Petros Pharmaceuticals(US:PTPI)2024-04-01 20:31Financial Position - As of December 31, 2023, Petros had cash of approximately $13.3 million and an accumulated deficit of approximately $98.9 million, indicating ongoing financial challenges [239]. - The company has an accumulated deficit of $98.9 million as of December 31, 2023, and does not currently have sufficient liquidity to fund operations for at least the next 12 months [295][296]. - Cash totaled $13,336,975 at December 31, 2023, an increase from $9,426,264 at December 31, 2022 [294]. - The company’s cash position increased by $3,910,711 in 2023, contrasting with a decrease of $14,421,308 in 2022, indicating improved liquidity [312]. Operational Performance - The company experienced net losses and negative cash flows from operations since inception, using approximately $7.6 million in cash for operations during the twelve months ended December 31, 2023 [239]. - Net cash used in operating activities for the year ended December 31, 2023, was $7,626,529, a decrease from $12,797,325 in 2022, reflecting a net loss of $8,163,188 [312][313]. - The company reported a net loss of $8,163,188 for 2023, an improvement from a net loss of $20,037,573 in 2022 [321]. - Adjusted EBITDA for the year ended December 31, 2023, was $(9,917,167), slightly worse than $(9,051,730) in 2022, indicating ongoing operational challenges [321]. Revenue and Sales - Net sales for the year ended December 31, 2023, were $5,822,388, a decrease of 3% compared to $5,992,054 in 2022, with Prescription Medicines contributing $2,286,373 and Medical Devices $3,536,015 [263][264]. - Gross billings for the year ended December 31, 2023, were $13,126,449, significantly down from $24,562,529 in 2022, with net sales of $5,822,388 in 2023 compared to $5,992,054 in 2022 [327]. - The company recognizes revenue upon delivery of prescription medications or medical devices, with significant sales deductions related to contract returns and rebates [253][255]. Expenses and Cost Management - Research and development expenses increased to $2,409,094 in 2023 from $1,740,280 in 2022, with significant investments in clinical development and OTC strategies for Stendra® [280]. - Selling, general and administrative expenses decreased by $2,947,691 or 24% in 2023, totaling $9,261,471, primarily due to reduced direct selling and marketing expenses [277]. - The company incurred stock-based compensation expenses of $417,230 in 2023, compared to $1,195,076 in 2022, reflecting cost management efforts [321]. - Cost of sales decreased by $658,198 or 29% in 2023, totaling $1,631,220, with a cost of sales percentage of net sales dropping from 38% in 2022 to 28% in 2023 [270][272]. Financing and Capital Raising - Petros is evaluating various financing strategies, including secured or unsecured debt, convertible debt, and equity offerings, to obtain additional liquidity for the next twelve months [240]. - The July 2023 Private Placement generated approximately $15 million in gross proceeds, with plans to use the net proceeds for general corporate purposes [299]. - The company is exploring additional ways to raise capital, including public or private equity or debt financings [309]. Product Development and Strategy - The company acquired the rights to Stendra® for a one-time fee of $70 million, with exclusive rights to sell in the U.S., Canada, South America, and India [241]. - Petros will pay a royalty of 5% on the first $500 million of net sales of Stendra® and 6% thereafter until patent expiration in April 2025 [242]. - The company anticipates that its OTC strategy for Stendra® will significantly increase product sales in the future, although failure to achieve projected sales could lead to impairment charges [260]. - Research and development expenses increased by $668,814 or 38% in 2023 compared to 2022, driven by increased clinical development expenses related to OTC strategies and upfront licensing fees [284]. Liabilities and Settlements - Petros retained approximately $7.3 million of API inventory as part of a settlement agreement with Vivus, reducing current liabilities by approximately $4.25 million [247]. - The principal balance on the promissory note to Vivus is $8.0 million as of December 31, 2023, with quarterly installments beginning April 1, 2022 [249]. - The company recorded a gain on the settlement with Vivus of $3,389,941 in 2022, which contributed to a reduction in total liabilities [278]. - The company executed a promissory note in favor of Vivus with a principal amount of $10,201,758 as part of a settlement in January 2022 [311]. Changes in Fair Value - The change in fair value of derivative liabilities resulted in a gain of $2,590,000 in 2023, compared to a gain of $460,000 in 2022 [263]. - The change in fair value of derivative liability was $(2,590,000) in 2023, compared to $(460,000) in 2022, highlighting increased volatility in financial instruments [321]. - The company recorded a gain of approximately $2.6 million for the change in fair value of the derivative liability in 2023, compared to a gain of $0.5 million in 2022 [289]. Inventory and Returns - The reserves for product returns as of December 31, 2023, were $4.2 million, up from $2.3 million in 2022, reflecting the company's return policy [256]. - Product returns in 2023 amounted to $3,381,694, down from $9,355,121 in 2022, indicating improved product acceptance [327].