0001493152-19-012535.txt : 20190814 0001493152-19-012535.hdr.sgml : 20190814 20190814161631 ACCESSION NUMBER: 0001493152-19-012535 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 93 CONFORMED PERIOD OF REPORT: 20190630 FILED AS OF DATE: 20190814 DATE AS OF CHANGE: 20190814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARROW HEALTH, INC. CENTRAL INDEX KEY: 0001360214 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 450567010 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-35814 FILM NUMBER: 191026610 BUSINESS ADDRESS: STREET 1: 12264 EL CAMINO REAL STREET 2: SUITE 350 CITY: SAN DIEGO STATE: CA ZIP: 92130 BUSINESS PHONE: 858-704-4042 MAIL ADDRESS: STREET 1: 12264 EL CAMINO REAL STREET 2: SUITE 350 CITY: SAN DIEGO STATE: CA ZIP: 92130 FORMER COMPANY: FORMER CONFORMED NAME: Imprimis Pharmaceuticals, Inc. DATE OF NAME CHANGE: 20120301 FORMER COMPANY: FORMER CONFORMED NAME: TRANSDEL PHARMACEUTICALS INC DATE OF NAME CHANGE: 20070912 FORMER COMPANY: FORMER CONFORMED NAME: Bywater Resources, Inc DATE OF NAME CHANGE: 20060421 10-Q 1 form10-q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to _____________

Commission File Number: 001-35814

Harrow Health, Inc.

(Exact name of registrant as specified in its charter)

Delaware		45-0567010
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12264 El Camino Real, Suite 350 San Diego, CA		92130
(Address of principal executive offices)		(Zip code)

(858) 704-4040

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a small reporting company, or an emerging growth company.

Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[ ]	Smaller reporting company	[X]
		Emerging growth company	[ ]

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name on exchange on which registered
Common Stock, $0.001 par value per share		HROW		The NASDAQ Capital Market

As of August 13, 2019, there were 25,165,965 shares of the registrant’s common stock, $0.001 par value, outstanding.

HARROW HEALTH, INC.

Table of Contents

		Page
Part I	FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41

Item 4.	Controls and Procedures	41

Part II	OTHER INFORMATION

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68

Item 3.	Defaults Upon Senior Securities	68

Item 4.	Mine Safety Disclosures	68

Item 5.	Other Information	68

Item 6.	Exhibits	69

	Signatures	70

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

HARROW HEALTH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

	June 30,			December 31,
	2019			2018
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents, including restricted cash of $200	$	4,193		$	6,838
Investment in Eton Pharmaceuticals		27,650			21,420
Accounts receivable, net		2,223			1,914
Inventories		2,652			1,834
Prepaid expenses and other current assets		1,401			837
Total current assets		38,119			32,843
Property, plant and equipment, net		5,946			6,375
Operating lease right-of-use assets		6,069			-
Intangible assets, net		3,154			3,059
Investment in Surface Pharmaceuticals		4,443			4,947
Investment in Melt Pharmaceuticals		5,199			-
Goodwill		2,227			2,227
TOTAL ASSETS	$	65,157		$	49,451
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	6,943		$	6,250
Accrued payroll and related liabilities		1,576			2,283
Deferred revenue and customer deposits		224			119
Current portion of note payable, net of unamortized debt discount		247			2,529
Current portion of operating lease obligations		496			-
Current portion of finance lease obligations, net of unamortized discount		370			720
Total current liabilities		9,856			11,901
Operating lease obligations, net of current portion		5,976			-
Finance lease obligations, net of current portion and unamortized discount		29			-
Accrued expenses, net of current portion		800			800
Note payable, net of current portion and unamortized debt discount		13,498			11,999
TOTAL LIABILITIES		30,159			24,700
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 50,000,000 shares authorized, 25,138,958 and 24,339,610 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		25			24
Additional paid-in capital		100,271			98,938
Accumulated deficit		(65,231	)		(74,211	)
TOTAL HARROW HEALTH, INC. STOCKHOLDERS’ EQUITY		35,065			24,751
Noncontrolling interests		(67	)		-
TOTAL STOCKHOLDERS’ EQUITY		34,998			24,751
TOTAL LIABILITIES AND EQUITY	$	65,157		$	49,451

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

HARROW HEALTH, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for share and per share data)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Sales, net	$	13,509		$	10,374		$	25,792		$	19,229
License revenues		7			10			14			20
Total revenues		13,516			10,384			25,806			19,249
Cost of sales		(5,225	)		(4,157	)		(9,123	)		(8,228	)
Gross profit		8,291			6,227			16,683			11,021
Operating expenses:
Selling, general and administrative		8,248			6,779			16,791			13,267
Research and development		810			72			1,215			159
Total operating expenses		9,058			6,851			18,006			13,426
Loss from operations		(767	)		(624	)		(1,323	)		(2,405	)
Other income (expense):
Interest expense, net		(716	)		(671	)		(1,319	)		(1,334	)
Investment gain (loss) from Melt Pharmaceuticals, net		(326	)		-			5,199			-
Investment gain (loss) from Surface Pharmaceuticals, net		(261	)		5,218			(504	)		5,218
Investment gain (loss) from Eton Pharmaceuticals, net		(350	)		(1,146	)		6,230			(2,215	)
Other income (expense), net		-			(255	)		630			(255	)
Total other income (expense), net		(1,653	)		3,146			10,236			1,414
Total net income (loss) including noncontrolling interests		(2,420	)		2,522			8,913			(991	)
Net loss attributable to noncontrolling interests		42			-			67			-
Net income (loss) attributable to Harrow Health, Inc.	$	(2,378	)	$	2,522		$	8,980		$	(991	)

Basic net income (loss) per share of common stock	$	(0.09	)	$	0.12		$	0.36		$	(0.05	)
Diluted net income (loss) per share of common stock	$	(0.09	)	$	0.11		$	0.34		$	(0.05	)
Weighted average number of shares of common stock outstanding, basic		25,216,565			21,190,794			25,030,012			21,070,644
Weighted average number of shares of common stock outstanding, diluted		25,216,565			23,175,431			26,696,683			21,070,644

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

HARROW HEALTH, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the periods ended June 30, 2019 and 2018

(In thousands, except for share data)

										Total Harrow			Total
					Additional					Health, Inc.			Noncontrolling			Total
	Common Stock				Paid-in		Accumulated			Stockholders’			Interest			Stockholders’
	Shares		Par Value		Capital		Deficit			Equity			Equity			Equity
Balance at March 31, 2018		20,813,205	$	21	$	92,411	$	(92,349	)	$	83		$	-		$	83

Issuance of common stock in connection with:
Sale of stock, net of costs (ATM)		236,243		-		519		-			519			-			519
Stock-based compensation expense		-		-		608		-			608			-			608
Net income		-		-		-		2,522			2,522			-			2,522
Balance at June 30, 2018		21,049,448	$	21	$	93,538	$	(89,827	)	$	3,732		$	-		$	3,732

						Additional					Total Harrow Health, Inc.			Total Noncontrolling			Total
		Common Stock				Paid-in		Accumulated			Stockholders’			Interest			Stockholders’
		Shares		ParValue		Capital		Deficit			Equity			Equity			Equity
Balance at March 31, 2019		24,718,649	$	25	$	99,887	$	(62,853	)	$	37,059		$	(25	)	$	37,034

Issuance of common stock in connection with:
Exercise of warrants		399,354		-		17		-			17			-			17
Exercise of employee stock options		20,955		-		-		-			-			-			-
Stock-based compensation expense		-		-		367		-			367			-			367
Net loss		-		-		-		(2,378	)		(2,378	)		(42	)		(2,420	)
Balance at June 30, 2019		25,138,958	$	25	$	100,271	$	(65,231	)	$	35,065		$	(67	)	$	34,998

					Additional					Total Harrow Health, Inc.			Total Noncontrolling			Total
	Common Stock				Paid-in		Accumulated			Stockholders’			Interest			Stockholders’
	Shares		Par Value		Capital		Deficit			Equity			Equity			Equity
Balance at December 31, 2017		20,623,129	$	21	$	91,430	$	(88,836	)	$	2,615		$	-		$	2,615

Issuance of common stock in connection with:
Vesting of RSUs, net of tax withholding		60,000		-				-			-			-			-
Sale of stock, net of costs (ATM)		305,619		-		641		-			641			-			641
Stock-based payment for services provided		60,700		-		108		-			108			-			108
Stock-based compensation expense		-		-		1,359		-			1,359			-			1,359
Net loss		-		-		-		(991	)		(991	)		-			(991	)
Balance at June 30, 2018		21,049,448	$	21	$	93,538	$	(89,827	)	$	3,732		$	-		$	3,732

						Additional					Total Harrow Health, Inc.			Total Noncontrolling			Total
		Common Stock				Paid-in		Accumulated			Stockholders’			Interest			Stockholders’
		Shares		Par Value		Capital		Deficit			Equity			Equity			Equity
Balance at December 31, 2018		24,339,610	$	24	$	98,938	$	(74,211	)	$	24,751		$	-		$	24,751

Issuance of common stock in connection with:
Exercise of warrants		763,393		1		178		-			179			-			179
Exercise of employee stock options		20,955		-		-		-			-			-			-
Stock-based payment for services provided		15,000		-		75		-			75			-			75
Stock-based compensation expense		-		-		1,080		-			1,080			-			1,080
Net income		-		-		-		8,980			8,980			(67	)		8,913
Balance at June 30, 2019		25,138,958	$	25	$	100,271	$	(65,231	)	$	35,065		$	(67	)	$	34,998

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

HARROW HEALTH, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	For the Six Months Ended June 30,
	2019			2018

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	8,913		$	(991	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of property, plant and equipment		968			800
Amortization of intangible assets		125			117
Amortization of operating lease right-of-use assets		256			-
Amortization of debt issuance costs and discount		263			314
Investment (gain) loss from Eton, net		(6,230	)		2,215
Investment (gain) from Melt, net		(5,199	)		-
Investment (gain) loss from Surface, net		504			(5,218	)
Loss on sale and disposal of assets		76			393
Stock-based payment of consulting services		75			-
Stock-based compensation		1,080			1,359
Changes in assets and liabilities:
Accounts receivable		(309	)		169
Inventories		(818	)		33
Prepaid expenses and other current assets		(564	)		(268	)
Accounts payable, accrued expenses, and other liabilities		830			885
Accrued payroll and related liabilities		(707	)		587
Deferred revenue and customer deposits		105			5
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(632	)		400
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of note receivable		-			4
Investment in patent and trademark assets		(220	)		(154	)
Purchases of property, plant and equipment		(565	)		(550	)
NET CASH USED IN INVESTING ACTIVITIES		(785	)		(700	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital lease obligations		(375	)		(337	)
Payments on Park deferred acquisition obligation		-			(53	)
Principal payments on note payable		(750	)		-
Payments of costs related to amendment of note payable		(282	)		-
Net proceeds from ATM sales of common stock		-			641
Net proceeds from exercise of warrants		179			-
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		(1,228	)		251
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(2,645	)		(49	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period		6,838			4,219
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period	$	4,193		$	4,170
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents	$	3,993		$	3,970
Restricted cash		200			200
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	4,193		$	4,170
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	8		$	4
Cash paid for interest	$	1,053		$	1,006
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of equipment with finance lease obligation	$	40		$	-
Issuance of stock and stock options for consulting services included in accounts payable and accrued expenses	$	-		$	108
Purchases of property and equipment included in accrued expenses	$	11		$	-

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

HARROW HEALTH, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three and six months ended June 30, 2019 and 2018

(Dollar amounts in thousands, except share and per share data)

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Company and Background

Harrow Health, Inc. (together with its subsidiaries, unless the context indicates or otherwise requires, the “Company” or “Harrow”) specializes in the development, production and sale of innovative medications that offer unique competitive advantages and serve unmet needs in the marketplace through its subsidiaries and deconsolidated companies. The Company owns one of the nation’s leading ophthalmology pharmaceutical businesses, ImprimisRx. In addition to wholly owning ImprimisRx, the Company also has equity positions in Eton Pharmaceuticals, Inc. (“Eton”), Surface Pharmaceuticals, Inc. (“Surface”), and Melt Pharmaceuticals, Inc. (“Melt”). More recently, the Company founded its subsidiaries Mayfield Pharmaceuticals, Inc. (“Mayfield”), Radley Pharmaceuticals, Inc. (“Radley”), and Stowe Pharmaceuticals, Inc. (“Stowe”). The Company owns royalty rights in certain 505(b)(2) drug candidates being developed by Surface, Melt, Radley and Mayfield. Harrow intends to continue to create new subsidiaries, and found, and hold equity and royalty rights in, new businesses that commercialize drug candidates that are internally developed or otherwise acquired or licensed from third parties

In February 2019, the Company entered into an agreement with Elle Pharmaceutical, Inc. (“Elle”) in which Mayfield issued 1,000,000 shares of its common stock to Elle (see Note 14).

In July 2019, the Company entered into an agreement with Noice Rx, LLC (“Noice”) to sell substantially all the assets associated with its non-ophthalmology pharmaceutical compounding business conducted by the Company’s subsidiary Park Compounding, Inc. (“Park”) for a purchase price of $8,000. The closing of the Park sale is contingent upon Noice being issued a temporary pharmacy and sterile license from the California State Board of Pharmacy and other customary conditions and terms (see Note 16). In connection with the sale of Park, the Company will issue Noice a seller’s note for $8,000.

Basis of Presentation

The Company has prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or for any other period. For further information, refer to the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

The consolidated financial statements include the accounts of Harrow and its wholly owned subsidiaries, as well as Mayfield, a 72% majority owned subsidiary of Harrow, as of June 30, 2019. The remaining 28% of Mayfield is owned by Elle. Mayfield was organized to develop women’s health focused drug candidates. All inter-company accounts and transactions have been eliminated in consolidation.

Harrow consolidates entities in which we have a controlling financial interest. We consolidate subsidiaries in which we hold, directly or indirectly, more than 50% of the voting rights.

The condensed consolidated balance sheets at June 30, 2019 and December 31, 2018 and the condensed consolidated statements of operations, stockholders’ equity and cash flows for the periods ended June 30, 2019 include our accounts and those of our wholly owned subsidiaries as well as Mayfield. The condensed consolidated statements of operations, stockholders’ equity and cash flows for the periods ended June 30, 2018 include our accounts and those of our wholly owned subsidiaries.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following represents an update for the three and six months ended June 30, 2019 to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

Liquidity

The Company has incurred significant operating losses and negative cash flows from operations since its inception. The Company incurred net income (loss) of $8,980 and $(991) for the six months ended June 30, 2019 and 2018, respectively, and had an accumulated deficit of $65,231 and $74,211 as of June 30, 2019 and December 31, 2018, respectively. In addition, the Company used cash in operating activities of $(632) for the six months ended June 30, 2019, while during the six months ended June 30, 2018, operating activities provided cash of $400.

While there is no assurance, management of the Company believes existing cash resources and restricted cash of $4,193 at June 30, 2019, will be sufficient to sustain the Company’s planned level of operations for at least the next twelve months. However, estimates of operating expenses and working capital requirements could be incorrect, and the Company could use its cash resources faster than anticipated. Further, some or all of the ongoing or planned activities may not be successful and could result in further losses.

The Company may seek to increase liquidity and capital resources through a variety of means which may include, but are not limited to: the sale of assets, investments and/or businesses, obtaining financing through the issuance of equity, debt, or convertible securities; and working to increase revenue growth through sales. There is no guarantee that the Company will be able to obtain capital when needed on terms management deems acceptable, or at all.

Segments

The Company’s chief operating decision-maker is its Chief Executive Officer who makes resource allocation decisions and assesses performance based on financial information presented on as operating segments. The Company has identified two operating segments as reportable segments. See Note 15 for more information regarding the Company’s reportable segments.

Noncontrolling Interests

The Company recognizes any noncontrolling interest as a separate line item in equity in the condensed consolidated financial statements. A noncontrolling interest represents the portion of equity ownership in a less-than-wholly owned subsidiary not attributable to the Company. Generally, any interest that holds less than 50% of the outstanding voting shares is deemed to be a noncontrolling interest; however, there are other factors, such as decision-making rights, that are considered as well. The Company includes the amount of net income (loss) attributable to noncontrolling interests in consolidated net income (loss) on the face of the condensed consolidated statements of operations.

The Company provides in the condensed consolidated statements of stockholders’ equity a reconciliation at the beginning and the end of the period of the carrying amount of total equity, equity attributable to the parent, and equity attributable to the noncontrolling interest that separately discloses:

	(1)	net income or loss;
	(2)	transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and
	(3)	each component of other income or loss.

Basic and Diluted Net Income (Loss) per Common Share

Basic net income (loss) per common share is computed by dividing income (loss) attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is computed by dividing the income (loss) attributable to common stockholders for the period by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during the period.

Basic and diluted net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period. Common stock equivalents (using the treasury stock or “if converted” method) from deferred acquisition obligations, convertible note payable, stock options, unvested restricted stock units (“RSUs”) and warrants were 5,331,883 and 10,245,280 at June 30, 2019 and 2018, respectively, and, except for the six months ended June 30, 2019 and the three months ended June 30, 2018, are excluded from the calculation of diluted net income (loss) per share for the periods presented, because the effect is anti-dilutive. Included in the basic and diluted net income (loss) per share calculation were RSUs awarded to directors that had vested, but the issuance and delivery of the shares are deferred until the director resigns. The number of shares underlying vested RSUs at June 30, 2019 and 2018 was 304,873 and 168,513, respectively.

The following table shows the computation of basic net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019		2018

Numerator – net income (loss) attributable to Harrow Health, Inc.	$	(2,378	)	$	2,522	$	8,980	$	(991	)
Denominator – weighted average number of shares outstanding, basic		25,216,565			21,190,794		25,030,012		21,070,644
Net income (loss) per share, basic	$	(0.09	)	$	0.12	$	0.36	$	(0.05	)

For the six months ended June 30, 2019 and the three months ended June 30, 2018, the Company had net income. As a result, the Company computed diluted net income per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding during those periods. Diluted common equivalent shares for the six months ended June 30, 2019 and the three months ended June 30, 2018, consisted of the following:

	For the		For the
	Three Months Ended		Six Months Ended
	June 30, 2018		June 30, 2019
Diluted shares related to:
Warrants		1,093,006		1,028,780
Stock options and RSUs		891,631		637,891
Dilutive common equivalent shares		1,984,637		1,666,671

The following table shows the computation of diluted net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019		2018

Numerator – net income (loss) attributable to Harrow Health, Inc.	$	(2,378	)	$	2,522	$	8,980	$	(991	)
Denominator – weighted average number of shares outstanding, basic		25,216,565			21,190,794		25,030,012		21,070,644
Dilutive common equivalents		-			1,984,637		1,666,671		-
Number of shares used for diluted earnings per share computation		25,216,565			23,175,431		26,696,683		21,070,644
Net income (loss) per share, diluted	$	(0.09	)	$	0.11	$	0.34	$	(0.05	)

Investment in Eton Pharmaceuticals, Inc. – Related Party

The Company owns 3,500,000 shares of Eton common stock, which represents approximately 19.7% of the equity and voting interests of Eton as of June 30, 2019. At June 30, 2019, the fair market value of Eton’s common stock was $7.90 per share, the closing share price of Eton common stock on June 28, 2019, the last trading day of the period ended June 30, 2019. In accordance with the Accounting Standards Update (“ASU”) 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, for the three months ended June 30, 2019, the Company recorded an investment loss from its Eton common stock position of $350, related to the change in fair market value of the Company’s investment in Eton during the measurement period. For the six months ended June 30, 2019, the Company recorded an investment gain from its Eton common stock position of $6,230, related to the change in fair market value of the Company’s investment in Eton during the measurement period. As of June 30, 2019, the fair market value of the Company’s investment in Eton was $27,650.

In November 2018, the Company entered into a lock-up agreement that prohibits the sale of any of its Eton common stock until November 2019 without the approval of National Securities Corporation, the underwriter of Eton’s initial public offering of its common stock.

Mark Baum, the Company’s Chief Executive Officer, is a member of the board of directors of Eton.

Investment in Melt Pharmaceuticals, Inc. – Related Party

In April 2018, the Company formed Melt as a wholly owned subsidiary. In January and March of 2019, Melt entered into definitive stock purchase agreements (collectively, the “Melt Series A Preferred Stock Agreement”) with certain investors and closed on the purchase and sale of Melt’s Series A Preferred Stock (the “Melt Series A Stock”), totaling approximately $11,400 of proceeds (collectively the “Melt Series A Round”) at a purchase price of $5.00 per share. As a result, the Company lost voting and ownership control of Melt and ceased consolidating Melt’s financial statements. In connection with the Melt Series A Preferred Stock Agreement, Melt also entered into a Registration Rights Agreement and agreed to use commercially reasonable efforts to file, or confidentially submit, a registration statement on Form S-1 with the United States Securities and Exchange Commission by September 30, 2020 relating to an initial public offering of its common stock.

At the time of deconsolidation, the Company recorded a gain of $5,810 and adjusted the carrying value in Melt to reflect the increased valuation of Melt and the Company’s new ownership interest in accordance with Accounting Standard Codification (“ASC”) 810-10-40-4(c), Consolidation.

The Company owns 3,500,000 common shares (which is approximately 44% of the equity interest as of June 30, 2019) of Melt and uses the equity method of accounting for this investment, as management has determined that the Company has the ability to exercise significant influence over the operating and financial decisions of Melt. Under this method, the Company recognizes earnings and losses of Melt in its consolidated financial statements and adjusts the carrying amount of its investment in Melt accordingly. The Company’s share of earnings and losses are based on the Company’s ownership interest of Melt. Any intra-entity profits and losses are eliminated. During the three and six months ended June 30, 2019, the Company recorded equity in net loss of Melt of $326 and $611, respectively. As of June 30, 2019, the carrying value of the Company’s investment in Melt was $5,199.

See Note 4 for more information and related party disclosure regarding Melt.

Investment in Surface Pharmaceuticals, Inc. – Related Party

In April 2017, the Company formed Surface as a wholly owned subsidiary. In May and July 2018, Surface entered into a definitive stock purchase agreement with an institutional investor for the purchase of Surface’s Series A Preferred Stock (the “Surface Series A Stock”) and closed on the sale, resulting in total proceeds to Surface of approximately $21,000. At the time of the first closing in May 2018, the Company lost voting and ownership control of Surface and it ceased consolidating Surface’s financial statements. The Surface Series A Stock (i) was issued at a purchase price of $3.30 per share; (ii) will vote together with the common stock and all other shares of stock of Surface having general voting power; (iii) will be entitled to the number of votes equal to the number of shares of preferred stock held; (iv) will hold liquidation preference over all other equity interests in Surface; and (v) will have mandatory conversion requirements into Surface common stock upon events including an underwritten initial public offering (“IPO”) of Surface common stock or similar transaction.

At the time of deconsolidation, the Company recorded a gain of $5,320 and adjusted the carrying value in Surface to reflect the increased valuation of Surface and the Company’s new ownership interest in accordance with ASC 810-10-40-4(c), Consolidation.

The Company owns 3,500,000 common shares (which is approximately 30% of the equity interest as of June 30, 2019) of Surface and uses the equity method of accounting for this investment, as management has determined that the Company has the ability to exercise significant influence over the operating and financial decisions of Surface. Under this method, the Company recognizes earnings and losses of Surface in its consolidated financial statements and adjusts the carrying amount of its investment in Surface accordingly. The Company’s share of earnings and losses are based on the Company’s ownership interest of Surface. Any intra-entity profits and losses are eliminated. The Company recorded equity in net loss of Surface of $261 and $504 during the three and six months ended June 30, 2019. The Company recorded equity in net loss of Surface of $102 during the three and six months ended June 30, 2018. As of June 30, 2019, the carrying value of the Company’s investment in Surface was $4,443.

See Note 5 for more information and related party disclosure regarding Surface.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842). This new guidance was initiated as a joint project with the International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify all leases with a term of over one year as either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use” asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease classification, with finance leases recognizing the amortization of the right-of-use asset separate from the interest on the lease liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU No. 2016-02 would be substantially unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 took effect for public companies in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. On January 1, 2019, the Company adopted Topic 842 using the modified retrospective transition method with no impact to stockholders’ equity. As of June 30, 2019, the Company held on its condensed consolidated balance sheet $6,069 for the right-of-use asset and $6,472 for the related lease liability related to operating leases. The difference between the right of use asset and related lease liability is predominantly deferred rent and other related lease expenses under the new lease accounting standard. For additional information regarding how the Company is accounting for leases under Topic 842, refer to Note 12.

Recently Issued Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other. This guidance simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the current two-step impairment test under ASC 350. The updated standard eliminates the requirement to calculate a goodwill impairment charge using Step 2. If a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for reporting periods beginning after December 31, 2019 on a prospective basis, and early adoption is permitted. The Company does not expect ASU 2017-04 to have a material effect on the Company’s financial position, results of operations and cash flows.

NOTE 3. REVENUES

The Company accounts for contracts with customers in accordance with ASC 606, Revenues from Contracts with Customers. The Company has two primary streams of revenues: (1) revenues recognized from our sale of products within our pharmacy services and (2) revenues recognized from intellectual property license and asset purchase agreements.

Product Revenues from Pharmacy Services

The Company sells prescription drugs directly through our pharmacy and outsourcing facility network. Revenues from our pharmacy services divisions includes: (i) the portion of the price the client pays directly to us, net of any volume-related or other discounts paid back to the client, (ii) the price paid to us by individuals, and (iii) customer copayments made directly to the pharmacy network. Sales taxes are not included in revenue. Following the core principle of ASC 606, we have identified the following:

	1.	Identify the contract(s) with a customer: A contract exists with a customer at the time the prescription or order is received by the Company.

	2.	Identify the performance obligations in the contract: The order received contains the performance obligations to be met, in almost all cases the product the customer is wishing to receive. If we are unable to be meet the performance obligation, the customer is notified.

	3.	Determine the transaction price: the transaction price is based on the product being sold to the customer, and any related customer discounts. These amounts are pre-determined and built into our order management software.

	4.	Allocate the transaction price to the performance obligations in the contract: The transaction price associated with the product(s) being ordered is allocated according to the pre-determined amounts.

	5.	Recognize revenue when (or as) the entity satisfies a performance obligation: At the time of shipment from the pharmacy or outsourcing facility, the performance obligation has been met.

The following revenue recognition policy has been established for the pharmacy services division:

Revenues generated from prescription or office use drugs sold by our pharmacies and outsourcing facility are recognized when the prescription is shipped. At the time of shipment, the pharmacy services division has performed substantially all of its obligations under its client contracts and does not experience a significant level of returns or reshipments. Determination of criteria (3) and (4) is based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. The Company records reductions to revenue for discounts at the time of the initial sale. Estimated returns and allowances and other adjustments are provided for in the same period during which the related sales are recorded and are based on actual returns history. The rate of returns is analyzed annually to determine historical returns experience. If the historical data we use to calculate these estimates do not properly reflect future returns, then a change in the allowance would be made in the period in which such a determination is made and revenues in that period could be materially affected. The Company will defer any revenues received for a product that has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered and no refund will be required.

Intellectual Property License Revenues

The Company currently holds five intellectual property license and related agreements in which the Company has promised to grant a license or sale which provides a customer with the right to access the Company’s intellectual property. License arrangements may consist of non-refundable upfront license fees, data transfer fees, research reimbursement payments, exclusive license rights to patented or patent pending compounds, technology access fees, and various performance or sales milestones. These arrangements can be multiple element arrangements, the revenue of which is recognized at the point of time the performance obligation is met.

Non-refundable fees that are not contingent on any future performance by the Company and require no consequential continuing involvement on the part of the Company are recognized as revenue when the license term commences and the licensed data, technology, compounded drug preparation and/or other deliverable is delivered. Such deliverables may include physical quantities of compounded drug preparations, design of the compounded drug preparations and structure-activity relationships, the conceptual framework and mechanism of action, and rights to the patents or patent applications for such compounded drug preparations. The Company defers recognition of non-refundable fees if it has continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee and that are separate and independent of the Company’s performance under the other elements of the arrangement. In addition, if the Company’s continued involvement is required, through research and development services that are related to its proprietary know-how and expertise of the delivered technology or can only be performed by the Company, then such non-refundable fees are deferred and recognized over the period of continuing involvement. Guaranteed minimum annual royalties are recognized on a straight-line basis over the applicable term.

Revenue disaggregated by revenue source for the three and six months ended June 30, 2019 and 2018, consists of the following:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Product sales, net	$	13,509	$	10,374	$	25,792	$	19,229
License revenues		7		10		14		20
Total revenues	$	13,516	$	10,384	$	25,806	$	19,249

Deferred revenue and customer deposits at June 30, 2019 and December 31, 2018, was $224 and $119, retrospectively. All deferred revenue and customer deposit amounts at December 31, 2018 were recognized as revenue during the six months ended June 30, 2019.

NOTE 4. INVESTMENT IN MELT PHARMACEUTICALS, INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS

In December 2018, the Company entered into an asset purchase agreement with Melt (the “Melt Asset Purchase Agreement”). Pursuant to the terms of the Melt Asset Purchase Agreement, Melt was assigned certain intellectual property and related rights from the Company to develop, formulate, make, sell, and sub-license certain Company conscious sedation and analgesia related formulations (collectively, the “Melt Products”). Under the terms of the Melt Asset Purchase Agreement, Melt is required to make royalty payments to the Company up to eight percent (8%) of net sales of the Melt Products while any patent rights remain outstanding, as well as other conditions. In January and March 2019, the Company entered into the Melt Series A Preferred Stock Agreement.

In February 2019, the Company and Melt entered into a Management Services Agreement (the “Melt MSA”), whereby the Company provides to Melt certain administrative services and support, including bookkeeping, web services and human resources related activities, and Melt pays the Company a monthly amount of $10.

As of June 30, 2019, the Company was due $714 from Melt for reimbursable expenses and amounts due under the Melt MSA and included in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

The Company’s Chief Executive Officer, Mark L. Baum, and Chief Medical Officer, Larry Dillaha, are members of the Melt board of directors, and several employees of the Company (including Mr. Baum and the Company’s Chief Financial Officer, Andrew Boll) entered into consulting agreements and provide consulting services to Melt.

The unaudited condensed results of operations information of Melt is summarized below:

	For the
	Six months ended
	June 30, 2019
Revenues, net	$	-
Loss from operations		1,382
Net loss	$	(1,382	)

The unaudited condensed balance sheet information of Melt is summarized below:

	June 30,
	2019
Current assets	$	9,521
Non current assets		3
Total assets	$	9,524

Total liabilities	$	940
Total preferred stock and stockholders’ equity		8,584
Total liabilities and stockholders’ equity	$	9,524

NOTE 5. INVESTMENT IN SURFACE PHARMACEUTICALS, INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS

The Company entered into an asset purchase and license agreement in 2017, and amended it in April 2018 (the “Surface License Agreements”) with Surface. Pursuant to the terms of the Surface License Agreements, the Company assigned and licensed to Surface certain intellectual property and related rights to develop, formulate, make, sell, and sub-license formulations of certain topical eye drop formulations that utilize a proprietary delivery vehicle and a proprietary doxycycline capsule (collectively, the “Surface Products”). Surface is required to make royalty payments to the Company of four to six percent (4%-6%) of net sales of the Surface Products while any patent rights remain outstanding.

In January 2018, the Company and Surface entered into an amended Management Services Agreement (the “Surface MSA”), whereby the Company provided to Surface certain administrative services and support, including bookkeeping, web services and human resources related activities, and Surface paid the Company a monthly amount of $10. The Surface MSA was terminated effective July 31, 2018.

As of June 30, 2019, the Company was due $50 from Surface for reimbursable expenses and amounts due under the Surface MSA and included in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.

As of June 30, 2019, the Company owned 3,500,000 shares of Surface common stock (approximately 30% of the issued and outstanding equity interests). The Company’s director, Richard L. Lindstrom and the Company’s Chief Executive Officer, Mark L. Baum, are directors of Surface. In addition, the Company’s Chief Financial Officer, Andrew R. Boll, was a director of Surface and resigned as a director of Surface concurrent with the sale of the Surface Series A Stock. Several employees and a director of the Company (including Mr. Baum, Dr. Lindstrom and Mr. Boll) entered into consulting agreements and provided consulting services to Surface. Surface is required to make royalty payments to Dr. Lindstrom of three percent (3%) of net sales of certain Surface products while certain patent rights remain outstanding. Dr. Lindstrom is also a principal of Flying L Partners, an affiliate of the funding investor who purchased the Surface Series A Stock.

The unaudited condensed results of operations information of Surface is summarized below:

	For the
	Six Months Ended
	June 30, 2019
Revenues, net	$	-
Loss from operations		1,680
Net loss	$	(1,680	)

The unaudited condensed balance sheet information of Surface is summarized below:

	June 30,
	2019
Current assets	$	18,061
Non current assets		48
Total assets	$	18,109

Total liabilities	$	532
Total stockholders’ equity		17,577
Total liabilities and stockholders’ equity	$	18,109

NOTE 6. INVENTORIES

Inventories are comprised of finished compounded formulations, over-the-counter and prescription retail pharmacy products, commercial pharmaceutical products, related laboratory supplies and active pharmaceutical ingredients. The composition of inventories as of June 30, 2019 and December 31, 2018 was as follows:

	June 30,		December 31,
	2019		2018
Raw materials	$	1,758	$	1,119
Work in progress		264		6
Finished goods		630		709
Total inventories	$	2,652	$	1,834

NOTE 7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

	June 30,		December 31,
	2019		2018
Prepaid insurance	$	65	$	328
Other prepaid expenses		434		334
Receivable due from Surface		50		50
Receivable due from Melt		714		-
Deposits and other current assets		138		125
Total prepaid expenses and other current assets	$	1,401	$	837

NOTE 8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

	June 30, 2019			December 31, 2018
Property, plant and equipment, net:
Computer software and hardware	$	1,743		$	1,662
Furniture and equipment		420			397
Lab and pharmacy equipment		3,416			3,184
Leasehold improvements		5,612			5,496
		11,191			10,739
Accumulated depreciation and amortization		(5,245	)		(4,364	)
	$	5,946		$	6,375

For the three and six months ended June 30, 2019, depreciation related to the property, plant and equipment was $491 and $968, respectively.

NOTE 9. INTANGIBLE ASSETS AND GOODWILL

The Company’s intangible assets at June 30, 2019 consisted of the following:

	Amortization
	periods			Accumulated						Net
	(in years)	Cost		amortization			Impairment			Carrying value
Patents	17-19 years	$	962	$	(64	)	$	-		$	898
Licenses	20 years		50		(5	)		-			45
Trademarks	Indefinite		332		-			-			332
Customer relationships	3-15 years		2,998		(1,115	)		(15	)		1,868
Trade name	5 years		16		(15	)		(1	)		-
Non-competition clause	3-4 years		294		(274	)		(20	)		-
State pharmacy licenses	25 years		45		(6	)		(28	)		11
		$	4,697	$	(1,479	)	$	(64	)	$	3,154

Amortization expense for intangible assets for the three and six months ended June 30, 2019 was as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Patents	$	11		6	$	15	$	13
Licenses		1		-		5		-
Customer relationships		51	$	50		102		100
Trade name		-		1		2		3
Non-competition clause		-		-		-		1
State pharmacy licenses		-		-		1		-
	$	63	$	57	$	125	$	117

Estimated future amortization expense for the Company’s intangible assets at June 30, 2019 is as follows:

Remainder of 2019	$	128
2020		252
2021		252
2022		252
2023		252
Thereafter		2,018
	$	3,154

There have been no changes in the carrying value of the Company’s goodwill during the three and six months ended June 30, 2019.

NOTE 10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

	June 30, 2019			December 31, 2018
Accounts payable	$	5,957		$	4,966
Accrued litigation settlement (see Note 14)		733			640
Deferred rent		-			388
Accrued interest		253			256
Accrued exit fee for note payable		800			800
Total accounts payable and accrued expenses		7,743			7,050
Less: Current portion		(6,943	)		(6,250	)
Non-current total accrued expenses	$	800		$	800

NOTE 11. DEBT

SWK Refinance – May 2019

In May 2019, the Company entered into a joinder and amendment (the “Amendment”) to its term loan and security agreement dated as of July 19, 2017 (the “SWK Loan”), with SWK Funding LLC and its partners (the “Lender”), as lender and collateral agent. A summary of the material changes contained in the Amendment are as follows:

	●	The interest rate calculation that the loan bears is now equal to the three-month London Inter-Bank Offered Rate (subject to a minimum of 2.00%), plus an applicable margin of 10.00% (the “Margin Rate”); provided that, if, two days prior to a payment date, the Company provides the Lender evidence that the Company has achieved a leverage ratio as of such date of less than 4.00:1:00, the Margin Rate shall equal 9.00%; and if the Company has achieved a leverage ratio as of such date of less than 3.00:1:00, the Margin Rate shall equal 7.00%;

	●	Leverage ratio in the Amendment means, as of any date of determination, the ratio of: (a) indebtedness as of such date to (b) EBITDA (as defined in the SWK Loan), of the Company for the immediately preceding twelve (12) month period, adding-back (i) actual litigation expenses for the immediately preceding twelve (12) month period, minus (ii) actual litigation expenses for the immediately preceding three (3) month period multiplied by four (4);

	●	The definition of the first amortization date was changed to May 14, 2020, permitting the Company to pay interest only on the principal amount loaned for the next four payments (payments are due on a quarterly basis) following the Amendment; and

	●	Subject to the satisfaction of certain revenue and market capitalization requirements and conditions, the Lender agreed to make available to the Company an additional principal amount of up to $5,000.

In addition to the terms described above, the Amendment joined the Company’s recently created subsidiaries to the SWK Loan and added definitions related to excluded subsidiaries that are not considered co-borrowers and are subsidiaries of the Company which the Company believes it will eventually deconsolidate from its financials and lose 50% or more of the equity interests of the subsidiary.

Related to the Amendment, the Company incurred expenses related to legal and lender costs of $282 that are included in debt discount and will be amortized over the term of the SWK Loan.

At June 30, 2019, future minimum payments under the Company’s note payable were as follows:

	Amount
Remainder of 2019	$	1,216
2020		3,696
2021		4,121
2022		3,828
2023		7,330
Total minimum payments		20,191
Less: amount representing interest		(4,941	)
Notes payable, gross		15,250
Less: unamortized discount		(1,505	)
		13,745
Less: current portion, net of unamortized discount		(247	)
Note payable, net of current portion and unamortized debt discount	$	13,498

For the three and six months ended June 30, 2019, debt discount amortization related to note payable was $125 and $250, respectively.

NOTE 12. LEASES

The Company adopted Topic 842 on January 1, 2019. Topic 842 allows the Company to elect a package of practical expedients, which include: (i) an entity need not reassess whether any expired or existing contracts are or contain leases; (ii) an entity need not reassess the lease classification for any expired or existing leases; and (iii) an entity need not reassess any initial direct costs for any existing leases. Another practical expedient allows the Company to use hindsight in determining the lease term when considering lessee options to extend or terminate the lease and to purchase the underlying asset. The Company has elected to utilize the package of practical expedients and has not elected the hindsight methodology in its implementation of Topic 842.

The Company elected to adopt this standard using the optional modified retrospective transition method and recognized a cumulative-effect adjustment to the condensed consolidated balance sheet on the date of adoption. Comparative periods have not been restated. With the adoption of Topic 842, the Company’s condensed consolidated balance sheet now contains the following line items: Right-of-use assets, Operating lease liabilities—short-term and Operating lease liabilities—long-term.

The Company determined that it held the following significant operating leases of office and laboratory space as of January 1, 2019:

	●	An operating lease for 10,200 square feet of office space in San Diego, California that expires in December 2021, with an option to extend the term for a five-year period;

	●	An operating lease for 4,500 square feet of office and lab space in Irvine, California that expires in December 2020, with an option to extend the term for up to two five-year periods. The Company expects this lease will be assigned if the sale of Park closes (see Note 16); and

	●	An operating lease for 25,000 square feet of lab, warehouse and office space in Ledgewood, New Jersey that expires in July 2024, with an option to extend the term for two additional five-year periods.

The extensions within the San Diego, California and Ledgewood, New Jersey operating lease agreements were included within the Company’s calculation of the new lease standard as the Company is reasonably certain it will exercise its option to extend these leases. The Company has elected to not recognize right-of-use assets and lease liabilities arising from short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

The previously classified capital leases are now classified as finance leases under the new standard. The Company has determined that the identified finance leases did not contain non-lease components and require no further allocation of the total lease cost. The Company has determined that the identified operating leases did contain non-lease components and elected an accounting policy to combine non-lease and lease components to determine the total lease cost. Additionally, the operating agreements in place did not contain information to determine the rate implicit in the leases. As such, the Company calculated the incremental borrowing rate based on the assumed remaining lease term for each lease in order to calculate the present value of the remaining lease payments. At June 30, 2019, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases held by the Company were 6.36% and 12.11 years, respectively.

Upon adoption of Topic 842, the Company recorded a $6,325 increase in operating lease right-of-use assets, a $388 decrease in accounts payable and accrued expenses and a $6,712 increase in operating lease liability. The Company did not record any cumulative effect adjustments to opening stockholders’ equity. As of June 30, 2019, right-of-use assets and liabilities arising from operating leases were $6,069 and $6,472, respectively. During the three and six months ended June 30, 2019, cash paid for amounts included for the operating lease liabilities was $230 and $448 and the Company recorded operating lease expense of $232 and $464 included in selling, general and administrative expenses, respectively.

Future lease payments under operating leases as of June 30, 2019 were as follows:

	Operating Leases
Remainder of 2019	$	457
2020		930
2021		809
2022		824
2023		843
Thereafter		5,304
Total minimum lease payments		9,167
Less: amount representing interest payments		(2,695	)
Total operating lease liabilities		6,472
Less: current portion, operating lease liabilities		(496	)
Operating lease liabilities, net of current portion	$	5,976

The Company also has two additional finance leases that are included in its lease accounting but are not considered significant.

Future lease payments under non-cancelable finance leases as of June 30, 2019 were as follows:

	Finance Leases
Remainder of 2019	$	368
2020		9
2021		9
2022		9
2023		10
Total minimum lease payments		405
Less: amount representing interest payments		(6	)
Present value of future minimum lease payments		399
Less: unamortized discount		-
		399
Less: current portion, net of unamortized discount		(370	)
Finance lease obligation, net of current portion	$	29

At June 30, 2019, the weighted average incremental borrowing rate and the weighted average remaining lease term for the finance leases held by the Company were 9.71% and 0.70 years, respectively.

For the three and six months ended June 30, 2019, debt discount amortization related to a finance lease obligation was $6 and $13, respectively, and included in interest expense, net.

For the three and six months ended June 30, 2019, depreciation expense related to the equipment held under the finance lease obligations was $73 and $146, respectively.

For the three and six months ended June 30, 2019, cash paid and expense recognized for interest expense related to the finance lease obligation was $4 and $15, respectively.

Future minimum lease payments under operating leases and future minimum finance lease payments as of December 31, 2018 were as follows (in thousands):

	Finance Leases			Operating Leases
2019	$	751		$	797
2020		-			857
2021		-			742
2022		-			320
2023		-			330
Thereafter		-			196
	$	751		$	3,242
Less: Amounts representing interest		(15	)
Less: Amounts representing unamortized discount		(16	)
Total obligation under capital leases		720
Less: Current portion of capital leases		(720	)
Long term capital lease obligation	$	-

NOTE 13. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

Common Stock

In March 2019, the Company issued 15,000 shares of its restricted common stock, with a fair value of $75, as consideration for commission expenses incurred during the six months ended June 30, 2019.

During the six months ended June 30, 2019, the Company issued 20,955 shares of its common stock upon the cashless exercise of 57,933 options to purchase common stock, with exercise prices ranging from $1.70 to $4.09 per share.

During the six months ended June 30, 2019, the Company issued 663,338 shares of its common stock upon the cashless exercise of 932,000 warrants to purchase common stock with an exercise price of $1.79 per share.

During the six months ended June 30, 2019, the Company issued 100,055 shares of its common stock upon the exercise of 100,055 warrants to purchase common stock with an exercise price of $1.79 per share, and received net proceeds of $179.

During the six months ended June 30, 2019, 68,180 shares of the Company’s common stock underlying RSUs issued to directors vested, but the issuance and delivery of these shares are deferred until the director resigns.

Stock Option Plan

On September 17, 2007, the Company’s Board of Directors and stockholders adopted the Company’s 2007 Incentive Stock and Awards Plan, which was subsequently amended on November 5, 2008, February 26, 2012, July 18, 2012, May 2, 2013 and September 27, 2013 (as amended, the “2007 Plan”). The 2007 Plan reached its term in September 2017, and we can no longer issue additional awards under this plan, however, options previously issued under the 2007 Plan will remain outstanding until they are exercised, reach their maturity or are otherwise cancelled/forfeited. On June 13, 2017, the Company’s Board of Directors and stockholders adopted the Company’s 2017 Incentive Stock and Awards Plan (the “2017 Plan” together with the 2007 Plan, the “Plans”). As of June 30, 2019, the 2017 Plan provides for the issuance of a maximum of 2,000,000 shares of the Company’s common stock. The purpose of the Plans are to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons in the Company’s development and financial success. Under the Plans, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the Internal Revenue Code, non-qualified stock options, restricted stock units and restricted stock. The Plans are administered by the Compensation Committee of the Company’s Board of Directors. The Company had 997,280 shares available for future issuances under the 2017 Plan at June 30, 2019.

Stock Options

A summary of stock option activity under the Plans for the six months ended June 30, 2019 is as follows:

	Number of shares			Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life		Aggregate Intrinsic Value
Options outstanding - January 1, 2019		2,482,009		$	5.10
Options granted		352,000		$	6.17
Options exercised		(57,933	)	$	3.72
Options cancelled/forfeited		(50,471	)	$	5.83
Options outstanding - June 30, 2019		2,725,605		$	5.25		5.61	$	9,621
Options exercisable		1,461,723		$	4.69		5.98	$	6,091
Options vested and expected to vest		2,607,104		$	5.21		5.63	$	9,323

The aggregate intrinsic value in the table above represents the total pre-tax amount of the proceeds, net of exercise price, which would have been received by option holders if all option holders had exercised and immediately sold all options with an exercise price lower than the market price on June 28, 2019, based on the closing price of the Company’s common stock of $8.70 on that date.

During the six months ended June 30, 2019, the Company granted stock options to certain employees and a consultant. The stock options were granted with an exercise price equal to the current market price of the Company’s common stock, as reported by the securities exchange on which the common stock was then listed, at the grant date and have contractual terms of 10 years. Vesting terms for options granted to employees and consultants during the six months ended June 30, 2019 typically included one of the following vesting schedules: 25% of the shares subject to the option vest and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over three years; 100% of the shares subject to the option vest on a quarterly basis in equal installments over three years; and 90% of the shares subject to the option vest and become exercisable on the second month after the grant date and the remaining 10% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over the next 11 months. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plan) and in the event of certain modifications to the option award agreement.

The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model. Beginning on April 1, 2018, the Company began calculating expected volatility based solely on the historical volatilities of the common stock of the Company. In the past, the expected volatility was based on the historical volatilities of the common stock of the Company and comparable publicly traded companies, the Company previously utilized this methodology based on its estimate that it had limited relevant historical data regarding the volatility of its stock price on which to base a meaningful estimate of expected volatility. The expected term of options granted to employees and directors was determined in accordance with the “simplified approach,” as the Company has limited, relevant, historical data on employee exercises and post-vesting employment termination behavior. The expected risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The financial statement effect of forfeitures is estimated at the time of grant and revised, if necessary, if the actual effect differs from those estimates. For option grants to employees and directors, the Company assigns a forfeiture factor of 10%. These factors could change in the future, which would affect the determination of stock-based compensation expense in future periods. Utilizing these assumptions, the fair value is determined at the date of grant.

The table below illustrates the fair value per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options granted to employees:

	2019
Weighted-average fair value of options granted	$	3.64
Expected terms (in years)		5.8 - 6.1
Expected volatility		64% - 67	%
Risk-free interest rate		2.19% - 2.68	%
Dividend yield		-

The following table summarizes information about stock options outstanding and exercisable at June 30, 2019:

	Options Outstanding						Options Exercisable
			Weighted
			Average		Weighted				Weighted
			Remaining		Average				Average
	Number		Contractual		Exercise		Number		Exercise
Range of Exercise Prices	Outstanding		Life in Years		Price		Exercisable		Price
$1.47 - $2.60		816,936		7.22	$	2.04		526,237	$	2.12
$2.76 - $4.66		495,496		6.68	$	3.97		441,452	$	3.99
$5.61 - $6.30		440,350		8.41	$	6.16		122,159	$	6.04
$6.64 - $8.99		967,793		2.44	$	8.01		366,845	$	8.24
$42.80		5,030		1.12	$	42.80		5,030	$	42.80
$1.47 - $42.80		2,725,605		5.61	$	5.25		1,461,723	$	4.69

As of June 30, 2019, there was approximately $4,128 of total unrecognized compensation expense related to unvested stock options granted under the Plans. That expense is expected to be recognized over the weighted-average remaining vesting period of 3.94 years. The stock-based compensation expense for all stock options was $262 and $540 during the three and six months ended June 30, 2019, respectively.

Restricted Stock Units

RSU awards are granted subject to certain vesting requirements and other restrictions, including performance and market-based vesting criteria. The grant date fair value of the RSUs, which has been determined based upon the market value of the Company’s common stock on the grant date, is expensed over the vesting period of the RSUs. Unvested portions of RSUs issued to consultants are remeasured on an interim basis until vesting criteria is met.

During the six months ended June 30, 2019, 185,000 RSUs with a fair market value of $1,139 were issued to certain employees; the RSUs vest in full on the third year anniversary of the grant date.

During the three and six months ended June 30, 2019, the Company’s board of directors were granted 38,860 RSUs with a fair market value $300 which vests on a quarterly basis, over one year in equal installments.

A summary of the Company’s RSU activity and related information for the six months ended June 30, 2019 is as follows:

	Number of RSUs			Weighted Average Grant Date Fair Value
RSUs unvested - January 1, 2019		1,275,680		$	2.16
RSUs granted		223,860		$	6.43
RSUs vested		(68,180	)	$	2.20
RSUs cancelled/forfeited		-
RSUs unvested at June 30, 2019		1,431,360		$	2.83

As of June 30, 2019, the total unrecognized compensation expense related to unvested RSUs was approximately $1,076, which is expected to be recognized over a weighted-average period of 0.37 years, based on estimated and actual vesting schedules of the applicable RSUs. The stock-based compensation for RSUs during the three and six months ended June 30, 2019 was $110 and $540, respectively.

Warrants

From time to time, the Company issues warrants to purchase shares of the Company’s common stock to investors, lenders, underwriters and other non-employees for services rendered or to be rendered in the future, or pursuant to settlement agreements.

A summary of warrant activity for the six months ended June 30, 2019 is as follows:

	Number of Shares Subject to Warrants Outstanding			Weighted Avg. Exercise Price

Warrants outstanding - January 1, 2019		2,206,973		$	1.91
Granted		-
Exercised		(1,032,055	)	$	1.79
Expired		-
Warrants outstanding and exercisable - June 30, 2019		1,174,918		$	2.01
Weighted average remaining contractual life of the outstanding warrants in years - June 30, 2019		3.51

A list of the warrants outstanding as of June 30, 2019 is included in the following table:

Warrants

Exercise

Expiration

Warrant Series

Issue Date

Outstanding

Price

Date

Lender warrants

5/11/2015

125,000

1.79

5/11/2025

Settlement warrants

8/16/2016

40,000

3.75

8/16/2021

PIPE investor and placement agent warrants

12/27/2016

394,532

1.79

12/27/2019

Lender warrants

7/19/2017

615,386

2.08

7/19/2024

1,174,918

Subsidiary Stock-Based Transactions

Mayfield Pharmaceuticals, Inc.

The Company issued 1,000,000 shares of Mayfield’s common stock to Elle in connection with acquisition of certain drug candidate intellectual property and rights in February 2019. Following the issuance of Mayfield common stock to Elle, and as of June 30, 2019, the Company owned 72% of the equity interests in Mayfield. Mayfield is a consolidated subsidiary; the Company reports the operating results of Mayfield and allocates the noncontrolling interests to the non-majority partners.

Stock-Based Compensation Summary

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

	For the Three Months Ended				For the Six Months Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Employees - selling, general and administrative	$	268	$	573	$	906	$	1,166
Directors - selling, general and administrative		75		35		150		85
Consultants - selling, general and administrative		24		-		99		108
Total	$	367	$	608	$	1,155	$	1,359

NOTE 14. COMMITMENTS AND CONTINGENCIES

Dr. Sobol

In December 2016, Louis L. Sobol, M.D. (“Sobol”) filed a lawsuit in the U.S. District Court for the Eastern District of Michigan, Southern Division against the Company, asserting claims on behalf of himself and an as-yet-uncertified class of consumers. The claims allege violations under the Telephone Consumer Protection Act, 47 U.S.C. § 227 via the Company’s alleged transmittal of advertisements to its clients via facsimile. In February 2019, prior to a ruling on class certification, the Company entered into a proposed settlement agreement to award the class up to $1,400 in damages. The Court approved the proposed settlement agreement in the spring of 2019 and on or about August 14, 2019, the Court will make a final ruling on the total damage award. As a result of the low claim rate of approximately 1.4%, the Company does not expect total damages to exceed $640, which was accrued as an expense during the year ended December 31, 2018 (see Note 10).

Allergan USA

In September 2017, Allergan USA, Inc. (“Allergan”) filed a lawsuit in the U.S. District Court for the Central District of California against the Company, primarily claiming violations under the federal Lanham Act and California’s Sherman Act. The Court granted in part and denied in part each parties’ motions for summary judgement, resolving all issues except for whether Allergan was entitled to damages related to the Company’s purported Lanham Act violations. The parties went to trial in May 2019 to litigate damages related to the Lanham Act, and a jury found the Company liable for only $48 in lost profit damages, which was accrued as an expense during the period ended June 30, 2019 (see Note 10). In July 2019, the Court entered a permanent injunction, the scope of which is limited to compounded drugs prepared in, dispensed from within, or shipped to the state of California. The injunction requires the Company to: (1) only dispense drugs from a 503(a) facility with a “Valid Prescription Order”; (2) abide by the FDA’s anticipatory compounding guidelines; and (3) only use bulk drug substances identified on a list established by the Secretary of Health and Human Services or FDA’s interim “Category 1” list. The Company believes its was already in compliance with the order, prior to the injunction being ordered.

Novel Drug Solutions et al.

In April 2018, Novel Drug Solutions, LLC and Eyecare Northwest, PA, (collectively “NDS”) filed a lawsuit against the Company in the U.S. District Court of Delaware asserting claims for breach of contract. The claims stem from an asset purchase agreement between the Company and NDS entered into in 2013 (the “NDS APA”). In July 2019, NDS filed a second amended complaint which added a claim related to its purported termination of the NDS APA. On August 12, 2019, the Company notified NDS of its acceptance of their purported termination of the NDS APA. The Company does not expect the termination of the NDS APA to affect its operations or revenues. The Company believes the claims are meritless and has previously and will continue to dispute all claims asserted against it and intends to vigorously defend against these allegations. Nonetheless, the Company cannot predict the eventual outcome of this litigation and, it could result in substantial costs, losses and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock.

California Board of Pharmacy

In March 2018, the California Board of Pharmacy filed an accusation against Park related to a compounded formulation the Company believes was legally dispensed and was, without its knowledge, inappropriately administered to a patient unknown to Park, by the prescribing healthcare professional. Park filed a response to the accusation and requested a formal hearing. In April 2019, Park agreed to and the California State Board of Pharmacy approved terms of a settlement agreement (the “Settlement Agreement”) that became effective on May 29, 2019. Pursuant to the terms of the Settlement Agreement, Park is required to surrender its California pharmacy license by August 27, 2019; provided however, in the event of a sale of Park, the California State Board of Pharmacy agreed to expedite the issuance of a temporary license to the Park acquiror. The Company recently entered into an agreement to sell the Park business and is actively working on the transfer of the Park license to the acquiror (see Note 16). If a sale is not completed, the Company expects its New Jersey-based pharmacy to retain approximately half of the Park business and revenues.

Product and Professional Liability

Product and professional liability litigation represents an inherent risk to all firms in the pharmaceutical and pharmacy industry. We utilize traditional third-party insurance policies with regard to our product and professional liability claims. Such insurance coverage at any given time reflects current market conditions, including cost and availability, when the policy is written.

John Erick et al.

In January 2018, John Erick and Deborah Ferrell, successors-in-interest and heirs of Jade Erick, (collectively “Erick”) filed a lawsuit in the San Diego County Superior against Kim Kelly, ND, MPH asserting claims related to death of Jade Erick. In April 2018, Erick filed an amendment to the lawsuit, naming us as a co-defendant. In September 2018, co-defendant Dr. Kelly filed a cross-complaint against the Company and various Spectrum entities. The cross-complaint seeks indemnity and contribution from the Company and Spectrum. The Company answered the claims filed by Dr. Kelly in October 2018. The case is currently in the discovery phase. The Company believes the claims are meritless and has previously and will continue to dispute all claims asserted against it and intends to vigorously defend against these allegations. Nonetheless, the Company cannot predict the eventual outcome of this litigation, it could result in substantial costs, losses and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock.

Anna Sue Gaukel et al.

In June 2019, Anna Sue Gaukel and Lawrence Gaukel served the Company with a lawsuit filed in state court in Idaho against Imprimis Pharmaceuticals, Inc. asserting class action allegations and product liability claims related to Mrs. Gaukel’s doctor’s use of a compounded drug injection in each of her eyes. In June 2019, the Company removed the case to Federal Court and subsequently answered the complaint. The case is in the early phase. The Company believes the claims are meritless and has previously and will continue to dispute all claims asserted against it and intends to vigorously defend against these allegations. Nonetheless, the Company cannot predict the eventual outcome of this litigation, it could result in substantial costs, losses and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock.

General and Other

In the ordinary course of business, the Company may face various claims brought by third parties and it may, from time to time, make claims or take legal actions to assert its rights, including intellectual property disputes, contractual disputes and other commercial disputes. Any of these claims could subject the Company to litigation.

Indemnities

In addition to the indemnification provisions contained in the Company’s governing documents, the Company generally enters into separate indemnification agreements with each of the Company’s directors and officers. These agreements require the Company, among other things, to indemnify the director or officer against specified expenses and liabilities, such as attorneys’ fees, judgments, fines and settlements, paid by the individual in connection with any action, suit or proceeding arising out of the individual’s status or service as the Company’s director or officer, other than liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest, and to advance expenses incurred by the individual in connection with any proceeding against the individual with respect to which the individual may be entitled to indemnification by the Company. The Company also indemnifies its lessors in connection with its facility leases for certain claims arising from the use of the facilities. These indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities in the accompanying condensed consolidated balance sheets.

Klarity License Agreement – Related Party

The Company entered into a license agreement in April 2017 and as amended in April 2018, (the “Klarity License Agreement”) with Richard L. Lindstrom, M.D., a member of its Board of Directors. Pursuant to the terms of the Klarity License Agreement, the Company licensed certain intellectual property and related rights from Dr. Lindstrom to develop, formulate, make, sell, and sub-license the topical ophthalmic solution Klarity used to protect and rehabilitate the ocular surface (the “Klarity Product”).

Under the terms of the Klarity License Agreement, the Company is required to make royalty payments to Dr. Lindstrom ranging from 3% - 6% of net sales, dependent upon the final formulation of the Klarity Product sold. In addition, the Company is required to make certain milestone payments to Dr. Lindstrom including: (i) an initial payment of $50 upon execution of the Klarity License Agreement, (ii) a second payment of $50 following the first $50 in net sales of the Klarity Product; and (iii) a final payment of $50 following the first $100 in net sales of the Klarity Product. All of the above referenced milestone payments are payable at the Company’s election in cash or shares of the Company’s restricted common stock. Payments totaling $22 and $37 were made during the three and six months ended June 30, 2019, respectively. $26 and $48 was incurred as royalty expense during the three and six months ended and included in accounts payable to Dr. Lindstrom at June 30, 2019.

Sales and Marketing Agreements

During 2017, the Company entered various sales and marketing agreements with certain organizations, to provide exclusive sales and marketing representation services to Harrow in select geographies in the U.S., in connection with our ophthalmic compounded formulations.

Under the terms of the sales and marketing agreements, the Company is required to make commission payments equal to 10% - 14% of net sales for products above and beyond the initial existing sales amounts. In addition, the Company is required to make periodic milestone payments to certain organizations in shares of the Company’s restricted common stock if net sales in the assigned territory reach certain future levels by the end of their terms, as applicable. $0 and $75 of stock-based payments were made and $640 and $1,182 were incurred under these agreements for commission expenses during the three and six months ended June 30, 2019, respectively.

Asset Purchase, License and Related Agreements

The Company has acquired and sourced intellectual property rights related to certain proprietary innovations from certain inventors and related parties (the “Inventors”) through multiple asset purchase agreements, license agreements, strategic agreements and commission agreements. In general, these agreements provide that the Inventors will cooperate with the Company in obtaining patent protection for the acquired intellectual property and that the Company will use commercially reasonable efforts to research, develop and commercialize a product based on the acquired intellectual property. In addition, the Company has acquired a right of first refusal on additional intellectual property and drug development opportunities presented by these Inventors.

In consideration for the acquisition of the intellectual property rights, the Company is obligated to make payments to the Inventors based on the completion of certain milestones, generally consisting of: (1) a payment payable within 30 days after the issuance of the first patent in the United States arising from the acquired intellectual property (if any); (2) a payment payable within 30 days after the Company files the first investigational new drug application (“IND”) with the FDA for the first product arising from the acquired intellectual property (if any); (3) for certain of the Inventors, a payment payable within 30 days after the Company files the first new drug application with the FDA for the first product arising from the acquired intellectual property (if any); and (4) certain royalty payments based on the net receipts received by the Company in connection with the sale or licensing of any product based on the acquired intellectual property (if any), after deducting (among other things) the Company’s development costs associated with such product. If, following five years after the date of the applicable asset purchase agreement, the Company either (a) for certain of the Inventors, has not filed an IND or, for the remaining Inventors, has not initiated a study where data is derived, or (b) has failed to generate royalty payments to the Inventors for any product based on the acquired intellectual property, the Inventors may terminate the applicable asset purchase agreement and request that the Company re-assign the acquired technology to the Inventors. $274 and $465 and $114 and $197 were incurred under these agreements as royalty expenses for the three and six months ended June 30, 2019 and 2018, respectively, and $274 and $114 were included in accounts payable at June 30, 2019 and 2018, respectively.

NOTE 15. SEGMENT INFORMATION AND CONCENTRATIONS

Beginning on January 1, 2019, the Company began evaluating performance of the Company based on operating segments. Segment performance for its two operating segments are based on segment contribution. The Company’s reportable segments consist of (i) its commercial stage pharmaceutical compounding business (Pharmaceutical Compounding), generally including the operations of ImprimisRx and Park businesses; and (ii) its start-up operations associated with pharmaceutical drug development business (Pharmaceutical Drug Development). Segment contribution for the segments represents net revenues less cost of sales, research and development, selling and marketing expenses, and select general and administrative expenses. The Company does not evaluate the following items at the segment level:

	●	Selling, general and administrative expenses that result from shared infrastructure, including certain expenses associated with legal matters, public company costs (e.g. investor relations), board of directors and principal executive officers and other like shared expenses.

	●	Operating expenses within selling, general and administrative expenses that result from the impact of corporate initiatives. Corporate initiatives primarily include integration, restructuring, acquisition and other shared costs.

	●	Other select revenues and operating expenses including R&D expenses, amortization, and asset sales and impairments, net as not all such information has been accounted for at the segment level, or such information has not been used by all segments.

	●	Total assets including capital expenditures.

The Company defines segment net revenues as pharmaceutical compounded drug sales, licenses and other revenue derived from related agreements.

Cost of sales within segment contribution 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 and other related expenses.

Selling, general and administrative expenses consist mainly of personnel-related costs, marketing and promotion costs, distribution costs, professional service costs, insurance, depreciation, facilities costs, transaction costs, and professional services costs which are general in nature and attributable to the segment.

Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the three and six months ended June 30, 2019:

	For the Three Months Ended June 30, 2019
	Pharmaceutical			Pharmaceutical
	Compounding			Drug Development			Total
Net revenues	$	13,516		$	-		$	13,516
Cost of sales		(5,225	)		-			(5,225	)
Gross profit		8,291			-			8,291

Operating expenses:
Selling, general and administrative		5,804			43			5,847
Research and development		533			127			660
Segment contribution		1,954			(170	)		1,784
Corporate								2,342
Research and development								150
Amortization								59
Operating loss							$	(767	)

	For the Six Months Ended June 30, 2019
	Pharmaceutical			Pharmaceutical
	Compounding			Drug Development			Total
Net revenues	$	25,806		$	-		$	25,806
Cost of sales		(9,123	)		-			(9,123	)
Gross profit		16,683			-			16,683

Operating expenses:
Selling, general and administrative		11,519			86			11,605
Research and development		658			263			921
Segment contribution		4,506			(349	)		4,157
Corporate								5,061
Research and development								294
Amortization								125
Operating loss							$	(1,323	)

The Company categorizes revenues by geographic area based on selling location. All operations are currently located in the U.S.; therefore, total revenues are attributed to the U.S. All long-lived assets at June 30, 2019 and December 31, 2018 are located in the U.S.

The Company sells its compounded formulations to a large number of customers. There were no customers who comprised more than 10% of the Company’s total pharmacy sales for the three and six months ended June 30, 2019 and 2018.

The Company receives its active pharmaceutical ingredients from three main suppliers. These suppliers collectively accounted for 69% and 65% of active pharmaceutical ingredient purchases during the three and six months ended June 30, 2019, respectively, and 54% and 52% during the three and six months ended June 30, 2018, respectively.

NOTE 16. SUBSEQUENT EVENTS

The Company has performed an evaluation of events occurring subsequent to June 30, 2019 through the filing date of this Quarterly Report. Based on its evaluation, no events other than those described below need to be disclosed.

From July 1, 2019 through the date of the filing of this Quarterly Report, the Company issued 25,135 shares of its common stock related to the cashless exercise of 32,532 common stock warrants with an exercise price of $1.79.

From July 1, 2019 through the date of the filing of this Quarterly Report, the Company issued 1,872 shares of its common stock upon the exercise of 1,872 options to purchase common stock, with exercise prices ranging from $1.70 to $3.20 per share, and received net proceeds of $5.

Park Sale

In July 2019, Park entered into an Asset Purchase Agreement (the “Park APA”) with Noice. Under the terms of the Park APA, Park has agreed to sell substantially all of its assets associated with its non-ophthalmology pharmaceutical compounding business, including but not limited to, trademarks, copyrights, inventories, equipment, customer lists, databases, permits, licenses, and assignment of the Company’s lease obligation for its Irvine, California based pharmacy, for a total purchase price of $8,000 (the “Purchase Price”).

Related to the Park APA, Noice entered into a loan agreement with Park equal to the Purchase Price (the “Sellers Note”). The Sellers Note will bear interest at 9.5% per annum and will be secured by all the assets of Noice. Noice will make ninety-six (96) monthly cash payments to the Company over the eight years following the closing. The first twenty-four months of the Sellers Note will require interest only payments of $63, with a principal payment of $2,000 due on September 15, 2021. Beginning on October 15, 2021, monthly payments will include interest and amortization of the principal balance and be equal to $119. The Sellers Note includes a warrant that becomes exercisable in five years and is equal to 19.9% of the ownership interests of Noice.

The closing of the Park APA is dependent on the California State Board of Pharmacy issuing a temporary pharmacy and sterile license permit to Noice, which Noice has applied for. If the license is issued, the closing is expected to occur on or before August 27, 2019, subject to other customary terms and conditions. If the sale is closed, the Park business will be classified as discontinued operations in future periods.

Mayfield License

In July 2019, Mayfield entered into a License Agreement (the “TGV License”) with TGV-Health, LLC and TGV-Gyneconix, LLC (collectively, “TGV”), to acquire intellectual property rights for use in the women’s health field, related to Mayfield’s proprietary drug candidate MAY-66. The TGV License provides that TGV will cooperate with Mayfield in transferring all embodiments of the intellectual property (including know-how) related to the TGV License, assist in obtaining and protecting its patent rights for the acquired intellectual property and that Mayfield will use commercially reasonable efforts to research, develop and commercialize products based on the acquired intellectual property. In connection with the TGV License, Mayfield is obligated to make royalty payments to TGV equal to a low single digit percentage of net sales received by Mayfield in connection with the sale or licensing of any product based on the licensed intellectual property. In addition, Mayfield issued 300,000 shares of its common stock to TGV and is required to make certain milestone payments to TGV over the development of MAY-66 and any related products based on the licensed intellectual property.

Stowe License

In July 2019, Stowe entered into a License Agreement (the “Stowe License”) with TGV-Health, LLC and TGV- Ophthalnix, LLC (collectively, “TGV-O”), to acquire intellectual property rights for use in the ophthalmology and otic health field, related to Stowe’s proprietary drug candidate STE-006. The Stowe License provides that TGV-O will cooperate with Stowe in transferring all embodiments of the intellectual property (including know-how) related to the Stowe License, assist in obtaining and protecting its patent rights for the acquired intellectual property and that Stowe will use commercially reasonable efforts to research, develop and commercialize products based on the acquired intellectual property. In connection with the Stowe License, Stowe is obligated to make royalty payments to TGV-O equal to a low single digit percentage of net sales received by Stowe in connection with the sale or licensing of any product based on the licensed intellectual property. In addition, Stowe agreed to issue 1,750,000 shares of its common stock to TGV-O and is required to make certain milestone payments to TGV-O over the development of STE-006 and any related products based on the licensed intellectual property.

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 accounting principles generally accepted in the United States of America (“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 fiscal year ended December 31, 2018 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 Health, Inc. and its consolidated subsidiaries, consisting of Park Compounding, Inc., ImprimisRx, LLC, ImprimisRx NJ, LLC dba ImprimisRx, Imprimis NJOF, LLC, Radley Pharmaceuticals, Inc., Mayfield Pharmaceuticals, Inc., and Stowe Pharmaceuticals, Inc. In this discussion and analysis, we refer to our consolidated subsidiaries ImprimisRx, LLC, ImprimisRx NJ, LLC and Imprimis NJOF, LLC collectively as our “ImprimisRx compounding pharmacies.”

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: our ability to successfully implement our business plan, develop and commercialize our proprietary formulations in a timely manner or at all, identify and acquire additional proprietary formulations, manage our pharmacy operations, 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; competition from pharmaceutical companies, outsourcing facilities and pharmacies; successful completion and close of the sale of Park Compounding, Inc.; the successful transfer of assets and/or revenues among our pharmacies; general economic and business conditions; 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; our limited operating history; and the other risks and uncertainties described under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report. 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

Our business specializes in the development, production and sale of innovative medications that offer unique competitive advantages and serve unmet needs in the marketplace through our subsidiaries and deconsolidated companies. We own one of the nation’s leading ophthalmology pharmaceutical businesses, ImprimisRx. In addition to wholly owning ImprimisRx, we also have equity positions in Eton Pharmaceuticals, Inc. (“Eton”), Surface Pharmaceuticals, Inc. (“Surface”), and Melt Pharmaceuticals, Inc. (“Melt”). More recently, we founded our drug development subsidiaries Mayfield Pharmaceuticals, Inc. (“Mayfield”), Radley Pharmaceuticals, Inc. (“Radley”), and Stowe Pharmaceuticals, Inc. (“Stowe”). We also own royalty rights in certain 505(b)(2) drug candidates being developed by Surface, Melt, Radley and Mayfield. We intend to continue to pursue the creation of new subsidiaries, and found, and hold equity and royalty rights, in, new businesses that commercialize drug candidates that are internally developed or otherwise acquired or licensed from third parties.

Pharmaceutical Compounding Businesses

Pharmaceutical Compounding

Pharmaceutical compounding is the science of combining different active pharmaceutical ingredients (APIs), all of which are approved by the U.S. Food and Drug Administration (“FDA”) (either as a finished form product or as a bulk drug ingredient) and excipients, to create specialized pharmaceutical preparations. Physicians and healthcare institutions use compounded drugs when commercially available drugs do not optimally treat a patient’s needs. In many cases, compounded drugs, such as ours, have wide market utility and may be clinically appropriate for large patient populations. Examples of compounded formulations include medications with alternative dosage strengths or unique dosage forms, such as topical creams or gels, suspensions, or solutions with more tolerable drug delivery vehicles.

Almost all of our sales revenue is derived from making, selling and dispensing our compounded prescription drug formulations as cash pay transactions between us and our end-user customer. As such, the majority of our commercial transactions do not involve distributors, wholesalers, insurance companies, pharmacy benefit managers or other middle parties. By not being reliant on insurance company formulary inclusion and pharmacy benefit manager payment clawbacks, we are able to simplify the prescription transaction process. We believe the outcome of our business model is a simple transaction, involving a patient-in-need, a physician’s diagnosis and a fair price and great service for a quality pharmaceutical product. We sell our products through a network of employees and independent contractors and we dispense our formulations in all 50 states, Puerto Rico and in selected markets outside the United States.

ImprimisRx

ImprimisRx is our ophthalmology focused pharmaceutical compounding business. We offer our thousands of physician customers and their patients critical medicines to meet needs that are unmet by commercially available drugs. We make our formulations available at prices that are, in most cases, lower than non-customized commercial drugs. Our current ophthalmology formulary includes over twenty compounded formulations, many of which are patented or patent-pending, and are customizable for the specific needs of a patient. Some examples of our compounded medications are various combinations of drugs formulated into one bottle and numerous preservative free formulations. Depending on the formulation, the regulations of a specific state and ultimately the needs of the patient, ImprimisRx products may be dispensed as patient-specific medications from our 503A pharmacies, or for in-office use, made according to current good manufacturing practices (or “cGMPs”) or other FDA guidance documents, in our FDA-registered outsourcing facility (“NJOF”).

Park Compounding

Park Compounding, Inc. (“Park”), our wholly owned subsidiary pharmacy based in Irvine, California, is focused on primarily health and wellness related, customizable pharmaceutical compounding. Park dispenses sterile and non-sterile compounded medications prescribed by licensed practitioners when commercially available choices do not meet a patient’s needs. Park also produces and dispenses certain of our ophthalmology-based formulations. In July 2019, we entered into an asset purchase agreement to sell substantially all the assets of Park, contingent upon the California Board of Pharmacy issuing the buyer a temporary pharmacy permit and other customary terms and conditions. If a temporary license is issued, we expect to close the sale of Park on or before August 27, 2019 – as described more fully above under the sub-heading “Park Sale” (see Note 16).

Pharmaceutical Development Businesses

We have ownership interests in Eton, Surface, Melt, Mayfield and Radley and hold royalty interests in certain of their drug candidates. These companies are pursuing market approval for their drug candidates under the United States Federal Food, Drug, and Cosmetic Act (“FDCA”), including under the abbreviated pathway described in Section 505(b)(2) which permits the submission of a new drug application (“NDA”) where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. In 2018 and 2019, we formed and created subsidiaries named Radley, Mayfield, and Stowe, which we intend to operate similar to Eton, Surface and Melt. In addition, we intend to create additional subsidiaries that will be focused on the development and FDA approval of certain proprietary drug formulations that we currently own, will in-license/acquire and/or otherwise develop.

Eton Pharmaceuticals, Inc.

Eton is a pharmaceutical company focused on developing and commercializing innovative products utilizing the FDA’s 505(b)(2) regulatory pathway. Its pipeline includes several products and drug candidates in various stages of development across a variety of dosage forms. Eton’s pipeline is focused on innovative 505(b)(2) products and obtaining FDA marketing approval for currently marketed but unapproved drugs.

In May 2017, Eton closed an offering of its Series A Preferred Stock and we lost our controlling interest in it. In November 2018, Eton completed an initial public offering of its common stock. We own 3,500,000 shares of Eton common stock, which we estimate is approximately 19.7% of the equity and voting interests issued and outstanding of Eton as of June 30, 2019.

Surface Pharmaceuticals, Inc.

Surface is a development-stage pharmaceutical company focused on development and commercialization of innovative therapeutics for ocular surface diseases and is seeking FDA approval for the commercialization of its drug candidates through the Section 505(b)(2) regulatory pathway under the FDCA. In 2017 and amended in April 2018, Harrow entered into asset purchase and license agreements (the “Surface License Agreements”) and transferred to Surface its current drug pipeline, which consists of three proprietary drug candidates. Surface’s patent-pending topical eye drop drug candidates, SURF-100 and SURF-200, utilize a patented delivery vehicle known as Klarity Drops (“Klarity”), that was invented by Harrow board member and Surface’s chairman of the board and renowned ophthalmologist Dr. Richard Lindstrom. Klarity is designed to protect and rehabilitate the ocular surface pathology for patients with dry eye disease, or DED. Surface’s drug candidate SURF-300 is a patent-pending oral capsule that will target patients also suffering from DED signs and symptoms.

In May and July 2018, Surface closed on an offering of its Series A Preferred Stock. At that time, we lost our controlling interest and deconsolidated Surface from our consolidated financial statements. We own 3,500,000 shares of Surface which we estimate is approximately 30% of the equity and voting interests as of June 30, 2019.

Melt Pharmaceuticals, Inc.

Melt is a development-stage pharmaceutical company focused on the development and commercialization of proprietary non-intravenous, sedation and anesthesia therapeutics for human medical procedures in hospital, outpatient, and in-office settings. Melt intends to seek regulatory approval through the FDA’s 505(b)(2) regulatory pathway for its proprietary technologies, where possible. In December 2018, we entered into an Asset Purchase Agreement with Melt (the “Melt Asset Purchase Agreement”), and Harrow assigned to Melt the underlying intellectual property for Melt’s current pipeline, including its lead drug candidate MELT-100. The core intellectual property Melt owns is a patented series of combination non-opioid sedation drug formulations that we estimate to have multitudinous applications. Pursuant to the terms of the Melt Asset Purchase Agreement, Melt is required to make royalty payments to the Company equal to five percent (5%) to eight (8%) of net sales of products described in the Melt Asset Purchase Agreement, while any patent rights remain outstanding, subject to other conditions.

During January and March 2019, Melt closed on the sale of its Series A Preferred Stock. At the time of the closing of the Melt Series A Round, we lost our controlling interest, and deconsolidated Melt from our consolidated financial statements. We own 3,500,000 shares of Melt common stock, which we estimate is approximately 44% of the equity and voting interests.

Mayfield Pharmaceuticals, Inc.

Mayfield, a consolidated subsidiary of Harrow, is a development-stage women’s health-focused pharmaceutical company. Mayfield is focused on enhancing women’s lives by developing products that address significant and conspicuous unmet needs. Its development programs focus on using known molecules in dosage forms for new indications, and by developing new chemical entities with known mechanisms of action. Mayfield recently licensed worldwide rights to a first in class drug candidate with antibacterial, antiviral and antifungal activity for the women’s health field. MAY-66 a patented new chemical entity drug candidate, is being studied to treat recurrent bacterial vaginosis. In February 2019, Mayfield acquired drug formulation assets and intellectual property, including three recently issued patents, for MAY-44, a drug candidate for the treatment of dyspareunia, or pain experienced by women during sexual intercourse. In addition to MAY-44, Mayfield is also developing MAY-88 for patients suffering from interstitial cystitis, which it will acquire from Harrow.

Mayfield and Harrow acquired the intellectual property associated with MAY-44 in January 2019 from Elle Pharmaceutical LLC (the “Mayfield Asset Purchase Agreement”) in exchange for $25,000, with an additional $175,000 due upon third party financing of Mayfield, 1,000,000 shares of Mayfield common stock and a 7.5% royalty rate on sales of the product.

We own 2,500,000 shares of Mayfield common stock, which was 72% of the equity and voting interests issued and outstanding of Mayfield at June 30, 2019. We intend to pursue a deconsolidating transaction for Mayfield during 2019. Once deconsolidated, we expect Mayfield to be run by experienced life science executive, Melissa Bradford-Klug.

Radley Pharmaceuticals, Inc.

Radley, a consolidated subsidiary of Harrow, is a development-stage pharmaceutical company focused on the development of proprietary 505(b)(2) drug candidates focused on rare diseases. Radley currently has three proprietary drug candidates in its pipeline. During 2019, and prior to initiating significant development activities and costs related to these drug candidates, we intend to meet with the FDA to establish and understand the expected clinical and regulatory path to approval for these drug candidates. We are also pursuing investigator-initiated studies for some of Radley’s drug candidates with two well-known healthcare institutions based in the New York and Boston areas. We believe this approach will allow us to better understand and weigh the economic costs, clinical feasibility and potential benefits associated with pursuing development activities associated with these drug candidates. Radley is also pursuing additional asset acquisition and licensing opportunities with a focus in oncology related therapies.

Stowe Pharmaceuticals, Inc.

Stowe is a consolidated subsidiary of Harrow that was formed in 2019, focused on the development of its proprietary ophthalmic drug candidate STE-006. STE-006 is a patented, new chemical entity, small molecule topical drug candidate intended to treat various bacterial, fungal, and viral infections in the eye. In initial preclinical models, STE-006 was shown to be significantly more effective compared to current conventional therapies against numerous bacterial and viral pathogens, including strains of methicillin-resistant staphylococcus aureus, or MRSA, and herpes simplex virus. STE-006 has several patents covering matter of composition, methods of production, methods of use and molecule, which are valid until 2038.

Factors Affecting Our Performance

We believe the primary factors affecting our performance are our ability to increase revenues of our proprietary compounded formulations and certain non-proprietary products, grow and gain operating efficiencies in our pharmacy operations, optimize pricing and obtain reimbursement options for our proprietary compounded formulations, and continue to pursue development and commercialization opportunities for certain of our ophthalmology and other assets that we have not yet made commercially available as compounded formulations. We believe we have built a tangible and intangible infrastructure that will allow us to scale revenues efficiently in the 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.

Reimbursement Options

Our proprietary ophthalmic compounded formulations are currently primarily available on a cash-pay basis. However, we work with third-party insurers, pharmacy benefit managers and buying groups to offer patient-specific customizable compounded formulations at accessible prices. We may devote time and other resources to seek reimbursement and patient pay opportunities for these and other compounded formulations and we have hired pharmacy billers to process certain existing reimbursement opportunities for certain formulations. However, we may be unsuccessful in achieving these goals, as many third-party payors have imposed significant restrictions on reimbursement for compounded formulations in recent years. Moreover, third-party payors, including Medicare, are increasingly attempting to contain health care costs by limiting coverage and the level of reimbursement for new drugs and by refusing, in some cases, to provide coverage for uses of approved products for disease indications for which the FDA has not granted labeling approval. Further, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the “Health Care Reform Law”), may have a considerable impact on the existing U.S. system for the delivery and financing of health care and could conceivable have a material effect on our business. As a result, reimbursement from Medicare, Medicaid and other third-party payors may never be available for any of our products or, if available, may not be sufficient to allow us to sell the products on a competitive basis and at desirable price points. We are communicating with government and third-payor payors in order to make our formulations available to more patients and at optimized pricing levels. However, if government and other third-party payors do not provide adequate coverage and reimbursement levels for our formulations, the market acceptance and opportunity for our formulations may be limited.

Recent Developments

The following describes certain developments in 2019 to date that are important to understand our financial condition and results of operations. See the notes to our condensed consolidated financial statements included in this report for additional information about each of these developments.

Melt Pharmaceuticals Asset Purchase Agreement and Series A Round

As described more fully above under the sub-heading “Melt Pharmaceuticals, Inc.”, we entered into the Melt Asset Purchase Agreement with our previously wholly owned subsidiary, Melt. Following closing of the Melt Series A Round, in January 2019, we lost controlling interest in Melt. Pursuant to the terms of the Melt Asset Purchase Agreement, we assigned and licensed to Melt certain intellectual property and related rights to develop, formulate, make, sell, and sub-license its current drug candidate pipeline.

Mayfield Pharmaceuticals MAY-44 Asset Purchase Agreement

As described more fully above under the sub-heading “Mayfield Pharmaceuticals, Inc.”, in February 2019, we along with our subsidiary, Mayfield, entered the Mayfield Asset Purchase Agreement with Elle Pharmaceuticals, Inc. to acquire intellectual property associated with its drug candidate, MAY-44.

SWK Refinance – May 2019

In May 2019, we entered into a joinder and amendment (the “Amendment”) to our term loan and security agreement dated as of July 19, 2017 (the “SWK Loan”), with SWK Funding LLC and its partners (the “Lender”), as lender and collateral agent. A summary of the material changes contained in the Amendment are as follows:

●

The interest rate calculation that the loan bears is now equal to the three-month London Inter-Bank Offered Rate (subject to a minimum of 2.00%), plus an applicable margin of 10.00% (the “Margin Rate”) provided that, if, two days prior to a payment date, we provide the Lender evidence that we have achieved a leverage ratio as of such date of less than 4.00:1:00, the Margin Rate shall equal 9.00%; and if we have achieved a leverage ratio as of such date of less than 3.00:1:00, the Margin Rate shall equal 7.00%;

	●	Leverage ratio in the Amendment means, as of any date of determination, the ratio of: (a) indebtedness as of such date to (b) EBITDA (as defined in the SWK Loan), of us for the immediately preceding twelve (12) month period, adding-back (i) actual litigation expenses for the immediately preceding twelve (12) month period, minus (ii) actual litigation expenses for the immediately preceding three (3) month period multiplied by four (4);

	●	The definition of the first amortization date was changed to May 14, 2020, permitting us to pay interest only on the principal amount loaned for the next four payments (payments are due on a quarterly basis) following the Amendment; and

	●	Subject to the satisfaction of certain revenue and market capitalization requirements and conditions, the Lender agreed to make available to us an additional principal amount of up to $5,000,000.

In addition to the terms described above, the Amendment joined our recently created subsidiaries to the SWK Loan and added definitions related to excluded subsidiaries that are not considered co-borrowers and are subsidiaries ours which we believe will eventually be deconsolidated from our financials and we will lose 50% or more of the equity interests of the subsidiary.

Park Sale

In July 2019, we entered into an Asset Purchase Agreement (the “Park APA”) with NoiceRx, LLC (“Noice”). Under the terms of the Park APA, Park has agreed to sell substantially all its assets associated with its non-ophthalmology pharmaceutical compounding business, including but not limited to, trademarks, copyrights, inventories, equipment, customer lists, databases, permits, licenses, and assignment of the Company’s lease obligation for its Irvine, California based pharmacy, for a total purchase price of $8,000,000 (the “Purchase Price”).

Related to the Park APA, Noice entered into a loan agreement with Park equal to the Purchase Price (the “Sellers Note”). The Sellers Note will bear interest at 9.5% per annum and will be secured by all the assets of Noice. Noice will make ninety-six (96) monthly cash payments to the Company over the eight years following the closing. The first twenty-four months of the Sellers Note will require interest only payments of $63,333 with a principal payment of $2,000 due on September 15, 2021. Beginning on October 15, 2021, monthly payments will include interest and amortization of the principal balance and be equal to $119,287. The Sellers Note included a warrant that becomes exercisable in five years and is equal to 19.99% of the ownership interests of Noice.

Mayfield Pharmaceuticals MAY-66 License

As described more fully above under the sub-heading “Mayfield Pharmaceuticals, Inc.”, in July 2019, our subsidiary Mayfield, entered the TGV License Agreement to acquire intellectual property associated with its drug candidate, MAY-66.

Stowe License

In July 2019, Stowe entered into a License Agreement (the “Stowe License”) with TGV-Health, LLC and TGV- Ophthalnix, LLC (collectively, “TGV-O”), to acquire intellectual property rights for use in the ophthalmology and otic health fields, related to Stowe’s proprietary drug candidate STE-006. The Stowe License provides that TGV-O will cooperate with Stowe in transferring all embodiments of the intellectual property (including know-how) related to the Stowe License, assist in obtaining and protecting its patent rights for the acquired intellectual property and that Stowe will use commercially reasonable efforts to research, develop and commercialize products based on the acquired intellectual property. In connection with the Stowe License, Stowe is obligated to make royalty payments to TGV-O equal to a low single digit percentage of net sales received by Stowe in connection with the sale or licensing of any product based on the licensed intellectual property. In addition, Stowe agreed to issue 1,750,000 shares of its common stock to TGV-O and is required to make certain milestone payments to TGV-O over the development of STE-006 and any related products based on the licensed intellectual property.

Results of Operations

The following period-to-period comparisons of our financial results for the three and six months ended June 30, 2019 and 2018, are not necessarily indicative of results for the current period or any future period.

Revenues

Our revenues include amounts recorded from sales of proprietary compounded formulations and revenues received from royalty payments owed to us pursuant to out-license arrangements.

The following presents our revenues for the three and six months ended June 30, 2019 and 2018:

	For the Three Months Ended							For the Six Months Ended
	June 30,				$			June 30,				$
	2019		2018		Variance			2019		2018		Variance
Product sales, net	$	13,509,000	$	10,374,000	$	3,135,000		$	25,792,000	$	19,229,000	$	6,563,000
License revenues		7,000		10,000		(3,000	)		14,000		20,000		(6,000	)
Total revenues	$	13,516,000	$	10,384,000	$	3,132,000		$	25,806,000	$	19,249,000	$	6,557,000

The increase in revenues between periods was largely attributable to increased sales of our proprietary formulations and furtherance of our ophthalmology-related pharmaceutical compounded formulations. Our gross ophthalmology-related sales were approximately $12,098,000 and $23,074,000 for the three and six months ended June 30, 2019, compared to $8,262,000 and $15,242,000 during the same periods last year, respectively. Net revenues generated from NJOF totaled $8,285,000 and $15,683,000 during the three and six months ended June 30, 2019, respectively, and $5,909,000 and $10,498,000 during the three and six months ended June 30, 2018, respectively.

Cost of Sales

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 and other related expenses.

The following presents our cost of sales for the three and six months ended June 30, 2019 and 2018:

	For the Three Months Ended						For the Six Months Ended
	June 30,				$		June 30,				$
	2019		2018		Variance		2019		2018		Variance
Cost of sales	$	5,225,000	$	4,157,000	$	1,068,000	$	9,123,000	$	8,228,000	$	895,000

The increase in our cost of sales between periods was largely attributable to an increase in production of new formulations and temporarily increase of waste associated with the costs of such new products.

Gross Profit and Margin

	For the Three Months Ended									For the Six Months Ended
	June 30,						$			June 30,						$
	2019			2018			Variance			2019			2018			Variance
Gross Profit	$	8,291,000		$	6,227,000		$	2,064,000		$	16,683,000		$	11,021,000		$	5,662,000
Gross Margin		61	%		60	%		1	%		65	%		57	%		8	%

The increase in gross profit and gross margin between periods is largely attributable to increased efficiencies in our production process, extension of beyond using dating, or BUD, of some of our products, and utilization of capacities as a result of increased output and unit volumes. During the second quarter of 2019 we introduced new formulations that we believe temporarily decreased our overall efficiency, and we expect gross margins in the second half of 2019 to improve.

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 and six months ended June 30, 2019 and 2018:

	For the Three Months Ended						For the Six Months Ended
	June 30,				$		June 30,				$
	2019		2018		Variance		2019		2018		Variance
Selling, general and administrative	$	8,248,000	$	6,779,000	$	1,469,000	$	16,791,000	$	13,267,000	$	3,524,000

The increase in selling, general and administrative expenses between periods was largely attributable to increased sales commission amounts and legal expenses incurred associated with ongoing litigation.

Research and Development Expenses

Our research and development expenses primarily include expenses related to the development of acquired intellectual property, investigator-initiated research and evaluations and other costs related to the clinical development of our assets.

The following presents our research and development expenses for the three and six months ended June 30, 2019 and 2018:

	For the Three Months Ended						For the Six Months Ended
	June 30,				$		June 30,				$
	2019		2018		Variance		2019		2018		Variance
Research and development	$	810,000	$	72,000	$	738,000	$	1,215,000	$	159,000	$	1,056,000

The increase in research and development expenses between periods was primarily attributable to the increase in formulation development studies for new ophthalmic formulations and clinical programs related to our drug development segment during the three and six months ended June 30, 2019.

Interest Expense, net

Interest expense, net was $716,000 and $1,319,000 for the three and six months ended June 30, 2019 compared to $671,000 and $1,334,000 during the same period last year. The decrease during the six-month period ending June 30, 2019 as compared to the same period in 2018 was primarily due to interest expense recognition related to a decrease in the amortization of our capital lease obligations. The increase during the three-month period ending June 30, 2019, as compared to the same period in 2018, was primarily due to the increase in interest expense recognition related to the refinance of our long term debt (see Note 11).

Investment Gain (Loss) from Melt, net

During the six months ended June 30, 2019, we recorded a net gain of $5,199,000 related to our investment in Melt. We recorded a gain of $5,810,000 for the deconsolidation of Melt, and a loss of $611,000 for our share of losses based on our ownership of Melt. We began using equity method accounting for our investment in Melt beginning on January 30, 2019, the date we no longer had a controlling interest. Prior to that date, Melt’s losses were consolidated within our statements of operations.

Investment Gain (Loss) from Surface

During the three and six months ended June 30, 2019, we recorded a loss of $261,000 and $504,000, respectively, for our share of losses based on our ownership of Surface. During the three and six months ended June 30, 2018, we recorded a loss of $102,000, for our share of losses based on our ownership of Surface. During the three and six months ended June 30, 2018, we recorded a gain of $5,320,000 on the deconsolidation of surface. We began using equity method accounting for our investment in Surface beginning on June 11, 2018, the date we no longer had a controlling interest. Prior to that date, Surface’s losses were consolidated within our statements of operations.

Investment Gain (Loss) from Eton, net

We recorded a loss of $(350,000) and gain of $6,230,000 related to the change in fair market value of Eton’s common stock for the three and six months ended June 30, 2019, respectively. During the three and six months ended June 30, 2018, we recorded a loss of $(1,146,000) and $(2,215,000), respectively, for our share of losses based on our ownership of Eton. We began recording our investment in Eton at fair market value, and ceased equity method accounting for our investment in Eton, in November 2018 following Eton’s IPO and our ownership percent falling below 20%.

Other Income (Expense), net

During the six months ended June 30, 2019, we recorded other income, net of $630,000. This was the result of income of $630,000 related to expenses that were paid by us and will be reimbursed by Melt following its deconsolidation. During the three and six months ended June 30, 2018, we recorded other expense, net of $255,000. This was due to a loss of $393,000 related to the impairment and write-off of a note receivable, and income of $138,000 related to expenses that were paid by us and reimbursed by Surface following its deconsolidation.

Net Income (Loss)

The following table presents our net income (loss) for the three and six months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019		2018
Net income (loss) attributable to Harrow Health, Inc.	$	(2,378,000	)	$	2,522,000	$	8,980,000	$	(991,000	)
Net income (loss) per share, basic	$	(0.09	)	$	0.12	$	0.36	$	(0.05	)
Net income (loss) per share, diluted	$	(0.09	)	$	0.11	$	0.34	$	(0.05	)

Financial Information About Segments and Geographic Areas

Beginning on January 1, 2019, we began evaluating performance of the Company based on operating segments. Segment performance for our two operating segments are based on segment contribution. Our reportable segments consist of (i) our commercial stage pharmaceutical compounding business (Pharmaceutical Compounding), generally including the operations of our ImprimisRx and Park businesses; and (ii) the start-up operations associated with our pharmaceutical drug development business (Pharmaceutical Drug Development). Segment contribution for the segments represents net revenues less cost of sales, research and development, selling and marketing expenses, and select general and administrative expenses. We do not evaluate the following items at the segment level:

	●	Selling, general and administrative expenses that result from shared infrastructure, including certain expenses associated with litigation and other legal matters, public company costs (e.g. investor relations), board of directors and principal executive officers, and other like shared expenses.

	●	Operating expenses within selling, general and administrative expenses that result from the impact of corporate initiatives. Corporate initiatives primarily include integration, restructuring, acquisition and other shared costs.

	●	Other select revenues and operating expenses including R&D expenses, amortization, and asset sales and impairments, net as not all such information has been accounted for at the segment level, or such information has not been used by all segments.

	●	Total assets including capital expenditures.

The Company defines segment net revenues as pharmaceutical compounded drug sales, licenses and other revenue derived from related agreements.

See Note 15 to our condensed consolidated financial statements included in this Quarterly Report for more information about our reportable segments.

Liquidity and Capital Resources

Liquidity

Our cash on hand (including restricted cash) at June 30, 2019 was $4,193,000, compared to $6,838,000 at December 31, 2018. Since inception through December 31, 2018, we have incurred aggregate losses of $74,211,000. These losses are primarily due to selling, general and administrative and research and development expenses incurred in connection with developing and seeking regulatory approval for a former drug candidate, which activities we have now discontinued, the development and commercialization of novel compounded formulations and the development of our pharmacy operations.

As of the date of this Quarterly Report, we believe that cash and cash equivalents of $3,993,000 and restricted investments of $200,000 totaling approximately $4,193,000 at June 30, 2019, will be sufficient to sustain our planned level of operations and capital expenditures for at least the next 12 months. We also may consider the sale of certain assets including, but not limited to, part of, or all of, our ownership interest in Eton and/or any of our consolidated subsidiaries. However, our plans for this period may change, our estimates of our operating expenses, capital expenditures and working capital requirements could be inaccurate, we may pursue acquisitions of pharmacies or other strategic transactions that involve large expenditures or we may experience growth more quickly 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 earlier than we expect 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 compounded formulations and technologies, integrating and developing our compounding operations, pursuing potential future strategic transactions as opportunities arise, including potential acquisitions of additional pharmacy, outsourcing facilities, drug company and manufacturers, and/or assets or technologies, 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 Six Months Ended June 30,
	2019			2018
Net cash provided by (used in) operating activities	$	(632,000	)	$	400,000
Net cash used in investing activities		(785,000	)		(700,000	)
Net cash provided by (used in) financing activities		(1,228,000	)		251,000
Net change in cash and cash equivalents		(2,645,000	)		(49,000	)
Cash and cash equivalents at beginning of the period		6,838,000			4,219,000
Cash and cash equivalents at end of the year	$	4,193,000		$	4,170,000

Operating Activities

Net cash provided by (used in) operating activities was $(632,000), compared to $400,000 in operating activities during the same period in the prior year. The increase in net cash used in operating activities during the periods was mainly attributed to increased unit volumes and sales, and the addition of new formulations which temporarily reduced operating efficiencies.

Investing Activities

Net cash used in investing activities during the six months ended June 30, 2019 and 2018 was $(785,000) and $(700,000), respectively. Cash used in investing activities in 2019 and 2018, was primarily associated with equipment purchases and upgrades and investments in our intellectual property portfolio.

Financing Activities

Net cash provided by (used in) financing activities during the six months ended June 30, 2019 and 2018 was $(1,228,000) and $251,000, respectively. Cash used in financing activities during the six months ended June 30, 2019 was mostly related to principal payments on our note payable.

Sources of Capital

Our principal source of cash consists of cash provided by operating activities from our pharmaceutical compounding business. We may also sell some or all of our ownership interests in Eton, Surface, Melt or our subsidiaries. We just recently began producing cash from our operations during 2018, however historically and during the three and six months ended June 30, 2019, we have not generated sufficient revenues to support our operations and may not be able to continue to do so.

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 and options 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 included in the agreements governing the loan from SWK Funding, LLC and its partners. 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, including our past bankruptcy proceedings. 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.

Recently Issued and Adopted Accounting Pronouncements

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted pursuant to the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

Under the supervision and with the participation of our principal executive officer and principal financial officer, our management conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act, as they existed on June 30, 2019. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective to achieve their stated purpose as of June 30, 2019, the end of the period covered by this report.

Changes in Internal Controls over Financial Reporting

There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended June 30, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

Dr. Sobol

In December 2016, Louis L. Sobol, M.D. (“Sobol”) filed a lawsuit in the U.S. District Court for the Eastern District of Michigan, Southern Division against us, asserting claims on behalf of himself and an as-yet-uncertified class of consumers. The claims allege violations under the Telephone Consumer Protection Act, 47 U.S.C. § 227 via our alleged transmittal of advertisements to our clients via facsimile. In February 2019, prior to a ruling on class certification, we entered into a proposed settlement agreement to award the class up to $1.4 million in damages. The Court approved our proposed settlement agreement in the spring of 2019 and on or about August 14, 2019, the Court will make a final ruling on the total damage award. As a result of the low claim rate of approximately 1.4%, we do not expect total damages to exceed $640,000, which we accrued as an expense during the year ended December 31, 2018.

Allergan USA

In September 2017, Allergan USA, Inc. (“Allergan”) filed a lawsuit in the U.S. District Court for the Central District of California against Imprimis Pharmaceuticals, Inc., primarily claiming violations under the federal Lanham Act and California’s Sherman Act. The Court granted in part and denied in part each parties’ motions for summary judgement, resolving all issues except for whether Allergan was entitled to damages related to Imprimis’ purported Lanham Act violations. The parties went to trial in May 2019 to litigate damages related to the Lanham Act, and a jury found Imprimis liable for only $48,500 in lost profit damages. In July 2019, the Court entered a permanent injunction, the scope of which is limited to compounded drugs prepared in, dispensed from within, or shipped to the State of California. The injunction requires Imprimis to: (1) only dispense drugs from a 503(a) facility with a “Valid Prescription Order”; (2) abide by the FDA’s anticipatory compounding guidelines; and (3) only use bulk drug substances identified on a list established by the Secretary of Health and Human Services or FDA’s interim “Category 1” list. We believe we were already in compliance with its order prior to the injunction being ordered,.

Novel Drug Solutions et al.

In April 2018, Novel Drug Solutions, LLC and Eyecare Northwest, PA, (collectively “NDS”) filed a lawsuit against us in the U.S. District Court of Delaware asserting claims for breach of contract. The claims stem from an asset purchase agreement between us and NDS entered into in 2013 (the “NDS APA”). In July 2019, NDS filed a second amended complaint which added a claim related to its purported termination of the NDS APA. On August 12, 2019, we notified NDS of our acceptance of their purported termination of the NDS APA. We not expect the termination of the NDS APA to affect our operations or revenues. We believe the claims are meritless and have previously and will continue to dispute all claims asserted against us and intend to vigorously defend against these allegations. Nonetheless, we cannot predict the eventual outcome of this litigation and it could result in substantial costs, losses and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock.

California Board of Pharmacy

In March 2018, the California Board of Pharmacy filed an accusation against Park related to a compounded formulation the Company believes was legally dispensed and was, without its knowledge, inappropriately administered to a patient unknown to Park, by the prescribing healthcare professional. Park filed a response to the accusation and requested a formal hearing. In April 2019, Park agreed to and the California Board of Pharmacy approved terms of a settlement agreement (the “Settlement Agreement”) that became effective on May 29, 2019. Pursuant to the terms of the Settlement Agreement, Park is required to surrender its California pharmacy license by August 27, 2019; provided however, in the event of a sale of Park, the California Board of Pharmacy agreed to expedite the issuance of a temporary license to the Park acquiror. We recently entered into an agreement to sell the Park business and are actively working on the transfer of the Park license to the acquiror. If a sale is not completed, we expect our New Jersey-based pharmacy to retain approximately half of the Park business and revenues.

Product and Professional Liability

John Erick et al.

In January 2018, John Erick and Deborah Ferrell, successors-in-interest and heirs of Jade Erick, (collectively “Erick”) filed a lawsuit in the San Diego County Superior against Kim Kelly, ND, MPH asserting claims related to death of Jade Erick. In April 2018, Erick filed an amendment to the lawsuit, naming us as a co-defendant. In September 2018, co-defendant Dr. Kelly filed a cross-complaint against us and various Spectrum entities. The cross-complaint seeks indemnity and contribution from us and Spectrum. We answered the claims filed by Dr. Kelly in October 2018. The case is currently in the discovery phase. We believe the claims are meritless and have previously and will continue to dispute all claims asserted against us and intend to vigorously defend against these allegations. Nonetheless, we cannot predict the eventual outcome of this litigation and it could result in substantial costs, losses and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock.

Anna Sue Gaukel et al.

In June 2019, Anna Sue Gaukel and Lawrence Gaukel served Imprimis with a lawsuit filed in state court in Idaho against Imprimis Pharmaceuticals, Inc. asserting class action allegations and product liability claims related to Mrs. Gaukel’s doctor’s use of a compounded drug injection in each of her eyes. In June 2019, Imprimis removed the case to Federal Court and subsequently answered the complaint. The case is in the early phase. We believe the claims are meritless and have previously and will continue to dispute all claims asserted against us and intend to vigorously defend against these allegations. Nonetheless, we cannot predict the eventual outcome of this litigation and it could result in substantial costs, losses and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock.

General and Other

In the ordinary course of business, we may face various claims brought by third parties and we may, from time to time, make claims or take legal actions to assert our rights, including intellectual property disputes, contractual disputes and other commercial disputes. Any of these claims could subject us to litigation.

Item 1A. Risk Factors

You should carefully consider the following risk factors in addition to the other information contained in this Quarterly Report. Our business, financial condition, results of operations and stock price could be materially adversely affected by any of these risks.

Risks Related to Our Business

Until last year, we incurred losses in every year of our operations, and we may not be profitable in the future.

Until 2018, we incurred losses in every year of our operations. As of June 30, 2019, our accumulated deficit was $(65,231,000). Our current projections indicate that we will have operating income and/or net income during 2019; however, these projections may not be correct and our plans could change. Also, we could incur increasing operating losses in the foreseeable future for our commercialization activities, research and development and our pharmaceutical compounding business which would impact net income. Recent changes to the accounting for equity investments require those investments to be measured at fair market value, which may cause our earnings (losses) to become volatile as the stock prices of those equity investments fluctuate. Although we have been generating revenue from our pharmaceutical compounding operations, our ability to generate the revenues necessary to achieve profitability will depend on many factors, including those discussed in this “Risk Factors” section. Our business plan and strategies involve costly activities that are susceptible to failure, and, therefore, we may not be able to generate sufficient revenue to support and sustain our business or reach the level of sales and revenues necessary to achieve and sustain profitability.

We may not receive sufficient revenue to fund our operations and recover our development costs.

Our business plan involves the preparation and sale of our proprietary formulations through our compounding pharmacies and outsourcing facilities. We have limited experience operating pharmacies and commercializing compounded formulations, and we may be unable to successfully manage this business or generate sufficient revenue to recover our development costs and operational expenses. We may have only limited success in marketing and selling our proprietary formulations. Although we have established and plan to grow our internal sales teams to market and sell our proprietary formulations and other non-proprietary products, we have limited experience with such activities and may not be able to generate sufficient physician and patient interest in our formulations to generate significant revenue from sales of these products. In addition, we are substantially dependent on our ImprimisRx compounding pharmacies and outsourcing facilities, along with any pharmacy partners with which we may contract to compound and sell our formulations using our quality standards and specifications, in a timely manner and sufficient volumes to accommodate the number of prescriptions they receive. Our pharmacies may be unable to compound our formulations successfully and we may be unable to acquire, build or enter into arrangements with pharmacies or outsourcing facilities of sufficient size, reputation and quality to implement our business plan, which would cause our business to suffer.

We sell certain of our proprietary formulations primarily through pharmaceutical compounding facilities we own, but we may not be successful in our efforts to integrate these businesses into our operations.

Our business strategy includes establishing a small compounding pharmacy group, whether through acquisitions, establishing new pharmacies or entering into licensing arrangements with third-party pharmacies and outsourcing facilities, to market and sell our proprietary formulations and other non-proprietary products in all 50 states and in certain geographies outside of the U.S.

We currently have compounding facilities in New Jersey and California. We may plan to expand our pharmacy operations and personnel and developing our facilities into a unified group compounding pharmacy facilities. We have been developing “ImprimisRx” as a uniform brand for certain compounding facilities and ophthalmology focused pharmaceutical compounding business. We have limited experience acquiring, building or operating compounding pharmacies or other prescription dispensing facilities or commercializing our formulations through ownership of or licensing arrangements with pharmacies.. In addition, as we have in the past, we have purchased and operated certain pharmaceutical compounding businesses and pharmacies, and subsequently divested or sold those associated assets, we may pursue similar strategies in the future. Those things considered, we may experience difficulties implementing and/or executing on our compounding pharmacy strategy, including difficulties that arise as a result of our lack of experience, and we may be unsuccessful and our plans may change materially. For instance:

	●	we have experienced delays and increased costs in our outsourcing facility construction efforts;

	●	we may not be successful in completing future construction plans on a timely basis or within budget;

	●	we may not be successful in our efforts to integrate, manage or otherwise realize the benefits we expect from acquisitions of our ImprimisRx compounding pharmacies or any additional pharmacy businesses or outsourcing facilities we to acquire, sell or build in the future;

	●	we may not be able to satisfy applicable federal and state licensing and other requirements for any of our pharmacy businesses in a timely manner or at all;

	●	changes to federal and state pharmacy regulations may restrict compounding operations or make them more costly;

	●	we may be unable to achieve a sufficient physician and patient customer base to sustain our pharmacy operations;

	●	market acceptance of compounding pharmacies generally may be curtailed or delayed; and

	●	we may not be able to enter into licensing or other arrangements with third-party pharmacies or outsourcing facilities when desired, on acceptable terms or at all.

Moreover, all our efforts to expand pharmacy operations will involve significant costs and other resources, which we may not be able to afford and may disrupt our other operations and distract management and employees from the other aspects of our business. As a result, our business could materially suffer if we are unable to further develop a group of unified compounding facilities and, even if we are successful, we may be unable to generate sufficient revenue to recover our costs.

We are dependent on market acceptance of compounding pharmacies and compounded formulations, and physicians may be unwilling to prescribe, and patients may be unwilling to use, our proprietary customizable compounded formulations.

We currently distribute our proprietary formulations through compounding pharmacies and an outsourcing facility. Formulations prepared and dispensed by compounding pharmacies contain FDA-approved ingredients, but are not themselves approved by the FDA. Thus, our compounded formulations have not undergone the FDA approval process and only limited data, if any, may be available about the safety and efficacy of our formulations for any particular indication. Certain compounding pharmacies have been subject to widespread negative media coverage in recent years, and the actions of these pharmacies have resulted in increased scrutiny of compounding pharmacy activities from the FDA and state governmental agencies. For example, the FDA has issued formal requests to compounding pharmacies and outsourcing facilities to conduct a recall of all non-expired, purportedly sterile drug products and to cease sterile compounding operations due to lack of sterility assurance. As a result, some health care providers may be reluctant to purchase and use compounded drugs. Our growth and future sales depend not only on our ability to demonstrate in the face of increased scrutiny the quality and safety of our pharmacies and outsourcing facilities and our compliance with more stringent regulatory standards at the federal and state levels, but also on the continued acceptance of compounded drugs and formulations, particularly outsourced compounded drugs and formulations, in the marketplace.

An incident similar to the fungal meningitis outbreak in 2012, which was caused by a compounding pharmacy employing a non-sterile-to-sterile business model, could cause our customers to reduce their use of compounded formulations significantly or even stop using compounded drugs altogether. States have in the past, and could in the future, enact regulation prohibiting or restricting the use of compounding pharmacies and outsourcing facilities in response to such incidents. Such prohibitions or restrictions by states or reduced customer demand as a result of an incident with compounded drugs and formulations could have a material adverse effect on our business, results of operations and financial condition.

In August 2017, FDA issued a MedWatch notification regarding our curcumin emulsion and two adverse events that had been associated with the use of these emulsions by prescribing physicians. We issued a press release on August 7, 2017, clarifying certain facts regarding the notice which outlined our belief that the adverse events associated with the two patients occurred due to an allergic reaction caused by the products being inappropriately administered and obtained by the prescribing physician, and our use of curcumin and excipients in our curcumin emulsion formulation met regulatory standards required for dispensing of the curcumin emulsion. In September 2017, the FDA released a letter confirming that the alleged misuse of certain ingredients in our curcumin emulsions were due to mislabeling by the underlying supplier, and not of our own misdoing. Separately, in December 2017, we were issued a warning letter from the FDA alleging that, in their interpretation of our public communications, we had made false or misleading claims and omitted risk and side effect information regarding certain of our ophthalmology focused compounded medications. We immediately performed a full review of our public communications referenced in the warning letter and responded to the FDA in January 2018. Notwithstanding our continued belief that our public communications were not in fact false and misleading, we have been in communication with the FDA and are taking steps to address the items outlined in the FDA letter. In June 2019, our outsourcing facility was issued a warning letter related to an April 2017 inspection and our use of certain active pharmaceutical ingredients in our compounded medications. We responded to the warning letter in July 2019. We will continue to work with the FDA to assure that all allegations in the warning letters have been addressed. We believe, to date, we have addressed all of the material items of concern in the FDA’s warning letters and those related to the MedWatch notification (and any other requirements observed by FDA and noted to us), and we do not believe there will be any further action taken by FDA in these matters. Nonetheless, these items increased further scrutiny and negative publicity on us as a company. At times, we have become aware of negative views of regulators related to certain formulations, and as a result discontinued compounding certain drug formulations in an attempt help mitigate potential regulatory risk. As a result of the MedWatch notice, warning letters and other regulatory notifications, some physicians may be hesitant to prescribe and some patients may be hesitant to purchase and use non-FDA approved compounded formulations, particularly when an FDA-approved potential alternative is available. For other reasons physicians may be unwilling to prescribe or patients may be unwilling to use our proprietary compounded formulations, including the following: legal proscriptions on our ability to discuss the efficacy or safety of our formulations with potential users to the extent applicable data is available; our pharmacy operations are primarily operating on a cash-pay basis and reimbursement may or may not be available from third-party payors, including the government Medicare and Medicaid programs; and certain formulations are not required to be prepared and are not presently being prepared in a manufacturing facility governed by cGMP requirements. Any failure by physicians, patients and/or third-party payors to accept and embrace compounded formulations could substantially limit our market and cause our operations to suffer.

Our business is significantly impacted by state and federal statutes and regulations.

Our proprietary formulations are comprised of active pharmaceutical ingredients that are components of drugs that have received marketing approval from the FDA, although our proprietary compounded formulations have not themselves received FDA approval. FDA approval is not required in order to market and sell our compounded formulations. In the future we may choose to pursue FDA approval to market and sell certain potential drug candidates. The marketing and sale of compounded formulations is subject to and must comply with extensive state and federal statutes and regulations governing compounding pharmacies. These statutes and regulations include, among other things, restrictions on compounding for office use or in advance of receiving a patient-specific prescription or, for outsourcing facilities, requirements regarding preparation, such as regular FDA inspections and cGMP requirements, prohibitions on compounding drugs that are essentially copies of FDA-approved drugs, limitations on the volume of compounded formulations that may be sold across state lines, and prohibitions on wholesaling or reselling. These and other restrictions on the activities of compounding pharmacies and outsourcing facilities may significantly limit the market available for compounded formulations, compared to the market available for FDA-approved drugs.

Our pharmacy business is impacted by federal and state laws and regulations governing the following: the purchase, distribution, management, compounding, dispensing, reimbursement, marketing and labeling of prescription drugs and related services; FDA and/or state regulation affecting the pharmacy and pharmaceutical industries, including state pharmacy licensure and registration or permit standards; rules and regulations issued pursuant to HIPAA and other state and federal laws related to the use, disclosure and transmission of health information; and state and federal controlled substance laws. Our failure to comply with any of these laws and regulations could severely limit or curtail our pharmacy operations, which would materially harm our business and prospects. Further, our business could be adversely affected by changes in these or any newly enacted laws and regulations, and federal and state agency interpretations of the statutes and regulations. Statutory or regulatory changes could require us to make changes to our business model and operations and/or could require us to incur significantly increased costs to comply with such regulations.

If one of our pharmacies fails to comply with state statutes and regulations, the pharmacy could be required to cease operations or become subject to restrictions that could adversely affect our business.

State pharmacy laws require pharmacy locations in those states be licensed as an in-state pharmacy to dispense pharmaceuticals. In addition, state controlled substance laws require registration and compliance with state pharmacy licensure, registration or permit standards promulgated by the state’s pharmacy licensing authority. Pharmacy and controlled substance laws often address the qualification of an applicant’s personnel, the adequacy of its prescription fulfillment and inventory control practices and the adequacy of its facilities. If one of our pharmacies, or with which we may partner is found not to comply with state pharmacy and controlled substance laws and regulations, the pharmacy could be required to cease operations or become subject to burdensome restrictions and limitations on its business. For example, in March 2018, the California Board of Pharmacy filed an accusation against our subsidiary, Park related to a compounded formulation we believe was legally dispensed and was, without our knowledge, inappropriately administered to a patient unknown to us, by the prescribing healthcare professionals. While we dispute all claims against Park, we did enter into a settlement agreement with the California Board of Pharmacy which if we do not close on a sale of Park by August 27, 2019, the settlement will require us to permanently or temporarily cease or limit Park’s pharmacy locations operations including its sterile compounding operations. If Park is required to permanently or temporarily cease or limit its sterile compounding operations, we intend to transfer approximately half of its business to our New Jersey based pharmacy. Although we distribute our proprietary formulations through other compounding pharmacies, and not solely through Park, the loss of Park’s ability to compound sterile formulations could have an adverse impact on our ability to implement our business plan in a timely manner.

If we or our partner facilities fail to comply with the Controlled Substances Act, FDCA, or similar state statutes and regulations, the pharmacy facilities could be required to cease operations or become subject to restrictions that could adversely affect our business.

State pharmacy laws require pharmacy locations in those states to be licensed as an in-state pharmacy to dispense pharmaceuticals. In addition, state controlled substance laws require registration and compliance with state pharmacy licensure, registration or permit standards promulgated by the state’s pharmacy licensing authority. Pharmacy and controlled substance laws often address the qualification of an applicant’s personnel, the adequacy of its prescription fulfillment and inventory control practices and the adequacy of its facilities. These laws also subject pharmacies to oversight by state boards of pharmacy and other regulators that could impose burdensome requirements or restrictions on operations if a pharmacy is found not in compliance with these laws. We believe that our compounding pharmacies are in material compliance with applicable regulatory requirements. Further, if any of our compounding pharmacies (including Park) fail to comply with regulatory requirements, they could be forced to permanently or temporarily cease or limit their compounding operations, which would severely limit our ability to market and sell our proprietary formulations and would materially harm our operations and prospects. Any noncompliance could also result in complaints or adverse actions by other state boards of pharmacy. FDA inspection of a facility to determine compliance with the FDCA, if not successful, may result in the loss of FDCA exemptions provided under Sections 503A and 503B, warning letters, injunctions, prosecution, fines and loss of required government licenses, certifications and approvals, any of which could involve significant costs and could cause us to be unable to realize the expected benefits of these pharmacies’ operations.

Further, under federal law, Section 503A of the FDCA seeks to limit the amount of compounded products that a pharmacy can dispense interstate. The interpretation and enforcement of this provision is dependent on the FDA entering into a standard Memorandum of Understanding (“MOU”) with each state setting forth limits on shipments of interstate compounding. Previously, the draft MOU presented by the FDA in February 2015 intended to limit interstate shipments of compounded drug units to 30% of all compounded and non-compounded units dispensed or distributed by the pharmacy per month, the excess of which the FDA considered an “inordinate amount.” The FDA stated in the guidance issued in February 2015 that it would not enforce interstate restrictions until after it published a final MOU and made it available to states for signature for some designated period of time. If the final MOU was drafted and released by the FDA and was not signed by a particular state, then interstate shipments of compounded preparations from a pharmacy located in that state would be limited to quantities not greater than 5% of total prescription orders dispensed or distributed by the pharmacy; however, we are not aware that the FDA currently enforces or has in the past enforced the 5% rule and, under current draft guidance, the FDA had historically stated that it would not enforce the 5% rule until a final MOU was made available to states for signature. The FDA originally proposed a 180-day period for states to agree to the final MOU after the final version was presented, which to date has not occurred, before it would begin to enforce the 5% rule. In January of 2018, the FDA released a “2018 Compounding Policy Priorities Plan” (the “2018 Compounding Plan”) which provided an overview of the key priorities the FDA plans to focus on in 2018 in connection with compounding regulations. One of the priorities outlined in the 2018 Compounding Plan addressed the current status of the MOU and the FDA’s plan to release a revised MOU (the “Revised MOU”). Pursuant to the statements in the Compounding Plan, the Revised MOU would consider amounts shipped interstate by a compounder to be inordinate amounts if the “number of prescriptions of compounded drugs distributed interstate during any calendar month is greater than 50 percent.” Importantly, instead of that number serving as a “hard limit, for state action,” the 50% target would trigger certain additional reporting requirements. The Revised MOU will also provide states more time to report to the FDA, and flexibility on identifying when amounts are inordinate, considering the size and scope of compounding operations. Until a the Revised MOU is issued and presented to states to consider, the extent of interstate dispensing restrictions imposed by Section 503A is unknown. However, if the final Revised MOU contains a 50% limit on interstate distribution, dependent on the additional reporting requirements to be outlined in the Revised MOU, our pharmacy operations could be materially limited. Additionally, the permanent injunction entered on July 22, 2019, by the United States District Court of the Central District of California in the Allergan litigation (also referenced in Item. 1 Legal Proceedings), enjoins the Company from engaging in activities that are inconsistent with current FDA guidelines for 503A and 503B operations. While the Company believes its operations fully comply with the injunction, if the Court were to find the Company to be in violation of the injunction, further sanctions including fines and limitations on the pharmacies’ operations could occur.

There are many competitive risks related to marketing and selling our proprietary formulations and operating our compounding pharmacy business.

The pharmaceutical and pharmacy industries are highly competitive. We compete against branded drug companies, generic drug companies, outsourcing facilities and other compounding pharmacies. We are significantly smaller than some of our competitors. Currently we lack some of the financial and other resources needed to develop, produce, distribute and market our proprietary formulations at a level to capture a significant market share in these sectors. The drug products available through branded and generic drug companies with which our formulations compete have been approved for marketing and sale by the FDA and are required to be manufactured in facilities compliant with cGMP standards. Although we prepare our compounded formulations in accordance with the standards provided by the United States Pharmacopeia (“USP”) <795> and USP <797> and applicable state and federal law, our proprietary compounded formulations are not required to be, and have not been, approved for marketing and sale by the FDA. As a result, some physicians may be unwilling to prescribe, and some patients may be unwilling to use, our formulations. Additionally, under federal and state laws applicable to our current compounding pharmacy operations, we are not permitted to prepare significant amounts of a specific formulation in advance of a prescription, compound quantities for office use or utilize a wholesaler for distribution of our formulations; instead, our compounded formulations must be prepared and dispensed in connection with a physician prescription for an individually identified patient. Pharmaceutical companies, on the other hand, are able to sell their FDA-approved products to large pharmaceutical wholesalers, which can in turn sell to and supply hospitals and retail pharmacies. Even if we are successful in registering certain of our facilities as outsourcing facilities, our business may not be scalable on the scope available to our competitors that produce FDA-approved drugs, which may limit our potential for profitable operations. These facets of our operations may subject our business to limitations our competitors with FDA-approved drugs may not face.

Our future success depends in large part on our ability to maintain a competitive position with respect to biotechnology and related pharmaceutical technologies.

Biotechnology and related pharmaceutical technologies have undergone and continue to be subject to rapid and significant change. Our future success will depend in large part on our ability to maintain a competitive position with respect to these technologies. Products developed by our competitors, including FDA-approved drugs and compounded formulations created by other pharmacies, could render our products and technologies obsolete or unable to compete. Any products that we develop may become obsolete before we recover expenses incurred in their development, which may require us to raise additional funds that may or may not be available. The competitive environment requires an ongoing, extensive search for medical and technological innovations and the ability to develop and market these innovations effectively, and we may not be competitive with respect to these factors. Other competitive factors include the safety and efficacy of a product, the size of the market for a product, the timing of market entry relative to competitive products, the availability of alternative compounded formulations or approved drugs, the price of a product relative to alternative products, the availability of third-party reimbursement, the success of sales and marketing efforts, brand recognition and the availability of scientific and technical information about a product. Although we believe we are positioned to compete favorably with respect to many of these factors, if our proprietary formulations are unable to compete with the products of our competitors, we may never gain market share or achieve sustained profitability.

If a compounded drug formulation provided through our compounding services leads to patient injury or death or results in a product recall, we may be exposed to significant liabilities and reputational harm.

The success of our business, including our proprietary formulations and pharmacy operations, is highly dependent upon medical and patient perceptions of us and the actual safety and quality of our products. We could be adversely affected if we, any other compounding pharmacies or our formulations and technologies are subject to negative publicity. We could also be adversely affected if any of our formulations or other products we sell, any similar products sold by other companies, or any products sold by other compounding pharmacies prove to be, or are asserted to be, harmful to patients. For instance, if any of the components of approved drugs or other ingredients used to produce our compounded formulations have quality or other problems that adversely affect the finished compounded preparations, our sales could be adversely affected. Because of our dependence upon medical and patient perceptions, adverse publicity associated with illness or other adverse effects resulting from the use or misuse of our products, any similar products sold by other companies, or any other compounded formulations could have a material adverse impact on our business.

To assure compliance with USP guidelines, we have a policy whereby 100% of all sterile compound batches produced by our ImprimisRx compounding pharmacies are tested prior to their delivery to patients and physicians both in-house and externally by an independent, FDA-registered laboratory that has represented to us that it operates in compliance with current good laboratory practices. However, we could still become subject to product recalls and termination or suspension of our state pharmacy licenses if we fail to fully implement this policy, if the laboratory testing does not identify all contaminated products, or if our products otherwise cause or appear to have caused injury or harm to patients. In addition, laboratory testing may produce false positives, which could harm our business and impact our pharmacy operations and licensure even if the impacted formulations are ultimately found to be sterile and no patients are harmed by them. If adverse events or deaths or a product recall, either voluntarily or as required by the FDA or a state board of pharmacy, were associated with one of our proprietary formulations or any compounds prepared by our ImprimisRx compounding pharmacies or any pharmacy partner, our reputation could suffer, physicians may be unwilling to prescribe our proprietary formulations or order any prescriptions from such pharmacies, we could become subject to product and professional liability lawsuits, and our state pharmacy licenses could be terminated or restricted. If any of these events were to occur, we may be subject to significant litigation or other costs and loss of revenue, and we may be unable to continue our pharmacy operations and further develop and commercialize our proprietary formulations.

We carry product and professional liability insurance which may be inadequate.

Although we have secured product and professional liability insurance for our pharmacy operations and the marketing and sale of our formulations, our current or future insurance coverage may prove insufficient to cover any liability claims brought against us. Because of the increasing costs of insurance coverage, we may not be able to maintain insurance coverage at a reasonable cost or at a level adequate to satisfy liabilities that may arise.

Our ability to generate revenues will be diminished if we fail to obtain acceptable prices or an adequate level of reimbursement from third-party payors.

Currently, our ImprimisRx compounding pharmacies operate on mostly a cash-pay basis and do not submit large amounts of claims for reimbursement through Medicare, Medicaid or other third-party payors. As part of our Imprimis Cares initiative, we work with third-party insurers, pharmacy benefit managers and buying groups to offer patient-specific customizable compounded formulations at accessible prices. We plan to continue to devote time and other resources to seek reimbursement and patient pay opportunities for these and other compounded formulations. We have hired pharmacy billers to process certain existing reimbursement opportunities for certain formulations. However, we may be unsuccessful in achieving these goals, as many third-party payors have imposed significant restrictions on reimbursement for compounded formulations in recent years. Moreover, third-party payors, including Medicare, are attempting to contain health care costs by limiting coverage and the level of reimbursement for new drugs and by refusing, in some cases, to provide coverage for uses of approved products for disease indications for which the FDA has not granted labeling approval. Further, the Health Care Reform Law Law may have a considerable impact on the existing U.S. system for the delivery and financing of health care and could conceivable have a material effect on our business. As a result, reimbursement from Medicare, Medicaid and other third-party payors may never be available for any of our products or, if available, may not be sufficient to allow us to sell the products on a competitive basis and at desirable price points. If government and other third-party payors do not provide adequate coverage and reimbursement levels for our formulations, the market acceptance for our formulations may be limited.

Additionally, we are making efforts to normalize the pricing for our currently available proprietary compounded formulations. Any efforts to attain optimized pricing for our Dropless Therapy or any of our other proprietary formulations could fail, which could make our products less attractive or unavailable to some patients or could reduce our margins.

We may not be able to correctly estimate our future operating expenses, which could lead to cash shortfalls.

The estimates of our future operating and capital expenditures are based upon our current business plan, our current operations and our current expectations regarding the commercialization of our proprietary formulations. Our projections have varied significantly in the past as a result of changes to our business model and strategy, our termination of efforts to pursue FDA approval of a drug candidate in November 2013, our acquisitions of compounding facilities and various product and corporate development opportunities since 2014, and the expenses in developing our pharmacy facilities into outsourcing facilities and registering them as such with the FDA. We may not accurately estimate the potential revenues and expenses of our operations. If we are unable to correctly estimate the amount of cash necessary to fund our business, we could spend our available financial resources much faster than we expect. If we do not have sufficient funds to continue to operate and develop our business, we could be required to seek additional financing earlier than we expect, which may not be available when needed or at all, or be forced to delay, scale back or eliminate some or all of our proposed operations.

If we do not successfully identify and acquire rights to potential formulations and successfully integrate them into our operations, our growth opportunities may be limited.

We plan to pursue the development of new proprietary compounded formulations in the ophthalmology and/or other therapeutic areas, which may include continued activities to develop and commercialize current assets or, if and as opportunities arise, potential acquisitions of new intellectual property rights and assets. We also intend to seek opportunities to introduce new lower-cost compounded formulation alternatives to higher-priced FDA-approved drugs. However, we expect acquisitions of compounding pharmacies to provide us with only limited research and development support and access to additional novel compounded formulations. We have historically relied, and we expect to continue to rely, primarily upon third parties to provide us with additional development opportunities. We may seek to enter into acquisition agreements or licensing arrangements to obtain rights to develop new formulations in the future, but only if we are able to identify attractive formulations and negotiate acquisition or license agreements on terms acceptable to us, which we may not be able to do. Moreover, we have limited resources to acquire additional potential product development assets and integrate them into our business. Acquisition opportunities may involve competition among several potential purchasers, which could include large multi-national pharmaceutical companies and other competitors that have access to greater financial resources than we do. If we are unable to obtain rights to development opportunities from third parties and we are unable to rely upon our compounding pharmacies and current and future relationships with pharmacists, physicians and other inventors to provide us with additional development opportunities, our growth and prospects could be limited.

Our product development strategy is to focus on a select few therapeutic areas in which we believe there is broad market potential, large unmet needs and/or unique value to physicians and patients and to develop and offer formulations within these therapeutic areas that could afford us with gross margins. However, our expectations and assumptions about market potential and patient needs may prove to be wrong and we may invest capital and other resources on formulations that do not generate sufficient revenues for us to recoup our investment.

We may be unable to successfully develop and commercialize our proprietary formulations or any other assets we may acquire.

We have acquired assets related to compoundable formulations and we have entered into one license agreement for rights to commercialize a compounding formulation. We are currently pursuing development and commercialization opportunities with respect to certain of these formulations, and we are in the process of assessing certain of our other assets in order to determine whether to pursue their development or commercialization. In addition, we expect to consider the acquisition of additional intellectual property rights or other assets in the future. Once we determine to pursue a potential drug candidate, we develop a commercialization strategy for it, which may include marketing and selling the formulation in compounded form through compounding pharmacies or outsourcing facilities, or pursuing FDA approval of the drug candidate. We may incorrectly assess the risks and benefits of the commercialization options or we may not pursue a commercialization strategy that proves to be successful. If we are unable to successfully commercialize one or more of our proprietary formulations, our operating results would be adversely affected. Even if we are able to successfully sell one or more proprietary formulations, we may never recoup our investment in acquiring or developing the formulations. Our failure to identify and expend our resources on formulations and technologies with commercial potential and execute an effective commercialization strategy for each of our formulations would negatively impact the long-term profitability of our business.

We have incurred significant indebtedness, which will require substantial cash to service and which subjects us to certain financial requirements and business restrictions.

Our ability to make scheduled payments on our indebtedness depends on our future performance and ability to raise additional capital, which is subject to economic, financial, competitive and other factors, some of which are beyond our control. If we are unable to generate sufficient cash to service our debt, we may be required to adopt one or more alternatives, such as selling assets, restructuring our debt or obtaining additional capital through equity sales or incurrence of additional debt on terms that may be onerous or highly dilutive to our stockholders. Our ability to engage in any of these activities would depend on the capital markets and our financial condition at such time, and we may not be able to do so when needed, on desirable terms or at all, which could result in a default on our debt obligations. Additionally, our SWK debt instrument contain various restrictive covenants, including, among others, our obligation to deliver to SWK certain financial and other information, our obligation to comply with certain notice and insurance requirements, and our inability, without SWK’s prior consent, to dispose of certain of our assets, incur certain additional indebtedness, enter into certain merger, acquisition or change of control transactions, pay certain dividends or distributions on or repurchase any of our capital stock or incur any lien or other encumbrance on our assets, subject to certain permitted exceptions. Any failure by us to comply with any of these covenants, subject to certain cure periods, or to make all payments under the debt instruments when due, would cause us to be in default under the applicable debt instrument. In the event of any such default, SWK may be able to foreclose on our assets that secure the debt or declare all borrowed funds, together with accrued and unpaid interest, immediately due and payable, thereby potentially causing all of our available cash to be used to pay our indebtedness or forcing us into bankruptcy or liquidation if we do not then have sufficient cash available. Any such event or occurrence could severely and negatively impact our operations and prospects.

We may need additional capital in order to continue operating our business, and such additional funds may not be available when needed, on acceptable terms, or at all.

We only recently started generating cash from operations, but we do not currently earn sufficient revenues to support our operations. We may need significant additional capital to execute our business plan and fund our proposed business operations. Additionally, our plans may change or the estimates of our operating expenses and working capital requirements could be inaccurate, we may pursue acquisitions of pharmacies or other strategic transactions that involve large expenditures, or we may experience growth more quickly or on a larger scale than we expect, any of which may result in the depletion of capital resources more rapidly than anticipated and could require us to seek additional financing earlier than we expect to support our operations.

We have raised over $59,000,000 in funds through equity and debt financings since January 2015. We may seek to obtain additional capital through equity or debt financings, funding from corporate partnerships or licensing arrangements, sales of assets or other financing transactions. If we issue additional equity or convertible debt securities to raise 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 and licensing arrangements or sales of assets, we may have to relinquish potentially valuable rights to our drug candidates or proprietary technologies, 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 those loans 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 included in our loan agreement with SWK. 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 options, convertible notes and warrants, which would adversely impact our financial results.

We have in the past and may in the future participate in strategic transactions that could impact our liquidity, increase our expenses and distract our management.

From time to time we consider engaging in strategic transactions, such as out-licensing or in-licensing of compounds or technologies, acquisitions of companies, and asset purchases. We may also consider a variety of different business arrangements in the future, including strategic partnerships, joint ventures, spin-offs, restructurings, divestitures, business combinations and investments. In addition, another entity may pursue us or certain of our assets or aspects of our operations as an acquisition target. Any such transactions may require us to incur expenses specific to the transaction and not incident to our operations, may increase our near- and long-term expenditures, may pose significant integration challenges, may require us to hire or otherwise engage personnel with additional expertise, or may result in our selling or licensing of our assets or technologies under terms that may not prove profitable, any of which could harm our operations and financial results. Such transactions may also entail numerous other operational and financial risks, including, among others, exposure to unknown liabilities, disruption of our business and diversion of our management’s time and attention in order to develop acquired products, drug candidates, technologies or businesses.

As part of our efforts to complete any significant transaction, we would need to expend significant resources to conduct business, legal and financial due diligence, with the goal of identifying and evaluating material risks involved in the transaction. We may be unsuccessful in ascertaining or evaluating all the risks and, as a result, we may not realize the expected benefits of the transaction, whether due to unidentified risks, integration difficulties, regulatory setbacks or other events. We may incur material liabilities for the past activities of any businesses we partner with or acquire. If any of these events occur, we could be subject to significant costs and damage to our reputation, business, results of operations and financial condition.

If we are unable to establish, train and maintain an effective sales and marketing infrastructure, we will not be able to commercialize our drug candidates successfully.

We have started to build an internal sales and marketing infrastructure to implement our business plan by developing internal sales teams and education campaigns to market our proprietary formulations. We will need to expend significant resources to further establish and grow this internal infrastructure and properly train sales personnel with respect to regulatory compliance matters. We may also choose to engage or enter into other arrangements with third parties to provide sales and marketing services for us in place of or to supplement our internal commercialization infrastructure. We may not be able to secure sales personnel or relationships with third-party sales organizations that are adequate in number or expertise to successfully market and sell our proprietary formulations and pharmacy services. Further, any third-party organizations we may seek to partner with or engage may not be able to provide sales and marketing services in accordance with our expectations and standards, may be more expensive than we can afford or may not be available on otherwise acceptable terms or at all. If we are unable to establish and maintain compliant and adequate sales and marketing capabilities, through our own internal infrastructure or third-party services or other arrangements, we may be unable to sell our formulations or services or generate meaningful revenue.

Our business and operations would suffer in the event of cybersecurity or other system failures.

Despite the implementation of security measures, our internal computer systems and those of any third parties with which we partner are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any cybersecurity or system failure, accident or breach to date, if an event were to occur, it could result in a material disruption of our operations, substantial costs to rectify or correct the failure, if possible, and potentially violation of HIPAA and other privacy laws applicable to our operations. If any disruption or security breach resulted in a loss of or damage to our data or applications or inappropriate disclosure of confidential or protected information, we could incur liability, further development of our proprietary formulations could be delayed, and our pharmacy operations could be disrupted, subject to restriction or forced to terminate their operations, any of which could severely harm our business and prospects.

We depend upon consultants, outside contractors and other third-party service providers for key aspects of our business.

We are substantially dependent on consultants and other outside contractors and service providers for key aspects of our business. For instance, we rely upon pharmacist, physician and research consultants and advisors to provide us with significant assistance in the evaluation of product development opportunities, and we have engaged or supported, and expect to continue to engage or support, consultants, advisors, clinical research organizations (“CROs”) and others to design, conduct, analyze and interpret the results of any clinical or non-clinical trials or other studies in connection with the research and development of our products. If any of our consultants or other service providers terminates its engagement with us, or if we are unable to engage highly qualified replacements as needed on commercially reasonable terms, we may be unable to successfully execute our business plan. We must effectively manage these third-party service providers to ensure that they successfully carry out their contractual obligations and meet expected deadlines. However, these third parties often engage in other business activities and may not devote sufficient time and attention to our activities and we may have only limited contractual rights in connection with the conduct of the activities we have engaged the service providers to perform. If we are unable to effectively manage our outsourced activities or if the quality, timeliness or accuracy of the services provided by third-party service providers is compromised for any reason, our development activities may be extended, delayed or terminated, and we may not be able to commercialize our formulations or advance our business.

Risks Related to Product Development, Regulatory Approval, Manufacturing and Commercialization

If we seek FDA approval to market and sell any of our proprietary formulations, such as with drug candidates being developed by Stowe, Radley, Mayfield, Melt, Surface and Eton, we may be unable to demonstrate the necessary safety and efficacy to obtain such FDA approval.

Historically, our business strategy was focused on developing and commercializing product opportunities as compounded formulations. In 2017 and in the future we, alone or with project partners, may seek FDA regulatory approval to market and sell one or more of our assets as a FDA-approved drug. Obtaining FDA approval to market and sell pharmaceutical products is costly, time consuming, uncertain and subject to unanticipated delays. The FDA or other regulatory agencies may not approve a drug candidate on a timely basis or at all. Before we obtain FDA approval for the sale of any potential drug candidates, we will be required to demonstrate through preclinical studies and clinical trials that it is safe and effective for each intended use, which we may not be able to do. A failure to demonstrate safety and efficacy of a drug candidate to the FDA’s satisfaction would result in our failure to obtain FDA approval. Moreover, even if the FDA were to grant regulatory approval of a drug candidate, the approval may be limited to specific therapeutic areas or limited as to its distribution, which could reduce revenue potential, and we will be subject to extensive and costly post-approval requirements and oversight with respect to commercialization of the drug candidate.

Delays in the completion of, or the termination of, any clinical or non-clinical trials for any drug candidates for which we may seek FDA approval could adversely affect our business.

Clinical trials are very expensive, time consuming, unpredictable and difficult to design and implement. The results of clinical trials may be unfavorable, they may continue for several years, and they may take significantly longer to complete and involve significantly more costs than expected. Delays in the commencement or completion of clinical testing could significantly affect product development costs and plans with respect to any drug candidate for which we seek FDA approval. The commencement and completion of clinical trials can be delayed and experience difficulties for a number of reasons, including delays and difficulties caused by circumstances over which we may have no control. For instance, approvals of the scope, design or trial site may not be obtained from the FDA and other required bodies in a timely manner or at all, agreements with acceptable terms may not be reached in a timely manner or at all with CROs to conduct the trials, a sufficient number of subjects may not be recruited and enrolled in the trials, and third-party manufacturers of the materials for use in the trials may encounter delays and problems in the manufacturing process, including failure to produce materials in sufficient quantities or of an acceptable quality to complete the trials. If we were to experience delays in the commencement or completion of, or if we were to terminate, any clinical or non-clinical trials we pursue in the future, the commercial prospects for the applicable drug candidates may be limited or eliminated, which may prevent us from recouping our investment in research and development efforts for the drug candidate and would have a material adverse effect on our business, results of operations, financial condition and prospects.

We depend on the success of our drug candidates, and those we have royalty rights to, which have not yet demonstrated efficacy for their target or any other indications. If we are unable to generate revenues from our drug candidates, our ability to create stockholder value will be limited.

Our drug candidates are in the early stages of clinical development. We do not generate revenues from any FDA approved drug products. We expect to submit an Investigational New Drug Application (“IND”) or foreign equivalent to the FDA or international regulatory authorities seeking approval to initiate our clinical trials in humans in the United States or other countries yet to be determined. We plan on submitting our clinical trial protocols and receive approvals from the FDA and international regulatory authorities before we can commence any clinical trials. We may not be successful in obtaining acceptance from the FDA or comparable foreign regulatory authorities to start our clinical trials. If we do not obtain such acceptance, the time in which we expect to commence clinical programs for any drug candidate will be extended and such extension will increase our expenses and increase our need for additional capital. Moreover, there is no guarantee that our clinical trials will be successful or that we will continue clinical development in support of an approval from the FDA or comparable foreign regulatory authorities for any indication. We note that most drug candidates never reach the clinical development stage and even those that do commence clinical development have only a small chance of successfully completing clinical development and gaining regulatory approval. Therefore, our business currently depends entirely on the successful development, regulatory approval and commercialization of our drug candidates, which may never occur.

If we are not able to obtain any required regulatory approvals for our drug candidates, we will not be able to commercialize our drug candidate and our ability to generate revenue will be limited.

We must successfully complete clinical trials for our drug candidates before we can apply for marketing approval. Even if we complete our clinical trials, it does not assure marketing approval. Our clinical trials may be unsuccessful, which would materially harm our business. Even if our initial clinical trials are successful, we are required to conduct additional clinical trials to establish our drug candidates’ safety and efficacy, before an NDA or Biologics License Application (“BLA”), or their foreign equivalents can be filed with the FDA or comparable foreign regulatory authorities for marketing approval of our drug candidates.

Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is uncertain as to outcome. Success in early phases of pre-clinical and clinical trials does not ensure that later clinical trials will be successful, and interim results of a clinical trial do not necessarily predict final results. A failure of one or more of our clinical trials can occur at any stage of testing. We may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent our ability to receive regulatory approval or commercialize our drug candidates. The research, testing, manufacturing, labeling, packaging, storage, approval, sale, marketing, advertising and promotion, pricing, export, import and distribution of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations differ from country to country. We are not permitted to market our drug candidates as prescription pharmaceutical products in the United States until we receive approval of an NDA from the FDA, or in any foreign countries until we receive the requisite approval from such countries. In the United States, the FDA generally requires the completion of clinical trials of each drug to establish its safety and efficacy and extensive pharmaceutical development to ensure its quality before an NDA is approved. Regulatory authorities in other jurisdictions impose similar requirements. Of the large number of drugs in development, only a small percentage result in the submission of an NDA to the FDA and even fewer are eventually approved for commercialization. We have not submitted an NDA to the FDA or comparable applications to other regulatory authorities. If our development efforts for our drug candidates, including regulatory approval, are not successful for their planned indications, or if adequate demand for our drug candidates is not generated, our business will be materially adversely affected.

Our success depends on the receipt of regulatory approval and the issuance of such regulatory approvals is uncertain and subject to a number of risks, including the following:

	●	the results of toxicology studies may not support the filing of an IND for our drug candidates;

	●	the FDA or comparable foreign regulatory authorities or Institutional Review Boards, or “IRB”, may disagree with the design or implementation of our clinical trials;

	●	we may not be able to provide acceptable evidence of our drug candidates’ safety and efficacy;

	●	the results of our clinical trials may not be satisfactory or may not meet the level of statistical or clinical significance required by the FDA, European Medicines Agency (the “EMA”), or other regulatory agencies for marketing approval;

	●	the dosing of our drug candidates in a particular clinical trial may not be at an optimal level;

	●	patients in our clinical trials may suffer adverse effects for reasons that may or may not be related to our drug candidates;

	●	the data collected from clinical trials may not be sufficient to support the submission of an NDA, BLA or other submission or to obtain regulatory approval in the United States or elsewhere;

	●	the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and

	●	the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.

Failure to obtain regulatory approval for our drug candidates for the foregoing, or any other reasons, will prevent us from commercializing our drug candidates, and our ability to generate revenue will be materially impaired. We cannot guarantee that regulators will agree with our assessment of the results of the clinical trials we intend to conduct in the future or that such trials will be successful. The FDA, EMA and other regulators have substantial discretion in the approval process and may refuse to accept any application or may decide that our data is insufficient for approval and require additional clinical trials, or pre-clinical or other studies. In addition, varying interpretations of the data obtained from pre-clinical and clinical testing could delay, limit or prevent regulatory approval of our drug candidates.

Excluding any activities through our ownership interest in Eton, we have not submitted an NDA or received regulatory approval to market our drug candidates in any jurisdiction. We have only limited experience in filing the applications necessary to gain regulatory approvals and expect to rely on consultants and third party contract research organizations, or “CROs”, with expertise in this area to assist us in this process. Securing regulatory approvals to market a product requires the submission of pre-clinical, clinical, and/or pharmacokinetic data, information about product manufacturing processes and inspection of facilities and supporting information to the appropriate regulatory authorities for each therapeutic indication to establish a drug candidate’s safety and efficacy for each indication. Our drug candidates may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude us from obtaining regulatory approval or prevent or limit commercial use with respect to one or all intended indications.

The process of obtaining regulatory approvals is expensive, often takes many years, if approval is obtained at all, and can vary substantially based upon, among other things, the type, complexity and novelty of the drug candidates involved, the jurisdiction in which regulatory approval is sought and the substantial discretion of the regulatory authorities. Changes in regulatory approval policies during the development period, changes in or the enactment of additional statutes or regulations, or changes in regulatory review for a submitted product application may cause delays in the approval or rejection of an application. Regulatory approval obtained in one jurisdiction does not necessarily mean that a drug candidate will receive regulatory approval in all jurisdictions in which we may seek approval, but the failure to obtain approval in one jurisdiction may negatively impact our ability to seek approval in a different jurisdiction. Failure to obtain regulatory marketing approval for our drug candidates in any indication will prevent us from commercializing the drug candidate, and our ability to generate revenue will be materially impaired.

If we fail to successfully commercialize any of our drug candidates, we may need to acquire additional drug candidates and our business will be adversely affected.

We have never commercialized any drug candidates and do not have any other compounds in pre-clinical testing, lead optimization or lead identification stages beyond our drug candidates. We cannot be certain that any of our drug candidates will prove to be sufficiently effective and safe to meet applicable regulatory standards for any indication. If we fail to successfully commercialize any of our drug candidates for their targeted indications, whether as stand-alone therapies or in combination with other therapeutic agents, our business would be adversely affected.

Even if we receive regulatory approval for any of our drug candidates, we may not be able to successfully commercialize the product and the revenue that we generate from its sales, if any, may be limited.

If approved for marketing, the commercial success of our drug candidates will depend upon each product’s acceptance by the medical community, including physicians, patients and health care payors. The degree of market acceptance for any of our drug candidates will depend on a number of factors, including:

	●	demonstration of clinical safety and efficacy;

	●	relative convenience, dosing burden and ease of administration;

	●	the prevalence and severity of any adverse effects;

	●	the willingness of physicians to prescribe our drug candidates, and the target patient population to try new therapies;

	●	efficacy of our drug candidates compared to competing products;

	●	the introduction of any new products that may in the future become available targeting indications for which our drug candidates may be approved;

	●	new procedures or therapies that may reduce the incidences of any of the indications in which our drug candidates may show utility;

	●	pricing and cost-effectiveness;

	●	the inclusion or omission of our drug candidates in applicable therapeutic and vaccine guidelines;

	●	the effectiveness of our own or any future collaborators’ sales and marketing strategies;

	●	limitations or warnings contained in approved labeling from regulatory authorities;

	●	our ability to obtain and maintain sufficient third-party coverage or reimbursement from government health care programs, including Medicare and Medicaid, private health insurers and other third-party payors or to receive the necessary pricing approvals from government bodies regulating the pricing and usage of therapeutics; and

	●	the willingness of patients to pay out-of-pocket in the absence of third-party coverage or reimbursement or government pricing approvals.

If any of our drug candidates are approved, but do not achieve an adequate level of acceptance by physicians, health care payors, and patients, we may not generate sufficient revenue and we may not be able to achieve or sustain profitability. Our efforts to educate the medical community and third-party payors on the benefits of our drug candidates may require significant resources and may never be successful.

In addition, even if we obtain regulatory approvals, the timing or scope of any approvals may prohibit or reduce our ability to commercialize our drug candidates successfully. For example, if the approval process takes too long, we may miss market opportunities and give other companies the ability to develop competing products or establish market dominance. Any regulatory approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render our drug candidates not commercially viable. For example, regulatory authorities may approve any of our drug candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for any of our drug candidates, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve any of our drug candidates with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that indication. Further, the FDA or comparable foreign regulatory authorities may place conditions on approvals or require risk management plans or a Risk Evaluation and Mitigation Strategy, “REMS”, to assure the safe use of the drug. If the FDA concludes a REMS is needed, the sponsor of the NDA must submit a proposed REMS; the FDA will not approve the NDA without an approved REMS, if required. A REMS could include medication guides, physician communication plans, or elements to assure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. The FDA may also require a REMS for an approved product when new safety information emerges. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of our drug candidates. Moreover, product approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following the initial marketing of the product. Any of the foregoing scenarios could materially harm the commercial success of our drug candidates.

Even if we obtain marketing approval for any of our drug candidates, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense. Additionally, our drug candidates could be subject to labeling and other restrictions and withdrawal from the market and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our drug candidates.

Even if we obtain regulatory approval for any of our drug candidates for an indication, the FDA or foreign equivalent may still impose significant restrictions on their indicated uses or marketing or the conditions of approval, or impose ongoing requirements for potentially costly and time-consuming post-approval studies, including Phase 4 clinical trials, and post-market surveillance to monitor safety and efficacy. Our drug candidates will also be subject to ongoing regulatory requirements governing the manufacturing, labeling, packaging, storage, distribution, safety surveillance, advertising, promotion, recordkeeping and reporting of adverse events and other post-market information. These requirements include registration with the FDA, as well as continued compliance with current Good Clinical Practices regulations, or “cGCPs”, for any clinical trials that we conduct post-approval. In addition, manufacturers of drug products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with current cGMP, requirements relating to quality control, quality assurance and corresponding maintenance of records and documents.

The FDA has the authority to require a REMS as part of an NDA or after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria or requiring patient testing, monitoring and/or enrollment in a registry.

With respect to sales and marketing activities by us or any future partner, advertising and promotional materials must comply with FDA rules in addition to other applicable federal, state and local laws in the United States and similar legal requirements in other countries. In the United States, the distribution of product samples to physicians must comply with the requirements of the U.S. Prescription Drug Marketing Act. Application holders must obtain FDA approval for product and manufacturing changes, depending on the nature of the change. We may also be subject, directly or indirectly through our customers and partners, to various fraud and abuse laws, including, without limitation, the U.S. Anti-Kickback Statute, U.S. False Claims Act, and similar state laws, which impact, among other things, our proposed sales, marketing, and scientific/educational grant programs. If we participate in the U.S. Medicaid Drug Rebate Program, the Federal Supply Schedule of the U.S. Department of Veterans Affairs, or other government drug programs, we will be subject to complex laws and regulations regarding reporting and payment obligations. All of these activities are also potentially subject to U.S. federal and state consumer protection and unfair competition laws. Similar requirements exist in many of these areas in other countries.

In addition, if any of our drug candidates are approved for a particular indication, our product labeling, advertising and promotion would be subject to regulatory requirements and continuing regulatory review. The FDA strictly regulates the promotional claims that may be made about prescription products. In particular, a product may not be promoted for uses that are not approved by the FDA as reflected in the product’s approved labeling. If we receive marketing approval for our drug candidates, physicians may nevertheless legally prescribe our products to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability and government fines. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant sanctions. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees of permanent injunctions under which specified promotional conduct is changed or curtailed.

If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, problems with the facility where the product is manufactured, or we or our manufacturers fail to comply with applicable regulatory requirements, we may be subject to the following administrative or judicial sanctions:

	●	restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls;

	●	issuance of warning letters or untitled letters;

	●	clinical holds;

	●	injunctions or the imposition of civil or criminal penalties or monetary fines;

	●	suspension or withdrawal of regulatory approval;

	●	suspension of any ongoing clinical trials;

	●	refusal to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals;

	●	suspension or imposition of restrictions on operations, including costly new manufacturing requirements; or

	●	product seizure or detention or refusal to permit the import or export of product.

The occurrence of any event or penalty described above may inhibit our ability to commercialize our drug candidates and generate revenue. Adverse regulatory action, whether pre- or post-approval, can also potentially lead to product liability claims and increase our product liability exposure.

Obtaining and maintaining regulatory approval of our drug candidates in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our drug candidates in other jurisdictions.

Obtaining and maintaining regulatory approval of our drug candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, but a failure or delay in obtaining regulatory approval in one jurisdiction may have a negative effect on the regulatory approval process in others. For example, even if the FDA grants marketing approval of a drug candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the drug candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from those in the United States, including additional preclinical studies or clinical trials, as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a drug candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/ or to receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our drug candidates will be harmed.

Current and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our drug candidates and affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval for our drug candidates, restrict or regulate post-approval activities and affect our ability to profitably sell our drug candidates. Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We do not know whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our drug candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

In the United States, the Medicare Modernization Act, or “MMA”, changed the way Medicare covers and pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursement methodology based on average sales prices for drugs. In addition, this legislation authorized Medicare Part D prescription drug plans to use formularies where they can limit the number of drugs that will be covered in any therapeutic class. As a result of this legislation and the expansion of federal coverage of drug products, we expect that there will be additional pressure to contain and reduce costs. These cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that we receive for our drug candidates and could seriously harm our business. While the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own reimbursement rates, and any reduction in reimbursement that results from the MMA may result in a similar reduction in payments from private payors.

The Health Care Reform Law is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The Health Care Reform Law revised the definition of “average manufacturer price” for reporting purposes, which could increase the amount of Medicaid drug rebates to states. Further, the law imposed a significant annual fee on companies that manufacture or import branded prescription drug products.

The Health Care Reform Law remains subject to legislative efforts to repeal, modify or delay the implementation of the law. Efforts to date have generally been unsuccessful. If the Health Care Reform Law is repealed or modified, or if implementation of certain aspects of the Health Care Reform Law are delayed, such repeal, modification or delay may materially adversely impact our business, strategies, prospects, operating results or financial condition. We are unable to predict the full impact of any repeal or modification in the implementation of the Health Care Reform Law on us at this time.

In addition, other legislative changes have been proposed and adopted in the United States since the Health Care Reform Law was enacted. We expect that additional federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, and in turn could significantly reduce the projected value of certain development projects and reduce or eliminate our profitability.

Our drug candidates may face competition sooner than expected.

Our success will depend in part on our ability to obtain and maintain patent protection for our certain of our drug candidates and technologies and to prevent third parties from infringing upon our proprietary rights. We must also operate without infringing upon patents and proprietary rights of others, including by obtaining appropriate licenses to patents or other proprietary rights held by third parties, if necessary. However, the applications we have filed or may file in the future may never yield patents that protect our inventions and intellectual property assets. Failure to obtain patents that sufficiently cover our formulations and technologies would limit our protection against compounding pharmacies, outsourcing facilities, generic drug manufacturers, pharmaceutical companies and other parties who may seek to copy our products, produce products substantially similar to ours or use technologies substantially similar to those we own.

We also intend to seek data exclusivity or market exclusivity for our drug candidates provided under the FDCA, and similar laws in other countries. The FDCA provides three years of marketing exclusivity for an NDA, 505(b)(2) NDA or supplement to an existing NDA if new clinical investigations, other than bioavailability studies, that were conducted or sponsored by the applicant are deemed by the FDA to be essential to the approval of the application, for example, for new indications, dosages, or strengths of an existing drug. This three-year exclusivity covers only the conditions associated with the new clinical investigations and does not prohibit the FDA from approving ANDAs for drugs containing the original active agent. Even if our drug candidates are considered to be reference products eligible for three years of exclusivity under the FDCA, another company could market competing products if the FDA approves a full NDA for such product containing the sponsor’s own preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of the products. Moreover, an amendment or repeal of the FDCA could result in a shorter exclusivity period for our drug candidates, which would have a material adverse effect on our business.

If we market any of our drug candidates in a manner that violates healthcare fraud and abuse laws, or if we violate government price reporting laws, we may be subject to civil or criminal penalties.

The FDA enforces laws and regulations which require that the promotion of pharmaceutical products be consistent with the approved prescribing information. While physicians may prescribe an approved product for a so-called “off label” use, it is unlawful for a pharmaceutical company to promote its products in a manner that is inconsistent with its approved label and any company which engages in such conduct can subject that company to significant liability. Similarly, industry codes in the EU and other foreign jurisdictions prohibit companies from engaging in off-label promotion and regulatory agencies in various countries enforce violations of the code with civil penalties. While we intend to ensure that our promotional materials are consistent with our label, regulatory agencies may disagree with our assessment and may issue untitled letters, warning letters or may institute other civil or criminal enforcement proceedings. In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal healthcare fraud and abuse laws have been applied in recent years to restrict certain marketing practices in the pharmaceutical industry. These laws include the U.S. Anti-Kickback Statute, U.S. False Claims Act and similar state laws. Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of these laws.

The U.S. Anti-Kickback Statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce, or in return for, purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted broadly to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are several statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not, in all cases, meet all of the criteria for safe harbor protection from anti-kickback liability. Moreover, recent health care reform legislation has strengthened these laws. For example, the Health Care Reform Law, among other things, amends the intent requirement of the U.S. Anti-Kickback Statute and criminal health care fraud statutes; a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition, the Health Care Reform Law provides that the government may assert that a claim including items or services resulting from a violation of the U.S. Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the U.S. False Claims Act. Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government or knowingly making, or causing to be made, a false statement to get a false claim paid.

Over the past few years, several pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of alleged promotional and marketing activities, such as: allegedly providing free trips, free goods, sham consulting fees and grants and other monetary benefits to prescribers; reporting to pricing services inflated average wholesale prices that were then used by federal programs to set reimbursement rates; engaging in off-label promotion that caused claims to be submitted to Medicare or Medicaid for non-covered, off-label uses; and submitting inflated best price information to the Medicaid Rebate Program to reduce liability for Medicaid rebates. Most states also have statutes or regulations similar to the U.S. Anti-Kickback Statute and the U.S. False Claims Act, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and state laws may include substantial civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, substantial criminal fines and imprisonment.

We will be completely dependent on third parties to manufacture our drug candidates, and our commercialization of our drug candidates could be halted, delayed or made less profitable if those third parties fail to obtain manufacturing approval from the FDA or comparable foreign regulatory authorities, fail to provide us with sufficient quantities of our drug candidates or fail to do so at acceptable quality levels or prices.

We do not currently have, nor do we plan to acquire, the capability or infrastructure to manufacture the active pharmaceutical ingredient, (“API”), in our drug candidates for use in our clinical trials or for commercial product, if any. In addition, we do not have the capability to encapsulate any of our drug candidates as a finished drug product for commercial distribution. As a result, we will be obligated to rely on contract manufacturers, if and when any of our drug candidates are approved for commercialization. We have not entered into an agreement with any contract manufacturers for commercial supply and may not be able to engage a contract manufacturer for commercial supply of any of our drug candidates on favorable terms to us, or at all.

The facilities used by our contract manufacturers to manufacture our drug candidates must be approved by the FDA or comparable foreign regulatory authorities pursuant to inspections that will be conducted after we submit an NDA or BLA to the FDA or their equivalents to other relevant regulatory authorities. We will not control the manufacturing process of, and will be completely dependent on, our contract manufacturing partners for compliance with cGMPs for manufacture of both active drug substances and finished drug products. These cGMP regulations cover all aspects of the manufacturing, testing, quality control and record keeping relating to our drug candidates. If our contract manufacturers do not successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our drug candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our drug candidates, if approved.

Our contract manufacturers will be subject to ongoing periodic unannounced inspections by the FDA and corresponding state and foreign agencies for compliance with cGMPs and similar regulatory requirements. We will not have control over our contract manufacturers’ compliance with these regulations and standards. Failure by any of our contract manufacturers to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, failure to grant approval to market any of our drug candidates, delays, suspensions or withdrawals of approvals, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business. In addition, we will not have control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. Failure by our contract manufacturers to comply with or maintain any of these standards could adversely affect our ability to develop, obtain regulatory approval for or market any of our drug candidates.

If, for any reason, these third parties are unable or unwilling to perform, we may not be able to terminate our agreements with them, and we may not be able to locate alternative manufacturers or formulators or enter into favorable agreements with them and we cannot be certain that any such third parties will have the manufacturing capacity to meet future requirements. If these manufacturers or any alternate manufacturer of finished drug product experiences any significant difficulties in its respective manufacturing processes for our API or finished products or should cease doing business with us, we could experience significant interruptions in the supply of any of our drug candidates or may not be able to create a supply of our drug candidates at all. Were we to encounter manufacturing issues, our ability to produce a sufficient supply of any of our drug candidates might be negatively affected. Our inability to coordinate the efforts of our third party manufacturing partners, or the lack of capacity available at our third party manufacturing partners, could impair our ability to supply any of our drug candidates at required levels. Because of the significant regulatory requirements that we would need to satisfy in order to qualify a new bulk or finished product manufacturer, if we face these or other difficulties with our current manufacturing partners, we could experience significant interruptions in the supply of any of our drug candidates if we decided to transfer the manufacture of any of our drug candidates to one or more alternative manufacturers in an effort to deal with the difficulties.

Any manufacturing problem or the loss of a contract manufacturer could be disruptive to our operations and result in lost sales. Additionally, we rely on third parties to supply the raw materials needed to manufacture our potential products. Any reliance on suppliers may involve several risks, including a potential inability to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality. Any unanticipated disruption to a future contract manufacturer caused by problems at suppliers could delay shipment of any of our drug candidates, increase our cost of goods sold and result in lost sales.

We cannot guarantee that our future manufacturing and supply partners will be able to reduce the costs of commercial scale manufacturing of any of our drug candidates over time. If the commercial-scale manufacturing costs of any of our drug candidates are higher than expected, these costs may significantly impact our operating results. In order to reduce costs, we may need to develop and implement process improvements. However, in order to do so, we will need, from time to time, to notify or make submissions with regulatory authorities, and the improvements may be subject to approval by such regulatory authorities. We cannot be sure that we will receive these necessary approvals or that these approvals will be granted in a timely fashion. We also cannot guarantee that we will be able to enhance and optimize output in our commercial manufacturing process. If we cannot enhance and optimize output, we may not be able to reduce our costs over time.

We expect to rely on third parties to conduct clinical trials for our drug candidates. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize any of our drug candidates and our business would be substantially harmed.

We expect to enter into agreements with third-party CROs to conduct and manage our clinical programs including contracting with clinical sites to perform our clinical studies. We plan to rely heavily on these parties for execution of clinical studies for our drug candidates and will control only certain aspects of their activities. Nevertheless, we will be responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on CROs and clinical sites will not relieve us of our regulatory responsibilities. We and our CROs will be required to comply with cGCPs, which are regulations and guidelines enforced by the FDA, the Competent Authorities of the Member States of the European Economic Area and comparable foreign regulatory authorities for any products in clinical development. The FDA and its foreign equivalents enforce these cGCP regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If we or our CROs fail to comply with applicable cGCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, the FDA or other regulatory authorities will determine that any of our clinical trials comply with cGCPs. In addition, our clinical trials must be conducted with products produced under cGMP regulations and will require a large number of test subjects. Our failure or the failure of our CROs or clinical sites to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process and could also subject us to enforcement action up to and including civil and criminal penalties.

Although we intend to design the clinical trials for our drug candidates in consultation with CROs, we expect that the CROs will manage all of the clinical trials conducted at contracted clinical sites. As a result, many important aspects of our drug development programs would be outside of our direct control. In addition, the CROs and clinical sites may not perform all of their obligations under arrangements with us or in compliance with regulatory requirements. If the CROs or clinical sites do not perform clinical trials in a satisfactory manner, breach their obligations to us or fail to comply with regulatory requirements, the development and commercialization of any of our drug candidates for the subject indication may be delayed or our development program materially and irreversibly harmed. We cannot control the amount and timing of resources these CROs and clinical sites will devote to our program or any of our drug candidates. If we are unable to rely on clinical data collected by our CROs, we could be required to repeat, extend the duration of, or increase the size of our clinical trials, which could significantly delay commercialization and require significantly greater expenditures.

If any of our relationships with these third-party CROs or clinical sites terminate, we may not be able to enter into arrangements with alternative CROs or clinical sites. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, any such clinical trials may be extended, delayed or terminated, and we may not be able to obtain regulatory approval for or successfully commercialize our drug candidates. As a result, our financial results and the commercial prospects for any of our drug candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.

Any termination or suspension of, or delays in the commencement or completion of, any necessary studies of any of our drug candidates for any indications could result in increased costs to us, delay or limit our ability to generate revenue and adversely affect our commercial prospects.

The commencement and completion of clinical studies can be delayed for a number of reasons, including delays related to:

	●	the FDA or a comparable foreign regulatory authority failing to grant permission to proceed and placing the clinical study on hold;

	●	subjects for clinical testing failing to enroll or remain in our trials at the rate we expect;

	●	a facility manufacturing any of our drug candidates being ordered by the FDA or other government or regulatory authorities to temporarily or permanently shut down due to violations of cGMP requirements or other applicable requirements, or cross-contaminations of drug candidates in the manufacturing process;

	●	any changes to our manufacturing process that may be necessary or desired;

	●	subjects choosing an alternative treatment for the indications for which we are developing our drug candidates, or participating in competing clinical studies;

	●	subjects experiencing severe or unexpected drug-related adverse effects;

	●	reports from clinical testing on similar technologies and products raising safety and/or efficacy concerns;

	●	third-party clinical investigators losing their license or permits necessary to perform our clinical trials, not performing our clinical trials on our anticipated schedule or employing methods consistent with the clinical trial protocol, cGMP requirements, or other third parties not performing data collection and analysis in a timely or accurate manner;

	●	inspections of clinical study sites by the FDA, comparable foreign regulatory authorities, or IRBs finding regulatory violations that require us to undertake corrective action, result in suspension or termination of one or more sites or the imposition of a clinical hold on the entire study, or that prohibit us from using some or all of the data in support of our marketing applications;

	●	third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or any of the data produced by such contractors in support of our marketing applications;

	●	one or more IRBs refusing to approve, suspending or terminating the study at an investigational site, precluding enrollment of additional subjects, or withdrawing its approval of the trial; reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

	●	deviations of the clinical sites from trial protocols or dropping out of a trial;

	●	adding new clinical trial sites;

	●	the inability of the CRO to execute any clinical trials for any reason; and

	●	government or regulatory delays or “clinical holds” requiring suspension or termination of a trial.

Product development costs for any of our drug candidates will increase if we have delays in testing or approval or if we need to perform more or larger clinical studies than planned. Additionally, changes in regulatory requirements and policies may occur and we may need to amend study protocols to reflect these changes. Amendments may require us to resubmit our study protocols to the FDA, comparable foreign regulatory authorities, and IRBs for reexamination, which may impact the costs, timing or successful completion of that study. If we experience delays in completion of, or if we, the FDA or other regulatory authorities, the IRB, or other reviewing entities, or any of our clinical study sites suspend or terminate any of our clinical studies of any of our drug candidates, its commercial prospects may be materially harmed and our ability to generate product revenues will be delayed. Any delays in completing our clinical trials will increase our costs, slow down our development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects significantly. In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement or completion of, clinical studies may also ultimately lead to the denial of regulatory approval of our drug candidates. In addition, if one or more clinical studies are delayed, our competitors may be able to bring products to market before we do, and the commercial viability of any of our drug candidates could be significantly reduced.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

Clinical testing of drug candidates is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of pre-clinical studies and early clinical trials may not be predictive of the results of later-stage clinical trials. We cannot assure you that the FDA or comparable foreign regulatory authorities will view the results as we do or that any future trials of any of our drug candidates will achieve positive results. Drug candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Any future clinical trial results for our drug candidates may not be successful.

In addition, a number of factors could contribute to a lack of favorable safety and efficacy results for any of our drug candidates. For example, such trials could result in increased variability due to varying site characteristics, such as local standards of care, differences in evaluation period and surgical technique, and due to varying patient characteristics including demographic factors and health status.

Even though we may apply for orphan drug designation for a drug candidate, we may not be able to obtain orphan drug marketing exclusivity.

There is no guarantee that the FDA, EMA or their foreign equivalents will grant any future application for orphan drug designation for any of our drug candidates, which would make us ineligible for the additional exclusivity and other benefits of orphan drug designation.

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug intended to treat a rare disease or condition, which is generally a disease or condition that affects fewer than 200,000 individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a drug available in the Unites States for this type of disease or condition will be recovered from sales of the product. Orphan drug designation must be requested before submitting an NDA. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan product designation does not convey any advantage in or shorten the duration of regulatory review and approval process. In addition to the potential period of exclusivity, orphan designation makes a company eligible for grant funding of up to $400,000 per year for four years to defray costs of clinical trial expenses, tax credits for clinical research expenses and potential exemption from the FDA application user fee.

If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan drug exclusivity, which means the FDA may not approve any other applications to market the same drug for the same indication for seven years, except in limited circumstances, such as (i) the drug’s orphan designation is revoked; (ii) its marketing approval is withdrawn; (iii) the orphan exclusivity holder consents to the approval of another applicant’s product; (iv) the orphan exclusivity holder is unable to assure the availability of a sufficient quantity of drug; or (v) a showing of clinical superiority to the product with orphan exclusivity by a competitor product. If a drug designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled to orphan drug exclusivity. There can be no assurance that we will receive orphan drug designation for any of our drug candidates in the indications for which we think they might qualify, if we elect to seek such applications.

Although we may pursue expedited regulatory approval pathways for a drug candidate, it may not qualify for expedited development or, if it does qualify for expedited development, it may not actually lead to a faster development or regulatory review or approval process.

Although we believe there may be an opportunity to accelerate the development of certain of our drug candidates through one or more of the FDA’s expedited programs, such as fast track, breakthrough therapy, accelerated approval or priority review, we cannot be assured that any of our drug candidates will qualify for such programs.

For example, a drug may be eligible for designation as a breakthrough therapy if the drug is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints. Although breakthrough designation or access to any other expedited program may expedite the development or approval process, it does not change the standards for approval. If we apply for breakthrough therapy designation or any other expedited program for our drug candidates, the FDA may determine that our proposed target indication or other aspects of our clinical development plans do not qualify for such expedited program. Even if we are successful in obtaining a breakthrough therapy designation or access to any other expedited program, we may not experience faster development timelines or achieve faster review or approval compared to conventional FDA procedures. Access to an expedited program may also be withdrawn by the FDA if it believes that the designation is no longer supported by data from our clinical development program. Additionally, qualification for any expedited review procedure does not ensure that we will ultimately obtain regulatory approval for such drug candidate.

If we are unable to protect our proprietary rights, we may not be able to prevent others from using our intellectual property, which may reduce the competitiveness and value of the related assets.

Our success will depend in part on our ability to obtain and maintain patent protection for our formulations and technologies and to prevent third parties from infringing upon our proprietary rights. We must also operate without infringing upon patents and proprietary rights of others, including by obtaining appropriate licenses to patents or other proprietary rights held by third parties, if necessary. The primary means by which we will be able to protect our formulations and technologies from unauthorized use by third parties is to obtain valid and enforceable patents that cover them. As of February 28, 2019, we owned and/or licensed nine U.S. issued patents, two international issued patents, and 32 U.S. patent applications, including 29 utility (including continuation, continuation-in-part and divisional) and three provisional patent applications, and we owned seven international patent applications filed under the Patent Cooperation Treaty and 42 foreign patent applications. However, the applications we have filed or may file in the future may never yield patents that protect our inventions and intellectual property assets. Failure to obtain patents that sufficiently cover our formulations and technologies would limit our protection against other compounding pharmacies and outsourcing facilities, generic drug manufacturers, pharmaceutical companies and other parties who may seek to copy our products, produce products substantially similar to ours or use technologies substantially similar to those we own. We have made, and expect to continue to make, significant investments in certain of our proprietary formulations prior to the grant of any patents covering these formulations, and we may not receive a sufficient return on these investments if patent coverage or other appropriate intellectual property protection is not obtained and their competitiveness and value decreases.

The patent and intellectual property positions of pharmacies and pharmaceutical companies, including ours, are uncertain and involve complex legal and factual questions. There is no guarantee that we have developed or obtained or will in the future develop or obtain the rights to products or processes that are patentable, that patents will issue from any pending applications or that claims allowed will be sufficient to protect the technology we have developed or may in the future develop or to which we have acquired or may in the future acquire development rights. In addition, we cannot be certain that patents issued to us will not be challenged, invalidated, infringed or circumvented, including by our competitors, or that the rights granted thereunder will provide competitive advantages to us.

We also rely on unpatented trade secrets and know-how and continuing technological innovation in order to develop our formulations, which we seek to protect, in part, by confidentiality agreements with our employees, consultants, collaborators and others, including certain service providers. We also have invention or patent assignment agreements with our current employees and certain consultants. Nonetheless, our employees and consultants may breach these agreements, and we may not have adequate remedies for the breach. Our trade secrets may otherwise become known or be independently discovered by competitors or could be developed by a person not bound by an invention assignment agreement with us, in which case we may have no rights to use the applicable invention.

We may face additional competition outside of the U.S. as a result of a lack of patent coverage in some territories and differences in patent prosecution and enforcement laws in foreign counties.

Filing, prosecuting, defending and enforcing patents on our proprietary formulations throughout the world is extremely expensive. We do not currently have patent protection outside of the U.S. that covers any of our proprietary formulations or other assets that we are currently pursuing. Competitors may use our technologies to develop their own products in jurisdictions where we have not obtained patent protection.

Even if the international patent applications we have filed or may in the future file are issued or approved, it is likely that the scope of protection provided by such patents would be different from, and possibly less than, the scope provided by corresponding U.S. patents. As a result, patent rights we are able to obtain may not be sufficient to prevent generic competition. Further, the extent of our international market opportunity may be dependent upon the enforcement of patent rights in various other countries. A number of countries in which we could file patent applications have a history of weak enforcement and/or compulsory licensing of intellectual property rights. Moreover, the legal systems of certain countries, particularly certain developing countries, do not favor the aggressive enforcement of patents and other intellectual property protection, particularly those relating to biotechnology and/or pharmaceuticals, which would make it difficult for us to stop a third party from infringing any of our intellectual property rights. Moreover, attempting to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business.

Our proprietary formulations and technologies could potentially conflict with the rights of others.

The preparation or sale of our proprietary formulations and use of our technologies may infringe on the patent or other intellectual property rights of others. If our products infringe or conflict with the patent or other intellectual property rights of others, third parties could bring legal actions against us claiming damages and seeking to enjoin our manufacturing and marketing of our affected products. Patent litigation is costly and time consuming and may divert management’s attention and our resources. We may not have sufficient resources to bring any actions to a successful conclusion. If we are not successful in defending against these legal actions should they arise, we may be subject to monetary liability or be forced to alter our products, cease some or all of our operations relating to the affected products, or seek to obtain a license in order to continue manufacturing and marketing the affected products, which may not available on acceptable terms or at all.

We are dependent on our Chief Executive Officer, Mark L. Baum, and other key persons for the continued growth and development of our Company.

Our Chief Executive Officer, Mark L. Baum, has played a primary role in creating and developing our current business model. Further, Mr. Baum has played a primary role in securing much of our material intellectual property rights and related assets, as well as the means to make and distribute our current products. We are highly dependent on Mr. Baum for the implementation of our business plan and the future development of our assets and our business, and the loss of Mr. Baum’s services and leadership would likely materially adversely impact our Company. We presently maintain key man insurance for Mr. Baum. In addition, our loan agreement identifies other key persons including, but not limited to, our Chief Financial Officer, Andrew R. Boll and our President of ImprimisRx, John P. Saharek.

If we are unable to attract and retain key personnel and consultants, we may be unable to maintain or expand our business.

We have been focusing on building our management, pharmacy, research and development, sales and marketing and other personnel to pursue our current business model. To achieve our planned growth, we may have significant difficulty attracting and retaining necessary employees. Because of the specialized nature of our business, the ability to develop products and to compete will remain highly dependent upon our ability to attract and retain qualified pharmacy, scientific, technical and commercial employees and consultants. There is intense competition to hire qualified personnel in our industry, and we may be unable to continue to attract and retain the qualified personnel necessary for the development of our business. The loss of key employees or consultants or the failure to recruit or engage new employees and consultants could have a material adverse effect on our business.

Risks Related to Our Common Stock

If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results, which could cause our stock price to fall.

Effective internal controls are necessary for us to provide reliable financial results. If we cannot provide reliable financial results, our consolidated financial statements could be misstated, our reputation may be harmed and the trading price of our common stock could decline. As we discussed in Part I - Item 4 of this Quarterly Report, our management concluded that our internal controls over financial reporting were effective as of June 30, 2019. However, our controls over financial processes and reporting may not continue to be effective or we may identify material weaknesses or significant deficiencies in our internal controls in the future. Any failure to remediate any future material weaknesses or successfully implement required new or improved controls, could harm our operating results, cause us to fail to meet our reporting obligations or result in material misstatements in our consolidated financial statements or other public disclosures. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

A consistently active trading market for shares of our common stock may not be sustained.

Historically, trading in our common stock has been sporadic and volatile and our common stock has been “thinly-traded.” There have been, and may in the future be, extended periods when trading activity in our shares is minimal, compared to a seasoned issuer with a large and steady volume of trading activity. The market for our common stock is also characterized by significant price volatility compared to seasoned issuers, and we expect that such volatility may continue. As a result, the trading of relatively small quantities of shares may disproportionately influence the market price of our common stock. A consistently active and liquid trading market in our securities may never develop or be sustained.

Our stock price may be volatile.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in response to various factors, many of which are beyond our control, including the following: our ability to execute our business plan; operating results that fall below expectations; industry or regulatory developments; investor perception of our industry or our prospects; economic and other external factors; and the other risk factors discussed in this “Risk Factors” section.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.

We have the right to issue shares of preferred stock without obtaining stockholder approval. If we were to issue preferred stock, it may have rights, preferences and privileges superior to those of our common stock.

We are authorized to issue 5,000,000 shares of “blank check” preferred stock, with such rights, preferences and privileges as may be determined from time to time by our board of directors. Our board of directors is empowered, without stockholder approval, to issue preferred stock at any time in one or more series and to fix the dividend rights, dissolution or liquidation preferences, redemption prices, conversion rights, voting rights and other rights, preferences and privileges for any series of our preferred stock that may be issued. The issuance of shares of preferred stock, depending on the rights, preferences and privileges attributable to the preferred stock, could reduce the voting rights and powers of our common stockholders and the portion of our assets allocated for distribution to our common stockholders in a liquidation event, and could also result in dilution to the book value per share of our common stock. The preferred stock could also be utilized, under certain circumstances, as a method for raising additional capital or discouraging, delaying or preventing a change in control of our Company.

We have not paid dividends in the past and do not expect to pay dividends in the future. Any return on an investment will be limited to any appreciation in the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. Any payment of dividends on our common stock would depend on contractual restrictions, such as those contained in our SWK loan agreement, as well as our earnings, financial condition and other business and economic factors as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

The sale of substantial amounts of our common stock in the public market, or the perception that sales could occur, may cause the market price of our common stock to fall. Sales could occur upon the expiration of any statutory holding period, such as under Rule 144 under the Securities Act of 1933, as amended, applicable to outstanding shares, upon expiration of any lock-up periods applicable to outstanding shares, upon our issuance of shares upon the exercise of outstanding options or warrants, or upon our issuance of shares pursuant offerings of our equity securities. The availability for sale of a substantial number of shares of our common stock, whether or not sales have occurred or are occurring, also could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future when needed, on acceptable terms or at all.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number		Description

10.1		Joinder and Amendment to Loan and Security Agreement, dated May 24, 2019, by and between Harrow Health, Inc., each of its wholly owned subsidiaries and SWK Funding LLC. (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Harrow Health, Inc. filed with the Securities and Exchange Commission on May 29, 2019)

10.2*		Consulting Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc. and Andrew R. Boll

10.3*		Consulting Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc. and Mark L. Baum

10.4*		Consulting Agreement dated June 3, 2019 between Mayfield Pharmaceuticals, Inc. and John P. Saharek

31.1*		Certification of Mark L. Baum, principal executive officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.

31.2*		Certification of Andrew R. Boll, principal financial and accounting officer, pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities and Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.

32.1**		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, executed by Mark L. Baum, principal executive officer, and Andrew R. Boll, principal financial and accounting officer.

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase

101.DEF*		XBRL Taxonomy Extension Definition Linkbase

101.LAB*		XBRL Taxonomy Extension Label Linkbase

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase

*	Filed herewith.
**	Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Harrow Health, Inc.

Dated: August 14, 2019	By:	/s/ Mark L. Baum
		Mark L. Baum
		Chief Executive Officer and Director
		(Principal Executive Officer)

	By:	/s/ Andrew R. Boll
		Andrew R. Boll
		Chief Financial Officer (Principal Financial and Accounting Officer)

EX-10.2 2 ex10-2.htm

Consulting Agreement

THIS CONSULTING AGREEMENT (the “Agreement”) is effective as the last date provided for on the signature page and is entered into by and between Andrew R. Boll, an individual (“Consultant”) and Mayfield Pharmaceuticals, Inc., a Delaware corporation with its principal address located at 12264 El Camino Real, Suite 350, San Diego, CA 92130 (the “Company”).

WHEREAS, the Company wishes to retain Consultant as an advisor to the Company; and

WHEREAS, Consultant wishes to provide advisory services to the Company as set forth below.

NOW THEREFORE, in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Consultant and the Company agree, intending to be legally bound, as follows:

1.	Consulting Services.

1.1.

Consultant will provide consulting services to the Company during the Term (as further defined below) of this Agreement. The consulting services (“Services”) are set forth in the Statement of Work (“SOW”) that is attached hereto as Appendix A and made a part hereof, as it may be amended from time to time by the parties hereto. Consultant shall perform all Services in compliance with all applicable laws.

2.	Effective Date; Term and Termination.

2.1.

This Agreement shall be effective on the later of the dates that it is executed by the Company and Consultant (the “Effective Date”) and shall terminate as of the date Services are completed (the “Term” as further defined and outlined in Appendix A) unless: (i) this Agreement is sooner terminated as provided in Section 2.2 below; or (ii) the parties agree in writing to extend the Term for a mutually agreed upon period.

2.2.

The Agreement and the Services provided by Consultant may be terminated by either Consultant or the Company, at any time and for any reason, upon five (5) days prior written notice of termination.

3.	Consulting Fees.

3.1.

In consideration of the Services provided hereunder, the Company shall provide Consultant the compensation as set forth in the applicable SOW (“Consulting Fee”).

3.2.

Consultant shall be responsible for all expenses incurred in association with performance of the Services, unless pre-approved by the Company in writing in advance.

Confidentiality. Consultant acknowledges that Consultant will receive confidential and proprietary information from, on behalf of, or at the direction of, the Company in connection with, and during the course of providing, the Services, including but not limited to technical, clinical, marketing, commercial and/or legal information, data, reports, drawings, models, designs, prototypes, biological material, specimens, chemical compounds, formulas, manufacturing or other processes, software, specifications, patent applications, marketing strategies, customer information and customer lists (“Confidential Information”). All Confidential Information is and shall at all times remain the exclusive property of the Company. Consultant agrees:

4.1.

to hold the Confidential Information in strict confidence and not to disclose or make available any Confidential Information to any third party whatsoever, without the prior written consent of the Company;

4.2.

to use the Confidential Information only for the benefit of the Company and only for the purpose of providing the Services;

4.3.

to take at least the same degree of care to prevent disclosure of Confidential Information as Consultant takes to preserve and safeguard Consultant’s own confidential and proprietary information, but in any event, no less than a reasonable degree of care;

4.4.

not to make copies of the Confidential Information except to the extent that the copies are reasonably necessary for providing the Services;

4.5.

to return or destroy (as the Company may direct) any Confidential Information held by Consultant immediately upon termination of the Term of this Agreement pursuant to Section 2 above and provide the Company with a letter certifying that all such Confidential Information has been returned or destroyed as directed;

4.6.

that Confidential Information excludes information that:

(a)

as evidenced by Consultant’s written records, was lawfully known to Consultant prior to its communication by, on behalf of, or at the direction of the Company and was not communicated to Consultant subject to any restrictions on disclosure or use; or

(b)

as evidenced by Consultant’s written records, is independently developed by Consultant without use or knowledge of the Confidential Information; or

(c)

is or becomes a part of the public domain other than by a breach of this Agreement by Consultant;

(d)

becomes known to Consultant by the action of a third party not in breach of any obligation of confidence; or

(e)

is required to be disclosed or made available by Consultant to a third party pursuant to any applicable law, governmental regulation, or decision of any court or tribunal of competent jurisdiction, so long as Consultant takes reasonable steps, in light of the circumstances, to give the Company sufficient prior notice in order to contest such law, governmental regulation, or decision;

4.7.

that no representation or warranty, express or implied, is made by the Company as to the accuracy, completeness or reasonableness of any Confidential Information and that neither the Company will have any liability to Consultant as a result of Consultant’s possession or use of the Confidential information; and

4.8.

that money damages may not be sufficient remedy for any breach of this Section and that the Company will be entitled to seek specific performance and injunctive or equitable relief as a remedy for any such breach.

4.9.

Nothing in this Section is intended to limit any remedy of the Company under the California Uniform Trade Secrets Act (California Civil Code Section 3426), or otherwise available under law.

4.10.

Notwithstanding the other provisions of this Agreement, pursuant to 18 U.S.C. Section 1833(b), Consultant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

Independent Contractor. The relationship of Consultant to the Company shall be that of an independent contractor rendering professional services. Consultant is not an employee of the Company. Nothing contained in this Agreement shall be deemed to create a relationship of employer and employee or principal and agent between the Company and Consultant. In no circumstance shall Consultant look to the Company as Consultant’s employer, partner, agent or principal. Consultant is not entitled to and will be excluded from participating in any of Company’s fringe benefit plans or programs as a result of the performance of the Services under this Agreement, including, but not limited to, health, sickness, accident or dental coverage, life insurance, disability benefits, accidental death and dismemberment coverage, unemployment insurance coverage, workers’ compensation coverage, and pension or 401(k) benefit(s) provided by Company to its employees (and Consultant waives the right to receive any such benefits). Consultant agrees, as an independent contractor, that Consultant is not entitled to unemployment benefits in the event this Agreement terminates, or workers’ compensation benefits in the event that Consultant is injured in any manner or becomes ill while performing the work under this Agreement. Consultant is solely responsible for all tax returns, payments, or reports required to be filed with or made to any federal, state or local tax authority with respect to Consultant’s performance of Services and receipt of consideration (including Consulting Fees) under this Agreement. Consultant is not authorized to make any representation, contract or commitment on behalf of the Company unless specifically requested or authorized in writing to do so by an executive officer or Board member of the Company.

Waiver. No waiver of this Agreement or any of its provisions shall be binding upon a party unless in writing and signed by each party. The waiver by either party of a breach or violation of any provision of this Agreement shall not constitute or be construed as a waiver of any subsequent breach or violation of that provision or as a waiver of any breach or violation of any other provision.

Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable provision, which, being valid, legal and enforceable, comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision.

8.	Survival. The provisions of Sections 2.2, 3, 4, 6-11 and any other obligation under this Agreement which is to survive or be performed after termination of this Agreement, regardless of the cause therefor, shall survive any termination or expiration of this Agreement.

Notices. Any notice or other communication required or permitted to be made or given under this Agreement to either party shall be in writing and shall be sufficiently given if (i) hand delivered, (ii) sent by overnight guaranteed delivery service, such as Federal Express or UPS; or (iii) sent by facsimile transmission or electronic mail during addressee’s normal business hours, with a duplicate copy sent by overnight delivery or certified or registered mail, addressed as either party may from time to time designate to the other by written notice. Any such notice or other communication shall be deemed to be given as of the date it is received by the addressee.

10.

Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, excluding the choice of law rules, and the parties hereby agree to submit to the jurisdiction and venue of the State and Federal courts of the State of California, and agree that the State and Federal courts of the State of California shall be the exclusive forum for the resolution of all disputes related to or arising out of this Agreement.

11.

Entire Agreement; Amendments. This Agreement, including any applicable SOW, represents the entire agreement between the parties in relation to the subject matter contained herein and supersedes all previous other agreements and representations, whether oral or written. This Agreement may be modified only if such modification is in writing and signed by a duly authorized representative of each party.

***SIGNATURE PAGE FOLLOWS***

SIGNATURE PAGE

IN WITNESS WHEREOF, the parties hereto have executed this Consulting Agreement as of the date first above written.

COMPANY:		CONSULTANT:

MAYFIELD PHARMACEUTICALS, INC.		Andrew R. Boll

	/s/ Mark Baum		/s/ Andrew Boll
By:	Mark L. Baum	By:	Andrew R. Boll
Its:	Executive Director		An individual

Date:	6/14/2019	Date:	6/14/2019

Reviewed and Acknowledged by:
HARROW HEALTH, INC.

Robert Kammer

/s/ Robert Kammer
By: Robert Kammer
Chairman of the Board and Compensation
Committee of Harrow Health, Inc.,
majority owner of Mayfield Pharmaceuticals, Inc.

Date: 6/14/2019

Appendix A

Statement of Work

under Consulting Agreement

by and between

Andrew R. Boll and Mayfield Pharmaceuticals, Inc.

Services:

Consultant shall provide management advisory services to the Company relating to its establishment, financing activities and other related services as may be requested from time to time by the Company.

Compensation:

Upon or shortly following commencement of Consultant’s Services to the Company, the Company shall grant to Consultant 362,500 shares (the “Shares”) of the Company’s restricted common stock, par value $0.001 (“Common Stock”) under the terms of the Company’s 2019 Equity Incentive Plan (the “Plan”) and a Restricted Stock Award Grant Notice and Agreement thereunder to be provided to Consultant by the Company (collectively with the Plan, the “Restricted Stock Documents”). The issuance of equity by the Company to Consultant in the form of Shares shall be determined and agreed upon in writing at a later time by the Company and Consultant.

The Shares and/or Options shall vest upon the earliest of:

(1)

a Change in Control (as defined in the Plan);

(2)

the date of any underwriting agreement between the Company and the underwriter(s) managing an initial public offering of the Company’s common stock, pursuant to which the common stock is priced for initial public offering (the “IPO”); or

(3)

the date of closing of any bona-fide equity financing with third party investors resulting in cash gross proceeds to the Company of at least $10,000,000 (“Subsequent Financing”).

and in any case of (1), (2) and (3), subject to Consultant’s Continuous Service through such vesting date; provided, however, in the event Consultant’s Continuous Service is terminated by the Company (other than for Cause) or by death of Consultant prior to the completion of the Term (as defined in this Consulting Agreement), the Shares and/or Options shall vest immediately upon such termination.

Consultant understands that that the receipt of the Shares and/or Options hereunder may trigger tax consequences to Consultant for which Consultant will be solely responsible and that the Shares and/or Options have not been registered under the Securities Act of 1933, as amended, or any applicable state securities law. Consultant must execute the Restricted Stock Documents and/or Stock Option Documents as a condition to receipt of the Shares and/or Options hereunder.

Term:

Consultant commenced providing Services to the Company on or about June 1, 2019 and shall provide the Services through the earlier of (i) one year from the Date of Grant, (ii) a Change in Control, (iii) the IPO, (iv) a Subsequent Financing or (v) such earlier date as the Services are terminated by the Company or Consultant in accordance with this Agreement (the “Term”).

EX-10.3 3 ex10-3.htm

Consulting Agreement

THIS CONSULTING AGREEMENT (the “Agreement”) is effective as the last date provided for on the signature page and is entered into by and between Mark L. Baum, an individual (“Consultant”) and Mayfield Pharmaceuticals, Inc., a Delaware corporation with its principal address located at 12264 El Camino Real, Suite 350, San Diego, CA 92130 (the “Company”).

WHEREAS, the Company wishes to retain Consultant as an advisor to the Company; and

WHEREAS, Consultant wishes to provide advisory services to the Company as set forth below.

1.	Consulting Services.

1.1.

2.	Effective Date; Term and Termination.

2.1.

2.2.

The Agreement and the Services provided by Consultant may be terminated by either Consultant or the Company, at any time and for any reason, upon five (5) days prior written notice of termination.

3.	Consulting Fees.

3.1.

In consideration of the Services provided hereunder, the Company shall provide Consultant the compensation as set forth in the applicable SOW (“Consulting Fee”).

3.2.

Consultant shall be responsible for all expenses incurred in association with performance of the Services, unless pre-approved by the Company in writing in advance.

4.1.

4.2.

to use the Confidential Information only for the benefit of the Company and only for the purpose of providing the Services;

4.3.

4.4.

not to make copies of the Confidential Information except to the extent that the copies are reasonably necessary for providing the Services;

4.5.

4.6.

that Confidential Information excludes information that:

(a)

(b)

as evidenced by Consultant’s written records, is independently developed by Consultant without use or knowledge of the Confidential Information; or

(c)

is or becomes a part of the public domain other than by a breach of this Agreement by Consultant;

(d)

becomes known to Consultant by the action of a third party not in breach of any obligation of confidence; or

(e)

4.7.

4.8.

4.9.

Nothing in this Section is intended to limit any remedy of the Company under the California Uniform Trade Secrets Act (California Civil Code Section 3426), or otherwise available under law.

4.10.

8.	Survival. The provisions of Sections 2.2, 3, 4, 6-11 and any other obligation under this Agreement which is to survive or be performed after termination of this Agreement, regardless of the cause therefor, shall survive any termination or expiration of this Agreement.

10.

11.

***SIGNATURE PAGE FOLLOWS***

SIGNATURE PAGE

IN WITNESS WHEREOF, the parties hereto have executed this Consulting Agreement as of the date first above written.

COMPANY:		CONSULTANT:

MAYFIELD PHARMACEUTICALS, INC.		Mark L. Baum

	/s/ Andrew Boll		/s/ Mark Baum
By:	Andrew R. Boll	By:	Mark L. Baum
Its:	Executive Director		An individual

Date:	6/14/2019	Date:	6/14/2019

Reviewed and Acknowledged by:
HARROW HEALTH, INC.

Robert Kammer

/s/ Robert Kammer
By: Robert Kammer
Chairman of the Board and Compensation
Committee of Harrow Health, Inc.,
majority owner of Mayfield Pharmaceuticals, Inc.

Date: 6/14/2019

Appendix A

Statement of Work

under Consulting Agreement

by and between

Mark L. Baum and Mayfield Pharmaceuticals, Inc.

Services:

Consultant shall provide management advisory services to the Company relating to its establishment, financing activities, invention support and other related services as may be requested from time to time by the Company.

Compensation:

Upon or shortly following commencement of Consultant’s Services to the Company, the Company shall grant to Consultant 725,000 shares (the “Shares”) of the Company’s restricted common stock, par value $0.001 (“Common Stock”) under the terms of the Company’s 2019 Equity Incentive Plan (the “Plan”) and a Restricted Stock Award Grant Notice and Agreement thereunder to be provided to Consultant by the Company (collectively with the Plan, the “Restricted Stock Documents”). The issuance of equity by the Company to Consultant in the form of Shares shall be determined and agreed upon in writing at a later time by the Company and Consultant.

The Shares and/or Options shall vest upon the earliest of:

(1)

a Change in Control (as defined in the Plan);

(2)

(3)

the date of closing of any bona-fide equity financing with third party investors resulting in cash gross proceeds to the Company of at least $10,000,000 (“Subsequent Financing”).

Term:

EX-10.4 4 ex10-4.htm

Consulting Agreement

THIS CONSULTING AGREEMENT (the “Agreement”) is effective as the last date provided for on the signature page and is entered into by and between John Saharek, an individual (“Consultant”) and Mayfield Pharmaceuticals, Inc., a Delaware corporation with its principal address located at 12264 El Camino Real, Suite 350, San Diego, CA 92130 (the “Company”).

WHEREAS, the Company wishes to retain Consultant as an advisor to the Company; and

WHEREAS, Consultant wishes to provide advisory services to the Company as set forth below.

1.	Consulting Services.

1.1.

2.	Effective Date; Term and Termination.

2.1.

2.2.

The Agreement and the Services provided by Consultant may be terminated by either Consultant or the Company, at any time and for any reason, upon five (5) days prior written notice of termination.

3.	Consulting Fees.

3.1.

In consideration of the Services provided hereunder, the Company shall provide Consultant the compensation as set forth in the applicable SOW (“Consulting Fee”).

3.2.

Consultant shall be responsible for all expenses incurred in association with performance of the Services, unless pre-approved by the Company in writing in advance.

4.1.

4.2.

to use the Confidential Information only for the benefit of the Company and only for the purpose of providing the Services;

4.3.

4.4.

not to make copies of the Confidential Information except to the extent that the copies are reasonably necessary for providing the Services;

4.5.

4.6.

that Confidential Information excludes information that:

(a)

(b)

as evidenced by Consultant’s written records, is independently developed by Consultant without use or knowledge of the Confidential Information; or

(c)

is or becomes a part of the public domain other than by a breach of this Agreement by Consultant;

(d)

becomes known to Consultant by the action of a third party not in breach of any obligation of confidence; or

(e)

4.7.

4.8.

4.9.

Nothing in this Section is intended to limit any remedy of the Company under the California Uniform Trade Secrets Act (California Civil Code Section 3426), or otherwise available under law.

4.10.

8.	Survival. The provisions of Sections 2.2, 3, 4, 6-11 and any other obligation under this Agreement which is to survive or be performed after termination of this Agreement, regardless of the cause therefor, shall survive any termination or expiration of this Agreement.

10.

11.

***SIGNATURE PAGE FOLLOWS***

SIGNATURE PAGE

IN WITNESS WHEREOF, the parties hereto have executed this Consulting Agreement as of the date first above written.

COMPANY:		CONSULTANT:

MAYFIELD PHARMACEUTICALS, INC.		John Saharek

	/s/ Andrew Boll		/s/ John Saharek
By:	Andrew R. Boll	By:	John Saharek
Its:	Executive Director		An individual

Date:	6/14/2019	Date:	6/14/2019

Reviewed and Acknowledged by:

HARROW HEALTH, INC.

Robert Kammer

/s/ Robert Kammer
By:	Robert Kammer
	Chairman of the Board and Compensation
	Committee of Harrow Health, Inc.,
	majority owner of Mayfield Pharmaceuticals, Inc.

Date: 6/14/2019

Appendix A

Statement of Work

under Consulting Agreement

by and between

John Saharek and Mayfield Pharmaceuticals, Inc.

Services:

Consultant shall provide advisory services to the Company relating to its sales and marketing activities and other related services as may be requested from time to time by the Company.

Compensation:

Upon or shortly following commencement of Consultant’s Services to the Company, the Company shall grant to Consultant an option to purchase up to 25,000 shares of Common Stock (the “Options”) under the terms of the Plan and a Stock Option Grant Notice and Agreement thereunder to be provided to Consultant by the Company (collectively with the Plan, the “Stock Option Documents”). The issuance of equity by the Company to Consultant in the form of Shares or Options shall be determined and agreed upon in writing at a later time by the Company and Consultant.

The Shares and/or Options shall vest upon the earliest of:

	(1)	a Change in Control (as defined in the Plan);
	(2)	the date of any underwriting agreement between the Company and the underwriter(s) managing an initial public offering of the Company’s common stock, pursuant to which the common stock is priced for initial public offering (the “IPO”); or
	(3)	the date of closing of any bona-fide equity financing with third party investors resulting in cash gross proceeds to the Company of at least $10,000,000 (“Subsequent Financing”).

Term:

EX-31.1 5 ex31-1.htm

EXHIBIT 31.1

CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT

I, Mark L. Baum, certify that:

	(1)	I have reviewed this quarterly report on Form 10-Q of Harrow Health, Inc.;

	(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	(4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in the report any change in this registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5)

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2019

/s/ Mark L. Baum

Mark L. Baum

Chief Executive Officer

Principal Executive Officer

EX-31.2 6 ex31-2.htm

EXHIBIT 31.2

CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER UNDER

SECTION 302 OF THE SARBANES-OXLEY ACT

I, Andrew R. Boll, certify that:

	(1)	I have reviewed this quarterly report on Form 10-Q of Harrow Health, Inc.;

	(2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	(3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	(4)	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)	Disclosed in the report any change in this registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5)

	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2019

/s/ Andrew R. Boll

Andrew R. Boll

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1 7 ex32-1.htm

Exhibit 32.1

CERTIFICATION REQUIRED BY
SECTION 1350 OF TITLE 18 OF THE UNITED STATES CODE

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned hereby certifies in his capacity as the specified officer of Harrow Health, Inc. (the “Company”), that, to the best of his knowledge, the Quarterly Report of the Company on Form 10-Q for the fiscal quarter ended June 30, 2019 fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such report.

Date: August 14, 2019

/s/ Mark L. Baum
Mark L. Baum Chief Executive Officer (Principal Executive Officer)

Date: August 14, 2019

/s/ Andrew R. Boll
Andrew R. Boll Chief Financial Officer (Principal Financial and Accounting Officer)

This certification accompanies this Report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

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The Company’s intangible assets at June 30, 2019 consisted of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td style="text-align: center">Amortization</td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td style="text-align: center">periods</td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2" style="text-align: center">Accumulated</td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2" style="text-align: center">Net</td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: center; border-bottom: Black 1.5pt solid">(in years)</td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Cost</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">amortization</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Impairment</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Carrying value</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 12%">Patents</td><td style="width: 2%"> </td> <td style="width: 22%; text-align: center">17-19 years</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">962</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">(64</td><td style="width: 1%; text-align: left">)</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">898</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Licenses</td><td> </td> <td style="text-align: center">20 years</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">50</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(5</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">45</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Trademarks</td><td> </td> <td style="text-align: center">Indefinite</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">332</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">332</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Customer relationships</td><td> </td> <td style="text-align: center">3-15 years</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">2,998</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(1,115</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(15</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">1,868</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Trade name</td><td> </td> <td style="text-align: center">5 years</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">16</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(15</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(1</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Non-competition clause</td><td> </td> <td style="text-align: center">3-4 years</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">294</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(274</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(20</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">State pharmacy licenses</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: center; padding-bottom: 1.5pt">25 years</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">45</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(6</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(28</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">11</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: right; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">4,697</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(1,479</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(64</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">3,154</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

Amortization expense for intangible assets for the three and six months ended June 30, 2019 was as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended June 30,</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended June 30,</td><td style="text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td style="text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 28%">Patents</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">11</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 14%; text-align: right">6</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">15</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">13</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Licenses</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">1</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">5</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Customer relationships</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">51</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">50</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">102</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">100</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Trade name</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">1</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">2</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">3</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Non-competition clause</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">1</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">State pharmacy licenses</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">-</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">-</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">1</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">-</td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">63</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">57</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">125</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">117</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr></table>

Estimated future amortization expense for the Company’s intangible assets at June 30, 2019 is as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 55%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%; text-align: left">Remainder of 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">128</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">252</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">252</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">252</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2023</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">252</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt; text-align: left">Thereafter</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">2,018</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">3,154</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

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2482009

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3.64

6.43

P5Y9M18D

P6Y1M6D

0.64

0.67

0.0219

0.0268

1.47

2.76

5.61

6.64

42.80

1.70

42.80

2.60

4.66

6.30

8.99

3.20

2725605

816936

495496

440350

967793

5030

P5Y7M10D

P7Y2M19D

P6Y8M5D

P8Y4M28D

P2Y5M9D

P1Y1M13D

1461723

526237

441452

122159

366845

5030

4.69

2.12

3.99

6.04

8.24

42.80

1275680

1431360

223860

2.16

2.83

2.20

2206973

1174918

1.70

4.09

1032055

2015-05-11 2016-08-16 2016-12-27 2017-07-19

125000

40000

394532

615386

1174918

1.79

3.75

1.79

2.08

2.01

1.79

1155000

1359000

906000

150000

99000

1166000

85000

108000

367000

608000

268000

573000

75000

35000

24000

2019 The Company is required to make royalty payments to Dr. Lindstrom ranging from 3% - 6% of net sales, dependent upon the final formulation of the Klarity Product sold.

68180

247000

2529000

247000

35065000

24751000

17577000

8584000

16683000

11021000

16683000

8291000

6227000

8291000

9123000

8228000

9123000

5225000

4157000

5225000

1215000

159000

658000

263000

810000

72000

533000

127000

16791000

13267000

11519000

86000

8248000

6779000

5804000

43000

10236000

1414000

-1653000

3146000

-1319000

-1334000

-716000

-671000

263000

314000

-707000

587000

830000

885000

388000

564000

268000

818000

-33000

309000

-169000

-785000

-700000

565000

550000

-1228000

251000

641000

53000

4193000

6838000

200000 200000 3993000 3970000

1053000

1006000

8000

4000

179000

The unaudited condensed results of operations information of Surface is summarized below:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">For the</td><td style="font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td><td style="font-weight: bold; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Six Months Ended</td><td style="font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td><td style="font-weight: bold; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Revenues, net</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 71%; text-align: left">Loss from operations</td><td style="width: 2%"> </td> <td style="width: 1%; border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="width: 25%; border-bottom: Black 1.5pt solid; text-align: right">1,680</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Net loss</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(1,680</td><td style="text-align: left">)</td></tr></table> The unaudited condensed results of operations information of Melt is summarized below:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center">For the</td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center">Six months ended</td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center">June 30, 2019</td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Revenues, net</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 71%; text-align: left">Loss from operations</td><td style="width: 2%"> </td> <td style="width: 1%; border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="width: 25%; border-bottom: Black 1.5pt solid; text-align: right">1,382</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Net loss</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(1,382</td><td style="text-align: left">)</td></tr></table> The unaudited condensed balance sheet information of Surface is summarized below:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">June 30,</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%; text-align: left">Current assets</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">18,061</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Non current assets</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">48</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total assets</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">18,109</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total liabilities</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">532</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total stockholders’ equity</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">17,577</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total liabilities and stockholders’ equity</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">18,109</td><td style="text-align: left"> </td></tr></table> The unaudited condensed balance sheet information of Melt is summarized below:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center">June 30,</td><td style="text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%; text-align: left">Current assets</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">9,521</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Non current assets</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">3</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total assets</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">9,524</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total liabilities</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">940</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total preferred stock and stockholders’ equity</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">8,584</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total liabilities and stockholders’ equity</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">9,524</td><td style="text-align: left"> </td></tr></table>

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   The following represents an update for the three and six months ended June 30, 2019 to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.   Liquidity   The Company has incurred significant operating losses and negative cash flows from operations since its inception. The Company incurred net income (loss) of $8,980 and $(991) for the six months ended June 30, 2019 and 2018, respectively, and had an accumulated deficit of $65,231 and $74,211 as of June 30, 2019 and December 31, 2018, respectively. In addition, the Company used cash in operating activities of $(632) for the six months ended June 30, 2019, while during the six months ended June 30, 2018, operating activities provided cash of $400.   While there is no assurance, management of the Company believes existing cash resources and restricted cash of $4,193 at June 30, 2019, will be sufficient to sustain the Company’s planned level of operations for at least the next twelve months. However, estimates of operating expenses and working capital requirements could be incorrect, and the Company could use its cash resources faster than anticipated. Further, some or all of the ongoing or planned activities may not be successful and could result in further losses.   The Company may seek to increase liquidity and capital resources through a variety of means which may include, but are not limited to: the sale of assets, investments and/or businesses, obtaining financing through the issuance of equity, debt, or convertible securities; and working to increase revenue growth through sales. There is no guarantee that the Company will be able to obtain capital when needed on terms management deems acceptable, or at all.   Segments   The Company’s chief operating decision-maker is its Chief Executive Officer who makes resource allocation decisions and assesses performance based on financial information presented on as operating segments. The Company has identified two operating segments as reportable segments. See Note 15 for more information regarding the Company’s reportable segments.   Noncontrolling Interests   The Company recognizes any noncontrolling interest as a separate line item in equity in the condensed consolidated financial statements. A noncontrolling interest represents the portion of equity ownership in a less-than-wholly owned subsidiary not attributable to the Company. Generally, any interest that holds less than 50% of the outstanding voting shares is deemed to be a noncontrolling interest; however, there are other factors, such as decision-making rights, that are considered as well. The Company includes the amount of net income (loss) attributable to noncontrolling interests in consolidated net income (loss) on the face of the condensed consolidated statements of operations.   The Company provides in the condensed consolidated statements of stockholders’ equity a reconciliation at the beginning and the end of the period of the carrying amount of total equity, equity attributable to the parent, and equity attributable to the noncontrolling interest that separately discloses:   <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif; text-align: justify">(1)</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">net income or loss;</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">(2)</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">(3)</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">each component of other income or loss.</td></tr> </table>   Basic and Diluted Net Income (Loss) per Common Share   Basic net income (loss) per common share is computed by dividing income (loss) attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is computed by dividing the income (loss) attributable to common stockholders for the period by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during the period.   Basic and diluted net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period. Common stock equivalents (using the treasury stock or “if converted” method) from deferred acquisition obligations, convertible note payable, stock options, unvested restricted stock units (“RSUs”) and warrants were 5,331,883 and 10,245,280 at June 30, 2019 and 2018, respectively, and, except for the six months ended June 30, 2019 and the three months ended June 30, 2018, are excluded from the calculation of diluted net income (loss) per share for the periods presented, because the effect is anti-dilutive. Included in the basic and diluted net income (loss) per share calculation were RSUs awarded to directors that had vested, but the issuance and delivery of the shares are deferred until the director resigns. The number of shares underlying vested RSUs at June 30, 2019 and 2018 was 304,873 and 168,513, respectively.   The following table shows the computation of basic net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: justify"> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%; text-align: left; padding-bottom: 2.5pt">Numerator – net income (loss) attributable to Harrow Health, Inc.</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">(2,378</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt">)</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">2,522</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">8,980</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">(991</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Denominator – weighted average number of shares outstanding, basic</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">25,216,565</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">21,190,794</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">25,030,012</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">21,070,644</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net income (loss) per share, basic</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(0.09</td><td style="text-align: left; padding-bottom: 2.5pt">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.12</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.36</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(0.05</td><td style="text-align: left; padding-bottom: 2.5pt">)</td></tr> </table>   For the six months ended June 30, 2019 and the three months ended June 30, 2018, the Company had net income. As a result, the Company computed diluted net income per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding during those periods. Diluted common equivalent shares for the six months ended June 30, 2019 and the three months ended June 30, 2018, consisted of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center">For the</td><td> </td><td> </td> <td colspan="2" style="text-align: center">For the</td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center">Three Months Ended</td><td> </td><td> </td> <td colspan="2" style="text-align: center">Six Months Ended</td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2018</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Diluted shares related to:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 56%; padding-left: 10pt">Warrants</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 18%; text-align: right">1,093,006</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 18%; text-align: right">1,028,780</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Stock options and RSUs</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">891,631</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">637,891</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Dilutive common equivalent shares</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,984,637</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,666,671</td><td style="text-align: left"> </td></tr> </table>   The following table shows the computation of diluted net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: justify"> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%; text-align: left; padding-bottom: 2.5pt">Numerator – net income (loss) attributable to Harrow Health, Inc.</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">(2,378</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt">)</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">2,522</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">8,980</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">(991</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Denominator – weighted average number of shares outstanding, basic</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">25,216,565</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">21,190,794</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">25,030,012</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">21,070,644</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Dilutive common equivalents</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,984,637</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,666,671</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Number of shares used for diluted earnings per share computation</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">25,216,565</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">23,175,431</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">26,696,683</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">21,070,644</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net income (loss) per share, diluted</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(0.09</td><td style="text-align: left; padding-bottom: 2.5pt">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.11</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.34</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(0.05</td><td style="text-align: left; padding-bottom: 2.5pt">)</td></tr> </table>   Investment in Eton Pharmaceuticals, Inc. – Related Party   The Company owns 3,500,000 shares of Eton common stock, which represents approximately 19.7% of the equity and voting interests of Eton as of June 30, 2019. At June 30, 2019, the fair market value of Eton’s common stock was $7.90 per share, the closing share price of Eton common stock on June 28, 2019, the last trading day of the period ended June 30, 2019. In accordance with the Accounting Standards Update (“ASU”) 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, for the three months ended June 30, 2019, the Company recorded an investment loss from its Eton common stock position of $350, related to the change in fair market value of the Company’s investment in Eton during the measurement period. For the six months ended June 30, 2019, the Company recorded an investment gain from its Eton common stock position of $6,230, related to the change in fair market value of the Company’s investment in Eton during the measurement period. As of June 30, 2019, the fair market value of the Company’s investment in Eton was $27,650.   In November 2018, the Company entered into a lock-up agreement that prohibits the sale of any of its Eton common stock until November 2019 without the approval of National Securities Corporation, the underwriter of Eton’s initial public offering of its common stock.   Mark Baum, the Company’s Chief Executive Officer, is a member of the board of directors of Eton.   Investment in Melt Pharmaceuticals, Inc. – Related Party   In April 2018, the Company formed Melt as a wholly owned subsidiary. In January and March of 2019, Melt entered into definitive stock purchase agreements (collectively, the “Melt Series A Preferred Stock Agreement”) with certain investors and closed on the purchase and sale of Melt’s Series A Preferred Stock (the “Melt Series A Stock”), totaling approximately $11,400 of proceeds (collectively the “Melt Series A Round”) at a purchase price of $5.00 per share. As a result, the Company lost voting and ownership control of Melt and ceased consolidating Melt’s financial statements. In connection with the Melt Series A Preferred Stock Agreement, Melt also entered into a Registration Rights Agreement and agreed to use commercially reasonable efforts to file, or confidentially submit, a registration statement on Form S-1 with the United States Securities and Exchange Commission by September 30, 2020 relating to an initial public offering of its common stock.   At the time of deconsolidation, the Company recorded a gain of $5,810 and adjusted the carrying value in Melt to reflect the increased valuation of Melt and the Company’s new ownership interest in accordance with Accounting Standard Codification (“ASC”) 810-10-40-4(c), Consolidation.   The Company owns 3,500,000 common shares (which is approximately 44% of the equity interest as of June 30, 2019) of Melt and uses the equity method of accounting for this investment, as management has determined that the Company has the ability to exercise significant influence over the operating and financial decisions of Melt. Under this method, the Company recognizes earnings and losses of Melt in its consolidated financial statements and adjusts the carrying amount of its investment in Melt accordingly. The Company’s share of earnings and losses are based on the Company’s ownership interest of Melt. Any intra-entity profits and losses are eliminated. During the three and six months ended June 30, 2019, the Company recorded equity in net loss of Melt of $326 and $611, respectively. As of June 30, 2019, the carrying value of the Company’s investment in Melt was $5,199.   See Note 4 for more information and related party disclosure regarding Melt.   Investment in Surface Pharmaceuticals, Inc. – Related Party   In April 2017, the Company formed Surface as a wholly owned subsidiary. In May and July 2018, Surface entered into a definitive stock purchase agreement with an institutional investor for the purchase of Surface’s Series A Preferred Stock (the “Surface Series A Stock”) and closed on the sale, resulting in total proceeds to Surface of approximately $21,000. At the time of the first closing in May 2018, the Company lost voting and ownership control of Surface and it ceased consolidating Surface’s financial statements. The Surface Series A Stock (i) was issued at a purchase price of $3.30 per share; (ii) will vote together with the common stock and all other shares of stock of Surface having general voting power; (iii) will be entitled to the number of votes equal to the number of shares of preferred stock held; (iv) will hold liquidation preference over all other equity interests in Surface; and (v) will have mandatory conversion requirements into Surface common stock upon events including an underwritten initial public offering (“IPO”) of Surface common stock or similar transaction.   At the time of deconsolidation, the Company recorded a gain of $5,320 and adjusted the carrying value in Surface to reflect the increased valuation of Surface and the Company’s new ownership interest in accordance with ASC 810-10-40-4(c), Consolidation.   The Company owns 3,500,000 common shares (which is approximately 30% of the equity interest as of June 30, 2019) of Surface and uses the equity method of accounting for this investment, as management has determined that the Company has the ability to exercise significant influence over the operating and financial decisions of Surface. Under this method, the Company recognizes earnings and losses of Surface in its consolidated financial statements and adjusts the carrying amount of its investment in Surface accordingly. The Company’s share of earnings and losses are based on the Company’s ownership interest of Surface. Any intra-entity profits and losses are eliminated. The Company recorded equity in net loss of Surface of $261 and $504 during the three and six months ended June 30, 2019. The Company recorded equity in net loss of Surface of $102 during the three and six months ended June 30, 2018. As of June 30, 2019, the carrying value of the Company’s investment in Surface was $4,443.   See Note 5 for more information and related party disclosure regarding Surface.   Recently Adopted Accounting Pronouncements   In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842). This new guidance was initiated as a joint project with the International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify all leases with a term of over one year as either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use” asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease classification, with finance leases recognizing the amortization of the right-of-use asset separate from the interest on the lease liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU No. 2016-02 would be substantially unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 took effect for public companies in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. On January 1, 2019, the Company adopted Topic 842 using the modified retrospective transition method with no impact to stockholders’ equity. As of June 30, 2019, the Company held on its condensed consolidated balance sheet $6,069 for the right-of-use asset and $6,472 for the related lease liability related to operating leases. The difference between the right of use asset and related lease liability is predominantly deferred rent and other related lease expenses under the new lease accounting standard. For additional information regarding how the Company is accounting for leases under Topic 842, refer to Note 12.   Recently Issued Accounting Pronouncements   In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other. This guidance simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the current two-step impairment test under ASC 350. The updated standard eliminates the requirement to calculate a goodwill impairment charge using Step 2. If a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for reporting periods beginning after December 31, 2019 on a prospective basis, and early adoption is permitted. The Company does not expect ASU 2017-04 to have a material effect on the Company’s financial position, results of operations and cash flows.

NOTE 3. REVENUES   The Company accounts for contracts with customers in accordance with ASC 606, Revenues from Contracts with Customers. The Company has two primary streams of revenues: (1) revenues recognized from our sale of products within our pharmacy services and (2) revenues recognized from intellectual property license and asset purchase agreements.   Product Revenues from Pharmacy Services   The Company sells prescription drugs directly through our pharmacy and outsourcing facility network. Revenues from our pharmacy services divisions includes: (i) the portion of the price the client pays directly to us, net of any volume-related or other discounts paid back to the client, (ii) the price paid to us by individuals, and (iii) customer copayments made directly to the pharmacy network. Sales taxes are not included in revenue. Following the core principle of ASC 606, we have identified the following:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse"> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="width: 0.5in; font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif; text-align: justify">1.</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">Identify the contract(s) with a customer: A contract exists with a customer at the time the prescription or order is received by the Company.</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">2.</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">Identify the performance obligations in the contract: The order received contains the performance obligations to be met, in almost all cases the product the customer is wishing to receive. If we are unable to be meet the performance obligation, the customer is notified.</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">3.</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">Determine the transaction price: the transaction price is based on the product being sold to the customer, and any related customer discounts. These amounts are pre-determined and built into our order management software.</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">4.</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">Allocate the transaction price to the performance obligations in the contract: The transaction price associated with the product(s) being ordered is allocated according to the pre-determined amounts.</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">5.</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">Recognize revenue when (or as) the entity satisfies a performance obligation: At the time of shipment from the pharmacy or outsourcing facility, the performance obligation has been met.</td></tr> </table>   The following revenue recognition policy has been established for the pharmacy services division:   Revenues generated from prescription or office use drugs sold by our pharmacies and outsourcing facility are recognized when the prescription is shipped. At the time of shipment, the pharmacy services division has performed substantially all of its obligations under its client contracts and does not experience a significant level of returns or reshipments. Determination of criteria (3) and (4) is based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. The Company records reductions to revenue for discounts at the time of the initial sale. Estimated returns and allowances and other adjustments are provided for in the same period during which the related sales are recorded and are based on actual returns history. The rate of returns is analyzed annually to determine historical returns experience. If the historical data we use to calculate these estimates do not properly reflect future returns, then a change in the allowance would be made in the period in which such a determination is made and revenues in that period could be materially affected. The Company will defer any revenues received for a product that has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered and no refund will be required.   Intellectual Property License Revenues   The Company currently holds five intellectual property license and related agreements in which the Company has promised to grant a license or sale which provides a customer with the right to access the Company’s intellectual property. License arrangements may consist of non-refundable upfront license fees, data transfer fees, research reimbursement payments, exclusive license rights to patented or patent pending compounds, technology access fees, and various performance or sales milestones. These arrangements can be multiple element arrangements, the revenue of which is recognized at the point of time the performance obligation is met.   Non-refundable fees that are not contingent on any future performance by the Company and require no consequential continuing involvement on the part of the Company are recognized as revenue when the license term commences and the licensed data, technology, compounded drug preparation and/or other deliverable is delivered. Such deliverables may include physical quantities of compounded drug preparations, design of the compounded drug preparations and structure-activity relationships, the conceptual framework and mechanism of action, and rights to the patents or patent applications for such compounded drug preparations. The Company defers recognition of non-refundable fees if it has continuing performance obligations without which the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee and that are separate and independent of the Company’s performance under the other elements of the arrangement. In addition, if the Company’s continued involvement is required, through research and development services that are related to its proprietary know-how and expertise of the delivered technology or can only be performed by the Company, then such non-refundable fees are deferred and recognized over the period of continuing involvement. Guaranteed minimum annual royalties are recognized on a straight-line basis over the applicable term.   Revenue disaggregated by revenue source for the three and six months ended June 30, 2019 and 2018, consists of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2018</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2018</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 32%; text-align: left">Product sales, net</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">13,509</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">10,374</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">25,792</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">19,229</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">License revenues</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">7</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">10</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">14</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">20</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Total revenues</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">13,516</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">10,384</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">25,806</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">19,249</td><td style="text-align: left"> </td></tr> </table>   Deferred revenue and customer deposits at June 30, 2019 and December 31, 2018, was $224 and $119, retrospectively. All deferred revenue and customer deposit amounts at December 31, 2018 were recognized as revenue during the six months ended June 30, 2019.

NOTE 5. INVESTMENT IN SURFACE PHARMACEUTICALS, INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS   The Company entered into an asset purchase and license agreement in 2017, and amended it in April 2018 (the “Surface License Agreements”) with Surface. Pursuant to the terms of the Surface License Agreements, the Company assigned and licensed to Surface certain intellectual property and related rights to develop, formulate, make, sell, and sub-license formulations of certain topical eye drop formulations that utilize a proprietary delivery vehicle and a proprietary doxycycline capsule (collectively, the “Surface Products”). Surface is required to make royalty payments to the Company of four to six percent (4%-6%) of net sales of the Surface Products while any patent rights remain outstanding.   In January 2018, the Company and Surface entered into an amended Management Services Agreement (the “Surface MSA”), whereby the Company provided to Surface certain administrative services and support, including bookkeeping, web services and human resources related activities, and Surface paid the Company a monthly amount of $10. The Surface MSA was terminated effective July 31, 2018.   As of June 30, 2019, the Company was due $50 from Surface for reimbursable expenses and amounts due under the Surface MSA and included in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.   As of June 30, 2019, the Company owned 3,500,000 shares of Surface common stock (approximately 30% of the issued and outstanding equity interests). The Company’s director, Richard L. Lindstrom and the Company’s Chief Executive Officer, Mark L. Baum, are directors of Surface. In addition, the Company’s Chief Financial Officer, Andrew R. Boll, was a director of Surface and resigned as a director of Surface concurrent with the sale of the Surface Series A Stock. Several employees and a director of the Company (including Mr. Baum, Dr. Lindstrom and Mr. Boll) entered into consulting agreements and provided consulting services to Surface. Surface is required to make royalty payments to Dr. Lindstrom of three percent (3%) of net sales of certain Surface products while certain patent rights remain outstanding. Dr. Lindstrom is also a principal of Flying L Partners, an affiliate of the funding investor who purchased the Surface Series A Stock.   The unaudited condensed results of operations information of Surface is summarized below:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">For the</td><td style="font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td><td style="font-weight: bold; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Six Months Ended</td><td style="font-weight: bold; text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td><td style="font-weight: bold; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Revenues, net</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 71%; text-align: left">Loss from operations</td><td style="width: 2%"> </td> <td style="width: 1%; border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="width: 25%; border-bottom: Black 1.5pt solid; text-align: right">1,680</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Net loss</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(1,680</td><td style="text-align: left">)</td></tr> </table>   The unaudited condensed balance sheet information of Surface is summarized below:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">June 30,</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%; text-align: left">Current assets</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">18,061</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Non current assets</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">48</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total assets</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">18,109</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total liabilities</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">532</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total stockholders’ equity</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">17,577</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total liabilities and stockholders’ equity</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">18,109</td><td style="text-align: left"> </td></tr></table>

NOTE 6. INVENTORIES   Inventories are comprised of finished compounded formulations, over-the-counter and prescription retail pharmacy products, commercial pharmaceutical products, related laboratory supplies and active pharmaceutical ingredients. The composition of inventories as of June 30, 2019 and December 31, 2018 was as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">June 30,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2018</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 56%; text-align: left">Raw materials</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">1,758</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">1,119</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Work in progress</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">264</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">6</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Finished goods</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">630</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">709</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total inventories</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,652</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,834</td></tr></table>

NOTE 7. PREPAID EXPENSES AND OTHER CURRENT ASSETS   Prepaid expenses and other current assets consisted of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">June 30,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2018</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 60%; text-align: left">Prepaid insurance</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">65</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">328</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Other prepaid expenses</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">434</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">334</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Receivable due from Surface</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">50</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">50</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Receivable due from Melt</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">714</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Deposits and other current assets</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">138</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">125</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total prepaid expenses and other current assets</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,401</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">837</td><td style="text-align: left"> </td></tr></table>

NOTE 8. PROPERTY, PLANT AND EQUIPMENT   Property, plant and equipment consisted of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31, 2018</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Property, plant and equipment, net:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 50%; text-align: left; padding-left: 10pt">Computer software and hardware</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 21%; text-align: right">1,743</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 21%; text-align: right">1,662</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Furniture and equipment</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">420</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">397</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Lab and pharmacy equipment</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">3,416</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">3,184</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 10pt">Leasehold improvements</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,612</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,496</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">11,191</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">10,739</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Accumulated depreciation and amortization</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(5,245</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(4,364</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="font-weight: bold; text-align: right; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">5,946</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">6,375</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>   For the three and six months ended June 30, 2019, depreciation related to the property, plant and equipment was $491 and $968, respectively.

NOTE 9. INTANGIBLE ASSETS AND GOODWILL   The Company’s intangible assets at June 30, 2019 consisted of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td style="text-align: center">Amortization</td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td style="text-align: center">periods</td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2" style="text-align: center">Accumulated</td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2" style="text-align: center">Net</td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: center; border-bottom: Black 1.5pt solid">(in years)</td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Cost</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">amortization</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Impairment</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Carrying value</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 12%">Patents</td><td style="width: 2%"> </td> <td style="width: 22%; text-align: center">17-19 years</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">962</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">(64</td><td style="width: 1%; text-align: left">)</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 12%; text-align: right">898</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Licenses</td><td> </td> <td style="text-align: center">20 years</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">50</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(5</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">45</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Trademarks</td><td> </td> <td style="text-align: center">Indefinite</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">332</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">332</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Customer relationships</td><td> </td> <td style="text-align: center">3-15 years</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">2,998</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(1,115</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(15</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">1,868</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Trade name</td><td> </td> <td style="text-align: center">5 years</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">16</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(15</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(1</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Non-competition clause</td><td> </td> <td style="text-align: center">3-4 years</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">294</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(274</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(20</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">State pharmacy licenses</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: center; padding-bottom: 1.5pt">25 years</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">45</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(6</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(28</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">11</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: right; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">4,697</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(1,479</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(64</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">3,154</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>   Amortization expense for intangible assets for the three and six months ended June 30, 2019 was as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended June 30,</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended June 30,</td><td style="text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td style="text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 28%">Patents</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">11</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 14%; text-align: right">6</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">15</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 14%; text-align: right">13</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Licenses</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">1</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">5</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Customer relationships</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">51</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">50</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">102</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">100</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Trade name</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">1</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">2</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">3</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Non-competition clause</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">1</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">State pharmacy licenses</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">-</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">-</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">1</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">-</td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">63</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">57</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">125</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">117</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr> </table>   Estimated future amortization expense for the Company’s intangible assets at June 30, 2019 is as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 55%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%; text-align: left">Remainder of 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">128</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">252</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">252</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">252</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2023</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">252</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt; text-align: left">Thereafter</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">2,018</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">3,154</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>   There have been no changes in the carrying value of the Company’s goodwill during the three and six months ended June 30, 2019.

NOTE 10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES   Accounts payable and accrued expenses consisted of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31, 2018</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 54%; text-align: left">Accounts payable</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 19%; text-align: right">5,957</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 19%; text-align: right">4,966</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Accrued litigation settlement (see Note 14)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">733</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">640</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Deferred rent</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">388</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Accrued interest</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">253</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">256</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Accrued exit fee for note payable</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">800</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">800</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total accounts payable and accrued expenses</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">7,743</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">7,050</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: Current portion</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(6,943</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(6,250</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Non-current total accrued expenses</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">800</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">800</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

NOTE 11. DEBT   SWK Refinance – May 2019   In May 2019, the Company entered into a joinder and amendment (the “Amendment”) to its term loan and security agreement dated as of July 19, 2017 (the “SWK Loan”), with SWK Funding LLC and its partners (the “Lender”), as lender and collateral agent. A summary of the material changes contained in the Amendment are as follows:   <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="width: 0.25in; text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="width: 0.25in; text-align: justify; font: 10pt Times New Roman, Times, Serif">●</td> <td style="width: 94%; text-align: justify; font: 10pt Times New Roman, Times, Serif">The interest rate calculation that the loan bears is now equal to the three-month London Inter-Bank Offered Rate (subject to a minimum of 2.00%), plus an applicable margin of 10.00% (the “Margin Rate”); provided that, if, two days prior to a payment date, the Company provides the Lender evidence that the Company has achieved a leverage ratio as of such date of less than 4.00:1:00, the Margin Rate shall equal 9.00%; and if the Company has achieved a leverage ratio as of such date of less than 3.00:1:00, the Margin Rate shall equal 7.00%;</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">●</td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">Leverage ratio in the Amendment means, as of any date of determination, the ratio of: (a) indebtedness as of such date to (b) EBITDA (as defined in the SWK Loan), of the Company for the immediately preceding twelve (12) month period, adding-back (i) actual litigation expenses for the immediately preceding twelve (12) month period, minus (ii) actual litigation expenses for the immediately preceding three (3) month period multiplied by four (4);</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">●</td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">The definition of the first amortization date was changed to May 14, 2020, permitting the Company to pay interest only on the principal amount loaned for the next four payments (payments are due on a quarterly basis) following the Amendment; and</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">●</td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">Subject to the satisfaction of certain revenue and market capitalization requirements and conditions, the Lender agreed to make available to the Company an additional principal amount of up to $5,000.</td></tr> </table>   In addition to the terms described above, the Amendment joined the Company’s recently created subsidiaries to the SWK Loan and added definitions related to excluded subsidiaries that are not considered co-borrowers and are subsidiaries of the Company which the Company believes it will eventually deconsolidate from its financials and lose 50% or more of the equity interests of the subsidiary.   Related to the Amendment, the Company incurred expenses related to legal and lender costs of $282 that are included in debt discount and will be amortized over the term of the SWK Loan.   At June 30, 2019, future minimum payments under the Company’s note payable were as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%; text-align: left">Remainder of 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">1,216</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">3,696</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">4,121</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">3,828</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">2023</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">7,330</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total minimum payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">20,191</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: amount representing interest</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(4,941</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Notes payable, gross</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">15,250</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: unamortized discount</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,505</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">13,745</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: current portion, net of unamortized discount</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(247</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Note payable, net of current portion and unamortized debt discount</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">13,498</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>   For the three and six months ended June 30, 2019, debt discount amortization related to note payable was $125 and $250, respectively.

NOTE 12. LEASES   The Company adopted Topic 842 on January 1, 2019. Topic 842 allows the Company to elect a package of practical expedients, which include: (i) an entity need not reassess whether any expired or existing contracts are or contain leases; (ii) an entity need not reassess the lease classification for any expired or existing leases; and (iii) an entity need not reassess any initial direct costs for any existing leases. Another practical expedient allows the Company to use hindsight in determining the lease term when considering lessee options to extend or terminate the lease and to purchase the underlying asset. The Company has elected to utilize the package of practical expedients and has not elected the hindsight methodology in its implementation of Topic 842.   The Company elected to adopt this standard using the optional modified retrospective transition method and recognized a cumulative-effect adjustment to the condensed consolidated balance sheet on the date of adoption. Comparative periods have not been restated. With the adoption of Topic 842, the Company’s condensed consolidated balance sheet now contains the following line items: Right-of-use assets, Operating lease liabilities—short-term and Operating lease liabilities—long-term.   The Company determined that it held the following significant operating leases of office and laboratory space as of January 1, 2019:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse"> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify; width: 0.25in">●</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">An operating lease for 10,200 square feet of office space in San Diego, California that expires in December 2021, with an option to extend the term for a five-year period;</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">●</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">An operating lease for 4,500 square feet of office and lab space in Irvine, California that expires in December 2020, with an option to extend the term for up to two five-year periods. The Company expects this lease will be assigned if the sale of Park closes (see Note 16); and</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">●</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">An operating lease for 25,000 square feet of lab, warehouse and office space in Ledgewood, New Jersey that expires in July 2024, with an option to extend the term for two additional five-year periods.</td></tr> </table>   The extensions within the San Diego, California and Ledgewood, New Jersey operating lease agreements were included within the Company’s calculation of the new lease standard as the Company is reasonably certain it will exercise its option to extend these leases. The Company has elected to not recognize right-of-use assets and lease liabilities arising from short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.   The previously classified capital leases are now classified as finance leases under the new standard. The Company has determined that the identified finance leases did not contain non-lease components and require no further allocation of the total lease cost. The Company has determined that the identified operating leases did contain non-lease components and elected an accounting policy to combine non-lease and lease components to determine the total lease cost. Additionally, the operating agreements in place did not contain information to determine the rate implicit in the leases. As such, the Company calculated the incremental borrowing rate based on the assumed remaining lease term for each lease in order to calculate the present value of the remaining lease payments. At June 30, 2019, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases held by the Company were 6.36% and 12.11 years, respectively.   Upon adoption of Topic 842, the Company recorded a $6,325 increase in operating lease right-of-use assets, a $388 decrease in accounts payable and accrued expenses and a $6,712 increase in operating lease liability. The Company did not record any cumulative effect adjustments to opening stockholders’ equity. As of June 30, 2019, right-of-use assets and liabilities arising from operating leases were $6,069 and $6,472, respectively. During the three and six months ended June 30, 2019, cash paid for amounts included for the operating lease liabilities was $230 and $448 and the Company recorded operating lease expense of $232 and $464 included in selling, general and administrative expenses, respectively.   Future lease payments under operating leases as of June 30, 2019 were as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Operating Leases</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%; text-align: left">Remainder of 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">457</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">930</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">809</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">824</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2023</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">843</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt; text-align: left">Thereafter</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,304</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total minimum lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">9,167</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Less: amount representing interest payments</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(2,695</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total operating lease liabilities</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">6,472</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Less: current portion, operating lease liabilities</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(496</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Operating lease liabilities, net of current portion</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">5,976</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>   The Company also has two additional finance leases that are included in its lease accounting but are not considered significant.   Future lease payments under non-cancelable finance leases as of June 30, 2019 were as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Finance Leases</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%; text-align: left">Remainder of 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">368</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">9</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">9</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">9</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">2023</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">10</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total minimum lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">405</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: amount representing interest payments</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(6</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Present value of future minimum lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">399</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: unamortized discount</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">399</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: current portion, net of unamortized discount</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(370</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Finance lease obligation, net of current portion</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">29</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>   At June 30, 2019, the weighted average incremental borrowing rate and the weighted average remaining lease term for the finance leases held by the Company were 9.71% and 0.70 years, respectively.   For the three and six months ended June 30, 2019, debt discount amortization related to a finance lease obligation was $6 and $13, respectively, and included in interest expense, net.   For the three and six months ended June 30, 2019, depreciation expense related to the equipment held under the finance lease obligations was $73 and $146, respectively.   For the three and six months ended June 30, 2019, cash paid and expense recognized for interest expense related to the finance lease obligation was $4 and $15, respectively.   Future minimum lease payments under operating leases and future minimum finance lease payments as of December 31, 2018 were as follows (in thousands):   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; border-bottom: Black 1.5pt solid; text-align: center">Finance Leases</td><td style="font-weight: bold; padding-bottom: 1.5pt; text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; border-bottom: Black 1.5pt solid; text-align: center">Operating Leases</td><td style="font-weight: bold; padding-bottom: 1.5pt; text-align: center"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 52%; text-align: left">2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 20%; text-align: right">751</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 20%; text-align: right">797</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">857</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">742</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">320</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2023</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">330</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Thereafter</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">-</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">196</td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">751</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">3,242</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Less: Amounts representing interest</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(15</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: Amounts representing unamortized discount</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(16</td><td style="text-align: left; padding-bottom: 1.5pt">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; padding-bottom: 1.5pt"> </td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Total obligation under capital leases</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">720</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: Current portion of capital leases</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(720</td><td style="text-align: left; padding-bottom: 1.5pt">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; padding-bottom: 1.5pt"> </td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt">Long term capital lease obligation</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">-</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt"> </td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr></table>

NOTE 14. COMMITMENTS AND CONTINGENCIES   Dr. Sobol   In December 2016, Louis L. Sobol, M.D. (“Sobol”) filed a lawsuit in the U.S. District Court for the Eastern District of Michigan, Southern Division against the Company, asserting claims on behalf of himself and an as-yet-uncertified class of consumers. The claims allege violations under the Telephone Consumer Protection Act, 47 U.S.C. § 227 via the Company’s alleged transmittal of advertisements to its clients via facsimile. In February 2019, prior to a ruling on class certification, the Company entered into a proposed settlement agreement to award the class up to $1,400 in damages. The Court approved the proposed settlement agreement in the spring of 2019 and on or about August 14, 2019, the Court will make a final ruling on the total damage award. As a result of the low claim rate of approximately 1.4%, the Company does not expect total damages to exceed $640, which was accrued as an expense during the year ended December 31, 2018 (see Note 10).   Allergan USA   In September 2017, Allergan USA, Inc. (“Allergan”) filed a lawsuit in the U.S. District Court for the Central District of California against the Company, primarily claiming violations under the federal Lanham Act and California’s Sherman Act. The Court granted in part and denied in part each parties’ motions for summary judgement, resolving all issues except for whether Allergan was entitled to damages related to the Company’s purported Lanham Act violations. The parties went to trial in May 2019 to litigate damages related to the Lanham Act, and a jury found the Company liable for only $48 in lost profit damages, which was accrued as an expense during the period ended June 30, 2019 (see Note 10). In July 2019, the Court entered a permanent injunction, the scope of which is limited to compounded drugs prepared in, dispensed from within, or shipped to the state of California. The injunction requires the Company to: (1) only dispense drugs from a 503(a) facility with a “Valid Prescription Order”; (2) abide by the FDA’s anticipatory compounding guidelines; and (3) only use bulk drug substances identified on a list established by the Secretary of Health and Human Services or FDA’s interim “Category 1” list. The Company believes its was already in compliance with the order, prior to the injunction being ordered.   Novel Drug Solutions et al.   In April 2018, Novel Drug Solutions, LLC and Eyecare Northwest, PA, (collectively “NDS”) filed a lawsuit against the Company in the U.S. District Court of Delaware asserting claims for breach of contract. The claims stem from an asset purchase agreement between the Company and NDS entered into in 2013 (the “NDS APA”). In July 2019, NDS filed a second amended complaint which added a claim related to its purported termination of the NDS APA. On August 12, 2019, the Company notified NDS of its acceptance of their purported termination of the NDS APA. The Company does not expect the termination of the NDS APA to affect its operations or revenues. The Company believes the claims are meritless and has previously and will continue to dispute all claims asserted against it and intends to vigorously defend against these allegations. Nonetheless, the Company cannot predict the eventual outcome of this litigation and, it could result in substantial costs, losses and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock.   California Board of Pharmacy   In March 2018, the California Board of Pharmacy filed an accusation against Park related to a compounded formulation the Company believes was legally dispensed and was, without its knowledge, inappropriately administered to a patient unknown to Park, by the prescribing healthcare professional. Park filed a response to the accusation and requested a formal hearing. In April 2019, Park agreed to and the California State Board of Pharmacy approved terms of a settlement agreement (the “Settlement Agreement”) that became effective on May 29, 2019. Pursuant to the terms of the Settlement Agreement, Park is required to surrender its California pharmacy license by August 27, 2019; provided however, in the event of a sale of Park, the California State Board of Pharmacy agreed to expedite the issuance of a temporary license to the Park acquiror. The Company recently entered into an agreement to sell the Park business and is actively working on the transfer of the Park license to the acquiror (see Note 16). If a sale is not completed, the Company expects its New Jersey-based pharmacy to retain approximately half of the Park business and revenues.   Product and Professional Liability   Product and professional liability litigation represents an inherent risk to all firms in the pharmaceutical and pharmacy industry. We utilize traditional third-party insurance policies with regard to our product and professional liability claims. Such insurance coverage at any given time reflects current market conditions, including cost and availability, when the policy is written.   John Erick et al.   In January 2018, John Erick and Deborah Ferrell, successors-in-interest and heirs of Jade Erick, (collectively “Erick”) filed a lawsuit in the San Diego County Superior against Kim Kelly, ND, MPH asserting claims related to death of Jade Erick. In April 2018, Erick filed an amendment to the lawsuit, naming us as a co-defendant. In September 2018, co-defendant Dr. Kelly filed a cross-complaint against the Company and various Spectrum entities. The cross-complaint seeks indemnity and contribution from the Company and Spectrum. The Company answered the claims filed by Dr. Kelly in October 2018. The case is currently in the discovery phase. The Company believes the claims are meritless and has previously and will continue to dispute all claims asserted against it and intends to vigorously defend against these allegations. Nonetheless, the Company cannot predict the eventual outcome of this litigation, it could result in substantial costs, losses and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock.   Anna Sue Gaukel et al.   In June 2019, Anna Sue Gaukel and Lawrence Gaukel served the Company with a lawsuit filed in state court in Idaho against Imprimis Pharmaceuticals, Inc. asserting class action allegations and product liability claims related to Mrs. Gaukel’s doctor’s use of a compounded drug injection in each of her eyes. In June 2019, the Company removed the case to Federal Court and subsequently answered the complaint. The case is in the early phase. The Company believes the claims are meritless and has previously and will continue to dispute all claims asserted against it and intends to vigorously defend against these allegations. Nonetheless, the Company cannot predict the eventual outcome of this litigation, it could result in substantial costs, losses and a diversion of management’s resources and attention, which could harm the Company’s business and the value of its common stock.   General and Other   In the ordinary course of business, the Company may face various claims brought by third parties and it may, from time to time, make claims or take legal actions to assert its rights, including intellectual property disputes, contractual disputes and other commercial disputes. Any of these claims could subject the Company to litigation.   Indemnities   In addition to the indemnification provisions contained in the Company’s governing documents, the Company generally enters into separate indemnification agreements with each of the Company’s directors and officers. These agreements require the Company, among other things, to indemnify the director or officer against specified expenses and liabilities, such as attorneys’ fees, judgments, fines and settlements, paid by the individual in connection with any action, suit or proceeding arising out of the individual’s status or service as the Company’s director or officer, other than liabilities arising from willful misconduct or conduct that is knowingly fraudulent or deliberately dishonest, and to advance expenses incurred by the individual in connection with any proceeding against the individual with respect to which the individual may be entitled to indemnification by the Company. The Company also indemnifies its lessors in connection with its facility leases for certain claims arising from the use of the facilities. These indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not incurred any payments for these obligations and, therefore, no liabilities have been recorded for these indemnities in the accompanying condensed consolidated balance sheets.   Klarity License Agreement – Related Party   The Company entered into a license agreement in April 2017 and as amended in April 2018, (the “Klarity License Agreement”) with Richard L. Lindstrom, M.D., a member of its Board of Directors. Pursuant to the terms of the Klarity License Agreement, the Company licensed certain intellectual property and related rights from Dr. Lindstrom to develop, formulate, make, sell, and sub-license the topical ophthalmic solution Klarity used to protect and rehabilitate the ocular surface (the “Klarity Product”).   Under the terms of the Klarity License Agreement, the Company is required to make royalty payments to Dr. Lindstrom ranging from 3% - 6% of net sales, dependent upon the final formulation of the Klarity Product sold. In addition, the Company is required to make certain milestone payments to Dr. Lindstrom including: (i) an initial payment of $50 upon execution of the Klarity License Agreement, (ii) a second payment of $50 following the first $50 in net sales of the Klarity Product; and (iii) a final payment of $50 following the first $100 in net sales of the Klarity Product. All of the above referenced milestone payments are payable at the Company’s election in cash or shares of the Company’s restricted common stock. Payments totaling $22 and $37 were made during the three and six months ended June 30, 2019, respectively. $26 and $48 was incurred as royalty expense during the three and six months ended and included in accounts payable to Dr. Lindstrom at June 30, 2019.   Sales and Marketing Agreements   During 2017, the Company entered various sales and marketing agreements with certain organizations, to provide exclusive sales and marketing representation services to Harrow in select geographies in the U.S., in connection with our ophthalmic compounded formulations.   Under the terms of the sales and marketing agreements, the Company is required to make commission payments equal to 10% - 14% of net sales for products above and beyond the initial existing sales amounts. In addition, the Company is required to make periodic milestone payments to certain organizations in shares of the Company’s restricted common stock if net sales in the assigned territory reach certain future levels by the end of their terms, as applicable. $0 and $75 of stock-based payments were made and $640 and $1,182 were incurred under these agreements for commission expenses during the three and six months ended June 30, 2019, respectively.   Asset Purchase, License and Related Agreements   The Company has acquired and sourced intellectual property rights related to certain proprietary innovations from certain inventors and related parties (the “Inventors”) through multiple asset purchase agreements, license agreements, strategic agreements and commission agreements. In general, these agreements provide that the Inventors will cooperate with the Company in obtaining patent protection for the acquired intellectual property and that the Company will use commercially reasonable efforts to research, develop and commercialize a product based on the acquired intellectual property. In addition, the Company has acquired a right of first refusal on additional intellectual property and drug development opportunities presented by these Inventors.   In consideration for the acquisition of the intellectual property rights, the Company is obligated to make payments to the Inventors based on the completion of certain milestones, generally consisting of: (1) a payment payable within 30 days after the issuance of the first patent in the United States arising from the acquired intellectual property (if any); (2) a payment payable within 30 days after the Company files the first investigational new drug application (“IND”) with the FDA for the first product arising from the acquired intellectual property (if any); (3) for certain of the Inventors, a payment payable within 30 days after the Company files the first new drug application with the FDA for the first product arising from the acquired intellectual property (if any); and (4) certain royalty payments based on the net receipts received by the Company in connection with the sale or licensing of any product based on the acquired intellectual property (if any), after deducting (among other things) the Company’s development costs associated with such product. If, following five years after the date of the applicable asset purchase agreement, the Company either (a) for certain of the Inventors, has not filed an IND or, for the remaining Inventors, has not initiated a study where data is derived, or (b) has failed to generate royalty payments to the Inventors for any product based on the acquired intellectual property, the Inventors may terminate the applicable asset purchase agreement and request that the Company re-assign the acquired technology to the Inventors. $274 and $465 and $114 and $197 were incurred under these agreements as royalty expenses for the three and six months ended June 30, 2019 and 2018, respectively, and $274 and $114 were included in accounts payable at June 30, 2019 and 2018, respectively.

NOTE 15. SEGMENT INFORMATION AND CONCENTRATIONS   Beginning on January 1, 2019, the Company began evaluating performance of the Company based on operating segments. Segment performance for its two operating segments are based on segment contribution. The Company’s reportable segments consist of (i) its commercial stage pharmaceutical compounding business (Pharmaceutical Compounding), generally including the operations of ImprimisRx and Park businesses; and (ii) its start-up operations associated with pharmaceutical drug development business (Pharmaceutical Drug Development). Segment contribution for the segments represents net revenues less cost of sales, research and development, selling and marketing expenses, and select general and administrative expenses. The Company does not evaluate the following items at the segment level:   <table cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse"> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; width: 0.25in; text-align: justify">●</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">Selling, general and administrative expenses that result from shared infrastructure, including certain expenses associated with legal matters, public company costs (e.g. investor relations), board of directors and principal executive officers and other like shared expenses.</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">●</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">Operating expenses within selling, general and administrative expenses that result from the impact of corporate initiatives. Corporate initiatives primarily include integration, restructuring, acquisition and other shared costs.</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">●</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">Other select revenues and operating expenses including R&D expenses, amortization, and asset sales and impairments, net as not all such information has been accounted for at the segment level, or such information has not been used by all segments.</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">●</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">Total assets including capital expenditures.</td></tr> </table>   The Company defines segment net revenues as pharmaceutical compounded drug sales, licenses and other revenue derived from related agreements.   Cost of sales within segment contribution 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 and other related expenses.   Selling, general and administrative expenses consist mainly of personnel-related costs, marketing and promotion costs, distribution costs, professional service costs, insurance, depreciation, facilities costs, transaction costs, and professional services costs which are general in nature and attributable to the segment.   Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the three and six months ended June 30, 2019:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="10" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended June 30, 2019</td><td style="text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center">Pharmaceutical</td><td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center">Pharmaceutical</td><td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center"> </td><td style="text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Compounding</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Drug Development</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Total</td><td style="text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%; text-align: left">Net revenues</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">13,516</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">13,516</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt">Cost of sales</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(5,225</td><td style="text-align: left; padding-bottom: 1.5pt">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">                   -</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(5,225</td><td style="text-align: left; padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Gross profit</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">8,291</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">8,291</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Operating expenses:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Selling, general and administrative</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">5,804</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">43</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">5,847</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 10pt">Research and development</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">533</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">127</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">660</td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Segment contribution</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">1,954</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">(170</td><td style="text-align: left; padding-bottom: 2.5pt">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">1,784</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Corporate</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">2,342</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Research and development</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">150</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 1.5pt">Amortization</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; padding-bottom: 1.5pt"> </td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; padding-bottom: 1.5pt"> </td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">59</td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt">Operating loss</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt"> </td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt"> </td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">(767</td><td style="text-align: left; padding-bottom: 2.5pt">)</td></tr> </table>   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="10" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended June 30, 2019</td><td style="text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center">Pharmaceutical</td><td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center">Pharmaceutical</td><td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center"> </td><td style="text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Compounding</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Drug Development</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Total</td><td style="text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%; text-align: left">Net revenues</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">25,806</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">25,806</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt">Cost of sales</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(9,123</td><td style="text-align: left; padding-bottom: 1.5pt">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">-</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(9,123</td><td style="text-align: left; padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Gross profit</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">16,683</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">16,683</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Operating expenses:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Selling, general and administrative</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">11,519</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">86</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">11,605</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 10pt">Research and development</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">658</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">263</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">921</td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Segment contribution</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">4,506</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">(349</td><td style="text-align: left; padding-bottom: 2.5pt">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">4,157</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Corporate</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">5,061</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Research and development</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">294</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 1.5pt">Amortization</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; padding-bottom: 1.5pt"> </td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; padding-bottom: 1.5pt"> </td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">125</td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt">Operating loss</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt"> </td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt">                  </td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">(1,323</td><td style="text-align: left; padding-bottom: 2.5pt">)</td></tr> </table>   The Company categorizes revenues by geographic area based on selling location. All operations are currently located in the U.S.; therefore, total revenues are attributed to the U.S. All long-lived assets at June 30, 2019 and December 31, 2018 are located in the U.S.   The Company sells its compounded formulations to a large number of customers. There were no customers who comprised more than 10% of the Company’s total pharmacy sales for the three and six months ended June 30, 2019 and 2018.   The Company receives its active pharmaceutical ingredients from three main suppliers. These suppliers collectively accounted for 69% and 65% of active pharmaceutical ingredient purchases during the three and six months ended June 30, 2019, respectively, and 54% and 52% during the three and six months ended June 30, 2018, respectively.

NOTE 16. SUBSEQUENT EVENTS   The Company has performed an evaluation of events occurring subsequent to June 30, 2019 through the filing date of this Quarterly Report. Based on its evaluation, no events other than those described below need to be disclosed.   From July 1, 2019 through the date of the filing of this Quarterly Report, the Company issued 25,135 shares of its common stock related to the cashless exercise of 32,532 common stock warrants with an exercise price of $1.79.   From July 1, 2019 through the date of the filing of this Quarterly Report, the Company issued 1,872 shares of its common stock upon the exercise of 1,872 options to purchase common stock, with exercise prices ranging from $1.70 to $3.20 per share, and received net proceeds of $5.   Park Sale   In July 2019, Park entered into an Asset Purchase Agreement (the “Park APA”) with Noice. Under the terms of the Park APA, Park has agreed to sell substantially all of its assets associated with its non-ophthalmology pharmaceutical compounding business, including but not limited to, trademarks, copyrights, inventories, equipment, customer lists, databases, permits, licenses, and assignment of the Company’s lease obligation for its Irvine, California based pharmacy, for a total purchase price of $8,000 (the “Purchase Price”).   Related to the Park APA, Noice entered into a loan agreement with Park equal to the Purchase Price (the “Sellers Note”). The Sellers Note will bear interest at 9.5% per annum and will be secured by all the assets of Noice. Noice will make ninety-six (96) monthly cash payments to the Company over the eight years following the closing. The first twenty-four months of the Sellers Note will require interest only payments of $63, with a principal payment of $2,000 due on September 15, 2021. Beginning on October 15, 2021, monthly payments will include interest and amortization of the principal balance and be equal to $119. The Sellers Note includes a warrant that becomes exercisable in five years and is equal to 19.9% of the ownership interests of Noice.   The closing of the Park APA is dependent on the California State Board of Pharmacy issuing a temporary pharmacy and sterile license permit to Noice, which Noice has applied for. If the license is issued, the closing is expected to occur on or before August 27, 2019, subject to other customary terms and conditions. If the sale is closed, the Park business will be classified as discontinued operations in future periods.   Mayfield License   In July 2019, Mayfield entered into a License Agreement (the “TGV License”) with TGV-Health, LLC and TGV-Gyneconix, LLC (collectively, “TGV”), to acquire intellectual property rights for use in the women’s health field, related to Mayfield’s proprietary drug candidate MAY-66. The TGV License provides that TGV will cooperate with Mayfield in transferring all embodiments of the intellectual property (including know-how) related to the TGV License, assist in obtaining and protecting its patent rights for the acquired intellectual property and that Mayfield will use commercially reasonable efforts to research, develop and commercialize products based on the acquired intellectual property. In connection with the TGV License, Mayfield is obligated to make royalty payments to TGV equal to a low single digit percentage of net sales received by Mayfield in connection with the sale or licensing of any product based on the licensed intellectual property. In addition, Mayfield issued 300,000 shares of its common stock to TGV and is required to make certain milestone payments to TGV over the development of MAY-66 and any related products based on the licensed intellectual property.   Stowe License   In July 2019, Stowe entered into a License Agreement (the “Stowe License”) with TGV-Health, LLC and TGV- Ophthalnix, LLC (collectively, “TGV-O”), to acquire intellectual property rights for use in the ophthalmology and otic health field, related to Stowe’s proprietary drug candidate STE-006. The Stowe License provides that TGV-O will cooperate with Stowe in transferring all embodiments of the intellectual property (including know-how) related to the Stowe License, assist in obtaining and protecting its patent rights for the acquired intellectual property and that Stowe will use commercially reasonable efforts to research, develop and commercialize products based on the acquired intellectual property. In connection with the Stowe License, Stowe is obligated to make royalty payments to TGV-O equal to a low single digit percentage of net sales received by Stowe in connection with the sale or licensing of any product based on the licensed intellectual property. In addition, Stowe agreed to issue 1,750,000 shares of its common stock to TGV-O and is required to make certain milestone payments to TGV-O over the development of STE-006 and any related products based on the licensed intellectual property.

Liquidity   The Company has incurred significant operating losses and negative cash flows from operations since its inception. The Company incurred net income (loss) of $8,980 and $(991) for the six months ended June 30, 2019 and 2018, respectively, and had an accumulated deficit of $65,231 and $74,211 as of June 30, 2019 and December 31, 2018, respectively. In addition, the Company used cash in operating activities of $(632) for the six months ended June 30, 2019, while during the six months ended June 30, 2018, operating activities provided cash of $400.   While there is no assurance, management of the Company believes existing cash resources and restricted cash of $4,193 at June 30, 2019, will be sufficient to sustain the Company’s planned level of operations for at least the next twelve months. However, estimates of operating expenses and working capital requirements could be incorrect, and the Company could use its cash resources faster than anticipated. Further, some or all of the ongoing or planned activities may not be successful and could result in further losses.   The Company may seek to increase liquidity and capital resources through a variety of means which may include, but are not limited to: the sale of assets, investments and/or businesses, obtaining financing through the issuance of equity, debt, or convertible securities; and working to increase revenue growth through sales. There is no guarantee that the Company will be able to obtain capital when needed on terms management deems acceptable, or at all.

Basic and Diluted Net Income (Loss) per Common Share   Basic net income (loss) per common share is computed by dividing income (loss) attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share is computed by dividing the income (loss) attributable to common stockholders for the period by the weighted average number of common and common equivalent shares, such as stock options and warrants, outstanding during the period.     Basic and diluted net income (loss) per share is computed using the weighted average number of shares of common stock outstanding during the period. Common stock equivalents (using the treasury stock or “if converted” method) from deferred acquisition obligations, convertible note payable, stock options, unvested restricted stock units (“RSUs”) and warrants were 5,331,883 and 10,245,280 at June 30, 2019 and 2018, respectively, and, except for the six months ended June 30, 2019 and the three months ended June 30, 2018, are excluded from the calculation of diluted net income (loss) per share for the periods presented, because the effect is anti-dilutive. Included in the basic and diluted net income (loss) per share calculation were RSUs awarded to directors that had vested, but the issuance and delivery of the shares are deferred until the director resigns. The number of shares underlying vested RSUs at June 30, 2019 and 2018 was 304,873 and 168,513, respectively.   The following table shows the computation of basic net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: justify"> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%; text-align: left; padding-bottom: 2.5pt">Numerator – net income (loss) attributable to Harrow Health, Inc.</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">(2,378</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt">)</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">2,522</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">8,980</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">(991</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Denominator – weighted average number of shares outstanding, basic</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">25,216,565</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">21,190,794</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">25,030,012</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">21,070,644</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net income (loss) per share, basic</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(0.09</td><td style="text-align: left; padding-bottom: 2.5pt">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.12</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.36</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(0.05</td><td style="text-align: left; padding-bottom: 2.5pt">)</td></tr> </table>   For the six months ended June 30, 2019 and the three months ended June 30, 2018, the Company had net income. As a result, the Company computed diluted net income per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding during those periods. Diluted common equivalent shares for the six months ended June 30, 2019 and the three months ended June 30, 2018, consisted of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center">For the</td><td> </td><td> </td> <td colspan="2" style="text-align: center">For the</td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center">Three Months Ended</td><td> </td><td> </td> <td colspan="2" style="text-align: center">Six Months Ended</td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2018</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Diluted shares related to:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 56%; padding-left: 10pt">Warrants</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 18%; text-align: right">1,093,006</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 18%; text-align: right">1,028,780</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Stock options and RSUs</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">891,631</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">637,891</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Dilutive common equivalent shares</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,984,637</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,666,671</td><td style="text-align: left"> </td></tr> </table>   The following table shows the computation of diluted net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: justify"> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%; text-align: left; padding-bottom: 2.5pt">Numerator – net income (loss) attributable to Harrow Health, Inc.</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">(2,378</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt">)</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">2,522</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">8,980</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">(991</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Denominator – weighted average number of shares outstanding, basic</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">25,216,565</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">21,190,794</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">25,030,012</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">21,070,644</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Dilutive common equivalents</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,984,637</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,666,671</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Number of shares used for diluted earnings per share computation</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">25,216,565</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">23,175,431</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">26,696,683</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">21,070,644</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net income (loss) per share, diluted</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(0.09</td><td style="text-align: left; padding-bottom: 2.5pt">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.11</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.34</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(0.05</td><td style="text-align: left; padding-bottom: 2.5pt">)</td></tr> </table>

Recently Adopted Accounting Pronouncements   In February 2016, the FASB issued new lease accounting guidance in ASU No. 2016-02, Leases (Topic 842). This new guidance was initiated as a joint project with the International Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information for users. This new guidance would eliminate the concept of off-balance sheet treatment for “operating leases” for lessees for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify all leases with a term of over one year as either finance or operating, with both classifications resulting in the recognition of a defined “right-of-use” asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease classification, with finance leases recognizing the amortization of the right-of-use asset separate from the interest on the lease liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU No. 2016-02 would be substantially unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 took effect for public companies in fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. On January 1, 2019, the Company adopted Topic 842 using the modified retrospective transition method with no impact to stockholders’ equity. As of June 30, 2019, the Company held on its condensed consolidated balance sheet $6,069 for the right-of-use asset and $6,472 for the related lease liability related to operating leases. The difference between the right of use asset and related lease liability is predominantly deferred rent and other related lease expenses under the new lease accounting standard. For additional information regarding how the Company is accounting for leases under Topic 842, refer to Note 12.

Recently Issued Accounting Pronouncements   In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other. This guidance simplifies the accounting for goodwill impairment for all entities by requiring impairment charges to be based on the first step in the current two-step impairment test under ASC 350. The updated standard eliminates the requirement to calculate a goodwill impairment charge using Step 2. If a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective for reporting periods beginning after December 31, 2019 on a prospective basis, and early adoption is permitted. The Company does not expect ASU 2017-04 to have a material effect on the Company’s financial position, results of operations and cash flows.

The following table shows the computation of basic net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: justify"> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%; text-align: left; padding-bottom: 2.5pt">Numerator – net income (loss) attributable to Harrow Health, Inc.</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">(2,378</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt">)</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">2,522</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">8,980</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">(991</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Denominator – weighted average number of shares outstanding, basic</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">25,216,565</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">21,190,794</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">25,030,012</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">21,070,644</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net income (loss) per share, basic</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(0.09</td><td style="text-align: left; padding-bottom: 2.5pt">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.12</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.36</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(0.05</td><td style="text-align: left; padding-bottom: 2.5pt">)</td></tr></table>

Revenue disaggregated by revenue source for the three and six months ended June 30, 2019 and 2018, consists of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 85%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2018</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2018</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 32%; text-align: left">Product sales, net</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">13,509</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">10,374</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">25,792</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 13%; text-align: right">19,229</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">License revenues</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">7</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">10</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">14</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">20</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Total revenues</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">13,516</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">10,384</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">25,806</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">19,249</td><td style="text-align: left"> </td></tr></table>

The composition of inventories as of June 30, 2019 and December 31, 2018 was as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">June 30,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2018</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 56%; text-align: left">Raw materials</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">1,758</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">1,119</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Work in progress</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">264</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">6</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Finished goods</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">630</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">709</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total inventories</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2,652</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,834</td><td style="text-align: left"> </td></tr></table>

Prepaid expenses and other current assets consisted of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">June 30,</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center">December 31,</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="font-weight: bold"> </td><td style="font-weight: bold"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2018</td><td style="font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 60%; text-align: left">Prepaid insurance</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">65</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">328</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Other prepaid expenses</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">434</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">334</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Receivable due from Surface</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">50</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">50</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Receivable due from Melt</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">714</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Deposits and other current assets</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">138</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">125</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total prepaid expenses and other current assets</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,401</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">837</td><td style="text-align: left"> </td></tr></table>

Property, plant and equipment consisted of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31, 2018</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Property, plant and equipment, net:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 50%; text-align: left; padding-left: 10pt">Computer software and hardware</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 21%; text-align: right">1,743</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 21%; text-align: right">1,662</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Furniture and equipment</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">420</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">397</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Lab and pharmacy equipment</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">3,416</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">3,184</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 10pt">Leasehold improvements</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,612</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,496</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">11,191</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">10,739</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Accumulated depreciation and amortization</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(5,245</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(4,364</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="font-weight: bold; text-align: right; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">5,946</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">6,375</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

Accounts payable and accrued expenses consisted of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31, 2018</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 54%; text-align: left">Accounts payable</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 19%; text-align: right">5,957</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 19%; text-align: right">4,966</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Accrued litigation settlement (see Note 14)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">733</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">640</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Deferred rent</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">388</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Accrued interest</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">253</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">256</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Accrued exit fee for note payable</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">800</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">800</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total accounts payable and accrued expenses</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">7,743</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">7,050</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: Current portion</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(6,943</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(6,250</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Non-current total accrued expenses</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">800</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">800</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

At June 30, 2019, future minimum payments under the Company’s note payable were as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%; text-align: left">Remainder of 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">1,216</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">3,696</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">4,121</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">3,828</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">2023</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">7,330</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total minimum payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">20,191</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: amount representing interest</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(4,941</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Notes payable, gross</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">15,250</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: unamortized discount</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,505</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">13,745</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: current portion, net of unamortized discount</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(247</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Note payable, net of current portion and unamortized debt discount</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">13,498</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

A summary of stock option activity under the Plans for the six months ended June 30, 2019 is as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="font-size: 11pt; text-align: center; padding-bottom: 1.5pt"> </td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Number of shares</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Weighted Avg. Exercise Price</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"> Weighted Avg. Remaining Contractual Life</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Aggregate Intrinsic Value</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%">Options outstanding - January 1, 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 11%; text-align: right">2,482,009</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">5.10</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%; font-size: 11pt"> </td> <td style="width: 1%; font-size: 11pt; text-align: left"> </td><td style="width: 11%; font-size: 11pt; text-align: right"> </td><td style="width: 1%; font-size: 11pt; text-align: left"> </td><td style="width: 2%; font-size: 11pt"> </td> <td style="width: 1%; font-size: 11pt; text-align: left"> </td><td style="width: 11%; font-size: 11pt; text-align: right"> </td><td style="width: 1%; font-size: 11pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Options granted</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">352,000</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">6.17</td><td style="text-align: left"> </td><td style="font-size: 11pt"> </td> <td style="font-size: 11pt; text-align: left"> </td><td style="font-size: 11pt; text-align: right"> </td><td style="font-size: 11pt; text-align: left"> </td><td style="font-size: 11pt"> </td> <td style="font-size: 11pt; text-align: left"> </td><td style="font-size: 11pt; text-align: right"> </td><td style="font-size: 11pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Options exercised</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(57,933</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">3.72</td><td style="text-align: left"> </td><td style="font-size: 11pt"> </td> <td style="font-size: 11pt; text-align: left"> </td><td style="font-size: 11pt; text-align: right"> </td><td style="font-size: 11pt; text-align: left"> </td><td style="font-size: 11pt"> </td> <td style="font-size: 11pt; text-align: left"> </td><td style="font-size: 11pt; text-align: right"> </td><td style="font-size: 11pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Options cancelled/forfeited</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(50,471</td><td style="text-align: left; padding-bottom: 1.5pt">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt">$</td><td style="text-align: right; padding-bottom: 1.5pt">5.83</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="font-size: 11pt; padding-bottom: 1.5pt"> </td> <td style="font-size: 11pt; text-align: left; padding-bottom: 1.5pt"> </td><td style="font-size: 11pt; text-align: right; padding-bottom: 1.5pt"> </td><td style="font-size: 11pt; text-align: left; padding-bottom: 1.5pt"> </td><td style="font-size: 11pt; padding-bottom: 1.5pt"> </td> <td style="font-size: 11pt; text-align: left; padding-bottom: 1.5pt"> </td><td style="font-size: 11pt; text-align: right; padding-bottom: 1.5pt"> </td><td style="font-size: 11pt; text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt">Options outstanding - June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">2,725,605</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt">$</td><td style="text-align: right; padding-bottom: 2.5pt">5.25</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt">5.61</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt">$</td><td style="text-align: right; padding-bottom: 2.5pt">9,621</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Options exercisable</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">1,461,723</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt">$</td><td style="text-align: right; padding-bottom: 2.5pt">4.69</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt">5.98</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt">$</td><td style="text-align: right; padding-bottom: 2.5pt">6,091</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Options vested and expected to vest</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">2,607,104</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt">$</td><td style="text-align: right; padding-bottom: 2.5pt">5.21</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt">5.63</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt">$</td><td style="text-align: right; padding-bottom: 2.5pt">9,323</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr></table>

The table below illustrates the fair value per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options granted to employees:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 74%; text-align: left">Weighted-average fair value of options granted</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 22%; text-align: right">3.64</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Expected terms (in years)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">5.8 - 6.1</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Expected volatility</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">64% - 67</td><td style="text-align: left">%</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Risk-free interest rate</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">2.19% - 2.68</td><td style="text-align: left">%</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Dividend yield</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr></table>

The following table summarizes information about stock options outstanding and exercisable at June 30, 2019:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="font-size: 9pt"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt"> </td> <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Options Outstanding</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt"> </td> <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Options Exercisable</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt"> </td></tr> <tr style="vertical-align: bottom; font-size: 9pt"> <td style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Weighted</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td></tr> <tr style="vertical-align: bottom; font-size: 9pt"> <td style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Average</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Weighted</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Weighted</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td></tr> <tr style="vertical-align: bottom; font-size: 9pt"> <td style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Remaining</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Average</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Average</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td></tr> <tr style="vertical-align: bottom; font-size: 9pt"> <td style="font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Number</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; font-size: 9pt; text-align: center">Contractual</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Exercise</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Number</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Exercise</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td></tr> <tr style="vertical-align: bottom; font-size: 9pt"> <td style="font-weight: bold; border-bottom: Black 1.5pt solid; font-size: 9pt; text-align: left">Range of Exercise Prices</td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Outstanding</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Life in Years</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Price</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Exercisable</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Price</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt; text-align: center"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255); font-size: 9pt"> <td style="width: 29%; font-size: 9pt">$1.47 - $2.60</td><td style="width: 2%; font-size: 9pt"> </td> <td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 10%; text-align: right; font-size: 9pt">816,936</td><td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 2%; font-size: 9pt"> </td> <td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 11%; text-align: right; font-size: 9pt">7.22</td><td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 2%; font-size: 9pt"> </td> <td style="width: 1%; text-align: left; font-size: 9pt">$</td><td style="width: 10%; text-align: right; font-size: 9pt">2.04</td><td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 2%; font-size: 9pt"> </td> <td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 10%; text-align: right; font-size: 9pt">526,237</td><td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 2%; font-size: 9pt"> </td> <td style="width: 1%; text-align: left; font-size: 9pt">$</td><td style="width: 10%; text-align: right; font-size: 9pt">2.12</td><td style="width: 1%; text-align: left; font-size: 9pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White; font-size: 9pt"> <td style="font-size: 9pt">$2.76 - $4.66</td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">495,496</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">6.68</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt">$</td><td style="text-align: right; font-size: 9pt">3.97</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">441,452</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt">$</td><td style="text-align: right; font-size: 9pt">3.99</td><td style="text-align: left; font-size: 9pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255); font-size: 9pt"> <td style="font-size: 9pt">$5.61 - $6.30</td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">440,350</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">8.41</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt">$</td><td style="text-align: right; font-size: 9pt">6.16</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">122,159</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt">$</td><td style="text-align: right; font-size: 9pt">6.04</td><td style="text-align: left; font-size: 9pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White; font-size: 9pt"> <td style="font-size: 9pt">$6.64 - $8.99</td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">967,793</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">2.44</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt">$</td><td style="text-align: right; font-size: 9pt">8.01</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">366,845</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt">$</td><td style="text-align: right; font-size: 9pt">8.24</td><td style="text-align: left; font-size: 9pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255); font-size: 9pt"> <td style="text-align: left; padding-bottom: 1.5pt; font-size: 9pt">$42.80</td><td style="padding-bottom: 1.5pt; font-size: 9pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left; font-size: 9pt"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right; font-size: 9pt">5,030</td><td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 1.5pt; font-size: 9pt"> </td> <td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 1.5pt; text-align: right; font-size: 9pt">1.12</td><td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 1.5pt; font-size: 9pt"> </td> <td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt">$</td><td style="padding-bottom: 1.5pt; text-align: right; font-size: 9pt">42.80</td><td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 1.5pt; font-size: 9pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left; font-size: 9pt"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right; font-size: 9pt">5,030</td><td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 1.5pt; font-size: 9pt"> </td> <td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt">$</td><td style="padding-bottom: 1.5pt; text-align: right; font-size: 9pt">42.80</td><td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White; font-size: 9pt"> <td style="padding-bottom: 2.5pt; font-size: 9pt">$1.47 - $42.80</td><td style="padding-bottom: 2.5pt; font-size: 9pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left; font-size: 9pt"> </td><td style="border-bottom: Black 2.5pt double; text-align: right; font-size: 9pt">2,725,605</td><td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 2.5pt; font-size: 9pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 2.5pt; text-align: right; font-size: 9pt">5.61</td><td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 2.5pt; font-size: 9pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt">$</td><td style="padding-bottom: 2.5pt; text-align: right; font-size: 9pt">5.25</td><td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 2.5pt; font-size: 9pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left; font-size: 9pt"> </td><td style="border-bottom: Black 2.5pt double; text-align: right; font-size: 9pt">1,461,723</td><td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 2.5pt; font-size: 9pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt">$</td><td style="padding-bottom: 2.5pt; text-align: right; font-size: 9pt">4.69</td><td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt"> </td></tr></table>

A summary of the Company’s RSU activity and related information for the six months ended June 30, 2019 is as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Number of RSUs</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Weighted Average Grant Date Fair Value</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 50%">RSUs unvested - January 1, 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 21%; text-align: right">1,275,680</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 21%; text-align: right">2.16</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">RSUs granted</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">223,860</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">6.43</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">RSUs vested</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(68,180</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">2.20</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">RSUs cancelled/forfeited</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt; text-align: right"> </td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt">RSUs unvested at June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,431,360</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left">$</td><td style="padding-bottom: 2.5pt; text-align: right">2.83</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

A summary of warrant activity for the six months ended June 30, 2019 is as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Number of Shares Subject to Warrants Outstanding</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Weighted Avg. Exercise Price</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 60%">Warrants outstanding - January 1, 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 16%; text-align: right">2,206,973</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">1.91</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Granted</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Exercised</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(1,032,055</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">1.79</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt">Expired</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt; text-align: right"> </td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Warrants outstanding and exercisable - June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,174,918</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left">$</td><td style="padding-bottom: 2.5pt; text-align: right">2.01</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Weighted average remaining contractual life of the outstanding warrants in years - June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">3.51</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>

A list of the warrants outstanding as of June 30, 2019 is included in the following table:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td><td style="text-align: center"> </td> <td style="text-align: center"> </td><td style="font-weight: bold; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Warrants</td><td style="font-weight: bold; text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center">Exercise</td><td style="text-align: center"> </td><td style="font-weight: bold; text-align: center"> </td> <td style="font-weight: bold; text-align: center">Expiration</td></tr> <tr style="vertical-align: bottom"> <td style="font-weight: bold; text-align: left; border-bottom: Black 1.5pt solid">Warrant Series</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Issue Date</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Outstanding</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Price</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Date</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 21%; text-align: left">Lender warrants</td><td style="width: 2%"> </td> <td style="width: 19%; text-align: center">5/11/2015</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 16%; text-align: right">125,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 15%; text-align: right">1.79</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 17%; text-align: center">5/11/2025</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Settlement warrants</td><td> </td> <td style="text-align: center">8/16/2016</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">40,000</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">3.75</td><td style="text-align: left"> </td><td> </td> <td style="text-align: center">8/16/2021</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">PIPE investor and placement agent warrants</td><td> </td> <td style="text-align: center">12/27/2016</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">394,532</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">1.79</td><td style="text-align: left"> </td><td> </td> <td style="text-align: center">12/27/2019</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Lender warrants</td><td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: center">7/19/2017</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">615,386</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt">$</td><td style="text-align: right; padding-bottom: 1.5pt">2.08</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: center">7/19/2024</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: center"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">1,174,918</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"></td><td style="text-align: right; padding-bottom: 2.5pt"></td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: center"> </td></tr></table>

The Company recorded stock-based compensation related to equity instruments granted to employees, directors and consultants as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2018</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2018</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%; text-align: left">Employees - selling, general and administrative</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">268</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">573</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">906</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">1,166</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Directors - selling, general and administrative</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">75</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">35</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">150</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">85</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Consultants - selling, general and administrative</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">24</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">99</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">108</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Total</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">367</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">608</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,155</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,359</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

25806000

25792000

14000

19249000

19229000

20000

25806000

13516000

10384000

13509000

10374000

7000

10000

13516000

18006000

13426000

9058000

6851000

NOTE 13. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION   Common Stock   In March 2019, the Company issued 15,000 shares of its restricted common stock, with a fair value of $75, as consideration for commission expenses incurred during the six months ended June 30, 2019.   During the six months ended June 30, 2019, the Company issued 20,955 shares of its common stock upon the cashless exercise of 57,933 options to purchase common stock, with exercise prices ranging from $1.70 to $4.09 per share.   During the six months ended June 30, 2019, the Company issued 663,338 shares of its common stock upon the cashless exercise of 932,000 warrants to purchase common stock with an exercise price of $1.79 per share.   During the six months ended June 30, 2019, the Company issued 100,055 shares of its common stock upon the exercise of 100,055 warrants to purchase common stock with an exercise price of $1.79 per share, and received net proceeds of $179.   During the six months ended June 30, 2019, 68,180 shares of the Company’s common stock underlying RSUs issued to directors vested, but the issuance and delivery of these shares are deferred until the director resigns.   Stock Option Plan   On September 17, 2007, the Company’s Board of Directors and stockholders adopted the Company’s 2007 Incentive Stock and Awards Plan, which was subsequently amended on November 5, 2008, February 26, 2012, July 18, 2012, May 2, 2013 and September 27, 2013 (as amended, the “2007 Plan”). The 2007 Plan reached its term in September 2017, and we can no longer issue additional awards under this plan, however, options previously issued under the 2007 Plan will remain outstanding until they are exercised, reach their maturity or are otherwise cancelled/forfeited. On June 13, 2017, the Company’s Board of Directors and stockholders adopted the Company’s 2017 Incentive Stock and Awards Plan (the “2017 Plan” together with the 2007 Plan, the “Plans”). As of June 30, 2019, the 2017 Plan provides for the issuance of a maximum of 2,000,000 shares of the Company’s common stock. The purpose of the Plans are to attract and retain directors, officers, consultants, advisors and employees whose services are considered valuable, to encourage a sense of proprietorship and to stimulate an active interest of such persons in the Company’s development and financial success. Under the Plans, the Company is authorized to issue incentive stock options intended to qualify under Section 422 of the Internal Revenue Code, non-qualified stock options, restricted stock units and restricted stock. The Plans are administered by the Compensation Committee of the Company’s Board of Directors. The Company had 997,280 shares available for future issuances under the 2017 Plan at June 30, 2019.   Stock Options   A summary of stock option activity under the Plans for the six months ended June 30, 2019 is as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="font-size: 11pt; text-align: center; padding-bottom: 1.5pt"> </td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Number of shares</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Weighted Avg. Exercise Price</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"> Weighted Avg. Remaining Contractual Life</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Aggregate Intrinsic Value</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%">Options outstanding - January 1, 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 11%; text-align: right">2,482,009</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">5.10</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%; font-size: 11pt"> </td> <td style="width: 1%; font-size: 11pt; text-align: left"> </td><td style="width: 11%; font-size: 11pt; text-align: right"> </td><td style="width: 1%; font-size: 11pt; text-align: left"> </td><td style="width: 2%; font-size: 11pt"> </td> <td style="width: 1%; font-size: 11pt; text-align: left"> </td><td style="width: 11%; font-size: 11pt; text-align: right"> </td><td style="width: 1%; font-size: 11pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Options granted</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">352,000</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">6.17</td><td style="text-align: left"> </td><td style="font-size: 11pt"> </td> <td style="font-size: 11pt; text-align: left"> </td><td style="font-size: 11pt; text-align: right"> </td><td style="font-size: 11pt; text-align: left"> </td><td style="font-size: 11pt"> </td> <td style="font-size: 11pt; text-align: left"> </td><td style="font-size: 11pt; text-align: right"> </td><td style="font-size: 11pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Options exercised</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(57,933</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">3.72</td><td style="text-align: left"> </td><td style="font-size: 11pt"> </td> <td style="font-size: 11pt; text-align: left"> </td><td style="font-size: 11pt; text-align: right"> </td><td style="font-size: 11pt; text-align: left"> </td><td style="font-size: 11pt"> </td> <td style="font-size: 11pt; text-align: left"> </td><td style="font-size: 11pt; text-align: right"> </td><td style="font-size: 11pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Options cancelled/forfeited</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(50,471</td><td style="text-align: left; padding-bottom: 1.5pt">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt">$</td><td style="text-align: right; padding-bottom: 1.5pt">5.83</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="font-size: 11pt; padding-bottom: 1.5pt"> </td> <td style="font-size: 11pt; text-align: left; padding-bottom: 1.5pt"> </td><td style="font-size: 11pt; text-align: right; padding-bottom: 1.5pt"> </td><td style="font-size: 11pt; text-align: left; padding-bottom: 1.5pt"> </td><td style="font-size: 11pt; padding-bottom: 1.5pt"> </td> <td style="font-size: 11pt; text-align: left; padding-bottom: 1.5pt"> </td><td style="font-size: 11pt; text-align: right; padding-bottom: 1.5pt"> </td><td style="font-size: 11pt; text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt">Options outstanding - June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">2,725,605</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt">$</td><td style="text-align: right; padding-bottom: 2.5pt">5.25</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt">5.61</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt">$</td><td style="text-align: right; padding-bottom: 2.5pt">9,621</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Options exercisable</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">1,461,723</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt">$</td><td style="text-align: right; padding-bottom: 2.5pt">4.69</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt">5.98</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt">$</td><td style="text-align: right; padding-bottom: 2.5pt">6,091</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Options vested and expected to vest</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">2,607,104</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt">$</td><td style="text-align: right; padding-bottom: 2.5pt">5.21</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt">5.63</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt">$</td><td style="text-align: right; padding-bottom: 2.5pt">9,323</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr> </table>   The aggregate intrinsic value in the table above represents the total pre-tax amount of the proceeds, net of exercise price, which would have been received by option holders if all option holders had exercised and immediately sold all options with an exercise price lower than the market price on June 28, 2019, based on the closing price of the Company’s common stock of $8.70 on that date.   During the six months ended June 30, 2019, the Company granted stock options to certain employees and a consultant. The stock options were granted with an exercise price equal to the current market price of the Company’s common stock, as reported by the securities exchange on which the common stock was then listed, at the grant date and have contractual terms of 10 years. Vesting terms for options granted to employees and consultants during the six months ended June 30, 2019 typically included one of the following vesting schedules: 25% of the shares subject to the option vest and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over three years; 100% of the shares subject to the option vest on a quarterly basis in equal installments over three years; and 90% of the shares subject to the option vest and become exercisable on the second month after the grant date and the remaining 10% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over the next 11 months. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plan) and in the event of certain modifications to the option award agreement.   The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model. Beginning on April 1, 2018, the Company began calculating expected volatility based solely on the historical volatilities of the common stock of the Company. In the past, the expected volatility was based on the historical volatilities of the common stock of the Company and comparable publicly traded companies, the Company previously utilized this methodology based on its estimate that it had limited relevant historical data regarding the volatility of its stock price on which to base a meaningful estimate of expected volatility. The expected term of options granted to employees and directors was determined in accordance with the “simplified approach,” as the Company has limited, relevant, historical data on employee exercises and post-vesting employment termination behavior. The expected risk-free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The financial statement effect of forfeitures is estimated at the time of grant and revised, if necessary, if the actual effect differs from those estimates. For option grants to employees and directors, the Company assigns a forfeiture factor of 10%. These factors could change in the future, which would affect the determination of stock-based compensation expense in future periods. Utilizing these assumptions, the fair value is determined at the date of grant.   The table below illustrates the fair value per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options granted to employees:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 74%; text-align: left">Weighted-average fair value of options granted</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 22%; text-align: right">3.64</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Expected terms (in years)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">5.8 - 6.1</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Expected volatility</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">64% - 67</td><td style="text-align: left">%</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Risk-free interest rate</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">2.19% - 2.68</td><td style="text-align: left">%</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Dividend yield</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> </table>   The following table summarizes information about stock options outstanding and exercisable at June 30, 2019:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="font-size: 9pt"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt"> </td> <td colspan="10" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Options Outstanding</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt"> </td> <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Options Exercisable</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt"> </td></tr> <tr style="vertical-align: bottom; font-size: 9pt"> <td style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Weighted</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td></tr> <tr style="vertical-align: bottom; font-size: 9pt"> <td style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Average</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Weighted</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Weighted</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td></tr> <tr style="vertical-align: bottom; font-size: 9pt"> <td style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Remaining</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Average</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-size: 9pt; text-align: center"> </td><td style="font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Average</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td></tr> <tr style="vertical-align: bottom; font-size: 9pt"> <td style="font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Number</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; font-size: 9pt; text-align: center">Contractual</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Exercise</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Number</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; font-size: 9pt">Exercise</td><td style="font-weight: bold; font-size: 9pt; text-align: center"> </td></tr> <tr style="vertical-align: bottom; font-size: 9pt"> <td style="font-weight: bold; border-bottom: Black 1.5pt solid; font-size: 9pt; text-align: left">Range of Exercise Prices</td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Outstanding</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Life in Years</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Price</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Exercisable</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt; text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; font-size: 9pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid; font-size: 9pt">Price</td><td style="padding-bottom: 1.5pt; font-weight: bold; font-size: 9pt; text-align: center"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255); font-size: 9pt"> <td style="width: 29%; font-size: 9pt">$1.47 - $2.60</td><td style="width: 2%; font-size: 9pt"> </td> <td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 10%; text-align: right; font-size: 9pt">816,936</td><td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 2%; font-size: 9pt"> </td> <td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 11%; text-align: right; font-size: 9pt">7.22</td><td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 2%; font-size: 9pt"> </td> <td style="width: 1%; text-align: left; font-size: 9pt">$</td><td style="width: 10%; text-align: right; font-size: 9pt">2.04</td><td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 2%; font-size: 9pt"> </td> <td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 10%; text-align: right; font-size: 9pt">526,237</td><td style="width: 1%; text-align: left; font-size: 9pt"> </td><td style="width: 2%; font-size: 9pt"> </td> <td style="width: 1%; text-align: left; font-size: 9pt">$</td><td style="width: 10%; text-align: right; font-size: 9pt">2.12</td><td style="width: 1%; text-align: left; font-size: 9pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White; font-size: 9pt"> <td style="font-size: 9pt">$2.76 - $4.66</td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">495,496</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">6.68</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt">$</td><td style="text-align: right; font-size: 9pt">3.97</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">441,452</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt">$</td><td style="text-align: right; font-size: 9pt">3.99</td><td style="text-align: left; font-size: 9pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255); font-size: 9pt"> <td style="font-size: 9pt">$5.61 - $6.30</td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">440,350</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">8.41</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt">$</td><td style="text-align: right; font-size: 9pt">6.16</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">122,159</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt">$</td><td style="text-align: right; font-size: 9pt">6.04</td><td style="text-align: left; font-size: 9pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White; font-size: 9pt"> <td style="font-size: 9pt">$6.64 - $8.99</td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">967,793</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">2.44</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt">$</td><td style="text-align: right; font-size: 9pt">8.01</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt"> </td><td style="text-align: right; font-size: 9pt">366,845</td><td style="text-align: left; font-size: 9pt"> </td><td style="font-size: 9pt"> </td> <td style="text-align: left; font-size: 9pt">$</td><td style="text-align: right; font-size: 9pt">8.24</td><td style="text-align: left; font-size: 9pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255); font-size: 9pt"> <td style="text-align: left; padding-bottom: 1.5pt; font-size: 9pt">$42.80</td><td style="padding-bottom: 1.5pt; font-size: 9pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left; font-size: 9pt"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right; font-size: 9pt">5,030</td><td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 1.5pt; font-size: 9pt"> </td> <td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 1.5pt; text-align: right; font-size: 9pt">1.12</td><td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 1.5pt; font-size: 9pt"> </td> <td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt">$</td><td style="padding-bottom: 1.5pt; text-align: right; font-size: 9pt">42.80</td><td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 1.5pt; font-size: 9pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left; font-size: 9pt"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right; font-size: 9pt">5,030</td><td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 1.5pt; font-size: 9pt"> </td> <td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt">$</td><td style="padding-bottom: 1.5pt; text-align: right; font-size: 9pt">42.80</td><td style="padding-bottom: 1.5pt; text-align: left; font-size: 9pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White; font-size: 9pt"> <td style="padding-bottom: 2.5pt; font-size: 9pt">$1.47 - $42.80</td><td style="padding-bottom: 2.5pt; font-size: 9pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left; font-size: 9pt"> </td><td style="border-bottom: Black 2.5pt double; text-align: right; font-size: 9pt">2,725,605</td><td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 2.5pt; font-size: 9pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 2.5pt; text-align: right; font-size: 9pt">5.61</td><td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 2.5pt; font-size: 9pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt">$</td><td style="padding-bottom: 2.5pt; text-align: right; font-size: 9pt">5.25</td><td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 2.5pt; font-size: 9pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left; font-size: 9pt"> </td><td style="border-bottom: Black 2.5pt double; text-align: right; font-size: 9pt">1,461,723</td><td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt"> </td><td style="padding-bottom: 2.5pt; font-size: 9pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt">$</td><td style="padding-bottom: 2.5pt; text-align: right; font-size: 9pt">4.69</td><td style="padding-bottom: 2.5pt; text-align: left; font-size: 9pt"> </td></tr> </table>   As of June 30, 2019, there was approximately $4,128 of total unrecognized compensation expense related to unvested stock options granted under the Plans. That expense is expected to be recognized over the weighted-average remaining vesting period of 3.94 years. The stock-based compensation expense for all stock options was $262 and $540 during the three and six months ended June 30, 2019, respectively.   Restricted Stock Units   RSU awards are granted subject to certain vesting requirements and other restrictions, including performance and market-based vesting criteria. The grant date fair value of the RSUs, which has been determined based upon the market value of the Company’s common stock on the grant date, is expensed over the vesting period of the RSUs. Unvested portions of RSUs issued to consultants are remeasured on an interim basis until vesting criteria is met.   During the six months ended June 30, 2019, 185,000 RSUs with a fair market value of $1,139 were issued to certain employees; the RSUs vest in full on the third year anniversary of the grant date.   During the three and six months ended June 30, 2019, the Company’s board of directors were granted 38,860 RSUs with a fair market value $300 which vests on a quarterly basis, over one year in equal installments.   A summary of the Company’s RSU activity and related information for the six months ended June 30, 2019 is as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Number of RSUs</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Weighted Average Grant Date Fair Value</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 50%">RSUs unvested - January 1, 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 21%; text-align: right">1,275,680</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 21%; text-align: right">2.16</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">RSUs granted</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">223,860</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">6.43</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">RSUs vested</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(68,180</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">2.20</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">RSUs cancelled/forfeited</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt; text-align: right"> </td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt">RSUs unvested at June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,431,360</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left">$</td><td style="padding-bottom: 2.5pt; text-align: right">2.83</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>   As of June 30, 2019, the total unrecognized compensation expense related to unvested RSUs was approximately $1,076, which is expected to be recognized over a weighted-average period of 0.37 years, based on estimated and actual vesting schedules of the applicable RSUs. The stock-based compensation for RSUs during the three and six months ended June 30, 2019 was $110 and $540, respectively.   Warrants   From time to time, the Company issues warrants to purchase shares of the Company’s common stock to investors, lenders, underwriters and other non-employees for services rendered or to be rendered in the future, or pursuant to settlement agreements.   A summary of warrant activity for the six months ended June 30, 2019 is as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Number of Shares Subject to Warrants Outstanding</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Weighted Avg. Exercise Price</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 60%">Warrants outstanding - January 1, 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 16%; text-align: right">2,206,973</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">1.91</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Granted</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Exercised</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(1,032,055</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">1.79</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt">Expired</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt; text-align: right"> </td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Warrants outstanding and exercisable - June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,174,918</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left">$</td><td style="padding-bottom: 2.5pt; text-align: right">2.01</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Weighted average remaining contractual life of the outstanding warrants in years - June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">3.51</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>   A list of the warrants outstanding as of June 30, 2019 is included in the following table:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td><td style="text-align: center"> </td> <td style="text-align: center"> </td><td style="font-weight: bold; text-align: center"> </td> <td colspan="2" style="font-weight: bold; text-align: center">Warrants</td><td style="font-weight: bold; text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center">Exercise</td><td style="text-align: center"> </td><td style="font-weight: bold; text-align: center"> </td> <td style="font-weight: bold; text-align: center">Expiration</td></tr> <tr style="vertical-align: bottom"> <td style="font-weight: bold; text-align: left; border-bottom: Black 1.5pt solid">Warrant Series</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Issue Date</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Outstanding</td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Price</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="font-weight: bold; text-align: center; padding-bottom: 1.5pt"> </td> <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Date</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 21%; text-align: left">Lender warrants</td><td style="width: 2%"> </td> <td style="width: 19%; text-align: center">5/11/2015</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 16%; text-align: right">125,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 15%; text-align: right">1.79</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 17%; text-align: center">5/11/2025</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Settlement warrants</td><td> </td> <td style="text-align: center">8/16/2016</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">40,000</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">3.75</td><td style="text-align: left"> </td><td> </td> <td style="text-align: center">8/16/2021</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">PIPE investor and placement agent warrants</td><td> </td> <td style="text-align: center">12/27/2016</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">394,532</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">1.79</td><td style="text-align: left"> </td><td> </td> <td style="text-align: center">12/27/2019</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Lender warrants</td><td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: center">7/19/2017</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">615,386</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt">$</td><td style="text-align: right; padding-bottom: 1.5pt">2.08</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: center">7/19/2024</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: center"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">1,174,918</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"></td><td style="text-align: right; padding-bottom: 2.5pt"></td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="padding-bottom: 2.5pt; text-align: center"> </td></tr> </table>   Subsidiary Stock-Based Transactions   Mayfield Pharmaceuticals, Inc.   The Company issued 1,000,000 shares of Mayfield’s common stock to Elle in connection with acquisition of certain drug candidate intellectual property and rights in February 2019. Following the issuance of Mayfield common stock to Elle, and as of June 30, 2019, the Company owned 72% of the equity interests in Mayfield. Mayfield is a consolidated subsidiary; the Company reports the operating results of Mayfield and allocates the noncontrolling interests to the non-majority partners.   Stock-Based Compensation Summary   The Company recorded stock-based compensation related to equity instruments granted to employees, directors and consultants as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2018</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2018</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%; text-align: left">Employees - selling, general and administrative</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">268</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">573</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">906</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 11%; text-align: right">1,166</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Directors - selling, general and administrative</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">75</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">35</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">150</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">85</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Consultants - selling, general and administrative</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">24</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">99</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">108</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Total</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">367</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">608</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,155</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,359</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>

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Diluted common equivalent shares for the six months ended June 30, 2019 and the three months ended June 30, 2018, consisted of the following:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center">For the</td><td> </td><td> </td> <td colspan="2" style="text-align: center">For the</td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center">Three Months Ended</td><td> </td><td> </td> <td colspan="2" style="text-align: center">Six Months Ended</td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2018</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Diluted shares related to:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 56%; padding-left: 10pt">Warrants</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 18%; text-align: right">1,093,006</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 18%; text-align: right">1,028,780</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Stock options and RSUs</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">891,631</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">637,891</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Dilutive common equivalent shares</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,984,637</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">1,666,671</td><td style="text-align: left"> </td></tr></table>

The following table shows the computation of diluted net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended June 30,</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td><td> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2018</td><td> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: justify"> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%; text-align: left; padding-bottom: 2.5pt">Numerator – net income (loss) attributable to Harrow Health, Inc.</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">(2,378</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt">)</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">2,522</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">8,980</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 11%; border-bottom: Black 2.5pt double; text-align: right">(991</td><td style="width: 1%; text-align: left; padding-bottom: 2.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Denominator – weighted average number of shares outstanding, basic</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">25,216,565</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">21,190,794</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">25,030,012</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">21,070,644</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Dilutive common equivalents</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,984,637</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,666,671</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Number of shares used for diluted earnings per share computation</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">25,216,565</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">23,175,431</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">26,696,683</td><td style="text-align: left"> </td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">21,070,644</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net income (loss) per share, diluted</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(0.09</td><td style="text-align: left; padding-bottom: 2.5pt">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.11</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.34</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(0.05</td><td style="text-align: left; padding-bottom: 2.5pt">)</td></tr></table>

Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the three and six months ended June 30, 2019:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="10" style="text-align: center; border-bottom: Black 1.5pt solid">For the Three Months Ended June 30, 2019</td><td style="text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center">Pharmaceutical</td><td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center">Pharmaceutical</td><td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center"> </td><td style="text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Compounding</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Drug Development</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Total</td><td style="text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%; text-align: left">Net revenues</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">13,516</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">13,516</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt">Cost of sales</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(5,225</td><td style="text-align: left; padding-bottom: 1.5pt">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">                   -</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(5,225</td><td style="text-align: left; padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Gross profit</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">8,291</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">8,291</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Operating expenses:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Selling, general and administrative</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">5,804</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">43</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">5,847</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 10pt">Research and development</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">533</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">127</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">660</td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Segment contribution</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">1,954</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">(170</td><td style="text-align: left; padding-bottom: 2.5pt">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">1,784</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Corporate</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">2,342</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Research and development</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">150</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 1.5pt">Amortization</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; padding-bottom: 1.5pt"> </td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; padding-bottom: 1.5pt"> </td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">59</td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt">Operating loss</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt"> </td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt"> </td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">(767</td><td style="text-align: left; padding-bottom: 2.5pt">)</td></tr> </table>   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="10" style="text-align: center; border-bottom: Black 1.5pt solid">For the Six Months Ended June 30, 2019</td><td style="text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center">Pharmaceutical</td><td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center">Pharmaceutical</td><td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center"> </td><td style="text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Compounding</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Drug Development</td><td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="text-align: center; padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Total</td><td style="text-align: center; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 40%; text-align: left">Net revenues</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">25,806</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">-</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">25,806</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt">Cost of sales</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(9,123</td><td style="text-align: left; padding-bottom: 1.5pt">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">-</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(9,123</td><td style="text-align: left; padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Gross profit</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">16,683</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">16,683</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Operating expenses:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Selling, general and administrative</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">11,519</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">86</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">11,605</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 10pt">Research and development</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">658</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">263</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">921</td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Segment contribution</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">4,506</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">(349</td><td style="text-align: left; padding-bottom: 2.5pt">)</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double"> </td><td style="text-align: right; border-bottom: Black 2.5pt double">4,157</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Corporate</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">5,061</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Research and development</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">294</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 1.5pt">Amortization</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; padding-bottom: 1.5pt"> </td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; padding-bottom: 1.5pt"> </td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">125</td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt">Operating loss</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt"> </td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt">                  </td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">(1,323</td><td style="text-align: left; padding-bottom: 2.5pt">)</td></tr></table>

-76000

-393000

105000

5000

224000

119000

10200

4500

25000

1400000

0.10 0.14

0.10

0.65 0.52 0.67 0.54

7.90

5.00

3.30

4157000 4506000 -349000 1784000 1954000 -170000

125000

59000

630000

-255000

100271000

98938000

75000

NOTE 4. INVESTMENT IN MELT PHARMACEUTICALS, INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS   In December 2018, the Company entered into an asset purchase agreement with Melt (the “Melt Asset Purchase Agreement”). Pursuant to the terms of the Melt Asset Purchase Agreement, Melt was assigned certain intellectual property and related rights from the Company to develop, formulate, make, sell, and sub-license certain Company conscious sedation and analgesia related formulations (collectively, the “Melt Products”). Under the terms of the Melt Asset Purchase Agreement, Melt is required to make royalty payments to the Company up to eight percent (8%) of net sales of the Melt Products while any patent rights remain outstanding, as well as other conditions. In January and March 2019, the Company entered into the Melt Series A Preferred Stock Agreement.   In February 2019, the Company and Melt entered into a Management Services Agreement (the “Melt MSA”), whereby the Company provides to Melt certain administrative services and support, including bookkeeping, web services and human resources related activities, and Melt pays the Company a monthly amount of $10.   As of June 30, 2019, the Company was due $714 from Melt for reimbursable expenses and amounts due under the Melt MSA and included in prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets.   The Company’s Chief Executive Officer, Mark L. Baum, and Chief Medical Officer, Larry Dillaha, are members of the Melt board of directors, and several employees of the Company (including Mr. Baum and the Company’s Chief Financial Officer, Andrew Boll) entered into consulting agreements and provide consulting services to Melt.   The unaudited condensed results of operations information of Melt is summarized below:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center">For the</td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center">Six months ended</td><td> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center">June 30, 2019</td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Revenues, net</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">-</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 71%; text-align: left">Loss from operations</td><td style="width: 2%"> </td> <td style="width: 1%; border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="width: 25%; border-bottom: Black 1.5pt solid; text-align: right">1,382</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Net loss</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(1,382</td><td style="text-align: left">)</td></tr> </table>   The unaudited condensed balance sheet information of Melt is summarized below:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 65%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2" style="text-align: center">June 30,</td><td style="text-align: center"> </td></tr> <tr style="vertical-align: bottom"> <td style="text-align: center"> </td><td style="text-align: center"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">2019</td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%; text-align: left">Current assets</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">9,521</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Non current assets</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">3</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total assets</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">9,524</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total liabilities</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">940</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total preferred stock and stockholders’ equity</td><td> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">8,584</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total liabilities and stockholders’ equity</td><td> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">9,524</td><td style="text-align: left"> </td></tr></table>

Investment in Eton Pharmaceuticals, Inc. – Related Party   The Company owns 3,500,000 shares of Eton common stock, which represents approximately 19.7% of the equity and voting interests of Eton as of June 30, 2019. At June 30, 2019, the fair market value of Eton’s common stock was $7.90 per share, the closing share price of Eton common stock on June 28, 2019, the last trading day of the period ended June 30, 2019. In accordance with the Accounting Standards Update (“ASU”) 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, for the three months ended June 30, 2019, the Company recorded an investment loss from its Eton common stock position of $350, related to the change in fair market value of the Company’s investment in Eton during the measurement period. For the six months ended June 30, 2019, the Company recorded an investment gain from its Eton common stock position of $6,230, related to the change in fair market value of the Company’s investment in Eton during the measurement period. As of June 30, 2019, the fair market value of the Company’s investment in Eton was $27,650.   In November 2018, the Company entered into a lock-up agreement that prohibits the sale of any of its Eton common stock until November 2019 without the approval of National Securities Corporation, the underwriter of Eton’s initial public offering of its common stock.   Mark Baum, the Company’s Chief Executive Officer, is a member of the board of directors of Eton.

200000

968000

800000

491000

4.69

P5Y7M10D

25165965

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6230000

5218000

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5199000

5976000

29000

-67000

34998000

24751000

21000

24000

91430000

98938000

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2615000

21000

25000

93538000

100271000

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2615000

24751000

3732000

35065000

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25000

21000

99887000

92411000

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37059000

83000

-25000

37034000

83000

-504000

6230000

5218000

-2215000

5199000

-326000

-261000

5218000

-350000

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67000

42000

8913000

-991000

8980000

-991000

8980000

-67000

-2420000

2522000

-2378000

2522000

-2378000

2522000

-42000

179000 1000 178000 179000 17000 17000 17000 763393 399354

1080000

1359000

1080000

1359000

1080000

367000

608000

367000

608000

367000

608000

60000

305619

236243

4193000 4170000

256000

108000

4000

220000

154000

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION   Company and Background   Harrow Health, Inc. (together with its subsidiaries, unless the context indicates or otherwise requires, the “Company” or “Harrow”) specializes in the development, production and sale of innovative medications that offer unique competitive advantages and serve unmet needs in the marketplace through its subsidiaries and deconsolidated companies. The Company owns one of the nation’s leading ophthalmology pharmaceutical businesses, ImprimisRx. In addition to wholly owning ImprimisRx, the Company also has equity positions in Eton Pharmaceuticals, Inc. (“Eton”), Surface Pharmaceuticals, Inc. (“Surface”), and Melt Pharmaceuticals, Inc. (“Melt”). More recently, the Company founded its subsidiaries Mayfield Pharmaceuticals, Inc. (“Mayfield”), Radley Pharmaceuticals, Inc. (“Radley”), and Stowe Pharmaceuticals, Inc. (“Stowe”). The Company owns royalty rights in certain 505(b)(2) drug candidates being developed by Surface, Melt, Radley and Mayfield. Harrow intends to continue to create new subsidiaries, and found, and hold equity and royalty rights in, new businesses that commercialize drug candidates that are internally developed or otherwise acquired or licensed from third parties   In February 2019, the Company entered into an agreement with Elle Pharmaceutical, Inc. (“Elle”) in which Mayfield issued 1,000,000 shares of its common stock to Elle (see Note 14).   In July 2019, the Company entered into an agreement with Noice Rx, LLC (“Noice”) to sell substantially all the assets associated with its non-ophthalmology pharmaceutical compounding business conducted by the Company’s subsidiary Park Compounding, Inc. (“Park”) for a purchase price of $8,000. The closing of the Park sale is contingent upon Noice being issued a temporary pharmacy and sterile license from the California State Board of Pharmacy and other customary conditions and terms (see Note 16). In connection with the sale of Park, the Company will issue Noice a seller’s note for $8,000.   Basis of Presentation   The Company has prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019 or for any other period. For further information, refer to the Company’s audited consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.   The consolidated financial statements include the accounts of Harrow and its wholly owned subsidiaries, as well as Mayfield, a 72% majority owned subsidiary of Harrow, as of June 30, 2019. The remaining 28% of Mayfield is owned by Elle. Mayfield was organized to develop women’s health focused drug candidates. All inter-company accounts and transactions have been eliminated in consolidation.   Harrow consolidates entities in which we have a controlling financial interest. We consolidate subsidiaries in which we hold, directly or indirectly, more than 50% of the voting rights.   The condensed consolidated balance sheets at June 30, 2019 and December 31, 2018 and the condensed consolidated statements of operations, stockholders’ equity and cash flows for the periods ended June 30, 2019 include our accounts and those of our wholly owned subsidiaries as well as Mayfield. The condensed consolidated statements of operations, stockholders’ equity and cash flows for the periods ended June 30, 2018 include our accounts and those of our wholly owned subsidiaries.

641000

519000

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11999000

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30159000

24700000

532000

940000

0.30

0.72

0.28

0.197

0.44

0.72

0.199

4193000

5331883

10245280

304873

168513

27650000

21000000

11400000

5320000

5810000

6472000

6712000

-632000

400000

1666671

1028780

637891

1984637

1093006

891631

26696683

21070644

25216565

23175431

0.08 0.03 0.04 0.06

714000

50000

48000

3000

10000

1758000

1119000

264000

6000

630000

709000

65000

328000

434000

334000

50000

714000

138000

125000

1743000

1662000

420000

397000

3416000

3184000

5612000

5496000

11191000

10739000

5245000

4364000

P20Y

P5Y

P25Y

P17Y

P19Y

P3Y

P15Y

P3Y

P4Y

Indefinite

4697000

962000

50000

332000

2998000

16000

294000

45000

1479000

64000

5000

1115000

15000

274000

6000

-64000 -15000 -1000 -20000 -28000

3154000

898000

45000

332000

1868000

11000

128000

252000

2018000

5957000

4966000

388000

253000

256000

7743000

7050000

1216000

3696000

4121000

3828000

20191000

4941000

15250000

13745000

P5Y

0.0636 0.0971

P12Y1M9D

P8M12D

448000 230000

464000

232000

Future lease payments under non-cancelable finance leases as of June 30, 2019 were as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Finance Leases</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%; text-align: left">Remainder of 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">368</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">9</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">9</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">9</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">2023</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">10</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Total minimum lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">405</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: amount representing interest payments</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(6</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Present value of future minimum lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">399</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: unamortized discount</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">399</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: current portion, net of unamortized discount</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(370</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Finance lease obligation, net of current portion</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">29</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

75000

932000

100055

179000

1000000

375000

337000

Segments   The Company’s chief operating decision-maker is its Chief Executive Officer who makes resource allocation decisions and assesses performance based on financial information presented on as operating segments. The Company has identified two operating segments as reportable segments. See Note 15 for more information regarding the Company’s reportable segments.

Noncontrolling Interests   The Company recognizes any noncontrolling interest as a separate line item in equity in the condensed consolidated financial statements. A noncontrolling interest represents the portion of equity ownership in a less-than-wholly owned subsidiary not attributable to the Company. Generally, any interest that holds less than 50% of the outstanding voting shares is deemed to be a noncontrolling interest; however, there are other factors, such as decision-making rights, that are considered as well. The Company includes the amount of net income (loss) attributable to noncontrolling interests in consolidated net income (loss) on the face of the condensed consolidated statements of operations.   The Company provides in the condensed consolidated statements of stockholders’ equity a reconciliation at the beginning and the end of the period of the carrying amount of total equity, equity attributable to the parent, and equity attributable to the noncontrolling interest that separately discloses:   <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="width: 0.25in; font: 10pt Times New Roman, Times, Serif; text-align: justify">(1)</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">net income or loss;</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">(2)</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify"> </td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">(3)</td> <td style="font: 10pt Times New Roman, Times, Serif; text-align: justify">each component of other income or loss.</td></tr></table>

Future lease payments under operating leases as of June 30, 2019 were as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 75%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="font-weight: bold; text-align: left"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Operating Leases</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%; text-align: left">Remainder of 2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">457</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">930</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">809</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">824</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2023</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">843</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt; text-align: left">Thereafter</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,304</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total minimum lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">9,167</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Less: amount representing interest payments</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(2,695</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Total operating lease liabilities</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">6,472</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Less: current portion, operating lease liabilities</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(496</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Operating lease liabilities, net of current portion</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">5,976</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

Investment in Melt Pharmaceuticals, Inc. – Related Party   In April 2018, the Company formed Melt as a wholly owned subsidiary. In January and March of 2019, Melt entered into definitive stock purchase agreements (collectively, the “Melt Series A Preferred Stock Agreement”) with certain investors and closed on the purchase and sale of Melt’s Series A Preferred Stock (the “Melt Series A Stock”), totaling approximately $11,400 of proceeds (collectively the “Melt Series A Round”) at a purchase price of $5.00 per share. As a result, the Company lost voting and ownership control of Melt and ceased consolidating Melt’s financial statements. In connection with the Melt Series A Preferred Stock Agreement, Melt also entered into a Registration Rights Agreement and agreed to use commercially reasonable efforts to file, or confidentially submit, a registration statement on Form S-1 with the United States Securities and Exchange Commission by September 30, 2020 relating to an initial public offering of its common stock.   At the time of deconsolidation, the Company recorded a gain of $5,810 and adjusted the carrying value in Melt to reflect the increased valuation of Melt and the Company’s new ownership interest in accordance with Accounting Standard Codification (“ASC”) 810-10-40-4(c), Consolidation.   The Company owns 3,500,000 common shares (which is approximately 44% of the equity interest as of June 30, 2019) of Melt and uses the equity method of accounting for this investment, as management has determined that the Company has the ability to exercise significant influence over the operating and financial decisions of Melt. Under this method, the Company recognizes earnings and losses of Melt in its consolidated financial statements and adjusts the carrying amount of its investment in Melt accordingly. The Company’s share of earnings and losses are based on the Company’s ownership interest of Melt. Any intra-entity profits and losses are eliminated. During the three and six months ended June 30, 2019, the Company recorded equity in net loss of Melt of $326 and $611, respectively. As of June 30, 2019, the carrying value of the Company’s investment in Melt was $5,199.   See Note 4 for more information and related party disclosure regarding Melt. Investment in Surface Pharmaceuticals, Inc. – Related Party   In April 2017, the Company formed Surface as a wholly owned subsidiary. In May and July 2018, Surface entered into a definitive stock purchase agreement with an institutional investor for the purchase of Surface’s Series A Preferred Stock (the “Surface Series A Stock”) and closed on the sale, resulting in total proceeds to Surface of approximately $21,000. At the time of the first closing in May 2018, the Company lost voting and ownership control of Surface and it ceased consolidating Surface’s financial statements. The Surface Series A Stock (i) was issued at a purchase price of $3.30 per share; (ii) will vote together with the common stock and all other shares of stock of Surface having general voting power; (iii) will be entitled to the number of votes equal to the number of shares of preferred stock held; (iv) will hold liquidation preference over all other equity interests in Surface; and (v) will have mandatory conversion requirements into Surface common stock upon events including an underwritten initial public offering (“IPO”) of Surface common stock or similar transaction.   At the time of deconsolidation, the Company recorded a gain of $5,320 and adjusted the carrying value in Surface to reflect the increased valuation of Surface and the Company’s new ownership interest in accordance with ASC 810-10-40-4(c), Consolidation.   The Company owns 3,500,000 common shares (which is approximately 30% of the equity interest as of June 30, 2019) of Surface and uses the equity method of accounting for this investment, as management has determined that the Company has the ability to exercise significant influence over the operating and financial decisions of Surface. Under this method, the Company recognizes earnings and losses of Surface in its consolidated financial statements and adjusts the carrying amount of its investment in Surface accordingly. The Company’s share of earnings and losses are based on the Company’s ownership interest of Surface. Any intra-entity profits and losses are eliminated. The Company recorded equity in net loss of Surface of $261 and $504 during the three and six months ended June 30, 2019. The Company recorded equity in net loss of Surface of $102 during the three and six months ended June 30, 2018. As of June 30, 2019, the carrying value of the Company’s investment in Surface was $4,443.   See Note 5 for more information and related party disclosure regarding Surface. More than 50% of the voting rights

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

504000

611000

326000

261000

102000

2021-12-31

2020-12-31

2024-07-31

The Company has elected to not recognize right-of-use assets and lease liabilities arising from short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

Term for up to two five-year periods

Term for two additional five-year periods.

368000

751000

9000

10000

405000

751000

399000

100000 50000

750000

6000

370000

720000

733000 640000

146000

73000

15000

4000

930000

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809000

742000

824000

320000

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330000

5304000

196000

9167000

3242000

In consideration for the acquisition of the intellectual property rights, the Company is obligated to make payments to the Inventors based on the completion of certain milestones, generally consisting of: (1) a payment payable within 30 days after the issuance of the first patent in the United States arising from the acquired intellectual property (if any); (2) a payment payable within 30 days after the Company files the first investigational new drug application ("IND") with the FDA for the first product arising from the acquired intellectual property (if any); (3) for certain of the Inventors, a payment payable within 30 days after the Company files the first new drug application with the FDA for the first product arising from the acquired intellectual property (if any); and (4) certain royalty payments based on the net receipts received by the Company in connection with the sale or licensing of any product based on the acquired intellectual property (if any), after deducting (among other things) the Company's development costs associated with such product. If, following five years after the date of the applicable asset purchase agreement, the Company either (a) for certain of the Inventors, has not filed an IND or, for the remaining Inventors, has not initiated a study where data is derived, or (b) has failed to generate royalty payments to the Inventors for any product based on the acquired intellectual property, the Inventors may terminate the applicable asset purchase agreement and request that the Company re-assign the acquired technology to the Inventors.

Future minimum lease payments under operating leases and future minimum finance lease payments as of December 31, 2018 were as follows (in thousands):   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; border-bottom: Black 1.5pt solid; text-align: center">Finance Leases</td><td style="font-weight: bold; padding-bottom: 1.5pt; text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt; text-align: center"> </td> <td colspan="2" style="font-weight: bold; border-bottom: Black 1.5pt solid; text-align: center">Operating Leases</td><td style="font-weight: bold; padding-bottom: 1.5pt; text-align: center"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 52%; text-align: left">2019</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 20%; text-align: right">751</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 20%; text-align: right">797</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">857</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">742</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">320</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2023</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">-</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">330</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Thereafter</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">-</td><td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">196</td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">751</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">3,242</td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Less: Amounts representing interest</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(15</td><td style="text-align: left">)</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: Amounts representing unamortized discount</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(16</td><td style="text-align: left; padding-bottom: 1.5pt">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; padding-bottom: 1.5pt"> </td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Total obligation under capital leases</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">720</td><td style="text-align: left"> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 1.5pt">Less: Current portion of capital leases</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; border-bottom: Black 1.5pt solid"> </td><td style="text-align: right; border-bottom: Black 1.5pt solid">(720</td><td style="text-align: left; padding-bottom: 1.5pt">)</td><td style="padding-bottom: 1.5pt"> </td> <td style="text-align: left; padding-bottom: 1.5pt"> </td><td style="text-align: right; padding-bottom: 1.5pt"> </td><td style="text-align: left; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt; padding-left: 10pt">Long term capital lease obligation</td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; border-bottom: Black 2.5pt double">$</td><td style="text-align: right; border-bottom: Black 2.5pt double">-</td><td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left; padding-bottom: 2.5pt"> </td><td style="text-align: right; padding-bottom: 2.5pt"> </td><td style="text-align: left; padding-bottom: 2.5pt"> </td></tr></table> Yes Yes false

60700

15000

75000

108000

75000

108000

75000

20955

40000 282000

4193000

6838000

4219000

4170000

8000000

6230000

350000

7330000

0.0200

0.1000

0.095

The interest rate calculation that the loan bears is now equal to the three-month London Inter-Bank Offered Rate (subject to a minimum of 2.00%), plus an applicable margin of 10.00% (the "Margin Rate"); provided that, if, two days prior to a payment date, the Company provides the Lender evidence that the Company has achieved a leverage ratio as of such date of less than 4.00:1:00, the Margin Rate shall equal 9.00%; and if the Company has achieved a leverage ratio as of such date of less than 3.00:1:00, the Margin Rate shall equal 7.00%

5000000

282000

457000

Vesting terms for options granted to employees and consultants during the six months ended June 30, 2019 typically included one of the following vesting schedules: 25% of the shares subject to the option vest and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over three years; 100% of the shares subject to the option vest on a quarterly basis in equal installments over three years; and 90% of the shares subject to the option vest and become exercisable on the second month after the grant date and the remaining 10% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over the next 11 months. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plan) and in the event of certain modifications to the option award agreement.

Which vests on a quarterly basis, over one year in equal installments.

8.70

2025-05-11

2021-08-16

2019-12-27

2024-07-19

P3Y6M3D 1.91 2.01 1.79 0.014

48000

1182000

640000

8000000

63000

2000000

2021-09-15

119000

P5Y

The Sellers Note will bear interest at 9.5% per annum and will be secured by all the assets of Noice. Noice will make ninety-six (96) monthly cash payments to the Company over the eight years following the closing. The first twenty-four months of the Sellers Note will require interest only payments of $63, with a principal payment of $2,000 due on September 15, 2021.

0.50

797000

-15000 -16000

720000

57933

2695000

720000

11000 274000 114000 32532 1872

1872

5000

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Schedule of Prepaid Expenses and Other Current Assets (Details) link:presentationLink link:calculationLink link:definitionLink 00000052 - Disclosure - Property, Plant and Equipment (Details Narrative) link:presentationLink link:calculationLink link:definitionLink 00000053 - Disclosure - Property, Plant and Equipment - Schedule of Property, Plant and Equipment (Details) link:presentationLink link:calculationLink link:definitionLink 00000054 - Disclosure - Intangible Assets and Goodwill - Schedule of Intangible Assets (Details) link:presentationLink link:calculationLink link:definitionLink 00000055 - Disclosure - Intangible Assets and Goodwill - Schedule of Amortization Expenses for Intangible Assets (Details) link:presentationLink link:calculationLink link:definitionLink 00000056 - Disclosure - Intangible Assets and Goodwill - Schedule of Estimated Future Amortization Expense (Details) link:presentationLink link:calculationLink link:definitionLink 00000057 - Disclosure - Accounts Payable and Accrued Expenses - 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Disclosure - Stockholders' Equity and Stock-based Compensation (Details Narrative) link:presentationLink link:calculationLink link:definitionLink 00000065 - Disclosure - Stockholders' Equity and Stock-based Compensation - Schedule of Stock Option Plan Activity (Details) link:presentationLink link:calculationLink link:definitionLink 00000066 - Disclosure - Stockholders' Equity and Stock-based Compensation - Schedule of Fair Value Assumptions (Details) link:presentationLink link:calculationLink link:definitionLink 00000067 - Disclosure - Stockholders' Equity and Stock-based Compensation - Schedule of Stock Option Outstanding and Exercisable (Details) link:presentationLink link:calculationLink link:definitionLink 00000068 - Disclosure - Stockholders' Equity and Stock-based Compensation - Schedule of Restricted Stock Units Activity (Details) link:presentationLink link:calculationLink link:definitionLink 00000069 - Disclosure - Stockholders' Equity and Stock-based Compensation - Schedule of Warrants Activity (Details) link:presentationLink link:calculationLink link:definitionLink 00000070 - Disclosure - Stockholders' Equity and Stock-based Compensation - Schedule of Warrants Outstanding and Warrants Exercisable (Details) link:presentationLink link:calculationLink link:definitionLink 00000071 - Disclosure - Stockholders' Equity and Stock-based Compensation - Schedule of Stock Based Compensation Granted to Employees Directors Consultants (Details) link:presentationLink link:calculationLink link:definitionLink 00000072 - Disclosure - Commitments and Contingencies (Details Narrative) link:presentationLink link:calculationLink link:definitionLink 00000073 - Disclosure - Segment Information and Concentrations (Details Narrative) link:presentationLink link:calculationLink link:definitionLink 00000074 - Disclosure - Segment Information and Concentrations - Schedule of Operating Segment (Details) link:presentationLink link:calculationLink link:definitionLink 00000075 - Disclosure - Subsequent Events (Details Narrative) link:presentationLink link:calculationLink link:definitionLink EX-101.CAL 10 hrow-20190630_cal.xml XBRL CALCULATION FILE EX-101.DEF 11 hrow-20190630_def.xml XBRL DEFINITION FILE EX-101.LAB 12 hrow-20190630_lab.xml XBRL LABEL FILE Type of Arrangement and Non-arrangement Transactions [Axis] Klarity License Agreement [Member] Title of Individual [Axis] Richard L. Lindstrom, M.D [Member] Award Type [Axis] Restricted Stock Units [Member] Class of Warrant or Right [Axis] Warrant [Member] Related Party [Axis] Surface Pharmaceuticals [Member] Legal Entity [Axis] Surface Pharmaceuticals, Inc [Member] Management Services Agreement [Member] Class of Stock [Axis] Surface Series A Stock [Member] Equity Components [Axis] Common Stock [Member] Additional Paid-in Capital [Member] Accumulated Deficit [Member] Range [Axis] Maximum [Member] Scenario [Axis] Initial Payment [Member] License Agreement [Member] Second Payment [Member] Final Payment [Member] Dr. Lindstrom [Member] Sales and Marketing Agreements [Member] Minimum [Member] Settlement Agreement [Member] Concentration Risk Type [Axis] Three Main Suppliers [Member] Stock Option Plan [Member] Income Statement Location [Axis] Corporate [Member] Research and Development Expense [Member] Product and Service [Axis] Product Sales, Net [Member] License Revenues [Member] Eton Pharmaceuticals [Member] Finite-Lived Intangible Assets by Major Class [Axis] Patents [Member] Licenses [Member] Customer Relationships [Member] Trade Name [Member] Non-Competition Clause [Member] State Pharmacy Licenses [Member] Debt Instrument [Axis] Note Payable [Member] Options Granted to Employees [Member] Exercise Price Range [Axis] Range One [Member] Range Two [Member] Range Three [Member] Range Four [Member] Range Five [Member] Lender Warrants [Member] Settlement Warrants [Member] PIPE Investor and Placement Agent Warrants [Member] Lender Warrants One [Member] Melt Pharmaceuticals [Member] Total Harrow Health, Inc Stockholders' Equity [Member] Total Noncontrolling Interest Equity [Member] Elle Pharmaceutical, LLC [Member] Consolidated Entities [Axis] Parent Company [Member] Eton Pharmaceuticals, Inc. [Member] Melt Series A Stock [Member] Melt Pharmaceuticals, Inc. [Member] Option Indexed to Issuer's Equity, Type [Axis] Stock Option and RSUs[Member] Asset Purchase Agreement [Member] Management Services Agreement [Member] Trademarks [Member] Notes Payable [Member] Adjustments for New Accounting Pronouncements [Axis] ASU- 2016-02 [Member] Geographical [Axis] San Diego [Member] Irvine [Member] Ledgewood [Member] Lease Arrangement, Type [Axis] Finance Leases [Member] Common Stock Warrants [Member] Common Stock Warrants One [Member] Restricted Stock [Member] Plan Name [Axis] 2017 Incentive Stock and Awards Plan [Member] Stock Option Plan [Member] Employees and Consultant [Member] Unvested RSUs [Member] Mayfield Pharmaceuticals, Inc. [Member] Employees [Member] Selling, General and Administrative [Member] Directors [Member] Consultants [Member] Pharmaceutical Compounding [Member] Pharmaceutical Drug Development [Member] Operating Lease [Member] Financing Lease [Member] Noice Rx, LLC [Member] Subsequent Event Type [Axis] Subsequent Event [Member] Term Loan and Security Agreement [Member] SWK Funding LLC [Member] Variable Rate [Axis] London Inter-Bank Offered Rate [Member] Margin Rate [Member] Derivative Instrument [Axis] Allergan USA, Inc. [Member] Park Compounding, Inc. [Member] Loan Agreement [Member] Forecast [Member] Stowe Pharmaceuticals, Inc. [Member] Board of Directors [Member] Document And Entity Information Entity Registrant Name Entity Central Index Key Document Type Document Period End Date Amendment Flag Current Fiscal Year End Date Entity Current Reporting Status Entity Interactive Data Current Entity Filer Category Entity Small Business Flag Entity Emerging Growth Company Entity Ex Transition Period Entity Shell Company Entity Common Stock, Shares Outstanding Document Fiscal Period Focus Document Fiscal Year Focus Statement [Table] Statement [Line Items] ASSETS Current assets Cash and cash equivalents, including restricted cash of $200 Investment in Eton Pharmaceuticals Accounts receivable, net Inventories Prepaid expenses and other current assets Total current assets Property, plant and equipment, net Operating lease right-of-use assets Intangible assets, net Investment Goodwill TOTAL ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses Accrued payroll and related liabilities Deferred revenue and customer deposits Current portion of note payable, net of unamortized debt discount Current portion of operating lease obligations Current portion of finance lease obligations, net of unamortized discount Total current liabilities Operating lease obligations, net of current portion Finance lease obligations, net of current portion and unamortized discount Accrued expenses, net of current portion Note payable, net of current portion and unamortized debt discount TOTAL LIABILITIES Commitments and contingencies STOCKHOLDERS' EQUITY Common stock, $0.001 par value, 50,000,000 shares authorized, 25,138,958 and 24,339,610 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively Additional paid-in capital Accumulated deficit TOTAL HARROW HEALTH, INC. STOCKHOLDERS' EQUITY Noncontrolling interests TOTAL STOCKHOLDERS' EQUITY TOTAL LIABILITIES AND EQUITY Statement of Financial Position [Abstract] Restricted cash Common stock, par value Common stock, shares authorized Common stock, shares issued Common stock, shares outstanding Revenues: Total revenues Cost of sales Gross profit Operating expenses: Selling, general and administrative Research and development Total operating expenses Loss from operations Other income (expense): Interest expense, net Investment gain from and equity net Loss Other income (expense), net Total other income (expense), net EX-101.PRE 13 hrow-20190630_pre.xml XBRL PRESENTATION FILE XML 14 R1.htm IDEA: XBRL DOCUMENT

Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2019	Aug. 13, 2019
Document And Entity Information
Entity Registrant Name	HARROW HEALTH, INC.
Entity Central Index Key	0001360214
Document Type	10-Q
Document Period End Date	Jun. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		25,165,965
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019

XML 15 R2.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets
Cash and cash equivalents, including restricted cash of $200	$ 4,193	$ 6,838
Investment in Eton Pharmaceuticals	27,650	21,420
Accounts receivable, net	2,223	1,914
Inventories	2,652	1,834
Prepaid expenses and other current assets	1,401	837
Total current assets	38,119	32,843
Property, plant and equipment, net	5,946	6,375
Operating lease right-of-use assets	6,069
Intangible assets, net	3,154	3,059
Goodwill	2,227	2,227
TOTAL ASSETS	65,157	49,451
Current liabilities
Accounts payable and accrued expenses	6,943	6,250
Accrued payroll and related liabilities	1,576	2,283
Deferred revenue and customer deposits	224	119
Current portion of note payable, net of unamortized debt discount	247	2,529
Current portion of operating lease obligations	496
Current portion of finance lease obligations, net of unamortized discount	370	720
Total current liabilities	9,856	11,901
Operating lease obligations, net of current portion	5,976
Finance lease obligations, net of current portion and unamortized discount	29
Accrued expenses, net of current portion	800	800
Note payable, net of current portion and unamortized debt discount	13,498	11,999
TOTAL LIABILITIES	30,159	24,700
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 50,000,000 shares authorized, 25,138,958 and 24,339,610 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively	25	24
Additional paid-in capital	100,271	98,938
Accumulated deficit	(65,231)	(74,211)
TOTAL HARROW HEALTH, INC. STOCKHOLDERS' EQUITY	35,065	24,751
Noncontrolling interests	(67)
TOTAL STOCKHOLDERS' EQUITY	34,998	24,751
TOTAL LIABILITIES AND EQUITY	65,157	49,451
Surface Pharmaceuticals [Member]
Current assets
Investment	4,443	4,947
Melt Pharmaceuticals [Member]
Current assets
Investment	$ 5,199

XML 16 R3.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Restricted cash	$ 200	$ 200
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	25,138,958	24,339,610
Common stock, shares outstanding	25,138,958	24,339,610

XML 17 R4.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues:
Total revenues	$ 13,516	$ 10,384	$ 25,806	$ 19,249
Cost of sales	(5,225)	(4,157)	(9,123)	(8,228)
Gross profit	8,291	6,227	16,683	11,021
Operating expenses:
Selling, general and administrative	8,248	6,779	16,791	13,267
Research and development	810	72	1,215	159
Total operating expenses	9,058	6,851	18,006	13,426
Loss from operations	(767)	(624)	(1,323)	(2,405)
Other income (expense):
Interest expense, net	(716)	(671)	(1,319)	(1,334)
Other income (expense), net		(255)	630	(255)
Total other income (expense), net	(1,653)	3,146	10,236	1,414
Total net income (loss) including noncontrolling interests	(2,420)	2,522	8,913	(991)
Net loss attributable to noncontrolling interests	42		67
Net income (loss) attributable to Harrow Health, Inc.	$ (2,378)	$ 2,522	$ 8,980	$ (991)
Basic net income (loss) per share of common stock	$ (0.09)	$ 0.12	$ 0.36	$ (0.05)
Diluted net income (loss) per share of common stock	$ (0.09)	$ 0.11	$ 0.34	$ (0.05)
Weighted average number of shares of common stock outstanding, basic	25,216,565	21,190,794	25,030,012	21,070,644
Weighted average number of shares of common stock outstanding, diluted	25,216,565	23,175,431	26,696,683	21,070,644
Melt Pharmaceuticals [Member]
Other income (expense):
Investment gain from and equity net Loss	$ (326)		$ 5,199
Surface Pharmaceuticals [Member]
Other income (expense):
Investment gain from and equity net Loss	(261)	5,218	(504)	5,218
Eton Pharmaceuticals [Member]
Other income (expense):
Investment gain from and equity net Loss	(350)	(1,146)	6,230	(2,215)
Product Sales, Net [Member]
Revenues:
Total revenues	13,509	10,374	25,792	19,229
License Revenues [Member]
Revenues:
Total revenues	$ 7	$ 10	$ 14	$ 20

XML 18 R5.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Total Harrow Health, Inc Stockholders' Equity [Member]	Total Noncontrolling Interest Equity [Member]	Total
Balance at Dec. 31, 2017	$ 21	$ 91,430	$ (88,836)	$ 2,615		$ 2,615
Balance, shares at Dec. 31, 2017	20,623,129
Issuance of common stock in connection with: Vesting of RSUs, net of tax withholding
Issuance of common stock in connection with: Vesting of RSUs, net of tax withholding, shares	60,000
Issuance of common stock in connection with: Sale of stock, net of costs (ATM)		641		641		641
Issuance of common stock in connection with: Sale of stock, net of costs (ATM), shares	305,619
Issuance of common stock in connection with: Stock-based payment for services provided		108		108		108
Issuance of common stock in connection with: Stock-based payment for services provided, shares	60,700
Stock-based compensation expense		1,359		1,359		1,359
Net income (loss)			(991)	(991)		(991)
Balance at Jun. 30, 2018	$ 21	93,538	(89,827)	3,732		3,732
Balance, shares at Jun. 30, 2018	21,049,448
Balance at Mar. 31, 2018	$ 21	92,411	(92,349)	83		83
Balance, shares at Mar. 31, 2018	20,813,205
Issuance of common stock in connection with: Sale of stock, net of costs (ATM)		519		519		519
Issuance of common stock in connection with: Sale of stock, net of costs (ATM), shares	236,243
Stock-based compensation expense		608		608		608
Net income (loss)			2,522	2,522		2,522
Balance at Jun. 30, 2018	$ 21	93,538	(89,827)	3,732		3,732
Balance, shares at Jun. 30, 2018	21,049,448
Balance at Dec. 31, 2018	$ 24	98,938	(74,211)	24,751		24,751
Balance, shares at Dec. 31, 2018	24,339,610
Issuance of common stock in connection with: Stock-based payment for services provided		75		75		75
Issuance of common stock in connection with: Stock-based payment for services provided, shares	15,000
Stock-based compensation expense		1,080		1,080		1,080
Net income (loss)			8,980	8,980	(67)	8,913
Issuance of common stock in connection with: Exercise of warrants	$ 1	178		179		179
Issuance of common stock in connection with: Exercise of warrants, shares	763,393
Issuance of common stock in connection with: Exercise of employee stock options
Issuance of common stock in connection with: Exercise of employee stock options , shares	20,955
Balance at Jun. 30, 2019	$ 25	100,271	(65,231)	35,065	(67)	34,998
Balance, shares at Jun. 30, 2019	25,138,958
Balance at Mar. 31, 2019	$ 25	99,887	(62,853)	37,059	(25)	37,034
Balance, shares at Mar. 31, 2019	24,718,649
Stock-based compensation expense		367		367		367
Net income (loss)			(2,378)	(2,378)	(42)	(2,420)
Issuance of common stock in connection with: Exercise of warrants		17		17		17
Issuance of common stock in connection with: Exercise of warrants, shares	399,354
Issuance of common stock in connection with: Exercise of employee stock options
Issuance of common stock in connection with: Exercise of employee stock options , shares	20,955
Balance at Jun. 30, 2019	$ 25	$ 100,271	$ (65,231)	$ 35,065	$ (67)	$ 34,998
Balance, shares at Jun. 30, 2019	25,138,958

XML 19 R6.htm IDEA: XBRL DOCUMENT

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$ 8,913	$ (991)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of property, plant and equipment	968	800
Amortization of intangible assets	125	117
Amortization of operating lease right-of-use assets	256
Amortization of debt issuance costs and discount	263	314
Loss on sale and disposal of assets	76	393
Stock-based payment of consulting services	75
Stock-based compensation	1,080	1,359
Changes in assets and liabilities:
Accounts receivable	(309)	169
Inventories	(818)	33
Prepaid expenses and other current assets	(564)	(268)
Accounts payable, accrued expenses, and other liabilities	830	885
Accrued payroll and related liabilities	(707)	587
Deferred revenue and customer deposits	105	5
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	(632)	400
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of note receivable		4
Investment in patent and trademark assets	(220)	(154)
Purchases of property, plant and equipment	(565)	(550)
NET CASH USED IN INVESTING ACTIVITIES	(785)	(700)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on capital lease obligations	(375)	(337)
Payments on Park deferred acquisition obligation		(53)
Principal payments on note payable	(750)
Payments of costs related to amendment of note payable	(282)
Net proceeds from ATM sales of common stock		641
Net proceeds from exercise of warrants	179
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	(1,228)	251
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(2,645)	(49)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period	6,838	4,219
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period	4,193	4,170
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash and cash equivalents	3,993	3,970
Restricted cash	200	200
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	4,193	4,170
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	8	4
Cash paid for interest	1,053	1,006
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of equipment with finance lease obligation	40
Issuance of stock and stock options for consulting services included in accounts payable and accrued expenses		108
Purchases of property and equipment included in accrued expenses	11
Eton Pharmaceuticals [Member]
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Investment gain from and equity in net loss	(6,230)	2,215
Melt Pharmaceuticals [Member]
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Investment gain from and equity in net loss	(5,199)
Surface Pharmaceuticals [Member]
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Investment gain from and equity in net loss	$ 504	$ (5,218)

XML 20 R7.htm IDEA: XBRL DOCUMENT

Description of Business and Basis of Presentation

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business and Basis of Presentation

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Company and Background

In February 2019, the Company entered into an agreement with Elle Pharmaceutical, Inc. (“Elle”) in which Mayfield issued 1,000,000 shares of its common stock to Elle (see Note 14).

Basis of Presentation

Harrow consolidates entities in which we have a controlling financial interest. We consolidate subsidiaries in which we hold, directly or indirectly, more than 50% of the voting rights.

XML 21 R8.htm IDEA: XBRL DOCUMENT

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Liquidity

Segments

Noncontrolling Interests

	(1)	net income or loss;
	(2)	transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and
	(3)	each component of other income or loss.

Basic and Diluted Net Income (Loss) per Common Share

The following table shows the computation of basic net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019		2018

Numerator – net income (loss) attributable to Harrow Health, Inc.	$	(2,378	)	$	2,522	$	8,980	$	(991	)
Denominator – weighted average number of shares outstanding, basic		25,216,565			21,190,794		25,030,012		21,070,644
Net income (loss) per share, basic	$	(0.09	)	$	0.12	$	0.36	$	(0.05	)

	For the		For the
	Three Months Ended		Six Months Ended
	June 30, 2018		June 30, 2019
Diluted shares related to:
Warrants		1,093,006		1,028,780
Stock options and RSUs		891,631		637,891
Dilutive common equivalent shares		1,984,637		1,666,671

The following table shows the computation of diluted net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019		2018

Numerator – net income (loss) attributable to Harrow Health, Inc.	$	(2,378	)	$	2,522	$	8,980	$	(991	)
Denominator – weighted average number of shares outstanding, basic		25,216,565			21,190,794		25,030,012		21,070,644
Dilutive common equivalents		-			1,984,637		1,666,671		-
Number of shares used for diluted earnings per share computation		25,216,565			23,175,431		26,696,683		21,070,644
Net income (loss) per share, diluted	$	(0.09	)	$	0.11	$	0.34	$	(0.05	)

Investment in Eton Pharmaceuticals, Inc. – Related Party

Mark Baum, the Company’s Chief Executive Officer, is a member of the board of directors of Eton.

Investment in Melt Pharmaceuticals, Inc. – Related Party

See Note 4 for more information and related party disclosure regarding Melt.

Investment in Surface Pharmaceuticals, Inc. – Related Party

See Note 5 for more information and related party disclosure regarding Surface.

Recently Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements

XML 22 R9.htm IDEA: XBRL DOCUMENT

Revenues

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenues

NOTE 3. REVENUES

Product Revenues from Pharmacy Services

	1.	Identify the contract(s) with a customer: A contract exists with a customer at the time the prescription or order is received by the Company.

	2.	Identify the performance obligations in the contract: The order received contains the performance obligations to be met, in almost all cases the product the customer is wishing to receive. If we are unable to be meet the performance obligation, the customer is notified.

	3.	Determine the transaction price: the transaction price is based on the product being sold to the customer, and any related customer discounts. These amounts are pre-determined and built into our order management software.

	4.	Allocate the transaction price to the performance obligations in the contract: The transaction price associated with the product(s) being ordered is allocated according to the pre-determined amounts.

	5.	Recognize revenue when (or as) the entity satisfies a performance obligation: At the time of shipment from the pharmacy or outsourcing facility, the performance obligation has been met.

The following revenue recognition policy has been established for the pharmacy services division:

Intellectual Property License Revenues

Revenue disaggregated by revenue source for the three and six months ended June 30, 2019 and 2018, consists of the following:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Product sales, net	$	13,509	$	10,374	$	25,792	$	19,229
License revenues		7		10		14		20
Total revenues	$	13,516	$	10,384	$	25,806	$	19,249

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Investment in Melt Pharmaceuticals, Inc. and Agreements - Related Party Transactions

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Investment in Melt Pharmaceuticals, Inc. and Agreements - Related Party Transactions

NOTE 4. INVESTMENT IN MELT PHARMACEUTICALS, INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS

The unaudited condensed results of operations information of Melt is summarized below:

	For the
	Six months ended
	June 30, 2019
Revenues, net	$	-
Loss from operations		1,382
Net loss	$	(1,382	)

The unaudited condensed balance sheet information of Melt is summarized below:

	June 30,
	2019
Current assets	$	9,521
Non current assets		3
Total assets	$	9,524

Total liabilities	$	940
Total preferred stock and stockholders’ equity		8,584
Total liabilities and stockholders’ equity	$	9,524

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Investment in Surface Pharmaceuticals, Inc. and Agreements - Related Party Transactions

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Investment in Surface Pharmaceuticals Inc. and Agreements - Related Party Transactions

NOTE 5. INVESTMENT IN SURFACE PHARMACEUTICALS, INC. AND AGREEMENTS - RELATED PARTY TRANSACTIONS

The unaudited condensed results of operations information of Surface is summarized below:

	For the
	Six Months Ended
	June 30, 2019
Revenues, net	$	-
Loss from operations		1,680
Net loss	$	(1,680	)

The unaudited condensed balance sheet information of Surface is summarized below:

	June 30,
	2019
Current assets	$	18,061
Non current assets		48
Total assets	$	18,109

Total liabilities	$	532
Total stockholders’ equity		17,577
Total liabilities and stockholders’ equity	$	18,109

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Inventories

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Inventories

NOTE 6. INVENTORIES

	June 30,		December 31,
	2019		2018
Raw materials	$	1,758	$	1,119
Work in progress		264		6
Finished goods		630		709
Total inventories	$	2,652	$	1,834

XML 26 R13.htm IDEA: XBRL DOCUMENT

Prepaid Expenses and Other Current Assets

6 Months Ended

Jun. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Prepaid Expenses and Other Current Assets

NOTE 7. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following:

	June 30,		December 31,
	2019		2018
Prepaid insurance	$	65	$	328
Other prepaid expenses		434		334
Receivable due from Surface		50		50
Receivable due from Melt		714		-
Deposits and other current assets		138		125
Total prepaid expenses and other current assets	$	1,401	$	837

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Property, Plant and Equipment

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

NOTE 8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following:

	June 30, 2019			December 31, 2018
Property, plant and equipment, net:
Computer software and hardware	$	1,743		$	1,662
Furniture and equipment		420			397
Lab and pharmacy equipment		3,416			3,184
Leasehold improvements		5,612			5,496
		11,191			10,739
Accumulated depreciation and amortization		(5,245	)		(4,364	)
	$	5,946		$	6,375

For the three and six months ended June 30, 2019, depreciation related to the property, plant and equipment was $491 and $968, respectively.

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Intangible Assets and Goodwill

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Goodwill

NOTE 9. INTANGIBLE ASSETS AND GOODWILL

The Company’s intangible assets at June 30, 2019 consisted of the following:

	Amortization
	periods			Accumulated						Net
	(in years)	Cost		amortization			Impairment			Carrying value
Patents	17-19 years	$	962	$	(64	)	$	-		$	898
Licenses	20 years		50		(5	)		-			45
Trademarks	Indefinite		332		-			-			332
Customer relationships	3-15 years		2,998		(1,115	)		(15	)		1,868
Trade name	5 years		16		(15	)		(1	)		-
Non-competition clause	3-4 years		294		(274	)		(20	)		-
State pharmacy licenses	25 years		45		(6	)		(28	)		11
		$	4,697	$	(1,479	)	$	(64	)	$	3,154

Amortization expense for intangible assets for the three and six months ended June 30, 2019 was as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Patents	$	11		6	$	15	$	13
Licenses		1		-		5		-
Customer relationships		51	$	50		102		100
Trade name		-		1		2		3
Non-competition clause		-		-		-		1
State pharmacy licenses		-		-		1		-
	$	63	$	57	$	125	$	117

Estimated future amortization expense for the Company’s intangible assets at June 30, 2019 is as follows:

Remainder of 2019	$	128
2020		252
2021		252
2022		252
2023		252
Thereafter		2,018
	$	3,154

There have been no changes in the carrying value of the Company’s goodwill during the three and six months ended June 30, 2019.

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Accounts Payable and Accrued Expenses

6 Months Ended

Jun. 30, 2019

Payables and Accruals [Abstract]

Accounts Payable and Accrued Expenses

NOTE 10. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

	June 30, 2019			December 31, 2018
Accounts payable	$	5,957		$	4,966
Accrued litigation settlement (see Note 14)		733			640
Deferred rent		-			388
Accrued interest		253			256
Accrued exit fee for note payable		800			800
Total accounts payable and accrued expenses		7,743			7,050
Less: Current portion		(6,943	)		(6,250	)
Non-current total accrued expenses	$	800		$	800

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Debt

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Debt

NOTE 11. DEBT

SWK Refinance – May 2019

	●	The interest rate calculation that the loan bears is now equal to the three-month London Inter-Bank Offered Rate (subject to a minimum of 2.00%), plus an applicable margin of 10.00% (the “Margin Rate”); provided that, if, two days prior to a payment date, the Company provides the Lender evidence that the Company has achieved a leverage ratio as of such date of less than 4.00:1:00, the Margin Rate shall equal 9.00%; and if the Company has achieved a leverage ratio as of such date of less than 3.00:1:00, the Margin Rate shall equal 7.00%;

	●	Leverage ratio in the Amendment means, as of any date of determination, the ratio of: (a) indebtedness as of such date to (b) EBITDA (as defined in the SWK Loan), of the Company for the immediately preceding twelve (12) month period, adding-back (i) actual litigation expenses for the immediately preceding twelve (12) month period, minus (ii) actual litigation expenses for the immediately preceding three (3) month period multiplied by four (4);

	●	The definition of the first amortization date was changed to May 14, 2020, permitting the Company to pay interest only on the principal amount loaned for the next four payments (payments are due on a quarterly basis) following the Amendment; and

	●	Subject to the satisfaction of certain revenue and market capitalization requirements and conditions, the Lender agreed to make available to the Company an additional principal amount of up to $5,000.

Related to the Amendment, the Company incurred expenses related to legal and lender costs of $282 that are included in debt discount and will be amortized over the term of the SWK Loan.

At June 30, 2019, future minimum payments under the Company’s note payable were as follows:

	Amount
Remainder of 2019	$	1,216
2020		3,696
2021		4,121
2022		3,828
2023		7,330
Total minimum payments		20,191
Less: amount representing interest		(4,941	)
Notes payable, gross		15,250
Less: unamortized discount		(1,505	)
		13,745
Less: current portion, net of unamortized discount		(247	)
Note payable, net of current portion and unamortized debt discount	$	13,498

For the three and six months ended June 30, 2019, debt discount amortization related to note payable was $125 and $250, respectively.

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Leases

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

NOTE 12. LEASES

The Company determined that it held the following significant operating leases of office and laboratory space as of January 1, 2019:

	●	An operating lease for 10,200 square feet of office space in San Diego, California that expires in December 2021, with an option to extend the term for a five-year period;

	●	An operating lease for 4,500 square feet of office and lab space in Irvine, California that expires in December 2020, with an option to extend the term for up to two five-year periods. The Company expects this lease will be assigned if the sale of Park closes (see Note 16); and

	●	An operating lease for 25,000 square feet of lab, warehouse and office space in Ledgewood, New Jersey that expires in July 2024, with an option to extend the term for two additional five-year periods.

Future lease payments under operating leases as of June 30, 2019 were as follows:

	Operating Leases
Remainder of 2019	$	457
2020		930
2021		809
2022		824
2023		843
Thereafter		5,304
Total minimum lease payments		9,167
Less: amount representing interest payments		(2,695	)
Total operating lease liabilities		6,472
Less: current portion, operating lease liabilities		(496	)
Operating lease liabilities, net of current portion	$	5,976

The Company also has two additional finance leases that are included in its lease accounting but are not considered significant.

Future lease payments under non-cancelable finance leases as of June 30, 2019 were as follows:

	Finance Leases
Remainder of 2019	$	368
2020		9
2021		9
2022		9
2023		10
Total minimum lease payments		405
Less: amount representing interest payments		(6	)
Present value of future minimum lease payments		399
Less: unamortized discount		-
		399
Less: current portion, net of unamortized discount		(370	)
Finance lease obligation, net of current portion	$	29

At June 30, 2019, the weighted average incremental borrowing rate and the weighted average remaining lease term for the finance leases held by the Company were 9.71% and 0.70 years, respectively.

For the three and six months ended June 30, 2019, debt discount amortization related to a finance lease obligation was $6 and $13, respectively, and included in interest expense, net.

For the three and six months ended June 30, 2019, depreciation expense related to the equipment held under the finance lease obligations was $73 and $146, respectively.

For the three and six months ended June 30, 2019, cash paid and expense recognized for interest expense related to the finance lease obligation was $4 and $15, respectively.

Future minimum lease payments under operating leases and future minimum finance lease payments as of December 31, 2018 were as follows (in thousands):

	Finance Leases			Operating Leases
2019	$	751		$	797
2020		-			857
2021		-			742
2022		-			320
2023		-			330
Thereafter		-			196
	$	751		$	3,242
Less: Amounts representing interest		(15	)
Less: Amounts representing unamortized discount		(16	)
Total obligation under capital leases		720
Less: Current portion of capital leases		(720	)
Long term capital lease obligation	$	-

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Stockholders' Equity and Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Stockholders' Equity and Stock-Based Compensation

NOTE 13. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

Common Stock

In March 2019, the Company issued 15,000 shares of its restricted common stock, with a fair value of $75, as consideration for commission expenses incurred during the six months ended June 30, 2019.

Stock Option Plan

Stock Options

A summary of stock option activity under the Plans for the six months ended June 30, 2019 is as follows:

	Number of shares			Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life		Aggregate Intrinsic Value
Options outstanding - January 1, 2019		2,482,009		$	5.10
Options granted		352,000		$	6.17
Options exercised		(57,933	)	$	3.72
Options cancelled/forfeited		(50,471	)	$	5.83
Options outstanding - June 30, 2019		2,725,605		$	5.25		5.61	$	9,621
Options exercisable		1,461,723		$	4.69		5.98	$	6,091
Options vested and expected to vest		2,607,104		$	5.21		5.63	$	9,323

The table below illustrates the fair value per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options granted to employees:

	2019
Weighted-average fair value of options granted	$	3.64
Expected terms (in years)		5.8 - 6.1
Expected volatility		64% - 67	%
Risk-free interest rate		2.19% - 2.68	%
Dividend yield		-

The following table summarizes information about stock options outstanding and exercisable at June 30, 2019:

	Options Outstanding						Options Exercisable
			Weighted
			Average		Weighted				Weighted
			Remaining		Average				Average
	Number		Contractual		Exercise		Number		Exercise
Range of Exercise Prices	Outstanding		Life in Years		Price		Exercisable		Price
$1.47 - $2.60		816,936		7.22	$	2.04		526,237	$	2.12
$2.76 - $4.66		495,496		6.68	$	3.97		441,452	$	3.99
$5.61 - $6.30		440,350		8.41	$	6.16		122,159	$	6.04
$6.64 - $8.99		967,793		2.44	$	8.01		366,845	$	8.24
$42.80		5,030		1.12	$	42.80		5,030	$	42.80
$1.47 - $42.80		2,725,605		5.61	$	5.25		1,461,723	$	4.69

Restricted Stock Units

During the six months ended June 30, 2019, 185,000 RSUs with a fair market value of $1,139 were issued to certain employees; the RSUs vest in full on the third year anniversary of the grant date.

A summary of the Company’s RSU activity and related information for the six months ended June 30, 2019 is as follows:

	Number of RSUs			Weighted Average Grant Date Fair Value
RSUs unvested - January 1, 2019		1,275,680		$	2.16
RSUs granted		223,860		$	6.43
RSUs vested		(68,180	)	$	2.20
RSUs cancelled/forfeited		-
RSUs unvested at June 30, 2019		1,431,360		$	2.83

Warrants

A summary of warrant activity for the six months ended June 30, 2019 is as follows:

	Number of Shares Subject to Warrants Outstanding			Weighted Avg. Exercise Price

Warrants outstanding - January 1, 2019		2,206,973		$	1.91
Granted		-
Exercised		(1,032,055	)	$	1.79
Expired		-
Warrants outstanding and exercisable - June 30, 2019		1,174,918		$	2.01
Weighted average remaining contractual life of the outstanding warrants in years - June 30, 2019		3.51

A list of the warrants outstanding as of June 30, 2019 is included in the following table:

Warrants

Exercise

Expiration

Warrant Series

Issue Date

Outstanding

Price

Date

Lender warrants

5/11/2015

125,000

1.79

5/11/2025

Settlement warrants

8/16/2016

40,000

3.75

8/16/2021

PIPE investor and placement agent warrants

12/27/2016

394,532

1.79

12/27/2019

Lender warrants

7/19/2017

615,386

2.08

7/19/2024

1,174,918

Subsidiary Stock-Based Transactions

Mayfield Pharmaceuticals, Inc.

Stock-Based Compensation Summary

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

	For the Three Months Ended				For the Six Months Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Employees - selling, general and administrative	$	268	$	573	$	906	$	1,166
Directors - selling, general and administrative		75		35		150		85
Consultants - selling, general and administrative		24		-		99		108
Total	$	367	$	608	$	1,155	$	1,359

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 14. COMMITMENTS AND CONTINGENCIES

Dr. Sobol

Allergan USA

Novel Drug Solutions et al.

California Board of Pharmacy

Product and Professional Liability

John Erick et al.

Anna Sue Gaukel et al.

General and Other

Indemnities

Klarity License Agreement – Related Party

Sales and Marketing Agreements

Asset Purchase, License and Related Agreements

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Segment Information and Concentrations

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment Information and Concentrations

NOTE 15. SEGMENT INFORMATION AND CONCENTRATIONS

	●	Selling, general and administrative expenses that result from shared infrastructure, including certain expenses associated with legal matters, public company costs (e.g. investor relations), board of directors and principal executive officers and other like shared expenses.

	●	Operating expenses within selling, general and administrative expenses that result from the impact of corporate initiatives. Corporate initiatives primarily include integration, restructuring, acquisition and other shared costs.

	●	Other select revenues and operating expenses including R&D expenses, amortization, and asset sales and impairments, net as not all such information has been accounted for at the segment level, or such information has not been used by all segments.

	●	Total assets including capital expenditures.

The Company defines segment net revenues as pharmaceutical compounded drug sales, licenses and other revenue derived from related agreements.

Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the three and six months ended June 30, 2019:

	For the Three Months Ended June 30, 2019
	Pharmaceutical			Pharmaceutical
	Compounding			Drug Development			Total
Net revenues	$	13,516		$	-		$	13,516
Cost of sales		(5,225	)		-			(5,225	)
Gross profit		8,291			-			8,291

Operating expenses:
Selling, general and administrative		5,804			43			5,847
Research and development		533			127			660
Segment contribution		1,954			(170	)		1,784
Corporate								2,342
Research and development								150
Amortization								59
Operating loss							$	(767	)

	For the Six Months Ended June 30, 2019
	Pharmaceutical			Pharmaceutical
	Compounding			Drug Development			Total
Net revenues	$	25,806		$	-		$	25,806
Cost of sales		(9,123	)		-			(9,123	)
Gross profit		16,683			-			16,683

Operating expenses:
Selling, general and administrative		11,519			86			11,605
Research and development		658			263			921
Segment contribution		4,506			(349	)		4,157
Corporate								5,061
Research and development								294
Amortization								125
Operating loss							$	(1,323	)

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Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

NOTE 16. SUBSEQUENT EVENTS

Park Sale

Mayfield License

Stowe License

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Liquidity

Liquidity

Segments

Segments

Noncontrolling Interests

Noncontrolling Interests

	(1)	net income or loss;
	(2)	transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners; and
	(3)	each component of other income or loss.

Basic and Diluted Net Income (Loss) Per Common Share

Basic and Diluted Net Income (Loss) per Common Share

The following table shows the computation of basic net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019		2018

Numerator – net income (loss) attributable to Harrow Health, Inc.	$	(2,378	)	$	2,522	$	8,980	$	(991	)
Denominator – weighted average number of shares outstanding, basic		25,216,565			21,190,794		25,030,012		21,070,644
Net income (loss) per share, basic	$	(0.09	)	$	0.12	$	0.36	$	(0.05	)

	For the		For the
	Three Months Ended		Six Months Ended
	June 30, 2018		June 30, 2019
Diluted shares related to:
Warrants		1,093,006		1,028,780
Stock options and RSUs		891,631		637,891
Dilutive common equivalent shares		1,984,637		1,666,671

The following table shows the computation of diluted net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019		2018

Numerator – net income (loss) attributable to Harrow Health, Inc.	$	(2,378	)	$	2,522	$	8,980	$	(991	)
Denominator – weighted average number of shares outstanding, basic		25,216,565			21,190,794		25,030,012		21,070,644
Dilutive common equivalents		-			1,984,637		1,666,671		-
Number of shares used for diluted earnings per share computation		25,216,565			23,175,431		26,696,683		21,070,644
Net income (loss) per share, diluted	$	(0.09	)	$	0.11	$	0.34	$	(0.05	)

Investment in Eton Pharmaceuticals, Inc. - Related Party

Investment in Eton Pharmaceuticals, Inc. – Related Party

Mark Baum, the Company’s Chief Executive Officer, is a member of the board of directors of Eton.

Investment in Melt Pharmaceuticals, Inc. - Related Party

Investment in Melt Pharmaceuticals, Inc. – Related Party

See Note 4 for more information and related party disclosure regarding Melt.

Investment in Surface Pharmaceuticals, Inc. - Related Party

Investment in Surface Pharmaceuticals, Inc. – Related Party

See Note 5 for more information and related party disclosure regarding Surface.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Schedule of Basic Earnings Per Common Share

The following table shows the computation of basic net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019		2018

Numerator – net income (loss) attributable to Harrow Health, Inc.	$	(2,378	)	$	2,522	$	8,980	$	(991	)
Denominator – weighted average number of shares outstanding, basic		25,216,565			21,190,794		25,030,012		21,070,644
Net income (loss) per share, basic	$	(0.09	)	$	0.12	$	0.36	$	(0.05	)

Schedule of Diluted Common Equivalent Shares

Diluted common equivalent shares for the six months ended June 30, 2019 and the three months ended June 30, 2018, consisted of the following:

	For the		For the
	Three Months Ended		Six Months Ended
	June 30, 2018		June 30, 2019
Diluted shares related to:
Warrants		1,093,006		1,028,780
Stock options and RSUs		891,631		637,891
Dilutive common equivalent shares		1,984,637		1,666,671

Schedule of Diluted Earnings Per Common Share

The following table shows the computation of diluted net income (loss) per share of common stock for the three and six months ended June 30, 2019 and 2018:

	For the Three Months Ended June 30,					For the Six Months Ended June 30,
	2019			2018		2019		2018

Numerator – net income (loss) attributable to Harrow Health, Inc.	$	(2,378	)	$	2,522	$	8,980	$	(991	)
Denominator – weighted average number of shares outstanding, basic		25,216,565			21,190,794		25,030,012		21,070,644
Dilutive common equivalents		-			1,984,637		1,666,671		-
Number of shares used for diluted earnings per share computation		25,216,565			23,175,431		26,696,683		21,070,644
Net income (loss) per share, diluted	$	(0.09	)	$	0.11	$	0.34	$	(0.05	)

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Revenues (Tables)

6 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregated Revenue

Revenue disaggregated by revenue source for the three and six months ended June 30, 2019 and 2018, consists of the following:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Product sales, net	$	13,509	$	10,374	$	25,792	$	19,229
License revenues		7		10		14		20
Total revenues	$	13,516	$	10,384	$	25,806	$	19,249

XML 39 R26.htm IDEA: XBRL DOCUMENT

Investment in Melt Pharmaceuticals, Inc. and Agreements - Related Party Transactions (Tables) - Melt Pharmaceuticals [Member]

6 Months Ended

Jun. 30, 2019

Schedule of Condensed Income Statement

The unaudited condensed results of operations information of Melt is summarized below:

	For the
	Six months ended
	June 30, 2019
Revenues, net	$	-
Loss from operations		1,382
Net loss	$	(1,382	)

Schedule of Condensed Balance Sheet

The unaudited condensed balance sheet information of Melt is summarized below:

	June 30,
	2019
Current assets	$	9,521
Non current assets		3
Total assets	$	9,524

Total liabilities	$	940
Total preferred stock and stockholders’ equity		8,584
Total liabilities and stockholders’ equity	$	9,524

XML 40 R27.htm IDEA: XBRL DOCUMENT

Investment in Surface Pharmaceuticals, Inc. and Agreements - Related Party Transactions (Tables) - Surface Pharmaceuticals, Inc [Member]

6 Months Ended

Jun. 30, 2019

Schedule of Condensed Income Statement

The unaudited condensed results of operations information of Surface is summarized below:

	For the
	Six Months Ended
	June 30, 2019
Revenues, net	$	-
Loss from operations		1,680
Net loss	$	(1,680	)

Schedule of Condensed Balance Sheet

The unaudited condensed balance sheet information of Surface is summarized below:

	June 30,
	2019
Current assets	$	18,061
Non current assets		48
Total assets	$	18,109

Total liabilities	$	532
Total stockholders’ equity		17,577
Total liabilities and stockholders’ equity	$	18,109

XML 41 R28.htm IDEA: XBRL DOCUMENT

Inventories (Tables)

6 Months Ended

Jun. 30, 2019

Inventory Disclosure [Abstract]

Schedule of Inventories

The composition of inventories as of June 30, 2019 and December 31, 2018 was as follows:

	June 30,		December 31,
	2019		2018
Raw materials	$	1,758	$	1,119
Work in progress		264		6
Finished goods		630		709
Total inventories	$	2,652	$	1,834

XML 42 R29.htm IDEA: XBRL DOCUMENT

Prepaid Expenses and Other Current Assets (Tables)

6 Months Ended

Jun. 30, 2019

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

	June 30,		December 31,
	2019		2018
Prepaid insurance	$	65	$	328
Other prepaid expenses		434		334
Receivable due from Surface		50		50
Receivable due from Melt		714		-
Deposits and other current assets		138		125
Total prepaid expenses and other current assets	$	1,401	$	837

XML 43 R30.htm IDEA: XBRL DOCUMENT

Property, Plant and Equipment (Tables)

6 Months Ended

Jun. 30, 2019

Property, Plant and Equipment [Abstract]

Schedule of Property, Plant and Equipment

Property, plant and equipment consisted of the following:

	June 30, 2019			December 31, 2018
Property, plant and equipment, net:
Computer software and hardware	$	1,743		$	1,662
Furniture and equipment		420			397
Lab and pharmacy equipment		3,416			3,184
Leasehold improvements		5,612			5,496
		11,191			10,739
Accumulated depreciation and amortization		(5,245	)		(4,364	)
	$	5,946		$	6,375

XML 44 R31.htm IDEA: XBRL DOCUMENT

Intangible Assets and Goodwill (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

The Company’s intangible assets at June 30, 2019 consisted of the following:

	Amortization
	periods			Accumulated						Net
	(in years)	Cost		amortization			Impairment			Carrying value
Patents	17-19 years	$	962	$	(64	)	$	-		$	898
Licenses	20 years		50		(5	)		-			45
Trademarks	Indefinite		332		-			-			332
Customer relationships	3-15 years		2,998		(1,115	)		(15	)		1,868
Trade name	5 years		16		(15	)		(1	)		-
Non-competition clause	3-4 years		294		(274	)		(20	)		-
State pharmacy licenses	25 years		45		(6	)		(28	)		11
		$	4,697	$	(1,479	)	$	(64	)	$	3,154

Schedule of Amortization Expenses for Intangible Assets

Amortization expense for intangible assets for the three and six months ended June 30, 2019 was as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2019		2018		2019		2018
Patents	$	11		6	$	15	$	13
Licenses		1		-		5		-
Customer relationships		51	$	50		102		100
Trade name		-		1		2		3
Non-competition clause		-		-		-		1
State pharmacy licenses		-		-		1		-
	$	63	$	57	$	125	$	117

Schedule of Estimated Future Amortization Expense

Estimated future amortization expense for the Company’s intangible assets at June 30, 2019 is as follows:

Remainder of 2019	$	128
2020		252
2021		252
2022		252
2023		252
Thereafter		2,018
	$	3,154

XML 45 R32.htm IDEA: XBRL DOCUMENT

Accounts Payable and Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2019

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following:

	June 30, 2019			December 31, 2018
Accounts payable	$	5,957		$	4,966
Accrued litigation settlement (see Note 14)		733			640
Deferred rent		-			388
Accrued interest		253			256
Accrued exit fee for note payable		800			800
Total accounts payable and accrued expenses		7,743			7,050
Less: Current portion		(6,943	)		(6,250	)
Non-current total accrued expenses	$	800		$	800

XML 46 R33.htm IDEA: XBRL DOCUMENT

Debt (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Summary of Future Minimum Payments

At June 30, 2019, future minimum payments under the Company’s note payable were as follows:

	Amount
Remainder of 2019	$	1,216
2020		3,696
2021		4,121
2022		3,828
2023		7,330
Total minimum payments		20,191
Less: amount representing interest		(4,941	)
Notes payable, gross		15,250
Less: unamortized discount		(1,505	)
		13,745
Less: current portion, net of unamortized discount		(247	)
Note payable, net of current portion and unamortized debt discount	$	13,498

XML 47 R34.htm IDEA: XBRL DOCUMENT

Leases (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Schedule of Future Lease Payment Under Operating Leases

Future lease payments under operating leases as of June 30, 2019 were as follows:

	Operating Leases
Remainder of 2019	$	457
2020		930
2021		809
2022		824
2023		843
Thereafter		5,304
Total minimum lease payments		9,167
Less: amount representing interest payments		(2,695	)
Total operating lease liabilities		6,472
Less: current portion, operating lease liabilities		(496	)
Operating lease liabilities, net of current portion	$	5,976

Schedule of Future Lease Payment Under Finance Lease

Future lease payments under non-cancelable finance leases as of June 30, 2019 were as follows:

	Finance Leases
Remainder of 2019	$	368
2020		9
2021		9
2022		9
2023		10
Total minimum lease payments		405
Less: amount representing interest payments		(6	)
Present value of future minimum lease payments		399
Less: unamortized discount		-
		399
Less: current portion, net of unamortized discount		(370	)
Finance lease obligation, net of current portion	$	29

Schedule of Future Minimum Lease Payments Under Operating Lease and Finance Lease

Future minimum lease payments under operating leases and future minimum finance lease payments as of December 31, 2018 were as follows (in thousands):

	Finance Leases			Operating Leases
2019	$	751		$	797
2020		-			857
2021		-			742
2022		-			320
2023		-			330
Thereafter		-			196
	$	751		$	3,242
Less: Amounts representing interest		(15	)
Less: Amounts representing unamortized discount		(16	)
Total obligation under capital leases		720
Less: Current portion of capital leases		(720	)
Long term capital lease obligation	$	-

XML 48 R35.htm IDEA: XBRL DOCUMENT

Stockholders' Equity and Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Schedule of Stock Option Plan Activity

A summary of stock option activity under the Plans for the six months ended June 30, 2019 is as follows:

	Number of shares			Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life		Aggregate Intrinsic Value
Options outstanding - January 1, 2019		2,482,009		$	5.10
Options granted		352,000		$	6.17
Options exercised		(57,933	)	$	3.72
Options cancelled/forfeited		(50,471	)	$	5.83
Options outstanding - June 30, 2019		2,725,605		$	5.25		5.61	$	9,621
Options exercisable		1,461,723		$	4.69		5.98	$	6,091
Options vested and expected to vest		2,607,104		$	5.21		5.63	$	9,323

Schedule of Fair Value Assumptions

The table below illustrates the fair value per share determined by the Black-Scholes-Merton option pricing model with the following assumptions used for valuing options granted to employees:

	2019
Weighted-average fair value of options granted	$	3.64
Expected terms (in years)		5.8 - 6.1
Expected volatility		64% - 67	%
Risk-free interest rate		2.19% - 2.68	%
Dividend yield		-

Schedule of Stock Option Outstanding and Exercisable

The following table summarizes information about stock options outstanding and exercisable at June 30, 2019:

	Options Outstanding						Options Exercisable
			Weighted
			Average		Weighted				Weighted
			Remaining		Average				Average
	Number		Contractual		Exercise		Number		Exercise
Range of Exercise Prices	Outstanding		Life in Years		Price		Exercisable		Price
$1.47 - $2.60		816,936		7.22	$	2.04		526,237	$	2.12
$2.76 - $4.66		495,496		6.68	$	3.97		441,452	$	3.99
$5.61 - $6.30		440,350		8.41	$	6.16		122,159	$	6.04
$6.64 - $8.99		967,793		2.44	$	8.01		366,845	$	8.24
$42.80		5,030		1.12	$	42.80		5,030	$	42.80
$1.47 - $42.80		2,725,605		5.61	$	5.25		1,461,723	$	4.69

Schedule of Restricted Stock Units Activity

A summary of the Company’s RSU activity and related information for the six months ended June 30, 2019 is as follows:

	Number of RSUs			Weighted Average Grant Date Fair Value
RSUs unvested - January 1, 2019		1,275,680		$	2.16
RSUs granted		223,860		$	6.43
RSUs vested		(68,180	)	$	2.20
RSUs cancelled/forfeited		-
RSUs unvested at June 30, 2019		1,431,360		$	2.83

Schedule of Warrants Activity

A summary of warrant activity for the six months ended June 30, 2019 is as follows:

	Number of Shares Subject to Warrants Outstanding			Weighted Avg. Exercise Price

Warrants outstanding - January 1, 2019		2,206,973		$	1.91
Granted		-
Exercised		(1,032,055	)	$	1.79
Expired		-
Warrants outstanding and exercisable - June 30, 2019		1,174,918		$	2.01
Weighted average remaining contractual life of the outstanding warrants in years - June 30, 2019		3.51

Schedule of Warrants Outstanding and Warrants Exercisable

A list of the warrants outstanding as of June 30, 2019 is included in the following table:

Warrants

Exercise

Expiration

Warrant Series

Issue Date

Outstanding

Price

Date

Lender warrants

5/11/2015

125,000

1.79

5/11/2025

Settlement warrants

8/16/2016

40,000

3.75

8/16/2021

PIPE investor and placement agent warrants

12/27/2016

394,532

1.79

12/27/2019

Lender warrants

7/19/2017

615,386

2.08

7/19/2024

1,174,918

Schedule of Stock Based Compensation Granted to Employees Directors Consultants

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

	For the Three Months Ended				For the Six Months Ended
	June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Employees - selling, general and administrative	$	268	$	573	$	906	$	1,166
Directors - selling, general and administrative		75		35		150		85
Consultants - selling, general and administrative		24		-		99		108
Total	$	367	$	608	$	1,155	$	1,359

XML 49 R36.htm IDEA: XBRL DOCUMENT

Segment Information and Concentrations (Table) (USD $)

6 Months Ended

Jun. 30, 2019

Segment Information And Concentrations Table

Schedule of Operating Segment

Segment net revenues, segment operating expenses and segment contribution information consisted of the following for the three and six months ended June 30, 2019:

	For the Three Months Ended June 30, 2019
	Pharmaceutical			Pharmaceutical
	Compounding			Drug Development			Total
Net revenues	$	13,516		$	-		$	13,516
Cost of sales		(5,225	)		-			(5,225	)
Gross profit		8,291			-			8,291

Operating expenses:
Selling, general and administrative		5,804			43			5,847
Research and development		533			127			660
Segment contribution		1,954			(170	)		1,784
Corporate								2,342
Research and development								150
Amortization								59
Operating loss							$	(767	)

	For the Six Months Ended June 30, 2019
	Pharmaceutical			Pharmaceutical
	Compounding			Drug Development			Total
Net revenues	$	25,806		$	-		$	25,806
Cost of sales		(9,123	)		-			(9,123	)
Gross profit		16,683			-			16,683

Operating expenses:
Selling, general and administrative		11,519			86			11,605
Research and development		658			263			921
Segment contribution		4,506			(349	)		4,157
Corporate								5,061
Research and development								294
Amortization								125
Operating loss							$	(1,323	)

XML 50 R37.htm IDEA: XBRL DOCUMENT

Description of Business and Basis of Presentation (Details Narrative) - USD ($) $ in Thousands	1 Months Ended			6 Months Ended
	Aug. 14, 2019	Jul. 31, 2019	Feb. 28, 2019	Jun. 30, 2019
Voting rights, description				More than 50% of the voting rights
Parent Company [Member]
Ownership percentage				72.00%
Subsequent Event [Member]
Number of shares issued	25,135
Elle Pharmaceutical, LLC [Member]
Number of shares issued			1,000,000
Ownership percentage				28.00%
Noice Rx, LLC [Member] \| Subsequent Event [Member]
Purchase price		$ 8,000
Proceeds from issuance of notes		$ 8,000

XML 51 R38.htm IDEA: XBRL DOCUMENT

Summary of Significant Accounting Policies (Details Narrative) $ / shares in Units, $ in Thousands	1 Months Ended			3 Months Ended			6 Months Ended
	Jan. 31, 2019 USD ($) $ / shares	Jul. 31, 2018 USD ($) $ / shares	May 31, 2018 USD ($) $ / shares	Jun. 30, 2019 USD ($) $ / shares shares	Mar. 31, 2019 USD ($) $ / shares	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) Segment $ / shares shares	Jun. 30, 2018 USD ($) shares	Dec. 31, 2018 USD ($)
Net income (loss)				$ (2,378)		$ 2,522	$ 8,980	$ (991)
Accumulated deficit				(65,231)			(65,231)		$ (74,211)
Net cash used in operating activities							(632)	$ 400
Cash resources and restricted investments, marketable securities				4,193			$ 4,193
Number of segments \| Segment							2
Non-controlling interest description							Generally, any interest that holds less than 50% of the outstanding voting shares is deemed to be a noncontrolling interest
Antidilutive securities \| shares							5,331,883	10,245,280
Right of use asset				6,069			$ 6,069
Lease liability				$ 6,472			$ 6,472
Melt Series A Stock [Member]
Stock price per shares \| $ / shares	$ 5.00				$ 5.00
Proceeds from issuance of preferred stock	$ 11,400				$ 11,400
Surface Series A Stock [Member]
Stock price per shares \| $ / shares		$ 3.30	$ 3.30
Proceeds from issuance of preferred stock		$ 21,000	$ 21,000
Eton Pharmaceuticals, Inc. [Member]
Number of shares owned \| shares				3,500,000			3,500,000
Ownership percentage				19.70%			19.70%
Stock price per shares \| $ / shares				$ 7.90			$ 7.90
Gain on investment				$ 350			$ 6,230
Fair market value of investments				$ 27,650			27,650
Melt Pharmaceuticals, Inc. [Member]
Net income (loss)							$ (1,382)
Number of shares owned \| shares				3,500,000			3,500,000
Ownership percentage				44.00%			44.00%
Gain on deconsolidation amount							$ 5,810
Net income (loss)				$ 326			611
Carrying value of investments				$ 5,199			5,199
Surface Pharmaceuticals, Inc [Member]
Net income (loss)							$ (1,680)
Number of shares owned \| shares				3,500,000			3,500,000
Ownership percentage				30.00%			30.00%
Gain on deconsolidation amount							$ 5,320
Net income (loss)				$ 261		$ 102	504	$ 102
Carrying value of investments				$ 4,443			$ 4,443
Restricted Stock Units [Member]
Number of shares vested during the period \| shares							304,873	168,513

XML 52 R39.htm IDEA: XBRL DOCUMENT

Summary of Significant Accounting Policies - Schedule of Basic Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Accounting Policies [Abstract]
Numerator - net income (loss) attributable to Harrow Health, Inc.	$ (2,378)	$ 2,522	$ 8,980	$ (991)
Denominator - weighted average number of shares outstanding, basic	25,216,565	21,190,794	25,030,012	21,070,644
Net income (loss) per share, basic	$ (0.09)	$ 0.12	$ 0.36	$ (0.05)

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

XML 53 R40.htm IDEA: XBRL DOCUMENT

Summary of Significant Accounting Policies - Schedule of Diluted Common Equivalent Shares (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Dilutive common equivalent shares	1,984,637	1,984,637	1,666,671
Stock Option and RSUs[Member]
Dilutive common equivalent shares	891,631		637,891
Warrant [Member]
Dilutive common equivalent shares	1,093,006		1,028,780

XML 54 R41.htm IDEA: XBRL DOCUMENT

Summary of Significant Accounting Policies - Schedule of Diluted Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Accounting Policies [Abstract]
Numerator - net income (loss) attributable to Harrow Health, Inc.	$ (2,378)	$ 2,522	$ 8,980	$ (991)
Denominator - weighted average number of shares outstanding, basic	25,216,565	21,190,794	25,030,012	21,070,644
Dilutive common equivalent shares	1,984,637	1,984,637	1,666,671
Number of shares used for diluted earnings per share computation	25,216,565	23,175,431	26,696,683	21,070,644
Net income (loss) per share, diluted	$ (0.09)	$ 0.11	$ 0.34	$ (0.05)

- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

+ References

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-URI http://asc.fasb.org/extlink&oid=117326831&loc=d3e1337-109256

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section S99
-Paragraph 2
-Subparagraph (SX 210.5-03(21))
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-SubTopic 10
-Section 45
-Paragraph 60B
-Subparagraph (d)
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-Name Accounting Standards Codification
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-SubTopic 220
-Section S99
-Paragraph 1
-Subparagraph (SX 210.7-04(19))
-URI http://asc.fasb.org/extlink&oid=116637232&loc=SL114874131-224263

+ Details

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

XML 55 R42.htm IDEA: XBRL DOCUMENT

Revenues (Details Narrative) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Revenue from Contract with Customer [Abstract]
Deferred revenue and customer deposits	$ 224	$ 119

XML 56 R43.htm IDEA: XBRL DOCUMENT

Revenue - Schedule of Disaggregated Revenue (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Total Revenues	$ 13,516	$ 10,384	$ 25,806	$ 19,249
Product Sales, Net [Member]
Total Revenues	13,509	10,374	25,792	19,229
License Revenues [Member]
Total Revenues	$ 7	$ 10	$ 14	$ 20

XML 57 R44.htm IDEA: XBRL DOCUMENT

Investment in Melt Pharmaceuticals, Inc. and Agreements - Related Party Transactions (Details Narrative) - Melt Pharmaceuticals, Inc. [Member] - USD ($) $ in Thousands	1 Months Ended
	Feb. 28, 2019	Dec. 31, 2018	Jun. 30, 2019
Asset Purchase Agreement [Member]
Royalty payment percentage on net sales		8.00%
Management Services Agreement [Member]
Administrative expenses	$ 10
Reimbursable expenses due			$ 714

XML 58 R45.htm IDEA: XBRL DOCUMENT

Investment in Melt Pharmaceuticals, Inc. and Agreements - Related Party Transactions - Schedule of Condensed Income Statement (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues, net	$ 13,516	$ 10,384	$ 25,806	$ 19,249
Loss from operations	(767)	(624)	(1,323)	(2,405)
Net loss	$ (2,378)	$ 2,522	8,980	$ (991)
Melt Pharmaceuticals, Inc. [Member]
Revenues, net
Loss from operations			1,382
Net loss			$ (1,382)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

XML 59 R46.htm IDEA: XBRL DOCUMENT

Investment in Melt Pharmaceuticals, Inc. and Agreements - Related Party Transactions - Schedule of Condensed Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets	$ 38,119	$ 32,843
Total assets	65,157	49,451
Total liabilities	30,159	24,700
Total stockholders' equity	35,065	24,751
Total liabilities and stockholders' equity	65,157	$ 49,451
Melt Pharmaceuticals, Inc. [Member]
Current assets	9,521
Non current assets	3
Total assets	9,524
Total liabilities	940
Total stockholders' equity	8,584
Total liabilities and stockholders' equity	$ 9,524

- Definition

Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold or consumed after one year or beyond the normal operating cycle, if longer.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
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-Topic 210
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-Paragraph 1
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-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

+ Details

XML 60 R47.htm IDEA: XBRL DOCUMENT

Investment in Surface Pharmaceuticals, Inc. and Agreements - Related Party Transactions (Details Narrative) - Surface Pharmaceuticals, Inc [Member] - USD ($) $ in Thousands	1 Months Ended	6 Months Ended
	Jan. 31, 2018	Jun. 30, 2019
Number of shares owned		3,500,000
Ownership percentage		30.00%
Dr. Lindstrom [Member]
Royalty payment percentage on net sales		3.00%
Asset Purchase Agreement [Member] \| Minimum [Member]
Royalty payment percentage on net sales		4.00%
Asset Purchase Agreement [Member] \| Maximum [Member]
Royalty payment percentage on net sales		6.00%
Management Services Agreement [Member]
Administrative expenses	$ 10
Reimbursable expenses due		$ 50

XML 61 R48.htm IDEA: XBRL DOCUMENT

Investment in Surface Pharmaceuticals, Inc. and Agreements - Related Party Transactions - Schedule of Condensed Income Statement (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues, net	$ 13,516	$ 10,384	$ 25,806	$ 19,249
Loss from operations	(767)	(624)	(1,323)	(2,405)
Net income (loss)	$ (2,378)	$ 2,522	8,980	$ (991)
Surface Pharmaceuticals, Inc [Member]
Revenues, net
Loss from operations			1,680
Net income (loss)			$ (1,680)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

XML 62 R49.htm IDEA: XBRL DOCUMENT

Investment in Surface Pharmaceuticals, Inc. and Agreements - Related Party Transactions - Schedule of Condensed Balance Sheet (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets	$ 38,119	$ 32,843
Total assets	65,157	49,451
Total liabilities	30,159	24,700
Total stockholders' equity	35,065	24,751
Total liabilities and stockholders' equity	65,157	$ 49,451
Surface Pharmaceuticals, Inc [Member]
Current assets	18,061
Non current assets	48
Total assets	18,109
Total liabilities	532
Total stockholders' equity	17,577
Total liabilities and stockholders' equity	$ 18,109

- Definition

Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold or consumed after one year or beyond the normal operating cycle, if longer.

+ References

+ Details

XML 63 R50.htm IDEA: XBRL DOCUMENT

Inventories - Schedule of Inventories (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Raw materials	$ 1,758	$ 1,119
Work in progress	264	6
Finished goods	630	709
Total inventories	$ 2,652	$ 1,834

XML 64 R51.htm IDEA: XBRL DOCUMENT

Prepaid Expenses and Other Current Assets - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Prepaid insurance	$ 65	$ 328
Other prepaid expenses	434	334
Deposits and other current assets	138	125
Total prepaid expenses and other current assets	1,401	837
Surface Pharmaceuticals, Inc [Member]
Receivable due from related party	50	50
Melt Pharmaceuticals, Inc. [Member]
Receivable due from related party	$ 714

XML 65 R52.htm IDEA: XBRL DOCUMENT

Property, Plant and Equipment (Details Narrative) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018
Property, Plant and Equipment [Abstract]
Depreciation and amortization of property, plant and equipment	$ 491	$ 968	$ 800

XML 66 R53.htm IDEA: XBRL DOCUMENT

Property, Plant and Equipment - Schedule of Property, Plant and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Property, Plant and Equipment [Abstract]
Computer software and hardware	$ 1,743	$ 1,662
Furniture and equipment	420	397
Lab and pharmacy equipment	3,416	3,184
Leasehold improvements	5,612	5,496
Property, plant and equipment, gross	11,191	10,739
Accumulated depreciation and amortization	(5,245)	(4,364)
Property, plant and equipment, Net	$ 5,946	$ 6,375

XML 67 R54.htm IDEA: XBRL DOCUMENT

Intangible Assets and Goodwill - Schedule of Intangible Assets (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Cost	$ 4,697
Accumulated amortization	(1,479)
Impairment	(64)
Net Carrying value	3,154
Patents [Member]
Cost	962
Accumulated amortization	(64)
Impairment
Net Carrying value	$ 898
Patents [Member] \| Minimum [Member]
Amortization periods (in years)	17 years
Patents [Member] \| Maximum [Member]
Amortization periods (in years)	19 years
Licenses [Member]
Amortization periods (in years)	20 years
Cost	$ 50
Accumulated amortization	(5)
Impairment
Net Carrying value	$ 45
Trademarks [Member]
Amortization periods description	Indefinite
Cost	$ 332
Accumulated amortization
Impairment
Net Carrying value	332
Customer Relationships [Member]
Cost	2,998
Accumulated amortization	(1,115)
Impairment	(15)
Net Carrying value	$ 1,868
Customer Relationships [Member] \| Minimum [Member]
Amortization periods (in years)	3 years
Customer Relationships [Member] \| Maximum [Member]
Amortization periods (in years)	15 years
Trade Name [Member]
Amortization periods (in years)	5 years
Cost	$ 16
Accumulated amortization	(15)
Impairment	(1)
Net Carrying value
Non-Competition Clause [Member]
Cost	294
Accumulated amortization	(274)
Impairment	(20)
Net Carrying value
Non-Competition Clause [Member] \| Minimum [Member]
Amortization periods (in years)	3 years
Non-Competition Clause [Member] \| Maximum [Member]
Amortization periods (in years)	4 years
State Pharmacy Licenses [Member]
Amortization periods (in years)	25 years
Cost	$ 45
Accumulated amortization	(6)
Impairment	(28)
Net Carrying value	$ 11

XML 68 R55.htm IDEA: XBRL DOCUMENT

Intangible Assets and Goodwill - Schedule of Amortization Expenses for Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Amortization of intangible assets	$ 63	$ 57	$ 125	$ 117
Patents [Member]
Amortization of intangible assets	11	6	15	13
Licenses [Member]
Amortization of intangible assets	1		5
Customer Relationships [Member]
Amortization of intangible assets	51	50	102	100
Trade Name [Member]
Amortization of intangible assets		1	2	3
Non-Competition Clause [Member]
Amortization of intangible assets				1
State Pharmacy Licenses [Member]
Amortization of intangible assets			$ 1

XML 69 R56.htm IDEA: XBRL DOCUMENT

Intangible Assets and Goodwill - Schedule of Estimated Future Amortization Expense (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2019	$ 128
2020	252
2021	252
2022	252
2023	252
Thereafter	2,018
Intangible assets	$ 3,154	$ 3,059

XML 70 R57.htm IDEA: XBRL DOCUMENT

Accounts Payable and Accrued Expenses - Schedule of Accounts Payable and Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Payables and Accruals [Abstract]
Accounts payable	$ 5,957	$ 4,966
Accrued litigation settlement (see Note 14)	733	640
Deferred rent		388
Accrued interest	253	256
Accrued exit fee for note payable	800	800
Total accounts payable and accrued expenses	7,743	7,050
Less: Current portion	(6,943)	(6,250)
Non-current total accrued expenses	$ 800	$ 800

XML 71 R58.htm IDEA: XBRL DOCUMENT

Debt (Details Narrative) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended	6 Months Ended
Debt (Details Narrative) - USD ($) $ in Thousands	May 31, 2019	Jun. 30, 2019	Jun. 30, 2019
Amortization of debt discount		$ 6	$ 13
Notes Payable [Member]
Amortization of debt discount		$ 125	$ 250
Term Loan and Security Agreement [Member] \| SWK Funding LLC [Member]
Debt interest rate, description	The interest rate calculation that the loan bears is now equal to the three-month London Inter-Bank Offered Rate (subject to a minimum of 2.00%), plus an applicable margin of 10.00% (the "Margin Rate"); provided that, if, two days prior to a payment date, the Company provides the Lender evidence that the Company has achieved a leverage ratio as of such date of less than 4.00:1:00, the Margin Rate shall equal 9.00%; and if the Company has achieved a leverage ratio as of such date of less than 3.00:1:00, the Margin Rate shall equal 7.00%
Additional principal amount	$ 5,000
Deconsolidation percentage	50.00%
Legal and lender costs	$ 282
Term Loan and Security Agreement [Member] \| SWK Funding LLC [Member] \| London Inter-Bank Offered Rate [Member] \| Minimum [Member]
Debt instrument interest rate	2.00%
Term Loan and Security Agreement [Member] \| SWK Funding LLC [Member] \| Margin Rate [Member]
Debt instrument interest rate	10.00%

XML 72 R59.htm IDEA: XBRL DOCUMENT

Debt - Summary of Future Minimum Payments (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Less: unamortized discount
Less: current portion, net of unamortized discount	(247)	$ (2,529)
Note payable, net of current portion and unamortized debt discount	13,498	$ 11,999
Note Payable [Member]
Remainder of 2019	1,216
2020	3,696
2021	4,121
2022	3,828
2023	7,330
Total minimum payments	20,191
Less: amount representing interest	(4,941)
Notes payable, gross	15,250
Less: unamortized discount	(1,505)
Notes payable	13,745
Less: current portion, net of unamortized discount	(247)
Note payable, net of current portion and unamortized debt discount	$ 13,498

XML 73 R60.htm IDEA: XBRL DOCUMENT

Leases (Details Narrative) $ in Thousands		3 Months Ended	6 Months Ended
Leases (Details Narrative) $ in Thousands	Jan. 02, 2019 USD ($) ft²	Jun. 30, 2019 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Lease term description			The Company has elected to not recognize right-of-use assets and lease liabilities arising from short-term leases, which are leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.
Operating lease percentage		6.36%	6.36%
Operating weighted average remaining term		12 years 1 month 9 days	12 years 1 month 9 days
Operating lease right use of assets		$ 6,069	$ 6,069
Decrease in accounts payable and accrued expenses			830	$ 885
Operating lease liability		6,472	6,472
Cash paid in operating lease liability		230	448
Operating lease expense		232	464
Debt discount amortization		6	13
Depreciation expenses		73	146
Cash paid for interest expenses		$ 4	$ 15
Finance Leases [Member]
Operating lease percentage		9.71%	9.71%
Operating weighted average remaining term		8 months 12 days	8 months 12 days
ASU- 2016-02 [Member]
Operating lease right use of assets	$ 6,325
Decrease in accounts payable and accrued expenses	388
Operating lease liability	$ 6,712
ASU- 2016-02 [Member] \| San Diego [Member]
Operating lease space \| ft²	10,200
Operating lease expires date	Dec. 31, 2021
Lease term	5 years
ASU- 2016-02 [Member] \| Irvine [Member]
Operating lease space \| ft²	4,500
Operating lease expires date	Dec. 31, 2020
Lease term description	Term for up to two five-year periods
ASU- 2016-02 [Member] \| Ledgewood [Member]
Operating lease space \| ft²	25,000
Operating lease expires date	Jul. 31, 2024
Lease term description	Term for two additional five-year periods.

XML 74 R61.htm IDEA: XBRL DOCUMENT

Leases - Schedule of Future Lease Payment Under Operating Leases (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Leases [Abstract]
Remainder of 2019	$ 457
2020	930
2021	809
2022	824
2023	843
Thereafter	5,304
Total minimum lease payments	9,167
Less: amount representing interest payments	(2,695)
Total operating lease liabilities	6,472
Less: current portion, operating lease liabilities	496
Operating lease liabilities, net of current portion	$ 5,976

XML 75 R62.htm IDEA: XBRL DOCUMENT

Leases - Schedule of Future Lease Payment Under Finance Lease (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Leases [Abstract]
Remainder of 2019	$ 368
2020	9
2021	9
2022	9
2023	10
Total minimum lease payments	405
Less: amount representing interest payments	(6)
Present value of future minimum lease payment	399
Less: unamortized discount
Present value of future net minimum lease payments	399
Less: current portion, net of unamortized discount	(370)	$ (720)
Finance lease obligation, net of current portion	$ 29

XML 76 R63.htm IDEA: XBRL DOCUMENT

Leases - Schedule of Future Minimum Lease Payments Under Operating Lease and Finance Lease (Details) $ in Thousands	Jun. 30, 2019 USD ($)
2019	$ 368
2020	9
2021	9
2022	9
2023	10
Financing lease payment	405
2020	930
2021	809
2022	824
2023	843
Thereafter	5,304
Operating lease payment	9,167
Financing Lease [Member]
2019	751
2020
2021
2022
2023
Thereafter
Financing lease payment	751
Less: Amounts representing interest	(15)
Less: Amounts representing unamortized discount	(16)
Total obligation under capital leases	720
Less: Current portion of capital leases	(720)
Long term capital lease obligation
Operating Lease [Member]
2019	797
2020	857
2021	742
2022	320
2023	330
Thereafter	196
Operating lease payment	$ 3,242

XML 77 R64.htm IDEA: XBRL DOCUMENT

Stockholders' Equity and Stock-based Compensation (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended	6 Months Ended
	Feb. 28, 2019	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018
Shares issued of common stock, shares			15,000
Commission expense			$ 75
Stock-based compensation			$ 1,080	$ 1,359
Mayfield Pharmaceuticals, Inc. [Member]
Number of shares issued for acquisition	1,000,000
Ownership percentage		72.00%	72.00%
2017 Incentive Stock and Awards Plan [Member]
Number of shares issued			997,280
Maximum number of common stock issuance under the plan		2,000,000	2,000,000
Restricted Stock [Member]
Shares issued of common stock, shares			68,180
Stock Option Plan [Member]
Closing price of common stock price per share		$ 8.70	$ 8.70
Forfeiture factor, percentage			10.00%
Unrecognized compensation expense related to unvested stock options granted under the plan		$ 4,128	$ 4,128
Expense expected to recognize over the weighted-average remaining vesting period			3 years 11 months 8 days
Stock-based compensation		$ 262	$ 540
Stock Option Plan [Member] \| Employees and Consultant [Member]
Stock options granted with exercise price contractual terms			10 years
Stock options granted vesting terms			Vesting terms for options granted to employees and consultants during the six months ended June 30, 2019 typically included one of the following vesting schedules: 25% of the shares subject to the option vest and become exercisable on the first anniversary of the grant date and the remaining 75% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over three years; 100% of the shares subject to the option vest on a quarterly basis in equal installments over three years; and 90% of the shares subject to the option vest and become exercisable on the second month after the grant date and the remaining 10% of the shares subject to the option vest and become exercisable quarterly in equal installments thereafter over the next 11 months. Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plan) and in the event of certain modifications to the option award agreement.
Restricted Stock Units [Member]
Shares issued of common stock, shares			185,000
Fair market value of restricted shares			$ 1,139
Restricted Stock Units [Member] \| Board of Directors [Member]
Shares issued of common stock, shares		38,860	38,860
Stock options granted vesting terms		Which vests on a quarterly basis, over one year in equal installments.	Which vests on a quarterly basis, over one year in equal installments.
Fair market value of restricted shares		$ 300	$ 300
Unvested RSUs [Member]
Unrecognized compensation expense related to unvested stock options granted under the plan		1,076	$ 1,076
Expense expected to recognize over the weighted-average remaining vesting period			4 months 13 days
Stock-based compensation		$ 110	$ 540
Common Stock Warrants [Member]
Number of shares issued			663,338
Exercise of warrants, shares		932,000	932,000
Warrants exercise price		$ 1.79	$ 1.79
Common Stock Warrants One [Member]
Number of shares issued			100,055
Exercise of warrants, shares		100,055	100,055
Warrants exercise price		$ 1.79	$ 1.79
Number of shares issued, value			$ 179
Stock Option and RSUs[Member]
Number of shares issued			20,955
Cashless exercise of options to purchase common stock			57,933
Stock Option and RSUs[Member] \| Minimum [Member]
Options exercise price			1.70
Stock Option and RSUs[Member] \| Maximum [Member]
Options exercise price			4.09

XML 78 R65.htm IDEA: XBRL DOCUMENT

Stockholders' Equity and Stock-based Compensation - Schedule of Stock Option Plan Activity (Details) - Stock Option Plan [Member] $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($) $ / shares shares
Number of shares, Outstanding, Beginning balance \| shares	2,482,009
Number of shares, Options granted \| shares	352,000
Number of shares, Options exercised \| shares	(57,933)
Number of shares, Options cancelled/forfeited \| shares	(50,471)
Number of shares, Outstanding, Ending balance \| shares	2,725,605
Number of shares, Options exercisable \| shares	1,461,723
Number of shares, Options vested and expected to vest \| shares	2,607,104
Weighted Avg. Exercise Price, Outstanding, Beginning balance \| $ / shares	$ 5.10
Weighted Avg. Exercise Price, Options granted \| $ / shares	6.17
Weighted Avg. Exercise Price, Options exercised \| $ / shares	3.72
Weighted Avg. Exercise Price, Options cancelled/forfeited \| $ / shares	5.83
Weighted Avg. Exercise Price, Outstanding, Ending balance \| $ / shares	5.25
Weighted Avg. Exercise Price, Exercisable Ending Balance \| $ / shares	4.69
Weighted Avg. Exercise Price, Vested and expected to vest \| $ / shares	$ 5.21
Weighted Avg. Remaining Contractual Life, Options outstanding	5 years 7 months 10 days
Weighted Avg. Remaining Contractual Life, Options exercisable	5 years 11 months 23 days
Weighted Avg. Remaining Contractual Life, Options vested and expected to vest	5 years 7 months 17 days
Aggregate Intrinsic Value, Options outstanding \| $	$ 9,621
Aggregate Intrinsic Value, Options exercisable \| $	6,091
Aggregate Intrinsic Value, Options vested and expected to vest \| $	$ 9,323

XML 79 R66.htm IDEA: XBRL DOCUMENT

Stockholders' Equity and Stock-based Compensation - Schedule of Fair Value Assumptions (Details) - Options Granted to Employees [Member]	6 Months Ended
	Jun. 30, 2019 $ / shares
Weighted-average fair value of options granted	$ 3.64
Expected volatility, minimum	64.00%
Expected volatility, maximum	67.00%
Risk-free interest rate, minimum	2.19%
Risk-free interest rate, maximum	2.68%
Dividend yield	0.00%
Minimum [Member]
Expected terms (in years)	5 years 9 months 18 days
Maximum [Member]
Expected terms (in years)	6 years 1 month 6 days

XML 80 R67.htm IDEA: XBRL DOCUMENT

Stockholders' Equity and Stock-based Compensation - Schedule of Stock Option Outstanding and Exercisable (Details)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Range of Exercise Prices, minimum	$ 1.47
Range of Exercise Prices, maximum	$ 42.80
Number of Options Outstanding \| shares	2,725,605
Weighted Average Remaining Contractual Life in Years	5 years 7 months 10 days
Weighted Average Exercise Price	$ 5.25
Number Exercisable \| shares	1,461,723
Weighted Average Exercisable Exercise Price	$ 4.69
Range One [Member]
Range of Exercise Prices, minimum	1.47
Range of Exercise Prices, maximum	$ 2.60
Number of Options Outstanding \| shares	816,936
Weighted Average Remaining Contractual Life in Years	7 years 2 months 19 days
Weighted Average Exercise Price	$ 2.04
Number Exercisable \| shares	526,237
Weighted Average Exercisable Exercise Price	$ 2.12
Range Two [Member]
Range of Exercise Prices, minimum	2.76
Range of Exercise Prices, maximum	$ 4.66
Number of Options Outstanding \| shares	495,496
Weighted Average Remaining Contractual Life in Years	6 years 8 months 5 days
Weighted Average Exercise Price	$ 3.97
Number Exercisable \| shares	441,452
Weighted Average Exercisable Exercise Price	$ 3.99
Range Three [Member]
Range of Exercise Prices, minimum	5.61
Range of Exercise Prices, maximum	$ 6.30
Number of Options Outstanding \| shares	440,350
Weighted Average Remaining Contractual Life in Years	8 years 4 months 28 days
Weighted Average Exercise Price	$ 6.16
Number Exercisable \| shares	122,159
Weighted Average Exercisable Exercise Price	$ 6.04
Range Four [Member]
Range of Exercise Prices, minimum	6.64
Range of Exercise Prices, maximum	$ 8.99
Number of Options Outstanding \| shares	967,793
Weighted Average Remaining Contractual Life in Years	2 years 5 months 9 days
Weighted Average Exercise Price	$ 8.01
Number Exercisable \| shares	366,845
Weighted Average Exercisable Exercise Price	$ 8.24
Range Five [Member]
Range of Exercise Prices, minimum	$ 42.80
Number of Options Outstanding \| shares	5,030
Weighted Average Remaining Contractual Life in Years	1 year 1 month 13 days
Weighted Average Exercise Price	$ 42.80
Number Exercisable \| shares	5,030
Weighted Average Exercisable Exercise Price	$ 42.80

XML 81 R68.htm IDEA: XBRL DOCUMENT

Stockholders' Equity and Stock-based Compensation - Schedule of Restricted Stock Units Activity (Details) - Restricted Stock Units [Member]	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Number of RSUs unvested, Outstanding, Beginning balance	1,275,680
Number of RSUs granted	223,860
Number of RSUs vested	(68,180)
Number RSUs cancelled/forfeited
Number of RSUs unvested, Outstanding, Ending balance	1,431,360
Weighted Average Grant Date Fair Value, Beginning balance \| $ / shares	$ 2.16
Weighted Average Grant Date Fair Value, RSUs granted \| $ / shares	6.43
Weighted Average Grant Date Fair Value, RSUs vested \| $ / shares	2.20
Weighted Average Grant Date Fair Value, Ending balance \| $ / shares	$ 2.83

XML 82 R69.htm IDEA: XBRL DOCUMENT

Stockholders' Equity and Stock-based Compensation - Schedule of Warrants Activity (Details) - Warrant [Member]	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Number of Shares Warrants Outstanding, beginning balance	2,206,973
Number of Shares Warrants Outstanding, Granted
Number of Shares Warrants Outstanding, Exercised	(1,032,055)
Number of Shares Warrants Outstanding, Expired
Number of Shares Warrants Outstanding, ending balance	1,174,918
Weighted average remaining contractual life of the outstanding warrants in years	3 years 6 months 3 days
Weighted avg. Exercise Price, outstanding, beginning balance \| $ / shares	$ 1.91
Weighted avg. Exercise Price, exercised \| $ / shares	1.79
Weighted avg. Exercise Price, outstanding and exercisable, ending balance \| $ / shares	$ 2.01

XML 83 R70.htm IDEA: XBRL DOCUMENT

Stockholders' Equity and Stock-based Compensation - Schedule of Warrants Outstanding and Warrants Exercisable (Details)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Warrant [Member]
Warrants Outstanding \| shares	1,174,918
Exercise Price \| $ / shares	$ 2.01
Lender Warrants [Member]
Issue Date	May 11, 2015
Warrants Outstanding \| shares	125,000
Exercise Price \| $ / shares	$ 1.79
Expiration Date	May 11, 2025
Settlement Warrants [Member]
Issue Date	Aug. 16, 2016
Warrants Outstanding \| shares	40,000
Exercise Price \| $ / shares	$ 3.75
Expiration Date	Aug. 16, 2021
PIPE Investor and Placement Agent Warrants [Member]
Issue Date	Dec. 27, 2016
Warrants Outstanding \| shares	394,532
Exercise Price \| $ / shares	$ 1.79
Expiration Date	Dec. 27, 2019
Lender Warrants One [Member]
Issue Date	Jul. 19, 2017
Warrants Outstanding \| shares	615,386
Exercise Price \| $ / shares	$ 2.08
Expiration Date	Jul. 19, 2024

XML 84 R71.htm IDEA: XBRL DOCUMENT

Stockholders' Equity and Stock-based Compensation - Schedule of Stock Based Compensation Granted to Employees Directors Consultants (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Stock based compensation related to equity instruments granted to related parties	$ 367	$ 608	$ 1,155	$ 1,359
Employees [Member] \| Selling, General and Administrative [Member]
Stock based compensation related to equity instruments granted to related parties	268	573	906	1,166
Directors [Member] \| Selling, General and Administrative [Member]
Stock based compensation related to equity instruments granted to related parties	75	35	150	85
Consultants [Member] \| Selling, General and Administrative [Member]
Stock based compensation related to equity instruments granted to related parties	$ 24		$ 99	$ 108

XML 85 R72.htm IDEA: XBRL DOCUMENT

Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands	1 Months Ended			3 Months Ended		6 Months Ended		12 Months Ended
	May 31, 2019	Feb. 28, 2019	Apr. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Accrued expenses				$ 800		$ 800		$ 800
Royalty payments				274	$ 114	465	$ 197
Stock based payments						$ 1,080	1,359
Business acquisition description						In consideration for the acquisition of the intellectual property rights, the Company is obligated to make payments to the Inventors based on the completion of certain milestones, generally consisting of: (1) a payment payable within 30 days after the issuance of the first patent in the United States arising from the acquired intellectual property (if any); (2) a payment payable within 30 days after the Company files the first investigational new drug application ("IND") with the FDA for the first product arising from the acquired intellectual property (if any); (3) for certain of the Inventors, a payment payable within 30 days after the Company files the first new drug application with the FDA for the first product arising from the acquired intellectual property (if any); and (4) certain royalty payments based on the net receipts received by the Company in connection with the sale or licensing of any product based on the acquired intellectual property (if any), after deducting (among other things) the Company's development costs associated with such product. If, following five years after the date of the applicable asset purchase agreement, the Company either (a) for certain of the Inventors, has not filed an IND or, for the remaining Inventors, has not initiated a study where data is derived, or (b) has failed to generate royalty payments to the Inventors for any product based on the acquired intellectual property, the Inventors may terminate the applicable asset purchase agreement and request that the Company re-assign the acquired technology to the Inventors.
Royalty expenses included in accounts payable				274	$ 114	$ 274	$ 114
Allergan USA, Inc. [Member]
Lost profit damages	$ 48
Settlement Agreement [Member]
Damages low claim rate, percentage								1.40%
Accrued expenses								$ 640
Klarity License Agreement [Member] \| Richard L. Lindstrom, M.D [Member]
Royalty payment description			The Company is required to make royalty payments to Dr. Lindstrom ranging from 3% - 6% of net sales, dependent upon the final formulation of the Klarity Product sold.
License Agreement [Member] \| Richard L. Lindstrom, M.D [Member]
Royalty payments				22		37
License Agreement [Member] \| Richard L. Lindstrom, M.D [Member] \| Initial Payment [Member]
Royalty payments			$ 50
Net sales			100
License Agreement [Member] \| Richard L. Lindstrom, M.D [Member] \| Second Payment [Member]
Royalty payments			50
License Agreement [Member] \| Richard L. Lindstrom, M.D [Member] \| Final Payment [Member]
Royalty payments			50
Net sales			$ 50
License Agreement [Member] \| Dr. Lindstrom [Member]
Royalty payments				26		48
Sales and Marketing Agreements [Member]
Stock based payments				0		75
Commission expense incurred				$ 640		$ 1,182
Maximum [Member]
Damages in lawsuit		$ 1,400
Maximum [Member] \| Sales and Marketing Agreements [Member]
Commission payments, percentage									14.00%
Minimum [Member] \| Sales and Marketing Agreements [Member]
Commission payments, percentage									10.00%

XML 86 R73.htm IDEA: XBRL DOCUMENT

Segment Information and Concentrations (Details Narrative) - Segment	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Number of reportable segment			2
Maximum percentage of sales derived from large number of customer			10.00%	10.00%
Three Main Suppliers [Member]
Percentage of drug and chemical purchases from three main suppliers	67.00%	54.00%	65.00%	52.00%

XML 87 R74.htm IDEA: XBRL DOCUMENT

Segment Information and Concentrations - Schedule of Operating Segment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Total revenues	$ 13,516	$ 10,384	$ 25,806	$ 19,249
Cost of sales	(5,225)	(4,157)	(9,123)	(8,228)
Gross profit	8,291	6,227	16,683	11,021
Selling, general and administrative	8,248	6,779	16,791	13,267
Research and development	810	72	1,215	159
Segment contribution	1,784		4,157
Amortization	59		125
Operating loss	(767)	$ (624)	(1,323)	$ (2,405)
Corporate [Member]
Operating loss	2,342		5,061
Research and Development Expense [Member]
Operating loss	150		294
Pharmaceutical Compounding [Member]
Total revenues	13,516		25,806
Cost of sales	(5,225)		(9,123)
Gross profit	8,291		16,683
Selling, general and administrative	5,804		11,519
Research and development	533		658
Segment contribution	1,954		4,506
Pharmaceutical Drug Development [Member]
Total revenues
Cost of sales
Gross profit
Selling, general and administrative	43		86
Research and development	127		263
Segment contribution	$ (170)		$ (349)

XML 88 R75.htm IDEA: XBRL DOCUMENT

Subsequent Events (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended		6 Months Ended
	Oct. 15, 2021	Aug. 14, 2019	Jul. 31, 2019	Jun. 30, 2019
Exercise price range, lower range limit				$ 1.47
Exercise price range, upper range limit				$ 42.80
Noice Rx, LLC [Member] \| Loan Agreement [Member] \| Forecast [Member]
Debt period payment	$ 119
Warrant exercisable term	5 years
Ownership percentage	19.90%
Mayfield Pharmaceuticals, Inc. [Member]
Ownership percentage				72.00%
Subsequent Event [Member]
Number of shares issued		25,135
Number of common stock warrant shares, cashless exercise		32,532
Warrant exercise price per share		$ 1.79
Number of common stock shares upon exercise		1,872
Option to purchase of common stock		1,872
Exercise price range, lower range limit		$ 1.70
Exercise price range, upper range limit		$ 3.20
Proceeds from stock option exercised		$ 5
Subsequent Event [Member] \| Park Compounding, Inc. [Member] \| Asset Purchase Agreement [Member]
Purchase price			$ 8,000
Subsequent Event [Member] \| Noice Rx, LLC [Member]
Purchase price			$ 8,000
Subsequent Event [Member] \| Noice Rx, LLC [Member] \| Loan Agreement [Member]
Interest rate			9.50%
Debt instrument description			The Sellers Note will bear interest at 9.5% per annum and will be secured by all the assets of Noice. Noice will make ninety-six (96) monthly cash payments to the Company over the eight years following the closing. The first twenty-four months of the Sellers Note will require interest only payments of $63, with a principal payment of $2,000 due on September 15, 2021.
Debt period payment interest			$ 63
Debt period payment principal			$ 2,000
Debt due date			Sep. 15, 2021
Subsequent Event [Member] \| Mayfield Pharmaceuticals, Inc. [Member] \| License Agreement [Member]
Number of shares issued			300,000
Subsequent Event [Member] \| Stowe Pharmaceuticals, Inc. [Member] \| License Agreement [Member]
Number of shares issued			1,750,000

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