Company: PTHS
Filing Date: 2025-05-27
Form Type: DEFM14C
Source: 0001140361-25-020509
Chunk: 405

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-05-27
Form: DEFM14C
Chunk 405
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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 amounts related to materials, manufacturing labor and overheads. 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, the Company expensed costs relating to production of pre-launch inventory as research and development expense in its audited and unaudited statements of operations in the period incurred. Inventory acquired and the related costs after January 5, 2024, the date of the FDA’s approval of ZELSUVMI, are capitalized.

Additionally, the Company’s product is subject to strict quality control and monitoring that is performed throughout the manufacturing process, including release of work-in-process to finished goods. In the event that certain batches or units of product do not meet quality specifications, the Company records a write-down of any potential unmarketable inventory to its estimated net realizable value.

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#### TABLE OF CONTENTS

#### Impairment of Goodwill and Long-Lived Assets
Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of net assets acquired. Goodwill is reviewed for impairment at the reporting unit level at least annually during the fourth quarter, or more frequently if an event occurs indicating the potential for impairment. During the goodwill impairment review, we assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and the overall financial performance. If, after assessing the totality of these qualitative factors, we determine that it is not more likely than not that the fair value of our reporting unit is less than the carrying amount, then no additional assessment is deemed necessary. The Company performed the annual assessment for goodwill impairment at the reporting unit level during the fourth quarter of 2024, noting no impairment. The Company did not identify indicators of impairment for goodwill at March 31, 2025.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances