Company: PTPI
Filing Date: 2025-02-14
Form Type: S-1/A
Source: 0001410578-25-000137
Chunk: 118

Company: Petros Pharmaceuticals, Inc.
Filing Date: 2025-02-14
Form: S-1/A
Chunk 118
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. Holder will take a tax basis in the shares acquired on the exercise of Series Warrants equal to the exercise price of the Series Warrants, increased by the U.S. Holder’s adjusted tax basis in the Series Warrants exercised (as determined pursuant to the rules discussed above). The U.S. Holder’s holding period in the shares of common stock acquired on the exercise of Series Warrants will begin on the date of exercise or possibly the day after such exercise, and will not include any period for which the U.S. Holder held the Series Warrants.

The lapse or expiration of Series Warrants will be treated as if the U.S. Holder sold or exchanged the Series Warrants and recognized a capital loss equal to the U.S. Holder’s tax basis in the Series Warrants. The deductibility of capital losses is subject to limitations.

The tax consequences of a cashless exercise of Series Warrants are not clear under current tax law. A cashless exercise may be tax-free, either because the exercise is not a realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either tax-free situation, a U.S. Holder’s tax basis in the common stock received generally would equal the U.S. Holder’s tax basis in the Series Warrants. If the cashless exercise was not a realization event, it is unclear whether a U.S. Holder’s holding period for the common stock would be treated as commencing on the date of exercise of the Series Warrants or the day following the date of exercise of the Series Warrants. If the cashless exercise were treated as a recapitalization, the holding period of the common stock would include the holding period of the Series Warrants.

It is also possible that a cashless exercise could be treated as a taxable exchange in which gain or loss would be recognized. In such event, a U.S. Holder could be deemed to have surrendered Series Warrants having an aggregate fair market value equal to the exercise price for the total number of Series Warrants to be exercised. The U.S. Holder would recognize capital gain or loss in an amount equal to the difference between the fair market value of the common stock received in respect of the Series Warrants deemed surrendered and the U.S. Holder’s tax basis in such Series Warrants. Such gain or loss would be long-term or short-term, depending on the U.S. Holder’s holding period in the Series Warrants deemed surrendered. In this case, a U.S. Holder’s tax basis in