UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): August 18, 2025 PELTHOS THERAPEUTICS INC. (Exact name of registrant as specified in its charter) | Nevada 001-41964 | 86-3335449 | | --- | --- | | (State or other jurisdiction (Commission File Number) | (IRS Employer | | of incorporation) | Identification No.) | | 4020 Stirrup Creek Drive, Suite 110 | | | Durham, NC | ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________to _______________. Commission File Number: 001-41964 Pelthos Therapeutics Inc. (Exact name of registrant as specified in its charter) (State or ...

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]

[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]

Core Viewpoint - The proposed merger between Ligand Pharmaceuticals and Channel Therapeutics aims to enhance the commercialization of Pelthos' ZELSUVMI™, a novel FDA-approved drug for treating Molluscum contagiosum infections, with a capital raise of $50 million from strategic investors [2][4][6]. Company Overview - Ligand Pharmaceuticals is a biopharmaceutical company focused on enabling scientific advancement through financing and licensing technologies, aiming to create a diversified portfolio of revenue streams [14]. - Channel Therapeutics is a clinical-stage biotechnology company developing non-opioid therapeutics for pain management, with a focus on the NaV1.7 sodium ion-channel [12]. - Pelthos Therapeutics, a subsidiary of Ligand, is dedicated to commercializing innovative therapeutic products, including ZELSUVMI™ [10]. Product Details - ZELSUVMI™ (berdazimer) is a topical gel approved by the FDA in 2024 for the treatment of Molluscum contagiosum in patients aged one year and older, and is the first prescription therapy that can be applied at home [3][9]. - The product utilizes Pelthos' proprietary nitric oxide-based technology platform, NITRICIL™, and is designed to be easy to use for patients, parents, and caregivers [5][9]. Market Opportunity - Molluscum contagiosum is a common skin infection affecting an estimated 16.7 million people in the U.S., with a significant unmet medical need for effective home treatment options [4][5]. - The merger is expected to provide near-term revenue generation opportunities from ZELSUVMI™ and advance Channel's existing pain treatment programs [4][6]. Transaction Details - The merger agreement stipulates that Channel will acquire 100% of Pelthos' equity interests, with Ligand investing $18 million and the investor group contributing $32 million, totaling $50 million [6][7]. - The combined company will operate under the name Pelthos Therapeutics Inc. and will be listed on the NYSE American under the ticker PTHS [2][7]. Leadership Structure - Following the merger, Scott Plesha will serve as CEO of the combined company, while Frank Knuettel II will take on the role of CFO [7].

Part I [Business](index=6&type=section&id=Item%201.%20Business) Channel Therapeutics is a clinical-stage biotech focused on developing non-opioid pain therapeutics targeting the NaV1.7 sodium ion-channel [Overview and Pipeline](index=6&type=section&id=Item%201.%20Business_Overview%20and%20Pipeline) The company is a clinical-stage biotech focused on developing non-addictive pain therapeutics, advancing its proprietary and licensed pipeline - The company's core focus is on developing therapeutics targeting the NaV1.7 sodium ion-channel to alleviate pain without using opioids[17](index=17&type=chunk) - CT2000 (Eye Pain): An eye drop formulation that has completed animal efficacy studies. The company plans to start human proof-of-concept (POC) studies in Australia in Q2 2025 to leverage a **43.5% tax credit**[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) - CT3000 (Post-operative Pain): Pre-clinical models showed formulations provided a depot effect exceeding four days, a significant improvement over the standard of care, bupivacaine. Human POC trials are expected to start in early 2026[21](index=21&type=chunk)[24](index=24&type=chunk)[30](index=30&type=chunk) - CC8464 (Neuropathic Pain): Four Phase 1 trials with 207 patients showed good overall tolerability but caused skin rashes. A slow dose escalation study is planned to mitigate this side effect before proceeding to a Phase 2a POC study for orphan indications EM and iSFN[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) - On December 23, 2023, the company licensed three spray formulations from Benuvia (Diclofenac, Rizatriptan, Ondansetron) to diversify its pipeline, but currently has no development plans for them[42](index=42&type=chunk)[45](index=45&type=chunk) [Strategy, Manufacturing, and Intellectual Property](index=10&type=section&id=Item%201.%20Business_Strategy,%20Manufacturing,%20and%20IP) The company's strategy focuses on advancing its drug candidates, expanding its pipeline, outsourcing manufacturing, and protecting intellectual property - The company's core strategy is to advance its three main drug candidates (CT2000, CT3000, CC8464) and expand its pipeline of non-opioid pain blockers[46](index=46&type=chunk)[48](index=48&type=chunk) - The company plans to apply for FDA Orphan Drug Designation for CC8464 for the treatment of Erythromelalgia (EM) and idiopathic small fiber neuropathy (iSFN)[47](index=47&type=chunk) - All drug substances are manufactured externally by Clinical Manufacturing Organizations (CMOs); the company does not have in-house production capabilities[49](index=49&type=chunk)[51](index=51&type=chunk) - The company holds a U.S. patent for the composition of matter and use of CC8464, which expires in **2035**. It also has patents in France, Japan, India, Mexico, Israel, and South Korea[53](index=53&type=chunk) [Legal Proceedings](index=12&type=section&id=Item%201.%20Business_Legal%20Proceedings) The company won a default judgment against its former CEO regarding termination claims and denies liability for a significant promissory note demand from Parexel - The company won a default judgment against former CEO Christian Kopfli and Chromocell Holdings, who had alleged improper termination and sought **$479,169**. The company reversed a related compensation accrual of **$363,091**, recording it as a gain[64](index=64&type=chunk)[65](index=65&type=chunk) - Parexel has demanded payment of approximately **$682,551** in principal plus over **$177,000** in interest related to a promissory note with Chromocell Holdings. The company denies liability as it is not a party to the note[66](index=66&type=chunk) [Government Regulation](index=13&type=section&id=Item%201.%20Business_Government%20Regulation) The company's operations are subject to extensive government regulation, including FDA oversight of drug development, manufacturing, and marketing - The company's products are regulated as new drugs by the FDA, requiring a multi-year process of preclinical studies and three phases of clinical trials before an NDA can be submitted for marketing approval[68](index=68&type=chunk)[69](index=69&type=chunk)[76](index=76&type=chunk) - The company may seek Orphan Drug Designation, which, if granted for a first-approved product, provides a **seven-year marketing exclusivity period** in the U.S. for treating a rare disease (affecting fewer than **200,000 people**)[93](index=93&type=chunk)[94](index=94&type=chunk) - The company may also apply for expedited programs such as Fast Track, Breakthrough Therapy, and Priority Review to potentially accelerate the development and review process for drugs addressing serious conditions[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) - Operations are subject to healthcare fraud and abuse laws, including the federal Anti-Kickback Statute and the False Claims Act, which carry significant civil and criminal penalties[113](index=113&type=chunk) - Commercial success depends on securing coverage and adequate reimbursement from third-party payors like Medicare, Medicaid, and private insurers, who are increasingly focused on cost-containment[115](index=115&type=chunk)[118](index=118&type=chunk) [Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant financial, operational, and regulatory risks, including going concern issues and early-stage pipeline uncertainties - The independent auditor's report includes a 'going concern' qualification, citing recurring losses and an accumulated deficit, which raises substantial doubt about the company's ability to continue operations[161](index=161&type=chunk) - The company has a history of net losses, with a net loss of approximately **$8.0 million** for the year ended December 31, 2024, and an accumulated deficit of **$21.5 million**[167](index=167&type=chunk) - Material weaknesses in internal control over financial reporting have been identified, including inadequate segregation of duties and ineffective IT controls[173](index=173&type=chunk) - The company is in the early stages of development for its entire pipeline (CC8464, CT2000, CT3000), and failure or significant delays in any program would materially harm the business[179](index=179&type=chunk)[181](index=181&type=chunk)[185](index=185&type=chunk) - The company is dependent on a committed equity financing facility (CEF Purchase Agreement) for up to **$30.0 million**, but may not be able to access the full amount, which could adversely affect liquidity[321](index=321&type=chunk)[328](index=328&type=chunk) [Unresolved Staff Comments](index=71&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the SEC - There are no unresolved staff comments[337](index=337&type=chunk) [Cybersecurity](index=71&type=section&id=Item%201C.%20Cybersecurity) As an R&D stage company, Channel Therapeutics views its cybersecurity risk as not significant and has no formal program, with board oversight - The company does not have a formal cybersecurity risk management program, viewing its risk as not significant at its current R&D stage[338](index=338&type=chunk) - The board of directors is responsible for overseeing strategic risk, including cybersecurity, while executive officers manage day-to-day risks[340](index=340&type=chunk) [Properties](index=72&type=section&id=Item%202.%20Properties) The company's principal executive offices are located at 4400 Route 9 South, Suite 1000, Freehold, NJ 07728, leased on a month-to-month basis - The company leases its principal executive office in Freehold, NJ on a month-to-month basis[341](index=341&type=chunk) [Legal Proceedings](index=72&type=section&id=Item%203.%20Legal%20Proceedings) The company won a default judgment against its former CEO regarding termination claims and denies liability for a significant promissory note demand from Parexel - The company won a default judgment against former CEO Christian Kopfli, who had alleged improper termination. As a result, the company removed an accrual of **$363,091** in compensation expenses and recorded a gain of the same amount[343](index=343&type=chunk)[344](index=344&type=chunk) - The company denies liability for a claim from Parexel seeking payment of a promissory note for **$682,551** plus interest, stating it is not a party to the note[345](index=345&type=chunk) [Mine Safety Disclosures](index=73&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[346](index=346&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=73&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on NYSE American, has never paid dividends, and has an authorized stock repurchase plan - The company's common stock is listed on the NYSE American under the symbol "CHRO"[348](index=348&type=chunk) - The company has never paid dividends and does not plan to in the foreseeable future[349](index=349&type=chunk) - A stock repurchase plan was authorized and later amended, increasing the total repurchase amount to **$750,000** and extending it to June 30, 2025. The company repurchased **86,196 shares** during 2024[356](index=356&type=chunk)[357](index=357&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=74&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company reported increased net losses, faces going concern doubts, and requires additional capital to fund its operations [Results of Operations](index=81&type=section&id=Item%207.%20MD%26A_Results%20of%20Operations) The company's net loss increased in 2024 due to higher G&A and professional fees, partially offset by reduced R&D expenses Results of Operations Comparison (2024 vs. 2023) | | 2024 | 2023 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **OPERATING EXPENSES** | | | | | | General and administrative expenses | $4,110,045 | $2,738,948 | $1,371,097 | 50% | | Research and development | $1,179,436 | $2,579,418 | ($1,399,982) | (54)% | | Professional fees | $2,281,968 | $1,543,918 | $738,050 | 48% | | **Total operating expenses** | **$7,571,449** | **$6,862,284** | **$709,165** | **10%** | | **Loss from operations** | **($7,571,449)** | **($6,862,284)** | **($709,165)** | **10%** | | Other expense | ($383,889) | ($518,509) | $134,620 | (26)% | | **Net loss** | **($7,955,338)** | **($7,380,793)** | **($574,545)** | **8%** | - General and Administrative expenses increased by **$1.4 million (50%)** in 2024, mainly due to higher compensation, marketing, D&O insurance, and IPO-related fees[401](index=401&type=chunk) - Research and Development expenses decreased by **$1.4 million (54%)** in 2024, primarily due to a **$2.3 million** reduction in IP services costs, which offset increases in CMC and consultant expenses[402](index=402&type=chunk) [Liquidity and Capital Resources](index=82&type=section&id=Item%207.%20MD%26A_Liquidity%20and%20Capital%20Resources) The company faces significant liquidity challenges, has substantial doubt about its going concern ability, and requires additional capital for operations - Management has concluded there is substantial doubt about the company's ability to continue as a going concern for at least the next twelve months[398](index=398&type=chunk)[604](index=604&type=chunk) Key Liquidity Metrics (as of Dec 31) | Metric | 2024 | 2023 | | :--- | :--- | :--- | | Cash | $0.5 million | $0.1 million | | Working Capital Deficit | ($2.7 million) | ($6.4 million) | | Accumulated Deficit | ($21.5 million) | ($13.5 million) | - The company completed its IPO on February 21, 2024, raising net proceeds of approximately **$5.7 million**[388](index=388&type=chunk)[410](index=410&type=chunk) Cash Flow Summary | | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | ($5,792,483) | ($981,031) | | Net cash provided by financing activities | $6,209,535 | $1,022,348 | | **Net Increase In Cash** | **$417,052** | **$41,317** | [Controls and Procedures](index=87&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were ineffective due to identified material weaknesses in financial reporting and IT controls - The CEO and CFO concluded that disclosure controls and procedures were not effective as of December 31, 2024[443](index=443&type=chunk) - Three material weaknesses were identified: (1) lack of segregation of duties, (2) lack of multiple levels of review in financial reporting, and (3) lack of internal IT general controls[445](index=445&type=chunk) - As an emerging growth company, an auditor attestation report on internal control over financial reporting is not yet required[444](index=444&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=88&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) The company is led by its executive officers and a board of directors with independent members and established committees Executive Officers and Directors | Name | Position | | :--- | :--- | | Francis Knuettel II | Chief Executive Officer, President, CFO, Treasurer, Secretary, Director | | Eric Lang | Chief Medical Officer | | Todd Davis | Director (Chairman of the Board) | | Ezra Friedberg | Director | | Richard Malamut | Director | | Chia-Lin Simmons | Director | - The board has determined that all non-employee directors, except for Mr. Todd Davis, are independent under NYSE American rules[464](index=464&type=chunk) - The board has three standing committees: Audit, Compensation, and Nominating and Corporate Governance[475](index=475&type=chunk) [Executive Compensation](index=94&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation for 2024 included base salaries, bonuses, and option awards for named officers, governed by employment agreements 2024 Summary Compensation Table | Name and Principal Position | Year | Salary | Bonus | Option Awards | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Francis Knuettel II, CEO & CFO | 2024 | $424,923 | $56,666 | $361,833 | $843,422 | | Eric Lang, CMO | 2024 | $446,154 | $— | $230,318 | $676,472 | - The company's 2023 Equity Incentive Plan was amended to increase the share reserve to **1,944,444 shares** of common stock[507](index=507&type=chunk)[508](index=508&type=chunk) - Dr. Eric Lang's employment agreement includes an annualized salary of **$400,000**, a target bonus of **50% of salary**, and an initial option grant for **218,000 shares**[501](index=501&type=chunk) - Francis Knuettel II became a direct employee and CEO in March 2024, transitioning from a consulting arrangement via Camden Capital LLC[500](index=500&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=105&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Executive officers and directors collectively own a significant portion of common stock, with several entities holding 5% or more - All executive officers and directors as a group beneficially own **1,145,212 shares**, representing **17.9%** of the company's common stock as of March 21, 2025[534](index=534&type=chunk) 5% or Greater Stockholders | Name of Beneficial Owner | Percentage Owned | | :--- | :--- | | Alexandra Wood (Canada) Inc. | 9.5% | | Ezra Friedberg (and related entities) | 9.4% | | Balmoral Financial Group LLC | 8.6% | | Motif Pharmaceuticals Ltd. | 8.0% | | Aperture Healthcare Ventures Ltd. | 7.4% | | Boswell Prayer Ltd | 7.8% | | Benuvia Operations, LLC | 6.4% | | AME Equities LLC | 6.1% | - Under the company's equity compensation plans, **925,449 securities** are subject to outstanding options/rights, and **1,018,995 securities** remain available for future issuance as of December 31, 2024[536](index=536&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=108&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) The company has engaged in significant related-party transactions, including its formation, various financings, and a key license agreement with an affiliated entity - The company was formed through a Contribution Agreement with its former parent, Chromocell Holdings, involving an exchange of assets and liabilities for stock[539](index=539&type=chunk)[540](index=540&type=chunk) - The company entered into an exclusive license agreement with Benuvia Operations LLC. Director Todd Davis is the Chairman and CEO of Benuvia's ultimate parent company, Benuvia Holdings, LLC[549](index=549&type=chunk)[552](index=552&type=chunk) - Multiple financing arrangements, including bridge notes and a rights offering, involved participation from significant stockholders and entities affiliated with directors, such as Balmoral Financial Group (affiliated with director Ezra Friedberg) and AME Equities LLC[545](index=545&type=chunk)[546](index=546&type=chunk)[548](index=548&type=chunk) - The company has a policy for the review and approval of related-person transactions exceeding **$120,000** by the audit committee[556](index=556&type=chunk) [Principal Accountant Fees and Services](index=112&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) The company's independent auditor, Marcum LLP, billed significant fees primarily for audit services, all pre-approved by the Audit Committee Accountant Fees | Fee Type | 2024 | 2023 | | :--- | :--- | :--- | | Audit fees | $211,817 | $164,229 | | Audit-related fees | $82,546 | $156,346 | | Tax fees | $— | $— | | All other fees | $77,092 | $43,490 | | **Total** | **$371,455** | **$364,065** | - The Audit Committee has a policy to pre-approve all audit and non-audit services provided by the independent auditors[560](index=560&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=113&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements and a comprehensive set of exhibits filed as part of the Form 10-K - This section lists the financial statements and exhibits filed with the report[562](index=562&type=chunk) - Key exhibits filed or incorporated by reference include the Contribution Agreement with Chromocell, the Benuvia License Agreement, employment agreements with executive officers, and details of various financing arrangements[565](index=565&type=chunk)[566](index=566&type=chunk)[567](index=567&type=chunk) Financial Statements [Report of Independent Registered Public Accounting Firm](index=121&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor's report expresses a fair opinion on the financial statements but highlights substantial doubt about the company's going concern - The auditor's report contains an explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern[579](index=579&type=chunk) - The audit was conducted in accordance with PCAOB standards, and the financial statements are the responsibility of the Company's management[580](index=580&type=chunk)[581](index=581&type=chunk) [Consolidated Financial Statements](index=122&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements detail the company's financial position, performance, and cash flows, reflecting a net loss and deficit Consolidated Balance Sheet Highlights (As of December 31) | | 2024 | 2023 | | :--- | :--- | :--- | | **Total Assets** | **$1,369,143** | **$96,391** | | Total Current Liabilities | $4,083,197 | $6,540,943 | | **Total Liabilities** | **$4,083,197** | **$6,540,943** | | **Total Stockholders' Deficit** | **($2,714,054)** | **($6,444,552)** | Consolidated Statement of Operations Highlights (For the Year Ended December 31) | | 2024 | 2023 | | :--- | :--- | :--- | | Total operating expenses | $7,571,449 | $6,862,284 | | **Net Loss** | **($7,955,338)** | **($7,380,793)** | | Net loss per common share | ($1.43) | ($5.78) | Consolidated Statement of Cash Flows Highlights (For the Year Ended December 31) | | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash Used In Operating Activities | ($5,792,483) | ($981,031) | | Net Cash Provided By Financing Activities | $6,209,535 | $1,022,348 | | **Net Increase In Cash** | **$417,052** | **$41,317** | [Notes to the Consolidated Financial Statements](index=127&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) The notes provide critical context to the financial statements, detailing accounting policies, related-party transactions, financing, equity, and tax matters - Note 2 (Liquidity and Going Concern): Management states there is substantial doubt about the company's ability to fund operations for the next twelve months, with a net loss of ~**$8.0 million** in 2024 and cash of ~**$0.5 million** at year-end[603](index=603&type=chunk)[604](index=604&type=chunk) - Note 4 (Related Party Transactions): Details the Contribution Agreement with Chromocell Holdings, a Director Note with Todd Davis, and the Benuvia License Agreement, where Director Todd Davis is also an executive at Benuvia's parent company[628](index=628&type=chunk)[637](index=637&type=chunk)[552](index=552&type=chunk) - Note 8 (Income Tax): The company has a federal net operating loss (NOL) carryforward of approximately **$16.4 million** as of Dec 31, 2024, but has a full valuation allowance against its deferred tax assets, meaning it does not expect to realize them[705](index=705&type=chunk)[706](index=706&type=chunk) - Note 10 (Subsequent Events): On February 25, 2025, the company issued an unsecured promissory note for a principal amount of **$325,000**, receiving **$250,000** in cash[712](index=712&type=chunk)

FREEHOLD, N.J., Dec. 20, 2024 (GLOBE NEWSWIRE) -- Channel Therapeutics Corporation, ("Channel" or the "Company"), (NYSE:CHRO), a pioneer in the development of non-opioid pain treatment therapeutics, is providing a statement regarding Vertex Pharmaceutical's recently announced Phase 2 data of Suzetrigine, an investigational, oral, highly selective NaV1.8 pain signal inhibitor in people with painful lumbosacral radiculopathy. "We are encouraged to see that the product will advance to Phase 3 trials in painful ...

Core Insights - Channel Therapeutics is focused on developing non-opioid, non-addictive therapeutics targeting the NaV1.7 sodium ion channel for pain relief [3] - The company is pursuing a three-pronged approach with an oral NaV1.7 inhibitor for neuropathic pain, a novel eye drop formulation for eye pain, and a slow-release depot formulation for post-surgical nerve blocks [2] - Recent data from ongoing programs, including in vivo nerve block results, have been encouraging, with critical milestones expected in 2025 [2] Company Overview - Channel Therapeutics Corporation is a clinical-stage biotechnology company dedicated to alleviating pain through innovative therapeutics [3] - The company aims to address various types of chronic pain, acute and chronic eye pain, and post-surgical nerve blocks through selective targeting of the NaV1.7 channel [3] Competitive Landscape - The company acknowledges the advancements of competitors, such as Vertex Pharmaceuticals, which is progressing with its NaV1.8 pain signal inhibitor [6][7] - There are significant differences between NaV1.7 and NaV1.8 in their roles in pain transmission, with NaV1.7 inhibition believed to be a more potent therapy for pain treatment [7] Product Development - The NaV1.7 inhibitors are expected to provide viable options for treating acute and postoperative pain, potentially improving upon existing therapeutic options [4] - The company is optimistic about the development path towards launching drugs with considerable market opportunities [4]

Core Insights - Channel Therapeutics Corporation has achieved significant results in pre-clinical trials for its nerve block formulations, demonstrating improved efficacy and duration compared to the current standard of care, bupivacaine [1][4][5] Company Developments - The company conducted thermal hyperalgesia and mechanical allodynia tests in rodents, showing that three of its four formulations outperformed bupivacaine in efficacy and duration [3][4][5] - The formulations exhibited a depot effect lasting over four days, which is a notable improvement over bupivacaine [3][4] - The NaV1.7 inhibitors are believed to be a promising target for pain treatment, potentially reducing reliance on opioids post-surgery [6][7] Market Opportunity - The global post-operative pain market was valued at $2.6 billion in 2023, with Exparel generating approximately $538 million in revenue, indicating a substantial market for Channel's products [7] - The results from the trials suggest a potential to decrease post-surgical opioid usage, addressing a significant market need [7] Future Prospects - Results for the company's eye drop formulations targeting various types of eye pain are expected in late January 2025, indicating ongoing development in pain management solutions [8]