Company: PTHS
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001753926-25-001764
Chunk: 31

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 1
Chunk 31
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, the amount of goodwill will increase and if the final
fair value estimates and tax adjustments related to the net assets acquired increase from their preliminary estimates, the amount
of goodwill will decrease. In addition, the final fair value estimates related to the net assets acquired could impact the amount
of amortization expense recorded associated with amounts allocated to intangible assets. The preliminary goodwill arising from
the Merger is primarily attributable to expected synergies. The goodwill will not be deductible for federal tax purposes. The fair
value measurements were primarily based on significant inputs that are not observable in the market and thus represent Level 3
fair value measurements.

The fair value of developed technology
was estimated using the “multi-period excess earnings” method, an income approach that considers the net cash flows
expected to be generated by the intangible asset by excluding any cash flows related to contributory assets. Significant assumptions
include the expected useful life of the patent, contributory asset charges and the concluded discount rate. The developed technology
will be amortized on a straight-line basis over an estimated useful of 12.2 years. The $32,200 fair value of the developed technology
is within intangible assets in the table above.

    20

The
fair value of the Sato Pharmaceutical Co., Ltd. (“Sato”) licensing agreement was estimated using the “relief
from royalty” method, an income approach that considers the market-based royalty a company would pay to enjoy the benefits
of the trade name or technology in lieu of actual ownership of the technology. Significant assumptions include the royalty rate,
forecasted cash flows of the license agreement and concluded discount rate. The $1,000 fair value of this agreement is within
intangible assets in the table above. The Sato licensing agreement will be amortized on a straight-line basis over an estimated
useful of 13.0 years. See Note 5— “Sato Agreement” for additional detail regarding the fair value of the Sato
licensing agreement.

The
fair value of the inventory was estimated using the top/down method that considers the estimated selling price, costs to complete,
disposal costs, profit margin on disposal effort, and holding costs. Significant assumptions include management’s estimates for
the selling price and the costs to be incurred related to the disposal effort of the inventory.

The
fair value of the Reedy Creek liability was estimated using the income approach that considers the royalties based on sales of
ZELSUVMI. The $19,600 fair value of this