PETROS PHARMACEUTICALS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

November 15, 2021 at 05:14 pm EST

Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A") is designed to provide a reader of Petros' 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, references are made to
relevant sections of the Notes to Condensed Consolidated Financial Statements to
direct the reader to a further detailed discussion. This section should be read
in conjunction with the Condensed Consolidated Financial Statements and
Supplementary Data included in this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q and
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Overview



Petros is a pharmaceutical company focused on men's health therapeutics,
consisting of wholly owned subsidiaries, Metuchen Pharmaceuticals, LLC
("Metuchen"), TIMM Medical Technologies, Inc. ("Timm Medical"), and Pos-T-Vac,
LLC ("PTV"). On September 30, 2016, the Company entered into a License and
Commercialization Agreement (the "License Agreement") with Vivus, Inc ("Vivus")
to purchase and receive the license for the commercialization and development of
Stendra® for a one-time fee of $70 million. The License Agreement gives the
Company the right to sell Stendra® in the U.S and its territories, Canada, South
America, and India. Stendra® is a U.S. Food and Drug Administration ("FDA")
approved PDE-5 inhibitor prescription medication for the treatment of erectile
dysfunction ("ED") and is the only patent protected PDE-5 inhibitor on the
market. Stendra® offers the ED therapeutic landscape a valuable addition as an
oral ED therapy that may be taken as early as approximately 15 minutes prior to
sexual engagement, with or without food when using the 100mg or 200mg dosing
(does not apply to 50mg dosing).

Metuchen was founded by Joseph J. Krivulka, an experienced pharmaceutical
executive who held several key leadership positions at leading pharmaceutical
companies such as Mylan Laboratories Inc. and its subsidiary Bertek Inc., and
was also the co-founder of Reliant Pharmaceuticals, which was sold to
GlaxoSmithKline in 2007 for $1.65 billion. During the period from Metuchen's
inception in 2016 through 2018, the founder decided to outsource the sales and
marketing function to an affiliated contractor. The level of performance
expected from this affiliated contractor was not realized. In 2018, the founder
passed away which caused significant disruption to the business. In 2019,
Metuchen terminated the relationship with this affiliate contractor and
established its own internal sales, marketing, and trade distribution functions
for Stendra®. Also in 2019, Metuchen deployed a specialized key account sales
model augmented by a national non-personal promotion campaign reaching nearly
30,000 healthcare professionals. Metuchen also enhanced its digital campaigns
designed to create awareness among patients and its partners. Additionally,
Metuchen engaged in a wide array of specialty medical conferences including
presentations at educational product theaters and launched a national savings
coupon for enhanced product access. Metuchen believes that these activities have
established a framework for growth. Following a year of internal management of
marketing, sales, and trade distribution functions, we believe the Company is
well-positioned for a strong, multi-channel sales and marketing campaign.

In addition to ED products, Petros is committed to identifying and developing
other pharmaceuticals to advance men's health. In March 2020, Petros acquired an
exclusive global license (the "Hybrid License") for the development and
commercialization of H100™ from Hybrid Medical LLC ("Hybrid"). H100™ is a novel
and patented topical formulation candidate for the treatment of acute Peyronie's
disease. Peyronie's disease is a condition that occurs upon penile tissue
disruption often caused by sexual activity or injury, healing into
collagen-based scars that may ultimately harden and cause penile deformity. On
September 24, 2020, the Company and Hybrid entered into a letter agreement,
pursuant to which the term of the license agreement was extended for an
additional six months to March 24, 2021. In consideration for the extension, the
Company paid Hybrid $50,000 in October 2020 and an additional $100,000 in
December 2020. On March 31, 2021, the Company and Hybrid, entered into a second
letter agreement, pursuant to which the parties agreed to extend the Second
Period (as defined in the Hybrid License) for an additional six (6) months to
September 24, 2021. Additionally, the Company agreed to pay Hybrid a one-time,
non-creditable and non-refundable payment of $200,000, which was paid within
seven calendar days of entering into the agreement. On September 24, 2021, the
Company entered into an amendment to the license agreement in which the Company
exercised its right not to terminate the Hybrid License even though orphan drug
status had not yet been granted by the FDA. Along with this election, the
Company paid Hybrid $150,000 on October 1, 2021, $200,000 on October 31, 2021,
and agreed to pay two (2) additional payments of $200,000 by December 1, 2021,
and December 31, 2021.

                                       30

  Table of Contents

Impact of COVID-19

In January 2020, the World Health Organization ("WHO") announced a global health
emergency because of a new strain of coronavirus originating in Wuhan, China
("COVID-19") and the risks to the international community. The WHO declared
COVID-19 a global pandemic on March 11, 2020, and since that time many of the
previously imposed restrictions and other measures which were instituted in
response have been subsequently reduced or lifted. However, the COVID-19
pandemic remains highly unpredictable and dynamic, and its duration and extent
continue to be dependent on various developments, such as the emergence of
variants to the virus that may cause additional strains of COVID-19, the
administration and ultimate effectiveness of vaccines, and the eventual timeline
to achieve a sufficient level of herd immunity among the general population.
Accordingly, the COVID-19 pandemic may continue to have negative effects on the
health of the U.S. economy for the foreseeable future. The Company cannot
reasonably estimate the length or severity of the impact that the COVID-19
pandemic, including the emergence of any new variants, such as the Delta
variant, will have on its financial results, and the Company may experience a
material adverse impact on its sales, results of operations, and cash flows in
fiscal 2021 and thereafter.

During 2020, government regulations and the voluntary business practices of the
Company and prescribing physicians had prevented in-person visits by sales
representatives to physicians' offices. The Company had taken steps to mitigate
the negative impact on its businesses of such restrictions. In March 2020, the
Company reduced its sales representative head count to reflect the lack of
in-person visits. The Company has maintained a core sales team which continued
to contact physicians via telephone and videoconference as well as continuing to
have webinars provided by the Company's key opinion leaders to other physicians
and pharmacists. In response to the spread of COVID-19, in March 2020, the
Company closed its administrative offices and as of September 30, 2021, they
remain closed, with the Company's employees continuing their work remotely. The
Company has selectively resumed in-person interactions by its customer-facing
personnel in compliance with local and state restrictions. The Company also
continues to engage with customers virtually as the Company seeks to continue to
support healthcare professionals and patient care. However, the Company's
ability to engage in personal interactions with physicians and customers remains
limited, and it is unknown when the Company's offices will reopen, and these
interactions will be fully resumed.

Nature of Operations and Basis of Presentation

Petros Pharmaceuticals, Inc. ("Petros" or the "Company") was organized as a
Delaware corporation 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 (the "Original Merger Agreement"), by and between Petros,
Neurotrope, Inc., a Nevada corporation ("Neurotrope"), PM Merger Sub 1, LLC, a
Delaware limited liability company and a wholly-owned subsidiary of Petros
("Merger Sub 1"), PN Merger Sub 2, Inc., a Delaware corporation and a wholly
owned subsidiary of Petros ("Merger Sub 2"), and Metuchen Pharmaceuticals LLC, a
Delaware limited liability company ("Metuchen"). On July 23, 2020, the parties
to the Merger Agreement entered into the First Amendment to the Agreement and
Plan of Merger and Reorganization (the "First Merger Agreement Amendment") and
on September 30, 2020, the parties to the Original Merger Agreement entered into
the Second Amendment to the Agreement and Plan of Merger and Reorganization (the
"Second Merger Agreement Amendment" and, together with the Original Merger
Agreement and the First Merger Agreement Amendment, the "Merger Agreement"). The
Merger Agreement provided for (1) the merger of Merger Sub 1, with and into
Metuchen, with Metuchen surviving as a wholly owned subsidiary of Petros (the
"Metuchen Merger") and (2) the merger of Merger Sub 2 with and into Neurotrope,
with Neurotrope surviving as a wholly owned subsidiary of Petros (the
"Neurotrope Merger" and together with the Metuchen Merger, the "Mergers"). As a
result of the Mergers, Metuchen and Neurotrope became wholly owned subsidiaries
of Petros, and Petros became a publicly traded corporation on December 1, 2020.

On December 7, 2020, Neurotrope completed the spin-off of certain assets,
whereby (i) any cash in excess of $20,000,000, subject to adjustment as provided
in the Merger Agreement, and all of the operating assets and liabilities of
Neurotrope not retained by Neurotrope in connection with the Mergers were
contributed to Synaptogenix, Inc. (formerly known as Neurotrope Bioscience, Inc.
and a wholly owned subsidiary of Neurotrope prior to the spin-off), a Delaware
corporation ("Synaptogenix") and (ii) holders of record of Neurotrope common
stock, par value $0.0001 per share, Neurotrope preferred stock, par value $0.001
per share and certain warrants as of November 30, 2020, received a pro rata
distribution of common stock of Synaptogenix, resulting in a separate,
independent publicly traded company.

                                       31

Table of Contents


The Mergers were accounted for as a reverse recapitalization in accordance with
U.S. GAAP. Metuchen was determined to be the accounting acquirer based on an
analysis of the criteria outlined in the FASB's ASC No. 805, Business
Combinations ("ASC 805"), and the facts and circumstances specific to the
Mergers, including: (1) Metuchen Securityholders owned approximately 51.0% of
Neurotrope and Metuchen at closing of the equity securities of the combined
company immediately following the closing of the transaction; (2) a majority of
the board of directors of the combined company are composed of directors
designated by Metuchen under the terms of the Mergers; and (3) a majority of the
existing members of Metuchen's management are the management of the combined
company. The net assets of Metuchen are stated at historical costs in the
Company's Condensed Consolidated Financial Statements, with no goodwill or
intangible assets recorded. Accordingly, the historical financial statements of
Metuchen through November 30, 2020, became the Company's historical financial
statements. These Condensed Consolidated Financial Statements include the
results of Petros from December 1, 2020, the date the reverse recapitalization
was consummated.

The Company manages its operations through two segments. The Company's two
segments, Prescription Medications and Medical Devices, focus on the treatment
of male ED. The Prescription Medications segment consists primarily of Stendra®,
which is sold generally in the United States. Expenses related to the
development of H100™, which is in the early stages of development and has not
yet sought FDA approval to begin Phase 1 clinical trials, will be within the
Prescription Medications segment. The Medical Devices segment consists primarily
of vacuum erection devices, which are sold domestically and internationally.

Licensing and Distribution



The Company acquired the rights to Stendra® avanafil on September 30, 2016, when
it entered into the License Agreement with Vivus to purchase and receive the
license for the commercialization and exploitation of Stendra® avanafil for a
one-time fee of $70 million. The License Agreement gives the Company the
exclusive right to sell avanafil in the U.S. and its territories, as well as
Canada, South America, and India. In December 2000, Vivus originally was granted
the license from Mitsubishi Tanabe Pharma Corporation ("MTPC") to develop,
market, and manufacture Stendra®. Stendra® was approved by the FDA in April 2012
to treat male ED.

The Company will pay MTPC a royalty of 5% on the first $500 million of net sales
and 6% of net sales thereafter until the expiration of the applicable patent in
a particular country. The last scheduled patent expiration is in April 2025. In
consideration for the trademark assignment and the use of the trademarks
associated with Stendra® and the Vivus technology, the Company shall (a) during
the first, second, and third years following the expiration of the royalty
period in a particular country in the Company's territory, pay to Vivus a
royalty equal to 2% of the net sales of Stendra® in such territory; and
(b) following the fourth and fifth years following the end of the royalty period
in such territory, pay to Vivus a royalty equal to 1% of the net sales of
Stendra® in such territory. After the royalty period, no further royalties shall
be owed with respect to net sales of Stendra® in such territory. In addition,
the Company will be responsible for a pro-rata portion of a one-time $6 million
milestone payment to be paid once $250 million in sales has been reached on the
separate revenue stream of Stendra® during any calendar year.

In connection with the License Agreement, the Company and Vivus also entered
into a Supply Agreement on the effective date of the License Agreement, which
has since been terminated, effective as of September 30, 2021. The Supply
Agreement stated that Vivus would initially manufacture, test, and supply the
product to the Company or its designee, directly or through one or more third
parties. In connection with the Supply Agreement, we and Vivus have been in
negotiations to determine the amounts ultimately owed to Vivus, but we may be
responsible for payments of approximately $20.7 million. The Company provided
Vivus with notice of termination of the Supply Agreement on September 30, 2019,
which became effective on  September 30, 2021.

The Company is currently negotiating with multiple contract manufacturers to
manufacture and supply Stendra® and serve as potential replacements for Vivus.
The Company intends to enter into a new supply agreement with one or more of
these candidates in the near future and hopes to have an agreement in place by
the end of the year. However, these negotiations are ongoing and there is no
assurance that we will be able to enter into any new supply agreement with such
potential vendors or that we will be able to do so at terms favorable to us in a
timely manner. As of November 15, 2021, we believe that we have sufficient
supplies of Stendra® to meet demand for the next 10 months.

In December 2020, Vivus obtained approval of an in-court prepackaged plan of
reorganization, under which IEH Biopharma LLC ("IEH") obtained 100% ownership of
Vivus (the "Prepackaged Plan"), and IEH assumed VIVUS' contractual obligations
under the Supply Agreement. The license agreement between MTPC and Vivus (the
"MTPC License") contains certain termination rights that will allow MTPC to
terminate the agreement if Vivus were to breach any of the terms of the MTPC
License or become insolvent or

                                       32

Table of Contents



bankrupt. In the event that MTPC terminates the MTPC License with Vivus because
of any contractual breach, the Company has step-in rights with MTPC, which would
allow the Company to continue to sell Stendra®.

On March 27, 2018, the Company entered into a Sublicense Agreement with Acerus
Pharmaceuticals Corporation ("Acerus") whereby the Company granted to Acerus an
exclusive sublicense in Canada for, among other things, the development and
commercialization of Stendra® avanafil for a one-time fee of $100,000. The
Company is entitled to receive an additional fee of $400,000 if Stendra® is
approved by Canadian regulators, as well as commercial milestone payments and
royalty fees of 12% of net sales. The agreement remains in effect. In
August 2018, the Company entered into the Acerus Supply Agreement, pursuant to
which Acerus will purchase the product from the Company so long as the Acerus
Sublicense Agreement remains in effect.

In March 2020, we entered into the Hybrid License for the development and
commercialization of H100™ from Hybrid. H100™ is a topical candidate with at
least one active ingredient and potentially a combination of ingredients
responsible for the improvement of penile curvature during the acute phase of
Peyronie's disease. We paid an initial license fee of $100,000 and additional
payments of $250,000, with additional annual milestone payments of $125,000,
$150,000, and $200,000 on each of the first, second and third anniversaries of
the entry into the Hybrid License and $250,000 annual payments due thereafter.
On September 24, 2020, the Company and Hybrid entered into a letter agreement,
pursuant to which the term of the license agreement was extended for an
additional six months to March 24, 2021. In consideration for the extension, the
Company paid Hybrid $50,000 in October 2020 and an additional $100,000 in
December 2020. On March 31, 2021, the Company and Hybrid, entered into a second
letter agreement, pursuant to which the parties agreed to extend the Second
Period (as defined in the License Agreement) for an additional six (6) months to
September 24, 2021. Additionally, the Company agreed to pay Hybrid a one-time,
non-creditable and non-refundable payment of two hundred thousand U.S. Dollars
($200,000), which was paid within seven calendar days of entering into the
agreement. On September 24, 2021, the Company entered into an amendment to the
license agreement in which the Company exercised its right not to terminate the
Hybrid License even though orphan drug status had not yet been granted by the
FDA. Along with this election, the Company paid Hybrid $150,000 on October 1,
2021, $200,000 on October 31, 2021, and agreed to pay two (2) additional
payments of $200,000 by December 1, 2021, and December 31, 2021.

Critical Accounting Policies and Estimates


The preparation of the condensed 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 condensed 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 revenue recognition, collectability of
accounts receivable, inventory valuation and obsolescence, intangibles, 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 condensed consolidated financial statements
as they occur. While our significant accounting policies are more fully
described in "Part I; Item 1. Financial Statements and Supplementary Data; Notes
to Condensed Consolidated Financial Statements; Note 2. Summary of Significant
Accounting Policies" in this Quarterly Report on Form 10-Q, we believe that the
following accounting policies and estimates are most critical to a full
understanding and evaluation of our reported financial results. The critical
accounting policies addressed below reflect our most significant judgments and
estimates used in the preparation of our condensed consolidated financial
statements. We have reviewed these critical accounting policies with the Audit
Committee of our Board of Directors.

Revenue Recognition



The Company recognizes revenue when its performance obligations with its
customers have been satisfied. In the contracts with its customers, the Company
has identified a single performance obligation to provide either its
prescription medication or medical devices upon receipt of a customer order. The
performance obligation is satisfied at a point in time when the Company's
customers obtain control of the prescription medication or medical device, which
is typically upon delivery.

In determining the transaction price, a significant financing component does not
exist since the timing from when the Company delivers either the prescription
medication or medical device to when the customers pay for the product is
typically less than one year. The Company records sales net of any variable
consideration, including but not limited to discounts, rebates, returns,
chargebacks, and

                                       33

  Table of Contents

distribution fees. The Company uses the expected value method when estimating
its variable consideration unless terms are specified within contracts. The
identified variable consideration is recorded as a reduction of revenue at the
time revenues from sales are recognized. The Company recognizes revenue to the
extent that it is probable that a significant revenue reversal will not occur in
a future period. These estimates may differ from actual consideration received.
The Company evaluates these estimates each reporting period to reflect known
changes.

The most significant sales deductions relate to returns, contract rebates,
coupon redemptions, and distribution service fees ("DSA fees"). Our estimates
are based on factors such as our direct and indirect customers' buying patterns
and the estimated resulting contractual deduction rates, historical experience,
specific known market events and estimated future trends, current contractual
and statutory requirements, industry data, estimated customer inventory levels,
current contract sales terms with our direct and indirect customers, and other
competitive factors. Significant judgment and estimation are required in
developing the foregoing and other relevant assumptions.

Consistent with industry practice, the Company maintains a return policy that
generally allows its customers to return either the prescription medication or
medical device and receive credit for product. The provision for returns is
based upon the Company's estimates for future returns and historical experience.
The provision of returns is part of the variable consideration recorded at the
time revenue is recognized.

Accounts Receivable



The Company extends credit to its customers in the normal course of business.
Accounts receivable are recorded at the invoiced amount, net of chargebacks, DSA
fees, and cash discounts. Management determines each allowance based on
historical experience along with the present knowledge of potentially
uncollectible accounts.

Inventory



Inventories consist of finished goods held for sale and raw materials.
Inventories are stated at the lower of cost or net realizable value, with cost
determined using the first-in, first-out method. Inventories are adjusted for
excess and obsolescence. Evaluation of excess inventory includes such factors as
expiry date, inventory turnover, and management's assessment of current product
demand.

Fair Value Measurements

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.



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 an 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.

In connection with the Mergers in December 2020, each security holder of
Metuchen received a liability classified earnout consideration to be paid in the
form of Petros Common Stock. The Company estimated their fair value using a
Monte Carlo Simulation approach. This fair value measurement is based on
significant inputs not observable in the market and thus represents a Level 3
measurement within the fair value hierarchy.

                                       34

  Table of Contents

Intangibles

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

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements, refer to Note 2. Summary of Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements, which is incorporated herein by reference.



                                       35

  Table of Contents

Results of Operations

The impact on our results of operations of the COVID-19 pandemic and related
changes in economic conditions, including changes to consumer spending resulting
from the rapid rise in local and national unemployment rates, are highly
uncertain and, in many instances, outside of our control. The duration and
severity of the direct and indirect effects of the pandemic continue to evolve
and in ways that are difficult to anticipate. There are numerous uncertainties
related to the COVID-19 pandemic that have impacted our ability to forecast our
future operations as a company. The extent to which the COVID-19 pandemic, and
the emergence of any new variants, will affect our business, financial position
and operating results in the future cannot be predicted with certainty; however,
any such impact could be material. The COVID-19 pandemic could also increase the
degree to which our results, including the results of our business segments,
fluctuate in the future.

Three Months Ended September 30, 2021 and 2020 (unaudited)

The following table sets forth a summary of our statements of operations for the three months ended September 30, 2021 and 2020:






                                                    For the Three Months
                                                     Ended September 30,
                                                    2021             2020
Net sales                                       $   2,145,169    $   3,464,695
Cost of sales                                         319,158          981,903
Gross profit                                        1,826,011        2,482,792

Operating expenses:
Selling, general and administrative                 3,413,223

3,121,023


Research and development                              280,576

36,828


Depreciation and amortization expense               1,728,829        1,661,362
Total operating expenses                            5,422,628        4,819,213

Loss from operations                              (3,596,617)      (2,336,421)


Change in fair value of derivative liability        1,970,000


Interest expense, senior debt                        (67,936)

(300,355)


Interest expense, related party term loans                  -        (669,730)
Loss before income taxes                          (1,694,553)      (3,306,506)

Income tax expense (benefit)                            2,345          (6,143)

Net loss                                        $ (1,696,898)    $ (3,300,363)




Net Sales

Net sales for the three months ended September 30, 2021, were $2,145,169, composed of $1,377,291 of net sales from Prescription Medicines and net sales of $767,878 from Medical Devices.

Net sales for the three months ended September 30, 2020, were $3,464,695, composed of $2,590,151 of net sales from Prescription Medicines and net sales of $874,544 from Medical Devices.

For the three months ended September 30, 2021, gross sales to customers representing 10% or more of the Company's total gross sales included four customers that represented approximately 42%, 17%, 15%, and 14% of total gross sales.

For the three months ended September 30, 2020, gross sales from customers representing 10% or more of the Company's total gross sales included one customer that represented approximately 82% of total gross sales.

Table of Contents


Prescription Medicines sales consist of sales of Stendra® in the U.S. for the
treatment of male ED. Stendra®      was primarily sold directly to four main
customers, which collectively accounted for approximately 98% of Stendra® gross
sales for the three months ended September 30, 2021. Individually, sales to the
four main customers accounted for 47%, 19%, 16%, and 16% of Stendra® gross sales
for the three months ended September 30, 2021.

Medical Device sales consist of domestic and international sales of men's health
products for the treatment of ED. The men's health products do not require a
prescription and include Vacuum Erection Devices ("VEDs and related
accessories").

Net sales were $1,319,526 or 38% lower during the three months ended September
30, 2021, then in the same period in 2020 consisting of a $1,212,860 decrease in
the net sales of Stendra® and a $106,666 decrease in Medical Device Sales. The
decrease in net sales of Stendra® was substantially the result of increased
sales allowances to promote sales of the 50mg Stendra® due to the manufacturing
delays of the 100mg Stendra®. This situation is expected to be resolved in the
fourth quarter of 2021. The decrease in net sales for our Medical Devices
segment was attributable to decreased demand in domestic sales and international
sales of VED systems.

Cost of Sales

Cost of sales for the three months ended September 30, 2021, were $319,158, composed of $45,254 of cost of sales for our Prescription Medicines segment and $273,904 for our Medical Devices segment.

Cost of sales for the three months ended September 30, 2020, were $981,903 composed of $749,575 of cost of sales for our Prescription Medicines segment and $232,328 for our Medical Devices segment.



Cost of sales for the Prescription Medicine segment for the three months ended
September 30, 2021, consisted of 152% royalty expenses, which was partially
offset by a net 32% favorable adjustment to the costs of Stendra® sales and
inventory obsolescence reserves and a 20% favorable adjustment to the 3PL order
fulfillment and shipping expenses.

Cost of sales for the Medical Device segment for the three months September 30, 2021, consisted of 86% raw materials and 14% production labor.



Cost of sales decreased by $662,745 or 68% during the three months ended
September 30, 2021, compared to the same period in 2020. For the three months
ended September 30, 2021, and 2020, cost of sales as a percentage of net sales
was 15% and 28%, respectively. The decrease in cost of sales as a percentage of
net sales was a result of decreased sales order fulfillment costs (on a per unit
basis) during the three months ended September 30, 2021, and decreased
amortization expense due to the inventory step-up asset being fully amortized in
September 2020.

Gross Profit


Gross profit for the three months ended September 30, 2021, was $1,826,011 or
85%, composed of $1,332,036 of gross profit from Prescription Medicines and
$493,974 from Medical Devices. Gross profit for the three months ended September
30, 2020, was $2,482,792 or 72%, composed of $1,840,576 of gross profit from
Prescription Medicines and $642,216 from Medical Devices. The changes in gross
profit were driven by the factors noted above.

Operating Expenses

Selling, general and administrative



Selling, general and administrative expenses for the three months ended
September 30, 2021, were $3,413,223, composed of $1,318,610 of selling, general
and administrative expenses of our Prescription Medicines segment, $722,998 of
selling, general and administrative expenses of our Medical Devices segment and
$1,371,615 of general corporate expenses.

Selling, general and administrative expenses for the three months ended
September 30, 2020, were $3,121,023, composed of $1,837,864 of selling, general
and administrative expenses of our Prescription Medicines segment, $566,666 of
selling, general and administrative expenses of our Medical Devices segment and
$716,493 of general corporate expenses.

                                       37

Table of Contents



Selling, general and administrative expenses for both segments include selling,
marketing, and regulatory expenses. Unallocated general corporate expenses
include costs that were not specific to a particular segment but are general to
the group, including expenses incurred for administrative and accounting staff,
general liability and other insurance, professional fees, and other similar
corporate expenses.

Selling, general and administrative expenses increased by $292,200 or 9.4%
during the three months ended September 30, 2021, compared to the same period in
2020. Increased selling general and administrative expenses were primarily
driven by increased expenses associated with accounting, advisory, insurance,
and investor relation services, which the Company did not incur in the prior
period as a private company, partially offset by lower payroll expenses and
direct marketing expenses as management sought to reduce expenses to improve
operational efficiencies.

Research and development

Research and development expenses for the three months ended September 30, 2021, were $280,576 in our Prescription Medicines segment.

Research and development expenses for Prescription Medicines segment are composed of $232,076 for consulting fees related to the Company's Non-Prescription / Over-The-Counter ("OTC") Strategies and $48,500 for legal fees related to the H100 license acquired in March 2020.


Research and development expenses for the three months ended September 30, 2020,
were $36,828, in our Prescription Medicines segment. Research and development
expenses for Prescription Medicines segment are composed of $7,790 for
consulting fees and $29,     038 for legal fees related to the H100 license
acquired in March 2020.

Research and development expenses increased by $243,748 or 662% during the three
months ended September 30, 2021, compared to the same period in 2020. Increased
research and development expenses were primarily driven by increased consulting
fees related to the Company's Non-Prescription / Over-The-Counter ("OTC")
Strategies and increased legal fees related to the H100 license acquired in
March 2020 partially offset by decreased consulting fees related to the H100
license acquired in March 2020.

Depreciation and amortization


Depreciation and amortization expenses for the three months ended September 30,
2021, were $1,728,829, composed of $1,398,270 of depreciation and amortization
expenses of our Prescription Medicines segment and $330,559 of depreciation and
amortization expenses of our Medical Devices segment.

Depreciation and amortization expenses for the three months ended September 30,
2020, were $1,661,362, composed of $1,353,591 of depreciation and amortization
expenses of our Prescription Medicines segment and $307,771 of depreciation and
amortization expenses of our Medical Devices segment.

Prescription Medicines depreciation and amortization consists primarily of the
amortization of the intangible assets related to Stendra® over its estimated
useful life of 10 years. Medical Devices depreciation and amortization primarily
consists of the amortization of the intangible assets related to Timm Medical
and PTV over their estimated useful life of 12 years.

Change in fair value of derivative liability



In connection with the Mergers consummated on December 1, 2020, each security
holder of Metuchen received a liability classified earnout consideration to be
paid in the form of Petros Common Stock if either Petros' Market Capitalization
(as defined in the Merger Agreement) or Petros receives aggregate gross proceeds
from securities offerings that equals or exceeds certain milestones set forth in
the Merger Agreement. The earnout contingent consideration met the criteria to
be classified as a derivative with fair value remeasurements recorded in
earnings each reporting period. As a result, the $1,970,000 represents the
change in fair value of the derivative during the three months ended September
30, 2021, primarily driven by the decline in the Company's stock price as well
as the passage of time.

                                       38

  Table of Contents

Interest expense, senior debt



Interest expense, senior debt for the three months ended September 30, 2021, was
$67,936, consisting of interest payments on our senior debt, with a weighted
average balance of $2,305,470. Interest expense, senior debt for the three
months ended September 30, 2020, was $300,355, consisting of interest payments
on our senior debt, with a weighted average balance of $8,696,030. The decrease
of $232,419 or 77% was due to the pay down of $6.4 million of senior debt and
unchanged weighted average interest rate subsequent to September 30, 2020.

Interest expense, subordinated related party term loans



There was no interest expense, subordinated related party term loans for the
three months ended September 30, 2021. During 2020, the Company borrowed
additional subordinated related party term loans in aggregate principal amount
of $15.5 million. The subordinated related party term loans were converted into
shares of the Company's common stock with the consummation of the Mergers on
December 1, 2020. Accordingly, there was no principal balance of the
subordinated related party term loans or accrued PIK interest as of September
30, 2021.

Income tax expense (benefit)


There was a $2,345 income tax expense for the three months ended September 30,
2021, as compared to a $6,143 income tax benefit for the three months ended
September 30, 2020. The income tax expense was primarily attributed to the
operations of the Medical Device segment, specifically Timm Medical, which is
now included in the Company's consolidated group.

Nine Months Ended September 30, 2021 and 2020 (unaudited)

The following table sets forth a summary of our statements of operations for the nine months ended September 30, 2021 and 2020:




                                                   For the Nine Months Ended
                                                         September 30,
                                                     2021              2020
Net sales                                       $    8,678,424    $    6,630,180
Cost of sales                                        1,355,838         2,305,169
Gross profit                                         7,322,586         4,325,011

Operating expenses:
Selling, general and administrative                 11,411,113

11,997,185


Research and development                               799,803

307,796


Depreciation and amortization expense                5,186,486         4,984,084
Total operating expenses                            17,397,402        17,289,065

Loss from operations                              (10,074,816)      (12,964,054)


Change in fair value of derivative liability         9,640,000


Interest expense, senior debt                        (356,873)

(1,085,347)


Interest expense, related party term loans                   -

(1,148,447)


Loss before income taxes                             (791,689)

(15,197,848)



Income tax expense (benefit)                             9,045          (49,895)

Net loss                                        $    (800,734)    $ (15,197,953)




Net Sales

Net sales for the nine months ended September 30, 2021, were $8,678,424, composed of $6,227,753 of net sales from Prescription Medicines and net sales of $2,450,671 from Medical Devices.

Table of Contents

Net sales for the nine months ended September 30, 2020, were $6,630,180, composed of $4,128,694 of net sales from Prescription Medicines and net sales of $2,501,486 from Medical Devices.

For the nine months ended September 30, 2021, gross sales to customers representing 10% or more of the Company's total gross sales included four customers that represented approximately 30%, 25%, 13% and 10% of total gross sales.

For the nine months ended September 30, 2020, gross sales to customers representing 10% or more of the Company's total gross sales included one customer that represented approximately 80% of total gross sales.


Prescription Medicines sales consist of sales of Stendra® in the U.S. for the
treatment of male ED. Stendra® was primarily sold directly to five main
customers, which collectively accounted for approximately 98% of Stendra® gross
sales for the nine months ended September 30, 2021. Individually, sales to the
five main customers accounted for 34%, 28%, 14%, 12% and 11% of Stendra® gross
sales for the nine months ended September 30, 2021.

Medical Device sales consist of domestic and international sales of men's health
products for the treatment of ED. The men's health products do not require a
prescription and include Vacuum Erection Devices ("VEDs and related
accessories").

Net sales were $2,048,244 or 31% higher during the nine months ended September
30, 2021, than in the same period in 2020 consisting of a $2,099,060 increase in
the net sales of Stendra® and a $50,815 decrease in Medical Device Sales. The
increase in net sales of Stendra® was substantially due to higher wholesaler
demand as the market began to recover from the implications of the 2019 FDA
warning letter that impacted the Company's ability to promote Stendra® through
the 3rd quarter of 2020 and the continued recovery from the COVID-19 pandemic in
2021. The decrease in net sales for our Medical Devices segment was attributable
to decreased demand in domestic sales of VED systems partially offset by
increased demand in international sales of VED systems.

Cost of Sales



Cost of sales for the nine months ended September 30, 2021, were $1,355,838,
composed of $607,582 of cost of sales for our Prescription Medicines segment and
$748,256 for our Medical Devices segment.

Cost of sales for the nine months ended September 30, 2020, were $2,305,169,
composed of $1,527,169 of cost of sales for our Prescription Medicines segment
and $778,000 for our Medical Devices segment.

Cost of sales for the Prescription Medicine segment for the nine months ended
September 30, 2021, consisted of 56% third-party product cost of sales, 50%
royalty expenses and 9% 3PL order fulfillment and shipping expenses, which was
partially offset by a 15% favorable adjustment to the inventory obsolescence
reserves.

Cost of sales for the Medical Device segment for the nine months September 30,
2021, consisted of 87% raw materials, 10% production labor and 2% other cost of
goods sold.

Cost of sales decreased by $949,331 or 41% during the nine months ended
September 30, 2021, compared to the same period in 2020. For the nine months
ended September 30, 2021, and 2020, cost of sales as a percentage of net sales
was 16% and 35%, respectively. The decrease in cost of sales as a percentage of
net sales was a result of decreased sales order fulfillment costs (on a per unit
basis) during the nine months ended September 30, 2021, and decreased
amortization expense due to the inventory step-up asset being fully amortized in
September 2020.

Gross Profit

Gross profit for the nine months ended September 30, 2021, was $7,322,586 or 84%, composed of $5,620,172 of gross profit from Prescription Medicines and $1,702,415 from Medical Devices. Gross profit for the nine months ended September 30, 2020, was $4,325,011 or 65%, composed of $2,601,525 of gross profit from Prescription Medicines and $1,723,486 from Medical Devices. The changes in gross profit were driven by the factors noted above.



                                       40

  Table of Contents

Operating Expenses

Selling, general and administrative



Selling, general and administrative expenses for the nine months ended September
30, 2021, were $11,411,113, composed of $4,985,603 of Selling, general and
administrative expenses of our Prescription Medicines segment, $2,014,424 of
Selling, general and administrative expenses of our Medical Devices segment and
$4,411,086 of general corporate expenses.

Selling, general and administrative expenses for the nine months ended September
30, 2020, were $11,997,185, composed of $6,658,231 of selling, general and
administrative expenses of our Prescription Medicines segment, $1,780,530 of
selling, general and administrative expenses of our Medical Devices segment and
$3,558,424 of general corporate expenses.

Selling, general and administrative expenses for both segments include selling,
marketing, and regulatory expenses. Unallocated general corporate expenses
include costs that were not specific to a particular segment but are general to
the group, including expenses incurred for administrative and accounting staff,
general liability and other insurance, professional fees, and other similar
corporate expenses.

Selling, general and administrative expenses decreased by $586,072 or 5% during
the nine months ended September 30, 2021, compared to the same period in 2020.
Decreased selling general and administrative expenses were primarily driven by
lower payroll expenses and direct marketing expenses as management sought to
reduce expenses to improve operational efficiencies partially offset by
increased expenses associated with accounting, advisory, insurance, and investor
relation services, which the Company did not incur in the prior period as a
private company.

Research and development



Research and development expenses for the nine months ended September 30, 2021,
were $799,803 in our Prescription Medicines segment. Research and development
expenses for Prescription Medicines segment are composed of $535,184 for
consulting fees related to the Company's Non-Prescription/OTC Strategies and
$200,000 for upfront licensing fees and $64,619 for legal fees related to the
H100 license acquired in March 2020.

Research and development expenses for the nine months ended September 30, 2020,
were $307,796, in our Prescription Medicines segment. Research and development
expenses for Prescription Medicines segment are composed of $13,875 for
consulting fees related to the Company's Non-Prescription/OTC Strategies and
$200,000 for upfront licensing fees, $51,180 for consulting fees and $42,741 for
legal fees related to the H100 license acquired in March 2020.

Research and development expenses increased by $492,007 or 160% during the nine
months ended September 30, 2021, compared to the same period in 2020. Increased
research and development expenses were primarily driven by increased consulting
fees related to the Company's Non-Prescription/OTC Strategies and increased
legal fees related to the H100 license acquired in March 2020 partially offset
by decreased consulting fees related to the H100 license acquired in March 2020.

Depreciation and amortization


Depreciation and amortization expenses for the nine months ended September 30,
2021 were $5,186,486, composed of $4,194,809 of depreciation and amortization
expenses of our Prescription Medicines segment and $991,677 of depreciation and
amortization expenses of our Medical Devices segment.

Depreciation and amortization expenses for the nine months ended September 30,
2020, were $4,984,084, composed of $4,060,772 of depreciation and amortization
expenses of our Prescription Medicines segment and $923,312 of depreciation and
amortization expenses of our Medical Devices segment.

Prescription Medicines depreciation and amortization consists primarily of the
amortization of the intangible assets related to Stendra® over its estimated
useful life of 10 years. Medical Devices depreciation and amortization primarily
consists of the amortization of the intangible assets related to Timm Medical
and PTV over their estimated useful life of 12 years.

                                       41

Table of Contents

Change in fair value of derivative liability



In connection with the Mergers consummated on December 1, 2020, each security
holder of Metuchen received a liability classified earnout consideration to be
paid in the form of Petros Common Stock if either Petros' Market Capitalization
(as defined in the Merger Agreement) or Petros receives aggregate gross proceeds
from securities offerings that equals or exceeds certain milestones set forth in
the Merger Agreement. The earnout contingent consideration met the criteria to
be classified as a derivative with fair value remeasurements recorded in
earnings each reporting period. As a result, the $9,640,000 represents the
change in fair value of the derivative during the nine months ended September
30, 2021, primarily driven by the decline in the Company's stock price as well
as the passage of time.

Interest expense, senior debt


Interest expense, senior debt for the nine months ended September 30, 2021, was
$356,873, consisting of interest payments on our senior debt, with a weighted
average balance of $3,958,927. Interest expense, senior debt for the nine months
ended September 30, 2020, was $1,085,347, consisting of interest payments on our
senior debt, with a weighted average balance of $10,204,922. The decrease of
$728,474 or 67% was due to the pay down of $6.4 million of senior debt and
unchanged weighted average interest rate subsequent to September 30, 2020.

Interest expense, subordinated related party term loans



There was no interest expense, subordinated related party term loans for the
nine months ended September 30, 2021. During 2020, the Company borrowed
additional subordinated related party term loans in aggregate principal amount
of $15.5 million. The subordinated related party term loans were converted into
shares of the Company's common stock with the consummation of the Mergers on
December 1, 2020. Accordingly, there was no principal balance of the
subordinated related party term loans or accrued PIK interest as of September
30, 2021.

Income tax expense (benefit)



There was a $9,045 income tax expense for the nine months ended September 30,
2021, as compared to a $49,895 income tax benefit for the nine months ended
September 30, 2020. The income tax expense was primarily attributed to the
operations of the Medical Device segment, specifically Timm Medical, which is
now included in the Company's consolidated group.

Liquidity and Capital Resources

General

Cash totaled $8,135,184 at September 30, 2021, compared to $17,139,694 at December 31, 2020.



We have experienced net losses and negative cash flows from operations since our
inception. As of September 30, 2021, we had cash of $8.1 million, negative
working capital of approximately $20.1 million, including debt of $1.7 million
maturing in 2021, and sustained cumulative losses attributable to holders of
common stock of $62.5 million. Our plans include, or may include, utilizing our
cash and cash equivalents on hand, and our liability due to Vivus as well as
exploring additional ways to raise capital in addition to increasing cash flows
from operations. In October 2021, the Company issued 3,323,616 shares of its
common stock and received $5.5 million in net proceeds. In November 2021, the
Company repaid $1.2 million in full satisfaction of its senior debt. While we
are optimistic that we will be successful in our efforts to achieve our plans,
there can be no assurances that we will be successful in doing so. As such, we
obtained a continued support letter from our largest shareholder, JCP III SM
AIV, L.P., through November 16, 2022.

To date, our principal sources of capital used to fund our operations have been
the net proceeds we received from the Mergers, revenues from product sales,
private sales and registered offering of equity securities and proceeds received
from the issuance of convertible debt, as described below.

Our principal expenditures include payment for inventory of Stendra® from our
key supplier, Vivus, including purchases of inventory accrued in current
periods, but for which payment is due in future periods. We have significant
unpaid balances owed to Vivus and are currently in discussions with Vivus with
respect to amounts owed. We had an aggregate accrued unpaid balance owed to


Vivus of

                                       42

  Table of Contents

$20,724,188 as of September 30, 2021. While the Company is in discussions with
Vivus to convert a portion of the amounts owed into a subordinated note, though
there can be no assurance that we will be successful in these discussions.

In March 2020, the Company acquired the Hybrid License, providing an exclusive
license to H100™. H100™ is a topical candidate with at least one active
ingredient and potentially a combination of ingredients responsible for the
improvement of penile curvature during the acute phase of Peyronie's disease. We
paid an initial license fee of $100,000 and an additional payment of $250,000
and additional annual milestone payments of $125,000, $150,000, and $200,000 are
due on each of the first, second and third anniversaries of the license
agreement and $250,000 annual payments due thereafter. The Company is also
required to make a $1,000,000 payment upon first commercial sale and a sliding
scale of percentage payments on net sales in the low single digits. Annual
anniversary payments will not be required after commercialization. The Company
is also obligated to make royalty payments between 3-6% of any net sales.

On September 24, 2020, the Company and Hybrid entered into a letter agreement,
pursuant to which the term of the Hybrid License was extended for an additional
six months to March 24, 2021. In consideration for the extension, the Company
paid Hybrid $50,000 in October 2020 and an additional $100,000 in December 2020.
On March 31, 2021, the Company and Hybrid, entered into a second letter
agreement, pursuant to which the parties agreed to extend the Second Period (as
defined in the Hybrid License) for an additional six (6) months to September 24,
2021. Additionally, the Company agreed to pay Hybrid a one-time, non-creditable
and non-refundable payment of two hundred thousand U.S. Dollars ($200,000),
which was paid within seven calendar days of entering into the second letter
agreement. On September 24, 2021, the Company entered into an amendment to the
license agreement in which the Company exercised its right not to terminate the
Hybrid License even though orphan drug status had not yet been granted by the
FDA. Along with this election, the Company paid Hybrid $150,000 on October 1,
2021, $200,000 on October 31, 2021, and agreed to pay two (2) additional
payments of $200,000 by December 1, 2021, and December 31, 2021.

The Company also expects to incur approximately $14 million of research and
development expenses relating to H100™ over the estimated four to six-year
period of clinical development prior to FDA approval, including approximately
$10 million for clinical trials and $4 million of other expenses.

October 2021 Financing



On October 13, 2021, the Company entered into a securities purchase agreement
(the "Purchase Agreement") with certain accredited and institutional investors
(the "Purchasers"). Pursuant to the Purchase Agreement, the Company agreed to
sell in a registered direct offering (the "Registered Direct Offering")
3,323,616 shares (the "Shares") of the Company's common stock, $0.0001 par value
per share (the "Common Stock"), to the Purchasers at an offering price of $1.715
per share and associated Investor Warrant (as defined herein). Pursuant to the
Purchase Agreement, in a concurrent private placement (together with the
Registered Direct Offering, the "Offerings"), the Company also agreed to sell to
the Purchasers unregistered warrants (the "Investor Warrants") to purchase up to
an aggregate of 3,323,616 shares of Common Stock, representing 100% of the
shares of Common Stock to be purchased in the Registered Direct Offering (the
"Warrant Shares"). The Investor Warrants are exercisable at an exercise price of
$1.715 per share, are exercisable immediately upon issuance and have a term of
exercise equal to five years from the date of issuance.

The Company received net proceeds from the sale of the Shares, after deducting fees and other estimated offering expenses payable by the Company, of approximately $5.5 million. The Company intends to use the net proceeds for expansion of its men's health platform and for working capital and general corporate purposes. The Offerings closed on October 18, 2021, subject to satisfaction of customary closing conditions.

Katalyst Securities LLC ("Katalyst") served as a financial advisor to the
company pursuant to an advisory consulting agreement (the "Katalyst Agreement")
entered into by the Company and Katalyst on October 13, 2021. Pursuant to the
Katalyst Agreement, the Company paid Katalyst an advisory fee and legal expenses
totaling $0.2 million for its services as a financial advisor in connection with
this offering. Additionally, the Company issued to Katalyst's representatives or
designees warrants to purchase up to an aggregate of 130,000 shares of Common
Stock (the "Katalyst Warrants") with the same terms as the Investor Warrants.

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

                                       43

Table of Contents



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.

Debt

Senior Debt

On September 30, 2016, the Company entered into a loan and security agreement
(the "Loan Agreement") with Hercules Capital, Inc. ("Hercules"), for a $35
million term loan. The Loan Agreement includes an additional Payable-In-Kind
("PIK") interest that increases the outstanding principal on a monthly basis at
an annual rate of 1.35% and a $787,500 end of term charge. The end of term
charge is being recognized as interest expense and accreted over the term of the
Loan Agreement, as amended, using the effective interest method. We refer to the
amounts available under the credit facility with Hercules as Senior Debt.

On November 22, 2017, the Company entered into Amendment No. 1 to the Loan
Agreement (the "First Amendment"). A covenant was added, in which the Company
must achieve a certain minimum EBITDA, as defined in the First Amendment, target
for the trailing twelve-month period, ending June,30, 2018. The end of term
charge was increased from $787,500 to $1,068,750. The minimum EBITDA for each of
the trailing six months and the fixed charge coverage ratio were reduced from
1:1 to 0.9:1. The Company was also required to prepay $10 million in principle.

Effective April 13, 2020, the Company and Hercules entered into Amendment No. 2
to the Loan Agreement, (the "Second Amendment"), to extend the maturity date
thereof to April 1, 2021, subject to further extension to December 1, 2021, if
the Company raises at least $20 million through an equity or debt financing or
other transaction. All previously accrued PIK interest was added to accrued
principal, and no further PIK interest will accrue. The cash interest would
accrue at a rate of the greater of (i) the prime rate reported in the Wall
Street Journal plus 11.50% minus 4.25% and (ii) 11.50%. The interest rate was
11.50% at September 30, 2021. The end of term charge of $1,068,750 was partially
extended with $534,375 due on October 1, 2020, and $534,375 due on February 1,
2021. The Company incurred a $50,000 amendment fee upon closing of the Second
Amendment.

Effective September 30, 2020, the Company and Hercules entered into the
Amendment No. 3 to Loan Agreement (the "Third Amendment") to provide for
interest only payments commencing on October 1, 2020, and continuing through
December 22, 2020, unless the Company raises net cash proceeds of at least $25
million through an equity or debt financing or other transaction on or before
December 21, 2020. The Third Amendment also amended the minimum cash, minimum
net revenue, and minimum EBITDA financial covenants. On that same date,
Juggernaut Capital Partners III, L.P., an affiliate of the JCP Investor,
Hercules, and Wells Fargo Bank, N.A. entered into an escrow agreement (the
"Escrow Agreement") to escrow certain funds in an aggregate amount equal to
certain principal payments owed under the Loan Agreement, as amended. In
connection with the consummation of the Mergers, the funds held in escrow were
disbursed back to Juggernaut Capital Partners III, L.P. and the Escrow Agreement
was terminated.

The Company satisfied the maturity date extension requirement pursuant to funds retained upon the closing of the Mergers in December 2020. As a result, the Senior Debt now has a maturity date of December 1, 2021.

On November 3, 2021, the Company repaid the remaining balance due on the Senior Debt.

Subordinated Related Party Term Loans



During 2020, the Company entered into Subordinated Promissory Notes with the JCP
Investor in the principal amount of $15.5 million. The maturity date of the
Subordinated Promissory Notes was April 2, 2021, and they had PIK interest that
increases the outstanding principal on a daily basis at an annual rate of 20%.

In connection with the entry into the Merger Agreement on May 17, 2020, the JCP
Investor, Neurotrope and Metuchen entered into a Note Conversion and Loan
Repayment Agreement pursuant to which, the JCP Investor agreed to convert all of
the above outstanding subordinated promissory notes and accrued PIK interest of
the Company held by Juggernaut Capital Partners LLP and the JCP Investor,

                                       44

Table of Contents

into Petros common stock in connection with the consummation of the Mergers on December 1, 2020, and the Subordinated Promissory Notes were terminated. Accordingly, the principal balance of the Subordinated Promissory Notes and accrued PIK interest was $0 as of December 31, 2020.

Cash Flows

The following table summarizes our cash flows for the nine months ended September 30, 2021, and 2020:






                                                                 For the Nine Months
                                                                  Ended September 30,
                                                                2021              2020


Net cash used in operating activities                       $ (3,557,732)    $ (10,782,430)
Net cash used in investing activities                                   -

(4,633)


Net cash (used in) provided by financing activities           (5,446,778)


      9,310,326
Net decrease in cash                                        $ (9,004,510)    $  (1,476,737)

Cash Flows from Operating Activities



Net cash used in operating activities for the nine months ended September 30,
2021, was $3,557,732, which primarily reflected our net loss of $800,734,
partially offset by cash adjustments to reconcile net income to net cash used in
operating activities of $3,131,046 consisting primarily of depreciation and
amortization, inventory obsolescence reserves, changes in the fair value of
derivative liability, and changes in operating assets and liabilities of
$374,048.

Net cash used in operating activities for the nine months ended September 30,
2020, was $10,782,430, which primarily reflected our net loss of $15,147,953,
partially offset by adjustments to reconcile net loss to net cash provided by
operating activities of $6,637,657 consisting primarily of depreciation and
amortization, non-cash paid-in-kind interest and amortization of deferred
financing costs and debt discount, and changes in operating assets and
liabilities of $2,272,134.

Cash Flows from Investing Activities


Net cash used in investing activities was $4,633 for the nine months ended
September 30, 2020, respectively, related to the acquisition of fixed assets. No
cash was used in investing activities for the nine months ended September 30,
2021.

Cash Flows from Financing Activities



Net cash used in financing activities was $5,446,778 for the nine months ended
September 30, 2021, consisting of payments of senior debt of $4,912,541 and a
payment for the senior debt end-of-term fee of $534,237.

Net cash provided by financing activities was $9,310,326 for the nine months
ended September 30, 2020, consisting of proceeds from issuance of subordinated
related party term loans of $14,000,000, partially offset by payments on the
senior debt of $4,639,674 and debt issuance costs of $50,000.

Off-Balance Sheet Commitments and Arrangements



We have not entered into any off-balance sheet financial guarantees or other
off-balance sheet commitments to guarantee the payment obligations of any third
parties. We have not entered into any derivative contracts that are indexed to
our shares and classified as stockholder's equity or that are not reflected in
our financial statements included as Exhibit 99.1 to this Form 10-Q.
Furthermore, we do not have any retained or contingent interest in assets
transferred to an unconsolidated entity that serves as credit, liquidity, or
market risk support to such entity. We do not have any variable interest in any
unconsolidated entity that provides financing, liquidity, market risk or credit
support to us or engages in leasing, hedging or product development services
with us.

                                       45

  Table of Contents

Contingencies

Certain conditions may exist as of the date the 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 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.

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA



Adjusted EBITDA is a non-GAAP financial measure utilized by management to
evaluate the Company's performance on a comparable basis. The Company believes
that Adjusted EBITDA is useful to investors as a supplemental way to evaluate
the ongoing operations of the Company's business as Adjusted EBITDA may enhance
investors' ability to compare historical periods as it adjusts for the impact of
financing methods, tax law and strategy changes, and depreciation and
amortization and to evaluate the Company's ability to service debt. In addition,
Adjusted EBITDA is a financial measurement that management and the Company's
Board of Directors use in their financial and operational decision-making and in
the determination of certain compensation programs. Adjusted EBITDA is a
non-GAAP financial measure commonly used in the Company's industry and should
not be construed as an alternative to net income as an indicator of operating
performance (as determined in accordance with GAAP). The Company's presentation
of Adjusted EBITDA may not be comparable to similarly titled measures reported
by other companies.

Adjusted EBITDA is adjusted to exclude certain items that affect comparability.
The adjustments are itemized in the tables below. You are encouraged to evaluate
these adjustments and the reason the Company considers them appropriate for
supplemental analysis. In evaluating adjustments, you should be aware that in
the future the Company may incur expenses that are the same as or similar to
some of the adjustments set forth below. The presentation of these adjustments
should not be construed as an inference that future results will be unaffected
by unusual or recurring items.

The Company defines Adjusted EBITDA as net income (loss) adjusted to exclude
(i) interest expense, net, (ii) depreciation and amortization and (iii) income
taxes, as further adjusted to eliminate the impact of certain items that the
Company does not consider indicative of its ongoing operating performance or
that are non-recurring in nature. For example, Adjusted EBITDA:

? does not reflect the Company's capital expenditures, future requirements for

capital expenditures or contractual commitments;

? does not reflect changes in, or cash requirements for, the Company's working

capital needs;

? does not reflect the significant interest expense, or the cash requirements

necessary to service interest or principal payments, on the Company's debt; and

? does not reflect payments related to income taxes, if applicable.




                                       46

  Table of Contents

The following table presents a reconciliation of Net loss to Adjusted EBITDA for the three and nine months ended September 30, 2021, and 2020.






                                       For the Three Months Ended         For the Nine Months Ended
                                              September 30,                      September 30,
                                          2021             2020             2021              2020
Net loss                             $  (1,696,898)    $ (3,300,363)    $   (800,734)    $ (15,147,953)
Interest expense, senior debt                67,936          300,355          356,873         1,085,347
Interest expense, related party
term loans                                        -          669,730                -         1,148,447
Income tax expense (benefit)                  2,345          (6,143)            9,045          (49,895)
Depreciation and amortization
expense                                   1,728,829        1,661,362        5,186,486         4,984,084
EBITDA                                      102,212        (675,059)        4,751,670       (7,979,970)
Change in fair value of
derivative liability                    (1,970,000)                -      (9,640,000)                 -
Adjusted EBITDA                      $  (1,867,788)    $   (675,059)    $ (4,888,330)    $  (7,979,970)

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of the Company's results as reported under GAAP.

Gross Billings



Gross billings is a non-GAAP financial measure utilized as a key performance
metric by management and the Company's Board of Directors in their financial and
operational decision-making as well as for the preparation of the annual budget.
The Company believes that Gross billings is useful to investors as a
supplemental way to provide an alternative measure of the total demand for the
products sold by the Company. Gross billings is a non-GAAP financial measure
commonly used in the Company's industry and should not be construed as an
alternative to net sales as an indicator of operating performance (as determined
in accordance with GAAP). The Company's presentation of gross billings may not
be comparable to similarly titled measures reported by other companies.

Gross billings is adjusted to exclude certain items that affect comparability.
The adjustments are itemized in the tables below. You are encouraged to evaluate
these adjustments and the reason the Company considers them appropriate for
supplemental analysis. In evaluating adjustments, you should be aware that in
the future the Company may incur expenses that are the same as or similar to
some of the adjustments set forth below. The presentation of these adjustments
should not be construed as an inference that future results will be unaffected
by unusual or recurring items.

The Company defines gross billings as the amount of its aggregate sales billed
to customers at standard prices before the application of certain adjustments
that reduce the net amount received from customers, including product returns,
certain rebates and coupon redemptions, discounts, and fees.

The following table presents a reconciliation of net sales to gross billings for the three and nine months ended September 30, 2021, and 2020.






                                        For the Three Months Ended         For the Nine Months Ended
                                               September 30                       September 30
                                           2021              2020             2021             2020
Net Sales                             $     2,145,169     $ 3,464,695    $    8,678,424    $  6,630,180
Product Returns                             2,256,673       (118,298)         4,069,440          53,448
Contract Rebates                              607,143         849,779         2,529,625       2,746,205
Chargebacks                                     4,748         146,117           270,094       1,167,142
Cash Discounts                                 79,722          73,398           346,656         200,600
Distribution Service Fees                     540,618         425,349         1,486,590       1,319,370
Coupon Redemptions                          2,896,935         582,346         4,821,786       1,802,705
Gross Billings                        $     8,531,008     $ 5,423,386    $   22,202,615    $ 13,919,650

Gross billings has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of the Company's results as reported under GAAP.

Table of Contents

Market Closed - Nasdaq Other stock markets 04:00:00 2024-04-26 pm EDT			5-day change	1st Jan Change
0.6399 ^USD	0.00%		-4.51%	-54.62%

Apr. 23	Petros, Lemonaid Health Collaborate to Expand Stendra Availability	MT
Apr. 23	Petros Pharmaceuticals, Inc. Expands Online Distribution for Prescription STENDRA Through New Agreement with Lemonaid Health	CI

Petros, Lemonaid Health Collaborate to Expand Stendra Availability	Apr. 23	MT
Petros Pharmaceuticals, Inc. Expands Online Distribution for Prescription STENDRA Through New Agreement with Lemonaid Health	Apr. 23	CI
Petros Gets 'Positive' FDA Response Over Technology Component in Stendra OTC Process	Apr. 16	MT
Petros Pharmaceuticals Receives Positive Response from Fda Following Recent Demonstration of Technology Component in Pursuit of Otc Status for Stendra(R)	Apr. 16	CI
Petros Pharmaceuticals, Inc. Reports Positive Results in an Initial Cohort Two-Arm Self-Selection (Phase 2-Equivalent) Study for STENDRA as it Pursues OTC Status	Apr. 02	CI
Petros Pharmaceuticals, Inc. Reports Earnings Results for the Full Year Ended December 31, 2023	Apr. 01	CI
Petros Pharmaceuticals Enters into Ai Licensing Agreement with Leading Multi-Billion-Dollar Software Provider	Feb. 14	CI
Top Premarket Gainers	Jan. 30	MT
Petros Pharmaceuticals, Inc. Announces Successful Completion of the Initial Cohort of A Phase 2 Equivalent Self-Selection Study	Jan. 17	CI
Petros Pharmaceuticals Successfully Completes Important Study in Effort to Make STENDRA(R) the First Erectile Dysfunction Medication to Achieve OTC Status	Dec. 12	CI
Maxim Initiates Petros Pharma at Buy Rating With $4 Price Target	Dec. 08	MT
Petros Pharmaceuticals Partners with Blockbuster Cholesterol Drug Crestor's (Rosuvastatin) OTC Switch Technology Provider	Dec. 05	CI
Petros Pharmaceuticals, Inc. Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2023	Nov. 15	CI
Petros Pharmaceuticals Announces to Develop Artificial Intelligence Technology for Phase 2 Equivalent Study for STENDRA(R)	23-10-30	CI
Petros Pharmaceuticals, Inc. Initiates Self-Selection (Phase 2-Equivalent) Study for STENDRA	23-10-19	CI
Petros Pharmaceuticals Announces Positive Outcomes in Label Comprehension Study for Potential Otc Stendra Label	23-10-04	CI
Top Premarket Decliners	23-10-04	MT
Petros Pharmaceuticals, Inc. Reports Earnings Results for the Second Quarter and Six Months Ended June 30, 2023	23-08-14	CI
Petros Pharmaceuticals Secures $15 Million Private Placement Financing	23-07-14	MT
Petros Pharmaceuticals, Inc. announced that it has received $15 million in funding	23-07-12	CI
Petros Pharmaceuticals, Inc. Reports Earnings Results for the First Quarter Ended March 31, 2023	23-05-15	CI
Top Premarket Decliners	23-04-17	MT
Wall Street Set to Open Lower, March Retail Sales Fall More Than Expected	23-04-14	MT
US Equity Futures Mixed Ahead of Retail Sales, Industrial Production, Consumer Sentiment Reports	23-04-14	MT
Top Premarket Gainers	23-04-14	MT

Petros Pharmaceuticals

Equities

PTPI

US71678J2096

PETROS PHARMACEUTICALS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

Latest news about Petros Pharmaceuticals

Chart Petros Pharmaceuticals

Company Profile

Income Statement Evolution

Analysts' Consensus

EPS Revisions

Quarterly earnings - Rate of surprise