment to deliver safe,
effective, accessible, and affordable medications that enhance patient compliance and improve clinical outcomes. For over a decade, we
have partnered with U.S. eyecare professionals to develop a comprehensive portfolio of high-quality products used to manage ophthalmic
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. By prioritizing clinical
value – to the provider and the patient – Harrow empowers professionals to enhance patient outcomes and preserve vision.
By combining our culture of creativity, entrepreneurship and groundbreaking innovation with operational discipline and strong financial
performance, we are building a future where life-changing ophthalmic treatments are within reach for all.

Factors
Affecting Our Performance

We
believe the primary factors affecting our performance are our ability to increase revenues of our branded pharmaceutical 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
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 will 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

The
following describes certain developments in 2025 and 2026 to date that are important to understand our financial condition, results of
operations, and expectations. See the notes to our consolidated financial statements included in this Annual Report for additional information
about certain developments.

Commercial
and Sales Force Expansions

In
February 2026, we announced several commercial investments expected to be implemented during 2026 to support growth across key products.
For VEVYE, following recent payor-coverage wins effective January 1, 2026, we began recruiting efforts to expand our commercial sales
team from approximately 50 to 100 U.S. sales territories by late May 2026. For IHEEZO, we have begun expanding our commercial focus beyond
retina practices into office-based ophthalmic procedures, targeting a broader set of anesthesia-dependent, reimbursed use cases, including
non-retina intravitreal and subconjunctival injections, YAG/laser procedures, foreign body removals, and selected ocular surface and
eyelid procedures. For TRIESENCE, we expect to increase the size of our dedicated sales force for this product during the coming months
in response to favorable surgeon feedback and improving demand indicators, including increased interest in adoption and reordering for
on-label uses in both office and surgical settings.

Acquisition
of Remaining Interests in Melt Pharmaceuticals, Inc.

In
September 2025, we entered into the Merger Agreement by and among Harrow, Harrow Acquisition Sub, Inc., a wholly owned subsidiary of
Harrow, Melt, and D. Brad Osborne, as stockholder representative. Under the terms of the Merger Agreement and a related milestone payment
agreement, we agreed to acquire the remaining equity interests of Melt in exchange for an initial cash payment of approximately $4,300,000
at closing, and contingent consideration consisting of cash and Company equity upon achievement of (i) FDA approval of the MELT-300 drug
candidate, (ii) coding and reimbursement of the MELT-300 drug candidate, and (iii) various one-time sales milestones, as follows:

●

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

●

Upon
receipt of pass-through status awarded and J-Code (or any other similar designation) issued
by CMS for MELT-300, we shall issue an aggregate of approximately 1,112,000 shares of our
common stock.

●

Upon
achievement of various annual net sales milestones ranging from $100,000,000 to $1,000,000,000
per year, we shall make various one-time cash payments that in the aggregate total up to
approximately $260,000,000 if all annual net sales milestones are achieved.

52

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

The
Melt acquisition closed on November 17, 2025, and was treated as an asset acquisition for accounting purposes. As a result of such
transaction, Melt’s drug candidates are now owned by Harrow and its R&D activities subsequent to the acquisition are
included in Harrow’s consolidated financial results as of the year ended December 31, 2025.

Fifth
Third Revolving Credit Facility

In
September 2025, we entered into a Credit Agreement (the “5/3 Revolver”) with Fifth Third Bank, National Association, as administrative
agent for itself and the other lenders (collectively, “Fifth Third”) providing for a senior secured revolving credit facility
in the initial principal amount of $40,000,000, together with an uncommitted incremental revolving line of credit in the principal amount
of up to $20,000,000. The 5/3 Revolver will mature on September 26, 2030, or, if earlier, the date that is 91 days prior to the earliest
maturity date of the Company’s 2030 Notes.

Borrowings
under the 5/3 Revolver bear interest at a floating rate equal to, at the Company’s option, either (i) a base rate plus a margin
ranging from 0.25% to 0.75%, or (ii) a Secured Overnight Financing Rate (“SOFR”) based rate plus a margin ranging from 1.25%
to 1.75%. In addition, an unused fee of 0.25% per annum is payable monthly in arrears based on the undrawn portion of the commitments
in respect of the 5/3 Revolver. Borrowings under the 5/3 Revolver are secured by a first priority lien in substantially all of the present
and future property and assets, real and personal, of the Company, subject to customary exceptions.

Under
the 5/3 Revolver, we are subject to certain customary affirmative and negative covenants. In addition, the 5/3 Revolver contains certain
financial covenants requiring the Company to maintain, on a consolidated basis as of the last day of each month, a fixed charge coverage
ratio of at least 1.10 to 1.0.

Harrow
Access for All

In
September 2025, we announced Harrow Access For All (“HAFA”) to expand our proprietary patient access model from a single
product to encompass Harrow’s comprehensive ophthalmic portfolio of branded, authorized generics (AGx), and compounded ophthalmic
medications. Beginning in late 2025 and expanding into 2027, HAFA will provide a single, unified access point for prescribers and patients,
offering affordability, streamlined prescribing, and predictable access. The platform creates a simpler, more predictable path to treatment—supporting
better outcomes for patients and greater efficiency for physicians.

8.625%
Senior Notes Due 2030 and Payoff of Prior Debt

In
September 2025, we closed a private offering of $250,000,000, aggregate principal amount of 8.625% senior notes due 2030. The 2030 Notes
offering resulted in net proceeds to us of approximately $242,748,000 after deducting underwriting discounts and commissions and other
offering expenses of $7,252,000.

The
2030 Notes are senior unsecured obligations and are effectively subordinated to any of our secured indebtedness to the extent of the
value of the assets securing such indebtedness. The 2030 Notes are guaranteed on a senior unsecured basis by us, subject to certain exceptions.
The 2030 Notes bear interest at the rate of 8.625% per annum. Interest on the 2030 Notes is payable semi-annually in arrears on March
15 and September 15 of each year. The issuance costs were recorded as a debt discount and are being amortized as interest expense over
the term of the 2030 Notes using the effective interest rate method.

We
used the net proceeds from the 2030 Notes offering to prepay all then outstanding senior debt borrowings, exit costs, and accrued interest
including $107,500,000 in total principal loan amount borrowed under the Credit Agreement and Guaranty (the “Oaktree Loan”)
with Oaktree Fund Administration, LLC, as administrative agent for the lenders (together, “Oaktree”), $75,000,000 in total
principal amount senior notes due 2026 (the “2026 Notes”), and $40,250,000 in total principal amount senior notes due 2027
(the “2027 Notes”). The 2026 Notes and 2027 Notes were listed on The Nasdaq Stock Market under the symbols “HROWL”
and “HROWM”, respectively. The 2026 Notes were delisted on October 10, 2025 and the 2027 Notes were delisted on October 8,
2025.

53

BYOOVIZ®
and OPUVIZTM – Commercialization Agreement

In
July 2025, we entered into a development and commercialization agreement (the “Samsung Agreement”) with Samsung Bioepis Co.,
Ltd. (“Samsung”). Under the terms of the Samsung Agreement, following completion of the transition of commercial rights from
Biogen, Inc. 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. market (the
“Rights”). In consideration of the Rights, we made a one-time upfront payment to Samsung of $4,000,000 in February 2026,
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. market.
We expect BYOOVIZ to be available in the middle of 2026 and OPUVIZ to be available in the middle of 2027.

Acquisition
of Commercial Rights to BYQLOVITM

In
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 to launch in the US in the middle of 2026.

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

In
March 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 discontinued compounding Klarity-C during 2025. We are also discontinued another related
compounded formulation called Klarity PF. Klarity PF is primarily purchased by a concentrated group of customers who we expect to
continue accepting our FRESHKOTE product as an alternative. In February 2026, we announced the launch of PharmaPack™, a direct-to-prescriber cash-pay offering designed to expand access to
affordable, FDA-approved branded ophthalmic therapies as alternatives to compounded formulations. 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 are not necessarily indicative of results for any future period.

Comparison
of Years Ended December 31, 2025 and 2024

Revenues

Our
revenues include amounts recorded from sales of branded products to wholesalers through a third-party logistics facility, sales of proprietary
compounded formulations, and revenues received from royalty payments owed to us pursuant to out-license and like arrangements. The following
table presents our revenues for the years ended December 31, 2025 and 2024:

For the Years Ended

December 31,

$

2025

2024

Variance

IHEEZO net sales

$

81,348,000

$

49,303,000

$

32,045,000

VEVYE net sales

88,688,000

28,061,000

60,627,000

Other branded products net sales

25,326,000

37,836,000

(12,510,000

)

Other revenues, net

394,000

915,000

(521,000

)

Branded revenue, net

195,756,000

116,115,000

79,641,000

ImprimisRx revenue, net

76,547,000

83,499,000

(6,952,000

)

Total revenues, net

$

272,303,000

$

199,614,000

$

72,689,000

54

The
increase in Branded revenues from product sales between the years ended December 31, 2025 and 2024 was primarily related to an increase
in sales and units sold of IHEEZO and VEVYE resulting from increased marketing efforts. These increases were partially offset by lower
sales of other brands and lower Imprimis revenue.

The
decrease in ImprimisRx revenue was primarily due to a decrease in volume for the year ended December 31, 2025 compared to 2024.

Cost
of Sales

Our
cost of sales includes direct and indirect costs to manufacture formulations and sell products, including API, 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.

The
following table presents our cost of sales for the years ended December 31, 2025 and 2024:

Branded

For the Years Ended December 31,

$

2025

2024

Variance

Cost of sales

$

37,230,000

$

21,667,000

$

15,563,000

The
increase in Branded cost of sales was primarily attributable to an increase in units sold of IHEEZO and VEVYE during the years ended
December 31, 2025 and 2024 as well as an increase in intangible asset amortization related to acquired product rights for TRIESENCE and
royalties related to VEVYE and IHEEZO.

ImprimisRx

For the Years Ended December 31,

$

2025

2024

Variance

Cost of sales

$

30,704,000

$

27,578,000

$

3,126,000

The
increase in ImprimisRx costs of sales between the years ended December 31, 2025 and 2024 was primarily attributable to product mix that
included more sales of lower gross margin products and inventory losses.

Gross
Profit and Margin

Branded

For the Years Ended December 31,

$

2025

2024

Variance

Gross profit

$

158,526,000

$

94,448,000

$

64,078,000

Gross margin

81.0

%

81.3

%

(0.3

)%

55

Gross
Margin increased due to increased sales. The slight decrease in Branded gross margin percentage between the years ended December 31,
2025 and 2024 was primarily attributable to an increase in our fixed expenses, in particular, acquired product rights amortization related
to the launch of TRIESENCE and a related contingent milestone payment that was capitalized in the fourth quarter of 2024.

ImprimisRx

For the Years Ended December 31,

$

2025

2024

Variance

Gross profit

$

45,843,000

$

55,921,000

$

(10,078,000

)

Gross margin

59.9

%

67.0

%

(7.1

)%

ImprimisRx
gross margin decreased during the year ended December 31, 2025 compared to 2024 due to the previously mentioned change in product mix
as well as inventory losses from lower manufacturing efficiency.

Selling,
General and Administrative Expenses

Our
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.

The
following table presents our SG&A expenses for the years ended December 31, 2025 and 2024:

For the Years Ended December 31,

$

2025

2024

Variance

Selling, general and administrative

$

152,914,000

$

129,064,000

$

23,850,000

The
increase in SG&A expenses between the years ended December 31, 2025 and 2024 was primarily attributable to (1) increased payroll
and related expenses of $15,092,000 due to the addition of new employees in sales, marketing and other departments to support
current and expected growth, (2) increased marketing and advertising expense of $3,600,000 and (3) increased audit fees as a result
of the Company being subject to the audit attestation requirements of Section 404(b) of the Sarbanes-Oxley Act. These increases were
partially offset by a decrease in stock-based compensation expense of $5,114,000 between the periods.

Research
and Development Expenses

Our
R&D expenses primarily included personnel costs, including wages and stock-based compensation, expenses related to the development
of intellectual property, investigator-initiated research and evaluations, formulation development, acquired in-process R&D and other
costs related to the clinical development of our assets.

The
following table presents our R&D expenses for the years ended December 31, 2025 and 2024:

For the Years Ended December 31,

$

2025

2024

Variance

Research and development

$

20,940 ,000

$

12,230,000

$

8,710,000

The
increase in R&D expenses between the years ended December 31, 2025 and 2024 was primarily attributable to one time in-process R&D
expense related to the acquisition of Melt of $8,450,000 during the fourth quarter of 2025. In addition, increased development activity
related to our branded product portfolio, new product candidate development efforts, and clinical and medical support. During the fourth quarter of 2024, we recorded $2,000,000 of one-time R&D costs associated with the product development
of TRIESENCE.

56

Impairment
and Disposal of Long-Lived Assets

During
the year ended December 31, 2025, there were no impairments or disposals of long-lived assets. During the year ended December 31, 2024,
we recognized an impairment loss of $253,000 related to intellectual property that we expect to no longer utilize in future revenue generating
products and compounded formulations.

Interest
Expense, net

Interest
expense, net was $24,180,000 during the year ended December 31, 2025, compared to $22,786,000 during the year ended December 31, 2024.
The increase was primarily due to an increase in the principal balance of our loans over the periods presented.

Investment
Gain (Loss) from Eton

During
the year ended December 31, 2025, there was no gain (loss) from investments. During the year ended December 31, 2024, we recorded a loss
of $3,171,000 related to the change in fair market value of Eton’s common stock at the time of its sale, including trading expenses
and commissions of approximately $436,000. In April 2024, we sold all of our remaining shares in Eton.

Loss
on Early Extinguishment of Debt

During
the year ended December 31, 2025, we recorded a loss on extinguishment of debt of $7,750,000 related to the payoff of a loan. There were
no extinguishments of debt during the year ended December 31, 2024.

Other
Income (Expense), net

During
the year ended December 31, 2025, other income of $47,000 represents foreign exchange gains on settlement of foreign-denominated
payables. During the year ended December 31, 2024, we recorded other expense, net, of $185,000 related primarily to income from the
sublease of office space in Nashville, offset by a loss associated with a cybersecurity incident.

Tax
Expense

During
the years ended December 31, 2025 and 2024, we recorded income tax expense of $3,771,000 and $161,000, respectively. The increase in
income tax expense in 2025 was primarily related to limitations of stock-based compensation expense under Section 179(m) of the Internal
Revenue Code.

The
following table presents our net loss for the years ended December 31, 2025 and 2024:

For the Years Ended December 31,

2025

2024

Net loss

$

(5,139,000

)

$

(17,481,000

)

Net loss per share, basic and diluted

$

(0.14

)

$

(0.49

)

Liquidity
and Capital Resources

Liquidity

Our
cash on hand at December 31, 2025 was $72,927,000, compared to $47,247,000 at December 31, 2024.

As
of the date of this Annual Report, we believe that cash and cash equivalents of $72,927,000 at December 31, 2025 will be sufficient to
sustain our planned level of operations and capital expenditures for fiscal year 2026 and the foreseeable future. We may consider the
sale of certain assets including, but not limited to, part of, or all of, our investment in Surface 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.

57

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 products, 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 Flows

The
following provides detailed information about our net cash flows for the years ended December 31, 2025, 2024 and 2023:

For the Years Ended December 31,

2025

2024

2023

Net cash provided by (used in):

Operating activities

$

43,864,000

$

(22,202,000

)

$

3,840,000

Investing activities

(5,460,000

)

(33,164,000

)

(152,553,000

)

Financing activities

(12,724,000

)

28,528,000

126,528,000

Net change in cash and cash equivalents

25,680,000

(26,838,000

)

(22,185,000

)

Cash and cash equivalents at beginning of the period

47,247,000

74,085,000

96,270,000

Cash and cash equivalents at end of the year

$

72,927,000

$

47,247,000

$

74,085,000

Operating
Activities

Net
cash provided by operating activities was $43,864,000 in 2025, compared to cash used in of $22,202,000 in the prior year. The increase
in net cash provided by operating activities between the periods was mainly attributed to better operating results and collections of
$5,010,000 of accounts receivable as a result of collection efforts partially offset by settlement of accrued accounts payable invoices
of $4,608,000.

Net
cash used in operating activities was $22,202,000 in 2024, compared to cash provided by of $3,840,000 in the prior year. The decrease
in net cash provided by operating activities between the periods was mainly attributed to changes in our working capital balances including
accounts payable, prepaid expenses, inventories and most notably, accounts receivable. Our accounts receivable balance between periods
increased significantly due to an increase in our branded product sales, which have a longer revenue cycle compared to our ImprimisRx
product sales. In addition, during 2024, we extended additional terms to our largest distributor to allow for downstream and end users
(e.g. hospitals, clinics and ambulatory surgery centers) of certain of our branded products additional time to pay for our branded products.

Investing
Activities

Net
cash used in investing activities in 2025 and 2024 was $5,460,000 and $33,164,000, respectively. Cash used in investing activities in
2025 was primarily due the acquisition of Melt for $4,358,000 and equipment and software purchases of $887,000. Cash used in investing
activities in 2024 was primarily due to the milestone payment of $37,000,000 related to TRIESENCE partially offset by cash received from
the sale of our investment in Eton for $5,510,000. Cash used in investing activities in 2023 was primarily associated with product acquisitions.

58

Financing
Activities

Net
cash used in financing activities in 2025 was $12,724,000 and cash provided by financing activities in 2024 was $28,528,000. Cash used
in financing activities during the year ended December 31, 2025 was primarily due to repayment of debt and payment of payroll taxes upon
vesting of stock compensation mostly offset by proceeds from issuance of new debt. Cash provided by financing activities during the year
ended December 31, 2024 was primarily due to additional borrowings under our long-term debt facility with Oaktree of $29,780,000, net
of issuance costs, and proceeds from the exercise of stock options, offset by the payment of taxes associated with the vesting and exercise
of share-based awards. Cash provided by financing activities during the year ended December 31, 2023 was primarily related to proceeds
received from the issuance of the Oaktree Loan and Oaktree Amendment, issuance of unsecured debt and sale of our equity, offset by payment
of payroll taxes upon vesting of PSUs in exchange for shares withheld from employees.

Sources
of Capital

During
the year ended December 31, 2025, our principal sources of cash came from cash generated by our operating activities. In future periods,
including the year ending December 31, 2026, we expect cash to be provided from our operating activities, but our forecasts may not be
accurate and our plans may change. We may also sell some or all of our ownership interests in Surface or our other subsidiaries

In
September 2025, we completed the sale of the 2030 Notes in a private offering and received net proceeds of $242,748,000. We used the
net proceeds from the 2030 Notes to prepay all outstanding borrowings under the Oaktree Loan, the 2027 Notes, and the 2026 Notes, and
to pay certain exit costs related thereto. The remaining funds will be used for general corporate purposes, which may include funding
future strategic business development opportunities and related investments. We also entered into the 5/3 Revolver with Fifth Third in
September 2025, which provided the Company with a secured revolving credit facility of $40,000,000, with an additional $20,000,000 of
uncommitted incremental revolving line of credit. We have not drawn down any amounts under the 5/3 Revolver. The Company is in compliance
with all debt covenants and expects to remain compliant for at least the next 12 months.

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 receive additional proceeds from the exercise of stock purchase warrants
that are currently outstanding. 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 entirely.

59

Critical
Accounting Policies and Estimates

We
rely on the use of estimates and make assumptions that impact our financial condition and results. These estimates and assumptions are
based on historical results and trends as well as our forecasts of how results and trends might change in the future. Although we believe
that the estimates we use are reasonable, actual results could differ materially from these estimates.

We
believe that the accounting policies described below are critical to understanding our business, results of operations and financial
condition because they involve the use of more significant judgments and estimates in the preparation of our consolidated financial statements.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that
are highly uncertain at the time the estimate is made, and any changes in the assumptions used in making the accounting estimates that
are reasonably likely to occur could materially impact our consolidated financial statements.

Revenue
Recognition

We
account for contracts with customers in accordance with ASC 606, Revenues from Contracts with Customers. We have two primary streams
of revenue: (1) product revenues, including revenue recognized from sales of products through its pharmacy and outsourcing facility and
sales of branded products to wholesalers through a third-party logistics (“3PL”) partner, and (2) revenue recognized from
intellectual property licenses.

Product
Revenues

We
recognize revenue from product sales at a point in time when our customer is deemed to have obtained control of the product, which generally
occurs upon receipt or acceptance by our customer.

Sales
of branded pharmaceutical products are subject to variable consideration due to chargebacks, government rebates, returns, administrative
and other rebates, and cash discounts. Estimates for these elements of variable consideration require significant judgment.

We
record reserves for rebates, chargebacks, discounts, distribution fees and product returns at the time revenue is recognized. These reserves
are inherently uncertain because they depend on future utilization patterns, payor mix, wholesaler inventory levels, and contractual
terms that vary across customers and programs. We use historical experience (where available), current-period data from distributors
and payors, and forecasted sales volumes to estimate these amounts.

At
December 31, 2025, our sales deduction and returns reserves totaled $68,381,000 compared to $59,631,000 at December 31, 2024. The increase
primarily reflects (i) higher ophthalmic product sales, (ii) expanded commercial rebate programs, and (iii) higher expected product returns
associated with the timing of lot expirations, partially offset by lower co-pay assistance costs.

Our
estimates are sensitive to changes in payor mix and program utilization. For example, if our aggregate rebate and discount rate for 2025
had been 2 percentage points higher, product revenue would have been approximately $10.6 million lower, and if it had been 2 percentage
points lower, product revenue would have been approximately $10.6 million higher.

Income
Taxes

As
part of the process of preparing our consolidated financial statements, we 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. A valuation allowance
is established for deferred tax assets for which it is more likely than not that some portion or all of the deferred tax assets will
not be realized. We periodically re-assess the need for a valuation allowance against our deferred tax assets based on all available
evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, results
of recent operations, and our historical earnings experience by taxing jurisdiction. Significant judgment is required in making this
assessment.

60

We
recognize the financial statement effects of a tax position when our assessment is that there is more than a 50% probability that the
position will be sustained upon examination by a taxing authority based upon its technical merits. Uncertain tax positions are recorded
based upon certain recognition and measurement criteria. Significant judgment is required in making this assessment, and, therefore,
we re-evaluate uncertain tax positions and consider various factors, including, but not limited to, changes in tax law, the measurement
of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, information obtained
during in-process audit activities, and changes in facts or circumstances related to a tax position. We adjust the amount of the liability
to reflect any subsequent changes in the relevant facts and circumstances surrounding the uncertain tax positions.

Intangible
Assets

Intangible
assets acquired in a business combination are recorded at fair value, while intangible assets acquired in connection with an asset acquisition
are recorded at cost. Payments to acquire intangible assets in an asset acquisition may include up-front payments and contingent consideration.
With regard to contingent consideration in an asset acquisition, the Company recognizes regulatory milestones upon achievement, royalties
in the period in which the underlying sales occur, and sales-based milestones when the milestone is deemed probable by the Company of
being achieved. Significant judgment is involved in assessing the probability of achievement of milestones. If contingent consideration
is recognized subsequent to the acquisition date in an asset acquisition, the amount of such consideration is recorded as an addition
to the cost basis of the intangible asset and amortization expense is recorded prospectively over the remaining useful life of the asset.

Impairment
of Intangible Assets

We
hold significant definite lived intangible assets including; product rights, licensed intangible assets, and other intangible assets.
Under GAAP, we evaluate these assets if events or changes in circumstances indicate that the carrying amount may not be recoverable (e.g.,
lower-than-expected sales, adverse regulatory or competitive developments, higher required returns, or changes in macroeconomic conditions).

When
we test definite-lived assets, we compare the carrying value to the undiscounted future cash flows expected to result from the use and
eventual disposition of the asset group. If those cash flows are less than the carrying amount, we recognize an impairment equal to the
amount by which the carrying value exceeds fair value.

As
a result of its assessment in 2024 and 2023, we recorded an impairment charge of $253,000 and $380,000, respectively, related to the
impairment of certain licenses, trademarks, patents and patent applications (see Note 11 to our consolidated financial statements). We
did not recognize any impairment charges for the year ended December 31, 2025.

Stock-Based
Compensation

We
measure stock-based compensation for stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”),
warrants, and restricted stock at fair value on the grant date and recognize the associated expense over the requisite service period.
Estimating the grant-date fair value requires significant judgment because the valuation models we use—including the Black-Scholes-Merton
option-pricing model and Monte Carlo simulation models for certain performance awards—depend on several subjective assumptions
such as expected volatility, expected term, risk-free interest rates, dividend yield, and, for PSUs, the probability of achieving market-based
performance targets.

These
assumptions are inherently uncertain because they rely on forward-looking estimates of employee exercise behavior, future share price
volatility, and performance outcomes that may differ from actual experience. For example, expected volatility is based on historical
volatility of our stock and those of comparable companies, which may not be indicative of future results. Likewise, the estimated forfeiture
rate reflects management’s judgment regarding employee turnover and achievement of service or performance conditions and is revised
when actual results differ from initial expectations.

61

Our
stock-based compensation expense is sensitive to changes in these inputs. Holding all other assumptions constant, a 10% increase in the
expected volatility used to value stock option grants would increase the grant-date fair value of such awards by approximately 7%, and
a 10% decrease in the expected term would decrease the fair value by approximately 7%. Actual outcomes that differ from our assumptions,
including changes in share price performance or employee turnover, could materially affect the amount and timing of stock-based compensation
expense in future periods.

Off-Balance
Sheet Arrangements

We
do not have any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest
entities.