Note 4 — Balance Sheet Details

Inventories

Inventories, which primarily relate to Proclarix product as of December 31, 2024 and ENTADFI product as of December 31, 2023, consisted of the following:

The Company recorded an impairment on the ENTADFI inventory in the amount of approximately $0.4 million during the year ended December 31, 2024. During the year ended December 31, 2023, $1.2 million of an impairment was recorded (see Note 5). 

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of December 31, 2024 and 2023:

Intangible Assets

Intangible assets, which were recorded during the year ended December 31, 2023 in connection with the ENTADFI and Proteomedix acquisitions (see Note 5), is comprised of customer relationships, product rights for developed technology and a trade name, and consisted of the following as of December 31, 2024 and 2023:  

The finite lived intangible assets held by the Company, which includes trade name, customer relationships and product rights for developed technology, were being amortized over their estimated useful lives, which is 15 years. Amortization expense related to intangible assets was approximately $0.7 million for the year ended December 31, 2024, of which approximately $457,000 and $252,000 was recorded as cost of revenue and selling, general, and administrative expenses, respectively, in the accompanying consolidated statements of operations and comprehensive loss. Amortization expense related to intangible assets was approximately $37,000 for the year ended December 31, 2023, of which approximately $31,000 and $6,000 was recorded as costs of revenue and selling, general, and administrative expenses, respectively.

ENTADFI Intangible Asset Impairment

During the three months ended March 31, 2024, the Company became aware of a new competitor that received approval by the FDA for a combined finasteride-tadalafil capsule, which is a direct competitor product to ENTADFI. This was determined to be a triggering event that could result in a decrease in future expected cash flows, and thus indicated the carrying amount of the ENTADFI asset group may not be fully recoverable. The Company performed an undiscounted cash flow analysis over the ENTADFI asset group and determined that the carrying value of the asset group is not recoverable. The Company then estimated the fair value of the asset group to measure the impairment loss for the period. Significant assumptions used to determine this non-recurring fair value measurement included projected sales driven by market share and product sales price estimates, associated expenses, growth rates, the discount rate used to measure the fair value of the net cash flows associated with this asset group, as well as Management’s estimates of an expected sales price for the asset group, and the probability of each potential strategic alternative taking place.

During the three months ended June 30, 2024, the Company reevaluated the probability of each potential strategic alternative occurring and determined that the change in probabilities is a triggering event that could result in a decrease in future expected cash flows. Based on the Company’s evaluation, there was no plan to resume commercialization of ENTADFI, the Company had not identified any buyers interested to consummate a sale or other transaction of the ENTADFI assets and was considering abandoning the product, all of which indicated the carrying amount of the ENTADFI asset group may not be fully recoverable. The Company further determined that the asset group was fully impaired at June 30, 2024, and recorded a corresponding impairment charge during the three months ended June 30, 2024, thus resulting in no remaining carrying value for the assets in the ENTADFI asset group. The Company further determined that the asset group was fully impaired at June 30, 2024, and recorded a corresponding impairment charge during the three months ended June 30, 2024, thus resulting in no remaining carrying value for the assets in the ENTADFI asset group. There were no additional impairments for the remainder of the year ending December 31, 2024.

Proteomedix Intangible Assets Impairment

The Company assesses the recoverability of its intangible with definite lives whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During the three months ended March 31, 2024, June 30, 2024 and September 30, 2024, the Company did identify certain impairment indicators such as the decrease in the Company’s stock price; however, the Company concluded the intangible assets’ values were recoverable based on its quantitative analyses to assess the projected future undiscounted cash flows associated with the intangible assets compared to their carrying value. Therefore, the Company recorded no impairment charges on its intangible assets during the three months ended March 31, 2024, June 30, 2024 and September 30, 2024. 

During the three months ended December 31, 2024, the Company identified indicators of impairment related to the intangible assets acquired in connection with the PMX acquisition. Although the Company continued to view the underlying technologies as strategically important, it determined that it no longer possessed the operational or financial resources required to advance their development. This conclusion was based on several factors including the Company experiencing a substantial decline in market capitalization and share price during the three months ended December 31, 2024. The decrease in market capitalization and share price was driven by significant recurring net losses and a decrease in the Company’s liquidity position. The Company’s updated financial forecasts reflected continued and increasing net losses associated with the development and commercialization of the PMX-related assets; however, the Company’s weakened financial condition constrained its ability to raise the capital necessary to support the continued investment in the PMX assets. This limited access to capital raise led the Company to conclude it no longer has the ability to support the continued operation and commercialization efforts associated with the PMX assets. As a result of these factors, the Company recorded a full impairment charge on the remaining balance of its intangible assets resulting in a zero balance at December 31, 2024.

Goodwill

During the three months ended March 31, 2024, the Company’s stock price and market capitalization declined, and the Company determined that this was an indicator of a potential impairment of its goodwill, and accordingly, as of March 31, 2024, the Company performed a quantitative analysis to identify and measure the amount of impairment loss to be recognized, if any. To perform its quantitative test, the Company compared the fair value of the Proteomedix reporting unit to its carrying value and determined that the fair value of the reporting unit was less than its carrying value. The Company determined the amount of impairment charges to its goodwill for the three months ended March 31, 2024 to be approximately $5.2 million.

Historically, the Company was organized in two reporting units, Proteomedix and ENTADFI. The goodwill arising from the Proteomedix acquisition was assigned solely to the Proteomedix reporting unit. The Company reevaluated its reporting units during the three months ended June 30, 2024, and determined that as of April 30, 2024, ENTADFI no longer qualified as a separate reporting unit. As a result, since that date, the Company’s goodwill is assigned to a single reporting unit. Accordingly, the Company performed a quantitative analysis immediately prior to the change in reporting units, and immediately after the change in reporting units, to identify and measure the amount of impairment loss to be recognized, if any. To perform its quantitative tests, the Company compared the fair value of the reporting unit to its carrying value and determined that the fair value of the reporting unit was less than its carrying value. The Company determined the amount of impairment charges to its goodwill for the three months ended June 30, 2024 to be approximately $10.3 million.

During the three months ended September 30, 2024, the Company’s re-evaluation of market conditions and anticipated timing of projected sales prompted the Company to determine that there was an indicator of a potential impairment of its related intangible assets and goodwill, and accordingly, as of September 30, 2024, the Company performed a quantitative analysis to identify and measure the amount of impairment loss to be recognized, if any. It was determined no further impairment on goodwill was required for the three months ended September 30, 2024.

During the three months ended December 31, 2024, the Company identified a measurement period adjustment relating from the Proteomedix acquisition resulting in an increase to the acquired goodwill of approximately $8.4 million (see Note 5). In addition, the Company performed a re-evaluation of market conditions and anticipated timing of projected sales which prompted the Company to determine that there was an indicator of a potential impairment of its related goodwill. Accordingly, as of December 31, 2024, the Company performed a quantitative analysis to identify and measure the amount of impairment loss to be recognized. It was determined there was an additional impairment on goodwill of $16.8 million for the three months ended December 31, 2024.

The Company has recorded a cumulative $32.3 million in impairment charges related to its goodwill for the year ended December 31, 2024.

The fair value estimate of the reporting units for the quarters ended March 31, 2024 and June 30, 2024 was derived from a combination of an income approach and a market approach, and a reconciliation to the Company’s market capitalization. The fair value estimate of the reporting units for the quarter ended September 30, 2024 was derived from the income approach and reconciled to the Company’s market capitalization. The method was changed for the quarter ended September 30, 2024 to reflect the disparity between the Company and the guideline transactions that were previously selected in prior quarters. The fair value estimate of the reporting units for the quarter ended December 31, 2024 was derived from the Company’s market capitalization. Under the income approach, the Company estimated the fair value of the reporting unit based on the present value of estimated future cash flows, which the Company considers to be a Level 3 unobservable input in the fair value hierarchy. The Company prepared cash flow projections based on management’s estimates of future revenue and operating costs, taking into consideration the historical performance and the current macroeconomic, industry, and market conditions. The Company based the discount rate on the weighted-average cost of capital considering Company-specific characteristics and changes in the reporting unit’s projected cash flows. Under the market approach, the Company estimated the fair value of the reporting unit based on revenue market multiples derived from comparable companies with similar characteristics as the reporting unit, as well as an estimated control premium.

Goodwill consisted of the following as of December 31, 2024 and 2023: 

Accrued Expenses

Accrued expenses consisted of the following as of December 31, 2024 and 2023: