Company: HROW
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001641172-25-000925
Chunk: 159

Company: HARROW, INC.
Filing Date: 2025-03-27
Form: 10-K
Item: Item 1
Chunk 159
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 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.

    F-20

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 the quarter in which the product was dispensed to a Medicaid beneficiary. Medicaid rebate amounts per
product unit are established by law, based on the Average Manufacturer Price (“AMP”), which is reported on a monthly and
quarterly basis, and, in the case of branded products