Pelthos Therapeutics Inc.PTHS
Pelthos Therapeutics Inc. Income Taxes Disclosure
INCOME TAXES
Income before provision for income taxes was as follows:
| Years Ended December 31, | |||||||||||
| 12/31/2025 | 12/31/2024 | ||||||||||
| United States | $ | (50,231) | $ | (7,928) | |||||||
| Foreign | (475) | (27) | |||||||||
| Total income before taxes | $ | (50,706) | $ | (7,955) | |||||||
The components of income tax expense attributable to income before income taxes for the period ended December 31, 2025 and December 31, 2024, consisted of the following:
| Years Ended December 31, | |||||||||||
| 12/31/2025 | 12/31/2024 | ||||||||||
| Current tax expense: | |||||||||||
| Federal | $ | — | $ | — | |||||||
| State | — | — | |||||||||
| Foreign | — | — | |||||||||
| Total current tax expense | — | — | |||||||||
| Deferred tax expense (benefit): | |||||||||||
| Federal | (6,963) | — | |||||||||
| State | (424) | — | |||||||||
| Foreign | — | — | |||||||||
| Total deferred tax expense (benefit) | (7,387) | — | |||||||||
| Total provision for income taxes | $ | (7,387) | $ | — | |||||||
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Acquisition of LNHC, Inc. was completed on July 1, 2025 and was accounted for as a business combination under ASC 805. The LNHC acquisition was a non-taxable acquisition and generated a net deferred tax liability on the opening balance sheet. As of December 31, 2025, the Company has generated enough additional deferred tax assets to reduce the opening balance sheet deferred tax liability to zero. During 2025, the Company also completed two taxable asset acquisitions, that give rise to tax deductible intangible assets.
Prior to the LNHC acquisition, the Company had a deferred tax asset related to net operating losses that was fully offset with a valuation allowance. Based on the December 31, 2025 consolidated Company tax position, including both deferred tax assets related to historical net operating loss carryforwards and deferred tax liabilities associated with the LNHC acquisition, for the year ended December 31, 2025 the Company recorded an income tax benefit, primarily related to the release of valuation allowance for historical deferred tax assets.
As of December 31, 2025 the Company has $18,107, $30,543, and $505 of Federal, State, and Foreign net operating losses. Federal and foreign net operating losses carryforward indefinitely, while the state net operating losses begin to expire in 2040.
As of December 31, 2025, there are no known items that would result in a material liability related to uncertain tax positions, as such, there are no unrecognized tax benefits. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2025, the Company had no accrued interest or penalties related to uncertain tax positions. There were no changes in uncertain tax positions during the 2025 reporting year.
The Company’s 2021 to 2024 domestic income tax return years are open under the statute of limitations for examination by the taxing authorities. Additionally, the Company’s tax returns for Channel Therapeutics Australia are open under the statute of limitations for examination by the tax authorities for tax years 2023 and 2024.
The Company recorded a valuation allowance of $2,835 against the deferred tax assets as of December 31, 2025 because realization is not more likely than not based on available positive and negative evidence. The change in valuation allowance was a decrease of $1,190 for the year ended December 31, 2025.
The Tax Cuts and Jobs Act of 2017 subjects a U.S. shareholder to tax on global intangible low-taxed income (“GILTI”) earned by certain foreign subsidiaries. The Company has elected to account for GILTI in the year the tax is incurred. The Company did not record a GILTI inclusion for the year ended December 31, 2025 or 2024.
On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act (OBBBA), which includes several changes to U.S. federal income tax law, including temporary and permanent extension, of expiring provisions of the Tax Cuts and Jobs Act of 2017. Significant provisions for corporate taxpayers include permanent 100% bonus depreciation for qualified property, immediate expensing of domestic R&D expenditures, and changes to the limitation on business interest expense deductions under Section 163(j). None of these provisions have a material impact on the Company’s 2025 income tax provision.
Significant components of the Company’s deferred tax assets and liabilities are as follows:
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Net operating losses | $ | 3,971 | $ | 4,025 | |||||||
| Lease liability | 763 | — | |||||||||
| Accrued compensation | 566 | — | |||||||||
| Royalty and license payments | 1,718 | — | |||||||||
| Deferred revenue | 8,143 | — | |||||||||
| Stock compensation | 848 | — | |||||||||
| Total deferred tax assets | 16,009 | 4,025 | |||||||||
| Valuation allowance | (2,835) | (4,025) | |||||||||
| Total net deferred income tax assets | 13,174 | — | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Fixed assets | (1,829) | — | |||||||||
| Intangible assets | (7,111) | — | |||||||||
| Inventory | (3,502) | — | |||||||||
| Right-of-use lease assets | (732) | — | |||||||||
| Total deferred income tax liabilities | (13,174) | — | |||||||||
| Total net deferred income tax assets | $ | — | $ | — | |||||||
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:
| Years Ended | |||||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| Amount | % of Pretax Losses | Amount | % of Pretax Losses | ||||||||||||||||||||
| U.S. Federal statutory tax rate | $ | (10,649) | 21.0 | % | $ | (1,675) | 21.0 | % | |||||||||||||||
| State and local income taxes, net of federal income tax effect | (424) | 0.8 | % | — | — | % | |||||||||||||||||
| Foreign tax effects | |||||||||||||||||||||||
| Australia | |||||||||||||||||||||||
| Statutory tax rate difference between Australia and U.S. | (19) | 0.1 | % | (1) | — | % | |||||||||||||||||
| Change in valuation allowance | 119 | (0.2) | % | 5 | — | % | |||||||||||||||||
| Change in valuation allowance | (1,353) | 2.6 | % | 1,671 | (21.0) | % | |||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||
| Change in fair value of convertible debt | 3,147 | (6.1) | % | — | — | % | |||||||||||||||||
| Interest expense - 163(l) | 633 | (1.2) | % | — | — | % | |||||||||||||||||
| Nondeductible transaction costs and other | 355 | (0.8) | % | — | — | % | |||||||||||||||||
| Adjustment to prior year NOL carryforwards | 804 | (1.6) | % | — | — | % | |||||||||||||||||
| Effective tax rate | $ | (7,387) | 14.6 | % | $ | — | — | % | |||||||||||||||
The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include Colorado and Kentucky.
For the years ended December 31, 2025 and 2024 the Company paid no cash amounts related to income taxesHistorical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 19, 2026 | Showing above |
| 2024 | Mar 27, 2025 | |
| 2023 | Apr 16, 2024 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.