Company: PTHS
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001753926-25-001764
Chunk: 42

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 1
Chunk 42
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 (ZELSUVMI), whereas Ligand will be responsible for satisfying all obligations related to the
SB204 and SB414 product candidates, if and when they are developed. Obligations under the Reedy Creek Agreement that arise from
any non-SB206 (ZELSUVMI) asset will be satisfied by Ligand. As of the July 1, 2025 Merger, the Company is obligated to pay Reedy
Creek amounts due, per the Reedy Creek Purchase Agreement, related to SB206 (commercially known as ZELSUVMI).

The
Company determined that the Reedy Creek Purchase Agreement is within the scope of ASC 730-20, Research and Development Arrangements
(“ASC 730-20”), and that there has not been a substantive and genuine transfer of risk related to the Reedy Creek
Purchase Agreement. As of the LNHC Acquisition date, the Reedy Creek liability was measured at fair value in the amount of $19,600.
This long-term liability is subsequently measured at amortized cost using the prospective effective interest method described
in ASC 835-30, Imputation of Interest (“ASC 835-30”).

The
effective interest rate is calculated by forecasting the expected cash flows to be paid over the life of the liability relative
to its fair value as of the LNHC Acquisition date. The effective interest rate is recalculated in each reporting period as the
difference between expected cash flows and actual cash flows are realized and as there are changes to expected future cash flows.
The carrying value of the Reedy Creek liability is made up of the opening balance, which is increased by accrued interest expense,
and decreased by any cash payments made to Reedy Creek during the period to arrive at the ending balance.

    27

The
following table provides the activity of the Reedy Creek Purchase Agreement for the three months ended September 30, 2025:

    Schedule of activity of Reedy Creek Purchase Agreement 
    Reedy Creek Purchase Agreement 

    Initial carrying value 
    $19,600 

    Interest accretion 
     837 

    Royalty payments accrued 
     (142)

    Carrying value of the financing at September 30, 2025 
     20,295 

    Less: current portion 
     2,830 

    Carrying value of the financing at September 30, 2025, net of current portion 
    $17,465 

    September 30,