Company: HROW
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001641172-25-000925
Chunk: 1249

Company: HARROW, INC.
Filing Date: 2025-03-27
Form: 10-K
Item: Item 7A
Chunk 1249
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 and anticipated future sales or use
in production compared to quantities on hand and the remaining shelf life of products and active pharmaceutical ingredients on hand.
The Company establishes reserves for excess and obsolete inventories as required based on its analyses.

Investment in Melt Pharmaceuticals, Inc. –
Related Party

The Company owns 3,500,000 shares of common stock
and 2,334,256 shares of preferred stock of Melt (representing in aggregate approximately 45% of the equity interests as of December 31,
2024). The Company analyzes its investment in Melt and related agreements on a regular basis to evaluate its position of variable interests
in Melt. The Company has determined that it does not have the ability to control Melt, however it has the ability to exercise significant
influence over the operating and financial decisions of Melt and uses the equity method of accounting for this investment. Under this
method, the Company recognizes earnings and losses in Melt in its consolidated financial statements and adjusts the carrying amount of
its investment in Melt accordingly. Any intra-entity profits and losses are eliminated. During the year ended December 31, 2021, the
Company reduced the carrying value of its investment in Melt to $0 as a result of the Company recording its share of equity losses in
Melt since its deconsolidation in 2019. As of December 31, 2022, and at the time of entering into the Melt Loan Agreement (see Note 5),
the Company owned 100% of Melt’s indebtedness. Following the reduction of the carrying value of the Company’s common stock
investment in Melt to $0, the Company began recording 100% of the equity method losses of Melt, based on its ownership of Melt’s
total indebtedness. In addition, the Company treated interest paid in kind on the Melt Loan Agreement as an in-substance capital contribution
and reduced its investment in Melt accordingly, rather than recording interest income.

On a quarterly basis, management assesses whether
there are any indicators that the carrying value of the Company’s equity method investments may be other than temporarily impaired.
Indicators include financial condition, operating performance, and near-term prospects of the investee. To the extent indicators suggest
that a loss in value may have occurred, the Company will evaluate both quantitative and qualitative factors to determine if the loss
in value is other than temporary. If a potential loss in value is determined to be other than temporary