Company: PTHS
Filing Date: 2025-05-09
Form Type: PREM14C
Source: 0001140361-25-018219
Chunk: 510

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-05-09
Form: PREM14C
Chunk 510
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| Exercise price          |     |        $0.73-1.30 |     |            $22.68 |
| Expected dividend yield |     |                0% |     |                0% |
| Risk free interest rate |     |             4.20% |     |        3.50-3.93% |
| Expected life in years  |     |                10 |     |                10 |
| Expected volatility     |     |          196-201% |     |          157-158% |

The risk-free interest rate assumption for options granted is based upon observed interest rates on the United States Government Bond Equivalent Yield appropriate for the expected term of the options. With certain adjustments outlined below, the Company based its determination of the underlying fair value of the Company’s Common Stock on the findings of an independent third party engaged by the Company to determine the fair value of the Company’s intellectual property. The Company had the analysis conducted in conjunction with the Contribution Agreement, which was executed on August 10, 2022. The analysis determined that the fair value of the Company’s intellectual property was $44.8 million. At the time of the Contribution Agreement and the option grants, there was 1,187,302 shares (on an as converted basis reflecting the conversion of the 600,000 Series A Convertible Preferred Stock held by Chromocell Holdings). As of December 31, 2024, all of the Series A Convertible Preferred Stock shares have been converted. The resulting value per share of common stock was $37.71. The Company then adjusted this value in accordance with the following:

| Value of intellectual property           |     | $44.8 million |
| Common shares outstanding (as converted) |     |     1,187,302 |
| Value per common share                   |     |        $37.71 |
| Illiquidity discount                     |     |           20% |
| Minority discount                        |     |           20% |
| Fair value of the common stock           |     |        $22.68 |

After the completion of the Company’s IPO, the trading price of the Company’s Common Stock is used as the fair value of the Company’s Common Stock. The Company determined the expected volatility assumption for options granted using the historical volatility of comparable public companies’ common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for future option grants