Company: PTHS
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001753926-25-001764
Chunk: 21

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 1
Chunk 21
---
vements and betterments that add new functionality or extend the useful
life of an asset are capitalized. Leases for real estate often include tenant improvement allowances, which the Company assesses
according to applicable accounting guidance to determine the appropriate owner, and capitalizes such tenant improvement assets
accordingly.

Intangible
Assets, Net and Goodwill

Intangible
assets represent certain identifiable intangible assets, including product rights consisting of pharmaceutical product licenses
and patents. Amortization for pharmaceutical products licenses is computed using the straight-line method based on the lesser
of the term of the agreement and the useful life of the license. Amortization for pharmaceutical patents is computed using the
straight-line method based on the useful life of the patent.

Definite-lived
intangible assets are reviewed for impairment whenever events or circumstances indicate that carrying amounts may not be recoverable.
In the event impairment indicators are present or if other circumstances indicate that an impairment might exist, then management
compares the future undiscounted cash flows directly associated with the asset or asset group to the carrying amount of the asset
group being determined for impairment. If those estimated cash flows are less than the carrying amount of the asset group, an
impairment loss is recognized. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s
fair value. Considerable judgment is necessary to estimate the fair value of these 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