UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to _____________

Commission File Number: 001-35814

Harrow, Inc.

(Exact name of registrant as specified in its charter)

Delaware		45-0567010
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

102 Woodmont Blvd., Suite 610

Nashville, Tennessee

37205

(Address of principal executive offices)

(Zip code)

(615) 733-4730

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name on exchange on which registered
Common Stock, $0.001 par value per share	HROW	The Nasdaq Stock Market LLC
8.625% Senior Notes due 2026	HROWL	The Nasdaq Stock Market LLC
11.875% Senior Notes due 2027	HROWM	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 10, 2024, there were 35,381.935 shares of the registrant’s common stock, $0.001 par value, outstanding.

HARROW, INC.

Table of Contents

		Page
Part I	FINANCIAL INFORMATION	3

Item 1.	Financial Statements (unaudited)	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

Part II	OTHER INFORMATION	29

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	29

	Signatures	30

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

HARROW, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2024			2023
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	68,538,000		$	74,085,000
Investment in Eton Pharmaceuticals		7,433,000			8,681,000
Accounts receivable, net		28,960,000			37,271,000
Inventories		10,810,000			10,867,000
Prepaid expenses and other current assets		9,717,000			9,588,000
Total current assets		125,458,000			140,492,000
Property, plant and equipment, net		3,389,000			3,521,000
Capitalized software costs, net		2,019,000			2,138,000
Operating lease right-of-use assets, net		6,968,000			6,785,000
Intangible assets, net		157,370,000			159,906,000
Goodwill		332,000			332,000
TOTAL ASSETS	$	295,536,000		$	313,174,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	15,129,000		$	24,581,000
Accrued rebates and copay assistance		20,690,000			19,442,000
Accrued payroll and related liabilities		5,027,000			5,450,000
Deferred revenue and customer deposits		112,000			75,000
Current portion of operating lease obligations		795,000			806,000
Total current liabilities		41,753,000			50,354,000
Operating lease obligations, net of current portion		6,716,000			6,524,000
Accrued expenses, net of current portion		2,713,000			2,713,000
Notes payable, net of unamortized debt discount		184,148,000			183,172,000
TOTAL LIABILITIES		235,330,000			242,763,000
Commitments and contingencies		-			-
STOCKHOLDERS’ EQUITY
Common stock, $0.001 par value, 50,000,000 shares authorized, 35,380,955 and 35,168,260 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively		35,000			35,000
Additional paid-in capital		207,995,000			204,635,000
Accumulated deficit		(147,469,000	)		(133,904,000	)
TOTAL HARROW, INC. STOCKHOLDERS’ EQUITY		60,561,000			70,766,000
Noncontrolling interests		(355,000	)		(355,000	)
TOTAL STOCKHOLDERS’ EQUITY		60,206,000			70,411,000
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	295,536,000		$	313,174,000

The accompanying notes are an integral part of these condensed consolidated financial statements

HARROW, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	2024			2023
	For the Three Months Ended
	March 31,
	2024			2023
Revenues:
Product sales, net	$	34,508,000		$	20,453,000
Other revenues		79,000			5,650,000
Total revenues		34,587,000			26,103,000
Cost of sales		(10,553,000	)		(8,271,000	)
Gross profit		24,034,000			17,832,000
Operating expenses:
Selling, general and administrative		28,813,000			15,888,000
Research and development		2,149,000			734,000
Total operating expenses		30,962,000			16,622,000
(Loss)income from operations		(6,928,000	)		1,210,000
Other (expense) income:
Interest expense, net		(5,415,000	)		(4,747,000	)
Investment (loss) gain from Eton Pharmaceuticals		(1,248,000	)		2,042,000
Loss on extinguishment of debt		-			(5,465,000	)
Other income, net		26,000			29,000
Total other expense, net		(6,637,000	)		(8,141,000	)
Loss before income tax expense		(13,565,000	)		(6,931,000	)
Income tax benefit		-			288,000
Net loss		(13,565,000	)		(6,643,000	)
Basic and diluted net loss per share of common stock	$	(0.38	)	$	(0.22	)
Weighted average number of shares of common stock outstanding, basic and diluted		35,469,638			30,289,730

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

HARROW, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended March 31, 2024 and 2023

												Total			Total
	Common Stock					Additional						Harrow, Inc.			Noncontrolling			Total
				Par		Paid-in			Accumulated			Stockholders’			Interest			Stockholders’
	Shares			Value		Capital			Deficit			Equity			Equity			Equity
Balance at December 31, 2022		29,901,530		$	30,000	$	137,058,000		$	(109,493,000	)	$	27,595,000		$	(355,000	)	$	27,240,000

Issuance of common stock in connection with:
Exercise of employee stock-based options		97,542			-		148,000			-			148,000			-			148,000
Vesting of RSUs		111,000			-		-			-			-			-			-
Shares withheld related to net share settlement of equity awards		(53,702	)		-		(850,000	)		-			(850,000	)		-			(850,000	)
Stock-based compensation expense		-			-		1,633,000			-			1,633,000			-			1,633,000
Net loss		-			-		-			(6,643,000	)		(6,643,000	)		-			(6,643,000	)
Balance at March 31, 2023		30,056,370		$	30,000	$	137,989,000		$	(116,136,000	)	$	21,883,000		$	(355,000	)	$	21,528,000

												Total			Total
	Common Stock					Additional						Harrow, Inc.			Noncontrolling			Total
				Par		Paid-in			Accumulated			Stockholders’			Interest			Stockholders’
	Shares			Value		Capital			Deficit			Equity			Equity			Equity
Balance at December 31, 2023		35,168,260		$	35,000	$	204,635,000		$	(133,904,000	)	$	70,766,000		$	(355,000	)	$	70,411,000
Balance		35,168,260		$	35,000	$	204,635,000		$	(133,904,000	)	$	70,766,000		$	(355,000	)	$	70,411,000

Issuance of common stock in connection with:
Exercise of employee stock-based options		46,175			-		348,000			-			348,000			-			348,000
Vesting of RSUs		275,000			-		-			-			-			-			-
Shares withheld related to net share settlement of equity awards		(108,480	)		-		(1,157,000	)		-			(1,157,000	)		-			(1,157,000	)
Stock-based compensation expense		-			-		4,169,000			-			4,169,000			-			4,169,000
Net loss		-			-		-			(13,565,000	)		(13,565,000	)		-			(13,565,000	)
Balance at March 31, 2024		35,380,955		$	35,000	$	207,995,000		$	(147,469,000	)	$	60,561,000		$	(355,000	)	$	60,206,000
Balance		35,380,955		$	35,000	$	207,995,000		$	(147,469,000	)	$	60,561,000		$	(355,000	)	$	60,206,000

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

HARROW, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


	For the Three Months Ended
	March 31,
	2024			2023

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(13,565,000	)	$	(6,643,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of property, plant and equipment and software development costs		432,000			292,000
Amortization of intangible assets		2,554,000			2,207,000
Amortization of operating lease right-of-use assets		194,000			177,000
(Recovery of) provision for credit losses		(85,000	)		20,000
Amortization of debt issuance costs and debt discount		976,000			761,000
Investment loss (gain) from investment in Eton		1,248,000			(2,042,000	)
Loss on extinguishment of debt		-			5,465,000
Stock-based compensation		4,169,000			1,633,000
Deferred income tax		-			(288,000	)
Changes in assets and liabilities:
Accounts receivable		8,396,000			(5,882,000	)
Inventories		57,000			(2,552,000	)
Prepaid expenses and other current assets		321,000			7,000
Accounts payable, accrued expenses, accrued rebates and copay assistance		(8,939,000	)		(212,000	)
Accrued payroll and related liabilities		(423,000	)		(1,111,000	)
Deferred revenue and customer deposits		37,000			(46,000	)
NET CASH USED IN OPERATING ACTIVITIES		(4,628,000	)		(8,214,000	)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in patent and trademark assets		(18,000	)		-
Purchase of product NDAs and related patents		-			(130,474,000	)
Purchases of property, plant and equipment		(92,000	)		(496,000	)
NET CASH USED IN INVESTING ACTIVITIES		(110,000	)		(130,970,000	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from 11.875% notes payable, net of costs		-			4,961,000
Proceeds from Oaktree Loan, net of costs		-			61,585,000
Payment of payroll taxes upon vesting of PSUs, RSUs and exercise of stock options		(1,157,000	)		(661,000	)
Proceeds from exercise of stock options		348,000			148,000
Proceeds from B. Riley senior secured note, net of costs		-			55,879,000
Repayment of B. Riley senior secured note		-			(59,750,000	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(809,000	)		62,162,000
NET CHANGE IN CASH AND CASH EQUIVALENTS		(5,547,000	)		(77,022,000	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		74,085,000			96,270,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	68,538,000		$	19,248,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$	-		$	-
Cash paid for interest	$	5,340,000		$	3,371,000
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Reclassification of deferred financing costs	$	-		$	1,950,000
Accrual of exit fee related to Oaktree Loan	$	-		$	2,275,000
Purchase of property, plant and equipment included in accounts payable and accrued expenses	$	89,000		$	61,000
Right-of-use assets obtained in exchange for new operating lease obligations	$	377,000		$	-
Income taxes owed for exercise of options	$	-		$	189,000
Insurance premium financed	$	450,000		$	-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

HARROW, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Three Months Ended March 31, 2024 and 2023

NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Company and Background

Harrow, Inc. (together with its consolidated subsidiaries, unless the context indicates or otherwise requires, the “Company” or “Harrow”) is a leading eyecare pharmaceutical company engaged in the discovery, development, and commercialization of innovative ophthalmic pharmaceutical products for the U.S. market. Harrow helps U.S. eyecare professionals preserve the gift of sight by making its comprehensive portfolio of prescription and non-prescription pharmaceutical products accessible and affordable to millions of Americans each year. The Company owns commercial rights to one of the largest portfolios of branded ophthalmic pharmaceutical products in the U.S. that are marketed under its Harrow name. The Company also owns and operates ImprimisRx, one of the nation’s leading ophthalmology-focused pharmaceutical-compounding businesses.

The Company owns non-controlling equity interests in Surface Ophthalmics, Inc. (“Surface”) and Melt Pharmaceuticals, Inc. (“Melt”), both companies that began as subsidiaries of Harrow. Harrow also owns royalty rights in various drug candidates being developed by Surface and Melt.

Basis of Presentation

The Company has prepared the accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, all adjustments (consisting of only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or for any other period. For further information, refer to the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned and majority-owned subsidiaries.

Harrow consolidates entities in which it has a controlling financial interest. The Company assesses control under the variable interest entity (“VIE”) model to determine whether the Company is the primary beneficiary of that entity. The Company consolidates (i) entities in which it holds and/or controls, directly or indirectly, more than 50% of the voting rights, and (ii) VIEs for which the Company is deemed to be the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The following represents an update for the three months ended March 31, 2024 to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Risks, Uncertainties and Liquidity

The Company is subject to certain regulatory standards, approvals, guidelines and inspections which could impact the Company’s ability to make, dispense, and sell certain products. If the Company was required to cease compounding and selling certain products as a result of regulatory guidelines or inspections, this may have a material impact on the Company’s financial condition, liquidity and results of operations.

Fair Value Measurements

Fair value measurements are determined based on the assumptions that market participants would use in pricing an asset or liability. GAAP establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The established fair value hierarchy prioritizes the use of inputs used in valuation methodologies into the following three levels:

●	Level 1: Applies to assets or liabilities for which there are quoted prices (unadjusted) for identical assets or liabilities in active markets. A quoted price in an active market provides the most reliable evidence of fair value and must be used to measure fair value whenever available.
●	Level 2: Applies to assets or liabilities for which there are significant other observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
●	Level 3: Applies to assets or liabilities for which there are significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. For example, Level 3 inputs would relate to forecasts of future earnings and cash flows used in a discounted future cash flows method.

At March 31, 2024 and December 31, 2023, the Company measured its investment in Eton Pharmaceuticals, Inc. (“Eton”) on a recurring basis. The Company’s investment in Eton is classified as Level 1 as the fair value is determined using quoted market prices in active markets for the same securities. As of March 31, 2024 and December 31, 2023, the fair market value of the Company’s investment in Eton was $7,433,000 and $8,681,000, respectively. The Company sold its remaining interest in April 2024 (see Note 16).

The Company’s 2026 Notes (as defined in Note 11) are carried at face value, including the unamortized premium, less unamortized debt issuance costs, the 2027 Notes (as described in Note 11) are carried at face value less unamortized debt issuance costs, and the Oaktree Loan (as defined in Note 11) is carried at face value less the original issue discount and unamortized debt issuance costs on the condensed consolidated balance sheets and the Company presents fair value for disclosure purposes only. The 2026 Notes and 2027 Notes are classified as Level 1 instruments as the fair value is determined using quoted market prices in active markets for the same securities. The Oaktree Loan is classified as a Level 2 instrument and its fair value is determined through an income approach that considers collateral coverage, yield calibration, yield analysis and any adjustments to implied yield associated with the Company’s fundamental measures.

The following table presents the estimated fair values and the carrying values:

SCHEDULE OF ESTIMATED FAIR VALUE

	March 31, 2024				December 31, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
2026 Notes	$	73,413,000	$	73,560,000	$	73,218,000	$	70,260,000
2027 Notes	$	37,591,000	$	41,860,000	$	37,413,000	$	40,363,000
Oaktree Loan	$	73,144,000	$	76,725,000	$	72,541,000	$	76,627,000

The Company’s other financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, accrued payroll and related liabilities, deferred revenue and customer deposits and operating lease liabilities. The carrying amount of these financial instruments, except for operating lease liabilities, approximates fair value due to the short-term maturities of these instruments. Based on borrowing rates currently available to the Company, the carrying value of the operating lease liabilities approximate their respective fair values.

Basic and Diluted Net Loss per Common Share

Basic net loss per common share is computed by dividing net loss attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders for the period by the weighted average number of common and common equivalent shares, such as stock options, restricted stock units (“RSUs”), performance stock units (“PSUs”), and warrants, outstanding during the period. Common equivalent shares (using the treasury stock method) from stock options, unvested RSUs, unvested PSUs and warrants were 4,318,057 and 4,750,340 at March 31, 2024 and 2023, respectively, and are excluded in the calculation of diluted net loss per common share for the periods presented, because the effect is anti-dilutive. Included in the basic and diluted net loss per share calculation were RSUs awarded to directors that had vested, but the issuance and delivery of the shares are deferred until the director resigns. The number of shares underlying vested RSUs at March 31, 2024 and 2023 was 223,928 and 336,264, respectively.

The following table shows the computation of basic net loss per share of common stock for the three months ended March 31, 2024 and 2023:

	2024			2023
	For the Three Months Ended March 31,
	2024			2023

Numerator – net loss	$	(13,565,000	)	$	(6,643,000	)
Denominator – weighted average number of shares outstanding, basic and diluted		35,469,638			30,289,730
Net loss per share, basic and diluted	$	(0.38	)	$	(0.22	)

Income Taxes

The Company’s effective tax rate was (0.11)% and 4.16% for the three months ended March 31, 2024 and 2023, respectively. The Company’s effective tax rate for the three months ended March 31, 2024 and 2023 differs from the U.S. federal statutory tax rate of 21% due to state taxes, permanent book-tax differences related to Internal Revenue Code of 1986, as amended (“IRC”), Section 162(m) excess officer compensation limitation and share-based compensation and the change in valuation allowance.

As of March 31, 2024 and December 31, 2023, there were no unrecognized tax benefits included in the condensed consolidated balance sheets that would, if recognized, affect the effective tax rate.

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 46% of Melt’s equity interests as of March 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 its portion of 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.

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, the Company will recognize an impairment loss based on the estimated fair value of the equity method investments. The Company has no other investments other than its common stock and preferred stock positions in Melt and no other requirements to advance funds to Melt.

The following table summarizes the Company’s investments in Melt as of March 31, 2024:

SCHEDULE OF INVESTMENT

	Cost		Share of Equity Method			Net Carrying
	Basis		Losses			Value
Common stock	$	5,810,000	$	(5,810,000	)	$	-
Preferred stock		18,397,000		(18,397,000	)		-
	$	24,207,000	$	(24,207,000	)	$	-

See Note 4 for more information and related party disclosure regarding Melt.

Accounting Guidance Issued but Not Adopted at March 31, 2024

In August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-05, Business Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement, which applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture) and requires joint ventures to initially measure all contributions received upon formation at fair value. The new guidance does not impact accounting by the venturers. The new guidance is applicable to joint venture entities with a formation date on or after January 1, 2025 on a prospective basis. Joint ventures formed prior to the effective date may elect to apply the new guidance retrospectively back to their original formation date. The Company will apply the guidance in ASU 2023-05 prospectively to any future arrangements meeting the definition of a joint venture.

In October 2023, FASB issued ASU 2023-06, Disclosure Improvements—Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. This ASU modifies the disclosure or presentation requirements of a variety of topics in the codification by aligning them with the SEC’s regulations. The amendments to the various topics should be applied prospectively, and the effective date for the Company for each amendment will be determined based on the effective date of the SEC’s removal of the related disclosure from Regulation S-X or Regulation S-K. If the SEC has not removed the applicable requirement by June 30, 2027, then the related amendment in ASU 2023-06 will be removed from the codification and will not become effective. Early adoption of this ASU is prohibited. The Company does not expect the amendments in this ASU to have a material impact on the disclosures or presentation in its consolidated financial statements.

In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures, which enhances the disclosures required for operating segments in the Company’s annual and interim consolidated financial statements. ASU 2023-07 is effective for the Company in our annual reporting for fiscal 2024 and for interim period reporting beginning in fiscal 2025 on a retrospective basis, with all required disclosures to be made for all prior periods presented in the consolidated financial statements. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statements.

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which enhances the disclosures required for income taxes in the Company’s annual consolidated financial statements. Notably, this ASU requires entities to disclose specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 is effective for the Company in its annual reporting for fiscal year 2025 on a prospective basis. Early adoption and retrospective reporting are permitted. The Company is currently evaluating the impact of ASU 2023-09 on its consolidated financial statements.

Reclassifications

Certain prior period items and amounts have been reclassified to conform to the classifications used to prepare the condensed consolidated financial statements for the current period. These reclassifications had no material impact on the Company’s condensed consolidated financial position, results of operations, or cash flows as previously reported.

NOTE 3. REVENUES

The Company accounts for contracts with customers in accordance with ASC 606, Revenues from Contracts with Customers. The Company has three primary streams of revenue: (1) product revenues, including revenue recognized from sales of products through its pharmacy and outsourcing facility and sales of branded products to wholesalers through a third-party logistics (“3PL”) partner, (2) revenue recognized from transfer of acquired product sales and profits in 2023, and (3) revenue recognized from intellectual property licenses and related arrangements.

Product Revenues

The Company sells prescription medications directly through its pharmacy, outsourcing facility and

SEC Form 10-Q filed by Harrow Inc.