Petros Pharmaceuticals(PTPI) - 2022 Q3 - Quarterly Report

Financial Performance - Petros Pharmaceuticals has experienced net losses and negative cash flows from operations since inception, with an accumulated deficit of approximately $86.5 million as of September 30, 2022[135]. - Net sales for the nine months ended September 30, 2022, were $5,193,953, a decrease of 40% compared to $8,678,424 in the same period of 2021[178]. - The gross profit for the nine months ended September 30, 2022, was $3,785,867, representing 73% of net sales, down from $7,322,586 or 84% of net sales in 2021[188]. - The company experienced a $3,511,442 decrease in net sales of Stendra®, partially offset by a $26,971 increase in Medical Device sales[183]. - Net sales for the three months ended September 30, 2022, were $(1,457,732), a decrease of $3,602,902 or 168% compared to $2,145,169 in the same period of 2021[208][210][214]. - Gross loss for the three months ended September 30, 2022, was $(1,744,257), compared to a gross profit of $1,826,011 in the same period of 2021[219]. - For the three months ended September 30, 2022, the company reported a net loss of $(13,830,196), compared to a net loss of $(1,696,898) for the same period in 2021[271]. - Adjusted EBITDA for the three months ended September 30, 2022, was $(4,343,012), a decline from $(1,814,621) in the prior year[271]. Cash Flow and Liquidity - The company had cash of approximately $11.2 million and positive working capital of $10.8 million as of September 30, 2022[135]. - Cash on hand totaled $11,181,662 at September 30, 2022, down from $23,847,572 at December 31, 2021[236]. - Net cash used in operating activities for the nine months ended September 30, 2022, was $11,226,985, reflecting a net loss of $13,830,196[263]. - The company does not currently have sufficient available liquidity to fund its operations for at least the next 12 months, raising substantial doubt about its ability to continue as a going concern[239]. - The company is evaluating various financing strategies, including secured or unsecured debt, convertible debt, and equity offerings, to obtain additional liquidity[240]. Revenue and Sales Strategy - Petros' ED product portfolio includes Stendra® and external penile rigidity devices, with the Prescription Medications segment primarily focused on Stendra® sales in the U.S.[145]. - The company has shifted from in-person sales to online and telehealth-based sales due to COVID-19, impacting net revenues due to lower gross margins[139]. - The company plans to continue investing in research and development related to OTC strategies for Stendra®, anticipating a dramatic increase in product sales in the future[203]. - The company reported a significant decrease in prescription demand for Stendra since the second quarter of the year[277]. Research and Development - Petros is conducting non-clinical consumer studies for FDA approval of Stendra® for Non-Prescription/Over-The-Counter use, which could significantly increase product sales[137]. - The company expects to incur approximately $20 million in research and development expenses for H100™ over the next four to six years prior to FDA approval[243]. - Research and development expenses increased by 95% to $1,562,518 for the nine months ended September 30, 2022, compared to $799,803 in the same period of 2021[199]. - Research and development expenses increased by $455,340, or 162%, during the three months ended September 30, 2022, totaling $735,916 compared to $280,576 in 2021[224][227]. 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 exclusive rights in the U.S., Canada, South America, and India[133]. - The Company entered into a Hybrid License for the development and commercialization of H100™, with an initial license fee of $100,000 and additional payments totaling $1,025,000 over the first three years[153]. - In the Vivus Settlement Agreement, the Company retained approximately $7.3 million of API inventory and executed a promissory note for $10,201,758[154]. Impairments and Reserves - The company recognized an impairment of approximately $7.5 million for the Stendra® product due to a significant decline in gross billings and higher than estimated returns[203]. - The company recorded an impairment of approximately $7.5 million for the Stendra® product intangible asset during the three months ended September 30, 2022[232]. - The Company increased its estimate of reserves for product returns by $2.7 million during the three months ended September 30, 2022, due to higher than estimated wholesaler returns[167]. Internal Controls and Compliance - The company identified a material weakness in internal controls, including insufficient monitoring and oversight, and plans to address these deficiencies in the second half of 2022[281]. - Management has hired an external consultant to assist in the remediation of internal control deficiencies[282]. - Management's evaluation of disclosure controls indicated they were not effective in ensuring timely and accurate reporting[280]. - The Company received a Nasdaq compliance letter on June 22, 2022, indicating it did not meet the minimum bid price of $1.00 per share, with a compliance period until December 19, 2022[160].