Company: PTHS
Filing Date: 2025-05-13
Form Type: 10-Q
Source: 0001753926-25-000790
Chunk: 60

Company: Pelthos Therapeutics Inc.
Filing Date: 2025-05-13
Form: 10-Q
Item: Part I, Item 1
Chunk 60
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 of March 31, 2025, our Chief
Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were
not effective.

37

Management
identified the following material weaknesses:

    1.
    We
    lack the necessary corporate accounting resources to maintain adequate segregation of duties. Such a lack of segregation of
    duties is typical in a company with limited resources.

    2.
    We
    lack the ability to provide multiple levels of review in connection with the financial reporting process, which means that
    we cannot ensure that we are meeting certain financial reporting and transaction processing controls standards.

    3.
    We
    lack the necessary internal IT infrastructure to ensure proper IT general controls. Additionally, we are reliant on third-party
    software for our financial systems and cannot ensure there are no vulnerabilities in these systems.

Changes
in Internal Controls

With
the completion of the IPO, the Company has begun instituting controls and procedures that we expect will demonstrably improve
the effectiveness of the Company’s disclosure controls and procedures in upcoming reporting periods.

PART
II. OTHER INFORMATION

Item
1. Legal Proceedings

From
time to time, we may be involved in legal proceedings arising in the ordinary course of our business. We are not presently a party
to any legal proceedings that, in the opinion of our management, would have a material adverse effect on our business. Regardless
of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources,
negative publicity and reputation harm, and other factors.

On
July 31, 2024, the Company received a demand letter from an attorney representing Parexel International (IRL) Limited (“Parexel”).
 The letter, which was addressed to both the Company and Chromocell Holdings, purports to be a notice of default of
the Promissory Note between Chromocell Holdings and Parexel and seeks the payment of allegedly unpaid principal
in the amount of $682,551 plus interest exceeding $177,000.  The Company denies that it is liable for any of the amounts
sought by Parexel; the Company is not a party to the Promissory Note and does not believe it is liable for any
amounts allegedly due thereunder. 

Item
1A. Risk Factors

As
a smaller reporting company, the Company is not required to include the