美国
证券交易委员会 及交易所
华盛顿特区，20549
表单
截至年度季度结束
或
在从___________到___________的过渡期间
委员会
档案号码：
(根据公司章程所述的注册人的正确名称)
(依据所在地或其他管辖区) 的注册地或组织地点) |
(国税局雇主 识别号码) | |
| （总执行办公室地址） | (邮编 码) |
（申报人的电话号码，包括区号）
根据该法案第12(b)条纪录的证券：
| 每个类别的标题 | 交易标志 | 名称 在交易所登记的 | ||
勾选表示公司已按照证券交易法第13或15(d)条款的规定，在过去12个月（或公司需要提交此类报告的较短期限内）提交了所有所需的报告；并且公司在过去90天内一直受到此类提交报告的要求。
请勾选，指出在过去12个月内（或更短时间并应提供此类文件的情况下），申报人是否已依据Regulation S-t（本章节之§232.405号）提交每一个所需提交的互动式数据文件。
请勾选以下选项，指明挂牌者是否为大型快速申报挂牌者、快速申报挂牌者、非快速申报挂牌者、较小型的报告公司或新兴成长型公司。关于Exchange Act第1202条中「大型快速申报挂牌者」、「快速申报挂牌者」、「较小型报告公司」和「新兴成长型公司」的定义，请参阅。
| 大型及加速提交者 | ☐ | 加速提交者 | ☐ |
| ☒ | 较小的报告公司 | ||
| 新兴成长型公司 |
若属新兴成长公司，则请在适用于依据第13(a)款拟定的任何新或修订财务会计准则时，打勾表示注册人已选择不使用过度过渡期遵守该准则。 ☐
请用勾选标示是否登记公司是外壳公司（依照《交易所法》第120亿2条所定义）。 是 ☐ 否
截至2024年11月12日，共有 美元每股面值的 面值，未偿还。
harrow, INC.
目 录
| Page | ||
| 部分 I | 财务信息 | 3 |
| 项目 1. | 基本报表 (未经审计) | 3 |
| 项目 2. | 管理层对财务状况和业绩的讨论与分析 | 27 |
| 项目 3. | 市场风险的定量和定性披露。 | 33 |
| 项目 4. | 内部控制及程序 | 33 |
| 部分 II | 其他资讯 | 34 |
| 项目 1. | 法律诉讼 | 34 |
| 项目 1A | 风险因素 | 34 |
| 项目 2. | 股票权益的未注册销售和资金用途 | 36 |
| 项目 3. | 优先证券违约 | 36 |
| 项目 4. | 矿业安全披露 | 36 |
| 项目 5. | 其他资讯 | 36 |
| 项目 6. | 展品 | 36 |
| 签名 | 37 |
| 2 |
第一部分
财务信息
项目 1. 基本报表（未经核数）
harrow, INC.
简明合并资产负债表
| 九月三十日， | 12月31日, | |||||||
| 2024 | 2023 | |||||||
| (未经审计) | ||||||||
| 资产 | ||||||||
| 流动资产合计 | ||||||||
| 现金及现金等价物 | $ | $ | ||||||
| 对伊顿制药的投资 | ||||||||
| 应收帐款，净额 | ||||||||
| 存货 | ||||||||
| 预付费用及其他流动资产 | ||||||||
| 流动资产总额 | ||||||||
| 不动产、厂房及设备净值 | ||||||||
| 资本化软体成本净额 | ||||||||
| 营运租赁权利资产，净额 | ||||||||
| 无形资产，扣除累计摊销 | ||||||||
| 商誉 | ||||||||
| 总资产 | $ | $ | ||||||
| 负债及股东权益 | ||||||||
| 流动负债 | ||||||||
| 应付帐款及应计费用 | $ | $ | ||||||
| 应付条件性考虑 | ||||||||
| 应计返利和自负辅助 | ||||||||
| 应计工资和相关负债 | ||||||||
| 透支收入及客户存款 | ||||||||
| 营运租赁负债的当期部分 | ||||||||
| 流动负债总额 | ||||||||
| 营运租赁负债，扣除当期部分净额 | ||||||||
| 应计费用，扣除当前部分 | ||||||||
| 递延所得税负债 | ||||||||
| 应付票据，扣除未摊销债务折扣 | ||||||||
| 负债合计 | ||||||||
| 合约和可能负债 | ||||||||
| 股东权益 | ||||||||
| 0.01 面值， 授权股份数， 和 于2024年9月30日及2023年12月31日分别发行及流通的股份 | ||||||||
| 资本公积额额外增资 | ||||||||
| 累积亏损 | ( | ) | ( | ) | ||||
| 总HARROW公司股东权益 | ||||||||
| 非控股权益 | ( | ) | ( | ) | ||||
| 股东权益总额 | ||||||||
| 总负债及股东权益 | $ | $ | ||||||
附注资料是这些缩表基本报表的重要组成部分
| 3 |
harrow, INC.
未经审核 简明列出的合并经营结果报表
| 截至三个月结束 | 截至九个月结束的日期 | |||||||||||||||
| 九月三十日， | 九月三十日， | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 营业收入： | ||||||||||||||||
| 产品销售净额 | $ | $ | $ | $ | ||||||||||||
| 其他收入 | ||||||||||||||||
| 总营业收入 | ||||||||||||||||
| 销售成本 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 毛利润 | ||||||||||||||||
| 营运费用： | ||||||||||||||||
| 销售、一般及行政 | ||||||||||||||||
| 研发 | ||||||||||||||||
| 营业费用总额 | ||||||||||||||||
| 营业收入（亏损） | ( | ) | ||||||||||||||
| 其他（费用）收入： | ||||||||||||||||
| 利息费用，净额 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 来自Eton Pharmaceuticals的投资（损失）收益 | ( | ) | ||||||||||||||
| 债务清偿损失 | ( | ) | ||||||||||||||
| 其他收入（支出），净额 | ( | ) | ( | ) | ||||||||||||
| 总其他费用，净额 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 税前损失 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 所得税准备 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 净亏损 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 普通股每股基本和稀释的净亏损 | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| 普通股票的加权平均在外流通股数 基本及稀释数量 | ||||||||||||||||
本 随附之附注为这些未经审核的简化合并基本报表的重要组成部分
| 4 |
harrow, inc.
未经审核 股东权益的综合财务报表
截至2024年和2023年9月30日的期间
| 总计 | 总计 | |||||||||||||||||||||||||||
| 普通股 | 追加 | Harrow, Inc. | 非控制权益 | 总计 | ||||||||||||||||||||||||
| Par | 已缴资本 | 累积的 | 股东的 | 利息 | 股东的 | |||||||||||||||||||||||
| 股份 | 价值 | 资本 | 赤字 | 权益 | 权益 | 权益 | ||||||||||||||||||||||
| 2022年12月31日结余 | $ | $ | $ | ( | ) | $ | | $ | ( | ) | $ | | ||||||||||||||||
| 与...有关的普通股发行： | ||||||||||||||||||||||||||||
| 公开发行，扣除发行成本 | ||||||||||||||||||||||||||||
| 顾问股份期权行使 | ||||||||||||||||||||||||||||
| 员工期权的运用 | ||||||||||||||||||||||||||||
| RSU和PSU的分配 | ( | ) | ||||||||||||||||||||||||||
| 股权奖励的净股份安顿相关的扣除股份 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| 股份报酬支出 | - | |||||||||||||||||||||||||||
| 净亏损 | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| 2023年9月30日的结余 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| 截至2023年12月31日的余额 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| 与...有关的普通股发行： | ||||||||||||||||||||||||||||
| 员工股票期权的行使 | ||||||||||||||||||||||||||||
| RSUs 的解约 | ||||||||||||||||||||||||||||
| 股权奖励的净股份安顿相关的扣除股份 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| 股份报酬支出 | - | |||||||||||||||||||||||||||
| 净亏损 | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| 2024年9月30日的账面 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| 总计 | 总计 | |||||||||||||||||||||||||||
| 普通股 | 额外 | 哈罗公司 | 非控制 | 总计 | ||||||||||||||||||||||||
| 配对 | 已付款 | 累积 | 股东 | 利息 | 股东 | |||||||||||||||||||||||
| 股票 | 价值 | 资本 | 赤字 | 股票 | 股票 | 股票 | ||||||||||||||||||||||
| 二零二三年六月三十日结余 | $ | $ | $ | ( | ) | $ | | $ | ( | ) | $ | | ||||||||||||||||
| 发行有关以下事项的普通股： | ||||||||||||||||||||||||||||
| 公开发售，除发售成本 | ||||||||||||||||||||||||||||
| 行使雇员股票期权 | ||||||||||||||||||||||||||||
| PSU 的权益 | ( | ) | ||||||||||||||||||||||||||
| 与股权奖项净额结算有关的扣押股份 | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| 基于股票的补偿费用 | - | |||||||||||||||||||||||||||
| 净亏损 | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| 二零二三年九月三十日止余额 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| 二零二四年六月三十日止余额 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| 发行有关以下事项的普通股： | ||||||||||||||||||||||||||||
| 行使雇员股票期权 | ||||||||||||||||||||||||||||
| 与股权奖项净额结算有关的扣押股份 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| 基于股票的补偿费用 | - | |||||||||||||||||||||||||||
| 净亏损 | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| 二零二四年九月三十日止余额 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
本 随附之附注为这些未经审核的简化合并基本报表的重要组成部分
| 5 |
harrow, INC.
未经审核 资金流量汇总表
| 截至九个月结束的日期 | ||||||||
| 九月三十日， | ||||||||
| 2024 | 2023 | |||||||
| 营运活动现金流量 | ||||||||
| 净亏损 | $ | ( | ) | $ | ( | ) | ||
| 调整为使净亏损转化为经营活动所使用现金： | ||||||||
| 不动产、厂房及设备的折旧和摊销及软件开发成本 | ||||||||
| 无形资产摊薄 | ||||||||
| 营运租赁权益资产摊销 | ||||||||
| (拨备的) 信用损失恢复 | ( | ) | ||||||
| 偿还债务发行成本和债务折扣 | ||||||||
| 来自对Eton投资的投资损失(收益) | ( | ) | ||||||
| 债务清偿损失 | ||||||||
| 处置无形资产的损失 | ||||||||
| 基于股票的薪酬 | ||||||||
| 递延所得税 | ||||||||
| 资产及负债的变动： | ||||||||
| 应收账款 | ( | ) | ( | ) | ||||
| 存货 | ( | ) | ||||||
| 预付费用及其他流动资产 | ( | ) | ( | ) | ||||
| 应付账款、应计费用、应计回扣及共付金援助 | ||||||||
| 应计工资和相关负债 | ||||||||
| 透支收入及客户存款 | ||||||||
| 营运活动中的净现金支出 | ( | ) | ( | ) | ||||
| 投资活动现金流量 | ||||||||
| 出售Eton Pharmaceuticals投资的净收益 | ||||||||
| 对专利和商标资产的投资 | ( | ) | ||||||
| 购买产品NDAs及相关专利 | ( | ) | ||||||
| 固定资产购入 | ( | ) | ( | ) | ||||
| 投资活动之净现金流入（流出） | ( | ) | ||||||
| 融资活动之现金流量净额 | ||||||||
| 来自 | ||||||||
| 来自Oaktree贷款的收入，扣除成本后的净额 | ||||||||
| 发行债务成本支付 | ( | ) | ||||||
| 在PSUs、RSUs的归属及行使期权时支付薪资税 | ( | ) | ( | ) | ||||
| 行使股票期权所得 | ||||||||
| 来自b. Riley高级担保票据的收入，扣除成本后的净额 | ||||||||
| 偿还b. Riley高级担保票据 | ( | ) | ||||||
| 来自公众发行普通股的收入，扣除成本后的净额 | ||||||||
| 融资活动中的净现金（使用）提供 | ( | ) | ||||||
| 现金及现金等价物的净变动 | ( | ) | ( | ) | ||||
| 期初现金及现金等价物 | ||||||||
| 期末现金及现金等价物 | $ | $ | ||||||
| 补充现金流量资讯： | ||||||||
| 支付所得税现金 | $ | $ | ||||||
| 支付利息的现金 | $ | $ | ||||||
| 补充披露非现金投资及融资活动： | ||||||||
| 重新分类递延融资成本 | $ | $ | ||||||
| 与Oaktree贷款相关的退出费用的累计 | $ | $ | ||||||
| 融资的保险费 | $ | $ | ||||||
| 购买与应付或有对价相关的产品保密协议 | $ | $ | ||||||
| 购买包含在 应付帐款及应计费用中的不动产、厂房及设备 | $ | $ | ||||||
| 因新操作租赁义务而获得的使用权资产 | $ | $ | ||||||
本 随附之附注为这些未经审核的简化合并基本报表的重要组成部分
| 6 |
harrow, INC.
备注 至未经审核的简明综合基本报表
截至2024年和2023年9月30日的三个月和九个月
注意 1. 业务描述和报告基础
公司 和背景
Harrow, Inc.（连同其并购子公司，除非上下文显示或另有要求，否则称为该「公司」
或「harrow」）是一家领先的眼科药品公司，从事研发、开发和商业化创新的眼科药品产品，为美国市场提供服务。Harrow帮助美国眼科专业人员保留视力的礼物，让数百万美国人每年都能够获得其全面的处方和非处方眼科药品组合，而且价格实惠。该公司拥有美国最大品牌眼科药品产品组合之一的商业权，全部在其Harrow名义下销售。该公司还拥有并运营ImprimisRx，是全国领先的眼科医疗药品混合制剂业务之一。
报表说明基础
公司已根据美国通用会计原则（"GAAP"）为中期基本报表准备了随附的未经审核的缩减合并基本报表，并遵循美国证券交易委员会的规则和规定。因此，这些报表并不包括GAAP对经审核基本报表所需的所有信息和附注。管理层认为，所有被认为对公平呈现必要的调整（仅包括正常的经常性调整）均已包含在内。截止2024年9月30日的三个月和九个月的经营结果不一定能指示2024年12月31日结束的年度或任何其他时期预期的结果。欲获取进一步信息，请参考公司截至2023年12月31日的年度报告表格10-k中包含的公司的经审核合并基本报表及其附注。
随附的未经审核的简化合并基本报表包括本公司及其全资和控股子公司的账户。
harrow
合并其拥有控制性财务利益的实体。公司根据变量利益实体
(“VIE”)模型来判断公司是否为该实体的主要受益者。公司合并了
注意 2。 重要会计政策摘要
以下内容代表截至2024年9月30日三个月和九个月的更新，与公司截至2023年12月31日年结的重要会计政策有关，详见公司年度十-K表格的年度报告。
区域
公司的首席营运决策者是其执行长，负责资源分配决策并根据呈交的财务资讯评估绩效。 截至2024年9月30日止期间，公司确定两个营运部门为可报告部门。 有关公司可报告部门的更多信息，请参见注15。
风险、不确定性和流动性
本公司需遵守某些监管标准、批准、指导方针和检查，这可能会影响本公司制作、分配及卖出某些产品的能力。如果本公司因监管指导方针或检查而被要求停止混合和卖出某些产品，这可能会对本公司的财务控制项、流动资金和业务结果产生重大影响。
| 7 |
信用 损失
公司估计并记录一个关于预期信贷损失的提存，有关财务工具的损失，包括其应收帐款。管理层在评估目前预期信贷损失时，考虑历史收款率、公司客户目前的财务状况、宏观经济因素和其他行业特定因素。在评估目前预期信贷损失时也会考虑前瞻性资讯。然而，由于预期应收帐款到帐的时间较短，管理层认为，扣除预期损失后的摊销值大致等同公平值，因此，在这些财务工具的历史和目前分析，包括其应收帐款方面，更多依赖历史和目前分析。
为了判断应收账款的信用损失，公司已经按照客户类别在业务部门层面进行细分，因管理层判断公司客户的风险档案是基于他们的经营类型和行业，主要是在制药行业中经营。每个业务部门都会单独分析预估的信用损失。在这样做的过程中，公司建立了一个基于应收账款历史收款时间的损失矩阵，并评估其客户的当前和预测金融状况，尽量详细。此外，公司考虑到宏观经济因素以及制药行业的状况，以估计是否存在根据公司对未来这些经济和行业特定因素的预期趋势来评估其应收账款中的当前预期信用损失。此外，通过检视未结发票来确定基于预设更高可能性的客户来记录适当的条款。
截至2024年9月30日，公司简明综合资产负债表上应收账款余额为$
| 2024年1月1日的余额 | $ | |||
| | ( | ) | ||
| | ( | ) | ||
| 2024年9月30日的账面 | $ |
公允价值衡量
公允价值测量是根据市场参与者在评定资产或负债定价时所使用的假设来确定的。GAAP建立了一个输入排序层次结构，用于衡量公允价值，该结构最大化了可观察输入的使用，并通过要求在有可用时使用最可观察的输入来最小化不可观察输入的使用。确定的公允价值层次结构将使用在估值方法中的输入按以下三个层次进行优先排序：
| ● | 层级 1: 适用于对于存在在活跃市场中对于相同资产或负债的报价价格（未调整）的资产或负债。活跃市场中的报价价格提供了最可靠的公允价值证据，必须在可用时用于测量公允价值。 |
| ● | 层级 2: 适用于对于存在具有显著其他可观察输入的资产或负债，非层级1价格，例如类似资产或负债的报价价格；非活跃市场中的报价价格；或其他可观察或可通过观察市场数据收到大部分资产或负债的输入。 |
| ● | 层级 3: 适用于对于存在反映报告实体对于市场参与者在定价资产或负债时将使用的假设的重要不可观察的输入的资产或负债。例如，层级3输入将涉及在折现未来现金流量方法中使用的未来盈利和现金流量的预测。 |
在2023年12月31日，公司对Eton Pharmaceuticals, Inc.（“Eton”）的投资进行了定期评估。由于其公平价值是通过活跃市场上相同证券的报价价格确定的，公司对Eton的投资被归类为一级。截至2023年12月31日，公司对Eton的投资的公平市值为$
| 8 |
2026年票面金额为基础评价的公司票据（如第11条所定义），包括未摊销的溢价减去未摊销的发行债务成本，2027年票面金额（如第11条所述）减去未摊销的发行债务成本，以及橡树贷款（如第11条所定义）在简明的合并资产负债表上以发行折扣和未摊销的发行债务成本减去票面金额，而公司仅就披露目的呈现公允价值。2026年票据和2027年票据被归类为第1级工具，因为其公平价值是通过在同一证券的活跃市场中使用的报价市场价格来确定的。橡树贷款被归类为第2级工具，其公平价值通过考虑抵押品覆盖、殖利率校准、殖利率分析以及与公司基本措施相关的隐含殖利率调整的收入方法来确定。
下表列出了估计的公平价值及摊销值：
| 2024年9月30日 | 2023年12月31日 | |||||||||||||||
| 账面价值 | 公允价值 | 账面价值 | 公允价值 | |||||||||||||
| 2026票据 | $ | $ | $ | $ | ||||||||||||
| 2027债券 | $ | $ | $ | $ | ||||||||||||
| 橡树贷款 | $ | $ | $ | $ | ||||||||||||
公司其他的财务工具包括现金及现金等价物、应收账款、应付账款和应计费用， 应计工资及相关负债、应付或有对价、递延收入以及客户存款和经营租赁 负债。除了经营租赁负债外，这些财务工具的账面金额因这些工具的短期到期而近似公平价值。根据目前公司可以获得的借款利率，经营租赁负债的账面价值近似其各自的公平价值。
基本每股净亏损是由期间内归于普通股股东的净亏损除以期间内流通的普通股的加权平均数计算而得。稀释每股净亏损是由期间内归于普通股股东的净亏损除以期间内流通的普通股和普通等价证券（如期权、受限股票单位（RSU）和市场表现性股票单位（PSU））的加权平均数计算而得。
采用库藏股法的普通等价证券（来自期权、未发放的RSU和未发放的PSU）是在2024年和2023年9月排除在所呈报期间的稀释每股净亏损的计算中，因为该效应是反稀释的。在基本和稀释每股净亏损计算中包括已授予董事但尚未发行和交付股份的RSU，但该等股份的发行和交付将延迟至董事停止提供服务。2024年和2023年9月底未发行的RSU所基础的股份数分别是 和 在2024年和2023年9月底分别是，并排除在所呈报期间的稀释每股净亏损的计算中，因为该效应是反稀释的。在基本和稀释每股净亏损计算中，包括已授予董事的RSU，但发行和交付股份将延迟至董事停止提供服务。
| 截至9月30日止三个月 | 截至9月30日止九个月 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 分子 – 净损失 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 分母 – 加权平均流通股份数，基本及摊薄 | ||||||||||||||||
| 每股净损，基本与稀释 | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
收入 税收
公司有效税率为 (
| 9 |
截至2024年9月30日和2023年12月31日，存在未确认的税收利益，
Melt Pharmaceuticals, Inc.的投资─关联方
该公司拥有Next Innovation LLC（合资）公司的百分之百股权，该公司正处于第一个结构计划的过程中。该公司在2023年和2024年没有任何活动或运营，NextTrip, Inc.不控制该公司，因此没有记录任何少数股权。 和股票增值权 Melt的优先股股份（合计大约代表
在每季度的基础上，管理层评估是否有任何因数表明公司的权益法投资的账面价值可能是暂时性以外的减值。因数包括被投资者的财务状况、经营绩效和近期前景。在因数表明可能发生价值损失的情况下，该公司将评估定量和定性因素以判断该价值损失是否是暂时性以外的。如果判断潜在的价值损失是暂时性以外的，该公司将根据权益法投资的估计公允价值确认减值损失。该公司在Melt的投资仅限于普通股和优先股，并且没有其他需要向Melt提供资金的要求。
以下表格总结了截至2024年9月30日公司对Melt的投资情况：
| 成本 | 权益法之股份 | Net 帐面 | ||||||||||
| 基础 | 损失 | 价值 | ||||||||||
| 普通股 | $ | $ | ( | ) | $ | |||||||
| 优先股 | ( | ) | ||||||||||
| $ | $ | ( | ) | $ | ||||||||
有关Melt的更多信息和相关方披露详情，请参阅注释4。
会计 在2024年9月30日发出的指导尚未采纳
在 2023年10月，财务会计标准委员会（“FASB”）发布了会计准则更新（“ASU”）2023-06， 披露改善—根据SEC的披露更新和简化倡议的编纂修订这个ASU修改了编纂中各种话题的披露或呈现要求，使其与SEC的规定保持一致。对各种话题的修订应该前瞻性地应用，并且对公司而言，每项修订的生效日期将根据SEC移除相关披露的Regulation S-X或Regulation S-K的生效日期来确定。如果SEC在2027年6月30日之前尚未移除适用的要求，那么ASU 2023-06中的相关修订将被移除，并且不会生效。不允许提前采用这个ASU。公司不预期这个ASU中的修订会对其合并基本报表的披露或呈现产生重大影响。
2023年11月，FASB发布了ASU 2023-07， 分部报告（主题280）- 改善可报告分部披露该标准强化了公司年度和中期合并基本报表中对营运板块所需披露的内容。 ASU 2023-07对本公司的年度报告影响从2024财年开始，对中期报告影响则从2025财年开始，并以追溯的方式进行，要求所有先前期间的所有必要披露须在合并基本报表中呈现。允许提前适用。公司目前正在评估ASU 2023-07对其合并基本报表的影响。
在 2023年12月，财务会计准则委员会发布了ASU 2023-09， 所得税（主题740） - 所得税披露的改善，该准则增强了公司年度合并基本报表中所需的所得税披露要求。值得注意的是，这项ASU要求 实体披露有效税率调节中的特定类别，并提供符合量化门槛的调节项目的额外资讯。ASU 2023-09将于公司在2025财年的年度报告中按前瞻性基础生效。允许提前采用和追溯报告。公司目前正在评估ASU 2023-09对其合并基本报表的影响。
| 10 |
2024年11月，FASb发布了ASU 2024-03。 损益表-报告综合收益-费用分解披露。 旨在改善公众企业对常见费用项目的披露类型。 此ASU将于2026年12月15日后开始的年度报告期间生效，并于2027年12月15日后开始的中期报告期间生效，允许提前采用。 公司目前正在评估ASU 2024-03对其合并财务报表的影响。
备注 3。 营收
公司根据ASC 606与客户签订合同。 客户合同的营业收入该公司有三个主要的营业收入来源： (1) 产品营业收入，包括通过其药房和外包设施销售产品所确认的收入，及通过第三方物流（"3PL"）合作伙伴向批发商销售品牌产品所确认的收入，(2) 从转让获得的产品销售和利润中确认的营业收入，以及 (3) 从知识产权许可及相关安排中确认的营业收入。
产品 收入
公司透过其药房、外包设施和第三方物流合作伙伴直接销售处方药品。公司药房服务的营业收入包括：(i) 客户直接支付给公司的部分价格，扣除任何与成交量或其他优惠有关的折扣支付给客户，(ii) 个人支付给公司的价格，以及(iii) 客户直接支付给药房网络的客户共付款。销售税不包含在营业收入中。根据ASC 606的核心原则，公司已确定以下内容：
| 1. | 识别 与客户的合约： 当客户透过接收处方、在线订单或接收来自客户的采购订单下订单时，合约被视为存在。对于品牌产品，订单通过公司的 3PL合作伙伴接收，客户通过正式的采购订单进行下单并取得产品的所有权。 |
| 2. | 识别 合约中的履行义务： 公司的合约履行义务包括将产品交付给客户，送到他们指定的目的地。根据ASC 606的运输和处理活动，如果客户在发货后控制商品，运输和处理活动将始终被视为履行活动，而不是单独的履行义务。如果客户在发货前控制商品，实体必须做出会计政策选择，将运输和处理活动视为履行成本或作为单独的履行义务。公司已选择将其运输和处理活动视为履行成本。 |
| 3. | 判断 交易价格： 交易价格基于一个反映公司预期获得的对价的金额，扣除预估的折扣、批发商回扣、折让、共付协助及其他扣减（统称为 销售扣减）以及在销售时针对退货和更换的预估。公司利用一家第三方专业服务公司估算与品牌产品销售相关的折扣和回扣。承诺的货物在一年内满足，因此没有任何重大融资成分。与产品销售无关的非现金考量。 |
| 4. | 分配 交易价格至合约中的履行义务： 因为产品销售只有一项履行义务，因此不需要分配。 |
| 5. | 当实体满足履行义务时，确认 营业收入： 产品的营业收入在将控制权 转移给客户时确认。这通常在发货时发生，除非与客户的合同条款规定控制权 于交货时转移。 |
收入 来自转让已收购产品的销售和利润
公司已签订协议，购买与特定眼科产品相关的资产的独家商业权利，来自其他药品公司（“卖方”）。在一段暂时过渡期间，卖方继续制造和销售这些产品并将产品销售的净利润转移给公司。公司从净利润转移的营业收入在卖方计算产品销售利润并经公司确认的时间点予以确认，通常是每月一次，此时公司无需未来履行义务，也无需继续涉及以确认相应收入。每季，卖方向公司开具有关与产品相关客户所作的所有信贷和退款（“退货扣款”）的发票。公司使用历史实际经验来估计与转移的销售和利润相关的退货扣款。估计的退货扣款被记录为减少从收购产品销售和利润转移中的收入，在公司的综合营运报表中作为记录，在确认收入时减少应收帐款在综合资产负债表中。
| 11 |
知识产权许可及相关安排收入
截至2024年9月30日，公司持有五份知识产权许可证及相关安排，根据这些安排，公司同意将公司的知识产权许可或卖给客户使用的权利。许可安排可能包括不可退还的预付许可费、数据转移费、研究报销费、专有专利或专利待申请化合物的专利授权权利、技术访问费，以及各种履约或销售里程碑。这些安排可以是多元素安排，其营业收入在履约义务达到时点予以确认。
非可退还的费用不依赖公司未来的表现，并不需要公司的持续参与，当许可期限开始时，并且已交付许可的数据、技术、复方制剂和/或其他可交付项目，即认列为营业收入。这些可交付项目可能包括复方制剂的实际数量、复方制剂的设计和结构活性关系、概念框架和作用机制，以及复方制剂的专利或专利申请权。如果公司有持续的履行义务，且无此履行义务则许可方无法使用费用附带的技术、权利、产品或服务时，而该履行义务与协议其他要素下公司的表现是独立的，则推迟认列非可退还的费用。此外，如果需要公司持续参与，通过与其所交付的技术相关的研究和开发服务或只有公司能够执行的服务，则此类非可退还的费用将推迟认列并在持续参与期间内分期确认。担保的最低年度权利金将按照适用期限的直线方式确认。
营业收入 按营收来源分解如下：
| 截至三个月结束 | 截至九个月结束的日期 | |||||||||||||||
| 九月三十日， | 九月三十日， | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 产品销售净额 | $ | $ | $ | $ | ||||||||||||
| 其他收入 | ||||||||||||||||
| 总营业收入 | $ | $ | $ | $ | ||||||||||||
2024年9月30日和2023年12月31日的迳收入和客户存入资金分别为$，
注意 4. 对于Melt Pharmaceuticals, Inc.的投资和应收款项-相关方交易
在2018年12月，公司与Melt（“Melt APA”）签订了一份资产购买协议。根据Melt APA的条款，Melt被指定从公司转让某些知识产权和相关权利，用于开发、配制、生产、卖出和转授某些公司意识镇静和止痛相关配方（总称为“Melt产品”）。根据Melt APA的条款，Melt需要在Melt产品的净销售额中向公司支付中位数数字的版税，同时任何专利权仍然有效，以及其他条款。
在2019年2月，公司签订了管理服务协议（"Melt MSA"），根据该协议，公司为Melt提供某些行政服务和支持，包括簿记、网络服务和人力资源相关活动，而Melt则需向公司支付每月$
| 12 |
在
2024年3月，Melt完成了其B系列优先股融资，筹集了大约$的总收益
公司的首席执行官Mark L. Baum是Melt董事会的成员。Melt董事会由五位成员组成，包括Baum先生。Baum先生是公司在Melt董事会中的唯一代表。
Melt的 未经审核的简要业务运营结果信息总结如下：
截至九个月结束的日期 九月三十日， | ||||||||
| 2024 | 2023 | |||||||
| 营业收入 | $ | $ | ||||||
| 营运亏损 | $ | ( | ) | $ | ( | ) | ||
| 净亏损 | $ | ( | ) | $ | ( | ) | ||
Melt的未经审计简明资产负债表信息如下：
| 截至9月30日， | 截至12月31日， | |||||||
| 2024 | 2023 | |||||||
| 流动资产合计 | $ | $ | ||||||
| 总资产 | $ | $ | ||||||
| 总负债 | $ | $ | ||||||
| 股东权益总额 | ||||||||
| 负债和股东权益总额 | $ | $ | ||||||
注意 5。 存货
库存包括完成的混剂配方、非处方和处方零售药品、品牌药品，包括公司在第三方物流供应商处的产品、相关实验室用品和活性药品成分。库存的组成如下：
在九月 30, 2024 | 截至12月31日， 2023 | |||||||
| 原材料 | $ | $ | ||||||
| 进行中的工作 | ||||||||
| 成品 | ||||||||
| 库存总额 | $ | $ | ||||||
注意 6。 预付费用及其他流动资产
预付费用及其资产中包括以下内容:
| 截至2024年9月30日 | 截至2023年12月31日 | |||||||
| 预付保险 | $ | $ | ||||||
| 预付软体许可证和相关费用 | ||||||||
| 预先资助的共同支付援助 | ||||||||
| 其他预付费用存入资金 | ||||||||
| 由Melt应收款项 | ||||||||
| 预付2024买方负担处方药（PDUFA）费用 | ||||||||
| 延后虎树贷款承诺费 | ||||||||
| 存款和其他流动资产 | ||||||||
| 预付费用及其他流动资产总额 | $ | $ | ||||||
| 13 |
备注 7。 财产、植物及设备
资产、 厂房及设备包括以下项目：
| 截至2024年9月30日 | 截至2023年12月31日 | |||||||
| 财产、厂房和设备： | ||||||||
| 电脑硬体 | $ | $ | ||||||
| 家具和设备 | ||||||||
| 实验室和药房设备 | ||||||||
| 租赁改良 | ||||||||
| 累计折旧 | ( | ) | ( | ) | ||||
| $ | $ | |||||||
截至2024年9月30日的三个月和九个月，与物业、厂房及设备有关的折旧金额为$
注意 8。 软体成本大写
资本化 软体成本由以下项目组成：
| 截至2024年9月30日 | 截至2023年12月31日 | |||||||
| 软件成本摊提： | ||||||||
| 资本化的内部使用软件开发成本 | $ | $ | ||||||
| 已取得用于内部使用的第三方软件许可证 | ||||||||
| 用于内部使用的总毛额化软件 | ||||||||
| 累计摊销 | ( | ) | ( | ) | ||||
| 进行中的内部使用软件摊提 | ||||||||
| $ | $ | |||||||
公司在截至2024年和2023年9月30日的三个月内，分别记录了摊销费用，金额为$
备注 9. 无形资产和商誉
2024年9月30日，公司的无形资产包括以下：
摊提 期限 (年) | 成本 | 累积的 摊销 | 净 账面价值 | |||||||||||||
| 专利 | $ | $ | ( | ) | $ | |||||||||||
| 许可 | ( | ) | ||||||||||||||
| 商标 | ||||||||||||||||
| 已取得的新药上市申请 | ( | ) | ||||||||||||||
| 客户关系 | ( | ) | ||||||||||||||
| 商标 | ( | ) | ||||||||||||||
| 非竞争条款 | ( | ) | ||||||||||||||
| 州立药房执照 | ( | ) | ||||||||||||||
| $ | $ | ( | ) | $ | ||||||||||||
| 14 |
无形资产的摊销费用如下：
| 截至三个月结束 | 截至九个月结束的日期 | |||||||||||||||
| 九月三十日， | 九月三十日， | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 专利 | $ | $ | $ | $ | ||||||||||||
| 许可 | ||||||||||||||||
| 已取得的新剂申请 | ||||||||||||||||
| 客户关系 | ||||||||||||||||
| 商标 | ||||||||||||||||
| 州立药房执照 | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
公司截至2024年9月30日的无形资产预估未来摊销费用如下：
| 2024年剩余部分 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 其后 | ||||
| $ |
根据诺华与本公司的资产购买协议，本公司需在首次商业可用的TRIESENCE批次释出后支付里程碑款项。
在截至2024年9月30日的三个月期间，本公司认定首次商业批次释出是很可能的，因此确认了$
有
五百零二万五千五百零五股Sonnet BioTherapeutics Holdings，Inc.的每股股份已发行和流通，截至2024年8月14日。
注释 10. 应付帐款及应计费用
应付帐款和应计费用包括以下内容:
截至 9月30日， | 截至 12月31日, | |||||||
| 2024 | 2023 | |||||||
| 应付账款 | $ | $ | ||||||
| 应计保险费 | ||||||||
| 其他应计付款 | ||||||||
| 应计利息（见附注11） | ||||||||
| Oaktree贷款的累计退出费用（见附注11） | ||||||||
| 应付帐款和应计费用总额 | $ | $ | ||||||
| 减：当期部分 | ( | ) | ( | ) | ||||
| 非流动总累计费用 | $ | $ | ||||||
| 15 |
备注 11。 债务
橡树 2026年到期贷款
在
2023年3月，公司与Oaktree基金管理公司签订了一份信贷协议及担保（“Oaktree贷款”），作为贷款人的管理代理人（“Oaktree”），提供了一项本金金额最高可达$的高级抵押定期贷款设施给公司。
有关Oaktree贷款的利息支出总计为$
该
Oaktree贷款的退出费用等于
HROWM -截至2027年到期的11.875%偿还债券
在2022年12月和2023年1月，公司完成了$的发行。
HROWL – 到期日为2026年的8.625%偿还债券
在2021年4月和9月，本公司完成了总值$（包括2021年5月的超额配售行使）的发行。
公司债务摘要如下：
截至 九月三十日， | 截至 12月31日, | |||||||
| 2024 | 2023 | |||||||
| $ | $ | |||||||
| 橡树贷款到期 | ||||||||
| 减：未摊销的债务发行成本，扣除溢价 | ( | ) | ( | ) | ||||
| $ | $ | |||||||
截至2024年9月30日的三个月和九个月，公司债务的总有效利率为
| 16 |
在2024年9月30日，公司债务未来最低支付如下：
| 金额 | ||||
| 2024年剩余部分 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 总最低支付金额 | ||||
| 减：代表利息支付的金额 | ( | ) | ||
| 应付票据，应付本金总额 | ||||
| 减：未摊销的债务发行成本，扣除溢价 | ( | ) | ||
| 应付票据，扣除未摊销的债务发行成本后净额 | $ | |||
注意 12. 租赁合同
该公司根据以下不可取消的经营租约租赁办公室和实验室空间。这些租约剩余期限介于 在权利益分享区间内，
| ● | 一项
在加州卡尔斯巴德的办公空间的操作租约，面积为 | |
| ● | 一项
在新泽西州莱奇伍德的实验室、仓库和办公空间的操作租约，面积为 | |
| ● | 一份运营租约，用于 | |
| ● | 位于田纳西州纳什维尔的运营租赁，面积为平方英尺，于2022年9月开始，将于 | |
| ● | 在
2024年3月，本公司签订了一份营运租约，租用在田纳西州纳什维尔的 |
2024年9月30日，公司持有的营运租赁所拥有的加权平均增量借款利率和加权平均剩余租赁期限为
截至2024年9月30日的三个和九个月期间，支付于营运租赁负债的现金金额为$
未来于2024年9月30日的营运租赁租金支付如下:
| 营运租赁 | ||||
| 2024年剩余部分 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 其后 | ||||
| 租赁最低支付款总额 | ||||
| 减：代表利息支付的金额 | ( | ) | ||
| 总营运租赁负债 | ||||
| 减：当期部分，营运租赁负债 | ( | ) | ||
| 营运租赁负债，扣除当期部分净额 | $ | |||
| 17 |
普通 股票
在2024年9月30日结束的九个月期间，该公司发行了 分享普通股并收到收益$
在2024年9月30日结束的九个月期间，该公司发行了 普通股股份在无现金行使期权购买时发行 股票行使价格从$起至$ 。
截至2024年9月30日的九个月内，公司发行了 在行使购买期权时以现金方式收取普通股股份 股份，行使价格为每股美元（「第二潮认股权股份」）。。公司暂扣 股普通股作为支付薪资税款，总额为美元.
在2024年9月30日结束的九个月内， 于2021年2月授予公司的临时代码安德鲁·B·博尔(RSUs)已经到期，公司的临时代码金融主管获得执行权。
在2024年9月30日结束的九个月内， 于2021年2月授予公司首席执行官马克·L·鲍姆（Mark L. Baum）的 RSU 已解冻，并
在2024年9月30日结束的九个月内， 2021年2月颁发给公司首席商务主管约翰·萨哈雷克（John Saharek）的 RSUs 已经发放。
在2024年9月30日结束的九个月内， 2021年2月授予的RSU给予多位其他员工，已获得完全行使，并且
在2024年9月30日结束的九个月期间，该公司发行了
在2024年9月30日结束的九个月内， 公司发行给董事的普通股期限股份已经积累， 但这些股票的发行和交付将延迟，直到相关董事停止向公司提供服务。
截至2024年9月30日为止的九个月内， 公司的 普通股所对应的RSU已经给予顾问，但这些股份的发行和交付尚未发生。
股票 期权计划
于2007年9月17日，公司的董事会及股东通过了公司的2007年激励股票和奖励计划，该计划在之后于2008年11月5日、2012年2月26日、2012年7月18日、2013年5月2日和2013年9月27日进行了修订（据修订，称为“2007计划”）。 2007年计划于2017年9月届满，我们不能再根据该计划发行额外的奖励，但是，已经根据2007年计划发行的期权将继续有效，直至行使、到期或被取消/丧失。于2017年6月13日，公司的董事会及股东通过了公司的2017年激励股票和奖励计划，之后于2021年6月3日进行了修订（据修订，称为“2017计划”与2007年计划合称“计划”）。截至2024年9月30日，2017年计划可最多发行 股的公司普通股。这些计划的目的是吸引并留住被认为服务价值重大的董事、高级职员、顾问、顾问和员工，鼓励一种所有权感，并激发这些人对公司发展和财务成功的积极兴趣。 根据这些计划，公司被授权发行旨在符合1986年修订的《1986年内部税收法典》第422条的激励股票期权、非合格的股票期权、RSUs以及受限股票。 这些计划由公司董事会的薪酬委员会管理。 公司在2024年9月30日根据2017年计划尚有 股可供未来在2017年计划下发行。
| 18 |
Stock Options
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||||||
| Options outstanding – January 1, 2024 | $ | |||||||||||||||
| Options granted | $ | |||||||||||||||
| Options exercised | ( | ) | $ | |||||||||||||
| Options cancelled/forfeited | ( | ) | $ | |||||||||||||
| Options outstanding – September 30, 2024 | $ | $ | ||||||||||||||
| Options exercisable | $ | $ | ||||||||||||||
| Options vested and expected to vest | $ | $ | ||||||||||||||
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 shares underlying options with an exercise price lower than the market price on September 30, 2024, based on the closing price of the Company’s common stock of $ on that date.
During the nine months ended September 30, 2024, the Company granted stock options to certain employees. . Certain option awards provide for accelerated vesting if there is a change in control (as defined in the Plans) and in the event of certain modifications to the option award agreement.
The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing model. The 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 %. These factors could change in the future, which would affect the determination of stock-based compensation expense in future periods.
| 2024 | ||||
| Weighted-average fair value of options granted | $ | |||
| Expected terms (in years) | ||||
| Expected volatility | - | % | ||
| Risk-free interest rate | - | % | ||
| Dividend yield | ||||
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
| Range of Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life in Years | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||||
| $ | - $ | $ | $ | |||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | - $ | $ | $ | |||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | - $ | $ | $ | |||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | - $ | $ | $ | |||||||||||||||||||
| $ | $ | $ | ||||||||||||||||||||
| $ | - $ | $ | $ | |||||||||||||||||||
| $ | - $ | $ | $ | |||||||||||||||||||
| 19 |
As of September 30, 2024, there was approximately $ of total unrecognized compensation expense related to unvested stock options granted under the Plans which is expected to be recognized over the weighted-average remaining vesting period of years. The stock-based compensation for all stock options was $ and $ during the three and nine months ended September 30, 2024, respectively, and $ and $ during the same periods in 2023, respectively.
The intrinsic value of options exercised during the nine months ended September 30, 2024 was $.
Restricted Stock Units
RSU awards are granted subject to certain vesting requirements and other restrictions, including time-based and performance-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.
| Number of Shares | Weighted Average Grant Date Fair Value | |||||||
| RSUs unvested - January 1, 2024 | $ | |||||||
| RSUs granted | ||||||||
| RSUs vested | ( | ) | ||||||
| RSUs cancelled/forfeited | ( | ) | ||||||
| RSUs unvested - September 30, 2024 | $ | |||||||
As of September 30, 2024, the total unrecognized compensation expense related to unvested RSUs was approximately $, which is expected to be recognized over a weighted-average period of years, based on estimated and actual vesting schedules of the applicable RSUs. The stock-based compensation for RSUs during the three and nine months ended September 30, 2024 was $ and $, respectively, and was $ and $ during the same periods in 2023, respectively.
Performance Stock Units (Market-Based Vesting)
| Number of Shares | Weighted Average Grant Date Fair Value | |||||||
| PSUs unvested – January 1, 2024 | $ | |||||||
| PSUs granted | ||||||||
| PSUs vested | ||||||||
| PSUs cancelled/forfeited | ||||||||
| PSUs unvested – September 30, 2024 | $ | |||||||
| 20 |
As of September 30, 2024, the total unrecognized compensation expense related to unvested PSUs was approximately $, which is expected to be recognized over a weighted-average period of years, based on estimated and actual vesting schedules of the applicable PSUs. The stock-based compensation for PSUs during the three and nine months ended September 30, 2024 was $ and $, respectively, and $ and $ during the same periods in 2023, respectively.
Stock-Based Compensation Summary
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Employees - selling, general and administrative | $ | $ | $ | $ | ||||||||||||
| Employees - research and development | ||||||||||||||||
| Directors - selling, general and administrative | ||||||||||||||||
| Consultants - selling, general and administrative | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
NOTE 14. COMMITMENTS AND CONTINGENCIES
Legal
General and Other
In the ordinary course of business, the Company is involved in various legal proceedings, government investigations and other matters that are complex in nature and have outcomes that are difficult to predict. The Company describes legal proceedings and other matters that are/were significant or that it believes could become significant in this note.
The Company records accruals for loss contingencies to the extent that it concludes it is probable that a liability has been incurred and the amount of the related loss can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in legal proceedings and other matters that could cause an increase or decrease in the amount of a liability that has been accrued previously.
The Company’s legal proceedings involve various aspects of its business and a variety of claims, some of which present novel factual allegations and/or unique legal theories. Typically, a number of the matters pending against the Company are at early stages of the legal process, which in complex proceedings of the sort the Company faces often extend for several years. While it is not possible to accurately predict or determine the eventual outcomes of matters that have not concluded, an adverse determination in one or more of the matters (whether discussed in this note or not) currently pending may have a material adverse effect on the Company’s condensed consolidated results of operations, financial position or cash flows.
Ocular Science, Inc. et. al
In July 2021, ImprimisRx, LLC, a subsidiary of the Company, filed a lawsuit against Ocular Science, Inc. and OSRX, Inc. (together, “OSRX”) in the U.S. District Court for the Southern District of California, asserting claims for copyright infringement, trademark infringement, unfair competition and false advertising (Lanham Act). Since July 2021, the complaint has been amended and OSRX added counterclaims alleging ImprimisRx, LLC is violating the Lanham Act with false advertising. The Court granted cross motions for summary judgement on each party’s Lanham Act claims thus leaving only ImprimisRx, LLC’s copyright infringement, trademark infringement and unfair competition claims for trial. ImprimisRx, LLC is seeking damages from OSRX. The trial associated with this matter began during the month of November 2024 and is ongoing as of the date of this Quarterly Report.
| 21 |
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.
Indemnities
In addition to the indemnification provisions contained in the Company’s charter 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. Several of the Company’s asset purchase and license agreements contain customary representations, warranties, covenants and confidentiality provisions, and also contain mutual indemnification obligations related primarily to performance under the respective agreements. 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.
Asset Purchase, License and Related Agreements
FDA Approved Product Acquisitions
In
recent years, the Company has acquired commercial and product rights to various FDA approved ophthalmic medications and products through
asset purchase, licenses, supply and/or other related agreements. In general, in exchange for product and commercial rights these agreements
provide the counterparties with certain upfront and contingent milestone payments typically related to certain annual sales amounts and
manufacturing events, and in certain cases, per unit transfer prices and royalties on sales of some of the products. During the three
and nine months ended September 30, 2024, $
Formulation Acquisitions
The Company has acquired and sourced intellectual property rights related to certain proprietary innovations from certain inventors, innovator companies and related parties (the “Inventors”) through multiple asset purchase agreements and license 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 these intellectual property rights, the Company is obligated to make payments to the Inventors based
on the completion of a milestone, generally consisting of: (1) a payment payable within 30 to 45 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 U.S. Food and Drug Administration (“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. During the three and nine months ended September 30, 2024, $
| 22 |
Sales and Marketing Agreements
The Company has entered various sales and marketing agreements with certain organizations to provide exclusive and non-exclusive sales and marketing representation services to Harrow in select geographies in the U.S. in connection with the Company’s ophthalmic pharmaceutical compounded formulations or related products.
Contract Manufacturing
The
Company has entered into manufacturing agreements with respect to third-party contract manufacturers for its FDA approved pharmaceutical
products. Some of these contract manufacturing agreements require minimum annual order amounts. The Company has committed to pay approximately
$
NOTE 15. SEGMENTS AND CONCENTRATIONS
Prior
to the three months ended September 30, 2024, the Company operated its business on the basis of a reportable segment due to the
lack of discrete, precise financial information available to the chief operating decision maker (“CODM”). The CODM does not
review segment assets when assessing segment performance and deciding how to allocate resources. During the three months ended September
30, 2024, refinements were made to the financial reporting information and the Company began reporting on
| ● | The Branded segment includes activities of our FDA approved ophthalmology pharmaceutical products, including the out-licensing of rights to certain of our branded products. | |
| ● | The ImprimisRx segment represents activities in our ophthalmology-focused pharmaceutical compounding business. |
Segment contribution for the segments represents net revenues less cost of sales, certain general and administrative expenses, selling and marketing expenses, and research and development 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 research and development 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. |
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Segment net revenues, segment operating expenses and segment contribution information consisted of the following:
| Three Months Ended September 30, 2024 | ||||||||||||
| Branded | ImprimisRx | Consolidated | ||||||||||
| Product sales, net | $ | $ | $ | |||||||||
| Other revenues | ||||||||||||
| Total revenues | ||||||||||||
| Cost of sales | ( | ) | ( | ) | ( | ) | ||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative | ||||||||||||
| Research and development | ||||||||||||
| Segment contribution | $ | $ | ||||||||||
| Corporate | ||||||||||||
| Research and development | ||||||||||||
| Income from operations | $ | |||||||||||
| Three Months Ended September 30, 2023 | ||||||||||||
| Branded | ImprimisRx | Consolidated | ||||||||||
| Product sales, net | $ | $ | $ | |||||||||
| Other revenues | ||||||||||||
| Total revenues | ||||||||||||
| Cost of sales | ( | ) | ( | ) | ( | ) | ||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative | ||||||||||||
| Research and development | ||||||||||||
| Segment contribution | $ | $ | ||||||||||
| Corporate | ||||||||||||
| Research and development | ||||||||||||
| Income from operations | $ | |||||||||||
| Nine Months Ended September 30, 2024 | ||||||||||||
| Branded | ImprimisRx | Consolidated | ||||||||||
| Product sales, net | $ | $ | $ | |||||||||
| Other revenues | ||||||||||||
| Total revenues | ||||||||||||
| Cost of sales | ( | ) | ( | ) | ( | ) | ||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative | ||||||||||||
| Research and development | ||||||||||||
| Segment contribution | $ | $ | ||||||||||
| Corporate | ||||||||||||
| Research and development | ||||||||||||
| Loss from operations | $ | ( | ) | |||||||||
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| Nine Months Ended September 30, 2023 | ||||||||||||
| Branded | ImprimisRx | Consolidated | ||||||||||
| Product sales, net | $ | $ | $ | |||||||||
| Other revenues | ||||||||||||
| Total revenues | ||||||||||||
| Cost of sales | ( | ) | ( | ) | ( | ) | ||||||
| Gross profit | ||||||||||||
| Operating expenses: | ||||||||||||
| Selling, general and administrative | ||||||||||||
| Research and development | ||||||||||||
| Segment contribution | $ | $ | ||||||||||
| Corporate | ||||||||||||
| Research and development | ||||||||||||
| Income from operations | $ | |||||||||||
All revenue is attributable to the United States. All long-lived assets at September 30, 2024 and December 31, 2023 were located in the United States.
Revenues by segment are further described as follows:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||||||||
| IHEEZO | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
| VEVYE | % | % | % | % | ||||||||||||||||||||||||||||
| Other products (Anterior Segment) | % | % | % | % | ||||||||||||||||||||||||||||
| Other revenue, net | % | % | % | % | ||||||||||||||||||||||||||||
| Branded revenue, net | % | % | % | % | ||||||||||||||||||||||||||||
| ImprimisRx revenue, net | % | % | % | % | ||||||||||||||||||||||||||||
| Total revenues, net | $ | % | $ | % | $ | % | $ | % | ||||||||||||||||||||||||
Other than IHEEZO, VEVYE, and one ImprimisRx product, no other products accounted for more than 10% of total revenues for the periods presented.
Customer and Supplier Concentrations
Substantially
all of the Company’s Branded sales are made to a third-party logistics wholesaler who sells the products to the end-user. There
were no customers who comprised more than
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As
of September 30, 2024 and December 31, 2023, accounts receivable from a single customer accounted for
The
Company receives its active pharmaceutical ingredients from three main suppliers. These suppliers collectively accounted for
NOTE 16. SUBSEQUENT EVENTS
The Company has performed an evaluation of events occurring subsequent to September 30, 2024 through the filing date of this Quarterly Report on Form 10-Q. Based on its evaluation, no events other than those described below need to be disclosed.
In
October 2024, the Company entered into the Second Amendment to Credit Agreement and Guaranty with Oaktree (“Second Amendment”).
Upon satisfaction of certain conditions to funding, the Company drew down the principal amount of $
In November 2024, the Company became aware of a cybersecurity incident that involved unauthorized access of an employee’s email account. Through this unauthorized access the threat actor was able to fraudulently divert Company funds to its bank account. The Company, along with its external cybersecurity experts, is continuing to work diligently to fully investigate and assess the impact of the incident and has notified, and is cooperating with, federal law enforcement. As the investigation of the incident is ongoing, the full scope, nature and impact of the incident are not yet fully known.
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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, 2023 and subsequent reports, which discuss our business in greater detail. As used in this discussion and analysis, unless the context indicates otherwise, the terms the “Company,” “Harrow,” “we,” “us” and “our” refer to Harrow, Inc. and its consolidated subsidiaries, including ImprimisRx, LLC, ImprimisRx NJ, LLC dba ImprimisRx, Imprimis NJOF, LLC, Harrow IP, LLC and Harrow Eye, LLC. In this discussion and analysis, we refer to our consolidated subsidiaries ImprimisRx, LLC, ImprimisRx NJ, LLC and Imprimis NJOF, LLC collectively as “ImprimisRx.”
In addition to historical information, the following discussion contains forward-looking statements regarding future events and our future performance. In some cases, you can identify forward-looking statements by terminology such as “will,” “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “forecasts,” “potential” or “continue” or the negative of these terms or other comparable terminology. All statements made in this Quarterly Report other than statements of historical fact are forward-looking statements. These forward-looking statements involve risks and uncertainties and reflect only our current views, expectations and assumptions with respect to future events and our future performance. If risks or uncertainties materialize or assumptions prove incorrect, actual results or events could differ materially from those expressed or implied by such forward-looking statements. Risks that could cause actual results to differ from those expressed or implied by the forward-looking statements we make include, among others, risks related to: liquidity or results of operations; our ability to successfully implement our business plan, develop and commercialize our products, product candidates and proprietary formulations in a timely manner or at all, identify and acquire additional products, manage our pharmacy operations, 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; general economic and business conditions, including inflation and supply chain challenges; regulatory and legal risks and uncertainties related to our pharmacy operations and the pharmacy and pharmaceutical business in general; physician interest in and market acceptance of our current and any future formulations and compounding pharmacies generally; and the other risks and uncertainties described under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report and in our other filings with the SEC. You should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we undertake no obligation to revise or publicly update any forward-looking statement for any reason.
Overview
We are a leading eyecare pharmaceutical company engaged in the discovery, development, and commercialization of innovative ophthalmic pharmaceutical products for the U.S. market. Harrow helps U.S. eyecare professionals preserve the gift of sight by making its comprehensive portfolio of prescription and non-prescription pharmaceutical products accessible and affordable to millions of Americans each year. We own commercial rights to one of the largest portfolios of branded ophthalmic pharmaceutical products in North America, all of which are marketed under the Harrow name. We also own and operate ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical-compounding businesses.
Factors Affecting Our Performance
We believe the primary factors affecting our performance are (1) our ability to increase revenues of our branded pharmaceutical products, proprietary compounded formulations and certain non-proprietary products, and grow and gain operating efficiencies in our operations, (2) potential and ongoing regulatory-related restrictions, (3) our ability to optimize pricing and obtain reimbursement options for our drug products, and continue to pursue development and commercialization opportunities for certain of our ophthalmology and other assets that we have not yet made commercially available. We believe we have built a tangible and intangible infrastructure that will allow us to scale revenues efficiently in the near and long-term. All of these activities 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.
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Recent Developments
The following is a summary of selected significant developments affecting our business that occurred since December 31, 2023. For additional developments, see our Annual Report on Form 10-K for the year ended December 31, 2023.
Cybersecurity Incident
In November 2024, we became aware of a cybersecurity incident that involved unauthorized access of an employee’s email account. Through this unauthorized access the threat actor was able to fraudulently divert Company funds to its bank account. We detected the incident in a time that management believes minimized any financial, operational or reputational risk to the Company, we believe this early detection will result in an immaterial impact to the Company’s financial results and at no point was our ability to generate revenues disrupted. We, along with our external cybersecurity experts, are continuing to work diligently to fully investigate and assess the impact of the incident and we have notified, and are cooperating with, federal law enforcement. As the investigation of the incident is ongoing, the full scope, nature and impact of the incident are not yet fully known.
TRIESENCE Re-Launch, Oaktree Second Amendment and Draw
In October 2024, we announced the re-launch of TRIESENCE following the successful manufacturing of three process performance qualification batches of the product. In connection with the re-launch, during October 2024 we made a one-time payment of $37,000,000 to Novartis Technology, LLC and Novartis Innovative Therapies AG (together, “Novartis”) pursuant to terms of an asset purchase agreement between Novartis and the Company. Also, during October 2024, we entered into the Second Amendment (the “Second Amendment”) to the Credit Agreement and Guaranty originally entered into on March 27, 2023, as amended by that certain First Amendment to Credit Agreement and Guaranty and Consent, dated as of July 18, 2023 (as amended, the “Oaktree Loan”), with the lenders from time to time party thereto and Oaktree Fund Administration, LLC, as administrative agent for the lenders (“Oaktree”). Upon satisfaction of certain conditions to funding, the Company drew down the principal amount of $30,000,000 (the “$30,000,000 Draw”) under a pre-existing commitment under the Oaktree Loan to partially fund the one-time payment to Novartis.
In the Second Amendment, the Company and Oaktree agreed to certain changes to the Oaktree Loan in connection with the Company’s draw under the Oaktree Loan. Pursuant to the amendment, Oaktree agreed to waive any make-whole costs associated with the $30,000,000 Draw in the event of early repayment of the debt under the Oaktree Loan if paid before March 31, 2025. In addition, Oaktree agreed to exclude the $30,000,000 Draw from the calculation of the Total Leverage Ratio as defined in the Oaktree Loan. No other material changes to the Oaktree Loan were provided in the Second Amendment.
Following entry into the Second Amendment and the funding of the Novartis milestone payment, the Company has drawn down a total principal loan amount of $107,500,000 under the Oaktree Loan and no additional principal loan amount remains available to the Company under the Oaktree Loan.
Apotex - Canadian Out-License
In February 2024, we entered into a license and supply agreement with Apotex Inc. (“Apotex”). Under the terms of the agreement, Apotex licensed exclusive rights and marketing authorizations of the following products in the Canadian market from Harrow: VERKAZIA (cyclosporine ophthalmic emulsion) 0.1% and Cationorm PLUS. Apotex was also granted a license for products Apotex will pursue approval for in Canada: VEVYE (cyclosporine ophthalmic solution) 0.1%, IHEEZO (chloroprocaine hydrochloride ophthalmic gel) 3%, and ZERVIATE (cetirizine ophthalmic solution) 0.24% (with VERKAZIA and Cationorm Plus, collectively, the “Apotex Products”). In exchange for these licenses, Harrow will earn amounts related to manufacturing, regulatory and commercial achievement milestones, in addition to royalties on net sales of the Apotex Products.
IHEEZO Reimbursement
In January 2024, we met with the Centers for Medicare & Medicaid Services (“CMS”) to request clarification related to its anesthesia billing policy which has historically not allowed for the separate billing of anesthesia services in the physician’s office. During the meeting we requested that CMS clarify that J-Code 2403, IHEEZO’s permanent J-Code, is appropriate to be billed for the anesthesia product itself (i.e., IHEEZO in our case) in the physician office setting. In March 2024, we received communication from a representative at CMS that the inclusion of J-Code 2403 in CMS’s April 2024 quarterly drug pricing file of the average sales prices (ASP) of some Medicare Part B-covered drugs and biologicals confirms that IHEEZO is separately payable in the physician office setting.
In February 2024, we made a request to CMS to consider increasing the Medically Unlikely Edits (“MUE”) for IHEEZO’s J-Code from 1 to 2. This request was made because the limitation of one MUE only allowed a single IHEEZO administration (equal to one single-use vial) to be used and billed, while many ophthalmologists perform bilateral ocular procedures, which would require two vials of IHEEZO to be used. On March 20, 2024, we received communication from the National Correct Coding Initiative (NCCI) program of CMS stating that CMS decided to increase the MUE for IHEEZO’s J-Code (J2403) from 1 to 2. The MUE edit was made effective on July 1, 2024.
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VEVYE U.S. Launch
In January 2024, we launched VEVYE (cyclosporine ophthalmic solution) 0.1%, the first and only water-free cyclosporine dissolved in a semifluorinated alkane approved to treat both the signs and symptoms of dry eye disease in the U.S. We partnered with various entities including PhilRx, Apollo Care and PARx Solutions to enhance our market and patient access program for VEVYE.
Results of Operations
The following period-to-period comparisons of our financial results for the three and nine months ended September 30, 2024 and 2023 are not necessarily indicative of results for any future period.
Revenues
Our revenues include amounts recorded from sales of proprietary compounded formulations, sales of branded products to wholesalers through a third-party logistics facility, commissions from third parties and revenues received from royalty payments owed to us pursuant to out-license arrangements. The following presents our revenues:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||
| September 30, | $ | September 30, | $ | |||||||||||||||||||||
| 2024 | 2023 | Variance | 2024 | 2023 | Variance | |||||||||||||||||||
| IHEEZO | $ | 12,882,000 | $ | 5,927,000 | $ | 6,955,000 | $ | 26,498,000 | $ | 10,073,000 | $ | 16,425,000 | ||||||||||||
| VEVYE | 5,186,000 | - | 5,186,000 | 12,099,000 | - | 12,099,000 | ||||||||||||||||||
| Other branded products (Anterior Segment) | 10,256,000 | 6,605,000 | 3,651,000 | 30,808,000 | 13,205,000 | 17,603,000 | ||||||||||||||||||
| Other revenues, net | 228,000 | 1,964,000 | (1,736,000 | ) | 375,000 | 10,585,000 | (10,2109,000 | ) | ||||||||||||||||
| Branded revenue, net | 28,552,000 | 14,496,000 | 14,056,000 | 69,780,000 | 33,863,000 | 35,917,000 | ||||||||||||||||||
| ImprimisRx revenue, net | 20,705,000 | 19,769,000 | 936,000 | 63,003,000 | 59,975,000 | 3,028,000 | ||||||||||||||||||
| Total revenues, net | $ | 49,257,000 | $ | 34,265,000 | $ | 14,992,000 | $ | 132,783,000 | $ | 93,838,000 | $ | 38,945,000 | ||||||||||||
Cost of Sales
Our cost of sales includes direct and indirect costs to manufacture formulations and products, including active pharmaceutical ingredients, personnel costs, packaging, storage, royalties, shipping and handling costs, manufacturing equipment and tenant improvements depreciation, the write-off of obsolete inventory, amortization of acquired product NDAs, and other related expenses.
Branded
The following presents our Branded cost of sales:
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||||||||||||||
| September 30, | $ | September 30, | $ | ||||||||||||||||||||||
| 2024 | 2023 | Variance | 2024 | 2023 | Variance | ||||||||||||||||||||
| Cost of sales | $ | 5,169,000 | $ | 3,335,000 | $ | 1,834,000 | $ | 14,406,000 | $ | 8,396,000 | $ | 6,010,000 | |||||||||||||
The increase in our Branded cost of sales was largely attributable to expenses associated with unit volumes sold.
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ImprimisRx
The following presents our ImprimisRx cost of sales:
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||
| September 30, | $ | September 30, | $ | |||||||||||||||||||||
| 2024 | 2023 | Variance | 2024 | 2023 | Variance | |||||||||||||||||||
| Cost of sales | $ | 6,849,000 | $ | 6,732,000 | $ | 117,000 | $ | 20,704,000 | $ | 19,942,000 | $ | 762,000 | ||||||||||||
The increase in our ImprimisRx cost of sales was largely attributable to expenses associated with unit volumes sold and increased direct and indirect costs associated with production of our products.
Gross Profit and Margin
Branded
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||
| September 30, | $ | September 30, | $ | |||||||||||||||||||||
| 2024 | 2023 | Variance | 2024 | 2023 | Variance | |||||||||||||||||||
| Gross Profit | $ | 23,383,000 | $ | 11,161,000 | $ | 12,222,000 | $ | 55,374,000 | $ | 25,467,000 | $ | 29,907,000 | ||||||||||||
| Gross Margin | 81.9 | % | 77.0 | % | 4.9 | % | 79.4 | % | 75.2 | % | 4.2 | % | ||||||||||||
The increase in Branded gross margin between the three and nine months ended September 30, 2024 and 2023 was primarily attributable to an increase in sales reducing the impact of our fixed expenses, such as license amortization.
ImprimisRx
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||
| September 30, | $ | September 30, | $ | |||||||||||||||||||||
| 2024 | 2023 | Variance | 2024 | 2023 | Variance | |||||||||||||||||||
| Gross Profit | $ | 13,856,000 | $ | 13,037,000 | $ | 819,000 | $ | 42,299,000 | $ | 40,033,000 | $ | 2,266,000 | ||||||||||||
| Gross Margin | 66.9 | % | 65.9 | % | 1.0 | % | 67.1 | % | 66.7 | % | 0.4 | % | ||||||||||||
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 FDA approved, proprietary compounded formulations and other non-proprietary pharmacy products and formulations.
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||||||||||
| September 30, | $ | September 30, | $ | |||||||||||||||||||||
| 2024 | 2023 | Variance | 2024 | 2023 | Variance | |||||||||||||||||||
| Selling, general and administrative | $ | 33,645,000 | $ | 21,033,000 | $ | 12,612,000 | $ | 94,275,000 | $ | 56,878,000 | $ | 37,397,000 | ||||||||||||
The increase in selling, general and administrative expenses between periods was primarily attributable to an increase in expenses including regulatory enhancements, costs to support the transition of recent product acquisitions, and an increase in expenses related to the addition of new employees in sales, marketing and other departments to support current and expected growth, including the commercial launch of VEVYE in December 2023. Stock-based compensation expense increased by $1,227,000 during the nine months ended September 30, 2024 compared to the prior year period.
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Research and Development Expenses
Our research and development (“R&D”) expenses primarily include personnel costs, including wages and stock-based compensation, expenses related to the development of intellectual property, investigator-initiated research and evaluations, formulation development, and other costs related to the clinical development of our assets.
| For the Three Months Ended | For the Nine Months Ended | |||||||||||
| September 30, | $ | September 30, | $ | |||||||||
| 2024 | 2023 | Variance | 2024 | 2023 | Variance | |||||||
| Research and development | $ | 2,273,000 | $ | 1,421,000 | $ | 852,000 | $ | 7,475,000 | $ | 3,316,000 | $ | 4,159,000 |
The increase in R&D expenses between periods was primarily attributable to activity related to our expanded branded product portfolio, technical transfer activities associated with the production of certain products related to our product acquisitions that occurred in 2023, product development efforts, product launches, and clinical and medical support.
Interest Expense, Net
Interest expense, net was $5,525,000 and $16,411,000 for the three and nine months ended September 30, 2024, respectively, compared to $5,749,000 and $16,200,000 for the same periods in 2023, respectively. The decrease during the three months ended September 30, 2024 compared to the same period in 2023 was primarily the result of increased interest income earned. The increase during the nine months ended September 30, 2024 compared to the same period in 2023 was primarily the result from the increase in the outstanding principal amount of our debt obligations.
Investment (Loss) Gain from Eton
During the nine months ended September 30, 2024, we recorded a loss of $3,171,000 related to the change in fair market value of Eton’s common stock at the time of its sale, including trading expenses and commissions of approximately $436,000, compared to a gain of $1,348,000 and gain of $2,676,000 during the three and nine months ended September 30, 2023, respectively.
Loss on Extinguishment of Debt
During the nine months ended September 30, 2023, we recorded a loss on extinguishment of debt of $5,465,000, related to the early payoff of a loan.
Other Income, Net
During the three and nine months ended September 30, 2024, we recorded other income of $4,000 and $76,000, respectively, related to a sublease of lab and office space in Nashville. During the three and nine months ended September 30, 2023, we recorded other expense, net of $195,000 and $344,000, respectively, related primarily to transition services and write-off of inventories associated with the divestment of our non-ophthalmology business.
Liquidity and Capital Resources
Liquidity
Our cash on hand at September 30, 2024 was $72,601,000, compared to $74,085,000 at December 31, 2023.
In October 2024, we made a one-time payment of $37,000,000 upon the achievement of a milestone associated with one of our asset purchase agreements which was funded, in part, from our availability under the delayed draw commitments of our Oaktree debt facility.
As of the date of this Quarterly Report, we believe that our cash and cash equivalents will be sufficient to sustain our planned level of operations and capital expenditures for at least the next 12 months. In addition, we may consider the sale of certain assets including, but not limited to, part of, or all of, our investments in Surface Ophthalmics, Inc. (“Surface”) and Melt Pharmaceuticals, Inc. (“Melt”) and any of our consolidated subsidiaries. However, we may pursue acquisitions of revenue generating products or drug candidates or other strategic transactions that involve large expenditures or we may experience growth more rapidly or on a larger scale than we expect, any of which could result in the depletion of capital resources more rapidly than anticipated and could require us to seek additional financing to support our operations.
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We expect to use our current cash position and funds generated from our operations and any financing to pursue our business plan, which includes developing and commercializing drug candidates, compounded formulations and technologies, integrating and developing our operations, pursuing potential future strategic transactions as opportunities arise, including potential acquisitions of additional drug products, drug candidates, and/or assets or technologies, pharmacies, outsourcing facilities, drug company and manufacturers, and otherwise fund our operations. We may also use our resources to conduct clinical trials or other studies in support of our formulations or any drug candidate for which we pursue FDA approval, to pursue additional development programs or to explore other development opportunities.
Net Cash Flow
The following provides detailed information about our net cash flows:
| For the Nine Months Ended September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash (used in) provided by: | ||||||||
| Operating activities | $ | (4,423,000 | ) | $ | (4,856,000 | ) | ||
| Investing activities | 4,396,000 | (152,350,000 | ) | |||||
| Financing activities | (1,457,000 | ) | 126,546,000 | |||||
| Net change in cash and cash equivalents | (1,484,000 | ) | (30,660,000 | ) | ||||
| Cash and cash equivalents at beginning of the period | 74,085,000 | 96,270,000 | ||||||
| Cash and cash equivalents at end of the period | $ | 72,601,000 | $ | 65,610,000 | ||||
Operating Activities
Net cash used in operating activities during the nine months ended September 30, 2024 was $(4,423,000) compared to $(4,856,000) during the same period in the prior year. The decrease in net cash used in operating activities between the periods was mainly attributed to changes in our working capital balances including accounts receivable, accounts payable, prepaid expenses and inventories.
Investing Activities
Net cash provided by (used in) investing activities during the nine months ended September 30, 2024 was $4,396,000 compared to $(152,350,000) during the same period in the prior year. Cash used in investing activities in 2023 was primarily related to the acquisition of branded products completed in 2023. Cash provided by investing activities in 2024 was primarily related to the sale of our investment in Eton.
Financing Activities
Net cash (used in) provided by financing activities during the nine months ended September 30, 2024 and 2023 was $(1,457,000) and $126,546,000, respectively. Cash used in financing activities during the nine months ended September 30, 2024 was primarily related to payment of payroll taxes upon vesting of RSUs in exchange for shares withheld from employees. Cash provided by financing activities during the nine months ended September 30, 2023 was primarily related to proceeds received from the sale of notes and common stock in our 2023 capital markets transactions and entering into loan arrangements, offset by repayment of the B. Riley senior secured note and payment of payroll taxes upon vesting and exercise of equity instruments in exchange for shares withheld from employees.
Sources of Capital
Our principal sources of cash have consisted of sales of our common stock, debt issuances, sales of our investments, and on an annual basis (e.g. for the year ended December 31, 2023) cash generated from operating activities. We may also sell some or all of our ownership interests in Surface, Melt or our other subsidiaries.
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We may acquire new products, product candidates and/or businesses and, as a result, we may need significant additional capital to support our business plan and fund our proposed business operations. We may receive additional proceeds from the exercise of stock 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. 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 unaudited 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 September 30, 2024. 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 September 30, 2024, the end of the period covered by this Quarterly Report.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings
See Note 14 to our unaudited condensed consolidated financial statements included in this Quarterly Report for information on various legal proceedings, which is incorporated into this Item by reference.
Item 1A. Risk Factors
In addition to the other information contained in this Quarterly Report you should consider the risk factors below which have been updated based on recent events as well as the other risk factors and information in our Annual Report on Form 10-K for the year ended December 31, 2023, including our audited financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If any such risks actually occur, our business, financial condition, results of operations and future growth prospects would likely be materially and adversely affected. In these circumstances, the market price of our common stock would likely decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Our business and operations could 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 that has been determined to have had a material impact, if a significant 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. For example, the California Consumer Privacy Act (the “CCPA”) became effective on January 1, 2020 and gave California residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation. Although the CCPA includes exemptions for certain clinical trials data, and HIPAA-protected health information, the law may increase our compliance costs and potential liability with respect to other personal information we collect about California residents. The CCPA has prompted a number of proposals for new federal and state privacy legislation. Other countries also have, or are developing, laws governing the collection, use and transmission of personal information, such as the General Data Protection Regulation (“GDPR”) in the European Union (the “EU”) that became effective in May 2018 and the Personal Information Protection and Electronic Documents Act that became effective in Canada in April 2000. We anticipate that over time we may expand our business outside of the United States. With such expansion, we would be subject to increased governmental regulation in the EU countries in which we might operate, including the GDPR. These laws and similar laws adopted in the future could increase our potential liability, increase our compliance costs and adversely affect our business. 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.
A breakdown of our information technology systems, or a cyberattack or information security breach could significantly compromise the confidentiality, integrity and availability of our information technology systems, network-connected control systems and/or our data, interrupt the operation of our business and/or affect our reputation.
To achieve our business objectives, we rely on sophisticated information technology systems, including hardware, software, technology infrastructure, online sites and networks for both internal and external operations, mobile applications, cloud services and network-connected control systems, some of which are managed, hosted, provided or serviced by third parties. Internal or external events that compromise the confidentiality, integrity and availability of our systems and data may significantly interrupt the operation of our business, result in significant costs and/or adversely affect our reputation.
Our information technology systems are highly integrated into our business, including our customer service infrastructure, R&D efforts, clinical and commercial manufacturing processes and product sales and distribution processes. Further, as the large part of our employees work remotely for some portion of their jobs, our reliance on our third-party information technology systems has increased substantially and is expected to continue to increase. Remote and hybrid working arrangements can increase cybersecurity risks due to the challenges associated with managing remote computing assets and security vulnerabilities that are present in many non-corporate and home networks. The complexity and interconnected nature of software, hardware and our systems make them vulnerable to breakdown or other service interruptions, and to software errors or defects, misconfiguration and other security vulnerabilities. Upgrades or changes to our systems or the software that we use have resulted and we expect, in the future, will result in the introduction of new cybersecurity vulnerabilities and risks. Our systems are also subject to frequent perimeter network reconnaissance and scanning, phishing and other cyberattacks. As the cyber-threat landscape evolves, these attacks are growing in frequency, sophistication, and intensity, and are becoming increasingly difficult to detect and increasingly sophisticated in using techniques and tools—including artificial intelligence—that circumvent security controls, evade detection and remove forensic evidence. Such attacks could include the use of harmful and virulent malware, including ransomware or other denials of service, which can be deployed through various means, including the software supply chain, e-mail, malicious websites and/or the use of social engineering/phishing.
We have experienced attacks against our network, although none that have had a material adverse impact to our business. Recently, in November 2024, we became aware of a cybersecurity incident that involved unauthorized access of an employee’s email account. Through this unauthorized access the threat actor was able to fraudulently divert Company funds to its bank account. We detected the incident in a time that management believes minimized the financial, operational or reputational risk to the Company, and at no point was our ability to generate revenues disrupted. However, we, along with our external cybersecurity experts, are continuing to work diligently to fully investigate and assess the impact of the incident and have notified, and are cooperating with, federal law enforcement. As the investigation of the incident is ongoing, the full scope, nature and impact of the incident are not yet fully known.
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There can be no assurance that our efforts to guard against the wide and growing variety of potential attack techniques will be successful. Attacks such as those experienced by government entities (including those that approve and/or regulate our products) and other multi-national companies, including some of our peers, could leave us unable to utilize key business systems or access or protect important data, and could have a material adverse effect on our ability to operate our business, including developing, gaining regulatory approval for, manufacturing, selling and/or distributing our products. For example, in 2017, a pharmaceutical company experienced a cyberattack involving virulent malware that significantly disrupted its operations, including its research and sales operations and the production of some of its medicines and vaccines. As a result of the cyberattack, its orders and sales for certain products were negatively affected. In late 2020, SolarWinds Corporation, a leading provider of software for monitoring and managing information technology infrastructure, disclosed that it had suffered a cybersecurity incident whereby attackers had inserted malicious code into legitimate software updates for its products that were installed by myriad private and government customers, enabling the attackers to access a backdoor to such systems. In 2022, Okta, Inc., a provider of software that helps companies manage user authentication, disclosed that several hundred of its corporate customers were vulnerable to a security breach that allowed attackers to access Okta’s internal network. Although this breach did not have a significant effect on our business, there can be no assurance that a similar future breach would not result in a material adverse effect on our business or results of operations.
Our systems contain and use a high volume of sensitive data, including intellectual property, trade secrets and other proprietary business information, financial information, regulatory information, strategic plans, sales trends and forecasts, litigation materials and/or personal identifiable information belonging to us, our staff, our patients, customers and/or other parties. In some cases, we utilize third-party service providers to collect, process, store, manage or transmit such data, which have increased our risk. Intentional or inadvertent data privacy or security breaches (including cyberattacks) resulting from attacks or lapses by employees, service providers (including providers of information technology-specific services), business partners, nation states (including groups associated with or supported by foreign intelligence agencies), organized crime organizations, “hacktivists” or others, create risks that our sensitive data may be exposed to unauthorized persons, our competitors or the public. System vulnerabilities and/or cybersecurity breaches experienced by our third-party service providers constitute a substantial share of the information security risks to our business. There can be no assurance that a cybersecurity incident would not result in a material adverse effect on our business or results of operations. Further, the timeliness of our awareness of a cybersecurity incident affects our ability to respond to and work to mitigate the severity of such events.
Cyberattackers are also increasingly exploiting vulnerabilities in commercially available software from shared or open-source code. We rely on third party commercial software that have had and may have such vulnerabilities, but as use of open-source code is frequently not disclosed, our ability to fully assess this risk to our systems is limited. There can be no assurances that a vulnerability in the software and services that we use would not result in a material adverse effect on our business or results of operations.
Domestic and global government regulators, our business partners, suppliers with whom we do business, companies that provide us or our partners with business services and companies we have acquired or may acquire face similar risks. Security breaches of their systems or service outages have adversely affected systems and could, in the future, affect our systems and security, leave us without access to important systems, products, raw materials, components, services or information, or expose our confidential data or sensitive personal information. An extended service outage affecting these or other vendors, particularly where such vendor is the single source from which we obtain the services, could have a material adverse effect on our business or results of operations. For example, in February 2024, UnitedHealth Group announced that a suspected nation-state associated cyber security threat actor had gained access to some of the Change Healthcare (“Change”) information technology systems. Change is the largest clearinghouse for medical claims in the U.S. While Harrow was not directly impacted by this cybersecurity incident, it was reported that as a reaction to the cybersecurity incident, Change temporarily disconnected over 100 related payment systems and Change was unable to process medical claims through its primary platforms. This resulted in the delays to the revenue and cash collection cycle for several ASCs and physician offices, putting a strain on their cash resources. While temporary, the cash constraints for these ASCs and physician offices, we believe, impacted sales of some of our products, such as IHEEZO, during this disrupted period of time. In addition, we distribute our products in the United States primarily through three pharmaceutical wholesalers, and a security breach that impairs the distribution operations of our wholesalers could significantly impair our ability to deliver our products to healthcare providers and patients. There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls, or procedures, will be effective in protecting our information technology systems and sensitive data.
We will continue to experience varying degrees of cyberattacks and other incidents in the future. Even though we continue to invest in the monitoring, protection and resilience of our critical and/or sensitive data and systems, there can be no assurances that our efforts will detect, prevent or fully recover systems or data from all breakdowns, service interruptions, attacks and/or breaches of our systems that could adversely affect our business and operations and/or result in the loss or exposure of critical, proprietary, private, confidential or otherwise sensitive data, which could result in material financial, legal business or reputational harm to us or negatively affect our stock price. While we maintain cyber-liability insurance, our insurance is not sufficient to cover us against all losses that could potentially result from a service interruption, breach of our systems or loss of our critical or sensitive data.
We are also subject to various laws and regulations globally regarding privacy and data protection, including laws and regulations relating to the collection, storage, handling, use, disclosure, transfer and security of personal data. The legislative and regulatory environment regarding privacy and data protection is continuously evolving and developing and the subject of significant attention globally. For example, we are subject to the CCPA, which became effective in January 2020, which can result in substantial penalties for noncompliance. The CCPA was amended in late 2020, to create the California Privacy Rights Act to create opt in requirements for the use of sensitive personal data and the formation of a new dedicated agency for the enforcement of the law, the California Privacy Protection Agency. Similar consumer privacy laws went into effect in Virginia, Colorado, Utah, Connecticut and Florida in 2023. Consumer privacy laws were also passed in 11 other states, with the earliest effective dates later this year, and proposed in three additional states. Failure to comply with these current and future laws could result in significant penalties and reputational harm and could have a material adverse effect on our business and results of operations.
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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
| * | Filed herewith. |
| ** | Furnished herewith. |
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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, Inc. | ||
| Dated: November 14, 2024 | 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) | ||
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