Company: PTHS
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001753926-25-001764
Chunk: 20

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 1
Chunk 20
---
 for credit losses.

Concentration
of Credit Risk

Financial
instruments that potentially subject the Company to a concentration of credit risk consist principally of cash, cash equivalents
and accounts receivable. The Company places its cash and cash equivalents with financial institutions, and these deposits may
at times be in excess of federally insured limits. In addition, the Company assesses the creditworthiness of its customers on
an on-going basis. As of September 30, 2025, the Company’s three wholesaler customers accounted for more than 94% of its
total gross accounts receivable balance at 34%, 32% and 28%, respectively.

    13

Inventory

The
Company measures inventory using the first-in, first-out method and values inventory at the lower of cost or net realizable value.
Inventory value includes costs related to materials, manufacturing, labor, conversion and overhead expenses. The Company adjusts
its inventory for potentially obsolete inventory. The adjustment for obsolescence is generally an estimate of the value of inventory
that is expected to expire in the future based on projected sales volume and product expiration or expected sell-by dates. These
assumptions require the Company to analyze the aging of and forecasted demand for its inventory and make estimates regarding future
product sales.

Prior
to obtaining initial regulatory approval for ZELSUVMI in January 2024, inventory costs related to the production of pre-launch
inventory were expensed as research and development costs. Subsequent to January 5, 2024, the date of the FDA’s approval
of ZELSUVMI, inventory costs were capitalized by LNHC. As part of the Merger, certain inventoried items were revalued subject
to ASC 805. See Note 3 — “Acquisition of LNHC, Inc.” for additional detail.

Property
and Equipment, Net

Property
and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives as follows:

Schedule of Property, Plant and Equipment 

    Computer
    equipment
    3
    years

    Software
    3 - 5
    years

    Furniture
    and fixtures
    5 - 7
    years

    Manufacturing
    and laboratory equipment
    7
    years

Leasehold
improvements are amortized over the shorter of the life of the lease or the useful life of the improvements. Expenditures for
maintenance and repairs are expensed as incurred. Impro