Exhibit 99.1 Pelthos Therapeutics Announces Fourth Quarter and Full Year 2025 Financial Results ZELSUVMI™ net product revenue grew 28% Quarter over Quarter to $9.1 million, bringing total ZELSUVMI net product revenue to $16.2 million, for the period from the launch in July 2025 through December 31, 2025. Total revenue including licensing revenue was $16.8 million for 2025. 8,948 ZELSUVMI units prescribed by 2,712 unique prescribers for fiscal year 2025, with a 129% quarter over quarter increase in units dis ...

Product Portfolio - Pelthos Therapeutics Inc. has three FDA approved products in its portfolio, including ZELSUVMI, XEPI, and XEGLYZE, with ZELSUVMI launched in July 2025[37]. - XEPI, acquired in November 2025, addresses a critical unmet need in antibiotic-resistant skin infections, affecting approximately 3 million people annually in the U.S.[53]. - XEGLYZE, acquired in December 2025, is indicated for the treatment of head lice, with an estimated 6 to 12 million infestations occurring annually among children aged 3 to 11 in the U.S.[62]. - The company acquired two additional FDA approved products during the fourth quarter of 2025 to expand its commercial product portfolio[37]. - ZELSUVMI is the first FDA approved topical medication for molluscum contagiosum that can be safely applied by patients without in-office administration[45]. - ZELSUVMI was approved by the FDA in January 2024 and launched in the United States in July 2025, focusing on the treatment of molluscum contagiosum[180][192]. - The company expects to continue incurring significant expenses and operating losses until revenue from ZELSUVMI is sufficient to fund operations[184]. - The company is dependent on the commercial success of ZELSUVMI and may not achieve profitability within the expected timeframe[191]. Financial Overview - The PIPE Financing generated gross proceeds of approximately $50.1 million, consisting of $50.0 million in cash and $0.1 million from the conversion of a convertible note[66]. - The company reported a net loss of approximately $43.3 million for the year ended December 31, 2025, with total operating expenses of $49.2 million[181]. - The company generated net revenue of $16.2 million for the year ended December 31, 2025, representing approximately six months of commercial activity for its lead product, ZELSUVMI[181]. - The company has cash of approximately $18.0 million and working capital of $27.4 million as of December 31, 2025[181]. - The company entered into a Venture Loan and Security Agreement for up to $50.0 million to support the commercialization of ZELSUVMI and prepare for the launch of two recently acquired products[182]. Market and Commercialization Strategy - The company has signed its first commercial agreement with a major Pharmacy Benefit Manager (PBM) to expand patient access for ZELSUVMI, managing prescription drug benefits for over 20 million covered lives[93]. - ZELSUVMI is marketed primarily to pediatricians and dermatologists, with a focus on increasing awareness and adoption through direct sales efforts and targeted marketing initiatives[90][91]. - The commercial success of ZELSUVMI and other drug candidates depends on adequate coverage and reimbursement from governmental and private payors[151]. - The commercial success of ZELSUVMI will be affected by third-party payor coverage and reimbursement policies, which may impose downward pressure on pricing and utilization[214]. - The efficacy and safety of ZELSUVMI compared to alternative treatments will significantly influence its market acceptance and commercial success[200]. - Establishing effective sales, marketing, and distribution capabilities is essential for the commercialization of ZELSUVMI, and the current sales organization may need expansion to support expected revenue growth[198]. Regulatory and Compliance - All clinical trials must be conducted under GCPs, requiring informed consent from research subjects[122]. - The FDA has a goal of ten months to review and act on a standard NDA for a new molecular entity after filing[129]. - The FDA may issue a Complete Response Letter (CRL) if the NDA has deficiencies, requiring resubmission[132]. - Drug manufacturers must register their establishments with the FDA and are subject to periodic inspections for compliance[135]. - The FDA can withdraw approval if regulatory compliance is not maintained or if new safety issues arise post-marketing[136]. - The company is required to report payments and transfers of value to healthcare professionals under the Physician Payments Sunshine Act[147]. Risks and Challenges - The company faces increased scrutiny regarding pharmaceutical pricing practices, which could affect its pricing strategies and market access[157]. - Future healthcare reforms may impose new regulatory requirements and limit reimbursement for products, potentially affecting demand for ZELSUVMI[161]. - The company may face challenges related to reimbursement for ZELSUVMI, which could impact its commercialization efforts[192]. - The company faces substantial competition from major pharmaceutical companies and alternative treatments, which may limit the commercial opportunity for ZELSUVMI[204]. - The market for ZELSUVMI may not be as large as anticipated, as many individuals may decline treatment for molluscum contagiosum, relying on the body's immune system for resolution[217]. - The company faces risks related to supply chain disruptions that could adversely affect sales and marketing efforts, as well as development timelines[225]. - There is a risk of decreased demand for ZELSUVMI and potential product candidates due to negative media attention or product liability claims[226]. Research and Development - The Company is developing three NaV1.7 pain programs, including CT2000 for eye pain, which is expected to enter Phase 1a/2b studies in Q1 2026[82]. - The NITRICIL technology platform is expected to generate differentiated product candidates leveraging nitric oxide's anti-viral and anti-inflammatory properties[78]. - The Company anticipates that the NITRICIL platform has many potential product candidates that could be further developed, including treatments for acne and atopic dermatitis[79]. - The company has limited experience in producing commercial scale products utilizing NITRICIL technology, which could impact development timelines[229]. Manufacturing and Supply Chain - The Company has a manufacturing facility in Durham, North Carolina, with 19,265 square feet dedicated to cGMP manufacturing and related operations[76]. - The Company has manufactured over one metric ton of Active Pharmaceutical Ingredient (API) since its facility became operational, ensuring sufficient capacity to meet current sales forecasts for ZELSUVMI[101][102]. - The Company has a multi-year supply agreement with Orion Corporation for the commercial supply of ZELSUVMI, with production forecasts informed by expected sales[105]. - The company relies on third-party manufacturers for the final production of ZELSUVMI, which introduces risks related to quality control and timely delivery[231]. - Unexpected results in raw material analysis could lead to increased costs and delays in regulatory submissions or commercialization[234]. Employee Relations - As of December 31, 2025, the company had a total of 92 full-time employees, highlighting the importance of human capital in its operations[164]. - The company considers its relations with employees to be good, with no employees represented by labor unions[166].

Financial Performance - Pelthos Therapeutics reported net product revenue of $7.1 million from ZELSUVMI in Q3 2025, with 2,716 units prescribed by 1,169 unique prescribers[1][4][6]. - Cash position as of September 30, 2025, was $14.2 million, with total current assets amounting to $49.8 million[6][8]. - Selling, general and administrative expenses for Q3 2025 were $19.6 million, reflecting costs associated with supporting ZELSUVMI's sales growth[6][10]. - The net loss for Q3 2025 was $16.2 million, equating to a net loss of $5.30 per share[6][10]. - Adjusted EBITDA for Q3 2025 was reported at $(11.5) million, indicating ongoing investment in growth despite losses[11][13]. - Cost of goods sold for Q3 2025 was $2.3 million, with adjustments leading to an adjusted COGs of $413,000[6][17]. Strategic Initiatives - The company closed a merger with Channel Therapeutics Corporation and LNHC, Inc., raising $50.1 million in an equity private placement to support ZELSUVMI's launch[4][6]. - The acquisition of XEPI, a novel FDA-approved treatment for impetigo, was completed in November 2025, addressing a significant unmet need in pediatric skin infections[4][5]. - Pelthos is positioned to leverage synergies between ZELSUVMI and XEPI to enhance revenue through existing commercial relationships[5][6]. - Pelthos expects the acquisition of XEPI to enhance existing commercial operations and provide additional revenue opportunities through cost synergies[21]. - The company believes it is well-positioned to capitalize on large addressable markets with both ZELSUVMI and XEPI[21]. Product Performance - The company anticipates continued strong growth for ZELSUVMI, with 2,189 units prescribed in October 2025 alone[3][4]. - Pelthos Therapeutics' lead product ZELSUVMI™ (berdazimer) topical gel, 10.3%, was approved by the U.S. FDA in 2024 for treating molluscum contagiosum[20]. - The company anticipates continued growth of ZELSUVMI in Q4 2025[21]. Risks and Considerations - Risks include reliance on collaborative partners for revenue projections and potential delays in product development and regulatory approvals[21]. - Adjusted EBITDA and Adjusted COGs are considered useful measures for period-to-period comparisons of business performance[21].

Product Launch and Market Opportunity - Pelthos Therapeutics Inc. launched its commercially marketed product, ZELSUVMI, for the treatment of molluscum contagiosum in July 2025[242]. - ZELSUVMI is the first FDA-approved topical medication for molluscum contagiosum, estimated to affect approximately 17 million people in the U.S.[261]. - The annual incidence of molluscum contagiosum is estimated to be between 3-6 million cases in the U.S., highlighting a significant market opportunity[265]. - The Company believes that ZELSUVMI will be positioned as the preferred first-line therapy among pediatricians, who diagnose the majority of infections[278]. - The Company estimates that over 390,000 unique patients are affected by molluscum contagiosum annually, with more than 100,000 unique healthcare providers treating the disease[279]. - ZELSUVMI is marketed primarily through personal promotion and direct sales efforts targeting pediatricians and dermatologists[280]. Financial Performance and Projections - The Company reported net product revenues of $7.112 million for the three months ended September 30, 2025, with total revenue of $7.406 million[309]. - The Company incurred a net loss of approximately $16.2 million for the three months ended September 30, 2025, compared to a net loss of $1.7 million for the same period in 2024[302][309]. - The Company expects to continue incurring losses as it invests in commercialization activities for ZELSUVMI and other operational costs[303]. - The Company expects to continue incurring losses and requires additional capital to fund operations and commercialization efforts for ZELSUVMI[332]. - There is substantial doubt about the company's ability to continue as a going concern and fund operations for at least the next twelve months[332]. - The company anticipates future capital requirements will depend on factors including sales from ZELSUVMI and costs of commercialization[342]. Merger and Financing Activities - The merger on July 1, 2025, resulted in the issuance of 31,278 shares of Series A Preferred Stock to Ligand as consideration for LNHC shares[249]. - The PIPE Financing generated gross proceeds of approximately $50.1 million, consisting of $50.0 million in cash and $0.1 million from the conversion of a convertible note[251]. - Following the merger and PIPE Financing, approximately 7.4% of the outstanding shares were owned by the Company's security holders, while LNHC security holders owned approximately 56.1%[257]. - The total net proceeds from the PIPE Financing, after settlement of payables and expenses, amounted to approximately $27.384 million[260]. - The maximum borrowing under the Ligand Bridge Note was $18.0 million, with a balance of $12.7 million at the closing of the merger[259]. Research and Development - The Company has clinical-stage assets targeting the NaV1.7 sodium ion-channel, which is validated as a pain receptor in human physiology[242]. - Research and development (R&D) expenses for the three and nine months ended September 30, 2025, were $0.145 million and $0.854 million, respectively, showing a decrease due to reduced activities in NaV1.7 pain programs[325]. Manufacturing and Supply Chain - The manufacturing facility in North Carolina spans 19,265 square feet and is dedicated to the production of berdazimer sodium, the active pharmaceutical ingredient in ZELSUVMI[267]. - The Company has sufficient API manufacturing capacity to meet current sales forecasts and can potentially double its manufacturing capacity if needed[291]. - The Company has a long-standing strategic alliance with Orion Corporation for the manufacturing of ZELSUVMI, which has been fully validated and qualified[292]. - The ZELSUVMI manufacturing process involves procurement of raw materials, conversion to API, and collaboration with third-party organizations for final product distribution[284]. Intellectual Property and Licensing - The Company has exclusive rights to a robust IP portfolio covering ZELSUVMI, including 14 issued U.S. patents expected to expire between 2026 and 2035[293][294]. - As of September 30, 2025, the last patent related to ZELSUVMI is set to expire in May 2026, with a total of 14 U.S. patents covering ZELSUVMI expected to expire between 2026 and 2035[375]. - The Company entered into a Purchase and Sale Agreement with Nomis RoyaltyVest LLC on July 1, 2025, selling rights to a portion of revenue payments for ZELSUVMI for a purchase price of $1,000[386]. - Under the ZELSUVMI Royalty Agreement, NRV will receive a 1.5% royalty on net sales of ZELSUVMI worldwide prior to the expiration of the initial royalty term[387]. - The Channel Products Royalty Agreement stipulates that NRV will receive a 5.3% royalty on net sales of the Channel Covered Products worldwide prior to the expiration of the initial royalty term[389]. Operational Costs and Expenses - Total selling, general and administrative (SG&A) expenses for the three and nine months ended September 30, 2025, were $19.6 million and $24.0 million, respectively, reflecting increased costs due to the launch of ZELSUVMI[322]. - Cost of goods sold for the three and nine months ended September 30, 2025, was $2.3 million, including $0.8 million of write-offs of in-process material[317]. - Amortization of intangible assets for the three and nine months ended September 30, 2025, was $0.7 million, related to the acquisition of LNHC[326]. Cash Flow and Capital Requirements - As of September 30, 2025, the Company had cash of approximately $14.2 million and working capital of $25.0 million[302]. - For the nine months ended September 30, 2025, net cash used in operating activities was $16.3 million, primarily due to a net loss of $21.7 million[334]. - Net cash provided by financing activities was $27.3 million, resulting from net proceeds from PIPE Financing[339]. - The company may need to raise additional capital for business expansion, product development, or strategic investments[341]. Lease and Contractual Obligations - The TBC Lease for corporate headquarters in Durham, North Carolina, spans until 2032, with monthly base rent starting at approximately $39,000[400][402]. - A letter of credit of $583,000 was provided as collateral for the TBC Lease obligations[403]. - A non-exclusive Contract Management Agreement with Orion was established for the manufacturing of ZELSUVMI, with an initial five-year term[404].

[Filing Information](index=1&type=section&id=Filing%20Information) This section provides essential details regarding the registrant, the filing date, and the general context of this Form 8-K submission [Registrant and Filing Details](index=1&type=section&id=Registrant%20and%20Filing%20Details) This section provides the basic identification details for Pelthos Therapeutics Inc. as the registrant, including its jurisdiction, address, and contact information, for this Form 8-K filing dated August 18, 2025 - **Registrant**: Pelthos Therapeutics Inc.[2](index=2&type=chunk) - **Date of Report**: August 18, 2025[2](index=2&type=chunk) Registrant Contact and Identification Details | Detail | Value | | :--- | :--- | | Jurisdiction of incorporation | Nevada | | Commission File Number | 001-41964 | | IRS Employer Identification No. | 86-3335449 | | Principal Executive Office | 4020 Stirrup Creek Drive, Suite 110, Durham, NC 27703 | | Registrant's telephone number | (919) 908-2400 | [Securities and Status](index=1&type=section&id=Securities%20and%20Status) This section outlines the company's registered securities and its status as an emerging growth company, as defined by SEC regulations Registered Securities Information | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :--- | :--- | :--- | | Common Stock, par value $0.0001 per share | PTHS | The NYSE American LLC | - Pelthos Therapeutics Inc. is an **emerging growth company**[4](index=4&type=chunk) - The registrant utilizes the **extended transition period** for complying with new or revised financial accounting standards[4](index=4&type=chunk) [Reported Events](index=2&type=section&id=Reported%20Events) This section details the specific events being reported, including financial results, Regulation FD disclosures, and accompanying exhibits [Item 2.02. Results of Operations and Financial Condition](index=2&type=section&id=Item%202.02.%20Results%20of%20Operations%20and%20Financial%20Condition) Pelthos Therapeutics Inc. reported its financial results for legacy operations for the three and six months ended June 30, 2025, and provided an update on its therapeutic programs via a press release (Exhibit 99.1) issued on August 18, 2025. This information is furnished but not deemed 'filed' for certain legal purposes - On August 18, 2025, Pelthos Therapeutics Inc. issued a press release summarizing **financial results for legacy operations** for the three and six months ended June 30, 2025[5](index=5&type=chunk) - The press release also provided an **update on the Company's therapeutic programs**[5](index=5&type=chunk) - A copy of the press release is furnished as **Exhibit 99.1** to this Current Report on Form 8-K and is incorporated by reference[5](index=5&type=chunk) - The information in this Item 2.02 and Exhibit 99.1 is **not deemed 'filed'** for purposes of Section 18 of the Securities Exchange Act of 1934, limiting certain liabilities[6](index=6&type=chunk) [Item 7.01. Regulation FD Disclosure](index=2&type=section&id=Item%207.01.%20Regulation%20FD%20Disclosure) This item formally incorporates the information disclosed under Item 2.02, including the press release (Exhibit 99.1), to satisfy Regulation FD requirements, ensuring fair and broad disclosure of material non-public information - Information disclosed in Item 2.02, including Exhibit 99.1, is **incorporated into this Item 7.01 by reference**[7](index=7&type=chunk) [Item 9.01. Financial Statements and Exhibits](index=2&type=section&id=Item%209.01.%20Financial%20Statements%20and%20Exhibits) This section lists the exhibits accompanying the Form 8-K filing, specifically identifying the press release dated August 18, 2025, as Exhibit 99.1 List of Exhibits | Exhibit No. | Description | | :--- | :--- | | 99.1 | Press Release, dated August 18, 2025. | [Signatures](index=3&type=section&id=Signatures) This section provides the formal authorization and signatory details for the submitted report [Authorization and Signatory](index=3&type=section&id=Authorization%20and%20Signatory) The report is duly signed on behalf of Pelthos Therapeutics Inc. by its Chief Financial Officer, Francis Knuettel II, confirming its authorization and submission on August 18, 2025 - The report was signed on behalf of Pelthos Therapeutics Inc. on **August 18, 2025**[11](index=11&type=chunk) - **Signatory**: Francis Knuettel II, Chief Financial Officer[11](index=11&type=chunk)

PART I: FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) Pelthos Therapeutics Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' deficit, cash flows, and comprehensive notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a significant decrease in total assets and a substantial increase in total liabilities from December 31, 2024, to June 30, 2025, leading to a larger stockholders' deficit | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | | :----------------------------- | :------------------------ | :------------------ | | Cash | $59,172 | $513,443 | | Total Current Assets | $822,850 | $1,369,143 | | Total Assets | $822,850 | $1,369,143 | | Total Current Liabilities | $7,317,145 | $4,083,197 | | Total Liabilities | $7,317,145 | $4,083,197 | | Total Stockholders' Deficit | $(6,494,295) | $(2,714,054) | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The company reported increased net losses for both the three and six months ended June 30, 2025, compared to the same periods in 2024, driven primarily by higher operating expenses, particularly research and development and professional fees | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | General and administrative expenses | $1,110,084 | $1,209,874 | $2,200,133 | $1,997,435 | | Research and development | $514,814 | $12,955 | $709,112 | $479,561 | | Professional fees | $1,605,525 | $541,257 | $2,155,155 | $1,221,072 | | Total operating expenses | $3,230,423 | $1,764,086 | $5,064,400 | $3,698,068 | | Net loss from operations | $(3,230,423) | $(1,764,086) | $(5,064,400) | $(3,698,068) | | Total other expense | $(218,516) | $(7,533) | $(352,150) | $(635,881) | | NET LOSS | $(3,448,939) | $(1,771,619) | $(5,416,550) | $(4,333,949) | | Net loss per common share - basic and diluted | $(5.38) | $(3.07) | $(8.64) | $(8.28) | [Condensed Consolidated Statements of Changes in Stockholders' Deficit](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Deficit) The statements reflect a significant increase in accumulated deficit and a corresponding increase in total stockholders' deficit from December 31, 2024, to June 30, 2025, primarily due to net losses and various equity-related transactions | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------- | :------------------ | :------------------ | | Common stock, par value $0.0001 | $61 | $67 | | Additional paid in capital | $18,760,872 | $20,397,175 | | Accumulated deficit | $(21,474,987) | $(26,891,537) | | Total Stockholders' Deficit | $(2,714,054) | $(6,494,295) | - The accumulated deficit increased by approximately **$5.4 million** from December 31, 2024, to June 30, 2025, primarily due to the net loss incurred during the period[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, the company experienced a net cash outflow from operating activities and a reduced cash inflow from financing activities compared to the prior year, resulting in a significant net decrease in cash | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(5,416,550) | $(4,333,949) | | Net Cash Used In Operating Activities | $(1,079,271) | $(4,944,308) | | Net Cash Provided By Financing Activities | $625,000 | $7,253,015 | | NET CHANGE IN CASH | $(454,271) | $2,308,707 | | CASH AT END OF YEAR | $59,172 | $2,405,098 | - Net cash used in operating activities decreased by **$3,865,037 (78%)** for the six months ended June 30, 2025, compared to the same period in 2024, primarily due to changes in accounts payable and accrued expenses[18](index=18&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk) - Net cash provided by financing activities decreased by **$6,628,015 (91%)** for the six months ended June 30, 2025, compared to the same period in 2024, mainly due to lower proceeds from common stock issued for cash[18](index=18&type=chunk)[243](index=243&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential context for the financial statements, detailing the company's organization, accounting policies, liquidity, related party transactions, debt, equity, and subsequent events [NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS](index=8&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20NATURE%20OF%20BUSINESS) Pelthos Therapeutics Inc. is a clinical-stage biotech focused on NaV1.7 pain therapeutics, which completed an IPO in February 2024 and underwent a significant merger in July 2025, changing its name and business focus - Pelthos Therapeutics Inc. is a clinical-stage biotech company focused on developing and commercializing new therapeutics to alleviate pain, specifically targeting the NaV1.7 sodium ion-channel[23](index=23&type=chunk) - The company completed its Initial Public Offering (IPO) on February 21, 2024, issuing **110,000 shares** of Common Stock at **$60.00 per share**, generating approximately **$5.7 million** in net proceeds[25](index=25&type=chunk) - On July 1, 2025, Channel Therapeutics Corporation consummated a merger, changed its name to Pelthos Therapeutics Inc., and effected a 10-for-1 reverse stock split[27](index=27&type=chunk) [NOTE 2 – LIQUIDITY AND GOING CONCERN](index=9&type=section&id=NOTE%202%20%E2%80%93%20LIQUIDITY%20AND%20GOING%20CONCERN) With a **$5.4 million** net loss and **$6.5 million** working capital deficit, management has substantial doubt about the company's going concern ability, despite a **$50.1 million** post-period equity offering, as significant future costs require further fundraising | Metric | June 30, 2025 | | :-------------------- | :-------------- | | Net Loss (6 months) | $(5.4) million | | Cash | $0.1 million | | Working Capital Deficit | $(6.5) million | - Management believes there is substantial doubt about the company's ability to continue as a going concern for at least the next twelve months[31](index=31&type=chunk) - A **$50.1 million** equity offering was completed subsequent to the reporting period, but significant costs for Zelsuvmi's commercial launch, potential acquisitions, and clinical trials will require additional funds[31](index=31&type=chunk) [NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=NOTE%203%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the company's significant accounting policies, covering U.S. GAAP basis, emerging growth company status, estimates, R&D expense, stock-based compensation, income tax, and recently issued accounting pronouncements - The company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[35](index=35&type=chunk)[36](index=36&type=chunk) - Research and development costs are expensed as incurred unless they qualify for capitalization[40](index=40&type=chunk) | R&D Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Consultant | $107,408 | $107,357 | $195,663 | $137,390 | | Lab Materials | $457 | $1,452 | $1,062 | $1,452 | | Lab Cell Storage | $15,795 | $27,272 | $31,223 | $51,398 | | Chemistry Manufacturing and Controls ("CMC") | $388,629 | $(133,780) | $470,799 | $169,617 | | IP Services | $2,525 | $10,654 | $10,365 | $119,704 | | Total R&D | $514,814 | $12,955 | $709,112 | $479,561 | - The company recognized stock-based compensation expense related to option vesting amortization of **$341,576** and **$745,497** for the three and six months ended June 30, 2025, respectively[93](index=93&type=chunk) [NOTE 4 – RELATED PARTY TRANSACTIONS](index=13&type=section&id=NOTE%204%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) The company has a **$40,400** asset due from Chromocell Holdings for reimbursed expenses. A related party promissory note for **$131,868**, controlled by the CFO, was in default as of June 30, 2025, accruing interest at **6.86%** after December 15, 2024 - As of June 30, 2025, the Company had a **$40,400** asset due from Chromocell Holdings for reimbursed expenses[55](index=55&type=chunk) - A related party promissory note for **$131,868**, controlled by the Company's CFO, was in default as of June 30, 2025, accruing interest at **6.86%** per annum after December 15, 2024[56](index=56&type=chunk) [NOTE 5 – NOTES PAYABLE](index=14&type=section&id=NOTE%205%20%E2%80%93%20NOTES%20PAYABLE) The company has several outstanding promissory notes, including a May Promissory Note (**$1.46 million** principal, in default), a Convertible Note (fully converted by June 30, 2025), and three Bridge Notes (February, May, June) totaling **$812,500** in principal. Interest expenses and debt discount amortizations were recognized for these notes - The May Promissory Note, with an outstanding principal of **$1,455,416**, was in default as of June 30, 2025, accruing interest at **6.86%** per annum[58](index=58&type=chunk) - The July Convertible Note, initially **$750,000**, was fully converted into common stock by June 30, 2025, at a conversion price of **$15.06 per share**[59](index=59&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) | Loan Payable | Outstanding Principal (June 30, 2025) | Outstanding Principal, net of Debt Discount (June 30, 2025) | | :--------------------- | :------------------------------------ | :---------------------------------------------------------- | | May Promissory Note | $1,455,416 | $1,455,416 | | February Bridge Note | $325,000 | $321,267 | | May Bridge Note | $325,000 | $272,260 | | June Bridge Note | $162,500 | $123,876 | | Total | $2,267,916 | $2,172,819 | [NOTE 6 – STOCKHOLDERS' EQUITY](index=17&type=section&id=NOTE%206%20%E2%80%93%20STOCKHOLDERS%27%20EQUITY) This section details significant changes in stockholders' equity, including the IPO, reverse stock splits, equity incentive plan amendments, equity issuances, a committed equity financing facility, a stock repurchase plan, PIPE financing, and activity for stock options, warrants, and RSUs - The company completed its IPO on February 21, 2024, issuing **110,000 shares** of Common Stock at **$60.00 per share**, generating approximately **$5.9 million** in net proceeds[72](index=72&type=chunk) - The 2023 Equity Incentive Plan was amended multiple times, increasing authorized shares for issuance to **2,400,000** by April 16, 2025[74](index=74&type=chunk) - A PIPE Financing closed on July 1, 2025, raising approximately **$50.1 million** gross proceeds through the issuance of **50,100 shares** of Series A Convertible Preferred Stock, with **23,810 shares** subsequently converted into **2,381,000 shares** of Common Stock[81](index=81&type=chunk)[86](index=86&type=chunk) | Stock Options Activity | Number of Shares (June 30, 2025) | Weighted Average Exercise Price (June 30, 2025) | | :--------------------- | :------------------------------- | :---------------------------------------------- | | Outstanding Dec 31, 2024 | 87,049 | $58.50 | | Granted | 7,899 | $13.50 | | Outstanding June 30, 2025 | 94,948 | $54.73 | | Exercisable June 30, 2025 | 50,913 | $86.50 | | RSU Activity | RSUs (June 30, 2025) | Weighted Average Exercise Price (June 30, 2025) | | :--------------------- | :------------------- | :---------------------------------------------- | | Non-vested Dec 31, 2024 | 29,219 | $10.80 | | Vested | (9,270) | $(11.82) | | Non-vested June 30, 2025 | 19,949 | $10.67 | [NOTE 7 – SEGMENT DISCLOSURE](index=23&type=section&id=NOTE%207%20%E2%80%93%20SEGMENT%20DISCLOSURE) The company operates as a single reportable segment: clinical-stage biotech, focused on developing pain therapeutics. This segment is currently pre-revenue, and the chief operating decision maker allocates resources and evaluates performance based on consolidated net loss - The company has one reportable segment: clinical-stage biotech, focused on developing and commercializing new therapeutics to alleviate pain[101](index=101&type=chunk)[104](index=104&type=chunk) - This segment is currently pre-revenue, and the chief operating decision maker assesses performance and allocates resources based on net loss[101](index=101&type=chunk)[103](index=103&type=chunk) [NOTE 8 – SUBSEQUENT EVENTS](index=23&type=section&id=NOTE%208%20%E2%80%93%20SUBSEQUENT%20EVENTS) Significant subsequent events include a July 1, 2025 merger changing the company's name and focus to Zelsuvmi commercialization, a 10-for-1 reverse stock split, a **$50.1 million** PIPE financing, new royalty agreements, board changes, and legal judgments - On July 1, 2025, the company consummated a merger, changed its name to Pelthos Therapeutics Inc., and its business focus became primarily the commercialization of Zelsuvmi[105](index=105&type=chunk)[106](index=106&type=chunk)[123](index=123&type=chunk) - A 10-for-1 reverse stock split became effective on July 1, 2025, and the company's common stock began trading under the ticker symbol 'PTHS' on July 2, 2025[109](index=109&type=chunk)[125](index=125&type=chunk) - A PIPE Financing raised approximately **$50.1 million** gross proceeds, with **23,810 shares** of Series A Preferred Stock converted into **2,381,000 shares** of Common Stock immediately after closing[110](index=110&type=chunk)[115](index=115&type=chunk) - New royalty agreements were established for ZELSUVMI (**1.5% to 1.2%** royalty on net sales to NRV) and Channel Covered Products (various royalties to NRV, Ligand, and Madison)[121](index=121&type=chunk)[122](index=122&type=chunk) - The company was awarded a default judgment in the Kopfli matter on July 25, 2025, for damages totaling **$17,950,205.38** against Mr. Kopfli and Chromocell Holdings, plus an additional **$348,461** against Mr. Kopfli[137](index=137&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and operational results, including forward-looking statements, business overview, historical background, financial performance analysis, liquidity, cash flows, critical accounting estimates, and segment reporting [Cautionary Notice Regarding Forward Looking Statements](index=29&type=section&id=Cautionary%20Notice%20Regarding%20Forward%20Looking%20Statements) This section serves as a disclaimer, highlighting that the report contains forward-looking statements about future events and conditions, which are subject to risks and uncertainties that could cause actual results to differ materially. Readers are cautioned not to place undue reliance on these statements, and the company undertakes no obligation to update them - The report contains forward-looking statements regarding future operations, business strategies, cash flows, and financial results, which are subject to risks and uncertainties[140](index=140&type=chunk)[141](index=141&type=chunk) - Factors outside the company's control, such as market conditions, liquidity, and the need for additional financing, could cause actual results to differ materially from projections[141](index=141&type=chunk) [Overview](index=29&type=section&id=Overview) Pelthos Therapeutics Inc. transitioned from NaV1.7 pain therapeutics to Zelsuvmi commercialization post-merger, with a pre-merger pipeline including CT2000 for eye pain, CT3000 for post-operative pain, CC8464 for neuropathic pain, and licensed Benuvia Spray Formulations - Prior to the merger, the company focused on developing NaV1.7-targeting therapeutics for pain; post-merger, the focus shifted to commercializing Zelsuvmi[143](index=143&type=chunk)[144](index=144&type=chunk) - The CT2000 Eye Pain program showed significant reduction in paw wipes (a surrogate for eye pain) in animal studies, with plans for human proof-of-concept studies in Australia[148](index=148&type=chunk)[153](index=153&type=chunk) - The CT3000 Depot Program for post-operative pain demonstrated material improvement over bupivacaine in efficacy and duration in pre-clinical nerve block models, with a depot effect exceeding four days[155](index=155&type=chunk)[156](index=156&type=chunk)[157](index=157&type=chunk) - CC8464 for neuropathic pain completed four Phase 1 trials with good tolerability but potential for skin rashes; a slow dose escalation study and pilot efficacy study in EM patients are planned[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[168](index=168&type=chunk) - The company licensed Benuvia Spray Formulations (Diclofenac, Rizatriptan, Ondansetron) to diversify its non-opioid pain pipeline, with preliminary data suggesting faster onset for Diclofenac spray[174](index=174&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) [Background](index=35&type=section&id=Background) This section outlines the company's corporate history, including its incorporation, reincorporation merger, acquisition of Chromocell Holdings' therapeutic business, and the completion of its IPO in February 2024. It also details various equity transactions and conversions that occurred in connection with the IPO, as well as a significant share transfer to AWI due to a default judgment - Channel Therapeutics Corporation was incorporated in Delaware in March 2021 and reincorporated in Nevada in November 2024[178](index=178&type=chunk) - The company acquired Chromocell Holdings' therapeutic business, including patents and clinical data for CC8464, in August 2022[179](index=179&type=chunk) - The IPO on February 21, 2024, generated approximately **$5.7 million** in net proceeds and triggered several equity conversions and issuances, including a 9-for-1 reverse stock split[181](index=181&type=chunk)[182](index=182&type=chunk) - On December 18, 2024, **74,719 shares** of Common Stock and **2,600 shares** of Series C Preferred Stock held by Chromocell Holdings were transferred to Alexandra Wood (Canada) Inc. (AWI) due to a default judgment[185](index=185&type=chunk) [Trends and Other Factors Affecting Our Business](index=36&type=section&id=Trends%20and%20Other%20Factors%20Affecting%20Our%20Business) The company entered an exclusive licensing agreement with Benuvia in December 2023 for three spray formulations to diversify its non-opioid pain pipeline, granting Pelthos worldwide commercialization rights with a **6.5%** royalty to Benuvia, though specific development plans are pending - The company entered an exclusive licensing agreement with Benuvia in December 2023 for Diclofenac, Rizatriptan, and Ondansetron spray formulations, diversifying its non-opioid pain pipeline[186](index=186&type=chunk) - Under the agreement, Pelthos has exclusive worldwide rights to develop, commercialize, and distribute the Spray Formulations, paying Benuvia a **6.5%** royalty on net sales for up to 15 years[186](index=186&type=chunk)[187](index=187&type=chunk) - As of the report date, the company does not have specific strategy and development plans for the Benuvia Spray Formulations[188](index=188&type=chunk) [Merger Transactions](index=37&type=section&id=Merger%20Transactions) On July 1, 2025, Channel Therapeutics merged with LNHC, Inc., becoming Pelthos Therapeutics Inc., effecting a 10-for-1 reverse stock split, and commencing NYSE American trading. Ligand invested **$18 million** in a **$50.1 million** equity raise, securing a **13%** royalty on ZELSUVMI net sales - On July 1, 2025, Channel Therapeutics Corporation merged with LNHC, Inc., changed its name to Pelthos Therapeutics Inc., and effected a 10-for-1 Reverse Stock Split[189](index=189&type=chunk) - Pelthos commenced trading on the NYSE American under 'PTHS' on July 2, 2025, and Ligand invested **$18 million** as part of a **$50.1 million** equity raise, securing a **13%** royalty on ZELSUVMI net sales[191](index=191&type=chunk) - The merger and associated financing mark the initiation of the commercial launch for ZELSUVMI in July 2025[191](index=191&type=chunk) [Securities Purchase Agreement](index=37&type=section&id=Securities%20Purchase%20Agreement) The company entered a Securities Purchase Agreement with PIPE Investors for a **$50.1 million** PIPE Financing, issuing **50,100 shares** of Series A Convertible Preferred Stock at **$1,000** per share, with **23,810 shares** converted into **2,381,000** common shares post-closing - The company entered a Securities Purchase Agreement with PIPE Investors for a **$50.1 million** PIPE Financing, issuing **50,100 shares** of Series A Convertible Preferred Stock[192](index=192&type=chunk) - The gross proceeds from the PIPE Financing were approximately **$50.1 million**, consisting of **$50.0 million** in cash and **$0.1 million** from convertible note conversion[192](index=192&type=chunk) - Immediately after the PIPE Financing closing on July 1, 2025, PIPE Investors converted **23,810 shares** of Series A Preferred Stock into an aggregate of **2,381,000 shares** of the company's Common Stock (post-Reverse Stock Split)[197](index=197&type=chunk) [Going Concern](index=38&type=section&id=Going%20Concern) With net losses of **$5.4 million** and **$4.3 million**, management has substantial doubt about the company's going concern ability, as significant future costs for Zelsuvmi's commercial launch and clinical trials necessitate further fundraising despite a recent **$50.1 million** equity offering | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :----------------------------- | :----------------------------- | | Net Loss | $(5.4) million | $(4.3) million | - Management believes there is substantial doubt about the company's ability to continue as a going concern and fund operations for at least the next twelve months[199](index=199&type=chunk) - Despite a **$50.1 million** equity offering post-period, significant costs for Zelsuvmi's commercial launch, potential acquisitions, and clinical trials will require additional funds, with no assurance of availability or terms[199](index=199&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) The company experienced a significant increase in net loss for both the three and six months ended June 30, 2025, compared to the prior year, primarily driven by substantial increases in research and development expenses (due to CMC fees) and professional fees (due to merger-related legal and accounting costs). General and administrative expenses saw a slight decrease for the three-month period but an increase for the six-month period [Comparison of the Three Months Ended June 30, 2025 and 2024](index=38&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the three months ended June 30, 2025, the net loss increased by **95%** to **$3.45 million**, primarily due to a **3,874%** increase in R&D expenses (driven by CMC fees) and a **197%** increase in professional fees (due to merger-related legal and accounting costs). General and administrative expenses decreased by **8%** | Operating Expense | 2025 (3 months) | 2024 (3 months) | $ Change | % Change | | :-------------------------- | :-------------- | :-------------- | :------- | :------- | | General and administrative | $1,110,084 | $1,209,874 | $(99,790) | (8)% | | Research and development | $514,814 | $12,955 | $501,859 | 3,874% | | Professional fees | $1,605,525 | $541,257 | $1,064,268 | 197% | | Total operating expenses | $3,230,423 | $1,764,086 | $1,466,337 | 83% | | Net loss | $(3,448,939) | $(1,771,619) | $(1,677,320) | (95)% | - Research and development expenses increased by **$501,859 (3,874%)** primarily due to an increase in Chemistry Manufacturing and Controls (CMC) fees[203](index=203&type=chunk) - Professional fees increased by **$1,064,268 (197%)** due to increased legal and accounting fees related to the company's merger[204](index=204&type=chunk) [Comparison of the Six Months Ended June 30, 2025 and 2024](index=39&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) For the six months ended June 30, 2025, the net loss increased by **25%** to **$5.42 million**. This was driven by a **48%** increase in R&D expenses (due to CMC) and a **76%** increase in professional fees (due to merger-related costs). General and administrative expenses also increased by **10%**, mainly from higher compensation and stock compensation | Operating Expense | 2025 (6 months) | 2024 (6 months) | $ Change | % Change | | :-------------------------- | :-------------- | :-------------- | :------- | :------- | | General and administrative | $2,200,133 | $1,997,435 | $202,698 | 10% | | Research and development | $709,112 | $479,561 | $229,551 | 48% | | Professional fees | $2,155,155 | $1,221,072 | $934,083 | 76% | | Total operating expenses | $5,064,400 | $3,698,068 | $1,366,332 | 37% | | Net loss | $(5,416,550) | $(4,333,949) | $(1,082,601) | (25)% | - General and administrative expenses increased by **$202,698 (10%)** primarily due to increases in compensation expenses and stock compensation[208](index=208&type=chunk) - Research and development expenses increased by **$229,551 (48%)** mainly due to an increase in Chemistry Manufacturing and Controls (CMC) costs[209](index=209&type=chunk) - Professional fees increased by **$934,083 (76%)** as a result of increased legal and accounting fees related to the company's merger[210](index=210&type=chunk) [Liquidity](index=41&type=section&id=Liquidity) The company, pre-revenue, faces significant liquidity challenges with **$0.1 million** cash and a **$6.5 million** working capital deficit. Despite a **$50.1 million** equity offering, substantial doubt about its going concern ability remains due to high future costs requiring further funding - The company is in early stages of development, without established sales or earnings, and does not expect revenue from product sales for several years[212](index=212&type=chunk) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------- | :-------------- | :------------------ | | Cash | $0.1 million | $0.5 million | | Accumulated Deficit | $(26.9) million | $(21.5) million | | Working Capital Deficit | $(6.5) million | $(2.7) million | - Management believes there is substantial doubt about the company's ability to continue as a going concern and fund operations for at least the next twelve months, despite a **$50.1 million** equity offering post-period[199](index=199&type=chunk) [Sources of Liquidity and Capital](index=41&type=section&id=Sources%20of%20Liquidity%20and%20Capital) Historically funded by advances, licensing, notes, and grants, recent financing includes a **$5.7 million** IPO, a **$30 million** committed equity facility, and a **$50.1 million** PIPE financing, alongside a lapsed stock repurchase plan and 2025 bridge notes - Historically, operations were funded by cash advances from Chromocell Holdings, licensing, bridge/note issuances, and NIH grants[214](index=214&type=chunk) - The IPO on February 21, 2024, generated approximately **$5.7 million** in net proceeds[217](index=217&type=chunk) - A Committed Equity Financing (CEF) facility with Tikkun Capital LLC provides for up to **$30 million** in common stock purchases[220](index=220&type=chunk) - A stock repurchase plan, initially for **$250,000** and later increased to **$750,000**, expired on June 30, 2025, with no shares repurchased in Q2 2025[221](index=221&type=chunk)[274](index=274&type=chunk) - The company issued several unsecured promissory notes in 2025 (February, May, June Bridge Notes) totaling **$812,500** in aggregate principal[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) - A PIPE Financing, concurrent with the merger, raised approximately **$50.1 million** gross proceeds through the issuance of Series A Preferred Stock[228](index=228&type=chunk) [Future Funding Requirements](index=44&type=section&id=Future%20Funding%20Requirements) The company anticipates significant and increasing operating losses and negative cash flows due to ongoing clinical development, research and development, and public company overhead. It will require additional funding through various means, and a lack of such funding on acceptable terms could curtail development plans, leading to substantial doubt about its ability to continue as a going concern - Primary cash use is for clinical development, operating expenses, and repaying accrued liabilities[234](index=234&type=chunk) - Significant and increasing expenses are expected from research and development and management overhead, including public company costs[235](index=235&type=chunk)[236](index=236&type=chunk) - Additional funding is required through strategic relationships, equity/debt financings, credit facilities, or grants; lack of funding could delay or eliminate planned development[237](index=237&type=chunk) - There is substantial doubt about the company's ability to continue as a going concern[238](index=238&type=chunk) [Cash Flows](index=44&type=section&id=Cash%20Flows) For the six months ended June 30, 2025, net cash used in operating activities significantly decreased to **$1.08 million**, primarily due to a large increase in accounts payable and accrued expenses. However, net cash provided by financing activities substantially decreased to **$0.63 million**, leading to a net change in cash of negative **$0.45 million**, a **120%** decrease compared to the prior year | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | $ Change | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :------- | :------- | | Net cash used in operating activities | $(1,079,271) | $(4,944,308) | $(3,865,037) | (78)% | | Net cash provided by financing activities | $625,000 | $7,253,015 | $(6,628,015) | (91)% | | Net change in cash | $(454,271) | $2,308,707 | $(2,762,978) | (120)% | - Net cash used in operating activities decreased by **$3,865,037 (78%)** for the six months ended June 30, 2025, primarily due to a **$3,102,476** change in accounts payable and accrued expenses[239](index=239&type=chunk)[240](index=240&type=chunk) - Net cash provided by financing activities decreased by **$6,628,015 (91%)** for the six months ended June 30, 2025, mainly due to lower proceeds from common stock issued for cash in the prior year[239](index=239&type=chunk)[243](index=243&type=chunk) [Off-Balance Sheet Arrangements](index=45&type=section&id=Off-Balance%20Sheet%20Arrangements) The company did not have any off-balance sheet arrangements during the six months ended June 30, 2025 and 2024, and currently does not have any - The company did not have any off-balance sheet arrangements during the six months ended June 30, 2025 and 2024, and currently has none[244](index=244&type=chunk) [Critical Accounting Estimates](index=45&type=section&id=Critical%20Accounting%20Estimates) The preparation of financial statements requires management to make significant estimates and judgments, particularly concerning income taxes. The company uses an asset and liability approach for deferred income taxes, providing a full valuation allowance against net deferred tax assets due to cumulative losses, indicating uncertainty about their realization. Changes in tax laws or interpretations could materially impact financial results - Significant judgment is required in determining income tax expense, deferred taxes, and uncertain tax positions[248](index=248&type=chunk) - A full valuation allowance is recorded against deferred tax assets due to cumulative losses since inception, indicating that realization is not more likely than not[248](index=248&type=chunk) - Changes in tax laws or interpretations could significantly impact the amounts provided for income taxes[249](index=249&type=chunk) [Recently Issued and Adopted Accounting Pronouncements](index=46&type=section&id=Recently%20Issued%20and%20Adopted%20Accounting%20Pronouncements) The company is evaluating ASU 2023-09 (Income Taxes) and ASU 2024-03 (Disaggregation of Income Statement Expenses), which require disaggregated tax and expense information, respectively, with other pronouncements not expected to have a material impact - ASU 2023-09 (Income Taxes), effective after December 15, 2024, requires disaggregated information about effective tax rate reconciliation and income taxes paid[252](index=252&type=chunk) - ASU 2024-03 (Disaggregation of Income Statement Expenses), effective after December 15, 2026, requires disclosures of certain disaggregated income statement expense captions[253](index=253&type=chunk) - The company is currently evaluating the impact of both ASUs on its condensed consolidated financial statements[252](index=252&type=chunk)[253](index=253&type=chunk) [Segment Reporting](index=46&type=section&id=Segment%20Reporting) Pelthos Therapeutics Inc. operates as a single reportable segment: clinical-stage biotech, focused on developing pain therapeutics. This segment is pre-revenue, and the chief operating decision maker, who also serves as CEO and CFO, uses consolidated net loss to evaluate performance and allocate resources - The company has one reportable segment: clinical-stage biotech, focused on developing new therapeutics to alleviate pain[254](index=254&type=chunk)[257](index=257&type=chunk) - This segment is currently pre-revenue, and its accounting policies are consistent with the summary of significant accounting policies[254](index=254&type=chunk)[255](index=255&type=chunk) - The chief operating decision maker, who is also the CEO and CFO, uses net loss to evaluate spending and allocate funds for research and development[257](index=257&type=chunk)[258](index=258&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Pelthos Therapeutics Inc. is exempt from providing quantitative and qualitative disclosures about market risk - The company is exempt from providing quantitative and qualitative disclosures about market risk as it is a smaller reporting company[259](index=259&type=chunk) [Item 4. Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were ineffective as of June 30, 2025, due to material weaknesses in accounting resources, financial reporting review, and IT infrastructure, with no material changes in internal control during the quarter [Evaluation of Disclosure Controls and Procedures](index=47&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) As of June 30, 2025, the company's disclosure controls and procedures were deemed ineffective by management, including the CEO and CFO, due to identified material weaknesses - As of June 30, 2025, the company's disclosure controls and procedures were concluded to be not effective by management[261](index=261&type=chunk) - Material weaknesses identified include a lack of necessary corporate accounting resources for adequate segregation of duties, inability to provide multiple levels of review in financial reporting, and inadequate internal IT infrastructure[263](index=263&type=chunk) [Changes in Internal Controls](index=47&type=section&id=Changes%20in%20Internal%20Controls) There have been no changes during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[262](index=262&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings expected to have a material adverse effect on its business. However, it is involved in the Kopfli matter, where it was awarded a default judgment of over **$18 million** against Mr. Kopfli and Chromocell Holdings. A demand letter was also received from Parexel International (IRL) Limited for allegedly unpaid principal and interest, which the company denies liability for - The company is not presently a party to any legal proceedings that would have a material adverse effect on its business[265](index=265&type=chunk) - A default judgment was awarded to the company in the Kopfli matter on October 3, 2024, with damages totaling **$17,950,205.38** against Mr. Kopfli and Chromocell Holdings, plus an additional **$348,461** against Mr. Kopfli, as of July 25, 2025[268](index=268&type=chunk) - The company received a demand letter from Parexel International (IRL) Limited for over **$859,000** in allegedly unpaid principal and interest, but the company denies liability[266](index=266&type=chunk) [Item 1A. Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, Pelthos Therapeutics Inc. is not required to include the disclosure of risk factors - The company is not required to include risk factor disclosures as it is a smaller reporting company[269](index=269&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued **2,500 shares** of Common Stock to a vendor in January 2025, exempt from registration under Section 4(a)(2) of the Securities Act. The previously authorized stock repurchase plan, which aimed to repurchase up to **$750,000** of common stock, expired on June 30, 2025, with no shares repurchased during the second quarter of the fiscal year - On January 23, 2025, the company issued **2,500 shares** of Common Stock to a vendor for services, exempt from registration under Section 4(a)(2) of the Securities Act[270](index=270&type=chunk)[271](index=271&type=chunk) - The stock repurchase plan, which allowed for repurchases up to **$750,000**, expired on June 30, 2025, and no shares were repurchased during the second quarter of the fiscal year[273](index=273&type=chunk)[274](index=274&type=chunk) [Item 3. Defaults Upon Senior Securities](index=49&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - The company reported no defaults upon senior securities[275](index=275&type=chunk) [Item 4. Mine Safety Disclosures](index=49&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the company[275](index=275&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - The company reported no other information for this item[276](index=276&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, merger-related agreements, employment agreements, and certifications, many incorporated by reference from previous SEC filings - The exhibits include corporate governance documents (e.g., Certificate of Amendment to Articles of Incorporation, Bylaws), merger-related agreements (e.g., Agreement and Plan of Merger, Securities Purchase Agreement), and employment agreements[277](index=277&type=chunk)[278](index=278&type=chunk) - Many exhibits are incorporated by reference from previous Current Reports on Form 8-K[277](index=277&type=chunk)[278](index=278&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer are included pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[279](index=279&type=chunk) SIGNATURES

Core Viewpoint - Channel Therapeutics Corporation announced a 10-for-one reverse stock split to increase the market price per share and meet NYSE American listing requirements in connection with a merger and capital raise of approximately $50 million [1][2][11] Group 1: Reverse Stock Split Details - The reverse stock split will be effective before market open on July 1, 2025, with trading on a split-adjusted basis starting July 2, 2025, under the new name "Pelthos Therapeutics Inc." [2] - The reverse stock split will convert every 10 shares of common stock into one share, reducing the number of outstanding shares from approximately 6,485,007 to about 648,501 shares [3] - Stockholders' percentage ownership will remain unchanged, and no fractional shares will be issued; fractional shares will be rounded up [4] Group 2: Company Information and Future Plans - Channel Therapeutics is focused on developing non-opioid, non-addictive therapeutics for pain relief, targeting the sodium ion-channel NaV1.7 for various pain types [7] - The trading symbol for the common stock will remain "CHRO" until the completion of the proposed transactions, after which it will change to "PTHS" [5] - Additional information regarding the reverse stock split and proposed transactions can be found in the Company's filings with the SEC [6][8]

Core Insights - The global chronic ocular pain market is valued at US$ 7.2 billion in 2023 and is projected to reach US$ 12.44 billion by 2032, with a CAGR of 6.6% during the forecast period from 2024 to 2032 [8] Company Developments - Channel Therapeutics Corporation has achieved predefined endpoints in two pre-clinical animal models for its eye drop formulation CT2000, targeting both acute ocular pain and chronic ocular surface pain associated with dry eye disease [1][2] - The results from animal efficacy studies support the potential of CT2000 in treating post-surgical pain and chronic eye pain, reinforcing the genetic validation of NaV1.7 as a target for pain management [2] Trial Results - In the first trial, CT2000 significantly reduced the number of paw wipes in rabbits treated with capsaicin, indicating a reduction in acute ocular pain within 15 minutes of administration [3] - The second trial demonstrated that CT2000 reduced paw wipes in mice with induced dry eye disease, showing cumulative efficacy over time with repeated dosing [6] Market Opportunity - The company aims to target the existing chronic eye pain market, valued at US$ 7.2 billion, and the acute eye pain market, valued at US$ 404 million, with its CT2000 formulation [8]

[PART I: FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%3A%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements for Q1 2025, reporting a net loss of approximately $2.0 million and significant going concern doubts, alongside details of the subsequent merger agreement with LNHC, Inc [Condensed Consolidated Financial Statements](index=3&type=section&id=Condensed%20Consolidated%20Financial%20Statements) For Q1 2025, the company's financial position weakened with cash decreasing to $0.13 million and total liabilities increasing to $5.1 million, while the net loss improved to $1.97 million from $2.56 million year-over-year Condensed Consolidated Balance Sheets (Unaudited) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $131,317 | $513,443 | | Total Current Assets | $911,179 | $1,369,143 | | **Liabilities and Stockholders' Deficit** | | | | Total Current Liabilities | $5,107,013 | $4,083,197 | | Total Stockholders' Deficit | $(4,195,834) | $(2,714,054) | Condensed Consolidated Statements of Operations (Unaudited) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total operating expenses | $1,833,977 | $1,933,982 | | **Net Loss** | **$(1,967,611)** | **$(2,562,330)** | | Net loss per common share - basic and diluted | $(0.32) | $(0.55) | Condensed Consolidated Statements of Cash Flows (Unaudited) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | $(632,126) | $(1,991,893) | | Net Cash Provided By Financing Activities | $250,000 | $5,665,731 | | **Net Change in Cash** | **$(382,126)** | **$3,673,838** | | Cash at End of Period | $131,317 | $3,770,229 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes detail the company's NaV1.7-targeting pain therapeutics, significant liquidity issues leading to a going concern warning, related-party transactions, debt defaults, equity transactions, and the subsequent merger agreement with LNHC, Inc. including a $50.1 million PIPE financing - The company is a clinical-stage biotech focused on developing therapeutics targeting the NaV1.7 sodium ion-channel to alleviate pain[23](index=23&type=chunk) - Management has substantial doubt about the company's ability to continue as a going concern for at least the next twelve months due to recurring losses and a working capital deficit of **$4.2 million**[28](index=28&type=chunk)[29](index=29&type=chunk) - As of March 31, 2025, a promissory note for **$1,455,416** with a professional advisor and a related-party note for **$131,868** were in default[53](index=53&type=chunk)[55](index=55&type=chunk) - On April 16, 2025, the company entered into a merger agreement with LNHC, Inc. (a subsidiary of Ligand Pharmaceuticals); post-merger, existing Channel securityholders are expected to own approximately **8.0%** of the combined company[96](index=96&type=chunk)[98](index=98&type=chunk) - Concurrent with the merger, a PIPE financing is expected to close, providing gross proceeds of approximately **$50.1 million**[105](index=105&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This MD&A details the company's clinical programs and financial results, showing a reduced net loss in Q1 2025 due to lower R&D expenses, but highlights critical liquidity issues and the dependence on the planned merger with LNHC, Inc. and associated PIPE financing - The company's pipeline includes three main programs based on its proprietary NaV1.7 blocker molecule: CT2000 for eye pain, CT3000 for post-operative pain, and CC8464 for neuropathic pain[113](index=113&type=chunk)[114](index=114&type=chunk)[124](index=124&type=chunk)[129](index=129&type=chunk) Results of Operations Comparison (Q1 2025 vs Q1 2024) | Expense Category | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | General and administrative | $1,090,049 | $787,561 | $302,488 | 38% | | Research and development | $194,298 | $466,606 | $(272,308) | (58)% | | Professional fees | $549,630 | $679,815 | $(130,185) | (19)% | | **Total operating expenses** | **$1,833,977** | **$1,933,982** | **$(100,005)** | **(5)%** | | **Net loss** | **$(1,967,611)** | **$(2,562,330)** | **$594,719** | **(23)%** | - The decrease in R&D expenses was primarily due to a **$221,227** reduction in Chemistry Manufacturing and Controls (CMC) fees; the increase in G&A was mainly from higher compensation and stock compensation expenses[172](index=172&type=chunk)[173](index=173&type=chunk) - As of March 31, 2025, the company had only **$0.1 million** in cash and a working capital deficit of **$4.2 million**, raising substantial doubt about its ability to continue as a going concern[169](index=169&type=chunk)[178](index=178&type=chunk) - The company's future is heavily dependent on the successful consummation of the merger with LNHC, Inc. and the related PIPE financing[157](index=157&type=chunk)[166](index=166&type=chunk)[191](index=191&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Channel Therapeutics is exempt from providing quantitative and qualitative disclosures about market risk - As a smaller reporting company, Channel Therapeutics is exempt from providing quantitative and qualitative disclosures about market risk[212](index=212&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were not effective due to identified material weaknesses including lack of segregation of duties, insufficient review, and inadequate IT controls - Disclosure controls and procedures were deemed "not effective" as of March 31, 2025[214](index=214&type=chunk) - Material weaknesses identified include: (1) lack of segregation of duties, (2) insufficient levels of review for financial reporting, and (3) inadequate IT general controls[223](index=223&type=chunk) [PART II. OTHER INFORMATION](index=44&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no material legal proceedings, but discloses a demand letter from Parexel International seeking **$682,551** plus interest on a promissory note with Chromocell Holdings, which Channel Therapeutics denies liability for - The company received a demand letter from Parexel International seeking payment of over **$682,551** plus interest on a promissory note between Parexel and Chromocell Holdings; Channel Therapeutics denies any liability[218](index=218&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, Channel Therapeutics is not required to include a discussion of risk factors in its Form 10-Q - As a smaller reporting company, Channel Therapeutics is not required to include a discussion of risk factors in its Form 10-Q[219](index=219&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section discloses the issuance of **25,000** unregistered common shares to a vendor and an update on the stock repurchase plan, which was increased to **$750,000** and extended to June 30, 2025, with no repurchases in Q1 2025 - On January 23, 2025, the company issued **25,000** unregistered shares of Common Stock to a vendor for services[220](index=220&type=chunk) - The company's stock repurchase plan was amended to increase the authorized amount to **$750,000** and extend the termination date to June 30, 2025; no shares were repurchased in Q1 2025[224](index=224&type=chunk)[225](index=225&type=chunk) [Item 3. Defaults Upon Senior Securities](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon its senior securities for the period, noting that other notes payable defaults were disclosed in the financial statement notes - No defaults upon senior securities were reported[226](index=226&type=chunk) [Item 4. Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's business - Not applicable[227](index=227&type=chunk) [Item 5. Other Information](index=45&type=section&id=Item%205.%20Other%20Information) The company discloses two post-quarter financing events in May 2025: the issuance of a new unsecured promissory note for **$325,000** and the extension of a prior bridge note's maturity date to September 30, 2025 - On May 8, 2025, the company issued a new unsecured promissory note for **$325,000** with a maturity date of September 30, 2025[228](index=228&type=chunk) - On May 12, 2025, the company amended its February Bridge Note to extend the maturity date from May 25, 2025, to September 30, 2025[229](index=229&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the 10-Q report, including the merger agreement with LNHC, Inc., the PIPE financing securities purchase agreement, lock-up agreements, new promissory notes, and officer certifications - Key exhibits filed include the Agreement and Plan of Merger with LNHC, Inc., the Securities Purchase Agreement for the PIPE financing, and new promissory note agreements from May 2025[232](index=232&type=chunk)

Company Overview - Channel Therapeutics Corporation is a clinical-stage biotechnology company focused on developing and commercializing novel, non-opioid, non-addictive therapeutics to alleviate pain [3] - The company's initial clinical focus is on selectively targeting the sodium ion-channel known as NaV1.7 for the treatment of various types of chronic pain, acute and chronic eye pain, and post-surgical nerve blocks [3] Financial Disclosure - The company disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024, that the audited financial statements included an audit opinion from its independent registered public accounting firm that contained a going concern emphasis of matter paragraph [1] - This announcement does not represent any change or amendment to the company's consolidated financial statements or to its Annual Report on Form 10-K for the year ended December 31, 2024 [2] Regulatory Compliance - The release of this information is required by Sections 410(h) and 610(b) of the NYSE American LLC Company Guide [2]