Company: HROW
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001641172-25-000925
Chunk: 2444

Company: HARROW, INC.
Filing Date: 2025-03-27
Form: 10-K
Item: Item 1C
Chunk 2444
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 in the consolidated balance
sheets, at the time the revenue is recognized.

Intellectual Property License Revenues

We currently
hold five intellectual property licenses and related agreements pursuant to which we have agreed to license or sell to a customer with
the right to access our intellectual property. License arrangements may consist of non-refundable upfront license fees, data transfer
fees, research reimbursement payments, exclusive license rights to patented or patent pending compounds, technology access fees, and
various performance or sales milestones. These arrangements can be multiple-element arrangements, the revenue of which is recognized
at the point in time that the performance obligation is met.

Non-refundable
fees that are not contingent on any future performance and require no consequential continuing involvement on our part are recognized
as revenue when the license term commences and the licensed data, technology, compounded drug preparation and/or other deliverables are
delivered. Such deliverables may include physical quantities of compounded drug preparations, design of the compounded drug preparations
and structure-activity relationships, the conceptual framework and mechanism of action, and rights to the patents or patent applications
for such compounded drug preparations. We defer recognition of non-refundable fees if it has continuing performance obligations without
which the technology, right, product or service conveyed in conjunction with the non-refundable fee has no utility to the licensee and
that are separate and independent of our performance under the other elements of the arrangement. In addition, if our continued involvement
is required, through research and development services that are related to its proprietary know-how and expertise of the delivered technology
or can only be performed by us, then such non-refundable fees are deferred and recognized over the period of continuing involvement.
Guaranteed minimum annual royalties are recognized on a straight-line basis over the applicable term.

 65 

Income Taxes

As part of the process of preparing
our consolidated financial statements, we must estimate the actual current tax assets and liabilities and assess permanent and temporary
differences that result from differing treatment of items for tax and accounting purposes. The temporary differences result in deferred
tax assets and liabilities, which are included within the consolidated balance sheets. We must assess the likelihood that the deferred
tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not more likely than not, a valuation
allowance must be established which reduces the amount of deferred tax assets recorded on the consolidated balance sheets. To the extent
we establish a valuation allowance or increase or decrease this allowance in