Company: PTHS
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001753926-25-000503
Chunk: 521

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-03-27
Form: 10-K
Item: Item 1B
Chunk 521
---
 an asset and liability approach to calculating deferred income taxes. The asset
and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences
of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided
to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will
not be realized.

The
Company follows the provision of the ASC 740 related to Accounting for Uncertain Income Tax Position. When tax returns are filed,
it is more likely than not that some positions taken would be sustained upon examination by the taxing authorities, while others
are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.
In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the consolidated financial statements
in the period during which, based on all available evidence, management believes it is most likely that not that the position
will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are
not offset or aggregated with other positions.

Tax
positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more
than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated
with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain
tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing
authorities upon examination. The Company believes its tax positions will more likely than not be upheld upon examination. As
such, the Company has not recorded a liability for uncertain tax benefits.

The
federal and state income tax returns of the Company are subject to examination by the Internal Revenue Service and state taxing
authorities, generally for three years after they were filed. The Company has filed its tax returns for the year ended December
31, 2023 and after review of the prior year consolidated financial statements and the results of operations through December 31,
2024, the Company has recorded a full valuation allowance on its deferred tax asset.

Recently
Issued Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting entity’s
effective