Company: PTHS
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001753926-25-001764
Chunk: 23

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 1
Chunk 23
---
 changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset
to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds
its estimated future cash flows, an impairment charge is recognized for an amount by which the carrying amount of the asset exceeds
the fair value of the asset.

The
Company did not identify indicators of impairment for the long-lived assets during the three or nine 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.

●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.

    15

See
Note 7— “Reedy Creek Liability” and Note 8— “License and Other Agreements” for additional
detail regarding the carrying value of certain balances reflected within the accompanying condensed consolidated financial statements.

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