Company: PTPI
Filing Date: 2025-02-13
Form Type: S-1/A
Source: 0001410578-25-000122
Chunk: 244

Company: Petros Pharmaceuticals, Inc.
Filing Date: 2025-02-13
Form: S-1/A
Chunk 244
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 the December Issuances. On March 21, 2024, the Company entered into waiver and amendment agreements with investors effective December 31, 2023, in which the investors waived the contractual requirement to adjust the Conversion Price related to the December Issuances and designated the December Issuances as Excluded Securities as defined in the Certificate of Designations. The Series A Preferred Shares were determined to be more akin to a debt-like host than an equity-like host. The Company identified the following embedded features that are not clearly and closely related to the debt host instrument: 1) make-whole interest upon a contingent redemption event, 2) make-whole interest upon a conversion event, 3) an installment redemption upon an Equity Conditions Failure (as defined in the Certificate of Designation), and 4) variable share-settled installment conversion. These features were bundled together, assigned probabilities of being affected and measured at fair value. Subsequent changes in fair value of these features are recognized in the Consolidated Statements of Operations. The Company estimated the $ 6,140,000fair value of the bifurcated embedded derivative at issuance using a Monte Carlo simulation model, with the following inputs the fair value of our common stock of $ 3.54on the issuance date, estimated equity volatility of 165.0%, estimated traded volume volatility of 790.0%, the time to maturity of 1.38years, a risk free rate of 5.0%, a discounted market interest rate of 8.1%, dividend rate of 8.0%, a penalty dividend rate of 15.0%, and probability of default of 9.7%. The fair value of the bifurcated derivative liability was estimated utilizing the with and without method which uses the probability weighted difference between the scenarios with the derivative and the plain vanilla maturity scenario without a derivative. The discount to the fair value is included as a reduction to the carrying value of the Series A Preferred Shares. During the year ended December 31, 2023, the Company recorded a total discount of $ 15,000,000upon issuance of the Series A Preferred Shares, which was comprised of the issuance date fair value of the associated embedded derivative of $ 6,140,000and the difference between the remaining gross proceeds after allocation to the derivative liability and the residual fair value of the Series A Preferred Shares of $ 8,860,003, which represents the portion of the Warrant liability allocated to the discount. It was deemed