Pelthos has told investors not to rely on its first quarter accounts, and the correction turns a $5.2m gain on its own convertible debt into a $9.6m charge

A gain is now a charge.

Pelthos Therapeutics said on Thursday that its accounts for the quarter ended March 31 should no longer be relied upon. The audit committee of the board reached that conclusion on August 12, in consultation with management, and the company filed an amended quarterly report the same morning it reported its second quarter. The reason given is a misapplication of ASC 820, the fair value standard, to a Level 3 measurement of the company's own convertible debt.

What moved

The restatement table in the amendment sets the old figures against the new ones. Convertible debt rises from $23.3m to $39.1m. Total liabilities go from $110.3m to $126.1m, accumulated deficit widens from $75.0m to $89.9m, and total stockholders' equity falls from $35.1m to $19.3m, a reduction of $15.8m against a figure that had stood at $35.1m.

The income statement changes sign. What was booked as a $5.2m gain on the change in fair value of the convertible debt is now a $9.6m charge. Net loss for the quarter goes from $10.2m to $25.1m, and loss per share from $3.09 to $7.57.

What did not move

Cash.

The filing states the restatement has no effect on liquidity or cash position, and none on revenue, operating expenses or operating loss, because the fair value movement sits in other income and expense rather than inside the operating result. The cash flow statement changes in two lines only, where a larger net loss is offset by a larger non-cash add-back. Net cash from operating, investing and financing activities is unchanged.

The control

The company said the misapplication came from a material weakness in internal control over financial reporting that existed at March 31 and continues to exist. Its disclosure controls and procedures were not effective at that date. The weakness sits in the review of Level 3 fair value measurements on the convertible debt, and specifically in the treatment of a subordination agreement signed in January 2026, whose extended payoff terms and conversion rate reset feature were not carried into the valuation.

Two auditors were consulted. CBIZ CPAs P.C. audited the affected period, and Grant Thornton LLP was appointed on May 16, after the original quarterly report had already been filed. The filing was signed by John M. Gay, the chief financial officer.