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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Risks, Uncertainties and Liquidity

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.

Segments

Segments

Due to shifts in the Company’s strategic plans to further focus on growing the Company’s ImprimisRx business and suspension of activities related to starting up development-stage pharmaceutical companies, along with changes to the Company’s organizational and internal reporting structure, beginning in January 2022 management no longer evaluates the Company’s business in two segments and instead focuses on the performance of the business as a single operating business.

Basic and Diluted Net (Loss) Income per Common Share

Basic and Diluted Net (Loss) Income per Common Share

Basic net (loss) income per common share is computed by dividing net (loss) income attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per share is computed by dividing the net (loss) income 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”) and warrants, outstanding during the period. Common equivalent shares (using the treasury stock method) from stock options, unvested RSUs and warrants were 5,546,200 and 5,486,678 at March 31, 2022 and 2021, respectively. For the three months ended March 31, 2022, the common equivalent shares are excluded in the calculation of diluted net loss per share because the effect is anti-dilutive. Included in the basic and diluted net (loss) income 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, 2022 and 2021 was 277,405 and 223,219, respectively.

The following table shows the computation of basic net (loss) income per share of common stock for the three months ended March 31, 2022 and 2021:

 SCHEDULE OF BASIC AND DILUTED EARNINGS PER COMMON SHARE

		2022				2021
		For the Three Months Ended
		March 31,
		2022				2021
Numerator – net (loss) income attributable to Harrow Health, Inc. common stockholders		$	(2,438,000	)		$	217,000
Denominator - weighted average number of shares outstanding, basic			27,226,819				26,019,255
Net (loss) income per share, basic		$	(0.09	)		$	0.01

For the three months ended March 31, 2021, the Company had net income. As a result, the Company computed diluted net income per share using the weighted-average number of common shares and dilutive common equivalent shares outstanding during the period. Diluted common equivalent shares for the three months ended March 31, 2021, consisted of the following:

 SCHEDULE OF DILUTED COMMON EQUIVALENT SHARES

		For the Three Months Ended
		March 31, 2021
Diluted shares related to:
Warrants			576,275
Stock options			885,092
Dilutive common equivalent shares			1,461,367

The following table shows the computation of diluted net (loss) income per share of common stock for the three months ended March 31, 2022 and 2021:

 SCHEDULE OF DILUTED NET INCOME LOSS PER SHARES

		2022				2021
		For the Three Months Ended
		March 31,
		2022				2021
Numerator – net (loss) income attributable to Harrow Health, Inc.		$	(2,438,000	)		$	217,000
Denominator – weighted average number of shares outstanding, basic			27,226,819				26,019,255
Dilutive common equivalent shares			-				1,461,367
Number of shares used for diluted earnings per share computation			27,226,819				27,480,622
Net (loss) income per share, diluted		$	(0.09	)		$	0.01

Investment in Eton Pharmaceuticals, Inc.

Investment in Eton Pharmaceuticals, Inc.

As of March 31, 2022, the Company owned 1,982,000 shares of Eton common stock, which represents less than 10% of the equity interests of Eton. At March 31, 2022, the fair market value of Eton’s common stock was $4.36 per share. In accordance with the Accounting Standards Update (“ASU”) 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, the Company recorded an unrealized investment gain (loss) from its Eton common stock position of $139,000 and $(2,835,000) during the three months ended March 31, 2022 and 2021, respectively, related to the change in fair market value of its investment in Eton during the measurement period. As of March 31, 2022, the fair market value of the Company’s investment in Eton was $8,642,000.

Investment in Melt Pharmaceuticals, Inc. – Related Party

Investment in Melt Pharmaceuticals, Inc. – Related Party

The Company owns 3,500,000 shares of common stock of Melt (representing approximately 46% of the equity interests as of March 31, 2022). 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 earnings and losses in Melt in its condensed consolidated financial statements and adjusts the carrying amount of its investment in Melt accordingly. Any intra-entity profits and losses are eliminated. During the year ended December 31, 2021, the Company reduced the carrying value of its common stock investment in Melt to $0 as a result of the Company recording its share of equity losses in Melt since its deconsolidation in 2019. As of March 31, 2022 and at the time of entering into the Melt Loan Agreement (see Note 4), the Company owned 100% of Melt’s indebtedness. Following the reduction of the carrying value of the Company’s common stock investment in Melt to $0, the Company began recording 100% of the equity method losses of Melt, based on its ownership of Melt’s total indebtedness. In addition, the Company treats interest paid in kind on the Melt Loan Agreement as an in-substance capital contribution and reduces its investment in Melt accordingly, rather than recording interest income. The Company has no other requirements to advance funds to Melt.

The following table summarizes the Company’s investments in Melt as of March 31, 2022:

 SCHEDULE OF INVESTMENT

		Cost				Share of Equity				Paid-in-Kind				In-substance Capital				Net
		Basis				Method Losses				Interest				Contributions				Carrying value
Common stock		$	5,810,000			$	(5,810,000	)		$	-			$				$
Loan			13,500,000				(5,253,000	)			1,021,000				(1,021,000	)			8,247,000
		$	19,310,000			$	(11,063,000	)		$	1,021,000			$	(1,021,000	)		$	8,247,000

During the three months ended March 31, 2022 and 2021, the Company recorded $30,000 due from Melt for reimbursable expenses and amounts payable pursuant to a Management Services Agreement between the Company and Melt (the “Melt MSA”), which are included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets.

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

Investment in Surface Ophthalmics, Inc. – Related Party

Investment in Surface Ophthalmics, Inc. – Related Party

The Company owns 3,500,000 common shares of Surface (representing approximately 20% of Surface’s equity interests following the closing of a round of financing completed by Surface in July 2021) and uses the equity method of accounting for this investment, as management has determined that the Company has the ability to exercise significant influence over the operating and financial decisions of Surface. Under this method, the Company recognizes earnings and losses in Surface in its consolidated financial statements and adjusts the carrying amount of its investment in Surface accordingly. The Company’s share of earnings and losses are based on the Company’s ownership interest of Surface. Any intra-entity profits and losses are eliminated. During the year ended December 31, 2021, the Company reduced its common stock investment in Surface to $0 as a result of the Company recording its share of equity losses of Surface. The Company has no other investments in Surface.

The following table summarizes the Company’s investment in Surface as of March 31, 2022:

 SCHEDULE OF INVESTMENT

		Cost				Share of Equity				Net
		Basis				Method Losses				Carrying value
Common stock		$	5,320,000			$	(5,320,000	)		$	-

See Note 5 for more information and related party disclosure regarding Surface.

Impairment of Equity Method Investments and Note Receivable

Impairment of Equity Method Investments and Note Receivable

On a quarterly basis, management assesses whether there are any indicators that the carrying value of the Company’s equity method investments and note receivable 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 and note receivable. At March 31, 2022 and December 31, 2021, no indicators of impairment existed.

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