Petros Pharmaceuticals, Inc.

Previous wording

Petros has experienced net losses and negative cash flows from operations since our inception. As of December 31, 2023, the Company had cash of approximately $13.3 million, positive working capital of $9.6 million, an accumulated deficit of approximately $98.9 million and used cash in operations during the twelve months ended December 31, 2023, of approximately $7.6 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.

Current wording

Petros has experienced net losses and negative cash flows from operations since our inception. As of December 31, 2024, the Company had cash of approximately $3.7 million, negative working capital of $10.7 million, an accumulated deficit of approximately $113.2 million and used cash in operations during the twelve months ended December 31, 2024, of approximately $2.6 million.

Previous wording

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 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 with its cash on hand, as well as by exploring additional ways to raise capital in addition to increasing cash flows from operations. There is no assurance the Company will manage to raise additional capital or otherwise increase cash flows, if required. The sources of financing described above that could be available to the Company and the timing and probability of obtaining sufficient capital depend, in part, on expanding the use of Stendra® and continuing to invest in research and development pursuant to our Non-Prescription OTC strategies related to Stendra®, which we believe has the potential to dramatically increase product sales in the future and future capital market conditions. If the Company’s current assumptions regarding timing of these events are incorrect or if there are any other changes or differences in our current assumptions that negatively impact our financing strategy, the Company may have to further reduce expenditures or significantly delay, scale back or discontinue the development or commercialization Stendra® OTC in order to extend its cash resources. 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.

Current wording

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.

Previous wording

Under the terms of the Note, the principal amount of $10,201,758 is payable in consecutive quarterly installments beginning on April 1, 2022, through January 1, 2027. Interest on the principal amount will accrue at a rate of 6% per year until the principal is repaid in full and is due and payable, in arrears, on the first day of each January, April, July, and October of each calendar year, commencing on April 1, 2022. The Company may prepay the Note, in whole or in part, at any time, with no premium or penalty. In the event that the Company defaults under the Security Agreement, all principal outstanding under the Note at the time of the default will bear interest at a rate of 9% per year until the full and final payment of all principal and interest under the Note (regardless of whether any default is waived or cured). If the Note is placed in the hands of any attorney for collection, or if it is collected through any legal proceeding at law or in equity or in bankruptcy, receivership, or other court proceedings, the Company will also be required to pay all costs of collection including, but not limited to, court costs and attorneys’ fees. 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 contains customary events of default. For the years ended December 31, 2023, and December 31, 2022, the

Current wording

Under the terms of the Note, the principal amount of $10,201,758 is payable in consecutive quarterly installments beginning on April 1, 2022, through January 1, 2027. Interest on the principal amount will accrue at a rate of 6% per year until the principal is repaid in full and is due and payable, in arrears, on the first day of each January, April, July, and October of each calendar year, commencing on April 1, 2022. The Company may prepay the Note, in whole or in part, at any time, with no premium or penalty. In the event that the Company defaults under the Security Agreement, all principal outstanding under the Note at the time of the default will bear interest at a rate of 9% per year until the full and final payment of all principal and interest under the Note (regardless of whether any default is waived or cured). If the Note is placed in the hands of any attorney for collection, or if it is collected through any legal proceeding at law or in equity or in bankruptcy, receivership, or other court proceedings, the Company will also be required to pay all costs of collection including, but not limited to, court costs and attorneys’ fees. 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 contains customary events of default. For the years ended December 31, 2024, and December 31, 2023, the Company paid Vivus $1.0 million and $2.0 million, respectively.

Previous wording

Consistent with industry practice, the Company maintains a return policy that generally allows its customers to return Stendra® and receive credit for product within six months prior to expiration date and up to one year after expiration date. The provision for returns is based upon the Company’s estimates for future Stendra® returns and historical experience. The provision of returns is part of the variable consideration recorded at the time revenue is recognized. As of December 31, 2023, and 2022, the reserves for product returns were $4.2 million and $2.3 million, respectively, and are included as a component of accrued expenses. During the years ended December 31, 2023, and December 2022, respectively, the Company recorded $3.4 million and $9.4 million of returns as a reduction of gross revenue.

Current wording

Consistent with industry practice, the Company maintains a return policy that generally allows its customers to return Stendra® and receive credit for product within six months prior to expiration date and up to one year after expiration date. The provision for returns is based upon the Company’s estimates for future Stendra® returns and historical experience. The provision of returns is part of the variable consideration recorded at the time revenue is recognized. As of December 31, 2024, and 2023, the reserves for product returns were $5.2 million and $4.2 million, respectively, and are included as a component of accrued expenses. During the years ended December 31, 2024, and December 2023, respectively, the Company recorded $1.8 million and $3.4 million of returns as a reduction of gross revenue.

Previous wording

The Company accounts for recognized intangible assets at cost. Intangible assets with finite useful lives are amortized over the useful life that 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, 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. During the three months ended September 30, 2022, the Company noted that indicators of impairment existed and prepared an undiscounted cash flow analysis, which indicated for the Stendra® product an impairment. The Company then prepared a discounted cash flow analysis through December 2029, representing the remaining economic useful life for the Stendra® product resulting in an impairment of approximately $7.5 million. As indicators of impairment existed as of December 31, 2022, the Company prepared an undiscounted cash flow analysis. This analysis included projections of future revenue and expenses, which if not achieved could result in future impairment charges. These projections included continued sales of prescription Stendra®. Additionally, the Company is investing in research and development pursuant to our OTC Strategies related to Stendra®, which we anticipate will dramatically increase product sales in the future, such that if our Stendra® OTC strategy is not successful, we may have to partially or fully impair the remaining intangible balance.

Current wording

The Company accounts for recognized intangible assets at cost. Intangible assets with finite useful lives are amortized over the useful life that 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, 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

Previous wording

The Company has prepared projections including the undiscounted cash flows of the remaining estimated useful lives through December 2031 for the medical device products. Based on the impairment assessment as of December 31, 2022, the Company determined that no intangible asset impairment occurred as the undiscounted cash flows exceeded the respective carrying values of the assets by approximately $0.8 million.

Current wording

The Company has prepared a carrying value recoverability test for the medical device asset group as of December 31, 2024. Based on the analysis as of December 31, 2024, the Company determined that no intangible asset impairment occurred as the undiscounted cash flows exceeded the respective carrying values.

Previous wording

Net sales for the year ended December 31, 2022, were $5,992,054, composed of $2,734,639 of net sales from Prescription Medicines and net sales of $3,257,415 from Medical Devices.

Current wording

Net sales for the year ended December 31, 2024, were $5,112,043, composed of $1,961,291 of net sales from Prescription Medicines and net sales of $3,150,752 from Medical Devices.

Previous wording

For the year ended December 31, 2022, gross billings to customers representing 10% or more of the Company’s total gross billings included four customers that represented approximately 26%, 21%, 17%, and 16% of total gross billings. Gross billings is a non-GAAP financial measure. For a reconciliation of net sales to gross billings, see the section titled “Reconciliation of Non-GAAP Financial Measures” below.

Current wording

For the year ended December 31, 2024, gross billings to customers representing 10% or more of the Company’s total gross billings included three customers that represented approximately 26%, 24%, and 13% of total gross billings, respectively. Gross billings is a non-GAAP financial measure. For a reconciliation of net sales to gross billings, see the section titled “Reconciliation of Non-GAAP Financial Measures” below.

Previous wording

Prescription Medicines sales consist of sales of Stendra® in the U.S. for the treatment of male ED. Stendra® is primarily sold directly to four main customers, as described above, which collectively accounted for approximately 92% of Stendra® net sales for the year ended December 31, 2023. Individually, sales to the four main customers, accounted for 30%, 28%, 23%, and 11% of Stendra® gross billings for the year ended December 31, 2023.

Current wording

Prescription Medicines sales consist of sales of Stendra® in the U.S. for the treatment of ED. Stendra® is primarily sold directly to three main customers, as described above, which collectively accounted for approximately 95% of Stendra® net sales for the year ended December 31, 2024. Individually, sales to the three main customers, accounted for 39%, 36%, and 20% of Stendra® gross billings for the year ended December 31, 2024.

Previous wording

Net sales were $169,666 or 3% lower during the year ended December 31, 2023, compared to the same period in 2022 consisting of a $448,266 decrease in the net sales of Stendra® and a $278,600 increase in Medical Device Sales. The decrease in net sales of Stendra® was substantially due to increased related sales allowances. The increase in net sales for Medical Devices included an increase in domestic and international sales of VED systems.

Current wording

Net sales were $710,345 or 12% lower during the year ended December 31, 2024, compared to the same period in 2023 consisting of a $385,263 decrease in Medical Device Sales and a $325,082 decrease in the net sales of Stendra®. The decrease in net sales for Medical Devices included a decrease in domestic and international sales of VED systems. The decrease in net sales of Stendra® was substantially due to decreased wholesaler sales and decreased related sales allowances.

Previous wording

Cost of sales for the year ended December 31, 2022, were $2,289,418, composed of $949,197 of cost of sales for our Prescription Medicines segment and $1,340,221 for our Medical Devices segment.

Current wording

Cost of sales for the year ended December 31, 2024, were $1,212,700, composed of $201,798 of cost of sales for our Prescription Medicines segment and $1,010,902 for our Medical Devices segment.

Previous wording

Cost of sales for the Prescription Medicine segment for the year ended December 31, 2023, consisted of 58% third-party product cost of sales, 41% royalty expenses, 26% third-party logistics (“3PL”) order fulfillment, shipping expenses and other cost of sales partially offset by an 25% benefit in inventory obsolescence reserves.

Current wording

Cost of sales for the Prescription Medicine segment for the year ended December 31, 2024, consisted of 40% third-party product cost of sales, 49% royalty expenses, and 11% 3PL order fulfillment and shipping expenses.

Previous wording

Cost of sales for the Medical Device segment for the year ended December 31, 2023, consisted of 81% raw materials and 19% production labor.

Current wording

Cost of sales for the Medical Device segment for the year ended December 31, 2024, consisted of 85% raw materials and 15% production labor.

Previous wording

Cost of sales decreased by $658,198 or 29% during the year ended December 31, 2023, compared to the same period in 2022. For the years ended December 31, 2023, and 2022, cost of sales as a percentage of net sales was 28% and 38%, respectively. The decrease in cost of sales as a percentage of net sales was a result of decreased excess and obsolete inventory, decreased 3PL order fulfillment, shipping expenses and other cost of sales, offset by increased sales allowances that reduced net sales.

Current wording

Cost of sales decreased by $418,520 or 26% during the year ended December 31, 2024, compared to the same period in 2023. For the year ended December 31, 2024, and 2023, cost of sales as a percentage of net sales was 24% and 28%, respectively. The decrease in cost of sales as a percentage of net sales was a result of decreased excess and obsolete inventory and decreased 3PL order fulfillment.

Previous wording

Gross profit for the year ended December 31, 2023, was $4,191,168 or 72%, composed of $2,008,883 of gross profit from Prescription Medicines and $2,182,285 from Medical Devices. Gross profit for the year ended December 31, 2022, was $3,702,636 or 62%, composed of $1,785,442 of gross profit from Prescription Medicines and $1,917,194 from Medical Devices. The increase in gross profit was driven by the factors noted above.

Current wording

Gross profit for the year ended December 31, 2024, was $3,899,343 or 76%, composed of $1,759,493 of gross profit from Prescription Medicines and $2,139,850 from Medical Devices. Gross profit for the year ended December 31, 2023, was $4,191,168, or 72% of net sales, composed of $2,008,883 of gross profit from Prescription Medicines and $2,182,285 from Medical Devices. The decrease in gross profit was driven by the factors noted above.

Previous wording

Selling, general and administrative expenses for the year ended December 31, 2022, were $12,209,162, composed of $4,947,466 of selling, general and administrative expenses of our Prescription Medicines segment, $1,685,678 of selling, general and administrative expenses of our Medical Devices segment and $5,576,018 of general corporate expenses.

Current wording

Selling, general and administrative expenses for the year ended December 31, 2024, were $8,749,102, composed of $1,999,363 of selling, general and administrative expenses of our Prescription Medicines segment, $2,031,104 of selling, general and administrative expenses of our Medical Devices segment and $4,718,635 of general corporate expenses.

Previous wording

Selling, general and administrative expenses for the year ended December 31, 2023, were $9,261,471, composed of $1,736,512 of selling, general and administrative expenses of our Prescription Medicines segment, $1,885,489 of selling, general and administrative expenses of our Medical Devices segment and $5,639,470 of general corporate expenses.

Current wording

Selling, general and administrative expenses for the year ended December 31, 2023, were $9,261,471, composed of $1,319,282 of selling, general and administrative expenses of our Prescription Medicines segment, $1,885,489 of selling, general and administrative expenses of our Medical Devices segment and $6,056,700 of general corporate expenses.

Previous wording

Selling, general and administrative expenses decreased by $2,947,691 or 24% during the year ended December 31, 2023, compared to the same period in 2022. Decreased selling general and administrative expenses were primarily driven by decreased direct selling and marketing expenses of $1,197,294, decreased stock based compensation expense of $777,844, decreased prescription data expenses of $575,077, decreased payroll expenses of $225,200 resulting from decreased headcount, decreased insurance expenses of $409,288, decreased franchise taxes of $163,632, and decreased other operating expenses of $272,787 partially offset by a waiver of FY 23 FDA product fees resulting in a $589,611 increase in FDA product fees and increased professional service fees of $83,820.

Current wording

Selling, general and administrative expenses decreased by $512,369 or 6% during the year ended December 31, 2024, compared to the same period in 2023. Decreased selling general and administrative expenses were primarily driven by decreased payroll and benefits expenses of $761,185, decreased insurance expenses of $249,592, decreased professional service fees of $224,328 and decreased stock- based compensation expenses of $220,015 partially offset by a waiver of FY 23 PDUFA fees by the FDA resulting in a $940,101 increase in PDUFA expense and increased other operating expenses of $2,650.

Previous wording

For the year ended December 31, 2023, the Company recorded warrant issuance costs of $2.9 million associated with the July 2023 Private Placement.

Current wording

For the year ended December 31, 2023, the Company recorded warrant issuance costs of $2.9 million associated with the issuance of the Warrants pursuant to the Private Placement.

Previous wording

Research and development expenses for the Prescription Medicines segment for the year ended December 31, 2023, are composed of $1,542,658 for clinical development and $502,252 for consulting fees related to the Company’s Non-Prescription OTC Strategies related to Stendra®; $200,000 for upfront licensing fees and $24,666 for consulting fees related to the H100 license acquired in March 2020 and $2,493 related to the Company's tech transfer of its manufacturing process. Research and development expenses for the Prescription Medicines segment for the year ended December 31, 2022, are composed of $900,864 for consulting fees related to the Company’s Non-

Current wording

Research and development expenses for the Prescription Medicines segment for the year ended December 31, 2024, are composed of $2,241,721 for clinical development, $341,877 for consulting fees, and $31,452 for legal fees related to the OTC Strategies related to Stendra®. Research and development expenses for the Prescription Medicines segment for the year ended December 31, 2023, are composed of $1,542,658 for clinical development and $502,252 for consulting fees related to the Company’s Non-Prescription OTC Strategies related to Stendra®; $200,000 for upfront licensing fees and $24,666 for consulting fees related to the H100 license acquired in March 2020 and $2,493 related to the Company’s tech transfer of its manufacturing process.

Previous wording

Research and development expenses for the Medical Devices segment for the year ended December 31, 2023, are composed of $137,025 for license fees related to the Company’s Tissue-Specific Oxygenation Sensor Technology Strategies. Research and development expenses for the Medical Devices segment for the year ended December 31, 2022, are composed of $198,566 for license fees related to the Company’s Tissue-Specific Oxygenation Sensor Technology Strategies.

Current wording

Research and development expenses for the Medical Devices segment for the year ended December 31, 2024, were $0. Research and development expenses for the Medical Devices segment for the year ended December 31, 2023, are composed of $137,025 for license fees related to the Company’s Tissue-Specific Oxygenation Sensor Technology Strategies.

Previous wording

Research and development expenses increased by $668,814 or 38% during the year ended December 31, 2023, compared to the same period in 2022. Increased research and development expenses were primarily driven by increased clinical development expenses related to the Company’s OTC strategies related to Stendra® and increased upfront licensing fees related to the H100 license acquired in March 2020 partially offset by decreased consulting fees related to the Company’s OTC strategies related to Stendra® and decreased license fees related to the Company’s Tissue-Specific Oxygenation Sensor Technology Strategies.

Current wording

Research and development expenses increased by $205,956 or 9% during the year ended December 31, 2024, compared to the same period in 2023. Increased research and development expenses were primarily driven by increased clinical development expenses related to the Company’s OTC strategies related to Stendra®.

Previous wording

Depreciation and amortization expenses for the year ended December 31, 2022, were $5,598,884, composed of $4,442,922 of depreciation and amortization expenses of our Prescription Medicines segment and $1,155,962 of depreciation and amortization expenses of our Medical Devices segment.

Current wording

Depreciation and amortization expenses for the year ended December 31, 2024, were $2,831,219, composed of $1,965,946 of depreciation and amortization expenses of our Prescription Medicines segment and $865,273 of depreciation and amortization expenses of our Medical Devices segment.

Previous wording

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. The decrease in total depreciation and amortization results from a $7.5 million write-down of intangible assets in 2022.

Current wording

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. This asset was deemed impaired as of December 31, 2024, as indicated below. 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.

Previous wording

During the year ended December 31, 2022, the Company noted that indicators of impairment existed and prepared an undiscounted cash flow analysis, which indicated that the Stendra® product intangible asset was impaired. The Company then prepared a discounted cash flow analysis resulting in an impairment of approximately $7.5 million. Management continued to analyze the Company’s intangible assets during 2023. Management noted that the Company’s financial results were consistent with the projections used in the December 31, 2022, analysis, as well as no triggering event, therefore, the Company concluded that no further analysis was required during 2023.

Current wording

During the year ended December 31, 2023, Management analyzed the Company’s intangible assets and noted that the Company’s financial results were consistent with its projections and concluded there was no triggering event. Therefore, the Company concluded that no further analysis was required during 2023.

Previous wording

For the year ended December 31, 2023, the Company recorded a gain of approximately $2.6 million for the change in fair value of the derivative liability. For the year ended December 31, 2022, the Company also recorded a gain of approximately $0.5 million for the change in fair value of the derivative liability. The gain in 2023 related to the decrease in the fair value of derivative liability established for certain bifurcated features of the Series A Preferred Stock issued in the July 2023 Private Placement. The gain in 2022 represented the change in fair value of the derivative during the year ended December 31, 2022, primarily driven by the decline in the Company’s stock price as well as the passage of time, as it became less likely that the earnout associated with the Mergers consummated on December 1, 2020, would be met.

Current wording

For the year ended December 31, 2024, and December 31, 2023, the Company recorded a gain of $3.6 million and $2.6 million, respectively, for the change in fair value of the derivative liability. The gains in 2024 and 2023 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 Private Placement.

Previous wording

For the year ended December 31, 2023, the Company recorded a gain of approximately $14.0 million for the change in fair value of the warrant liability compared to $0 for the year ended December 31, 2022. The gain related to the decrease in the fair value of warrants issued in the July 2023 Private Placement which were classified as liabilities in accordance with ASC 815. The gain resulted principally from the decrease in the Company’s common stock price. In addition, as of December 31, 2023, the warrant liability was reclassified to permanent equity based upon the modification of the warrant.

Current wording

For the year ended December 31, 2024, and December 31, 2023, respectively, the Company recorded a gain of $0 and $14.0 million for the change in fair value of the warrant liability. The gain related to the decrease in the fair value of warrants issued in the Private Placement which were classified as liabilities in accordance with ASC 815. In addition, as of December 31, 2023, the warrant liability was reclassified to permanent equity based upon the modification of the warrant.

Previous wording

Interest income for the year ended December 31, 2023, and December 31, 2022, was $515,311 and $14,194, respectively. Petros invested its cash in money market securities during 2023.

Current wording

Interest income for the year ended December 31, 2024, and December 31, 2023, was $371,769 and $515,311, respectively. Petros invested its cash in money market securities.

Previous wording

In January 2022, the Company executed a promissory note in favor of Vivus with a principal amount of $10,201,758 in connection with the Vivus Settlement Agreement. Interest expense, promissory note for the year ended December 31, 2023, and December 31, 2022, was $536,138 and $596,018, respectively.

Current wording

In January 2022, the Company executed a promissory note in favor of Vivus with a principal amount of $10,201,758 in connection with the Vivus Settlement Agreement. Interest expense, promissory note for the year ended December 31, 2024, and December 31, 2023, was $560,909 and $536,138, respectively.

Previous wording

Cash totaled $13,336,975 at December 31, 2023, compared to $9,426,264 at December 31, 2022.

Current wording

Cash and cash equivalents totaled $3,709,971 at December 31, 2024, compared to $13,336,975 at December 31, 2023.

Previous wording

We have experienced net losses and negative cash flows from operations since our inception. As of December 31, 2023, we had cash of $13.3 million, working capital of $9.6 million, and an accumulated deficit of $98.9 million. Our plans include, or may include, utilizing our cash on hand, as well as exploring additional ways to raise capital in addition to increasing cash flows from operations. In January 2022, the Company executed a promissory note in favor of Vivus in connection with the Vivus Settlement Agreement in the principal amount of $10,201,758, net of a prepayment of $900,000. The terms of this promissory note are discussed in the section titled “Vivus Settlement Agreement, Promissory Note and the Security Agreement” above.

Current wording

We have experienced net losses and negative cash flows from operations since our inception. As of December 31, 2024, we had cash of $3.7 million, negative working capital of $10.7 million, and an accumulated deficit of $113.2 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. In January 2022, the Company executed a promissory note in favor of Vivus in connection with the Vivus Settlement Agreement in the principal amount of $10,201,758, net of a prepayment of $900,000. The terms of this promissory note are discussed in the section titled “Vivus Settlement Agreement, Promissory Note and the Security Agreement” above.

Previous wording

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 6,666,668 shares of our common stock at an initial conversion price of $2.25 per share and (ii) warrants to acquire up to an aggregate of 6,666,668 shares of common stock (the “Warrants”) at an initial exercise price of $2.25 per share (collectively, the “Private Placement”). Pursuant to the terms of the Certificate of Designations and the Warrants, each of the Conversion Price (as defined below) and the exercise price and the number of shares underlying the Warrants 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

Current wording

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 6,666,668 shares of our Common Stock at an initial conversion price of $2.25 per share and (ii) Warrants to acquire up to an aggregate of 6,666,668 shares of Common Stock at an initial exercise price of $2.25 per share. Pursuant to the terms of the Certificate of Designations and the Warrants, each of the Conversion Price (as defined below) and the exercise price and the

Previous wording

The Private Placement was exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act and in reliance on similar exemptions under applicable state laws. The closing of the Private Placement occurred on July 17, 2023. The aggregate gross proceeds from the Private Placement was approximately $15 million. We intend to use the net proceeds from the Private Placement for general corporate purposes.

Current wording

The Private Placement was exempt from the registration requirements of the Securities Act pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act and in reliance on similar exemptions under applicable state laws. The closing of the Private Placement occurred on July 17, 2023. The aggregate gross proceeds from the Private Placement was approximately $15 million. We used the net proceeds from the Private Placement for general corporate purposes.

Previous wording

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 $2.25 (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). We are required to redeem the Series A Preferred Stock in 13 equal monthly installments, commencing on November 1, 2023. The amortization payments due upon such 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) $0.396 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. We may require holders to convert their Series A Preferred Stock into Conversion Shares if the closing price of the Common Stock exceeds $6.75 per share (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) for 20 consecutive trading days and the daily dollar trading volume of the Common Stock exceeds two million dollars ($2,000,000) per day during the same period and certain equity conditions described in the Certificate of Designations are satisfied.

Current wording

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) $0.396 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. We may require holders to convert their Series A Preferred Stock into Conversion Shares if the closing price of the Common Stock exceeds $6.75 per share (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events) for 20 consecutive trading days and the daily dollar trading volume of the Common Stock exceeds two million dollars ($2,000,000) per day during the same period and certain equity conditions described in the Certificate of Designations are satisfied.

Previous wording

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. On September 29, 2023, we filed an amendment to the Certificate of Designations with the Secretary of State for the State of Delaware, pursuant to which the terms of the Series A Preferred Stock were amended to permit certain additional procedures for the payment of redemptions and conversions 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 holders of Series A Preferred Stock have no voting rights on account of the Series A Preferred Stock, other than with respect to certain matters affecting the rights of the Series A Preferred Stock.

Current wording

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. On September 29, 2023, we filed an amendment to the Certificate of Designations with the Secretary of State for the State of Delaware, pursuant to which the terms of the Series A Preferred Stock were amended to permit certain additional procedures for the payment of redemptions and conversions. 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.

Previous wording

As of March 26, 2024, we have redeemed or converted approximately 7,902 shares of Series A Preferred Stock and issued 4,634,771 shares of Common Stock pursuant to the terms of the Certificate of Designations.

Current wording

As of March 22, 2025, we have redeemed, converted or accrued for redemption of all 15,000 shares of Series A Preferred Stock and issued 8,689,802 shares of Common Stock pursuant to the terms of the Certificate of Designations.

Previous wording

On March 21, 2024, we entered into an Omnibus Waiver and Amendment (the “Waiver and Amendment”) with the Investors in the Private Placement, effective as of December 31, 2023. The Waiver and Amendment 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.

Current wording

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.

Previous wording

As noted above, in January 2022, the Company executed a promissory note in favor of Vivus with a principal amount of $10,201,758 as part of the settlement. For more information, see the section above titled “Vivus Settlement Agreement, Promissory Note and the Security Agreement.”

Current wording

As noted above, in January 2022, the Company executed the Note in favor of Vivus with a principal amount of $10,201,758 as part of the settlement. For more information, see the section above titled “Vivus Settlement Agreement, Promissory Note and the Security Agreement.”

Previous wording

Net cash used in operating activities for the year ended December 31, 2022, was $12,797,325, which primarily reflected our net loss of $20,037,573. Adjustments to reconcile net loss to net cash provided by operating activities of $10,542,319 consisting primarily of depreciation and amortization, intangible asset impairment, gain on Vivus settlement, stock compensation and changes in operating assets and liabilities of $3,302,071.

Current wording

Net cash used in operating activities for the year ended December 31, 2024, was $2,603,051, which primarily reflected our net loss of $14,318,790. Adjustments to reconcile net loss to net cash provided by operating activities of $7,189,008 consisting primarily of depreciation and amortization, intangible asset and API asset impairments and changes in operating assets and liabilities of $4,526,731.

Previous wording

Net cash used in financing activities was $1,623,983 for the year ended December 31, 2022, consisting of payments of the promissory note, including a prepayment of $900,000.

Current wording

Net cash used in financing activities was $6,999,366 for the year ended December 31, 2024, consisting of redemptions of Series A Preferred Stock equal to $6,234,087 and principal payments of the Note equal to $765,279.