Petros Pharmaceuticals(PTPI) - 2021 Q4 - Annual Report

Licensing and Agreements - Petros entered into a License Agreement with Vivus for the commercialization of Stendra® for a one-time fee of $70 million, granting rights to sell in the U.S., Canada, South America, and India [271]. - A Technology Transfer Service Agreement was established with Patheon Pharmaceuticals for the commercial production of Stendra® tablets, effective January 20, 2022 [285]. - The company has a sublicense agreement with Acerus Pharmaceuticals for Stendra® in Canada, which includes a one-time fee of $100,000 and potential additional fees upon regulatory approval [287]. - The principal amount of the promissory note to Vivus is $10,201,758, payable in quarterly installments starting April 1, 2022, through January 1, 2027 [292]. - The company executed a promissory note in January 2022 for $10,201,758 in connection with the Vivus Settlement Agreement [338]. Financial Performance - Net sales for the year ended December 31, 2021, were $7,811,264, a decrease from $9,559,469 in 2020, representing a decline of approximately 18.3% [310]. - Gross profit increased to $6,211,698 in 2021 from $5,513,003 in 2020, indicating a growth of about 12.7% [310]. - Total operating expenses rose to $24,259,714 in 2021 from $22,795,042 in 2020, reflecting an increase of approximately 6.4% [310]. - The loss from operations was $18,048,016 in 2021, compared to a loss of $17,282,039 in 2020, indicating a worsening of about 4.4% [310]. - The net loss for 2021 was $8,986,676, a significant improvement from the net loss of $20,585,925 in 2020, representing a reduction of approximately 56.3% [310]. - Net cash used in operating activities for the year ended December 31, 2021 was $11,862,031, reflecting a net loss of $8,986,676 [364]. - Net cash provided by financing activities was $18,569,909 for the year ended December 31, 2021, primarily from the issuance of common stock and warrant exercises [367]. - The company had a net cash increase of $6,707,878 for the year ended December 31, 2021 [363]. - Adjusted EBITDA for 2021 was $(11,170,026), compared to $(10,621,601) in 2020, indicating a slight decline in operational performance [377]. Sales and Marketing Strategy - The company has established its own internal sales and marketing functions for Stendra® after terminating its relationship with an affiliate contractor in 2019, enhancing its multi-channel sales strategy [273]. - The company experienced a shift from in-person sales to online sales due to COVID-19, which generally have lower gross margins, impacting net revenues [277]. - Petros manages operations through two segments: Prescription Medications, primarily Stendra®, and Medical Devices, focusing on vacuum erection devices [281]. - The company plans to invest in research and development related to Stendra®, anticipating significant future sales growth [306]. Research and Development - Petros acquired an exclusive global license for H100™, a novel treatment for Peyronie's disease, and is conducting non-clinical studies for potential FDA approval for Stendra® as an over-the-counter product [274]. - Research and development expenses increased to $1,788,491 in 2021 from $459,636 in 2020, marking a substantial rise of about 288.5% [310]. - Research and development expenses increased by $1,328,855 or 289% in 2021, totaling $1,788,491, driven by increased licensing fees and consulting fees related to OTC strategies [328]. - The company expects to incur approximately $14 million in research and development expenses for H100™ over the next four to six years prior to FDA approval [342]. Capital Management - The company is exploring additional ways to raise capital, including public or private equity or debt financings, to support its business strategy [351]. - The company sold 3,323,616 shares of common stock at $1.715 per share in October 2021, raising approximately $5.5 million in net proceeds [344]. - The company sold 2,153,333 shares of common stock at an offering price of $3.00 per share, raising approximately $9.3 million in net proceeds from the November Offering [346]. - In December 2021, the company sold 1,545,183 shares of common stock at an offering price of $3.43 per share, generating approximately $6.9 million in net proceeds from the December Offering [348]. - The company repaid the remaining balance of $10,201,758 on its Senior Debt on November 3, 2021 [360]. Operational Challenges - Product returns significantly increased to $8,342,505 in 2021 from $1,177,473 in 2020, which may impact future revenue recognition [382]. - The company emphasizes that gross billings is a non-GAAP measure and should not be viewed as a substitute for net sales in assessing operational performance [378]. - The change in fair value of derivative liability resulted in a gain of $9,430,000 in 2021, contrasting with a loss of $1,680,000 in 2020 [310]. - The change in the fair value of derivative liability was $9,430,000 for the year ended December 31, 2021, primarily due to a decline in the company's stock price [332]. - The company reported a change in the fair value of derivative liability of $(9,430,000) in 2021, compared to $1,680,000 in 2020, which may affect future financial stability [377].