Company: PTHS
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001753926-25-001764
Chunk: 98

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 1
Chunk 98
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 years.

●The
                                         fair value of the Sato licensing agreement was estimated using the “relief from
                                         royalty” method, an income approach that considers the market-based royalty a company
                                         would pay to enjoy the benefits of the trade name or technology in lieu of actual ownership
                                         of the technology. Significant assumptions include the royalty rate, forecasted cash
                                         flows of the license agreement and concluded discount rate. The Sato licensing agreement
                                         will be amortized on a straight-line basis over an estimated useful of 13.0 years.

●The
                                         fair value of the inventory was estimated using the top/down method that considers the
                                         estimated selling price, costs to complete, disposal costs, profit margin on disposal
                                         effort, and holding costs. Significant assumptions include management's estimates for
                                         the selling price and the costs to be incurred related to the disposal effort of the
                                         inventory.

57

●The
                                         fair value of the Reedy Creek liability was estimated using the income approach that
                                         considers the royalties based on sales of ZELSUVMI. Significant assumptions include the
                                         management's revenue forecast, royalty rate, and concluded discount rate.

●Deferred
                                         taxes were adjusted to record the deferred tax impact of acquisition accounting adjustments
                                         primarily related to amounts allocated to intangible assets and inventory.

See
Note 3 — “Acquisition of LNHC, Inc.” in the notes to our condensed consolidated financial statements for additional
detail.

Revenue
Recognition

Pursuant
to ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when a customer obtains
control of promised goods or services. Revenue is recognized in an amount that reflects the consideration that the Company expects
to receive in exchange for those goods or services. To determine revenue recognition for contracts with customers within the scope
of ASC 606, the Company performs the following 5 steps: (i) identify the contract(s) with a customer; (ii) identify the performance
obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations
in the contract; and (v) recognize revenue when (or as) a performance obligation is satisfied.

Net
Product Revenues

The
Company sells ZELSUVMI to three wholesalers and one specialty distributor in the United States. The three wholesalers and one
specialty distributor are considered the Company's customers for accounting purposes.

Revenue
from product sales is recognized when the customer