Petros Pharmaceuticals, Inc. [PTPI] Filings

10-Q 1 tmb-20240630x10q.htm 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended June 30, 2024

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from to

Commission File Number: 001-39752

Petros Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)


Delaware		85-1410058
(State of Incorporation)		(I. R. S. Employer Identification No.)

1185 Avenue of the Americas, 3rd Floor, New York, New York		10036
(Address of principal executive offices)		(Zip Code)

(973) 242-0005

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001	PTPI	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 13, 2024, there were 9,606,678 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q may contain or incorporate by reference forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements are based upon management’s assumptions, expectations, projections, intentions and beliefs about future events. Except for historical information, the use of predictive, future-tense or forward-looking words such as “intend,” “plan,” “predict,” “may,” “will,” “project,” “target,” “strategy,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “forecast,” “should” and similar expressions, whether in the negative or affirmative, that reflect our current views with respect to future events and operational, economic and financial performance are intended to identify such forward-looking statements. Such forward-looking statements are only predictions, and actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of risks and uncertainties, including, without limitation, Petros’ ability to execute on its business strategy, including its plans to develop and commercialize its product candidates; Petros’ ability to comply with obligations as a public reporting company; Petros’ ability to regain and maintain compliance with the Nasdaq Stock Market’s listing standards; the ability of Petros to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002; risks resulting from Petros’ status as an emerging growth company and smaller reporting company, including that reduced disclosure requirements may make shares of Petros common stock less attractive to investors; Petros’ ability to continue as a going concern; risks related to Petros’ history of incurring significant losses; risks related to Petros’ dependence on the commercialization of a single product, Stendra®; risks related to Petros’ ability to obtain regulatory approvals for, or market acceptance of, any of its products or product candidates. Additional factors that could cause actual results to differ materially from the results anticipated in these forward-looking statements are described in this Quarterly Report on Form 10-Q, in “Risk Factor Summary” and in Part I, Item 1A., “Risk Factors,” in Petros’ Annual Report on Form 10-K for the year ended December 31, 2023, and in our other reports filed with the Securities and Exchange Commission (the “SEC”). We advise you to carefully review the reports and documents we file from time to time with the SEC, particularly our annual reports on Form 10-K, our quarterly reports on Form 10-Q and our current reports on Form 8-K. Petros cautions readers that the forward-looking statements included in, or incorporated by reference into, this Quarterly Report on Form 10-Q represent our beliefs, expectations, estimates and assumptions only as of the date hereof and are not intended to give any assurance as to future results. New factors emerge from time to time, and it is not possible for us to predict all of these factors. Further, Petros cannot assess the effect of each such factor on our business or the extent to which any factor, or combination of factors, may cause actual results to be materially different from those contained in any forward-looking statement.

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in, or incorporated by reference into, this Quarterly Report on Form 10-Q to reflect any new information or future events or circumstances or otherwise, except as required by the federal securities laws.

OTHER INFORMATION

All references to “Petros,” the “Company,” “we,” “us” and “our” in this Quarterly Report on Form 10-Q refer to Petros Pharmaceuticals, Inc. and its subsidiaries.

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		Page

PART I—FINANCIAL INFORMATION		4

Item 1. Unaudited Financial Statements		4

Condensed Consolidated Balance Sheets as of June 30, 2024, and December 31, 2023		4

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024, and 2023		5

Condensed Consolidated Statements of Changes in Convertible Redeemable Preferred Stock and Stockholders’ Equity for the three and six months ended June 30, 2024, and 2023		6

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024, and 2023		7

Notes to Condensed Consolidated Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		23

Item 3. Quantitative and Qualitative Disclosures About Market Risk.		35

Item 4. Controls and Procedures.		35

PART II—OTHER INFORMATION		37

Item 1. Legal Proceedings.		37

Item 1A. Risk Factors.		37

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		38

Item 3. Defaults Upon Senior Securities.		38

Item 4. Mine Safety Disclosures.		38

Item 5. Other Information.		38

Item 6. Exhibits.		39

Signatures.		40

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PART I—FINANCIAL INFORMATION

ITEM 1. UNAUDITED FINANCIAL STATEMENTS.

PETROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS


	June 30,		December 31,
	2024		2023
	(Unaudited)
Assets
Current assets:
Cash	$	7,460,014	$	13,336,975
Accounts receivable, net		1,776,531		2,226,151
Inventories		1,433,217		1,610,391
Prepaid inventory		1,414,320		1,182,899
Prepaid expenses and other current assets		1,894,963		2,033,980
Total current assets		13,979,045		20,390,396

Fixed assets, net		23,846		28,957
Intangible assets, net		7,541,171		8,971,737
API purchase commitment		3,471,471		4,178,446
Right of use assets		153,741		226,259
Total assets	$	25,169,274	$	33,795,795

Liabilities, Convertible Redeemable Preferred Stock and Stockholders’ Equity
Current liabilities:
Current portion of promissory note	$	1,936,995	$	1,156,550
Accounts payable		791,091		1,713,253
Accrued expenses		6,673,591		5,360,077
Accrued Series A Convertible Preferred payments payable		224,124		2,047,583
Other current liabilities		350,544		493,288
Total current liabilities		9,976,345		10,770,751

Promissory note, net of current portion		5,697,128		6,857,364
Derivative Liability		202,000		3,550,000
Other long-term liabilities		107,756		137,657
Total liabilities		15,983,229		21,315,772

Commitments and contingencies (see note 14)
Series A convertible redeemable preferred stock (par value $0.0001 per share and $1,000 stated value), 15,000 and 15,000 shares authorized at June 30, 2024, and December 31, 2023, respectively; 4,039 and 10,022 shares issued and outstanding at June 30, 2024, and December 31, 2023, respectively; Liquidation preference of $4,585,929 and $11,271,365, as of June 30, 2024, and December 31, 2023, respectively.		1,115,762		408,982

Stockholders’ Equity:
Common stock (par value $0.0001 per share, 250,000,000 and 250,000,000 shares authorized at June 30, 2024, and December 31, 2023, respectively; 9,297,538 and 2,991,377 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively)		930		298
Additional paid-in capital		109,783,623		110,960,324
Accumulated deficit		(101,714,270)		(98,889,581)
Total Stockholders’ Equity		8,070,283		12,071,041

Total Liabilities, Convertible Redeemable Preferred Stock and Stockholders’ Equity	$	25,169,274	$	33,795,795

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

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PETROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2024		2023		2024		2023
Net sales	$	2,810,276	$	4,511,983	$	1,421,471	$	1,994,011
Cost of goods sold		660,939		1,064,599		329,110		513,857
Gross profit		2,149,337		3,447,384		1,092,361		1,480,154
Operating expenses:
Selling, general and administrative		4,998,088		4,380,231		2,286,630		2,249,592
Research and development expense		1,924,750		1,185,668		368,798		866,575
Depreciation and amortization expense		1,435,677		1,653,590		717,838		826,795
Total operating expenses		8,358,515		7,219,489		3,373,266		3,942,962

Loss from operations		(6,209,178)		(3,772,105)		(2,280,905)		(2,462,808)
Other income (expenses):
Change in fair value of derivative liability		3,348,000		—		1,614,000		—
Interest income		271,210		119,241		119,391		52,924
Interest expense, promissory note		(234,721)		(278,966)		(114,512)		(136,799)
Total other income (expenses)		3,384,489		(159,725)		1,618,879		(83,875)
Net loss before income taxes	$	(2,824,689)	$	(3,931,830)	$	(662,026)	$	(2,546,683)
Provision for income taxes		—		—		—		—
Net loss	$	(2,824,689)	$	(3,931,830)	$	(662,026)	$	(2,546,683)

Preferred Stock dividend and cash premiums		(812,303)		—		(216,798)		—
Preferred Stock accretion		(7,124,871)		—		(1,856,095)		—

Net loss attributable to common stockholders		(10,761,863)		—		(2,734,919)		—
Basic and Diluted	$	(1.77)	$	(1.87)	$	(0.37)	$	(1.20)
Weighted average common shares outstanding
Basic and Diluted		6,072,349		2,103,220		7,388,107		2,117,581

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

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PETROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(Unaudited)


		Convertible
	Convertible	Redeemable
	Redeemable	Preferred			Common		Additional
	Preferred	Stock		Common	Stock		Paid-in		Accumulated
	Stock	Amount		Stock	Amount		Capital		Deficit		Total
Three Months Ended June 30, 2024
Balance, March 31, 2024	5,663	$	906,979	6,881,864	$	688	$	110,838,135	$	(101,052,244)	$	9,786,579
Stock-based compensation expense	—		—	—		—		16,834		—		16,834
Common Stock issued for services	—		—	245,158		25		99,975		—		100,000
Series A Preferred Stock accretion	—		1,856,095	—		—		(1,856,095)		—		(1,856,095)
Series A Preferred Stock dividends	—		153,842	—		—		(153,842)		—		(153,842)
Preferred Stock redemption including cash premium	(1,624)		(1,801,154)	2,170,516		217		901,572		—		901,789
Deemed dividends on Preferred Stock	—		—	—		—		(62,956)		—		(62,956)
Net loss	—		—	—		—		—		(662,026)		(662,026)
Balance, June 30, 2024	4,039	$	1,115,762	9,297,538	$	930	$	109,783,623	$	(101,714,270)	$	8,070,283


		Convertible
	Convertible	Redeemable
	Redeemable	Preferred			Common		Additional
	Preferred	Stock		Common	Stock		Paid-in		Accumulated
	Stock	Amount		Stock	Amount		Capital		Deficit		Total
Six Months Ended June 30, 2024
Balance, December 31, 2023	10,022	$	408,982	2,991,377	$	298	$	110,960,324	$	(98,889,581)	$	12,071,041
Stock-based compensation expense	—		—	—		—		197,215		—		197,215
Common Stock issued for services	—		—	322,986		33		209,967		—		210,000
Series A Preferred Stock accretion	—		7,124,871	—		—		(7,124,871)		—		(7,124,871)
Series A Preferred Stock dividends	—		754,962	—		—		(754,962)		—		(754,962)
Preferred Stock redemption including cash premium	(5,983)		(7,173,053)	5,983,175		599		6,353,291		—		6,353,890
Deemed dividends on Preferred Stock	—		—	—		—		(57,341)		—		(57,341)
Net loss	—		—	—		—		—		(2,824,689)		(2,824,689)
Balance, June 30, 2024	4,039	$	1,115,762	9,297,538	$	930	$	109,783,623	$	(101,714,270)	$	8,070,283


		Preferred			Common		Additional
	Preferred	Stock		Common	Stock		Paid-in		Accumulated
	Stock	Amount		Stock	Amount		Capital		Deficit		Total
Three Months Ended June 30, 2023
Balance, March 31, 2023	—	$	—	2,088,698	$	209	$	107,558,987	$	(92,111,540)	$	15,447,656
Stock-based compensation expense	—		—	—		—		43,316		—		43,316
Shares issued for vested RSU’s	—		—	30,922		2		(2)		—		—
Net loss	—		—	—		—		—		(2,546,683)		(2,546,683)
Balance, June 30, 2023	—	$	—	2,119,620	$	211	$	107,602,301	$	(94,658,223)	$	12,944,289


		Preferred			Common		Additional
	Preferred	Stock		Common	Stock		Paid-in		Accumulated
	Stock	Amount		Stock	Amount		Capital		Deficit		Total
Six Months Ended June 30, 2023
Balance, December 31, 2022	—	$	—	2,079,387	$	208	$	107,428,652	$	(90,726,393)	$	16,702,467
Stock-based compensation expense	—		—	—		—		173,652		—		173,652
Shares issued for vested RSU’s	—		—	40,233		3		(3)		—		—
Net loss	—		—	—		—		—		(3,931,830)		(3,931,830)
Balance, June 30, 2023	—	$	—	2,119,620	$	211	$	107,602,301	$	(94,658,223)	$	12,944,289

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

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PETROS PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	For the Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(2,824,689)	$	(3,931,830)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,435,677		1,653,590
Bad debt expense (recoveries)		(25,352)		4,499
Inventory and sample inventory reserve		7,999		41,195
Amortization of right of use asset		72,517		64,081
Derivative liability		(3,348,000)		—
Employee stock-based compensation		197,215		173,652
Stock issued for services		210,000		—

Changes in operating assets and liabilities:
Accounts receivable		474,972		(470,984)
Inventories		169,175		33,266
Prepaid inventory		(231,421)		—
Prepaid expenses and other current assets		845,992		326,992
Accounts payable		(922,164)		(22,668)
Accrued expenses		1,313,514		1,143,909
Deferred revenue		(117,238)		(281,372)
Other current liabilities		(25,506)		24,586
Other long-term liabilities		(29,901)		(79,349)
Net cash used in operating activities		(2,797,210)		(1,320,433)

Cash flows from financing activities:
Payment of promissory note		(379,791)		(721,034)
Redemption of Series A Preferred Stock		(2,699,960)		—
Net cash used in financing activities		(3,079,751)		(721,034)

Net decrease in cash		(5,876,961)		(2,041,467)

Cash, beginning of period		13,336,975		9,426,264
Cash, end of period	$	7,460,014	$	7,384,797

Supplemental cash flow information:
Cash paid for interest during the period	$	120,209	$	278,966

Noncash Items:
Noncash increase in inventory due to API reclass	$	—	$	439,353
Noncash decrease in API purchase commitment		—		459,422
Noncash decrease in other current assets: API purchase commitment		—		20,069
Noncash issuance of common stock to non-employee		—		3
Noncash redemption of Series A Preferred Stock		6,353,890		—
Accrued Series A Convertible Preferred payments payable		224,124		—
Accretion of Series A convertible preferred stock to redemption value		7,124,871		—
Accrual of Series convertible preferred stock dividends		754,962		—

The accompanying Notes are an integral part of the Condensed Consolidated Financial Statements.

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PETROS PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1) Nature of Operations, Basis of Presentation, Liquidity and Going Concern

Nature of Operations

Petros Pharmaceuticals, Inc. (“Petros” or the “Company”) was incorporated in Delaware on May 14, 2020, for the purpose of effecting the transactions contemplated by that certain Agreement and Plan of Merger, dated as of May 17, 2020 (as amended, the “Merger Agreement”), by and between Petros, Neurotrope, Inc., a Nevada corporation (“Neurotrope”), Metuchen Pharmaceuticals LLC, a Delaware limited liability company (“Metuchen”), and certain subsidiaries of Petros and Neurotrope. Petros consists of wholly owned subsidiaries, Metuchen, Neurotrope, Timm Medical Technologies, Inc. (“Timm Medical”), and Pos-T-Vac, LLC (“PTV”). The Company is engaged in the commercialization and development of Stendra®, a U.S. Food and Drug Administration (“FDA”) approved PDE-5 inhibitor prescription medication for the treatment of erectile dysfunction (“ED”), which the Company have licensed from Vivus, Inc. (“Vivus”). Petros also markets its own line of ED products in the form of vacuum erection device products through its subsidiaries, Timm Medical and PTV.

Petros is committed to the goal of becoming a leading innovator in the emerging self-care market driving expanded access to key prescription pharmaceuticals as Over-The-Counter (“OTC”) treatment options. Currently, Petros is pursuing increased access for its flagship prescription ED therapy, Stendra®, via potential OTC designation. If ultimately approved by the FDA for OTC access, Stendra® may be the first in its class to achieve this marketing status, also establishing company know how as a proven platform for other prospective prescription therapeutics.

The Company manages its operations through two segments, Prescription Medications and Medical Devices, both of which focus on the treatment of male ED. The Prescription Medications segment consists primarily of Stendra®, which is sold generally in the United States. The Medical Devices segment consists primarily of vacuum erection devices, which are sold domestically and internationally.

The Company’s priority is the ability to sell Stendra® OTC.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, the unaudited condensed consolidated financial statements included herein contain all adjustments necessary to present fairly the Company’s financial position and the results of its operations and cash flows for the interim periods presented. Such adjustments are of a normal recurring nature. The results of operations for the six months ended June 30, 2024, may not be indicative of results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes to those statements for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K initially filed with the SEC on April 1, 2024, as amended on May 31, 2024. All transactions between the consolidated entities have been eliminated in consolidation.

Liquidity, Going Concern and Other Uncertainties

In accordance with Financial Accounting Standards Board (the “FASB”) Accounting Standards Update (“ASU”) ASU 2014-15, Presentation of Financial Statements - going Concern (Subtopic 205-40) (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. To date, the Company’s principal sources of capital used to fund operations have been the revenues from product sales, private sales, registered offerings and private placements of equity securities. The Company has experienced net losses and negative cash flows from operations since inception. As of June 30, 2024, the Company had cash of $7.5 million, positive working capital of $4.0 million, and accumulated deficit of $101.7 million. The Company’s plans include, or may include, utilizing cash on hand, as well as exploring additional ways to raise capital in addition to increasing cash flows from operations. In January 2022, the Company executed a promissory note in favor of Vivus in connection with the Vivus Settlement Agreement (as defined herein) in the principal amount of $10,201,758. As of June 30, 2024, the principal balance of the note is $7.6

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million. The terms of this promissory note are discussed in Note 8 and Note 13. The Company does not currently have sufficient available liquidity to fund its operations for at least the next 12 months. These conditions and events raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these interim unaudited condensed consolidated financial statements are issued. The accompanying interim unaudited condensed consolidated financial statements do not include any adjustments that might result from these uncertainties. The unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

In response to these conditions and events, the Company is evaluating various financing strategies to obtain sufficient additional liquidity to meet its operating, debt service and capital requirements for the next twelve months following the date of this Quarterly Report. The potential sources of financing that the Company is evaluating include one or any combination of secured or unsecured debt, convertible debt and equity in both public and private offerings. The Company also plans to finance near-term operations with its cash on hand, including the gross proceeds of $15 million raised in the Private Placement (as defined herein), as well as by exploring additional ways to raise capital and increasing cash flows from operations. The Company intends to use the proceeds from the Private Placement to fund its OTC progress throughout 2024. There is no assurance the Company will manage to raise additional capital or otherwise increase cash flows, if required. The sources of financing described above that could be available to the Company and the timing and probability of obtaining sufficient capital depend, in part, on expanding the use of Stendra® and continuing to invest in research and development pursuant to the Company’s Non-Prescription / OTC strategies related to Stendra®, which the Company believes has the potential to dramatically increase product sales in the future and future capital market conditions. If the Company’s current assumptions regarding timing of these events are incorrect or if there are any other changes or differences in the Company’s current assumptions that negatively impact the Company’s financing strategy, the Company may have to further reduce expenditures or significantly delay, scale back or discontinue the development or commercialization of Stendra® OTC in order to extend its cash resources.

NASDAQ Capital Market Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard

On May 15, 2024, the Company received notice from the Listing Qualifications Staff of Nasdaq indicating that, based upon the closing bid price of the Company’s common stock for the 30 consecutive business day period between April 3, 2024, through May 14, 2024, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). The letter also indicated that the Company would be provided with a compliance period until November 11, 2024, in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).

2) Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting periods. Such estimates include the adequacy of accounts receivable reserves, return reserves, inventory reserves, assessment of long-lived assets, including intangible asset impairment, and the valuation of the derivative liability, among others. Actual results could differ from these estimates and changes in these estimates are recorded when known.

Risks and Uncertainties

The Company is subject to risks common to companies in the pharmaceutical industry including, but not limited to, uncertainties related to commercialization of competitor products, regulatory approvals, dependence on key products, dependence on key customers and suppliers, and protection of intellectual property rights.

Concentration of Credit Risk

Financial instruments that subject the Company to concentrations of credit risk includes cash. The Company maintains cash on deposit at U.S.-based banks in amounts which, at times, may be in excess of insured limits of $250,000.

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Segment Reporting

Operating segments are components of a Company for which separate financial information is available and evaluated regularly by the chief operating decision maker in assessing performance and deciding how to allocate resources. The Company’s two segments, Prescription Medications and Medical Devices, focus on the treatment of male erectile dysfunction. The Prescription Medications segment consists primarily of operations related to Stendra®, which is sold generally in the United States. The Medical Devices segment consists primarily of operations related to vacuum erection devices, which are sold domestically and internationally. See Note 15 Segment Information.

Revenue Recognition

Prescription Medication Sales

The Company’s prescription medication sales consist of sales of Stendra® in the U.S. for the treatment of male erectile dysfunction. Under Accounting Standards Codification (“ASC”) Topic 606, Revenue Recognition (“Topic 606”), the Company recognizes revenue from prescription medication sales when its performance obligations with a customer have been satisfied. In the contracts with its customers, the Company has identified a single performance obligation to provide Stendra® upon receipt of a customer order. The performance obligation is satisfied at a point in time when the Company’s customers obtain control of Stendra®, which is typically upon delivery. The Company invoices its customers after Stendra® has been delivered and invoice payments are generally due within 30 to 75 days of invoice date.

In determining the transaction price, a significant financing component does not exist since the timing from when the Company delivers Stendra® to when the customers pay for the product is typically less than one year. The Company records prescription medication sales net of any variable consideration, including but not limited to discounts, rebates, returns, chargebacks, and distribution service fees (“DSA”). The Company uses the expected value method when estimating its variable consideration, unless terms are specified within contracts. The identified variable consideration is recorded as a reduction of revenue at the time revenues from sales of Stendra® are recognized. The Company recognizes revenue to the extent that it is probable that a significant revenue reversal will not occur in a future period. These estimates may differ from actual consideration received. The Company evaluates these estimates each reporting period to reflect known changes.

As of June 30, 2024, and December 31, 2023, the reserves for sales deductions were $5.1 million and $4.7 million, respectively. The most significant sales deductions included in this reserve relate to returns, contract rebates, and DSA fees. The Company’s estimates are based on factors such as direct and indirect customers’ buying patterns and the estimated resulting contractual deduction rates, historical experience, specific known market events and estimated future trends, current contractual and statutory requirements, industry data, estimated customer inventory levels, current contract sales terms with the Company’s direct and indirect customers, and other competitive factors. Significant judgment and estimation is required in developing the foregoing and other relevant assumptions. The most significant sales deductions are further described below.

Product Returns

Consistent with industry practice, the Company maintains a return policy that generally allows its customers to return Stendra® and receive credit for product within six months prior to expiration date and up to one year after expiration date. The provision for returns is based upon the Company’s estimates for future Stendra® returns and historical experience. The provision of returns is part of the variable consideration recorded at the time revenue is recognized. As of June 30, 2024, and December 31, 2023, the reserves for product returns were $4.9 million and $4.2 million, respectively, and are included as a component of accrued expenses. During the six months ended June 30, 2024, and 2023, respectively, the Company recorded $0.8 million and $0.8 million of returns as a reduction of gross revenue. During the three months ended June 30, 2024, and 2023, respectively, the Company recorded $0.3 million and $0.4 million of returns as a reduction of gross revenue.

Contract Rebates, Coupon Redemptions and DSA Fees

The Company establishes contracts with wholesalers, chain stores, and indirect customers that provide for rebates, sales incentives, DSA fees and other allowances. Some customers receive rebates upon attaining established sales volumes. Direct rebates are generally rebates paid to direct purchasing customers based on a percentage applied to a direct customer’s purchases from us, including fees paid to

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wholesalers under the Company’s DSAs, as described below. Indirect rebates are rebates paid to indirect customers that have purchased the Company’s products from a wholesaler under a contract with us.

The Company has entered into DSAs with certain significant wholesaler customers that obligate the wholesalers, in exchange for fees paid by us, to: (i) manage the variability of their purchases and inventory levels within specified limits based on product demand and (ii) provide us with specific services, including the provision of periodic retail demand information and current inventory levels for the Company’s pharmaceutical products held at their warehouse locations. See Note 3 Accounts Receivable, net for further discussion of these reserves.

Medical Device Sales

The Company’s medical device sales consist of domestic and international sales of men’s health products for the treatment of erectile dysfunction. The men’s health products do not require a prescription and include Vacuum Erection Devices, PreBoost, VenoSeal, penile injections (Rx), and urinary tract infection tests. Under Topic 606, the Company recognizes revenue from medical device sales when its performance obligations with its customers have been satisfied. In the contracts with its customers, the Company has identified a single performance obligation to provide medical devices upon receipt of a customer order. The performance obligation is satisfied at a point in time when the Company’s customers obtain control of the medical device, which is typically upon shipment. The Company invoices its customers after the medical devices have been shipped and invoice payments are generally due within 30 days of invoice date for domestic customers and 90 days for international customers.

In determining the transaction price, a significant financing component does not exist since the timing from when the Company delivers the medical devices to when the customers pay for the product is typically less than one year. The Company records medical device sales net of any variable consideration, including but not limited to returns. The Company uses the expected value method when estimating its variable consideration. The identified variable consideration is recorded as a reduction of revenue at the time revenues from the medical device sales are recognized. The Company recognizes revenue to the extent that it is probable that a significant revenue reversal will not occur in a future period. These estimates may differ from actual consideration received. The Company evaluates these estimates each reporting period to reflect known changes.

Product Returns

Consistent with industry practice, the Company maintains a return policy that generally allows its customers to return medical devices and receive credit for products within 90 days of the sale. The provision for returns is based upon the Company’s estimates for future product returns and historical experience. The Company has not made significant changes to the judgments made in applying Topic 606. As of June 30, 2024, and December 31, 2023, the reserves for product returns for medical devices were not significant.

Contract Costs

In relation to customer contracts, the Company incurs costs to fulfill a contract but does not incur costs to obtain a contract. These costs to fulfill a contract do not meet the criteria for capitalization and are expensed as incurred. As such, the Company did not have any contract assets at June 30, 2024, and December 31, 2023.

Contract Liabilities

Under Accounting Standards Codification Topic 606, Revenue Recognition, the Company recognizes revenue when its performance obligations with a customer has been satisfied. In the event it has not been satisfied, the Company records deferred revenue as a liability on the balance sheet. As of June 30, 2024, and December 31, 2023, deferred revenue was $0 and $0.1 million respectively.

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the

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use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market.

Level 3 – Unobservable inputs which are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Financial instruments recognized at historical amounts in the consolidated balance sheets consist of cash, accounts receivable, other current assets, accounts payable, accrued expenses, and other current liabilities. The Company believes that the carrying values of cash, accounts receivable, other current assets, accounts payable, accrued expenses, note payable, and other current liabilities approximate their fair values due to the short-term nature of these instruments.

In connection with the Private Placement, the Company incurred liabilities related to derivatives arising from embedded features that were not clearly and closely related to the host instruments. The Company estimated the fair value of derivative liability utilizing Monte Carlo Simulation approach. These fair value measurements are based on significant inputs not observable in the market and thus represent Level 3 measurements within the fair value hierarchy. See Notes 16 and 17.

Intangible Assets

The Company accounts for recognized intangible assets at cost. Intangible assets with finite useful lives are amortized over the useful life that the assets are expected to contribute directly or indirectly to future cash flows. Intangible assets are amortized using an accelerated method based on the pattern in which the economic benefits of the assets are consumed. The Company reviews the carrying value and useful lives of its intangible assets with definite lives whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable or the period over which they should be amortized has changed. When indicators of impairment exist, the Company determines whether the estimated undiscounted sum of the future cash flows of such assets is less than their carrying amounts. If less, an impairment loss is recognized in the amount, if any, by which the carrying amount of such assets exceeds their respective fair values. The Company evaluates the remaining useful life of each intangible asset that is being amortized during each reporting period to determine whether events and circumstances warrant a revision to the remaining period of amortization. If the estimate of the intangible asset’s remaining useful life has changed, the remaining carrying amount of the intangible asset is amortized prospectively over that revised remaining useful life.

The Company’s prepared projections including the undiscounted cash flows of the remaining estimated useful lives through December 2031 for the medical device products. Management continued to analyze the Company’s intangible assets during 2024. Management noted that the Company’s financial results were consistent with previous projections. Based on its analysis, Management concluded that there were no triggering events noted that would indicate a potential impairment for long-lived assets for any of the two asset groups, Metuchen Pharmaceuticals and TIMM/PTV.

Derivative Financial Instruments

The Company evaluates all its financial instruments to determine if such instruments contain features that qualify as embedded derivatives per ASC 815, Derivatives and Hedging (“ASC 815”). Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the statement of operations each period. Bifurcated embedded derivatives are classified with the related host contract in the Company’s balance sheet.

Preferred Stock

The Company records shares of convertible preferred stock at their respective fair values on the dates of issuance, net of issuance costs. The Company concluded that the Series A Preferred Stock is more akin to a debt-type instrument than an equity-type instrument,

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therefore certain conversion features associated with the convertible preferred stock were deemed to not be clearly and closely related to the host instrument and were bifurcated as a derivative under ASC 815. The Company has applied the guidance in ASC 480-10-S99-3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities and has therefore classified the Series A convertible preferred stock as mezzanine equity as it redeemable in monthly installments. The Company adjusts the carrying values of the convertible preferred stock by accreting the discount and accruing dividends to the state the convertible preferred stock at redemption value each reporting period.

Recent Accounting Pronouncements

Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires an enhanced disclosure of significant segment expenses on an annual and interim basis. This guidance will be effective for the annual periods beginning the year ended December 31, 2024, and for interim periods beginning January 1, 2025. Early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating segment disclosures related to its annual report for fiscal year 2024.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. The Company is currently evaluating income tax disclosures related to its annual report for fiscal year 2025.

3) Accounts Receivable, net

Accounts receivable, net is comprised of the following:


	June 30,		December 31,
	2024		2023
Gross accounts receivables	$	2,099,868	$	2,887,317
Distribution service fees		(117,049)		(398,968)
Chargebacks accrual		(5,983)		(2,462)
Cash discount allowances		(22,979)		(24,639)
Allowance for credit losses		(177,326)		(235,097)
Total accounts receivable, net	$	1,776,531	$	2,226,151

For the six months ended June 30, 2024, gross billings to customers representing 10% or more of the Company’s total gross billings included three customers which represented approximately 27%, 25%, and 14% of total gross billings, respectively. For the six months ended June 30, 2023, gross billings to customers representing 10% or more of the Company’s total gross billings included four customers which represented approximately 23%, 18%, 17% and 10% of total gross billings, respectively. For the three months ended June 30, 2024, gross billings to customers representing 10% or more of the Company’s total gross billings included three customers which represented approximately 28%, 25%, and 12% of total gross billings, respectively. For the three months ended June 30, 2023, gross billings to customers representing 10% or more of the Company’s total gross billings included three customers which represented approximately 24%, 19%, and 16% of total gross billings, respectively.

Receivables from customers representing 10% or more of the Company’s gross accounts receivable included three customers at June 30, 2024, equal to 28%, 25%, and 22%, respectively. Receivables from customers representing 10% or more of the Company’s gross accounts receivable included three customers at December 31, 2023, equal to 35%, 22% and 18%, respectively.

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4) Inventories

Inventory is comprised of the following:


	June 30, 2024		December 31, 2023
Raw Materials	$	1,321,107	$	1,430,139
Finished goods		112,110		180,252
Total inventory	$	1,433,217	$	1,610,391

Finished goods are net of valuation reserves of $303,410 and $295,411 as of June 30, 2024, and December 31, 2023, respectively.

5) Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are comprised of the following:


	June 30, 2024		December 31, 2023
Prepaid insurance	$	128,319	$	45,664
Prepaid FDA fees		312,551		937,652
API purchase commitment asset (see Note 13)		1,180,283		704,729
Other prepaid expenses		187,263		234,459
Other current assets		86,547		111,476
Total prepaid expenses and other current assets	$	1,894,963	$	2,033,980

6) Intangible Assets


Balance at December 31, 2022	$	12,244,484
Amortization expense		(3,272,747)
Balance at December 31, 2023		8,971,737
Amortization expense		(1,430,566)
Balance at June 30, 2024	$	7,541,171

The future annual amortization related to the Company’s intangible assets is as follows as of June 30, 2024:


2024 (remaining 6 months)	$	1,370,058
2025		1,754,329
2026		1,442,186
2027		1,212,871
2028		996,636
Thereafter		765,091
Total	$	7,541,171

The intangible assets held by the Company are the Stendra® product, Timm Medical product, and PTV product and are being amortized over their estimated useful lives of 10 years, 12 years, and 12 years, respectively. The carrying value of the Stendra® product, Timm Medical product, and PTV product as of June 30, 2024, are $3.9 million, $2.8 million and $0.8 million, respectively. The carrying value of the Stendra® product, Timm Medical product, and PTV product as of December 31, 2023, were $4.9 million, $3.2 million and $0.9 million, respectively. During the six months ended June 30, 2024, and 2023, respectively, the Company recorded $1.4 million and $1.6 million of amortization expense. During the three months ended June 30, 2024, and 2023, respectively, the Company recorded $0.7 million and $0.8 million of amortization expense.

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7) Accrued Expenses

Accrued expenses are comprised of the following:


	June 30, 2024		December 31, 2023
Accrued product returns	$	4,944,502	$	4,178,176
Accrued contract rebates		48,552		128,562
Due to 3PL/Wholesalers		62,284		75,727
Accrued bonuses		964,418		665,184
Accrued professional fees		—		15,000
Accrued R&D fees		601,952		100,668
Other accrued expenses		51,883		196,760
Total accrued expenses	$	6,673,591	$	5,360,077

8) Debt

Promissory Note

In connection with the Settlement Agreement entered into with Vivus (see Note 13), Petros executed an interest-bearing promissory note (the “Note”) in favor of Vivus in the principal amount of $10,201,758. The parties also entered into a Security Agreement to secure Petros’ obligations under the Note.

Under the terms of the Note, the original principal amount of $10,201,758 is payable in consecutive quarterly installments of principal and interest beginning on April 1, 2022, through January 1, 2027. Interest on the principal amount will accrue at a rate of 6% per year. The Company may prepay the Note, in whole or in part, at any time, with no premium or penalty. In the event that the Company defaults under the Security Agreement, all principal outstanding under the Note at the time of the default will bear interest at a rate of 9% per year until the full and final payment of all principal and interest under the Note (regardless of whether any default is waived or cured). Pursuant to the Security Agreement, dated January 18, 2022, the Company granted to Vivus a continuing security interest in all of its Stendra® API and products and its rights under the License Agreement. For the six months ended June 30, 2024, and 2023, the Company paid Vivus $0.5 million and $1.0 million, respectively. As of June 30, 2024, and December 31, 2023, the principal balance on the Note is $7.6 million and $8.0 million, respectively.

Future minimum principal payments of the promissory note are as follows:


2024 (remaining 6 months)	$	776,759
2025		2,720,940
2026		3,264,351
2027		872,073
Total	$	7,634,123
Less: current portion		(1,936,995)
Promissory note, net of current portion	$	5,697,128

9) Stockholders’ Equity

On December 21, 2023, the Company approved and accrued for the issuance of $200,000 of common stock, payable in

Petros Pharmaceuticals, Inc. [PTPI] Filings
10-Q	[2024-08-14]
10-Q	[2024-05-15]
10-K	[2024-04-01]
10-Q	[2023-11-15]
10-Q	[2023-08-14]
10-Q	[2023-05-15]
10-K	[2023-03-31]
10-Q	[2022-11-14]
10-Q	[2022-08-12]
10-Q	[2022-05-16]
10-K	[2022-03-31]
S-1	[2022-01-06]
S-1	[2021-12-13]
10-Q	[2021-11-15]
S-1	[2021-11-12]
10-Q	[2021-08-16]
10-Q	[2021-05-14]
10-K	[2021-03-31]