Petros Pharmaceuticals (PTPI) details tech pivot, default fallout and cash strain
Petros Pharmaceuticals, Inc. files its annual report describing a major shift from erectile dysfunction products to developing a SaaS/SaMD platform to support prescription-to-OTC switches. The 10-K highlights severe liquidity constraints, a going concern warning, and reliance on future capital raises and platform commercialization.
The company exited Stendra and VEDs, assigned related subsidiaries’ assets for the benefit of creditors, and defaulted on a Vivus promissory note, leading to foreclosure on Stendra-related collateral and termination of the Vivus license. Petros now focuses on early-stage, technology-driven Rx-to-OTC solutions without current platform revenue.
Positive
- None.
Negative
- Going concern warning and liquidity shortfall: Auditor expressed substantial doubt about Petros’ ability to continue as a going concern, with only $5.1 million cash and $2.9 million working capital as of December 31, 2025, which management states is not enough to fund at least the next 12 months.
- Default and asset loss tied to Vivus note: Petros’ subsidiary defaulted on a Vivus promissory note, leading to foreclosure on Stendra-related collateral, termination of the Vivus license, cessation of Stendra commercialization, and assignment of Metuchen and its subsidiaries’ assets for the benefit of creditors.
- Costly preferred stock Triggering Event: The Vivus default triggered a higher 15% dividend on Series A preferred stock and redemption rights at a premium, increasing cash obligations and complicating future financing.
- Unproven new business model: The company has exited its historical revenue base and is relying on an early-stage SaaS/SaMD Rx-to-OTC platform with no current revenue, facing significant regulatory, technical and commercialization risk.
Insights
Petros pivots to SaaS/SaMD amid going concern and default.
Petros Pharmaceuticals is transitioning from legacy ED drugs and devices to an early-stage SaaS/SaMD platform for Rx-to-OTC switches. This new model targets licensing fees and technology services rather than owning manufacturing and distribution, but the platform has no commercialization history or revenues.
Financial risk is acute. The auditor raised substantial doubt about the company’s ability to continue as a going concern. As of December 31, 2025, Petros held only $5.1 million in cash with working capital of $2.9 million and an accumulated deficit of $111.3 million, which management acknowledges is insufficient to fund at least 12 months of operations.
Default on the Vivus promissory note triggered foreclosure on Stendra-related collateral and termination of the license, while also causing a Triggering Event on Series A preferred stock, pushing the dividend rate to 15% and allowing costly redemptions. The combination of business model pivot, regulatory dependence, and urgent capital needs materially raises execution and dilution risk.
Key Figures
Key Terms
going concern financial
assignment for the benefit of creditors financial
Additional Condition for Nonprescription Use regulatory
Software as a Medical Device technical
Triggering Event financial
HIPAA regulatory
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Fiscal Year Ended
or
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
PETROS PHARMACEUTICALS, INC. |
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | |
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(Address of principal executive offices) | | (Zip Code) | |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading Symbol | | Name of each exchange on which registered |
| | None |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐Yes☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐Yes ☒
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. ☒
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.
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Large accelerated filer | ☐ | | 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
As of June 30, 2025, the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the last sale price of the common equity was $
As of April 15, 2026, the registrant had
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PETROS PHARMACEUTICALS, INC.
TABLE OF CONTENTS
Page | |
PART I | |
Item 1. Business | 1 |
Item 1A. Risk Factors | 6 |
Item 1B. Unresolved Staff Comments | 30 |
Item 1C. Cybersecurity | 31 |
Item 2. Properties | 32 |
Item 3. Legal Proceedings | 32 |
Item 4. Mine Safety Disclosures | 32 |
PART II | |
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 33 |
Item 6. Reserved | 33 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33 |
Item 7A. Quantitative and Qualitative Disclosures about Market Risk | 46 |
Item 8. Financial Statements and Supplementary Data | 46 |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 46 |
Item 9A. Controls and Procedures | 46 |
Item 9B. Other Information | 48 |
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 48 |
PART III | |
Item 10. Directors, Executive Officers and Corporate Governance | 49 |
Item 11. Executive Compensation | 54 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 66 |
Item 13. Certain Relationships and Related Transactions, and Director Independence | 69 |
Item 14. Principal Accounting Fees and Services | 70 |
PART IV | |
Item 15. Exhibits, Financial Statement Schedules | 71 |
Item 16. Form 10-K Summary | 75 |
SIGNATURES | 76 |
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
All references to “Petros,” the “Company,” “we,” “us” and “our” in this Annual Report on Form 10-K (this “Form 10-K”) refer to Petros Pharmaceuticals, Inc. and its consolidated subsidiaries.
This Annual Report on Form 10-K 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. In some cases, predictive, future-tense or forward-looking words such as “intend,” “plan,” “predict,” “may,” “will,” “project,” “target,” “strategy,” “estimate,” “anticipate,” “believe,” “expect,” “continue,” “potential,” “opportunity,” “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, but are not the exclusive means of identifying such 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 a proprietary Rx-to-OTC switch technology; Petros’ ability to comply with obligations as a public reporting company; the ability of Petros to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002; the risk that the financial performance of Petros may not be as anticipated by the merger transactions that resulted in the Company’s creation; risks resulting from Petros’ status as an emerging growth company, including that reduced disclosure requirements may make shares of Petros’ Common Stock, par value $0.0001 per share (“Common Stock”) less attractive to investors; risks related to Petros’ ability to continue as a going concern; risks related to Petros’ history of incurring significant losses; 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 Annual Report, including under the section entitled “Risk Factors,” and in our other reports filed with the Securities and Exchange Commission (the “SEC”). The Company advise you to carefully review the reports and documents the Company files 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 Annual Report on Form 10-K 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 Annual Report to reflect any new information or future events or circumstances or otherwise, except as required by the federal securities laws.
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RISK FACTOR SUMMARY
We are subject to a variety of risks and uncertainties. The following is a summary of the principal risks that we deem material to an investment in our securities, all of which are more fully described in, and should be read in conjunction with the section titled “Risk Factors” below.
| ● | Our consolidated financial statements have been prepared on a going concern basis; we must raise additional capital to fund our operations in order to continue as a going concern. |
| ● | Petros has incurred significant losses and may continue to experience losses in the future. |
| ● | We expect to require additional capital in the future in order to develop our products, fund operations, and otherwise implement our business strategy. If we do not obtain any such additional financing, it may be difficult to effectively realize our long-term strategic goals and objectives. |
| ● | Any additional capital raised through the sale of equity or equity-backed securities may dilute our stockholders’ ownership percentages and could also result in a decrease in the market value of our equity securities. |
| ● | Our focus on the development of our platform may adversely impact our operations and financial performance. |
| ● | We are in the early development stage with no revenues from our platform and have no operating history in the broad commercialization of platforms for consumer use. |
| ● | We defaulted on certain covenants included in the Promissory Note with Vivus that has resulted in the Obligations becoming immediately due and payable on the date of the Foreclosure Notice and the forfeiture of assets pledged as collateral under the Promissory Note. |
| ● | The Vivus Event of Default (as defined herein) constitutes a Triggering Event (as defined in the Certificate of Designations (as defined herein) pursuant to the terms of the Certificate of Designations, which may materially and adversely affect our liquidity, financial condition and results of operations. |
| ● | Any difficulties or delays in product engineering, regulatory compliance, sales or marketing could affect Petros’ future results. |
| ● | Our technology may be viewed as relatively new or untested, which could result in regulatory delays or disruptions in the pathway to commercialization. In addition, following broad commercialization of our platform, Petros will be substantially dependent on a limited number of commercial products. Any difficulties or delays in regulatory compliance, sales or marketing could affect Petros’ future results. |
| ● | If we fail to successfully initiate broad commercialization of, market and sell our platform cost-effectively, our sales, business, financial condition and results of operations will be negatively affected. |
| ● | Petros has concluded that there are material weaknesses in its internal control over financial reporting, which, if not remediated, could materially adversely affect its ability to timely and accurately report its results of operations and financial condition. The accuracy of Petros’ financial reporting depends on the effectiveness of its internal controls over financial reporting. |
| ● | Public health crises could adversely affect our business, financial condition and results of operations. |
| ● | Our products and information technology systems are critical to our business. Issues with product development or enhancements, IT system integration, implementation, updates and upgrades could disrupt our operations and have a material impact on our business and operating results. |
| ● | Cyberattacks and other data security breaches could compromise our proprietary and confidential information, which could harm our business and reputation or cause us to incur increased expenses to address any such breaches. |
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| ● | Because Petros is a small company with limited resources, it may be unable to attract qualified personnel. |
| ● | Rx-to-OTC switches are part of our future growth and may be affected by regulatory developments governing Rx-to-OTC switches. |
| ● | We may not receive the necessary authorizations to market our platform or any future new products, and any failure to timely do so may adversely affect our ability to grow our business. |
| ● | Ongoing changes in healthcare regulation, internet regulation or other laws and regulation could negatively affect our revenues, business and financial condition. |
| ● | Our products may cause or contribute to adverse medical events that we are required to report to FDA and other governmental authorities, and if we fail to do so, we would be subject to sanctions that could harm our reputation, business, results of operations, and financial condition. The discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of FDA or another governmental authority, could have a negative impact on us. |
| ● | We may be subject to certain federal, state, and foreign fraud and abuse laws, health information privacy and security laws, and transparency laws, which, if violated, could subject us to substantial penalties. |
| ● | Since our platform will utilize cloud-based information systems and the exchange of information between patients and doctors, we will be subject to numerous U.S. federal and state laws and regulations related to the privacy and security of personally identifiable information, including health information. |
| ● | We cannot yet determine or predict the impact emerging regulatory framework for artificial intelligence (“AI”) and future laws, regulations, standards, or market perception of the requirements may have on our business and may not always be able to anticipate how to respond to these laws or regulations. |
| ● | Petros may be subject to potential product liability and other claims, creating risks and expense. |
| ● | If Petros fails to protect its intellectual property rights, which process can be expense and time consuming, its ability to pursue the development of its products would be negatively affected. |
| ● | If Petros infringes the rights of third parties, it could be prevented from selling products and forced to pay damages and defend against litigation. |
| ● | Series A Convertible Preferred Stock and the warrants issued concurrently therewith contain anti-dilution provisions that may result in the reduction of the conversion price of the Series A Convertible Preferred Stock or the exercise price of such Warrants in the future. These features may increase the number of shares of Common Stock being issuable upon conversion of the Series A Convertible Preferred Stock or upon the exercise of the Warrants. |
| ● | Under the Purchase Agreement (as defined herein) we are subject to certain restrictive covenants that may make it difficult to procure additional financing. |
| ● | We are an “emerging growth company” and our election to delay adoption of new or revised accounting standards applicable to public companies may result in our consolidated financial statements not being comparable to those of other public companies. As a result of this and other reduced disclosure requirements applicable to emerging growth companies, our securities may be less attractive to investors. |
| ● | Our stock price may be volatile, and sales of a substantial number of shares of our Common Stock, or the perception that such sales may occur, may adversely impact the price of our Common Stock. |
| ● | Our delisting from the Nasdaq Capital Market and transition to over-the-counter trading may adversely affect the liquidity and market price of our Common Stock. |
| ● | Our bylaws include a forum selection clause, which may impact your ability to bring actions against us. |
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PART I
ITEM 1.BUSINESS
In this Annual Report on Form 10-K, unless the context otherwise requires, references to “we,” “us,” “our,” “Petros” and the “Company” refer to Petros Pharmaceuticals, Inc. and its subsidiaries.
Business Model and Primary Products in Development
Petros 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. Prior to June 2025, Petros consisted of wholly owned subsidiaries: Metuchen, Neurotrope, Timm Medical Technologies, Inc. (“Timm Medical”), and Pos-T-Vac, LLC (“PTV” and, collectively with Metuchen and Timm Medical, the “Subsidiaries”). The Company has historically been 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 licensed from Vivus, Inc. (“Vivus”). Petros also historically marketed its own line of ED products in the form of vacuum erection device products (“VEDs”) through its previous subsidiaries, Timm Medical and PTV, including VEDs marketed as “Osbon ErecAid” and “PosTVac.”
In December 2024, the Company determined to discontinue sales of Stendra® to wholesalers. Beginning in March 2025, the Company is no longer engaged in the commercialization, development or sales of Stendra®. In addition, on June 16, 2025, in accordance with California state law, the Company effected an assignment (the “Assignment”) of all of the business, assets, properties, contractual rights, goodwill, going concern value, rights and claims (“Assets”) of Metuchen, including Metuchen’s wholly-owned subsidiaries, Timm Medical and PTV and each of their respective Assets (collectively, the “ABC Assets”), for the benefit of creditors to a special purpose vehicle that is managed by a third-party fiduciary (the “Assignee”) such that, as of June 16, 2025, the Assignee succeeded to all of each Subsidiary’s right, title and interest in and to the respective ABC Assets. Upon the completion of the Assignment, the Assignee obtained sole control over the ABC Assets and each Subsidiary no longer operates its business or controls the liquidation or distribution of its assets or the resolution of claims. The Assignment is a judicial insolvency procedure, which was commenced by each Subsidiary entering a contractual assignment for the benefit of creditors on June 16, 2025, that effectuates the assignment, grant, conveyance, transfer, and setting over to the Assignee, in trust, of all of the ABC Assets. Accordingly, the Company is no longer engaged in the marketing or selling of VEDs following the completion of the Assignment.
Today, the Company is working towards the goal of becoming a leading innovator in the emerging self-care market driving expanded access to key nonprescription pharmaceuticals as Over-the-Counter (“OTC”) and nonprescription drug products with additional condition for nonprescription use (“ACNU Products”) treatment options.
Petros is pursuing the development of a proprietary integrated technology solutions platform (the “platform”) containing two components (i) SaaS, designed to assist pharmaceutical companies in operationalizing and commercializing an Rx-to-OTC switch as an element in the development of an ACNU Product, and (ii) a potential Software as a Medical Device (“SaMD”) component, which must comply with FDA governance and approval and is expected to be a consumer interface that guides the consumer in navigating appropriate self-selection or deselection, through the acquisition process of the OTC product. The Company has been working towards the development of the platform, which is currently in early development stages and is being designed to serve as a retail or online interface, with clinically established algorithmic logic qualifying the intended consumer-patient for purchase and use of an ACNU Product, while reducing subjectivity to the least possible degree and maximizing objective qualifiers to the greatest possible degree.
We believe our platform will be anchored in recent FDA adopted rules, such as the FDA’s Nonprescription Drug Product with an Additional Condition for Nonprescription Use rule (“ACNU Rule”), intended to increase options to develop and market nonprescription drug products; Trusted Exchange Framework and Common Agreement (“TEFCA”), a nationwide framework for health information sharing; and Qualified Health Information Networks, which are sponsored by the FDA and the Department of Health and Human Services.
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Our Technology
Our SaaS platform is expected to serve as a digital hosting solution, offering pharmaceutical companies various features, such as secure data exchanges, regulatory compliance management, labeling and usage guidance and market access optimization to assist in the operationalization of the Rx-to-OTC switch. By addressing the complex commercial and regulatory requirements of the prescription-to-OTC switch, the platform is expected to enable pharmaceutical companies to streamline the process and strategically position their products for successful commercialization in the OTC market.
In addition to the SaaS component, the platform is intended to incorporate SaMD capabilities, transforming traditional OTC medications into digitally enabled solutions. The SaMD interface is expected to be designed to be customized and branded to the particular pharmaceutical therapy and established as a specific application pathway to that therapy. Together, the Company aims to develop the SaaS and SaMD components to create a scalable, licensable platform that supports various classes of medications across the pharmaceutical industry, assisting pharmaceutical companies achieve regulatory approval efficiently, while delivering innovative, consumer-focused healthcare solutions.
The regulatory process of switching a prescription medication to OTC requires a collection of behavior studies that demonstrate appropriate comprehension, self-selection and actual use, which is regulated, reviewed and ultimately approved by the FDA. The recently approved ACNU Rule, provides a pathway for approval to nonprescription use and allows the assistance of technology to empower and guide the consumer to appropriate self-selection (or de-selection) and safe utilization. The ACNU Rule further allows for prescription-grade pharmaceuticals and their sponsors, generally deemed nuanced with critical safety measures yet host potential for significant value to public health via expanded access, to integrate assistive technology that demonstrates safe and appropriate use.
Manufacturing, Supply and Virtual Infrastructure
Petros is working towards the development of its proprietary SaaS and SaMD technology platform, moving away from reliance on manufacturing and supply channels as a source of significant revenue. The Company’s commercial and operational model is intended to be based on agreements that will out-license the Company’s proprietary technology without the Company being directly responsible for the production costs of medication or its related supply chain. Under these agreements, the licensees will be responsible for production and supply chain management, allowing the Company to concentrate on the development and support of its proprietary platform. To support this model, the Company is developing a virtual technology infrastructure capable of hosting and operating both out-licensed or in-licensed assets. The technology will also integrate standard IoT, cloud, web-based, software, and cybersecurity, risks and concerns, among others, to ensure reliable performance. We believe this approach will position Petros as a leader in technology-assisted pharmaceutical solutions and offer assurances for its future partners.
Distribution and Marketing
Petros has evolved into a healthcare technology company that is no longer directly responsible for distribution or marketing of medication. The Company focuses on developing and licensing its proprietary technology platform, with primary revenue streams that are intended to stem primarily from licensing fees and the creation of customized, virtual web-based environment tailored to the needs of our partners.
Petros has an established industry-wide network of prospective companies that may license our technology, if it is successfully developed, which the Company expects will serve as its primary target customer base. Additionally, Petros engages in various industry conferences as an attendee and provides business development presentations featuring its technology services and history with regulatory bodies with the intention of promoting awareness of its technology and obtaining prospective customers. We expect that as our proprietary technology is commercialized among our initial prospective customers, joint press releases and announcements will also have the potential to increase the pool of customers and lead to increased revenue and expanded utilization of our proprietary platform across the pharmaceutical industry. Additionally, we may seek future customers by engaging business development contractors to further the Company’s goals and objectives.
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While the Company’s intended primary business model is based in developing and licensing its technology, the Company’s extensive experience in product distribution remains a key asset. Should the terms of future agreements with future licensees of its proprietary technology support it, Petros expects it will have the capabilities to offer distribution strategy development as an outsourced service. This would allow our licensees to benefit from our experience and distribution capabilities, ensuring that the full lifecycle of product commercialization is supported. However, the Company intends to remain focused on its technology innovation with a goal of assisting pharmaceutical companies in the switch from Rx-to-OTC.
Prospective Customers
Petros’ targeted customer base are pharmaceutical innovative label owners and exclusive OTC commercial licensees that are interested in switching certain therapeutic candidates within their prescription portfolio to OTC. This prospective customer pool spans a diverse range of organizations, from traditional pharmaceutical companies with an established prescription drug portfolio, to self-care consumer companies specializing in direct-to-consumer OTC pharmaceutical treatment options. For self-care consumer companies, switching prescription products to OTC treatments represents an opportunity for such companies to diversify product lines, increase accessibility to their products and drive revenue growth through direct consumer engagement. However, the complexity of navigating the regulatory hurdles and achieving commercialization demonstrate a clear need for our technology. By having the ability to provide innovative solutions that assist these companies with their Rx-to-OTC switch and accelerate such OTC transition, our technology enables these companies to unlock new revenue streams and provides consumers broadened access to medication OTC.
Additionally, emerging companies in health tech present additional potential partners, particularly as they explore combining technology, such as digital platforms, with OTC treatment solutions.
Market Opportunity
We aim to provide consumers expanded access to key nonprescription pharmaceuticals as OTC and nonprescription drug products with additional condition for nonprescription use (“ACNU Products”) treatment options and aim to capitalize on the emerging self-care market. The self-care market is valued at $38 billion and is projected to grow, driven by the increase in consumers’ desire to seek self-managed healthcare options, such as readily available access to prescription medication over-the-counter, which in turn, contributes to a growing demand for safe, accessible and effective OTC solutions for pharmaceutical companies. Pharmaceutical companies are also increasingly pursuing Rx-to-OTC switches, which has recently been driven by a supportive regulatory environment. Regulatory agencies, including the FDA, have shown an increase willingness to approve Rx-to-OTC switches, as evidenced by the FDA’s recent adoption of the ACNU Rule, which has promoted pharmaceutical companies to pursue switches for its medications that can be safely used without a prescription, sometimes with an ACNU. As a result, pharmaceutical companies are increasingly looking for solutions for scalable, streamlined pathways to convert their prescription portfolios to OTC.
Our proprietary technology is intended to enable pharmaceutical companies to efficiently navigate the FDA’s Rx-to-OTC switch regulatory process and allow them to ensure their sponsored product complies with safety and efficacy standards. The SaaS component of our platform is being developed to assist companies in the operationalization and market access of their switch candidate, while the SaMD capabilities are being developed to enhance FDA regulatory review and approval, as well as consumer engagement. We believe that we are uniquely positioned to capture a share of the emerging self-care market by leveraging our innovative technology.
Competition
Currently, the Rx-to-OTC industry is driven by individual sponsors, each working independently to transition their products from prescription to OTC. In terms of technology-centered switches, such as ACNUs, only a handful of companies are actively developing proprietary software products, including established pharmaceutical companies, such as Astra Zeneca and Sanofi, without clear interest in establishing their own technology platforms for future licensing capabilities and instead remaining focused on their independent product development efforts. Nevertheless, the ACNU Rx-to-OTC licensing marketplace is growing and evolving, and we may experience increased competition from companies offering proprietary, licensable technology. Several technology firms, such as Idea Evolver, are already providing critical support to sponsors in their ACNU switch platforms. Such firms are developing platforms that could ultimately be licensed to other companies in the future, potentially positioning themselves as significant competitors.
To date, there are no FDA-approved ACNU therapeutics that have switched from Rx-to-OTC and therefore no proven conceptor technology platform has been established for FDA-approved commercialization or licensable potential in this area. This lack of established platforms is the primary reason that there is no competitive landscape for licensable ACNU Rx-to-OTC switch technologies to date. Although the Company’s proprietary technology platform is in its early development stage, it seeks to distinguishes itself from emerging competitors in several key ways. Most, if not all, ACNU technology platforms used in current Rx-to-OTC switch programs
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rely solely on questionnaire-based models. In contrast, our platform is being developed to not only incorporate a questionnaire feature but also is being developed to integrate innovative elements, such as Artificial Intelligence (“AI”) to validate critical factors like patient identification, age and gender, offering a more advanced approach. Additionally, our proprietary technology has been under development to integrate other key features, such as electronic health records, and population longitudinal data, enabling a multifaceted and real-time objective qualification of a patient’s appropriateness for use. Much of our technology platform will be built to scale to accommodate several licensable SaaS and SaMD assets. This technology, however, continues to be experimental, ambitious, and nascent posing the potential, if successfully executed and regulatorily compliant, will be what we believe to be the first of its kind in the industry.
Employees
Our Board of Directors oversees our employee relations programs as it views building our culture from employee development and retention to diversity, equity, inclusion and belonging initiatives as key to driving long-term value for our business and helping to mitigate risks.
As of December 31, 2025, we had 3 full time employees, all of whom were based inside the United States. None of our employees are represented by a labor union or covered by a collective bargaining agreement.
Government Regulation
Pharmaceutical products and medical devices, development activities and manufacturing processes are subject to extensive and rigorous regulation by numerous government agencies, including the FDA and comparable foreign agencies.
Each company that will license our technology will need to undergo individual FDA approval of its medication for OTC status. Regulatory agencies highly scrutinize any product application submitted to switch a product from physician prescribed Rx to OTC and the process of switching a prescription medication to OTC is highly regulated. The process required by the FDA first involves the design of a Drug Facts Label (“DFL”) that is well understood by potential consumers of the product. Then, data must show that consumers can make an appropriate informed decision to use or not to use the product based solely upon the information on the DFL applied with their personal medical history. Then consumers must demonstrate that they can properly use the product based upon the information on the DFL. To accomplish this, the FDA ordinarily requires a consumer tested OTC DFL. Such testing includes conduct of iterative Label Comprehension Studies (“LCS”) in the general population, Self-Selection Studies (“SSS”) in a population interested in using the product and in specific populations who may be harmed if they use the product, and generally one Actual Use Trial (“AUT”) demonstrating safe and appropriate use by consumers in a simulated OTC setting.
In December 2024, the FDA announced the adoption of the final rule governing approval of a nonprescription therapeutic with an Additional Condition for Nonprescription Use, or ACNU. This rule aims to expand options for consumer access to appropriate, safe, and effective pharmaceuticals that may contribute to improved public health. Governed by the same divisions within FDA (i.e. Office of Nonprescription Drugs or OND) this particular pathway allows for nonprescription products requiring greater assistance in use controls and appropriate self-selection criteria. Often, this development pathway includes an assistive technology component that aids the consumer in selection or deselection according to the Drug Facts Label and FDA criteria. A pharmaceutical candidate must undergo much of the same development pathway as the traditional Rx-to-OTC switch pathway while demonstrating specific outcomes related to the assistive technology or additional condition for use.
Regulation of Patient Information
Our SaMD component will relate to the processing of information regarding patient health information and is therefore subject to substantial regulation. In addition, the confidentiality of patient-specific information and the circumstances under which such patient-specific records may be released for inclusion in our databases or used in other aspects of our business is heavily regulated. Federal, state and foreign governments are contemplating or have proposed or adopted additional legislation governing the possession, use and dissemination of personal data, such as personal health information and personal financial data, as well as security breach notification rules for loss or theft of such data. Additional legislation or regulation of this type might, among other things, require us to implement additional security measures and processes or bring within the legislation or regulation de-identified health or other data, each of which may require substantial expenditures or limit our ability to offer some of our services.
In particular, personal health information is recognized in many countries such as the United States, the European Union, or EU, and several countries in Asia, as a special, sensitive category of personal information, subject to additional mandatory protections. Violations
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of data protection regulations are subject to administrative penalties, civil money penalties and criminal prosecution, including corporate fines and personal liability.
Health Information Privacy Laws
There are numerous U.S. federal and state laws and regulations related to the privacy and security of our technology platform, including health information. In particular, HIPAA establishes privacy and security standards that limit the use and disclosure of personal health information, and require the implementation of administrative, physical, and technical safeguards to ensure the confidentiality, integrity and availability of such information, including health information, in electronic form. We will be a business associate of clients which may be deemed covered entities when we are providing technology services to those clients using our technology platform. We are likely to be also directly regulated by HIPAA and are required to provide satisfactory written assurances to our covered entity partners through written agreements that we will provide our services in accordance with HIPAA. Failure to comply with these contractual agreements could lead to loss of clients, liability to our clients and direct action by HHS, including monetary penalties.
Violations of HIPAA may result in significant civil and criminal penalties. Under the breach notification rule, covered entities must notify affected individuals without unreasonable delay in the case of a breach of unsecured personal health information, which may compromise the privacy, security or integrity of such information. In addition, notification must be provided to HHS and the local media in cases where a breach affects more than 500 individuals. Breaches affecting fewer than 500 individuals must be reported to HHS on an annual basis. HIPAA also requires a business associate to notify its covered entity clients of breaches by the business associate.
State attorneys general also have the right to prosecute HIPAA violations committed against residents of their states. While HIPAA does not create a private right of action that would allow individuals to sue in civil court for a HIPAA violation, its standards have been used as the basis for the duty of care in state civil suits, such as those for negligence or recklessness in misusing personal information. In addition, HIPAA mandates that HHS conduct periodic compliance audits of HIPAA covered entities and their business associates for compliance. It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the Civil Monetary Penalty fine paid by the violator. In light of the HIPAA Omnibus Final Rule, recent enforcement activity, and statements from HHS, we expect increased federal and state HIPAA privacy and security enforcement efforts in the future.
Many states in which we may operate and in which our partners are located also have laws or are in the process of adopting laws that protect the privacy and security of sensitive and personal information, including health information. These laws may be similar to or even more protective or broader than HIPAA and other federal privacy laws. Where state laws are more protective or broader than HIPAA, we must comply with the state laws we are subject to, in addition to HIPAA. In certain cases, it may be necessary to modify our planned operations and procedures to comply with these more stringent state laws. Not only may some of these state laws impose fines and penalties upon violators, but, unlike HIPAA, some may afford private rights of action to individuals who believe their personal information has been misused. In addition, state laws are changing rapidly, and there may be new federal privacy laws or federal breach notification laws, to which we may be subject.
Intellectual Property
We have historically relied on a combination of intellectual property, including patent, trademark, trade dress, copyright, trade secret and domain name protection laws, as well as confidentiality and license agreements, to protect its intellectual property and proprietary rights. In connection with the development of our platform, we have completed a competitive patent audit and are currently preparing an initial submission for a patent application for the platform.
Seasonality
Our business is generally not seasonal. However, we may experience moderate development or milestone fluctuations, at certain periods of the year leading to common terms for vacations, holidays, and inclement weather, such as July/August, November, and December.
Environmental Matters
We have no material expenditures for compliance with Federal, State or local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment.
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Properties
Our principal executive offices are located in New York, New York. The Company currently does not own any real property.
We believe that our current facilities are suitable and adequate to meet our current needs. We believe that suitable additional space or substitute space will be available in the future to accommodate our operations as needed.
Available Information
Information about Petros, including its reports filed with or furnished to the SEC, is available through our website at www.petrospharma.com. Such reports are accessible at no charge through our website and are made available as soon as reasonably practicable after such material is filed with or furnished to the SEC. The SEC also maintains a website that contains reports, proxy statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.
We have included our website addresses throughout this report as textual references only. The information contained on the websites referenced herein is not incorporated into this Form 10-K.
ITEM 1A.RISK FACTORS
In addition to the other information in this Form 10-K, stockholders or prospective investors should carefully consider the following risk factors when evaluating Petros. If any of the events described below occurs, our business, financial condition, results of operations and future growth prospects could be adversely affected.
Risks Related to Petros’ Capital Requirements and Financing
Our consolidated financial statements have been prepared on a going concern basis; we must raise additional capital to fund our operations in order to continue as a going concern.
In its report dated April 15, 2026, HTL International, LLC, our independent registered public accounting firm, expressed substantial doubt about our ability to continue as a going concern as we have suffered recurring losses from operations and have insufficient liquidity to fund our future operations. If we are unable to improve our liquidity position, we may not be able to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern and, therefore, be required to realize our assets and discharge our liabilities other than in the normal course of business which could cause investors to suffer the loss of all or a substantial portion of their investment. As of December 31, 2025, we had approximately $5.1 million of cash and cash equivalents on hand. In order to have sufficient cash to fund our operations in the future, we will need to raise additional equity or debt capital and cannot provide any assurance that we will be successful in doing so. If we are unable to raise sufficient capital to fund our operations, we may need to delay, reduce or eliminate certain research and development programs or other operations, sell some or all of our assets or merge with another entity.
Petros has incurred significant losses and may continue to experience losses in the future.
As of December 31, 2025, the Company had cash and cash equivalents of $5.1 million, working capital of $2.9 million, and accumulated deficit of $111.3 million. Petros cannot predict if it will achieve profitability soon or at all. Petros expects to continue to expend substantial financial and other resources on, among other things:
| ● | investments in hiring key personnel; |
| ● | successful development and commercialization of our platform; and |
| ● | general administration, including legal, accounting and other expenses. |
Petros may not generate sufficient revenue to offset such costs to achieve or sustain profitability in the future. Petros expects to continue to invest in its operations and product and business development to obtain a market position and to meet its expanded reporting and compliance obligations as a public company.
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Petros expects its operating losses to continue in the near term in order to carry out its strategic objectives. Petros considers historical operating results, capital resources and financial position, and current projections and estimates as part of its plan to fund operations over a reasonable period of time. Petros believes that based on these factors, the available cash and cash equivalents on hand is not sufficient to fund its operations for at least the next 12 months.
We expect to require additional capital in the future in order to develop our products, fund operations, and otherwise implement our business strategy. If we do not obtain any such additional financing, it may be difficult to effectively realize our long-term strategic goals and objectives.
We will require additional financing to further develop and market our products, fund operations, and otherwise implement our business strategy. Our current cash resources will not be sufficient to fund these activities. We are exploring additional ways to raise capital, but we cannot assure you that we will be able to raise capital. The timing and probability of obtaining sufficient capital depends, in part, on the development and commercialization of our platform. Should Petros not be successful with its business strategy, it could have a material adverse impact on our operations and consolidated financial statements. Our failure to raise capital as and when needed would have a material adverse impact on our financial condition, our ability to meet our obligations, and our ability to pursue our business strategy and may require us to delay, reduce or eliminate certain research and development programs or other operations, sell some or all of our assets or merge with another entity.
Any additional capital raised through the sale of equity or equity-backed securities may dilute our stockholders’ ownership percentages and could also result in a decrease in the market value of our equity securities.
The terms of any securities issued by us in future capital transactions may be more favorable to new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities, which may have a further dilutive effect on the holders of any of our securities then outstanding.
In addition, we may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition.
Risks Related to Petros’ Business, Industry and Operations
Our focus on the development of our platform may adversely impact our operations and financial performance.
We have historically been engaged in the commercialization and development of Stendra®. Beginning in March 2025, the Company is no longer engaged in the commercialization, development or sales of Stendra®. We are separately working towards the development and commercialization of our platform. This may result in reduced overall revenue, particularly as we move away from established wholesalers and reallocate resources to the development of our platform. Additionally, the development and commercialization of our platform may present challenges, including unforeseen development delays, difficulties in market acceptance or increased competition. If we are unable to successfully execute our strategy, it could materially and adversely affect our financial condition, results of operations and long-term growth prospects.
We are in the early development stage with no revenues from our platform and have no operating history in the broad commercialization of platforms for consumer use.
We are in the early development stage of our platform and face all of the risks and uncertainties associated with a new and unproven business. Our future is based on an unproven business plan with no historical facts to support projections and assumptions. We do not expect to generate significant revenue until we have successfully launched broad commercialization of our platform.
There can be no assurance that we will ever achieve revenues or profitability from our platform. Our operations are subject to all of the risks inherent in the establishment of a new business enterprise. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered in connection with the formation of a pre-revenue business.
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We defaulted on certain covenants included in the Promissory Note with Vivus that has resulted in the Obligations becoming immediately due and payable on the date of the Foreclosure Notice and the forfeiture of assets pledged as collateral under the Promissory Note.
On January 18, 2022, Petros (through its wholly-owned subsidiary) and Vivus entered into a Settlement Agreement (the “Vivus Settlement Agreement”) related to the minimum purchase requirements under the Vivus Supply Agreement in 2018, 2019 and 2020 and certain reimbursement rights asserted by a third-party retailer in connection with quantities of the Company’s Stendra® product that were delivered to the third-party retailer and later returned. In connection with the Vivus Settlement Agreement, Petros executed the Promissory 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 Promissory Note. In addition to the payments to be made in accordance with the Promissory Note, the Company further agreed in the Vivus Settlement Agreement to (i) grant to Vivus a right of first refusal to provide certain types of debt and convertible equity (but not preferred equity) financing issued by or to Metuchen (including any subsidiaries and intermediaries) until the Promissory Note is paid in full, and (ii) undertake to make certain regulatory submissions to effectuate Vivus’ ability to exercise its rights under the License Agreement. Borrowings under the Promissory Note and Security Agreement are secured by the Company’s Stendra® API and products and the Company’s rights under the License Agreement (the “Collateral”).
On October 1, 2024, we failed to make the payment due pursuant to the Promissory Note and related Security Agreement in the amount of $0.5 million, constituting an Event of Default (as defined in the Promissory Note) under the Promissory Note and Security Agreement. The outstanding principal amount on the Promissory Note, plus accrued and unpaid interest thereon, was $7,574,824 as of December 31, 2024. As a result of an event of default under the Settlement Agreement and the Security Agreement existing and continuing by virtue of our failure to pay the Installment (as defined in the Promissory Note) that was due October 1, 2024 (the “Vivus Event of Default”), all the obligations under the Settlement Agreement and the Security Agreement (the “Obligations”) became immediately due and payable on the date of the Foreclosure Notice (as defined below).
On December 10, 2024, pursuant to a Notice of Proposal to Accept Pledged Collateral in Partial Satisfaction of Indebtedness Pursuant to Uniform Commercial Code Section 9-620 (the “Foreclosure Notice”), Vivus proposed to accept all the Collateral (save and except the Specified License Agreement (as defined in the Security Agreement); collectively, the “Foreclosed Collateral”) in partial satisfaction of the Obligations. Vivus further proposed in the Foreclosure Notice that its acceptance of the Foreclosed Collateral would only constitute satisfaction of $2,000,000 worth of the Obligations and would not include any other amounts outstanding under the Promissory Note, the Settlement Agreement, or the Security Agreement, including but not limited to (i) all interest accrued or at any time accruing thereon and (ii) all other sums recoverable by Vivus from Metuchen by virtue of the Obligations (the “Vivus Settlement”). On December 13, 2024, Metuchen accepted and agreed to the Foreclosure Notice.
In connection with the Foreclosure Notice, Metuchen and Vivus entered into that certain termination agreement, dated as of March 31, 2025, pursuant to which, the parties mutually agreed to terminate the Vivus License Agreement, effective as of March 31, 2025 (the “Vivus Termination Agreement”), subject to the survival of certain provisions as set forth therein. As a result of the Vivus Termination Agreement, Metuchen no longer has any right in or to Vivus Technology (as defined in the Vivus License Agreement in the United States of America and its territories and possessions, including Puerto Rico and U.S. military bases abroad, Canada, South America and India (the “Licensed Territory”) and Metuchen agreed to immediately cease the development, manufacturing and commercialization of Stendra® in the Licensed Territory. Metuchen further agreed to assign any trademarks incorporating the mark “Stendra®” to Vivus, subject to certain exceptions as set forth therein. In furtherance of the Foreclosure Notice, and pursuant to the Termination Agreement, Metuchen agreed to transfer all completed inventory of Stendra® and all substantially manufactured inventory of Stendra® on hand to Vivus at Metuchen’s sole expense within 30 days of the date of the Vivus Termination Agreement. In order to satisfy the Obligations, on March 31, 2025, the Board determined and approved that it is advisable and in the best interests of the Company and the Company’s stockholders to effect assignment of all of the business, assets, properties, contractual rights, goodwill, going concern value, rights and claims of Metuchen, including Metuchen’s wholly-owned subsidiaries, Timm Medical Technologies, Inc. and Pos-T-Vac, LLC (the “Metuchen Assets”) for the benefit of Metuchen’s creditors. As a result of the Vivus Event of Default, we may be forced to seek additional financing on unfavorable terms, restructure our operations, or pursue other alternatives, including bankruptcy.
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The Vivus Event of Default constitutes a Triggering Event (as defined in the Certificate of Designations) pursuant to the terms of the Certificate of Designations, which may materially and adversely affect our liquidity, financial condition and results of operations.
The Vivus Event of Default under the Settlement Agreement and the Security Agreement existing and continuing by virtue of our failure to pay the Installment (as defined in the Promissory Note) that was due October 1, 2024, constitutes a Triggering Event pursuant to the terms of the Certificate of Designations of the Company’s Series A Preferred Stock. As a result, the dividend rate of the Company’s Series A Preferred Stock was automatically increased to 15% per annum beginning on October 1, 2024. This default interest rate will increase our financial obligations and could materially and adversely affect our liquidity, financial condition and results of operations. In addition, given the occurrence of a Triggering Event, the holders of Series A Preferred Stock are entitled to require the Company to redeem all or any of the shares of Series A Preferred Stock held by such Holders at a price equal to the greater of (i) the product of (A) the conversion amount to be redeemed multiplied by (B) 150% and (ii) the product of (X) the conversion rate with respect to the conversion amount in effect at such time as such Holder delivers a triggering event redemption notice multiplied by (Y) the product of (1) 150% multiplied by (2) the greatest closing sale price of the Common Stock on any trading day during the period commencing on the date immediately preceding the Triggering Event and ending on the date the Company makes the entire payment required to be made. The increased costs associated with the increased default interest rate and any triggering event redemption may limit our ability to secure additional financing, which could exacerbate our financial challenges and hinder our long-term growth prospects.
Any difficulties or delays in product engineering, regulatory compliance, sales or marketing could affect Petros’ future results.
Petros’ ability to achieve its business objectives is directly dependent on its ability to get its products to market, and any delays or difficulties in engineering, regulatory compliance, sales or marketing could have an adverse impact, including but not limited to the following types of events:
| ● | failure to predict market demand for, or to gain market acceptance of, approved products; |
| ● | failure to comply with applicable regulatory requirements, which could result in costly and disruptive enforcement actions, or otherwise require costly and disruptive corrective actions; |
| ● | delays, unavailability, or undetected defects with respect to our technology; |
| ● | failure to establish and maintain market demand and acceptance for Petros’ products through marketing and sales activities, and any other arrangements to promote these products; |
| ● | failure to establish and maintain agreements with wholesalers, distributors, and group purchasing organizations on commercially reasonable terms; |
| ● | failure to effectively compete with other products on the market; and |
| ● | failure to maintain a continued acceptable product safety and efficacy profile. |
Our technology may be viewed as relatively new or untested, which could result in regulatory delays or disruptions in the pathway to commercialization.
One of the most critical factors is alignment with the FDA regarding the SaMD model, SaaS platform, and the underlying technology, including emerging elements like AI, each of which may significantly impact the future of the Petros’ commercial model. Lack of clarity or delays in FDA approval of these technologies could have a significant impact on our ability to scale and execute our business model. Additionally, each licensee using our proprietary technology would need to secure individual FDA approval for their specific product within the SaMD and SaaS framework. Each asset leveraging our platform is subject to its own individual FDA approval process for commercialization which presents additional complexity and risks. While our strategy involves licensing our technology to multiple partners, which aims to build a proven track record and strengthen relationships with the FDA, this nevertheless introduces an independent variable and potential vulnerability.
Until Petros has successfully guided several products through the Rx-to-OTC approval process, its technology may be viewed as relatively new or untested, which could result in regulatory delays or disruptions in the pathway to commercialization. As products are
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licensed and approved using our platform, we believe that Petros will build greater credibility and confidence with the FDA, helping to mitigate these risks. However, in the early stages, the nascent nature of the technology could contribute to slower adoption, delays and disruptions.
If we fail to successfully initiate broad commercialization of, market and sell our platform cost-effectively, our sales, business, financial condition and results of operations will be negatively affected.
Our commercial success will depend on the future adoption of the platform. If we are unable to successfully drive interest in our platform, our business, financial condition and results of operations would be harmed.
We cannot predict how quickly, if at all, pharmaceutical companies and patients will adopt our platform. Our ability to make sales of our platform and drive market acceptance will depend on successfully educating pharmaceutical companies and patients of the relative benefits of our platform. If we are unable to successfully drive interest in our platform, our business, financial condition and results of operations would be harmed.
Following broad commercialization of our platform, Petros will be substantially dependent on a limited number of commercial products. Any difficulties or delays in regulatory compliance, sales or marketing could affect Petros’ future results.
Petros is working towards the development and licensing of its platform. The Company anticipates that its primary revenue streams from its platform will stem primarily from licensing fees.
Petros’ ability to achieve its business objectives is directly dependent on its ability to get its platform to market, and any delays or difficulties in manufacturing, regulatory compliance, sales or marketing could have an adverse impact, including but not limited to the following types of events:
| ● | failure to predict market demand for, or to gain market acceptance of, our platform; |
| ● | failure to comply with applicable regulatory requirements, which could result in costly and disruptive enforcement actions, or otherwise require costly and disruptive corrective actions; |
| ● | failure to establish and maintain market demand and acceptance for our platform through marketing and sales activities, and any other arrangements to promote these products; |
| ● | failure to establish and maintain agreements with licensees on commercially reasonable terms; |
| ● | failure to effectively compete with other products on the market; and |
| ● | failure to maintain a continued acceptable product safety and efficacy profile. |
Petros has concluded that there are material weaknesses in its internal control over financial reporting, which, if not remediated, could materially adversely affect its ability to timely and accurately report its results of operations and financial condition. The accuracy of Petros’ financial reporting depends on the effectiveness of its internal controls over financial reporting.
Internal controls over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of consolidated financial statements and may not prevent or detect misstatements. Failure to maintain effective internal controls over financial reporting, or lapses in disclosure controls and procedures, could undermine the ability to provide accurate disclosure (including with respect to financial information) on a timely basis, which could cause investors to lose confidence in Petros’ disclosures (including with respect to financial information), require significant resources to remediate the lapse or deficiency, and expose it to legal or regulatory proceedings.
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In connection with the audit of its December 31, 2025, consolidated financial statements, Petros’ management identified the following deficiencies, which it considers to be “material weaknesses,” which, individually or in the aggregate, could reasonably result in a material misstatement in the Company’s financial statements:
| ● | Petros currently has an insufficient level of monitoring and oversight controls and does not enforce the implementation of key controls reflected on its internal control process matrices. This restricts the Company’s ability to gather, analyze and report information relative to the consolidated financial statements in a timely manner, including timely and adequate review of schedules and analysis used in the financial close process and the documentation and review of the selection and application of generally accepted accounting principles to significant non-routine transactions. The Company should evaluate their significant processes to ensure the key controls are being carried out as designed; |
| ● | The size of Petros’ accounting and IT department makes it impracticable to achieve an appropriate segregation of duties; |
| ● | Petros does not have appropriate IT access related controls specifically: |
| ● | There is no limit to the number of password attempts allowed before an account becomes locked out. |
| ● | There is no maximum length of days a password can be in use. |
The Company should implement mitigating controls that would prevent or detect (in a timely manner) unauthorized transactions that might result.
Petros’ remediation efforts are ongoing and it will continue its initiatives to implement and document policies, procedures, and internal controls. The remediation efforts included the implementation of additional controls to ensure all risks have been addressed. Management further emphasized compliance with existing internal controls. Remediation of the identified material weaknesses and strengthening the internal control environment will require a substantial effort, as necessary, and Petros will test the ongoing operating effectiveness of the new and existing controls in future periods. The material weaknesses cannot be considered completely remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Petros cannot guarantee that it will be successful in remediating the material weaknesses it identified or that its internal control over financial reporting, as modified, will enable it to identify or avoid material weaknesses in the future.
Petros cannot guarantee that its management will be successful in identifying and retaining appropriate personnel; that newly engaged staff or outside consultants will be successful in identifying material weaknesses in the future; or that appropriate personnel will be identified and retained prior to these deficiencies resulting in material and adverse effects on Petros’ business.
Public health crises could adversely affect our business, financial condition and results of operations.
Our business could be adversely impacted by the effects of future pandemics, epidemics or infectious disease outbreaks. The COVID-19 pandemic had negative effects on the health of the U.S. economy, and other public health crises could have similar effects in the future.
The emergence of another pandemic, epidemic or infectious disease outbreak, and any required or voluntary actions to help limit the spread of illness, could impact our ability to carry out our business and may materially adversely impact global economic conditions, our business, financial condition and results of operations. The extent to which a future pandemic, an epidemic or an infectious disease outbreak impacts our business will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope and the actions taken to contain or treat such pandemic, epidemic or outbreak.
Our products and information technology systems are critical to our business. Issues with product development or enhancements, IT system integration, implementation, updates and upgrades could disrupt our operations and have a material impact on our business and operating results.
We rely on the efficient, uninterrupted and secure operation of our IT systems and are dependent on key third-party software embedded in our products and IT systems as well as third-party hosted IT systems to support our operations. All software and IT systems are vulnerable to damage, cyber attacks or interruption from a variety of sources. To effectively manage and improve our operations, our IT systems and applications require an ongoing commitment of significant expenditures and resources to maintain, protect, upgrade,
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enhance and restore existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving industry and regulatory standards, increasingly sophisticated cyber threats, and changing consumer preferences. Failure to adequately protect and maintain the integrity of our products and IT systems may result in a material effect on our financial position, results of operations and cash flows.
We plan to continuously upgrade and issue new releases of our products and customer-facing software applications, upon which our operations will depend. Software applications and products containing software frequently contain errors or defects, especially when first introduced or when new versions are released. Additionally, the third-party software integrated into or interoperable with our products and services will routinely reach end of life, and as a consequence, may be exposed to additional vulnerabilities, including increased security risks, errors and malfunctions that may be irreparable or difficult to repair. The discovery of a defect, error or security vulnerability in our products, software applications or IT systems, incompatibility with future customers’ operating systems and with a new release or upgraded version or the failure of our products or primary IT systems may cause adverse consequences, including: delay or loss of revenues, significant remediation costs, delay in market acceptance, loss of data, disclosure of financial, health or other personal information of any customers or patients, product recalls, damage to our reputation, or increased service costs, any of which could have a material effect on our business, financial condition or results of our operations and the operations of our potential customers or our business partners.
Cyberattacks and other data security breaches could compromise our proprietary and confidential information, which could harm our business and reputation or cause us to incur increased expenses to address any such breaches.
In the ordinary course of our business, Petros generates, collects and stores proprietary information, including intellectual property and business information. The secure storage, maintenance, and transmission of and access to this information is important to our operations and reputation. If a cyber incident, such as a phishing or ransomware attack, business email compromise attack, virus, malware installation, server malfunction, software or hardware failure, impairment of data integrity, loss of data or other computer assets, adware or other similar issue, impairs, shuts down, or penetrates our computer systems, our proprietary and confidential information, including e-mails and other electronic communications, may be misappropriated. In addition, an employee, contractor, or other third party with whom we do business may attempt to obtain such information and may purposefully or inadvertently cause a breach involving such information. As a result, our information technology networks and infrastructure may be vulnerable to unpermitted access by hackers or other breaches, or employee error or malfeasance, and our business, financial condition, and results of operations could be materially and adversely affected.
We rely on third parties to perform services necessary for the operation of our business, and they may fail to adequately secure our proprietary and confidential information. We have in the past been subject to low-threat cyber, phishing, social engineering and business email compromise attacks, none of which individually or in the aggregate has led to costs or consequences that have materially impacted our business, results of operations or financial condition, however, we and our third-party vendors may be subject to such attacks and other cybersecurity incidents in the future. If we or our third-party vendors were to suffer an attack or breach in the future, for example, that resulted in the unauthorized access to or use or disclosure of proprietary and confidential information, we may be required to notify government authorities, be subject to investigations, civil penalties, administrative and enforcement actions, and litigation, any of which could harm our business, financial results and reputation.
Attacks upon information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise. Because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. Even if identified, we may be unable to adequately investigate or remediate incidents or breaches due to attackers increasingly using tools and techniques that are designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence.
Any such compromise of our data security and access to, or public disclosure or loss of, confidential business or proprietary information could disrupt our operations, damage our reputation, provide our competitors with valuable information and subject us to additional costs, which could adversely affect our business. We may also incur significant remediation costs, including liability for stolen customer or employee information, repairing system damage or providing benefits to affected customers or employees.
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Risks Related to Petros’ Personnel
Because Petros is a small company with limited resources, it may be unable to attract qualified personnel.
Because of the specialized nature of its business, Petros’ ability to develop products and to compete with its current and future competitors largely depends upon its ability to attract, retain and motivate highly qualified managerial, marketing, engineering, consulting and scientific personnel. Petros faces intense competition for qualified employees and consultants from biopharmaceutical companies, research organizations and academic institutions. Attracting, retaining or replacing these personnel on acceptable terms may be difficult and time-consuming given the high demand in its industry for similar personnel. There is intense competition for qualified personnel in this business sector, and we cannot assure you that Petros will be able to attract the qualified personnel necessary for the development of its business.
Petros will need to expand its operations and increase its size, and it may experience difficulties in managing growth.
As Petros begins to sell its platform service, it may need to increase personnel headcounts with respect to sales, marketing, product development, engineering, scientific, or administrative departments. The management, personnel and systems currently in place may not be adequate to support this future growth. The need to effectively manage its operations, growth and various projects requires that it:
| ● | successfully attract and recruit new employees with the required expertise and experience; |
| ● | successfully grow marketing, distribution and sales infrastructure; and |
| ● | continue to improve operational, financial and management controls, reporting systems and procedures. |
If Petros is unable to manage this growth and increased complexity of operations, its business may be adversely affected.
Petros may be adversely affected by any misconduct or improper activities on the part of its individual employees or consultants.
Petros is exposed to the risk that any of its employees and consultants may engage in fraudulent conduct or other illegal activity. Although Petros has adopted a code of conduct applicable to all of its employees, it is not always possible to identify and deter misconduct by employees and other third parties, and the precautions it takes to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting it from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. Misconduct by these parties could include intentional, reckless and/or negligent conduct or other unauthorized activities that violate the regulations of the FDA and other regulatory authorities, including those laws requiring the reporting of true, complete and accurate information to such authorities; healthcare fraud and abuse laws and regulations in the United States and abroad; or laws that require the reporting of financial information or data accurately. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.
Additionally, Petros is subject to the risk that a person could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against Petros, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on its business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of Petros’ operations, any of which could adversely affect its ability to operate its business and results of operations.
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Risks Related to Government Regulation and Legal Proceedings for Petros
Rx-to-OTC switches are part of our future growth, and may be affected by regulatory developments governing Rx-to-OTC switches.
Regulatory agencies highly scrutinize any product application submitted to switch a product from physician prescribed Rx to OTC and the process of switching a prescription medication to OTC is highly regulated. The process required by the FDA first involves the design of a Drug Facts Label (“DFL”) that is well understood by potential consumers of the product. Then, data must show that consumers can make an appropriate informed decision to use or not to use the product based solely upon the information on the DFL applied with their personal medical history. Then consumers must demonstrate that they can properly use the product based upon the information on the DFL. To accomplish this, the FDA ordinarily requires a consumer tested OTC DFL. Such testing includes conduct of iterative Label Comprehension Studies (“LCS”) in the general population, Self-Selection Studies (“SSS”) in a population interested in using the product and in specific populations who may be harmed if they use the product, and generally one Actual Use Trial (“AUT”) demonstrating safe and appropriate use by consumers in a simulated OTC setting.
Our business strategy relies on a growing number of OTC product categories and products. If regulatory agencies fail to approve Rx-to-OTC switches in new product categories or reassess the terms of existing OTC classifications, our growth prospects may be impaired. Further, regulatory agencies may reassess the terms of OTC classification if they perceive a shift in the previously assessed benefit/risk profile potentially increasing restrictions and barriers for approval, commercialization, and patient-consumer access.
We may not receive the necessary authorizations to market our platform or any future new products, and any failure to timely do so may adversely affect our ability to grow our business.
Before we can sell a new medical device in the U.S., such as our SaMD platform, or market a new use of, new claim for, or significant modification to a legally marketed device, we may be required to first obtain either FDA 510(k) clearance or premarket approval, unless an exemption applies. In the 510(k) clearance process, before a device may be marketed, the applicant must submit a premarket notification to FDA under Section 510(k) of the FD&C Act, and FDA must determine that a proposed device is “substantially equivalent” to a legally-marketed “predicate” device. To be “substantially equivalent,” the proposed device must have the same intended use as the predicate device, and either have the same technological characteristics as the predicate device or have different technological characteristics, not raise different questions of safety or effectiveness than the predicate device, and be as safe and as effective as the predicate device. The 510(k) clearance process can be expensive and uncertain and typically takes from three to 12 months, but may last significantly longer. Clinical data may be required in connection with an application for 510(k) clearance. If a product candidate is not eligible for or successful in obtaining 510(k) clearance, the product candidate may have to undergo de novo review to obtain premarket approval, which is typically significantly more resource and time intensive than the 510(k) clearance process. Furthermore, even if we are granted regulatory clearances or approvals, they may include limitations on the indications for use or intended uses of the device, which may limit the market for the device.
FDA can delay, limit, or deny 510(k) clearance, or other approval or reclassification, of a device for many reasons, including:
| ● | we may be unable to demonstrate to FDA’s satisfaction that the products or modifications are substantially equivalent to a proposed predicate device or safe and effective for their intended uses; |
| ● | we may be unable to demonstrate that the clinical and other benefits of the device outweigh the risks; and |
| ● | the applicable regulatory authority may identify deficiencies in our submissions or in the facilities or processes of our third party contract manufacturers. |
Any delay or failure to obtain necessary regulatory clearances or approvals could harm our business. For example, if we obtain 510(k) clearance for our SaMD component and later decide to market our SaMD component for a broader or additional indication(s) for use and/or make any material modifications to any element of the device and/or the manufacturing or distribution thereof in the future, an additional 510(k) submission, and FDA clearance thereof, will be required prior to making any promotional communications expressly or impliedly claiming that the device may be used for such indication(s) and/or prior to making such modification, respectively.
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In addition, FDA may change its policies, adopt additional regulations, revise existing regulations, or take other actions, or Congress may enact different or additional statutory requirements, which may prevent or delay clearance of our future products under development. Such policy, statutory, or regulatory changes could impose additional requirements upon us that could delay our ability to obtain new 510(k) clearances or premarket approvals, increase the costs of compliance, or restrict our ability to maintain our current marketing authorizations, if any.
Failure to comply with these rules, regulations, self-regulatory codes, circulars, and orders could result in significant civil and criminal penalties and costs and could have a material adverse impact on our business. Also, these regulations may be interpreted or applied by a prosecutorial, regulatory, or judicial authority in a manner that could require us to make changes in our operations or incur substantial defense and settlement expenses. Even unsuccessful challenges by regulatory authorities or private regulators could result in reputational harm and the incurring of substantial costs. In addition, many of these laws are vague or indefinite and have not been interpreted by the courts and have been subject to frequent modification and varied interpretation by prosecutorial and regulatory authorities, increasing compliance risks.
Ongoing changes in healthcare regulation could negatively affect our revenues, business and financial condition
The United States healthcare system has been continually evolving at the federal and state level due to comprehensive reforms relating to the payment for, the availability of and reimbursement for healthcare services. Key reforms have ranged from fundamentally changing federal and state healthcare reimbursement programs, including providing comprehensive healthcare coverage to the public under government-funded programs, to minor modifications to existing programs, and many have been challenged (with some being overturned or modified) along the way. One example, among countless others, is the Patient Protection and Affordable Care Act (the “Affordable Care Act”), which was the most significant federal healthcare reform law enacted in the U.S. in recent history. The Affordable Care Act has undergone substantial challenges and changes since its enactment in 2010, and numerous other federal healthcare reform legislation, executive orders, and judicial rulings have been implemented in the years since, most of which have been or are aimed at lowering healthcare costs in the U.S. To the extent any such reform measures or any future initiatives reduce reimbursement or coverage eligibility or any amounts or funds available (such as by reductions in reimbursement to our healthcare provider customers) for our platform and/or any future products we may market in the U.S. (if any), our business may be adversely affected.
Healthcare reform initiatives will continue to be proposed and may reduce healthcare related funding. It is impossible to predict the ultimate content and timing of any healthcare reform legislation and its resulting impact on us. If significant reforms are made to the healthcare system in the United States, or in other jurisdictions, those reforms may increase our costs or otherwise negatively effect on our business, results of operations, and financial condition.
On April 5, 2017, the European Parliament passed the Medical Devices Regulation (Regulation 2017/745), which repeals and replaces the EU Medical Device Directive and became effective on May 26, 2021. The Medical Devices Regulation, among other things, is intended to establish a uniform, transparent, predictable, and sustainable regulatory framework across the EEA for medical devices and ensure a high level of safety and health while supporting innovation. The new regulations, among other things:
| ● | strengthen the rules on placing devices on the market and reinforce surveillance once they are available; |
| ● | establish explicit provisions on manufacturers’ responsibilities for the follow-up of the quality, performance and safety of devices placed on the market; |
| ● | improve the traceability of medical devices throughout the supply chain to the end-user or patient through a unique identification number; |
| ● | set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the European Union; and |
| ● | strengthen rules for the assessment of certain high-risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market. |
These modifications may have an effect on the way we conduct our business in the EEA.
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Any change in the laws or regulations that govern the clearance and approval processes relating to our current, planned and future products could make it more difficult and costly to obtain clearance or approval for new products or to produce, market and distribute existing products. Significant delays in receiving clearance or approval or the failure to receive clearance or approval for our new products would have an adverse effect on our ability to expand our business.
Our products may cause or contribute to adverse medical events that we are required to report to FDA and other governmental authorities, and if we fail to do so, we would be subject to sanctions that could harm our reputation, business, results of operations, and financial condition. The discovery of serious safety issues with our products, or a recall of our products either voluntarily or at the direction of FDA or another governmental authority, could have a negative impact on us.
We are required to timely file various reports with FDA, including reports required by the medical device reporting regulations which require us to report to FDA when we receive or become aware of information that reasonably suggests that one of our products may have caused or contributed to a death or serious injury or malfunctioned in a way that, if the malfunction were to recur in the device or a similar device that we market, could cause or contribute to a death or serious injury. If we fail to comply with our reporting obligations, FDA or other governmental authorities could take action, including warning letters, untitled letters, administrative actions, criminal prosecution, imposition of civil monetary penalties, revocation of our device clearance, seizure of our products, or delay in clearance of future products. FDA and certain foreign regulatory bodies have the authority to require the recall of commercialized products under certain circumstances.
A government-mandated or voluntary recall by us could occur as a result of an unacceptable risk to health, component failures, malfunctions, labeling or design deficiencies, packaging defects, or other deficiencies, or failures to comply with applicable regulations. If we do not adequately address problems associated with our devices, we may face additional regulatory requirements or enforcement action, including required new marketing authorizations, FDA warning letters, product seizure, injunctions, administrative penalties, or civil or criminal proceedings.
We may initiate voluntary withdrawals, removals, or corrections for our products in the future that we determine do not require notification of FDA because no material compliance issue or safety risk is involved. If FDA disagrees with our determinations, it could require us to report those actions and we may be subject to enforcement action. A future recall announcement or other corrective action could harm our financial results and reputation, potentially lead to product liability claims against us, require the dedication of our time and capital, and negatively affect our sales.
In addition, FDA’s and other regulatory authorities’ policies may change, and additional government regulations may be enacted that could prevent, limit, or delay regulatory approval of our future products. For example, in November 2018, FDA announced that it plans to develop proposals to drive manufacturers utilizing the 510(k) pathway toward the use of newer predicates. It is unclear the extent to which any proposals, if adopted, could impose additional regulatory requirements on us that could delay our ability to obtain new 510(k) clearances, increase the costs of compliance, or restrict our ability to maintain our current clearances.
We also cannot predict the likelihood, nature, or extent of government regulation that may arise from future legislation or administrative or executive action, either in the U.S. or abroad. For example, the Trump Administration previously enacted several executive actions that could impose significant burdens on, or otherwise materially delay, FDA’s ability to engage in routine regulatory and oversight activities. It is difficult to predict how these executive actions and executive actions that may be taken under the current Trump Administration may affect FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.
Changes in internet regulations could adversely affect our business.
Laws, rules, and regulations governing internet communications, advertising, and e-commerce are dynamic, and the extent of future government regulation is uncertain. Federal and state regulations govern various aspects of our online business, including intellectual property ownership and infringement, trade secrets, the distribution of electronic communications, marketing and advertising, user privacy and data security, search engines, and internet tracking technologies. Future taxation on the use of the internet or e-commerce transactions could also be imposed. Existing or future regulation or taxation could increase our operating expenses and expose us to significant liabilities.
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Disruptions at the FDA, other agencies or notified bodies caused by funding shortages or global health concerns could hinder their ability to hire, retain, or deploy key leadership and other personnel, or otherwise prevent new or modified products from being developed, cleared or approved, or commercialized in a timely manner, or at all, which could negatively impact our business.
The ability of the FDA, other agencies and notified bodies to review and authorize or certify for marketing new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, agency’s or notified body’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the agency’s or notified body’s ability to perform routine functions. Average review times at the FDA and other agencies and notified bodies have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA, other agencies and notified bodies may also slow the time necessary for new medical devices or modifications to be reviewed and/or cleared, approved or certified by necessary agencies or notified bodies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, or if global health concerns, including pandemics, were to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.
The 2025 change of United States presidential administration has the potential to bring significant leadership and policy changes in regulatory agencies, including the FDA, which may contribute to the time and resources needed to maintain compliance and ultimately could adversely affect our business.
In the EU, notified bodies must be officially designated to certify products and services in accordance with the MDR, which regulates the development and sale of medical devices in Europe. While several notified bodies have been designated, the COVID-19 pandemic significantly slowed down their designation process and the current designated notified bodies are facing a large amount of requests with the new regulation, as a consequence of which review times have lengthened although a regulation amending the EU MDR was adopted in March 2023, extending existing transitional provisions to December 31, 2028. This situation could significantly impact the ability of notified bodies to timely review and process our regulatory submissions, which could have a material adverse effect on our business in the EU and EEA (which consists of the 27 EU member states plus Norway, Liechtenstein and Iceland).
The misuse or off-label use of our platform may harm our reputation in the marketplace, result in injuries that lead to product liability suits or result in costly investigations, fines or sanctions by regulatory bodies, particularly if we are deemed to have engaged in the promotion of these uses, any of which could be costly to our business.
If FDA determines that we have promoted any product without the requisite clearance or approval and/or for an off-label or unapproved use, it could take any number of enforcement actions against us, including (among others), issuing untitled or warning letters and/or pursuing an injunction, seizure, civil fine and/or criminal penalties. It is also possible that other federal, state or foreign enforcement authorities might take action under other regulatory authority, such as laws prohibiting false claims for reimbursement, any of which would have a material adverse effect on our financial condition and/or business as a whole.
Additionally, we must have competent and reliable scientific evidence or, where applicable, other adequate substantiation for each reasonable interpretation of every promotional claim we make. In particular, comparative or superiority claims generally require adequate, well controlled, head-to-head clinical studies, comparing the product to the applicable competing products. To the extent we make any claims, or are otherwise held responsible for third-party claims about any product we may market in the United States, without the requisite clinical substantiation, we could be subject to enforcement action by FDA and/or the Federal Trade Commission (FTC), as well as a competitor challenge via the National Advertising Division (NAD) of the Better Business Bureau. Further, consumers can bring private false-advertising lawsuits, including class actions, against us for any material misrepresentations and/or deceptive or unsubstantiated claims (among other similar causes of action) in our promotional materials or other advertising. Any of the foregoing could have a material adverse effect on our business.
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We may be subject to certain federal, state, and foreign fraud and abuse laws, health information privacy and security laws, and transparency laws, which, if violated, could subject us to substantial penalties. Additionally, any challenge to or investigation into our practices under these laws could cause adverse publicity and be costly to respond to, and thus could harm our business.
There are numerous U.S. federal and state, as well as foreign, laws pertaining to healthcare fraud and abuse, including anti-kickback, false claims, and physician transparency laws. Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations may involve substantial costs. Our business practices and relationships with pharmaceutical companies and consumers are subject to scrutiny under these laws. We may also be subject to patient information privacy and security regulation by both the federal government and the states and foreign jurisdictions in which we conduct our business. The healthcare laws and regulations that may affect our ability to operate include:
| ● | the federal healthcare Medicare and Medicaid Patient Protection Act of 1987 (the “Anti-Kickback Statute”), which prohibits, among other things, persons, and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, lease, order, or arrange for or recommend a good or service, for which payment may be made, in whole or in part, under federal healthcare programs, such as Medicare and Medicaid. The term “remuneration” has been broadly interpreted to include anything of value. The government can establish a violation of the Anti-Kickback Statute without proving that a person or entity had actual knowledge of the law or a specific intent to violate. Moreover, the government may assert that a claim including items or services resulting from a violation of the federal healthcare Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal civil False Claims Act. Although there are a number of statutory exceptions and regulatory safe harbors to the federal healthcare Anti-Kickback Statute protecting certain common business arrangements and activities from prosecution or regulatory sanctions, the exceptions and safe harbors are drawn narrowly. Practices that involve remuneration to those who prescribe, purchase, or recommend medical device products, including discounts, or engaging individuals as speakers, consultants, or advisors, may be subject to scrutiny if they do not fit squarely within an exception or safe harbor. Our practices may not in all cases meet all of the criteria for safe harbor protection from anti- kickback liability. Moreover, there are no safe harbors for many common practices, such as reimbursement support programs, educational or research grants, or charitable donations; |
| ● | the federal civil False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or causing to be presented, false or fraudulent claims for payment of federal government funds, and knowingly making, using or causing to be made or used a false record or statement material to a false or fraudulent claim to avoid, decrease or conceal an obligation to pay money to the federal government. Private individuals, commonly known as “whistleblowers,” can bring civil False Claims Act qui tam actions, on behalf of the government and such individuals and may share in amounts paid by the entity to the government in recovery or settlement. False Claims Act liability is potentially significant in the healthcare industry because the statute provides for treble damages and mandatory penalties for each false or fraudulent claim or statement. The government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim under the federal civil False Claims Act. Many pharmaceutical and medical device manufacturers have been investigated and have reached substantial settlements under the federal civil False Claims Act in connection with alleged off-label promotion of their products and allegedly providing free products to customers with the expectation that the customers would bill federal health care programs for the product. In addition, manufacturers can be held liable under the federal civil False Claims Act even when they do not submit claims directly to government payers if they are deemed to “cause” the submission of false or fraudulent claims. There are also criminal penalties, including imprisonment and criminal fines, for making or presenting false, fictitious or fraudulent claims to the federal government; |
| ● | Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program, including private third-party payers, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statements or representations, or making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or entry in connection with the delivery of, or payment for, healthcare benefits, items or services. Similar to the federal healthcare Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation; |
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| ● | the federal Physician Payments Sunshine Act under the Affordable Care Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to the United States Department of Health and Human Services, Centers for Medicare and Medicaid Services, information related to payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, and applicable manufacturers and group purchasing organizations, as well as ownership and investment interests held by physicians and their immediate family members. Since January 2022, applicable manufacturers are also required to report information regarding payments and transfers of value provided to physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, and certified nurse-midwives; |
| ● | HIPAA, as amended by Health Information Technology for Economic and Clinical Health Act (“HITECH”), and their respective implementing regulations, which imposes privacy, security, and breach reporting obligations with respect to Protected Health Information (“PHI”), upon entities subject to the law, such as health plans, healthcare clearinghouses and certain healthcare providers, and their respective business associates that perform services on their behalf that involve PHI. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make HIPAA compliance as well as civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions; and |
| ● | analogous state and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payer, including commercial insurers or patients; state laws that require device companies to comply with the industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential referral sources; state and local laws that require the licensure of sales representatives; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures and pricing information; data privacy and security laws and regulations in foreign jurisdictions that may be more stringent than those in the United States (such as the EU, which adopted the General Data Protection Regulation, which became effective in May 2018); state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts; and state laws related to insurance fraud in the case of claims involving private insurers. |
These laws and regulations, among other things, may constrain our business, marketing, and other promotional activities by limiting the kinds of financial arrangements, including sales programs, we may have with potential purchasers of our products. Due to the breadth of these laws, the narrowness of statutory exceptions and regulatory safe harbors available, and the range of interpretations to which they are subject, it is possible that some of our current or future practices might be challenged under one or more of these laws.
To enforce compliance with healthcare regulatory laws, certain enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. For example, U.S. federal and state regulatory and enforcement agencies continue to actively investigate violations of healthcare laws and regulations, including pursuing novel theories of liability under these laws. These government agencies recently have increased regulatory scrutiny and enforcement activity with respect to manufacturer reimbursement support activities and patient support programs, including bringing criminal charges or civil enforcement actions under the federal healthcare Anti-Kickback statute, federal civil False Claims Act, the health care fraud statute, and HIPAA privacy provisions. Responding to investigations can be time and resource consuming and can divert management’s attention from the business. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. Even an unsuccessful challenge or investigation into our practices could cause adverse publicity, and be costly to respond to.
If our operations are found to be in violation of any of the healthcare laws or regulations described above or any other healthcare regulations that may apply to us, we may be subject to administrative, civil and criminal penalties, damages, fines, disgorgement, substantial monetary penalties, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, imprisonment, additional reporting obligations, and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, reputational harm, and the curtailment or restructuring of our operations.
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Since our platform will utilize cloud-based information systems and the exchange of information between patents and doctors, we will be subject to numerous U.S. federal and state laws and regulations related to the privacy and security of personally identifiable information, including health information.
Among other data-privacy and/or confidentiality laws to which we may be subject, HIPAA establishes privacy and security standards that limit the use and disclosure of PHI and require covered entities and business associates to implement administrative, physical, and technical safeguards to ensure the confidentiality, integrity, and availability of individually identifiable health information in electronic form, among other requirements.
Violations of HIPAA may result in civil and criminal penalties. We must also comply with HIPAA’s breach notification rule which requires notification to affected individuals and the Secretary of Health and Human Services (“HHS”), and in certain cases to media outlets, in the case of a breach of unsecured PHI. The regulations also require business associates of covered entities to notify the covered entity of breaches by the business associate.
State attorneys general also have the right to prosecute HIPAA violations committed against residents of their states, and HIPAA standards have been used as the basis for the duty of care in state civil suits, such as those for negligence or recklessness in misusing personal information. In addition, HIPAA mandates that HHS conduct periodic compliance audits of HIPAA covered entities and their business associates for compliance.
Many states also have laws that protect the privacy and security of sensitive and personal information, including health information. These laws may be similar to or even more protective than HIPAA and other federal privacy laws. For example, the laws of the State of California are more restrictive than HIPAA. Where state laws are more protective than HIPAA, we must comply with the state laws we are subject to, in addition to HIPAA. For example, California passed the California Consumer Privacy Act or CCPA on June 28, 2018, which went into effect January 1, 2020. On November 3, 2020, the California Privacy Rights Act of 2020 (“CPRA”), which amends the CCPA and adds new privacy protections that became effective on January 1, 2023, was enacted through a ballot initiative. While information we maintain that is covered by HIPAA may be exempt from the CCPA, other records and information we maintain related to patients or personnel may be subject to the CCPA. In certain cases, it may be necessary to modify our planned operations and procedures to comply with these more stringent state laws. Not only may some of these state laws impose fines and penalties upon violators, but also some, unlike HIPAA, may afford private rights of action to individuals who believe their personal information has been misused. In addition, state and federal privacy laws subject to frequent change.
In addition to HIPAA and state health information privacy laws, we may be subject to other state and federal privacy laws, including laws that prohibit unfair privacy and security practices and deceptive statements about privacy and security, laws that place specific requirements on certain types of activities, such as data security and texting, and laws requiring holders of personal information to maintain safeguards and to take certain actions in response to a data breach.
Foreign data protection, privacy, and other laws and regulations are often more restrictive than those in the U.S. The E.U., for example, traditionally has imposed stricter obligations under its laws and regulations relating to privacy, data protection and consumer protection than the U.S. In May 2018, the GDPR, governing data practices and privacy in the E.U., became effective and replaced the data protection laws of the individual member states. GDPR requires companies to meet stringent requirements regarding the handling of personal data of individuals in the E.U. These more stringent requirements include expanded disclosures to inform members about how we may use their personal data, increased controls on profiling members, and increased rights for members to access, control and delete their personal data. In addition, there are mandatory data breach notification requirements. The law also includes significant penalties for non-compliance, which may result in monetary penalties of up to 20 million Euros or 4% of a company’s worldwide turnover, whichever is higher. GDPR and other similar regulations require companies to give specific types of notice, and informed consent is required for the placement of a cookie or similar technologies on a user’s device for online tracking for behavioral advertising and other purposes and for direct electronic marketing. The GDPR also imposes additional conditions in order to satisfy such consent, such as a prohibition on pre-checked consents. It remains unclear how the U.K. data protection laws or regulations will develop in the medium to longer term and how data transfer to the U.K. from the E.U. will be regulated. Outside of the E.U., there are many other countries with data protection laws, and new countries are adopting data protection legislation with increasing frequency. Many of these laws may require consent from individuals for the use of data for various purposes, including marketing, which may reduce our ability to market our products.
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There is no harmonized approach to these laws and regulations globally. Consequently, we increase our risk of non-compliance with applicable foreign data protection laws and regulations if we expand internationally. We may need to change and limit the way we use personal information in operating our business and may have difficulty maintaining a single operating model that is compliant. Compliance with such laws and regulations will result in additional costs and may necessitate changes to our business practices and divergent operating models, limit the effectiveness of our marketing activities, adversely affect our business, results of operations, and financial condition, and subject us to additional liabilities.
Security breaches, data breaches, cyber attacks, other cybersecurity incidents or the failure to comply with privacy, security and data protection laws could materially impact our operations, patient care could suffer, we could be liable for damages, and our business, operations and reputation could be harmed.
We expect to retain confidential customer personal and financial, patient health information and our own proprietary information and data essential to our business operations. We will rely upon the effective operation of our IT systems, and those of our service providers, vendors, and other third parties to safeguard the information and data. It is critical that the facilities, infrastructure and IT systems on which we depend to run our business and the products we develop remain secure and be perceived by the marketplace and our potential customers to be secure. Despite the implementation of security features in our products and security measures in our IT systems, we and our service providers, vendors, and other third parties may become subject to physical break-ins, computer viruses or other malicious code, unauthorized or fraudulent access, programming errors or other technical malfunctions, hacking or phishing attacks, malware, ransomware, employee error or malfeasance, cyber attacks, and other breaches of IT systems or similar disruptive actions, including by organized groups and nation-state actors. For example, we may experience cybersecurity incidents and unauthorized internal employee exfiltration of company information.
Further, the frequency of third-party cyber-attacks has increased over the last several years. The military conflict in Ukraine may cause nation-state actors or hackers sympathetic to either side of the conflict to carry out cyber-attacks to achieve their goals, which may include espionage, information gathering operations, monetary gain, ransomware, disruption, and destruction. Significant service disruptions, breaches in our infrastructure and IT systems or other cybersecurity incidents could expose us to litigation or regulatory investigations, impair our reputation and competitive position, be distracting to our management, and require significant time and resources to address. Affected parties or regulatory agencies could initiate legal or regulatory action against us, which could prevent us from resolving the issues quickly or force us to resolve them in unanticipated ways, cause us to incur significant expense and liability, or result in judicial or governmental orders forcing us to cease operations or modify our business practices in ways that could materially limit or restrict the products and services we provide. Concerns over our privacy practices could adversely affect others’ perception of us and deter potential customers, patients and partners from using our products. In addition, patient care could suffer, and we could be liable if our products or IT systems fail to deliver accurate and complete information in a timely manner. We have internal monitoring and detection systems as well as cybersecurity and other forms of insurance coverage related to a breach event covering expenses for notification, credit monitoring, investigation, crisis management, public relations and legal advice. However, damages and claims arising from such incidents may not be covered or may exceed the amount of any coverage and do not cover the time and effort we may incur investigating and responding to any incidents, which may be material. The costs to eliminate, mitigate or recover from security problems and cyber attacks and incidents could be material and depending on the nature and extent of the problem and the networks or products impacted, may result in network or systems interruptions, decreased product sales, or data loss that may have a material impact on our operations, net revenues and operating results.
Our business will expose us to potential liability for the quality and safety of our products and services, how we advertise and market those products and services and how and to whom we sell them, and we may incur substantial expenses or be found liable for substantial damages or penalties if we are subject to claims or litigation.
Our products and services involve an inherent risk of claims concerning their design, manufacture, safety and performance, how they are marketed and advertised in a complex framework of highly regulated domestic and international laws and regulations, how we package, bundle or sell them to potential customers, who may be private individuals or companies or public entities such as hospitals and clinics, and how we train and support doctors, their staffs and patients who administer or use our products. Moreover, consumer products and services are routinely subject to claims of false, deceptive or misleading advertising, consumer fraud and unfair business practices. Additionally, we may be held liable if any product we develop or manufacture or services we offer or perform causes injury or is otherwise found unhealthy. If our products are safe but they are promoted for off-label usage, we may be investigated, fined or have our products or services enjoined or approvals rescinded or we may be required to defend ourselves in litigation. Although we maintain insurance for product liability, business practices and other types of activities we make or offer, coverage may not be available on acceptable terms, if at all, and may be insufficient for actual liabilities. Any claim for product liability, sales, advertising and business practices, regardless of its merit or eventual outcome, could result in material legal defense costs and damage our reputation, increase our expenses and divert management’s attention.
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Changes in laws could negatively impact Petros’ business.
Petros’ future results could be adversely affected by changes in interpretations of existing laws and regulations, or changes in laws and regulations, including, among others, changes in taxation requirements, competition laws, privacy laws and environmental laws in the United States and other countries.
The regulatory framework for artificial intelligence (“AI”) technologies is rapidly evolving as many federal, state and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations. In addition, existing laws and regulations may be interpreted in ways that would affect the use of AI in our business. As a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or market perception of their requirements may have on our business and may not always be able to anticipate how to respond to these laws or regulations.
We incorporate AI solutions into our platform technology, services, and features, and these applications are important in our operations. The regulatory framework for AI technologies is rapidly evolving as many federal, state and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations. In addition, existing laws and regulations may be interpreted in ways that would affect the use of AI in our business. As a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or market perception of their requirements may have on our business and may not always be able to anticipate how to respond to these laws or regulations.
Certain existing legal regimes (e.g., relating to data privacy) regulate certain aspects of AI technologies, and new laws regulating AI technologies recently entered into force in the United States and Europe. In the United States, the Biden administration issued a broad Executive Order on the Safe, Secure and Trustworthy Development and Use of Artificial Intelligence (the “2023 AI Order”), which sets out principles intended to guide AI design and deployment for the public and private sectors and signals the increase in governmental involvement and regulation over AI technologies. Agencies such as the Department of Commerce and the FTC have issued proposed rules governing the use and development of AI technologies. Legislation related to AI technologies has also been introduced at the federal level and is advancing at the state level. Such additional regulations may impact our ability to develop, use, and commercialize AI technologies offered by our service providers and within our products and services in the future. This executive order was revoked by President Trump on January 23, 2025. Subsequently, on January 23, 2025, the President issued Executive Order ion Removing Barriers to American Leadership in Artificial Intelligence, which directed relevant agencies to develop an action plan to assure global dominance by the United States in artificial intelligence, and to examine any actions taken in connection with the 2023 AI Order, which are incongruent with Trump’s order.
On May 21, 2024, the European Union legislators approved the EU Artificial Intelligence Act (the “EU AI Act”), which establishes a comprehensive, risk-based governance framework for artificial intelligence in the EU market. The EU AI Act entered into force on August 2, 2024, and the majority of the substantive requirements will apply from August 2, 2026. The EU AI Act, and developing interpretation and application of the GDPR in respect of automated decision making, together with developing guidance and/or decisions in this area, may affect our use of AI technologies and our ability to provide, improve or commercialize our business, require additional compliance measures and changes to our operations and processes, result in increased compliance costs and potential increases in civil claims against us, and could adversely affect our business, operations and financial condition.
It is possible that further new laws and regulations will be adopted in the United States and in other non-U.S. jurisdictions, or that existing laws and regulations, including competition and antitrust laws, may be interpreted in ways that would limit our ability to use AI technologies for our business, or require us to change the way we use AI technologies in a manner that negatively affects the performance of our system and business and the way in which we use AI technologies. We may need to expend resources to adjust our system in certain jurisdictions if the laws, regulations, or decisions are not consistent across jurisdictions. Further, the cost to comply with such laws, regulations or decisions and/or guidance interpreting existing laws, could be significant and would increase our operating expenses (such as by imposing additional reporting obligations regarding our use of AI technologies). Such an increase in operating expenses, as well as any actual or perceived failure to comply with such laws and regulations, could materially and adversely affect our business, financial condition, results of operations, and prospects.
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Further, a number of aspects of intellectual property protection in the field of AI are currently under development and there is uncertainty and ongoing litigation in different jurisdictions as to the degree and extent of protection warranted for AI and relevant system input and outputs. If we fail to obtain protection for our intellectual property rights within our AI technologies, or later have our intellectual property rights invalidated or otherwise diminished, our competitors may be able to take advantage of our research and development efforts to develop competing products that could adversely affect our business, reputation and financial condition. Further, given the long history of development of AI technologies, other parties may have (or in the future may obtain) patents or other proprietary rights that would prevent, limit or interfere with our ability to make, use or sell our own AI technologies.
Additionally, the FDA’s position on AI and its role in SaMDs is rapidly evolving. Changes in the FDA’s regulations and policy positions may cause significant disruption in our development or commercialization of our technology.
Petros may be subject to potential product liability and other claims, creating risks and expense.
Petros is also exposed to potential product liability risks inherent in the development, testing, marketing, and commercialization of consumer products. Product liability insurance can be extremely expensive, difficult to obtain and may not be available on acceptable terms, if at all. Petros cannot guarantee that the coverage limits of such insurance policies will be adequate. A successful claim against Petros in excess of its insurance coverage could have a material adverse effect upon it and on its financial condition.
In addition to direct expenditures for damages, settlement and defense costs, there is a possibility of adverse publicity and loss of revenues as a result of product liability claims. Product liability is a significant commercial risk for Petros. Plaintiffs have received substantial damage awards in some jurisdictions against companies based upon claims for injuries allegedly caused by the use of their products. In addition, in the age of social media, plaintiffs’ counsel now has a wide variety of tools to advertise their services and solicit new clients for litigation. Thus, any significant product liability litigation or mass tort in which Petros is a defendant may have a larger number of plaintiffs than such actions have seen historically because of the increasing use of widespread and media-varied advertising.
Risks Related to Petros’ Intellectual Property
If Petros fails to protect its intellectual property rights, its ability to pursue the development of its products would be negatively affected.
Petros’ long-term success largely depends on its ability to market technologically competitive products. Petros relies and expects to continue to rely on a combination of intellectual property, including patent, trademark, trade dress, copyright, trade secret and domain name protection laws, as well as confidentiality and license agreements, to protect its intellectual property and proprietary rights. If Petros or its licensors fail to obtain and maintain adequate intellectual property protection, it may not be able to prevent third parties from launching generic or biosimilar versions of its branded products using its proprietary technologies or from marketing products that are very similar or identical to those of Petros. In addition, any patents Petros licenses may not contain claims sufficiently broad to protect it against third parties with similar technologies or products or provide Petros with any competitive advantage, including exclusivity in a particular product area. Petros may be subject to challenges by third parties regarding its or its licensors’ intellectual property, including, among others, claims regarding validity, enforceability, scope and effective term.
The patent positions of life sciences companies, including Petros’ patent position, involve complex legal and factual questions, and, therefore, the issuance, scope, validity and enforceability of any patent claims that Petros may obtain cannot be predicted with certainty. Patents, if issued, may be challenged, deemed unenforceable, invalidated, or circumvented. A third-party may submit prior art, or Petros may become involved in opposition, derivation, reexamination, inter partes review, post-grant review, supplemental examination, or interference proceedings challenging Petros’ patent rights or the patent rights of its licensors or development partners. The costs of defending or enforcing Petros’ proprietary rights in these proceedings can be substantial, and the outcome can be uncertain. An adverse determination in any such submission or proceeding could reduce the scope of, or invalidate, Petros’ patent rights, allow third parties to commercialize Petros’ technology or products and compete directly with Petros, or reduce Petros’ ability to manufacture or commercialize products. Furthermore, if the scope or strength of protection provided by Petros’ patents and patent applications is threatened, it could discourage companies from collaborating with Petros to license, develop or commercialize current or future products. The ownership of Petros’ proprietary rights could also be challenged.
Moreover, the issuance of a patent, while presumed valid and enforceable, is not conclusive as to its validity or its enforceability and it may not provide Petros with adequate proprietary protection or competitive advantages against competitors with similar products. Competitors may also be able to design around Petros’ patents. Other parties may develop and obtain patent protection for more effective
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technologies, designs or methods. Petros may not be able to prevent the unauthorized disclosure or use of our technical knowledge or trade secrets by consultants, vendors, former employees and current employees.
Petros’ ability to enforce its in-licensed patents also depends on the laws of individual countries and each country’s practice with respect to enforcement of intellectual property rights, and the extent to which certain sovereigns may seek to engage in policies or practices that may weaken its intellectual property framework (e.g., a policy of routine compulsory licensing (or threat of compulsory licensing) of intellectual property). Patent rights are territorial, and patent protection extends only to those countries where Petros has issued patents. Filing, prosecuting and defending patents on Petros’ products and product candidates in all countries and jurisdictions throughout the world would be prohibitively expensive, and Petros’ intellectual property rights in some countries outside the United States could be less extensive than those in the United States. Some foreign countries lack rules and methods for defending intellectual property rights and do not protect proprietary rights to the same extent as the United States. Competitors may successfully challenge or avoid Petros’ patents, or manufacture products in countries where Petros has not applied for patent protection. Changes in the patent laws in the U.S. or other countries may diminish the value of Petros’ patent rights. As a result of these and other factors, the scope, validity, enforceability, and commercial value of Petros’ patent rights are uncertain and unpredictable. As such, Petros may have difficulty protecting its proprietary rights in these foreign countries.
Indeed, several companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of some countries do not favor the enforcement of patents and other intellectual property rights, which could make it difficult for Petros to stop the infringement, misappropriation or other violation of Petros’ intellectual property rights generally. Proceedings to enforce Petros’ intellectual property rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of Petros’ business, could put Petros’ patents at risk of being invalidated or interpreted narrowly and Petros’ patent applications at risk of not issuing and could provoke third parties to assert claims against Petros. Petros may not prevail in any lawsuits that it initiates, and the damages or other remedies awarded, if any, may not be commercially meaningful.
Furthermore, Petros’ ability to enforce its patent rights depends on its ability to detect infringement. It is difficult to detect infringers who do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product, particularly in litigation in countries other than the U.S. that do not provide an extensive discovery procedure. Any litigation to enforce or defend Petros’ patent rights, if any, even if Petros were to prevail, could be costly and time-consuming and would divert the attention of Petros’ management and key personnel from its business operations. Petros may not prevail in any lawsuits that it initiates and the damages or other remedies awarded if it were to prevail may not be commercially meaningful.
In addition to patents, Petros relies on a combination of trade secrets, confidentiality, nondisclosure and other contractual provisions and security measures to protect its confidential and proprietary information. These measures do not guarantee protection of its trade secrets or other proprietary information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, Petros cannot guarantee that it has executed these agreements with each party that may have or have had access to its trade secrets. Furthermore, if the employees and consultants who are parties to these agreements breach or violate the terms of these agreements, Petros may not have adequate remedies for any such breach or violation, and Petros could lose its trade secrets through such breaches or violations. There is risk that third parties could use Petros’ technology and it could lose any competitive advantage it may have. In addition, others may independently develop similar proprietary information or techniques or otherwise gain access to Petros’ trade secrets, which could impair any competitive advantage it may have.
Furthermore, in some cases, Petros may rely on its licensors to conduct patent prosecution, patent maintenance, or enforce patents on its behalf. Therefore, Petros’ ability to ensure that these patents are properly prosecuted, maintained, or defended may be limited, which may adversely affect Petros’ rights to the licensed technology. Failure by a licensor to properly conduct patent prosecution, maintenance, or enforcement could materially harm Petros’ ability to obtain suitable patent protection to cover its commercial products, thereby potentially reducing Petros’ royalties from any sublicensee and/or limiting the patent barrier to competition.
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Petros may be involved in lawsuits to protect or enforce its patents, which could be expensive and time consuming.
Petros’ commercial success also depends upon its ability, and the ability of any third party with which it may partner, to develop, manufacture, market and sell its product candidates and/or products, if approved, and use its patent-protected technologies without infringing the patents of third parties. The pharmaceutical industry has been characterized by extensive litigation regarding patents and other intellectual property rights, and companies have employed intellectual property litigation to gain a competitive advantage.
Petros may not have identified all patents, published applications or published literature that affect its business either by blocking its ability to commercialize its products or potential products, by preventing the patentability of one or more aspects of its products or potential products to it or its licensors, or by covering the same or similar technologies that may affect its ability to market its products and potential products. For example, Petros (or the licensor of a product or potential product to it) may not have conducted a patent clearance search sufficient to identify potentially obstructing third party patent rights. Moreover, patent applications in the United States are maintained in confidence for up to 18 months after their filing. In some cases, however, patent applications remain confidential in the U.S. Patent and Trademark Office, or the USPTO, for the entire time prior to issuance as a U.S. patent. Patent applications filed in countries outside of the United States are not typically published until at least 18 months from their first filing date. Similarly, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. Petros cannot be certain that it or its licensors were the first to invent, or the first to file, patent applications covering its products and candidates. Petros also may not know if its competitors filed patent applications for technology covered by its pending applications or if it was the first to invent the technology that is the subject of its patent applications. Competitors may have filed patent applications or received patents and may obtain additional patents and proprietary rights that block or compete with our patents.
Petros may therefore become subject to infringement claims or litigation arising out of patents and pending applications of its competitors, additional interference proceedings declared by the United States Patent and Trade Office (“USPTO”) to determine the priority of inventions, or post-grant review, inter parties review, or re-examination proceedings filed with the USPTO. The defense and prosecution of intellectual property suits, USPTO proceedings and related legal and administrative proceedings are costly and time-consuming to pursue, and their outcome is uncertain. Litigation may be necessary to enforce Petros’ licensed patents, to protect its trade secrets and know-how, or to determine the enforceability, scope and validity of the proprietary rights of others. An adverse determination in litigation or USPTO post-issuance interference proceedings to which Petros may become a party could subject it to significant liabilities, require it to obtain licenses from third parties, restrict or prevent it from selling its products in certain markets, dissuade companies from collaborating with it, or permit third parties to directly compete with it. Although patent and intellectual property disputes might be settled through licensing or similar arrangements, the costs associated with such arrangements may be substantial and could include paying large, fixed payments and ongoing royalties. Furthermore, the necessary licenses may not be available on satisfactory terms or at all.
Competitors may infringe Petros’ licensed patents and Petros may file infringement claims to counter infringement or unauthorized use. This can be expensive, particularly for a company of Petros’ size, and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent Petros has licensed is not valid or is unenforceable or may refuse to stop the other party from using the technology at issue on the grounds that Petros’ licensed patents do not cover the other party’s technology. An adverse determination of any litigation or defense proceedings could put one or more of Petros’ licensed patents at risk of being invalidated or interpreted narrowly.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation or USPTO post-issuance proceedings, there is a risk that some of Petros’ confidential information could be compromised by disclosure. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments.
If Petros infringes the rights of third parties, it could be prevented from selling products and forced to pay damages and defend against litigation.
If Petros’ products, methods, processes and other technologies infringe the proprietary rights of other parties, it could incur substantial costs and Petros may have to: obtain licenses, which may not be available on commercially reasonable terms, if at all; abandon an infringing product candidate; redesign its products or processes to avoid infringement; stop using the subject matter claimed in the patents held by others; pay damages; and/or defend litigation or administrative proceedings which may be costly whether Petros wins or loses, and which could result in a substantial diversion of its financial and management resources.
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Petros may be subject to claims that its employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.
Petros may employ individuals who were previously employed at other biotechnology or pharmaceutical companies. It may be subject to claims that it or its employees, consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information of our employees’ former employers or other third parties. Petros may also be subject to claims that former employers or other third parties have an ownership interest in its patents. Litigation may be necessary to defend against these claims. There is no guarantee of success in defending these claims, and if Petros does not prevail, it could be required to pay substantial damages and could lose rights to important intellectual property. Even if Petros is successful, litigation could result in substantial cost and be a distraction to its management and other employees.
Changes in trends in the pharmaceutical and medical device industries, including changes to market conditions, could adversely affect Petros’ operating results.
The pharmaceutical and medical device industries generally, and drug discovery and development companies more specifically, are subject to increasingly rapid technological changes. Petros’ competitors might develop technologies or products that are more effective or commercially attractive than Petros’ current or future technologies, or that render its technologies or products less competitive or obsolete. If competitors introduce superior technologies or products and Petros cannot make enhancements to its technologies or products to remain competitive, its competitive position and, in turn, its business, revenue and financial condition, may be materially and adversely affected.
Obtaining and maintaining patent protection depends on compliance with various procedures and other requirements, and Petros’ patent protection could be reduced or eliminated in case of non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to the relevant patent agencies in several stages over the lifetime of the patents and /or applications. The relevant patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent application process. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which the failure to comply with the relevant requirements can result in the abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, Petros’ competitors might be able to use Petros’ technologies and know-how which could have a material adverse effect on Petros’ business, prospects, financial condition and results of operation.
Risks Related to Petros’ Strategic Transactions
Acquisitions involve risks that could result in a reduction of our operating results, cash flows and liquidity.
Petros has made, and in the future may continue to make, strategic acquisitions including licenses of third-party products. However, it may not be able to identify suitable acquisition and licensing opportunities. It may pay for acquisitions and licenses with equity or with convertible securities. In addition, acquisitions or licenses may expose Petros to operational challenges and risks, including:
| ● | the ability to profitably manage acquired businesses or successfully integrate the acquired business’ operations and financial reporting and accounting control systems into our business; |
| ● | increased indebtedness and contingent purchase price obligations associated with an acquisition; |
| ● | the ability to fund cash flow shortages that may occur if anticipated revenue is not realized or is delayed, whether by general economic or market conditions or unforeseen internal difficulties; |
| ● | the availability of funding sufficient to meet increased capital needs; |
| ● | diversion of management’s attention; and |
| ● | the ability to retain or hire qualified personnel required for expanded operations. |
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In addition, acquired companies may have liabilities or risks that we fail, or are unable, to discover in the course of performing due diligence investigations. Petros cannot guarantee that the indemnification granted to it by sellers of acquired companies will be sufficient in amount, scope or duration to fully offset the possible liabilities associated with businesses or properties that are assumed upon consummation of an acquisition. Petros may learn additional information about acquired businesses that materially adversely affect it, such as unknown or contingent liabilities and liabilities related to compliance with applicable laws. Any such liabilities, individually or in the aggregate, could have a material adverse effect on its business.
Failure to successfully manage the operational challenges and risks associated with, or resulting from, acquisitions could adversely affect Petros’ results of operations, cash flows and liquidity. Borrowings or issuance of convertible securities associated with any acquisitions may also result in higher levels of indebtedness, which could impact its ability to service its debt within the scheduled repayment terms.
Risks Related to Our Series A Preferred Stock
The Certificate of Designations for the Series A Preferred Stock and the Warrants issued concurrently therewith contain anti-dilution provisions that may result in the reduction of the conversion price of the Series A Preferred Stock or the exercise price of such Warrants in the future. These features may increase the number of shares of Common Stock being issuable upon conversion of the Series A Preferred Stock or upon the exercise of the Warrants.
The Certificate of Designations and the Warrants contain anti-dilution provisions, which provisions require the lowering of the applicable conversion price or exercise, as then in effect, to the purchase price of equity or equity-linked securities issued in any subsequent offerings. If while any shares of Series A Preferred Stock or Warrants are outstanding, we issue securities for a consideration per share of Common Stock (the “New Issuance Price”) that is less than the Conversion Price of the Series A Preferred Stock or the exercise price of the Warrants, as then in effect, we have been required in the past and will be required in the future, subject to certain limitations and adjustments as provided in the Certificate of Designations or the Warrants, to reduce the Conversion Price or the exercise price to be equal to the New Issuance Price, which will result in a greater number of shares of Common Stock being issuable upon conversion of the Series A Preferred Stock and the exercise of the Warrants, which in turn will increase the dilutive effect of such conversions or exercises on existing holders of our Common Stock.
It is possible that we will not have a sufficient number of shares available to satisfy the conversion of the Series A Preferred Stock or the exercise of the Warrants if we enter into a future transaction that reduces the applicable Conversion Price or exercise price. If we do not have a sufficient number of available shares for any Series A Preferred Stock conversions or Warrant exercises, we may need to seek shareholder approval to increase the number of authorized shares of our Common Stock, which may not be possible and will be time consuming and expensive. The potential for such additional issuances may depress the price of our Common Stock regardless of our business performance and may make it difficult for us to raise additional equity capital while any of the Series A Preferred Stock or Warrants are outstanding.
Under the Purchase Agreement we are subject to certain restrictive covenants that may make it difficult to procure additional financing.
The Securities Purchase Agreement pursuant to which we issued the Series A Preferred Stock (“Purchase Agreement”) contains the following restrictive covenants: (i) until no shares of Series A Preferred Stock are outstanding, we agreed not to enter into any variable rate transactions; (ii) for approximately six months after the date on which Conversion Shares and Warrant Shares are eligible for sale by the Investors under a registration statement declared effective by the SEC or pursuant to Rule 144 under the Securities Act, we agreed not to issue or sell any equity security or convertible security, subject to certain exceptions; and (iii) until the later of no shares of Series A Preferred Stock being outstanding and the maturity date of the Series A Preferred Stock, we agreed to offer to the investors party to the Purchase Agreement the opportunity to participate in any subsequent securities offerings by us. If we require additional funding while these restrictive covenants remain in effect, we may be unable to effect a financing transaction while remaining in compliance with the terms of the Purchase Agreement, or we may be forced to seek a waiver from the investors party to the Purchase Agreement.
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Risks Related to Our Series B Preferred Stock
We may issue additional series of preferred stock that rank senior or equally to our Series B Convertible Preferred Stock (“Series B Preferred Stock”) as to dividend payments and liquidation preference.
Neither our Charter nor the Certificate of Designation for the Series B Preferred Stock (“Series B Certificate of Designations”) prohibits us from issuing additional series of preferred stock that would rank senior or equally to the Series B Preferred Stock as to dividend payments and liquidation preference. Our Charter provides that we have the authority to issue up to 50,000,000 shares of preferred stock, 15,000 shares have been designated as Series A Convertible Preferred Stock and 1,000,000 have been designated as Series B Preferred Stock. The Series B Preferred Stock rank equally with the Series A Convertible Preferred Stock as to dividend payments and liquidation preference. The issuances of other series of preferred stock could have the effect of reducing the amounts available to the Series B Preferred Stock in the event of our liquidation, winding-up or dissolution. It may also reduce cash dividend payments on the Series B Preferred Stock if we do not have sufficient funds to pay dividends on all Series B Preferred Stock outstanding and outstanding parity preferred stock.
The Series B Preferred Stock will rank junior to all our liabilities to third party creditors in the event of a bankruptcy, liquidation or winding up of our assets.
In the event of bankruptcy, liquidation or winding up, our assets will be available to pay obligations on the Series B Preferred Stock only after all our liabilities have been paid. The Series B Preferred Stock effectively rank junior to all existing and future liabilities held by third party creditors. The terms of the Series B Preferred Stock do not restrict our ability to raise additional capital in the future through the issuance of debt. In the event of bankruptcy, liquidation or winding up, there may not be sufficient assets remaining, after paying our liabilities, to pay amounts due on any or all of the Series B Preferred Stock then outstanding.
Risks Related to Petros’ Common Stock
We do not anticipate paying dividends on our Common Stock in the foreseeable future.
We currently plan to invest all available funds and future earnings, if any, in the development and growth of our business. We currently do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. So long as any shares of Series A Preferred Stock are outstanding, as they are at this time, we are not able to declare or pay any cash dividend or distribution on any of our capital stock (other than as required by the Certificate of Designations) without the prior written consent of the Required Holders (as defined in the Certificate of Designations). In addition, the terms of our existing and any future debt agreements may preclude us from paying dividends. As a result, a rise in the market price of our Common Stock, which is uncertain and unpredictable, will be our shareholders’ sole source of potential gain in the foreseeable future and our shareholders should not rely on an investment in our Common Stock for dividend income.
We are an “emerging growth company” and our election to delay adoption of new or revised accounting standards applicable to public companies may result in our financial statements not being comparable to those of other public companies. As a result of this and other reduced disclosure requirements applicable to emerging growth companies, our securities may be less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”), for complying with new or revised accounting standards.
In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are electing to delay such adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result of such election, our financial statements may not be comparable to the consolidated
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financial statements of other public companies. We cannot predict whether investors will find our securities less attractive because it will rely on these exemptions. If some investors find the Company Common Stock less attractive as a result, there may be a less active trading market for the Company Common Stock and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.” We could remain an “emerging growth company” until the earliest to occur of earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more; (ii) December 31, 2026; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.
Sales of a substantial number of shares of our Common Stock, or the perception that such sales may occur, may adversely impact the price of our Common Stock.
Almost all of our outstanding shares of Common Stock, as well as a substantial number of shares of our Common Stock underlying outstanding options and warrants, are available for sale in the public market, either pursuant to Rule 144 under the Securities Act, or an effective registration statement. Except as provided in the Purchase Agreement, we are generally not restricted from issuing additional Common Stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, Common Stock. Sales of a substantial number of shares of our Common Stock in the public markets could depress the market price of our Common Stock and impair our ability to raise capital through the sale of additional equity securities.
In addition, we may be required to issue shares of Common Stock to the holders of Series A Preferred Stock upon conversion of the Series A Preferred Stock and the payment of the dividends to the holders thereof in Common Stock as a result of the full ratchet anti-dilution price protection in the Certificate of Designations if the effective Common Stock purchase price in a subsequent offering is less than the then current Series A Preferred Stock conversion price, which in turn will increase the number of shares of Common Stock available for sale. Pursuant to the Registration Rights Agreement, we have agreed to file a registration statement covering the resale of such shares. See “Risk Factors-Risks Related to Our Series A Preferred Stock-The Certificate of Designations for the Series A Preferred Stock and the Warrants issued concurrently therewith contain anti-dilution provisions that may result in the reduction of the conversion price of the Series A Preferred Stock or the exercise price of such Warrants in the future. These features may increase the number of shares of Common Stock being issuable upon conversion of the Series A Preferred Stock or upon the exercise of the warrants.” We cannot predict the effect that future sales of our Common Stock would have on the market price of our Common Stock.
Our stock price may be volatile.
The market price of our Common Stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
| ● | results of our operations and product development efforts; |
| ● | our ability to obtain working capital financing; |
| ● | additions or departures of key personnel; |
| ● | limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our Common Stock; |
| ● | our ability to execute our business plan; |
| ● | sales of our Common Stock and decline in demand for our Common Stock; |
| ● | regulatory developments; |
| ● | economic and other external factors; |
| ● | investor perception of our industry or our prospects; and |
| ● | period-to-period fluctuations in our financial results. |
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In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies.
Our delisting from the Nasdaq Capital Market and transition to over-the-counter trading may adversely affect the liquidity and market price of our Common Stock.
On May 20, 2025, the Company received a letter (the “Letter”) from the Nasdaq Hearings Panel (the “Panel”) indicating that the Panel has determined to delist the Company’s securities from The Nasdaq Stock Market LLC (“Nasdaq”) as a result of (i) the Company’s failure to maintain compliance with the minimum stockholders’ equity requirement under Nasdaq Listing Rule 5550(b)(1), (ii) the Company’s failure to meet the minimum bid price of $1.00 per share pursuant to Nasdaq Listing Rule 5550(a)(2), (iii) the Company’s low bid price pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iii), and (iv) Nasdaq’s public interest concerns regarding the Company’s public offering of securities that closed on February 19, 2025, pursuant to Nasdaq Listing Rule 5810(d). Pursuant to the Letter, the Panel determined to deny the Company’s request to continue its listing on Nasdaq and the Company’s Common Stock was suspended at the open of trading on May 22, 2025. On November 7, 2025, Nasdaq announced the delisting of the Company’s Common Stock and filed a Form 25 with the SEC to complete the delisting in accordance with Rule 12d2-2 promulgated under the Exchange Act. The delisting became effective ten days after the Form 25 was filed. As a result, our shares now trade on the OTCID® Basic Market (the “OTCID”) market under the symbol “PTPI”.
Trading on the OTCID market may limit the liquidity of our common stock, making it more difficult for investors to buy or sell shares at desired prices or in desired quantities. In addition, OTCID markets are generally less regulated and more volatile than national securities exchanges. The lack of analyst coverage and lower visibility may also reduce investor interest and negatively affect our stock price. Furthermore, the delisting may hinder our ability to raise capital, attract institutional investors, or retain key personnel.
There can be no assurance that we will be able to relist our securities on a national exchange or maintain compliance with any applicable OTCID market requirements.
Our bylaws include a forum selection clause, which may impact your ability to bring actions against us.
Subject to certain limitations, our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware will be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring: (a) any derivative action or proceeding brought on our behalf; (b) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers or other employees or our stockholders; (c) any action asserting a claim arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws; or (d) any action asserting a claim governed by the internal affairs doctrine. In addition, our bylaws provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the federal securities laws of the United States against us, our officers, directors, employees or underwriters. These limitations on the forum in which stockholders may initiate action against us could create costs, inconvenience or otherwise adversely affect your ability to seek legal redress.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. As a result, a court may decline to enforce these exclusive forum provisions with respect to suits brought to enforce any duty or liability created by the Securities Act or any other claim for which the federal and state courts have concurrent jurisdiction, and our stockholders may not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. If a court were to find the exclusive forum provisions to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.
ITEM 1B.UNRESOLVED STAFF COMMENTS
None.
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ITEM 1C. CYBERSECURITY
We operate in the pharmaceutical industry, which is subject to various cybersecurity risks that could adversely affect our business, financial condition, and results of operations, including: intellectual property theft; fraud; extortion; harm to employees or customers; violation of privacy laws and other litigation and legal risk; and reputational risk.
Our current cybersecurity risk assessment program consists of processes designed to assess, identify and manage cybersecurity risks, including the use of anti-virus software, multi-factor authentication and risky/suspicious log-in monitoring. We leverage the advice of third-party consultants, including our IT consultant, to help us assess and identify risks from cybersecurity threats, including the threat of a cybersecurity incident, and manage our risk assessment program. Among other things, these providers advise on best practices for safeguarding company data.
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ITEM 2.PROPERTIES
Our principal executive offices are located in New York, New York.
ITEM 3.LEGAL PROCEEDINGS
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business.
The information set forth in Note 9 Commitments and Contingencies of the Notes to Consolidated Financial Statements of this Form 10-K is incorporated by reference herein.
ITEM 4.MINE SAFETY DISCLOSURES
Not Applicable.
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PART II
ITEM 5.MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our Common Stock is listed for trading on the OTCID® Basic Market (the “OTCID”) under the symbol “PTPI.”
Holders
As of April 15, 2026, there were approximately 313 holders of record of our Common Stock. The number of holders of record is based upon the actual number of holders registered at such date and does not include holders of shares in “street names” or persons, partnerships, associates, corporations, or other entities identified in security position listings maintained by depositories.
Dividends
We have never declared or paid any cash dividends on our Common Stock. So long as any shares of Series A Preferred Stock are outstanding, as they are at this time, we are not able to declare or pay any cash dividend or distribution on any of our capital stock (other than as required by the Certificate of Designations) without the prior written consent of the Required Holders (as defined in the Certificate of Designations). We currently anticipate that we will retain future earnings to fund development and growth of our business, and we do not anticipate paying cash dividends on our Common Stock in the foreseeable future. The decision to pay dividends is at the discretion of our board of directors and depends upon our ability to obtain a waiver of the restriction on paying dividends contained in our credit facility, and on our financial condition, results of operations, capital requirements, and other factors that our board of directors deems relevant.
Unregistered Sales of Securities.
None.
Issuer Purchases of Equity Securities.
We did not repurchase any of our equity securities during the fiscal year ended December 31, 2025.
ITEM 6.Reserved
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of Petros’ consolidated financial statements with a narrative from the perspective of management on the Company’s financial condition, results of operations, liquidity and certain other factors that may affect future results. In certain instances, parenthetical references are made to relevant sections of the Notes to Consolidated Financial Statements to direct the reader to a further detailed discussion. This section should be read in conjunction with the Consolidated Financial Statements and Supplementary Data included in this Annual Report on Form 10-K. This MD&A contains forward-looking statements reflecting Petros’ current expectations, whose actual outcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” contained in this Annual Report on Form 10-K.
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Overview
Petros 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. Prior to June 2025, Petros consisted of wholly owned subsidiaries: Metuchen, Neurotrope, Timm Medical Technologies, Inc. (“Timm Medical”), and Pos-T-Vac, LLC (“PTV” and, collectively with Metuchen and Timm Medical, the “Subsidiaries”). The Company has historically been 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 licensed from Vivus, Inc. (“Vivus”). Petros also historically marketed its own line of ED products in the form of vacuum erection device products (“VEDs”) through its previous subsidiaries, Timm Medical and PTV, including VEDs marketed as “Osbon ErecAid” and “PosTVac.”
In December 2024, the Company determined to discontinue sales of Stendra® to wholesalers. Beginning in March 2025, the Company is no longer engaged in the commercialization, development or sales of Stendra®. In addition, on June 16, 2025, in accordance with California state law, the Company effected an assignment (the “Assignment”) of all of the business, assets, properties, contractual rights, goodwill, going concern value, rights and claims (“Assets”) of Metuchen, including Metuchen’s wholly-owned subsidiaries, Timm Medical and PTV and each of their respective Assets (collectively, the “ABC Assets”), for the benefit of creditors to a special purpose vehicle that is managed by a third-party fiduciary (the “Assignee”) such that, as of June 16, 2025, the Assignee succeeded to all of each Subsidiary’s right, title and interest in and to the respective ABC Assets. Upon the completion of the Assignment, the Assignee obtained sole control over the ABC Assets and each Subsidiary no longer operates its business or controls the liquidation or distribution of its assets or the resolution of claims. The Assignment is a judicial insolvency procedure, which was commenced by each Subsidiary entering a contractual assignment for the benefit of creditors on June 16, 2025, that effectuates the assignment, grant, conveyance, transfer, and setting over to the Assignee, in trust, of all of the ABC Assets. Accordingly, the Company is no longer engaged in the marketing or selling of VEDs following the completion of the Assignment. Today, the Company is working towards the goal of becoming a leading innovator in the emerging self-care market driving expanded access to key nonprescription pharmaceuticals as Over-the-Counter (“OTC”) and nonprescription drug products with additional condition for nonprescription use (“ACNU Products”) treatment options.
Petros is pursuing the development of a proprietary integrated technology solutions platform (the “platform”) containing two components (i) SaaS, designed to assist pharmaceutical companies in operationalizing and commercializing an Rx-to-OTC switch as an element in the development of an ACNU Product, and (ii) a potential Software as a Medical Device (“SaMD”) component, which must comply with FDA governance and approval and is expected to be a consumer interface that guides the consumer in navigating appropriate self-selection or deselection, through the acquisition process of the OTC product. The Company has been working towards the development of the platform, which is currently in early development stages and is being designed to serve as a retail or online interface, with clinically established algorithmic logic qualifying the intended consumer-patient for purchase and use of an ACNU Product, while reducing subjectivity to the least possible degree and maximizing objective qualifiers to the greatest possible degree.
We believe our platform will be anchored in recent FDA adopted rules, such as the FDA’s Nonprescription Drug Product with an Additional Condition for Nonprescription Use rule (“ACNU Rule”), intended to increase options to develop and market nonprescription drug products; Trusted Exchange Framework and Common Agreement (“TEFCA”), a nationwide framework for health information sharing; and Qualified Health Information Networks, which are sponsored by the FDA and the Department of Health and Human Services.
The Company’s Business
The Company has historically been engaged in the commercialization and development of Stendra®. In December 2024, the Company determined to discontinue sales of Stendra® to wholesalers to mitigate the risk of returns associated with expired or near-expired prescription medication due to Stendra® having less than a six-month shelf life. In addition, as of March 2025, the Company is no longer engaged in the commercialization, development or sales of Stendra® and is no longer engaged in the marketing or selling of VEDs. Today, the Company is working towards the goal of becoming a leading innovator in the emerging self-care market driving expanded access to key nonprescription pharmaceuticals as Over-the-Counter (“OTC”) and nonprescription drug products with additional condition for nonprescription use (“ACNU Products”) treatment options.
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Going Concern
Petros has experienced net losses and negative cash flows from operations since our inception. As of December 31, 2025, the Company had cash of approximately $5.1 million, working capital of $2.9 million, an accumulated deficit of approximately $111.3 million and used cash in operations during the twelve months ended December 31, 2025, of approximately $4.7 million.
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 consolidated financial statements are issued. The accompanying consolidated financial statements do not include any adjustments that might result from these uncertainties. The 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 our consolidated financial statements included in this annual 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 by exploring additional ways to raise capital and increasing cash flows from operations. There is no assurance the Company will manage to raise additional capital or otherwise increase cash flows, if required or that the Company will have sufficient cash to develop its platform, even after the proceeds raised in this offering.
Vivus Settlement Agreement, Promissory Note and the Security Agreement
On January 18, 2022, Petros (through its wholly-owned subsidiary) and Vivus entered into a Settlement Agreement (the “Vivus Settlement Agreement”) related to the minimum purchase requirements under the Vivus Supply Agreement in 2018, 2019 and 2020 and certain reimbursement rights asserted by a third-party retailer in connection with quantities of the Company’s Stendra® product that were delivered to the third-party retailer and later returned. In connection with the Vivus Settlement Agreement, Petros retained approximately $7.3 million of API inventory (representing the 2018 and 2019 minimum purchase requirements) out of approximately $12.4 million due under the Vivus Supply Agreement, in conjunction with forgiveness of approximately $4.25 million of current liabilities relating to returned goods and minimum purchase commitments. In exchange for the API and reduction of current liabilities, 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. The Company recorded the impact of this transaction, including the gain in the first quarter of 2022.
Under the terms of the Note, the principal amount of $10,201,758 was payable in consecutive quarterly installments beginning on April 1, 2022, through January 1, 2027. Interest on the principal amount accrued at a rate of 6% per year, 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 (the “Security Agreement”). The Security Agreement contains customary events of default. For the years ended December 31, 2025, and December 31, 2024, the Company paid Vivus $0.0 million and $1.0 million, respectively under the Note.
On October 1, 2024, we failed to make the payment due pursuant to the Note and related Security Agreement in the amount of $0.5 million, constituting an Event of Default (as defined in the Note) under the Note and Security Agreement. The outstanding principal amount on the Note, plus accrued and unpaid interest thereon, was $7,574,824 as of December 31, 2024. As a result of an event of default under the Settlement Agreement and the Security Agreement existing and continuing by virtue of our failure to pay the Installment (as defined in the Note) that was due October 1, 2024 (the “Vivus Event of Default”), all the obligations under the Settlement Agreement and the Security Agreement (the “Obligations”) became immediately due and payable on the date of the Foreclosure Notice (as defined below).
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Pursuant to the Security Agreement, Vivus held a security interest against the Collateral (as defined herein). On December 10, 2024, pursuant to a Notice of Proposal to Accept Pledged Collateral in Partial Satisfaction of Indebtedness Pursuant to Uniform Commercial Code Section 9-620 (the “Foreclosure Notice”), Vivus proposed to accept all the Collateral (save and except the Specified License Agreement (as defined in the Security Agreement); collectively, the “Foreclosed Collateral”) in partial satisfaction of the Obligations. Vivus further proposed in the Foreclosure Notice that its acceptance of the Foreclosed Collateral would only constitute satisfaction of $2,000,000 worth of the Obligations and would not include any other amounts outstanding under the Note, the Settlement Agreement, or the Security Agreement, including but not limited to (i) all interest accrued or at any time accruing thereon and (ii) all other sums recoverable by Vivus from Metuchen by virtue of the Obligations. On December 13, 2024, Metuchen accepted and agreed to the Foreclosure Notice.
In connection with the Foreclosure Notice, Metuchen and Vivus entered into that certain termination agreement, dated as of March 31, 2025, pursuant to which, the parties mutually agreed to terminate the Vivus License Agreement, effective as of March 31, 2025 (the “Vivus Termination Agreement”), subject to the survival of certain provisions as set forth therein. As a result of the Vivus Termination Agreement, Metuchen no longer has any right in or to Vivus Technology (as defined in the Vivus License Agreement in the United States of America and its territories and possessions, including Puerto Rico and U.S. military bases abroad, Canada, South America and India (the “Licensed Territory”) and Metuchen agreed to immediately cease the development, manufacturing and commercialization of Stendra® in the Licensed Territory. Metuchen further agreed to assign any trademarks incorporating the mark “Stendra®” to Vivus, subject to certain exceptions as set forth therein. In furtherance of the Foreclosure Notice, and pursuant to the Termination Agreement, Metuchen agreed to transfer all completed inventory of Stendra® and all substantially manufactured inventory of Stendra® on hand to Vivus at Metuchen’s sole expense within 30 days of the date of the Vivus Termination Agreement.
Metuchen ABC
On March 31, 2025, the Board determined and approved that it is advisable and in the best interests of the Company and the Company’s stockholders to effect the Assignment. In accordance with California state law, on June 16, 2025, the Company assigned all of its right, title, interest in, and custody and control of each Subsidiary’s property to the Assignee, such that, as of June 16, 2025, the Assignee succeeded to all of each Subsidiary’s right, title and interest in and to the respective ABC Assets. Upon the completion of the Assignment, the Assignee obtained sole control over the ABC Assets and each Subsidiary no longer operates its business or controls the liquidation or distribution of its assets or the resolution of claims. The Assignment is a judicial insolvency procedure, which was commenced by each Subsidiary entering a contractual assignment for the benefit of creditors on June 16, 2025, that effectuates the assignment, grant, conveyance, transfer, and setting over to the Assignee, in trust, of all of the ABC Assets. The Assignee liquidated the property through an auction sale and distributed the proceeds to the Subsidiaries’ creditors according to their respective priorities at law to satisfy the Subsidiaries’ obligations, in accordance with the rules and regulations of the State of California.
Reverse Stock Split
On April 29, 2025, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware to effect a 1-for-25 reverse stock split of the shares of the Company’s Common Stock, either issued and outstanding or held by the Company as treasury stock, effective as of 4:05 p.m. (New York time) on April 30, 2025 (the “Reverse Stock Split”) and began trading on a Reverse Stock Split-adjusted basis on Nasdaq on May 1, 2025. All share amounts have been retroactively adjusted for the Reverse Stock Split.
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Nasdaq Listing Requirements
On May 15, 2024, the Company received notice from the Listing Qualifications Staff of Nasdaq (the “Staff”) 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 “Rule”). The letter also indicated that the Company was provided with a compliance period until November 11, 2024, in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A).
On November 12, 2024, the Company received notice from the Staff granting the Company’s request for a 180-day extension to regain compliance with the Rule, or, until May 12, 2025 (the “Compliance Period”). In order to regain compliance with Nasdaq’s minimum bid price requirement, the Company’s Common Stock must maintain a minimum closing bid price of $1.00 for at least ten consecutive business days during the Compliance Period. On May 6, 2025, the Company addressed these concerns before a Nasdaq Hearings Panel (the “Panel”).
On March 26, 2025, the Company received a letter (the “March 2025 Letter”) from the Staff notifying the Company that the Company’s Common Stock had a closing bid price of $0.10 or less for ten consecutive trading days, and, accordingly, the Company is subject to the provisions contemplated under Nasdaq Listing Rule 5810(c)(3)(A)(iii) (the “Low Bid Price Listing Rule”) which the Company addressed before the Panel.
On April 8, 2025, Nasdaq notified the Company that it did not comply with the $2.5 million minimum stockholders’ equity requirement, as set forth in Nasdaq Listing Rule 5550(b)(1). Pursuant to Nasdaq Listing Rule 5810(d), this deficiency became an additional basis for delisting, and as such, the Company addressed these concerns before the Panel on May 6, 2025.
On April 28, 2025, the Company received a letter from the Staff indicating that the Staff had public interest concerns regarding the Company’s public offering of securities that closed on February 19, 2025, which serves as an additional basis for delisting the Company’s securities pursuant to Nasdaq Listing Rule 5810(d) (the “Matter”) and the Company addressed these concerns before the Panel on May 6, 2025.
On May 20, 2025, the Company received a letter (the “Letter”) from the Panel indicating that the Panel has determined to delist the Company’s securities from Nasdaq as a result of the foregoing. Pursuant to the Letter, the Panel determined to deny the Company’s request to continue its listing on Nasdaq and the Company’s Common Stock was suspended at the open of trading on May 22, 2025. Following the suspension of trading on Nasdaq, the Company’s Common Stock continues trade publicly on the OTC Markets under its existing symbol “PTPI” beginning on May 22, 2025.
On November 3, 2025, Nasdaq notified the Company that, on November 7, 2025, it would announce the delisting of the Company’s Common Stock. Since July 1, 2025, the Company’s Common Stock has been trading on the OTCID® Basic Market (the “OTCID”) under the symbol “PTPI.” Nasdaq filed a Form 25 with the SEC on November 7, 2025, to complete the delisting in accordance with Rule 12d2-2 promulgated under the Exchange Act. The delisting became effective ten days after the date the Form 25 was filed.
Critical Accounting Estimates
The preparation of the consolidated financial statements requires us to make assumptions, estimates and judgments that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Certain of our more critical accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. On an ongoing basis, we evaluate our judgments, including but not limited to those related to income taxes, litigation, and contingencies. We use historical experience and other assumptions as the basis for our judgments and making these estimates. Because future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Any changes in those estimates will be reflected in our consolidated financial statements as they occur. The Company did not have any critical accounting estimates for the year ended December 31, 2025.
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Revenue Recognition
The Company does not expect to generate revenue unless and until we successfully complete development of our products and/or services and obtain required regulatory approvals, enter into commercial arrangements, or otherwise commence revenue-generating operations. There can be no assurance as to when, or if, we will generate revenue. Accordingly, no revenue has been recognized for any period presented in this Annual Report on Form 10-K.
Results of Operations
Years ended December 31, 2025, and December 31, 2024
The following table sets forth a summary of our statements of operations for the years ended December 31, 2025, and 2024:
| | | | | | |
| | For the Year Ended | ||||
| | December 31, | ||||
| | 2025 | | 2024 | ||
Operating expenses: | |
| | |
| |
Selling, general and administrative | |
| 4,641,350 | |
| 4,626,943 |
Total operating expenses | |
| 4,641,350 | |
| 4,626,943 |
| | | | | | |
Loss from operations | |
| (4,641,350) | |
| (4,626,943) |
| | | | | | |
Other income (expense): | | | | | | |
Warrant issuance costs | | | (10,420,982) | | | — |
Change in fair value of derivative liability | |
| — | |
| 3,550,000 |
Change in fair value of warrant liability | | | 10,305,357 | | | — |
Interest income | |
| 256,933 | |
| 371,769 |
Total other income | | | 141,308 | | | 3,921,769 |
| | | | | | |
Loss before income taxes | | | (4,500,042) | | | (705,174) |
Provision for income taxes | | | — | | | — |
Loss from continuing operations, net of tax | |
| (4,500,042) | |
| (705,174) |
| | | | | | |
Gain from assignment of subsidiaries and Vivus settlement | | | 6,973,302 | | | — |
Loss from discontinued operations, net of tax | | | (559,665) | | | (13,613,616) |
| | | | | | |
Net Income (loss) | | $ | 1,913,595 | | $ | (14,318,790) |
Operating Expenses
Selling, general and administrative expenses for the years ended December 31, 2025, and December 31, 2024, were $4,641,350 and $4,626,943, respectively. Selling, general and administrative expenses include administrative and corporate expenses.
Selling, general and administrative expenses increased by $14,407 or 0.3% during the year ended December 31, 2025, compared to the year ended December 31, 2024. Increased selling general and administrative expenses were primarily driven by increased professional service fees of $113,223, increased stock-based compensation expense of $107,419, and increased payroll and benefits expenses of $41,088, partially offset by decreased franchise taxes of $200,824 and decreased other operating expenses of $46,499.
Warrant Issuance Costs
Warrant issuance costs for the years ended December 31, 2025, and December 31, 2024, were $10,420,982 and $0, respectively. The warrant issuance costs of $10.4 million were associated with the February 2025 Public Offering (as defined herein).
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Change in Fair Value of Derivative Liability
For the years ended December 31, 2025, and December 31, 2024, the Company recorded gains of $0.0 million and $3.6 million, respectively, for the change in fair value of the derivative liability. The gain in 2024 is related to the decrease in the fair value of a derivative liability established for certain bifurcated features of the Series A Preferred Stock issued in the July 2023 Private Placement.
Change in Fair Value of Warrant Liability
For the years ended December 31, 2025, and December 31, 2024, the Company recorded a gain of approximately $10.3 million and $0.0 million, respectively, for the change in fair value of the warrant liability. The gain in 2025 is related to the decrease in fair value of the Series Warrants issued in the Public Offering.
Interest Income
Interest income for the years ended December 31, 2025, and December 31, 2024, was $256,933 and $371,769, respectively. Petros invested its cash in money market securities during 2025 and 2024.
Gain from assignment of subsidiaries and Vivus settlement
For the years ended December 31, 2025, and December 31, 2024, the Company recorded a gain of $7.0 million and $0.0 million, respectively, for the disposal of assets and the settlement with Vivus. The gain in 2025 is related to the assignment of the net liabilities of the Subsidiaries on June 15, 2025.
Loss on Discontinued Operations
For the years ended December 31, 2025, and December 31, 2024, the Company recorded losses of $0.6 million and $13.6 million, respectively, from discontinued operations.
Liquidity and Capital Resources
General
Cash and cash equivalents totaled $5,136,722 at December 31, 2025, compared to $1,718,645 at December 31, 2024.
We have experienced net losses and negative cash flows from operations since our inception. As of December 31, 2025, we had cash of $5.1 million, working capital of $2.9 million, and an accumulated deficit of $111.3 million. Our plans include, or may include, utilizing our cash and cash equivalents on hand, as well as exploring additional ways to raise capital in addition to increasing cash flows from operations.
To date, our principal sources of capital used to fund our operations have been the revenues from product sales, private sales, registered offerings and private placements of equity securities. 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 audited annual consolidated financial statements are issued. For further information, see the section titled “Going Concern” above.
Metuchen ABC
On March 31, 2025, the Board determined and approved that it is advisable and in the best interests of the Company and the Company’s stockholders to effect the Assignment. In accordance with California state law, on June 16, 2025, the Company assigned all of its right, title, interest in, and custody and control of each Subsidiary’s property to the Assignee, such that, as of June 16, 2025, the Assignee succeeded to all of each Subsidiary’s right, title and interest in and to the respective ABC Assets. Upon the completion of the Assignment, the Assignee obtained sole control over the ABC Assets and each Subsidiary no longer operates its business or controls the liquidation or distribution of its assets or the resolution of claims. The Assignment is a judicial insolvency procedure, which was commenced by each Subsidiary entering a contractual assignment for the benefit of creditors on June 16, 2025, that effectuates the assignment, grant, conveyance, transfer, and setting over to the Assignee, in trust, of all of the ABC Assets. The Assignee liquidated the property through
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an auction sale and distributed the proceeds to the Subsidiaries’ creditors according to their respective priorities at law to satisfy the Subsidiaries’ obligations, in accordance with the rules and regulations of the State of California. If any proceeds remain and costs associated with the liquidation process have been satisfied, any remaining proceeds will be distributed to the Subsidiaries’ equity holder, which is the Company.
February 2025 Equity Financing
On February 17, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional and accredited investors (collectively, the “Investors”) for the issuance and sale, in a best efforts public offering (the “Public Offering”), of (i) 558,000 units (the “Units”), each Unit consisting of one share (the “Shares”) of the Company’s Common Stock, one Series A Warrant (the “Series A Warrants”) to purchase 0.25 share of Common Stock (the “Series A Warrant Shares”) and one Series B Warrant (the “Series B Warrants,” and together with the Series A Warrants, the “Series Warrants”) to purchase one shares of Common Stock (the “Series B Warrant Shares” and, together with the Series A Warrant Shares, the “Series Warrant Shares”) and (ii) 1,042,000 pre-funded units (the “Pre-Funded Units”), each Pre-Funded Unit consisting of one pre-funded warrant (the “Pre-Funded Warrants”) to purchase one share of Common Stock (the “Pre-Funded Warrant Shares”), one Series A Warrant and one Series B Warrant. The public offering price was $6.00 per Unit and $5.9975 per Pre-Funded Unit. The Offering closed on February 19, 2025. The initial exercise price of each of the Series A Warrants and the Series B Warrants was $12.00 per share of Common Stock, which was subsequently adjusted as set forth herein. The aggregate gross proceeds from the Offering were approximately $9.6 million before deducting estimated offering expenses payable by the Company. The Company intends to use the net proceeds from the offering for working capital and general corporate purposes.
In connection with the Company’s Reverse Stock Split, the exercise price of the Series B Warrants was adjusted to $0.4883 per share and the number of shares of Common Stock issuable upon exercise of the Series B Warrants was adjusted to 13,105,802 shares pursuant to the full ratchet anti-dilution provisions contained in the Series Warrants. As the Series B Warrants were classified as liabilities upon issuance, the changes in fair value as a result of these adjustments were recognized in earnings during the year ended December 31, 2025.
During April 2025, the Company modified the Series A Warrants to adjust the exercise price to $0.36625 per 0.25 share, and the number of Series A Warrants to 13,105,802 which are exercisable into 3,276,451 shares of Common Stock (the “Series A Warrant Modification”). As a result of the Series A Warrant Modification, the Company recognized the change in the fair value of the Series A Warrants as a deemed dividend in the amount of approximately $3.03 million during the year ended December 31, 2025.
The Company valued the deemed dividend in connection with the Series A Warrant Modification as the difference between: (a) the modified fair value of the Series A Warrants in the amount of approximately $3.31 million and (b) the fair value of the original award prior to the modification of approximately $0.34 million. The fair value of the Series A Warrants before the Series A Warrant Modification was estimated utilizing the Black Scholes model and the following key inputs and assumptions: the number of the Series A Warrants totaling 1,600,000; the exercise price of $3.00 per 0.25 share; dividend yield of 0%; remaining term of 4.95 years; equity volatility of 129%; and a risk-free interest rate of 3.7%. The fair value of the Series A Warrants after the effect of the Series A Warrant Modification was estimated utilizing the Black Scholes model and the following key inputs and assumptions: the number of the Series A Warrants totaling 13,105,802; the exercise price of $0.36625 per 0.25 share; dividend yield of 0%; remaining term of 4.95 years; equity volatility of 129%; and a risk-free interest rate of 3.7%.
The exercisability of the Series Warrants was subject to receipt of such stockholder approval was required by the applicable rules and regulations of the Nasdaq Capital Market LLC, including, but not limited to, with respect to (i) the issuance of all of the shares of Common Stock issuable upon exercise the Series Warrants in accordance with their terms (including adjustment provisions set forth therein), and (ii) to consent to any adjustment to the exercise price or number of shares of Common Stock underlying the Series Warrants in the event of a Share Combination Event and Dilutive Issuance, each as defined in the Series Warrants (collectively, the “Warrant Stockholder Approval”). The Company agreed to use its reasonable best efforts to obtain such approval within 60 days from the closing of the Offering, and agreed to cause an additional stockholder meeting to be held every 90 days thereafter until such Warrant Stockholder Approval is obtained. The Series B Warrants specifically can be settled by way of an alternative cashless exercise after stockholder approval is obtained, in which the Series B Warrant holders can receive three times the number of shares of Common Stock that would be issuable under a cash exercise. The Warrant Stockholder Approval was obtained at the Company’s special meeting of stockholders held on April 10, 2025. Subsequent to March 31, 2025, and pursuant to the terms of the Series Warrants, upon receipt of the Warrant Stockholder Approval, the Floor Price (as defined in the Series Warrants) was adjusted to $1.465 per share.
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The Series B Warrants became exercisable beginning on the first trading day following the date of Warrant Stockholder Approval (the “Initial Exercise Date.”). Holders of the Series B Warrants may effect an “alternative cashless exercise” at any time while the Series B Warrants are outstanding following the Initial Exercise Date. Under the alternative cashless exercise option, a holder of a Series B Warrant has the right to receive an aggregate number of shares equal to the product of (i) the aggregate number of shares of Common Stock that would be issuable upon a cash rather than a cashless exercise of the Series B Warrant and (ii) 3.0.
Subject to certain limitations described in the Pre-Funded Warrants, the Pre-Funded Warrants were immediately exercisable and could have been exercised at a nominal consideration of $0.0001 per share any time until all of the Pre-Funded Warrants were exercised in full. A holder did not have the right to exercise any portion of the Series Warrants or the Pre-Funded Warrants if the holder (together with its affiliates) would have beneficially owned in excess of 4.99% or 9.99%, respectively (or at the election of the holder of the Series Warrants, 9.99%) of the number of shares of Common Stock outstanding immediately after having given effect to the exercise, as such percentage ownership was determined in accordance with the terms of the Series Warrants or the Pre-Funded Warrants, respectively. However, upon notice from the holder to the Company, the holder could have increased the beneficial ownership limitation pursuant to the Series Warrants, which may not have exceeded 9.99% of the number of shares of Common Stock outstanding immediately after having given effect to the exercise, as such percentage ownership was determined in accordance with the terms of the Series Warrants, provided that any increase in the beneficial ownership limitation would not have taken effect until 61 days following notice to the Company.
In connection with the Public Offering, (i) the conversion price of the Series A Preferred Stock was adjusted to $6.00 per share pursuant to the full ratchet anti-dilution provisions contained in the Certificate of Designations and, (ii) the exercise price of the Warrants was adjusted to $6.00 per share and the number of shares of Common Stock issuable upon exercise of the Warrants was adjusted proportionally to 2,700,000 shares pursuant to the full ratchet anti-dilution provisions contained in the Warrants (the “Public Offering Warrant Adjustment”). In connection with the Company’s 1-for-25 Reverse Stock Split and pursuant to the share combination event adjustment provisions in the Series A Certificate of Designations, the conversion price of the Series A Preferred Stock was further adjusted to $0.1269.
During April 2025, the Company modified the Warrants to adjust the exercise price to $0.1269 per share and the number of shares of Common Stock issuable upon exercise of the Warrants to 127,659,584 shares (the “April 2025 Modification”).
As a result of the Public Offering Warrant Adjustment and the April 2025 Modification, the Company recognized the change in the fair value of the Warrants as a deemed dividend in the amount of approximately $41.6 million during the year ended December 31, 2025. The Company valued the deemed dividend in connection with the Public Offering Warrant Adjustment as the difference between: (a) the modified fair value of the Warrants in the amount of approximately $9.1 million and (b) the fair value of the original award prior to the modification of approximately $0.7 million. The fair value of the Warrants before the effect of the Public Offering Warrant Adjustment was estimated utilizing the Black Scholes model using the following key inputs and assumptions: the number of shares issuable upon exercise of the Warrants totaling 288,000 shares; the exercise price of $56.25 per share; dividend yield of 0%; %; remaining term of 3.40 years; equity volatility of 165.0%; and a risk-free interest rate of 4.3%. The fair value of the Warrants after the effect of the Public Offering Warrant Adjustment was estimated utilizing the Black Scholes model and the following key inputs and assumptions: the number of shares issuable upon exercise of the Warrants totaling 2,700,000 shares; the exercise price of $6.00 per share; dividend yield of 0%; remaining term of 3.40 years; equity volatility of 165.0%; and a risk-free interest rate of 4.3%. The Company valued the deemed dividend in connection with the April 2025 Modification as the difference between: (a) the modified fair value of the Warrants in the amount of approximately $33.6 million and (b) the fair value of the original award prior to the modification of approximately $0.5 million. The fair value of the Warrants before the effect of the April 2025 Modification was estimated utilizing the Black Scholes model using the following key inputs and assumptions: the number of shares issuable upon exercise of the Warrants totaling 2,700,000 shares; the exercise price of $6.00 per share; dividend yield of 0%; remaining term of 3.20 years; equity volatility of 140.0%; and a risk-free interest rate of 3.6%. The fair value of the Warrants after the effect of the April 2025 Modification was estimated utilizing the Black Scholes model and the following key inputs and assumptions: the number of shares issuable upon exercise of the Warrants totaling 127,659,584 shares; the exercise price of $0.1269 per share; dividend yield of 0%; remaining term of 3.20 years; equity volatility of 140.0%; and a risk-free interest rate of 3.6%.
Dawson James Securities, Inc. (“Dawson”) acted as the Company’s exclusive placement agent in connection with the Public Offering, pursuant to that certain engagement letter, dated as of January 24, 2025, between the Company and Dawson (the “Engagement Letter”). Pursuant to the Engagement Letter, the Company agreed to pay Dawson a cash fee equal to 8.0% of the aggregate gross proceeds of the Public Offering and reimbursed certain expenses and legal fees.
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The aggregate gross proceeds from the Public Offering were approximately $9.6 million before deducting estimated offering expenses payable by the Company. The Company intends to use the net proceeds from the offering for working capital and general corporate purposes.
The Company assessed the Pre-Funded Warrants and Series A Warrants under ASC 480 and ASC 815 and determined that the Pre-Funded and Series A Warrants met the requirements to be classified in stockholders’ equity. However, as discussed in the following paragraph, as the fair value of the Series B Warrants exceeded the proceeds received from the Public Offering, and thus the Pre-Funded Warrants and Series A Warrants were recorded at their residual fair value of $0 upon issuance.
Transaction costs incurred attributable to the Series B Warrants of approximately $10.4 million were expensed immediately upon issuance, of which approximately $1.1 million represents cash broker and legal fees, and approximately $9.3 million represents the excess of the issuance date fair value of the Series B Warrants over cash proceeds.
July 2023 Private Placement
On July 13, 2023, we entered into the Purchase Agreement with certain accredited investors (the “Investors”), pursuant to which we agreed to sell in a private placement to the Investors (i) an aggregate of 15,000 shares of our newly-designated Series A Preferred Stock initially convertible into up to 266,667 shares of our Common Stock (ii) Warrants to acquire up to an aggregate of 266,667 shares of Common Stock.
Series A Preferred Stock
The terms of the Series A Preferred Stock are as set forth in the form of Certificate of Designations. The Series A Preferred Stock is convertible into shares of Common Stock (the “Conversion Shares”) at the election of the holder at any time at an initial conversion price of $56.25 (the “Conversion Price”). The Conversion Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Conversion Price (subject to certain exceptions).
Pursuant to the Certificate of Designations and prior to the November 2024 Certificate of Amendment (as defined below) and the January 2025 Certificate of Amendment (as defined below), we were initially required to redeem the Series A Preferred Stock in 13 equal monthly installments, which commenced on November 1, 2023.
On November 13, 2024, the Company entered into an Amendment Agreement with the Required Holders (as defined in the Certificate of Designations), pursuant to which, the Required Holders agreed to (i) amend the Certificate of Designations, by filing a Certificate of Amendment with the Secretary of State of the State of Delaware (the “November 2024 Certificate of Amendment”), (ii) defer any payment amounts that have accrued and that are unpaid as of November 13, 2024, pursuant to the Certificate of Designations, to January 15, 2025, and (iii) waive any breach or violation of the Purchase Agreement, the Certificate of Designations, or the Warrants resulting from the Company’s failure to pay such outstanding amounts (the “November 2024 Certificate of Amendment”). The November 2024 Certificate of Amendment amends the Certificate of Designations to, (i) extend the maturity date to January 15, 2025, (ii) modify the schedule of Installment Dates (as defined in the Certificate of Designations), and (iii) adds an additional restrictive covenant to the Certificate of Designations requiring the Company from November 13, 2024 until January 15, 2025, to maintain unencumbered, unrestricted cash and cash equivalents on hand in amount equal to at least $1,500,000. The November 2024 Certificate of Amendment was filed with the Secretary of State of the State of Delaware, effective as of November 13, 2024.
On January 23, 2025, the Company entered into an Amendment Agreement with the Required Holders (as defined in the Certificate of Designations), pursuant to which, the Required Holders agreed to (i) amend the Certificate of Designations of the Company’s Series A Preferred Stock by filing a Certificate of Amendment to the Certificate of Designations (the “January 2025 Certificate of Amendment”) with the Secretary of State of the State of Delaware, (ii) defer any payment amounts that have accrued and that are unpaid as of January 23, 2025, pursuant to the Certificate of Designations, to February 15, 2025, and (iii) waive any breach or violation of the Purchase Agreement, the Certificate of Designations, or the Warrants resulting from the Company’s failure to pay such outstanding amounts. The January 2025 Certificate of Amendment amends the Certificate of Designations to, (i) extend the maturity date to February 15, 2025, (ii) modify the schedule of Installment Dates (as defined in the Certificate of Designations), (iii) amends the restrictive covenant to the Certificate of Designations requiring the Company from January 15, 2025 until February 15, 2025, to maintain unencumbered, unrestricted cash and cash equivalents on hand in amount equal to at least $500,000, and (iv) amends the restrictive covenant relating to
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the change in nature of the Company’s business, such that such covenant does not apply to the Company’s change in sales strategy related to the Company’s Stendra® avanafil and product development strategy as it relates to the development and commercialization of a proprietary platform focused on prescription medication to over-the-counter switch solutions. The January 2025 Certificate of Amendment was filed with the Secretary of State of the State of Delaware, effective as of January 24, 2025.
On March 30, 2025, the Company entered into an Amendment Agreement (the “March 2025 Amendment Agreement”) with the Required Holders (as defined in the Certificate of Designations), pursuant to which, the Required Holders agreed to (i) amend the Certificate of Designations of the Company’s Series A Preferred Stock by filing a Certificate of Amendment to the Certificate of Designations (the “March 2025 Certificate of Amendment”) with the Secretary of State of the State of Delaware, (ii) defer any payment amounts that have accrued and that are unpaid as of the date of the March 2025 Amendment Agreement, pursuant to the Certificate of Designations, to July 15, 2025, and (iii) waive any breach or violation of the Purchase Agreement, the Certificate of Designations, or the Warrants resulting from the Company’s failure to pay such outstanding amounts. The March 2025 Certificate of Amendment amends the Certificate of Designations to, (i) extend the maturity date to July 15, 2025, and (ii) modify the schedule of Installment Dates (as defined in the Certificate of Designations). The March 2025 Certificate of Amendment was filed with the Secretary of State of the State of Delaware, effective as of March 31, 2025.
The amortization payments due upon redemptions are payable, at our election, in cash at 107% of the Installment Redemption Amount (as defined in the Certificate of Designations), or subject to certain limitations, in shares of Common Stock valued at the lower of (i) the Conversion Price then in effect and (ii) the greater of (A) 80% of the average of the three lowest closing prices of the Common Stock during the thirty trading day period immediately prior to the date the amortization payment is due or (B) $9.90 or such lower amount as permitted, from time to time, by the Nasdaq Stock Market, subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events.
The holders of the Series A Preferred Stock are entitled to dividends of 8% per annum, compounded monthly, which are payable, at our option, in cash or shares of Common Stock, or in a combination thereof, in accordance with the terms of the Certificate of Designations. Upon the occurrence and during the continuance of a Triggering Event (as defined in the Certificate of Designations), the Series A Preferred Stock will accrue dividends at the rate of 15% per annum. In connection with a Triggering Event, each holder of Series A Preferred Stock will be able to require us to redeem in cash any or all of the holder’s Series A Preferred Stock at a premium set forth in the Certificate of Designations. Upon conversion or redemption, the holders of the Series A Preferred Stock are also entitled to receive a dividend make-whole payment.
The event of default under the Settlement Agreement and the Security Agreement with Vivus existing and continuing by virtue of Metuchen’s failure to pay the Installment (as defined in the Promissory Note) that was due October 1, 2024, constitutes a Triggering Event pursuant to the terms of the Certificate of Designations. As a result, the dividend rate of the Series A Preferred Stock was automatically increased to 15% per annum beginning on October 1, 2024.
During the year ended December 31, 2024, the Company experienced an Equity Conditions Failure in which the Company’s average stock price during the Installment Conversion Price Measuring Period (as defined in the Certificate of Designations) corresponding to the September 1, 2024, and October 1, 2024, and November 1, 2024, installments (the “Affected Installments”) was below the Floor Price (as defined in the Certificate of Designations) (the “Floor Price Condition”). As a result of the Floor Price Condition, the Company is required to redeem the Affected Installments as well as any previously deferred installment amounts at a 125% premium. Accordingly, the Company recorded an additional liability for penalty premiums totaling $697,504 (the “ECF Premiums”) as of December 31, 2024, related to the Floor Price Condition, which is included in Accrued Series A Convertible Preferred payments payable on the accompanying consolidated balance sheet, and a corresponding reduction in additional paid-in capital for the year ended December 31, 2024, which was recognized as a deemed dividend.
On October 11, 2024, the Company entered into an Amendment Agreement with the Required Holders (as defined in the Certificate of Designations) pursuant to which, the Required Holders agreed to amend the Certificate of Designations of the Company’s Series A Preferred Stock, by filing a Certificate of Amendment with the Secretary of State of the State of Delaware (“October 2024 Certificate of Amendment”). The October 2024 Certificate of Amendment amends the Certificate of Designations to, among other things, provide that, except as required by applicable law, the holders of the Series A Preferred Stock will be entitled to vote with holders of the Common Stock on an as converted basis based on the Stated Value (as defined in the Certificate of Designations) of preferred shares held and the conversion price in effect, subject to certain beneficial ownership limitations. The October 2024 Certificate of Amendment was filed with the Secretary of State of the State of Delaware, effective as of October 11, 2024.
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During the year ended December 31, 2024, the Company recorded a gain of $3,550,000 related to the change in fair value of the derivative liability related to the bifurcated embedded derivative within the Series A Preferred Stock which is recorded in other income (expense) on the Consolidated Statement of Operations and reflects a derivative liability of $0 at December 31, 2024, as the Company had redeemed, converted, or accrued for redemption all Series A Preferred Shares as of December 31, 2024.
As of December 31, 2024, the Company has notified the investors of its intention to redeem the remaining installments due in cash and recorded a liability of $1,909,496 representing the cash payable to investors which includes $853,185 of the stated value of the Series A Preferred Shares, $314,998 of accrued dividends payable, and $741,313 for the cash premiums (inclusive of the ECF Premiums) which was recognized as a deemed dividend. During the year ended December 31, 2024, the Company has redeemed an aggregate 10,022 Series A Preferred Shares for cash of $6,234,087 and issued 283,070 shares of Common Stock, elected pursuant to the terms of the Certificate of Designations, worth $6,791,325 in relief of the accrued Series A Preferred Stock payments payable. During the year ended December 31, 2024, the Company recognized $2,308,122 of preferred dividends.
During the year ended December 31, 2025, the Company issued 1,031,638 shares of Common Stock to settle $476,444 of the accrued Series A Preferred Stock payments payable. Additionally, during the year ended December 31, 2025, the Company made cash payments totaling $224,249 in settlement of the accrued Series A Preferred Stock payments payable. During the year ended December 31, 2025, the Company recognized additional Series A Preferred Stock dividends totaling $973,984.
As of December 31, 2025, we have redeemed, converted or accrued for redemption all 15,000 shares of Series A Preferred Stock.
We are subject to certain affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends (other than dividends pursuant to the Certificate of Designations), distributions or redemptions, and the transfer of assets, among other matters.
There is no established public trading market for the Series A Preferred Stock and we do not intend to list the Series A Preferred Stock on any national securities exchange or nationally recognized trading system.
Warrants
The Warrants became exercisable for shares of Common Stock (the “Warrant Shares”) immediately upon issuance, at an initial exercise price of $56.25 per share (the “Exercise Price”) and expire five years from the date of issuance. The Exercise Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Exercise Price (subject to certain exceptions). Upon any such price-based adjustment, the number of Warrant Shares issuable upon exercise of the Warrants will be increased proportionately. There is no established public trading market for the Warrants and we do not intend to list the Warrants on any national securities exchange or nationally recognized trading system.
On March 21, 2024, we entered into the Waiver and Amendment with the Investors in the Private Placement, effective as of December 31, 2023. The Waiver and Amendment, among other things, amended certain terms of the Warrants relating to the rights of the holders of the Warrants to provide that, in the event of a Fundamental Transaction (as defined in the Warrants) that is not within our control, including not approved by our Board of Directors, the holder of a Warrant shall only be entitled to receive from the Company or any successor entity the same type or form of consideration (and in the same proportion), at the Black Scholes Value of the unexercised portion of such Warrant, that is being offered and paid to the holders of our Common Stock in connection with the Fundamental Transaction.
Registration Rights
In connection with the Private Placement, we entered into a Registration Rights Agreement with the Investors (the “Registration Rights Agreement”), pursuant to which we agreed to file a resale registration statement (the “Registration Statement”) with the SEC to register for resale 200% of the Conversion Shares and the Warrant Shares promptly following the Closing Date (as defined in the Purchase Agreement), but in no event later than 30 calendar days after the effective date of the Registration Rights Agreement, and to have such Registration Statement declared effective by the Effectiveness Date (as defined in the Registration Rights Agreement). We filed a registration statement on Form S-3 covering such securities, which registration statement, as amended, was declared effective on September 18, 2023. Under the Registration Rights Agreement, we are obligated to pay certain liquidated damages to the investors if we fail to maintain the effectiveness of the Registration Statement.
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We will require additional financing to further develop and market our products, fund operations, and otherwise implement our business strategy at amounts relatively consistent with the expenditure levels disclosed above. We are exploring additional ways to raise capital, but we cannot assure you that we will be able to raise capital. Our failure to raise capital as and when needed would have a material adverse impact on our financial condition, our ability to meet our obligations, and our ability to pursue our business strategies. We expect to seek additional funds through a variety of sources, which may include additional public or private equity or debt financings, collaborative, or other arrangements with corporate sources, or through other sources of financing.
We are focused on expanding our service offering through internal development, collaborations, and through strategic acquisitions. We are continually evaluating potential asset acquisitions and business combinations. To finance such acquisitions, we might raise additional equity capital, incur additional debt, or both.
Cash Flows
The following table summarizes our cash flows from continuing operations for the years ended December 31, 2025, and 2024:
| | | | | | |
| | For the Years Ended | ||||
| | December 31, | ||||
| | 2025 | | 2024 | ||
Net cash used in operating activities | | $ | (4,743,381) | | $ | (4,054,565) |
Net cash used in investing activities | |
| — | |
| — |
Net cash provided by/(used in) financing activities | |
| 8,161,458 | |
| (6,234,087) |
Net increase (decrease) in cash – continuing operations | | $ | 3,418,077 | | $ | (10,288,652) |
Cash Flows Used in Operating Activities
Net cash used in operating activities for the year ended December 31, 2025, was $4,743,381, which primarily reflected our net loss of $1,422,333, which was inclusive of a loss from discontinued operations of $559,665, in addition to noncash adjustments to reconcile net loss to net cash used in operating activities of $6,553,043 consisting of the change in the fair value of the warrant liability, noncash warrant expense, and the gain on the assignment of the Subsidiaries and Vivus settlement, and changes in operating assets and liabilities of $172,336 largely driven by accounts payable and accrued expenses related to professional fees and employee bonuses and equity issuance fees.
Net cash used in operating activities for the year ended December 31, 2024, was $4,054,565, which primarily reflected our net loss of $14,318,790, which was inclusive of a loss from discontinued operations of $13,613,616 in addition to noncash adjustments to reconcile net loss to net cash used in operating activities of $3,082,785 consisting of the change in the fair value of the derivative liability, and changes in operating assets and liabilities of $266,606 largely driven by accounts payable and accrued expenses related to professional fees and employee bonuses and equity issuance fees.
Cash Flows Used in Investing Activities
Net cash used in investing activities for the year ended December 31, 2025, was $0.
Net cash used in investing activities for the year ended December 31, 2024, was $0.
Cash Flows Provided by/Used in Financing Activities
Net cash provided by financing activities was $8,161,458 for the year ended December 31, 2025, consisting of proceeds from the Public Offering, and the payment for the redemption of Series A Preferred Stock.
Net cash used in financing activities was $6,234,087 for the year ended December 31, 2024, consisting of redemptions of Series A Preferred Stock.
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Contingencies
Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our audited consolidated financial statements as of, and for the years ended December 31, 2025, and December 31, 2024, are included beginning on Page F-1 immediately following the signature page to this Annual Report. See Item 15 for a list of the consolidated financial statements included herein.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2025. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, because of certain weaknesses in internal control over financial reporting discussed below under “Management’s Annual Report on Internal Control over Financial Reporting,” our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed by us under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
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Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the Company’s principal executive officer and principal financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
| ● | Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of its assets; |
| ● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and |
| ● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of assets that could have a material effect on our consolidated financial statements. |
All internal control systems, no matter how well designed, have inherent limitations. Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
As of December 31, 2025, our management, including our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting based on the criteria for effective internal control over financial reporting established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and SEC guidance on conducting such assessments. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of U.S. generally accepted accounting principles (“GAAP”) as more fully described below. This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that may be considered to be material weaknesses. The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were:
| ● | Petros currently has an insufficient level of monitoring and oversight controls and does not enforce the implementation of key controls reflected on its internal control process matrices. This restricts the Company’s ability to gather, analyze and report information relative to the consolidated financial statements in a timely manner, including timely and adequate review of schedules and analysis used in the financial close process and the documentation and review of the selection and application of generally accepted accounting principles to significant non-routine transactions. The company should evaluate their significant processes to ensure the key controls are being carried out as designed; |
| ● | The sizes of Petros’ accounting and IT departments make it impracticable to achieve an appropriate segregation of duties; |
| ● | Petros does not have appropriate IT access related controls, specifically: |
| o | Elevated privileges such as administrator access to financial systems are not always assigned to individuals who do not bear responsibility for performing financial reporting or posting financial transaction (e.g., IT personnel). |
| o | There is no limit to the number of password attempts allowed before an account becomes locked out. |
| o | There is no maximum length of days a password can be in use. |
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The Company should implement mitigating controls that would prevent or detect (in a timely manner) unauthorized transactions that might result.
The material weaknesses resulted in misstatements that were identified and corrected prior to the issuance of the consolidated financial statements and there were no changes to previously released financial results.
Management’s Remediation Initiatives
In an effort to remediate identified material weaknesses and other deficiencies and enhance our internal controls, we implemented certain measures including additional closing procedures and other review and approval processes by our management team. The remediation efforts included the implementation of additional controls to ensure all risks have been addressed. Management further emphasized compliance with existing internal controls. Preparation of a GAAP disclosure checklist with appropriate review procedures ensured that accounting guidance and disclosure requirements have been addressed. Third party contracts with key service providers have been updated to ensure that all control activities performed are defined as to service levels and appropriate review procedures of these services are implemented.
As a result of the material weaknesses discussed above or of others, we may experience negative impacts on our ability to accurately report our results of operation and financial condition in a timely manner. If we do identify a material weakness in our internal control over financial reporting and are unsuccessful in implementing or following a remediation plan, or fail to update our internal control over financial reporting as our business evolves or to integrate acquired businesses into our controls system, if additional material weaknesses are found in our internal controls in the future, or if our external auditors cannot attest to the effectiveness of our internal control over financial review, we may not be able to timely or accurately report our financial condition, results of operations or cash flows or to maintain effective disclosure controls and procedures. If we are unable to report financial information in a timely and accurate manner or to maintain effective disclosure controls and procedures, we could be subject to, among other things, regulatory or enforcement actions by the SEC, an inability for us to be accepted for listing on any national securities exchange in the near future, securities litigation and a general loss of investor confidence, any one of which could adversely affect our business prospects and the market value of our Common Stock. Further, there are inherent limitations to the effectiveness of any system of controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. We could face additional litigation exposure and a greater likelihood of an SEC enforcement or other regulatory action if further restatements were to occur or other accounting-related problems emerge.
The weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Changes in Internal Control Over Financial Reporting
There were remediation efforts to improve our internal control over financial reporting that occurred during the year ended December 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. These remediation efforts primarily consist of improved adherence to existing internal controls.
Matters affecting our internal controls may cause us to be unable to report our financial information on a timely basis or may cause us to restate previously issued financial information, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules.
ITEM 9B.OTHER INFORMATION
During the year ended December 31, 2025, no director or Section 16 officer
ITEM 9C.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Board of Directors
The Petros Board of Directors (the “Board”) is currently composed of three members of the Board (each, a “Director”). Under the amended and restated Bylaws of the Company, the number of Directors will be fixed from time to time by resolution of the Board or the stockholders at an annual meeting of the stockholders, and Directors serve until the next annual election and their successors are duly elected and qualified, or until their earlier resignation, removal or death.
Below is a list of the names, ages as of April 15, 2026, and positions of the individuals who currently serve as our Directors.
Name | | Age | | Position |
|
Joshua N. Silverman | | 55 | | Executive Chairman | |
Bruce T. Bernstein | | 61 | | Director | |
Wayne R. Walker | | 66 | | Director | |
Director Biographies
Information concerning our Directors is set forth below. The biographical description of each Director includes the specific experience, qualifications, attributes and skills that led the Board to conclude that such person should serve as a Director.
Joshua N. Silverman — Mr. Silverman joined Petros as a Director and Vice Chairman of the Board in December 2020 and currently serves as the Company’s Executive Chairman of the Board since August 2025. Mr. Silverman currently serves as the managing member of Parkfield Funding LLC. Mr. Silverman has also served as Interim Chairman, Interim Chief Executive Officer and Interim President of PharmaCyte Biotech, Inc. (Nasdaq: PMCB) since October 2022, as a director since August 2022, and Chief Executive Officer, President, and Executive Chairman since August 13, 2025. Mr. Silverman was the co-founder, and a principal and managing partner of Iroquois Capital Management, LLC (“Iroquois”), an investment advisory firm. Since its inception in 2003 until July 2016, Mr. Silverman served as co-chief investment officer of Iroquois. While at Iroquois, he designed and executed complex transactions, structuring and negotiating investments in both public and private companies and has often been called upon by the companies to solve inefficiencies as they relate to corporate structure, cash flow, and management. From 2000 to 2003, Mr. Silverman served as co-chief investment officer of Vertical Ventures, LLC, a merchant bank. Prior to forming Iroquois, Mr. Silverman was a director of Joele Frank, a boutique consulting firm specializing in mergers and acquisitions. Previously, Mr. Silverman served as assistant press secretary to the president of the United States. In addition to Synaptogenix, Mr. Silverman has served as a director and acting Chief Executive Officer of AYRO, Inc. (Nasdaq: AYRO) since 2020; as Interim Chief Executive Officer, Interim President and Interim Chairman of PharmaCyte Biotech, Inc. (Nasdaq: PMCB); as director of MYMD Pharmaceuticals, Inc. (Nasdaq: MYMD) since September 2018. He previously served as a director of Marker Therapeutics, Inc. from 2016 until 2018 and Protagenic Therapeutics, Inc. from 2016 to 2022. Mr. Silverman received his B.A. from Lehigh University in 1992. Mr. Silverman’s financial, leadership, and operational expertise enable him to contribute valuable insights into strategic governance, operations and planning for the Company.
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Bruce T. Bernstein — Mr. Bernstein joined Petros as a Director in 2020. Mr. Bernstein has over thirty five years of experience in the securities industry, primarily as senior portfolio manager for two alternative finance funds as well as in trading and structuring of arbitrage strategies. Mr. Bernstein has served as President of Rockmore Capital, LLC since 2006, the manager of a direct investment and lending fund with peak assets under management of $140 million. Previously, he served as Co-President of Omicron Capital, LP, an investment firm based in New York, which he joined in 2001. Omicron Capital focused on direct investing and lending to public small cap companies and had peak assets under management of $260 million. Prior to joining Omicron Capital, Mr. Bernstein was with Fortis Investments Inc., where he was Senior Vice President in the bank’s Global Securities Arbitrage business unit, specializing in equity structured products and equity arbitrage and then President in charge of the bank’s proprietary investment business in the United States. Prior to Fortis, Mr. Bernstein was Director in the Equity Derivatives Group at Nomura Securities International specializing in cross-border tax arbitrage, domestic equity arbitrage and structured equity swaps. Mr. Bernstein started his career at Kidder Peabody, where he rose to the level of Assistant Treasurer. Mr. Bernstein also serves as Chairman of the Board of Directors of Xwell, Inc. (Formerly XpresSpa Holdings, Inc.) the leading airport spa company in the world, based in New York and on the Boards of TAO Synergies, Inc, formerly named Synaptogenix and Wrap Technologies, Inc. Mr. Bernstein holds a B.B.A. from City University of New York (Baruch). Mr. Bernstein’s banking, accounting and finance expertise enable him to contribute valuable insights into accounting and financial matters for the Company.
Wayne R. Walker — Mr. Walker joined Petros as a Director in 2020. Mr. Walker has over 35 years of experience in corporate governance, turnaround management, corporate restructuring and bankruptcy matters. In 1998, Mr. Walker founded Walker Nell Partners, Inc., an international business consulting firm, and has served as its president from its founding to the present. Before founding Walker Nell Partners, Inc., Mr. Walker worked for 15 years at the DuPont Company in Wilmington, Delaware in the Securities and Bankruptcy group, where he worked in the Corporate Secretary’s office and served as Senior Counsel. From 2025 to present, Mr. Walker has served as director of Pitney Bowes, Inc. (NYE: PBI), a technology company focused on digital shipping and mailing innovation. From 2022 to present, Mr. Walker has served as a director of Outdoor Holding Company, formerly AMMO, Inc., (Nasdaq: POWW), an online marketplace for firearms, hunting, and related products. From December 2020 to the present, Mr. Walker has served as a director of StableX Technologies, Inc., formerly AYRO, Inc. (Nasdaq: SBLX), a company focused on acquisition of and development of stable coin assets, infrastructure, and related technologies. From 2018 to 2023, Mr. Walker has served as a director of Pitcairn Company and as the Chair of its Compensation Committee. From 2018 to 2023, Mr. Walker served as a director of Wrap Technologies, Inc. including Chairman of the Board, Compensation, Nominations and Corporate Governance Committees. From 2013 to 2014, Mr. Walker served as chairman of the board of directors of BridgeStreet Worldwide, Inc., a global provider of extended corporate housing. From 2016 to 2018, Mr. Walker served as chairman of the board of directors of Last Call Operating Companies, an owner of various national restaurants. From 2013 to 2020, Mr. Walker served as chairman of the board of trustees of National Philanthropic Trust, a public charity. From 2018 to 2020, Mr. Walker served as Vice President of the Board of Education of the City of Philadelphia. Mr. Walker has also served on the board of directors for numerous other companies and foundations including Seaborne Airlines, Inc., Green Flash Brewery, Inc., and Eagleville Hospital and Foundation. Mr. Walker has a J.D. from Catholic University (Washington, DC) and a Bachelor of Arts from Loyola University (New Orleans). He is an attorney licensed by the State Bar of Georgia. He is a member of the State Bar Association of Georgia, American Bar Association, American Bankruptcy Institute and Turnaround Management Association. Mr. Walker was chosen as a director of the Company because of his extensive board experience.
Executive Officers
Below is a list of the names, ages as of April 15, 2026, positions, and a brief account of the business experience of the individuals who serve as our executive officers.
Name | | Age | | Position |
|
Joshua N. Silverman | | 55 | | Executive Chairman | |
Fady Boctor, MBA | | 48 | | President and Chief Commercial Officer | |
Mitchell Arnold, MBA | | 62 | | Vice President of Finance and Chief Accounting Officer | |
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Executive Officer Biographies
The principal occupation and business experience for at least the past five years for our executive officers is as follows:
Mr. Silverman’s biography is incorporated by reference from page 49 of this Annual Report.
Fady Boctor, M.B.A. — Mr. Boctor has served as President and Chief Commercial Officer of Petros since 2020. Mr. Boctor has over 20 years of experience in the pharmaceutical industry, across a wide array of functions including brand and portfolio marketing, sales channel optimization, product portfolio strategy development and new product launches. Mr. Boctor has driven significant revenue growth for mainstream men’s health product lines, rare/orphan disease therapeutics, and substance abuse rescue modalities. Mr. Boctor previously served as Vice President of Marketing at Metuchen Pharmaceuticals, a position he held since March 2019. From May 2017 to March 2019, Mr. Boctor served as Director of Marketing for Adapt Pharma, Inc. Prior to joining Adapt Pharma, Inc., Mr. Boctor held various roles at Endo International plc from Mar 2010 to May 2017, most recently holding the position of Senior Brand/Marketing Manager. Mr. Boctor holds a B.A. in International Relations from Hamline University, a Masters in Diplomacy from Norwich University and an M.B.A. from the University of Manchester Business School.
Mitchell Arnold, M.B.A. — Mitchell Arnold has served as the Vice President of Finance and Chief Accounting Officer of Petros since 2021. Mr. Arnold has served as Vice President of Finance of the Company since 2019. Mr. Arnold brings to the Company over 30 years of experience in organizational leadership in finance and accounting roles at both public and private companies, where he was successful in improving financial performance, cash flows, accounting processes, SOX compliance and ERP systems. Prior to joining the Company, from 2011 to 2018, Mr. Arnold served as Vice President of Financial Accounting at Akrimax Pharmaceuticals, LLC where he provided strategic guidance of accounting and finance, treasury management, risk management and insurance, information technology and facilities management. Mr. Arnold holds a Master of Business Administration degree in Finance from Temple University and a Bachelor of Science degree in Accounting from Pennsylvania State University.
There is no arrangement or understanding between any of the directors or officers identified above and any other person pursuant to which he was selected as a director or officer. None of the directors or officers identified above is, or has been, a participant in any transaction involving the Company, and is not a participant in any proposed transaction with the Company, in each case, required to be disclosed pursuant to Item 404(a) of Regulation S-K, other than as described in the “Certain Relationships and Related Transactions, and Director Independence” section below.
Director Independence
Our Board has reviewed the materiality of any relationship that each of our Directors and Director nominees has with Petros, either directly or indirectly. Our Common Stock is quoted on the OTC Pink Market operated by the OTC Markets Group Inc., which does not have director independence requirements. We also have not established our own definition for determining whether our director and nominees for directors are “independent” nor have we adopted any other standard of independence employed by any national securities exchange. :
Board Committees
Our Board has established four committees. Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are composed of at least two independent directors:
| ● | The Audit Committee consists of Mr. Bernstein, as Chairman, Mr. Silverman and Mr. Walker. |
| ● | The Compensation Committee consists of Mr. Silverman, as Chairman, Mr. Bernstein and Mr. Walker. |
| ● | The Nominating and Corporate Governance Committee consists of Mr. Walker, as Chairman, and Mr. Bernstein. |
| ● | The Budget and Strategy Committee consists of Mr. Bernstein, as Chairman, and Mr. Silverman. |
Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee has a written charter adopted by the Board; a current copy of each such charter is available in the “Investors & Press” section on our website, https://investors.petrospharma.com
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Audit Committee
Our Audit Committee provides oversight of our accounting and financial reporting process, the audit of our consolidated financial statements and our internal control function. Among other matters, the Audit Committee is responsible for the following:
| ● | appointment, compensation,retention and oversight the independent auditor’s services to the Company; |
| ● | reviewing the scope of the annual audit and non-audit services of the independent auditor; |
| ● | reviewing and discussing with management and the independent auditor the results of the annual audit and the review of our quarterly financial statements, including the disclosures in our annual and quarterly reports filed with the SEC; |
| ● | evaluating the independence of the independent auditors; |
| ● | evaluating and discussing with management the adequacy and effectiveness of the Company’s accounting and internal control policies and procedures; |
| ● | reviewing our risk assessment and risk management processes; and |
| ● | establishing and overseeing procedures for receiving, retaining and the treatment of complaints received by us regarding accounting, internal accounting controls or audit matters. |
All members of our Audit Committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC. Our Board has determined that Mr. Bernstein is an audit committee financial expert as defined under the applicable rules of the SEC. Two of the members of our Audit Committee are independent directors as defined under the applicable rules and regulations of the SEC. Mr. Silverman, a member of the Audit Committee, is not an independent director as defined under the applicable rules and regulations of the SEC.
Compensation Committee
The Compensation Committee, among other things, (i) oversees the Company’s compensation plans and practices with respect to the Company’s executive officers and directors, (ii) evaluates the performance of the executive officers of the Company, and (iii) administers the Company’s stock and incentive compensation plans and recommends changes in such plans to the Board as needed.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee assists the Board in, among other things; (i) identifying individuals qualified to become members of the Board with the goal of ensuring that the Board has the requisite expertise and that its membership consists of persons with sufficiently diverse and independent backgrounds; (ii) annually reviewing the Board’s committee structure; (iii) recommending that the Board select director nominees for election to the Board at the next annual meeting of stockholders or to fill any vacancy that occurs on the Board or any Board Committee; (iv) reviewing management development and succession plans for the executive officers and their direct reports; (v) overseeing the annual self-evaluations of the Board; (vi) developing and maintaining the Company’s corporate governance policies and practices, including identifying best practices; and (vii) reviewing and reassessing the Nominating and Corporate Governance Committee charter.
Nomination and Election of Directors
The Nominating and Corporate Governance Committee identifies and recommends to the Board the requisite skills and characteristics of individuals qualified to serve as members of the Board and recommends to the Board the director nominees for each annual meeting of stockholders. Both the Nominating and Corporate Governance Committee and the Board seek the talents and backgrounds that would be most helpful to Petros in selecting director nominees. The Board believes diversity of background provides for a variety of points of view, improves the quality of dialogue, and contributes to a more effective decision-making process. The Board also monitors the mix of specific experience, qualifications and skills of its directors in order to assure that the Board, as a whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure.
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The Nominating and Corporate Governance Committee has adopted a formal policy regarding stockholder recommendations of director nominees, available in the “Investor Relations” section on our website at http://www.petrospharma.com/investors. The Nominating and Corporate Governance Committee considers any timely submitted and qualified director candidates recommended by any security holder entitled to vote in an election of Directors. Stockholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee must do so by delivering a written recommendation to the Nominating and Corporation Governance Committee c/o Petros Pharmaceuticals, Inc., 1185 Avenue of the Americas, Third Floor, New York, New York 10036. The submission must set forth: (1) the name and address of the stockholder on whose behalf the submission is made; (2) the number and class of shares of the Company that are owned beneficially by such stockholder as of the date of the submission; (3) the name and address of the proposed candidate; and (4) the resume of the proposed candidate. The Nominating and Corporate Governance Committee evaluates all potential director nominees using the same criteria, regardless of the source of the nominee. Consistent with our core values and beliefs, our Board appreciates the value of diversity in all aspects of the Company, including at the Board level.
Pursuant to our By-Laws, nominations of persons for election to the Board at an annual meeting or at any special meeting of stockholders for the purpose of electing directors may be made by or at the direction of the by or at the direction of the Board (or any duly authorized committee thereof) or the Chairman of by the Board, or by any stockholder of record entitled to vote for the election of directors at the meeting who complies with the following notice procedures. Such nominations, other than those made by, or at the direction of, or under the authority of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Company by a stockholder of record at such time. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Company (a) in the case of an annual meeting, not less than 90 nor more than 120 days prior to the one-year anniversary of the date of the annual meeting of the previous year; provided, however, that if the annual meeting is called for a date that is not within 30 days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth day following the day on which notice of the date of the annual meeting was mailed or public disclosure of the date of the annual meeting was made, whichever first occurs; and (b) in the case of a special meeting of stockholders for the purpose of electing directors, not less than ninety (90) nor more than one hundred twenty (120) days prior to such special meeting, provided, however, that in the event that the special meeting is called for on a date that is less than ninety (90) days prior to the special meeting, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which the first public announcement of the date of the special meeting was made or the notice of the special meeting was mailed, whichever first occurs. Such stockholder’s notice to the Secretary must set forth as to each stockholder providing the notice of the nomination proposed to be made at the meeting, beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made, and any affiliate or associate of such stockholder or beneficial owner, (i) the name, age, nationality, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the class and number of shares of capital stock of the Company, if any, which are beneficially owned by the person and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A under the Securities and Exchange Act or other applicable law. The chair of the meeting may, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedures, and the defective nomination will be disregarded.
Budget and Strategy Committee
The Budget and Strategy Committee, among other things, works with management and advises the Board with respect to budgetary and strategic matters, reports to the Board its findings and recommendations as to what action the Company should take with respect to those matters.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to all of our employees, officers and directors (including our principal executive officer and principal financial officer and principal accounting officer). Our Code of Ethics is available to security holders in the “Investors & Press” section on our website, https://IRdirect.net/PTPI. We intend to disclose any amendments to, or waivers from, our Code of Ethics at the same website address provided above.
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Involvement in Certain Legal Proceedings
None of our directors or executive officers has been involved in any of the following events during the past ten years:
| ● | any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
| ● | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences); |
| ● | being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or |
| ● | being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
Family Relationships
There are no family relationships among our directors or executive officers.
Insider Trading Policy
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors and executive officers and each person who owns more than ten percent of a registered class of our equity securities (collectively, “Reporting Persons”) to file with the SEC initial reports of ownership and reports of changes in ownership of our Common Stock and our other equity securities. Reporting Persons are required by SEC regulation to furnish us with copies of all Section 16(a) forms that they file. Based solely on the Company’s review of the copies of the forms received by it during the fiscal year ended December 31, 2025 and written representations that no other reports were required, the Company believes that each person who, at any time during such fiscal year, was a director, officer or beneficial owner of more than ten percent of the Company’s Common Stock complied with all Section 16(a) filing requirements during such fiscal year.
ITEM 11.EXECUTIVE COMPENSATION
The Board is responsible for evaluating and approving the compensation of executive officers. The major elements of Petros’ compensation program include:
| ● | base salary; |
| ● | cash bonus incentive opportunities tied to Petros’ performance and certain employment agreements; |
| ● | retirement benefits through a qualified defined contribution scheme (such as a 401(k) plan in the United States); and |
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| ● | other benefit programs generally available to all U.S. and non-U.S. employees that are customary and appropriate for the country in which the employee is operating. |
Petros’ compensation objectives.
| | Description | | Performance/ Job Considerations | | Primary Objectives |
|
Base Salary | | Fixed cash amount. | | Increases based upon individual performance against goals, objectives and job criteria such as executive qualifications, responsibilities, role criticality, potential and market value. | | Recruit qualified executives or personnel. Retention of personnel. | |
Cash Incentive Opportunity | | Short-term incentive, annual bonus opportunities. | | Amount of actual payment based on achievement of corporate financial goals, key strategic and operating objectives. | | Promote achievement of short-term financial goals and strategic and operating objectives. | |
Retirement and Welfare Benefits | | 401(k) plan, health and insurance benefits. | | None, benefits offered to broad workforce. | | Recruit qualified employees. | |
Petros provides base salary based on the executive officers’ individual responsibilities and performance. Petros offers bonus opportunities to certain executive officers and employees based primarily on company performance. See “Employment Agreements” below. Petros’ compensation decisions and salary adjustments are generally evaluated on a calendar year basis.
On November 28, 2023, we adopted a Compensation Recovery Policy, which provides for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers.
Summary Compensation Table
The following table shows compensation awarded to, paid to or earned by (1) Petros’ principal executive officer, (2) Petros’ two most highly compensated executive officer other than the principal executive officer and (3) up to two individuals who would have qualified as one of Petros’ two most highly compensated executive officers other than the principal executive officer but for the fact that the individual was not serving as an executive officer of the Company at the end of the last completed fiscal year; during the fiscal years ended December 31, 2025 and 2024.
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Non-equity | | | | |
| | | | | | | | | | | | Incentive Plan | | | | |
| | | | | | | | Stock | | Option | | Compensation | | All Other | | |
Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Awards ($) (1) | | Awards ($) (2) | | ($) | | Compensation ($) (3) | | Total ($) (4) |
Joshua N. Silverman | | 2025 | | 321,250 | | 200,000 | | 271,000 | | — | | — | | — | | 792,250 |
Executive Chairman |
| 2024 |
| 100,000 |
| — | | — |
| — |
| — |
| — |
| 100,000 |
| | | | | | | | | | | | | | | | |
Fady Boctor |
| 2025 |
| 320,833 |
| 50,000 | | 121,950 |
| — |
| — |
| 35,421 |
| 528,204 |
President and Chief Commercial Officer |
| 2024 |
| 332,500 |
| 350,000 | | — |
| — |
| — |
| 57,961 |
| 740,461 |
| | | | | | | | | | | | | | | | |
Mitchell Arnold |
| 2025 |
| 231,000 |
| 25,000 | | 40,650 |
| — |
| — |
| 47,523 |
| 344,173 |
Vice President of Finance and Chief Accounting Officer |
| 2024 |
| 274,313 |
| 111,250 | | — |
| — |
| — |
| 52,729 |
| 438,292 |
| (1) | Mr. Boctor received restricted stock units of 18,000 shares and Mr. Arnold received restricted stock units of 6,000 shares. The shares were valued as of the grant date. |
| (2) | For awards of stock options, the aggregate grant date fair value is computed based on the Black-Scholes option pricing model using the fair value of the underlying shares at the measurement date. |
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| (3) | Amounts in this column reflect 401(k) contributions and insurance premiums (life, long term disability, short term disability, health, dental, and vision). For 2025, this represents: for Mr. Boctor, $4,301 for contributions under Petros’ 401(k) plan and $31,120 of insurance premiums; and for Mr. Arnold, $7,889 for contributions under Petros’ 401(k) plan and $39,634 of insurance premiums. For 2024, this represents: for Mr. Boctor, $10,350 for contributions under Metuchen’s 401(k) plan and $47,611 of insurance premiums; for Mr. Arnold, $10,350 for contributions under Petros’ 401(k) plan and $42,379 of insurance premiums. |
| (4) | In 2024, Mr. Silverman received a total of $100,000 in cash compensation payments in his role as Board Chairman. |
Employment Agreements
Joshua Silverman
On August 13, 2025, the Company entered into an executive compensation agreement (the “Employment Agreement”) with Mr. Silverman setting forth the terms and conditions of Mr. Silverman’s employment as the Company’s Executive Chairman. The Employment Agreement has a three-year initial term commencing on August 13, 2025, which term automatically renews each year for successive one-year terms, unless earlier terminated by either party in accordance with the terms of the Employment Agreement.
The Employment Agreement provides that Mr. Silverman will be entitled to receive an annual base salary of three hundred thousand dollars ($300,000), payable in accordance with the Company’s normal payroll practices. For each fiscal year during the employment period, Mr. Silverman is eligible to receive an annual bonus upon achievement of target objectives and performance criteria, payable on or before March 15 of the fiscal year following the fiscal year to which the bonus relates. The Employment Agreement also entitles Mr. Silverman to receive customary benefits and reimbursement for ordinary business expenses.
In connection with Mr. Silverman’s appointment, the Company agreed to grant Mr. Silverman long-term incentive awards under the Company’s long-term equity incentive plan (the “LTIP”) on such terms and conditions as determined by the Board and the Compensation Committee in their sole discretion. For each fiscal year during the employment period, Mr. Silverman shall receive annual long-term incentive awards under the LTIP of up to 300% of his base salary upon achievement of target objectives and performance criteria established by the Board in their sole discretion, subject to and governed by the terms and provisions of the LTIP as in effect from time to time and the award agreements evidencing such awards.
In the event Mr. Silverman’s employment is terminated by the Company for Cause (as defined in the Employment Agreement) or by Mr. Silverman without Good Reason (as defined in the Employment Agreement), Mr. Silverman will be entitled to: (i) any earned but unpaid base salary earned during his employment and applicable to all pay periods prior to the termination date, and (ii) any unpaid expense reimbursements and vested amounts and benefits in accordance with the terms of any applicable plan, program, corporate governance document, policy, agreement or arrangement of the Company (collectively, “Accrued Compensation”).
If Mr. Silverman’s employment is terminated prior to the end of the term by the Company without Cause or by Mr. Silverman for Good Reason, then, subject to certain conditions set forth in the Employment Agreement (including the execution and non-revocation of a general release of claims), Mr. Silverman will be entitled to: (i) Accrued Compensation; (ii) severance equal to two times the sum of (A) Mr. Silverman’s base salary in effect at the time his employment terminates and (B) the target bonus for the year of termination prorated based upon the number of days worked for the year of termination; and (iii) accelerated vesting of the unvested portion of any outstanding equity awards.
If Mr. Silverman’s employment is terminated prior to the end of the term by the Company without Cause or by Mr. Silverman for Good Reason within two (2) years after a Change in Control (as defined in the Employment Agreement) or within six (6) months prior to a Change in Control, Mr. Silverman will be entitled to: (i) Accrued Compensation; (ii) severance equal to three times the sum of (A) Mr. Silverman’s base salary in effect at the time his employment terminates and (B) the target bonus for the year of termination prorated based upon the number of days worked for the year of termination; and (iii) accelerated vesting of the unvested portion of any outstanding equity awards.
The Employment Agreement also contains customary provisions relating to, among other things, confidentiality and non-disparagement.
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Fady Boctor
On January 24, 2019, the Company provided an offer letter to Mr. Boctor. The offer letter provided for Mr. Boctor’s at-will employment and set forth his initial base salary as $250,000 per annum ($208,333 was paid pro-rata based on his start date of March 1, 2019), a signing bonus of $50,000, eligibility for an annual bonus with a target of 36% of his base salary and additional incentive bonuses, and eligibility to participate in the Company’s benefit plans generally. Mr. Boctor is subject to the Company’s standard confidentiality, non-competition and invention assignment agreement.
On December 11, 2020, and in connection with the commencement of Mr. Fady Boctor’s employment as the President and Chief Commercial Officer of Petros, the Company and Mr. Boctor entered into a Bonus Agreement (the “Bonus Agreement”), pursuant to which Petros agreed to award Mr. Boctor a bonus in the amount of $125,000 payable on December 15, 2020. The Bonus Agreement provides that in the event that Mr. Boctor is not employed by Petros on June 11, 2022, he shall be obligated to repay such amount to Petros, unless his employment was terminated by Petros without “Cause” or by Mr. Boctor for “Good Reason” as such terms are defined in the Bonus Agreement.
Effective as of February 19, 2021, the Company entered into an employment offer letter (the “Employment Offer Letter”) with Mr. Boctor, pursuant to which, Mr. Boctor will serve in an “at-will” capacity, at an initial base salary of $350,000 per annum. Mr. Boctor received a signing bonus in the amount of $250,000 (the “Signing Bonus”), payable in two equal installments of $125,000 each, the first of which was paid to Mr. Boctor in December 2020, and the second will be paid to Mr. Boctor as soon as practicable following May 1, 2021, provided that Mr. Boctor remains employed with the Company on such date. The Employment Offer Letter provides that in the event that Mr. Boctor does not remain employed by Petros on May 1, 2022, he shall be obligated to repay to Petros the Signing Bonus, unless his employment was terminated by Petros without “Cause” or by Mr. Boctor for “Good Reason” as such terms are defined in the Employment Offer Letter. Additionally, commencing in calendar year 2021, Mr. Boctor will be eligible to earn an annual cash bonus (the “Annual Bonus”) in respect of each calendar year that ends during the term of his employment, to be earned based on the achievement of performance objectives determined in the discretion of the Compensation Committee. Each Annual Bonus will be targeted at 100% of Mr. Boctor’s then-base salary. Mr. Boctor will be entitled to participate in all employee benefit plans, policies, programs or privileges made available to similarly situated employees of Petros. The Employment Offer Letter contains customary restrictive covenants and confidentiality obligations and provides that Mr. Boctor will be subject to non-competition and non-solicitation covenants during the term of his employment with Petros and for a period of one-year following Mr. Boctor’s separation from the Company under any circumstances.
In consideration of entering into the Employment Offer Letter, Mr. Boctor was granted an option to purchase up to 21,566 shares of the Company’s Common Stock, par value $0.0001 per share, at an exercise price of $37.40 per share (the “Options”). The Options vested 50% as of February 19, 2021, the date of grant, and the remainder vested in equal installments on the first and second anniversary thereof.
On December 21, 2023, we approved a one-time grant under our Amended and Restated 2020 Omnibus Incentive Compensation Plan (the “Plan”) to Mr. Boctor of: (i) 49,645 shares of our Common Stock; and (ii) options to purchase up to 109,066 shares of our Common Stock, with an exercise price of $1.41 per share. On the date of grant, 50% of the options vested, and the remaining options will vest upon the achievement of certain strategic goals during 2023 and 2024, provided that Mr. Boctor remains employed on the applicable vesting date.
On October 16, 2024, the Company entered into an amendment to the Employment Offer Letter (the “Offer Letter Amendment”), which, among other things, (i) allows Mr. Boctor to engage in other consulting or employment activities for direct or indirect remuneration, so long as such engagement or service does not create a conflict of interest with, or interfere with the performance of, his duties under the Employment Offer Letter or conflict with any covenants with the Company; (ii) amends the term of the Offer Letter, such that the Offer Letter terminated on December 31, 2024; and (iii) adjusts Boctor’s base salary from an annual rate of $350,000 to an annual rate of $280,000, effective as of October 16, 2024.
On June 1, 2025, the Company adjusted Mr. Boctor’s base salary from an annual rate of $280,000 to an annual rate of $350,000.
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Outstanding Equity Awards at 2025 Fiscal Year-End
The following table sets forth information concerning outstanding equity awards held by each of our named executive officers as of December 31, 2025.
| | | | | | | | | | | |
| | Option awards | |||||||||
| | | | | | Number of | | | | | |
| | | | Number of | | securities | | | | | |
| | | | securities | | underlying | | | | | |
| | Vesting | | underlying | | unexercised | | Option | | | |
| | Commencement | | unexercised | | options (#) | | Exercise | | Option | |
Name | | date | | options (#) exercisable | | unexercisable | | Price ($) | | Expiration Date | |
Joshua N. Silverman | | 04/08/2021 | | 200 | | — | | $ | 31.80 | | 04/08/2031 |
| | 04/06/2023 | | 1,600 | | — | | $ | 35.25 | | 04/06/2033 |
| | 12/21/2023 | | 1,600 | | — | | $ | 35.25 | | 12/21/2033 |
Fady Boctor |
| 2/19/2021 |
| 863 |
| — | | $ | 37.40 |
| 2/19/2031 |
| | 12/21/2023 | | 2,182 | | — | | $ | 35.25 | | 12/21/2033 |
Mitchell Arnold |
| 5/11/2021 |
| 200 |
| — | | $ | 32.10 |
| 5/11/2031 |
| | 12/21/2023 | | 800 | | — | | $ | 35.25 | | 12/21/2033 |
Accounting and Tax Considerations
Section 162(m) of the Code places a limit of $1,000,000 on the amount of compensation that a public company may deduct as a business expense in any year with respect to such company’s chief executive officer, certain other named executive officers, and all “covered employees” as defined by Section 162(m).
The Company’s Compensation Committee intends to maximize deductibility of compensation under Section 162(m) to the extent practicable while maintaining a competitive, performance-based compensation program. However, the Company’s compensation committee reserves the right to award compensation which it deems to be in the Company’s best interest and in the best interest of its stockholders, but which may not be fully tax deductible under Code Section 162(m).
2020 Omnibus Incentive Compensation Plan
The Petros Pharmaceuticals, Inc. 2020 Omnibus Incentive Compensation Plan (as amended and restated, the “2020 Plan”) was approved by our stockholders on November 25, 2020 (the “Effective Date”), and amended by the First Amendment on November 17, 2021, the Second Amendment on December 22, 2021, and the Amended and Restated Omnibus Incentive Compensation Plan on December 21, 2022. The 2020 Plan is a successor to the Neurotrope, Inc. 2017 Equity Incentive Plan and the Neurotrope, Inc. 2013 Equity Incentive Plan, amended as of July 23, 2014, and further amended as of November 21, 2016 (collectively, the “Prior Plans”).
On December 22, 2021, our stockholders approved the Second Amendment to the 2020 Plan to increase the total number of shares of Common Stock issuable under the 2020 Plan by 152,166 shares to a total of 260,000 shares of Common Stock. On September 14, 2023, our stockholders approved the Third Amendment to the 2020 Plan, which then became effective as of August 15, 2023, to increase the total number of shares of Common Stock issuable under the 2020 Plan by 2,500,000 shares to a total of 2,760,000 shares of Common Stock. On April 10, 2025, our stockholders approved an amendment to the 2020 Plan to increase the total number of shares of Common Stock issuable under the 2020 Plan by 40,000,000, to a total of 40,110,400 shares of Common Stock.
On February 10, 2025, the Company amended the 2020 Plan to remove certain individual limitations on the number of stock options, stock appreciation rights, shares of restricted stock and restricted stock units that could be awarded to an employee participant in any fiscal year pursuant to Section 4(d) of the 2020 Plan. As of April 15, 2026, we had 32,129,087 shares of Common Stock available for future issuance under the 2020 Plan.
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Purpose and Types of Awards
The purpose of the 2020 Plan is to attract and retain key employees, non-employee directors, consultants, and advisors. The 2020 Plan provides for the issuance of incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights, and other stock-based awards. The 2020 Plan is intended to provide an incentive to participants to contribute to Petros’ economic success by aligning the economic interests of participants with those of Petros’ stockholders.
Administration
The 2020 Plan is administered by Petros’ Compensation Committee. The committee consists of two “non-employee directors” as defined under Rule 16b - 3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Mr. Silverman, Chairman of the Compensation Committee, is not a “non-employee directors” as defined under Rule 16b 3 promulgated under the Exchange Act. The committee determines the terms and conditions applicable to awards under the 2020 Plan, including, without limitation, who will receive awards and the number of shares of Common Stock subject to awards. The committee may delegate authority under the 2020 Plan to one or more subcommittees as it deems appropriate. Subject to compliance with applicable law and the applicable stock exchange rules, the Board, in its discretion, may perform any action of the committee under the 2020 Plan. Subject to compliance with applicable law and applicable stock exchange requirements, the committee (or the Board or a subcommittee, as applicable) may delegate all or part of its authority to Petros’ Chief Executive Officer, as it deems appropriate, with respect to awards to employees, consultants, or advisors who are not executive officers or directors under Section 16 of the Exchange Act. The committee, the Board, any subcommittee, or the Chief Executive Officer, as applicable, that has authority with respect to a specific award will be referred to as “the committee” in this description of the 2020 Plan.
Shares Subject to the 2020 Plan
Subject to adjustment, the maximum aggregate number of shares of Common Stock that may be issued or transferred under the 2020 Plan, as amended, with respect to awards made on and after the Effective Date is 40,110,400 shares. In addition, the number of shares of Common Stock subject to outstanding awards under the Prior Plans that terminate, expire, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested, or paid in shares under the Prior Plans, as applicable, after the Effective Date will be available for issuance under the 2020 Plan.
If any options or stock appreciation rights, including outstanding options granted under the Prior Plans, terminate, expire, or are canceled, forfeited, exchanged, or surrendered without having been exercised, or if any stock awards, stock units, or other stock-based awards are forfeited, terminated, or otherwise not paid in full, the shares of Petros’ Common Stock subject to such awards will again be available for purposes of the 2020 Plan. Shares of Petros’ Common Stock that are surrendered in payment of the exercise price of an option (including an option granted under the Prior Plans) or a stock appreciation right will not again be available for issuance under the 2020 Plan. Shares of Petros’ Common Stock that are withheld in satisfaction of the withholding taxes, or surrendered for the payment of taxes, incurred in connection with the issuance, vesting, or exercise of any award (including an option granted under the Prior Plans), or the issuance of Petros’ Common Stock will not be available for issuance under the 2020 Plan. When stock appreciation rights are granted, the full number of shares subject to the stock appreciation rights will be considered issued under the 2020 Plan regardless of the number of shares issued upon exercise of the stock appreciation rights. If Petros repurchases shares of Petros’ Common Stock on the open market with the proceeds from the exercise price Petros receives from options (including options granted under the Prior Plans), the repurchased shares will not be available for issuance under the 2020 Plan. If any awards are paid in cash, and not in shares of Petros’ Common Stock, any shares of Petros’ Common Stock subject to such awards will also be available for future awards. In addition, shares of Petros’ Common Stock issued under awards made pursuant to assumption, substitution, or exchange of previously granted awards of a company that Petros acquires will not reduce the number of shares of Petros’ Common Stock available under the 2020 Plan. Available shares under a stockholder approved plan of an acquired company may be used for awards under the 2020 Plan and will not reduce the share reserve, subject to compliance with the applicable stock exchange requirements and the Code.
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The maximum number of shares of Petros’ Common Stock that may be subject to an option, stock appreciation right, stock award, stock unit, or other stock-based awards made to any employee, consultant, or advisor under the 2020 Plan, as interpreted and administered by Petros since the Effective Date, in any calendar year will not exceed 21,567 shares of Petros’ Common Stock in the aggregate, subject to adjustments as described below. The limit for awards that are made to newly hired employees on around their date of hire is two times the limit described in the preceding sentence, subject to any adjustments as described below. The maximum aggregate grant date value of shares of Common Stock subject to awards made to any non-employee director during any calendar year for services rendered as a non-employee director, including any cash fees earned for services rendered as a non-employee director during the calendar year, will not exceed $750,000 in total value. In determining this dollar limit, the value of awards will be calculated based on the grant date fair market value of the awards for financial reporting purposes.
Adjustments
In connection with stock splits (reverse stock splits), stock dividends, recapitalizations, and certain other events affecting Petros’ Common Stock, the committee will make adjustments as it deems appropriate including, without limitation, in (i) the maximum number of shares of Common Stock reserved for issuance as awards or for which individuals may receive awards in any year, (ii) the number and kind of shares covered by outstanding awards, (iii) the kind of shares that may be issued or transferred under the 2020 Plan, (iv) the price per share or market value of any outstanding awards, (v) the exercise price of options and the base amount of stock appreciation rights, and (vi) the performance goals or other terms and conditions as the committee deems appropriate. On November 30, 2022, the Company effected a 1-for-10 reverse stock split.
Eligibility
All of Petros’ employees and non-employee directors are eligible to receive awards under the 2020 Plan. In addition, Petros’ consultants and advisors who render bona fide services for Petros may receive awards under the 2020 Plan if (i) the services rendered are not in connection with the offer and sale of securities in a capital-raising transaction, and (ii) such consultant or advisor does not directly or indirectly promote or maintain a market for Petros’ securities. Incentive stock options may be granted only to Petros’ employees.
Vesting
The committee determines the vesting and exercisability terms of awards granted under the 2020 Plan. Except in connection with a change in control (in which case, awards will be treated as described below), the committee may generally accelerate the vesting of awards in its discretion, provided such acceleration complies with Sections 409A and 424 of the Code. Dividends and dividend equivalents granted in connection with any awards made under the 2020 Plan will vest and be paid only if and to the extent the underlying awards vest and are paid.
At the committee’s discretion, performance objectives for awards may be based on the attainment of specified levels of one or more performance goals established by the committee. If the committee so determines, the vesting of any such award subject to performance objectives may be described in terms of company-wide objectives or objectives that are related to the performance of the individual participant or the subsidiary, division, department, or function within the company or subsidiary in which the participant is employed. Performance objectives may be measured on an absolute or relative basis. Relative performance may be measured by a group of peer companies or by a financial market index. Performance objectives may include: specified levels of or increases in, a division’s or a subsidiary’s return on capital, equity, or assets; earnings measures/ratios (on a gross, net, pre-tax, or post-tax basis), including basic earnings per share, diluted earnings per share, total earnings, operating earnings, earnings growth, earnings before interest and taxes and earnings before interest, taxes, depreciation, and amortization; net economic profit (which is operating earnings minus a charge to capital); net income; operating income; sales; sales growth; gross margin; direct margin; costs; share price (including but not limited to growth measures and total stockholder return); operating profit; per period or cumulative cash flow (including but not limited to operating cash flow and free cash flow) or cash flow return on investment (which equals net cash flow divided by total capital); inventory turns; financial return ratios; market share; balance sheet measurements such as receivable turnover; improvement in or attainment of expense levels; improvement in or attainment of working capital levels; debt reduction; strategic innovation; customer or employee satisfaction; the consummation of one or more acquisitions of a certain size as measured by one or more of the financial criteria listed above; individual objectives; regulatory body approval for commercialization of a product; implementation or completion of critical projects (including, but not limited to, milestones such as clinical trial enrollment targets, commencement of phases of clinical trials and completion of phases of clinical trials); and any combination of the foregoing.
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Options
Under the 2020 Plan, the committee will determine the exercise price of the options granted and may grant options to purchase shares of Common Stock in such amounts as it determines. The committee may grant options that are intended to qualify as incentive stock options under Section 422 of the Code, or non-qualified stock options, which are not intended to so qualify. Non-qualified stock options may be granted to eligible participants under the 2020 Plan, but incentive stock options may only be granted to employees of Petros or its parent or subsidiaries that are corporations. The exercise price of a stock option granted under the 2020 Plan cannot be less than the fair market value of a share of Petros’ Common Stock on the date the option is granted. If an incentive stock option is granted to a 10% or greater stockholder, the exercise price cannot be less than 110% of the fair market value of a share of Petros’ Common Stock on the date the option is granted. The aggregate number of shares of Common Stock that may be issued or transferred under the 2020 Plan, as interpreted and administered by Petros since the Effective Date, pursuant to incentive stock options under Section 422 of the Code granted on and after the Effective Date may not exceed 2,760,000 shares of Common Stock. The fair market value of Petros’ Common Stock is generally equal to the closing price for the Common Stock on the date the option is granted (or if there was no closing price on that date, on the last preceding date on which a closing price was reported). If the fair market value (determined as of the date of grant) of the shares with respect to which a participant’s incentive stock options are exercisable for the first time during any year, whether granted under the 2020 Plan or any Prior Plans, exceeds $100,000, then incentive stock options for the shares over the $100,000 threshold will be treated as nonqualified stock options, rather incentive stock options.
The exercise price for any option is generally payable in cash or check. In certain circumstances as permitted by the committee, the exercise price may be paid by (i) the surrender of shares of Petros’ Common Stock with an aggregate fair market value on the date the option is exercised that is at least equal to the exercise price, (ii) payment through a broker in accordance with procedures established by the Federal Reserve Board, (iii) withholding shares of Common Stock subject to the exercisable option which have a fair market value on the date of exercise equal to the aggregate exercise price, (iv) or such other method as the committee approves.
The term of an option cannot exceed ten years from the date of grant, except that if an incentive stock option is granted to a 10% or greater stockholder, the term cannot exceed five years from the date of grant. In the event that on the last day of the term of a non-qualified stock option, the exercise is prohibited by applicable law, including a prohibition on purchases or sales of Petros’ Common Stock under Petros’ insider trading policy, the term of the non-qualified option will be extended for a period of 30 days following the end of the legal prohibition, unless the committee determines otherwise.
Except as provided in the award agreement, an option may only be exercised while a participant is employed by or providing service to Petros. The committee will determine in the award agreement under what circumstances and during what time periods a participant may exercise an option after termination of employment.
Stock Appreciation Rights
Under the 2020 Plan, the committee may grant stock appreciation rights to eligible participants separately or in tandem with any options. Stock appreciation rights granted with a non-qualified stock option may be granted either at the time the non-qualified stock option is granted or any time thereafter while the option remains outstanding. Stock appreciation rights granted with an incentive stock option may be granted only at the time of the grant of the incentive stock option. The committee will establish the base amount of the stock appreciation right at the time the stock appreciation right is granted, which will be equal to or greater than the fair market value of a share of Petros’ Common Stock as of the date of grant.
If a stock appreciation right is granted in tandem with an option, the number of stock appreciation rights that are exercisable during a specified period will not exceed the number of shares of Petros’ Common Stock that the participant may purchase upon exercising the related option during such period. Upon exercising the related option, the related stock appreciation rights will terminate, and upon the exercise of a stock appreciation right, the related option will terminate, to the extent of an equal number of shares of Petros’ Common Stock. Generally, stock appreciation rights may only be exercised while the participant is employed by, or providing services to, Petros unless otherwise specified by the committee. When a participant exercises a stock appreciation right, the participant will receive the excess of the fair market value of the underlying Common Stock over the base amount of the stock appreciation right. The appreciation of a stock appreciation right will be paid in shares of Petros’ Common Stock, cash, or both.
The term of a stock appreciation right cannot exceed ten years from the date of grant. In the event that on the last day of the term of a stock appreciation right, the exercise is prohibited by applicable law, including a prohibition on purchases or sales of Petros’ Common
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Stock under Petros’ insider trading policy, the term of the stock appreciation right will be extended for a period of 30 days following the end of the legal prohibition, unless the committee determines otherwise.
Stock Awards
Under the 2020 Plan, the committee may grant stock awards to eligible participants. A stock award is an award of Petros’ Common Stock that may be subject to restrictions as the committee determines. The restrictions, if any, may lapse over a specified period of employment or based on the satisfaction of pre-established criteria, in installments, or otherwise, as the committee may determine. Except to the extent restricted under the award agreement relating to the stock award, a participant will have all of the rights of a stockholder as to those shares, including the right to vote and the right to receive dividends or distributions on the shares; provided, however, that dividends with respect to stock awards shall vest and be paid if and to the extent that the underlying stock award vests and is paid. All unvested stock awards are forfeited if the participant’s employment or service is terminated for any reason, unless the committee determines otherwise.
Stock Units
Under the 2020 Plan, the committee may grant restricted stock units to eligible participants. Restricted stock units are phantom units that represent shares of Petros’ Common Stock. Restricted stock units become payable on terms and conditions determined by the committee and will be payable in cash or shares of Petros’ stock as determined by the committee. All unvested restricted stock units are forfeited if the participant’s employment or service is terminated for any reason, unless the committee determines otherwise.
Other Stock-Based Awards
Under the 2020 Plan, the committee may grant other types of awards that are based on or measured by shares of Petros’ Common Stock to eligible participants. The committee will determine the terms and conditions of such awards. Other stock-based awards may be payable in cash, shares of Petros’ Common Stock, or a combination of the two.
Dividend Equivalents
Under the 2020 Plan, the committee may grant dividend equivalents in connection with awards of stock units or other stock-based awards made under the 2020 Plan. Dividend equivalents entitle the participant to receive amounts equal to ordinary dividends that are paid on the shares underlying an award while the award is outstanding. Dividend equivalents may be paid in cash, in shares of Petros’ Common Stock, or in a combination of the two. The committee will determine the terms and conditions of the dividend equivalent awards, including whether the awards are payable upon the achievement of specific performance goals; provided, however, that dividend equivalents shall vest and be paid only if and to the extent that the underlying stock units or other stock-based awards vest and are paid. For the avoidance of doubt, no dividends or dividend equivalents will be granted with respect to stock options or stock appreciation rights.
Change in Control
If Petros experiences a “change in control” (as defined in the 2020 Plan, which definition is generally described below) where Petros is not the surviving corporation (or survive only as a subsidiary of another corporation), all outstanding awards that are not exercised or paid at the time of the change in control will be assumed by, or replaced with awards that have comparable terms by, the surviving corporation (or a parent or subsidiary of the surviving corporation). In the event that the surviving corporation (or a parent or subsidiary of the surviving corporation) does not assume or replace awards with grants that have comparable terms, unless otherwise provided in an award agreement, outstanding options and stock appreciation rights will accelerate and become fully exercisable and the restrictions and conditions on outstanding stock awards, stock units, other stock-based awards and dividend equivalents immediately lapse, provided that if the vesting of any such awards is based, in whole or in part, on performance, such awards shall vest based on the greater of (i) actual performance as of the change in control, or (ii) target performance, pro-rated based on the period elapsed between the beginning of the applicable performance period and the date of the change in control. At the committee’s discretion, if awards are assumed by, or replaced with awards that have comparable terms by, the surviving corporation (or a parent or subsidiary of the surviving corporation) and a participant incurs an involuntary termination of employment or service on or after a change in control, the participant’s outstanding awards may become vested, in whole or in part, as of the date of termination; provided that if the vesting of any such award is based, in whole or in part, on performance, such awards shall vest only based on the greater of (i) actual performance as of the change in control,
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or (ii) target performance, pro-rated based on the period elapsed between the beginning of the applicable performance period and the date of the termination.
If there is a change in control and any outstanding awards are not assumed by, or replaced with awards that have comparable terms by, the surviving corporation, the committee may take any of the following action without the consent of any participant:
| ● | pay participants, in an amount and form determined by the committee, in settlement of outstanding stock units, other stock-based awards, or dividend equivalents; |
| ● | require that participants surrender their outstanding stock options, stock appreciation rights, or any other exercisable award, in exchange for a payment by Petros, in cash or shares of Petros’ Common Stock, equal to the difference between the exercise price and the fair market value of the underlying shares of Common Stock; provided, however, if the per share fair market value of the Common Stock does not exceed the per share stock option exercise price or stock appreciation right base amount, as applicable, Petros will not be required to make any payment to the participant upon surrender of the stock option or stock appreciation right; or |
| ● | after giving participants an opportunity to exercise all of their outstanding stock options and stock appreciation rights, terminate any unexercised stock options and stock appreciation rights on the date determined by the committee. |
In general terms, a “change in control” under the 2020 Plan includes:
| ● | the acquisition, directly or indirectly, by a person of more than 50% of the combined voting power of Petros’ voting securities entitled to vote generally in the election of directors; provided, however, that the following acquisitions of voting securities shall not constitute a change in control: (a) any acquisition by or from Petros or any of its subsidiaries, or by any employee benefit plan (or related trust) sponsored or maintained by Petros or any of its subsidiaries, (b) any acquisition by any underwriter in any firm commitment underwriting of securities to be issued by Petros, or (c) any acquisition by any corporation (or other entity) if, immediately following such acquisition, 50% or more of the then outstanding shares of Common Stock (or other equity unit) of such corporation (or other entity) and the combined voting power of the then outstanding voting securities of such corporation (or other entity), are beneficially owned, directly or indirectly, by all or substantially all of the individuals or entities who, immediately prior to such acquisition, were the beneficial owners of Petros’ then outstanding shares of Common Stock and the voting securities in substantially the same proportions, respectively, as their ownership immediately prior to the acquisition of Petros’ stock and voting securities; |
| ● | the consummation of the sale or other disposition of all or substantially all of Petros’ assets, other than to a wholly-owned subsidiary or to a holding company of which Petros is a direct or indirect wholly owned subsidiary prior to such transaction; |
| ● | the consummation of a reorganization, merger or consolidation of Petros, other than a reorganization, merger or consolidation which would result in Petros’ voting securities outstanding immediately prior to the transaction continuing to represent (whether by remaining outstanding or by being converted to voting securities of the surviving entity) 65% or more of the voting securities or the voting power of the voting securities of such surviving entity outstanding immediately after such transaction; |
| ● | the consummation of a plan for Petros’ complete liquidation; or |
| ● | the following individuals cease for any reason to constitute a majority of the Board: individuals who, as of the Effective Date, constituted the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, but not limited to, a consent solicitation relating to the election of Petros’ directors) whose appointment or election by the Board or nomination for election by Petros’ stockholders was approved and recommended by a vote of at least two-thirds of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended. |
Notwithstanding the above, in the case of an award under the 2020 Plan is subject to Section 409A of the Code, only an event which constitutes a “change in control event” as defined under Section 409A of the Code shall constitute a change in ownership or effective control for purposes of the payment provisions under the 2020 Plan.
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Deferrals
The committee may permit or require participants to defer receipt of the payment of cash or the delivery of shares of Common Stock that would otherwise be due to the participant in connection with an award under the 2020 Plan. The committee will establish the rules and procedures applicable to any such deferrals, consistent with the requirements of Section 409A of the Code.
Withholding
All awards under the 2020 Plan are subject to applicable U.S. federal (including Federal Insurance Contribution Act (“FICA”)), state and local, foreign, or other tax withholding requirements. Petros may require participants or other persons receiving awards or exercising awards to pay an amount sufficient to satisfy such tax withholding requirements with respect to such awards, or Petros may deduct from other wages and compensation paid by Petros the amount of any withholding taxes due with respect to such award.
The committee may permit or require that Petros’ tax withholding obligation with respect to awards paid in Petros’ Common Stock will be paid by having shares withheld up to an amount that does not exceed the participant’s applicable withholding tax rate for U.S. federal (including FICA), state and local, foreign, or other tax liabilities. In addition, the committee may, in its discretion, and subject to such rules as the committee may adopt, allow participants to elect to have such share withholding applied to all or a portion of the tax withholding obligation arising in connection with any particular award.
Transferability
Except as permitted by the committee with respect to non-qualified stock options, only a participant may exercise rights under an award during the participant’s lifetime. Upon death, the personal representative or other person entitled to succeed to the rights of the participant may exercise such rights. A participant cannot transfer those rights except (i) by will or by the laws of descent and distribution, or (ii) with respect to awards other than incentive stock options, pursuant to a domestic relations order. The committee may provide in an award agreement that a participant may transfer non-qualified stock options to (x) family members, or (y) one or more trusts or other entities for the benefit of or owned by family members, consistent with applicable securities laws; provided, the participant receives no consideration for the transfer and the transferred options continue to be subject to the same terms and conditions as were applicable immediately before the transfer.
Amendment; Termination
The Board may amend or terminate the 2020 Plan at any time, except that Petros’ stockholders must approve an amendment if such approval is required in order to comply with the Code, applicable laws, or applicable stock exchange requirements. Unless terminated sooner by the Board or extended with stockholder approval, the 2020 Plan will terminate on the day immediately preceding the tenth anniversary of the Effective Date.
Stockholder approval is required to (i) amend the terms of outstanding options or stock appreciation rights to reduce the exercise price or base price of options or stock appreciation rights, respectively, (ii) cancel outstanding options or stock appreciation rights in exchange for options or stock appreciation rights with an exercise price or base price, as applicable, that is less than the exercise price or base price of the original options or stock appreciation rights, or (iii) cancel outstanding options or stock appreciation rights with an exercise price or base price, as applicable, above the current stock price in exchange for cash or other securities. However, such stockholder approval is not required in connection with certain corporate transactions or other actions with respect to Petros’ securities, such as a stock split, extraordinary cash dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares of Petros’ Common Stock.
Establishment of Sub-Plans
The Board may, from time to time, establish one or more sub-plans under the 2020 Plan to satisfy applicable blue sky, securities, or tax laws of various jurisdictions. The Board may establish such sub-plans by adopting supplements to the 2020 Plan setting forth limitations on the committee’s discretion and such additional terms and conditions not otherwise inconsistent with the 2020 Plan as the Board will deem necessary or desirable. All such supplements will be deemed part of the 2020 Plan, but each supplement will only apply to participants within the affected jurisdiction.
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Clawback
Subject to applicable law, the committee may provide in any award agreement that if a participant breaches any restrictive covenant agreement between the participant and Petros, or otherwise engages in activities that constitute cause either while employed by, or providing services to, Petros or within the applicable period of time thereafter, all awards held by the participant will terminate, and Petros may rescind any exercise of an option or stock appreciation right and the vesting of any other award and delivery of shares upon such exercise or vesting, as applicable on such terms as the committee will determine, including the right to require that in the event of any rescission:
| ● | the participant must return the shares received upon the exercise of any option or stock appreciation right or the vesting and payment of any other awards; or |
| ● | if the participant no longer owns the shares, the participant must pay to Petros the amount of any gain realized or payment received as a result of any sale or other disposition of the shares (if the participant transferred the shares by gift or without consideration, then the fair market value of the shares on the date of the breach of the restrictive covenant agreement or activity constituting cause), net of the price originally paid by the participant for the shares. |
All awards are also subject to any applicable clawback or recoupment policy, share trading policy, and other policies that the Board may adopt and amend from time to time. Payment by the participant will be made in such manner and on such terms and conditions as may be required by the committee. Petros will be entitled to set off against the amount of any such payment any amounts that Petros otherwise owes to the participant.
Employment Benefits Plans
Petros 401(k) Plan
Petros has a defined contribution retirement plan in which all employees are eligible to participate. This plan is intended to qualify under Section 401(k) of the Code so that contributions by employees and by Petros to the plan and income earned on plan contributions are not taxable to employees until withdrawn or distributed from the plan, and so that contributions, including employee salary deferral contributions, will be deductible by Petros when made. Petros currently provides contributions under this plan of up to four percent (4%) of an employee’s compensation, subject to statutory limits.
Participants may elect a salary deferral up to the statutorily prescribed annual limit for tax-deferred contributions and Petros may make contributions up to four percent (4%) of the participant’s compensation, subject to certain statutory limits.
Petros also contributes to medical, disability and other standard insurance plans for its employees.
Director Compensation Program
The following table presents the total compensation for each person who served as a member of our Board during the fiscal year ended December 31, 2025. Other than set forth in the table and described more below, we did not pay any compensation, reimburse any expense of, make any equity awards or non-equity awards to, or pay any other compensation to any of the other members of our Board in 2025.
| | | | | | | | | | | | | | |
| | | | | | | | Non-equity | | | | | | |
| | Fees | | | | | | incentive | | Nonqualified | | | | |
| | earned or | | Stock | | Option | | plan | | deferred | | All other | | |
| | paid in | | awards | | awards | | compensation | | compensation | | compensation | | |
Name | | cash ($)(1) | | ($) | | ($) (2) | | ($) | | earnings ($) | | ($) | | Total ($) |
Bruce T. Bernstein |
| 197,500 | | 81,300 | | — | | — | | — | | — | | 278,800 |
Wayne R. Walker |
| 100,000 | | 40,650 | | — | | — | | — | | — | | 140,650 |
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Timing of Certain Equity Awards
We do not have any policies and practices on the timing of awards of stock options or other equity grants in relation to the disclosure of material nonpublic information.
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Equity Compensation Plan Information
The following table sets forth additional information, as of December 31, 2025, about our Common Stock that may be issued upon the exercise of options and other rights under the 2020 Plan.
| | | | | | | |
| | | | | | | (c) Number of securities |
| | | | | | | remaining available for |
| | (a) Number of securities | | (b) Weighted-average | | future issuance under | |
| | to be issued upon exercise | | exercise price of | | equity compensation plans | |
| | of outstanding options, | | outstanding options, | | (excluding securities | |
Plan Category | | warrants and rights | | warrants and rights | | reflected in column (a)) | |
Equity compensation plans approved by security holders |
| 14,625 | | $ | 31.81 | | 40,004,087 |
Equity compensation plans not approved by security holders |
| N/A | |
| N/A |
| N/A |
Total |
| 14,625 | | $ | 31.81 | | 40,004,087 |
N/A - Not applicable
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Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information regarding beneficial ownership of our voting securities as of April 15, 2026 (i) by each person who is known by us to beneficially own more than 5% of our voting securities; (ii) by each of our named executive officers and directors; and (iii) by all of our executive officers and directors as a group. Unless otherwise indicated in the following table, the address for each person named in the table is: 1185 Avenue of the Americas, New York, NY 10036.
| | | | | | | | | |
| | | | | | Number of | | | |
| | Number of | | | | Shares of | | | |
| | Shares of | | | | Series A | | | |
| | Common | | | | Preferred | | | |
| | Stock | | | | Stock | | | |
| | Beneficially | | |
| Beneficially | | | |
Name and Address of Beneficial Owner | | Owned (1) | | Percentage of Class (2) | | Owned (1) | | Percentage of Class (2) | |
5% Stockholders |
| |
| | | | | | |
Iroquois Capital Management L.L.C.(3) |
| 4,702,799 | | 9.99 | % | 66.34 | | 21.49 | % |
Intracoastal Capital LLC(4) |
| 2,225,425 | | 4.99 | % | 136.19 | | 44.12 | % |
Five Narrow Lane LP(5) |
| 2,225,425 | | 4.99 | % | 36.90 | | 11.95 | % |
Brio Capital Master Fund Ltd. (6) | | 2,225,425 | | 4.99 | % | 38.46 | | 12.46 | % |
V4 Global, LLC(7) | | 2,225,425 | | 4.99 | % | 30.77 | | 9.97 | % |
Named Executive Officers and Directors |
| |
| | | | | | |
Bruce T. Bernstein(8) |
| 941,194 | | 2.17 | % | — | | — | |
Joshua N. Silverman(9) |
| 2,191,310 | | 4.92 | % | — | | — | |
Wayne R. Walker(10) | | 253,693 | | * | | — | | — | |
Fady Boctor(11) | | 255,031 | | * | | — | | — | |
Mitchell Arnold(12) |
| 1,005 | | * | | — | | — | |
All directors and executive officers as a group (5 persons) | | 3,642,233 | | 7.92 | % | — | | — | |
* | represents ownership of less than 1%. |
Iroquois Capital Management L.L.C. (“ICM”) is the investment manager of IMF. ICM has voting control and investment discretion over securities held by IMF. As Managing Members of ICM, Richard Abbe and Kimberly Page make voting and investment decisions on behalf of ICM in its capacity as investment manager to IMF. As a result of the foregoing, Mr. Abbe and Mrs. Page may be deemed to have beneficial ownership (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended) of the securities held by ICM and IMF. Mr. Abbe is the managing member of ICIG. Mr. Abbe has sole voting control and investment discretion over securities held by ICIG. As such, Mr. Abbe may be deemed to be the beneficial owner (as determined under Section 13(d) of the Securities Exchange Act of 1934, as amended) of the securities held by ICIG. The address for each of IMF and ICIG is 2 Overhill Road, Suite 400, Scarsdale, NY 10583.
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Mr. Kopin and Mr. Asher are each managers of Intracoastal and have shared voting control and investment discretion over the securities reported herein that are held by Intracoastal. As a result, each of
Mr. Kopin and Mr. Asher may be deemed to have beneficial ownership (as determined under Section 13(d) of the Exchange Act of the securities reported herein that are held by Intracoastal Capital LLC. The principal business office of Mr. Kopin and Intracoastal is 245 Palm Trail, Delray Beach, Florida 33483 and the principal business office of Mr. Asher is 111 W. Jackson Boulevard, Suite 2000, Chicago, Illinois 60604.
Messrs. Arie Rabinowitz and Joe Hammer have voting and investment control over the securities held by Five Narrow Lane LP. Five Narrow Lane LP’S address is 510 Madison Avenue, Suite 1400, New York, NY 10022.
Shaye Hirsch has voting and investment control over the securities held by Brio Capital Master Fund, Ltd. Brio Capital Master Fund, Ltd.’s address is 100 Merrick Road, Suite 401W, Rockville Centre, NY 11570.
The securities are held by V4 Global, LLC (“V4”). Scot Cohen has voting and dispositive control with respect to the securities being offered. V4 and Scot Cohen disclaim beneficial ownership of the securities except to the extent of their respective pecuniary interests therein. V4’s address is 445 Grand Bay Drive, Apt. P1A, Key Biscayne, FL 33149.
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ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Transactions with Related Persons
SEC rules require us to disclose any transaction or currently proposed transaction in which we are a participant and in which any related person has or will have a direct or indirect material interest involving an amount that exceeds the lesser of $120,000 or one percent (1%) of the average of the Company’s total assets as of the end of last two completed fiscal years (“related party transactions”). A related person is any executive officer, director, nominee for director, or holder of 5% or more of the Company’s Common Stock, or an immediate family member of any of those persons. During the years ended December 31, 2025, and 2024, in addition to the compensation arrangements described elsewhere herein, we participated in the following related party transactions:
On February 17, 2025, the Company entered into the Public Offering Purchase Agreement with certain institutional and accredited investors, including Five Narrow Lane LP (“Five Narrow”), 3i, LP (“3i), Iroquois Master Fund Ltd. (“IMF), Iroquois Capital Investment Group, LLC (“ICIG”) and Alto, each of which beneficially own 5% or more of the Company’s voting securities. Pursuant to the Public Offering Purchase Agreement, Five Narrow, 3i, IMF, Alto and ICIG each purchased in a best effort public offering, 4,166,664, 4,166,667, 6,708,334, 1,250,000 and 12,458,334 Units (or Pre-Funded Units in lieu thereof), respectively, with each such Unit (or Pre-Funded Unit in lieu thereof) consisting of one share of the Company’s Common Stock, one Series A Warrant to purchase 0.25 share of Common Stock and one Series B Warrant to purchase one shares of Common Stock. The public offering price was $0.24 per Unit and $0.2399 per Pre-Funded Unit. The Offering closed on February 19, 2025. The exercise price of each of the Series A Warrants and the Series B Warrants is $0.48 per share of Common Stock.
Director Independence
See “Directors, Executive Officers and Corporate Governance – Director Independence” and “Directors, Executive Officers and Corporate Governance – Board Committees” above.
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ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICES
Independent Registered Public Accounting Firm
The Audit Committee, effective as of January 8, 2024, appointed Marcum LLP (Auditor ID #688) (“Marcum”) as the Company’s independent registered public accounting firm for the Company’s fiscal year ended December 31, 2024. On April 5, 2025, upon CBIZ CPAs P.C. (“CBIZ CPAs”) acquiring the attest business of Marcum, the Company terminated its relationship with Marcum as the Company’s independent registered accounting firm and, with the approval of the Audit Committee of the Company’s Board of Directors, engaged CBIZ CPAs as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2025.
On August 29, 2025, the Audit Committee approved the dismissal of CBIZ CPAs and appointed HTL International, LLC (“HTL”) as the Company’s independent registered public accounting firm for the Company’s fiscal year ended December 31, 2025.
Audit and Non-Audit Fees
The Company engaged HTL from August 29, 2025, to present. The following table presents fees for professional audit services rendered by HTL for the audit of the Company’s consolidated financial statements for the years ended December 31, 2025, and December 31, 2024.
| | | | | | |
| | 2025 | | 2024 | ||
Audit fees:(1) | | $ | 200,130 | | $ | — |
Audit related fees:(2) | |
| — | |
| — |
Tax fees: (3) | |
| — | |
| — |
All other fees | |
| — | |
| — |
Total | | $ | 200,130 | | $ | — |
| (1) | Audit fees for 2025 and 2024 relate to professional services provided in connection with the audit of our consolidated financial statements, the reviews of our quarterly condensed consolidated financial statements. |
| (2) | There were no audit related or other fees. |
| (3) | Tax fees related to tax compliance work. |
The percentage of services set forth above in the category audit related fees, that were approved by the Audit Committee pursuant to Rule 2-01(c)(7)(i)(C) (relating to the approval of a de minimis amount of non-audit services after the fact but before completion of the audit), was 100%.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Public Accountant
Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of our independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm.
Prior to engagement of an independent registered public accounting firm for the next year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of four categories of services to the Audit Committee for approval.
| 1. | Audit services include audit work performed in the preparation of consolidated financial statements, as well as work that generally only an independent registered public accounting firm can reasonably be expected to provide, including comfort letters, statutory audits, and attest services and consultation regarding financial accounting and/or reporting standards. |
| 2. | Audit-Related services are for assurance and related services that are traditionally performed by an independent registered public accounting firm, including due diligence related to mergers and acquisitions, employee benefit plan audits, and special procedures required to meet certain regulatory requirements. |
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| 3. | Tax services include all services performed by an independent registered public accounting firm’s tax personnel except those services specifically related to the audit of the financial statements, and includes fees in the areas of tax compliance, tax planning, and tax advice. |
| 4. | Other Fees are those associated with services not captured in the other categories. The Company generally does not request such services from our independent registered public accounting firm. |
Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted, and the Audit Committee requires our independent registered public accounting firm and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage our independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging our independent registered public accounting firm.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.
PART IV
ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
The documents listed below are filed as part of this Form 10-K:
| Page |
Report of Independent Registered Public Accounting Firm (PCAOB ID # | F-1 |
Report of Independent Registered Public Accounting Firm (PCAOB ID # | F-2 |
Consolidated Balance Sheets as of December 31, 2025, and December 31, 2024 | F-3 |
Consolidated Statements of Operations for the years ended December 31, 2025, and December 31, 2024 | F-4 |
Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity/(Deficit) for the years ended December 31, 2025, and December 31, 2024 | F-5 |
Consolidated Statements of Cash Flows for the years ended December 31, 2025, and December 31, 2024 | F-6 |
Notes to Consolidated Financial Statements | F-7 |
(a)(2) Consolidated Financial Statement Schedules:
Schedules not filed are omitted because of the absence of the conditions under which they are required or because the required information is included in the consolidated financial statements or the notes thereto.
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(a)(3) Exhibits:
Exhibit No. | | Description |
2.1∞ |
| Agreement and Plan of Merger and Reorganization, dated as of May 17, 2020, by and among Petros Pharmaceuticals, Inc., Neurotrope, Inc., PM Merger Sub 1, LLC, PN Merger Sub 2, Inc. and Metuchen Pharmaceuticals LLC (incorporated by reference to Exhibit 2.1 to the Company’s Registration Statement on Form S-4 filed on October 28, 2020). |
2.1.1 |
| First Amendment to Agreement and Plan of Merger, dated as of July 23, 2020, by and between Petros Pharmaceuticals, Inc., PM Merger Sub 1, LLC, PN Merger Sub 2, Inc., Neurotrope, Inc. and Metuchen Pharmaceuticals LLC (incorporated by reference to Exhibit 2.2 to the Company’s Registration Statement on Form S-4 filed on October 28, 2020). |
2.1.2 |
| Second Amendment to Agreement and Plan of Merger, dated as of September 30, 2020, by and between Petros Pharmaceuticals, Inc., PM Merger Sub 1, LLC, PN Merger Sub 2, Inc., Neurotrope, Inc. and Metuchen Pharmaceuticals LLC (incorporated by reference to Exhibit 2.3 to the Company’s Registration Statement on Form S-4 filed on October 28, 2020). |
3.1 |
| Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on December 2, 2020). |
3.1.1 | | Certificate of Amendment of Amended and Restated Certificate of Incorporation of Petros Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on November 30, 2022). |
3.1.2 |
| Certificate of Amendment of Amended and Restated Certificate of Incorporation of Petros Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8 - K filed on September 15, 2023). |
3.1.3 | | Certificate of Designations of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on July 13, 2023). |
3.1.4 | | Certificate of Amendment of Amended and Restated Certificate of Incorporation of Petros Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on May 2, 2025). |
3.1.5 | | Certificate of Amendment of Amended and Restated Certificate of Incorporation of Petros Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on April 11, 2025). |
3.2 | | Certificate of Amendment of Certificate of Designations of Series A Convertible Preferred Stock. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 2, 2023). |
3.2.1 | | Certificate of Amendment to the Certificate of Designations of Series A Convertible Preferred Stock of Petros Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 17, 2024). |
3.2.2 | | Certificate of Amendment to the Certificate of Designations of Series A Convertible Preferred Stock of Petros Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Quarterly Report on Form 10 - Q filed on November 13, 2024). |
3.2.3 | | Certificate of Amendment to the Certificate of Designations of Series A Convertible Preferred Stock of Petros Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on January 24, 2025). |
3.2.4 | | Certificate of Amendment to the Certificate of Designations of Series A Convertible Preferred Stock of Petros Pharmaceuticals, Inc. (incorporated by reference to Exhibit 19.1 to the Company’s Annual Report on Form 10-K filed on March 31, 2025). |
3.2.5 | | Certificate of Amendment to the Certificate of Designations of Series A Convertible Preferred Stock of Petros Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.2.4 to the Company’s Annual Report on Form 10-K filed on March 31, 2025). |
3.3 | | Amended and Restated By-laws (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8- K filed on December 2, 2020). |
3.3.1 | | Amendment to the Amended and Restated By-laws of Petros Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on August 15, 2023). |
3.4 | | Certificate of Designations of Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.11 to the Company’s Registration Statement on Form S-1/A filed on February 13, 2025). |
4.1 |
| Specimen Stock Certificate evidencing shares of Common Stock (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-4 filed on October 28, 2020). |
4.2 | | Description of Capital Stock. (incorporated by reference to Exhibit 4.2 to the Company’s Annual Report on Form 10-K filed on March 31, 2025). |
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4.3 | | Form of Investor Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 15, 2021). |
4.4 | | Form of Investor Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 1, 2021). |
4.5 | | Form of Investor Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 27, 2021). |
4.6 |
| Form of Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on July 13, 2023). |
4.7 | | Form of Series A Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8 - K filed on February 21, 2025). |
4.8 | | Form of Series B Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8 - K filed on February 21, 2025). |
4.9 | | Form of Pre - Funded Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8 - K filed on February 21, 2025). |
10.1 |
| Registration Rights Agreement, dated as of December 1, 2020, by and among Petros Pharmaceuticals, Inc. and JCP III SM AIV, L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on December 2, 2020). |
10.2+ |
| License and Commercialization Agreement by and between VIVUS, Inc. and Metuchen Pharmaceuticals LLC, dated September 30, 2016 (incorporated by reference to Exhibit 10.3 the Company’s Registration Statement on Form S-4 filed on October 28, 2020). |
10.3†∞ |
| Employment Offer Letter, entered into as of February 19, 2021, by and between Petros Pharmaceuticals, Inc. and Fady Boctor Form of Petros Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed with February 25, 2021). |
10.3.1 | | Offer Letter Amendment, effective as of October 16, 2024, by and between the Company and Fady Boctor (incorporated by reference to Exhibit 10.1 of the Company’s Form 8 - K filed with October 18, 2024). |
10.4†∞ |
| Form of Petros Pharmaceuticals, Inc. Nonqualified Stock Option Grant Agreement (incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K filed on February 25, 2021). |
10.5∞+ | | Settlement Agreement, dated January 18, 2022, between Metuchen Pharmaceuticals LLC and VIVUS LLC, a Delaware limited liability company (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2022, filed on May 16, 2022). |
10.6+ | | Promissory Note, dated January 18, 2022, by Metuchen Pharmaceuticals LLC in favor or VIVUS LLC, a Delaware limited liability company (incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2022, filed on May 16, 2022). |
10.7 | | Security Agreement, dated January 18, 2022, between Metuchen Pharmaceuticals LLC and VIVUS LLC, a Delaware limited liability company (incorporated by reference to Exhibit 10.3 of the Company’s Form 8-K filed on January 21, 2022). |
10.8+ | | Amendment No. 1 to License and Commercialization Agreement, dated January 18, 2022, between Metuchen Pharmaceuticals LLC and VIVUS LLC, a Delaware limited liability company (incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2022, filed on May 16, 2022). |
10.9 | | Technology Transfer Service Agreement, dated January 20, 2022, between Patheon Pharmaceuticals Inc., part of Thermo Fisher Scientific, and Metuchen Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 30, 2022, filed on May 16, 2022). |
10.10† | | Petros Pharmaceuticals, Inc. Amended and Restated 2020 Omnibus Incentive Compensation Plan (incorporated by reference to Exhibit 99.1 of the Company’s Registration Statement on Form S-8 filed on December 22, 2022). |
10.10.1† | | First Amendment to Amended and Restated Petros Pharmaceuticals, Inc. 2020 Omnibus Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 15, 2023). |
10.10.2† | | Second Amendment to Amended and Restated Petros Pharmaceuticals, Inc. 2020 Omnibus Incentive Compensation Plan (incorporated by reference to Exhibit 10.23 to the Company’s registration statement on Form S-1/A filed on February 10, 2025). |
10.11 | | Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 13, 2023). |
10.12 | | Registration Rights Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 13, 2023). |
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10.13 | | Form of Omnibus Waiver and Amendment, dated March 21, 2024, by and between Petros Pharmaceuticals, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 22, 2024). |
10.14 | | Form of Amendment Agreement, dated October 11, 2024, by and between Petros Pharmaceuticals, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 17, 2024). |
10.15 | | Form of Amendment Agreement, dated November 13, 2024, by and between Petros Pharmaceuticals, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10 - Q filed on November 13, 2024). |
10.16 | | Form of Amendment Agreement, dated January 23, 2025, by and between Petros Pharmaceuticals, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on January 24, 2025). |
10.17 | | Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.22 to the Company’s registration statement on Form S-1/A filed on February 10, 2025). |
10.18 | | Form of Securities Purchase Agreement, dated February 17, 2025, by and between Petros Pharmaceuticals, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8 - K filed on February 21, 2025). |
10.19 | | Termination Agreement, dated as of March 31, 2025, by and between Vivus LLC and Metuchen Pharmaceuticals LLC (incorporated by reference to Exhibit 10.19 to the Company’s Annual Report on Form 10-K filed on March 31, 2025). |
10.20 | | Form of Amendment Agreement, dated March 30, 2025, by and between Petros Pharmaceuticals, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.20 to the Company’s Annual Report on Form 10-K filed on March 31, 2025). |
10.21† | | Third Amendment to the Petros Pharmaceuticals, Inc. Amended and Restated 2020 Omnibus Incentive Compensation Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 11, 2025). |
10.22† | | Executive Compensation Agreement, by and between Petros Pharmaceuticals, Inc. and Joshua Silverman, dated as of August 13, 2025 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2025). |
19.1 | | Petros Pharmaceuticals, Inc. Insider Trading Policy (incorporated by reference to Exhibit 19.1 to the Company’s Annual Report on Form 10-K filed on March 31, 2025). |
21* |
| List of Subsidiaries |
23.1* |
| Consent of Independent Registered Public Accounting Firm, Marcum LLP |
23.2* | | Consent of Independent Registered Public Accounting Firm, HTL International, LLC. |
31.1* |
| Rule 13a-14(a)/15d-14(a) Certification - Principal Executive Officer. |
31.2* |
| Rule 13a-14(a)/15d-14(a) Certification - Principal Financial Officer. |
32** |
| Section 1350 Certification - Principal Executive Officer and Principal Financial Officer. |
97.1 | | Petros Pharmaceuticals, Inc. Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 to the Company’s Annual Report on Form 10-K filed on April 1, 2024). |
101.INS* |
| Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH* |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL* |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* |
| Inline XBRL Taxonomy Extension Labels Linkbase Document |
101.PRE* |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104* |
| Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) |
* | Filed herewith. |
** | Furnished herewith |
∞ | Certain of the schedules (and similar attachments) to these exhibits have been omitted in accordance with Regulation S-K Item 601(a)(5) of Regulation S-K under the Securities Act of 1933, as amended, because they do not contain information material to an investment or voting decision and that information is not otherwise disclosed in the exhibit or the disclosure document. The registrant hereby agrees to furnish a copy of all omitted schedules (or similar attachments) to the SEC upon its request. |
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+ | Portions of these exhibits have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K under the Securities Act of 1933, as amended, because they are both (i) not material and (ii) the type that the registrant treats as private or confidential. A copy of the omitted portions will be furnished to the SEC upon its request. |
† | Management contract or compensatory plan or arrangement. |
(c) Additional Financial Statement Schedules:
None.
ITEM 16.FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| PETROS PHARMACEUTICALS, INC. | |
|
|
|
April 15, 2026 | By: | /s/ Fady Boctor |
| Name: | Fady Boctor |
| Title: | President and Chief Commercial Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates indicated.
| |
| |
|
Signature |
| Title | | Date |
|
|
|
| |
/s/ Fady Boctor |
| President and Chief Commercial Officer |
| April 15, 2026 |
Fady Boctor |
| (Principal Executive Officer) |
|
|
|
|
|
| |
/s/ Mitchell Arnold |
| Vice President of Finance |
| April 15, 2026 |
Mitchell Arnold |
| (Principal Financial and Accounting Officer) |
|
|
|
|
|
| |
/s/ Joshua N. Silverman |
| Executive Chairman |
| April 15, 2026 |
Joshua N. Silverman |
|
|
|
|
|
|
|
| |
/s/ Bruce T. Bernstein |
| Director |
| April 15, 2026 |
Bruce T. Bernstein |
|
|
|
|
|
|
|
| |
/s/ Wayne R. Walker |
| Director |
| April 15, 2026 |
Wayne R. Walker |
|
|
|
|
76
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Petros Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Petros Pharmaceuticals, Inc. (the “Company”) as of December 31, 2025, and the related consolidated statements of operations, changes in shareholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph - Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1 to the financial statements, the Company has incurred significant losses and negative operating cash flows since inception and needs to raise additional funds to meet its obligations and sustain future operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
We have served as the Company’s auditor since 2025.
April 15, 2026
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Petros Pharmaceuticals, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Petros Pharmaceuticals, Inc. (the “Company”) as of December 31, 2024, the related consolidated statements of operations, changes in convertible redeemable preferred stock and stockholders’ deficit and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/
Marcum LLP
We have served as the Company’s auditors from 2024 through 2025.
March 31, 2025 (except for the Reverse Stock Split described in Note 1 and the effects of discontinued operations as to which the date is April 15, 2026)
F-2
Table of Contents
PETROS PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
| | | | | | |
| | December 31, | | December 31, | ||
| | 2025 | | 2024 | ||
Assets |
| | |
| | |
Current assets: |
| | |
| | |
Cash and cash equivalents | | $ | | | $ | |
Prepaid expenses and other current assets | |
| | |
| |
Current assets held for sale | | | — | | | |
Total current assets | | | | | | |
| | | | | | |
Non-current assets held for sale | |
| — | |
| |
Total assets | | $ | | | $ | |
| | | | | | |
Liabilities, Temporary Equity and Stockholders’ Equity (Deficit) | |
| | |
| |
Current liabilities: | |
| | |
| |
Accounts payable | |
| | |
| |
Accrued expenses | |
| | |
| |
Accrued Series A convertible redeemable preferred payments payable | | | | | | |
Warrant liability | |
| | |
| — |
Current held for sale liabilities | |
| — | |
| |
Total current liabilities | |
| | |
| |
| | | | | | |
Non-current liabilities held for sale | |
| — | |
| |
Total liabilities | | | | | | |
| | | | | | |
Commitments and contingencies | | | | | | |
Series A convertible redeemable preferred stock (par value $ | | | — | | | — |
| | | | | | |
Stockholders’ Equity (Deficit): | | | | | | |
Series B convertible redeemable preferred stock (par value $ | | | — | | | — |
Common stock (par value $ | |
| | |
| |
| | | | | | |
Additional paid-in capital | |
| | |
| |
Accumulated deficit | |
| ( | |
| ( |
Total Stockholders’ Equity (Deficit) | |
| | |
| ( |
| | | | | | |
Total Liabilities, Temporary Equity and Stockholders’ Equity (Deficit) | | $ | | | $ | |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
F-3
Table of Contents
PETROS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| | | | | | |
| | For the Years Ended | ||||
| | December 31, | ||||
| | 2025 | | 2024 | ||
Operating expenses: | |
| | |
| |
Selling, general and administrative | | $ | | | $ | |
Total operating expenses | |
| | | | |
| | | | | | |
Loss from continuing operations | |
| ( | |
| ( |
Other income (expense): | | | | | | |
Warrant issuance costs | | | ( | | | — |
Change in fair value of derivative liability | |
| — | |
| |
Change in fair value of warrant liability | | | | | | — |
Interest income | | | | | | |
Total other income, net | | | | | | |
| | | | | | |
Loss before income taxes | |
| ( | |
| ( |
Provision for income taxes | |
| — | |
| — |
Loss from continuing operations, net of tax | | | ( | | | ( |
| | | | | | |
Gain from assignment of subsidiaries and Vivus settlement | |
| | |
| — |
Loss from discontinued operations | | | ( | | | ( |
| | | | | | |
Net income (loss) | | $ | | | $ | ( |
| | | | | | |
Preferred stock dividend and cash premiums | | | ( | | | ( |
Preferred stock accretion | | | | | | ( |
Deemed dividend on Series A Preferred Warrants | | | ( | | | — |
Deemed dividend on Series A Warrants | | | ( | | | — |
| | | | | | |
Net loss from continuing operations attributable to common stockholders | | $ | ( | | $ | ( |
Gain (loss) from discontinued operations attributable to common stockholders | | $ | | | $ | ( |
Basic and Diluted – continuing operations | | $ | ( | | $ | ( |
Basic and Diluted – discontinued operations, assignment and settlement | | $ | | | $ | ( |
Basic and Diluted | | $ | ( | | $ | ( |
Weighted average common shares outstanding | |
| | |
| |
Basic and Diluted | |
| | |
| |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
F-4
Table of Contents
PETROS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND STOCKHOLDERS’ EQUITY/(DEFICIT)
| | | | | | | | | | | | | | | | | | | | |
| | | | Convertible | | | | | | | | | | | | | | | | |
| | Convertible | | Redeemable | | | | | | | | | | | | | | | | |
| | Redeemable | | Preferred | | | | | Common | | | | | | | | | |||
| | Preferred | | Stock | | | Common | | Stock | | | Additional Paid-in | | Accumulated | | | | |||
| | Stock | | Amount | | | Stock | | Amount | | Capital | | Deficit | | Total | |||||
Year Ended December 31, 2025 | | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2024 | | — | | | — | | | | | $ | | | $ | | | $ | ( | | $ | ( |
Stock-based compensation expense | | — | | | — | | | — | | | — | | | | | | — | | | |
Common stock and prefunded warrants issued, net of expense | | — | | | — | | | | | | | | | ( | | | — | | | — |
Series A Preferred stock dividends | | — | | | — | | | — | | | — | | | ( | | | — | | | ( |
Preferred stock redemption including cash premium | | — | | | — | | | | | | | | | | | | — | | | |
Issuance of Series B warrants on stock combination event | | — | | | — | | | | | | | | | ( | | | — | | | — |
Cashless exercise of Series B warrants | | — | | | — | | | | | | | | | | | | — | | | |
Net loss | | — | | | — | | | — | | | — | | | — | | | | | | |
Balance, December 31, 2025 | | — | | $ | — | | | | | $ | | | $ | | | $ | ( | | $ | |
| | | | | | | | | | | | | | | | | | | | |
| | | | Convertible | | | | | | | | | | | | | | | | |
| | Convertible | | Redeemable | | | | | | | | | | | | | | | | |
| | Redeemable | | Preferred | | | | | Common | | | | | | | | | | ||
| | Preferred | | Stock | | | Common | | Stock | | Additional Paid-in | | Accumulated | | | | ||||
| | Stock | | Amount | | | Stock | | Amount | | Capital | | Deficit | | Total | |||||
Year Ended December 31, 2024 | | | | | | | | | | | | | | | | | | | | |
Balance, December 31, 2023 | | | | $ | | | | | | $ | | | $ | | | $ | ( | | $ | |
Stock-based compensation expense | | — | | | — | | | — | | | — | | | | | | — | | | |
Non-employee exercise of restricted stock units | | — | | | — | | | | | | | | | | | | — | | | |
Series A Preferred Stock accretion | | — | | | | | | — | | | — | | | ( | | | — | | | ( |
Series A Preferred Stock dividends | | — | | | | | | — | | | — | | | ( | | | — | | | ( |
Deemed dividends on Preferred Stock | | — | | | — | | | — | | | — | | | ( | | | — | | | ( |
Preferred Stock redemption including cash premium | | ( | | | ( | | | | | | | | | | | | — | | | |
Net loss | | — | | | — | | | — | | | — | | | — | | | ( | | | ( |
Balance, December 31, 2024 | | — | | $ | — | | | | | $ | | | $ | | | $ | ( | | $ | ( |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
F-5
Table of Contents
PETROS PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| | | | | | |
| | For the Years Ended | ||||
| | December 31, | ||||
| | 2025 | | 2024 | ||
Cash flows from operating activities: |
| | |
| | |
Net income (loss) | | $ | | | $ | ( |
Less loss from discontinued operations | | | ( | | | ( |
Net income (loss) from continuing operations | | | | | | ( |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | |
| | |
| |
Change in fair value of warrant liability | | | ( | | | — |
Change in fair value of derivative liability | | | — | | | ( |
Warrant issuance costs | | | | | | — |
Gain on asset disposition and Vivus settlement | | | ( | | | — |
Employee stock-based compensation | | | | | | |
Stock issued for services | |
| — | |
| |
Changes in operating assets and liabilities: | |
| | |
| |
Prepaid expenses and other current assets | |
| ( | |
| |
Accounts payable | |
| ( | |
| |
Accrued expenses | |
| | |
| ( |
Net cash used in operating activities – continuing operations | |
| ( | |
| ( |
Net cash (used in) provided by operating activities – discontinued operations | |
| ( | |
| |
Net cash used in operating activities | |
| ( | |
| ( |
| | | | | | |
Cash flows from investing activities: | | | | | | |
Net cash used in investing activities – discontinued operations | | | — | | | ( |
| | | | | | |
Cash flows from financing activities: | |
| | |
| |
Proceeds from common stock and prefunded warrants, net | | | | | | — |
Redemption of Series A Preferred Stock | | | ( | | | ( |
Net cash provided by (used in) financing activities – continuing operations | | | | | | ( |
Net cash used in financing activities – discontinued operations | |
| — | |
| ( |
Net cash provided by (used in) financing activities | |
| | |
| ( |
| | | | | | |
Net increase (decrease) in cash | |
| | |
| ( |
| | | | | | |
Cash and cash equivalents, beginning of year | |
| | |
| |
Cash and cash equivalents, end of year | | | | | | |
Less: cash and cash equivalents attributable to discontinued operations | | | — | | | ( |
Cash and cash equivalents, end of year – continuing operations | | $ | | | $ | |
| | | | | | |
Supplemental cash flow information: | |
| | |
| |
Cash paid for interest during the year | | $ | — | | $ | — |
Cash paid for income tax during the year | | $ | — | | $ | — |
| | | | | | |
Noncash items: | | | | | | |
Noncash redemption of Series A Preferred Stock | | $ | | | $ | |
Accrued Series A Preferred Stock payments payable | | | — | | | |
Accretion of Series A Preferred Stock to redemption value | | | — | | | |
Accrual of Series A Preferred Stock dividends | | | | | | |
Non-cash warrant issuance costs | | | | | | — |
Cashless exercise of Series B warrants | | | | | | — |
Deemed dividend on Series A Preferred Warrants | | | | | | — |
Deemed dividend on Series A Warrants | | | | | | — |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
F-6
Table of Contents
PETROS PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) Nature of Operations, Basis of Presentation, and Liquidity
Nature of Operations and Basis of Presentation
Petros 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. Prior to June 2025, Petros consisted of wholly owned subsidiaries: Metuchen, Neurotrope, Timm Medical Technologies, Inc. (“Timm Medical”), and Pos-T-Vac, LLC (“PTV” and, collectively with Metuchen and Timm Medical, the “Subsidiaries”). The Company has historically been 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 licensed from Vivus, Inc. (“Vivus”). Petros also historically marketed its own line of ED products in the form of vacuum erection device products (“VEDs”) through its previous subsidiaries, Timm Medical and PTV, including VEDs marketed as “Osbon ErecAid” and “PosTVac.”
In December 2024, the Company determined to discontinue sales of Stendra® to wholesalers. Beginning in March 2025, the Company is no longer engaged in the commercialization, development or sales of Stendra®. In addition, on June 16, 2025, in accordance with California state law, the Company effected an assignment (the “Assignment”) of all of the business, assets, properties, contractual rights, goodwill, going concern value, rights and claims (“Assets”) of Metuchen, including Metuchen’s wholly-owned subsidiaries, Timm Medical and PTV and each of their respective Assets (collectively, the “ABC Assets”), for the benefit of creditors to a special purpose vehicle that is managed by a third-party fiduciary (the “Assignee”) such that, as of June 16, 2025, the Assignee succeeded to all of each Subsidiary’s right, title and interest in and to the respective ABC Assets. Upon the completion of the Assignment, the Assignee obtained sole control over the ABC Assets and each Subsidiary no longer operates its business or controls the liquidation or distribution of its assets or the resolution of claims. The Assignment is a judicial insolvency procedure, which was commenced by each Subsidiary entering a contractual assignment for the benefit of creditors on June 16, 2025, that effectuates the assignment, grant, conveyance, transfer, and setting over to the Assignee, in trust, of all of the ABC Assets. Accordingly, the Company is no longer engaged in the marketing or selling of VEDs following the completion of the Assignment. Today, the Company is working towards the goal of becoming a leading innovator in the emerging self-care market driving expanded access to key nonprescription pharmaceuticals as Over-the-Counter (“OTC”) and nonprescription drug products with additional condition for nonprescription use (“ACNU Products”) treatment options.
Petros is pursuing the development of a proprietary integrated technology solutions platform (the “platform”) containing two components (i) SaaS, designed to assist pharmaceutical companies in operationalizing and commercializing an Rx-to-OTC switch as an element in the development of an ACNU Product, and (ii) a potential Software as a Medical Device (“SaMD”) component, which must comply with FDA governance and approval and is expected to be a consumer interface that guides the consumer in navigating appropriate self-selection or deselection, through the acquisition process of the OTC product. The Company has been working towards the development of the platform, which is currently in early development stages and is being designed to serve as a retail or online interface, with clinically established algorithmic logic qualifying the intended consumer-patient for purchase and use of an ACNU Product, while reducing subjectivity to the least possible degree and maximizing objective qualifiers to the greatest possible degree.
We believe our platform will be anchored in recent FDA adopted rules, such as the FDA’s Nonprescription Drug Product with an Additional Condition for Nonprescription Use rule (“ACNU Rule”), intended to increase options to develop and market nonprescription drug products; Trusted Exchange Framework and Common Agreement (“TEFCA”), a nationwide framework for health information sharing; and Qualified Health Information Networks, which are sponsored by the FDA and the Department of Health and Human Services. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the accounting rules under Regulation S-X, as promulgated by the Securities and Exchange Commission (“SEC”). All significant intercompany accounts and transactions have been eliminated in consolidation.
Reverse Stock Split
On April 29, 2025, the Company effected a 1-for-25 reverse stock split as of April 30, 2025. All share, restricted stock unit (“RSU”) and per share or per RSU information has been retroactively adjusted to reflect the reverse stock split.
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Liquidity and Going Concern
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 the Company’s 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 the Company’s inception. As of December 31, 2025, the Company had cash of $
The accompanying consolidated financial statements do not include any adjustments that might result from these uncertainties. The 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 the Company’s consolidated financial statements included in this annual 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 by exploring additional ways to raise capital and increasing cash flows from operations. There is no assurance the Company will manage to raise additional capital or otherwise increase cash flows, if required or that the Company will have sufficient cash to develop its platform, even after the proceeds raised in this offering.
Metuchen ABC
On January 18, 2022, Metuchen and Vivus, Inc. (“Vivus”) entered into a Settlement Agreement (the “Vivus Settlement Agreement”) related to the minimum purchase requirements under the Vivus Supply Agreement in 2018, 2019 and 2020 and certain reimbursement rights asserted by a third-party retailer in connection with quantities of Metuchen’s Stendra® product that were delivered to the third-party retailer and later returned. In connection with the Vivus Settlement Agreement, Metuchen retained approximately $
In addition to the payments to be made in accordance with the Note, Metuchen further agreed in the Vivus Settlement Agreement to (i) grant to Vivus a right of first refusal to provide certain types of debt and convertible equity (but not preferred equity) financing issued by or to Metuchen (including any subsidiaries and intermediaries) until the Note is paid in full, and (ii) undertake to make certain regulatory submissions to effectuate Vivus’ ability to exercise its rights under the License Agreement. On January 18, 2022, Metuchen made a prepayment of the obligations under the Note in the amount of $
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On October 1, 2024, Metuchen failed to make the payment due pursuant to the Note and related Security Agreement in the amount of $
Pursuant to the Security Agreement, Vivus holds a security interest against the Collateral. On December 10, 2024, pursuant to a Notice of Proposal to Accept Pledged Collateral in Partial Satisfaction of Indebtedness Pursuant to Uniform Commercial Code Section 9-620 (the “Foreclosure Notice”), Vivus proposed to accept all the Collateral (save and except the Specified License Agreement (as defined in the Security Agreement); collectively, the “Foreclosed Collateral”) in partial satisfaction of the Obligations. Vivus further proposed in the Foreclosure Notice that its acceptance of the Foreclosed Collateral would only constitute satisfaction of $
In connection with the Foreclosure Notice, Metuchen and Vivus entered into that certain termination agreement, dated as of March 31, 2025, pursuant to which, the parties mutually agreed to terminate the Vivus License Agreement, effective as of March 31, 2025 (the “Vivus Termination Agreement”), subject to the survival of certain provisions as set forth therein. As a result of the Vivus Termination Agreement, Metuchen no longer has any right in or to Vivus Technology (as defined in the Vivus License Agreement) in the United States of America and its territories and possessions, including Puerto Rico and U.S. military bases abroad, Canada, South America and India (the “Licensed Territory”) and Metuchen agreed to immediately cease the development, manufacturing and commercialization of Stendra® in the Licensed Territory. Metuchen further agreed to assign any trademarks incorporating the mark “Stendra®” to Vivus, subject to certain exceptions as set forth therein. In furtherance of the Foreclosure Notice, and pursuant to the Termination Agreement, Metuchen agreed to transfer all completed inventory of Stendra® and all substantially manufactured inventory of Stendra® on hand to Vivus at Metuchen’s sole expense within 30 days of the date of the Vivus Termination Agreement.
Pursuant to the Vivus Termination Agreement, Metuchen agreed to provide transition services to Vivus, including transferring any agreements or arrangements with distributors of Stendra®, to enable the development, manufacturing and commercialization of Stendra® to proceed without disruption. Additionally, Metuchen agreed to transfer to Vivus any regulatory approvals with respect to Stendra® controlled by Metuchen or its affiliates within
Pursuant to the Vivus Termination Agreement, Metuchen further agreed that Metuchen will retain liability for payment of all gross to net sales deductions (including returns, rebates and chargeback) of Stendra® products that were sold prior to the date of the Vivus Termination Agreement and agreed to reimburse Vivus for any such deductions charged to or otherwise borne by Vivus.
On June 16, 2025, in accordance with California state law, the Company effected an assignment (the “Assignment”) of all of the business, assets, properties, contractual rights, goodwill, going concern value, rights and claims (“Assets”) of Metuchen, including Metuchen’s wholly-owned subsidiaries, Timm Medical and PTV and each of their respective Assets (collectively, the “ABC Assets”), for the benefit of creditors to a special purpose vehicle that is managed by a third-party fiduciary (the “Assignee”) such that, as of June 16, 2025, the Assignee succeeded to all of each Subsidiary’s right, title and interest in and to the respective ABC Assets. Upon the completion of the Assignment, the Assignee obtained sole control over the ABC Assets and each Subsidiary no longer operates its business or controls the liquidation or distribution of its assets or the resolution of claims. The Assignment is a judicial insolvency procedure, which was commenced by each Subsidiary entering a contractual assignment for the benefit of creditors on June 16, 2025, that effectuates the assignment, grant, conveyance, transfer, and setting over to the Assignee, in trust, of all of the ABC Assets. The Assignee is expected to liquidate the property through an auction sale and distribute the proceeds to the Subsidiaries’ creditors according to their respective priorities at law to satisfy Metuchen’s obligations, including the Obligations, in accordance with the rules and regulations of the State of California. If any proceeds remain after all of Metuchen’s obligations, including the Obligations, and costs associated with the liquidation process have been satisfied, any remaining proceeds will be distributed to Metuchen’s equity holder, which is the Company (collectively, the “ABC”).
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Pursuant to that certain letter agreement (the “Sherwood Agreement”), dated as of March 31, 2025, by and between Metuchen and Sherwood Partners, Inc. (“Sherwood”), Sherwood agreed to provide certain consulting and advisory services in connection with the ABC, including in connection with the sale process and budgeting and planning process (the “Services”). In consideration for the Services, Metuchen has agreed to pay a fee to Sherwood equal to $
2) Summary of Significant Accounting Policies
Use of Estimates
The preparation of Consolidated Financial Statements in conformity with 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 the valuation of the derivative liability, and the valuation of warrants, among others. Actual results could differ from these estimates and changes in these estimates are recorded when known.
Discontinued Operations
Assets and liabilities of a business that meet the accounting requirements to be classified as held for sale are separated in a disposal group. Disposal group net assets are recorded at the lower of their carrying amount or estimated fair value less expected costs to sell. After being classified as held for sale, assets are not depreciated or amortized.
Assets and liabilities of a disposal group that meet the accounting requirements to be classified as discontinued operations are presented separately for all current and prior periods in the condensed consolidated balance sheets. The results of discontinued operations are reported in income (loss) from discontinued operations, net of taxes in the condensed consolidated statements of operations (loss) for the current and prior periods beginning in the period in which the business meets the held for sale criteria. Income (loss) from discontinued operations includes direct costs attributable to the business held for sale, and an estimate of costs from corporate functions dedicated to the business, but excludes corporate expenses composed of selling, general and administrative expenses not attributable to any of the operating segments (see Note 3).
Unless otherwise indicated, the information in the notes to the condensed consolidated financial statements refers only to the Company’s continuing operations.
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.
Revenue Recognition
The Company does not expect to generate revenue unless and until it successfully completes development of its products and/or services and obtain required regulatory approvals, enter into commercial arrangements, or otherwise commence revenue-generating operations. There can be no assurance as to when, or if, the Company will generate revenue. Accordingly, no revenue has been recognized for any period presented in this Annual Report on Form 10 - K.
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 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.
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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 payable, and accrued expenses. The Company believes that the carrying values of cash, accounts payable, and accrued expenses 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 issued warrants and derivatives arising from embedded features that were not clearly and closely related to the host instruments. The Company estimated the fair value of the warrants and derivative liability utilizing the Black Scholes Model and a Monte Carlo Simulation approach, respectively. 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 Note 11.
Stock-Based Compensation
The Company accounts for stock-based awards to employees in accordance with applicable accounting principles, which requires compensation expense related to stock-based transactions, including employee stock options and restricted stock units, to be measured and recognized in the consolidated financial statements based on a determination of the fair value of the stock options or restricted stock units. The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model for stock options and the closing price per share on the date of the award for restricted stock units. Employee stock option and restricted stock units expense is recognized over the employee’s requisite service period (generally the vesting period of the equity grant), except for performance-based milestones which is recognized upon the probability of achievement. The Company accounts for forfeitures as they occur.
The Company’s option pricing model requires the input of highly subjective assumptions, including the volatility and expected term. Any changes in these highly subjective assumptions can significantly impact stock-based compensation expense. See Note 6 Stock-Based Compensation.
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 Company’s Series A Convertible Preferred Stock, par value $
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Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own Common Stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be liability classified and recorded at their initial fair value on the date of issuance and remeasured at fair value and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The warrants are classified as liabilities in accordance with ASC 815 as they could be net cash settled in the event of a Fundamental Transaction. The fair value of the warrant liability was estimated using a Black-Scholes approach (see Note 7).
Modification of warrants
The Company applies the guidance in ASC 815-40 to account for warrants that are liability classified that are subsequently modified resulting in a reclassification to equity. The warrants are remeasured at fair value on the modification date, the change in fair value is recognized as a non-cash gain or loss on the statements of operations, and the warrants are reclassified to additional paid-in capital.
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the consolidated financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Company determines that it would be able to realize deferred tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. As of December 31, 2025, and 2024, the Company has recorded a full valuation allowance against its deferred tax assets.
The Company records uncertain tax positions in accordance under Accounting Standards Codification (“ASC”) Topic 740, Income taxes (“ASC 740”), on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. As of December 31, 2025, and 2024,
Contingencies
The Company may be subject to various patent challenges, product liability claims, government investigations and other legal proceedings in the ordinary course of business. Legal fees and other expenses related to litigation are expensed as incurred and included in general and administrative expenses in the consolidated statements of operations.
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Basic and Diluted Net Loss per Common Share
The Company computes basic net loss per common share by dividing net loss applicable to Common Stockholders by the weighted average number of shares of Common Stocks outstanding during the period, excluding the anti-dilutive effects of stock options and warrants to purchase Common Stocks. The Company computes diluted net loss per Common Stock by dividing the net loss applicable to Common Stocks by the sum of the weighted-average number of Common Stocks outstanding during the period plus the potential dilutive effects of its convertible preferred stocks, stock options and warrants to purchase Common Stocks, but such items are excluded if their effect is anti-dilutive. In accordance with ASC 260, warrants that are accounted for as liabilities which are potentially dilutive have not been included in diluted earnings per share as they would have been anti-dilutive. Because the impact of these items is anti-dilutive during periods of net loss, there was no difference between the Company’s basic and diluted net loss per stock of Common Stock for the years ended December 31, 2025, and 2024.
Segment Reporting
The Company determines its reporting units in accordance with FASB ASC 280, “Segment Reporting” (“ASC 280”). The Company operations comprise a single operating segment at the consolidated level. The Company’s chief operating decision maker (“CODM”) is its President and Chief Commercial Officer, who reviews and evaluates consolidated net income as presented in the accompanying consolidated statements of operations for purposes of assessing performance, making operating decisions, allocating resources, and planning and forecasting for future periods.
Recent Accounting Pronouncements
Accounting Pronouncements Adopted
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. The Company adopted ASU 2023-09 effective January 1, 2025, on a prospective basis. The impact of ASU 2023-09 on the Company’s consolidated financial statements is reflected in Note 12 - Income Taxes.
Accounting Pronouncements Not Yet Adopted
In November 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure in the notes to the financial statements of specified information about certain costs and expenses. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements and related disclosures.
3) Discontinued Operations
ABC Assets’ Discontinued Operations
As a result of the Board ABC Resolution and Sherwood Agreement, as of March 31, 2025, the Company determined that the ABC Assets met the held for sale and discontinued operations accounting criteria. Accordingly, the ABC Assets were classified as held for sale in the consolidated balance sheets for all periods presented, and its net assets were classified as current and non-current. Additionally, the Company classified the ABC Assets’ operations as discontinued operations in its consolidated statements of operations for all periods presented.
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Carrying amounts of assets and liabilities associated with the ABC Assets included as part of consolidated discontinued operations:
| | | |
| | December 31, | |
| | 2024 | |
Assets held for sale: |
| | |
Current assets: |
| | |
Cash and cash equivalents | | $ | |
Accounts receivable, net | |
| |
Inventories | |
| |
Prepaid inventory | |
| |
Prepaid expenses and other current assets | |
| |
Total current assets held for sale | |
| |
| | | |
Fixed assets, net | |
| |
Intangible assets, net | |
| |
Right of use assets | |
| |
Total non-current assets held for sale | | $ | |
| | | |
Liabilities held for sale: | |
| |
Current liabilities: | |
| |
Current portion of promissory note | | $ | |
Accounts payable | |
| |
Accrued expenses | |
| |
Other current liabilities | |
| |
Total current liabilities held for sale | |
| |
| | | |
Other long-term liabilities | |
| |
Total non-current liabilities held for sale | | $ | |
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Consolidated statements of operations related to the ABC Assets’ discontinued operations:
| | | | | | |
| | For the Years Ended December 31, | ||||
| | 2025 | | 2024 | ||
Net sales | | $ | | | $ | |
Cost of goods sold | |
| | |
| |
Gross profit | |
| | |
| |
Selling, general and administrative | |
| | |
| |
Research and development expense | |
| | |
| |
Depreciation and amortization expense | |
| | |
| |
Intangible asset impairment | |
| — | |
| |
API asset impairment | |
| — | |
| |
Interest expense, promissory note | |
| | |
| |
Loss from discontinued operations before income tax | |
| ( | |
| ( |
Provision for income taxes | |
| — | |
| — |
Loss from discontinued operations | | $ | ( | | $ | ( |
4) Accrued Expenses
Accrued expenses are comprised of the following:
| | | | | | |
| | December 31, 2025 | | December 31, 2024 | ||
Accrued professional fees | | $ | | | $ | |
Other accrued expenses | |
| | |
| |
Total accrued expenses | | $ | | | $ | |
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5) Stockholders’ Equity
Private Placement
On July 13, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which the Company agreed to sell in a private placement to the Investors (i) an aggregate of
Series A Preferred Stock
The terms of the Series A Preferred Stock are as set forth in the form of Certificate of Designations. The Series A Preferred Stock is convertible into shares of Common Stock (the “Conversion Shares”) at the election of the holder at any time at an initial conversion price of $
Pursuant to the Certificate of Designations and prior to the November 2024 Certificate of Amendment (as defined below) and the January 2025 Certificate of Amendment (as defined below), we were initially required to redeem the Series A Preferred Stock in
On November 13, 2024, the Company entered into an Amendment Agreement with the Required Holders (as defined in the Certificate of Designations), pursuant to which, the Required Holders agreed to (i) amend the Certificate of Designations, by filing a Certificate of Amendment with the Secretary of State of the State of Delaware (the “November 2024 Certificate of Amendment”), (ii) defer any payment amounts that have accrued and that are unpaid as of November 13, 2024, pursuant to the Certificate of Designations, to January 15, 2025, and (iii) waive any breach or violation of the Purchase Agreement, the Certificate of Designations, or the Warrants resulting from the Company’s failure to pay such outstanding amounts (the “November 2024 Certificate of Amendment”). The November 2024 Certificate of Amendment amends the Certificate of Designations to, (i) extend the maturity date to January 15, 2025, (ii) modify the schedule of Installment Dates (as defined in the Certificate of Designations), and (iii) adds an additional restrictive covenant to the Certificate of Designations requiring the Company from November 13, 2024 until January 15, 2025, to maintain unencumbered, unrestricted cash and cash equivalents on hand in amount equal to at least $
On January 23, 2025, the Company entered into an Amendment Agreement with the Required Holders (as defined in the Certificate of Designations (the “Certificate of Designations”) of the Company’s Series A Convertible Preferred Stock (“Series A Preferred Stock”)), pursuant to which, the Required Holders agreed to (i) amend the Certificate of Designations of the Company’s Series A Preferred Stock by filing a Certificate of Amendment to the Certificate of Designations (the “January 2025 Certificate of Amendment”) with the Secretary of State of the State of Delaware, (ii) defer any payment amounts that have accrued and that are unpaid as of January 23, 2025 pursuant to the Certificate of Designations, to February 15, 2025, and (iii) waive any breach or violation of that certain Purchase Agreement, dated as of July 13, 2023 (“Series A Purchase Agreement”), pursuant to which the Company issued the Series A Preferred Stock and the related warrants (the “Warrants”), the Certificate of Designations, or the Warrants resulting from the Company’s failure to pay such outstanding amounts. The January 2025 Certificate of Amendment amended the Certificate of Designations to (i) extend the maturity date to February 15, 2025, (ii) modify the schedule of Installment Dates (as defined in the Certificate of Designations), (iii) amends the restrictive covenant to the Certificate of Designations requiring the Company from January 15, 2025 until February 15, 2025, to maintain unencumbered, unrestricted cash and cash equivalents on hand in amount equal to at least $
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development and commercialization of a proprietary platform focused on prescription medication to over - the - counter switch solutions. The January 2025 Certificate of Amendment was filed with the Secretary of State of the State of Delaware, effective as of January 24, 2025.
On March 30, 2025, the Company entered into an Amendment Agreement (the “March 2025 Amendment Agreement”) with the Required Holders (as defined in the Certificate of Designations), pursuant to which, the Required Holders agreed to (i) amend the Certificate of Designations of the Company’s Series A Preferred Stock by filing a Certificate of Amendment to the Certificate of Designations (the “March 2025 Certificate of Amendment”) with the Secretary of State of the State of Delaware, (ii) defer any payment amounts that have accrued and that are unpaid as of the date of the March 2025 Amendment Agreement, pursuant to the Certificate of Designations, to July 15, 2025, and (iii) waive any breach or violation of the Purchase Agreement, the Certificate of Designations, or the Warrants resulting from the Company’s failure to pay such outstanding amounts. The March 2025 Certificate of Amendment amends the Certificate of Designations to, (i) extend the maturity date to July 15, 2025, and (ii) modify the schedule of Installment Dates (as defined in the Certificate of Designations). The March 2025 Certificate of Amendment was filed with the Secretary of State of the State of Delaware, effective as of March 31, 2025. As of the date of this filing, the liability for accrued Series A Preferred payments payable has not been fully settled and the Certificate of Designations has not been further amended to extend the maturity date as set forth therein.
The amortization payments due upon redemptions are payable, at the Company’s election, in cash at
The holders of the Series A Preferred Shares are entitled to dividends of
The event of default under the Settlement Agreement and the Security Agreement with Vivus existing and continuing by virtue of Metuchen’s failure to pay the Installment (as defined in the Promissory Note) that was due October 1, 2024, constituted a Triggering Event pursuant to the terms of the Certificate of Designations. As a result, the dividend rate of the Series A Preferred Stock was automatically increased to
During the year ended December 31, 2024, the Company experienced an Equity Conditions Failure in which the Company’s average stock price during the Installment Conversion Price Measuring Period (as defined in the Certificate of Designations) corresponding to the September 1, 2024, and October 1, 2024, and November 1, 2024, installments (the “Affected Installments”) was below the Floor Price (as defined in the Certificate of Designations) (the “Floor Price Condition”). As a result of the Floor Price Condition, the Company is required to redeem the Affected Installments as well as any previously deferred installment amounts at a
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On October 11, 2024, the Company entered into an Amendment Agreement with the Required Holders (as defined in the Certificate of Designations) pursuant to which, the Required Holders agreed to amend the Certificate of Designations of the Company’s Series A Preferred Stock, by filing a Certificate of Amendment with the Secretary of State of the State of Delaware (“October 2024 Certificate of Amendment”). The October 2024 Certificate of Amendment amends the Certificate of Designations to, among other things, provide that, except as required by applicable law, the holders of the Series A Preferred Stock will be entitled to vote with holders of the Common Stock on an as converted basis, with the number of votes to which each holder of Series A Preferred Stock is entitled to be determined by dividing the Stated Value (as defined in the Certificate of Designations) by a conversion price equal to $
The Series A Preferred Shares were determined to be more akin to a debt-like host than an equity-like host. The Company identified the following embedded features that are not clearly and closely related to the debt host instrument: 1) make-whole interest upon a contingent redemption event, 2) make-whole interest upon a conversion event, 3) an installment redemption upon an Equity Conditions Failure (as defined in the Certificate of Designation), and 4) variable share-settled installment conversion. These features were bundled together, assigned probabilities of being affected and measured at fair value. Subsequent changes in fair value of these features are recognized in the Consolidated Statements of Operations. During the year ended December 31, 2024, the Company recorded a gain of $
As of December 31, 2025, the Company recorded a total liability of $
As of December 31, 2024, the Company has notified the investors of its intention to redeem the remaining installments due in cash and recorded a liability of $
The Company is subject to certain affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends (other than dividends pursuant to the Certificate of Designations), distributions or redemptions, and the transfer of assets, among other matters.
There is no established public trading market for the Series A Preferred Shares and the Company does not intend to list the Series A Preferred Shares on any national securities exchange or nationally recognized trading system.
Series B Preferred Stock
On February 13, 2025, the Company filed a Certificate of Designations with the Secretary of State of the State of Delaware, establishing the designations, preferences, powers and rights of the shares of a new series of the Company’s preferred stock, Series B Convertible Preferred Stock, which was effective immediately on filing (the “Series B Certificate of Designations”).
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February 2025 Equity Financing
On February 17, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with certain institutional and accredited investors (collectively, the “Investors”) for the issuance and sale, in a best efforts public offering (the “Public Offering”), of (i)
In connection with the Company’s Reverse Stock Split, the exercise price of the Series B Warrants was adjusted to $
On April 30, 2025, the Company modified the Series A Warrants to adjust the exercise price to $
The Company valued the deemed dividend in connection with the Series A Warrant Modification as the difference between: (a) the modified fair value of the Series A Warrants in the amount of approximately $
The exercisability of the Series Warrants was subject to receipt of such stockholder approval was required by the applicable rules and regulations of the Nasdaq Capital Market LLC, including, but not limited to, with respect to (i) the issuance of all of the shares of Common Stock issuable upon exercise the Series Warrants in accordance with their terms (including adjustment provisions set forth therein), and (ii) to consent to any adjustment to the exercise price or number of shares of Common Stock underlying the Series Warrants in the event of a Share Combination Event and Dilutive Issuance, each as defined in the Series Warrants (collectively, the “Warrant Stockholder Approval”). The Company agreed to use its reasonable best efforts to obtain such approval within 60 days from the closing of the Offering, and agreed to cause an additional stockholder meeting to be held every 90 days thereafter until such Warrant Stockholder Approval is obtained. The Series B Warrants specifically can be settled by way of an alternative cashless exercise after stockholder approval is obtained, in which the Series B Warrant holders can receive
The Series B Warrants became exercisable beginning on the first trading day following the date of Warrant Stockholder Approval (the “Initial Exercise Date.”). Holders of the Series B Warrants may effect an “alternative cashless exercise” at any time while the Series B Warrants are outstanding following the Initial Exercise Date. Under the alternative cashless exercise option, a holder of a Series B Warrant has the right to receive an aggregate number of shares equal to the product of (i) the aggregate number of shares of Common Stock that would be issuable upon a cash rather than a cashless exercise of the Series B Warrant and (ii)
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Subject to certain limitations described in the Pre-Funded Warrants, the Pre-Funded Warrants were immediately exercisable and could have been exercised at a nominal consideration of $
In connection with the Public Offering, (i) the conversion price of the Series A Preferred Stock was adjusted to $
On April 30, 2025, the Company modified the Warrants to adjust the exercise price to $
As a result of the Public Offering Warrant Adjustment and the April 2025 Modification, the Company recognized the change in the fair value of the Warrants as a deemed dividend in the amount of approximately $
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Dawson James Securities, Inc. (“Dawson”) acted as the Company’s exclusive placement agent in connection with the Public Offering, pursuant to that certain engagement letter, dated as of January 24, 2025, between the Company and Dawson (the “Engagement Letter”). Pursuant to the Engagement Letter, the Company agreed to pay Dawson a cash fee equal to
The aggregate gross proceeds from the Public Offering were approximately $
The Company assessed the Pre-Funded Warrants and Series A Warrants under ASC 480 and ASC 815 and determined that the Pre-Funded and Series A Warrants met the requirements to be classified in stockholders’ equity. However, as discussed in the following paragraph, the fair value of the Series B Warrants exceeded the proceeds received from the Public Offering, and thus the Pre-Funded Warrants and Series A Warrants were recorded at their residual fair value of $
Transaction costs incurred attributable to the Series B Warrants of approximately $
During the year ended December 31, 2025, investors exercised a total of
On January 5, 2024, the Company executed an advisory agreement (“Maxim Agreement”) with Maxim Group LLC (“Maxim”) that included the issuance of $
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6) Stock-Based Compensation
The Company held a special meeting of stockholders on April 10, 2025, at which the Company’s stockholders approved an amendment to the Petros Pharmaceuticals, Inc. Amended and Restated 2020 Omnibus Incentive Compensation Plan (the “Incentive Plan”) to increase the aggregate number of shares of Common Stock available for the grant of awards under the Incentive Plan by
The following is a summary of the Company’s stock options activities for the year ended December 31, 2025, and 2024.
| | | | | | | | | | |
| | | | | | Weighted-Average | | Aggregate Intrinsic | ||
| | | | Weighted-Average | | Remaining Contractual | | Value | ||
| | Number of Shares | | Exercise Price | | Term (Years) | | ($ in thousands) | ||
Options outstanding at January 1, 2024 |
| | | $ | |
| | $ | | |
Options granted |
| — | |
| — |
| — | | $ | — |
Less options forfeited |
| ( | | $ | |
| — | | $ | — |
Options outstanding at January 1, 2025 |
| | | $ | |
| | $ | — | |
Options granted |
| — | |
| — |
| — | | $ | — |
Less options forfeited | | ( | | $ | | | — | | $ | — |
Options outstanding at December 31, 2025 |
| | | $ | |
| | $ | — | |
Options exercisable at December 31, 2025 | | | | $ | | | | $ | — | |
The following is a summary of the Company’s restricted stock awards activities for the years ended December 31, 2025, and 2024:
| | | | | |
| | | | Weighted- | |
| | Number of | | Average | |
| | Shares | | Grant Date Fair Value | |
Restricted Stock Awards Unvested at January 1, 2024 |
| — | | | — |
Restricted Stock Awards Unvested at December 31, 2024 | | — | | | — |
Restricted Stock Awards granted | | | | $ | |
Restricted Stock Awards Unvested at December 31, 2025 |
| | | $ | |
Stock-based compensation expense associated with restricted stock awards recognized for the years ended December 31, 2025, and December 31, 2024, was $
7) Common Stock Warrants
The following is a summary of warrant activities for the years ended December 31, 2025, and 2024:
| | | | | | | | | | |
| | | | | | | | | Aggregate | |
| | | | | | | | | Intrinsic | |
| | | | Weighted-Average | | Remaining | | Value ($ in | ||
| | Number of Warrants | | Exercise Price | | Contractual Years | | thousands) | ||
Warrants outstanding - December 31, 2023 |
| | | $ | | | | $ | — | |
Warrants expired in 2024 | | ( | | | ( | | — | | | — |
Warrants abandoned in 2024 |
| ( | | | ( | | — | | | — |
Warrants outstanding - December 31, 2024 | | | | $ | | | | $ | — | |
Warrants issued in 2025 | | | | | | | — | | | — |
Warrants exercised in 2025 | | ( | | | | | — | | | — |
Warrants expired in 2025 | | ( | | | ( | | — | | | — |
Warrants outstanding and exercisable – December 31, 2025 |
| | | $ | | | | $ | — | |
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Of the
On February 17, 2025, the Company issued a total of
The Company assessed the Pre-Funded Warrants and Series A Warrants under ASC 480 and ASC 815 and determined that the Pre-Funded and Series A Warrants met the requirements to be classified in stockholders’ equity. The Company assessed the Series B Warrants under ASC 480 and ASC 815 and determined that the Series B Warrants will be classified as liabilities as they do not meet the requirements to be considered indexed to the Company’s own stock, due to the potential change in the settlement amount of the Series B Warrants upon an alternative cashless exercise election.
The Company utilized a scenario-based option pricing model to calculate the value of the Series B Warrants issued during the year ended December 31, 2025. The fair value of the Series B Warrants of $
During the year ended December 31, 2025, the Company recorded a gain of approximately $
8) Dilutive Convertible Securities
The following table summarizes the potentially dilutive securities convertible into shares of Common Stock that were excluded from the calculation of diluted net income (loss) per share because their inclusion would have been antidilutive:
| | | | |
| | For the Years Ended | ||
| | December 31, | ||
| | 2025 | | 2024 |
Stock options |
| |
| |
Restricted stock awards | | | | — |
Series A Convertible Preferred stock | | — | | — |
Warrants |
| |
| |
Total |
| |
| |
9) Commitments and Contingencies
(a) Legal Proceedings
From time to time, the Company is involved in various legal matters arising in the normal course of business. The Company does not expect the outcome of such proceedings, either individually or in the aggregate, to have a material effect on the Company’s financial position, cash flows or results of operations.
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10) Segment Information
During 2025, the Company has reorganized its business operations resulting in a change in the number of reportable segments. As a result of the Vivus Termination Agreement (as defined herein) entered into by the Company in March 2025, the Company is no longer engaged in the commercialization, development or sales of Stendra®. Additionally, Metuchen, Timm Medical and PTV have been assigned to a third-party in connection with the ABC (as defined herein), and accordingly, the Company is no longer engaged in the marketing or selling of VEDs. As a result,
11) Fair Value Measurements
The Company maintains cash in checking and money market accounts with financial institutions. The Company considers all highly liquid investments purchased with an original maturity of three months or less from the time they are acquired to be cash equivalents. The Company had approximately $
Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the years ended December 31, 2025, and 2024. The carrying amounts of cash equivalents, other current assets, other assets, accounts payable, and accrued expenses approximated their fair values as of December 31, 2025, and 2024 due to their short-term nature.
During the year ended December 31, 2025, the Company had warrant liabilities that were measured at fair value on a recurring basis. These fair value measurements were estimated using a scenario-based option pricing model, with the key inputs described in Note 7 above. Each of these fair value measurements was considered to be a Level 3 measurement by the Company as they used significant unobservable inputs, including the probability and expected date of stockholder approval.
The following table details the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of the years ended December 31, 2025, and December 31, 2024:
| | | | | | | | |
| | | | December 31 | | December 31 | ||
Description | | Level | | 2025 | | 2024 | ||
Liabilities: |
| | | | |
| | |
Warrant Liabilities |
| 3 | | $ | | | $ | — |
The following table provides a roll forward of the fair value of the warrant liability noted above:
| | | | | | | |
| | Series B | | | Total Warrant | ||
| | Warrants | | | Liabilities | ||
Balance - January 1, 2024 | | $ | — | | | $ | — |
Ending balance - December 31, 2024 | | $ | — | | | $ | — |
Issuances | | $ | | | | $ | |
Exercises | | $ | ( | | | $ | ( |
Gain on change in fair value | | $ | ( | | | $ | ( |
Ending balance - December 31, 2025 | | $ | | | | $ | |
The following table sets forth a summary of the change in the fair value of the bifurcated embedded derivative liability that is measured at fair value on a recurring basis:
| | | |
Balance on January 1, 2024 | | $ | |
Change in fair value of bifurcated embedded derivative | |
| ( |
Balance on December 31, 2024 | | $ | — |
Balance on December 31, 2025 | | $ | — |
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12) Income Taxes
For the years ended December 31, 2025, and 2024, the loss from continuing operations before tax consists of the following:
| | | | | | |
| | For the Years Ended December 31, | ||||
| | 2025 | | 2024 | ||
United States | | $ | ( | | $ | ( |
Foreign | |
| — | |
| — |
Total | | $ | ( | | $ | ( |
The current and deferred income tax expense (benefit) for the years ended December 31, 2025, and 2024 is as follows:
| | | | | | |
| | For the Years Ended December 31, | ||||
| | 2025 | | 2024 | ||
Current expense (benefit): |
| | |
| | |
U.S. Federal | | $ | | | $ | |
Foreign | | | | | | |
U.S. State and local | |
| | |
| |
Total current expense (benefit) | |
| | |
| |
Deferred expense (benefit): | |
| | |
| |
U.S. Federal | |
| | |
| |
Foreign | | | | | | |
U.S. State and local | |
| | |
| |
Total deferred expense (benefit) | |
| | |
| |
Total income tax expense (benefit) | | $ | | | $ | |
A reconciliation of the Company’s statutory income tax rate to the Company’s effective income tax rate for the year ended December 31, 2025, is as follows:
| | | | | | |
| | For the Year Ended December 31, | | |||
| | 2025 | | 2025 | | |
Income at US statutory rate |
| | ( | | | % |
State taxes, net of federal benefit |
| | — | | | % |
Change in Fair Value of Derivative Liability | | | — | | | % |
Revaluation of Warrants | | | ( | | | % |
Warrant Issuance Costs | | | | | ( | % |
Loss on Issuance of Preferred Stock | | | — | | | % |
API Asset Impairment (inventory) | | | — | | | % |
Change in State Rate | | | — | | | % |
Valuation allowance |
| | | | ( | % |
Other – Deferred Adjustment – Loss on ABC Assignment | | | | | ( | % |
Other | | | | | ( | % |
Effective income tax rate |
| $ | — | | | % |
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A reconciliation of the Company’s statutory income tax rate to the Company’s effective income tax rate for the year ended December 31, 2024, is as follows:
| | | |
| | For the Year Ended |
|
| | December 31, |
|
| | 2024 |
|
Income at US statutory rate | | | % |
State taxes, net of federal benefit | | | % |
Change in Fair Value of Derivative Liability |
| | % |
API Asset Impairment (inventory) |
| ( | % |
Change in State Rate |
| ( | % |
Valuation allowance |
| ( | % |
Other |
| ( | % |
Effective income tax rate |
| | % |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025, and December 31, 2024, are as follows:
| | | | | | |
| | For the Years Ended December 31, | ||||
| | 2025 | | 2024 | ||
Accruals | | $ | — | | $ | |
Intangible assets | |
| — | |
| ( |
Depreciation and amortization | |
| — | |
| |
Expenses not currently deductible | |
| — | |
| |
Net operating loss carryforwards | |
| | |
| |
Interest expense limitation | |
| | |
| |
Stock-based compensation | |
| | |
| |
Valuation allowance | |
| ( | |
| ( |
Total deferred tax asset (liability) | | $ | — | | $ | — |
The Company assesses the need for a valuation allowance related to its deferred income tax assets by considering whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. A valuation allowance has been recorded against the Company’s deferred income tax assets, as it is in the opinion of management that it is more likely than not that the net operating loss carryforwards (“NOL”) will not be utilized in the foreseeable future.
The cumulative valuation allowance as of December 31, 2025, is $
As of December 31, 2025, the Company’s estimated aggregate total NOLs were $
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The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which we operate or do business in. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.
It is the Company’s policy to record uncertain tax positions as liabilities in accordance with ASC 740 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2025, and 2024, the Company has
We recognize interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. As of December 31, 2025, and 2024,
Provision enacted in the TCJA related to the capitalization for tax purposes of research and experimental expenditures became effective on January 1, 2022. This provision requires us to capitalize research and experimental expenditures and amortize them on the U.S. tax return over five or fifteen years, depending on where the research is conducted. This provision is not expected to have a material impact on our calendar year 2025 effective tax rate on a net basis or our cash paid for taxes due to our net operating loss position.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. Exceptions may apply, for example, if the repurchases are less than $1,000 or issued to employees. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
13) Defined Contribution Plan
The Company has a qualified defined contribution plan under Section 401(k) of the Internal Revenue Code covering eligible employees. Eligible employees can contribute to the defined contribution plan, subject to certain limitations, on a pre-tax basis. For the year ended December 31, 2025, the Company matches up to
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14) Related Party Transactions
On February 17, 2025, the Company entered into the Public Offering Purchase Agreement with certain institutional and accredited investors, including Five Narrow Lane LP (“Five Narrow”), 3i, LP (“3i), Iroquois Master Fund Ltd. (“IMF), Iroquois Capital Investment Group, LLC (“ICIG”) and Alto, each of which beneficially own 5% or more of the Company’s voting securities. Pursuant to the Public Offering Purchase Agreement, and prior to the adjustment for the reverse stock split, Five Narrow, 3i, IMF, Alto and ICIG each purchased in a best effort public offering,
15) Subsequent Events
On January 1, 2026, the Board of Directors of the Company approved grants, effective as of January 2, 2026 (the “Grant Date”), to each of (i) Joshua Silverman, the Company’s Chairman of the Board, (ii) Bruce Bernstein, a director of the Company, (iii) Fady Boctor, President and Chief Commercial Officer of the Company, and (iv) Wayne Walker, a director of the Company, of an aggregate of
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