Company: HROW
Filing Date: 2025-08-11
Form Type: 10-Q
Source: 0001641172-25-022980
Chunk: 19

Company: HARROW, INC.
Filing Date: 2025-08-11
Form: 10-Q
Item: Item 1
Chunk 19
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, no allocation is necessary.

    5.
    Recognize
    revenue when (or as) the entity satisfies a performance obligation: Revenue from products is recognized upon transfer of control
    of a product to a customer. This generally occurs upon shipment unless contractual terms with a customer state that transfer of control
    occurs at delivery.

Variable
Consideration

Sales
of branded pharmaceutical products are subject to variable consideration due to chargebacks, government rebates, returns, administrative
fees, co-pay assistance and other rebates, and prompt pay discounts. Estimates for these elements of variable consideration require significant
judgment.

Chargebacks

Chargebacks,
primarily from distributors and wholesalers, result from arrangements with indirect customers establishing prices for products which
the indirect customer purchases through a wholesaler. Alternatively, the Company may pre-authorize wholesalers to offer specified contract
pricing to other indirect customers. Under either arrangement, the Company provides a chargeback credit to the wholesaler for any difference
between the contracted price with the indirect customer and the wholesaler’s invoice price, typically Wholesale Acquisition Cost
(“WAC”).

Prior
period chargebacks claimed by wholesalers are analyzed to determine the actual net price per package (“NPP”) for each product.
This calculation is performed by product, by wholesaler. NPPs can be affected by several factors such as:

    ●
    Changes
    in customer mix

    ●
    Changes
    in negotiated terms with customers

    ●
    Changes
    in the volume of off-contract purchases

    ●
    Changes
    in WAC

As
necessary, NPPs are adjusted based on anticipated changes in the factors above.

The
difference between NPP and WAC is recorded as a reduction in both gross revenues in the consolidated statements of operations and accounts
receivable in the consolidated balance sheets, at the time revenue is recognized from the product sale. The Company continually monitors
chargeback activity and adjusts NPPs when the Company believes that actual selling prices will differ from current NPPs.

Government
Rebates

Government
rebates reserve consists of estimated payments due to governmental agencies for utilization of the Company’s products by beneficiaries
under such governmental programs. The two largest government programs are Medicaid and Medicare.

    12

The
Company participates in the Medicaid Drug Rebate Program and pays rebates to the states related to Medicaid beneficiary utilization of
the Company’s products. Medicaid rebates are billed within 60-90 days of the end of