Company: PTHS
Filing Date: 2025-05-13
Form Type: 10-Q
Source: 0001753926-25-000790
Chunk: 57

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-05-13
Form: 10-Q
Item: Part I, Item 1
Chunk 57
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 accordance with accounting
principles generally accepted in the United States.

The
preparation of these consolidated financial statements requires management to make estimates, judgments and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingencies. We continually evaluate
the accounting policies and estimates used to prepare the consolidated financial statements. We base our estimates on historical
experiences and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could
differ from these estimates made by management.

See
Note 3 – Summary of Significant Accounting Policies to the accompanying consolidated financial statements for a detailed
description of our significant accounting policies.

Income
Taxes

We
are subject to income taxes in the U.S. Significant judgment is required in determining income tax expense, deferred taxes and
uncertain tax positions. The underlying assumptions are also highly susceptible to change from period to period. In assessing
the realizability of deferred tax assets, management considers whether it is more likely than not that some or all the deferred
tax assets will be realized. The ultimate realization of deferred taxes assets is dependent upon generation of future taxable
income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income, and taxable income in carryback years and tax-planning strategies when
making this assessment. There is currently significant negative evidence which contributes to our recording a valuation allowance
against our deferred tax assets due to cumulative losses since inception.

Although
we believe our assumptions, judgments, and estimates are reasonable, changes in tax laws or our interpretation of tax laws and
the resolution of any tax audits could significantly impact the amounts provided for income taxes in our consolidated financial
statements. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period
that includes the enactment date. Adjustments to income tax expense, to the extent we establish a valuation allowance or adjust
the allowance in a future period, could have a material impact on our financial condition and results of operations.

Recently
Issued and Adopted Accounting Pronouncements

The
FASB issues ASUs to amend the authoritative literature in the Accounting Standards Codification (“ASC”). There have
been several ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to
date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv)