PART I: FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) 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 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 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 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 period15 Condensed Consolidated Statements of Cash Flows 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 expenses18240241 - 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 cash18243 Notes to Condensed Consolidated Financial Statements 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 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-channel23 - 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 proceeds25 - 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 split27 NOTE 2 – LIQUIDITY AND GOING CONCERN 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 months31 - 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 funds31 NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 standards3536 - Research and development costs are expensed as incurred unless they qualify for capitalization40 | 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, respectively93 NOTE 4 – RELATED PARTY TRANSACTIONS 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 expenses55 - 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, 202456 NOTE 5 – NOTES PAYABLE 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 annum58 - 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 share596162 | 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 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 proceeds72 - The 2023 Equity Incentive Plan was amended multiple times, increasing authorized shares for issuance to 2,400,000 by April 16, 202574 - 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 Stock8186 | 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 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 pain101104 - This segment is currently pre-revenue, and the chief operating decision maker assesses performance and allocates resources based on net loss101103 NOTE 8 – SUBSEQUENT EVENTS 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 Zelsuvmi105106123 - 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, 2025109125 - 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 closing110115 - 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)121122 - 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. Kopfli137 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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 uncertainties140141 - 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 projections141 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 Zelsuvmi143144 - 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 Australia148153 - 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 days155156157 - 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 planned164165166168 - The company licensed Benuvia Spray Formulations (Diclofenac, Rizatriptan, Ondansetron) to diversify its non-opioid pain pipeline, with preliminary data suggesting faster onset for Diclofenac spray174175176 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 2024178 - The company acquired Chromocell Holdings' therapeutic business, including patents and clinical data for CC8464, in August 2022179 - 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 split181182 - 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 judgment185 Trends and Other Factors Affecting Our Business 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 pipeline186 - 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 years186187 - As of the report date, the company does not have specific strategy and development plans for the Benuvia Spray Formulations188 Merger Transactions 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 Split189 - 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 sales191 - The merger and associated financing mark the initiation of the commercial launch for ZELSUVMI in July 2025191 Securities Purchase Agreement 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 Stock192 - 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 conversion192 - 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 Going Concern 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 months199 - 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 terms199 Results of Operations 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 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) fees203 - Professional fees increased by $1,064,268 (197%) due to increased legal and accounting fees related to the company's merger204 Comparison of the Six Months Ended June 30, 2025 and 2024 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 compensation208 - Research and development expenses increased by $229,551 (48%) mainly due to an increase in Chemistry Manufacturing and Controls (CMC) costs209 - Professional fees increased by $934,083 (76%) as a result of increased legal and accounting fees related to the company's merger210 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 years212 | 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-period199 Sources of Liquidity and Capital 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 grants214 - The IPO on February 21, 2024, generated approximately $5.7 million in net proceeds217 - A Committed Equity Financing (CEF) facility with Tikkun Capital LLC provides for up to $30 million in common stock purchases220 - 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 2025221274 - The company issued several unsecured promissory notes in 2025 (February, May, June Bridge Notes) totaling $812,500 in aggregate principal222223224 - A PIPE Financing, concurrent with the merger, raised approximately $50.1 million gross proceeds through the issuance of Series A Preferred Stock228 Future Funding Requirements 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 liabilities234 - Significant and increasing expenses are expected from research and development and management overhead, including public company costs235236 - Additional funding is required through strategic relationships, equity/debt financings, credit facilities, or grants; lack of funding could delay or eliminate planned development237 - There is substantial doubt about the company's ability to continue as a going concern238 Cash Flows 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 expenses239240 - 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 year239243 Off-Balance Sheet Arrangements 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 none244 Critical Accounting Estimates 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 positions248 - A full valuation allowance is recorded against deferred tax assets due to cumulative losses since inception, indicating that realization is not more likely than not248 - Changes in tax laws or interpretations could significantly impact the amounts provided for income taxes249 Recently Issued and Adopted Accounting Pronouncements 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 paid252 - ASU 2024-03 (Disaggregation of Income Statement Expenses), effective after December 15, 2026, requires disclosures of certain disaggregated income statement expense captions253 - The company is currently evaluating the impact of both ASUs on its condensed consolidated financial statements252253 Segment Reporting 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 pain254257 - This segment is currently pre-revenue, and its accounting policies are consistent with the summary of significant accounting policies254255 - The chief operating decision maker, who is also the CEO and CFO, uses net loss to evaluate spending and allocate funds for research and development257258 Item 3. Quantitative and Qualitative Disclosures About Market Risk 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 company259 Item 4. Controls and Procedures 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 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 management261 - 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 infrastructure263 Changes in Internal Controls 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 quarter262 PART II. OTHER INFORMATION Item 1. Legal Proceedings 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 business265 - 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, 2025268 - 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 liability266 Item 1A. Risk Factors 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 company269 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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 Act270271 - 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 year273274 Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - The company reported no defaults upon senior securities275 Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company275 Item 5. Other Information The company reported no other information for this item - The company reported no other information for this item276 Item 6. Exhibits 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 agreements277278 - Many exhibits are incorporated by reference from previous Current Reports on Form 8-K277278 - Certifications from the Principal Executive Officer and Principal Financial Officer are included pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002279 SIGNATURES
Chromocell Therapeutics(CHRO) - 2025 Q2 - Quarterly Report