Company: HROW
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001641172-25-009263
Chunk: 9

Company: HARROW, INC.
Filing Date: 2025-05-08
Form: 10-Q
Item: Item 1
Chunk 9
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6 Notes in full.

The accompanying consolidated financial statements
are prepared on a going concern basis and do not include any adjustments that might result from the Company’s inability to refinance
the Oaktree Loan and the 2026 Notes or sell some of its assets to meet its obligations.

 Credit Losses

The Company estimates and records a provision
for its expected credit losses related to its financial instruments, including its trade receivables. Management considers historical
collection rates, the current financial status of the Company’s customers, macroeconomic factors, and other industry-specific factors
when evaluating for current expected credit losses. Forward-looking information is also considered in the evaluation of current expected
credit losses. However, because of the short time to the expected receipt of accounts receivable, management believes that the carrying
value, net of expected losses, approximates fair value and therefore, relies more on historical and current analysis of such financial
instruments, including its trade receivables.

To determine the provision for credit losses for
accounts receivable, the Company has disaggregated its accounts receivable by class of customer at the business component level, as management
determined that the risk profile of the Company’s customers is consistent based on the type and industry in which they operate,
mainly in the pharmaceuticals industry. Each business component is analyzed for estimated credit losses individually. In doing so, the
Company establishes a historical loss matrix, based on the previous collections of accounts receivable by the age of such receivables,
and evaluates the current and forecasted financial position of its customers, as available. Further, the Company considers macroeconomic
factors and the status of the pharmaceuticals industry to estimate if there are current expected credit losses within its trade receivables
based on the trends of the Company’s expectation of the future status of such economic and industry-specific factors. Also, specific
allowance amounts are established based on review of outstanding invoices to record the appropriate provision for customers that have
a higher probability of default.

The following table provides a roll-forward of
the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected
to be collected at March 31, 2025:

  SCHEDULE
OF ACCOUNTS RECEIVABLE ALLOWANCE OF CREDIT LOSS 

    Balance at January 1, 2025 
    $416,000 
  
    Change in expected credit losses 
     114,000 
  
    Write-offs, net of recoveries