Company: PTHS
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001753926-25-001764
Chunk: 14

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 1
Chunk 14
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 (each, a “Side Letter”) with the Company, pursuant
to which, immediately after the closing of the PIPE Financing on July 1, 2025, the PIPE Investors converted 23,810 shares of Series
A Preferred Stock not exceeding such PIPE Investors’ Maximum Percentage into an aggregate of 2,381,000 shares of the Company’s
Common Stock (after giving effect to the reverse stock split discussed in Note 10 — “Stockholders’ Equity”),
by providing the Company with a completed and signed Conversion Notice under the Certificate of Designation. Approximately 57,568
shares of the Company’s Series A Preferred Stock were issued and outstanding immediately following the Effective Time. Immediately
following the Merger and the PIPE Financing, the Company’s security holders as of immediately prior to the Merger owned approximately
7.4% of the outstanding shares of the Company and LNHC security holders owned approximately 56.1% of the outstanding shares of
the Company, in each case on a fully diluted basis, calculated using the treasury stock method.

Net
Proceeds from PIPE Financing

Certain
PIPE Investors were a party to the ZELSUVMI Royalty Agreement while other PIPE Investors were a party to the Channel Products
Royalty Agreement, (collectively, the “Royalty Agreements”) as described in Note 8 — “License
and Other Agreements”. Further, certain PIPE Investors were not a party to the Royalty Agreements. As the PIPE Financing
and Royalty Agreements were negotiated together, aggregate proceeds were allocated based on their relative fair value basis. The
Company will account for future royalties due as liabilities and will accrete the financing using the effective interest method
based on estimated and actual cash flows payable to the counterparties over the estimated life of the royalty agreements.

Effective January 1, 2025, LNHC entered
into a bridge loan agreement with Ligand under which any amounts of cash transferred from Ligand to LNHC, or settlement of LNHC’s
expenses directly by Ligand, starting from January 1, 2025, were considered a loan from Ligand to LNHC. The maximum borrowing under
the bridge loan agreement was $18,000, (the “Ligand Bridge Note”). The repayment of the Ligand Bridge Note loan at
the closing of the Merger was offset against Ligand’s funding commitment in the PIPE Financing. The balance of the Ligand
Bridge Note was $12,732, resulting in $5,268 of