HARROW, INC. (HROW)

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto contained in Part I, Item 1 of this Quarterly Report on Form 10-Q (this “Quarterly Report”). Our condensed consolidated financial statements have been prepared and, unless otherwise stated, the information derived therefrom as presented in this discussion and analysis is presented, in accordance with GAAP.

The information contained in this Quarterly Report is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this Quarterly Report and in our other reports filed with the U.S. Securities and Exchange Commission (the “SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2025 and subsequent reports, which discuss our business in greater detail. As used in this discussion and analysis, unless the context indicates otherwise, the terms the “Company,” “Harrow,” “we,” “us” and “our” refer to Harrow, Inc. and its consolidated subsidiaries, including ImprimisRx, LLC, ImprimisRx NJ, LLC dba ImprimisRx, Imprimis NJOF, LLC, Harrow IP, LLC and Harrow Eye, LLC. In this discussion and analysis, we refer to our consolidated subsidiaries ImprimisRx, LLC, ImprimisRx NJ, LLC and Imprimis NJOF, LLC collectively as “ImprimisRx.”

In addition to historical information, the following discussion contains forward-looking statements regarding future events and our future performance. In some cases, you can identify forward-looking statements by terminology such as “will,” “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “forecasts,” “potential” or “continue” or the negative of these terms or other comparable terminology. All statements made in this Quarterly Report other than statements of historical fact are forward-looking statements. These forward-looking statements involve risks and uncertainties and reflect only our current views, expectations and assumptions with respect to future events and our future performance. If risks or uncertainties materialize or assumptions prove incorrect, actual results or events could differ materially from those expressed or implied by such forward-looking statements. Risks that could cause actual results to differ from those expressed or implied by the forward-looking statements we make include, among others, risks related to: liquidity or results of operations; our ability to successfully implement our business plan, develop and commercialize our products, product candidates and proprietary formulations in a timely manner or at all, identify and acquire additional products, or complete pending acquisitions on terms and in the timeframe expected, or at all, manage our pharmacy operations, refinance and otherwise service our debt, obtain financing necessary to operate our business, recruit and retain qualified personnel, manage any growth we may experience and successfully realize the benefits of our previous acquisitions and any other acquisitions and collaborative arrangements we may pursue; the ongoing communications with the U.S. Food and Drug Administration relating to compliance and quality plans at our outsourcing facility in New Jersey; competition from pharmaceutical companies, outsourcing facilities and pharmacies; general economic and business conditions, including inflation and supply chain challenges; regulatory and legal risks and uncertainties related to our pharmacy operations and the pharmacy and pharmaceutical business in general; physician interest in and market acceptance of our current and any future formulations and compounding pharmacies generally; and the other risks and uncertainties described under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report and in our other filings with the SEC. You should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made and, except as required by law, we undertake no obligation to revise or publicly update any forward-looking statement for any reason.

Overview

We are a leading eyecare pharmaceutical company engaged in the discovery, development, and commercialization of innovative ophthalmic pharmaceutical products for the U.S. market. We help U.S. eyecare professionals preserve the gift of sight by making our comprehensive portfolio of prescription and non-prescription pharmaceutical products accessible and affordable to millions of Americans each year. We own commercial rights to one of the largest portfolios of branded ophthalmic pharmaceutical products in North America, all of which are marketed under the Harrow name. We also own and operate ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical-compounding businesses.

Factors Affecting Our Performance

We believe the primary factors affecting our performance are our ability to increase revenues of our branded pharmaceutical products, proprietary compounded formulations and certain non-proprietary products, grow and gain operating efficiencies in our operations, avoid or mitigate any potential regulatory-related restrictions, optimize pricing and obtain reimbursement options for our drug products, and continue to pursue development and commercialization

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opportunities for certain of our ophthalmology and other assets that we have not yet made commercially available. We believe we have built a tangible and intangible infrastructure that will allow us to scale revenues efficiently in the near and long-term. All of these activities may require significant costs and other resources, which we may not have or be able to obtain from operations or other sources. See “Liquidity and Capital Resources” below.

Recent Developments

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

8.625% Senior Notes Due 2030

In March 2026, we entered into the First Supplemental Indenture to the Indenture dated September 12, 2025 pursuant to which we issued $50,000,000 aggregate principal amount of additional 8.625% Senior Notes due 2030 (the “New Notes”). The New Notes were issued at 100.25% of par value and resulted in net proceeds to us of $48,445,000 after deducting underwriting discounts, commissions and other offering expenses of $1,555,000. The New Notes, together with the 8.625% Senior Notes due 2030 issued in September 2025 (the “Existing Notes”) (together, the “2030 Notes”) are treated as a single series and have the same terms as the Existing Notes. The issuance costs and premium relating to the New Notes were deferred and will be recognized as interest expense using the effective-interest method over the remaining term of the debt.

Acquisition of TYRVAYA®

In August 2026, the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Viatris Inc. and certain of its subsidiaries (collectively, “Viatris”), pursuant to which we agreed to acquire the global rights to TYRVAYA® (varenicline solution) nasal spray 0.03% (“TYRVAYA”), a cholinergic agonist indicated for the treatment of the signs and symptoms of dry eye disease (the “Acquisition”).

As consideration for the Acquisition, we will pay Viatris $30,000,000 in cash at the closing of the Acquisition (the “Closing”) and have agreed to pay up to an additional $70,000,000 in contingent milestone payments, payable if specified annual net sales thresholds for TYRVAYA are achieved in certain calendar years following the Closing. The Company expects to fund the cash payment due at Closing with cash on hand. The purchase price is subject to a customary post-closing adjustment based on the net working capital transferred at the Closing.

Results of Operations

The following period-to-period comparisons of our financial results for the three and six months ended June 30, 2026 and 2025 are not necessarily indicative of results for any future period.

Revenues

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

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The following presents our revenues for the three and six months ended June 30, 2026 and 2025:

The increase in Branded revenues was primarily related to an increase in VEVYE volume and other branded products, such as TRIESENCE, offset by a decrease in IHEEZO volume for both the three and six months ended June 30, 2026 compared to the same periods in 2025. The decrease in compounding revenue was primarily due to a decrease in volume and the discontinuation of sales of our Klarity-C compounded formulation which occurred during the second quarter of 2025.

Cost of Sales, Gross Profit and Gross Margin

Our cost of sales includes direct and indirect costs to manufacture formulations and sell products, including active pharmaceutical ingredients, personnel costs, packaging, storage, royalties, shipping and handling costs, manufacturing equipment and tenant improvements depreciation, the write-off of obsolete inventory, amortization of acquired product rights, and other related expenses.

Branded

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

As
used in this discussion and analysis, unless the context indicates otherwise, the terms the “Company,” “Harrow”
“we,” “us” and “our” refer to Harrow, Inc. and its consolidated subsidiaries, including Imprimis
RxNJ, LLC, Imprimis NJOF, LLC, ImprimisRx, LLC, Harrow IP, LLC and Harrow Eye, LLC.

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Overview

We
are a leading provider of ophthalmic disease management solutions in North America, and were founded with a commitment to deliver safe,
effective, accessible, and affordable medications that enhance patient compliance and improve clinical outcomes. For over a decade, we
have partnered with U.S. eyecare professionals to develop a comprehensive portfolio of high-quality products used to manage ophthalmic
conditions affecting both the front and back of the eye, such as dry eye disease, wet (or neovascular) age-related macular degeneration,
cataracts, refractive errors, glaucoma, and a range of other ocular surface conditions and retina diseases. By prioritizing clinical
value – to the provider and the patient – Harrow empowers professionals to enhance patient outcomes and preserve vision.
By combining our culture of creativity, entrepreneurship and groundbreaking innovation with operational discipline and strong financial
performance, we are building a future where life-changing ophthalmic treatments are within reach for all.

Factors
Affecting Our Performance

We
believe the primary factors affecting our performance are our ability to increase revenues of our branded pharmaceutical products, grow
and gain operating efficiencies in our operations, avoid or mitigate any potential regulatory-related restrictions, optimize pricing
and obtain reimbursement options for our drug products, and continue to pursue development and commercialization opportunities for certain
assets that we have not yet made commercially available. We believe we have built a tangible and intangible infrastructure that will
allow us to scale revenues efficiently in the near and long-term. All of these activities will require significant costs and other resources,
which we may not have or be able to obtain from operations or other sources. See “Liquidity and Capital Resources” below.

Recent
Developments

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

Commercial
and Sales Force Expansions

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

Acquisition
of Remaining Interests in Melt Pharmaceuticals, Inc.

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

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

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

Fifth
Third Revolving Credit Facility

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

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

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

Harrow
Access for All

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

8.625%
Senior Notes Due 2030 and Payoff of Prior Debt

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

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

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

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BYOOVIZ®
and OPUVIZTM – Commercialization Agreement

In
July 2025, we entered into a development and commercialization agreement (the “Samsung Agreement”) with Samsung Bioepis Co.,
Ltd. (“Samsung”). Under the terms of the Samsung Agreement, following completion of the transition of commercial rights from
Biogen, Inc. back to Samsung, Samsung will develop, manufacture, and supply BYOOVIZ (ranibizumab-nuna) and OPUVIZ (aflibercept-yszy)
(individually, a “Product” and together, the “Products”) for Harrow to commercialize in the U.S. market (the
“Rights”). In consideration of the Rights, we made a one-time upfront payment to Samsung of $4,000,000 in February 2026,
and Samsung will be eligible to receive additional one-time payments based on the achievement of net sales-based milestones of the Products.
In addition to other mutually agreed terms, we shall pay to Samsung a share of net sales from the Products generated in the U.S. market.
We expect BYOOVIZ to be available in the middle of 2026 and OPUVIZ to be available in the middle of 2027.

Acquisition
of Commercial Rights to BYQLOVITM

In
June 2025, we announced a licensing agreement whereby we acquired the exclusive U.S. commercial rights to BYQLOVI (clo

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