Company: PTHS
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001753926-25-001764
Chunk: 101

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 1
Chunk 101
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 assets; accordingly, actual results may vary
significantly from such estimates.

Indefinite-lived
intangible assets, including goodwill, are not amortized. The Company tests the carrying amounts of goodwill for recoverability
on an annual basis on July 1 or when events or changes in circumstances indicate evidence that a potential impairment exists,
using a fair value-based test.

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, or more frequently if an event occurs indicating the potential for
impairment. During a goodwill impairment review, management performs an assessment of 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, management determines that it is not more likely than
not that the fair value of reporting unit is less than the carrying amount, then no additional assessment is deemed necessary.
The Company did not identify indicators of impairment for goodwill during the three months ended September 30, 2025.

Fair
Value Measurements and Fair Value of Financial Instruments

The
Company determines fair value, per ASC 820, based on assumptions that market participants would use in pricing an asset or liability
in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the
following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following
levels:

●Level
                                         1 Inputs are unadjusted quoted prices in active markets for identical assets or liabilities
                                         available at the measurement date.

59

●Level
                                         2 Inputs are unadjusted quoted prices for similar assets and liabilities in active markets,
                                         quoted prices for identical or similar assets and liabilities in markets that are not
                                         active, inputs other than quoted prices that are observable, and inputs derived from
                                         or corroborated by observable market data.

●Level
                                         3 Inputs are unobservable inputs which reflect the reporting entity’s own assumptions
                                         on what assumptions the market participants would use in pricing the asset or liability
                                         based on the best available information.

Reedy
Creek Purchase Agreement

The
Company has determined that the Reedy Creek Purchase Agreement is within the scope of ASC