Good afternoon. And welcome to the conference call covering Harrow Health Financial Results and Business Update for the First Quarter of 2019. My name is Christy and I will be your operator for today. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. By now you should have received a copy of the earnings press release. If you have not received a copy please go to the Investor Relations page of the company's Web site at www.harrowinc.com. Before we begin today, let me remind you that the company's remarks include forward-looking statements within the meaning of federal securities law. Forward-looking statements are subject to numerous risks and uncertainties many of which are beyond Harrow Health control including risks and uncertainties described from time-to-time in its SEC filings such as the risks and uncertainties related to the company's ability to make commercially available its compounded formulations and technologies and FDA approval of certain drug candidates in a timely manner or at all. For a list and description of those risks and uncertainties, please see the Risk Factors section of the company's most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. Harrow Health results may differ materially from those projected. Harrow's disclaims any intention or obligation to update or revise any financial projections or forward-looking statements whether because of new information future events or otherwise. This conference call contains time sensitive information and as accurate only as of today. Additionally, Harrow will refer to non-GAAP financial metrics specifically adjusted EBITDA and or adjusted earnings. A reconciliation of any non-GAAP measures with the most directly comparable GAAP measures is included in the company's press release available on the Web site. With that I would like to turn the call over to Mark Baum, Chief Executive Officer of Harrow. Mark?

Thanks for joining us. Today we will cover our Q1 2019 numbers and talk about our plan to continue to grow, focus on what's working and continue to drive innovation and shareholder value. Andrew is going to add additional color to our financial results and discuss our new segmented financial reporting. Less than 60 days ago, Harrow Health reported 2018 consolidated year-over-year revenue growth of 55% and 78% year-over-year revenue growth for a market leading ImprimisRx ophthalmology business. I'm happy to report that Q1 of 2019 was yet another record quarter for Harrow Health and ImprimisRx. Our ImprimisRx ophthalmology business recorded record high revenues for Q1 accounting for nearly 90% of overall revenue and is on pace to achieve our $100 million revenue run rate goal in 2021. Consolidated gross margins hit a record high, our portfolio of equities in our spin out businesses hit a record high non-GAAP value of $57 million. And critically from an innovation and future value creation perspective in my view the past 90 days has been the most productive and exciting period of development by our team since the company was founded in 2011. When you purchase a share of Harrow Health stock you're buying a stake in a growing portfolio of pharmaceutical focused businesses all with the potential value creation catalysts traditionally associated with pharmaceutical investing. Our businesses are developing and in some cases commercializing pharmaceutical solutions for large markets in order to solve unmet needs. They're led by seasoned pharma industry veterans with records of success in their respective therapeutic areas. Our businesses are financed to reach critical value creating milestones and importantly our businesses are founded to be impactful and important to the patients and physicians they will ultimately serve. Now let's talk about our first quarter. Revenue grew to another…

Good day everyone. Thank you for taking the time to join our call today. As Mark mentioned during the first quarter of 2019 we continue to experience the strong growth we've seen in recent times. Total revenues for the first quarter were $12.3 million compared to $8.9 million a year ago, a 39% increase and an 8% increase from the fourth quarter of 2018 to the first quarter of 2019. Total cost of sales in the first quarter 2019 was $3.9 million yielding a gross profit of $8.4 million and a gross margin of 68% compared to a gross profit of $4.8 million the prior year and a gross margin of 54%. As we've seen over the past few quarters revenue growth was driven primarily by our ImprimisRx ophthalmology business with a strong increase in revenues associated with chronic care formulations. This chronic care business for ImprimisRx was almost non-existent 18 months ago. As we have predicted is becoming an important part of our revenue stream and we continue to add more and more recurring prescriptions to our order queues, trends we expect to continue. Gross revenues from our chronic care formulations have increased 165% year-over-year. And these types of formulations are now contributing more than $1 million of revenue a quarter and we expect these revenues will continue to make up the greater part of the overall revenue story in the medium term. Operating expenses totaled $8.95 million which resulted in a loss from operations of $556,000 during the first quarter of 2019. Our first quarter operating expenses included roughly $1.3 million in costs associated with settling and defending legal matters. Compared to the first quarter last year, we reported operating expenses of $6.6 million and the operating loss of approximately $1.8 million. This was the first quarter we…

Thanks, Andrew. Our team is focused and continues to deliver in terms of revenue growth, adjusted EBITDA, gross margin expansion, customer accounts, balance sheet value and equity we hold in deconsolidated businesses and nearly every critical metric we track. We believe there is value in our market leading ImprimisRx ophthalmology business, our 505(b)(2) focused pharmaceutical companies and our IP portfolio and much of that value is yet to be reflected in our share price. As we continue to grow revenue and create more pharmaceutical companies of significance, we expect shareholders will be rewarded. I am appreciative of shareholders who share our vision and see the long-term potential for our business to deliver exceptional returns. Our team appreciates your continued votes of confidence. Last and certainly not least I would also like to voice my sincere gratitude for all of our employees as they work hard to deliver on the promises that we make on these calls. Through their diligent and committed efforts Harrow Health in my view has never been stronger and more valuable. With that said operator please open the line to questions from today's participants.

Thank you. [Operator Instructions] And we'll take the first question from Brooks O'Neil with Lake Street Capital.

Yes. Thanks guys. Frank on for Brooks. Nice start to the year. I had a couple of questions. First, I don't know if you said it or not and I missed it, but I'd like to talk about chronic care refills a little bit. If I remember correctly Q3 '18 was about 30% of new customers, Q4 was 40%, Q1 you said you're on pace to hit about 50% of new customers. Is this holding true? And then, could you also touch on some of the puts and takes you seeing that this chronic care refills and kind of how you're looking at this throughout the rest of the year?

Thanks for the question Frank. So we have certainly hit the target that we set in terms of the number of customers who are prescribing - a number of new customers who are prescribing chronic care formulations. So we achieved that -- the team achieved that. And in terms of the importance of that we're seeing is that the number of these refill customers growing. And as I said on prior calls, you sort of get the power of economic compounding and we're starting to see that happen. This will become as Andrew alluded to a more important part of our overall revenue picture in the coming quarters. So it's an exciting new part of our business and not only do we intend to grow the number of customers who are prescribing these formulations and the number of patients who are receiving those formulations, but we also intend to innovate in that segment as well. There are areas within what would traditionally be called a chronic care ophthalmic medicine that we intend to enter and I alluded to that as well in terms of presbyopia. Once again another very large chronic care market in ophthalmology that is not served at all presently.

That's great. That's very helpful. Secondly, going on to a total market opportunity, I'm aware of how large all of these different markets that you guys are participating in your core ophthalmology business or just kind of curious how you guys are viewing overall -- your guys penetration and internally how you think that's going to scale and maybe where you could get in the next say three to five years?

Yes. So, in terms of the overall market opportunity the total addressable market for the FDA approved medicines is certainly in the billions. We're not selling FDA approved medicines within our ImprimisRx business. So, it's a little bit different. We don't accept insurance as you know, we've really deconstructed the value chain and account all of the middle people which creates efficiencies for us. It saves patients a lot of brain damage and physicians offices and their staff a lot of the same challenges when they buy from us. But the overall addressable market is certainly near a billion dollars or more. We're quite happy with our penetration rates within the segments that we play in. We're oftentimes serving unmet needs in the marketplace, patients that have challenges with compliance with existing FDA approved medications, we make medicines for those patients. Patients who can't afford their medications. We serve those folks. So I think we're doing a great job. We can only grow so fast. I think our growth rates have been tremendous. Our team is doing an amazing job certainly within ophthalmology 57% growth year-over-year is tremendous. So I think we're growing at a rate that we can continue to deliver the kinds of levels of service that our customers expect. And in terms of scalability, within that a lot of the segments that we play in, we really for example in chronic care, I mentioned the Klarity C formulation. We are really at the very, very infancy of the value that we can create with that one formulation let alone some of the others that that are in our portfolio. So our business is in many areas is really at its infancy within ophthalmology. We have the resources certainly the infrastructure or the physical infrastructure to scale our business well beyond the $100 hundred million revenue mark that that we have targeted. And as you note from our CapEx, our CapEx was fairly low this quarter in fact most of our CapEx was actually for a phone system so that we can answer all the calls that we received from our customers. So business is doing well. It's in its infancy and it is certainly scalable as you'll see over the coming periods.

Okay. That's great. I just have two more, talking about the sales force a little bit. Can you give us an update on how big the current sales force is? And then, as you start to scale through the end of the year and next year as well how much variation do you think we could see in that SG&A line or sales or marketing line?

Yes. So, in terms of our sales force, I don't know the exact number of folks that we have on board now. Our W-2 force is the same. It's a handful of well-trained committed long-term people that have been with us and do a terrific job. I mentioned last year that we integrated a 1099 sales force and grew that I think the number is in the 60 to 70 range now. And I met with a lot of those folks actually at our ASCRS meeting and they're doing a terrific job delivering. I think the biggest change that we've made in the last couple of quarters has been that we've also integrated an internal sales force as well. So there's a process that we employ using W-2s 1099 and also inside sales folks as well. So, we've got a really nice integrated strategy and a terrific team that is delivering for us. And in terms of variation, I think you're asking about variation over the coming periods within the sales force. I think that we'll see -- we'll start to rely more and more on our inside sales team in order to scale our presence within the practices that we serve and they're doing a great job and I think they'll continue to do that for us.

Okay. And then, lastly, on the litigation front what can you provide us as far as timelines go specifically with the Allergan case kind of how you are thinking about when that could be resolved? And any other major updates on the other litigation that's novel and non-novel drug?

Well, I promised I think was it our last call, that we were going to hard charge to get those matters behind us and to resolve those cases along with the cost connected to those matters and we're delivering. We resolved the Sobol matter. We as I said here a few moments ago resolved the matter with the Board of Pharmacy and we continue to tick-off these matters and the costs related to them and you'll start to see that reflected in our numbers as Andrew alluded to in the back half of the year. Starting really at the beginning of the third quarter towards the Allergan case goes, I've said in the past and we're not going to comment on that matter specifically other than to say that we have a strategy that we're confident in and we're prepared. The trial is actually starting today. And I continue to believe that Allergan has not suffered damages as it regards -- as it relates to our activities. So we don't think they're going to be able to show that they've suffered any damages ultimately and that's what the matter is about, damages.

Awesome. That's very helpful. Thank you guys and congratulations on Q1.

Thank you, Frank.

Our next question comes from Andrew D'Silva with B. Riley FBR. Please go ahead.

Hey good afternoon. Thanks for taking my questions. Just a couple of quick ones here. And I'm sorry, I was bouncing between calls, I may have missed this when you talked about it. But I noticed your New Jersey A facility got registered in California. And I was just curious what the timeline and next steps right now are for the outsourcing facility to get registered in the state?

Well that's a really great question Andy and thanks for it. And we have our application in with the authorities in California and my understanding is, it's complete and we stand ready to be inspected by California and so we expect that really at anytime, there's no way that we can predict when we'll receive that license to the extent we do. But the application is in.

So everything is on your end. It's really just -- the bureaucratics if at all.

The state authorities have to inspect us. And we are anxiously awaiting that inspection. We're ready for them.

Got it. Okay, perfect. And as it relates to the Allergan case, I'm not trying to get anything from a timing or strategy standpoint, I just -- my memory is failing me a little bit right now, but I recall going through one of the transcripts as it related to expert deposition from a total monetary damages standpoint. I forgot what the total amount was, but I remember not being very significant. Could you -- I believe this was before that last court order that came out where they said half of that was valid. Can you refresh my memory on what that amount was?

I believe it was their damages expert who was really their only expert witness on damages said that their damages were $2.8 million.

2.8, okay. But they spent more than that in legal fees. And then, just the final question for me, I was going through Eton's 10-Q, saw that you bought back the right to CT100. Just curious on what cause for the reversal was there and what the strategy is with the candidate going forward. Are you trying to build another spin on around it? Just a color in that would be useful?

Sure. We were able to acquire the rights to the synthetic corticotrophin formulation from Eton. Their strategy I think moved away from developing those sorts of assets. And we're building businesses that are equipped I think to handle that that kind of development. As you probably know, we've sold the formulation, it's a compounded formulation in the past it's been dispensed and there is some knowledge of how it has performed as a compounded medication in the faith that we believe in the medication, we think it's potentially important -- potential competitor to Mallinckrodt Acthar Gel which is a billion dollar medication. But what we need to do now that we have the asset is to go and speak to the FDA about the strategy that we're considering and we intend to do that.

Thank you very much. Congrats on the good quarter and I'll catch up with guys. Have fun.

Thank you, Andy.

Thanks Andy.

And our next question comes from Patrick Retzer with Retzer Capital. Please go ahead.

Good afternoon, gentlemen. Congratulations on a wonderful quarter

Thank you, Patrick.

You talked about introducing five new formulations recently in for ophthalmology area. Can you talk about the significance of those versus your current portfolio of offerings?

Sure. These are five formulations, first of all, we promised that we would launch five or more, I think two quarters ago and consistent with what we said we have launched those formulations are now available. I'll touch on a couple of them that may be more impactful than others and once again these are newly launched. And when we launch something even though we have a large customer base, we don't get instant up tick, it's something that builds over a period of time. But for example Loteprednol in 2018, 2017 it's historically been a $300 million plus formulation, the branded products, were now -- it's facing generic competition. But we have a unique formulation and we're excited about being able to offer our Klarity L formulation but there's a large market for it out there as exemplified by the sales of lotemax and other Loteprednol formulations. But, azithromycin is another one that I'll touch on. Azithromycin has not been a large revenue market opportunity, but historically it's been out of stock and it's also fairly expensive medication is required prior authorizations. Once again, we have a unique formulation and I think physicians who deem it appropriate for their patients will see that our formulation performs as they would want it to perform. It will not be out of stock. There will be no prior authorization and it will be affordable for the patients that they serve. So whether it's the Klarity A azithromycin formulation or Klarity L or any of the other ones that we've launched, we think we have an audience that has said they wanted these formulations and we expect over the coming quarters that we'll start to build a revenue base from those formulations.

Okay that's great. I've actually done channel checks with ophthalmologist that have said they haven't been able to find these -- some of these formulations of the various traps anywhere with you folks. So congratulations on that. What should we be looking for if anything for the rest of the year in terms of new launches?

Well, we have a few new products Patrick that we intend to bring to market over the coming quarters. I think the one that I would focus in on that I'm really excited about and I said this on the call is our presbyopia program. And there are so many of us and when I say us, it include myself who use reading glasses for near vision and the promise of being able to use a single drop in order to eliminate the need for eyeglasses is tremendous. It's a problem that a lot of companies are working on and it's a problem that we have been interested in for a number of years. And we have recently filed our first patent application on the formulation family that we are interested in. It is a very large market. It is not served at all and we are very hopeful that we have something that could be impactful. But, there is work that needs to be done and we're going to continue to do that over the coming quarters. But that's an area that's really potentially exciting. And there continues to be other parts of our business that I think you'll see and hopefully we'll be surprised about over the coming quarters as well things that that we've talked about in years past. In terms of pricing that hopefully we're able to deliver on. So we think we've got a lot of upside in terms of innovation and pricing opportunities and we're excited about that and hopefully it'll all be reflected in the price of our stock at some point. Not to mention by the way our ability to do these spin outs. In terms of our innovation, I don't want to underplay the work that we did there. We have some really exciting programs that we intend to spin out and you'll learn more about that in the coming quarters as well.

Okay, great. You mentioned the Mayfield and Radley deconsolidations, do you anticipate either of those happening in this area?

We're going to work hard Patrick to make that happen and we're certainly hopeful we can't guarantee anything but we'll talk more about that hopefully this summer.

Okay, great. Well, keep up the good work guys.

Thank you, Patrick.

[Operator Instructions] And it appears there are no further questions at this time. I would like to turn the conference call back over to Mark Baum, CEO of Harrow Health for any closing remarks.

Thank you, operator. Thanks for attending everyone. If you have any investor related questions please remember to contact Jon Patton, our Investor Relations Associate, his direct number 858-704-4587. This will conclude our call. Thank you.