diff --git a/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2024-03-31 (0001493152-24-018944).md b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2024-03-31 (0001493152-24-018944).md new file mode 100644 index 0000000000000000000000000000000000000000..86c2f7c325efaaac1e73ff99f1ff19c01e776f61 --- /dev/null +++ b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2024-03-31 (0001493152-24-018944).md @@ -0,0 +1,975 @@ +**UNITED STATES** + +**SECURITIES AND EXCHANGE COMMISSION** + +**Washington, D.C. 20549** + +**FORM 10-Q** + +(Mark One) + +| ☒ | Quarterly Report UNDER Section 13 or 15(d) of the Securities Exchange Act of 1934 +---|---|--- + +For the quarterly period ended March 31, 2024 + +OR + +| ☐ | Transition Report UNDER Section 13 or 15(d) of the Securities Exchange Act of 1934 +---|---|--- + +For the transition period from ______________ to ______________ + +Commission file number 001-41488 + +**SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** + +(Exact name of registrant as specified in its charter) + +**Delaware** | | **82-5089826** +---|---|--- +(State or other jurisdiction of | | (I.R.S. Employer +incorporation or organization) | | Identification Number) + +**401 Professional Drive , Suite 260** + +**Gaithersburg , MD 20879 ** + +(Address of principal executive offices) (Zip Code) + +**(240) 403-4212** + +(Registrant’s telephone number, including area code) + +N/A + +(Former name, former address and former fiscal year, if changed since last report) + +Securities registered pursuant to Section 12(b) of the Act: + +**Title of each class** | | **Trading Symbol(s)** | | **Name of each exchange on which registered** +---|---|---|---|--- +Common Stock | | SHPH | | The Nasdaq Stock Market LLC + +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ + +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ + +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. + +| Large accelerated filer | ☐ | Accelerated filer | ☐ +---|---|---|---|--- +| Non-accelerated filer | ☒ | Smaller reporting company | ☒ +| | | Emerging growth company | ☒ + +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ + +Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ + +The number of shares outstanding of the registrant’s common stock on May 13, 2024 was 16,794,893. + +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**TABLE OF CONTENTS** + +| | **Page No.** +---|---|--- +| | +| **PART I. Financial Information** | +| | +**Item 1.** | Unaudited Condensed Consolidated Financial Statements | 3 +| | +| Unaudited Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023 | 3 +| | +| Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 | 4 +| | +| Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023 | 5 +| | +| Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 | 6 +| | +| Notes to Unaudited Condensed Consolidated Financial Statements | 7 +| | +**Item 2.** | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 19 +| | +**Item 3.** | Quantitative and Qualitative Disclosures About Market Risk | 24 +| | +**Item 4.** | Controls and Procedures | 24 +| | +| **PART II. Other Information** | +| | +**Item 1.** | Legal Proceedings | 25 +| | +**Item 1A.** | Risk Factors | 25 +| | +**Item 2.** | Unregistered Sale of Equity Securities and Use of Proceeds | 25 +| | +**Item 3.** | Defaults Upon Senior Securities | 25 +| | +**Item 4.** | Mine Safety Disclosures | 25 +| | +**Item 5.** | Other Information | 25 +| | +**Item 6.** | Exhibits | 25 +| | +| Signatures | 26 + +2 +--- + +**PART I. Financial Information ** + +**Item 1\. Unaudited Condensed Consolidated Financial Statements** + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Balance Sheets** + +**(Unaudited)** + +| | March 31,| | | December 31,| +---|---|---|---|---|---|--- +| | 2024| | | 2023| +Assets| | | | | | +Current assets| | | | | | | | +Cash and cash equivalents| | $| 1,398,628| | | $| 2,576,416| +Prepaid expenses| | | 129,642| | | | 114,473| +Marketable securities| | | 2,789,251| | | | 2,887,215| +Accrued interest income| | | 11,964| | | | 14,901| +Other current assets| | | 81,534| | | | -| +Total Current Assets| | | 4,411,019| | | | 5,593,005| +| | | | | | | | +Property and equipment, net| | | 22,915| | | | 24,827| +Operating lease right-of-use asset| | | 319,987| | | | 333,904| +Total Assets| | $| 4,753,921| | | $| 5,951,736| +| | | | | | | | +Liabilities and Stockholders’ Equity| | | | | | | | +Current Liabilities| | | | | | | | +Accounts payable and accrued expenses| | $| 347,556| | | $| 282,860| +Accounts payable and accrued expenses related party| | | -| | | | 446| +Accounts payable and accrued expenses | | | -| | | | 446| +Accrued interest payable| | | 143,676| | | | 110,453| +Convertible notes payable, net| | | 941,398| | | | 595,999| +Derivative liability| | | 2,035| | | | -| +Operating lease liability| | | 54,552| | | | 52,479| +Total Current Liabilities| | | 1,489,217| | | | 1,042,237| +| | | | | | | | +Convertible notes payable non-current, net| | | -| | | | 135,089| +Derivative liability non-current| | | 214,615| | | | 414,512| +Operating lease liability non-current| | | 288,602| | | | 304,127| +Total Liabilities| | | 1,992,434| | | | 1,895,965| +| | | | | | | | +Stockholders’ Equity| | | | | | | | +Series A Convertible Preferred Stock, $0.00001 par value; $1,000 per share liquidation value; 20,000,000 shares authorized; no shares outstanding| | | -| | | | -| +Common stock, $0.00001 par value; 100,000,000 shares authorized; 16,819,893 and 16,069,320 shares issued and outstanding, respectively| | | 168| | | | 161| +Additional paid in capital| | | 19,979,962| | | | 19,543,222| +Accumulated deficit| | | (17,218,643| )| | | (15,487,612| ) +Total Stockholders’ Equity| | | 2,761,487| | | | 4,055,771| +Total Liabilities and Stockholders’ Equity| | $| 4,753,921| | | $| 5,951,736| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +3 +--- + +**** + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Operations** + +**(Unaudited)** + +| | 2024 | | | 2023 | +---|---|---|---|---|---|--- +| | Three Months Ended | +| | March 31, | +| | 2024 | | | 2023 | +| | | | | | +Revenue | | $ | - | | | $ | - | +| | | | | | | | +Operating expenses | | | | | | | | +Research and development | | | 586,104 | | | | 921,801 | +General and administrative | | | 324,609 | | | | 255,355 | +Legal and professional | | | 474,134 | | | | 367,624 | +Total operating expenses | | | 1,384,847 | | | | 1,544,780 | +| | | | | | | | +Loss from operations | | | (1,384,847 | ) | | | (1,544,780 | ) +| | | | | | | | +Other income (expense) | | | | | | | | +Interest expense - related parties | | | - | | | | (4,237 | ) +Interest expense | | | (497,515 | ) | | | (599,331 | ) +Interest income | | | 21,453 | | | | 16,688 | +Finance fee | | | - | | | | (104,245 | ) +Change in fair value of derivative liabilities | | | 197,862 | | | | 1,241,000 | +Gain on sale of marketable securities | | | 4,037 | | | | - | +Change in fair value of marketable securities | | | (706 | ) | | | 38,062 | +Loss on settlement of convertible debt | | | (71,315 | ) | | | (18,254 | ) +Total other income (expense) | | | (346,184 | ) | | | 569,683 | +| | | | | | | | +Net loss attributable to common stockholders | | $ | (1,731,031 | ) | | $ | (975,097 | ) +| | | | | | | | +Weighted average common shares outstanding - basic and diluted | | | 16,572,527 | | | | 13,635,994 | +Net loss per shares - basic and diluted | | $ | (0.10 | ) | | $ | (0.07 | ) + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +4 +--- + +**** + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)** + +**(Unaudited)** + +**_For the Three Months Ended March 31, 2024_** + +| | | | | | | | Additional| | | | | | Total| +---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Common Stock| | | Paid in| | | Accumulated| | | Stockholders’| +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity| +| | | | | | | | | | | | | | | +Balance - December 31, 2023| | | 16,069,320| | | $| 161| | | $| 19,543,222| | | $| (15,487,612| )| | $| 4,055,771| +| | | | | | | | | | | | | | | | | | | | +Common stock issued for conversion of accrued interest and principal| | | 625,573| | | | 6| | | | 325,292| | | | -| | | | 325,298| +Common stock issued for restricted stock units| | | 125,000| | | | 1| | | | (1| )| | | -| | | | -| +Stock-based compensation| | | -| | | | -| | | | 111,449| | | | -| | | | 111,449| +Net loss| | | -| | | | -| | | | -| | | | (1,731,031| )| | | (1,731,031| ) +Balance - March 31, 2024| | | 16,819,893| | | $| 168| | | $| 19,979,962| | | $| (17,218,643| )| | $| 2,761,487| + +**_For the Three Months Ended March 31, 2023_** + +| | | | | | | | Additional| | | | | | Total| +---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Common Stock| | | Paid in| | | Accumulated| | | Stockholders’| +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity (Deficit)| +| | | | | | | | | | | | | | | +Balance - December 31, 2022| | | 13,603,129| | | $| 136| | | $| 16,572,622| | | $| (8,894,889| )| | $| 7,677,869| +Balance| | | 13,603,129| | | $| 136| | | $| 16,572,622| | | $| (8,894,889| )| | $| 7,677,869| +| | | | | | | | | | | | | | | | | | | | +Warrants issued for financing costs| | | -| | | | -| | | | 99,543| | | | -| | | | 99,543| +Financing fees allocated to warrants| | | -| | | | -| | | | (8,727| )| | | -| | | | (8,727| ) +Common stock issued for conversion of accrued interest and principal| | | 50,998| | | | 1| | | | 104,546| | | | -| | | | 104,547| +Stock-based compensation| | | -| | | | -| | | | 8,333| | | | -| | | | 8,333| +Net loss| | | -| | | | -| | | | -| | | | (975,097| )| | | (975,097| ) +Balance - March 31, 2023| | | 13,654,127| | | | 137| | | $| 16,776,317| | | $| (9,869,986| )| | $| 6,906,468| +Balance | | | 13,654,127| | | | 137| | | | 16,776,317| | | | (9,869,986| )| | | 6,906,468| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +5 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Cash Flows** + +**(Unaudited)** + +| | 2024| | | 2023| +---|---|---|---|---|---|--- +| | Three Months Ended| +| | March 31,| +| | 2024| | | 2023| +| | | | | | +CASH FLOWS FROM OPERATING ACTIVITIES:| | | | | | | | +Net loss| | $| (1,731,031| )| | $| (975,097| ) +Adjustments to reconcile net loss to net cash used in operating activities:| | | | | | | | +Depreciation| | | 1,912| | | | 1,488| +Change in fair value of derivative liabilities| | | (197,862| )| | | (1,241,000| ) +Amortization of debt discount and finance fees| | | 445,509| | | | 567,297| +Gain on marketable securities| | | (4,037| )| | | -| +Change in fair value of marketable securities| | | 706| | | | (38,062| ) +Accrued interest settled with common stock| | | 18,783| | | | 20,142| +Loss on settlement of convertible debt| | | 71,315| | | | 18,254| +Stock-based compensation| | | 111,449| | | | 8,333| +Changes in operating assets and liabilities:| | | | | | | | +Accrued interest income| | | 2,937| | | | (7,023| ) +Prepaid expenses| | | (15,169| )| | | (42,687| ) +Accounts payable and accrued expenses| | | 23,162| | | | 330,729| +Accounts payable and accrued expenses - related parties| | | (446| )| | | (12,500| ) +Accrued interest payable| | | 33,223| | | | 116,051| +Accrued interest payable - related parties| | | -| | | | (74,807| ) +Other assets| | | -| | | | (7,206| ) +Change in operating lease asset and liability| | | 466| | | | (1,894| ) +Net cash used in operating activities| | | (1,239,083| )| | | (1,337,982| ) +| | | | | | | | +CASH FLOWS FROM INVESTING ACTIVITIES:| | | | | | | | +Investment in marketable securities| | | (18,705| )| | | (2,953,709| ) +Proceeds from disposition of marketable securities| | | 120,000| | | | -| +Net cash used in investing activities| | | 101,295| | | | (2,953,709| ) +| | | | | | | | +CASH FLOWS FROM FINANCING ACTIVITIES:| | | | | | | | +Repayment of note payable-related party| | | -| | | | (546,244| ) +Proceeds from convertible notes payable and warrants| | | -| | | | 3,935,000| +Payment for finance costs related to convertible note payable| | | -| | | | (345,000| ) +Payment for finance costs| | | (40,000| )| | | -| +Net cash provided by financing activities| | | (40,000| )| | | 3,043,756| +| | | | | | | | +| | | | | | | | +Net change in cash and cash equivalents| | | (1,177,788| )| | | (1,247,935| ) +Cash and cash equivalents, beginning of period| | | 2,576,416| | | | 8,417,203| +Cash and cash equivalents, end of period| | $| 1,398,628| | | $| 7,169,268| +| | | | | | | | +Cash paid for:| | | | | | | | +Interest| | $| -| | | $| 79,044| +Income taxes| | $| -| | | $| -| +| | | | | | | | +Supplemental non-cash financing activities:| | | | | | | | +Common stock issued for settlement of debt| | $| 325,298| | | $| 104,547| +Finance costs accrued in accounts payable| | $| 41,534| | | $| -| +Warrants issued for financing fees, net of issuance fees of $0 and $8,727, respectively| | $| -| | | $| 90,816| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +**** + +6 +--- + +**** + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Notes to Unaudited Condensed Consolidated Financial Statements** + +**March 31, 2024** + +**Note 1 – Organization and Liquidity** + +**_Organization and Line of Business_** + +Shuttle Pharmaceuticals Holdings, Inc. (“we”, “us”, “our”, the “Company”) was originally formed as Shuttle Pharmaceuticals, LLC in the State of Maryland on December 18, 2012. On August 12, 2016, the Company filed articles of conversion with the State of Maryland to convert from an LLC to a C corporation, at which time the Company changed its name to Shuttle Pharmaceuticals, Inc. (“Shuttle”). In connection with the conversion the Company issued 45,000,000 shares of common stock in exchange for 100% of the outstanding membership interests in Shuttle prior to conversion. On June 4, 2018, Shuttle completed a reverse merger with Shuttle Pharmaceuticals Holdings, Inc. (then known as Shuttle Pharma Acquisition Corp, Inc.), a Delaware corporation, pursuant to which Shuttle, our operating entity, became a wholly owned subsidiary of the Company. + +The Company’s primary purpose is to develop and commercialize unique drugs for the sensitization of cancers and protection of normal tissues, with the goal of improving outcomes for cancer patients receiving radiation therapy. Shuttle has deployed its proprietary technology to develop novel cancer immunotherapies, producing a pipeline of selective HDAC inhibitors for cancer and immunotherapy applications. The Company’s HDAC platform is designed to target candidate molecules with potential roles in therapeutics beyond cancer, including autoimmune, inflammatory, metabolic, neurological and infectious diseases. The Company’s Ropidoxuridine product, which is used with radiation therapy to sensitize cancer cells, was initially funded by a Small Business Innovation Research (“SBIR”) contract provided by the National Cancer Institute (“NCI”), a unit of the National Institutes of Health (“NIH”). Ropidoxuridine has been further developed though the Company’s collaborations with scientists at the University of Virginia for use in combination with proton therapy to improve patient survival. Historically, and prior to the Company’s initial public offering in September 2022, the Company has obtained funding to develop products through NIH grants, including a product to predict late effects of radiation with metabolite biomarkers and develop prostate cancer cell lines in health disparities research. + +The production and marketing of the Company’s products and its ongoing research and development activities will be and are subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any products or combination of products developed by the Company must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the Food and Drug Administration (“FDA”) under the Food, Drug and Cosmetic Act. There can be no assurance that the Company will not encounter problems in its clinical trials that will cause the Company or the FDA to delay or suspend the clinical trials. + +The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and in other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company now or in the future. + +**_Liquidity and Going Concern_** + +Our condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception and has a net loss of approximately $1.7 million and no revenues for the three months ended March 31, 2024 and has working capital of approximately $2.9 million as of March 31, 2024. In addition, the convertible note payable outstanding at March 31, 2024 includes covenants and certain cash payment requirements. These conditions, and the Company’s ability to comply with such conditions, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. + +7 +--- + +In September 2022, the Company completed its IPO, generating net proceeds of approximately $10.0 million. Additionally, in January 2023, the Company entered into a securities purchase agreement with an institutional investor through which the Company sold a convertible note with a principal value of $4.3 million, along with a four-year warrant to purchase 1,018,079 shares of common stock, exercisable at $2.35 per share, providing the Company with approximately $3.6 million in net proceeds. To date, the warrant has not yet been exercised. However, the Company’s existing cash resources, marketable securities and the cash received from the equity offering and convertible note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next 12 months. + +The IPO and subsequent capital raise have supported operations leading up to the manufacture of drug product and FDA approval of the IND for the Phase II clinical trial of Ropidoxuridine and radiation therapy in glioblastoma. The FDA recommended and the Company agreed to an expansion of the clinical trial, necessitating additional capital to complete the trial as well as fund ongoing operations. As a result, management is in the process of initiating a $4.5 million rights offering and has submitted an application for a Small Business Innovation Research (“SBIR”) grant for non-dilutive funding for pre-clinical project through the National Institutes of Health (“NIH”). The ability of the Company to continue as a going concern is dependent upon its ability to successfully raise additional equity or debt financing to allow it to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues. + +The accompanying condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company is unable to continue as a going concern. + +**Note 2 – Summary of Significant Accounting Policies** + +**_Basis of Presentation_** + +The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and notes required by accounting principles generally accepted in the United States of America for annual financial statements. A complete discussion of the Company’s significant accounting policies is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. + +In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all of the adjustments necessary to present the financial position of the Company as of March 31, 2024 and the results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements of the Company have not been audited by the Company’s independent registered public accounting firm, except that the year-end condensed consolidated balance sheet was derived from audited financial statements. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 24, 2024. + +**_Basis of Consolidation_** + +The unaudited condensed consolidated financial statements have been prepared on a consolidated basis with those of the Company’s wholly-owned subsidiaries, Shuttle Pharmaceuticals, Inc. and Shuttle Diagnostics Inc. All intercompany transactions and balances have been eliminated. + +8 +--- + +**_Correction of an Immaterial Error in the Prior Period Financial Statements_** + +During the fourth quarter of 2023, the Company determined that the prior year consolidated financial statements had a misstatement caused by an immaterial classification error of certain research and development expenses in accordance with ASC 730. As a result, certain prior year amounts have been corrected for consistency with the current year presentation. The Company assessed the materiality of this change in presentation on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” (ASC Topic 250, Accounting Changes and Error Corrections). Based on this assessment, the Company concluded that these error corrections in its Condensed Consolidated Statements of Operations are not material to any previously presented financial statements based upon overall considerations of both quantitative and qualitative factors. The corrections had no impact on the Condensed Consolidated Balance Sheet, Condensed Consolidated Statements of Cash Flows, or Condensed Consolidated Statement of Changes in Stockholders’ Equity, to these financial statements, or for any previously presented interim or annual financial statements. Further, the corrections did not result in a change in quarterly or year-to-date operating losses, basic or diluted earnings per share, or working capital. The quarterly correction required for March 31, 2023 was $89,007. Accordingly, the Company corrected the previously reported immaterial error for the three months ended March 31, 2023 in this Quarterly Report on Form 10-Q. + +Schedule of the Error Correction + +| | March 31, 2023| | | Correction| | | Corrected +March 31, 2023| +---|---|---|---|---|---|---|---|---|--- +Research and development expense| | $| 1,010,808| | | $| (89,007| )| | $| 921,801| +General and administrative expense| | | 166,348| | | | 89,007| | | | 255,355| +Net Loss| | $| 1,177,156| | | $| -| | | $| 1,177,156| + +**_Use of Estimates_** + +The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates are contained in the accompanying condensed consolidated financial statements for the valuation of derivatives, share-based compensation, and initial measurement of equity-based warrants. + +**_Cash and Cash Equivalents_** + +Cash and cash equivalents include cash in bank accounts and money market funds with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. As of March 31, 2024 and December 31, 2023, cash and cash equivalents consisted of the following: + +Schedule of Cash and Cash Equivalents + +| | March 31,| | | December 31,| +---|---|---|---|---|---|--- +| | 2024| | | 2023| +Cash| | $| 364,069| | | $| 1,550,098| +Money market funds| | | 1,034,559| | | | 1,026,318| +Total cash and cash equivalents| | $| 1,398,628| | | $| 2,576,416| + +9 +--- + +Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of March 31, 2024 was approximately $1.1 million. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. + +**_Marketable Securities_** + +Our investments in debt securities are carried at fair value. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading of debt securities are charged to income. + +The marketable securities held by the Company, which are classified as trading marketable securities, consisted of an outstanding balance of $2,789,251 and $2,887,215 as of March 31, 2024 and December 31, 2023, respectively. During the three months ended March 31, 2024 and 2023, the Company recognized interest income of $13,651 and $16,688, realized gains of $4,037 and $0, and unrealized loss of $706 and gain of $38,062, respectively. + +**_Fair Value of Financial Instruments_** + +The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair Value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments: + +| ● | Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments. +---|---|--- +| | +| ● | Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace. +| | +| ● | Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation. + +Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires the Company to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded, may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange. + +The carrying amounts of the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. + +10 +--- + +Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of March 31, 2024 and December 31, 2023: + +Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis + +March 31, 2024| | Level 1| | | Level 2| | | Level 3| | | Carrying Value| +---|---|---|---|---|---|---|---|---|---|---|---|--- +Assets| | | | | | | | | | | | | | | | +Marketable Securities:| | | | | | | | | | | | | | | | +United States Treasury Bonds| | $| 2,789,251| | | $| -| | | $| -| | | $| 2,789,251| +Total Assets| | $| 2,789,251| | | $| -| | | $| -| | | $| 2,789,251| +Liabilities| | | | | | | | | | | | | | | | +Derivative Liability - Warrants| | $| -| | | $| -| | | $| 214,615| | | $| -| +Derivative Liability - Accelerated feature| | | -| | | | -| | | | 2,035| | | | -| +Total Liabilities| | $| -| | | $| -| | | $| 216,650| | | $| -| + +December 31, 2023| | Level 1| | | Level 2| | | Level 3| | | Carrying Value| +---|---|---|---|---|---|---|---|---|---|---|---|--- +Assets| | | | | | | | | | | | | | | | +Marketable Securities:| | | | | | | | | | | | | | | | +United States Treasury Bonds| | $| 2,887,215| | | $| -| | | $| -| | | $| 2,887,215| +Total Assets| | $| 2,887,215| | | $| -| | | $| -| | | $| 2,887,215| +Liabilities| | | | | | | | | | | | | | | | +Derivative Liability - Warrants| | $| -| | | $| -| | | $| 410,660| | | $| 410,660| +Derivative Liability - Accelerated feature| | | -| | | | -| | | | 3,852| | | | 3,852| +Derivative Liability| | | -| | | | -| | | | 3,852| | | | 3,852| +Total Liabilities| | $| -| | | $| -| | | $| 414,512| | | $| 414,512| + +**_Derivative Financial Instruments_** + +The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. For our liability classified derivative financial instruments, the Company used a Monte Carlo valuation model to value the derivative instruments at inception and on subsequent valuation dates. For our equity classified derivative financial instruments, we used a Black-Scholes option-pricing model at the grant date to value the derivative instrument. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the condensed consolidated balance sheet sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date. + +11 +--- + +**__** + +**_Warrants_** + +The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. + +For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the condensed consolidated statements of operations. The fair value of the warrants is estimated using a Black-Scholes pricing model or a Monte Carlo simulation. + +**_Research and Development Expenses_** + +Research and development expenses are charged to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, which include a certain portion of our chief executive officer, chief operating officer, chief financial officer and directors’ compensation. For the three months ended March 31, 2024 and 2023, a portion of personnel-related expenses and stock-based compensation expense for these individuals totaling $165 thousand and $385 thousand, respectively, was included within research and development due to their active involvement in the research and development activities, materials, supplies, related subcontract expenses, and consulting costs. + +Regarding the accounting treatment for reimbursements, GAAP provides limited guidance on the accounting for government grants received by for-profit companies. In accordance with ASC Topic 832, _Government Assistance_ , as adopted January 1, 2022, we disclose certain types of government assistance received in the notes to the consolidated financial statements that includes: a) the nature of the transaction including the nature of the assistance being given, b) the accounting policies being used to account for the transaction and c) other provisions of relevance, where required. Depending on the type of grant or contract, we understand there is more than one acceptable alternative for the accounting treatment – a reduction of costs, a deferred credit to be amortized, revenue or other income. The Company has concluded that reimbursements received for R&D expenses incurred, are more akin to a reduction of costs and applies reimbursements against incurred research costs. There were no reimbursements received for the three months ended March 31, 2024 and 2023. + +12 +--- + +**_Net Loss Per Common Stock_** + +Net loss per share of common stock requires presentation of basic earnings per share on the face of the statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying condensed consolidated financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive. + +The dilutive effect of restricted stock units subject to vesting and other stock-based payment awards is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting shares of common stock are included in the denominator of the diluted calculation for the entire period being presented. + +For the three months ended March 31, 2024 and 2023, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive. + +Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share + +| | March 31,| | | March 31,| +---|---|---|---|---|---|--- +| | 2024| | | 2023| +Convertible notes (Note 6)| | | 859,428| | | | 1,893,128| +Warrants| | | 1,446,155| | | | 1,446,155| +Restricted stock units| | | 272,855| | | | 23,724| +| | | 2,578,438| | | | 3,363,007| + +**_Deferred Offering Costs_** + +Pursuant to ASC 340-10-S99-1, costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering as a reduction of additional paid-in capital. Deferred offering costs consist of underwriting, legal, accounting, and other expenses incurred through the balance sheet date that are directly related to the proposed public offering. Should the proposed public offering prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be expensed. + +**_Recent Accounting Pronouncements_** + +In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting Topic 280, “Segment Reporting-Improvements to Reportable Segment Disclosures,” which allows disclosure of one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires enhanced disclosures of significant segment expenses and other segment items, as well as incremental qualitative disclosures on both an annual and interim basis. This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting periods after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The Company is currently evaluating the impact of adopting this guidance on its Consolidated and Condensed Financial Statements and disclosures included within Notes to Consolidated and Condensed Financial Statements. + +In December 2023, the FASB issued ASU No. 2023-09, Income Taxes Topic 740, “Income Tax-Improvements to Income Tax Disclosures,” which requires enhanced disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is effective for annual reporting periods beginning after December 15, 2024. Early adoption is permitted and should be applied on a prospective basis, however retrospective application is permitted. The Company is currently evaluating the impact of adopting this guidance on its Consolidated and Condensed Financial Statements and disclosures included within Notes to Consolidated and Condensed Financial Statements. + +13 +--- + +**Note 3 – Leases** + +Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the present value of the future lease payments as of the lease commencement date. Operating lease expense is recognized on a straight-line basis over the lease term. + +During the three months ended March 31, 2023, the Company had a lease agreement which allowed for the use of a laboratory facility for a monthly payment of $6,480. The laboratory lease commenced on October 1, 2018 and expired on October 31, 2023. + +The Company currently has a lease agreement which allows for the use of a laboratory facility, entered into on February 16, 2023, with base rent of $7,206 per month for a period of 64 months, which increases at the rate of 3% per year, that commenced June 1, 2023. The lease included a six-month 50% rent abatement upon commencement. Additional common area maintenance (“CAM”) fees are charged monthly and revised annually. The estimated monthly CAM fees are $3,300 per month for the first year of the lease, which are being expensed as incurred. An irrevocable letter of credit (“LOC”) for the security deposit of $43,234 and base rent of $3,891, including 50% abatement, and $3,315 of CAM cost, was due and paid on execution of the lease agreement. Alexandria Real Estate (ARE-QRS-CORP) is the beneficiary of the LOC, and the expiry date of the LOC is March 1, 2025. + +The following summarizes the right-of use asset and lease information for the Company’s operating leases: + +Schedule of Right-of Use Asset and Lease Information about Operating Lease + +| | 2024| | | 2023| +---|---|---|---|---|---|--- +| | Three Months Ended| +| | March 31,| +| | 2024| | | 2023| +| | | | | | +Operating lease cost| | $| 22,947| | | $| 17,544| +Variable lease cost| | | 10,440| | | | -| +Sublease income| | | (2,163| )| | | (2,121| ) +Total lease cost| | $| 31,224| | | $| 15,423| +| | | | | | | | +Other information| | | | | | | | +Operating cash flows from operating leases| | $| 22,482| | | $| 19,440| +| | | | | | | | +Weighted-average remaining lease term — operating leases (year)| | | 4.42| | | | 0.56| +Weighted-average discount rate — operating leases| | | 10.48| %| | | 10| % + +Future non-cancelable minimum lease payments under the operating lease liability as of March 31, 2024, are as follows: + +Schedule of Future Non-cancelable Minimum Lease Payments Under Operating Lease Liability + +Years Ended December 31,| | | +---|---|---|--- +2024 (excluding the three months ended March 31, 2024)| | $| 69,020| +2025| | | 94,246| +2026| | | 97,074| +2027| | | 99,986| +2028| | | 68,235| +Total future minimum lease payments| | | 428,561| +Less: imputed interest| | | (85,407| ) +Present value of payments| | $| 343,154| + +14 +--- + +**Note 4 – Notes Payable-Related Party** + +During the three months ended March 31, 2024 and 2023 the Company incurred $0 and $4,237 in interest expense. During the three months ended March 31, 2024 and 2023 principal payments of $0 and $546,244 and accrued interest of $0 and $79,044 were paid, respectively, on notes to related parties. The principal and accrued interest for these notes were fully paid by December 31, 2023. + +**Note 5 – Convertible Notes and Notes Payable** + +**_Alto Opportunity Master Fund, SPC_** + +On January 11, 2023, the Company entered into a securities purchase agreement (the “SPA”) with Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B, a Cayman entity (the “Investor”), pursuant to which the Company sold to the Investor a $4,300,000 convertible note (the “Alto Convertible Note”) and warrant (the “Warrant”) to purchase 1,018,079 shares of common stock, exercisable at $2.35 per share, in exchange for gross proceeds of $3,935,000 million (the “Investment Amount”) (See Note 7). The Company determined that the Warrant contains a net cash settlement feature at inception and categorized the Warrant as a liability in the accompanying condensed consolidated financial statements. The Alto Convertible Note matures on March 11, 2025, but may be extended at the option of the noteholder. The Alto Convertible Note amortizes on a monthly basis and the Company can make such monthly amortization payments in cash or, subject to certain equity conditions, in registered shares of common stock or a combination thereof. Installments may be deferred by the noteholder, resulting in a variable interest rate. However, the effective interest rate is approximately 244% based on the internal rate of return calculated on a series of cash flows that occur at regular intervals. For equity repayment, the Alto Convertible Note is convertible into shares of common stock at a price per share equal to the lower of (i) $2.35, (ii) 90% of the three lowest daily VWAPs of the 15 trading days prior to the payment date, or (iii) 90% of the VWAP of the trading day prior to payment date. The noteholder may convert at any time at a fixed price of $2.35 per share. The noteholder has an acceleration of installment amount conversion option (the “Acceleration Option”), whereby the noteholder, with certain share percentage limitations, can convert to common stock any outstanding installment amount at an amount equal to the installment amount plus five times (5x) the installment amount at any time. The Company has determined the Acceleration Option is an embedded derivative within the host instrument and has bifurcated it from the host instrument and recorded it as a derivative liability valued at $1,442,000 at inception, using a Monte Carlo simulation model (Note 7). The Convertible Note is repayable over 26 months and bears interest at the rate of 5% per annum. Additionally, the note contains certain redemption options and “Make Whole” provisions. + +15 +--- + +In conjunction with entry into the SPA, the Company entered into a series of related agreements, including a security agreement (the “Security Agreement”), an intellectual property security agreement (the “IP Security Agreement”) and a subsidiary guaranty (the “Subsidiary Guaranty”). The security agreements and guaranty allow, among other things, for the Investor to have a security interest in and place a lien on all of the Company’s assets and intellectual property until such time as the Alto Convertible Note is paid off. In addition, the SPA called for the Company to enter into a springing deposit account control agreement (the “Springing DACA”), which, in the event the Company defaults on its repayment of the Alto Convertible Note, would allow the Investor to assume control of the Company’s bank account only with regard to any funds remaining outstanding under the Alto Convertible Note. As such, in conjunction with entry into the SPA, the Company established a separate bank account in which it deposited the Investment Amount and pursuant to which the Company, the Investor and the bank holding the Investment Amount, First Republic Bank, entered into the Springing DACA agreement. As the Investment Amount had been held at First Republic Bank, in light of certain banking crises then affecting smaller banks, on March 12, 2023, the Company and the Investor moved the Investment Amount from First Republic Bank, after which time the Springing DACA was no longer in effect. Further, pursuant to amendments to the SPA entered into in May and June of 2023, the Company and the Investor agreed that all of the Investment Amount would be released to the Company and the relevant provision of the SPA which required the Springing DACA would no longer be deemed applicable. In addition, the Company granted the Investor the option to purchase up to an additional $10 million in convertible notes and warrants on substantially the same terms as the Alto Convertible Note and Warrant, excluding the Springing DACA requirement, with such option to be effective through December 31, 2025. The agreement offers the investor an opportunity to participate in future capital raises at substantially similar terms as the January 11, 2023 agreement. The Company expects that such subsequent convertible notes and warrants would be issued on substantially similar terms as the January 11, 2023 initial agreement, as amended, thus providing the Company the opportunity to negotiate certain aspects of the agreement. + +Boustead Securities, LLC (“Boustead”) served as a placement agent for the Alto Convertible Note and Warrant offering and received $345,000 cash compensation and a warrant to purchase 71,266 shares of common stock, exercisable at $2.35 per share. The Boustead warrant was determined to be an equity instrument valued on a non-recurring basis. The Company used the Black Scholes valuation model using a term of five years, volatility of 110%, a risk-free rate of 3.53% for a value of $99,543. + +The Company allocated the finance costs related to the Boustead placement agent fee of $345,000, based on the relative fair market values of the Convertible Note and warrants issued. The allocation of the financing costs applied $232,027 to the debt component as a debt discount that is being amortized to interest expense over the term of the Convertible Note, $104,245 to the warrant derivative liability component, expensed as a finance fee, and $8,727 to the equity warrant as a reduction in additional paid in capital. + +The Company allocated to the debt component of the note an original discount of $300,000, legal fees of $65,000, $215,000 for additional interest fees on day one added to note principal, $1,442,000 for the accelerated conversion feature, and $1,288,543 for the fair value of warrants, resulting in an additional $3,310,543 debt discount that is being amortized to interest expense over the term of the Alto Convertible Note. + +During the three months ended March 31, 2024, the Company recorded interest expense of $497,515, which included amortization of debt discount as interest expense of $445,509. During the three months ended March 31, 2024, the Company settled $235,200 of principal, and settled $18,783 of accrued interest, which settlements were made in the form of 625,573 shares of common stock, during the three months ended March 31, 2024. + +During the three months ended March 31, 2023, the Company recorded interest expense of $599,331, which included amortization of debt discount of $463,052 as interest expense and settlement of $20,142 of accrued interest and $66,150 of principal by issuing 50,998 shares of Common Stock. + +As of March 31, 2024, the outstanding principal for the convertible note was $2,019,656 and the debt discount remaining was $1,078,258, with a net convertible note carrying value of $941,398 as of March 31, 2024. + +16 +--- + +**** + +**Note 6 – Stockholders’ Equity** + +**_Common Stock_** + +During the three months ended March 31, 2024, the Company issued: + +| ● | 625,573 shares of common stock to settle $235,200 of principal and $18,783 of interest on a convertible note and incurred $71,315 of loss on settlement. +---|---|--- +| ● | 125,000 shares of common stock issued for vesting of restricted stock units. + +During the three months ended March 31, 2023, the Company issued: + +| ● | 50,998 shares of Common Stock to settle $66,150 of principal and $20,142 of interest on a convertible note and incurred $18,254 of loss on settlement. +---|---|--- + +**_Warrants_** + +In connection with the January 2023 Alto Convertible Note, Boustead was granted warrants to purchase 71,266 shares of common stock, at an exercise price of $2.35 per share (Note 5). In addition, Alto was granted warrants to purchase 1,018,079 shares of common stock, at an exercise price of $2.35 per share (Note 5, 7). + +A summary of activity regarding all warrants issued for the three months ended March 31, 2024 were as follows: + +Schedule of Warrants Activity + +| | **Number of**| | | **Weighted Average**| | | **Average**| +---|---|---|---|---|---|---|---|---|--- +| | **warrants**| | | **Exercise Price**| | | **Life (years)**| +Outstanding, December 31, 2023| | | 1,446,155| | | $| 2.74| | | | 2.77| +Granted| | | -| | | | -| | | | -| +Outstanding, March 31, 2024| | | 1,446,155| | | $| 2.74| | | | 2.53| + +The intrinsic value of the warrants as of March 31, 2024 is $0. All of the outstanding warrants are exercisable as of March 31, 2024. + +**_Equity Incentive Plan_** + +Our 2018 Equity Incentive Plan (the “2018 Plan”) provides for equity incentives to be granted to our employees, executive officers, directors and key advisers and consultants. Equity incentive grants may be made in the form of stock options with an exercise price of not less than the fair market value of the underlying shares as determined pursuant to the 2018 Equity Incentive Plan, restricted stock awards, other stock-based awards, or any combination of the foregoing. The 2018 Equity Incentive Plan is administered by the Company’s compensation committee. We have reserved 3,000,000 shares of our common stock for issuance under the 2018 Equity Incentive Plan. As of March 31, 2024, 878,180 shares have been granted under the 2018 Equity Incentive Plan, of which 605,325 shares have vested. + +**_Restricted Stock Units_** + +We may grant restricted stock units (“RSU”) under our 2018 Plan. RSUs are bookkeeping entries representing an amount equal to the fair market value of one share of our common stock. Subject to the provisions of our 2018 Plan, the administrator determines the terms and conditions of RSUs, including the vesting criteria and the form and timing of payment. Notwithstanding the foregoing, the administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. RSUs granted typically vest annually in one third increments from the date of appointment. + +During the three months ended March 31, 2024 and 2023, pursuant to agreements with officers and consultants, 200,000 and 0 RSUs with a value of $41,840 and $0 were granted and compensation expense for RSUs of $111,449 and $8,333, respectively, was incurred. During the three months ended March 31, 2024 and 2023, $33,953 and $0, respectively, was included in compensation under Research and Development. + +As of March 31, 2024, there was $161,941 of unrecognized RSU compensation cost related to non-vested share-based compensation arrangements which is expected to be recognized over a weighted-average period of 0.92 years. + +A summary of activity regarding the Restricted Stock Units issued follows: + +Schedule of Restricted Stock Units (RSUs) + +| | Number of RSU| | | Weighted Average Fair Value Per RSU| +---|---|---|---|---|---|--- +Outstanding, December 31, 2023| | | 197,855| | | $| 1.47| +Granted| | | 200,000| | | | 0.21| +Vested| | | (125,000| )| | | 0.73| +Outstanding, March 31, 2024| | | 272,855| | | $| 0.89| + +**_Rights Offering and Financing Commitment_** + +On February 7, 2024, the Company and its wholly-owned subsidiary, Shuttle Diagnostics, Inc., entered into a securities purchase agreement (the “Purchase Agreement”) with SRO, LLC, a Nevada limited liability company, pursuant to which SRO LLC agreed to commit to purchasing from the Company $2,250,000 of units from the Company, with each Unit consisting of (i) one share of the Company’s common stock, (ii) a warrant to purchase one share of the Company’s common stock exercisable at a purchase price of $2.35 per share, and (iii) a percentage of equity interest in Diagnostics such that, assuming the sale of all $2,250,000 of Units, SRO LLC will own a 22% interest in Diagnostics. Pursuant to the terms of the Purchase Agreement, the Units will be sold at a per Unit price equal to 90% of the VWAP of the Company’s common stock for the five trading days immediately preceding closing. The parties entered into the Purchase Agreement in anticipation of the Company commencing a rights offering (the “Rights Offering”) pursuant to which the Company intends to offer a total of $4,500,000 of Units to existing stockholders, which includes the $2,250,000 of Units being sold to SRO LLC, an entity which is controlled by Keith Moore, Executive Chairman of Boustead & Company Limited, an affiliate of Boustead Securities, LLC (“BSL”). + +The Company filed an initial registration statement on Form S-1 (the “Form S-1”) with the SEC in April 2024 related to the registration of subscription rights to purchase the Units to be sold in the Rights Offering. The Form S-1 has not been declared effective as of the date these condensed consolidated financial statements were issued. Upon the Form S-1 being declared effective, the Purchase Agreement allows SRO LLC up to 60 days to raise the initial $2,250,000, which funds will be placed in escrow with Sutter Securities, Inc. (“SSI”), an affiliate of BSL, pursuant to the terms of an escrow agreement entered into between the Company, Shuttle Diagnostics, Inc., BSL and SSI on February 7, 2024 (the “Escrow Agreement”). The funds will remain in escrow up until closing on the Rights Offering. In addition, in the event the Company fails to raise the full $4,500,000 in the Rights Offering, SRO LLC agreed to a backstop commitment pursuant to which it would have the right to purchase any remaining Units not purchased by existing Company stockholders in the Rights Offering, up to an additional $2,250,000 (the “Back-up Contingency”). Unless the parties waive the conditions to closing, in the event the full $4,500,000 is not raised, whether through SRO LLC or through the Company’s existing stockholders, the Company will not close on the offering and any funds raised and held in escrow will be returned to investors. + +In conjunction with its entry into the Purchase Agreement, on February 7, 2024, the Company entered into a placement agent and advisory services agreement (the “Placement Agent Agreement”) with BSL, pursuant to which BSL and BSL’s affiliates will provide the Company with regular and customary financial consulting advice and will act as placement agent, on a best efforts basis, for the Rights Offering. In exchange for its services, BSL will receive a commitment fee equal to $112,500 upon the earlier of the Company filing the registration statement on Form S-1 registering the Rights Offering or upon such date as the Company terminates the Rights Offering, a commission equal 8% of the gross proceeds disbursed to the Company upon closing the Rights Offering, and $40,000 in diligence and related expenses. + +As of March 31, 2024, the Company has incurred $82,000 in costs directly related to the planned Rights Offering. The Company has deferred these costs as other current assets in the condensed consolidated balance sheet and will recognize the deferred costs as a reduction in proceeds obtained upon the closing of the Rights Offering, or as an expense in the event the Rights Offering is not consummated. + +17 +--- + +**Note 7 – Derivative Liabilities** + +**_Fair Value Assumptions Used in Accounting for Derivative Liabilities_** + +ASC 815 requires us to assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense. + +In January 2023, in connection with the Alto Convertible Note, the Company issued warrants to purchase 1,018,079 shares of common stock, with an exercise price of $2.35 per share, valued at inception at $1,189,000 and as of March 31, 2024, at $214,615. The Company determined our derivative liabilities from the warrants issued in relation to the Alto Convertible Note do not satisfy the classification as equity instruments due to the existence of a certain net cash settlement provision that is not within the sole control of the Company. In addition, there are certain down round provisions that could reduce the exercise price if the Company issues securities at lower prices in the future. + +The Company determined our derivative liability from the noteholder’s Acceleration Option for the Alto Convertible Note is not clearly and closely related to the host and should be thus accounted for as a bifurcated derivative liability. + +We classified these derivative liabilities as a Level 3 fair value measurement and used the Monte Carlo pricing model to calculate the fair value as of January 11, 2023 ($2,631,000 included in debt discount) and March 31, 2024 ($216,650). Key inputs for the simulation are summarized below. The Monte Carlo simulation uses an implied VWAP for the January 11, 2023 valuation date. The implied VWAP was backsolved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds. The simulation was then iterated and manipulated to solve for the implied share price, which was approximately $1.58 per share (or an approximate 14% discount to the quoted market VWAP on January 11, 2023). + +The key inputs for the Monte Carlo simulation as of March 31, 2024, were as follows: + +Schedule of Monte Carlo Simulation Assumption + +Net cash settlement and down round key valuation inputs – warrants*| | | +---|---|---|--- +Annualized volatility| | | 67.19% - 72.53| % +Risk-free interest rate| | | 4.40% - 5.47| % +Quoted VWAP| | $| 0.41| +Exercise price| | $| 2.35| +Probability assessment| | | 5% - 25| % +Illiquidity discount| | | -16| % +Time period (years)| | | 0.17 \- 2.79| + +*| | _Based on a Monte Carlo simulation analysis of 250,000 iterations_ +---|---|--- + +Acceleration option key valuation inputs*| | | +---|---|---|--- +Annualized volatility| | | 48.36% \- 54.75| % +Risk-free interest rate| | | 4.94% - 5.49| % +Quoted VWAP| | $| 0.41| +Illiquidity discount| | | -16| % +Time period (years)| | | 0 \- 0.95| + +_*_| | _Based on a Monte Carlo simulation analysis of 250,000 iterations_ +---|---|--- + +The following table summarizes the changes in the derivative liabilities: + +Schedule of Derivative Liabilities + +Fair Value Measurements Using Significant Unobservable Inputs (Level 3) +--- +| | Warrants| | | Accelerated Feature| +Balance - December 31, 2023| | $| 410,660| | | $| 3,852| +Gain on change in fair value| | | (196,045| )| | | (1,817| ) +Balance - March 31, 2024| | $| 214,615| | | $| 2,035| + +**Note 8 – Related Party transactions** + +On September 14, 2022, we entered into a manufacturing agreement with TCG GreenChem, Inc. (“TCG GreenChem”), the U.S. subsidiary of TCG Lifesciences Pvt Ltd., a global contract research and manufacturing services company located in India. Dr. Chis Senanayake, one of our independent directors, is CEO and CSO of TCG GreenChem and CSO of TCG Lifesciences Pvt Ltd. TCG GreenChem was contracted for process research, development and cGMP compliant manufacture of IPdR. During the three months ended March 31, 2024 and 2023, the Company expensed $0 and $300,000, respectively. + +**Note 9 – Subsequent Events** + +On May 3, 2024, the SEC entered an order (the “SEC Order”) against our former auditor, BF Borgers CPA PC and its sole audit partner, Benjamin F. Borgers (together “BF Borgers”), instituting settled administrative and cease-and-desist proceedings against BF Borgers. The SEC Order denies BF Borgers the privilege of appearing or practicing before the SEC as an accountant, and has resulted in BF Borgers being unable to issue consents related to BF Borgers’ audit of our 2022 financial statements. As we are in the process of filing a registration statement on Form S-1 related to our planned Rights Offering, we will need to have our 2022 financial statements re-audited by a licensed PCAOB accounting firm. As a result, the Company is implementing plans to re-audit the 2022 financial statements. + +18 +--- + +**** + +**Item 2\. Management’s Discussion and Analysis of Financial Condition and Results of Operations** + +_The following Management’s Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Annual Report. The Management’s Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Annual Report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors including, but not limited to, those noted under “Risk Factors” in this Annual Report._ + +_We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report, except as required by U.S. federal securities laws._ + +**Overview** + +Founded by Georgetown University Medical School faculty members, Shuttle Pharmaceuticals Holdings, Inc. is a discovery and development stage pharmaceutical company leveraging our proprietary technology to develop novel therapies that are designed to cure cancer. Originally formed as Shuttle Pharmaceuticals, LLC in 2012, our goal is to extend the benefits of cancer treatments by leveraging insights into cancer therapy with surgery, radiation therapy, chemotherapy and immunotherapy. While there are several therapies being developed with the goal of curing cancer, one of the most effective and proven approaches to this is radiation therapy (RT). We are developing a pipeline of products designed to address the limitations of the current standard of cancer therapies. We believe that our product candidates will enable us to deliver cancer treatments that are safer, more reliable and at a greater scale than that available with the current standard of care. + +Operations to date have focused on continuing our research and development efforts to advance Ropidoxuridine clinical testing and improved drug formulation, to advance HDAC6 inhibitor (SP-2-225) preclinical development and explore new SBIR contract work on predictive biomarkers of radiation response, as well as prostate cell lines for health disparities research. We have received Small Business Innovation Research (“SBIR”) contract funding from the National Institutes of Health (“NIH”) for the aforementioned projects. The clinical development of Ropidoxuridine has shown drug bioavailability and a maximum tolerated dose has been established for use in Phase II clinical trials. TCG GreenChem, Inc. (“TCG GreenChem”), with whom we have contracted for process research, development and cGMP compliant manufacture of IPdR, has successfully completed the manufacturing campaign for the active pharmaceutical ingredient (API) of Ropidoxuridine for use in the Company’s upcoming Phase II clinical trial in brain cancer patients undergoing radiation therapy. Shuttle also worked with University of Iowa Pharmaceuticals to develop the formulation and produce the capsules, which have been shipped to contract research organization (CRO) Theradex Oncology for distribution to clinical trial sites. Both activities have now been completed. In addition, Shuttle received approval from the FDA to begin the clinical trial. The FDA made recommendations to expand the clinical trial and we agreed with the recommendation. Meetings with clinical sites to review the protocol documents have occurred and FDA required Institutional Review Board approval has been received from the central internal review board, or IRB. With FDA recommended changes incorporated into the revised protocol, the Company believes it remains on track to commence its Phase II clinical study in the second quarter of 2024. The radiation biomarker project and the health disparities project have been completed and the company is following up with plans for clinical validation and potential commercialization. Changes in operational, administrative, legal and professional expenses related to our operations are set forth in more detail in the discussion below. + +19 +--- + +**Results of Operations** + +**_Comparison of the three months ended March 31, 2024 and 2023_** + +The following table summarizes the results of our operations: + +| | Three Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | March 31,| | | | | | | +| | 2024| | | 2023| | | Change| | | %| +Revenue| | $| -| | | $| -| | | $| -| | | | -| +Operating expenses:| | | | | | | | | | | | | | | | +Research and development| | | 586,104| | | | 921,801| | | | (335,697| )| | | (36| %) +General and administrative| | | 324,609| | | | 255,355| | | | 69,254| | | | 27| % +Legal and professional| | | 474,134| | | | 367,624| | | | 106,510| | | | 29| % +Total operating expenses and loss of operations| | | 1,384,847| | | | 1,544,780| | | | (159,933| )| | | (10| %) +Other income (expense):| | | | | | | | | | | | | | | | +Interest expense - related parties| | | -| | | | (4,237| )| | | 4,237| | | | (100| %) +Interest expense| | | (497,515| )| | | (599,331| )| | | 101,816| | | | (17| %) +Interest income| | | 21,453| | | | 16,688| | | | 4,765| | | | 29| % +Finance fee| | | -| | | | (104,245| )| | | 104,245| | | | (100| %) +Change in fair value of derivative liabilities| | | 197,862| | | | 1,241,000| | | | (1,043,138| )| | | (84| %) +Gain on sale of marketable securities| | | 4,037| | | | -| | | | 4,037| | | | 100| % +Change in fair value of marketable securities| | | (706| )| | | 38,062| | | | (38,768| )| | | (102| %) +Loss on settlement of convertible debt| | | (71,315| )| | | (18,254| )| | | (53,061| )| | | 291| % +Total other expense| | | (346,184| )| | | 569,683| | | | (915,867| )| | | (161| %) +Net loss| | $| (1,731,031| )| | $| (975,097| )| | $| (755,934| )| | | 78| % + +_Research and Development._ Research and development (“R&D”) expense was $0.6 million for the three months ended March 31, 2024, as compared to $0.9 million for three months ended March 31, 2023. The decrease of $0.3 million, or 36%, is primarily related to the Company having completed production of the drug product and waiting for the initiation of trials. + +20 +--- + +R&D compensation related expenses were $0.3 million in the three months ended March 31, 2024 as compared to $0.6 million in the three months ended March 31, 2023. Compensation related expenses were 56% for the three months ended March 31, 2024, representing a decrease from 61% of total R&D in the three months ended March 31, 2023. Subcontract work made up 34% of total R&D expenses in the three months ended March 31, 2024 and 37% of total R&D expenses during the three months ended March 31, 2023. + +_General and Administrative Expenses._ General and Administrative expenses in the three months ended March 31, 2024 increased by $0.1 million, or 27% to $0.3 million in the three months ended March 31, 2024. The increase in general and administrative expenses was primarily due to a restricted stock-based grant to an officer of the Company valued at $41,840. + +_Legal and Professional Expenses_. During the three months ended March 31, 2024, legal and professional expenses increased by $0.1 million or 29%. The increase in legal and professional fees was primarily due to increases in our expenses related to our public filing requirements, contracts and financing related work. + +_Other Income Expense_. Other expense was $0.3 million for the three months ended March 31, 2024, which consisted of $0.5 million in interest expense on convertible loans, interest income of $21 thousand, loss on settlement of convertible debt of $71 thousand, change in marketable securities of $4 thousand, and a gain on change in fair value of derivative liabilities of $0.2 million. Other income was $0.6 million for the three months ended March 31, 2023, which consisted of $0.6 million in interest expense on convertible loans, $4 thousand in interest expense on related party loans, interest income of $17 thousand, finance fee on convertible loans of $0.1 million, loss on settlement of convertible debt of $18 thousand, unrealized gain on marketable securities of $38 thousand, and a gain on change in fair value of derivative liability of $1.2 million. The $1.0 million gain in fair value of derivative liability resulted from the fair value measurement using the Monte Carlo pricing model and the impact of the decrease in the market price of warrant shares. + +**Liquidity and Capital Resources** + +Our condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception and had a net loss of approximately $1.7 million and no revenues for the three months ended March 31, 2024 and has working capital of approximately $2.9 million as of March 31, 2024. In addition, the convertible note payable outstanding at March 31, 2024 includes covenants and certain cash payment requirements. These conditions, and the Company’s ability to comply with such conditions, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. + +In September 2022, the Company completed its IPO, generating net proceeds of approximately $10.0 million. Additionally, in January 2023, the Company entered into a securities purchase agreement with an institutional investor through which the Company sold a convertible note with a principal value of $4.3 million, along with a four-year warrant to purchase 1,018,079 shares of common stock, exercisable at $2.35 per share, providing the Company with approximately $3.6 million in net proceeds. To date, the warrant has not yet been exercised. However, the Company’s existing cash resources, marketable securities and the cash received from the equity offering and convertible note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months. + +The IPO and subsequent capital raise have supported operations leading up to the manufacture of drug product and FDA approval of the IND for the Phase II clinical trial of Ropidoxuridine and radiation therapy in glioblastoma. The FDA recommended and the Company agreed to an expansion of the clinical trial, necessitating additional capital to complete the trial as well as fund ongoing operations. As a result, management is in the process of initiating a $4.5 million rights offering and has submitted an application for a Small Business Innovation Research (“SBIR”) grant for non-dilutive funding for pre-clinical project through the National Institutes of Health (“NIH”). The ability of the Company to continue as a going concern is dependent upon its ability to successfully raise additional equity or debt financing to allow it to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues. + +The accompanying condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company is unable to continue as a going concern. + +21 +--- + +**Balance Sheet Data:** + +| | March 31,| | | December 31,| | | | | | | +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | 2024| | | 2023| | | Change| | | %| +Current assets| | $| 4,411,019| | | $| 5,593,005| | | $| (1,181,986| )| | | (21| %) +Current liabilities| | | 1,489,217| | | | 1,042,237| | | | 446,980| | | | 43| % +Working capital| | $| 2,921,802| | | $| 4,550,768| | | $| (1,628,966| )| | | (36| %) + +As of March 31, 2024, total current assets were $4.4 million and total current liabilities were $1.5 million, resulting in working capital of $2.9 million. As of December 31, 2023, total current assets were $5.6 million and total current liabilities were $1.0 million, resulting in a working capital of $4.6 million. As of March 31, 2024, the current assets primarily resulted from $1.4 million cash and $2.8 million marketable securities, with the decrease from December 31, 2023 being primarily due to ongoing cash burn from our R&D programs, filing expenses and general operations. The increase in current liabilities is primarily due to the current portion of the $4,300,000 convertible note and accrued interest that increased $0.4 million and an increase in accounts payable of $65 thousand. + +**_Cash Flows from Operating Activities_** + +| | Three Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | March 31,| | | | | | | +| | 2024| | | 2023| | | Change| | | %| +Cash used in operating activities| | $| (1,239,083| )| | $| (1,337,982| )| | $| 98,899| | | | (7| %) +Cash provided by (used in) investing activities| | $| 101,295| | | $| (2,953,709| )| | $| 3,055,004| | | | (103| %) +Cash provided by (used in) financing activities| | $| (40,000| )| | $| 3,043,756| | | $| (3,083,756| )| | | (101| %) +Cash on hand| | $| 1,398,628| | | $| 7,169,268| | | $| (5,770,640| )| | | (80| %) + +To date, we have not generated positive cash flows from operating activities. For the three months ended March 31, 2024, net cash flows used in operating activities was $1.2 million, consisting of a net loss of $1.7 million, increased by a gain on change in derivative liabilities of $0.2 million, offset by amortization of debt discount of $0.4 million, loss on settlement of convertible debt of $71 thousand, accrued interest settled with common stock of $19 thousand, stock-based compensation of $111 thousand and increased by a net change in working capital of $50 thousand. For the three months ended March 31, 2023, net cash flows used in operating activities was $1.3 million, consisting of a net loss of $1.0 million, increased by a gain on change in derivative liability of $1.2 million, offset by amortization of debt discount of $0.6 million, and further reduced by a net change in working capital of $0.3 million. + +**_Cash Flows from Investing Activities_** + +For the three months ended March 31, 2024, we invested in trading marketable securities for $19 thousand and received $120 thousand in proceeds from disposition of marketable securities. For the three months ended March 31, 2023, we invested in trading marketable securities for $3.0 million. + +22 +--- + +**_Cash Flows from Financing Activities_** + +For the three months ended March 31, 2024, we paid $40,000 related to financing activities. For the three months ended March 31, 2023, we received a net of $3,590,000 from the sale and issuance of convertible notes payable and warrants and repaid $546,244 in related party notes payable. + +**Off-Balance Sheet Arrangements** + +We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. + +**Critical Accounting Policies and Significant Judgments and Estimates** + +This discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our condensed consolidated financial statements included elsewhere in this report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. + +Our most critical accounting policies and estimates relate to the following: + +| ● | Research and Development Expenses +---|---|--- +| ● | Fair Value of Derivative Financial Instruments +| ● | Initial Measurement of Equity-Based Warrants + +_Research and Development_ + +Research and development expenses are expensed as incurred and, prior to our initial public offering in September 2022, have historically been offset by contract receivable payments from an NIH SBIR contract that has supported our scientific research. This is stated in the financials as research and development-net of contract expense reimbursements. + +_Fair Value of Financial Instruments_ + +We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities are evaluated at the end of each reporting period. + +For our derivative financial instruments classified as a liability, the Company uses a Monte Carlo valuation model to value the derivative instruments at inception and on subsequent valuation dates. The model requires the use of simulations that are weighted based on significant unobservable inputs including the average volatility of a population set and probabilities assigned. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. The Monte Carlo simulation uses an implied VWAP for valuation. The implied VWAP was backsolved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds and is updated each period. + +23 +--- + +The use of Monte Carlo valuation models require key inputs, some of which are based on estimates and judgements by management and/or external consultants. Any change to these key inputs could produce significantly higher or lower fair value measurements. + +_Initial Measurement of Equity-Based Warrants_ + +We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as equity, the derivative instrument is initially recorded at its fair value and recorded to additional paid in capital. The classification of derivative instruments, including whether such instruments should be recorded as equity, is evaluated at the end of each reporting period. + +For our derivative financial instruments classified as equity, the Company used a Black Scholes valuation model, to calculate the fair value on issuance date, without revaluation. + +The use of Black Scholes valuation model requires the input of highly subjective assumptions, including the expected price volatility, that is based on an analysis of the historical volatility of the common stock of a group of comparable entities. Any change to these inputs could produce significantly higher or lower fair value measurements. + +**Item 3\. Quantitative and Qualitative Disclosures About Market Risk** + +As a “smaller reporting company,” we are not required to provide the information required by this Item. + +**Item 4\. Controls and Procedures** + +Evaluation of Disclosure Controls and Procedures + +Disclosure controls and procedures (as defined in Exchange Act Rule 15d-15(e)) are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. + +As of March 31, 2024, our management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Such evaluation was carried out under the supervision of our Chief Executive Officer with the participation of our President and Chief Operating Officer, our Chief Financial Officer, and our third party financial service provider. Based on this evaluation, management concluded that our disclosure controls and procedures were, and continue to be, ineffective as of March 31, 2024. Based on the foregoing, our management concluded that our internal controls over the following financial reporting areas to be material weaknesses: + +| ● | Our written accounting policies and documentation of management’s contemplation of the accounting treatment and implications over significant unusual transactions, including complex accounting associated with debt and equity transactions, was limited and resulted in ineffective monitoring of financial reporting. +---|---|--- +| ● | Due to our size and stage of development, segregation of all conflicting duties may not always be possible and may not be economically feasible. During the year, we lacked sufficient review procedures and segregation of duties such that a proper review had not been performed by someone other than a preparer, including manual journal entries, and that process documentation is lacking for review and monitoring controls over financial statements close process and financial reporting. +| ● | As a result of the Company’s evolution since the date of our initial formation, when we were focused on NIH SBIR research contracts with related costing allocation allowances until when we completed our IPO and continued our development process, management has lacked a formal process to identify and properly classify operating expenses such as Research and Development (“R&D”). +| ● | We identified findings related to overall information technology general controls (“ITGCs”) including issues with access and segregation of duties for systems supporting the Company’s internal control processes and controls. + +There has been no change in the Company’s internal control over financial reporting during the three months ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting. Management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional improvements as necessary. + +24 +--- + +**PART II — OTHER INFORMATION** + +**ITEM 1\. LEGAL PROCEEDINGS** + +Currently, there are no legal proceedings pending or threatened against us. We are not presently party to any pending or other threatened legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results, although from time to time, we may become involved in legal proceedings in the ordinary course of business. + +**ITEM 1A. RISK FACTORS** + +As a smaller reporting company, we are not required to provide the information required by this item. + +**ITEM 2\. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS** + +None. + +**ITEM 3\. DEFAULTS UPON SENIOR SECURITIES** + +Not Applicable. + +**ITEM 4\. MINE SAFETY DISCLOSURES** + +Not Applicable. + +**ITEM 5\. OTHER INFORMATION** + +None. + +**Item 6\. Exhibits** + +The following exhibits are filed or furnished with this report: + +**Exhibit No.** | | **Description of Exhibit** +---|---|--- +3.1 | | [Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 (File No. 333-265429) filed on June 3, 2022).]() +3.2 | | [Certificate of Amendment to Amended and Restated Certificate of Incorporation, effective March 30, 2022 (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (File No. 333-265429) filed on June 3, 2022).]() +3.3 | | [Certificate of Amendment to Amended and Restated Certificate of Incorporation, effective June 22, 2022 (incorporated by reference to Exhibit 3.5 to the Registration Statement on Form S-1/A (File No. 333-265429) filed on June 23, 2022).]() +3.4 | | [Second Amended and Restated By-Laws (incorporated by reference to Exhibit 3.1 to the current Report on Form 8-K filed on November 1, 2022).]() +4.1 | | [Form of Convertible Note, dated January 11, 2023, issued by Shuttle Pharmaceuticals Holdings, Inc. to Alto Capital Master Fund, SPC – Segregated Master Portfolio B (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed January 12, 2023).]() +4.2 | | [Form of Warrant, dated January 11, 2023, issued by Shuttle Pharmaceuticals Holdings, Inc. to Alto Capital Master Fund, SPC – Segregated Master Portfolio B (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed January 12, 2023).]() +10.1 | | [Asset Purchase Agreement, dated January 30, 2024, by and between Shuttle Pharmaceuticals Holdings, Inc., Alan Kozikowski and Werner Tueckmantel (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 5, 2024).]() +10.2 | | [Securities Purchase Agreement, dated February 7, 2024, between Shuttle Pharmaceuticals Holdings, Inc., Shuttle Diagnostics, Inc. and SRO, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on February 13, 2024).]() +10.3 | | [Placement Agent and Advisory Services Agreement, dated February 7, 2024, between Shuttle Pharmaceuticals Holdings, Inc. and Boustead Securities, LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on February 13, 2024).]() +10.4 | | [Offering Deposit Account Agency Agreement, dated February 7, 2024, between Shuttle Pharmaceuticals Holdings, Inc., Boustead Securities, LLC and Sutter Securities Inc. (incorporated by reference to Exhibit 10.3 to the Current Report on From 8-K filed on February 13, 2024).]() +31.1 | | [Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*]() +31.2 | | [Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*]() +32.1 | | [Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**]() +32.2 | | [Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**]() +101.INS | | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. +101.SCH | | Inline XBRL Taxonomy Schema Document +101.CAL | | Inline XBRL Taxonomy Calculation Linkbase Document +101.DEF | | Inline XBRL Taxonomy Definition Linkbase Data +101.LAB | | Inline XBRL Taxonomy Label Linkbase Document +101.PRE | | Inline XBRL Taxonomy Presentation Linkbase Document +104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) + +* Filed herewith. + +**Furnished herewith. + +25 +--- + +**SIGNATURES** + +In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. + +| **SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** +---|--- +| | +May 13, 2024 | By: | _/s/ Anatoly Dritschilo_ +| | Anatoly Dritschilo, M.D. +| | Chief Executive Officer +| | +May 13, 2024 | By: | _/s/ Michael Vander Hoek_ +| | Michael Vander Hoek Chief Financial Officer + +26 +--- diff --git a/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2024-06-30 (0001493152-24-034902).md b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2024-06-30 (0001493152-24-034902).md new file mode 100644 index 0000000000000000000000000000000000000000..a90b6b27a0251283e50fd7016d481dcf25264981 --- /dev/null +++ b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2024-06-30 (0001493152-24-034902).md @@ -0,0 +1,1089 @@ +**UNITED STATES** + +**SECURITIES AND EXCHANGE COMMISSION** + +**Washington, D.C. 20549** + +**FORM 10-Q** + +(Mark One) + +| ☒ | Quarterly Report UNDER Section 13 or 15(d) of the Securities Exchange Act of 1934 +---|---|--- + +For the quarterly period ended June 30, 2024 + +OR + +| ☐ | Transition Report UNDER Section 13 or 15(d) of the Securities Exchange Act of 1934 +---|---|--- + +For the transition period from ______________ to ______________ + +Commission file number 001-41488 + +**SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** + +(Exact name of registrant as specified in its charter) + +**Delaware** | | **82-5089826** +---|---|--- +(State or other jurisdiction of | | (I.R.S. Employer +incorporation or organization) | | Identification No.) + +**401 Professional Drive , Suite 260** + +**Gaithersburg , MD 20879 ** + +(Address of principal executive offices) (Zip Code) + +**(240) 403-4212** + +(Registrant’s telephone number, including area code) + +N/A + +(Former name, former address and former fiscal year, if changed since last report) + +Securities registered pursuant to Section 12(b) of the Act: + +**Title of each class** | | **Trading Symbol(s)** | | **Name of each exchange on which registered** +---|---|---|---|--- +Common Stock | | SHPH | | The Nasdaq Stock Market LLC + +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ + +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ + +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. + +| Large accelerated filer | ☐ | Accelerated filer | ☐ +---|---|---|---|--- +| Non-accelerated filer | ☒ | Smaller reporting company | ☒ +| | | Emerging growth company | ☒ + +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ + +Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ + +The number of shares outstanding of the registrant’s common stock on September 3, 2024 was 2,226,951. + +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**TABLE OF CONTENTS** + +| | | **Page No.** +---|---|---|--- +| | | +| PART I. Financial Information | | +| | | +**Item 1.** | Financial Statements | | 3 +| | | +| Unaudited Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 | | 3 +| | | +| Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 | | 4 +| | | +| Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023 | | 5 +| | | +| Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 | | 6 +| | | +| Notes to Unaudited Condensed Consolidated Financial Statements | | 7 +| | | +**Item 2.** | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 20 +| | | +**Item 3.** | Quantitative and Qualitative Disclosures About Market Risk | | 26 +| | | +**Item 4.** | Controls and Procedures | | 26 +| | | +| PART II. Other Information | | +| | | +**Item 1.** | Legal Proceedings | | 27 +| | | +**Item 1A.** | Risk Factors | | 27 +| | | +**Item 2.** | Unregistered Sale of Equity Securities and Use of Proceeds | | 27 +| | | +**Item 3.** | Defaults Upon Senior Securities | | 27 +| | | +**Item 4.** | Mine Safety Disclosures | | 27 +| | | +**Item 5.** | Other Information | | 27 +| | | +**Item 6.** | Exhibits | | 27 +| | | +| Signatures | | 28 + +2 +--- + +**PART I. Financial Information** + +**Item 1\. Unaudited Condensed Consolidated Financial Statements** + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Balance Sheets** + +**(Unaudited)** + +| | June 30,| | | December 31,| +---|---|---|---|---|---|--- +| | 2024| | | 2023| +Assets| | | | | | | | +Current assets| | | | | | | | +Cash and cash equivalents| | $| 695,594| | | $| 2,576,416| +Prepaid expenses| | | 139,518| | | | 114,473| +Marketable securities| | | 1,642,995| | | | 2,887,215| +Accrued interest income| | | 7,226| | | | 14,901| +Total Current Assets| | | 2,485,333| | | | 5,593,005| +| | | | | | | | +Property and equipment, net| | | 21,953| | | | 24,827| +Operating lease right-of-use asset| | | 305,712| | | | 333,904| +Total Assets| | $| 2,812,998| | | $| 5,951,736| +| | | | | | | | +Liabilities and Stockholders’ Equity| | | | | | | | +Current Liabilities| | | | | | | | +Accounts payable and accrued expenses| | $| 364,891| | | $| 282,860| +Accounts payable and accrued expenses related party| | | -| | | | 446| +Accounts payable and accrued expenses | | | -| | | | 446| +Accrued interest payable| | | 130,898| | | | 110,453| +Convertible notes payable, net| | | 826,235| | | | 595,999| +Derivative liability| | | 504| | | | -| +Operating lease liability| | | 62,092| | | | 52,479| +Total Current Liabilities| | | 1,384,620| | | | 1,042,237| +| | | | | | | | +Convertible notes payable non-current, net| | | -| | | | 135,089| +Derivative liability| | | 359,919| | | | 414,512| +Operating lease liability non-current| | | 267,025| | | | 304,127| +Total Liabilities| | | 2,011,564| | | | 1,895,965| +| | | | | | | | +Stockholders’ Equity| | | | | | | | +Series A Convertible Preferred Stock, $0.00001 par value; $1,000 per share liquidation value; 20,000,000 shares authorized; no shares issued or outstanding| | | -| | | | -| +Common stock, $0.00001 par value; 100,000,000 shares authorized; 2,106,233 and 2,008,689 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively| | | 21| | | | 20| +Additional paid in capital| | | 29,996,963| | | | 29,489,055| +Accumulated deficit| | | (29,195,550| )| | | (25,433,304| ) +Total Stockholders’ Equity| | | 801,434| | | | 4,055,771| +Total Liabilities and Stockholders’ Equity| | $| 2,812,998| | | $| 5,951,736| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +3 +--- + +**** + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Operations** + +**(Unaudited)** + +| | 2024| | | 2023| | | 2024| | | 2023| +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Three Months Ended| | | Six Months Ended| +| | June 30,| | | June 30,| +| | 2024| | | 2023| | | 2024| | | 2023| +| | | | | | | | | | | | +Revenue| | $| -| | | $| -| | | $| -| | | $| -| +| | | | | | | | | | | | | | | | +Operating expenses| | | | | | | | | | | | | | | | +Research and development| | | 645,719| | | | 839,665| | | | 1,231,823| | | | 1,761,466| +General and administrative| | | 310,038| | | | 209,279| | | | 634,647| | | | 464,633| +Legal and professional| | | 526,877| | | | 416,688| | | | 1,001,011| | | | 784,312| +Total operating expenses| | | 1,482,634| | | | 1,465,632| | | | 2,867,481| | | | 3,010,411| +| | | | | | | | | | | | | | | | +Loss from operations| | | (1,482,634| )| | | (1,465,632| )| | | (2,867,481| )| | | (3,010,411| ) +| | | | | | | | | | | | | | | | +Other income (expense)| | | | | | | | | | | | | | | | +Interest expense - related parties| | | -| | | | (2,588| )| | | -| | | | (6,825| ) +Interest expense| | | (430,685| )| | | (729,351| )| | | (928,200| )| | | (1,328,682| ) +Interest income| | | 14,158| | | | 19,267| | | | 35,611| | | | 35,955| +Finance fee| | | -| | | | -| | | | -| | | | (104,245| ) +Change in fair value of derivative liabilities| | | (143,773| )| | | 434,275| | | | 54,089| | | | 1,675,275| +Gain on sale of marketable securities| | | 39,683| | | | 1,744| | | | 43,720| | | | 1,744| +Change in fair value of marketable securities| | | (27,964| )| | | (26,534| )| | | (28,670| )| | | 11,528| +Loss on settlement of convertible debt| | | -| | | | (415,553| )| | | (71,315| )| | | (433,807| ) +Total other expense| | | (548,581| )| | | (718,740| )| | | (894,765| )| | | (149,057| ) +| | | | | | | | | | | | | | | | +Net loss attributable to common stockholders| | $| (2,031,215| )| | $| (2,184,372| )| | $| (3,762,246| )| | $| (3,159,468| ) +| | | | | | | | | | | | | | | | +Weighted average common shares outstanding - basic and diluted| | | 2,104,933| | | | 1,780,171| | | | 2,090,890| | | | 1,742,520| +Net loss per shares - basic and diluted| | $| (0.96| )| | $| (1.23| )| | $| (1.80| )| | $| (1.81| ) + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +4 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Changes in Stockholders’ Equity** + +**(Unaudited)** + +**_For the Six Months Ended June 30, 2024_** + +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity| +---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|--- +| | | | | | | | Additional| | | | | | Total| +| | Common Stock| | | Paid in| | | Accumulated| | | Stockholders’| +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity| +| | | | | | | | | | | | | | | +Balance - December 31, 2023| | | 2,008,689| | | $| 20| | | $| 29,489,055| | | $| (25,433,304| )| | $| 4,055,771| +| | | | | | | | | | | | | | | | | | | | +Common stock issued for conversion of accrued interest and principal| | | 78,197| | | | 1| | | | 325,297| | | | -| | | | 325,298| +Common stock issued for restricted stock units| | | 15,625| | | | -| | | | -| | | | -| | | | -| +Stock-based compensation| | | -| | | | -| | | | 111,449| | | | -| | | | 111,449| +Net loss| | | -| | | | -| | | | -| | | | (1,731,031| )| | | (1,731,031| ) +Balance - March 31, 2024| | | 2,102,511| | | | 21| | | | 29,925,801| | | | (27,164,335| )| | | 2,761,487| +| | | | | | | | | | | | | | | | | | | | +Common stock issued for restricted stock units| | | 3,722| | | | -| | | | -| | | | -| | | | -| +Stock-based compensation| | | -| | | | -| | | | 71,162| | | | -| | | | 71,162| +Net loss| | | -| | | | -| | | | -| | | | (2,031,215| )| | | (2,031,215| ) +Balance - June 30, 2024| | | 2,106,233| | | $| 21| | | $| 29,996,963| | | $| (29,195,550| )| | $| 801,434| + +**_For the Six months ended June 30, 2023_** + +| | | | | | | | Additional| | | | | | Total| +---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Common Stock| | | Paid in| | | Accumulated| | | Stockholders’| +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity (Deficit)| +| | | | | | | | | | | | | | | +Balance - December 31, 2022| | | 1,700,414| | | $| 17| | | $| 26,518,433| | | $| (18,840,581| )| | $| 7,677,869| +| | | | | | | | | | | | | | | | | | | | +Warrants issued for financing costs, net of issuance fees of $8,727| | | -| | | | -| | | | 90,816| | | | -| | | | 90,816| +Common stock issued for conversion of accrued interest and principal| | | 6,375| | | | -| | | | 104,547| | | | -| | | | 104,547| +Stock-based compensation| | | -| | | | -| | | | 8,333| | | | -| | | | 8,333| +Net loss| | | -| | | | -| | | | -| | | | (975,097| )| | | (975,097| ) +Balance - March 31, 2023| | | 1,706,789| | | | 17| | | | 26,722,129| | | | (19,815,678| )| | | 6,906,468| +Balance | | | 1,706,789| | | | 17| | | | 26,722,129| | | | (19,815,678| )| | | 6,906,468| +| | | | | | | | | | | | | | | | | | | | +Common stock issued for conversion of accrued interest and principal| | | 228,489| | | | 2| | | | 2,163,990| | | | -| | | | 2,163,992| +Stock-based compensation| | | -| | | | -| | | | 49,522| | | | -| | | | 49,522| +Net loss| | | -| | | | -| | | | -| | | | (2,184,372| )| | | (2,184,372| ) +Balance - June 30, 2023| | | 1,935,278| | | $| 19| | | $| 28,935,641| | | $| (22,000,050| )| | $| 6,935,610| +Balance| | | 1,935,278| | | $| 19| | | $| 28,935,641| | | $| (22,000,050| )| | $| 6,935,610| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +5 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Cash Flows** + +**(Unaudited)** + +| | 2024| | | 2023| +---|---|---|---|---|---|--- +| | Six Months Ended| +| | June 30,| +| | 2024| | | 2023| +| | | | | | +CASH FLOWS FROM OPERATING ACTIVITIES:| | | | | | | | +Net loss| | $| (3,762,246| )| | $| (3,159,468| ) +Adjustments to reconcile net loss to net cash used in operating activities:| | | | | | | | +Depreciation| | | 2,874| | | | 2,970| +Change in fair value of derivative liabilities| | | (54,089| )| | | (1,675,275| ) +Amortization of debt discount and finance fees| | | 832,014| | | | 1,116,422| +Gain on sale of marketable securities| | | (43,720| )| | | (1,744| ) +Change in fair value of marketable securities| | | 28,670| | | | (11,528| ) +Accrued interest settled with common stock| | | 18,783| | | | 240,831| +Loss on settlement of convertible debt| | | 71,315| | | | 433,807| +Stock-based compensation| | | 182,611| | | | 57,855| +Changes in operating assets and liabilities:| | | | | | | | +Accrued interest income| | | 7,675| | | | (6,950| ) +Prepaid expenses| | | (25,045| )| | | 82,199| +Accounts payable and accrued expenses| | | 82,031| | | | (28,004| ) +Accounts payable and accrued expenses - related parties| | | (446| )| | | (12,500| ) +Accrued interest payable| | | 20,445| | | | 75,511| +Accrued interest payable - related parties| | | -| | | | (98,135| ) +Change in operating lease asset and liability| | | 703| | | | (30| ) +Net cash used in operating activities| | | (2,638,425| )| | | (2,984,039| ) +| | | | | | | | +CASH FLOWS FROM INVESTING ACTIVITIES:| | | | | | | | +Investment in marketable securities| | | (35,982| )| | | (2,970,905| ) +Proceeds from disposition of marketable securities| | | 1,295,252| | | | 80,000| +Net cash provided by (used in) investing activities| | | 1,259,270| | | | (2,890,905| ) +| | | | | | | | +CASH FLOWS FROM FINANCING ACTIVITIES:| | | | | | | | +Repayment of note payable-related party| | | -| | | | (685,473| ) +Proceeds from convertible notes payable and warrants| | | -| | | | 3,935,000| +Payment for finance costs related to convertible note payable| | | -| | | | (345,000| ) +Payment of convertible note payable| | | (501,667| )| | | -| +Net cash provided by (used in) financing activities| | | (501,667| )| | | 2,904,527| +| | | | | | | | +| | | | | | | | +Net change in cash and cash equivalents| | | (1,880,822| )| | | (2,970,417| ) +Cash and cash equivalents, beginning of period| | | 2,576,416| | | | 8,417,203| +Cash and cash equivalents, end of period| | $| 695,594| | | $| 5,446,786| +| | | | | | | | +Cash paid for:| | | | | | | | +Interest| | $| 56,958| | | $| 102,373| +Income taxes| | $| -| | | $| -| +| | | | | | | | +Supplemental non-cash financing activities:| | | | | | | | +Common stock issued for settlement of debt| | $| 325,298| | | $| 2,268,539| +Warrants issued for financing fees, net of issuance fees of $0 and $8,727, respectively| | $| -| | | $| 90,816| +Initial recognition of right of use asset and liability| | $| -| | | $| 365,556| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +6 +--- + +**** + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Notes to Unaudited Condensed Consolidated Financial Statements** + +**June 30, 2024** + +**Note 1 – Organization and Liquidity** + +**_Organization and Line of Business_** + +Shuttle Pharmaceuticals Holdings, Inc. (“we”, “us”, “our”, the “Company”) was originally formed as Shuttle Pharmaceuticals, LLC in the State of Maryland on December 18, 2012. On August 12, 2016, the Company filed articles of conversion with the State of Maryland to convert from an LLC to a C corporation, at which time the Company changed its name to Shuttle Pharmaceuticals, Inc. (“Shuttle”). In connection with the conversion the Company issued 5,625,000 shares of common stock in exchange for 100% of the outstanding membership interests in Shuttle prior to conversion. On June 4, 2018, Shuttle completed a reverse merger with Shuttle Pharmaceuticals Holdings, Inc. (then known as Shuttle Pharma Acquisition Corp, Inc.), a Delaware corporation, pursuant to which Shuttle, our operating entity, became a wholly owned subsidiary of the Company. All share numbers referenced herein reflect a 1-for-8 reverse split of our common stock on a post-split basis, which was effective as of August 13, 2024 (see Note 2). + +The Company’s primary purpose is to develop and commercialize unique drugs for the sensitization of cancers and protection of normal tissues, with the goal of improving outcomes for cancer patients receiving radiation therapy. Shuttle has deployed its proprietary technology to develop novel cancer immunotherapies, producing a pipeline of selective HDAC inhibitors for cancer and immunotherapy applications. The Company’s HDAC platform is designed to target candidate molecules with potential roles in therapeutics beyond cancer, including autoimmune, inflammatory, metabolic, neurological and infectious diseases. The Company’s Ropidoxuridine product, which is used with radiation therapy to sensitize cancer cells, was initially funded by a Small Business Innovation Research (“SBIR”) contract provided by the National Cancer Institute (“NCI”), a unit of the National Institutes of Health (“NIH”). Ropidoxuridine has been further developed though the Company’s collaborations with scientists at the University of Virginia for use in combination with proton therapy to improve patient survival. Historically, and prior to the Company’s initial public offering in September 2022, the Company has obtained funding to develop products through NIH grants, including a product to predict late effects of radiation with metabolite biomarkers and develop prostate cancer cell lines in health disparities research. + +The production and marketing of the Company’s products and its ongoing research and development activities will be and are subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any products or combination of products developed by the Company must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the Food and Drug Administration (“FDA”) under the Food, Drug and Cosmetic Act. There can be no assurance that the Company will not encounter problems in its clinical trials that will cause the Company or the FDA to delay or suspend the clinical trials. + +The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and in other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company now or in the future. + +**_Liquidity and Going Concern_** + +Our unaudited condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception and has a net loss of approximately $3.8 million and no revenues for the six months ended June 30, 2024 and has working capital of approximately $1.1 million as of June 30, 2024. In addition, the convertible note payable outstanding at June 30, 2024 includes covenants and certain cash payment requirements. On July 12, 2024, the Company informed the investor of its convertible note that the Company’s expected restatement of its financial statements for the years ended December 31, 2022 and 2023 constituted an event of default under the terms of the convertible note. On August 6, 2024, the Company paid $0.6 million to the investor of the convertible note and received a waiver from the investor related to the default. The funds paid are restricted and will be held as collateral to the balance owed under the convertible note (see Note 9). These conditions, and the Company’s ability to comply with such conditions, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued. + +7 +--- + +In January 2023, the Company entered into a securities purchase agreement with an institutional investor through which the Company sold a convertible note with a principal value of $4.3 million, along with a four-year warrant to purchase 127,260 shares of common stock, exercisable at $18.80 per share, providing the Company with approximately $3.6 million in net proceeds. To date, the warrant has not yet been exercised. However, the Company’s existing cash resources, marketable securities and the cash received from the equity offering and convertible note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months. + +The IPO and subsequent capital raise have supported operations, the manufacture of drug product and FDA approval of the IND for the Phase II clinical trial of Ropidoxuridine and radiation therapy in glioblastoma. The FDA recommended and the Company agreed to an expansion of the clinical trial, necessitating additional capital to complete the trial as well as fund ongoing operations. As a result, management had initiated a $4.5 million rights offering and submitted an application for a SBIR grant for non-dilutive funding for pre-clinical project through the NIH. The Company is also currently pursuing other financing. The ability of the Company to continue as a going concern is dependent upon its ability to successfully raise additional equity or debt financing to allow it to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues. + +The accompanying unaudited condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company is unable to continue as a going concern. + +**Note 2 – Summary of Significant Accounting Policies** + +**_Basis of Presentation_** + +The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and notes required by GAAP for annual financial statements. A complete discussion of the Company’s significant accounting policies is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. + +In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all of the adjustments necessary to present the financial position of the Company as of June 30, 2024 and the results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements of the Company have not been audited by the Company’s independent registered public accounting firm, except that the year-end consolidated balance sheet was derived from audited financial statements. The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the restated financial statements and related notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K/A filed with the SEC on September 3, 2024. + +**_Reverse Stock Split_** + +On August 13, 2024, in order to meet Nasdaq’s minimum bid price requirement of $1.00 per share (the “Minimum Bid Price Requirement”), the Company effectuated a 1-for-8 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares (the “Reverse Stock Split”). The Reverse Stock Split had no effect on the Company’s authorized shares of common stock or preferred stock and the par value will remain unchanged at $0.00001, respectively. Following the reverse stock split on August 13, 2024, the Company had a total of 2,111,235 shares issued and outstanding (or 2,106,233 on a post-split basis as of June 30, 2024). All common stock share, option, warrant and per share amounts (except our authorized but unissued shares) have been retroactively adjusted in these financial statements and related disclosures. + +8 +--- + +**__** + +**_Basis of Consolidation_** + +The unaudited condensed consolidated financial statements have been prepared on a consolidated basis with those of the Company’s wholly-owned subsidiaries, Shuttle Pharmaceuticals, Inc. and Shuttle Diagnostics Inc. All intercompany transactions and balances have been eliminated. + +**_Correction of an Immaterial Error in the Prior Period Financial Statements_** + +During the fourth quarter of 2023, the Company determined that the prior year consolidated financial statements had a misstatement caused by an immaterial classification error of certain research and development expenses in accordance with Accounting Standards Codification (“ASC”) 730. As a result, certain prior year amounts have been corrected for consistency with the current year presentation. The Company assessed the materiality of this change in presentation on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” (ASC Topic 250, Accounting Changes and Error Corrections). Based on this assessment, the Company concluded that these error corrections in its unaudited condensed consolidated statements of operations are not material to any previously presented financial statements based upon overall considerations of both quantitative and qualitative factors. The corrections had no impact on the unaudited condensed consolidated balance sheet, unaudited condensed consolidated statements of cash flows, or unaudited condensed consolidated statement of changes in stockholders’ equity, to these financial statements, or for any previously presented interim or annual financial statements. Further, the corrections did not result in a change in quarterly or year-to-date operating losses, basic or diluted earnings per share, or working capital. The quarterly correction required for the three and six months ended June 30, 2023 was $93,708 and $182,715, respectively. Accordingly, the Company corrected the previously reported immaterial error for the three and six months ended June 30, 2023 in this Quarterly Report on Form 10-Q. + +Schedule of the Error Correction + +| | June 30, 2023| | | Correction| | | Corrected June 30, 2023| +---|---|---|---|---|---|---|---|---|--- +Research and development expense| | $| 1,944,181| | | $| (182,715| )| | $| 1,761,466| +General and administrative expense| | | 281,918| | | | 182,715| | | | 464,633| +Total| | $| 2,226,099| | | $| -| | | $| 2,226,099| + +**_Use of Estimates_** + +The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates are contained in the accompanying unaudited condensed consolidated financial statements for the recognition of research and development expenses, valuation of warrants and valuation of bifurcated derivative liabilities and other financial instruments. + +**_Cash and Cash Equivalents_** + +Cash and cash equivalents include cash in bank accounts and money market funds with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. As of June 30, 2024 and December 31, 2023, cash and cash equivalents consisted of the following: + +Schedule of Cash and Cash Equivalents + +| | June 30,| | | December 31,| +---|---|---|---|---|---|--- +| | 2024| | | 2023| +Cash| | $| 645,594| | | $| 1,550,098| +Money market funds| | | 50,000| | | | 1,026,318| +Total cash and cash equivalents| | $| 695,594| | | $| 2,576,416| + +9 +--- + +Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of June 30, 2024 was approximately $0.4 million. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. + +**_Marketable Securities_** + +Our investments in debt securities are carried at fair value. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading of debt securities are charged to income. + +The marketable securities held by the Company, which are classified as trading marketable securities, consisted of an outstanding balance of $1.6 million and $2.9 million as of June 30, 2024 and December 31, 2023, respectively. During the three months ended June 30, 2024 and 2023, the Company recognized interest income of $14,158 and $19,267, realized gains of $39,683 and $1,744, and unrealized loss of $27,964 and unrealized loss of $26,534, respectively. During the six months ended June 30, 2024 and 2023, the Company recognized interest income of $35,611 and $35,955, realized gains of $43,720 and $1,744, and unrealized loss of $28,670 and unrealized gain of $11,528, respectively. + +**_Fair Value of Financial Instruments_** + +The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair Value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments: + +| ● | Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments. +---|---|--- +| | +| ● | Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace. +| | +| ● | Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation. + +Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires the Company to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded, may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange. + +The carrying amounts of the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. + +10 +--- + +Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of June 30, 2024 and December 31, 2023: + +Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis + +June 30, 2024| | Level 1| | | Level 2| | | Level 3| | | Carrying Value| +---|---|---|---|---|---|---|---|---|---|---|---|--- +Assets| | | | | | | | | | | | | | | | +Marketable Securities:| | | | | | | | | | | | | | | | +United States Treasury Bonds| | $| 1,642,995| | | $| -| | | $| -| | | $| 1,642,995| +Total Assets| | $| 1,642,995| | | $| -| | | $| -| | | $| 1,642,995| +Liabilities| | | | | | | | | | | | | | | | +Derivative Liability - Warrants| | $| -| | | $| -| | | $| 359,919| | | $| 359,919| +Derivative Liability - Accelerated feature| | | -| | | | -| | | | 504| | | | 504| +Total Liabilities| | $| -| | | $| -| | | $| 360,423| | | $| 360,423| + +December 31, 2023| | Level 1| | | Level 2| | | Level 3| | | Carrying Value| +---|---|---|---|---|---|---|---|---|---|---|---|--- +Assets| | | | | | | | | | | | | | | | +Marketable Securities:| | | | | | | | | | | | | | | | +United States Treasury Bonds| | $| 2,887,215| | | $| -| | | $| -| | | $| 2,887,215| +Total Assets| | $| 2,887,215| | | $| -| | | $| -| | | $| 2,887,215| +Liabilities| | | | | | | | | | | | | | | | +Derivative Liability - Warrants| | $| -| | | $| -| | | $| 410,660| | | $| 410,660| +Derivative Liability - Accelerated feature| | | -| | | | -| | | | 3,852| | | | 3,852| +Derivative Liability | | | -| | | | -| | | | 3,852| | | | 3,852| +Total Liabilities| | $| -| | | $| -| | | $| 414,512| | | $| 414,512| + +**_Derivative Financial Instruments_** + +The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. For our liability classified derivative financial instruments, the Company used a Monte Carlo valuation model to value the derivative instruments at inception and on subsequent valuation dates. For our equity classified derivative financial instruments, we used a Black-Scholes option-pricing model at the grant date to value the derivative instrument. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the unaudited condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date. + +**_Warrants_** + +The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, _Distinguishing Liabilities from Equity_ (“ASC 480”) and ASC 815, _Derivatives and Hedging_ (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. + +For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed consolidated statements of operations. The fair value of the warrants is estimated using a Black-Scholes pricing model or a Monte Carlo simulation. + +11 +--- + +**__** + +**_Research and Development Expenses_** + +Research and development expenses are charged to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, which include a certain portion of our chief executive officer, chief operating officer, chief financial officer and directors’ compensation. For the three and six months ended June 30, 2024 and 2023, a portion of personnel-related expenses and stock-based compensation expense for these individuals totaling $0.1 million and $0.3 million, respectively, and $0.2 million and $0.6 million, respectively, was included within research and development due to their active involvement in the research and development activities, materials, supplies, related subcontract expenses, and consulting costs. + +Regarding the accounting treatment for reimbursements, GAAP provides limited guidance on the accounting for government grants received by for-profit companies. In accordance with ASC Topic 832, _Government Assistance_ , as adopted January 1, 2022, we disclose certain types of government assistance received in the notes to the consolidated financial statements that includes: a) the nature of the transaction including the nature of the assistance being given, b) the accounting policies being used to account for the transaction and c) other provisions of relevance, where required. Depending on the type of grant or contract, we understand there is more than one acceptable alternative for the accounting treatment – a reduction of costs, a deferred credit to be amortized, revenue or other income. The Company has concluded that reimbursements received for R&D expenses incurred, are more akin to a reduction of costs and applies reimbursements against incurred research costs. There were no reimbursements received for the six months ended June 30, 2024 and 2023. + +**_Net Loss Per Common Stock_** + +Net loss per share of common stock requires presentation of basic earnings per share on the face of the unaudited condensed consolidated statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying unaudited condensed consolidated financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive. + +The dilutive effect of restricted stock units subject to vesting and other stock-based payment awards is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting shares of common stock are included in the denominator of the diluted calculation for the entire period being presented. + +For the six months ended June 30, 2024 and 2023, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive. + +Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share + +| | June 30,| | | June 30,| +---|---|---|---|---|---|--- +| | 2024| | | 2023| +Convertible notes (Note 5)| | | 80,744| | | | 155,378| +Warrant (Note 6)| | | 184,000| | | | 184,000| +Restricted stock units (Note 6)| | | 58,839| | | | 10,382| +| | | 323,583| | | | 349,760| + +**_Deferred Offering Costs_** + +Pursuant to ASC 340-10-S99-1, costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of an offering as a reduction of additional paid-in capital. Deferred offering costs may consist of underwriting, legal, accounting, and other expenses incurred through the balance sheet date that are directly related to a proposed public offering. Should the proposed public offering prove to be unsuccessful, any deferred costs, as well as additional expenses to be incurred, will be expensed. + +12 +--- + +**__** + +**_Recent Accounting Pronouncements_** + +In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting Topic 280, “Segment Reporting-Improvements to Reportable Segment Disclosures,” which allows disclosure of one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires enhanced disclosures of significant segment expenses and other segment items, as well as incremental qualitative disclosures on both an annual and interim basis. This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting periods after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The adoption of this new guidance is not expected to have a significant impact on our consolidated financial statements. + +In December 2023, the FASB issued ASU No. 2023-09, Income Taxes Topic 740, “Income Tax-Improvements to Income Tax Disclosures,” which requires enhanced disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is effective for annual reporting periods beginning after December 15, 2024. Early adoption is permitted and should be applied on a prospective basis, however retrospective application is permitted. The Company is currently evaluating the impact of adopting this guidance on its consolidated and condensed financial statements and disclosures included within notes to consolidated and condensed financial statements. + +**Note 3 – Leases** + +Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the present value of the future lease payments as of the lease commencement date. Operating lease expense is recognized on a straight-line basis over the lease term. + +During the six months ended June 30, 2023, the Company had a lease agreement which allowed for the use of a laboratory facility for a monthly payment of $6,480. The laboratory lease commenced on October 1, 2018 and expired on October 31, 2023. + +The Company currently has a lease agreement which allows for the use of a laboratory facility, entered into on February 16, 2023, with base rent of $7,206 per month for a period of 64 months, which increases at the rate of 3% per year, that commenced June 1, 2023. The lease included a six-month 50% rent abatement upon commencement. Additional common area maintenance (“CAM”) fees are charged monthly and revised annually. The estimated monthly CAM fees are $3,300 per month for the first year of the lease, which are being expensed as incurred. An irrevocable letter of credit (“LOC”) for the security deposit of $43,234 and base rent of $3,891, including 50% abatement, and $3,315 of CAM cost, was due and paid on execution of the lease agreement. Alexandria Real Estate (ARE-QRS-CORP) is the beneficiary of the LOC, and the expiry date of the LOC is March 1, 2025. + +The following summarizes the ROU lease expense components and cash flow information for the Company’s operating leases: + +Schedule of Right-of Use Asset and Lease Information about Operating Lease + +| | | | | | | | | | | | +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Three Months Ended| | | Six Months Ended| +| | June 30,| | | June 30,| +| | 2024| | | 2023| | | 2024| | | 2023| +| | | | | | | | | | | | +Operating lease cost| | $| 22,947| | | $| 25,193| | | $| 45,894| | | $| 42,737| +Variable lease cost| | | 9,937| | | | -| | | | 20,377| | | | -| +Sublease income| | | (2,163| )| | | (2,121| )| | | (4,326| )| | | (4,242| ) +Total lease cost| | $| 30,721| | | $| 23,072| | | $| 61,945| | | $| 38,495| +| | | | | | | | | | | | | | | | +Cash paid for operating cash flows from operating leases| | $| 22,707| | | $| 23,331| | | $| 45,189| | | $| 42,771| +Right-of-use assets obtained in exchange for new operating lease liability| | $| -| | | $| -| | | $| -| | | $| 365,556| + +Supplemental balance sheet information related to operating leases was as follows: + +Schedule of Balance Sheet Information Related to Operating Leases + +| | 2024| | | 2023| +---|---|---|---|---|---|--- +| | June 30,| | | December 31,| +| | 2024| | | 2023| +| | | | | | +Weighted-average remaining lease term (year)| | | 4.18| | | | 4.98| +Weighted-average discount rate| | | 10.48| %| | | 10.46| % + +13 +--- + +Future non-cancelable minimum lease payments under the operating lease liability as of June 30, 2024, are as follows: + +Schedule of Future Non-cancelable Minimum Lease Payments Under Operating Lease Liability + +Years Ended December 31,| | | +---|---|---|--- +2024 (excluding the six months ended June 30, 2024)| | $| 46,313| +2025| | | 94,246| +2026| | | 97,074| +2027| | | 99,986| +2028| | | 68,235| +Total future minimum lease payments| | | 405,854| +Less: imputed interest| | | (76,737| ) +Present value of payments| | $| 329,117| + +**Note 4 – Notes Payable-Related Party** + +During the three and six months ended June 30, 2023 the Company incurred $2,588 and $6,825, respectively, in interest expense. During the three and six months ended June 30, 2023 principal payments of $139,229 and $685,473, respectively, and accrued interest of $25,917 and $102,373 were paid, respectively, on notes to related parties. The principal and accrued interest for these notes were fully paid by December 31, 2023. + +**Note 5 – Convertible Notes and Notes Payable** + +**_Alto Opportunity Master Fund, SPC_** + +On January 11, 2023, the Company entered into a securities purchase agreement (the “SPA”) with Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B, a Cayman entity (the “Investor”), pursuant to which the Company sold to the Investor a $4,300,000 convertible note (the “Alto Convertible Note”) and warrant (the “Warrant”) to purchase 127,260 shares of common stock, exercisable at $18.80 per share, in exchange for gross proceeds of $3,935,000 (the “Investment Amount”) (See Note 7). The Company determined that the Warrant contains a net cash settlement feature at inception and categorized the Warrant as a liability in the accompanying unaudited condensed consolidated financial statements. The Alto Convertible Note matures on March 11, 2025, but may be extended at the option of the noteholder. The Alto Convertible Note amortizes on a monthly basis and the Company can make such monthly amortization payments in cash or, subject to certain equity conditions, in registered shares of common stock or a combination thereof. Installments may be deferred by the noteholder, resulting in a variable interest rate. However, the effective interest rate is approximately 218% based on the internal rate of return calculated on a series of cash flows that occur at regular intervals. For equity repayment, the Alto Convertible Note is convertible into shares of common stock at a price per share equal to the lower of (i) $18.80, (ii) 90% of the three lowest daily VWAPs of the 15 trading days prior to the payment date, or (iii) 90% of the VWAP of the trading day prior to payment date. The noteholder may convert at any time at a fixed price of $18.80 per share. The noteholder has an acceleration of installment amount conversion option (the “Acceleration Option”), whereby the noteholder, with certain share percentage limitations, can convert to common stock any outstanding installment amount at an amount equal to the installment amount plus five times (5x) the installment amount at any time. The Company has determined the Acceleration Option is an embedded derivative within the host instrument and has bifurcated it from the host instrument and recorded it as a derivative liability valued at $1,442,000 at inception, using a Monte Carlo simulation model (Note 7). The Convertible Note is repayable over 26 months and bears interest at the rate of 5% per annum. Additionally, the note contains certain redemption options and “Make Whole” provisions. + +14 +--- + +In conjunction with entry into the SPA, the Company entered into a series of related agreements, including a security agreement (the “Security Agreement”), an intellectual property security agreement (the “IP Security Agreement”) and a subsidiary guaranty (the “Subsidiary Guaranty”). The security agreements and guaranty allow, among other things, for the Investor to have a security interest in and place a lien on all of the Company’s assets and intellectual property until such time as the Alto Convertible Note is paid off. In addition, the SPA called for the Company to enter into a springing deposit account control agreement (the “Springing DACA”), which, in the event the Company defaults on its repayment of the Alto Convertible Note, would allow the Investor to assume control of the Company’s bank account only with regard to any funds remaining outstanding under the Alto Convertible Note. As such, in conjunction with entry into the SPA, the Company established a separate bank account in which it deposited the Investment Amount and pursuant to which the Company, the Investor and the bank holding the Investment Amount, First Republic Bank, entered into the Springing DACA agreement. As the Investment Amount had been held at First Republic Bank, in light of certain banking crises then affecting smaller banks, on March 12, 2023, the Company and the Investor moved the Investment Amount from First Republic Bank, after which time the Springing DACA was no longer in effect. Further, pursuant to amendments to the SPA entered into in May and June of 2023, the Company and the Investor agreed that all of the Investment Amount would be released to the Company and the relevant provision of the SPA which required the Springing DACA would no longer be deemed applicable. In addition, the Company granted the Investor the option to purchase up to an additional $10.0 million in convertible notes and warrants on substantially the same terms as the Alto Convertible Note and Warrant, excluding the Springing DACA requirement, with such option to be effective through December 31, 2025. The agreement offers the investor an opportunity to participate in future capital raises at substantially similar terms as the January 11, 2023 agreement. The Company expects that such subsequent convertible notes and warrants would be issued on substantially similar terms as the January 11, 2023 initial agreement, as amended, thus providing the Company the opportunity to negotiate certain aspects of the agreement. + +Boustead Securities, LLC (“Boustead”) served as a placement agent for the Alto Convertible Note and Warrant offering and received $345,000 cash compensation and a warrant to purchase 8,909 shares of common stock, exercisable at $18.80 per share. The Boustead warrant was determined to be an equity instrument valued on a non-recurring basis. The Company used the Black Scholes valuation model using a term of five years, volatility of 110%, a risk-free rate of 3.53% for a value of $99,543. + +The Company allocated the finance costs related to the Boustead placement agent fee of $345,000, based on the relative fair market values of the Convertible Note and warrants issued. The allocation of the financing costs applied $232,027 to the debt component as a debt discount that is being amortized to interest expense over the term of the Convertible Note, $104,245 to the warrant derivative liability component, expensed as a finance fee, and $8,727 to the equity warrant as a reduction in additional paid in capital. + +The Company allocated to the debt component of the note an original discount of $300,000, legal fees of $65,000, $215,000 for additional interest fees on day one added to note principal, $1,442,000 for the accelerated conversion feature, and $1,288,543 for the fair value of warrants, resulting in an additional $3,310,543 debt discount that is being amortized to interest expense over the term of the Alto Convertible Note. + +During the three and six months ended June 30, 2024, the Company recorded interest expense of $430,685 and $928,200, respectively, which included amortization of debt discount as interest expense of $386,505 and $832,014, respectively. During the three and six months ended June 30, 2024, the Company settled $0 and $235,200 of principal, and settled $0 and $18,783 of accrued interest, which settlements were made in the form of 0 and 78,197 shares of common stock. The Company also settled for cash during the six months ended June 30, 2024 $501,667 of principal and $56,958 of accrued interest for a total of $558,628 of principal and interest paid in cash. + +During the three and six months ended June 30, 2023, the Company recorded interest expense of $729,351 and $1,328,682 respectively, which included amortization of debt discount as interest expense of $549,125 and $1,012,177 respectively. During the three and six months ended June 30, 2023, the Company paid $1,527,750 and $1,593,900 of principal, respectively, and paid $220,689 and $240,831, respectively, of accrued interest, which payments were made in the form of 228,489 and 234,864 shares of common stock, respectively, during the three and six months ended June 30, 2023. + +As of June 30, 2024, the outstanding principal for the convertible note was $1,517,989 and the debt discount remaining was $691,754, with a net convertible note carrying value of $826,235. + +15 +--- + +**** + +**Note 6 – Stockholders’ Equity** + +**_Common Stock_** + +During the three and six months ended June 30, 2024, the Company issued: + +| ● | 0 and 78,197 shares of common stock to settle $0 and $235,200 of principal and $0 and $18,783 of interest on a convertible note and incurred $0 and $71,315 of loss on settlement, respectively. +---|---|--- +| ● | 3,722 and 19,347 shares of common stock issued for vesting of restricted stock units, respectively. + +During the three and six months ended June 30, 2023, the Company issued: + +| ● | 228,489 and 234,864 shares of common stock to settle $1,527,750 and $1,593,900 of principal and $220,689 and $240,831 of interest, respectively, on a Convertible Note and incurred $415,553 and $433,807 of loss on settlement, respectively. +---|---|--- + +**_Warrants_** + +In connection with the January 2023 Alto Convertible Note, Boustead was granted warrants to purchase 8,909 shares of common stock, at an exercise price of $18.80 per share (Note 5). In addition, Alto was granted warrants to purchase 127,260 shares of common stock, at an exercise price of $18.80 per share (Note 5, 7). + +A summary of activity regarding all warrants issued for the six months ended June 30, 2024 were as follows: + +Schedule of Warrants Activity + +| | Number of| | | Weighted Average| | | Average| +---|---|---|---|---|---|---|---|---|--- +| | Warrants Shares| | | Exercise Price| | | Life (years)| +Outstanding, December 31, 2023| | | 184,000| | | $| 23.20| | | | 2.77| +Granted| | | -| | | | -| | | | -| +Outstanding, June 30, 2024| | | 184,000| | | $| 23.20| | | | 2.29| + +The intrinsic value of the warrants as of June 30, 2024 is $0. All of the outstanding warrants are exercisable as of June 30, 2024. + +**_Equity Incentive Plan_** + +Our 2018 Equity Incentive Plan (the “2018 Plan”) provides for equity incentives to be granted to our employees, executive officers, directors and key advisers and consultants. Equity incentive grants may be made in the form of stock options with an exercise price of not less than the fair market value of the underlying shares as determined pursuant to the 2018 Equity Incentive Plan, restricted stock awards, other stock-based awards, or any combination of the foregoing. The 2018 Equity Incentive Plan is administered by the Company’s compensation committee. We have reserved 3,000,000 shares of our common stock for issuance under the 2018 Equity Incentive Plan. As of June 30, 2024, 138,234 shares have been granted under the 2018 Equity Incentive Plan, of which 79,395 shares have vested. + +**_Restricted Stock Units_** + +We may grant restricted stock units (“RSU”) under our 2018 Plan. RSUs are bookkeeping entries representing an amount equal to the fair market value of one share of our common stock. Subject to the provisions of our 2018 Plan, the administrator determines the terms and conditions of RSUs, including the vesting criteria and the form and timing of payment. Notwithstanding the foregoing, the administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. RSUs granted typically vest annually in one third increments from the date of appointment. + +16 +--- + +During the three and six months ended June 30, 2024 and 2023, pursuant to agreements with officers and consultants, 28,455 and 53,455, respectively and 4,291 and 7,416 RSUs, respectively with a value of $100,000 and $141,840, respectively, and $47,400 and $95,400, respectively, were granted and compensation expense for RSUs of $182,611 and $57,855, respectively, was incurred. During the three and six months ended June 30, 2024 and 2023, $13,033 and $46,986, respectively, and $41,190 and $41,190, respectively was included in compensation under Research and Development. + +As of June 30, 2024, there was $190,779 of unrecognized RSU compensation cost related to non-vested stock-based compensation arrangements which is expected to be recognized over a weighted-average period of 1.97 years. + +A summary of activity regarding the Restricted Stock Units issued follows: + +Schedule of Restricted Stock Units (RSUs) + +| | Number of RSUs| | | Weighted Average Fair Value Per RSU| +---|---|---|---|---|---|--- +Outstanding, December 31, 2023| | | 24,731| | | $| 11.76| +Granted| | | 53,455| | | | 2.65| +Vested| | | (19,347| )| | | 7.58| +Outstanding, June 30, 2024| | | 58,839| | | $| 4.87| + +**_Rights Offering and Financing Commitment_** + +On February 7, 2024, the Company and its wholly-owned subsidiary, Shuttle Diagnostics, Inc., entered into a securities purchase agreement (the “Purchase Agreement”) with SRO, LLC, a Nevada limited liability company, pursuant to which SRO LLC agreed to commit to purchasing from the Company $2,250,000 of units from the Company, with each Unit consisting of (i) one share of the Company’s common stock, (ii) a warrant to purchase one share of the Company’s common stock exercisable at a purchase price of $18.80 per share, and (iii) a percentage of equity interest in Diagnostics such that, assuming the sale of all $2,250,000 of Units, SRO LLC will own a 22% interest in Diagnostics. Pursuant to the terms of the Purchase Agreement, the Units will be sold at a per Unit price equal to 90% of the VWAP of the Company’s common stock for the five trading days immediately preceding closing. The parties entered into the Purchase Agreement in anticipation of the Company commencing a rights offering (the “Rights Offering”) pursuant to which the Company intends to offer a total of $4,500,000 of Units to existing stockholders, which includes the $2,250,000 of Units being sold to SRO LLC, an entity which is controlled by Keith Moore, Executive Chairman of Boustead & Company Limited, an affiliate of Boustead. + +The Company filed an initial registration statement on Form S-1 (the “Form S-1”) with the SEC in April 2024 related to the registration of subscription rights to purchase the Units to be sold in the Rights Offering. The Form S-1 has not been declared effective as of the date these unaudited condensed consolidated financial statements were issued. Upon the Form S-1 being declared effective, the Purchase Agreement allows SRO LLC up to 60 days to raise the initial $2,250,000, which funds will be placed in escrow with Sutter Securities, Inc. (“SSI”), an affiliate of BSL, pursuant to the terms of an escrow agreement entered into between the Company, Shuttle Diagnostics, Inc., BSL and SSI on February 7, 2024 (the “Escrow Agreement”). The funds will remain in escrow up until closing on the Rights Offering. In addition, in the event the Company fails to raise the full $4,500,000 in the Rights Offering, SRO LLC agreed to a backstop commitment pursuant to which it would have the right to purchase any remaining Units not purchased by existing Company stockholders in the Rights Offering, up to an additional $2,250,000 (the “Back-up Contingency”). Unless the parties waive the conditions to closing, in the event the full $4,500,000 is not raised, whether through SRO LLC or through the Company’s existing stockholders, the Company will not close on the offering and any funds raised and held in escrow will be returned to investors. + +In conjunction with its entry into the Purchase Agreement, on February 7, 2024, the Company entered into a placement agent and advisory services agreement (the “Placement Agent Agreement”) with BSL, pursuant to which BSL and BSL’s affiliates will provide the Company with regular and customary financial consulting advice and will act as placement agent, on a best efforts basis, for the Rights Offering. In exchange for its services, BSL will receive a commitment fee equal to $112,500 upon the earlier of the Company filing the registration statement on Form S-1 registering the Rights Offering or upon such date as the Company terminates the Rights Offering, a commission equal 8% of the gross proceeds disbursed to the Company upon closing the Rights Offering, and $40,000 in diligence and related expenses. + +17 +--- + +As of June 30, 2024, the Company has incurred $142,000 in costs directly related to the planned Rights Offering and initially deferred these costs as other current assets in the unaudited condensed consolidated balance sheet. However, since that date, the Rights Offering has not been consummated and, therefore, the deferred costs have been expensed. As of June 30, 2024, there were no deferred costs recorded on the Company’s unaudited condensed consolidated balance sheet. Subsequent to June 30, 2024, the Company is pursuing other financing options. + +**Note 7 – Derivative Liabilities** + +**_Fair Value Assumptions Used in Accounting for Derivative Liabilities_** + +ASC 815 requires us to assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense. + +In January 2023, in connection with the Alto Convertible Note, the Company issued warrants to purchase 127,260 shares of common stock, with an exercise price of $18.80 per share, valued at inception at $1,189,000 and as of June 30, 2024, at $359,919. The Company determined our derivative liabilities from the warrants issued in relation to the Alto Convertible Note do not satisfy the classification as equity instruments due to the existence of a certain net cash settlement provision that is not within the sole control of the Company. In addition, there are certain down round provisions that could reduce the exercise price if the Company issues securities at lower prices in the future. + +The Company has determined the Acceleration Option is an embedded derivative within the host instrument and has bifurcated it from the host instrument and recorded it as a derivative liability valued at $1,442,000, using a Monte Carlo simulation model. The Company determined our derivative liability from the noteholder’s Acceleration Option for the Alto Convertible Note is not clearly and closely related to the host and should be thus accounted for as a bifurcated derivative liability. + +The Company classified these derivative liabilities as a Level 3 fair value measurement and used the Monte Carlo pricing model to calculate the fair value as of January 11, 2023 ($2,631,000 included in debt discount) and June 30, 2024 ($360,423). Key inputs for the simulation are summarized below. The Monte Carlo simulation uses an implied VWAP for the January 11, 2023 valuation date. The implied VWAP was backsolved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds. The simulation was then iterated and manipulated to solve for the implied share price, which was approximately $12.64 per share (or an approximate 14% discount to the quoted market VWAP on January 11, 2023). + +The key inputs for the Monte Carlo simulation as of June 30, 2024, were as follows: + +Schedule of Monte Carlo Simulation Assumption + +Net cash settlement and down round key valuation inputs – warrants*| | | +---|---|---|--- +Annualized volatility| | | 89.76% - 99.20| % +Risk-free interest rate| | | 4.61% \- 5.48| % +Quoted VWAP| | $| 3.12| +Exercise price| | $| 18.80| +Probability assessment| | | 2.5% - 30| % +Illiquidity discount| | | -15| % +Time period (years)| | | 0.11 \- 2.53| + +*| | _Based on a Monte Carlo simulation analysis of 250,000 iterations_ +---|---|--- + +Acceleration option key valuation inputs*| | | +---|---|---|--- +Annualized volatility| | | 64.76% - 74.98| % +Risk-free interest rate| | | 5.23% - 5.48| % +Quoted VWAP| | $| 3.12| +Illiquidity discount| | | -15| % +Time period (years)| | | 0 \- 0.7| + +*| | _Based on a Monte Carlo simulation analysis of 250,000 iterations_ +---|---|--- + +18 +--- + +The following table summarizes the changes in the derivative liabilities: + +Schedule of Derivative Liabilities + +Fair Value Measurements Using Significant Unobservable Inputs (Level 3) +--- +| | Warrants| | | Accelerated Feature| +Balance - December 31, 2023| | $| 410,660| | | $| 3,852| +Gain on change in fair value| | | (196,045| )| | | (1,817| ) +Balance - March 31, 2024| | $| 214,615| | | $| 2,035| +(Gain) loss on change in fair value| | | 145,304| | | | (1,531| ) +Balance - June 30, 2024| | $| 359,919| | | $| 504| + +**Note 8 – Related Party transactions** + +On September 14, 2022, we entered into a manufacturing agreement with TCG GreenChem, Inc. (“TCG GreenChem”), the U.S. subsidiary of TCG Lifesciences Pvt Ltd., a global contract research and manufacturing services company located in India. Dr. Chis Senanayake, one of our independent directors, is CEO and CSO of TCG GreenChem and CSO of TCG Lifesciences Pvt Ltd. TCG GreenChem was contracted for process research, development and cGMP compliant manufacture of IPdR. During the six months ended June 30, 2024 and 2023, the Company expensed $0 and $608,000, respectively, related to these services. + +**Note 9 – Subsequent Events** + +See Note 2, Summary of Significant Accounting Policies, Reverse Stock Split, above. + +**Alto Opportunity Master Fund, SPC** + +On July 12, 2024, the Company informed the Investor in the Alto Convertible Note that the Company’s expected restatement of its consolidated financial statements for the years ended December 31, 2022 and 2023 constituted an event of default under the terms of the Alto Convertible Note. On August 6, 2024, the Company paid $600,000 to the Investor, which funds will be held as collateral to the balance owed under the Alto Convertible Note, and received a waiver from the Investor related to the default. + +**Alliance Global Partners** + +**** + +On July 30, 2024, the Company engaged A.G. P./Alliance Global Partners (“AGP”) to serve as exclusive underwriter, placement agent or advisor in any public or private offering or financing (as defined, the “Offering”) of up to $10.0 million. + +**Phase II study of Ropidoxuridine** + +**** + +On August 8, 2024, the Company entered into a work order (the “Work Order”) with Theradex Systems, Inc., a New Jersey contract research organization (“CRO”) for purposes of supporting the Company’s Phase II Study of Ropidoxuridine as a Radiation Sensitizing Agent During Radiotherapy in Patients with Newly Diagnosed IDH-Wildtype Glioblastoma with Unmethylated MGMT Promotor.” As such, Shuttle Pharma is now in the process of signing up six clinical sites where the clinical studies will be performed – two of which have completed initial site initiation visits and one of which is ready to enroll patients – and where the CRO will oversee such studies. + +Under the terms of the Work Order, the CRO will oversee the studies for a period of 53 months (the “Term”), including overseeing and monitoring the regulatory aspects of the Phase II clinical trial, and managing the documentation surrounding the clinical trial in exchange for a fee of approximately $2.3 million, payable in stages and based upon services performed during the Term of the study. + +19 +--- + +**** + +**Item 2\. Management’s Discussion and Analysis of Financial Condition and Results of Operations** + +_The following Management’s Discussion and Analysis should be read in conjunction with our unaudited financial statements and the related notes thereto included elsewhere in this quarterly report, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 21, 2024. The Management’s Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this quarterly report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors including, but not limited to, those noted under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and in subsequent reports that we file with the U.S. Securities and Exchange Commission (the “SEC”)._ + +_We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this quarterly report, except as required by U.S. federal securities laws._ + +**Overview** + +Founded by Georgetown University Medical School faculty members, Shuttle Pharmaceuticals Holdings, Inc. (“Shuttle” or the “Company”) is a discovery and development stage pharmaceutical company leveraging our proprietary technology to develop novel therapies that are designed to cure cancer. Originally formed as Shuttle Pharmaceuticals, LLC in 2012, our goal is to extend the benefits of cancer treatments by leveraging insights into cancer therapy with surgery, radiation therapy, chemotherapy and immunotherapy. While there are several therapies being developed with the goal of curing cancer, one of the most effective and proven approaches to this is radiation therapy (RT). We are developing a pipeline of products designed to address the limitations of the current standard of cancer therapies. We believe that our product candidates will enable us to deliver cancer treatments that are safer, more reliable and at a greater scale than that available with the current standard of care. + +Operations to date have focused on continuing our research and development efforts to advance Ropidoxuridine clinical testing and improved drug formulation, to advance HDAC6 inhibitor (SP-2-225) preclinical development and explore new Small Business Innovation Research (SBIR) contract work on predictive biomarkers of radiation response, as well as prostate cell lines for health disparities research. We have received SBIR contract funding from the National Institutes of Health (“NIH”) for the aforementioned projects. The clinical development of Ropidoxuridine has shown drug bioavailability and a maximum tolerated dose has been established for use in Phase 2 clinical trials. TCG GreenChem, Inc. (“TCG GreenChem”), with whom we have contracted for process research, development and cGMP compliant manufacture of IPdR, has successfully completed the manufacturing campaign for the active pharmaceutical ingredient (API) of Ropidoxuridine for use in the Company’s upcoming Phase 2 clinical trial in brain cancer patients undergoing radiation therapy. Shuttle has also worked with University of Iowa Pharmaceuticals to develop the formulation and produce the capsules, which have been shipped to contract research organization (CRO) Theradex Oncology for distribution to clinical trial sites. Both activities have now been completed. In addition, Shuttle received approval from the FDA to begin the clinical trial. The FDA made recommendations to expand the clinical trial and we agreed with the recommendation. Meetings with clinical sites to review the protocol documents have occurred and FDA required Institutional Review Board approval has been received from the central internal review board, or IRB. With FDA recommended changes incorporated into the revised protocol, the Company believes it remains on track to commence the Phase 2 clinical study in the second quarter of 2024. The radiation biomarker project and the health disparities project have each been completed and the company is following up with plans for clinical validation and potential commercialization. Changes in operational, administrative, legal and professional expenses related to our operations are set forth in more detail in the discussion below. + +**Reverse Stock Split** + +On August 13, 2024, in order to meet Nasdaq’s minimum bid price requirement of $1.00 per share (the “Minimum Bid Price Requirement”), the Company effectuated a 1-for-8 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares (the “Reverse Stock Split”). The Reverse Stock Split had no effect on the Company’s authorized shares of common stock or preferred stock. Following the reverse stock split on August 13, 2024, the Company had a total of 2,111,235 shares issued and outstanding (or 2,106,233 on a post-split basis as of June 30, 2024). All share, option, warrant and per share amounts (except our authorized outstanding) have been retroactively restated in these financial statements and related disclosures. + +20 +--- + +**Results of Operations** + +**_Comparison of the three months ended June 30, 2024 and 2023_** + +The following table summarizes the results of our operations: + +| | Three Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | June 30,| | | | | | | +| | 2024| | | 2023| | | Change| | | %| +Revenue| | $| -| | | $| -| | | $| -| | | | -| +Operating expenses:| | | | | | | | | | | | | | | | +Research and development| | | 645,719| | | | 839,665| | | | (193,946| )| | | (23| )% +General and administrative| | | 310,038| | | | 209,279| | | | 100,759| | | | 48| % +Legal and professional| | | 526,877| | | | 416,688| | | | 110,189| | | | 26| % +Total operating expenses and loss from operations| | | 1,482,634| | | | 1,465,632| | | | 17,002| | | | 1| % +Other income (expense):| | | | | | | | | | | | | | | | +Interest expense - related parties| | | -| | | | (2,588| )| | | 2,588| | | | (100| )% +Interest expense| | | (430,685| )| | | (729,351| )| | | 298,666| | | | (41| )% +Gain on sale of marketable securities| | | 39,683| | | | 1,744| | | | 37,939| | | | 2,175| % +Change in fair value of marketable securities| | | (27,964| )| | | (26,534| )| | | (1,430| )| | | 5| % +Interest income| | | 14,158| | | | 19,267| | | | (5,109| )| | | (27| )% +Change in fair value of derivative liabilities| | | (143,773| )| | | 434,275| | | | (578,048| )| | | (133| )% +Loss on settlement of convertible debt| | | -| | | | (415,553| )| | | 415,553| | | | (100| )% +Total other expense| | | (548,581| )| | | (718,740| )| | | 170,159| | | | (24| )% +Net loss| | $| (2,031,215| )| | $| (2,184,372| )| | $| 153,157| | | | (7| )% + +_Research and Development._ Research and development (“R&D”) expense was $0.6 million for the three months ended June 30, 2024, as compared to $0.8 million for three months ended June 30, 2023. The decrease of $0.2 million, or 23%, is primarily related to the Company having completed production of the drug product and waiting for the initiation of trials. + +R&D compensation related expenses were $0.3 million in the three months ended June 30, 2024 as compared to $0.3 million in the three months ended June 30, 2023. Compensation related expenses were 48% for the three months ended June 30, 2024, representing an increase from 39% of total R&D in the three months ended June 30, 2023. Subcontract work made up 42% of total R&D expenses in the three months ended June 30, 2024 and 56% of total R&D expenses during the three months ended June 30, 2023. + +_General and Administrative Expenses._ General and Administrative expenses in the three months ended June 30, 2024 increased by $0.1 million, or 48% to $0.3 million in the three months ended June 30, 2024, compared to $0.2 million in the three months ended June 30, 2023. + +_Legal and Professional Expenses_. During the three months ended June 30, 2024, legal and professional expenses increased by $0.1 million or 26% to $0.5 million compared to $0.4 million in the same period in the prior year. The increase in legal and professional fees was primarily due to increases in our expenses related to our public filing requirements, contracts and financing related work. + +21 +--- + +__ + +_Other Income Expense_. Other expense was $0.5 million for the three months ended June 30, 2024, which consisted of $0.4 million in interest expense on convertible loans, interest income of $14 thousand, change in marketable securities of $28 thousand, and a loss on change in fair value of derivative liabilities of $0.1 million. Other income was $0.7 million for the three months ended June 30, 2023, which consisted of $0.7 million in interest expense on convertible loans, $3 thousand in interest expense on related party loans, interest income of $19 thousand, loss on settlement of convertible debt of $0.4 million, unrealized loss on marketable securities of $26 thousand, and a gain on change in fair value of derivative liability of $0.4 million. The $0.4 million gain in fair value of derivative liability resulted from the fair value measurement using the Monte Carlo pricing model and the impact of the decrease in the market price of warrant shares. + +**_Comparison of the six months ended June 30, 2024 and 2023_** + +The following table summarizes the results of our operations: + +| | Six Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | June 30,| | | | | | | +| | 2024| | | 2023| | | Change| | | %| +Revenue| | $| -| | | $| -| | | $| -| | | | -| +Operating expenses:| | | | | | | | | | | | | | | | +Research and development| | | 1,231,823| | | | 1,761,466| | | | (529,643| )| | | (30| %) +General and administrative| | | 634,647| | | | 464,633| | | | 170,014| | | | 37| % +Legal and professional| | | 1,001,011| | | | 784,312| | | | 216,699| | | | 28| % +Total operating expenses and loss of operations| | | 2,867,481| | | | 3,010,411| | | | (142,930| )| | | (5| %) +Other income (expense):| | | | | | | | | | | | | | | | +Interest expense - related parties| | | -| | | | (6,825| )| | | 6,825| | | | (100| %) +Interest expense| | | (928,200| )| | | (1,328,682| )| | | 400,482| | | | (30| %) +Interest income| | | 35,611| | | | 35,955| | | | (344| )| | | (1| %) +Finance fee| | | -| | | | (104,245| )| | | 104,245| | | | (100| %) +Change in fair value of derivative liabilities| | | 54,089| | | | 1,675,275| | | | (1,621,186| )| | | (97| %) +Gain on sale of marketable securities| | | 43,720| | | | 1,744| | | | 41,976| | | | 2,407| % +Change in fair value of marketable securities| | | (28,670| )| | | 11,528| | | | (40,198| )| | | (349| %) +Loss on settlement of convertible debt| | | (71,315| )| | | (433,807| )| | | 362,492| | | | (84| %) +Total other expense| | | (894,765| )| | | (149,057| )| | | (745,708| )| | | 500| % +Net loss| | $| (3,762,246| )| | $| (3,159,468| )| | $| (602,778| )| | | 19| % + +_Research and Development._ Research and development (“R&D”) expense was $1.2 million for the six months ended June 30, 2024, as compared to $1.8 million for six months ended June 30, 2023. The decrease of $0.5 million, or 30%, is primarily related to the Company having completed production of the drug product and waiting for the initiation of trials. + +R&D compensation related expenses were $0.6 million in the six months ended June 30, 2024 as compared to $0.9 million in the six months ended June 30, 2023. Compensation related expenses were 52% for the six months ended June 30, 2024, representing an increase from 51% of total R&D in the six months ended June 30, 2023. Subcontract work made up 38% of total R&D expenses in the six months ended June 30, 2024 and 56% of total R&D expenses during the six months ended June 30, 2023. + +_General and Administrative Expenses._ General and Administrative expenses in the six months ended June 30, 2024 increased by $0.2 million, or 37% to $0.6 million in the six months ended June 30, 2024. The increase in general and administrative expenses was primarily due to a restricted stock-based grant to an officer of the Company valued at $42 thousand, and increases in marketing, advertising and filing expenses. + +22 +--- + +__ + +_Legal and Professional Expenses_. During the six months ended June 30, 2024, legal and professional expenses increased by $0.2 million or 28%. The increase in legal and professional fees was primarily due to increases in our expenses related to our public filing requirements, contracts and financing related work. + +_Other Income Expense_. Other expense was $0.9 million for the six months ended June 30, 2024, which consisted of $0.9 million in interest expense on convertible loans, interest income of $36 thousand, loss on settlement of convertible debt of $71 thousand, change in marketable securities of $29 thousand, and a gain on change in fair value of derivative liabilities of $54 thousand. Other expense was $0.1 million for the six months ended June 30, 2023, which consisted of $1.3 million in interest expense on convertible loans, $7 thousand in interest expense on related party loans, interest income of $36 thousand, finance fee on convertible loans of $0.1 million, loss on settlement of convertible debt of $0.4 million, gain on sale of marketable securities of $2 thousand, unrealized gain on marketable securities of $12 thousand, and a gain on change in fair value of derivative liabilities of $1.7 million. The $1.7 million gain in fair value of derivative liability resulted from the fair value measurement using the Monte Carlo pricing model and the impact of the decrease in the market price of warrant shares. + +**** + +**Liquidity and Capital Resources** + +Our unaudited condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception and has a net loss of approximately $3.8 million and no revenues for the six months ended June 30, 2024 and has working capital of approximately $1.1 million as of June 30, 2024. In addition, the convertible note payable outstanding at June 30, 2024 includes covenants and certain cash payment requirements. On July 12, 2024, the Company informed the investor of its convertible note that the Company’s expected restatement of its financial statements for the years ended December 31, 2022 and 2023 constituted an event of default under the terms of the convertible note. On August 6, 2024, the Company paid $0.6 million to the investor of the convertible note and received a waiver from the investor related to the default. The funds paid are restricted and will be held as collateral to the balance owed under the convertible note (see Note 9). These conditions, and the Company’s ability to comply with such conditions, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued. + +In January 2023, the Company entered into a securities purchase agreement with an institutional investor through which the Company sold a convertible note with a principal value of $4.3 million, along with a four-year warrant to purchase 127,260 shares of common stock, exercisable at $18.80 per share, providing the Company with approximately $3.6 million in net proceeds. To date, the warrant has not yet been exercised. However, the Company’s existing cash resources, marketable securities and the cash received from the equity offering and convertible note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months. + +The IPO and subsequent capital raise have supported operations, the manufacture of drug product and FDA approval of the IND for the Phase 2 clinical trial of Ropidoxuridine and radiation therapy in glioblastoma. The FDA recommended and the Company agreed to an expansion of the clinical trial, necessitating additional capital to complete the trial as well as fund ongoing operations. As a result, management has submitted an application for a SBIR grant for non-dilutive funding for pre-clinical project through the NIH. The Phase II clinical trial was also approved by the Institutional Review Board “IRB” in June, 2024. In August 2024, the Company took action to pursue a separate capital raise of up to $10.0 million and entered into a work order with a contract research organization (“CRO”) for purposes of supporting the Company’s Phase II Study of Ropidoxuridine. Under the terms of the work order, the CRO will oversee the studies for a period of 53 months in exchange for a fee of approximately $2.3 million, payable in stages and based upon services performed during the study. The ability of the Company to continue as a going concern is dependent upon its ability to successfully raise additional equity or debt financing to allow it to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues. + +The accompanying unaudited condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company is unable to continue as a going concern. + +**Balance Sheet Data:** + +**** + +| | June 30,| | | December 31,| | | | | | | +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | 2024| | | 2023| | | Change| | | %| +Current assets| | $| 2,485,333| | | $| 5,593,005| | | $| (3,107,672| )| | | (56)| % +Current liabilities| | | 1,384,620| | | | 1,042,237| | | | 342,383| | | | 33| % +Working capital| | $| 1,100,713| | | $| 4,550,768| | | $| (3,450,055| )| | | (76)| % + +23 +--- + +As of June 30, 2024, total current assets were $2.5 million and total current liabilities were $1.4 million, resulting in working capital of $1.1 million. As of December 31, 2023, total current assets were $5.6 million and total current liabilities were $1.0 million, resulting in a working capital of $4.6 million. As of June 30, 2024, the current assets primarily resulted from $0.7 million cash and $1.6 million marketable securities, with the decrease from December 31, 2023 being primarily due to ongoing cash burn from our R&D programs, filing expenses and general operations. The increase in current liabilities is primarily due to the current portion of the $1.0 million convertible note and accrued interest that increased $0.3 million and an increase in accounts payable of $82 thousand. + +**_Cash Flows from Operating Activities_** + +| | Six Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | June 30,| | | | | | | +| | 2024| | | 2023| | | Change| | | %| +Cash used in operating activities| | $| (2,638,425| )| | $| (2,984,039| )| | $| 345,614| | | | (12| )% +Cash provided by (used in) investing activities| | $| 1,259,270| | | $| (2,890,905| )| | $| 4,150,175| | | | (144| )% +Cash provided by (used in) financing activities| | $| (501,667| )| | $| 2,904,527| | | $| (3,406,194| )| | | (117| )% +Cash on hand| | $| 695,594| | | $| 5,446,786| | | $| (4,751,192| )| | | (87| )% + +To date, we have not generated positive cash flows from operating activities. For the six months ended June 30, 2024, net cash flows used in operating activities was $2.6 million, consisting of a net loss of $3.8 million, increased by a gain on change in derivative liabilities of $54 thousand, offset by amortization of debt discount of $0.8 million, loss on settlement of convertible debt of $71 thousand, accrued interest settled with common stock of $19 thousand, stock-based compensation of $183 thousand and increased by a net change in working capital of $85 thousand. For the six months ended June 30, 2023, net cash flows used in operating activities was $3.0 million, consisting of a net loss of $3.2 million, increased by a gain on change in derivative liabilities of $1.7 million, offset by amortization of debt discount of $1.1 million, loss on settlement of convertible debt of $0.4 million, accrued interest settled with common stock of $0.2 million, stock-based compensation of $58 thousand and further reduced by a net change in working capital of $12 thousand. + +**_Cash Flows from Investing Activities_** + +For the six months ended June 30, 2024, we invested in trading marketable securities for $36 thousand and received $1.3 million in proceeds from disposition of marketable securities. For the six months ended June 30, 2023, we invested in trading marketable securities for $3.0 million and received $80 thousand in proceeds from disposition of marketable securities. + +**_Cash Flows from Financing Activities_** + +For the six months ended June 30, 2024, we paid $0.5 million related to payments on a convertible note. For the six months ended June 30, 2023, we received a net of $3.6 million from the sale and issuance of a convertible note payable and warrants and repaid $0.7 million in related party notes payable. + +**Off-Balance Sheet Arrangements** + +We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. + +24 +--- + +**** + +**Critical Accounting Policies and Significant Judgments and Estimates** + +This discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our unaudited condensed consolidated financial statements included elsewhere in this report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. + +Our most critical accounting policies and estimates relate to the following: + +| ● | Research and Development Expenses +---|---|--- +| ● | Fair Value of Derivative Financial Instruments +| ● | Initial Measurement of Equity-Based Warrants + +_Research and Development_ + +Research and development expenses are expensed as incurred and, prior to our initial public offering in September 2022, have historically been offset by contract receivable payments from an NIH SBIR contract that has supported our scientific research. This is stated in the financials as research and development-net of contract expense reimbursements. + +_Fair Value of Financial Instruments_ + +We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities are evaluated at the end of each reporting period. + +For our derivative financial instruments classified as a liability, the Company uses a Monte Carlo valuation model to value the derivative instruments at inception and on subsequent valuation dates. The model requires the use of simulations that are weighted based on significant unobservable inputs including the average volatility of a population set and probabilities assigned. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. The Monte Carlo simulation uses an implied VWAP for valuation. The implied VWAP was backsolved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds and is updated each period. + +The use of Monte Carlo valuation models require key inputs, some of which are based on estimates and judgements by management. Any change to these key inputs could produce significantly higher or lower fair value measurements. + +_Initial Measurement of Equity-Based Warrants_ + +We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as equity, the derivative instrument is initially recorded at its fair value and recorded to additional paid in capital. The classification of derivative instruments, including whether such instruments should be recorded as equity, is evaluated at the end of each reporting period. + +For our derivative financial instruments classified as equity, the Company used a Black Scholes valuation model, to calculate the fair value on issuance date, without revaluation. + +The use of Black Scholes valuation model requires the input of highly subjective assumptions, including the expected price volatility, that is based on an analysis of the historical volatility of the common stock of a group of comparable entities. Any change to these inputs could produce significantly higher or lower fair value measurements. + +25 +--- + +**** + +**Item 3\. Quantitative and Qualitative Disclosures About Market Risk** + +As a “smaller reporting company,” we are not required to provide the information required by this Item. + +**Item 4\. Controls and Procedures** + +Evaluation of Disclosure Controls and Procedures + +Disclosure controls and procedures (as defined in Securities Exchange Act of 1934, as amended, or the Exchange Act Rule 15d-15(e)) are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. + +As of June 30, 2024, our management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Such evaluation was carried out under the supervision of our Chief Executive Officer with the participation of our President and Chief Operating Officer, and our Chief Financial Officer, and our third party financial service provider. Based on this evaluation, management concluded that our disclosure controls and procedures were, and continue to be, ineffective as of June 30, 2024. Based on the foregoing, our management concluded that our internal controls over the following financial reporting areas to be material weaknesses: + +| ● | Our written accounting policies and documentation of management’s contemplation of the accounting treatment and implications over significant unusual transactions, including complex accounting associated with debt and equity transactions, was limited and resulted in ineffective monitoring of financial reporting. These were contributing factors which lead to untimely filings. +---|---|--- +| ● | Due to our size and stage of development, segregation of all conflicting duties may not always be possible and may not be economically feasible. During the reporting period, we lacked sufficient review procedures and segregation of duties such that a proper review had not been performed by someone other than a preparer, including manual journal entries, and that process documentation is lacking for review and monitoring controls over financial statements close process and financial reporting. +| ● | As a result of the Company’s evolution since the date of our initial formation, when we were focused on NIH SBIR research contracts with related costing allocation allowances until when we completed our IPO and continued our development process, management has lacked a formal process to identify and properly classify operating expenses such as R&D. +| ● | We identified findings related to overall information technology general controls including issues with access and segregation of duties for systems supporting the Company’s internal control processes and controls. +| ● | Our accounting policies and oversight regarding certain technical aspects of financial reporting for stock-based compensation transactions, particularly relating to grant date valuations and expense attribution, was also limited and resulted in the incorrect recording of related compensation expense and related disclosures. + +Except as noted below, there has been no change in the Company’s internal control over financial reporting during the three months ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting. Management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional improvements as necessary. + +Management’s Remediation Measures + +The aforementioned material weaknesses were identified in 2023 and 2024 and the ineffective monitoring of financial reporting weaknesses resulted in the Company needing to restate its 2023 and 2022 financial statements. While the Company has improved its organizational capabilities, the Company’s remediation efforts will continue to take place. Management is committed to maintaining a strong internal control environment. In response to the identified material weaknesses in the overall control environment, management is currently implementing additional measures which include: + +● | Hired a new Chief Financial Officer (“CFO”) during the second quarter of 2024 to bolster the Company’s internal technical accounting and financial reporting experience and provide bandwidth for the prior CFO to focus on the Company’s expanding clinical trial. +---|--- +| +● | Engaged a third-party consulting firm to assist with the preparation of SEC reporting and other technical accounting matters. + +The Company will continue to review and improve its internal controls over financial reporting to address the underlying causes of the material weaknesses and control deficiencies. Such material weaknesses and control deficiencies will not be fully remediated until the Company has concluded that its internal controls are operating effectively for a sufficient period of time. + +26 +--- + +**PART II — OTHER INFORMATION** + +**ITEM 1\. LEGAL PROCEEDINGS** + +We are not presently party to any pending or other threatened legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results, although from time to time, we may become involved in legal proceedings in the ordinary course of business. We maintain insurance policies in amounts and with the coverage and deductibles we believe are adequate, based on the nature and risks of our business, historical experience and industry standards. + +**ITEM 1A. RISK FACTORS** + +As a smaller reporting company, we are not required to provide the information required by this item. + +**ITEM 2\. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS** + +None. + +**ITEM 3\. DEFAULTS UPON SENIOR SECURITIES** + +Not Applicable. + +**ITEM 4\. MINE SAFETY DISCLOSURES** + +Not Applicable. + +**ITEM 5\. OTHER INFORMATION** + +**** + +Director and Officer Trading Arrangements. + +None. + +**Item 6\. Exhibits** + +The following exhibits are filed or furnished with this report: + +**Exhibit No.** | | **Description of Exhibit** +---|---|--- +3.1 | | [Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 (File No. 333-265429) filed on June 3, 2022).]() +3.2 | | [Certificate of Amendment to Amended and Restated Certificate of Incorporation, effective March 30, 2022 (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (File No. 333-265429) filed on June 3, 2022).]() +3.3 | | [Certificate of Amendment to Amended and Restated Certificate of Incorporation, effective June 22, 2022 (incorporated by reference to Exhibit 3.5 to the Registration Statement on Form S-1/A (File No. 333-265429) filed on June 23, 2022).]() +3.4 | | [Second Amended and Restated By-Laws (incorporated by reference to Exhibit 3.1 to the current Report on Form 8-K filed on November 1, 2022).]() +3.5 | | [Certificate of Amendment to Amended and Restated Certificate of Incorporation, effective August 13, 2024 (incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K dated filed on August 7, 2024). ]() +4.1 | | [Form of Convertible Note, dated January 11, 2023, issued by Shuttle Pharmaceuticals Holdings, Inc. to Alto Capital Master Fund, SPC – Segregated Master Portfolio B (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed January 12, 2023).]() +4.2 | | [Form of Warrant, dated January 11, 2023, issued by Shuttle Pharmaceuticals Holdings, Inc. to Alto Capital Master Fund, SPC – Segregated Master Portfolio B (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed January 12, 2023).]() +10.1 | | [Employment Agreement, dated June 13, 2024, between Shuttle Pharmaceuticals Holdings, Inc. and Timothy J. Lorber (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed June 18, 2024).]() +10.2 | | [Amendment Agreement, dated August 6, 2024, between Shuttle Pharmaceuticals Holdings, Inc., Shuttle Pharmaceuticals, Inc. and Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 7, 2024).]() +10.3 | | [Work Order, dated August 8, 2024, between Shuttle Pharmaceuticals, Inc. and Theradex Systems, Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 14, 2024).]() +10.4 | | [Master Services Agreement, dated November 1, 2018, between Shuttle Pharmaceuticals, Inc. and Theradex Systems, Inc. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on August 14, 2024).]() +31.1 | | [Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*]() +31.2 | | [Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*]() +32.1 | | [Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**]() +32.2 | | [Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**]() +101.INS | | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. +101.SCH | | Inline XBRL Taxonomy Schema Document +101.CAL | | Inline XBRL Taxonomy Calculation Linkbase Document +101.DEF | | Inline XBRL Taxonomy Definition Linkbase Data +101.LAB | | Inline XBRL Taxonomy Label Linkbase Document +101.PRE | | Inline XBRL Taxonomy Presentation Linkbase Document +104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) + +* Filed herewith. + +**Furnished herewith. + +27 +--- + +**SIGNATURES** + +In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. + +| **SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** +---|--- +| | +September 3, 2024 | By: | _/s/ Anatoly Dritschilo_ +| | Anatoly Dritschilo, M.D. +| | Chief Executive Officer +| | +September 3, 2024 | By: | _/s/ Timothy J. Lorber,_ +| | Timothy J. Lorber Chief Financial Officer + +28 +--- diff --git a/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2024-09-30 (0001493152-24-045176).md b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2024-09-30 (0001493152-24-045176).md new file mode 100644 index 0000000000000000000000000000000000000000..6139400d29e481dd3c3c3ce4cd14292a140c71c7 --- /dev/null +++ b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2024-09-30 (0001493152-24-045176).md @@ -0,0 +1,1184 @@ +**UNITED STATES** + +**SECURITIES AND EXCHANGE COMMISSION** + +**Washington, D.C. 20549** + +**FORM 10-Q** + +(Mark One) + +| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +---|---|--- + +For the quarterly period ended September 30, 2024 + +or + +| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 +---|---|--- + +For the transition period from ______________ to ______________ + +Commission File Number: 001-41488 + +**SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** + +(Exact name of registrant as specified in its charter) + +**Delaware** | | **82-5089826** +---|---|--- +(State or other jurisdiction of | | (I.R.S. Employer +incorporation or organization) | | Identification No.) + +**401 Professional Drive , Suite 260** + +**Gaithersburg , MD 20879** + +(Address of principal executive offices) (Zip Code) + +**** + +**(240) 403-4212** + +(Registrant’s telephone number, including area code) + +N/A + +(Former name, former address and former fiscal year, if changed since last report) + +Securities registered pursuant to Section 12(b) of the Act: + +**Title of each class** | | **Trading Symbol(s)** | | **Name of each exchange on which registered** +---|---|---|---|--- +Common Stock | | SHPH | | The Nasdaq Stock Market LLC + +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ + +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ + +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. + +| Large accelerated filer | ☐ | Accelerated filer | ☐ +---|---|---|---|--- +| Non-accelerated filer | ☒ | Smaller reporting company | ☒ +| | | Emerging growth company | ☒ + +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ + +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ + +The number of shares outstanding of the registrant’s common stock on November 13, 2024 was 3,664,919 + +--- + +--- + +**TABLE OF CONTENTS** + +| | | **Page No.** +---|---|---|--- +| | | +| **PART I. Financial Information** | | +| | | +**Item 1.** | Unaudited Condensed Consolidated Financial Statements | | 3 +| | | +| Unaudited Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 | | 3 +| | | +| Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2024 and 2023 | | 4 +| | | +| Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2024 and 2023 | | 5 +| | | +| Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 | | 6 +| | | +| Notes to Unaudited Condensed Consolidated Financial Statements | | 7 +| | | +**Item 2.** | Management’s Discussion and Analysis of Financial Condition and Results of Operations | | 21 +| | | +**Item 3.** | Quantitative and Qualitative Disclosures About Market Risk | | 27 +| | | +**Item 4.** | Controls and Procedures | | 27 +| | | +| **PART II. Other Information** | | +| | | +**Item 1.** | Legal Proceedings | | 28 +| | | +**Item 1A.** | Risk Factors | | 28 +| | | +**Item 2.** | Unregistered Sales of Equity Securities and Use of Proceeds | | 29 +| | | +**Item 3.** | Defaults Upon Senior Securities | | 29 +| | | +**Item 4.** | Mine Safety Disclosures | | 29 +| | | +**Item 5.** | Other Information | | 29 +| | | +**Item 6.** | Exhibits | | 29 +| | | +| Signatures | | 30 + +2 +--- + +--- + +**PART I. Financial Information** + +**Item 1\. Unaudited Condensed Consolidated Financial Statements** + +**** + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Balance Sheets** + +**(Unaudited)** + +| | September 30,| | | December 31,| +---|---|---|---|---|---|--- +| | 2024| | | 2023| +Assets| | | | | | | | +Current assets| | | | | | | | +Cash and cash equivalents| | $| 156,656| | | $| 2,576,416| +Prepaid expenses| | | 103,040| | | | 114,473| +Marketable securities| | | -| | | | 2,887,215| +Accrued interest income| | | 4| | | | 14,901| +Deferred costs| | | 101,651| | | | -| +Total Current Assets| | | 361,351| | | | 5,593,005| +Property and equipment, net| | | 21,160| | | | 24,827| +Operating lease right-of-use asset| | | 291,057| | | | 333,904| +Total Assets| | $| 673,568| | | $| 5,951,736| +| | | | | | | | +Liabilities and Stockholders’ Equity| | | | | | | | +Current Liabilities| | | | | | | | +Accounts payable and accrued expenses| | $| 1,348,444| | | $| 282,860| +Accounts payable and accrued expenses related party| | | -| | | | 446| +Accounts payable and accrued expenses| | | -| | | | 446| +Accrued interest payable| | | -| | | | 110,453| +Accrued interest payable - related parties| | | 2,137| | | | -| +Accrued interest payable| | | 2,137| | | | -| +Notes payable to related parties| | | 250,000| | | | -| +Convertible notes payable, net| | | -| | | | 595,999| +Operating lease liability| | | 58,652| | | | 52,479| +Total Current Liabilities| | | 1,659,233| | | | 1,042,237| +Convertible notes payable non-current, net| | | -| | | | 135,089| +Derivative liability| | | 74,107| | | | 414,512| +Operating lease liability non-current| | | 255,605| | | | 304,127| +Total Liabilities| | | 1,988,945| | | | 1,895,965| +| | | | | | | | +Stockholders’ Equity (Deficit)| | | | | | | | +Series A Convertible Preferred Stock, $0.00001 par value; $1,000 per share liquidation value; 20,000,000 shares authorized; no shares outstanding| | | -| | | | -| +Common stock, $0.00001 par value; 100,000,000 shares authorized; 2,946,099 and 2,008,689 shares issued and outstanding, respectively| | | 29| | | | 20| +Additional paid in capital| | | 31,664,226| | | | 29,489,055| +Accumulated deficit| | | (32,979,632| )| | | (25,433,304| ) +Total Stockholders’ Equity (Deficit)| | | (1,315,377| )| | | 4,055,771| +Total Liabilities and Stockholders’ Equity (Deficit)| | $| 673,568| | | $| 5,951,736| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +3 +--- + +--- + +**** + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Operations** + +**(Unaudited)** + +| | 2024| | | 2023| | | 2024| | | 2023| +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Three Months Ended| | | Nine Months Ended| +| | September 30,| | | September 30,| +| | 2024| | | 2023| | | 2024| | | 2023| +| | | | | | | | | | | | +Revenue| | $| -| | | $| -| | | $| -| | | $| -| +| | | | | | | | | | | | | | | | +Operating expenses| | | | | | | | | | | | | | | | +Research and development| | | 1,400,564| | | | 1,045,177| | | | 2,632,387| | | | 2,806,644| +General and administrative| | | 328,995| | | | 265,553| | | | 963,642| | | | 730,186| +Legal and professional| | | 1,322,002| | | | 288,416| | | | 2,323,013| | | | 1,072,728| +Total operating expenses| | | 3,051,561| | | | 1,599,146| | | | 5,919,042| | | | 4,609,558| +| | | | | | | | | | | | | | | | +Loss from operations| | | (3,051,561| )| | | (1,599,146| )| | | (5,919,042| )| | | (4,609,558| ) +| | | | | | | | | | | | | | | | +Other income (expense)| | | | | | | | | | | | | | | | +Interest expense - related parties| | | (2,137| )| | | -| | | | (2,137| )| | | (6,825| ) +Interest expense| | | (270,538| )| | | (623,465| )| | | (1,198,738| )| | | (1,952,147| ) +Interest income| | | 2,524| | | | 20,765| | | | 38,135| | | | 56,720| +Finance fee| | | -| | | | -| | | | -| | | | (104,245| ) +Change in fair value of derivative liabilities| | | 286,316| | | | 442,900| | | | 340,405| | | | 2,118,175| +Gain on sale of marketable securities| | | 56,398| | | | -| | | | 100,118| | | | 1,744| +Change in fair value of marketable securities| | | (42,898| )| | | 9,606| | | | (71,568| )| | | 21,134| +Loss on settlement of convertible debt| | | (762,186| )| | | (43,414| )| | | (833,501| )| | | (477,221| ) +Total other income (expense)| | | (732,521| )| | | (193,608| )| | | (1,627,286| )| | | (342,665| ) +| | | | | | | | | | | | | | | | +Net loss attributable to common stockholders| | $| (3,784,082| )| | $| (1,792,754| )| | $| (7,546,328| )| | $| (4,952,223| ) +| | | | | | | | | | | | | | | | +Weighted average common shares outstanding - basic and diluted| | | 2,384,177| | | | 1,969,904| | | | 2,189,366| | | | 1,820,006| +Net loss per shares - basic and diluted| | $| (1.59| )| | $| (0.91| )| | $| (3.45| )| | $| (2.72| ) + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +4 +--- + +--- + +**** + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)** + +**(Unaudited)** + +**_For the Nine Months Ended September 30, 2024_** + +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity (Deficit)| +---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|--- +| | | | | | | | Additional| | | | | | Total| +| | Common Stock| | | Paid in| | | Accumulated| | | Stockholders’| +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity (Deficit)| +| | | | | | | | | | | | | | | +Balance - December 31, 2023| | | 2,008,689| | | $| 20| | | $| 29,489,055| | | $| (25,433,304| )| | $| 4,055,771| +| | | | | | | | | | | | | | | | | | | | +Common stock issued for conversion of accrued interest and principal| | | 78,197| | | | 1| | | | 325,297| | | | -| | | | 325,298| +Common stock issued for restricted stock units| | | 15,625| | | | -| | | | -| | | | -| | | | -| +Stock-based compensation| | | -| | | | -| | | | 111,449| | | | -| | | | 111,449| +Net loss| | | -| | | | -| | | | -| | | | (1,731,031| )| | | (1,731,031| ) +Balance - March 31, 2024| | | 2,102,511| | | | 21| | | | 29,925,801| | | | (27,164,335| )| | | 2,761,487| +| | | | | | | | | | | | | | | | | | | | +Common stock issued for restricted stock units| | | 3,722| | | | -| | | | -| | | | -| | | | -| +Stock-based compensation| | | -| | | | -| | | | 71,162| | | | -| | | | 71,162| +Net loss| | | -| | | | -| | | | -| | | | (2,031,215| )| | | (2,031,215| ) +Balance - June 30, 2024| | | 2,106,233| | | $| 21| | | $| 29,996,963| | | $| (29,195,550| )| | $| 801,434| +| | | | | | | | | | | | | | | | | | | | +Common stock issued for conversion of convertible debt accrued interest and principal| | | 719,148| | | | 7| | | | 1,621,989| | | | -| | | | 1,621,996| +Common stock issued for restricted stock units| | | 5,002| | | | -| | | | -| | | | -| | | | -| +Common stock issued for reverse stock split fractional share round up| | | 115,716| | | | 1| | | | (1| )| | | -| | | | -| +Stock-based compensation| | | -| | | | -| | | | 45,275| | | | -| | | | 45,275| +Net loss| | | -| | | | -| | | | -| | | | (3,784,082| )| | | (3,784,082| ) +Balance - September 30, 2024| | | 2,946,099| | | $| 29| | | $| 31,664,226| | | $| (32,979,632| )| | $| (1,315,377| ) + +**_For the Nine Months Ended September 30, 2023_** + +| | | | | | | | Additional| | | | | | Total| +---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Common Stock| | | Paid in| | | Accumulated| | | Stockholders’| +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity| +| | | | | | | | | | | | | | | +Balance - December 31, 2022| | | 1,700,414| | | | 17| | | $| 26,518,433| | | $| (18,840,581| )| | $| 7,677,869| +| | | | | | | | | | | | | | | | | | | | +Warrants issued for financing costs, net of issuance fees of $8,727| | | -| | | | -| | | | 90,816| | | | -| | | | 90,816| +Common stock issued for conversion of accrued interest and principal| | | 6,375| | | | -| | | | 104,547| | | | -| | | | 104,547| +Stock-based compensation| | | -| | | | -| | | | 8,333| | | | -| | | | 8,333| +Net loss| | | -| | | | -| | | | -| | | | (975,097| )| | | (975,097| ) +Balance - March 31, 2023| | | 1,706,789| | | | 17| | | | 26,722,129| | | | (19,815,678| )| | | 6,906,468| +| | | | | | | | | | | | | | | | | | | | +Common stock issued for conversion of accrued interest and principal| | | 228,489| | | | 2| | | | 2,163,990| | | | -| | | | 2,163,992| +Stock-based compensation| | | -| | | | -| | | | 49,522| | | | -| | | | 49,522| +Net loss| | | -| | | | -| | | | -| | | | (2,184,372| )| | | (2,184,372| ) +Balance - June 30, 2023| | | 1,935,278| | | $| 19| | | $| 28,935,641| | | $| (22,000,050| )| | $| 6,935,610| +Balance| | | 1,935,278| | | $| 19| | | $| 28,935,641| | | $| (22,000,050| )| | $| 6,935,610| +| | | | | | | | | | | | | | | | | | | | +Common stock issued for conversion of convertible debt accrued interest and principal| | | 62,761| | | | 1| | | | 429,309| | | | -| | | | 429,310| +Common stock issued for restricted stock units| | | 1,876| | | | -| | | | -| | | | -| | | | -| +Stock-based compensation| | | -| | | | -| | | | 37,583| | | | -| | | | 37,583| +Net loss| | | -| | | | -| | | | -| | | | (1,792,754| )| | | (1,792,754| ) +Balance - September 30, 2023| | | 1,999,915| | | $| 20| | | $| 29,402,533| | | $| (23,792,804| )| | $| 5,609,749| +Balance| | | 1,999,915| | | $| 20| | | $| 29,402,533| | | $| (23,792,804| )| | $| 5,609,749| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +**** + +5 +--- + +--- + +**** + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Cash Flows** + +**(Unaudited)** + +****| **** | **2024**| ****| **** | **2023**| **** +---|---|---|---|---|---|--- +****| **** | **Nine Months Ended**| **** +****| **** | **September 30,**| **** +****| **** | **2024**| ****| **** | **2023**| **** +| | | | | | +CASH FLOWS FROM OPERATING ACTIVITIES:| | | | | | | | +Net loss| | $| (7,546,328| )| | $| (4,952,223| ) +Adjustments to reconcile net loss to net cash used in operating activities:| | | | | | | | +Depreciation| | | 3,667| | | | 4,828| +Change in fair value of derivative liabilities| | | (340,405| )| | | (2,118,175| ) +Amortization of debt discount and finance fees| | | 1,079,444| | | | 1,654,724| +Gain on marketable securities| | | (100,118| )| | | (1,744| ) +Change in fair value of marketable securities| | | 71,568| | | | (21,134| ) +Accrued interest settled with common stock| | | 54,670| | | | 294,927| +Loss on settlement of convertible debt| | | 833,501| | | | 477,221| +Stock-based compensation| | | 227,886| | | | 95,438| +Changes in operating assets and liabilities:| | | | | | | | +Accrued interest income| | | 14,897| | | | (12,435| ) +Prepaid expenses| | | 11,433| | | | (8,956| ) +Accounts payable and accrued expenses| | | 1,065,584| | | | 63,255| +Accounts payable and accrued expenses - related parties| | | (446| )| | | (12,500| ) +Accrued interest payable| | | (15,056| )| | | 106,578| +Accrued interest payable - related parties| | | 2,137| | | | (98,135| ) +Change in operating lease asset and liability| | | 498| | | | 9,358| +Net cash used in operating activities| | | (4,637,068| )| | | (4,518,973| ) +CASH FLOWS FROM INVESTING ACTIVITIES:| | | | | | | | +Investment in marketable securities| | | (43,587| )| | | (2,977,714| ) +Proceeds from disposition of marketable securities| | | 2,959,352| | | | 80,000| +Purchase of equipment| | | -| | | | (19,046| ) +Net cash used in investing activities| | | 2,915,765| | | | (2,916,760| ) +CASH FLOWS FROM FINANCING ACTIVITIES:| | | | | | | | +Proceeds from note payable-related party| | | 250,000| | | | -| +Repayment of note payable-related party| | | -| | | | (685,473| ) +Proceeds from convertible notes payable and warrants| | | -| | | | 3,935,000| +Payment for finance costs related to convertible note payable| | | -| | | | (345,000| ) +Payment for finance costs| | | (101,651| )| | | -| +Payment of convertible note payable| | | (846,806| )| | | -| +Net cash provided by financing activities| | | (698,457| )| | | 2,904,527| +Net change in cash and cash equivalents| | | (2,419,760| )| | | (4,531,206| ) +Cash and cash equivalents, beginning of period| | | 2,576,416| | | | 8,417,203| +Cash and cash equivalents, end of period| | $| 156,656| | | $| 3,885,997| +Cash paid for:| | | | | | | | +Interest| | $| 79,682| | | $| 102,373| +Income taxes| | $| -| | | $| -| +Supplemental non-cash financing activities:| | | | | | | | +Common stock issued for settlement of debt| | $| 1,947,294| | | $| 2,697,849| +Warrants issued for financing fees, net of issuance fees of $0 and $8,727, respectively| | $| -| | | $| 90,816| +Initial recognition of right of use asset and liability| | $| -| | | $| 365,556| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +6 +--- + +--- + +**** + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Notes to Unaudited Condensed Consolidated Financial Statements** + +**September 30, 2024** + +**Note 1 – Organization and Liquidity** + +**_Organization and Line of Business_** + +Shuttle Pharmaceuticals Holdings, Inc. (“we,” “us,” “our,” or the “Company”) was originally formed as Shuttle Pharmaceuticals, LLC in the State of Maryland on December 18, 2012. On August 12, 2016, the Company filed articles of conversion with the State of Maryland to convert from an LLC to a C corporation, at which time the Company changed its name to Shuttle Pharmaceuticals, Inc. (“Shuttle”). In connection with the conversion the Company issued 5,625,000 shares of common stock in exchange for 100% of the outstanding membership interests in Shuttle prior to conversion. On June 4, 2018, Shuttle completed a reverse merger with Shuttle Pharmaceuticals Holdings, Inc. (then known as Shuttle Pharma Acquisition Corp, Inc.), a Delaware corporation, pursuant to which Shuttle, our operating entity, became a wholly-owned subsidiary of the Company. All share numbers referenced herein reflect a 1-for-8 reverse split of our common stock on a post-split basis, which was effective as of August 13, 2024 (see Note 2). + +The Company’s primary purpose is to develop and commercialize unique drugs for the sensitization of cancers and protection of normal tissues, with the goal of improving outcomes for cancer patients receiving radiation therapy. Shuttle has deployed its proprietary technology to develop novel cancer immunotherapies, producing a pipeline of selective HDAC inhibitors for cancer and immunotherapy applications. The Company’s HDAC platform is designed to target candidate molecules with potential roles in therapeutics beyond cancer, including autoimmune, inflammatory, metabolic, neurological and infectious diseases. The Company’s Ropidoxuridine product, which is used with radiation therapy to sensitize cancer cells, was initially funded by a Small Business Innovation Research (“SBIR”) contract provided by the National Cancer Institute (“NCI”), a unit of the National Institutes of Health (“NIH”). Ropidoxuridine has been further developed though the Company’s collaborations with scientists at the University of Virginia for use in combination with proton therapy to improve patient survival. Historically, and prior to the Company’s initial public offering in September 2022, the Company has obtained funding to develop products through NIH grants, including a product to predict late effects of radiation with metabolite biomarkers and develop prostate cancer cell lines in health disparities research. + +The production and marketing of the Company’s products and its ongoing research and development activities will be and are subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any products or combination of products developed by the Company must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the Food and Drug Administration (“FDA”) under the Food, Drug and Cosmetic Act. There can be no assurance that the Company will not encounter problems in its clinical trials that will cause the Company or the FDA to delay or suspend the clinical trials. + +The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and in other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company now or in the future. + +**_Liquidity and Going Concern_** + +Our unaudited condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception and has a net loss of approximately $7.5 million and no revenues for the nine months ended September 30, 2024 and has a working capital deficit of approximately $1.3 million as of September 30, 2024. The Company does not expect to generate positive cash flows from operating activities in the near future. + +7 +--- + +--- + +In September 2024, the Company’s CEO provided $250 thousand to the Company in exchange for a promissory note repayable in equal monthly installments of principal and interest over a term of one year. In October 2024, the Company completed an offering of senior secured convertible bridge notes, receiving $790 thousand in cash. The notes have a term of one-year and were accompanied by 329,461 warrants with a weighted-average exercise price of $1.42. Also in October 2024, the Company completed an equity raise that provided $3.9 million net cash for the issuance of 2.9 million shares / pre-funded warrants, and by 2.9 million warrants with an exercise price of $1.40. However, the Company’s existing cash resources and the cash received from the equity offering and senior convertible note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months. + +The Company’s capital raises have to date supported operations, the manufacture of drug product and FDA approval of the IND for the Phase II clinical trial of Ropidoxuridine and radiation therapy in glioblastoma and other radiation sensitizer discovery and therapy. The FDA recommended and the Company agreed to an expansion of the Phase II clinical trial, necessitating additional capital to complete the trial as well as fund ongoing operations. Additionally, the Phase II clinical trial of Ropidoxuridine has evolved with finalized agreements with all six of the planned site enrollment locations to administer the Phase II clinical trial of Ropidoxuridine and the enrollment of the first three patients. + +The ability of the Company to continue as a going concern is dependent upon its ability to continue to successfully raise additional equity or debt financing to allow it to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued. + +The accompanying unaudited condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company is unable to continue as a going concern. + +**Note 2 – Summary of Significant Accounting Policies** + +**_Basis of Presentation_** + +The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and notes required by GAAP for annual financial statements. A complete discussion of the Company’s significant accounting policies is included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023. + +In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all of the adjustments necessary to present the financial position of the Company as of September 30, 2024 and the results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements of the Company have not been audited by the Company’s independent registered public accounting firm, except that the year-end consolidated balance sheet was derived from audited financial statements. The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the restated financial statements and related notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K/A filed with the SEC on September 4, 2024. + +**_Reverse Stock Split_** + +On August 13, 2024, in order to meet Nasdaq’s minimum bid price requirement of $1.00 per share (the “Minimum Bid Price Requirement”), the Company effectuated a 1-for-8 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares (the “Reverse Stock Split”). The Reverse Stock Split had no effect on the Company’s authorized shares of common stock or preferred stock and the par value will remain unchanged at $0.00001, respectively. All common stock share, option, warrant and per share amounts (except our authorized but unissued shares and previously reserved shares) have been retroactively adjusted in these financial statements and related disclosures. + +8 +--- + +--- + +**_Basis of Consolidation_** + +The unaudited condensed consolidated financial statements have been prepared on a consolidated basis with those of the Company’s wholly-owned subsidiaries, Shuttle Pharmaceuticals, Inc. and Shuttle Diagnostics Inc. All intercompany transactions and balances have been eliminated. + +**_Correction of an Immaterial Error in the Prior Period Financial Statements_** + +During the fourth quarter of 2023, the Company determined that the prior year consolidated financial statements had a misstatement caused by an immaterial classification error of certain research and development expenses in accordance with Accounting Standards Codification (“ASC”) 730. As a result, certain prior year amounts have been corrected for consistency with the current year presentation. The Company assessed the materiality of this change in presentation on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” (ASC Topic 250, Accounting Changes and Error Corrections). Based on this assessment, the Company concluded that these error corrections in its unaudited condensed consolidated statements of operations are not material to any previously presented financial statements based upon overall considerations of both quantitative and qualitative factors. The corrections had no impact on the unaudited condensed consolidated balance sheet, unaudited condensed consolidated statements of cash flows, or unaudited condensed consolidated statement of changes in stockholders’ equity, to these financial statements, or for any previously presented interim or annual financial statements. Further, the corrections did not result in a change in quarterly or year-to-date operating losses, basic or diluted earnings per share, or working capital. The quarterly correction required for the three and nine months ended September 30, 2023 was $95,129 and $277,844, respectively. Accordingly, the Company corrected the previously reported immaterial error for the three and nine months ended September 30, 2023 in this Quarterly Report on Form 10-Q. + +Schedule of the Error Correction + +| | September 30, 2023| | | Correction| | | Corrected +September 30, 2023| +---|---|---|---|---|---|---|---|---|--- +Research and development expense| | $| 3,084,488| | | $| (277,844| )| | $| 2,806,644| +General and administrative expense| | | 452,342| | | | 277,844| | | | 730,186| +Net Loss| | $| 3,536,830| | | $| -| | | $| 3,536,830| + +**_Use of Estimates_** + +The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates are contained in the accompanying unaudited condensed consolidated financial statements for the recognition of research and development expenses, valuation of warrants and valuation of bifurcated derivative liabilities and other financial instruments. + +9 +--- + +--- + +**_Cash and Cash Equivalents_** + +Cash and cash equivalents include cash in bank accounts and money market funds with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. As of September 30, 2024 and December 31, 2023, cash and cash equivalents consisted of the following: + +Schedule of Cash and Cash Equivalents + +| | September 30,| | | December 31,| +---|---|---|---|---|---|--- +| | 2024| | | 2023| +Cash| | $| 155,652| | | $| 1,550,098| +Money market funds| | | 1,004| | | | 1,026,318| +Total cash and cash equivalents| | $| 156,656| | | $| 2,576,416| + +Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of September 30, 2024 was $0. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. + +**_Marketable Securities_** + +Our investments in debt securities are carried at fair value. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading of debt securities are charged to income. + +The marketable securities held by the Company, which are classified as trading marketable securities, consisted of an outstanding balance of $0 and $2.9 million as of September 30, 2024 and December 31, 2023, respectively. During the three months ended September 30, 2024 and 2023, the Company recognized interest income of $2,524 and $20,765, realized gains of $56,398 and $0, and unrealized losses of $42,898 and unrealized gains of $9,606, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized interest income of $38,135 and $56,720, realized gains of $100,118 and $1,744, and unrealized loss of $71,568 and unrealized gain of $21,134, respectively. + +**_Fair Value of Financial Instruments_** + +The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair Value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments: + +| ● | Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments. +---|---|--- +| | +| ● | Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace. +| | +| ● | Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation. + +Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires the Company to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded, may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange. + +10 +--- + +--- + +The carrying amounts of the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. + +Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of September 30, 2024 and December 31, 2023: + +Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis + +September 30, 2024| | Level 1| | | Level 2| | | Level 3| | | Carrying Value| +---|---|---|---|---|---|---|---|---|---|---|---|--- +Assets| | | | | | | | | | | | | | | | +Marketable Securities:| | | | | | | | | | | | | | | | +United States Treasury Bonds| | $| -| | | $| -| | | $| -| | | $| -| +Total Assets| | $| -| | | $| -| | | $| -| | | $| -| +Liabilities| | | | | | | | | | | | | | | | +Derivative Liability - Warrants| | $| -| | | $| -| | | $| 74,107| | | $| 74,107| +Derivative Liability - Accelerated feature| | | -| | | | -| | | | -| | | | -| +Total Liabilities| | $| -| | | $| -| | | $| 74,107| | | $| 74,107| + +December 31, 2023| | Level 1| | | Level 2| | | Level 3| | | Carrying Value| +---|---|---|---|---|---|---|---|---|---|---|---|--- +Assets| | | | | | | | | | | | | | | | +Marketable Securities:| | | | | | | | | | | | | | | | +United States Treasury Bonds| | $| 2,887,215| | | $| -| | | $| -| | | $| 2,887,215| +Total Assets| | $| 2,887,215| | | $| -| | | $| -| | | $| 2,887,215| +Liabilities| | | | | | | | | | | | | | | | +Derivative Liability - Warrants| | $| -| | | $| -| | | $| 410,660| | | $| 410,660| +Derivative Liability - Accelerated feature| | | -| | | | -| | | | 3,852| | | | 3,852| +Derivative Liability| | | -| | | | -| | | | 3,852| | | | 3,852| +Total Liabilities| | $| -| | | $| -| | | $| 414,512| | | $| 414,512| + +**_Derivative Financial Instruments_** + +The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. For our liability classified derivative financial instruments, the Company used a Monte Carlo valuation model to value the derivative instruments at inception and on subsequent valuation dates. For our equity classified derivative financial instruments, we used a Black-Scholes option-pricing model at the grant date to value the derivative instrument. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the unaudited condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date. + +**_Warrants_** + +The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, _Distinguishing Liabilities from Equity_ (“ASC 480”) and ASC 815, _Derivatives and Hedging_ (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. + +11 +--- + +--- + +For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed consolidated statements of operations. The fair value of the warrants is estimated using a Black-Scholes pricing model or a Monte Carlo simulation. + +**_Research and Development Expenses_** + +Research and development expenses are charged to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, which include a certain portion of our chief executive officer, chief operating officer, chief financial officer and directors’ compensation. For the three and nine months ended September 30, 2024 and 2023, a portion of personnel-related expenses and stock-based compensation expense for these individuals totaling $0.1 million and $0.4 million, respectively, and $0.1 million and $0.7 million, respectively, was included within research and development due to their active involvement in the research and development activities, materials, supplies, related subcontract expenses, and consulting costs. In June 2024, the Company recruited a new chief financial officer who is substantially devoted to administrative functions and our then existing chief financial officer, who also handled research and development compliance functions, transitioned to substantially research and development functions. + +Regarding the accounting treatment for reimbursements, GAAP provides limited guidance on the accounting for government grants received by for-profit companies. In accordance with ASC Topic 832, _Government Assistance_ , as adopted January 1, 2022, we disclose certain types of government assistance received in the notes to the consolidated financial statements that includes: a) the nature of the transaction including the nature of the assistance being given, b) the accounting policies being used to account for the transaction and c) other provisions of relevance, where required. Depending on the type of grant or contract, we understand there is more than one acceptable alternative for the accounting treatment – a reduction of costs, a deferred credit to be amortized, revenue or other income. The Company has concluded that reimbursements received for R&D expenses incurred, are more akin to a reduction of costs and applies reimbursements against incurred research costs. There were no reimbursements received for the three and nine months ended September 30, 2024 and 2023. + +**_Net Loss Per Common Stock_** + +Net loss per share of common stock requires presentation of basic earnings per share on the face of the unaudited condensed consolidated statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying unaudited condensed consolidated financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive. + +The dilutive effect of restricted stock units subject to vesting and other stock-based payment awards is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting shares of common stock are included in the denominator of the diluted calculation for the entire period being presented. + +12 +--- + +--- + +For the nine months ended September 30, 2024 and 2023, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive. + +Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share + +| | September 30,| | | September 30,| +---|---|---|---|---|---|--- +| | 2024| | | 2023| +Convertible notes (Note 5)| | | -| | | | 137,729| +Warrants (Note 6)| | | 184,000| | | | 184,000| +Restricted stock units (Note 6)| | | 41,338| | | | 21,006| +| | | 225,338| | | | 342,735| + +**_Deferred Offering Costs_** + +Pursuant to ASC 340-10-S99-1, costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of an offering as a reduction of additional paid-in capital. Deferred offering costs may consist of underwriting, legal, accounting, and other expenses incurred through the balance sheet date that are directly related to a proposed public offering. Should the proposed public offering prove to be unsuccessful, any deferred costs, as well as additional expenses to be incurred, will be expensed. + +**_Recent Accounting Pronouncements_** + +In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting Topic 280, “Segment Reporting-Improvements to Reportable Segment Disclosures,” which allows disclosure of one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires enhanced disclosures of significant segment expenses and other segment items, as well as incremental qualitative disclosures on both an annual and interim basis. This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting periods after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The adoption of this new guidance is not expected to have a significant impact on our consolidated financial statements. + +In December 2023, the FASB issued ASU No. 2023-09, Income Taxes Topic 740, “Income Tax-Improvements to Income Tax Disclosures,” which requires enhanced disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is effective for annual reporting periods beginning after December 15, 2024. Early adoption is permitted and should be applied on a prospective basis, however retrospective application is permitted. The Company is currently evaluating the impact of adopting this guidance on its consolidated and condensed financial statements and disclosures included within notes to consolidated and condensed financial statements. + +**Note 3 – Leases** + +Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the present value of the future lease payments as of the lease commencement date. Operating lease expense is recognized on a straight-line basis over the lease term. + +During the nine months ended September 30, 2023, the Company had a lease agreement which allowed for the use of a laboratory facility for a monthly payment of $6,480. The laboratory lease commenced on October 1, 2018 and expired on October 31, 2023. + +The Company currently has a lease agreement which allows for the use of a laboratory facility, entered into on February 16, 2023, with base rent of $7,206 per month for a period of 64 months, which increases at the rate of 3% per year, that commenced June 1, 2023. The lease included a six-month 50% rent abatement upon commencement. Additional common area maintenance (“CAM”) fees are charged monthly and revised annually. The estimated monthly CAM fees are $3,300 per month for the first year of the lease, which are being expensed as incurred. An irrevocable letter of credit (“LOC”) for the security deposit of $43,234 and base rent of $3,891, including 50% abatement, and $3,315 of CAM cost, was due and paid on execution of the lease agreement. Alexandria Real Estate (ARE-QRS-CORP) is the beneficiary of the LOC, and the expiry date of the LOC is March 1, 2025. + +13 +--- + +--- + +The following summarizes the ROU lease expense components and cash flow information for the Company’s operating leases: + +Schedule of Right-of Use Asset and Lease Information about Operating Lease + +| | 2024| | | 2023| | | 2024| | | 2023| +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Three Months Ended| | | Nine Months Ended| +| | September 30,| | | September 30,| +| | 2024| | | 2023| | | 2024| | | 2023| +Operating lease cost| | $| 22,947| | | $| 40,491| | | $| 68,841| | | $| 83,230| +Variable lease cost| | | 10,440| | | | 10,408| | | | 30,817| | | | 13,723| +Sublease income| | | (2,163| )| | | (2,135| )| | | (6,489| )| | | (6,377| ) +Total lease cost| | $| 31,224| | | $| 48,764| | | $| 93,169| | | $| 90,576| +Cash paid for operating cash flows from operating leases| | $| 23,156| | | $| 31,113| | | $| 68,345| | | $| 73,884| +Right-of-use assets obtained in exchange for new operating lease liability| | $| -| | | $| -| | | $| -| | | $| 365,556| + +Supplemental balance sheet information related to operating leases was as follows: + +Schedule of Balance Sheet Information Related to Operating Leases + +| | September 30,| | | December 31,| +---|---|---|---|---|---|--- +| | 2024| | | 2023| +Weighted-average remaining lease term (year)| | | 3.92| | | | 4.67| +Weighted-average discount rate| | | 10.48| %| | | 10.48| % + +Future non-cancelable minimum lease payments under the operating lease liability as of September 30, 2024, are as follows: + +Schedule of Future Non-cancelable Minimum Lease Payments Under Operating Lease Liability + +Years Ended December 31,| | | +---|---|---|--- +2024 (excluding the nine months ended September 30, 2024)| | $| 23,156| +2025| | | 94,247| +2026| | | 97,074| +2027| | | 99,986| +2028| | | 68,235| +Total future minimum lease payments| | $| 382,698| +Less imputed interest| | | (68,441| ) +Present value of payments| | $| 314,257| + +**Note 4 – Notes Payable-Related Party** + +On September 4, 2024, the Company issued a $250,000 promissory note (the “Promissory Note”) to an officer of the Company for $250,000. The Promissory Note accrues interest at 12% per annum and is repayable in 12 substantially equal installments over a period of one year. During the three and nine months ended September 30, 2024 the Company incurred $2,137 and $2,137, respectively, in interest expense relating to this Promissory Note. During the three and nine months ended September 30, 2024 the Company did not pay any principal or accrued interest. + +On December 1, 2020, the Company consolidated all of the outstanding loans owed to an officer of the Company and to his spouse, resulting in the following two loans: (i) a single loan from the spouse of an officer of the Company, dated December 1, 2020, with a principal balance of $426,243, bearing interest at the rate of 7.5% per annum, with a maturity date of December 31, 2021; and (ii) a single loan owed to an officer of the Company in the principal amount of $139,229, bearing interest at the rate of 7.5% per annum, with a maturity date of December 31, 2021. In December of 2021, the maturity dates of these loans were further extended to June 30, 2022. In July of 2022, the notes were extended to June 30, 2023. + +14 +--- + +--- + +On June 21, 2021, the Company entered into a loan from the spouse of an officer of the Company in the amount of $120,000 (principal) with an interest rate of 7.5% per annum due June 21, 2022. In July of 2022, the loan was extended to June 30, 2023. + +During the three and nine months ended September 30, 2023 the Company incurred $0 and $6,825, respectively, in interest expense for the related party notes payable with maturity dates on June 30, 2023. During the three and nine months ended September 30, 2023 principal payments of $0 and $685,473, respectively, and accrued interest of $0 and $102,373 were paid, respectively, on notes to these related parties. The principal and accrued interest for these notes were fully paid by December 31, 2023. + +**Note 5 – Convertible Notes** + +**_Alto Opportunity Master Fund, SPC_** + +On January 11, 2023, the Company entered into a securities purchase agreement (the “SPA”) with Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B, a Cayman entity (the “Investor”), pursuant to which the Company sold to the Investor a $4,300,000 convertible note (the “Alto Convertible Note”) and warrant (the “Warrant”) to purchase 127,260 shares of common stock, exercisable at $1.93 per share, as adjusted, in exchange for gross proceeds of $3,935,000 (the “Investment Amount”) (See Note 7). The Company determined that the Warrant contains a net cash settlement feature at inception and categorized the Warrant as a liability in the accompanying unaudited condensed consolidated financial statements. The Alto Convertible Note matures on March 11, 2025, but may be extended at the option of the noteholder. The Alto Convertible Note amortizes on a monthly basis and the Company can make such monthly amortization payments in cash or, subject to certain equity conditions, in registered shares of common stock or a combination thereof. Installments may be deferred by the noteholder, resulting in a variable interest rate. However, the effective interest rate is approximately 214% based on the internal rate of return calculated on a series of cash flows that occur at regular intervals. For equity repayment, the Alto Convertible Note is convertible into shares of common stock at a price per share equal to the lower of (i) $18.80, (ii) 90% of the three lowest daily VWAPs of the 15 trading days prior to the payment date, or (iii) 90% of the VWAP of the trading day prior to payment date. The noteholder may convert at any time at a fixed price of $18.80 per share. The noteholder has an acceleration of installment amount conversion option (the “Acceleration Option”), whereby the noteholder, with certain share percentage limitations, can convert to common stock any outstanding installment amount at an amount equal to the installment amount plus five times (5x) the installment amount at any time. The Company has determined the Acceleration Option is an embedded derivative within the host instrument and has bifurcated it from the host instrument and recorded it as a derivative liability valued at $1,442,000 at inception, using a Monte Carlo simulation model (Note 7). The Convertible Note is repayable over 26 months and bears interest at the rate of 5% per annum. Additionally, the note contains certain redemption options and “Make Whole” provisions. + +In conjunction with entry into the SPA, the Company entered into a series of related agreements, including a security agreement (the “Security Agreement”), an intellectual property security agreement (the “IP Security Agreement”) and a subsidiary guaranty (the “Subsidiary Guaranty”). The security agreements and guaranty allow, among other things, for the Investor to have a security interest in and place a lien on all of the Company’s assets and intellectual property until such time as the Alto Convertible Note is paid off. In addition, the SPA called for the Company to enter into a springing deposit account control agreement (the “Springing DACA”), which, in the event the Company defaults on its repayment of the Alto Convertible Note, would allow the Investor to assume control of the Company’s bank account only with regard to any funds remaining outstanding under the Alto Convertible Note. As such, in conjunction with entry into the SPA, the Company established a separate bank account in which it deposited the Investment Amount and pursuant to which the Company, the Investor and the bank holding the Investment Amount, First Republic Bank, entered into the Springing DACA agreement. As the Investment Amount had been held at First Republic Bank, in light of certain banking crises then affecting smaller banks, on March 12, 2023, the Company and the Investor moved the Investment Amount from First Republic Bank, after which time the Springing DACA was no longer in effect. Further, pursuant to amendments to the SPA entered into in May and June of 2023, the Company and the Investor agreed that all of the Investment Amount would be released to the Company and the relevant provision of the SPA which required the Springing DACA would no longer be deemed applicable. In addition, the Company granted the Investor the option to purchase up to an additional $10.0 million in convertible notes and warrants on substantially the same terms as the Alto Convertible Note and Warrant, excluding the Springing DACA requirement, with such option to be effective through December 31, 2025. The agreement offers the investor an opportunity to participate in future capital raises at substantially similar terms as the January 11, 2023 agreement. The Company expects that such subsequent convertible notes and warrants would be issued on substantially similar terms as the January 11, 2023 initial agreement, as amended, thus providing the Company the opportunity to negotiate certain aspects of the agreement. + +15 +--- + +--- + +Boustead Securities, LLC (“Boustead”) served as a placement agent for the Alto Convertible Note and Warrant offering and received $345,000 cash compensation and a warrant to purchase 8,909 shares of common stock, exercisable at $18.80 per share. The Boustead warrant was determined to be an equity instrument valued on a non-recurring basis. The Company used the Black Scholes valuation model using a term of five years, volatility of 110%, a risk-free rate of 3.53% for a value of $99,543. + +The Company allocated the finance costs related to the Boustead placement agent fee of $345,000, based on the relative fair market values of the Convertible Note and warrants issued. The allocation of the financing costs applied $232,027 to the debt component as a debt discount that is being amortized to interest expense over the term of the Convertible Note, $104,245 to the warrant derivative liability component, expensed as a finance fee, and $8,727 to the equity warrant as a reduction in additional paid in capital. + +The Company allocated to the debt component of the note an original discount of $300,000, legal fees of $65,000, $215,000 for additional interest fees on day one added to note principal, $1,442,000 for the accelerated conversion feature, and $1,288,543 for the fair value of warrants, resulting in an additional $3,310,543 debt discount that is being amortized to interest expense over the term of the Alto Convertible Note. + +On August 6, 2024, the Company entered into an amendment to the SPA with Alto. Under the Amendment Agreement, the Company and Alto agreed as follows: (i) that the Company would pay $600,000 (the “Cash Collateral”) in cash by wire transfer of immediately available funds to Alto, which would be held as collateral on the remaining $1.2 million outstanding under the Alto Note; (ii) Alto will defer the monthly installment payment due on September 3, 2024 under the Alto Note until the Alto Note’s March 11, 2025 maturity date; and (iii) Alto would grant a waiver of any default Section 4(a)(xvi) of the Note related to the restatement and reaudit of the Company’s financial statements for the years ended December 31, 2022 and 2023. The amendment was accounted for as a troubled debt restructuring as the Company determined it was experiencing financial difficulties and was provided a concession through the deferral of one monthly principal and interest payment. As the future undiscounted cash flows exceeded the carrying value of the Alto Convertible Note, the Company did not recognize any gain or loss associated with the troubled debt restructuring. + +During the three and nine months ended September 30, 2024, the Company recorded interest expense of $270,538 and $1,198,738, respectively, which included amortization of debt discount as interest expense of $247,430 and $1,079,444, respectively. During the three and nine months ended September 30, 2024, the Company settled $1,172,850 and $1,408,050 of principal, and $35,888 and $54,670 of accrued interest, which settlements were made in the form of 719,148 and 797,345 shares of common stock. During the three months ended September 30, 2024, the Company also paid $345,139 of principal and $22,724 of accrued interest for a total of $367,863. During the nine months ended September 30, 2024, the Company paid $846,806 of principal and $79,682 of accrued interest for a total of $926,488. In relation to the settlements described above, the Company recognized a loss on settlement of convertible debt of $762,186 and $833,501 for the three and nine months ended September 30, 2024. + +During the three and nine months ended September 30, 2023, the Company recorded interest expense of $623,465 and $1,952,147 respectively, which included amortization of debt discount as interest expense of $538,302 and $1,550,479 respectively. During the three and nine months ended September 30, 2023, the Company settled $331,800 and $1,925,700 of principal, respectively, and settled $54,096 and $294,927, respectively, of accrued interest, which settlements were made in the form of 62,761 and 297,625 shares of common stock, respectively, during the three and nine months ended September 30, 2023. + +As of September 30, 2024, the outstanding principal, debt discount and net carry value for the convertible note was $0. + +16 +--- + +--- + +**Note 6 – Stockholders’ Equity** + +**_Common Stock_** + +During the three and nine months ended September 30, 2024, the Company issued: + +| ● | 719,148 and 797,345 shares of common stock to settle $1,172,850 and $1,408,050 of principal and $35,888 and $54,670 of interest on a convertible note and incurred $762,186 and $833,501 of loss on settlement, respectively. +---|---|--- +| ● | 5,002 and 24,349 shares of common stock issued for vesting of restricted stock units, respectively. +| ● | 115,716 shares of common stock issued for the round up of reverse split fractional shares. + +During the three and nine months ended September 30, 2023, the Company issued: + +| ● | 62,761 and 297,625 shares of common stock to settle $331,800 and $1,925,700 of principal and $54,096 and $294,927 of interest, respectively, on a Convertible Note and incurred $43,414 and $477,221 of loss on settlement, respectively. +---|---|--- +| ● | 1,876 and 1,876 shares of common stock issued for vesting of restricted stock units. + +**_Warrants_** + +In connection with the January 2023 Alto Convertible Note, Boustead was granted warrants to purchase 8,909 shares of common stock, at an exercise price of $18.80 per share (Note 5). Effective with the recent reverse split, the exercise price was adjusted to $1.93 per share, as provided for in the underlying agreement. In addition, Alto was granted warrants to purchase 127,260 shares of common stock, at an exercise price of $1.93 per share, as adjusted (Note 5, 7). + +A summary of activity regarding all warrants issued for the nine months ended September 30, 2024 were as follows: + +Schedule of Warrants Activity + +| | Number of| | | Weighted Average| | | Average| +---|---|---|---|---|---|---|---|---|--- +| | warrants| | | Exercise Price| | | Life (years)| +Outstanding, December 31, 2023| | | 184,000| | | $| 23.20| | | | 2.77| +Granted| | | -| | | | -| | | | -| +Outstanding, September 30, 2024| | | 184,000| | | $| 11.54| | | | 2.04| + +The intrinsic value of the warrants as of September 30, 2024 is $0. All of the outstanding warrants are exercisable as of September 30, 2024. + +**_Equity Incentive Plan_** + +Our 2018 Equity Incentive Plan (the “2018 Plan”) provides for equity incentives to be granted to our employees, executive officers, directors and key advisers and consultants. Equity incentive grants may be made in the form of stock options with an exercise price of not less than the fair market value of the underlying shares as determined pursuant to the 2018 Equity Incentive Plan, restricted stock awards, other stock-based awards, or any combination of the foregoing. The 2018 Equity Incentive Plan is administered by the Company’s compensation committee. We have reserved 3,000,000 shares of our common stock for issuance under the 2018 Equity Incentive Plan. As of September 30, 2024, 125,734 shares have been granted under the 2018 Equity Incentive Plan, of which 84,396 shares have vested. + +**_Restricted Stock Units_** + +We may grant restricted stock units (“RSU”) under our 2018 Plan. RSUs are bookkeeping entries representing an amount equal to the fair market value of one share of our common stock. Subject to the provisions of our 2018 Plan, the administrator determines the terms and conditions of RSUs, including the vesting criteria and the form and timing of payment. Notwithstanding the foregoing, the administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. RSUs granted typically vest annually in one third increments from the date of appointment. + +During the three and nine months ended September 30, 2024 and 2023, pursuant to agreements with officers and consultants, 0 and 53,455, respectively and 12,500 and 19,916 RSUs, respectively with a value of $0 and $141,840, respectively, and $196,000 and $291,400, respectively, were granted and compensation expense for RSUs of $45,275 and $227,886, and $37,583 and $95,438 respectively, was incurred. During the three and nine months ended September 30, 2024 and 2023, $13,033 and $60,019, respectively, and $0 and $41,190, respectively was included in compensation under Research and Development. + +17 +--- + +--- + +As of September 30, 2024, there was $145,504 of unrecognized RSU compensation cost related to non-vested stock-based compensation arrangements which is expected to be recognized over a weighted-average period of 2.14 years. + +A summary of activity regarding the Restricted Stock Units issued follows: + +Schedule of Restricted Stock Units (RSUs) + +| | Number of RSU| | | Weighted Average Fair Value Per RSU| +---|---|---|---|---|---|--- +Outstanding, December 31, 2023| | | 24,731| | | $| 11.76| +Granted| | | 53,455| | | | 2.65| +Forfeiture| | | (12,500| )| | | -| +Vested| | | (24,348| )| | | 9.06| +Outstanding, September 30, 2024| | | 41,338| | | $| 5.14| + +**_Rights Offering and Financing Commitment_** + +On February 7, 2024, the Company and its wholly-owned subsidiary, Shuttle Diagnostics, Inc., entered into a securities purchase agreement (the “Purchase Agreement”) with SRO, LLC, a Nevada limited liability company, pursuant to which SRO LLC agreed to commit to purchasing from the Company $2,250,000 of units from the Company, with each Unit consisting of (i) one share of the Company’s common stock, (ii) a warrant to purchase one share of the Company’s common stock exercisable at a purchase price of $18.80 per share, and (iii) a percentage of equity interest in Diagnostics such that, assuming the sale of all $2,250,000 of Units, SRO LLC will own a 22% interest in Diagnostics. Pursuant to the terms of the Purchase Agreement, the Units will be sold at a per Unit price equal to 90% of the VWAP of the Company’s common stock for the five trading days immediately preceding closing. The parties entered into the Purchase Agreement in anticipation of the Company commencing a rights offering (the “Rights Offering”) pursuant to which the Company intends to offer a total of $4,500,000 of Units to existing stockholders, which includes the $2,250,000 of Units being sold to SRO LLC, an entity which is controlled by Keith Moore, Executive Chairman of Boustead & Company Limited, an affiliate of Boustead. + +The Company filed an initial registration statement on Form S-1 (the “Form S-1”) with the SEC in April 2024 related to the registration of subscription rights to purchase the Units to be sold in the Rights Offering. The Form S-1 has not been declared effective as of the date these unaudited condensed consolidated financial statements were issued. Upon the Form S-1 being declared effective, the Purchase Agreement allows SRO LLC up to 60 days to raise the initial $2,250,000, which funds will be placed in escrow with Sutter Securities, Inc. (“SSI”), an affiliate of BSL, pursuant to the terms of an escrow agreement entered into between the Company, Shuttle Diagnostics, Inc., BSL and SSI on February 7, 2024 (the “Escrow Agreement”). The funds will remain in escrow up until closing on the Rights Offering. In addition, in the event the Company fails to raise the full $4,500,000 in the Rights Offering, SRO LLC agreed to a backstop commitment pursuant to which it would have the right to purchase any remaining Units not purchased by existing Company stockholders in the Rights Offering, up to an additional $2,250,000 (the “Back-up Contingency”). Unless the parties waive the conditions to closing, in the event the full $4,500,000 is not raised, whether through SRO LLC or through the Company’s existing stockholders, the Company will not close on the offering and any funds raised and held in escrow will be returned to investors. + +In conjunction with its entry into the Purchase Agreement, on February 7, 2024, the Company entered into a placement agent and advisory services agreement (the “Placement Agent Agreement”) with BSL, pursuant to which BSL and BSL’s affiliates agreed to provide the Company with regular and customary financial consulting advice and act as placement agent, on a best efforts basis, for the Rights Offering. In exchange for its services, BSL will receive a commitment fee equal to $112,500 upon the earlier of the Company filing the registration statement on Form S-1 registering the Rights Offering or upon such date as the Company terminates the Rights Offering, a commission equal 8% of the gross proceeds disbursed to the Company upon closing the Rights Offering, and $40,000 in diligence and related expenses. + +18 +--- + +--- + +The Company has incurred $142,000 in costs directly related to the planned Rights Offering and initially deferred these costs in 2024, then expensed them at June 30, 2024, as the Rights Offering has not yet consummated. + +**_Alliance Global Partners_** + +On July 30, 2024, the Company entered into an agreement with A.G.P./Alliance Global Partners (“AGP”), as the exclusive underwriter, placement agent, or advisor in a public or private offering of up to $10,000,000 of the Company’s securities, and bridge financing of up to $1,350,000. AGP was paid a $50,000 retainer fee. + +As of September 30, 2024, the Company has incurred $101,651 of expenses included in deferred costs recorded on the Company’s unaudited condensed consolidated balance sheet. + +See Note 9, Subsequent Events, Alliance Global Partners. + +**Note 7 – Derivative Liabilities** + +**_Fair Value Assumptions Used in Accounting for Derivative Liabilities_** + +ASC 815 requires us to assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense. + +In January 2023, in connection with the Alto Convertible Note, the Company issued warrants to purchase 127,260 shares of common stock, with an exercise price of $1.93 per share, as adjusted for the recent reverse split, valued at inception at $1,189,000 and as of September 30, 2024, at $74,107. The Company determined our derivative liabilities from the warrants issued in relation to the Alto Convertible Note do not satisfy the classification as equity instruments due to the existence of a certain net cash settlement provision that is not within the sole control of the Company. In addition, there are certain down round provisions that could reduce the exercise price if the Company issues securities at lower prices in the future. + +The Company has determined the Acceleration Option is an embedded derivative within the host instrument and has bifurcated it from the host instrument and recorded it as a derivative liability valued at $1,442,000, using a Monte Carlo simulation model. The Company determined our derivative liability from the noteholder’s Acceleration Option for the Alto Convertible Note is not clearly and closely related to the host and should be thus accounted for as a bifurcated derivative liability. + +The Company classified these derivative liabilities as a Level 3 fair value measurement and used the Monte Carlo pricing model to calculate the fair value as of January 11, 2023 ($2,631,000 included in debt discount) and September 30, 2024 ($74,107). Key inputs for the simulation are summarized below. The Monte Carlo simulation uses an implied VWAP for the January 11, 2023 valuation date. The implied VWAP was backsolved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds. The simulation was then iterated and manipulated to solve for the implied share price, which was approximately $12.64 per share (or an approximate 14% discount to the quoted market VWAP on January 11, 2023). + +The key inputs for the Monte Carlo simulation as of September 30, 2024, were as follows: + +Schedule of Monte Carlo Simulation Assumption + +| | September 30, 2024| +---|---|---|--- +Net cash settlement and down round key valuation inputs – warrants*| | | +Annualized volatility| | | 92.04% - 101.79%| +Risk-free interest rate| | | 3.64% - 4.93%| +Quoted VWAP| | $| 1.31| +Exercise price| | $| 1.93| +Probability assessment| | | 0% - 40%| +Illiquidity discount| | | (14| %) +Time period (years)| | | 0.08 \- 2.28| + +*| | _Based on a Monte Carlo simulation analysis of 250,000 iterations_ +---|---|--- + +19 +--- + +--- + +The following table summarizes the changes in the derivative liabilities: + +Schedule of Derivative Liabilities + +Fair Value Measurements Using Significant Unobservable Inputs (Level 3) +--- +| | Warrants| | | Accelerated Feature| +Balance - December 31, 2023| | $| 410,660| | | $| 3,852| +Gain on change in fair value| | | (196,045| )| | | (1,817| ) +Balance - March 31, 2024| | $| 214,615| | | $| 2,035| +Loss (gain) on change in fair value| | | 145,304| | | | (1,531| ) +Balance - June 30, 2024| | $| 359,919| | | $| 504| +Gain on change in fair value of the derivative| | | (285,812| )| | | (504| ) +Balance - September 30, 2024| | $| 74,107| | | $| -| + +**Note 8 – Other Related Party transactions** + +On September 14, 2022, we entered into a manufacturing agreement with TCG GreenChem, Inc. (“TCG GreenChem”), the U.S. subsidiary of TCG Lifesciences Pvt Ltd., a global contract research and manufacturing services company located in India. Dr. Chis Senanayake, one of our independent directors, is CEO and CSO of TCG GreenChem and CSO of TCG Lifesciences Pvt Ltd. TCG GreenChem was contracted for process research, development and cGMP compliant manufacture of IPdR. During the nine months ended September 30, 2024 and 2023, the Company expensed $0 and $1,058,348, respectively, related to these services. + +**Note 9 – Subsequent Events** + +**** + +**_Convertible Bridge Notes_** + +**__** + +On October 14, 2024, the Company issued an aggregate of $600,000 (of an up to $1.3 million authorized financing) senior secured convertible notes due in October 2025, which accrue interest at 14.5% interest per year. The notes include a 5% original issue discount and the Company received $570,000 in proceeds. The notes are convertible beginning three months after the date of issuance, and the conversion price will be the lower of a 15% discount to (i) the 5-day VWAP immediately prior to Closing or (ii) the price of any offering entered into by the Company during the term of the notes. The Company has the option to prepay the notes at any time for 107% of total outstanding balance and any outstanding principal will be paid in conversion of shares of common stock at the end of the term, subject to the Company’s exercise of the optional prepayment right. Any accrued interest will be repaid quarterly in cash. The Company also issued warrants to the lenders to purchase an aggregate 240,917 shares of common stock, exercisable at $1.40 per share, with such warrants expiring five years from issuance. In addition, the Company’s Chief Executive Officer, Dr. Anatoly Dritschilo, invested a total of $237,500 in this financing round, in exchange for a $250,000 convertible note. + +On October 21, 2024, the Company issued an additional $231,579 in senior secured convertible notes due in October 2025, with substantially similar terms as the October 14, 2024, issuance. The notes include a 5% original issue discount and the Company received $220,000 in proceeds. The Company also issued warrants to the lenders to purchase an aggregate 88,544 shares of common stock, exercisable at $1.49 per share, with such warrants expiring five years from issuance. Upon completing this issuance, the Company closed the senior secured convertible note offering after receiving a total of $790,000 in proceeds. + +**_Alliance Global Partners_** + +**__** + +On October 31, 2024, the Company consummated a public offering of an aggregate of (i) 395,574 shares of common stock and 2,555,246 pre-funded warrants to purchase up to 2,555,246 shares of common stock, and (ii) 2,950,820 common stock purchase warrants to purchase up to 2,950,820 shares of common stock. Each share of common stock, or a pre-funded warrant in lieu thereof, was sold together with an accompanying warrant to purchase one share of common stock. AGP served as lead underwriter along with Boustead as co-underwriter. + +The public offering price for each share of common stock and one accompanying warrant was $1.525. The public offering price of each pre-funded warrant and one accompanying common warrant was $1.524, which equals the price at which one share of common stock and accompanying warrant was sold to the public in this offering, minus $0.001. The exercise price of each pre-funded warrant is $0.001 per share. Each warrant offered in the offering is exercisable for one share of common stock and has an initial exercise price equal to $1.40. The Company received aggregate gross proceeds from the offering of approximately $4.5 million, before deducting placement agents’ fees and other offering expenses. + +20 +--- + +--- + +**** + +**Item 2\. Management’s Discussion and Analysis of Financial Condition and Results of Operations** + +**** + +_The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD &A”) should be read in conjunction with our unaudited financial statements and the related notes thereto included elsewhere in this quarterly report. The MD&A contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this quarterly report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors._ + +**Overview** + +Founded by Georgetown University Medical School faculty members, Shuttle Pharmaceuticals Holdings, Inc. (the “Company”) is a discovery and development stage pharmaceutical company leveraging our proprietary technology to develop novel therapies that are designed to cure cancer. Originally formed as Shuttle Pharmaceuticals, LLC in 2012, our goal is to extend the benefits of cancer treatments by leveraging insights into cancer therapy with surgery, radiation therapy, chemotherapy and immunotherapy. While there are several therapies being developed with the goal of curing cancer, one of the most effective and proven approaches to this is radiation therapy (RT). We are developing a pipeline of products designed to address the limitations of the current standard of cancer therapies. We believe that our product candidates will enable us to deliver cancer treatments that are safer, more reliable and at a greater scale than that of the current standard of care. + +Operations to date have focused on continuing our research and development efforts to advance Ropidoxuridine clinical testing and improved drug formulation, to advance HDAC6 inhibitor (SP-2-225) preclinical development and explore new Small Business Innovation Research (SBIR) contract work on predictive biomarkers of radiation response, as well as prostate cell lines for health disparities research. We received SBIR contract funding from the National Institutes of Health (NIH), for the aforementioned projects. The clinical development of Ropidoxuridine has shown drug bioavailability and a maximum tolerated dose has been established for use in Phase II clinical trials. TCG GreenChem, Inc. (“TCG GreenChem”), with whom we have contracted for process research, development and cGMP compliant manufacture of IPdR, has successfully completed the manufacturing campaign for the active pharmaceutical ingredient (API) of Ropidoxuridine for use in the Company’s upcoming Phase II clinical trial in brain cancer patients undergoing radiation therapy. Shuttle also worked with University of Iowa Pharmaceuticals to develop the formulation, produce the capsules, and which have been shipped to Contract Research Organization (CRO) Theradex Oncology for distribution to clinical trial sites. Both activities have now been completed. In addition, Shuttle received approval from the U.S. Food and Drug Administration (FDA) to begin the clinical trial. The FDA made recommendations to expand the clinical trial and the Company agreed with the recommendation. With this change incorporated into the revised protocol, the Company commenced its Phase II clinical study with finalized agreements with all six of the planned site enrollment locations to administer the Phase II clinical trial of Ropidoxuridine and has enrolled the first three patients in October 2024. The radiation biomarker project and the health disparities project have been completed and the Company is following up with plans for clinical validation and potential commercialization. Changes in operational, administrative, legal and professional expenses related to our operations are set forth in more detail in the discussion below. + +**Reverse Stock Split** + +On August 13, 2024, in order to meet the Nasdaq minimum bid price requirement, the Company effectuated a 1-for-8 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares (the “Reverse Stock Split”). The Reverse Stock Split had no effect on the Company’s authorized shares of common stock or preferred stock. All share, option, warrant and per share amounts (except our authorized outstanding and previously reserved shares) have been retroactively recast in our most recent filings, and are presented as such in these financial statements and related disclosures. + +21 +--- + +--- + +**Nasdaq Listing Compliance** + +On September 10, 2024, the Company received a letter (the “Notification”) from The Nasdaq Capital Market (“Nasdaq”), notifying the Company that it is no longer in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) requires listed companies to maintain stockholders’ equity of at least $2,500,000. In the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2024, the Company reported stockholders’ equity of $801,434, which is below the minimum stockholders’ equity required for continued listing pursuant to Nasdaq Listing Rule 5550(b)(1). In addition, presently, the Company does not meet the alternatives of market value of listed securities or net income from continuing operations. + +This Notification has no immediate effect on the listing of the Company’s securities on the Nasdaq Capital Market. Nasdaq has provided the Company with 45 calendar days, or until October 25, 2024, to submit a plan to regain compliance with the minimum stockholders’ equity standard. If the Company’s plan to regain compliance is accepted, Nasdaq may grant an extension of up to 180 calendar days from September 10, 2024 for the Company to regain compliance. + +On October 15, 2024, the Company submitted a plan to Nasdaq to regain compliance. However, there can be no assurance that the Company’s plan will be accepted or that, if it is, that the Company will be able to regain compliance and maintain its listing on the Nasdaq Capital Market. If the Company’s plan to regain compliance is not accepted or if Nasdaq does not grant an extension and the Company does not regain compliance, or if the Company fails to satisfy another Nasdaq requirement for continued listing, Nasdaq could provide notice that the Company’s securities will become subject to delisting. In that event, the Company will have an opportunity to appeal Nasdaq’s decision to a hearings panel. + +**Results of Operations** + +**** + +**_Comparison of the three months ended September 30, 2024 and 2023_** + +The following table summarizes the results of our operations: + +| | Three Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | September 30,| | | | | | | +| | 2024| | | 2023| | | Change| | | %| +Revenue| | $| -| | | $| -| | | $| -| | | | -| +Operating expenses:| | | | | | | | | | | | | | | | +Research and development| | | 1,400,564| | | | 1,045,177| | | | 355,387| | | | 34| % +General and administrative| | | 328,995| | | | 265,553| | | | 63,442| | | | 24| % +Legal and professional| | | 1,322,002| | | | 288,416| | | | 1,033,586| | | | 358| % +Total operating expenses and loss of operations| | | 3,051,561| | | | 1,599,146| | | | 1,452,415| | | | 91| % +Other income (expense):| | | | | | | | | | | | | | | | +Interest expense - related parties| | | (2,137| )| | | -| | | | (2,137| )| | | (100| %) +Interest expense| | | (270,538| )| | | (623,465| )| | | 352,927| | | | 56| % +Gain on sale of marketable securities| | | 56,398| | | | -| | | | 56,398| | | | 100| % +Change in fair value of marketable securities| | | (42,898| )| | | 9,606| | | | (52,504| )| | | (547| %) +Interest income| | | 2,524| | | | 20,765| | | | (18,241| )| | | (88| %) +Change in fair value of derivative liabilities| | | 286,316| | | | 442,900| | | | (156,584| )| | | (35| %) +Loss on settlement of convertible debt| | | (762,186| )| | | (43,414| )| | | (718,772| )| | | 1656| % +Total other expense| | | (732,521| )| | | (193,608| )| | | (538,913| )| | | 278| % +Net loss| | $| (3,784,082| )| | $| (1,792,754| )| | $| (1,991,328| )| | | 111| % + +22 +--- + +--- + +_Research and Development._ Research and development (“R&D”) expenses were $1.4 million for the three months ended September 30, 2024, as compared to $1.0 million for three months ended September 30, 2023. The increase of $0.4 million, or 34%, is primarily related to the Company having completed production of the drug product and the start of work related to the initiation of trials. + +R&D compensation related expenses were $0.3 million in the three months ended September 30, 2024 as compared to $0.3 million in the three months ended September 30, 2023. Compensation related expenses were 22% for the three months ended September 30, 2024, representing a decrease from 29% of total R&D in the three months ended September 30, 2023. Subcontract work made up 73% of total R&D expenses in the three months ended September 30, 2024 and 65% of total R&D expenses during the three months ended September 30, 2023. + +_General and Administrative Expenses._ General and Administrative expenses in the three months ended September 30, 2024 increased by $63 thousand, or 24% to $0.33 million in the three months ended June 30, 2024, compared to $0.27 million in the three months ended September 30, 2023, largely due to costs associated with the additional focus on financial reporting and capital needs. + +_Legal and Professional Expenses_. During the three months ended September 30, 2024, legal and professional expenses increased by $1.0 million or 358% to $1.3 million compared to $0.3 million in the same period in the prior year. The increase in legal and professional fees was primarily due to increases in our expenses related to our public filing requirements, reaudits, contracts, and financing related work. + +_Other Income Expense_. Other expense was $0.7 million for the three months ended September 30, 2024, which consisted primarily of $0.3 million in interest expense on convertible loans, loss on settlement of debt of $0.8 million, and a gain on change in fair value of derivative liabilities of $0.3 million. Other expense was $0.2 million for the three months ended September 30, 2023, which consisted primarily of $0.4 million in interest expense on convertible loans, loss on settlement of convertible debt of $0.8 million, and a gain on change in fair value of derivative liabilities of $0.4 million. The $0.4 million gain in fair value of derivative liability resulted from the fair value measurement using the Monte Carlo pricing model and the impact of the decrease in the market price of warrant shares. These amounts were largely attributable to the Alto Convertible Note conversions and cash management activities. + +**__** + +**_Comparison of the nine months ended September 30, 2024 and 2023_** + +The following table summarizes the results of our operations: + +| | Nine Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | September 30,| | | | | | | +| | 2024| | | 2023| | | Change| | | %| +Revenue| | $| -| | | $| -| | | $| -| | | | -| +Operating expenses:| | | | | | | | | | | | | | | | +Research and development| | | 2,632,387| | | | 2,806,644| | | | (174,257| )| | | (6| %) +General and administrative| | | 963,642| | | | 730,186| | | | 233,456| | | | 32| % +Legal and professional| | | 2,323,013| | | | 1,072,728| | | | 1,250,285| | | | 117| % +Total operating expenses and loss of operations| | | 5,919,042| | | | 4,609,558| | | | 1,309,484| | | | 28| % +Other income (expense):| | | | | | | | | | | | | | | | +Interest expense - related parties| | | (2,137| )| | | (6,825| )| | | 4,688| | | | (69| %) +Interest expense| | | (1,198,738| )| | | (1,952,147| )| | | 753,409| | | | 39| % +Interest income| | | 38,135| | | | 56,720| | | | (18,585| )| | | (33| %) +Finance fee| | | -| | | | (104,245| )| | | 104,245| | | | (100| %) +Change in fair value of derivative liabilities| | | 340,405| | | | 2,118,175| | | | (1,777,770| )| | | (84| %) +Gain on sale of marketable securities| | | 100,118| | | | 1,744| | | | 98,374| | | | 5,641| % +Change in fair value of marketable securities| | | (71,568| )| | | 21,134| | | | (92,702| )| | | (439| %) +Loss on settlement of convertible debt| | | (833,501| )| | | (477,221| )| | | (356,280| )| | | (75| %) +Total other expense| | | (1,627,286| )| | | (342,665| )| | | (1,284,621| )| | | 375| % +Net loss| | $| (7,546,328| )| | $| (4,952,223| )| | $| (2,594,105| )| | | 52| % + +23 +--- + +--- + +_Research and Development._ Research and development (“R&D”) expenses were $2.6 million for the nine months ended September 30, 2024, as compared to $2.8 million for nine months ended September 30, 2023. The decrease of $0.2 million, or 6%, is primarily related to the Company having completed production of the drug product in the prior period substantially offset by costs incurred for the start of work related to the initiation of trials in the current period. + +R&D compensation related expenses were $0.9 million in the nine months ended September 30, 2024 as compared to $1.2 million in the nine months ended September 30, 2023. Compensation related expenses were 36% for the nine months ended September 30, 2024, representing a decrease from 42% of total R&D in the nine months ended September 30, 2023. Subcontract work made up 57% of total R&D expenses in the nine months ended September 30, 2024 and 53% of total R&D expenses during the nine months ended September 30, 2023. + +_General and Administrative Expenses._ General and Administrative expenses in the nine months ended September 30, 2024 increased by $0.2 million, or 32% to $1.0 million in the nine months ended September 30, 2024. The increase in general and administrative expenses was primarily due to increases in marketing, advertising and filing expenses. + +_Legal and Professional Expenses_. During the nine months ended September 30, 2024, legal and professional expenses increased by $1.3 million or 117%. The increase in legal and professional fees was primarily due to increases in our expenses related to our public filing requirements, reaudits, contracts and financing related work. + +_Other Income Expense_. Other expense was $1.6 million for the nine months ended September 30, 2024, which consisted primarily of $1.2 million in interest expense on convertible loans, loss on settlement of convertible debt of $0.8 million, change in marketable securities of $0.1 million, and a gain on change in fair value of derivative liabilities of $0.3 million. Other expense was $0.3 million for the nine months ended September 30, 2023, which consisted primarily of $2.0 million in interest expense on convertible loans, finance fee on convertible loans of $0.1 million, loss on settlement of convertible debt of $0.5 million, and a gain on change in fair value of derivative liabilities of $2.1 million. The $2.1 million gain in fair value of derivative liability resulted from the fair value measurement using the Monte Carlo pricing model and the impact of the decrease in the market price of warrant shares. These amounts were largely attributable to the Alto Convertible Note conversions and cash management activities. + +**Liquidity and Capital Resources** + +Our unaudited condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception and has a net loss of approximately $7.5 million and no revenues for the nine months ended September 30, 2024 and has a working capital deficit of approximately $1.3 million as of September 30, 2024. The Company does not expect to generate positive cash flows from operating activities in the near future. + +In September 2024, the Company’s CEO provided $250 thousand to the Company in exchange for a promissory note repayable in equal monthly installments of principal and interest over a term of one year. In October 2024, the Company completed an offering of senior secured convertible bridge notes, receiving $790 thousand in cash. The notes have a term of one-year and were accompanied by 329,461 warrants with a weighted-average exercise price of $1.42. Also in October 2024, the Company completed an equity raise that provided $3.9 million net cash for the issuance of 2.9 million shares / pre-funded warrants, and by 2.9 million warrants with an exercise price of $1.40. However, the Company’s existing cash resources and the cash received from the equity offering and senior convertible note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months. + +24 +--- + +--- + +The Company’s capital raises have to date supported operations, the manufacture of drug product and FDA approval of the IND for the Phase II clinical trial of Ropidoxuridine and radiation therapy in glioblastoma and other radiation sensitizer discovery and therapy. The FDA recommended and the Company agreed to an expansion of the Phase II clinical trial, necessitating additional capital to complete the trial as well as fund ongoing operations. Additionally, the Phase II clinical trial of Ropidoxuridine has evolved with finalized agreements with all six of the planned site enrollment locations to administer the Phase II clinical trial of Ropidoxuridine and the enrollment of the first three patients. + +The ability of the Company to continue as a going concern is dependent upon its ability to continue to successfully raise additional equity or debt financing to allow it to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued. + +The accompanying unaudited condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company is unable to continue as a going concern. + +**Balance Sheet Data:** + +| | September 30,| | | December 31,| | | | | | | +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | 2024| | | 2023| | | Change| | | %| +Current assets| | $| 361,351| | | $| 5,593,005| | | $| (5,231,654| )| | | (94| %) +Current liabilities| | | 1,659,233| | | | 1,042,237| | | | 616,996| | | | 59| % +Working capital (deficiency)| | $| (1,297,882| )| | $| 4,550,768| | | $| (5,848,650| )| | | (129| %) + +As of September 30, 2024, total current assets were $0.4 million and total current liabilities were $1.7 million, resulting in a working capital deficiency of $1.3 million. As of December 31, 2023, total current assets were $5.6 million and total current liabilities were $1.0 million, resulting in a working capital of $4.6 million. As of September 30, 2024, the current assets were from $0.2 million cash, $0.1 million in prepaid expenses and $0.1 million in deferred costs, with the decrease from December 31, 2023 being primarily due to ongoing cash burn from our R&D programs, filing expenses, reaudits, and general operations. The increase in current liabilities is primarily due to an increase in accounts payable of $1.1 million compared to December 31, 2023, partially offset by the net change in amounts owed under convertible notes and notes payable of $0.5 million. + +**_Cash Flows from Operating Activities_** + +| | Nine Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | September 30,| | | | | | | +| | 2024| | | 2023| | | Change| | | %| +Cash used in operating activities| | $| (4,637,068| )| | $| (4,518,973| )| | $| (118,095| )| | | 3| % +Cash provided by (used in) investing activities| | $| 2,915,761| | | $| (2,916,760| )| | $| 5,832,521| | | | (200| %) +Cash provided by (used in) financing activities| | $| (698,457| )| | $| 2,904,527| | | $| (3,602,984| )| | | (124| %) +Cash on hand| | $| 156,652| | | $| 3,885,997| | | $| (3,729,345| )| | | (96| %) + +To date, we have not generated positive cash flows from operating activities. For the nine months ended September 30, 2024, and 2023, net cash flows used in operating activities were $4.6 million and $4.5 million, respectively, with a shift in 2024 from a majority of research and development activity costs in 2023 to additional administrative costs in 2024 associated with financing and financial reporting matters. + +25 +--- + +--- + +**_Cash Flows from Investing Activities_** + +For the nine months ended September 30, 2024, we invested in trading marketable securities for $44 thousand and received $3.0 million in proceeds from disposition of marketable securities. For the nine months ended September 30, 2023, we invested in trading marketable securities for $3.0 million and received $80 thousand in proceeds from disposition of marketable securities and purchased $19 thousand of equipment. + +**_Cash Flows from Financing Activities_** + +For the nine months ended September 30, 2024, we paid $0.8 million related to payments on a convertible note and $0.1 million for finance costs, and received $0.3 million of proceeds from a related party notes payable. For the nine months ended September 30, 2023, we received a net of $3.6 million from the sale and issuance of convertible notes payable and warrants and repaid $0.7 million in related party notes payable. + +**Off-Balance Sheet Arrangements** + +We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. + +**** + +**Critical Accounting Policies and Significant Judgments and Estimates** + +This discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our unaudited condensed consolidated financial statements included elsewhere in this report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. + +Our most critical accounting policies and estimates relate to the following: + +| ● | Research and Development Expenses +---|---|--- +| ● | Fair Value of Derivative Financial Instruments +| ● | Initial Measurement of Equity-Based Warrants + +_Research and Development_ + +Research and development expenses are expensed as incurred and, prior to our initial public offering in September 2022, have historically been offset by contract receivable payments from an NIH SBIR contract that has supported our scientific research. This is stated in the financials as research and development-net of contract expense reimbursements. + +_Fair Value of Financial Instruments_ + +We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities are evaluated at the end of each reporting period. + +26 +--- + +--- + +For our derivative financial instruments classified as a liability, the Company uses a Monte Carlo valuation model to value the derivative instruments at inception and on subsequent valuation dates. The model requires the use of simulations that are weighted based on significant unobservable inputs including the average volatility of a population set and probabilities assigned. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. The Monte Carlo simulation uses an implied VWAP for valuation. The implied VWAP was backsolved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds and is updated each period. + +The use of Monte Carlo valuation models require key inputs, some of which are based on estimates and judgements by management. Any change to these key inputs could produce significantly higher or lower fair value measurements. + +_Initial Measurement of Equity-Based Warrants_ + +We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as equity, the derivative instrument is initially recorded at its fair value and recorded to additional paid in capital. The classification of derivative instruments, including whether such instruments should be recorded as equity, is evaluated at the end of each reporting period. + +For our derivative financial instruments classified as equity, the Company used a Black Scholes valuation model, to calculate the fair value on issuance date, without revaluation. + +The use of Black Scholes valuation model requires the input of highly subjective assumptions, including the expected price volatility, that is based on an analysis of the historical volatility of the common stock of a group of comparable entities. Any change to these inputs could produce significantly higher or lower fair value measurements. + +**Item 3\. Quantitative and Qualitative Disclosures About Market Risk** + +As a “smaller reporting company,” we are not required to provide the information required by this Item. + +**Item 4\. Controls and Procedures** + +Evaluation of Disclosure Controls and Procedures + +Disclosure controls and procedures (as defined in Securities Exchange Act of 1934, as amended, or the Exchange Act Rule 15d-15(e)) are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. + +As of September 30, 2024, our management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Such evaluation was carried out under the supervision of our Chief Executive Officer with the participation of our President and Chief Operating Officer, and our Chief Financial Officer, and our third-party financial service provider. Based on this evaluation, management concluded that our disclosure controls and procedures were, and continue to be, ineffective as of September 30, 2024. Based on the foregoing, our management concluded that our internal controls over the following financial reporting areas to be material weaknesses: + +| ● | Our written accounting policies and documentation of management’s contemplation of the accounting treatment and implications over significant unusual transactions, including complex accounting associated with debt and equity transactions, is limited and resulted in ineffective monitoring of financial reporting. These were contributing factors which lead to untimely filings. +---|---|--- + +27 +--- + +--- + +| ● | Due to our size and stage of development, segregation of all conflicting duties may not always be possible and may not be economically feasible. During the reporting period, we lacked sufficient review procedures and segregation of duties such that a proper review had not been performed by someone other than a preparer, including manual journal entries, and that process documentation is lacking for review and monitoring controls over financial statements close process and financial reporting. +---|---|--- +| ● | As a result of the Company’s evolution since the date of our initial formation, when we were focused on NIH SBIR research contracts with related costing allocation allowances until when we completed our IPO and continued our development process, management lacks a formal process to identify and properly classify operating expenses such as R&D. +| ● | We identified findings related to overall information technology general controls including issues with access and segregation of duties for systems supporting the Company’s internal control processes and controls. +| ● | Our accounting policies and oversight regarding certain technical aspects of financial reporting for stock-based compensation transactions, particularly relating to grant date valuations and expense attribution, is limited and resulted in the incorrect recording of related compensation expense and related disclosures. + +Except as noted below, there has been no change in the Company’s internal control over financial reporting during the three months ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional improvements as necessary. + +Management’s Remediation Measures + +The aforementioned material weaknesses were identified in 2023 and 2024 and the ineffective monitoring of financial reporting weaknesses resulted in the Company needing to restate its 2023 and 2022 financial statements. While the Company has improved its organizational capabilities, the Company’s remediation efforts will continue to take place. Management is committed to maintaining a strong internal control environment. In response to the identified material weaknesses in the overall control environment, management is currently implementing additional measures which include: + +● | Hired a new Chief Financial Officer (“CFO”) during the second quarter of 2024 to bolster the Company’s internal technical accounting and financial reporting experience and provide bandwidth for the prior CFO to focus on the Company’s expanding clinical trial. +---|--- +| +● | Engaged a third-party consulting firm to assist with the preparation of SEC reporting and other technical accounting matters. + +The Company will continue to review and improve its internal controls over financial reporting to address the underlying causes of the material weaknesses and control deficiencies. Such material weaknesses and control deficiencies will not be fully remediated until the Company has concluded that its internal controls are operating effectively for a sufficient period of time. + +**** + +**PART II — OTHER INFORMATION** + +**ITEM 1\. LEGAL PROCEEDINGS** + +We are not presently party to any pending or other threatened legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results, although from time to time, we may become involved in legal proceedings in the ordinary course of business. We maintain insurance policies in amounts and with the coverage and deductibles we believe are adequate, based on the nature and risks of our business, historical experience and industry standards. + +**ITEM 1A. RISK FACTORS** + +As a smaller reporting company, we are not required to provide the information required by this item. + +28 +--- + +--- + +**ITEM 2\. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS** + +None. + +**ITEM 3\. DEFAULTS UPON SENIOR SECURITIES** + +Not applicable. + +**ITEM 4\. MINE SAFETY DISCLOSURES** + +Not Applicable. + +**ITEM 5\. OTHER INFORMATION** + +None. + +**Item 6\. Exhibits** + +The following exhibits are filed or furnished with this report: + +**Exhibit No.** | | **Description of Exhibit** +---|---|--- +3.1 | | [Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 (File No. 333-265429) filed on June 3, 2022).]() +3.2 | | [Certificate of Amendment to Amended and Restated Certificate of Incorporation, effective March 30, 2022 (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (File No. 333-265429) filed on June 3, 2022).]() +3.3 | | [Certificate of Amendment to Amended and Restated Certificate of Incorporation, effective June 22, 2022 (incorporated by reference to Exhibit 3.5 to the Registration Statement on Form S-1/A (File No. 333-265429) filed on June 23, 2022).]() +3.4 | | [Second Amended and Restated By-Laws (incorporated by reference to Exhibit 3.1 to the current Report on Form 8-K filed on November 1, 2022).]() +3.5 | | [Certificate of Amendment of Shuttle Pharmaceuticals Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 7, 2024).]() +4.1 | | [Form of Convertible Note, dated January 11, 2023, issued by Shuttle Pharmaceuticals Holdings, Inc. to Alto Capital Master Fund, SPC – Segregated Master Portfolio B (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed January 12, 2023).]() +4.2 | | [Form of Warrant, dated January 11, 2023, issued by Shuttle Pharmaceuticals Holdings, Inc. to Alto Capital Master Fund, SPC – Segregated Master Portfolio B (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed January 12, 2023).]() +4.3 | | [Form of Promissory Note, dated September 4, 2024, between Shuttle Pharmaceuticals and Anatoly Dritschilo (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on September 10, 2024).]() +4.4 | | [Form of Senior Secured Convertible Notes (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on October 17, 2024).]() +4.5 | | [Form of Common Warrants (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on October 17, 2024).]() +4.6 | | [Form of Common Warrants (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on November 1, 2024).]() +4.7 | | [Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on November 1, 2024).]() +10.1 | | [Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on October 17, 2024).]() +10.2 | | [Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 1, 2024).]() +31.1 | | [Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*]() +31.2 | | [Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*]() +32.1 | | [Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**]() +32.2 | | [Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**]() +101.INS | | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. +101.SCH | | Inline XBRL Taxonomy Schema Document +101.CAL | | Inline XBRL Taxonomy Calculation Linkbase Document +101.DEF | | Inline XBRL Taxonomy Definition Linkbase Data +101.LAB | | Inline XBRL Taxonomy Label Linkbase Document +101.PRE | | Inline XBRL Taxonomy Presentation Linkbase Document +104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) + +* Filed herewith. + +**Furnished herewith. + +Certain portions of the exhibit have been redacted in accordance with Item 601(b) of Regulation S-K. The Company will supplementally furnish an unredacted copy to the SEC upon requested; provided however, that the Company may request confidential treatment pursuant to Ruel 24b-2 of the Securities Exchange Act of 1934, as amended, to the extent so furnished. + +29 +--- + +--- + +**SIGNATURES** + +In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. + +| **SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** +---|--- +| | +November 13, 2024 | By: | _/s/ Anatoly Dritschilo_ +| | Anatoly Dritschilo, M.D. +| | Chief Executive Officer +| | (Principal Executive Officer) +| | +November 13, 2024 | By: | _/s/ Timothy J. Lorber_ +| | Timothy J. Lorber +| | Chief Financial Officer +| | (Principal Financial and Accounting Officer) + +30 +--- diff --git a/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2025-03-31 (0001641172-25-009325).md b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2025-03-31 (0001641172-25-009325).md new file mode 100644 index 0000000000000000000000000000000000000000..2167ceed85797cd3a12c4570724dc1953d45f5e1 --- /dev/null +++ b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2025-03-31 (0001641172-25-009325).md @@ -0,0 +1,1202 @@ +**** + +**** + +**** + +**UNITED STATES** + +**SECURITIES AND EXCHANGE COMMISSION** + +**Washington, D.C. 20549** + +**FORM 10-Q** + +(Mark One) + +| ☒ | Quarterly Report PURSUANT TO Section 13 or 15(d) of the Securities Exchange Act of 1934 +---|---|--- + +For the quarterly period ended March 31, 2025 + +OR + +| ☐ | Transition Report PURSUANT TO Section 13 or 15(d) of the Securities Exchange Act of 1934 +---|---|--- + +For the transition period from ______________ to ______________ + +Commission File Number 001-41488 + +**SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** + +(Exact name of registrant as specified in its charter) + +**Delaware** | | **82-5089826** +---|---|--- +(State or other jurisdiction of | | (I.R.S. Employer +incorporation or organization) | | Identification Number) + +**401 Professional Drive , Suite 260** + +**Gaithersburg , MD 20879** + +(Address of principal executive offices) (Zip Code) + +**(240) 403-4212** + +(Registrant’s telephone number, including area code) + +N/A + +(Former name, former address and former fiscal year, if changed since last report) + +Securities registered pursuant to Section 12(b) of the Act: + +**Title of each class** | | **Trading Symbol(s)** | | **Name of each exchange on which registered** +---|---|---|---|--- +Common Stock, par value $0.00001 per share | | SHPH | | The Nasdaq Stock Market LLC + +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ + +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ + +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. + +| Large accelerated filer | ☐ | Accelerated filer | ☐ +---|---|---|---|--- +| Non-accelerated filer | ☒ | Smaller reporting company | ☒ +| | | Emerging growth company | ☒ + +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ + +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ + +The number of shares outstanding of the registrant’s common stock on May 8, 2025 was 10,984,291. + +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**TABLE OF CONTENTS** + +| | Page +---|---|--- +| Part I. Financial Information | +| | +Item 1. | Unaudited Condensed Consolidated Financial Statements | +| Unaudited Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024 | 3 +| Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2025 and 2024 | 4 +| Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2025 and 2024 | 5 +| Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024 | 6 +| Notes to Unaudited Condensed Consolidated Financial Statements | 7 +| | +Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 +Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 30 +Item 4. | Controls and Procedures | 30 +| | +| Part II. Other Information | 32 +| | +Item 1. | Legal Proceedings | 32 +Item 1A. | Risk Factors | 32 +Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 32 +Item 3. | Defaults Upon Senior Securities | 32 +Item 4. | Mine Safety Disclosures | 32 +Item 5. | Other Information | 32 +Item 6. | Exhibits | 32 +Signatures | 33 + +2 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Balance Sheets** + +**(Unaudited)** + +**** + +| | March 31,| | | December 31,| +---|---|---|---|---|---|--- +| | 2025| | | 2024| +Assets| | | | | | | | +Current assets| | | | | | | | +Cash and cash equivalents| | $| 4,512,607| | | $| 1,920,144| +Prepaid expenses| | | 446,790| | | | 290,773| +Total current assets| | | 4,959,397| | | | 2,210,917| +| | | | | | | | +Property and equipment, net| | | 18,356| | | | 19,364| +Deferred financing costs| | | 71,880| | | | —| +Operating lease right-of-use asset| | | 260,557| | | | 276,009| +Total Assets| | | 5,310,190| | | | 2,506,290| +| | | | | | | | +Liabilities and Stockholders’ Equity| | | | | | | | +Current Liabilities| | | | | | | | +Accounts payable and accrued expenses| | $| 896,885| | | $| 596,600| +Accrued interest payable - related parties| | | 1,208| | | | 1,785| +Notes payable to related parties| | | 128,730| | | | 190,270| +Convertible notes payable, net - fair value option, related parties| | | 217,379| | | | 206,085| +Convertible notes payable, net - fair value option| | | 474,749| | | | 478,120| +Operating lease liability| | | 63,226| | | | 60,909| +Total Current Liabilities| | | 1,782,177| | | | 1,533,769| +| | | | | | | | +Derivative liability| | | 22,638| | | | 25,281| +Operating lease liability non-current| | | 220,110| | | | 238,088| +Total Liabilities| | | 2,024,925| | | | 1,797,138| +| | | | | | | | +Commitments and contingencies (Note 8)| | | -| | | | -| +| | | | | | | | +Stockholders’ Equity| | | | | | | | +Series A Convertible Preferred Stock, $0.00001 par value; $1,000 per share liquidation value; 20,000,000 shares authorized; no shares outstanding| | | —| | | | —| +Common stock, $0.00001 par value; 100,000,000 shares authorized; 6,382,694 shares issued and outstanding at March 31, 2025; 4,076,567 shares issued and outstanding at December 31, 2024| | | 63| | | | 41| +Additional paid in capital| | | 40,916,310| | | | 35,287,212| +Accumulated deficit| | | (37,631,108| )| | | (34,578,101| ) +Total Stockholders’ Equity| | | 3,285,265| | | | 709,152| +Total Liabilities and Stockholders’ Equity| | $| 5,310,190| | | $| 2,506,290| + +__ + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +3 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Operations** + +**(Unaudited)** + +**** + +| | 2025| | | 2024| +---|---|---|---|---|---|--- +| | Three Months Ended| +| | March 31,| +| | 2025| | | 2024| +| | | | | | +Revenue| | $| —| | | | —| +| | | | | | | | +Operating expenses| | | | | | | | +Research and development| | | 1,573,928| | | | 586,104| +General and administrative| | | 596,886| | | | 324,609| +Legal and professional| | | 780,427| | | | 474,134| +Total operating expenses| | | 2,951,241| | | | 1,384,847| +| | | | | | | | +Net loss from operations| | | (2,951,241| )| | | (1,384,847| ) +| | | | | | | | +Other income (expense)| | | | | | | | +Interest expense - related parties| | | (5,395| )| | | —| +Interest expense| | | (6,535| )| | | (497,515| ) +Interest income| | | —| | | | 21,453| +Change in fair value of derivative liabilities| | | 2,643| | | | 197,862| +Change in fair value of convertible notes| | | (92,479| )| | | —| +Gain on sale of marketable securities| | | —| | | | 4,037| +Change in fair value of marketable securities| | | —| | | | (706| ) +Loss on settlement of convertible debt| | | —| | | | (71,315| ) +Total other income (expense)| | | (101,766| )| | | (346,184| ) +| | | | | | | | +Net loss| | | (3,053,007| )| | | (1,731,031| ) +| | | | | | | | +Weighted average common shares outstanding - basic and diluted| | | 10,048,915| | | | 2,075,745| +Net loss per shares - basic and diluted| | $| (0.30| )| | $| (0.83| ) + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +4 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Changes in Stockholders’ Equity** + +**(Unaudited)** + +**** + +**_For the Three Months Ended March 31, 2025_** + +**__** + +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity| +---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|--- +| | | | | | | | Additional| | | | | | Total| +| | Common Stock| | | Paid-In| | | Accumulated| | | Stockholders’| +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity| +Balance at December 31, 2024| | | 4,076,567| | | $| 41| | | $| 35,287,212| | | $| (34,578,101| )| | $| 709,152| +Common stock issued for restricted stock units| | | 840,206| | | | 8| | | | (8| )| | | —| | | | —| +Issuance of common stock and pre-funded warrants, net of issuance costs of $693,600| | | 1,340,921| | | | 13| | | | 5,038,561| | | | —| | | | 5,038,574| +Partial conversion of convertible note at fair value| | | 125,000| | | | 1| | | | 53,499| | | | —| | | | 53,500| +Stock-based compensation| | | —| | | | —| | | | 537,046| | | | —| | | | 537,046| +Net loss| | | —| | | | —| | | | —| | | | (3,053,007| )| | | (3,053,007| ) +Balance at March 31, 2025| | | 6,382,694| | | $| 63| | | $| 40,916,310| | | $| (37,631,108| )| | $| 3,285,265| + +**_For the Three Months Ended March 31, 2024_** + +**__** + +| | | | | | | | Additional| | | | | | Total| +---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Common Stock| | | Paid-In| | | Accumulated| | | Stockholders’| +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity| +Balance at December 31, 2023| | | 2,008,689| | | | 20| | | | 29,489,055| | | | (25,433,304| )| | | 4,055,771| +Balance| | | 2,008,689| | | | 20| | | | 29,489,055| | | | (25,433,304| )| | | 4,055,771| +Common stock issued for conversion of accrued interest and principal| | | 78,197| | | | 1| | | | 325,297| | | | —| | | | 325,298| +Common stock issued for restricted stock units| | | 15,625| | | | —| | | | —| | | | —| | | | —| +Stock-based compensation| | | —| | | | —| | | | 111,449| | | | —| | | | 111,449| +Net loss| | | —| | | | —| | | | —| | | | (1,731,031| )| | | (1,731,031| ) +Balance at March 31, 2024| | | 2,102,511| | | | 21| | | | 29,925,801| | | | (27,164,335| )| | | 2,761,487| +Balance| | | 2,102,511| | | | 21| | | | 29,925,801| | | | (27,164,335| )| | | 2,761,487| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +__ + +5 +--- + +_****_ + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Cash Flows** + +**(Unaudited)** + +| | 2025| | | 2024| +---|---|---|---|---|---|--- +| | Three Months Ended| +| | March 31,| +| | 2025| | | 2024| +CASH FLOWS FROM OPERATING ACTIVITIES:| | | | | | | | +Net loss| | $| (3,053,007| )| | $| (1,731,031| ) +Adjustments to reconcile net loss to net cash used in operating activities:| | | | | | | | +Depreciation| | | 1,008| | | | 1,912| +Change in fair value of derivative liabilities| | | (2,643| )| | | (197,862| ) +Amortization of debt discount and finance fees| | | 6,535| | | | 445,509| +Gain on marketable securities| | | —| | | | (4,037| ) +Change in fair value of marketable securities| | | —| | | | 706| +Accrued interest settled with common stock| | | —| | | | 18,783| +Loss on settlement of convertible debt| | | —| | | | 71,315| +Stock-based compensation| | | 537,046| | | | 111,449| +Interest payments on convertible notes accounted for at fair value| | | (31,056| )| | | —| +Change in fair value of convertible notes| | | 92,479| | | | —| +Changes in operating assets and liabilities:| | | | | | | | +Accrued interest income| | | —| | | | 2,937| +Prepaid expenses| | | (156,017| )| | | (15,169| ) +Accounts payable and accrued expenses| | | 79,517| | | | 23,162| +Accounts payable and accrued expenses - related parties| | | —| | | | (446| ) +Accrued interest payable| | | —| | | | 33,223| +Accrued interest payable - related parties| | | (577| )| | | —| +Change in operating lease asset and liabilities| | | (209| )| | | 466| +Net cash used in operating activities| | | (2,526,924| )| | | (1,239,083| ) +| | | | | | | | +CASH FLOWS FROM INVESTING ACTIVITIES:| | | | | | | | +Investment in marketable securities| | | —| | | | (18,705| ) +Proceeds from disposition of marketable securities| | | —| | | | 120,000| +Net cash provided by investing activities| | | —| | | | 101,295| +| | | | | | | | +CASH FLOWS FROM FINANCING ACTIVITIES:| | | | | | | | +Repayment of note payable-related party| | | (61,540| )| | | —| +Proceeds from issuance of common stock and pre-funded warrants, net of placement agent costs of $322,501| | | 5,409,673| | | | —| +Payment of other issuance costs for issuance of common stock and equity-classified warrants| | | (178,745| )| | | —| +Payment for finance costs| | | (50,001| )| | | (40,000| ) +Net cash provided by (used in) financing activities| | | 5,119,387| | | | (40,000| ) +| | | | | | | | +Net change in cash and cash equivalents| | | 2,592,463| | | | (1,177,788| ) +Cash and cash equivalents, beginning of period| | | 1,920,144| | | | 2,576,416| +Cash and cash equivalents, end of period| | $| 4,512,607| | | $| 1,398,628| +| | | | | | | | +Cash paid for:| | | | | | | | +Interest| | $| 36,153| | | $| —| +Income taxes| | $| —| | | $| —| +| | | | | | | | +Supplemental non-cash financing activities:| | | | | | | | +Issuance costs in accounts payable and accrued expenses| | $| 192,354| | | $| —| +Common stock issued for RSUs| | $| 8| | | $| —| +Conversion of convertible notes accounted for at fair value| | $| 53,500| | | $| —| +Finance costs accrued in accounts payable| | $| 28,414| | | $| 41,534| +Common stock issued for settlement of debt| | $| —| | | $| 325,298| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +__ + +6 +--- + +**Note 1 – Organization and Liquidity** + +**** + +**_Organization and Line of Business_** + +**** + +Shuttle Pharmaceuticals Holdings, Inc. (“we,” “us,” “our,” or the “Company”) was originally formed as Shuttle Pharmaceuticals, LLC in the State of Maryland on December 18, 2012. On August 12, 2016, the Company filed articles of conversion with the State of Maryland to convert from an LLC to a C corporation, at which time the Company changed its name to Shuttle Pharmaceuticals, Inc. (“Shuttle”). In connection with the conversion, the Company issued 5,625,000 shares of common stock in exchange for 100% of the outstanding membership interests in Shuttle prior to conversion. On June 4, 2018, Shuttle completed a reverse merger with Shuttle Pharmaceuticals Holdings, Inc. (then known as Shuttle Pharma Acquisition Corp, Inc.), a Delaware corporation, pursuant to which Shuttle, our operating entity, became a wholly-owned subsidiary of the Company. Shuttle Diagnostics, Inc, a subsidiary of the Company, was formed in the State of Maryland on November 14, 2023. + +The Company’s primary purpose is to develop and commercialize unique drugs for the sensitization of cancers and protection of normal tissues, with the goal of improving outcomes for cancer patients receiving radiation therapy. Shuttle has deployed its proprietary technology to develop novel cancer immunotherapies, producing a pipeline of selective HDAC inhibitors for cancer and immunotherapy applications. The Company’s HDAC platform is designed to target candidate molecules with potential roles in therapeutics beyond cancer, including autoimmune, inflammatory, metabolic, neurological and infectious diseases. The Company’s Ropidoxuridine product, which is used with radiation therapy to sensitize cancer cells, was initially funded by a Small Business Innovation Research (“SBIR”) contract provided by the National Cancer Institute (“NCI”), a unit of the National Institutes of Health (“NIH”). Ropidoxuridine has been further developed through the Company’s collaborations with scientists at the University of Virginia for use in combination with proton therapy to improve patient survival. Historically, and prior to the Company’s initial public offering in September 2022, the Company had obtained funding to develop products through NIH grants, including a product to predict late effects of radiation with metabolite biomarkers and develop prostate cancer cell lines in health disparities research. + +The production and marketing of the Company’s products and its ongoing research and development activities will be and are subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any products or combination of products developed by the Company must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the Food and Drug Administration (“FDA”) under the Food, Drug and Cosmetic Act. There can be no assurance that the Company will not encounter problems in its clinical trials that will cause the Company or the FDA to delay or suspend the clinical trials. + +The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and in other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company now or in the future. + +**** + +**Liquidity and Going Concern** + +**** + +Our unaudited condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception and has a net loss of approximately $3.0 million and no revenues for the three months ended March 31, 2025 and working capital of approximately $3.2 million as of March 31, 2025. The Company does not expect to generate positive cash flows from operating activities in the near future. + +In February 2025, the Company issued a revolving note in the principal amount of up to $2,000,000, which the Company may draw upon at its discretion from time to time. In March 2025, the Company completed an equity raise that provided $5.0 million net cash proceeds for the issuance of 1.3 million shares and 17.8 million pre-funded warrants. However, the Company’s existing cash resources, the cash received from the equity offering, and financing available under the revolving note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months. + +7 +--- + +The ability of the Company to continue as a going concern is dependent upon its ability to continue to successfully raise additional equity or debt financing to allow it to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued. + +The accompanying unaudited condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company is unable to continue as a going concern. + +**Note 2 – Summary of Significant Accounting Policies** + +**** + +**_Basis of Presentation_** + +The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and notes required by GAAP for annual financial statements. A complete discussion of the Company’s significant accounting policies is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. + +In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all of the adjustments necessary to present the financial position of the Company as of March 31, 2025 and the results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements of the Company have not been audited by the Company’s independent registered public accounting firm, except that the year-end consolidated balance sheet was derived from audited financial statements. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the operating results for the full fiscal year or any future period. + +**_Reverse Stock Split_** + +On August 13, 2024, in order to meet Nasdaq’s minimum bid price requirement of $1.00 per share (the “Minimum Bid Price Requirement”), the Company effectuated a 1-for-8 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares (the “Reverse Stock Split”). The Reverse Stock Split had no effect on the Company’s authorized shares of common stock or preferred stock and the par value will remain unchanged at $0.00001, respectively. All common stock share, option, warrant and per share amounts (except our authorized but unissued shares and previously reserved shares) have been retroactively adjusted in these unaudited condensed consolidated financial statements and related disclosures. + +**_Basis of Consolidation_** + +The unaudited condensed consolidated financial statements have been prepared on a consolidated basis with those of the Company’s wholly-owned subsidiaries, Shuttle Pharmaceuticals, Inc. and Shuttle Diagnostics, Inc. All intercompany transactions and balances have been eliminated. + +**__** + +**_Use of Estimates_** + +**__** + +The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates are contained in the accompanying unaudited condensed consolidated financial statements for the valuation of debt and warrants and valuation of bifurcated derivative liabilities and other financial instruments. + +8 +--- + +**_Cash and Cash Equivalents_** + +Cash and cash equivalents include cash in bank accounts and money market funds with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. As of March 31, 2025 and December 31, 2024, cash and cash equivalents consisted of the following: + +Schedule of Cash and Cash Equivalents + +| **March 31,** | | **December 31,** +---|---|---|--- +| **2025** | | **2024** +Cash | $ 4,511,790 | | $ 1,918,941 +Money market funds | 817 | | 1,203 +Total cash and cash equivalents | $ 4,512,607 | | $ 1,920,144 + +Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of March 31, 2025 was approximately $4.3 million. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. + +**_Fair Value of Financial Instruments_** + +The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments: + +| ● | Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments +---|---|--- +| | +| ● | Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace. +| | +| ● | Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation. + +Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires the Company to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded, may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange. + +The carrying amounts of the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. + +9 +--- + +Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of March 31, 2025 and December 31, 2024: + +Schedule of Fair Value Liabilities Measured on Recurring Basis + +March 31, 2025| | Level 1| | | Level 2| | | Level 3| | | Carrying Value| +---|---|---|---|---|---|---|---|---|---|---|---|--- +Liabilities| | | | | | | | | | | | | | | | +Derivative Liability - Warrants| | $| —| | | $| —| | | $| 22,638| | | $| 22,638| +Convertible Note| | | —| | | | —| | | | 692,128| | | | 692,128| +Total Liabilities| | $| —| | | $| —| | | $| 714,766| | | $| 714,766| + +December 31, 2024| | Level 1| | | Level 2| | | Level 3| | | Carrying Value| +---|---|---|---|---|---|---|---|---|---|---|---|--- +Liabilities| | | | | | | | | | | | | | | | +Derivative Liability - Warrants| | $| —| | | $| —| | | $| 25,281| | | $| 25,281| +Convertible Note| | | —| | | | —| | | | 684,205| | | | 684,205| +Total Liabilities| | $| —| | | $| —| | | $| 709,486| | | $| 709,486| + +See Note 5 and Note 7 for additional disclosures related to the fair value of the Company’s convertible notes and derivative liabilities, respectively. + +**_Derivative Financial Instruments_** + +The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. + +For its derivative financial instruments, the Company utilizes the most appropriate valuation model (such as Monte Carlo simulations or other sophisticated models, based on the nature of the terms of the instrument) to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the consolidated balance sheet sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date. + +**_Convertible Notes_** + +The Company accounts for its Convertible Bridge Notes (as defined in Note 5) under the fair value option in accordance with ASC 825. The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. Additional term or other notes may be issued in subsequent periods where the Company would be able to make a fair value option election upon issuance provided eligibility criteria are met. The Company records the portion of the Convertible Bridge Notes that are issued and outstanding for accounting purposes at fair value with changes in fair value recorded in other income (expense), net in the unaudited condensed consolidated statements of operations, except for the portion of the total change in fair value that results from a change in the instrument-specific credit risk of the Convertible Bridge Notes, which is recorded in other comprehensive income (loss), if applicable. No loss was attributed to changes in credit risk for the periods presented therefore net loss was equal to comprehensive loss. The fair value option election was made to align the accounting for the Convertible Bridge Notes with the Company’s financial reporting objectives and reduce operational effort to account for embedded features that otherwise would require bifurcation as a separate unit of account. + +Pursuant to the fair value option election, direct and incremental debt issuance costs and consideration paid to the lender related to the Convertible Bridge Notes were expensed as incurred and recorded in other income (expense), net in the unaudited condensed consolidated statements of operations. + +10 +--- + +For convertible notes for which the fair value option is not elected, the Company evaluates the convertible notes for embedded features and bifurcates these features (such as conversion options and redemption options) from their host instruments and accounts for them as free standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. All of the Company’s convertible bridge notes as of March 31, 2025 had elected the fair value option at the initial transaction date. + +**_Warrants_** + +The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, _Distinguishing Liabilities from Equity_(“ASC 480”) and ASC 815, _Derivatives and Hedging_ (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. Finally, the Company determines if the warrants meet the definition of a derivative based on their contractual terms. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. + +For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and at each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed consolidated statements of operations. The Company also evaluates if changes in contractual terms or other considerations would result in the reclassification of outstanding warrants from liabilities to stockholders’ equity (or vice versa). + +The fair value of the warrants is estimated using a Monte Carlo simulation. Warrants that have terms greater than one year are classified as non-current liabilities in the balance sheet, unless there is an indication that the warrants would be settled within one year. + +**_Stock-Based Compensation_** + +Compensation cost for stock awards, which include restricted stock units (“RSUs”), is measured at the fair value on the grant date and recognized as expense, over the related service period. The fair value of stock awards is based on the quoted price of our common stock on the grant date. Compensation expense related to the RSUs is reduced by the fair value of the units that are forfeited by employees that leave the Company prior to vesting as they occur. Compensation cost for RSUs is recognized using the straight-line method over the requisite service period. + +**_Research and Development Expenses_** + +Research and development expenses are charged to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, which include a certain portion of the Company’s former chief executive officer (prior to his transition to chief scientific officer), chief operating officer, vice president regulatory (formerly the chief financial officer) and directors’ compensation. For the three months ended March 31, 2025 and 2024, a portion of personnel-related expenses and stock-based compensation expense for these individuals totaling $0.8 million and $0.2 million, respectively, was included within research and development due to their active involvement in the research and development activities, materials, supplies, related subcontract expenses, and consulting costs. + +11 +--- + +Regarding the accounting treatment for reimbursements, GAAP provides limited guidance on the accounting for government grants received by for-profit companies. In accordance with ASC Topic 832, _Government Assistance_ , as adopted January 1, 2022, the Company discloses certain types of government assistance received in the notes to the consolidated financial statements that includes: a) the nature of the transaction including the nature of the assistance being given, b) the accounting policies being used to account for the transaction and c) other provisions of relevance, where required. Depending on the type of grant or contract, the Company understands there is more than one acceptable alternative for the accounting treatment – a reduction of costs, a deferred credit to be amortized, revenue or other income. The Company has concluded that reimbursements received for R&D expenses incurred are more akin to a reduction of costs and applies reimbursements against incurred research costs. For the three months ended March 31, 2025 and 2024, the Company recorded $1.6 million and $0.6 million, respectively, in research and development. + +**__** + +**_Segment Information_** + +Operating segments are defined as components of an enterprise about which separate and discrete information is available for evaluation by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM, its chief executive officer, evaluates the Company’s operations and manages its business as a single operating segment. All of the Company’s long-lived assets are held in the United States. Refer to Note 9 for the Company’s disclosure on its 1 single operating segment. + +**_Net Loss Per Common Stock_** + +Net loss per share of common stock requires presentation of basic and diluted earnings per common share on the face of the condensed and consolidated statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation to diluted earnings per share. + +In the accompanying unaudited condensed consolidated financial statements, basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Certain warrants issued and outstanding include terms and conditions resulting in the treatment as participating securities. Such warrants do not include an obligation for the warrant holders to fund the losses of the Company. Therefore, these warrants are excluded from the calculation of earnings per common share in periods of net loss. + +Diluted earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding and potentially dilutive shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through convertible securities, contingent share arrangements, stock options and warrants unless the result would be antidilutive. + +The dilutive effect of restricted stock units and other stock-based payment awards subject to vesting and common stock warrants is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting shares of common stock are included in the denominator of the diluted calculation for the entire period being presented. + +Given the nominal exercise price of the Company’s issuance of Pre-Funded Warrants (as defined in Note 6), such Pre-Funded Warrants are included in in the calculation of basic and diluted net loss per share as the exercise price per warrant is deemed nonsubstantive when compared to the fair value of the underlying common shares. The 19,651,746 unexercised pre-funded warrants as of March 31, 2025 were included in the Company’s calculation of basic and diluted loss per share. + +12 +--- + +For the three months ended March 31, 2025 and 2024, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive. + +Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share + +| | March 31,| | | March 31,| +---|---|---|---|---|---|--- +| | 2025| | | 2024| +Convertible notes (Note 5)| | | 2,924,123| | | | 107,429| +Warrants (Note 7)| | | 3,464,281| | | | 184,000| +Restricted stock units (Note 7)| | | 796,925| | | | 34,106| +Anti-dilutive securities| | | 7,185,329| | | | 325,535| + +**_Recently Issued Accounting Pronouncements_** + +In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The guidance is effective for the Company’s fiscal years beginning after December 15, 2024. The Company will reflect any impact of adoption in its Form 10-K for the annual period ending December 31, 2025. The Company does not expect the adoption of this standard to have any material impact on its financial statements. + +On November 4, 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses (“DISE”),” which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the notes to the financial statements. ASU 2024-03 is effective for all public business entities for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements and related disclosures. + +There have been no other recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance during the three months ended March 31, 2025 that are of significance or potential significance to the Company. + +**__** + +**Note 3 - Leases** + +Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the present value of the future lease payments as of the lease commencement date. Operating lease expense is recognized on a straight-line basis over the lease term. + +The Company currently has a lease agreement which allows for the use of a laboratory facility, entered into on February 16, 2023, with base rent of $7,206 per month for a period of 64 months, which increases at the rate of 3% per year, that commenced June 1, 2023. The lease included a six-month 50% rent abatement upon commencement. Additional common area maintenance (“CAM”) fees are charged monthly and revised annually. The estimated monthly CAM fees are $3,300 for the first year of the lease, which are being expensed as incurred. An irrevocable letter of credit (“LOC”) for the security deposit of $43,234 and base rent of $3,891, including 50% abatement, and $3,315 of CAM cost, was due and paid on execution of the lease agreement. Alexandria Real Estate (ARE-QRS-CORP) is the beneficiary of the LOC. The current LOC expires on March 1, 2026. + +13 +--- + +The following summarizes the right-of use asset and lease information for the Company’s operating leases: + +Schedule of Right-of Use Asset and Lease Information about Operating Lease + +| | 2025| | | 2024| +---|---|---|---|---|---|--- +| | Three Months Ended| +| | March 31,| +| | 2025| | | 2024| +Operating lease cost| | $| 22,947| | | $| 22,947| +Variable lease cost| | | 10,878| | | | 10,440| +Sublease income| | | —| | | | (2,163| ) +Total lease cost| | $| 33,825| | | $| 31,224| +| | | | | | | | +Other information:| | | | | | | | +Cash paid for operating cash flows for operating leases| | $| 23,156| | | $| 22,482| +Right-of-use assets obtained in exchange for new operating lease liabilities| | | —| | | | —| +| | | | | | | | +Weighted-average remaining lease term - operating leases (year)| | | 3.42| | | | 4.42| +Weighted-average discount rate - operating leases| | | 10.48| %| | | 10.48| % + +Future non-cancelable minimum lease payments under the operating lease liability as of March 31, 2025, are as follows: + +Schedule of Future Non-cancelable Minimum Lease Payments Under Operating Lease Liability + +Years ended December 31,| | | +---|---|---|--- +2025 (excluding the three months ended March 31, 2025)| | $| 71,090| +2026| | | 97,074| +2027| | | 99,986| +2028| | | 68,236| +2029 and thereafter| | | —| +Total future minimum lease payments| | | 336,386| +Less: imputed interest| | | (53,050| ) +Present value of payments| | $| 283,336| + +**Note 4 – Notes Payable-Related Party** + +On October 14, 2024, as part of the senior convertible note offering described in Note 5, the Company entered into a loan with an officer of the Company in the amount of $250,000 (principal) with an interest rate of 14.5% per annum due October 13, 2025, and warrants to purchase 100,382 shares of common stock at an exercise price of $1.40 per share. As of March 31, 2025, there was outstanding principal and interest balances for these related party notes of $250,000 and $7,653, respectively. Under the fair value option, the senior convertible note is $217,379 as of March 31, 2025. + +On September 4, 2024, the Company issued a $250,000 promissory note (the “Promissory Note”) to an officer of the Company for $250,000. The Promissory Note accrues interest at 12% per annum and is repayable in 12 substantially equal installments over a period of one year. During the three months ended March 31, 2025 the Company incurred $5,395 in interest expense relating to this Promissory Note. During the three months ended March 31, 2025 the Company repaid principal and interest of $61,540 and $5,097, respectively. The principal balance of the Promissory Note as of March 31, 2025 and December 31, 2024 was $128,730 and 190,270, respectively. + +**Note 5 - Convertible Notes and Loan Agreement** + +**_Revolving Note Agreement_** + +**__** + +On February 27, 2025, the Company entered into a Revolving Loan Agreement with a lender. Pursuant to and under the terms of the Revolving Loan Agreement, the Company issued a revolving note dated February 28, 2025 in the principal amount of up to $2,000,000 (the “Revolving Note”), which the Company may draw upon at its discretion from time to time through its maturity on February 28, 2026. + +14 +--- + +The Revolving Note bears interest at the rate of 18% per annum calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue interest daily commencing from the date of any draw down until paid in full on the maturity date. The Company recognized deferred loan costs of approximately $78,000 in relation to the closing of the Revolving Loan Agreement as an asset on the unaudited condensed consolidated balance sheet. These deferred loan costs are being amortized to interest expense on a straight-line basis to the maturity of the Revolving Loan Agreement. During the quarter ended March 31, 2025, the Company recognized $6,535 in interest expense related to the amortization of these deferred loan costs. + +The Revolving Loan Agreement contains customary events of default. If an event of default occurs, the lender may accelerate the repayment of amounts outstanding under the Revolving Loan Agreement, and an amount equal to 120% of the outstanding principal amount and accrued and unpaid interest plus other amounts, costs, expenses and/or liquidated damages. The default provision meets the criteria of a derivative liability that would have an associated fair value if any amounts are outstanding under the Agreement. + +As of March 31, 2025, the Company has not yet drawn on the Revolving Note and no balances are outstanding. + +**_2024 Convertible Bridge Notes_** + +During October 2024, the Company completed a senior convertible note offering in two closings, as further described below. + +On October 14, 2024, the Company issued an aggregate of $600,000 (of an up to $1.3 million authorized financing) senior secured convertible notes due in October 2025, which accrue interest at 14.5% interest per year. The notes include a 5% original issue discount and the Company received $570,000 in proceeds. The notes are optionally convertible by each holder at a 10% premium beginning three months after the date of issuance, and the conversion price will be the 5-day volume-weighted average price (“VWAP”) immediately prior to Closing unless re-set (one-time only) by a lower price of an offering entered into by the Company during the term of the notes. The Company has the option to prepay the notes at any time for 107% of total outstanding balance. Any outstanding principal at maturity will be paid in conversion of shares of common stock (provided such shares have been registered), at a 15% discount of the effective conversion price (unless re-set, one-time only), subject to the Company’s exercise of the optional prepayment right. If such shares of common stock have not been registered, any outstanding principal will be settled in cash. Any accrued interest will be repaid quarterly in cash. The Company also issued warrants to the lenders to purchase an aggregate 240,917 shares of common stock, exercisable at $1.40 per share, with such warrants expiring five years from issuance. In addition, the Company’s former Chief Executive Officer, now Chief Scientific Officer, Dr. Anatoly Dritschilo, invested a total of $237,500 in this financing round, in exchange for a $250,000 convertible note. + +As part of the same offering, on October 21, 2024, the Company issued an additional $231,579 in senior secured convertible notes due in October 2025, with substantially similar terms as the October 14, 2024, issuance. The notes include a 5% original issue discount and the Company received $220,000 in proceeds. The Company also issued warrants to the lenders to purchase an aggregate 88,544 shares of common stock, exercisable at $1.49 per share, with such warrants expiring five years from issuance. Upon completing this issuance, the Company closed the senior secured convertible note offering after receiving a total of $790,000 in proceeds. + +After analyzing the terms of the 2024 Convertible Bridge Notes (“Convertible Bridge Notes”) and its embedded features, the Company elected to account for the 2024 Convertible Bridge Notes at fair value under the allowable fair value option election. As such, the Company initially recognized the 2024 Convertible Bridge Notes at their fair value and subsequently measured the notes at fair value with changes in fair value recorded in current period earnings (or other comprehensive income, if specific to Company credit risk). The Company initially recorded the 2024 Convertible Bridge Notes at their estimated issuance date fair value of $806,758. As the fair value of the 2024 Convertible Bridge Notes exceeded the proceeds received, the Company recorded a loss on issuance of convertible notes of $16,758. The proceeds were allocated in full to the 2024 Convertible Bridge Notes recorded at fair value. The warrants issued in connection with the 2024 Convertible Bridge Notes were deemed to be equity instruments. In addition, the Company allocated the issuance costs incurred to these instruments to the 2024 Convertible Bridge Notes and, as such, expensed $107,491 in issuance costs, including $41,579 of original issue discount on the 2024 Convertible Bridge Notes. + +15 +--- + +The Company used a Monte Carlo simulation model to calculate the fair value of the 2024 Convertible Bridge Notes. The 2024 Convertible Bridge Notes were classified within Level 3 of the fair value hierarchy at the initial measurement date, due to the use of unobservable inputs. The key inputs into the model for the 2024 Convertible Bridge Note were as follows: + +Schedule of Key Inputs of Convertible Bridge Note + +| | March 31, 2025| | | December 31, 2024| +---|---|---|---|---|---|--- +Risk-free interest rate| | | 4.38| %| | | 4.16| % +Expected term (years)| | | 0.54| | | | 0.83| +Quoted VWAP| | $| 0.38| | | $| 0.82| +Volatility| | | 73.90% - 120.16| %| | | 57.50% - 97.14| % +Discount rate| | | 40% - 60| %| | | 40% - 60| % +Probability assessment1| | | 5% - 20| %| | | 10% - 40| % +Illiquidity discount| | | (29| )%| | | (26| )% + +(1)| Probability assessments include the probabilities that subsequent successful capital raises (in terms of amounts raised and timing) are not executed and the probability that the securities issuable under the convertible bridge notes are not timely registered. +---|--- + +The following table summarizes the changes in the carrying value of the 2024 Convertible Bridge Notes: + +Schedule of Fair Value Measurement using Significant Unobservable Inputs + +| | | | +---|---|---|---|--- +Fair Value Measurements Using Significant Unobservable Inputs (Level 3) +Balance - December 31, 2024| | $| 684,205| +Conversion of Convertible Bridge Note (at fair value)| | | (53,500| ) +Payments of coupon interest| | | (31,056| ) +Loss on change in fair value| | | 92,479| +Balance - March 31, 2025| | $| 692,128| + +**_Alto Opportunity Master Fund, SPC_** + +On January 11, 2023, the Company entered into a securities purchase agreement (the “SPA”) with Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B, a Cayman entity (the “Investor”), pursuant to which the Company sold to the Investor a $4,300,000 convertible note (the “Alto Convertible Note”) and warrant (the “Alto Warrant”) to purchase 127,260 shares of common stock, exercisable at $18.80 per share (after taking into account the Company’s August 2025 reverse stock split), in exchange for gross proceeds of $3,935,000 (the “Investment Amount”) (See Note 6). As a consequence of the Company issuing the Convertible Bridge Notes in October 2024, and then subsequently completing the Equity Financing in March 2025, the exercise price of the Alto Warrant was adjusted to $0.48 and $0.32 per share, respectively. The Company determined that the Alto Warrant contains a net cash settlement feature at inception and categorized the Alto Warrant as a liability in the accompanying consolidated financial statements. The Alto Convertible Note was amortized on a monthly basis and the Company could make such monthly amortization payments in cash or, subject to certain equity conditions, in registered shares of common stock or a combination thereof. Installments could be deferred by the noteholder, resulting in a variable interest rate. However, the effective interest rate was approximately 346% based on the internal rate of return calculated on a series of cash flows that occur at regular intervals. For equity repayment, the Alto Convertible Note was convertible into shares of common stock at a price per share equal to the lower of (i) $18.80 per share, as adjusted, (ii) 90% of the three lowest daily VWAPs of the 15 trading days prior to the payment date, or (iii) 90% of the VWAP of the trading day prior to payment date. The noteholder had an acceleration of installment amount conversion option (the “Alto Acceleration Option”), whereby the noteholder, with certain share percentage limitations, could convert to common stock any outstanding installment amount at an amount equal to the installment amount plus five times (5x) the installment amount at any time. The Company determined the Alto Acceleration Option was an embedded derivative within the host instrument and bifurcated it from the host instrument and recorded it as a derivative liability valued at $1,442,000 at inception, using a Monte Carlo simulation model (Note 7). The Convertible Note was repayable over 26 months and bore interest at the rate of 5% per annum. Additionally, the note contained certain redemption options and “Make Whole” provisions. + +16 +--- + +In conjunction with entry into the SPA, the Company entered into a series of related agreements, including a security agreement (the “Security Agreement”), an intellectual property security agreement (the “IP Security Agreement”) and a subsidiary guaranty (the “Subsidiary Guaranty”). The security agreements and guaranty allow, among other things, for the Investor to have a security interest in and place a lien on all of the Company’s assets and intellectual property until such time as the Alto Convertible Note is paid off. In addition, the SPA called for the Company to enter into a springing deposit account control agreement (the “Springing DACA”), which, in the event the Company defaulted on its repayment of the Alto Convertible Note, would allow the Investor to assume control of the Company’s bank account only with regard to any funds remaining outstanding under the Alto Convertible Note. As such, in conjunction with entry into the SPA, the Company established a separate bank account in which it deposited the Investment Amount and pursuant to which the Company, the Investor and the bank holding the Investment Amount, First Republic Bank, entered into the Springing DACA agreement. As the Investment Amount had been held at First Republic Bank, in light of certain banking crises then affecting smaller banks, on March 12, 2023, the Company and the Investor moved the Investment Amount from First Republic Bank, after which time the Springing DACA was no longer in effect. Further, pursuant to amendments to the SPA entered into in May and June of 2023, the Company and the Investor agreed that all of the Investment Amount would be released to the Company and the relevant provision of the SPA which required the Springing DACA would no longer be deemed applicable. In addition, the Company granted the Investor the option to purchase up to an additional $10 million in convertible notes and warrants on substantially the same terms as the Alto Convertible Note and Alto Warrant, excluding the Springing DACA requirement, with such option to be effective through December 31, 2025. The agreement offered the investor an opportunity to participate in future capital raises at substantially similar terms as the January 11, 2023 agreement. The Company expected that such subsequent convertible notes and warrants would be issued on substantially similar terms as the January 11, 2023 initial agreement, as amended, thus providing the Company the opportunity to negotiate certain aspects of the agreement. + +Boustead Securities, LLC (“Boustead”) served as a placement agent for the Alto Convertible Note and Warrant offering and received $345,000 cash compensation and a warrant to purchase 8,909 shares of common stock, exercisable at $18.80 per share. The Boustead warrant was determined to be an equity instrument valued on a non-recurring basis. The Company used the Black Scholes valuation model using a term of five years, volatility of 110%, a risk-free rate of 3.53% for a value of $99,543. + +The Company allocated the finance costs related to the Boustead placement agent fee of $345,000, based on the relative fair market values of the Convertible Note and warrants issued. The allocation of the financing costs applied $232,027 to the debt component as a debt discount that was being amortized to interest expense over the term of the Convertible Note, $104,245 to the warrant derivative liability component, expensed as a finance fee, and $8,727 to the equity warrant as a reduction in additional paid in capital. + +The Company allocated to the debt component of the note an original discount of $300,000, legal fees of $65,000, $215,000 for additional interest fees on day one added to note principal, $1,442,000 for the accelerated conversion feature, and $1,288,543 for the fair value of warrants, resulting in an additional $3,310,543 debt discount that was being amortized to interest expense over the term of the Alto Convertible Note. + +On August 6, 2024, the Company entered into an amendment to the SPA with Alto. Under the Amendment Agreement, the Company and Alto agreed as follows: (i) that the Company would pay $600,000 (the “Cash Collateral”) in cash by wire transfer of immediately available funds to Alto, which would be held as collateral on the remaining $1.2 million outstanding under the Alto Note; (ii) Alto will defer the monthly installment payment due on September 3, 2024 under the Alto Note until the Alto Note’s March 11, 2025 maturity date; and (iii) Alto would grant a waiver of any default Section 4(a)(xvi) of the Note related to the restatement and reaudit of the Company’s financial statements for the years ended December 31, 2022 and 2023. The amendment was accounted for as a troubled debt restructuring as the Company determined it was experiencing financial difficulties and was provided a concession through the deferral of one monthly principal and interest payment. As the future undiscounted cash flows exceeded the carrying value of the Alto Convertible Note, the Company did not recognize any gain or loss associated with the troubled debt restructuring. + +On February 26, 2025, the Company, entered into an amendment agreement (the “Amendment Agreement”) for purposes of amending the terms of the SPA originally dated January 11, 2023, and as amended May 10, 2023, June 5, 2023 and August 6, 2024, between the Company and Alto. Under the Amendment Agreement, in exchange for the Company’s payment of $75,000 to Alto, Alto agreed to permanently waive its right to purchase up to $10 million in Additional Notes and Additional Warrants and to a one-time waiver of the right to participate in the Company’s contemplated registered securities offering, as disclosed in the Company’s registration statement on Form S-1, filed with the SEC on February 13, 2025. The payment to Alto was accounted for as an issuance cost and recorded as a reduction to additional paid-in capital. + +17 +--- + +During the three months ended March 31, 2024, the Company recorded interest expense of $497,515, which included amortization of debt discount as interest expense of $445,509. + +During the three months ended March 31, 2024, the Company settled $235,200 of principal, and settled $18,783 of accrued interest, which settlements were made in the form of 78,197 shares of common stock, during the three months ended March 31, 2024. As a consequence of the settlement during the year ended December 31, 2024, no balances were outstanding as of March 31, 2025 and December 31, 2024. + +**__** + +**Note 6 - Stockholders’ Equity** + +**_Common Stock_** + +During the three months ended March 31, 2025, the Company issued: + +| ● | 125,000 shares of common stock upon partial conversion of the 2024 Convertible Bridge Notes, +---|---|--- +| ● | 1,340,921 shares of common stock as part of a public offering, and +| ● | 840,206 shares of common stock issued for vesting of restricted stock units. + +During the three months ended March 31, 2024, the Company issued: + +| ● | 78,197 shares of common stock to settle $235,200 of principal and $18,783 of interest on a convertible note and incurred $71,315 of loss on settlement, and +---|---|--- +| ● | 15,625 shares of common stock issued for vesting of restricted stock units. + +**__** + +**_March 2025 Equity Financing_** + +On March 12, 2025, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with WestPark Capital, Inc. (“WestPark”) as the sole underwriter (the “Underwriter”), related to a public offering (the “Offering”) of (i) 1,340,921 shares of common stock, par value $0.00001 per share, of the Company, at a public offering price of $0.30 per share and (ii) pre-funded warrants to purchase 17,825,746 shares of Common Stock at an exercise price of $0.001 per share, at a public offering price of $0.299 per Pre-Funded Warrant (the “Pre-Funded Warrants”). The Offering closed on March 13, 2025. + +The Offering resulted in gross proceeds of approximately $5.7 million and net proceeds of approximately $5.0 million, reflecting approximately $0.7 million of legal costs and other expenses connected with the transaction. + +The Pre-Funded Warrants are exercisable at any time after March 13, 2025, at an exercise price of $0.001 per share. The Pre-Funded Warrants contain standard adjustments to the exercise price, including for stock splits, stock dividends and pro rata distributions and contain customary terms regarding the treatment of such Pre-Funded Warrants in the event of a fundamental transaction, which include but are not limited to a merger or consolidation involving the Company, a sale of all or substantially all of the assets of the Company or a business combination resulting in any person acquiring more than 50% of the outstanding shares of Common Stock of the Company. Additionally, the Pre-Funded Warrants include restrictions on exercise in the event the Purchaser’s beneficial ownership of the Company’s common stock would exceed 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise. + +The Company concluded that the Pre-Funded Warrants met the requirements to be classified in stockholders’ equity, and have been recorded as additional paid in capital. + +As of March 31, 2025, no Pre-Funded Warrants have expired or have been exercised. + +18 +--- + +**_Warrants_** + +In connection with the January 2023 Alto Convertible Note, Boustead was granted warrants to purchase 8,909 shares of common stock, at an exercise price of $18.80 per share (Note 5). In addition, Alto was granted warrants to purchase 127,260 shares of common stock, at an exercise price of $0.32 per share, as adjusted (Note 5, 7). + +In connection with the Convertible Bridge Notes issued on October 14, 2024, the lenders were granted warrants to purchase 240,917 shares of common stock, at an exercise price of $1.40 per share. In addition, in connection with the Convertible Bridge Notes issued on October 21, 2024, the lenders were granted warrants to purchase 88,544 shares of common stock, at an exercise price of $1.49 per share. + +In connection with the October 2024 Equity Financing, the Company issued pre-funded warrants to purchase up to 2,555,246 shares of common stock, at an exercise price of $0.001 per share, and warrants to purchase up to 2,950,820 shares of common stock, at an exercise price of $1.40 per share. + +The table below excludes the pre-funded warrants, of which none were exercised during the three months ended March 31, 2025. As of March 31, 2025, 19,651,746 pre-funded warrants remained unexercised and outstanding and have no expiration date, including 17,825,746 and 1,826,000 from the March 2025 and October 2024 Equity Financings, respectively. + +A summary of activity regarding warrants to purchase common stock (excluding pre-funded warrants) for the three months ended March 31, 2025 were as follows: + +Schedule of Warrants Activity + +| | Number of| | | Weighted Average| | | Average| +---|---|---|---|---|---|---|---|---|--- +| | warrants| | | Exercise Price| | | Life (years)| +Outstanding, December 31, 2024| | | 3,464,281| | | $| 1.89| | | | 4.67| +Granted| | | —| | | | —| | | | 0—| +Outstanding, March 31, 2025| | | 3,464,281| | | $| 1.88| | | | 4.42| + +The warrants had intrinsic value of $8,450 as of March 31, 2025. All of the outstanding warrants are exercisable as of March 31, 2025. + +**__** + +**_Equity Incentive Plan_** + +The Company’s 2018 Equity Incentive Plan (the “2018 Plan”) provides for equity incentives to be granted to employees, executive officers, directors and key advisers and consultants. Equity incentive grants may be made in the form of stock options with an exercise price of not less than the fair market value of the underlying shares as determined pursuant to the 2018 Plan, restricted stock awards, other stock-based awards, or any combination of the foregoing. The 2018 Plan is administered by the Company’s compensation committee. The Company has reserved 3,000,000 shares of common stock for issuance under the 2018 Plan. As of March 31, 2025, 1,727,175 shares have been granted, net of forfeitures, under the 2018 Equity Incentive Plan, of which 930,250 shares have vested. + +**_Restricted Stock Units_** + +The Company may grant restricted stock units (“RSU”) under our 2018 Plan. RSUs are bookkeeping entries representing an amount equal to the fair market value of one share of our common stock. Subject to the provisions of the 2018 Plan, the administrator determines the terms and conditions of RSUs, including the vesting criteria and the form and timing of payment. Notwithstanding the foregoing, the administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. RSUs granted typically vest annually in one third increments from the date of appointment. + +During the three months ended March 31, 2025 and 2024, pursuant to agreements with directors, officers and consultants, 552,486 and 25,000 RSUs with a value of $0.3 million and $42 thousand were granted, respectively. + +19 +--- + +Stock-based compensation expense was classified as follows: + +Schedule of Compensation Expenses (RSUs) + +| | 2025| | | 2024| +---|---|---|---|---|---|--- +| | Three Months Ended| +| | March 31,| +| | 2025| | | 2024| +Research and development| | $| 320,105| | | $| 33,953| +General and administrative| | | 216,941| | | | 77,496| +Total| | $| 537,046| | | $| 111,449| + +On February 27, 2025, the Company entered into a Revolving Loan Agreement with Bowery Consulting Group Inc. (“Bowery”) where the Company may borrow from Bowery an aggregate principal amount of up to $2,000,000 (see Note 5). As part of one of the lender conditions, no less than four of the current board members were to resign, with three new nominees to be elected and appointed by the remaining members of the Company’s Board of Directors. Upon the resignation of the four board members, vesting of all outstanding unvested RSUs held by the departing board members were allowed to accelerate immediately. The Company concluded that the acceleration represented a modification of the outstanding unvested RSUs. As a result of the modification, the Company recorded approximately $0.5 million of stock based compensation expense. + +As of March 31, 2025, there was $0.5 million of unrecognized RSU compensation cost related to non-vested stock-based compensation arrangements which is expected to be recognized over a weighted-average period of 2.47 years. + +The following is a summary of activity regarding Restricted Stock Units issued: + +Schedule of Restricted Stock Units (RSUs) + +| | Number of RSU| | | Weighted Average Fair Value Per RSU| +---|---|---|---|---|---|--- +Outstanding, December 31, 2024| | | 1,084,644| | | $| 0.84| +Granted| | | 552,486| | | | 0.54| +Forfeited| | | —| | | | —| +Vested| | | (840,205| )| | $| 0.73| +Outstanding, March 31, 2025| | | 796,925| | | $| 0.74| + +**__** + +**Note 7 – Derivative Liabilities** + +**_Fair Value Assumptions Used in Accounting for Derivative Liabilities_** + +ASC 815 requires the Company to assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense. + +In October 2024, in connection with the Equity Financing, the Company issued warrants to purchase 2,950,820 shares of common stock, with an exercise price of $1.40 per share, valued at inception at $0.2 million and as of March 31, 2025, at less than $0.1 million. The Company determined that the derivative liabilities from the warrants issued in relation to the October 2024 Equity Financing did not qualify for classification as equity instruments as they did not meet the requirements to be considered indexed to the Company’s own stock, due to potential variability in the settlement amount upon a fundamental transaction, as defined. + +In January 2023, in connection with the Alto Convertible Note, the Company issued warrants to purchase 127,260 shares of common stock, with an exercise price of $0.32 per share, as adjusted, valued at inception at $1.1 million and as of March 31, 2025, at less than $0.1 million. The Company determined that the derivative liabilities from the warrants issued in relation to the Alto Convertible Note did not qualify for classification as equity instruments due to the existence of certain net cash settlement provisions that are not within the sole control of the Company. In addition, there are certain down round provisions that could reduce the exercise price if the Company issues securities at lower prices in the future. + +20 +--- + +The Company has determined the Acceleration Option in the Alto warrants is an embedded derivative within the host instrument and has bifurcated it from the host instrument and recorded it as a derivative liability valued at $1.4 million at inception, using a Monte Carlo simulation model. The Company determined its derivative liability from the noteholder’s Acceleration Option for the Alto Convertible Note was not clearly and closely related to the host and should thus be accounted for as a bifurcated derivative liability. As of March 31, 2025, the value of the Acceleration Option was $0 as the Alto Convertible Note was settled in full by September 30, 2024. + +The Company classifies these derivative liabilities as a Level 3 fair value measurement and used the Monte Carlo pricing model to calculate the fair value as of March 31, 2025 (less than $0.1 million) and December 31, 2024 (less than $0.1 million). + +The key inputs for the Monte Carlo simulation* for the Alto and October 2024 Equity Financing warrants as of March 31, 2025, were as follows: + +Schedule of Monte Carlo Simulation Assumption + +Net cash settlement and down round key valuation inputs - warrants*| | | +---|---|---|--- +Annualized volatility| | | 73.90% - 120.16| % +Risk-free interest rate| | | 3.89 \- 4.38| % +Quoted VWAP| | $| 0.38| +Exercise price| | | 0.32 \- 1.40| +Probability assessment1| | | 5% - 20| % +Illiquidity discount| | | (29| )% +Time period (years)| | | 1.79 \- 4.58| + +1| | Probability assessments include the probabilities that subsequent successful capital raises (in terms of amounts raised and timing) are not executed and the probability that the securities issuable under the convertible bridge notes are not timely registered. +---|---|--- + +_*_| | _Based on a Monte Carlo simulation analysis of 50,000 iterations_ +---|---|--- + +__ + +The key inputs for the Monte Carlo simulation as of December 31, 2024, were as follows: + +Net cash settlement and down round key valuation inputs - warrants*| | | +---|---|---|--- +Annualized volatility| | | 57.50% - 97.14| % +Risk-free interest rate| | | 4.25 \- 4.38| % +Quoted VWAP| | $| 0.82| +Exercise price| | | 0.48 \- 1.40| +Probability assessment1| | | 10% - 40| % +Illiquidity discount| | | (26| )% +Time period (years)| | | 2.03 \- 4.84| + +1| | Probability assessments include the probabilities that subsequent successful capital raises (in terms of amounts raised and timing) are not executed and the probability that the securities issuable under the convertible bridge notes are not timely registered. +---|---|--- + +*| | Based on a Monte Carlo simulation analysis of 50,000 iterations. +---|---|--- + +__ + +The following table summarizes the changes in the derivative liabilities: + +Schedule of Derivative Liabilities + +Fair Value Measurements Using Significant Unobservable Inputs (Level 3) +--- +| | Warrants| | | Alto Acceleration Feature| +Balance - December 31, 2024 | | $ | 25,281 | | | $ | — | +Addition of new derivatives | | | — | | | | — | +Gain on change in fair value | | | (2,643 | ) | | | — | +Balance - March 31, 2025 | | $ | 22,638 | | | $ | — | +| | | | | | | | +Balance - December 31, 2023| | $| 410,660| | | $| 3,852| +Gain on change in fair value| | | (196,045| )| | | (1,817| ) +Addition of new derivatives| | | —| | | | —| +Balance - March 31, 2024| | $| 214,615| | | $| 2,035| + +21 +--- + +**Note 8 – Commitments and Contingencies** + +On December 16, 2024, the Company entered into a sponsored research agreement (the “Sponsored Research Agreement”) with the Regents of the University of California, on behalf of its San Francisco campus (the “UCSF”), pursuant to which UCSF’s employees will conduct research on a project entitled “Investigation of 18F-fluorodeboronation method for PSMA targeting ligand radiolabeling and evaluation in prostate cancer models” (the “Research Program”). Under the terms of the Sponsored Research Agreement, the Company will bear the total cost of $0.3 million of the Research Program and has an exclusive license to the intellectual property underlying the research. This Sponsored Research Agreement will be effective for a period of one year and may be extended by written mutual consent of the parties. During the three months ended March 31, 2025, the Company made prepayments of $0.2 million and amortized $0.05 million of costs under the Sponsored Research Agreement. + +**** + +In January 2025, the Company entered into a change order to its existing agreement with Theradex Systems, Inc., the Company’s primary third-party CRO, for purposes of supporting the Company’s clinical trials of Ropidoxuridine. Following the change order, the Company’s total cost limit increased by $3.0 million, for an aggregate of $5.3 million, of which $3.2 million has not yet been incurred. + +**** + +In March 2025, the Company entered into a consulting services agreement (the “Consulting Agreement”) with Bowery Consulting Group Inc. (the “Consultant”). According to the Consulting Agreement, the Consultant will provide consulting services in connection with the Company’s business, advising on viability of plans for scaling activities, growth and capital raising strategies, and costs minimization associated with technological platform improvements and marketing spend. The Company agreed to pay the Consultant $260,000 for their services, of which the Company recognized less than $0.1 million during the three months ended March 31, 2025 related to the Consulting Agreement. The Company is not obligated to pay amounts under the Consulting Agreement until it regains full Nasdaq listing requirement. + +On November 10, 2021, the Company entered into an engagement agreement (“EA”) with Boustead designating Boustead as its exclusive financial advisor for corporate finance activities and subsequently, on August 29, 2022, the Company entered into an underwriting agreement with Boustead in conjunction with the Company’s IPO. The EA contained an up to three year right of first refusal (“ROFR’) and the Underwriting Agreement, which overrode conflicting terms in the EA, contained a two year ROFR following the September 2, 2022 closing of the Company’s IPO. Further, Boustead also had a ROFR in conjunction with the Company’s terminated rights offering, which provided Boutead with a ROFR through February 7, 2025\. Following the Company’s engagement agreement and underwriting agreement with WestPark Capital dated February 10, 2025 and March 13, 2025, respectively, Boustead asserted it has ROFR rights, demanding termination of WestPark’s engagement and claiming entitlement to compensation under the Boustead EA. As of the reporting date, there are no conditions indicating a loss has been incurred, nor does the Company believe a loss is probable and reasonably estimable, therefore no accrual for a potential loss has been recorded. + +**** + +**Note 9 – Business Segment Information** + +The Company operates as one operating segment with a focus on products designed to address the limitations of current cancer therapies and extend new applications of radiation therapy. The CEO, as our chief operating decision maker (CODM), manages and allocates resources to the operations of the Company on a consolidated basis, considering primarily research and development expenditures, cash burn and net loss. This enables the CEO to assess our overall level of available resources and determine how best to deploy these resources across products and research and development projects in line with the longer-term Company-wide strategic goals. During the three months ended March 31, 2025, the Company appointed an Interim CEO, who assumed the role of CODM. This appointment did not result in any immediate changes to the reporting metrics that the CODM uses to manage and allocate resources to the operations of the Company. Our former CEO continues to chair the Company’s Board of Directors and serve in a corporate role as Chief Scientific Officer. + +22 +--- + +The accounting policies of our reportable segment are the same as those described in the “Summary of Significant Accounting Policies” for the Company. All costs, research and development expenses, general and administrative expenses, other operating expenses, interest expense, depreciation, corporate overhead assets (workforce, intellectual property, etc.) are fully allocated to the Company’s one segment. Significant segment expenses include payroll and costs incurred for the Company’s primary third-party contract research organization (“CRO”). During the three months ended March 31, 2025 and 2024, the Company incurred payroll expenses classified in our unaudited condensed consolidated statements of operations as research and development of $0.3 million and $0.3 million, respectively. During the three months ended March 31, 2025 and 2024, the Company incurred payroll expenses classified in our unaudited condensed consolidated statements of operations as general and administrative of $0.2 million and $0.1 million. During the three months ended March 31, 2025, the Company incurred third-party CRO expenses of $0.8 million and $0.2 million, respectively, all of which is classified in our unaudited condensed consolidated statements of operations as research and development. All other operating expenses in our unaudited condensed consolidated statements of operations are characterized as other segment expenses which, after factoring in other income and expenses, reconcile to net loss for each period. The Company’s reportable segment’s profit or loss, assets, significant expenses and other specified items are consistent with the financial information disclosed in our unaudited condensed consolidated financial statements. See the unaudited condensed consolidated financial statements for the financial information of the Company’s one segment. + +**Note 10 – Subsequent Events** + +On April 3, 2025, the Company, entered into a consulting agreement (the “Consulting Agreement”) with IR Agency LLC (the “IR Agency”). Pursuant to the Consulting Agreement, IR Agency agrees to provide certain marketing and advertising services to communicate information about the Company to the financial community (the “Services”), including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company. As consideration for the performance of the Services, the Company paid IR Agency $2.0 million on April 5, 2025\. The term of the Consulting Agreement will be three months starting on April 3, 2025. + +On April 4, 2025, the Company received a conversion request related to the Convertible Bridge Notes. As a result, the Company issued 175,000 shares of common stock with a fair value of $77,525. + +Through May 8, 2025, holders exercised prefunded warrants, resulting in the issuance of 4,426,000 shares of common stock. + +23 +--- + +**ITEM 2. MANAGEMENT** ’**S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** + +__ + +_The following Management’s Discussion and Analysis of Financial Condition and Result of Operations (the “MD &A”) should be read in conjunction with our unaudited financial statements and the related notes thereto included elsewhere in this Quarterly Report and our financial statement and related notes contained in our annual report on Form 10-K for the fiscal year ended December 31, 2024. The MD&A contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors including, but not limited to, those noted under “Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2024. _ + +_We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this report, except as required by U.S. federal securities laws._ + +__ + +**Overview** + +Founded by Georgetown University Medical School faculty members, Shuttle Pharmaceuticals Holdings, Inc. is a discovery and development stage pharmaceutical company leveraging our proprietary technology to develop novel therapies that are designed to cure cancer. Originally formed as Shuttle Pharmaceuticals, LLC in 2012, our goal is to extend the benefits of cancer treatments by leveraging insights into cancer therapy with surgery, radiation therapy, chemotherapy and immunotherapy. While there are several therapies being developed with the goal of curing cancer, one of the most effective and proven approaches to this is radiation therapy (“RT”). We are developing a pipeline of products designed to address the limitations of the current standard of cancer therapies. We believe that our product candidates will enable us to deliver cancer treatments that are safer, more reliable and at a greater scale than that of the current standard of care. + +Operations to date have focused on continuing our research and development efforts to advance Ropidoxuridine clinical testing and improved drug formulation, to advance HDAC6 inhibitor (SP-2-225) preclinical development and explore the application of the PC-RAD Test, predictive biomarkers of radiation response. The clinical development of Ropidoxuridine has included completion of a Phase I clinical trial to establish drug bioavailability and a maximum tolerated dose for use in Phase II clinical trials. TCG GreenChem, with whom we have contracted for process research, development and cGMP compliant manufacture of IPdR, has manufactured the API of Ropidoxuridine and the University of Iowa Pharmaceuticals has formulated the drug product for use in our upcoming Phase II clinical trial in brain cancer patients undergoing radiation therapy. The drug product (capsules) were shipped to CRO Theradex Oncology and distributed to clinical trial sites that are fully approved to enroll patients in the trial. Shuttle received approval from the FDA to begin the clinical trial. The FDA thereafter made recommendations to expand the clinical trial to include a randomized dose “optimization” step and we agreed with the recommendation. Meetings with engaged clinical sites to review the protocol documents have occurred and FDA required IRB approvals have been received. With FDA recommended changes incorporated into the revised protocol and the completion of site initiation visits, we commenced our Phase II clinical study in October 2024. The Company’s radiation biomarker project and the health disparities project have been completed and we are proceeding with plans for clinical validation and potential for commercialization of Ropidoxuridine as a radiation sensitizer. + +**__** + +**Nasdaq Listing Compliance** + +On December 31, 2024, we received a letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) stating that for the 30 consecutive business day period between November 15, 2024 to December 30, 2024 our common stock had failed to maintain a minimum closing bid price of $1.00 per share, as required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until June 30, 2025 (the “Compliance Period”), to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days. + +24 +--- + +Because we have already completed a 1-for-8 reverse stock split in August 2024, under new Nasdaq rules, we will not be allowed an additional 180 day compliance period. As such, if we do not regain compliance with the Minimum Bid Price Requirement by June 30, 2025, we will be subject to delisting. As such, we are seeking stockholder approval to complete an additional reverse stock split at our upcoming Annual Meeting of Stockholders, scheduled to be held on May 9, 2025, in the event our stock does not begin trading above $1.00 per share in the interim. + +If we cannot regain compliance during the Compliance Period, by reverse split or otherwise, Nasdaq will provide a notice that our common stock will be subject to delisting. At that time, we may appeal Nasdaq’s delisting determination to a Nasdaq Hearings Panel. + +Nasdaq’s notice of noncompliance has no immediate effect on the listing of our common stock and our common stock will continue to be listed on The Nasdaq Capital Market under the symbol “SHPH.” There can be no assurance that we will regain compliance with the Minimum Bid Price Requirement or maintain compliance with any of the other Nasdaq continued listing requirements. We will continue to monitor the closing bid price of its common stock and may, if appropriate, consider available options to regain compliance with the Minimum Bid Price Requirement. + +On September 10, 2024, we received a letter from Nasdaq, notifying us that we were no longer in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) requires listed companies to maintain stockholders’ equity of at least $2.5 million. In our Quarterly Report on Form 10-Q for the period ended June 30, 2024, we reported stockholders’ equity of $0.8 million, which was below the minimum stockholders’ equity required for continued listing pursuant to Nasdaq Listing Rule 5550(b)(1). Nasdaq provided us with 45 calendar days, or until October 25, 2024, to submit a plan to regain compliance with the minimum stockholders’ equity standard. On October 15, 2024, we submitted a plan to Nasdaq to regain compliance and Nasdaq subsequently granted us up until March 10, 2025 to regain compliance. + +Following the Company’s March 2025 $5.75 million equity financing, on March 14, 2025, Nasdaq acknowledged that we had regained compliance with the Listing Rule 5550(b)(1) but indicated that if we fail to evidence compliance upon filing our next periodic report for the period ended March 31, 2025, we may be subject to delisting. As evidenced herein, we continue to be in compliance with the Listing Rule 5550(b)(1). However, Nasdaq will continue to monitor our ongoing compliance with the Minimum Equity Requirement and, subject to a determination that we are not in compliance, we may be subject to delisting. + +**Results of Operations** + +**** + +**_Comparison of the three months ended March 31, 2025 and 2024_** + +__ + +The following table summarizes the results of our operations: + +| | Three Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | March 31,| | | | | | | +| | 2025| | | 2024| | | Change| | | %| +Revenue| | $| —| | | $| —| | | $| —| | | | —| +Operating expenses:| | | | | | | | | | | | | | | | +Research and development| | | 1,573,928| | | | 586,104| | | | 987,824| | | | 169| % +General and administrative| | | 596,886| | | | 324,609| | | | 272,277| | | | 84| % +Legal and professional| | | 780,427| | | | 474,134| | | | 306,293| | | | 65| % +Total operating expenses and loss of operations| | | 2,951,241| | | | 1,384,847| | | | 1,566,394| | | | 113| % +| | | | | | | | | | | | | | | | +Other income (expense):| | | | | | | | | | | | | | | | +Interest expense - related parties| | | (5,395| )| | | —| | | | (5,395| )| | | —| % +Interest expense| | | (6,535| )| | | (497,515| )| | | 490,980| | | | (99| )% +Interest income| | | —| | | | 21,453| | | | (21,453| )| | | (100| )% +Change in fair value of derivative liabilities| | | 2,643| | | | 197,862| | | | (195,219| )| | | (99| )% +Change in fair value of convertible notes| | | (92,479| )| | | —| | | | (92,479| )| | | —| % +Gain on sale of marketable securities| | | —| | | | 4,037| | | | (4,037| )| | | (100| )% +Change in fair value of marketable securities| | | —| | | | (706| )| | | 706| | | | (100| )% +Loss on settlement of convertible debt| | | —| | | | (71,315| )| | | 71,315| | | | (100| )% +Total other expense| | | (101,766| )| | | (346,184| )| | | 244,418| | | | (71| )% +Net loss| | $| (3,053,007| )| | $| (1,731,031| )| | $| (1,321,976| )| | | 76| % + +25 +--- + +_Research and Development._ Total research and development (“R&D”) expense was $1.6 million for the three months ended March 31, 2025, as compared to $0.6 million to the three months ended March 31, 2024. The increase in total R&D expense of $1.0 million, or 169%, is primarily related to the Company having completed production of the drug product and the start of work related to the initiation of trials including contract research organization (“CRO”) expenses, clinical trial sites, other regulatory activities. + +R&D compensation related expenses were $0.6 million in the three months ended March 31, 2025 as compared to $0.3 million in the three months ended March 31, 2024. For the three months ended March 31, 2025, R&D compensation related expenses were 39% as a percent of total R&D expense, representing a decrease from the 56% of total R&D incurred in the three months ended March 31, 2024. Subcontractor expense made up 58% of total R&D expenses in the three months ended March 31, 2025 and 34% of total R&D expenses during the three months ended March 31, 2024. + +_General and Administrative Expenses_. General and administrative expenses in the three months ended March 31, 2025 increased by $0.3 million, or 84%, from $0.3 million in the three months ended March 31, 2024 to $0.6 million in the three months ended March 31, 2025\. The increase in general and administrative expenses was primarily due to costs associated with stock-based compensation of $0.1 million and marketing of $0.1 million for investor relations and other administrative costs. + +_Legal and Professional Expenses._ During the three months ended March 31, 2025, legal and professional expenses increased by $0.3 million or 65% compared to the same period in 2024. The increase in legal and professional fees was primarily due to increases in legal costs associated with corporate matters and our accounting expenses related to our public filing requirements. + +_Other Income (expense)._ During the three months ended March 31, 2025, other expense decreased by $0.3 million or 73% compared to the same period in 2024. The decrease was primarily driven by a $0.5 million decrease in interest expense. The decrease was partially offset by a $0.2 million decrease in change in fair value of derivative liabilities. + +**Liquidity and Capital Resources** + +Our unaudited condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. We have incurred losses since inception and had a net loss of $3.0 million and no revenues generated during the three months ended March 31, 2025 and working capital of approximately $3.2 million as of March 31, 2025. We do not expect to generate positive cash flows from operating activities in the near future. + +In January 2025, we entered into a change order to the existing agreement with Theradex Systems, Inc., our primary third-party CRO, for purposes of supporting our clinical trials of Ropidoxuridine. Following the change order, our total cost limit increased by $3.0 million, for an aggregate of $5.3 million, of which $2.4 million had not yet been incurred as of March 31, 2025. + +**** + +26 +--- + +**** + +In March 2025, we entered into a consulting services agreement (the “Bowery Consulting Agreement”) with Bowery Consulting Group Inc. (the “Consultant”). According to the Bowery Consulting Agreement, the Consultant will provide consulting services in connection with our business, advising on viability of plans for scaling activities, growth and capital raising strategies and cost minimization associated with technological platform improvements and marketing spend. We agreed to pay the Consultant $260,000 for their services. We are not obligated to pay amounts under the Bowery Consulting Agreement until we regain full Nasdaq listing requirement compliance. + +In April 2025, we entered into a consulting agreement (the “IR Agency Consulting Agreement”) with IR Agency LLC (the “IR Agency”). Pursuant to the IR Agency Consulting Agreement, IR Agency agrees to provide certain marketing and advertising services to communicate information about us to the financial community (the “Services”), including, but not limited to, creating company profiles, media distribution and building a digital community with respect to us. As consideration for the performance of the Services, we paid IR Agency $2.0 million on April 5, 2025. The term of the IR Agency Consulting Agreement is three months commencing April 3, 2025. + +Our ability to continue as a going concern is dependent upon our ability to continue to successfully raise additional equity or debt financing to allow us to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements contained in this report are issued. + +**_Recent Financings_** + +On February 27, 2025, we entered into a Revolving Loan Agreement (the “Revolving Loan Agreement”) with certain lender identified on the signature page thereto. Pursuant to and under the terms of the Revolving Loan Agreement, we issued a revolving note dated February 28, 2025 in the principal amount of up to $2.0 million (the “Revolving Note”), which we may draw upon at our discretion from time to time through its maturity on February 28, 2026. The Revolving Note bears interest at the rate of 18% per annum calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue interest daily commencing from the date of any draw down until paid in full. + +On March 12, 2025, we consummated a public offering of an aggregate of (i) 1,340,921 shares of common stock, of the Company, at a public offering price of $0.30 per share and (ii) pre-funded warrants to purchase 17,825,746 shares of common stock at an exercise price of $0.001 per share, at a public offering price of $0.299 per pre-funded warrant (the “Offering”). The Offering closed on March 13, 2025. We received gross proceeds of approximately $5.7 million and net proceeds of approximately $5.0 million, reflecting approximately $0.7 million of legal costs and other expenses connected with the Offering. + +**Balance Sheet Data:** + +| | March 31,| | | December 31,| | | | | | | +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | 2025| | | 2024| | | Change| | | %| +Current assets| | $| 4,959,397| | | $| 2,210,917| | | $| 2,748,480| | | | 124| % +Current liabilities| | | 1,782,177| | | | 1,533,769| | | | 248,408| | | | 16| % +Working capital| | $| 3,177,220| | | $| 677,148| | | $| 2,500,072| | | | 369| % + +As of March 31, 2025, total current assets were $5.0 million and total current liabilities were $1.8 million, resulting in working capital of $3.2 million. As of December 31, 2024, total current assets were $2.2 million and total current liabilities were $1.5 million, resulting in a working capital of $0.7 million. The Company’s current assets as of March 31, 2025 are comprised of $4.5 million of cash and cash equivalents and $0.4 million of prepaid expenses, with the increase from December 31, 2024 being primarily due to the March 2025 equity raise that provided $5.0 million in net cash. + +27 +--- + +In addition, we continued progress on our R&D programs during the three months ended March 31, 2025 that resulted in increased cash expenditures. The Company’s current liabilities as of March 31, 2025 are primarily comprised of $0.7 million of convertible notes payable, $0.9 million of accounts payable and accrued expenses, $0.1 million of notes payable to related parties, and the current portion of our operating lease liability of $0.1 million. The increase in current liabilities is primarily due to an increases in accounts payable and accrued expenses of $0.2 million, primarily attributable to our efforts to preserve cash while we strive to raise funds to finance ongoing business and operations. + +**_Cash Flows_** + +| | Three Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | March 31,| | | Change| | | %| +| | 2025| | | 2024| | | | | | | +Cash used in operating activities| | $| (2,526,924| )| | $| (1,239,083| )| | $| (1,287,841| )| | | 104| % +Cash provided by investing activities| | $| —| | | $| 101,295| | | $| (101,295| )| | | 100| % +Cash provided by (used in) financing activities| | $| 5,119,387| | | $| (40,000| )| | $| 5,159,387| | | | (12898| )% +Cash and cash equivalents on hand| | $| 4,512,607| | | $| 1,398,628| | | $| 3,113,979| | | | 223| % + +**_Cash Flows from Operating Activities_** + +Our cash flows from operating activities are greatly influenced by our use of cash for operating expenses and working capital requirements to support the business. We have historically experienced negative cash flows from operating activities as we invested in research and development activities. The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges, which are generally attributable to stock-based compensation, changes in fair value of our derivative liabilities and amortization of debt discounts and finance fees, as well as changes in components of operating assets and liabilities, which are generally attributable to increased expenses and timing of vendor payments. + +During the three months ended March 31, 2025, net cash used in operating activities of $2.5 million was primarily due to our net loss of $3.0 million, stock-based compensation of $0.5 million, change in fair value of convertible notes of $0.1 million, partially offset by the net change in operating assets and liabilities of $0.1 million. + +During the three months ended March 31, 2024, net cash used in operating activities of $1.2 million was primarily due to our net loss of $1.7 million, increased by a gain on change in derivative liabilities of $0.2 million, offset by amortization of debt discount of $0.4 million, loss on settlement of convertible debt of less than $0.1 million, accrued interest settled with common stock of less than $0.1 million, stock-based compensation of $0.1 million and increased by a net change in working capital of $0.1 million. + +**_Cash Flows from Investing Activities_** + +For the three months ended March 31, 2025, the Company did not have investing activities. For the three months ended March 31, 2024, cash flows used in investing activities was primarily attributable to investing in trading marketable securities for $19 thousand and receiving $120 thousand in proceeds from disposition of marketable securities. + +**_Cash Flows from Financing Activities_** + +For the three months ended March 31, 2025, cash flows from financing activities was primarily comprised of net proceeds of $5.4 million, from the sale of common stock and pre-funded warrants, net of placement agent costs of $0.3 million, partially offset by $0.2 million payment of other issuance costs for issuance of common stock and equity-classified warrants, $0.1 million of payment for finance cost, and $0.1 million of repayment of note payable-related party used to finance the Company’s ongoing operations. For the three months ended March 31, 2024, the Company paid $40,000 related to financing activities. + +**Off-Balance Sheet Arrangements** + +We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. + +28 +--- + +**Critical Accounting Policies and Significant Judgments and Estimates** + +This discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While the significant accounting policies are described in more detail in the notes to the unaudited condensed consolidated financial statements included elsewhere in this report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. + +Our most critical accounting policies and estimates relate to the following: + +| ● | Research and Development Expenses +---|---|--- +| ● | Fair Value of Convertible Notes +| ● | Fair Value of Warrant to Purchase Common Stock +| ● | Fair Value of Derivative Financial Instruments + +_Research and Development Expense_ + +Research and development expenses are expensed as incurred and, prior to our initial public offering in September 2022, have historically been offset by contract receivable payments from an NIH SBIR contract that has supported our scientific research. This is stated in the financials as research and development-net of contract expense reimbursements. + +_Fair Value of Convertible Notes_ + +__ + +As permitted under ASC 825, Financial Instruments (“ASC 825”), we elected the fair value option to account for the October 2024 Convertible Bridge Notes. The valuation of the October 2024 Convertible Bridge Notes utilizes a Monte Carlo simulation model. Monte Carlo simulation models require the use of simulations that are weighted based on projected future stock prices, the volatility of a set of guideline companies and significant unobservable inputs including probabilities assigned to not achieving a successful capital raise and a registration of related securities. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. + +The significant inputs and assumptions used to estimate the fair value also include: (i) the expected timing of conversion, (ii) the amount subject to equity conversion, (iii) the sum of the notes’ principal and unpaid accrued interest, (iv) expected volatility, (v) risk-free interest rate, (vi) the discount rate, (vii) volume-weighted average price (“VWAP”), (viii) illiquidity discounts, and (ix) probabilities assigned. The October 2024 Convertible Bridge Notes are subject to revaluation at the end of each reporting period, with changes in fair value recognized in the accompanying unaudited condensed consolidated statements of operations, or for changes due to our credit worthiness, if any, as a component of other comprehensive income. + +__ + +_Fair Value of Warrants to Purchase Common Stock_ + +We have issued warrants to investors in our debt and equity offerings. We have also issued warrants to service providers in relation to our financing offerings. + +We evaluate all warrants issued to determine the appropriate classification under ASC 480 and ASC 815 (as well as under ASC 718 for warrants issued as share-based payments). In addition to determining classification, we evaluate these instruments to determine if such instruments meet the definition of a derivative. + +For warrants that are determined to be equity-classified, we estimate the fair value at issuance and record the amounts to additional paid in capital (potentially on a relative fair value basis if issued in a basket transaction with other financial instruments). Warrants that are equity-classified are not subsequently remeasured unless modified or required to be reclassified as liabilities. For warrants that are determined to be liability-classified, we estimate the fair value at issuance and each subsequent reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. The classification of all outstanding warrants, including whether such instruments should be recorded as equity, is evaluated at the end of each reporting period. + +29 +--- + +For warrants with uncertain or more complex terms (such as variability in the warrant shares or exercise price), we may utilize more complex models to address such provisions, including Monte Carlo simulation models. Monte Carlo simulation models require the use of simulations that are weighted based on projected future stock prices, the volatility of a set of guideline companies and significant unobservable inputs including probabilities assigned. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. + +The use of these valuation models requires the input of highly subjective assumptions. Any change to these inputs could produce significantly higher or lower fair value measurements. + +__ + +_Fair Value of Financial Instruments_ + +We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, such as the Acceleration Option in the Alto warrants (as defined in Note 5). For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities are evaluated at the end of each reporting period. + +For our derivative financial instruments classified as a liability, we use a Monte Carlo valuation model to value the derivative instruments at inception and on subsequent valuation dates. The model requires the use of simulations that are weighted based the volatility of a set of guideline companies and significant unobservable inputs including probabilities assigned. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. The Monte Carlo simulation uses an implied VWAP for valuation. The implied VWAP was backsolved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds and is updated each period. + +The use of Monte Carlo valuation models require key inputs, some of which are based on estimates and judgements by management. Any change to these key inputs could produce significantly higher or lower fair value measurements. + +**Item 3. Quantitative and Qualitative Disclosures About Market Risk** + +As a “smaller reporting company,” we are not required to provide the information required by this Item. + +**Item 4. Controls and Procedures** + +Evaluation of Disclosure Controls and Procedures + +Disclosure controls and procedures (as defined in Securities Exchange Act of 1934, as amended, or the Exchange Act Rule 15d-15(e)) are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. + +As of March 31, 2025, our management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Such evaluation was carried out under the supervision of our Chief Executive Officer with the participation of our President and Chief Operating Officer, and our Chief Financial Officer, and our third-party financial service provider. Based on this evaluation, management concluded that our disclosure controls and procedures were, and continue to be, ineffective as of March 31, 2025. Based on the foregoing, our management concluded that our internal controls over the following financial reporting areas to be material weaknesses: + +| ● | Our written policies and procedures over accounting transaction processing and period end financial close and reporting are limited, which has resulted in ineffective oversight in the establishment of proper monitoring controls over accounting and financial reporting; in addition, we lacked sufficient review and segregation of duties for certain financial transactions, manual journal entries, and critical financial spreadsheets, such that a proper review had not been performed by someone other than preparer, and that process documentation is lacking for review and monitoring controls over accounting and financial reporting. These were contributing factors which led to untimely filings for certain periods in fiscal year 2024. +---|---|--- + +30 +--- + +| ● | We lack a formal process to identify and ensure the proper classification of operating expenses as Research and Development. +---|---|--- +| ● | We identified findings related to overall information technology general controls (“ITGCs”) including issues with super-user access and segregation of duties for systems supporting the Company’s internal control processes and controls. + +Management’s Remediation Measures + +While the Company has improved its organizational capabilities, the Company’s remediation efforts will continue to take place. Management is committed to maintaining a strong internal control environment. In response to the identified material weaknesses in the overall control environment, management is currently implementing additional measures which include: + +● | Hired a new Chief Financial Officer during the second quarter of 2024 to bolster the Company’s internal technical accounting and financial reporting experience and provide bandwidth for the prior Chief Financial Officer to focus on the Company’s expanding clinical trial. +---|--- +| +● | Engaged a third-party consulting firm to assist with the preparation of SEC reporting and other technical accounting matters. + +The Company will continue to review and improve its internal controls over financial reporting to address the underlying causes of the material weaknesses and control deficiencies. Such material weaknesses and control deficiencies will not be fully remediated until the Company has concluded that its internal controls are operating effectively for a sufficient period of time. + +Remediation of Previously Disclosed Material Weaknesses + +As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, we identified material weaknesses in our internal controls over financial reporting for 1) significant unusual transactions, including complex accounting associated with debt and equity transactions and 2) certain technical aspects of financial reporting for stock-based compensation transactions. Our remediation efforts, including those noted above, were completed and the related controls were in place for a sufficient period of time to conclude that these material weaknesses were remediated as of March 31, 2025. + +**Changes in Internal Control over Financial Reporting** + +There has been no change in the Company’s internal control over financial reporting during the three months ended March 31, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional improvements as necessary. + +31 +--- + +**PART II — OTHER INFORMATION** + +**ITEM 1. LEGAL PROCEEDINGS** + +Currently, there are no legal proceedings pending or threatened against us. We are not presently party to any pending or other threatened legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results, although from time to time, we may become involved in legal proceedings in the ordinary course of business. + +**ITEM 1A. RISK FACTORS** + +As a smaller reporting company, we are not required to provide the information required by this item. + +**ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS** + +None. + +**ITEM 3. DEFAULTS UPON SENIOR SECURITIES** + +Not Applicable. + +**ITEM 4. MINE SAFETY DISCLOSURES** + +Not Applicable. + +**ITEM 5. OTHER INFORMATION** + +During the quarter ended March 31, 2025, none of our directors or executive officers adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each item is defined Item 408(a) of Regulation S-K). + +**Item 6. Exhibits** + +The following exhibits are filed or furnished with this report: + +**Exhibit No.** | | **Description of Exhibit** +---|---|--- +10.1 | | [Form of Pre-Funded Warrants (incorporated by reference to Exhibit 4.9 to the Registration Statement on Form S-1/A (File No. 333-284889) filed on March 5, 2025).]() +10.2 | | [Amendment Agreement, dated February 26, 2025, between Shuttle Pharmaceuticals Holdings, Inc. and Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed February 27, 2025).]() +10.3 | | [Revolving Loan Agreement, dated February 28, 2025, between Shuttle Pharmaceuticals Holdings, Inc. and Bowery Consulting Group Inc. (incorporated by reference to the Current Report on Form 8-K filed on February 28, 2025).]() +10.4 | | [Revolving Note, dated February 28, 2025, between Shuttle Pharmaceuticals Holdings, Inc. and Bowery Consulting Group Inc. (incorporated by reference to Current Report on Form 8-K filed on February 28, 2025).]() +10.5 | | [Employment Agreement, dated March 11, 2025, between Shuttle Pharmaceuticals Holdings, Inc. and Christopher Cooper (incorporated by reference to Exhibit 10. 1 to the Current Report on Form 8-K filed on March 12, 2025).]() +10.6 | | [Form of Employment Agreement, dated March 31, 2025, between Shuttle Pharmaceuticals holdings, Inc. and Anatoly Dritschilo (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on March 31, 2025).]() +31.1 | | [Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*]() +31.2 | | [Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*]() +32.1 | | [Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**]() +32.2 | | [Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**]() +101.INS | | Inline XBRL Document Set for the financial statements and accompanying notes in Part I, Item 1, of this Quarterly Report on Form 10-Q. +104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) + +* Filed herewith. + +**Furnished herewith. + +32 +--- + +**SIGNATURES** + +In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. + +| **SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** +---|--- +| | +May 8, 2025 | By: | _/s/ Chris Cooper_ +| | Chris Cooper +| | Interim Chief Executive Officer +| | (Principal Executive Officer) +| | +May 8, 2025 | By: | _/s/ Timothy J. Lorber_ +| | Timothy J. Lorber Chief Financial Officer +| | (Principal Financial and Accounting Officer) + +33 +--- diff --git a/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2025-06-30 (0001641172-25-023263).md b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2025-06-30 (0001641172-25-023263).md new file mode 100644 index 0000000000000000000000000000000000000000..c8447b8cfcb5ae5bec81e040cdda186f49593210 --- /dev/null +++ b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2025-06-30 (0001641172-25-023263).md @@ -0,0 +1,1247 @@ +**** + +**** + +**** + +**UNITED STATES** + +**SECURITIES AND EXCHANGE COMMISSION** + +**Washington, D.C. 20549** + +**FORM 10-Q** + +(Mark One) + +☒ | Quarterly Report PURSUANT TO Section 13 or 15(d) of the Securities Exchange Act of 1934 +---|--- + +For the quarterly period ended June 30, 2025 + +OR + +☐ | Transition Report PURSUANT TO Section 13 or 15(d) of the Securities Exchange Act of 1934 +---|--- + +For the transition period from ______________ to ______________ + +Commission File Number 001-41488 + +**SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** + +(Exact name of registrant as specified in its charter) + +**Delaware** | | **82-5089826** +---|---|--- +(State or other jurisdiction of | | (I.R.S. Employer +incorporation or organization) | | Identification Number) + +**401 Professional Drive , Suite 260** + +**Gaithersburg , MD 20879** + +(Address of principal executive offices) (Zip Code) + +**(240) 403-4212** + +(Registrant’s telephone number, including area code) + +N/A + +(Former name, former address and former fiscal year, if changed since last report) + +Securities registered pursuant to Section 12(b) of the Act: + +**Title of each class** | | **Trading Symbol(s)** | | **Name of each exchange on which registered** +---|---|---|---|--- +Common Stock, par value $0.00001 per share | | SHPH | | The Nasdaq Stock Market LLC + +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ + +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ + +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. + +| Large accelerated filer | ☐ | Accelerated filer | ☐ +---|---|---|---|--- +| Non-accelerated filer | ☒ | Smaller reporting company | ☒ +| | | Emerging growth company | ☒ + +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ + +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ + +The number of shares outstanding of the registrant’s common stock on August 11, 2025 was 1,070,773. + +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**TABLE OF CONTENTS** + +| | Page +---|---|--- +| Part I. Financial Information | +Item 1. | Unaudited Condensed Consolidated Financial Statements | +| Unaudited Condensed Consolidated Balance Sheets as of June 30, 2025 and December 31, 2024 | 3 +| Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2025 and 2024 | 4 +| Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2025 and 2024 | 5 +| Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2025 and 2024 | 6 +| Notes to Unaudited Condensed Consolidated Financial Statements | 7 +| | +Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 +Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 31 +Item 4. | Controls and Procedures | 31 +| | +| Part II. Other Information | 33 +Item 1. | Legal Proceedings | 33 +Item 1A. | Risk Factors | 33 +Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 33 +Item 3. | Defaults Upon Senior Securities | 33 +Item 4. | Mine Safety Disclosures | 33 +Item 5. | Other Information | 33 +Item 6. | Exhibits | 33 +Signatures | 34 + +2 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Balance Sheets** + +**(Unaudited)** + +| | June 30,2025| | | December 31,2024| +---|---|---|---|---|---|--- +Assets| | | | | | | | +Current assets| | | | | | | | +Cash and cash equivalents| | $| 4,817,672| | | $| 1,920,144| +Prepaid expenses| | | 374,245| | | | 290,773| +Total current assets| | | 5,191,917| | | | 2,210,917| +| | | | | | | | +Property and equipment, net| | | 19,335| | | | 19,364| +Deferred financing costs| | | 48,487| | | | —| +Operating lease right-of-use asset| | | 244,690| | | | 276,009| +Total Assets| | | 5,504,429| | | | 2,506,290| +| | | | | | | | +Liabilities and Stockholders’ Equity| | | | | | | | +Current liabilities| | | | | | | | +Accounts payable and accrued expenses| | $| 1,174,374| | | $| 596,600| +Accrued interest payable - related parties| | | 590| | | | 1,785| +Notes payable to related parties| | | 65,326| | | | 190,270| +Convertible notes payable, net - fair value option, related parties| | | 127,689| | | | 206,085| +Convertible notes payable, net - fair value option| | | 252,938| | | | 478,120| +Operating lease liability| | | 71,869| | | | 60,909| +Total current liabilities| | | 1,692,786| | | | 1,533,769| +| | | | | | | | +Derivative liability| | | 10,965| | | | 25,281| +Operating lease liability non-current| | | 195,159| | | | 238,088| +Total Liabilities| | | 1,898,910| | | | 1,797,138| +| | | | | | | | +Commitments and contingencies (Note 8)| | | -| | | | -| +| | | | | | | | +Stockholders’ Equity| | | | | | | | +Series A Convertible Preferred Stock, $0.00001 par value; $1,000 per share liquidation value; 800,000 shares authorized; no shares outstanding| | | —| | | | —| +Common stock, $0.00001 par value; 100,000,000 shares authorized; 1,070,773 shares issued and outstanding at June 30, 2025; 163,093 shares issued and outstanding at December 31, 2024| | | 11| | | | 2| +Additional paid in capital| | | 44,943,081| | | | 35,287,251| +Accumulated deficit| | | (41,337,573| )| | | (34,578,101| ) +Total Stockholders’ Equity| | | 3,605,519| | | | 709,152| +Total Liabilities and Stockholders’ Equity| | $| 5,504,429| | | $| 2,506,290| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +3 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Operations** + +**(Unaudited)** + +| | 2025| | | 2024| | | 2025| | | 2024| +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Three Months Ended| | | Six Months Ended| +| | June 30,| | | June 30,| +| | 2025| | | 2024| | | 2025| | | 2024| +| | | | | | | | | | | | +Revenue| | $| —| | | $| —| | | $| —| | | $| —| +| | | | | | | | | | | | | | | | +Operating expenses| | | | | | | | | | | | | | | | +Research and development| | | 1,025,547| | | | 645,719| | | | 2,599,475| | | | 1,231,823| +General and administrative| | | 2,346,323| | | | 310,038| | | | 2,943,209| | | | 634,647| +Legal and professional| | | 538,536| | | | 526,877| | | | 1,318,963| | | | 1,001,011| +Total operating expenses| | | 3,910,406| | | | 1,482,634| | | | 6,861,647| | | | 2,867,481| +| | | | | | | | | | | | | | | | +Net loss from operations| | | (3,910,406| )| | | (1,482,634| )| | | (6,861,647| )| | | (2,867,481| ) +| | | | | | | | | | | | | | | | +Other income (expense)| | | | | | | | | | | | | | | | +Interest expense - related parties| | | (2,614| )| | | —| | | | (8,009| )| | | —| +Interest expense| | | (19,129| )| | | (430,685| )| | | (25,664| )| | | (928,200| ) +Interest income| | | 81| | | | 14,158| | | | 81| | | | 35,611| +Change in fair value of derivative liabilities| | | 11,673| | | | (143,773| )| | | 14,316| | | | 54,089| +Change in fair value of convertible notes| | | 213,930| | | | —| | | | 121,451| | | | —| +Gain on sale of marketable securities| | | —| | | | 39,683| | | | —| | | | 43,720| +Change in fair value of marketable securities| | | —| | | | (27,964| )| | | —| | | | (28,670| ) +Loss on settlement of convertible debt| | | —| | | | —| | | | —| | | | (71,315| ) +Total other income (expense)| | | 203,941| | | | (548,581| )| | | 102,175| | | | (894,765| ) +| | | | | | | | | | | | | | | | +Net loss| | | (3,706,465| )| | | (2,031,215| )| | | (6,759,472| )| | | (3,762,246| ) +| | | | | | | | | | | | | | | | +Weighted average common shares outstanding - basic and diluted| | | 1,126,054| | | | 84,197| | | | 766,021| | | | 83,636| +Net loss per shares - basic and diluted| | $| (3.29| )| | $| (24.12| )| | $| (8.82| )| | $| (44.98| ) + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +4 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Changes in Stockholders’ Equity** + +**(Unaudited)** + +**_For the Six Months Ended June 30, 2025_** + +**__** + +| | | | | | | | Additional| | | | | | Total| +---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Common Stock| | | Paid-In| | | Accumulated| | | Stockholders’| +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity| +Balance at December 31, 2024| | | 163,093| | | $| 2| | | $| 35,287,251| | | $| (34,578,101| )| | $| 709,152| +Common stock issued for restricted stock units| | | 33,609| | | | —| | | | —| | | | —| | | | —| +Issuance of common stock and pre-funded warrants, net of issuance costs of $693,600| | | 53,637| | | | 1| | | | 5,038,573| | | | —| | | | 5,038,574| +Partial conversion of convertible note at fair value| | | 5,000| | | | —| | | | 53,500| | | | —| | | | 53,500| +Stock-based compensation| | | —| | | | —| | | | 537,046| | | | —| | | | 537,046| +Net loss| | | —| | | | —| | | | —| | | | (3,053,007| )| | | (3,053,007| ) +Balance at March 31, 2025| | | 255,339| | | | 3| | | | 40,916,370| | | | (37,631,108| )| | | 3,285,265| +Common stock issued for restricted stock units| | | 404| | | | —| | | | —| | | | —| | | | —| +Issuance of common stock and pre-funded warrants, net of issuance costs of $357,987| | | 21,924| | | | —| | | | 3,891,964| | | | —| | | | 3,891,964| +Issuance of common stock and pre-funded warrants, net of issuance costs| | | 21,924| | | | —| | | | 3,891,964| | | | —| | | | 3,891,964| +Partial conversion of convertible note at fair value| | | 7,000| | | | —| | | | 68,250| | | | —| | | | 68,250| +Exercise of pre-funded warrants| | | 786,070| | | | 8| | | | 19,644| | | | —| | | | 19,652| +Common stock issued for reverse stock split fractional share round up| | | 36| | | | —| | | | —| | | | —| | | | —| +Stock-based compensation| | | —| | | | —| | | | 46,853| | | | —| | | | 46,853| +Net loss| | | —| | | | —| | | | —| | | | (3,706,465| )| | | (3,706,465| ) +Balance at June 30, 2025| | | 1,070,773| | | | 11| | | | 44,943,081| | | | (41,337,573| )| | | 3,605,519| + +**_For the Six Months Ended June 30, 2024_** + +| | | | | | | | Additional| | | | | | Total| +---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Common Stock| | | Paid-In| | | Accumulated| | | Stockholders’| +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity| +Balance at December 31, 2023| | | 80,348| | | | 1| | | | 29,489,074| | | | (25,433,304| )| | | 4,055,790| +Common stock issued for conversion of accrued interest and principal| | | 3,128| | | | —| | | | 325,298| | | | —| | | | 325,299| +Common stock issued for restricted stock units| | | 625| | | | —| | | | —| | | | —| | | | —| +Stock-based compensation| | | —| | | | —| | | | 111,449| | | | —| | | | 111,449| +Net loss| | | —| | | | —| | | | —| | | | (1,731,031| )| | | (1,731,031| ) +Balance at March 31, 2024| | | 84,101| | | | 1| | | | 29,925,821| | | | (27,164,335| )| | | 801,454| +Balance| | | 84,101| | | | 1| | | | 29,925,821| | | | (27,164,335| )| | | 801,454| +Common stock issued for restricted stock units| | | 149| | | | —| | | | —| | | | —| | | | —| +Stock-based compensation| | | —| | | | —| | | | 71,162| | | | —| | | | 71,162| +Net loss| | | —| | | | —| | | | —| | | | (2,031,215| )| | | (2,031,215| ) +Balance at June 30, 2024| | | 84,250| | | | 21| | | | 29,996,983| | | | (29,195,550| )| | | 801,454| +Balance | | | 84,250| | | | 21| | | | 29,996,983| | | | (29,195,550| )| | | 801,454| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +5 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Cash Flows** + +**(Unaudited)** + +| | 2025| | | 2024| +---|---|---|---|---|---|--- +| | Six Months Ended June 30,| +| | 2025| | | 2024| +CASH FLOWS FROM OPERATING ACTIVITIES:| | | | | | | | +Net loss| | $| (6,759,472| )| | $| (3,762,246| ) +Adjustments to reconcile net loss to net cash used in operating activities:| | | | | | | | +Depreciation| | | 29| | | | 2,874| +Change in fair value of derivative liabilities| | | (14,316| )| | | (54,089| ) +Amortization of debt discount and finance fees| | | 29,927| | | | 832,014| +Gain on marketable securities| | | —| | | | (43,720| ) +Change in fair value of marketable securities| | | —| | | | 28,670| +Accrued interest settled with common stock| | | —| | | | 18,783| +Loss on settlement of convertible debt| | | —| | | | 71,315| +Stock-based compensation| | | 583,899| | | | 182,611| +Interest payments on convertible notes accounted for at fair value| | | (60,377| )| | | —| +Change in fair value of convertible notes| | | (121,451| )| | | —| +Changes in operating assets and liabilities:| | | | | | | | +Accrued interest income| | | —| | | | 7,675| +Prepaid expenses| | | (83,472| )| | | (25,045| ) +Accounts payable and accrued expenses| | | 545,099| | | | 82,031| +Accounts payable and accrued expenses - related parties| | | —| | | | (446| ) +Accrued interest payable| | | —| | | | 20,445| +Accrued interest payable - related parties| | | (1,195| )| | | —| +Change in operating lease asset and liabilities| | | (650| )| | | 703| +Net cash used in operating activities| | | (5,881,979| )| | | (2,638,425| ) +| | | | | | | | +CASH FLOWS FROM INVESTING ACTIVITIES:| | | | | | | | +Investment in marketable securities| | | —| | | | (35,982| ) +Proceeds from disposition of marketable securities| | | —| | | | 1,295,252| +Net cash provided by investing activities| | | —| | | | 1,259,270| +| | | | | | | | +CASH FLOWS FROM FINANCING ACTIVITIES:| | | | | | | | +Repayment of note payable-related party| | | (124,944| )| | | —| +Proceeds from issuance of common stock and pre-funded warrants, net of placement agent costs of $322,501| | | 5,409,673| | | | —| +Proceeds from issuance of common stock and pre-funded warrants, net of placement agent costs of $170,000| | | 4,080,000| | | | —| +Payment of other issuance costs for issuance of common stock and equity-classified warrants| | | (526,460| )| | | —| +Proceeds from exercise of pre-funded warrants| | | 19,652| | | | —| +Payment for finance costs| | | (78,414| )| | | —| +Payment of convertible note payable| | | —| | | | (501,667| ) +Net cash provided by (used in) financing activities| | | 8,779,507| | | | (501,667| ) +| | | | | | | | +Net change in cash and cash equivalents| | | 2,897,528| | | | (1,880,822| ) +Cash and cash equivalents, beginning of period| | | 1,920,144| | | | 2,576,416| +Cash and cash equivalents, end of period| | $| 4,817,672| | | $| 695,594| +| | | | | | | | +Cash paid for:| | | | | | | | +Interest| | $| 36,153| | | $| 56,958| +Income taxes| | $| —| | | $| —| +| | | | | | | | +Supplemental non-cash financing activities:| | | | | | | | +Issuance costs in accounts payable and accrued expenses| | $| 32,675| | | $| —| +Conversion of convertible notes accounted for at fair value| | $| 121,750| | | $| —| +Common stock issued for settlement of debt| | $| —| | | $| 325,298| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +6 +--- + +**Note 1 – Organization and Liquidity** + +**** + +**_Organization and Line of Business_** + +**** + +Shuttle Pharmaceuticals Holdings, Inc. (“we,” “us,” “our,” or the “Company”) was originally formed as Shuttle Pharmaceuticals, LLC in the State of Maryland on December 18, 2012. On August 12, 2016, the Company filed articles of conversion with the State of Maryland to convert from an LLC to a C corporation, at which time the Company changed its name to Shuttle Pharmaceuticals, Inc. (“Shuttle”). In connection with the conversion, the Company issued 225,000 shares of common stock in exchange for 100% of the outstanding membership interests in Shuttle prior to conversion. On June 4, 2018, Shuttle completed a reverse merger with Shuttle Pharmaceuticals Holdings, Inc. (then known as Shuttle Pharma Acquisition Corp, Inc.), a Delaware corporation, pursuant to which Shuttle, our operating entity, became a wholly-owned subsidiary of the Company. Shuttle Diagnostics, Inc, a subsidiary of the Company, was formed in the State of Maryland on November 14, 2023. + +The Company’s primary purpose is to develop and commercialize unique drugs for the sensitization of cancers and protection of normal tissues, with the goal of improving outcomes for cancer patients receiving radiation therapy. Shuttle has deployed its proprietary technology to develop novel cancer immunotherapies, producing a pipeline of selective HDAC inhibitors for cancer and immunotherapy applications. The Company’s HDAC platform is designed to target candidate molecules with potential roles in therapeutics beyond cancer, including autoimmune, inflammatory, metabolic, neurological and infectious diseases. The Company’s Ropidoxuridine product candidate, which is used with radiation therapy to sensitize cancer cells, was initially funded by a Small Business Innovation Research (“SBIR”) contract provided by the National Cancer Institute (“NCI”), a unit of the National Institutes of Health (“NIH”). Ropidoxuridine has been further developed through the Company’s collaborations with scientists at the University of Virginia for use in combination with proton therapy to improve patient survival. Historically, and prior to the Company’s initial public offering in September 2022, the Company had obtained funding to develop products through NIH grants, including a product to predict late effects of radiation with metabolite biomarkers and develop prostate cancer cell lines in health disparities research. + +The production and marketing of the Company’s products and its ongoing research and development activities will be and are subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any products or combination of products developed by the Company must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the Food and Drug Administration (“FDA”) under the Food, Drug and Cosmetic Act. There can be no assurance that the Company will not encounter problems in its clinical trials that will cause the Company or the FDA to delay or suspend the clinical trials. + +The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and in other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company now or in the future. + +**** + +**_Liquidity and Going Concern_** + +**** + +Our unaudited condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception and had a net loss of approximately $6.8 million and no revenues for the six months ended June 30, 2025 and working capital of approximately $3.5 million as of June 30, 2025. The Company does not expect to generate positive cash flows from operating activities in the near future. + +In February 2025, the Company issued a revolving note in the principal amount of up to $2,000,000, which the Company may draw upon at its discretion from time to time. In March 2025, the Company completed an equity raise that provided $5.0 million net cash proceeds for the issuance of 53,637 shares and 713,030 pre-funded warrants. In June 2025, the Company completed a private placement equity raise that provided $3.9 million net cash proceeds for the issuance of 21,924 shares and 1,158,953 pre-funded warrants. However, the Company’s existing cash resources, the cash received from the equity offering, and financing available under the revolving note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months. + +7 +--- + +The ability of the Company to continue as a going concern is dependent upon its ability to continue to successfully raise additional equity or debt financing to allow it to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued. + +The accompanying unaudited condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company is unable to continue as a going concern. + +**Note 2 – Summary of Significant Accounting Policies** + +**** + +**_Basis of Presentation_** + +The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and notes required by GAAP for annual financial statements. A complete discussion of the Company’s significant accounting policies is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. + +In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all of the adjustments necessary to present the financial position of the Company as of June 30, 2025 and the results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements of the Company have not been audited by the Company’s independent registered public accounting firm, except that the year-end consolidated balance sheet was derived from audited financial statements. The results of operations for the six months ended June 30, 2025 are not necessarily indicative of the operating results for the full fiscal year or any future period. + +**_Reverse Stock Split_** + +On August 13, 2024, in order to meet Nasdaq’s minimum bid price requirement of $1.00 per share (the “Minimum Bid Price Requirement”), the Company effectuated a 1-for-8 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares (the “August 2024 Reverse Stock Split”). The Reverse Stock Split had no effect on the Company’s authorized shares of common stock or preferred stock and the par value will remain unchanged at $0.00001, respectively. + +On June 16, 2025, in order to meet the Minimum Bid Price Requirement again, the Company effectuated a 1-for-25 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares ( the “June 2025 Reverse Stock Split”, collectively with the August 2024 Reverse Stock Split, the “Reverse Stock Splits”). The Reverse Stock Splits had no effect on the Company’s authorized shares of common stock or preferred stock and the par value will remain unchanged at $0.00001, respectively. All common stock share, option, warrant and per share amounts (except our authorized but unissued shares and previously reserved shares) have been retroactively adjusted in these unaudited condensed consolidated financial statements and related disclosures. + +**_Basis of Consolidation_** + +The unaudited condensed consolidated financial statements have been prepared on a consolidated basis with those of the Company’s wholly-owned subsidiaries, Shuttle Pharmaceuticals, Inc. and Shuttle Diagnostics, Inc. All intercompany transactions and balances have been eliminated. + +**__** + +**_Use of Estimates_** + +**__** + +The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates are contained in the accompanying unaudited condensed consolidated financial statements for the valuation of debt and warrants and valuation of bifurcated derivative liabilities and other financial instruments. + +8 +--- + +**_Cash and Cash Equivalents_** + +Cash and cash equivalents include cash in bank accounts and money market funds with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. As of June 30, 2025 and December 31, 2024, cash and cash equivalents consisted of the following: + +Schedule of Cash and Cash Equivalents + +| | June 30,2025| | | December 31,2024| +---|---|---|---|---|---|--- +Cash| | $| 4,742,472| | | $| 1,918,941| +Money market funds| | | 75,200| | | | 1,203| +Total cash and cash equivalents| | $| 4,817,672| | | $| 1,920,144| + +Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of June 30, 2025 was approximately $4.6 million. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. + +**_Fair Value of Financial Instruments_** + +The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments: + +| ●| Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments. +---|---|--- + +| ●| Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace. +---|---|--- + +| ●| Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation. +---|---|--- + +Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires the Company to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded, may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange. + +The carrying amounts of the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. + +9 +--- + +Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of June 30, 2025 and December 31, 2024: + +Schedule of Fair Value Liabilities Measured on Recurring Basis + +June 30, 2025| | Level 1| | | Level 2| | | Level 3| | | Carrying Value| +---|---|---|---|---|---|---|---|---|---|---|---|--- +Liabilities| | | | | | | | | | | | | | | | +Derivative Liability - Warrants| | $| —| | | $| —| | | $| 10,965| | | $| 10,965| +Convertible Note| | | —| | | | —| | | | 380,627| | | | 380,627| +Total Liabilities| | $| —| | | $| —| | | $| 391,592| | | $| 391,592| + +December 31, 2024| | Level 1| | | Level 2| | | Level 3| | | Carrying Value| +---|---|---|---|---|---|---|---|---|---|---|---|--- +Liabilities| | | | | | | | | | | | | | | | +Derivative Liability - Warrants| | $| —| | | $| —| | | $| 25,281| | | $| 25,281| +Convertible Note| | | —| | | | —| | | | 684,205| | | | 684,205| +Total Liabilities| | $| —| | | $| —| | | $| 709,486| | | $| 709,486| + +See Note 5 and Note 7 for additional disclosures related to the fair value of the Company’s convertible notes and derivative liabilities, respectively. + +**_Derivative Financial Instruments_** + +The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. + +For its derivative financial instruments, the Company utilizes the most appropriate valuation model (such as Monte Carlo simulations or other sophisticated models, based on the nature of the terms of the instrument) to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the unaudited condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date. + +**_Convertible Notes_** + +The Company accounts for its Convertible Bridge Notes (as defined in Note 5) under the fair value option in accordance with ASC 825. The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. Additional term or other notes may be issued in subsequent periods where the Company would be able to make a fair value option election upon issuance provided eligibility criteria are met. The Company records the portion of the Convertible Bridge Notes that are issued and outstanding for accounting purposes at fair value with changes in fair value recorded in other income (expense), net in the unaudited condensed consolidated statements of operations, except for the portion of the total change in fair value that results from a change in the instrument-specific credit risk of the Convertible Bridge Notes, which is recorded in other comprehensive income (loss), if applicable. No loss was attributed to changes in credit risk for the periods presented therefore net loss was equal to comprehensive loss. The fair value option election was made to align the accounting for the Convertible Bridge Notes with the Company’s financial reporting objectives and reduce operational effort to account for embedded features that otherwise would require bifurcation as a separate unit of account. + +10 +--- + +Pursuant to the fair value option election, direct and incremental debt issuance costs and consideration paid to the lender related to the Convertible Bridge Notes were expensed as incurred and recorded in other income (expense), net in the unaudited condensed consolidated statements of operations. + +For convertible notes for which the fair value option is not elected, the Company evaluates the convertible notes for embedded features and bifurcates these features (such as conversion options and redemption options) from their host instruments and accounts for them as free standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. All of the Company’s convertible bridge notes as of June 30, 2025 had elected the fair value option at the initial transaction date. + +**_Warrants_** + +The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, _Distinguishing Liabilities from Equity_(“ASC 480”) and ASC 815, _Derivatives and Hedging_ (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. Finally, the Company determines if the warrants meet the definition of a derivative based on their contractual terms. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. + +For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and at each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed consolidated statements of operations. The Company also evaluates if changes in contractual terms or other considerations would result in the reclassification of outstanding warrants from liabilities to stockholders’ equity (or vice versa). + +The fair value of the warrants is estimated using a Monte Carlo simulation. Warrants that have terms greater than one year are classified as non-current liabilities in the balance sheet, unless there is an indication that the warrants would be settled within one year. + +**_Stock-Based Compensation_** + +Compensation cost for stock awards, which include restricted stock units (“RSUs”), is measured at the fair value on the grant date and recognized as expense, over the related service period. The fair value of stock awards is based on the quoted price of our common stock on the grant date. Compensation expense related to the RSUs is reduced by the fair value of the units that are forfeited by employees that leave the Company prior to vesting as they occur. Compensation cost for RSUs is recognized using the straight-line method over the requisite service period. + +**_Research and Development Expenses_** + +Research and development expenses are charged to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, which include a certain portion of the Company’s former chief executive officer (prior to his transition to chief scientific officer), chief operating officer, vice president regulatory (formerly the chief financial officer) and directors’ compensation. Both the chief scientific officer and the vice president regulatory resigned in May and June 2025, respectively. For the three and six months ended June 30, 2025 and 2024, a portion of personnel-related expenses and stock-based compensation expense for these individuals totaling $0.4 million and $1.2 million and $0.1 million and $0.3 million, respectively, was included within research and development due to their active involvement in the research and development activities, materials, supplies, related subcontract expenses, and consulting costs. + +11 +--- + +Regarding the accounting treatment for reimbursements, GAAP provides limited guidance on the accounting for government grants received by for-profit companies. In accordance with ASC Topic 832, _Government Assistance_ , as adopted January 1, 2022, the Company discloses certain types of government assistance received in the notes to the unaudited condensed consolidated financial statements that includes: a) the nature of the transaction including the nature of the assistance being given, b) the accounting policies being used to account for the transaction and c) other provisions of relevance, where required. Depending on the type of grant or contract, the Company understands there is more than one acceptable alternative for the accounting treatment – a reduction of costs, a deferred credit to be amortized, revenue or other income. The Company has concluded that reimbursements received for R&D expenses incurred are more akin to a reduction of costs and applies reimbursements against incurred research costs. For the three months ended June 30, 2025 and 2024, the Company recorded $1.0 million and $0.6 million, respectively, in research and development expenses. For the six months ended June 30, 2025 and 2024, the Company recorded and $2.6 million and $1.2 million, respectively, in research and development expenses. + +**__** + +**_Segment Information_** + +Operating segments are defined as components of an enterprise about which separate and discrete information is available for evaluation by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM, its chief executive officer, evaluates the Company’s operations and manages its business as a single operating segment. All of the Company’s long-lived assets are held in the United States. Refer to Note 9 for the Company’s disclosure on its 1 single operating segment. + +**_Net Loss Per Common Stock_** + +Net loss per share of common stock requires presentation of basic and diluted earnings per common share on the face of the unaudited condensed consolidated statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation to diluted earnings per share. + +In the accompanying unaudited condensed consolidated financial statements, basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Certain warrants issued and outstanding include terms and conditions resulting in the treatment as participating securities. Such warrants do not include an obligation for the warrant holders to fund the losses of the Company. Therefore, these warrants are excluded from the calculation of earnings per common share in periods of net loss. + +Diluted earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding and potentially dilutive shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through convertible securities, contingent share arrangements, stock options and warrants unless the result would be antidilutive. + +The dilutive effect of restricted stock units and other stock-based payment awards subject to vesting and common stock warrants is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting shares of common stock are included in the denominator of the diluted calculation for the entire period being presented. + +Given the nominal exercise price of the Company’s issuance of Pre-Funded Warrants (as defined in Note 6), such Pre-Funded Warrants are included in the calculation of basic and diluted net loss per share as the exercise price per warrant is deemed nonsubstantive when compared to the fair value of the underlying common shares. The 1,158,953 unexercised pre-funded warrants as of June 30, 2025 were included in the Company’s calculation of basic and diluted loss per share. + +12 +--- + +For the six months ended June 30, 2025 and 2024, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive. + +Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share + +| | June 30,2025| | | June 30,2024| +---|---|---|---|---|---|--- +Convertible notes (Note 5)| | | 109,967| | | | 3,230| +Warrants (Note 7)| | | 138,582| | | | 7,360| +Restricted stock units (Note 7)| | | 31,442| | | | 2,354| +Anti-dilutive securities| | | 279,991| | | | 12,944| + +**__** + +**_Recently Issued Accounting Pronouncements_** + +**__** + +In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The guidance is effective for the Company’s fiscal years beginning after December 15, 2024. The Company will reflect any impact of adoption in its SEC Form 10-K for the annual period ending December 31, 2025 and does not expect any material impact on its consolidated financial statements. + +On November 4, 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses (“DISE”),” which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the notes to the financial statements. ASU 2024-03 is effective for all public business entities for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the potential impact that this standard may have on its condensed consolidated financial statements and related disclosures. + +There have been no other recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance that are of significance or potential significance to the Company. + +**Note 3 - Leases** + +Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the present value of the future lease payments as of the lease commencement date. Operating lease expense is recognized on a straight-line basis over the lease term. + +The Company currently has a lease agreement which allows for the use of a laboratory facility, entered into on February 16, 2023, with base rent of $7,206 per month for a period of 64 months, which increases at the rate of 3% per year, that commenced June 1, 2023. The lease included a six-month 50% rent abatement upon commencement. Additional common area maintenance (“CAM”) fees are charged monthly and revised annually. In addition to monthly base rent, the Company pays monthly CAM fees, which are being expensed as incurred. An irrevocable letter of credit (“LOC”) for the security deposit of $43,234 and base rent of $3,891, including 50% abatement, and $3,315 of CAM cost, was due and paid on execution of the lease agreement. Alexandria Real Estate (ARE-QRS-CORP) is the beneficiary of the LOC. The current LOC expires on March 1, 2026. + +13 +--- + +The following summarizes the right-of use asset and lease information for the Company’s operating leases: + +Schedule of Right-of Use Asset and Lease Information about Operating Lease + +| | 2025| | | 2024| | | 2025| | | 2024| +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Three Months Ended| | | Six Months Ended| +| | June 30,| | | June 30,| +| | 2025| | | 2024| | | 2025| | | 2024| +Operating lease cost| | $| 22,947| | | $| 22,947| | | $| 45,894| | | $| 45,894| +Variable lease cost| | | 9,052| | | | 9,937| | | | 19,930| | | | 20,377| +Sublease income| | | —| | | | (2,163| )| | | —| | | | (4,326| ) +Total lease cost| | $| 31,999| | | $| 30,721| | | $| 65,824| | | $| 61,945| +| | | | | | | | | | | | | | | | +Other information:| | | | | | | | | | | | | | | | +Cash paid for operating cash flows for operating leases| | $| 23,388| | | $| 22,707| | | | 46,544| | | | 45,189| + +| | June 30,2025| | | December 31,2024| +---|---|---|---|---|---|--- +Weighted-average remaining lease term - operating leases (year)| | | 3.18| | | | 4.18| +Weighted-average discount rate - operating leases| | | 10.48| %| | | 10.48| % + +Future non-cancelable minimum lease payments under the operating lease liability as of June 30, 2025, are as follows: + +Schedule of Future Non-cancelable Minimum Lease Payments Under Operating Lease Liability + +Years ended December 31,| | | +---|---|---|--- +2025 (excluding the six months ended June 30, 2025)| | $| 47,702| +2026| | | 97,074| +2027| | | 99,986| +2028| | | 68,236| +2029 and thereafter| | | —| +Total future minimum lease payments| | | 312,998| +Less: imputed interest| | | (45,970| ) +Present value of payments| | $| 267,028| + +**Note 4 – Notes Payable-Related Party** + +On October 14, 2024, as part of the senior convertible note offering described in Note 5, the Company entered into a loan with an officer of the Company in the amount of $250,000 (principal) with an interest rate of 14.5% per annum due October 13, 2025, and warrants to purchase 4,016 shares of common stock at an exercise price of $35.00 per share. As of June 30, 2025, there was outstanding principal and interest balances for these related party notes of $250,000 and $7,753, respectively. Under the fair value option, the senior convertible note is $127,689 as of June 30, 2025. + +On September 4, 2024, the Company issued a $250,000 promissory note (the “Promissory Note”) to an officer of the Company for $250,000. The Promissory Note accrues interest at 12% per annum and is repayable in 12 substantially equal installments over a period of one year. During the three and six months ended June 30, 2025 the Company incurred $2,614 and $8,009 in interest expense relating to this Promissory Note. For the three and six months ended June 30, 2025, the Company repaid principal of $63,405 and $124,944, respectively. For the three and six months ended June 30, 2025, the Company paid interest of $3,232 and $8,329, respectively. The principal balance of the Promissory Note as of June 30, 2025 and December 31, 2024 was $65,326 and $190,270, respectively. + +**Note 5 - Convertible Notes and Loan Agreement** + +**_Revolving Note Agreement_** + +On February 27, 2025, the Company entered into a Revolving Loan Agreement with a lender. Pursuant to the Revolving Loan Agreement, the Company issued a revolving note dated February 28, 2025 in the principal amount of up to $2,000,000 (the “Revolving Note”), which the Company may draw upon at its discretion from time to time through its maturity on February 28, 2026. + +14 +--- + +The Revolving Note bears interest at the rate of 18% per annum calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue interest daily commencing from the date of any draw down until paid in full on the maturity date. The Company recognized deferred loan costs of approximately $78,000 in relation to the closing of the Revolving Loan Agreement as an asset on the unaudited condensed consolidated balance sheet. These deferred loan costs are being amortized to interest expense on a straight-line basis to the maturity of the Revolving Loan Agreement. During the three and six months ended June 30, 2025, the Company recognized $23,392 and $29,928 in interest expense related to the amortization of these deferred loan costs, respectively. + +The Revolving Loan Agreement contains customary events of default. If an event of default occurs, the lender may accelerate the repayment of amounts outstanding under the Revolving Loan Agreement, and an amount equal to 120% of the outstanding principal amount and accrued and unpaid interest plus other amounts, costs, expenses and/or liquidated damages. The default provision meets the criteria of a derivative liability that would have an associated fair value if any amounts are outstanding under the Agreement. + +As of June 30, 2025, the Company has not yet drawn on the Revolving Note and no balances are outstanding. + +**_2024 Convertible Bridge Notes_** + +During October 2024, the Company completed a senior convertible note offering in two closings, as further described below. + +On October 14, 2024, the Company issued an aggregate of $600,000 (of an up to $1.3 million authorized financing) senior secured convertible notes due in October 2025, which accrue interest at 14.5% interest per year. The notes include a 5% original issue discount and the Company received $570,000 in proceeds. The notes are optionally convertible by each holder at a 10% premium beginning three months after the date of issuance, and the conversion price will be the 5-day volume-weighted average price (“VWAP”) immediately prior to closing unless re-set (one-time only) by a lower price of an offering entered into by the Company during the term of the notes. The Company has the option to prepay the notes at any time for 107% of total outstanding balance and any outstanding principal will be paid in conversion of shares of common stock at a 15% discount at the end of the term, subject to the Company’s exercise of the optional prepayment right. Any accrued interest will be repaid quarterly in cash. The Company also issued warrants to the lenders to purchase an aggregate 9,639 shares of common stock, exercisable at $35.00 per share, with such warrants expiring five years from issuance. In addition, the Company’s former Chief Executive Officer and Chief Scientific Officer, Dr. Anatoly Dritschilo, invested a total of $237,500 in this financing round, in exchange for a $250,000 convertible note. + +As part of the same offering, on October 21, 2024, the Company issued an additional $231,579 in senior secured convertible notes due in October 2025, with substantially similar terms as the October 14, 2024, issuance. The notes include a 5% original issue discount and the Company received $220,000 in proceeds. The Company also issued warrants to the lenders to purchase an aggregate 3,543 shares of common stock, exercisable at $37.25 per share, with such warrants expiring five years from issuance. Upon completing this issuance, the Company closed the senior secured convertible note offering after receiving a total of $790,000 in proceeds. + +After analyzing the terms of the senior convertible notes (“Convertible Bridge Notes”) and its embedded features, the Company elected to account for the Convertible Bridge Notes at fair value under the allowable fair value option election. As such, the Company initially recognized the Convertible Bridge Notes at their fair value and subsequently measures the notes at fair value with changes in fair value recorded in current period earnings (or other comprehensive income, if specific to Company credit risk). The Company initially recorded the Convertible Bridge Notes at their estimated issuance date fair value of $806,758. As the fair value of the Convertible Bridge Notes exceeded the proceeds received, the Company recorded a loss on issuance of convertible notes of $16,758. The proceeds were allocated in full to the Convertible Bridge Notes recorded at fair value. The warrants issued in connection with the Convertible Bridge Notes were deemed to be equity instruments. In addition, the Company allocated the issuance costs incurred to these instruments to the Convertible Bridge Notes and, as such, expensed $107,491 in issuance costs, including $41,579 of original issue discount on the Convertible Bridge Notes. + +15 +--- + +The Company used a Monte Carlo simulation model to calculate the fair value of the Convertible Bridge Notes. The Convertible Bridge Notes were classified within Level 3 of the fair value hierarchy at the initial measurement date, due to the use of unobservable inputs. The key inputs into the model for the Convertible Bridge Note were as follows: + +Schedule of Key Inputs of Convertible Bridge Note + +| | June 30, 2025| | | December 31, 2024| +---|---|---|---|---|---|--- +Risk-free interest rate| | | 4.41| %| | | 4.16| % +Expected term (years)| | | 0.30| | | | 0.83| +Quoted VWAP| | $| 3.74| | | $| 20.50| +Volatility| | | 65.79% \- 95.34| %| | | 57.50% \- 97.14| % +Discount rate| | | 40% \- 60| %| | | 40% \- 60| % +Probability assessment1| | | 5% \- 10| %| | | 10% \- 40| % +Illiquidity discount| | | (12| )%| | | (26| )% + +(1) | Probability assessments include the probabilities that subsequent successful capital raises (in terms of amounts raised and timing) are not executed and the probability that the securities issuable under the convertible bridge notes are not timely registered. +---|--- + +The following table summarizes the changes in the carrying value of the Convertible Bridge Notes: + +Schedule of Fair Value Measurement using Significant Unobservable Inputs + +| | | | +---|---|---|---|--- +Fair Value Measurements Using Significant Unobservable Inputs (Level 3) +Balance - December 31, 2024| | $| 684,205| +Conversion of Convertible Bridge Note (at fair value)| | | (121,750| ) +Payments of coupon interest| | | (60,377| ) +Gain on change in fair value| | | (121,451| ) +Balance - June 30, 2025| | $| 380,627| + +Upon mandatory conversion of the current outstanding principal of the notes at their maturity, 117,084 shares of common stock would be issuable. + +16 +--- + +**_Alto Opportunity Master Fund, SPC_** + +On January 11, 2023, the Company entered into a securities purchase agreement (the “SPA”) with Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B, a Cayman entity (the “Investor”), pursuant to which the Company sold to the Investor a $4,300,000 convertible note (the “Alto Convertible Note”) and warrant (the “Alto Warrant”) to purchase 5,091 shares of common stock, exercisable at $470.00 per share, for gross proceeds of $3,935,000 (the “Investment Amount”) (See Note 6). As a consequence of the Company issuing the Convertible Bridge Notes, and then subsequently completing the Equity Financings in March 2025 and June 2025, the exercise price of the Alto Warrant was adjusted to $3.38. The Company determined that the Alto Warrant contains a net cash settlement feature at inception and categorized the Alto Warrant as a liability in the accompanying unaudited condensed consolidated financial statements. The Alto Convertible Note was amortized on a monthly basis and the Company could make such monthly amortization payments in cash or, subject to certain equity conditions, in registered shares of common stock or a combination thereof. Installments could be deferred by the noteholder, resulting in a variable interest rate. However, the effective interest rate was approximately 346% based on the internal rate of return calculated on a series of cash flows that occur at regular intervals. For equity repayment, the Alto Convertible Note was convertible into shares of common stock at a price per share equal to the lower of (i) $470.00 per share, as adjusted, (ii) 90% of the three lowest daily VWAPs of the 15 trading days prior to the payment date, or (iii) 90% of the VWAP of the trading day prior to payment date. The noteholder had an acceleration of installment amount conversion option (the “Alto Acceleration Option”), whereby the noteholder, with certain share percentage limitations, could convert to common stock any outstanding installment amount at an amount equal to the installment amount plus five times (5x) the installment amount at any time. The Company determined the Alto Acceleration Option was an embedded derivative within the host instrument and bifurcated it from the host instrument and recorded it as a derivative liability valued at $1,442,000 at inception, using a Monte Carlo simulation model (Note 7). The Alto Convertible Note was repayable over 26 months and bore interest at the rate of 5% per annum. Additionally, the note contained certain redemption options and “Make Whole” provisions. + +In conjunction with entry into the SPA, the Company entered into a series of related agreements, including a security agreement (the “Security Agreement”), an intellectual property security agreement (the “IP Security Agreement”) and a subsidiary guaranty (the “Subsidiary Guaranty”). The security agreements and guaranty allow, among other things, for the Investor to have a security interest in and place a lien on all of the Company’s assets and intellectual property until such time as the Alto Convertible Note is paid off. In addition, the SPA called for the Company to enter into a springing deposit account control agreement (the “Springing DACA”), which, in the event the Company defaulted on its repayment of the Alto Convertible Note, would allow the Investor to assume control of the Company’s bank account only with regard to any funds remaining outstanding under the Alto Convertible Note. As such, in conjunction with entry into the SPA, the Company established a separate bank account in which it deposited the Investment Amount and pursuant to which the Company, the Investor and the bank holding the Investment Amount, First Republic Bank, entered into the Springing DACA agreement. As the Investment Amount had been held at First Republic Bank, in light of certain banking crises then affecting smaller banks, on March 12, 2023, the Company and the Investor moved the Investment Amount from First Republic Bank, after which time the Springing DACA was no longer in effect. Further, pursuant to amendments to the SPA entered into in May and June of 2023, the Company and the Investor agreed that all of the Investment Amount would be released to the Company and the relevant provision of the SPA which required the Springing DACA would no longer be deemed applicable. In addition, the Company granted the Investor the option to purchase up to an additional $10 million in convertible notes and warrants on substantially the same terms as the Alto Convertible Note and Alto Warrant, excluding the Springing DACA requirement, with such option to be effective through December 31, 2025. The agreement offered the investor an opportunity to participate in future capital raises at substantially similar terms as the January 11, 2023 agreement. The Company expected that such subsequent convertible notes and warrants would be issued on substantially similar terms as the January 11, 2023 initial agreement, as amended, thus providing the Company the opportunity to negotiate certain aspects of the agreement. + +Boustead Securities, LLC (“Boustead”) served as a placement agent for the Alto Convertible Note and Warrant offering and received $345,000 cash compensation and a warrant to purchase 357 shares of common stock, exercisable at $470.00 per share. The Boustead warrant was determined to be an equity instrument valued on a non-recurring basis. The Company used the Black Scholes valuation model using a term of five years, volatility of 110%, a risk-free rate of 3.53% for a value of $99,543. + +The Company allocated the finance costs related to the Boustead placement agent fee of $345,000, based on the relative fair market values of the Convertible Note and warrants issued. The allocation of the financing costs applied $232,027 to the debt component as a debt discount that was being amortized to interest expense over the term of the Alto Convertible Note, $104,245 to the warrant derivative liability component, expensed as a finance fee, and $8,727 to the equity warrant as a reduction in additional paid in capital. + +17 +--- + +The Company allocated to the debt component of the note an original discount of $300,000, legal fees of $65,000, $215,000 for additional interest fees on day one added to note principal, $1,442,000 for the accelerated conversion feature, and $1,288,543 for the fair value of warrants, resulting in an additional $3,310,543 debt discount that was being amortized to interest expense over the term of the Alto Convertible Note. + +On August 6, 2024, the Company entered into an amendment to the SPA with Alto. Under the Amendment Agreement, the Company and Alto agreed as follows: (i) that the Company would pay $600,000 (the “Cash Collateral”) in cash to Alto, which would be held as collateral on the remaining $1.2 million outstanding under the Alto Note; (ii) Alto will defer the monthly installment payment due on September 3, 2024 under the Alto Note until the Alto Note’s March 11, 2025 maturity date; and (iii) Alto would grant a waiver of any default Section 4(a)(xvi) of the Note related to the restatement and reaudit of the Company’s financial statements for the years ended December 31, 2022 and 2023. The amendment was accounted for as a troubled debt restructuring as the Company determined it was experiencing financial difficulties and was provided a concession through the deferral of one monthly principal and interest payment. As the future undiscounted cash flows exceeded the carrying value of the Alto Convertible Note, the Company did not recognize any gain or loss associated with the troubled debt restructuring. + +On February 26, 2025, the Company, entered into an amendment agreement (the “Amendment Agreement”) for purposes of amending the terms of the SPA originally dated January 11, 2023, and as amended May 10, 2023, June 5, 2023 and August 6, 2024, between the Company and Alto. + +Under the Amendment Agreement, in exchange for the Company’s payment of $75,000 to Alto, Alto agreed to permanently waive its right to purchase up to $10 million in Additional Notes and Additional Warrants and to a one-time waiver of the right to participate in the Company’s contemplated registered securities offering, as disclosed in the Company’s registration statement on Form S-1, filed with the SEC on February 13, 2025. The payment to Alto was accounted for as an issuance cost and recorded as a reduction to additional paid-in capital. + +During the three and six months ended June 30, 2024, the Company recorded interest expense of $430,685 and $928,200, respectively, which included amortization of debt discount as interest expense of $386,505 and $832,014, respectively. During the three and six months ended June 30, 2024, the Company settled $0 and $235,200 of principal, and settled $0 and $18,783 of accrued interest, which settlements were made in the form of 0 and 3,128 shares of common stock. The Company also settled for cash during the six months ended June 30, 2024 $501,667 of principal and $56,958 of accrued interest for a total of $558,628 of principal and interest paid in cash. + +**Note 6 - Stockholders’ Equity** + +**_Common Stock_** + +During the six months ended June 30, 2025, the Company issued: + +| ●| 12,000 shares of common stock upon conversion of $81,818 of principal related to a partial conversion of the Convertible Bridge Notes, +---|---|--- +| ●| 53,637 shares of common stock as part of a public offering, +| ●| 34,013 shares of common stock for vesting of restricted stock units, +| ●| 21,924 shares of common stock as part of a private placement, +| ●| 36 shares of common stock for rounding of reverse stock split fractional shares, and +| ●| 786,070 shares of common stock for exercise of pre-funded warrants. + +During the six months ended June 30, 2024, the Company issued: + +| ●| 3,128 shares of common stock to settle $235,200 of principal and $18,783 of interest on a convertible note and incurred $71,315 of loss on settlement, and +---|---|--- +| ●| 774 shares of common stock for vesting of restricted stock units. + +18 +--- + +**_March 2025 Equity Financing_** + +On March 12, 2025, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with WestPark Capital, Inc. (“WestPark”) as the sole underwriter (the “Underwriter”), related to a public offering (the “Offering”) of (i) 53,637 shares of common stock, of the Company, at a public offering price of $7.50 per share and (ii) pre-funded warrants to purchase 713,030 shares of common stock at an exercise price of $0.025 per share, at a public offering price of $7.475 per Pre-Funded Warrant (the “March 2025 Pre-Funded Warrants”). The Offering closed on March 13, 2025. + +The Offering resulted in gross proceeds of approximately $5.7 million and net proceeds of approximately $5.0 million, reflecting approximately $0.7 million of legal costs and other expenses connected with the transaction. + +The March 2025 Pre-Funded Warrants were exercisable at any time after March 13, 2025, at an exercise price of $0.025 per share. The March 2025 Pre-Funded Warrants contained standard adjustments to the exercise price, including for stock splits, stock dividends and pro rata distributions and contain customary terms regarding the treatment of such March 2025 Pre-Funded Warrants in the event of a fundamental transaction, which included but are not limited to a merger or consolidation involving the Company, a sale of all or substantially all of the assets of the Company or a business combination resulting in any person acquiring more than 50% of the outstanding shares of Common Stock of the Company. Additionally, the March 2025 Pre-Funded Warrants included restrictions on exercise in the event the holder’s beneficial ownership of the Company’s common stock would exceed 4.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise. + +The Company concluded that the March 2025 Pre-Funded Warrants met the requirements to be classified in stockholders’ equity, and have been recorded as additional paid in capital. + +As of June 30, 2025, all of the 713,030 March 2025 Pre-Funded Warrants have been exercised. + +**_June 2025 Private Placement_** + +On June 20, 2025, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) in a private placement, and engaged WestPark Capital, Inc. (“WestPark”) as the sole placement agent (the “Placement Agent”), pursuant to which the Company sold an aggregate of $4.3 million of its securities. The private placement consisted of the issuance of (i) 21,924 shares of common stock of the Company at a purchase price of $3.60 per share, and (ii) 1,158,953 pre-funded warrants, each to purchase one share of common stock of the Company at a purchase price of $3.599 and exercise price of $0.001 per pre-funded warrant (the “June 2025 Pre-Funded Warrants”) to one investor. The private placement closed on June 24, 2025. The private placement resulted in gross proceeds of approximately $4.3 million and net proceeds of approximately $3.9 million, reflecting approximately $0.4 million of placement agent fees, legal costs and other expenses connected with the transaction. The private placement closed on June 24, 2025. + +The June 2025 Pre-Funded Warrants are exercisable at any time after issuance on June 24, 2025, at an exercise price of $0.001 per share. The June 2025 Pre-Funded Warrants contain standard adjustments to the exercise price, including for stock splits, stock dividends and pro rata distributions and contain customary terms regarding the treatment of such June 2025 Pre-Funded Warrants in the event of a fundamental transaction, which include but are not limited to a merger or consolidation involving the Company, a sale of all or substantially all of the assets of the Company or a business combination resulting in any person acquiring more than 50% of the outstanding shares of Common Stock of the Company. Additionally, the June 2025 Pre-Funded Warrants include restrictions on exercise in the event the holder’s beneficial ownership of the Company’s common stock would exceed 4.99% (or, upon election by a holder prior to the issuance of any Warrants, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to the exercise. + +19 +--- + +In connection with the Securities Purchase Agreement, the Company entered into a registration rights agreement with the investor. Pursuant to the registration rights agreement, the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) to register for resale the shares of common stock, and the shares issuable upon exercise of the pre-funded warrants issued under the purchase agreement, within 10 days of the closing date, and to have such registration statement declared effective within 90 days of the closing date (or 120 days if the registration statement is reviewed by the SEC). The registration rights agreement provided that the Company would be obligated to pay certain liquidated damages to the investor if the Company failed to file the resale registration statement, or to have such registration statement declared effective by such dates. The Company was prepared to file the registration statement within the deadline required under the registration rights agreement but due to requests by the investor, the Company did not file the registration statement until August 4, 2025 , upon receiving the investor’s request to do so. The registration statement was declared effective on August 11, 2025. + +The Company concluded that the shares and June 2025 Pre-Funded Warrants met the requirements to be classified in stockholders’ equity, and the proceeds from the issuance of the shares and June 2025 Pre-Funded Warrants have been recorded in additional paid-in capital. + +As of June 30, 2025, no pre-funded warrants related to the June 2025 Private Placement have been exercised. + +**_Warrants_** + +In connection with the Convertible Bridge Notes in October 2024, the lenders were granted warrants to purchase 9,639 shares of common stock, at an exercise price of $35.00 per share and warrants to purchase 3,543 shares of common stock, at an exercise price of $37.25 per share. + +In connection with the October 2024 Equity Financing, the Company issued pre-funded warrants to purchase up to 102,210 shares of common stock, at an exercise price of $0.025 per share, and warrants to purchase up to 118,033 shares of common stock, at an exercise price of $35.00 per share. + +During the three months ended June 30, 2025, holders of pre-funded warrants exercised their warrants from the March 2025 and October 2024 Equity Financings, resulting in the issuance of 786,070 shares of common stock. As of June 30, 2025, 1,158,953 pre-funded warrants remained unexercised and outstanding and have no expiration date. + +A summary of activity regarding warrants to purchase common stock (excluding pre-funded warrants) for the six months ended June 30, 2025 were as follows: + +Schedule of Warrants Activity + +| | Number of| | | Weighted Average| | | Average| +---|---|---|---|---|---|---|---|---|--- +| | warrants| | | Exercise Price| | | Life (years)| +Outstanding, December 31, 2024| | $| 138,582| | | $| 46.92| | | | 4.67| +Granted| | | —| | | | —| | | | 0—| +Outstanding, June 30, 2025| | $| 138,582| | | $| 46.92| | | | 4.17| + +The warrants had intrinsic value of $1,960 as of June 30, 2025. All of the outstanding warrants are exercisable as of June 30, 2025. + +**__** + +**_Equity Incentive Plan_** + +The Company’s 2018 Equity Incentive Plan (the “2018 Plan”) provides for equity incentives to be granted to employees, executive officers, directors and key advisers and consultants. Equity incentive grants may be made in the form of stock options with an exercise price of not less than the fair market value of the underlying shares as determined pursuant to the 2018 Plan, restricted stock awards, other stock-based awards, or any combination of the foregoing. The 2018 Plan is administered by the Company’s compensation committee. In May 2025, the Company increased the shares authorized under the 2018 Plan by 5,000,000 shares. As of June 30, 2025, the Company has authorized 8,000,000 shares of common stock for issuance under the 2018 Plan. As of June 30, 2025, 69,066 shares have been granted, net of forfeitures, under the 2018 Equity Incentive Plan, of which 37,624 shares have vested. + +20 +--- + +**_Restricted Stock Units_** + +The Company may grant restricted stock units (“RSU”) under our 2018 Plan. RSUs are bookkeeping entries representing an amount equal to the fair market value of one share of our common stock. Subject to the provisions of the 2018 Plan, the administrator determines the terms and conditions of RSUs, including the vesting criteria and the form and timing of payment. Notwithstanding the foregoing, the administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. RSUs granted typically vest annually in one third increments from the date of appointment. + +During the three and six months ended June 30, 2025, pursuant to agreements with directors, officers and consultants, 22,101 RSUs with a value of $0.3 million were granted. During the three and six months ended June 30, 2024, 1,139 and 2,139 RSUs, respectively, with a value of $0.1 million and $0.1 million, respectively, were granted. + +Stock-based compensation expense was classified as follows for the three and six months ended June 30, 2025 and 2024: + +Schedule of Compensation Expenses (RSUs) + +| | 2025| | | 2024| | | 2025| | | 2024| +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Three Months Ended| | | Six Months Ended| +| | June 30,| | | June 30,| +| | 2025| | | 2024| | | 2025| | | 2024| +Research and development| | $| 1,111| | | $| 13,034| | | $| 321,215| | | $| 46,987| +General and administrative| | | 45,742| | | | 58,128| | | | 262,684| | | | 135,624| +Total| | $| 46,853| | | $| 71,162| | | $| 583,899| | | $| 182,611| + +On February 27, 2025, the Company entered into a Revolving Loan Agreement with Bowery Consulting Group Inc. (“Bowery”) where the Company may borrow from Bowery an aggregate principal amount of up to $2,000,000 (see Note 5). As part of one of the lender conditions, no less than four of the current board members were to resign, with three new nominees to be elected and appointed by the remaining members of the Company’s Board of Directors. Upon the resignation of the four board members, vesting of all outstanding unvested RSUs held by the departing board members were allowed to accelerate immediately. The Company concluded that the acceleration represented a modification of the outstanding unvested RSUs. As a result of the modification, the Company recorded approximately $0.5 million of stock-based compensation expense. + +As of June 30, 2025, there was $0.5 million of unrecognized RSU compensation cost related to non-vested stock-based compensation arrangements which is expected to be recognized over a weighted-average period of 2.48 years. + +The following is a summary of activity regarding Restricted Stock Units issued: + +Schedule of Restricted Stock Units (RSUs) + +| | Number of RSU| | | Weighted Average Fair Value Per RSU| +---|---|---|---|---|---|--- +Outstanding, December 31, 2024| | | 43,386| | | $| 21.00| +Granted| | | 22,101| | | | 13.58| +Forfeited| | | (32| )| | | 272.00| +Vested| | | (34,013| )| | | 19.28| +Outstanding, June 30, 2025| | | 31,442| | | $| 17.29| + +**__** + +**__** + +21 +--- + +**__** + +**Note 7 – Derivative Liabilities** + +**_Fair Value Assumptions Used in Accounting for Derivative Liabilities_** + +ASC 815 requires the Company to assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense. + +In October 2024, in connection with the October 2024 Equity Financing, the Company issued warrants to purchase 118,033 shares of common stock, with an exercise price of $35.00 per share, valued at inception at $0.2 million and as of June 30, 2025, at less than $0.1 million. The Company determined that the derivative liabilities from the warrants issued in relation to the October 2024 Equity Financing did not qualify for classification as equity instruments as they did not meet the requirements to be considered indexed to the Company’s own stock, due to potential variability in the settlement amount upon a fundamental transaction, as defined. + +In January 2023, in connection with the Alto Convertible Note, the Company issued warrants to purchase 5,091 shares of common stock, with an exercise price of $3.38 per share, as adjusted, valued at inception at $1.1 million and as of June 30, 2025, at less than $0.1 million. The Company determined that the derivative liabilities from the warrants issued in relation to the Alto Convertible Note did not qualify for classification as equity instruments due to the existence of certain net cash settlement provisions that are not within the sole control of the Company. In addition, there are certain down round provisions that could reduce the exercise price if the Company issues securities at lower prices in the future. + +The Company has determined the Acceleration Option in the Alto warrants is an embedded derivative within the host instrument and has bifurcated it from the host instrument and recorded it as a derivative liability valued at $1.4 million at inception, using a Monte Carlo simulation model. The Company determined its derivative liability from the noteholder’s Acceleration Option for the Alto Convertible Note was not clearly and closely related to the host and should thus be accounted for as a bifurcated derivative liability. As of June 30, 2025, the value of the Acceleration Option was $0 as the Alto Convertible Note was settled in full by September 30, 2024. + +The Company classifies these derivative liabilities as a Level 3 fair value measurement and used the Monte Carlo pricing model to calculate the fair value as of June 30, 2025 (less than $0.1 million) and December 31, 2024 (less than $0.1 million). + +The key inputs for the Monte Carlo simulation* for the Alto and October 2024 Equity Financing warrants as of June 30, 2025, were as follows: + +Schedule of Monte Carlo Simulation Assumption + +Net cash settlement and down round key valuation inputs - warrants*| | | +---|---|---|--- +Annualized volatility| | | 65.79% - 95.34| % +Risk-free interest rate| | | 4.41| % +Quoted VWAP| | $| 3.74| +Exercise price| | | 3.38 \- 35.00| +Probability assessment1| | | 5% - 10| % +Illiquidity discount| | | (12| )% +Time period (years)| | | 1.53 \- 4.34| + +1| | Probability assessments include the probabilities that subsequent successful capital raises (in terms of amounts raised and timing) are not executed and the probability that the securities issuable under the convertible bridge notes are not timely registered. +---|---|--- + +| _*_ | _Based_ _on a Monte Carlo simulation analysis of 50,000 iterations_ +---|---|--- + +__ + +The key inputs for the Monte Carlo simulation as of December 31, 2024, were as follows: + +Net cash settlement and down round key valuation inputs - warrants*| | | +---|---|---|--- +Annualized volatility| | | 57.50% \- 97.14| % +Risk-free interest rate| | | 4.25 \- 4.38| % +Quoted VWAP| | $| 20.50| +Exercise price| | | 12.00 \- 35.00| +Probability assessment1| | | 10% - 40| % +Illiquidity discount| | | (26| )% +Time period (years)| | | 2.03 \- 4.84| + +1| | Probability assessments include the probabilities that subsequent successful capital raises (in terms of amounts raised and timing) are not executed and the probability that the securities issuable under the convertible bridge notes are not timely registered. +---|---|--- + +| * | _Based on a Monte Carlo simulation analysis of 50,000 iterations_ +---|---|--- + +__ + +The following table summarizes the changes in the derivative liabilities: + +Schedule of Derivative Liabilities + +Fair Value Measurements Using Significant Unobservable Inputs (Level 3) +--- +| | Warrants| | | Alto Acceleration Feature| +Balance - December 31, 2024| | $| 25,281| | | $| —| +Gain on change in fair value| | | (2,643| )| | | —| +Balance - March 31, 2025| | | 22,638| | | | —| +Gain on change in fair value| | | (11,673| )| | | —| +Balance - June 30, 2025| | $| 10,965| | | $| —| + +22 +--- + +**Note 8 – Commitments and Contingencies** + +On April 3, 2025, the Company, entered into a consulting agreement (the “Consulting Agreement”) with IR Agency LLC (the “IR Agency”). Pursuant to the Consulting Agreement, IR Agency agrees to provide certain marketing and advertising services to communicate information about the Company to the financial community (the “Services”), including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company. As consideration for the performance of the Services, the Company paid IR Agency $2.0 million on April 5, 2025. The term of the Consulting Agreement was three months starting on April 3, 2025. For the three months ended June 30, 2025, the Company incurred $2.0 million of costs under the Consulting Agreement. + +On December 16, 2024, the Company entered into a sponsored research agreement (the “Sponsored Research Agreement”) with the Regents of the University of California, on behalf of its San Francisco campus (the “UCSF”), pursuant to which UCSF’s employees will conduct research on a project entitled “Investigation of 18F-fluorodeboronation method for PSMA targeting ligand radiolabeling and evaluation in prostate cancer models” (the “Research Program”). Under the terms of the Sponsored Research Agreement, the Company will bear the total cost of $0.3 million of the Research Program and has an exclusive license to the intellectual property underlying the research. This Sponsored Research Agreement will be effective for a period of one year and may be extended by written mutual consent of the parties. During the three and six months ended June 30, 2025, the Company made prepayments of less than $0.1 and $0.2 million, respectively, and amortized $0.05 million and $0.1 million, respectively, of costs under the Sponsored Research Agreement. + +**** + +In January 2025, the Company entered into a change order to its existing agreement with Theradex Systems, Inc., the Company’s primary third-party CRO, for purposes of supporting the Company’s clinical trials of Ropidoxuridine. Following the change order, the Company’s total cost limit increased by $3.0 million, for an aggregate of $5.3 million, of which $2.0 million has not yet been incurred. + +**** + +In March 2025, the Company entered into a consulting services agreement (the “Consulting Agreement”) with Bowery Consulting Group Inc. (the “Consultant”). According to the Consulting Agreement, the Consultant will provide consulting services in connection with the Company’s business, advising on viability of plans for scaling activities, growth and capital raising strategies, and costs minimization associated with technological platform improvements and marketing spend. The Company agreed to pay the Consultant $260,000 for their services, of which the Company recognized less than $0.1 million and $0.1 million during the three and six months ended June 30, 2025 related to the Consulting Agreement. The Company was not obligated to pay amounts under the Consulting Agreement until it regained full Nasdaq listing requirement. The Company received notice from Nasdaq on July 2, 2025 that it had regained compliance with the listing requirement and has since paid the fee. + +On November 10, 2021, the Company entered into an engagement agreement (“EA”) with Boustead designating Boustead as its exclusive financial advisor for corporate finance activities and subsequently, on August 29, 2022, the Company entered into an underwriting agreement with Boustead in conjunction with the Company’s IPO. The EA contained an up to three year right of first refusal (“ROFR’) and the Underwriting Agreement, which overrode conflicting terms in the EA, contained a two year ROFR following the September 2, 2022 closing of the Company’s IPO. Further, Boustead also had a ROFR in conjunction with the Company’s terminated rights offering, which provided Boutead with a ROFR through February 7, 2025. Following the Company’s engagement agreement and underwriting agreement with WestPark Capital dated February 10, 2025 and March 13, 2025, respectively, Boustead asserted it has ROFR rights, demanding termination of WestPark’s engagement and claiming entitlement to compensation under the Boustead EA. As of the reporting date, there are no conditions indicating a loss has been incurred, nor does the Company believe a loss is probable and reasonably estimable, therefore no accrual for a potential loss has been recorded. + +**** + +**Note 9 – Business Segment Information** + +The Company operates as one operating segment with a focus on products designed to address limitations of the current cancer therapies and extend new applications of radiation therapy. The CEO, as our chief operating decision maker (CODM), manages and allocates resources to the operations of the Company on a consolidated basis, considering primarily research and development expenditures, cash burn and net loss. This enables the CEO to assess our overall level of available resources and determine how best to deploy these resources across products and research and development projects in line with the longer-term Company-wide strategic goals. During the six months ended June 30, 2025, the Company appointed an Interim CEO, who assumed the role of CODM. This appointment did not result in any immediate changes to the reporting metrics that the CODM uses to manage and allocate resources to the operations of the Company. Our former CEO continued to chair the Company’s Board of Directors and serve in a corporate role as Chief Scientific Officer until his retirement on May 9, 2025. + +The accounting policies of our reportable segment are the same as those described in the “Summary of Significant Accounting Policies” for the Company. All costs, research and development expenses, general and administrative expenses, other operating expenses, interest expense, depreciation, corporate overhead assets (workforce, intellectual property, etc.) are fully allocated to the Company’s one segment. Significant segment expenses include payroll and costs incurred for the Company’s primary third-party contract research organization (“CRO”). During the three and six months ended June 30, 2025 and 2024, the Company incurred payroll expenses classified in our unaudited condensed consolidated statements of operations as research and development of $0.2 million in both periods, respectively, and $0.4 and $0.5 million, respectively. During the three and six months ended June 30, 2025 and 2024, the Company incurred payroll expenses classified in our unaudited condensed consolidated statements of operations as general and administrative of $0.1 million and $0.2 million, respectively, and $0.3 million for each six-month period. During the three and six months ended June 30, 2025, the Company incurred third-party CRO expenses of $0.6 million and $1.5 million, respectively, all of which is classified in our unaudited condensed consolidated statements of operations as research and development. All other operating expenses in our unaudited condensed consolidated statements of operations are characterized as other segment expenses which, after factoring in other income and expenses, reconcile to net loss for each period. The Company’s reportable segment’s profit or loss, assets, significant expenses and other specified items are consistent with the financial information disclosed in our unaudited condensed consolidated financial statements. See the unaudited condensed consolidated financial statements for the financial information of the Company’s one segment. + +**** + +**Note 10 – Subsequent Events** + +**** + +On August 8, 2025, the Company granted $100,000 of RSUs (29,240 units) to each of the four members of its Board of Directors and its Chief Financial Officer that will vest over a three year period (one-third on each anniversary of the grant date), and another $85,000 of RSUs (24,854 units) to its Chief Financial Officer that will vest six months from the grant date. + +On August 11, 2025, the Company’s Board of Directors expanded its membership to five and appointed Chief Executive Officer Christopher Cooper to fill the newly created seat. + +23 +--- + +**ITEM 2\. MANAGEMENT** ’**S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** + +__ + +_The following Management’s Discussion and Analysis of Financial Condition and Result of Operations (the “MD &A”) should be read in conjunction with our unaudited financial statements and the related notes thereto included elsewhere in this Quarterly Report and our financial statement and related notes contained in our annual report on From 10-K for the fiscal year ended December 31, 2024. The MD&A contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors including, but not limited to, those noted under “Risk Factors” in this report and in our annual report on Form 10-K for the fiscal year ended December 31, 2024._ + +_We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this report, except as required by U.S. federal securities laws._ + +__ + +**Overview** + +Founded by Georgetown University Medical School faculty members, Shuttle Pharmaceuticals Holdings, Inc. is a discovery and development stage pharmaceutical company leveraging our proprietary technology to develop novel therapies that are designed to cure cancer. Originally formed as Shuttle Pharmaceuticals, LLC in 2012, our goal is to extend the benefits of cancer treatments by leveraging insights into cancer therapy with surgery, radiation therapy, chemotherapy and immunotherapy. While there are several therapies being developed with the goal of curing cancer, one of the most effective and proven approaches to this is radiation therapy (“RT”). We are developing a pipeline of products designed to address the limitations of the current standard of cancer therapies. We believe that our product candidates will enable us to deliver cancer treatments that are safer, more reliable and at a greater scale than that of the current standard of care. + +Operations to date have focused on continuing our research and development efforts to advance Ropidoxuridine clinical testing and improved drug formulation, to advance HDAC6 inhibitor (SP-2-225) preclinical development and explore the application of the PC-RAD Test, predictive biomarkers of radiation response. The clinical development of Ropidoxuridine has included completion of a Phase I clinical trial to establish drug bioavailability and a maximum tolerated dose for use in Phase II clinical trials. TCG GreenChem, with whom we have contracted for process research, development and cGMP compliant manufacture of IPdR, has manufactured the API of Ropidoxuridine and the University of Iowa Pharmaceuticals has formulated the drug product for use in our upcoming Phase II clinical trial in brain cancer patients undergoing radiation therapy. The drug product (capsules) were shipped to CRO Theradex Oncology and distributed to clinical trial sites that are fully approved to enroll patients in the trial. Shuttle received approval from the FDA to begin the clinical trial. The FDA thereafter made recommendations to expand the clinical trial to include a randomized dose “optimization” step and we agreed with the recommendation. Meetings with engaged clinical sites to review the protocol documents have occurred and FDA required IRB approvals have been received. With FDA recommended changes incorporated into the revised protocol and the completion of site initiation visits, we commenced our Phase II clinical study in October 2024. The Company’s radiation biomarker project and the health disparities project have been completed and we are proceeding with plans for clinical validation and potential for commercialization of Ropidoxuridine as a radiation sensitizer. + +**__** + +**Nasdaq Listing Compliance** + +On December 31, 2024, we received a letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) stating that for the 30 consecutive business day period between November 15, 2024 to December 30, 2024 our common stock had failed to maintain a minimum closing bid price of $1.00 per share, as required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we had a period of 180 calendar days, or until June 30, 2025 (the “Compliance Period”), to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days. + +24 +--- + +Following the March 2025 $5.75 million equity financing, on March 14, 2025, Nasdaq acknowledged that we had regained compliance with the Listing Rule 5550(b)(1) but indicated that if we fail to evidence compliance upon filing the March 31, 2025 Form 10-Q, we may be subject to delisting. We have evidenced compliance through maintaining a minimum closing bid price of our common stock of $1.00 per share or greater from June 16, 2025 to July 1, 2025. Accordingly, we have regained compliance with Listing Rule 5550(a)(2). + +On June 16, 2025, in order to maintain the Minimum Bid Price Requirement again, we effectuated a 1-for-25 reverse stock split of our issued and outstanding common stock, rounding up to account for any fractional shares. The reverse stock split had no effect on our authorized shares of common stock or preferred stock and the par value will remain unchanged at $0.00001, respectively. All common stock share, option, warrant and per share amounts (except our authorized but unissued shares and previously reserved shares) have been retroactively adjusted in these unaudited condensed consolidated financial statements and related disclosures. + +On July 2, 2025, we received notification from Nasdaq acknowledging that we maintained the requisite minimum closing bid price of our common stock of $1.00 per share or greater. Accordingly, we regained compliance with Listing Rule 5550(a)(2), and the matter was closed. + +**Results of Operations** + +**** + +**_Comparison of the three months ended June 30, 2025 and 2024_** + +__ + +The following table summarizes the results of our operations: + +| | Three Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | June 30,| | | | | | | +| | 2025| | | 2024| | | Change| | | %| +Revenue| | $| —| | | $| —| | | $| —| | | | —| +Operating expenses:| | | | | | | | | | | | | | | | +Research and development| | | 1,025,547| | | | 645,719| | | | 379,828| | | | 59| % +General and administrative| | | 2,346,323| | | | 310,038| | | | 2,036,285| | | | 657| % +Legal and professional| | | 538,536| | | | 526,877| | | | 11,659| | | | 2| % +Total operating expenses and loss of operations| | | 3,910,406| | | | 1,482,634| | | | 2,427,772| | | | 164| % +| | | | | | | | | | | | | | | | +Other income (expense):| | | | | | | | | | | | | | | | +Interest expense - related parties| | | (2,614| )| | | —| | | | (2,614| )| | | —| % +Interest expense| | | (19,129| )| | | (430,685| )| | | 411,556| | | | (96| )% +Interest income| | | 81| | | | 14,158| | | | (14,077| )| | | (99| )% +Change in fair value of derivative liabilities| | | 11,673| | | | (143,773| )| | | 155,446| | | | (108| )% +Change in fair value of convertible notes| | | 213,930| | | | —| | | | 213,930| | | | —| % +Gain on sale of marketable securities| | | —| | | | 39,683| | | | (39,683| )| | | (100| )% +Change in fair value of marketable securities| | | —| | | | (27,964| )| | | 27,964| | | | (100| )% +Total other expense| | | 203,941| | | | (548,581| )| | | 752,522| | | | (137| )% +Net loss| | $| (3,706,465| )| | $| (2,031,215| )| | $| (1,675,250| )| | | 82| % + +_Research and Development._ Total research and development (“R&D”) expense was $1.0 million for the three months ended June 30, 2025, as compared to $0.6 million to the three months ended June 30, 2024. The increase in total R&D expense of $0.4 million, or 59%, is primarily related to the Company having completed production of the drug product and the start of work related to the initiation of trials including contract research organization (“CRO”) expenses, clinical trial sites, other regulatory activities. + +25 +--- + +R&D compensation related expenses were $0.3 million in the three months ended June 30, 2025 as compared to $0.3 million in the three months ended June 30, 2024. For the three months ended June 30, 2025, R&D compensation related expenses were 25% of total R&D expense, representing a decrease from the 48% of total R&D incurred in the three months ended June 30, 2024. The decrease is largely attributable to the retirement of our former CEO and Chief Scientific Officer in early May 2025. Subcontractor expense made up 71% of total R&D expenses in the three months ended June 30, 2025 and 42% of total R&D expenses during the three months ended June 30, 2024. + +_General and Administrative Expenses_. General and administrative expenses in the three months ended June 30, 2025 increased by $2.0 million, or 657%, from $0.3 million in the three months ended June 30, 2024 to $2.3 million in the three months ended June 30, 2025. The increase in general and administrative expenses was primarily due to costs associated with advertising for investor relations of $2.0 million and other administrative costs. + +_Legal and Professional Expenses._ During the three months ended June 30, 2025, legal and professional expenses increased by less than $0.1 million or 2% compared to the same period in 2024. The increase in legal and professional fees was primarily due to increases in legal costs associated with corporate matters and our accounting expenses related to our public filing requirements. + +_Other Income (expense)._ During the three months ended June 30, 2025, other expense decreased by $0.8 million or 137% compared to the same period in 2024. The decrease was primarily driven by a $0.4 million decrease in interest expense, a $0.2 million decrease in change in fair value of derivative liabilities and a $0.2 million increase in change in fair value of convertible notes. + +**_Comparison of the six months ended June 30, 2025 and 2024_** + +**__** + +The following table summarizes the results of our operations: + +| | Six Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | June 30,| | | | | | | +| | 2025| | | 2024| | | Change| | | %| +Revenue| | $| —| | | $| —| | | $| —| | | | —| +Operating expenses:| | | | | | | | | | | | | | | | +Research and development| | | 2,599,475| | | | 1,231,823| | | | 1,367,652| | | | 111| % +General and administrative| | | 2,943,209| | | | 634,647| | | | 2,308,562| | | | 364| % +Legal and professional| | | 1,318,963| | | | 1,001,011| | | | 317,952| | | | 32| % +Total operating expenses and loss of operations| | | 6,861,647| | | | 2,867,481| | | | 3,994,166| | | | 139| % +| | | | | | | | | | | | | | | | +Other income (expense):| | | | | | | | | | | | | | | | +Interest expense - related parties| | | (8,009| )| | | —| | | | (8,009| )| | | —| % +Interest expense| | | (25,664| )| | | (928,200| )| | | 902,536| | | | (97| )% +Interest income| | | 81| | | | 35,611| | | | (35,530| )| | | (100| )% +Change in fair value of derivative liabilities| | | 14,316| | | | 54,089| | | | (39,773| )| | | —| % +Change in fair value of convertible notes| | | 121,451| | | | —| | | | 121,451| | | | 100| % +Gain on sale of marketable securities| | | —| | | | 43,720| | | | (43,720| )| | | (100| )% +Change in fair value of marketable securities| | | —| | | | (28,670| )| | | 28,670| | | | (100| )% +Loss on settlement of convertible debt| | | —| | | | (71,315| )| | | 71,315| | | | (100| )% +Total other expense| | | 102,175| | | | (894,765| )| | | 996,940| | | | (111| )% +Net loss| | $| (6,759,472| )| | $| (3,762,246| )| | $| (2,997,226| )| | | 80| % + +26 +--- + +_Research and Development._ Research and development (“R&D”) expense was $2.6 million for the six months ended June 30, 2025, as compared to $1.2 million for six months ended June 30, 2024. The increase of $1.4 million, or 111%, is primarily related to the Company having completed production of the drug product and the start of work related to the initiation of trials including contract research organization (“CRO”) expenses, clinical trial sites, other regulatory activities. + +R&D compensation related expenses were $0.9 million in the six months ended June 30, 2025 as compared to $0.6 million in the six months ended June 30, 2024. For the six months ended June 30, 2025, R&D compensation related expenses were 34% of total R&D expense, representing a decrease from the 52% of total R&D incurred in the six months ended June 30, 2024. The decrease is largely attributable to the retirement of our former CEO and Chief Scientific Officer in early May 2025. Subcontractor expense made up 63% of total R&D expenses in the six months ended June 30, 2025 and 38% of total R&D expenses during the six months ended June 30, 2024. + +_General and Administrative Expenses._ General and Administrative expenses in the six months ended June 30, 2025 increased by $2.3 million, or 364% from $0.6 million in the six months ended June 30, 2024 to $2.9 million in the six months ended June 30, 2025. The increase in general and administrative expenses was primarily due to costs associated with advertising for investor relations and filing expenses of $2.0 million, $0.1 million increase in general and administrative stock-based compensation expense, and other administrative costs. + +_Legal and Professional Expenses_. During the six months ended June 30, 2025, legal and professional expenses increased by $0.3 million or 32%. The increase in legal and professional fees was primarily due to increases in our expenses related to our public filing requirements, contracts and financing related work. + +_Other Income (expense)_. During the six months ended June 30, 2025, other expense decreased by $0.9 million or 111% compared to the same period in 2024. The decrease was primarily driven by a $0.9 million decrease in interest expense. + +**Liquidity and Capital Resources** + +Our unaudited condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. We have incurred losses since inception and had a net loss of $6.8 million and no revenues generated during the six months ended June 30, 2025 and working capital of approximately $3.5 million as of June 30, 2025. We do not expect to generate positive cash flows from operating activities in the near future. + +In January 2025, we entered into a change order to the existing agreement with Theradex Systems, Inc., our primary third-party CRO, for purposes of supporting our clinical trials of Ropidoxuridine. Following the change order, our total cost limit increased by $3.0 million, for an aggregate of $5.3 million, of which $2.0 million had not yet been incurred as of June 30, 2025. + +**** + +In March 2025, we entered into a consulting services agreement (the “Bowery Consulting Agreement”) with Bowery Consulting Group Inc. (the “Consultant”). According to the Bowery Consulting Agreement, the Consultant will provide consulting services in connection with our business, advising on viability of plans for scaling activities, growth and capital raising strategies and cost minimization associated with technological platform improvements and marketing spend. We agreed to pay the Consultant $260,000 for their services, which we were not obligated to pay until we regained full Nasdaq listing requirement. We received notice from Nasdaq on July 2, 2025 that we had regained compliance with the listing requirement and have since paid the fee. + +In April 2025, we entered into a consulting agreement (the “IR Agency Consulting Agreement”) with IR Agency LLC (the “IR Agency”). Pursuant to the IR Agency Consulting Agreement, IR Agency agrees to provide certain marketing and advertising services to communicate information about us to the financial community (the “Services”), including, but not limited to, creating company profiles, media distribution and building a digital community with respect to us. As consideration for the performance of the Services, we paid IR Agency $2.0 million on April 5, 2025. The term of the IR Agency Consulting Agreement was three months commencing April 3, 2025. + +27 +--- + +Our ability to continue as a going concern is dependent upon our ability to continue to successfully raise additional equity or debt financing to allow us to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements contained in the report are issued. + +**_Recent Financings_** + +On February 27, 2025, we entered into a Revolving Loan Agreement (the “Revolving Loan Agreement”) with a lender. Pursuant to and under the terms of the Revolving Loan Agreement, we issued a revolving note dated February 28, 2025 in the principal amount of up to $2.0 million (the “Revolving Note”), which we may draw upon at our discretion from time to time through its maturity on February 28, 2026. The Revolving Note bears interest at the rate of 18% per annum calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue interest daily commencing from the date of any draw down until paid in full. + +On March 12, 2025, we consummated a public offering of an aggregate of (i) 53,637 shares of common stock, of the Company, at a public offering price of $0.30 per share and (ii) pre-funded warrants to purchase 713,030 shares of common stock at an exercise price of $0.025 per share, at a public offering price of $7.48 per pre-funded warrant (the “Offering”). The Offering closed on March 13, 2025. We received gross proceeds of approximately $5.7 million and net proceeds of approximately $5.0 million, reflecting approximately $0.7 million of legal costs and other expenses connected with the Offering. + +On June 20, 2025, we consummated a private placement of an aggregate of (i) 21,924 shares of common stock, of the Company, at a purchase price of $3.60 per share and (ii) pre-funded warrants to purchase 1,158,953 shares of common stock at an exercise price of $0.001 per share, at a purchase price of $3.599 per pre-funded warrant. The private placement closed on June 24, 2025. We received gross proceeds of approximately $4.3 million and net proceeds of approximately $3.9 million, reflecting approximately $0.4 million of legal costs and other expenses connected with the private placement. + +**Balance Sheet Data:** + +| | June 30,| | | December 31,| | | | | | | +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | 2025| | | 2024| | | Change| | | %| +Current assets| | $| 5,191,917| | | $| 2,210,917| | | $| 2,981,000| | | | 135| % +Current liabilities| | | 1,692,786| | | | 1,533,769| | | | 159,017| | | | 10| % +Working capital| | $| 3,499,131| | | $| 677,148| | | $| 2,821,983| | | | 417| % + +As of June 30, 2025, total current assets were $5.2 million and total current liabilities were $1.7 million, resulting in working capital of $3.5 million. As of December 31, 2024, total current assets were $2.2 million and total current liabilities were $1.5 million, resulting in a working capital of $0.7 million. The Company’s current assets as of June 30, 2025 are comprised of $4.8 million of cash and cash equivalents and $0.4 million of prepaid expenses, with the increase from December 31, 2024 being primarily due to the March 2025 equity raise that provided $5.0 million in net cash and the June 2025 private placement that provided $3.9 million in net cash. + +In addition, we continued progress on our R&D programs during the six months ended June 30, 2025 that resulted in increased cash expenditures. The Company’s current liabilities as of June 30, 2025 are primarily comprised of $0.4 million of convertible notes payable, $1.2 million of accounts payable and accrued expenses, $0.1 million of notes payable to related parties, and the current portion of our operating lease liability of $0.1 million. The increase in current liabilities is primarily due to an increase in accounts payable and accrued expenses of $0.6 million, partially offset by a $0.1 million decrease in convertible notes payable and a $0.1 million decrease in notes payable to related parties. This is primarily attributable to our efforts to preserve cash while we strive to raise funds to finance ongoing business and operations. + +28 +--- + +**_Cash Flows_** + +| | Six Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | June 30,| | | Change| | | %| +| | 2025| | | 2024| | | | | | | +Cash used in operating activities| | | (5,881,979| )| | | (2,638,425| )| | | (3,243,554| )| | | 123| % +Cash provided by investing activities| | | —| | | | 1,259,270| | | | (1,259,270| )| | | 100| % +Cash provided by (used in) financing activities| | | 8,779,507| | | | (501,667| )| | | 9,281,174| | | | (1850| )% +Cash and cash equivalents on hand| | | 4,817,672| | | | 695,594| | | | 4,122,078| | | | 593| % + +**_Cash Flows from Operating Activities_** + +Our cash flows from operating activities are greatly influenced by our use of cash for operating expenses and working capital requirements to support the business. We have historically experienced negative cash flows from operating activities as we invested in research and development activities. The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges, which are generally attributable to stock-based compensation, changes in fair value of our derivative liabilities, changes in fair value of our convertible notes, and amortization of debt discounts and finance fees, as well as changes in components of operating assets and liabilities, which are generally attributable to increased expenses and timing of vendor payments. + +During the six months ended June 30, 2025, net cash used in operating activities of $5.9 million was primarily due to our net loss of $6.8 million, change in fair value of convertible notes of $0.1 million, and interest payments on convertible notes accounted for at fair value of $0.1 million, partially offset by stock-based compensation of $0.6 million and the net change in operating assets and liabilities of $0.5 million. + +During the six months ended June 30, 2024, net cash flows used in operating activities was $2.6 million, consisting of a net loss of $3.8 million, increased by a gain on change in derivative liabilities of $54 thousand, offset by amortization of debt discount of $0.8 million, loss on settlement of convertible debt of $71 thousand, accrued interest settled with common stock of $19 thousand, stock-based compensation of $183 thousand and increased by a net change in working capital of $85 thousand. + +**_Cash Flows from Investing Activities_** + +For the six months ended June 30, 2025, we did not have investing activities. For the six months ended June 30, 2024, cash provided by investing activities was primarily attributable to $1.3 million in proceeds from the disposition of marketable securities. + +**_Cash Flows from Financing Activities_** + +For the six months ended June 30, 2025, cash flows from financing activities was primarily comprised of proceeds of $5.4 million, from the sale of common stock and pre-funded warrants as part of the March 2025 equity financing, net of placement agent costs of $0.3 million, proceeds of $4.1 million, from the sale of common stock and pre-funded warrants as part of the June 2025 equity financing, net of placement agent costs of $0.2 million, partially offset by $0.5 million payment of other issuance costs for issuance of common stock and equity-classified warrants in the March 2025 and June 2025 equity financings, and $0.1 million of repayment of note payable-related party used to finance our ongoing operations. For the six months ended June 30, 2024, we paid $0.5 million related to payments on a convertible note. + +**Off-Balance Sheet Arrangements** + +We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. + +29 +--- + +**Critical Accounting Policies and Significant Judgments and Estimates** + +This discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While the significant accounting policies are described in more detail in the notes to the unaudited condensed consolidated financial statements included elsewhere in this report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. + +Our most critical accounting policies and estimates relate to the following: + +| ● | Research and Development Expenses +---|---|--- +| ● | Fair Value of Convertible Notes +| ● | Fair Value of Warrant to Purchase Common Stock +| ● | Fair Value of Derivative Financial Instruments + +_Research and Development Expense_ + +Research and development expenses are charged to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, which include a certain portion of the Company’s former chief executive officer (prior to his transition to chief scientific officer), chief operating officer, vice president regulatory (formerly the chief financial officer) and directors’ compensation. Both the chief scientific officer and the vice president regulatory resigned in May and June 2025, respectively.. + +_Fair Value of Convertible Notes_ + +__ + +As permitted under ASC 825, Financial Instruments (“ASC 825”), we elected the fair value option to account for the October 2024 Convertible Bridge Notes. The valuation of the October 2024 Convertible Bridge Notes utilizes a Monte Carlo simulation model. Monte Carlo simulation models require the use of simulations that are weighted based on projected future stock prices, the volatility of a set of guideline companies and significant unobservable inputs including probabilities assigned to not achieving a successful capital raise and a registration of related securities. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. + +The significant inputs and assumptions used to estimate the fair value also include: (i) the expected timing of conversion, (ii) the amount subject to equity conversion, (iii) the sum of the notes’ principal and unpaid accrued interest, (iv) expected volatility, (v) risk-free interest rate, (vi) the discount rate, (vii) volume-weighted average price (“VWAP”), (viii) illiquidity discounts, and (ix) probabilities assigned. The October 2024 Convertible Bridge Notes are subject to revaluation at the end of each reporting period, with changes in fair value recognized in the accompanying unaudited condensed consolidated statements of operations, or for changes due to our credit worthiness, if any, as a component of other comprehensive income. + +__ + +_Fair Value of Warrants to Purchase Common Stock_ + +We have issued warrants to investors in our debt and equity offerings. We have also issued warrants to service providers in relation to our financing offerings. + +We evaluate all warrants issued to determine the appropriate classification under ASC 480 and ASC 815 (as well as under ASC 718 for warrants issued as share-based payments). In addition to determining classification, we evaluate these instruments to determine if such instruments meet the definition of a derivative. + +30 +--- + +For warrants that are determined to be equity-classified, we estimate the fair value at issuance and record the amounts to additional paid in capital (potentially on a relative fair value basis if issued in a basket transaction with other financial instruments). Warrants that are equity-classified are not subsequently remeasured unless modified or required to be reclassified as liabilities. For warrants that are determined to be liability-classified, we estimate the fair value at issuance and each subsequent reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. The classification of all outstanding warrants, including whether such instruments should be recorded as equity, is evaluated at the end of each reporting period. + +For warrants with uncertain or more complex terms (such as variability in the warrant shares or exercise price), we may utilize more complex models to address such provisions, including Monte Carlo simulation models. Monte Carlo simulation models require the use of simulations that are weighted based on projected future stock prices, the volatility of a set of guideline companies and significant unobservable inputs including probabilities assigned. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. + +The use of these valuation models requires the input of highly subjective assumptions. Any change to these inputs could produce significantly higher or lower fair value measurements. + +__ + +_Fair Value of Financial Instruments_ + +We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, such as the Acceleration Option in the Alto warrants (as defined in Note 5). For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities are evaluated at the end of each reporting period. + +For our derivative financial instruments classified as a liability, we use a Monte Carlo valuation model to value the derivative instruments at inception and on subsequent valuation dates. The model requires the use of simulations that are weighted based the volatility of a set of guideline companies and significant unobservable inputs including probabilities assigned. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. The Monte Carlo simulation uses an implied VWAP for valuation. The implied VWAP was backsolved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds and is updated each period. + +The use of Monte Carlo valuation models require key inputs, some of which are based on estimates and judgements by management. Any change to these key inputs could produce significantly higher or lower fair value measurements. + +**Item 3\. Quantitative and Qualitative Disclosures About Market Risk** + +As a “smaller reporting company,” we are not required to provide the information required by this Item. + +**Item 4\. Controls and Procedures** + +Evaluation of Disclosure Controls and Procedures + +Disclosure controls and procedures (as defined in Securities Exchange Act of 1934, as amended, or the Exchange Act Rule 15d-15(e)) are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. + +31 +--- + +As of June 30, 2025, our management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Such evaluation was carried out under the supervision of our Chief Executive Officer with the participation of our Chief Financial Officer, and our third-party financial service provider. Based on this evaluation, management concluded that our disclosure controls and procedures were, and continue to be, ineffective as of June 30, 2025. Based on the foregoing, our management concluded that our internal controls over the following financial reporting areas to be material weaknesses: + +● | Our written policies and procedures over accounting transaction processing and period end financial close and reporting are limited, which has resulted in ineffective oversight in the establishment of proper monitoring controls over accounting and financial reporting; in addition, we lacked sufficient review and segregation of duties for certain financial transactions, manual journal entries, and critical financial spreadsheets, such that a proper review had not been performed by someone other than preparer, and that process documentation is lacking for review and monitoring controls over accounting and financial reporting. These were contributing factors which led to untimely filings for certain periods in fiscal year 2024. +---|--- +● | We identified findings related to overall information technology general controls (“ITGCs”) including issues with super-user access and segregation of duties for systems supporting the Company’s internal control processes and controls. + +Management’s Remediation Measures + +While the Company has improved its organizational capabilities, the Company’s remediation efforts will continue to take place. Management is committed to maintaining a strong internal control environment. In response to the identified material weaknesses in the overall control environment, management has implemented additional measures which include: + +● | Hired a new Chief Financial Officer during the second quarter of 2024 to bolster the Company’s internal technical accounting and financial reporting experience. +---|--- +| +● | Engaged a third-party consulting firm to assist with the preparation of SEC reporting and other technical accounting matters. +| +● | Redesigned and implemented certain management review controls around the proper classification of operating expenses as research and development and general and administrative. + +The Company will continue to review and improve its internal controls over financial reporting to address the underlying causes of the material weaknesses and control deficiencies. Such material weaknesses and control deficiencies will not be fully remediated until the Company has concluded that its internal controls are operating effectively for a sufficient period of time. + +Remediation of Previously Disclosed Material Weaknesses + +As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, we identified a material weakness in our internal controls over financial reporting for lack of a formal process to identify and ensure proper classification of expenses as Research and Development. Our remediation efforts, including those noted above, were completed and the related controls were in place for a sufficient period of time to conclude that this material weakness was remediated as of June 30, 2025. + +Changes in Internal Control over Financial Reporting + +Except for the remediation efforts described above, there has been no change in the Company’s internal control over financial reporting during the three months ended June 30, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional improvements as necessary. + +32 +--- + +**PART II - OTHER INFORMATION** + +**ITEM 1\. LEGAL PROCEEDINGS** + +There are no material pending legal proceedings, to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. + +**ITEM 1A. RISK FACTORS** + +As a smaller reporting company, we are not required to provide the information required by this item. + +**ITEM 2\. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS** + +None. + +**ITEM 3\. DEFAULTS UPON SENIOR SECURITIES** + +Not Applicable. + +**ITEM 4\. MINE SAFETY DISCLOSURES** + +Not Applicable. + +**ITEM 5\. OTHER INFORMATION** + +During the quarter ended June 30, 2025, none of our directors or executive officers adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each item is defined Item 408(a) of Regulation S-K). + +**Item 6\. Exhibits** + +The following exhibits are filed or furnished with this report: + +**Exhibit No.** | | **Description of Exhibit** +---|---|--- +10.1 | | [Securities Purchase Agreement dated June 20, 2025 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on June 25, 2025)]() +10.2 | | [Registration Rights Agreement dated June 20, 2025 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on June 25, 2025)]() +10.3 | | [Form of Pre-Funded Warrant (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on June 25, 2025)]() +31.1 | | [Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*]() +31.2 | | [Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*]() +32.1 | | [Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**]() +32.2 | | [Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**]() +101.INS | | Inline XBRL Document Set for the financial statements and accompanying notes in Part I, Item 1, of this Quarterly Report on Form 10-Q. +104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) + +* Filed herewith. + +**Furnished herewith. + +33 +--- + +**SIGNATURES** + +Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. + +| **SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** +---|--- +| | +August 12, 2025 | By: | _/s/ Christopher Cooper_ +| | Christopher Cooper +| | Interim Chief Executive Officer +| | (Principal Executive Officer) +| | +August 12, 2025 | By: | _/s/ Timothy J. Lorber_ +| | Timothy J. Lorber +| | Chief Financial Officer +| | (Principal Financial and Accounting Officer) + +34 +--- diff --git a/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2025-09-30 (0001493152-25-022162).md b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2025-09-30 (0001493152-25-022162).md new file mode 100644 index 0000000000000000000000000000000000000000..0153cdba6204433bbd7b012f518f6d716d13742c --- /dev/null +++ b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 10-Q. For the Fiscal Quarter Ended 2025-09-30 (0001493152-25-022162).md @@ -0,0 +1,1313 @@ +**UNITED STATES** + +**SECURITIES AND EXCHANGE COMMISSION** + +**Washington, D.C. 20549** + +**FORM 10-Q** + +(Mark One) + +☒ | Quarterly Report PURSUANT TO Section 13 or 15(d) of the Securities Exchange Act of 1934 +---|--- + +For the quarterly period ended September 30, 2025 + +OR + +☐ | Transition Report PURSUANT TO Section 13 or 15(d) of the Securities Exchange Act of 1934 +---|--- + +For the transition period from ______________ to ______________ + +Commission File Number 001-41488 + +**SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** + +(Exact name of registrant as specified in its charter) + +**Delaware** | | **82-5089826** +---|---|--- +(State or other jurisdiction of | | (I.R.S. Employer +incorporation or organization) | | Identification Number) + +**401 Professional Drive , Suite 260** + +**Gaithersburg , MD 20879** + +(Address of principal executive offices) (Zip Code) + +**(240) 403-4212** + +(Registrant’s telephone number, including area code) + +N/A + +(Former name, former address and former fiscal year, if changed since last report) + +Securities registered pursuant to Section 12(b) of the Act: + +**Title of each class** | | **Trading Symbol(s)** | | **Name of each exchange on which registered** +---|---|---|---|--- +Common Stock, par value $0.00001 per share | | SHPH | | The Nasdaq Stock Market LLC + +Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ + +Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ + +Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. + +| Large accelerated filer | ☐ | Accelerated filer | ☐ +---|---|---|---|--- +| Non-accelerated filer | ☒ | Smaller reporting company | ☒ +| | | Emerging growth company | ☒ + +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ + +Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ + +The number of shares outstanding of the registrant’s common stock on November 11, 2025 was 1,603,285. + +--- + +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**TABLE OF CONTENTS** + +| | Page +---|---|--- +| Part I. Financial Information | +Item 1. | Unaudited Condensed Consolidated Financial Statements | +| Unaudited Condensed Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 | 3 +| Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2025 and 2024 | 4 +| Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2025 and 2024 | 5 +| Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 | 6 +| Notes to Unaudited Condensed Consolidated Financial Statements | 7 +| | +Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26 +Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 34 +Item 4. | Controls and Procedures | 34 +| | +| Part II. Other Information | +Item 1. | Legal Proceedings | 35 +Item 1A. | Risk Factors | 35 +Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 35 +Item 3. | Defaults Upon Senior Securities | 35 +Item 4. | Mine Safety Disclosures | 35 +Item 5. | Other Information | 35 +Item 6. | Exhibits | 35 +Signatures | 36 + +2 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Balance Sheets** + +**(Unaudited)** + +**** + +| | September 30,| | | December 31,| +---|---|---|---|---|---|--- +| | 2025| | | 2024| +Assets| | | | | | | | +Current assets| | | | | | | | +Cash and cash equivalents| | $| 2,094,643| | | $| 1,920,144| +Prepaid expenses and other current assets| | | 1,171,270| | | | 290,773| +Total current assets| | | 3,265,913| | | | 2,210,917| +| | | | | | | | +Property and equipment, net| | | 18,327| | | | 19,364| +Deferred financing costs| | | 30,305| | | | —| +Operating lease right-of-use asset| | | 228,382| | | | 276,009| +Total Assets| | | 3,542,927| | | | 2,506,290| +| | | | | | | | +Liabilities and Stockholders’ Equity| | | | | | | | +Current liabilities| | | | | | | | +Accounts payable and accrued expenses| | $| 1,472,897| | | $| 596,600| +Accrued interest payable - related parties| | | —| | | | 1,785| +Notes payable to related parties| | | —| | | | 190,270| +Convertible notes payable, net - fair value option, related parties| | | 139,217| | | | 206,085| +Convertible notes payable, net - fair value option| | | 278,299| | | | 478,120| +Operating lease liability| | | 74,497| | | | 60,909| +Total current liabilities| | | 1,964,910| | | | 1,533,769| +| | | | | | | | +Derivative liability| | | 8,538| | | | 25,281| +Operating lease liability non-current| | | 175,318| | | | 238,088| +Total Liabilities| | | 2,148,766| | | | 1,797,138| +| | | | | | | | +Commitments and contingencies (Note 8)| | | -| | | | | +| | | | | | | | +Stockholders’ Equity| | | | | | | | +Series A Convertible Preferred Stock, $0.00001 par value; $1,000 per share liquidation value; 800,000 shares authorized; no shares outstanding| | | —| | | | —| +Common stock, $0.00001 par value; 100,000,000 shares authorized; 1,235,507 shares issued and outstanding at September 30, 2025; 163,093 shares issued and outstanding at December 31, 2024| | | 13| | | | 2| +Additional paid in capital| | | 45,079,023| | | | 35,287,251| +Accumulated deficit| | | (43,684,875| )| | | (34,578,101| ) +Total Stockholders’ Equity| | | 1,394,161| | | | 709,152| +Total Liabilities and Stockholders’ Equity| | $| 3,542,927| | | $| 2,506,290| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +3 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Operations** + +**(Unaudited)** + +**** + +| | 2025| | | 2024| | | 2025| | | 2024| +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Three Months Ended| | | Nine Months Ended| +| | September 30,| | | September 30,| +| | 2025| | | 2024| | | 2025| | | 2024| +| | | | | | | | | | | | +Revenue| | $| —| | | $| —| | | $| —| | | $| —| +| | | | | | | | | | | | | | | | +Operating expenses| | | | | | | | | | | | | | | | +Research and development| | | 943,478| | | | 1,400,564| | | | 3,542,953| | | | 2,632,387| +General and administrative| | | 886,055| | | | 328,995| | | | 3,829,264| | | | 963,642| +Legal and professional| | | 437,409| | | | 1,322,002| | | | 1,756,372| | | | 2,323,013| +Total operating expenses| | | 2,266,942| | | | 3,051,561| | | | 9,128,589| | | | 5,919,042| +| | | | | | | | | | | | | | | | +Net loss from operations| | | (2,266,942| )| | | (3,051,561| )| | | (9,128,589| )| | | (5,919,042| ) +| | | | | | | | | | | | | | | | +Other (Expense) income| | | | | | | | | | | | | | | | +Interest expense - related parties| | | (721| )| | | (2,137| )| | | (8,730| )| | | (2,137| ) +Interest expense| | | (18,183| )| | | (270,538| )| | | (43,847| )| | | (1,198,738| ) +Interest income| | | 486| | | | 2,524| | | | 567| | | | 38,135| +Change in fair value of derivative liabilities| | | 2,427| | | | 286,316| | | | 16,743| | | | 340,405| +Change in fair value of convertible notes| | | (64,369| )| | | —| | | | 57,082| | | | —| +Gain on sale of marketable securities| | | —| | | | 56,398| | | | —| | | | 100,118| +Change in fair value of marketable securities| | | —| | | | (42,898| )| | | —| | | | (71,568| ) +Loss on settlement of convertible debt| | | —| | | | (762,186| )| | | —| | | | (833,501| ) +Total other (expense) income| | | (80,360| )| | | (732,521| )| | | 21,815| | | | (1,627,286| ) +| | | | | | | | | | | | | | | | +Net loss| | | (2,347,302| )| | | (3,784,082| )| | | (9,106,774| )| | | (7,546,328| ) +| | | | | | | | | | | | | | | | +Weighted average common shares outstanding - basic and diluted| | | 2,233,650| | | | 95,004| | | | 1,260,606| | | | 87,439| +Net loss per shares - basic and diluted| | $| (1.05| )| | $| (39.83| )| | $| (7.22| )| | $| (86.30| ) + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +4 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Changes in Stockholders’ Equity** + +**(Unaudited)** + +**_For the Nine Months September 30, 2025_** + +**__** + +| | | | | | | | Additional| | | | | | Total| +---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Common Stock| | | Paid-In| | | Accumulated| | | Stockholders’| +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity| +Balance at December 31, 2024| | | 163,093| | | $| 2| | | $| 35,287,251| | | $| (34,578,101| )| | $| 709,152| +Common stock issued for restricted stock units| | | 33,609| | | | —| | | | —| | | | —| | | | —| +Issuance of common stock and pre-funded warrants, net of issuance costs of $693,600| | | 53,637| | | | 1| | | | 5,038,573| | | | —| | | | 5,038,574| +Partial conversion of convertible note at fair value| | | 5,000| | | | —| | | | 53,500| | | | —| | | | 53,500| +Stock-based compensation| | | —| | | | —| | | | 537,046| | | | —| | | | 537,046| +Net loss| | | —| | | | —| | | | —| | | | (3,053,007| )| | | (3,053,007| ) +Balance at March 31, 2025| | | 255,339| | | | 3| | | | 40,916,370| | | | (37,631,108| )| | | 3,285,265| +Common stock issued for restricted stock units| | | 404| | | | —| | | | —| | | | —| | | | —| +Issuance of common stock and pre-funded warrants, net of issuance costs of $357,987| | | 21,924| | | | —| | | | 3,891,964| | | | —| | | | 3,891,964| +Issuance of common stock and pre-funded warrants, net of issuance costs| | | 21,924| | | | —| | | | 3,891,964| | | | —| | | | 3,891,964| +Partial conversion of convertible note at fair value| | | 7,000| | | | —| | | | 68,250| | | | —| | | | 68,250| +Exercise of pre-funded warrants| | | 786,070| | | | 8| | | | 19,644| | | | —| | | | 19,652| +Common stock issued for reverse stock split fractional share round up| | | 36| | | | —| | | | —| | | | —| | | | —| +Stock-based compensation| | | —| | | | —| | | | 46,853| | | | —| | | | 46,853| +Net loss| | | —| | | | —| | | | —| | | | (3,706,465| )| | | (3,706,465| ) +Balance at June 30, 2025| | | 1,070,773| | | | 11| | | | 44,943,081| | | | (41,337,573| )| | | 3,605,519| +Common stock issued for restricted stock units| | | 14,734| | | | —| | | | —| | | | —| | | | —| +Exercise of pre-funded warrants| | | 150,000| | | | 2| | | | 148| | | | —| | | | 150| +Reversal of accrued issuance costs related to June 2025 Offering| | | —| | | | —| | | | 1,476| | | | —| | | | 1,476| +Stock-based compensation| | | —| | | | —| | | | 134,318| | | | —| | | | 134,318| +Net loss| | | —| | | | —| | | | —| | | | (2,347,302| )| | | (2,347,302| ) +Balance at September 30, 2025| | | 1,235,507| | | $| 13| | | $| 45,079,023| | | $| (43,684,875| )| | $| 1,394,161| + +**__** + +**_For the Nine Months September 30, 2024_** + +**__** + +| | | | | | | | Additional| | | | | | Total| +---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Common Stock| | | Paid-In| | | Accumulated| | | Stockholders’| +| | Shares| | | Amount| | | Capital| | | Deficit| | | Equity| +Balance at December 31, 2023| | | 80,348| | | $| 1| | | | 29,489,074| | | | (25,433,304| )| | | 4,055,771| +Common stock issued for conversion of accrued interest and principal| | | 3,128| | | | —| | | | 325,298| | | | —| | | | 325,298| +Common stock issued for restricted stock units| | | 625| | | | —| | | | —| | | | —| | | | —| +Stock-based compensation| | | —| | | | —| | | | 111,449| | | | —| | | | 111,449| +Net loss| | | —| | | | —| | | | —| | | | (1,731,031| )| | | (1,731,031| ) +Balance at March 31, 2024| | | 84,101| | | | 1| | | | 29,925,821| | | | (27,164,335| )| | | 2,761,487| +Common stock issued for restricted stock units| | | 149| | | | —| | | | —| | | | —| | | | —| +Stock-based compensation| | | —| | | | —| | | | 71,162| | | | —| | | | 71,162| +Net loss| | | —| | | | —| | | | —| | | | (2,031,215| )| | | (2,031,215| ) +Balance at June 30, 2024| | | 84,250| | | | 1| | | | 29,996,983| | | | (29,195,550| )| | | 801,434| +Balance| | | 84,250| | | | 1| | | | 29,996,983| | | | (29,195,550| )| | | 801,434| +Common stock issued for conversion of convertible debt accrued interest and principal| | | 28,766| | | | —| | | | 1,621,996| | | | —| | | | 1,621,996| +Common stock issued for restricted stock units| | | 201| | | | —| | | | —| | | | —| | | | —| +Common stock issued for reverse stock split fractional share round up| | | 4,629| | | | —| | | | —| | | | —| | | | —| +Stock-based compensation| | | —| | | | —| | | | 45,275| | | | —| | | | 45,275| +Net loss| | | —| | | | —| | | | —| | | | (3,784,082| )| | | (3,784,082| ) +Balance at September 30, 2024| | | 117,846| | | $| 1| | | $| 31,664,254| | | $| (32,979,632| )| | $| (1,315,377| ) +Balance| | | 117,846| | | $| 1| | | $| 31,664,254| | | $| (32,979,632| )| | $| (1,315,377| ) + +__ + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +5 +--- + +**Shuttle Pharmaceuticals Holdings, Inc.** + +**Condensed Consolidated Statements of Cash Flows** + +**(Unaudited)** + +| | 2025| | | 2024| +---|---|---|---|---|---|--- +| | Nine Months Ended| +| | September 30,| +| | 2025| | | 2024| +CASH FLOWS FROM OPERATING ACTIVITIES:| | | | | | | | +Net loss| | $| (9,106,774| )| | $| (7,546,328| ) +Adjustments to reconcile net loss to net cash used in operating activities:| | | | | | | | +Depreciation| | | 1,037| | | | 3,667| +Change in fair value of derivative liabilities| | | (16,743| )| | | (340,405| ) +Amortization of debt discount and finance fees| | | 48,109| | | | 1,079,444| +Gain on marketable securities| | | —| | | | (100,118| ) +Change in fair value of marketable securities| | | —| | | | 71,568| +Accrued interest settled with common stock| | | —| | | | 54,670| +Loss on settlement of convertible debt| | | —| | | | 833,501| +Stock-based compensation| | | 718,217| | | | 227,886| +Interest payments on convertible notes accounted for at fair value| | | (87,857| )| | | —| +Change in fair value of convertible notes| | | (57,082| )| | | —| +Changes in operating assets and liabilities:| | | | | | | | +Accrued interest income| | | —| | | | 14,897| +Prepaid expenses and other current assets| | | (880,497| )| | | 11,433| +Accounts payable and accrued expenses| | | 876,297| | | | 1,065,584| +Accounts payable and accrued expenses - related parties| | | —| | | | (446| ) +Accrued interest payable| | | —| | | | (15,056| ) +Accrued interest payable - related parties| | | (1,785| )| | | 2,137| +Change in operating lease asset and liabilities| | | (1,555| )| | | 498| +Net cash used in operating activities| | | (8,508,633| )| | | (4,637,068| ) +| | | | | | | | +CASH FLOWS FROM INVESTING ACTIVITIES:| | | | | | | | +Investment in marketable securities| | | —| | | | (43,587| ) +Proceeds from disposition of marketable securities| | | —| | | | 2,959,352| +Net cash provided by investing activities| | | —| | | | 2,915,765| +| | | | | | | | +CASH FLOWS FROM FINANCING ACTIVITIES:| | | | | | | | +Repayment of note payable-related party| | | (190,270| )| | | 250,000| +Proceeds from issuance of common stock and pre-funded warrants, net of placement agent costs of $322,501| | | 5,409,673| | | | —| +Proceeds from issuance of common stock and pre-funded warrants, net of placement agent costs of $170,000| | | 4,080,000| | | | —| +Payment of other issuance costs for issuance of common stock and equity-classified warrants| | | (557,659| )| | | —| +Proceeds from exercise of pre-funded warrants| | | 19,802| | | | —| +Payment for finance costs| | | (78,414| )| | | (101,651| ) +Payment of convertible note payable| | | —| | | | (846,806| ) +Net cash provided by (used in) financing activities| | | 8,683,132| | | | (698,457| ) +| | | | | | | | +Net change in cash and cash equivalents| | | 174,499| | | | (2,419,760| ) +Cash and cash equivalents, beginning of period| | | 1,920,144| | | | 2,576,416| +Cash and cash equivalents, end of period| | $| 2,094,643| | | $| 156,656| +| | | | | | | | +Cash paid for:| | | | | | | | +Interest| | $| 175,002| | | $| 79,682| +Income taxes| | $| —| | | $| —| +| | | | | | | | +Supplemental non-cash financing activities:| | | | | | | | +Conversion of convertible notes accounted for at fair value| | $| 121,750| | | $| —| +Common stock issued for settlement of debt| | $| —| | | $| 1,947,294| + +_The accompanying notes are an integral part of these unaudited condensed consolidated financial statements._ + +6 +--- + +**Note 1 – Organization and Liquidity** + +**** + +**_Organization and Line of Business_** + +**** + +Shuttle Pharmaceuticals Holdings, Inc. (“we,” “us,” “our,” or the “Company”) was originally formed as Shuttle Pharmaceuticals, LLC in the State of Maryland on December 18, 2012. On August 12, 2016, the Company filed articles of conversion with the State of Maryland to convert from an LLC to a C corporation, at which time the Company changed its name to Shuttle Pharmaceuticals, Inc. (“Shuttle”). In connection with the conversion, the Company issued 225,000 shares of common stock in exchange for 100% of the outstanding membership interests in Shuttle prior to conversion. On June 4, 2018, Shuttle completed a reverse merger with Shuttle Pharmaceuticals Holdings, Inc. (then known as Shuttle Pharma Acquisition Corp, Inc.), a Delaware corporation, pursuant to which Shuttle, our operating entity, became a wholly-owned subsidiary of the Company. Shuttle Diagnostics, Inc, a subsidiary of the Company, was formed in the State of Maryland on November 14, 2023. + +The Company’s primary purpose is to develop and commercialize unique drugs for the sensitization of cancers and protection of normal tissues, with the goal of improving outcomes for cancer patients receiving radiation therapy. Shuttle has deployed its proprietary technology to develop novel cancer immunotherapies, producing a pipeline of selective HDAC inhibitors for cancer and immunotherapy applications. The Company’s HDAC platform is designed to target candidate molecules with potential roles in therapeutics beyond cancer, including autoimmune, inflammatory, metabolic, neurological and infectious diseases. The Company’s Ropidoxuridine product, which is used with radiation therapy to sensitize cancer cells, was initially funded by a Small Business Innovation Research (“SBIR”) contract provided by the National Cancer Institute (“NCI”), a unit of the National Institutes of Health (“NIH”). Ropidoxuridine has been further developed through the Company’s collaborations with scientists at the University of Virginia for use in combination with proton therapy to improve patient survival. Historically, and prior to the Company’s initial public offering in September 2022, the Company had obtained funding to develop products through NIH grants, including a product to predict late effects of radiation with metabolite biomarkers and develop prostate cancer cell lines in health disparities research. + +The production and marketing of the Company’s products and its ongoing research and development activities will be and are subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any products or combination of products developed by the Company must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the Food and Drug Administration (“FDA”) under the Food, Drug and Cosmetic Act. There can be no assurance that the Company will not encounter problems in its clinical trials that will cause the Company or the FDA to delay or suspend the clinical trials. + +The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and in other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company now or in the future. + +**** + +On October 20, 2025, the Company entered into a binding term sheet with 1542770 BC Ltd. (“Molecule”). The term sheet sets forth the material business terms of a transaction under which the Company or its affiliate will purchase from Molecule substantially all of Molecule’s assets and liabilities for a purchase price of $10,000,000 payable in a combination of cash and shares of common stock of the Company (which combination of cash and common stock is subject to the Company’s sole determination) over time and subject to the achievement of certain milestones. The parties agreed that they will enter into one or more written agreements embodying the terms of the term sheet and effectuating the transactions contemplated thereby, that will address in further detail the matters covered by the term sheet, together with additional customary terms and conditions regarding the transaction. Completion of the transaction will be subject to, among other customary conditions, negotiation and execution of such definitive agreements, approval of the Company’s board of directors, and completion of due diligence by both parties. + +**** + +**_Liquidity and Going Concern_** + +**** + +Our unaudited condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception and has a net loss of approximately $9.1 million and no revenues for the nine months ended September 30, 2025 and working capital of approximately $1.3 million as of September 30, 2025. The Company does not expect to generate positive cash flows from operating activities in the near future. + +In February 2025, the Company issued a revolving note in the principal amount of up to $2,000,000, which the Company may draw upon at its discretion from time to time. As of September 30, 2025, the Company has not drawn on the revolving note and no balances are outstanding. In March 2025, the Company completed an equity raise that provided $5.0 million net cash proceeds for the issuance of 53,637 shares and 713,030 pre-funded warrants. In June 2025, the Company completed a private placement equity raise that provided $3.9 million net cash proceeds for the issuance of 21,924 shares and 1,158,953 pre-funded warrants. However, the Company’s existing cash resources, the cash received from the equity offering, and financing available under the revolving note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months. + +7 +--- + +On November 3, 2025, the Company entered into a securities purchase agreement with the purchaser, pursuant to which the Company agreed to issue and sell to the purchaser in a private placement transaction (the “November 2025 Offering”) a pre-funded warrant to purchase up to 625,156 shares of common stock of the Company, par value $0.00001 per share for aggregate gross proceeds of approximately $2.5 million, before deducting placement agent fees to WestPark Capital, Inc. and offering expenses payable by the Company. The November 2025 Offering closed on November 4, 2025. + +The ability of the Company to continue as a going concern is dependent upon its ability to continue to successfully raise additional equity or debt financing to allow it to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued. + +The accompanying unaudited condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company is unable to continue as a going concern. + +**__** + +**Note 2 – Summary of Significant Accounting Policies** + +**** + +**_Basis of Presentation_** + +The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and notes required by GAAP for annual financial statements. A complete discussion of the Company’s significant accounting policies is included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. + +In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all of the adjustments necessary to present the financial position of the Company as of September 30, 2025 and the results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements of the Company have not been audited by the Company’s independent registered public accounting firm, except that the year-end consolidated balance sheet was derived from audited financial statements. The results of operations for the nine months ended September 30, 2025 are not necessarily indicative of the operating results for the full fiscal year or any future period. + +**_Reverse Stock Split_** + +On August 13, 2024, in order to meet Nasdaq’s minimum bid price requirement of $1.00 per share (the “Minimum Bid Price Requirement”), the Company effectuated a 1-for-8 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares (the “August 2024 Reverse Stock Split”). Subsequently, on June 16, 2025, in order to meet the Minimum Bid Price Requirement again, the Company effectuated a 1-for-25 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares ( the “June 2025 Reverse Stock Split”, and collectively with the August 2024 Reverse Stock Split, the “Reverse Stock Splits”). + +The Reverse Stock Splits had no effect on the Company’s authorized shares of common stock or preferred stock and the par value remained unchanged at $0.00001. All common stock share, option, warrant and per share amounts (except our authorized but unissued shares and previously reserved shares) have been retroactively adjusted in these unaudited condensed consolidated financial statements and related disclosures. + +**_Basis of Consolidation_** + +The unaudited condensed consolidated financial statements have been prepared on a consolidated basis with those of the Company’s wholly-owned subsidiaries, Shuttle Pharmaceuticals, Inc. and Shuttle Diagnostics, Inc. All intercompany transactions and balances have been eliminated. + +**__** + +**__** + +8 +--- + +**__** + +**_Use of Estimates_** + +**__** + +The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates are contained in the accompanying unaudited condensed consolidated financial statements for the valuation of debt and warrants and valuation of bifurcated derivative liabilities and other financial instruments. + +**_Cash and Cash Equivalents_** + +Cash and cash equivalents include cash in bank accounts and money market funds with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. As of September 30, 2025 and December 31, 2024, cash and cash equivalents consisted of the following: + +Schedule of Cash and Cash Equivalents + +| | September 30,| | | December 31,| +---|---|---|---|---|---|--- +| | 2025| | | 2024| +Cash| | $| 2,019,106| | | $| 1,918,941| +Money market funds| | | 75,537| | | | 1,203| +Total cash and cash equivalents| | $| 2,094,643| | | $| 1,920,144| + +Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of September 30, 2025 was approximately $1.8 million. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. + +**_Fair Value of Financial Instruments_** + +The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments: + +| ●| Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments. +---|---|--- +| | +| ●| Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace. +| | +| ●| Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation. + +Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires the Company to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded, may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange. + +9 +--- + +The carrying amounts of the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments. + +Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of September 30, 2025 and December 31, 2024: + +Schedule of Fair Value Liabilities Measured on Recurring Basis + +September 30, 2025| | Level 1| | | Level 2| | | Level 3| | | Carrying +Value| +---|---|---|---|---|---|---|---|---|---|---|---|--- +Liabilities| | | | | | | | | | | | | | | | +Derivative Liability - Warrants| | $| —| | | $| —| | | $| 8,538| | | $| 8,538| +Convertible Notes Payable| | | —| | | | —| | | | 417,516| | | | 417,516| +Total Liabilities| | $| —| | | $| —| | | $| 426,054| | | $| 426,054| + +December 31, 2024| | Level 1| | | Level 2| | | Level 3| | | Carrying +Value| +---|---|---|---|---|---|---|---|---|---|---|---|--- +Liabilities| | | | | | | | | | | | | | | | +Derivative Liability - Warrants| | $| —| | | $| —| | | $| 25,281| | | $| 25,281| +Convertible Notes Payable| | | —| | | | —| | | | 684,205| | | | 684,205| +Total Liabilities| | $| —| | | $| —| | | $| 709,486| | | $| 709,486| + +See Note 5 and Note 7 for additional disclosures related to the fair value of the Company’s convertible notes and derivative liabilities, respectively. + +**_Derivative Financial Instruments_** + +The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. + +For its derivative financial instruments, the Company utilizes the most appropriate valuation model (such as Monte Carlo simulations or other sophisticated models, based on the nature of the terms of the instrument) to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the unaudited condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date. + +**_Convertible Notes Payable_** + +The Company accounts for its Convertible Bridge Notes (as defined in Note 5) under the fair value option in accordance with ASC 825. The fair value option may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. Additional term or other notes may be issued in subsequent periods where the Company would be able to make a fair value option election upon issuance provided eligibility criteria are met. The Company records the portion of the Convertible Bridge Notes that are issued and outstanding for accounting purposes at fair value with changes in fair value recorded in other income (expense), net in the unaudited condensed consolidated statements of operations, except for the portion of the total change in fair value that results from a change in the instrument-specific credit risk of the Convertible Bridge Notes, which is recorded in other comprehensive income (loss), if applicable. No loss was attributed to changes in credit risk for the periods presented therefore net loss was equal to comprehensive loss. The fair value option election was made to align the accounting for the Convertible Bridge Notes with the Company’s financial reporting objectives and reduce operational effort to account for embedded features that otherwise would require bifurcation as a separate unit of account. + +10 +--- + +Pursuant to the fair value option election, direct and incremental debt issuance costs and consideration paid to the lender related to the Convertible Bridge Notes were expensed as incurred and recorded in other income (expense), net in the unaudited condensed consolidated statements of operations. + +For convertible notes for which the fair value option is not elected, the Company evaluates the convertible notes for embedded features and bifurcates these features (such as conversion options and redemption options) from their host instruments and accounts for them as free standing derivative financial instruments if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. All of the Company’s Convertible Bridge Notes as of September 30, 2025 had elected the fair value option at the initial transaction date. + +**_Warrants_** + +The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, _Distinguishing Liabilities from Equity_(“ASC 480”) and ASC 815, _Derivatives and Hedging_ (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. Finally, the Company determines if the warrants meet the definition of a derivative based on their contractual terms. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. + +For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and at each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed consolidated statements of operations. The Company also evaluates if changes in contractual terms or other considerations would result in the reclassification of outstanding warrants from liabilities to stockholders’ equity (or vice versa). + +**_Stock-Based Compensation_** + +Compensation cost for stock awards, which include restricted stock units (“RSUs”), is measured at the fair value on the grant date and recognized as expense, over the related service period. The fair value of stock awards is based on the quoted price of our common stock on the grant date. Compensation expense related to the RSUs is reduced by the fair value of the units that are forfeited by employees that leave the Company prior to vesting as they occur. Compensation cost for RSUs is recognized using the straight-line method over the requisite service period. + +11 +--- + +**_Research and Development Expenses_** + +Research and development expenses are charged to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, which may include portions of the Company’s executives to the extent they are active involved in the research and development activities, materials, supplies, related subcontract expenses, and consulting costs. Our research and development costs include activities conducted by third-party service providers, which we record based on the estimated amount of work completed and in accordance with agreements established with these third parties. The estimated accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from the clinical research organization and other third-party service providers. As such, actual expenses may vary from our accrued expense amounts. To date, there have been no material differences from our accrued expenses to actual expenses. + +Regarding the accounting treatment for reimbursements, GAAP provides limited guidance on the accounting for government grants received by for-profit companies. In accordance with ASC Topic 832, _Government Assistance_ , as adopted January 1, 2022, the Company discloses certain types of government assistance received in the notes to the unaudited condensed consolidated financial statements that includes: a) the nature of the transaction including the nature of the assistance being given, b) the accounting policies being used to account for the transaction and c) other provisions of relevance, where required. Depending on the type of grant or contract, the Company understands there is more than one acceptable alternative for the accounting treatment – a reduction of costs, a deferred credit to be amortized, revenue or other income. The Company has concluded that reimbursements received for R&D expenses incurred are more akin to a reduction of costs and applies reimbursements against incurred research costs. + +For the three months ended September 30, 2025 and 2024, the Company recorded $0.9 million and $1.4 million, respectively, in research and development expenses. For the nine months ended September 30, 2025 and 2024, the Company recorded and $3.5 million and $2.6 million, respectively, in research and development expenses. + +**__** + +**_Segment Information_** + +Operating segments are defined as components of an enterprise about which separate and discrete information is available for evaluation by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance. The Company’s CODM, its chief executive officer, evaluates the Company’s operations and manages its business as a single operating segment. All of the Company’s long-lived assets are held in the United States. Refer to Note 9 for the Company’s disclosure on its 1 single operating segment. + +**_Net Loss Per Common Stock_** + +Net loss per share of common stock requires presentation of basic and diluted earnings per common share on the face of the unaudited condensed consolidated statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation to diluted earnings per share. + +In the accompanying unaudited condensed consolidated financial statements, basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Certain warrants issued and outstanding include terms and conditions resulting in the treatment as participating securities. Such warrants do not include an obligation for the warrant holders to fund the losses of the Company. Therefore, these warrants are excluded from the calculation of earnings per common share in periods of net loss. + +Diluted earnings per share is computed by dividing net income attributable to common stockholders by the weighted average number of shares of common stock outstanding and potentially dilutive shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through convertible securities, contingent share arrangements, stock options and warrants unless the result would be antidilutive. + +The dilutive effect of restricted stock units and other stock-based payment awards subject to vesting and common stock warrants is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting shares of common stock are included in the denominator of the diluted calculation for the entire period being presented. + +12 +--- + +Given the nominal exercise price of the Company’s issuance of Pre-Funded Warrants (as defined in Note 6), such Pre-Funded Warrants are included in the calculation of basic and diluted net loss per share as the exercise price per warrant is deemed nonsubstantive when compared to the fair value of the underlying common shares. The 1,008,953 unexercised pre-funded warrants as of September 30, 2025 were included in the Company’s calculation of basic and diluted loss per share. + +For the nine months ended September 30, 2025 and 2024, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive. + +Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share + +| | September 30,| | | September 30,| +---|---|---|---|---|---|--- +| | 2025| | | 2024| +Convertible notes (Note 5)| | | 117,612| | | | —| +Warrants (Note 6)| | | 136,892| | | | 7,367| +Restricted stock units (Note 6)| | | 166,822| | | | 1,654| +Anti-dilutive securities| | | 421,326| | | | 9,021| + +**__** + +**_Recently Issued Accounting Pronouncements_** + +**__** + +In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The guidance is effective for the Company’s fiscal years beginning after December 15, 2024. The Company will reflect any impact of adoption in its SEC Form 10-K for the annual period ending December 31, 2025 and does not expect any material impact on its consolidated financial statements. + +On November 4, 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses (“DISE”),” which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the notes to the financial statements. ASU 2024-03 is effective for all public business entities for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the potential impact that this standard may have on its condensed consolidated financial statements and related disclosures. + +There have been no other recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance that are of significance or potential significance to the Company. + +**Note 3 - Leases** + +Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the present value of the future lease payments as of the lease commencement date. Operating lease expense is recognized on a straight-line basis over the lease term. + +The Company currently has a lease agreement which allows for the use of a laboratory facility, entered into on February 16, 2023, with base rent of $7,206 per month for a period of 64 months, which increases at the rate of 3% per year, that commenced June 1, 2023. The lease included a six-month 50% rent abatement upon commencement. Additional common area maintenance (“CAM”) fees are charged monthly and revised annually. In addition to monthly base rent, the Company pays monthly CAM fees, which are being expensed as incurred. An irrevocable letter of credit (“LOC”) for the security deposit of $43,234 and base rent of $3,891, including 50% abatement, and $3,315 of CAM cost, was due and paid on execution of the lease agreement. Alexandria Real Estate (ARE-QRS-CORP) is the beneficiary of the LOC. The current LOC expires on March 1, 2026. + +13 +--- + +The following summarizes the right-of use asset and lease information for the Company’s operating leases: + +Schedule of Right-of Use Asset and Lease Information about Operating Lease + +| | 2025| | | 2024| | | 2025| | | 2024| +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Three Months Ended| | | Nine Months Ended| +| | September 30,| | | September 30,| +| | 2025| | | 2024| | | 2025| | | 2024| +Operating lease cost| | $| 22,947| | | $| 22,947| | | $| 68,841| | | $| 68,841| +Variable lease cost| | | 10,878| | | | 10,440| | | | 30,808| | | | 30,817| +Sublease income| | | —| | | | (2,163| )| | | —| | | | (6,489| ) +Total lease cost| | $| 33,825| | | $| 31,224| | | $| 99,649| | | $| 93,169| +| | | | | | | | | | | | | | | | +Other information:| | | | | | | | | | | | | | | | +Cash paid for operating cash flows for operating leases| | $| 23,851| | | $| 23,156| | | | 70,395| | | | 68,345| + +| | September 30,| | | December 31,| +---|---|---|---|---|---|--- +| | 2025| | | 2024| +Weighted-average remaining lease term - operating leases (year)| | | 2.92| | | | 4.18| +Weighted-average discount rate - operating leases| | | 10.48| %| | | 10.48| % + +Future non-cancelable minimum lease payments under the operating lease liability as of September 30, 2025, are as follows: + +Schedule of Future Non-cancelable Minimum Lease Payments Under Operating Lease Liability + +Years ended December 31,| | | +---|---|---|--- +2025 (excluding the nine months ended September 30, 2025)| | $| 23,851| +2026| | | 97,074| +2027| | | 99,986| +2028| | | 68,236| +2029 and thereafter| | | —| +Total future minimum lease payments| | | 289,147| +Less: imputed interest| | | (39,332| ) +Present value of payments| | $| 249,815| + +**Note 4 – Notes Payable-Related Party** + +On October 14, 2024, as part of the senior convertible note offering described in Note 5, the Company entered into a loan with an officer of the Company in the amount of $250,000 (principal) with an interest rate of 14.5% per annum due October 13, 2025, and warrants to purchase 4,016 shares of common stock at an exercise price of $35.00 per share. As of September 30, 2025, there was outstanding principal and interest balances for these related party notes of $250,000 and $7,854, respectively. Under the fair value option, the senior convertible note is $139,217 as of September 30, 2025. The convertible note converted to shares of the Company’s common stock in October 2025 (see Note 10). + +On September 4, 2024, the Company issued a $250,000 promissory note (the “Promissory Note”) to an officer of the Company for $250,000. The Promissory Note accrues interest at 12% per annum and is repayable in 12 substantially equal installments over a period of one year. During the three and nine months ended September 30, 2025 the Company incurred $721 and $8,730 in interest expense relating to this Promissory Note. For the three and nine months ended September 30, 2025, the Company repaid principal of $65,326 and $190,270, respectively. For the three and nine months ended September 30, 2025, the Company paid interest of $1,311 and $9,640, respectively. The principal balance of the Promissory Note as of September 30, 2025 and December 31, 2024 was $0 and $190,270, respectively. + +14 +--- + +**Note 5 - Convertible Notes and Loan Agreement** + +**_Revolving Note Agreement_** + +On February 27, 2025, the Company entered into a Revolving Loan Agreement with a lender. Pursuant to and under the terms of the Revolving Loan Agreement, the Company issued a revolving note dated February 28, 2025 in the principal amount of up to $2,000,000 (the “Revolving Note”), which the Company may draw upon at its discretion from time to time through its maturity on February 28, 2026. + +The Revolving Note bears interest at the rate of 18% per annum calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue interest daily commencing from the date of any draw down until paid in full on the maturity date. The Company recognized deferred loan costs of approximately $78,000 in relation to the closing of the Revolving Loan Agreement as an asset on the unaudited condensed consolidated balance sheet. These deferred loan costs are being amortized to interest expense on a straight-line basis to the maturity of the Revolving Loan Agreement. During the three and nine months ended September 30, 2025, the Company recognized $18,183 and $48,109 in interest expense related to the amortization of these deferred loan costs, respectively. + +The Revolving Loan Agreement contains customary events of default. If an event of default occurs, the lender may accelerate the repayment of amounts outstanding under the Revolving Loan Agreement, and an amount equal to 120% of the outstanding principal amount and accrued and unpaid interest plus other amounts, costs, expenses and/or liquidated damages. The default provision meets the criteria of a derivative liability that would have an associated fair value if any amounts are outstanding under the Agreement. + +As of September 30, 2025, the Company has not yet drawn on the Revolving Note and no balances are outstanding. + +**_2024 Convertible Bridge Notes_** + +During October 2024, the Company completed a senior convertible note offering in two closings, as further described below. + +On October 14, 2024, the Company issued an aggregate of $600,000 (of an up to $1.3 million authorized financing) senior secured convertible notes due in October 2025, which accrue interest at 14.5% interest per year. The notes include a 5% original issue discount and the Company received $570,000 in proceeds. The notes are optionally convertible by each holder at a 10% premium beginning three months after the date of issuance, and the conversion price would have been the 5-day volume-weighted average price (“VWAP”) immediately prior to Closing, unless re-set (one-time only) by a lower price of an offering entered into by the Company during the term of the notes. The conversion price was subsequently reset in March 2025 to $7.50 per share, as adjusted. The Company has the option to prepay the notes at any time for 107% of total outstanding balance and any outstanding principal will be paid in conversion of shares of common stock at a 15% discount at the end of the term, subject to the Company’s exercise of the optional prepayment right. Any accrued interest will be repaid quarterly in cash. The Company also issued warrants to the lenders to purchase an aggregate 9,639 shares of common stock, exercisable at $35.00 per share, with such warrants expiring five years from issuance. In addition, the Company’s former Chief Executive Officer and Chief Scientific Officer, Dr. Anatoly Dritschilo, invested a total of $237,500 in this financing round, in exchange for a $250,000 convertible note (see Note 4). + +As part of the same offering, on October 21, 2024, the Company issued an additional $231,579 in senior secured convertible notes due in October 2025, with substantially similar terms as the October 14, 2024, issuance. The notes include a 5% original issue discount and the Company received $220,000 in proceeds. The Company also issued warrants to the lenders to purchase an aggregate 3,543 shares of common stock, exercisable at $37.25 per share, with such warrants expiring five years from issuance. Upon completing this issuance, the Company closed the senior secured convertible note offering after receiving a total of $790,000 in proceeds. + +After analyzing the terms of the senior convertible notes (“Convertible Bridge Notes”) and its embedded features, the Company elected to account for the Convertible Bridge Notes at fair value under the allowable fair value option election. As such, the Company initially recognized the Convertible Bridge Notes at their fair value and subsequently measures the notes at fair value with changes in fair value recorded in current period earnings (or other comprehensive income, if specific to Company credit risk). The Company initially recorded the Convertible Bridge Notes at their estimated issuance date fair value of $806,758. As the fair value of the Convertible Bridge Notes exceeded the proceeds received, the Company recorded a loss on issuance of convertible notes of $16,758. The proceeds were allocated in full to the Convertible Bridge Notes recorded at fair value. The warrants issued in connection with the Convertible Bridge Notes were deemed to be equity instruments. In addition, the Company allocated the issuance costs incurred to these instruments to the Convertible Bridge Notes and, as such, expensed $107,491 in issuance costs, including $41,579 of original issue discount on the Convertible Bridge Notes. + +15 +--- + +As of December 31, 2024, the Company used a Monte Carlo simulation model to calculate the fair value of the Convertible Bridge Notes. The Convertible Bridge Notes were classified within Level 3 of the fair value hierarchy at the initial measurement date, due to the use of unobservable inputs. The key inputs into the model for the Convertible Bridge Note were as follows: + +Schedule of Key Inputs of Convertible Bridge Note + +| | December 31, 2024| +---|---|---|--- +Risk-free interest rate| | | 4.16| % +Expected term (years)| | | 0.83| +Quoted VWAP| | $| 20.50| +Volatility| | | 57.50% - 97.14| % +Discount rate| | | 40% - 60| % +Probability assessment1| | | 10% - 40| % +Illiquidity discount| | | (26| )% + +(1)| | Probability assessments include the probabilities that subsequent successful capital raises (in terms of amounts raised and timing) are not executed and the probability that the securities issuable under the convertible bridge notes are not timely registered. +---|---|--- + +Due to the short duration between the reporting date and mandatory conversion of the Convertible Bridge Notes, as of September 30, 2025, the Company calculated the fair value based on the number of shares into which the Convertible Bridge Notes will convert in mandatory conversion and the fair value of the Company’s common stock as of the reporting date. Upon mandatory conversion of the current outstanding principal, the Company expects to issue 117,612 shares of common stock. The fair value of the Company’s common stock at September 30, 2025 was $3.55 per share. As of September 30, 2025, the fair value of the Convertible Bridges Notes was $417,516. + +16 +--- + +The following table summarizes the changes in the carrying value of the Convertible Bridge Notes: + +Schedule of Fair Value Measurement using Significant Unobservable Inputs + +| | | | +---|---|---|---|--- +Fair Value Measurements Using Significant Unobservable Inputs (Level 3) +Balance - December 31, 2024| | $| 684,205| +Conversion of Convertible Bridge Note (at fair value)| | | (121,750| ) +Payments of coupon interest| | | (87,857| ) +Gain on change in fair value| | | (57,082| ) +Balance - September 30, 2025| | $| 417,516| + +**_Alto Opportunity Master Fund, SPC_** + +On January 11, 2023, the Company entered into a securities purchase agreement (the “SPA”) with Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B, a Cayman entity (the “Investor”), pursuant to which the Company sold to the Investor a $4,300,000 convertible note (the “Alto Convertible Note”) and warrant (the “Alto Warrant”) to purchase 5,091 shares of common stock, exercisable at $470.00 per share, in exchange for gross proceeds of $3,935,000 (the “Investment Amount”) (See Note 6). As a consequence of the Company issuing the Convertible Bridge Notes, and then subsequently completing the Equity Financings in March 2025 and June 2025, the exercise price of the Alto Warrant was adjusted to $3.38. The Company determined that the Alto Warrant contains a net cash settlement feature at inception and categorized the Alto Warrant as a liability in the accompanying unaudited condensed consolidated financial statements. The Alto Convertible Note was amortized on a monthly basis and the Company could make such monthly amortization payments in cash or, subject to certain equity conditions, in registered shares of common stock or a combination thereof. Installments could be deferred by the noteholder, resulting in a variable interest rate. However, the effective interest rate was approximately 346% based on the internal rate of return calculated on a series of cash flows that occur at regular intervals. For equity repayment, the Alto Convertible Note was convertible into shares of common stock at a price per share equal to the lower of (i) $470.00 per share, as adjusted, (ii) 90% of the three lowest daily VWAPs of the 15 trading days prior to the payment date, or (iii) 90% of the VWAP of the trading day prior to payment date. The noteholder had an acceleration of installment amount conversion option (the “Alto Acceleration Option”), whereby the noteholder, with certain share percentage limitations, could convert to common stock any outstanding installment amount at an amount equal to the installment amount plus five times (5x) the installment amount at any time. The Company determined the Alto Acceleration Option was an embedded derivative within the host instrument and bifurcated it from the host instrument and recorded it as a derivative liability valued at $1,442,000 at inception, using a Monte Carlo simulation model (Note 7). The Alto Convertible Note was repayable over 26 months and bore interest at the rate of 5% per annum. Additionally, the note contained certain redemption options and “Make Whole” provisions. + +In conjunction with entry into the SPA, the Company entered into a series of related agreements, including a security agreement (the “Security Agreement”), an intellectual property security agreement (the “IP Security Agreement”) and a subsidiary guaranty (the “Subsidiary Guaranty”). The security agreements and guaranty allow, among other things, for the Investor to have a security interest in and place a lien on all of the Company’s assets and intellectual property until such time as the Alto Convertible Note is paid off. In addition, the SPA called for the Company to enter into a springing deposit account control agreement (the “Springing DACA”), which, in the event the Company defaulted on its repayment of the Alto Convertible Note, would allow the Investor to assume control of the Company’s bank account only with regard to any funds remaining outstanding under the Alto Convertible Note. As such, in conjunction with entry into the SPA, the Company established a separate bank account in which it deposited the Investment Amount and pursuant to which the Company, the Investor and the bank holding the Investment Amount, First Republic Bank, entered into the Springing DACA agreement. As the Investment Amount had been held at First Republic Bank, in light of certain banking crises then affecting smaller banks, on March 12, 2023, the Company and the Investor moved the Investment Amount from First Republic Bank, after which time the Springing DACA was no longer in effect. Further, pursuant to amendments to the SPA entered into in May and June of 2023, the Company and the Investor agreed that all of the Investment Amount would be released to the Company and the relevant provision of the SPA which required the Springing DACA would no longer be deemed applicable. In addition, the Company granted the Investor the option to purchase up to an additional $10 million in convertible notes and warrants on substantially the same terms as the Alto Convertible Note and Alto Warrant, excluding the Springing DACA requirement, with such option to be effective through December 31, 2025. The agreement offered the investor an opportunity to participate in future capital raises at substantially similar terms as the January 11, 2023 agreement. The Company expected that such subsequent convertible notes and warrants would be issued on substantially similar terms as the January 11, 2023 initial agreement, as amended, thus providing the Company the opportunity to negotiate certain aspects of the agreement. + +Boustead Securities, LLC (“Boustead”) served as a placement agent for the Alto Convertible Note and Warrant offering and received $345,000 cash compensation and a warrant to purchase 357 shares of common stock, exercisable at $470.00 per share. The Boustead warrant was determined to be an equity instrument valued on a non-recurring basis. The Company used the Black Scholes valuation model using a term of five years, volatility of 110%, a risk-free rate of 3.53% for a value of $99,543. + +The Company allocated the finance costs related to the Boustead placement agent fee of $345,000, based on the relative fair market values of the Convertible Note and warrants issued. The allocation of the financing costs applied $232,027 to the debt component as a debt discount that was being amortized to interest expense over the term of the Alto Convertible Note, $104,245 to the warrant derivative liability component, expensed as a finance fee, and $8,727 to the equity warrant as a reduction in additional paid in capital. + +17 +--- + +The Company allocated to the debt component of the note an original discount of $300,000, legal fees of $65,000, $215,000 for additional interest fees on day one added to note principal, $1,442,000 for the accelerated conversion feature, and $1,288,543 for the fair value of warrants, resulting in an additional $3,310,543 debt discount that was being amortized to interest expense over the term of the Alto Convertible Note. + +On August 6, 2024, the Company entered into an amendment to the SPA with Alto. Under the Amendment Agreement, the Company and Alto agreed as follows: (i) that the Company would pay $600,000 (the “Cash Collateral”) in cash by wire transfer of immediately available funds to Alto, which would be held as collateral on the remaining $1.2 million outstanding under the Alto Note; (ii) Alto will defer the monthly installment payment due on September 3, 2024 under the Alto Note until the Alto Note’s March 11, 2025 maturity date; and (iii) Alto would grant a waiver of any default Section 4(a)(xvi) of the Note related to the restatement and reaudit of the Company’s financial statements for the years ended December 31, 2022 and 2023. The amendment was accounted for as a troubled debt restructuring as the Company determined it was experiencing financial difficulties and was provided a concession through the deferral of one monthly principal and interest payment. As the future undiscounted cash flows exceeded the carrying value of the Alto Convertible Note, the Company did not recognize any gain or loss associated with the troubled debt restructuring. + +On February 26, 2025, the Company, entered into an amendment agreement (the “Amendment Agreement”) for purposes of amending the terms of the SPA originally dated January 11, 2023, and as amended May 10, 2023, June 5, 2023 and August 6, 2024, between the Company and Alto. + +Under the Amendment Agreement, in exchange for the Company’s payment of $75,000 to Alto, Alto agreed to permanently waive its right to purchase up to $10 million in Additional Notes and Additional Warrants and to a one-time waiver of the right to participate in the Company’s contemplated registered securities offering, as disclosed in the Company’s registration statement on Form S-1, filed with the SEC on February 13, 2025. The payment to Alto was accounted for as an issuance cost and recorded as a reduction to additional paid-in capital. + +During the three and nine months ended September 30, 2024, the Company recorded interest expense of $270,538 and $1,198,738, respectively, which included amortization of debt discount as interest expense of $247,430 and $1,079,444, respectively. During the three and nine months ended September 30, 2024, the Company settled $1,172,850 and $1,408,050 of principal, and $35,888 and $54,670 of accrued interest, which settlements were made in the form of 28,766 and 31,894 shares of common stock. During the three months ended September 30, 2024, the Company also paid $345,139 of principal and $22,724 of accrued interest for a total of $367,863. During the nine months ended September 30, 2024, the Company paid $846,806 of principal and $79,682 of accrued interest for a total of $926,488. In relation to the settlements described above, the Company recognized a loss on settlement of convertible debt of $762,186 and $833,501 for the three and nine months ended September 30, 2024. + +**__** + +**Note 6 - Stockholders’ Equity** + +**_Common Stock_** + +During the nine months ended September 30, 2025, the Company issued: + +| ●| 12,000 shares of common stock upon conversion of $81,818 of principal related to a partial conversion of the Convertible Bridge Notes, +---|---|--- +| ●| 53,637 shares of common stock as part of a public offering, +| ●| 48,747 shares of common stock issued for vesting of restricted stock units, +| ●| 21,924 shares of common stock as part of a private placement, +| ●| 36 shares of common stock issued for rounding of reverse stock split fractional shares, and +| ●| 936,070 shares of common stock issued for exercise of pre-funded warrants. + +18 +--- + +During the nine months ended September 30, 2024, the Company issued: + +| ●| 31,894 shares of common stock to settle $1,408,050 of principal and $54,670 of interest on a convertible note and incurred $833,501 of loss on settlement, +---|---|--- +| ●| 975 shares of common stock issued for vesting of restricted stock units, and +| ●| 4,629 shares of common stock issued for reverse stock split fractional share round up. + +**_March 2025 Equity Financing_** + +On March 12, 2025, the Company entered into an Underwriting Agreement (the “Underwriting Agreement”) with WestPark Capital, Inc. (“WestPark”) as the sole underwriter (the “Underwriter”), related to a public offering (the “Offering”) of (i) 53,637 shares of common stock of the Company, at a public offering price of $7.50 per share and (ii) pre-funded warrants to purchase 713,030 shares of common stock at an exercise price of $0.025 per share, at a public offering price of $7.475 per Pre-Funded Warrant (the “March 2025 Pre-Funded Warrants”). The Offering closed on March 13, 2025. + +The Offering resulted in gross proceeds of approximately $5.7 million and net proceeds of approximately $5.0 million, reflecting approximately $0.7 million of legal costs and other expenses connected with the transaction. + +The March 2025 Pre-Funded Warrants were exercisable at any time after March 13, 2025, at an exercise price of $0.025 per share. The March 2025 Pre-Funded Warrants contained standard adjustments to the exercise price, including for stock splits, stock dividends and pro rata distributions and contain customary terms regarding the treatment of such March 2025 Pre-Funded Warrants in the event of a fundamental transaction, which included but are not limited to a merger or consolidation involving the Company, a sale of all or substantially all of the assets of the Company or a business combination resulting in any person acquiring more than 50% of the outstanding shares of common stock of the Company. Additionally, the March 2025 Pre-Funded Warrants included restrictions on exercise in the event the holder’s beneficial ownership of the Company’s common stock would exceed 4.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise. + +The Company concluded that the March 2025 Pre-Funded Warrants met the requirements to be classified in stockholders’ equity, and have been recorded as additional paid in capital. + +As of September 30, 2025, all 713,030 of the March 2025 Pre-Funded Warrants have been exercised. + +**_June 2025 Private Placement_** + +On June 20, 2025, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) in a private placement, and engaged WestPark Capital, Inc. (“WestPark”) as the sole placement agent (the “Placement Agent”), pursuant to which the Company agreed to sell an aggregate of $4.3 million of its securities. The private placement consisted of the issuance of (i) 21,924 shares of common stock of the Company and purchase price of $3.60 per share, and (ii) 1,158,953 pre-funded warrants, each to purchase one share of common stock of the Company at a purchase price of $3.599 and exercise price of $0.001 per pre-funded warrant (the “June 2025 Pre-Funded Warrants”) to one investor. The private placement closed on June 24, 2025. The private placement resulted in gross proceeds of approximately $4.3 million and net proceeds of approximately $3.9 million, reflecting approximately $0.4 million of placement agent fees, legal costs and other expenses connected with the transaction. + +The June 2025 Pre-Funded Warrants are exercisable at any time after issuance on June 24, 2025, at an exercise price of $0.001 per share. The June 2025 Pre-Funded Warrants contain standard adjustments to the exercise price, including for stock splits, stock dividends and pro rata distributions and contain customary terms regarding the treatment of such June 2025 Pre-Funded Warrants in the event of a fundamental transaction, which include but are not limited to a merger or consolidation involving the Company, a sale of all or substantially all of the assets of the Company or a business combination resulting in any person acquiring more than 50% of the outstanding shares of common stock of the Company. Additionally, the June 2025 Pre-Funded Warrants include restrictions on exercise in the event the holder’s beneficial ownership of the Company’s common stock would exceed 4.99% (or, upon election by a holder prior to the issuance of any Warrants, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to the exercise. + +19 +--- + +In connection with the Securities Purchase Agreement, the Company entered into a registration rights agreement with the investor. Pursuant to the registration rights agreement, the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) to register for resale the shares of common stock, and the shares issuable upon exercise of the pre-funded warrants issued under the purchase agreement, within 10 days of the closing date, and to have such registration statement declared effective within 90 days of the closing date (or 120 days if the registration statement is reviewed by the SEC). The registration rights agreement provided that the Company would be obligated to pay certain liquidated damages to the investor if the Company failed to file the resale registration statement, or to have such registration statement declared effective by such dates. The Company was prepared to file the registration statement within the deadline required under the registration rights agreement but due to requests by the investor, the Company did not file the registration statement until August 4, 2025, upon receiving the investor’s request to do so. The registration statement was declared effective on August 11, 2025. + +The Company concluded that the shares and June 2025 Pre-Funded Warrants met the requirements to be classified in stockholders’ equity, and the proceeds from the issuance of the shares and June 2025 Pre-Funded Warrants have been recorded in additional paid-in capital. + +As of September 30, 2025, 150,000 pre-funded warrants related to the June 2025 Private Placement have been exercised. + +**_Warrants_** + +In connection with the Convertible Bridge Notes in October 2024, the lenders were granted warrants to purchase 9,639 shares of common stock, at an exercise price of $35.00 per share and warrants to purchase 3,543 shares of common stock, at an exercise price of $37.25 per share. + +In connection with the October 2024 Equity Financing, the Company issued pre-funded warrants to purchase up to 102,210 shares of common stock, at an exercise price of $0.025 per share, and warrants to purchase up to 118,033 shares of common stock, at an exercise price of $35.00 per share. + +During the nine months ended September 30, 2025, holders of pre-funded warrants exercised their warrants resulting in the issuance of 936,070 shares of common stock. As of September 30, 2025, 1,008,953 pre-funded warrants remained unexercised and outstanding and have no expiration date. + +A summary of activity regarding warrants to purchase common stock (excluding pre-funded warrants) for the nine months ended September 30, 2025 were as follows: + +Schedule of Warrants Activity + +| | Number of| | | Weighted Average| | | Average| +---|---|---|---|---|---|---|---|---|--- +| | warrants| | | Exercise Price| | | Life (years)| +Outstanding, December 31, 2024| | | 138,582| | | $| 46.92| | | | 4.67| +Granted| | | —| | | | —| | | | —| +Forfeited| | | (1,690| )| | | 800| | | | —| +Outstanding, September 30, 2025| | | 136,892| | | $| 37.62| | | | 3.97| + +The warrants had intrinsic value of $865 as of September 30, 2025. All of the outstanding warrants are exercisable as of September 30, 2025. + +**__** + +**__** + +20 +--- + +**__** + +**_Equity Incentive Plan_** + +The Company’s 2018 Equity Incentive Plan (the “2018 Plan”) provides for equity incentives to be granted to employees, executive officers, directors and key advisers and consultants. Equity incentive grants may be made in the form of stock options with an exercise price of not less than the fair market value of the underlying shares as determined pursuant to the 2018 Plan, restricted stock awards, other stock-based awards, or any combination of the foregoing. The 2018 Plan is administered by the Company’s compensation committee. In May 2025, the Company increased the shares authorized under the 2018 Plan by 5,000,000 shares. As of September 30, 2025, the Company has authorized 8,000,000 shares of common stock for issuance under the 2018 Plan. As of September 30, 2025, 219,180 shares have been granted, net of forfeitures, under the 2018 Equity Incentive Plan, of which 52,358 shares have vested. + +**_Restricted Stock Units_** + +The Company may grant restricted stock units (“RSU”) under our 2018 Plan. RSUs are bookkeeping entries representing an amount equal to the fair market value of one share of our common stock. Subject to the provisions of the 2018 Plan, the administrator determines the terms and conditions of RSUs, including the vesting criteria and the form and timing of payment. Notwithstanding the foregoing, the administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. RSUs granted typically vest annually in one third increments from the date of appointment. + +During the three and nine months ended September 30, 2025, pursuant to agreements with directors, officers and consultants, 171,054 and 231,720 RSUs with a value of $0.6 million and $1.1 million, respectively, were granted with vesting terms ranging from six months to three years. During the three and nine months ended September 30, 2024, 0 and 2,139 RSUs, respectively, with a value of $0 million and $0.1 million, respectively, were granted. + +Stock-based compensation expense was classified as follows for the three and nine months ended September 30, 2025 and 2024: + +Schedule of Compensation Expenses (RSUs) + +| | 2025| | | 2024| | | 2025| | | 2024| +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | Three Months Ended| | | Nine Months Ended| +| | September 30,| | | September 30,| +| | 2025| | | 2024| | | 2025| | | 2024| +Research and development| | $| 51,388| | | $| 13,033| | | $| 372,603| | | $| 60,019| +General and administrative| | | 82,930| | | | 32,242| | | | 345,614| | | | 167,868| +Total| | $| 134,318| | | $| 45,275| | | $| 718,217| | | $| 227,886| + +On February 27, 2025, the Company entered into a Revolving Loan Agreement with Bowery Consulting Group Inc. (“Bowery”) where the Company may borrow from Bowery an aggregate principal amount of up to $2,000,000 (see Note 5). As part of one of the lender conditions, no less than four of the current board members were to resign, with three new nominees to be elected and appointed by the remaining members of the Company’s Board of Directors. Upon the resignation of the four board members, vesting of all outstanding unvested RSUs held by the departing board members were allowed to accelerate immediately. The Company concluded that the acceleration represented a modification of the outstanding unvested RSUs. As a result of the modification, the Company recorded approximately $0.5 million of stock-based compensation expense. On September 8, 2025, the managing partner of Bowery was appointed to the Company’s Board of Directors. As a result, Bowery became a related party effective as of that date + +On May 8, 2025, the Company and Dr. Anatoly Dritschilo (“Dr. Dritschilo”) executed a Settlement Agreement and General Release pursuant to which Dr. Dritschilo agreed to resign from his position as the Company’s Chief Scientist Officer and Director of the Company’s Board of Directors on May 9, 2025. Under the Agreement and as consideration for timely signing, not timely revoking, and compliance with the promises made therein, the Company agreed to issue 38,565 RSUs, which vests in two years from issuance date. The fair value of the Company’s common stock at close of market on May 9, 2025 was $5.825 per share, for an aggregate fair value of the RSUs of $224,641. + +21 +--- + +On August 31, 2025 and September 11, 2025, Steve Richards and Joseph Tung, respectively, resigned from their positions on the Board of Directors. Upon the resignation of the two board members, vesting of 7,367 RSUs held by each departing board member, for a total of 14,734 were allowed to accelerate immediately and the remaining unvested RSUs were forfeited. The Company concluded that the acceleration represented a modification of the outstanding unvested RSUs. As a result of the modification, the Company recorded approximately $30,503 of stock-based compensation expense. + +As of September 30, 2025, there was $0.7 million of unrecognized RSU compensation cost related to non-vested stock-based compensation arrangements which is expected to be recognized over a weighted-average period of 2.17 years. + +The following is a summary of activity regarding Restricted Stock Units issued: + +Schedule of Restricted Stock Units (RSUs) + +| | Number of RSU| | | Weighted Average +Fair Value Per RSU| +---|---|---|---|---|---|--- +Outstanding, December 31, 2024| | | 43,386| | | $| 21.00| +Granted| | | 231,720| | | | 4.79| +Forfeited| | | (59,537| )| | | 5.60| +Vested| | | (48,747| )| | | 16.02| +Outstanding, September 30, 2025| | | 166,822| | | $| 5.42| + +**__** + +**Note 7 – Derivative Liabilities** + +**_Fair Value Assumptions Used in Accounting for Derivative Liabilities_** + +ASC 815 requires the Company to assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense. + +In October 2024, in connection with the October 2024 Equity Financing, the Company issued warrants to purchase 118,033 shares of common stock, with an exercise price of $35.00 per share, valued at inception at $0.2 million and as of September 30, 2025, at less than $0.1 million. The Company determined that the derivative liabilities from the warrants issued in relation to the October 2024 Equity Financing did not qualify for classification as equity instruments as they did not meet the requirements to be considered indexed to the Company’s own stock, due to potential variability in the settlement amount upon a fundamental transaction, as defined. + +In January 2023, in connection with the Alto Convertible Note, the Company issued warrants to purchase 5,091 shares of common stock, with an exercise price of $3.38 per share, as adjusted, valued at inception at $1.1 million and as of September 30, 2025, at less than $0.1 million. The Company determined that the derivative liabilities from the warrants issued in relation to the Alto Convertible Note did not qualify for classification as equity instruments due to the existence of certain net cash settlement provisions that are not within the sole control of the Company. In addition, there are certain down round provisions that could reduce the exercise price if the Company issues securities at lower prices in the future. + +The Company has determined the Acceleration Option in the Alto warrants is an embedded derivative within the host instrument and has bifurcated it from the host instrument and recorded it as a derivative liability valued at $1.4 million at inception, using a Monte Carlo simulation model. The Company determined its derivative liability from the noteholder’s Acceleration Option for the Alto Convertible Note was not clearly and closely related to the host and should thus be accounted for as a bifurcated derivative liability. As of September 30, 2025, the value of the Acceleration Option was $0 as the Alto Convertible Note was settled in full by September 30, 2024. + +22 +--- + +The Company classifies these derivative liabilities as a Level 3 fair value measurement. As of December 31, 2024, the Company utilized a Monte Carlo simulation to calculate the fair value of the October 2024 Equity Financing warrants. The key inputs for the Monte Carlo simulation as of December 31, 2024, were as follows: + +Schedule of Monte Carlo Simulation Assumption + +Net cash settlement and down round key valuation inputs - warrants*| | | +---|---|---|--- +Annualized volatility| | | 57.50% - 97.14| % +Risk-free interest rate| | | 4.25 \- 4.38| % +Quoted VWAP| | $| 20.50| +Exercise price| | | 12.00 \- 35.00| +Probability assessment1| | | 10% - 40| % +Illiquidity discount| | | (26| )% +Time period (years)| | | 2.03 \- 4.84| + +1| | Probability assessments include the probabilities that subsequent successful capital raises (in terms of amounts raised and timing) are not executed and the probability that the securities issuable under the convertible bridge notes are not timely registered. +---|---|--- + +__ + +| _*_| _Based on a Monte Carlo simulation analysis of 50,000 iterations_ +---|---|--- + +__ + +As of September 30, 2025, the Company utilized a probability-weighted expected return method (“PWERM”), which assumed various scenarios and the potential value of the October 2024 Equity Financing warrants at various stock prices of the Company’s common stock. The scenarios included stock prices up to $35.50 and probabilities ranging from 50% to 13%. Changes in assumptions did not have a material impact to the concluded fair value. + +The following table summarizes the changes in the derivative liabilities: + +Schedule of Derivative Liabilities + +Fair Value Measurements Using Significant Unobservable Inputs (Level 3) +--- +| | Warrants| | | Alto Acceleration Feature| +Balance - December 31, 2024| | $| 25,281| | | $| —| +Gain on change in fair value| | | (2,643| )| | | —| +Balance - March 31, 2025| | $| 22,638| | | | —| +Gain on change in fair value| | | (11,673| )| | | —| +Balance - June 30, 2025| | $| 10,965| | | $| —| +Gain on change in fair value| | | (2,427| )| | | —| +Balance - September 30, 2025| | $| 8,538| | | $| —| + +**Note 8 – Commitments and Contingencies** + +On April 3, 2025, the Company, entered into a consulting agreement with the IR Agency LLC (the “IR Agency”). Pursuant to the consulting agreement, IR Agency agreed to provide certain marketing and advertising services to communicate information about the Company to the financial community, including, but not limited to, creating personnel profiles, media distribution and building a digital community with respect to the Company. As consideration for the performance of the services, the Company paid the IR Agency $2.0 million on April 5, 2025. The term of the consulting agreement will be three months starting on April 3, 2025. For the nine months ended September 30, 2025, the Company incurred $2.0 million of costs under the consulting agreement. + +On September 15, 2025, the Company, entered into another consulting agreement with the IR Agency to continue the services contracted for in April 2025. As consideration for the performance of the services, the Company paid the IR Agency an additional $1,450,000. The term of this consulting agreement will be two months. For the three months ended September 30, 2025, the Company incurred $0.5 million of costs under the consulting agreement. + +23 +--- + +On December 16, 2024, the Company entered into a sponsored research agreement (the “Sponsored Research Agreement”) with the Regents of the University of California, on behalf of its San Francisco campus (the “UCSF”), pursuant to which UCSF’s employees will conduct research on a project entitled “Investigation of 18F-fluorodeboronation method for PSMA targeting ligand radiolabeling and evaluation in prostate cancer models” (the “Research Program”). Under the terms of the Sponsored Research Agreement, the Company will bear the total cost of $0.3 million of the Research Program and has an exclusive license to the intellectual property underlying the research. This Sponsored Research Agreement will be effective for a period of one year and may be extended by written mutual consent of the parties. During the three and nine months ended September 30, 2025, the Company made prepayments of $0 and $0.2 million, respectively, and amortized $0.1 million and $0.2 million, respectively, of costs under the Sponsored Research Agreement. + +**** + +In January 2025, the Company entered into a change order to its existing agreement with Theradex Systems, Inc., the Company’s primary third-party CRO, for purposes of supporting the Company’s clinical trials of Ropidoxuridine. Following the change order, the Company’s total cost limit increased by $3.0 million, for an aggregate of $5.3 million, of which $2.0 million has not yet been incurred. On October 15, 2025, the Company received a letter from Theradex Systems, Inc., providing written notice of termination of the master agreement, dated November 1, 2018 (See Note 10). + +**** + +In March 2025, the Company entered into a consulting services agreement (the “Consulting Agreement”) with Bowery Consulting Group Inc. (the “Consultant”). According to the Consulting Agreement, the Consultant will provide consulting services in connection with the Company’s business, advising on viability of plans for scaling activities, growth and capital raising strategies, and costs minimization associated with technological platform improvements and marketing spend. On September 8, 2025, the managing partner of the Consultant was appointed to the Company’s Board of Directors. As a result, the Consultant became a related party effective as of that date. The Company agreed to pay the Consultant $260,000 for their services, of which the Company recognized expense of $0.1 million and $0.3 million during the three and nine months ended September 30, 2025 related to the Consulting Agreement. + +On November 10, 2021, the Company entered into an engagement agreement (“EA”) with Boustead designating Boustead as its exclusive financial advisor for corporate finance activities and subsequently, on August 29, 2022, the Company entered into an underwriting agreement with Boustead in conjunction with the Company’s IPO. The EA contained an up to three-year right of first refusal (“ROFR’) and the Underwriting Agreement, which overrode conflicting terms in the EA, contained a two-year ROFR following the September 2, 2022 closing of the Company’s IPO. Further, Boustead also had a ROFR in conjunction with the Company’s terminated rights offering, which provided Boustead with a ROFR through February 7, 2025. Following the Company’s engagement agreement and underwriting agreement with WestPark Capital dated February 10, 2025 and March 13, 2025, respectively, Boustead asserted it has ROFR rights, demanding termination of WestPark’s engagement and claiming entitlement to compensation under the Boustead EA. As of the reporting date, there are no conditions indicating a loss has been incurred, nor does the Company believe a loss is probable and reasonably estimable, therefore no accrual for a potential loss has been recorded. + +**** + +The Company is, from time to time, involved in various legal proceedings relating to claims arising in the ordinary course of its business. Neither the Company nor any of its subsidiaries is a party to any such legal proceeding the outcome of which, individually or in the aggregate, is expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. + +**** + +**Note 9 – Business Segment Information** + +The Company operates as one operating segment with a focus on products designed to address limitations of the current cancer therapies and extend new applications of radiation therapy. The CEO, as our chief operating decision maker (CODM), manages and allocates resources to the operations of the Company on a consolidated basis, considering primarily research and development expenditures, cash burn and net loss. This enables the CEO to assess our overall level of available resources and determine how best to deploy these resources across products and research and development projects in line with the longer-term Company-wide strategic goals. In March 2025, the Company appointed an Interim CEO, who assumed the role of CODM. Our former CEO continued to chair the Company’s Board of Directors and serve in a corporate role as Chief Scientific Officer until his retirement on May 9, 2025. This appointment did not result in any immediate changes to the reporting metrics that the CODM uses to manage and allocate resources to the operations of the Company. + +24 +--- + +The accounting policies of our reportable segment are the same as those described in the “Summary of Significant Accounting Policies” for the Company. All costs, research and development expenses, general and administrative expenses, other operating expenses, interest expense, depreciation, corporate overhead assets (workforce, intellectual property, etc.) are fully allocated to the Company’s one segment. Significant segment expenses include payroll and costs incurred for the Company’s primary third-party contract research organization (“CRO”). During the three and nine months ended September 30, 2025 and 2024, the Company incurred payroll expenses classified in our unaudited condensed consolidated statements of operations as research and development of $0.1 million and $0.6 million, respectively, and $0.2 million and $0.7 million, respectively. During the three and nine months ended September 30, 2025 and 2024, the Company incurred payroll expenses classified in our unaudited condensed consolidated statements of operations as general and administrative of $0.1 million and $0.4 million, respectively, and $0.2 million and $0.5 million, respectively. During the three and nine months ended September 30, 2025, the Company incurred third-party CRO expenses of $0.5 million and $1.8 million, respectively, all of which is classified in our unaudited condensed consolidated statements of operations as research and development. All other operating expenses in our unaudited condensed consolidated statements of operations are characterized as other segment expenses which, after factoring in other income and expenses, reconcile to net loss for each period. The Company’s reportable segment’s profit or loss, assets, significant expenses and other specified items are consistent with the financial information disclosed in our unaudited condensed consolidated financial statements. See the unaudited condensed consolidated financial statements for the financial information of the Company’s one segment. + +**** + +**Note 10 – Subsequent Events** + +In October and November 2025, the Company issued a total of 250,000 shares of Pre-Funded Warrants from the Pre-Funded Warrant Shares reserved for issuance upon the exercise of Pre-Funded Warrants, leaving a total of 758,953 Pre-Funded Warrant Shares available for exercise. + +In October 2025, the October 2024 Convertible Bridge Notes converted into 117,612 shares of common stock due to reaching maturity. The Convertible Bridge Notes converted based on the conversion price of $7.50 and a 15% discount, for a share price of $6.38, based on the mandatory conversion terms in the Convertible Bridge Notes. See Note 5 for more information. + +On October 15, 2025, the Company received a letter from Theradex Systems, Inc. (“Theradex”), the Company’s primary third-party contract research organization, providing written notice of termination of the master agreement, dated November 1, 2018, between the Company and Theradex, and all work orders thereunder, and demanding immediate payment of all outstanding amounts owed thereunder in the aggregate amount of $1.1 million. The Company has accrued for the outstanding amount and it is included in accounts payable and accrued expenses on the unaudited condensed consolidated balance sheet as of September 30, 2025. The termination of the Master Agreement with Theradex introduces uncertainty regarding the continuity and timing of our Ropidoxuridine clinical trials, as Theradex was our primary CRO. We are currently evaluating options and alternatives and assessing the potential impact on business, which could materially affect our development plans and financial position. + +On October 20, 2025, the Company entered into a binding term sheet with 1542770 BC Ltd. (“Molecule”). The term sheet sets forth the material business terms of a transaction under which the Company or its affiliate will purchase from Molecule substantially all of Molecule’s assets and liabilities for a purchase price of $10,000,000 payable in a combination of cash and shares of common stock of the Company (which combination of cash and common stock is subject to the Company’s sole determination) over time and subject to the achievement of certain milestones. The parties agreed that they will enter into one or more written agreements embodying the terms of the term sheet and effectuating the transactions contemplated thereby, that will address in further detail the matters covered by the term sheet, together with additional customary terms and conditions regarding the transaction. Completion of the transaction will be subject to, among other customary conditions, negotiation and execution of such definitive agreements, approval of the Company’s board of directors, and completion of due diligence by both parties. + +On November 3, 2025, the Company entered into a securities purchase agreement with the purchaser, pursuant to which the Company agreed to issue and sell to the purchaser in a private placement transaction (the “November 2025 Offering”) a pre-funded warrant to purchase up to 625,156 shares of common stock of the Company, par value $0.00001 per share for aggregate gross proceeds of approximately $2.5 million, before deducting placement agent fees to WestPark Capital, Inc. and offering expenses payable by the Company. The November 2025 Offering closed on November 4, 2025. The Company intends to use the net proceeds from the November 2025 Offering for marketing, general corporate purposes and working capital purposes. + +25 +--- + +**ITEM 2\. MANAGEMENT** ’**S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS** + +__ + +_The following Management’s Discussion and Analysis of Financial Condition and Result of Operations (the “MD &A”) should be read in conjunction with our unaudited financial statements and the related notes thereto included elsewhere in this Quarterly Report and our financial statement and related notes contained in our annual report on From 10-K for the fiscal year ended December 31, 2024. The MD&A contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors including, but not limited to, those noted under “Risk Factors” in this report and in our annual report on Form 10-K for the fiscal year ended December 31, 2024. _ + +_We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this report, except as required by U.S. federal securities laws._ + +__ + +**Overview** + +Founded by Georgetown University Medical School faculty members, Shuttle Pharmaceuticals Holdings, Inc. is a discovery and development stage pharmaceutical company leveraging our proprietary technology to develop novel therapies that are designed to cure cancer. Originally formed as Shuttle Pharmaceuticals, LLC in 2012, our goal is to extend the benefits of cancer treatments by leveraging insights into cancer therapy with surgery, radiation therapy, chemotherapy and immunotherapy. While there are several therapies being developed with the goal of curing cancer, one of the most effective and proven approaches to this is radiation therapy (“RT”). We are developing a pipeline of products designed to address the limitations of the current standard of cancer therapies. We believe that our product candidates will enable us to deliver cancer treatments that are safer, more reliable and at a greater scale than that of the current standard of care. + +Operations to date have focused on continuing our research and development efforts to advance Ropidoxuridine clinical testing and improved drug formulation, to advance HDAC6 inhibitor (SP-2-225) preclinical development and explore the application of the PC-RAD Test, predictive biomarkers of radiation response. The clinical development of Ropidoxuridine has included completion of a Phase I clinical trial to establish drug bioavailability and a maximum tolerated dose for use in Phase II clinical trials. TCG GreenChem, with whom we have contracted for process research, development and cGMP compliant manufacture of IPdR, has manufactured the API of Ropidoxuridine and the University of Iowa Pharmaceuticals has formulated the drug product for use in our upcoming Phase II clinical trial in brain cancer patients undergoing radiation therapy. The drug product (capsules) were shipped to CRO Theradex Oncology and distributed to clinical trial sites that are fully approved to enroll patients in the trial. Shuttle received approval from the FDA to begin the clinical trial. The FDA thereafter made recommendations to expand the clinical trial to include a randomized dose “optimization” step and we agreed with the recommendation. Meetings with engaged clinical sites to review the protocol documents have occurred and FDA required IRB approvals have been received. With FDA recommended changes incorporated into the revised protocol and the completion of site initiation visits, we commenced our Phase II clinical study in October 2024. The Company’s radiation biomarker project and the health disparities project have been completed and we are proceeding with plans for clinical validation and potential for commercialization of Ropidoxuridine as a radiation sensitizer. + +On October 15, 2025, the Company received a letter from Theradex Systems, Inc., providing written notice of termination of the master agreement, dated November 1, 2018 (the “Master Agreement”), between us and Theradex, and all work orders thereunder, and demanding immediate payment of all outstanding amounts owed thereunder in the aggregate amount of $1.1 million. The Company has accrued for the outstanding amount and it is included in accounts payable and accrued expenses on the condensed consolidated balance sheet as of September 30, 2025. + +The potential termination of the Theradex Master Agreement and execution of a letter of intent with Molecule.ai disclosed elsewhere in this filing introduces uncertainty regarding the continuity and timing of our clinical trials and strategic business direction. We are currently evaluating options and alternatives and assessing potential business impacts, all of which could materially affect our plans and financial position. This evaluation is ongoing and management has made no specific decisions or commitments other than disclosed herein. + +**__** + +**__** + +26 +--- + +**__** + +**Nasdaq Listing Compliance** + +On December 31, 2024, we received a letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) stating that for the 30 consecutive business day period between November 15, 2024 to December 30, 2024 our common stock had failed to maintain a minimum closing bid price of $1.00 per share, as required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until June 30, 2025 (the “Compliance Period”), to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days. + +Following the March 2025 $5.75 million equity financing, on March 14, 2025, Nasdaq acknowledged that we had regained compliance with the Listing Rule 5550(b)(1) but indicated that if we fail to evidence compliance upon filing the March 31, 2025 Form 10-Q, we may be subject to delisting. We have evidenced compliance through maintaining a minimum closing bid price of our common stock of $1.00 per share or greater from June 16, 2025 to July 1, 2025. Accordingly, we have regained compliance with Listing Rule 5550(a)(2). + +On June 16, 2025, in order to maintain the Minimum Bid Price Requirement again, we effectuated a 1-for-25 reverse stock split of our issued and outstanding common stock, rounding up to account for any fractional shares. The reverse stock split had no effect on our authorized shares of common stock or preferred stock and the par value will remain unchanged at $0.00001, respectively. All common stock share, option, warrant and per share amounts (except our authorized but unissued shares and previously reserved shares) have been retroactively adjusted in these unaudited condensed consolidated financial statements and related disclosures. + +On July 2, 2025, we received notification from Nasdaq acknowledging that we maintained the requisite minimum closing bid price of our common stock of $1.00 per share or greater. Accordingly, we regained compliance with Listing Rule 5550(a)(2), and the matter was closed. + +27 +--- + +**Results of Operations** + +**** + +**_Comparison of the three months ended September 30, 2025 and 2024_** + +__ + +The following table summarizes the results of our operations: + +| | Three Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | September 30,| | | | | | | +| | 2025| | | 2024| | | Change| | | %| +Revenue| | $| —| | | $| —| | | $| —| | | | —| +Operating expenses:| | | | | | | | | | | | | | | | +Research and development| | | 943,478| | | | 1,400,564| | | | (457,086| )| | | (33| )% +General and administrative| | | 886,055| | | | 328,995| | | | 557,060| | | | 169| % +Legal and professional| | | 437,409| | | | 1,322,002| | | | (884,593| )| | | (67| )% +Total operating expenses and loss of operations| | | 2,266,942| | | | 3,051,561| | | | (784,619| )| | | (26| )% +| | | | | | | | | | | | | | | | +Other income (expense):| | | | | | | | | | | | | | | | +Interest expense - related parties| | | (721| )| | | (2,137| )| | | 1,416| | | | (66| )% +Interest expense| | | (18,183| )| | | (270,538| )| | | 252,355| | | | (93| )% +Interest income| | | 486| | | | 2,524| | | | (2,038| )| | | (81| )% +Change in fair value of derivative liabilities| | | 2,427| | | | 286,316| | | | (283,889| )| | | (99| )% +Change in fair value of convertible notes| | | (64,369| )| | | —| | | | (64,369| )| | | 100| % +Gain on sale of marketable securities| | | —| | | | 56,398| | | | (56,398| )| | | (100| )% +Change in fair value of marketable securities| | | —| | | | (42,898| )| | | 42,898| | | | (100| )% +Loss on settlement of convertible debt| | | —| | | | (762,186| )| | | 762,186| | | | (100| )% +Total other expense| | | (80,360| )| | | (732,521| )| | | 652,161| | | | (89| )% +Net loss| | $| (2,347,302| )| | $| (3,784,082| )| | $| 1,436,780| | | | (38| )% + +_Research and Development._ Total research and development (“R&D”) expense was $0.9 million for the three months ended September 30, 2025, as compared to $1.4 million to the three months ended September 30, 2024. The decrease in total R&D expense of $0.5 million, or 33%, is primarily related to a $0.5 million decrease in subcontractor expenses and $0.2 million decrease in R&D compensation related expenses in the three months ended September 30, 2025 compared to the three months ended September 30, 2024\. Subcontractor expense made up 78% of total R&D expenses in the three months ended September 30, 2025 and 73% of total R&D expenses during the three months ended September 30, 2024. R&D compensation related expenses were $0.2 million in the three months ended September 30, 2025 as compared to $0.3 million in the three months ended September 30, 2024. For the three months ended September 30, 2025, R&D compensation related expenses were 16% as a percent of total R&D expense, representing a decrease from the 22% of total R&D incurred in the three months ended September 30, 2024. The decrease is largely attributable to the lower employee headcount year over year and retirement of our CSO. + +_General and Administrative Expenses_. General and administrative expenses in the three months ended September 30, 2025 increased by $0.6 million, or 169%, from $0.3 million in the three months ended September 30, 2024 to $0.8 million in the three months ended September 30, 2025. The increase in general and administrative expenses was primarily due to costs associated with advertising for investor relations of $0.5 million for the three months ended September 30, 2025. + +_Legal and Professional Expenses._ During the three months ended September 30, 2025, legal and professional expenses decreased by $0.9 million or 67% compared to the same period in 2024. The decrease in legal and professional fees was primarily due to higher accounting expenses in the three months ended September 30, 2024 compared to the three months ended September 30, 2025 related to the restatement and reaudit of the Company’s financial statements, which occurred and concluded in 2024. + +_Other Expense._ During the three months ended September 30, 2025, other expense decreased by $0.7 million or 89% compared to the same period in 2024. The decrease was primarily driven by a $0.3 million decrease in interest expense, $0.8 million decrease in loss on settlement of convertible debt, partially offset by a $0.3 million decrease in change in fair value of derivative liabilities, $0.1 million decrease in loss on change in fair value of convertible notes, and $0.1 million decrease in gain on sale of marketable securities. + +28 +--- + +**_Comparison of the nine months ended September 30, 2025 and 2024_** + +**__** + +The following table summarizes the results of our operations: + +| | Nine Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | September 30,| | | | | | | +| | 2025| | | 2024| | | Change| | | %| +Revenue| | $| —| | | $| —| | | $| —| | | | —| +Operating expenses:| | | | | | | | | | | | | | | | +Research and development| | | 3,542,953| | | | 2,632,387| | | | 910,566| | | | 35| % +General and administrative| | | 3,829,264| | | | 963,642| | | | 2,865,622| | | | 297| % +Legal and professional| | | 1,756,372| | | | 2,323,013| | | | (566,641| )| | | (24| )% +Total operating expenses and loss of operations| | | 9,128,589| | | | 5,919,042| | | | 3,209,547| | | | 54| % +| | | | | | | | | | | | | | | | +Other income (expense):| | | | | | | | | | | | | | | | +Interest expense - related parties| | | (8,730| )| | | (2,137| )| | | (6,593| )| | | 309| % +Interest expense| | | (43,847| )| | | (1,198,738| )| | | 1,154,891| | | | (96| )% +Interest income| | | 567| | | | 38,135| | | | (37,568| )| | | (99| )% +Change in fair value of derivative liabilities| | | 16,743| | | | 340,405| | | | (323,662| )| | | (95| )% +Change in fair value of convertible notes| | | 57,082| | | | —| | | | 57,082| | | | 100| % +Gain on sale of marketable securities| | | —| | | | 100,118| | | | (100,118| )| | | (100| )% +Change in fair value of marketable securities| | | —| | | | (71,568| )| | | 71,568| | | | (100| )% +Loss on settlement of convertible debt| | | —| | | | (833,501| )| | | 833,501| | | | (100| )% +Total other (expense) income| | | 21,815| | | | (1,627,286| )| | | 1,649,101| | | | (101| )% +Net loss| | $| (9,106,774| )| | $| (7,546,328| )| | $| (1,560,446| )| | | 21| % + +_Research and Development._ Research and development (“R&D”) expense was $3.5 million for the nine months ended September 30, 2025, as compared to $2.6 million for nine months ended September 30, 2024. The increase of $0.9 million, or 35%, is primarily related to the Company having completed production of the drug product and the start of work related to the initiation of trials including contract research organization (“CRO”) expenses, clinical trial sites, other regulatory activities. + +R&D compensation related expenses were $1.0 million in the nine months ended September 30, 2025 as compared to $0.9 million in the nine months ended September 30, 2024. For the nine months ended September 30, 2025, R&D compensation related expenses were 29% as a percent of total R&D expense, representing a decrease from the 36% of total R&D incurred in the nine months ended September 30, 2024. The decrease in R&D compensation related expenses is largely attributable to the retirement of our former CEO and Chief Scientific Officer in early May 2025. Subcontractor expense made up 67% of total R&D expenses in the nine months ended September 30, 2025 and 38% of total R&D expenses during the nine months ended September 30, 2024. + +_General and Administrative Expenses._ General and Administrative expenses in the nine months ended September 30, 2025 increased by $2.9 million, or 297% from $1.0 million in the nine months ended September 30, 2024 to $3.8 million in the nine months ended September 30, 2025. The increase in general and administrative expenses was primarily due to costs associated with advertising for investor relations and filing expenses of $2.5 million, $0.3 million increase in general and administrative stock-based compensation expense, and other administrative costs. + +_Legal and Professional Expenses_. During the nine months ended September 30, 2025, legal and professional expenses decreased by $0.6 million or 24%. The decrease in legal and professional fees was primarily due to higher expenses related to our public filing requirements including the restatement and reaudit of the Company’s financial statements, contracts and financing related work that occurred in the nine months ended September 30, 2024 than compared to the nine months ended September 30, 2025. + +29 +--- + +_Other Income (expense)_. During the nine months ended September 30, 2025, other income (expense) decreased by $1.6 million or 101% compared to the same period in 2024. The decrease was primarily driven by a $1.2 million decrease in interest expense, $0.1 million increase in the change in fair value of convertible notes, $0.1 million increase in the change in fair value of marketable securities, $0.8 million decrease in the loss on settlement of convertible debt, partially offset by $0.3 million decrease in the change in fair value of derivative liabilities, and a $0.1 million decrease in the gain on sale of marketable securities. + +The potential termination of the Theradex Master Agreement and execution of a letter of intent with Molecule.ai disclosed elsewhere in this filing introduces uncertainty regarding the continuity and timing of our clinical trials and strategic business direction. We are currently evaluating options and alternatives and assessing potential business impacts, all of which could materially affect our plans and financial position. This evaluation is ongoing and management has made no specific decisions or commitments other than disclosed herein. + +**Liquidity and Capital Resources** + +Our unaudited condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. We have incurred losses since inception and had a net loss of $9.1 million and no revenues generated during the nine months ended September 30, 2025 and working capital of approximately $1.3 million as of September 30, 2025. We do not expect to generate positive cash flows from operating activities in the near future. + +In January 2025, we entered into a change order to the existing agreement with Theradex Systems, Inc., our primary third-party CRO, for purposes of supporting our clinical trials of Ropidoxuridine. Following the change order, our total cost limit increased by $3.0 million, for an aggregate of $5.3 million, of which $0.6 million had not yet been incurred as of September 30, 2025. On October 15, 2025, the Company received a letter from Theradex Systems, Inc., providing written notice of termination of the master agreement, dated November 1, 2018 (the “Master Agreement”), between us and Theradex, and all work orders thereunder, and demanding immediate payment of all outstanding amounts owed thereunder in the aggregate amount of $1.1 million. The Company has accrued for the outstanding amount and it is included in accounts payable and accrued expenses on the condensed consolidated balance sheet as of September 30, 2025. The termination of the Master Agreement with Theradex introduces uncertainty regarding the continuity and timing of our Ropidoxuridine clinical trials, as Theradex was our primary CRO. We are currently evaluating options and alternatives and assessing the potential impact on business, which could materially affect our development plans and financial position. + +**** + +In March 2025, we entered into a consulting services agreement (the “Bowery Consulting Agreement”) with Bowery Consulting Group Inc. (the “Consultant”). According to the Bowery Consulting Agreement, the Consultant will provide consulting services in connection with our business, advising on viability of plans for scaling activities, growth and capital raising strategies and cost minimization associated with technological platform improvements and marketing spend. On September 8, 2025, the managing partner of the Consultant was appointed to the Company’s Board of Directors. As a result, the Consultant became a related party effective as of that date. We agreed to pay the Consultant $260,000 for their services, which we are not obligated to pay until we regain full Nasdaq listing requirement. We received notice from Nasdaq on July 2, 2025 that we had regained compliance with the listing requirement and have since paid the fee. + +On April 3, 2025, the Company entered into a consulting agreement with the IR Agency LLC (the “IR Agency”). Pursuant to the consulting agreement, IR Agency agreed to provide certain marketing and advertising services to communicate information about the Company to the financial community, including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company. As consideration for the performance of the Services, the Company paid the IR Agency $2.0 million on April 5, 2025. The term of the consulting agreement was three months starting on April 3, 2025. For the nine months ended September 30, 2025, the Company incurred $2.0 million of costs under the consulting agreement. + +On September 15, 2025, the Company entered into another consulting agreement with the IR Agency. Pursuant to the consulting agreement, IR Agency agreed to provide marketing and advertising services to communicate information about the Company to the financial community, including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company. As consideration for the performance of the Services, the Company paid the IR Agency $1,450,000. The term of the consulting agreement will be two months. For the three months ended September 30, 2025, the Company incurred $0.5 million of costs under the consulting agreement. + +On October 2025, the Company converted the October 2024 Convertible Bridge Notes into 117,612 shares of common stock due to reaching maturity. The Convertible Bridge Notes converted at a share price of $6.38, which is the conversion price with a 15% discount per the Convertible Bridge Notes’ terms. See Note 5 for more information. + +Our ability to continue as a going concern is dependent upon our ability to continue to successfully raise additional equity or debt financing to allow us to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements contained in the report are issued. + +**_Recent Financings_** + +On February 27, 2025, we entered into a Revolving Loan Agreement (the “Revolving Loan Agreement”) with a single lender. Pursuant to and under the terms of the Revolving Loan Agreement, we issued a revolving note dated February 28, 2025 in the principal amount of up to $2.0 million (the “Revolving Note”), which we may draw upon at our discretion from time to time through its maturity on February 28, 2026. The Revolving Note bears interest at the rate of 18% per annum calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue interest daily commencing from the date of any draw down until paid in full. + +On March 12, 2025, we consummated a public offering of an aggregate of (i) 53,637 shares of common stock, of the Company, at a public offering price of $7.50 per share and (ii) pre-funded warrants to purchase 713,030 shares of common stock at an exercise price of $0.025 per share, at a public offering price of $7.48 per pre-funded warrant (the “Offering”). The Offering closed on March 13, 2025. We received gross proceeds of approximately $5.7 million and net proceeds of approximately $5.0 million, reflecting approximately $0.7 million of legal costs and other expenses connected with the Offering. + +30 +--- + +On June 20, 2025, we consummated a private placement of an aggregate of (i) 21,924 shares of common stock, of the Company, at a purchase price of $3.60 per share and (ii) pre-funded warrants to purchase 1,158,953 shares of common stock at an exercise price of $0.001 per share, at a purchase price of $3.599 per pre-funded warrant. The private placement closed on June 24, 2025. We received gross proceeds of approximately $4.3 million and net proceeds of approximately $3.9 million, reflecting approximately $0.4 million of legal costs and other expenses connected with the private placement. + +On November 3, 2025, the Company entered into a securities purchase agreement with the purchaser, pursuant to which the Company agreed to issue and sell to the purchaser in a private placement transaction (the “November 2025 Offering”) a pre-funded warrant to purchase up to 625,156 shares of common stock of the Company, par value $0.00001 per share for aggregate gross proceeds of approximately $2.5 million, before deducting placement agent fees to WestPark Capital, Inc. and offering expenses payable by the Company. The November 2025 Offering closed on November 4, 2025. The Company intends to use the net proceeds from the November 2025 Offering for marketing, general corporate purposes and working capital purposes. + +**Balance Sheet Data:** + +**** + +| | September 30,| | | December 31,| | | | | | | +---|---|---|---|---|---|---|---|---|---|---|---|--- +| | 2025| | | 2024| | | Change| | | %| +Current assets| | $| 3,265,913| | | $| 2,210,917| | | $| 1,054,996| | | | 48| % +Current liabilities| | | 1,964,910| | | | 1,533,769| | | | 431,141| | | | 28| % +Working capital| | $| 1,301,003| | | $| 677,148| | | $| 623,855| | | | 92| % + +As of September 30, 2025, total current assets were $3.3 million and total current liabilities were $2.0 million, resulting in working capital of $1.3 million. As of December 31, 2024, total current assets were $2.2 million and total current liabilities were $1.5 million, resulting in a working capital of $0.7 million. The Company’s current assets as of September 30, 2025 are comprised of $2.1 million of cash and cash equivalents and $1.2 million of prepaid expenses and other current assets, with the increase from December 31, 2024 being primarily due to the March 2025 equity raise that provided $5.0 million in net cash and the June 2025 private placement that provided $3.9 million in net cash. + +In addition, we continued progress on our R&D programs during the nine months ended September 30, 2025 that resulted in increased cash expenditures. The Company’s current liabilities as of September 30, 2025 are primarily comprised of $1.5 million of accounts payable and accrued expenses and $0.4 million of convertible notes payable carried at fair value. The increase in current liabilities is primarily due to an increase in accounts payable and accrued expenses of $0.9 million, partially offset by a $0.1 million decrease in convertible notes payable and a $0.2 million decrease in notes payable to related parties. This is primarily attributable to our efforts to preserve cash while we strive to raise funds to finance ongoing business and operations. + +**_Cash Flows_** + +**__** + +| | Nine Months Ended| | | | | | | +---|---|---|---|---|---|---|---|---|--- +| | September 30,| | | Change| | | %| +| | 2025| | | 2024| | | | | | | +Cash used in operating activities| | $| (8,508,633| )| | $| (4,637,068| )| | $| (3,871,565| )| | | 83| % +Cash provided by investing activities| | $| —| | | $| 2,915,765| | | $| (2,915,765| )| | | 100| % +Cash provided by (used in) financing activities| | $| 8,683,132| | | $| (698,457| )| | $| 9,381,589| | | | (1343| )% +Cash and cash equivalents on hand| | $| 2,094,643| | | $| 156,656| | | $| 1,937,987| | | | 1237| % + +**_Cash Flows from Operating Activities_** + +Our cash flows from operating activities are greatly influenced by our use of cash for operating expenses and working capital requirements to support the business. We have historically experienced negative cash flows from operating activities as we invested in research and development activities. The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges, which are generally attributable to stock-based compensation, changes in fair value of our derivative liabilities, changes in fair value of our convertible notes, and amortization of debt discounts and finance fees, as well as changes in components of operating assets and liabilities, which are generally attributable to increased expenses and timing of vendor payments. + +During the nine months ended September 30, 2025, net cash used in operating activities of $8.5 million was primarily due to our net loss of $9.1 million, change in fair value of convertible notes of $0.1 million, and interest payments on convertible notes accounted for at fair value of $0.1 million, partially offset by stock-based compensation of $0.7 million. + +During the nine months ended September 30, 2024, net cash flows used in operating activities was $4.6 million, consisting of a net loss of $7.5 million and change in fair value of derivative liabilities of $0.3 million, partially offset by loss on settlement of convertible debt of $0.8 million, amortization of debt discount and finance fees of $1.1 million, accrued interest settled with common stock of $0.1 million, stock-based compensation of $0.2 million, and the net change in operating assets and liabilities of $1.1 million. + +**_Cash Flows from Investing Activities_** + +For the nine months ended September 30, 2025, we did not have cash flows from investing activities. For the nine months ended September 30, 2024, cash provided by investing activities was primarily attributable to $3.0 million in proceeds from the disposition of marketable securities. + +**_Cash Flows from Financing Activities_** + +For the nine months ended September 30, 2025, cash flows from financing activities was primarily comprised of proceeds of $5.4 million from the sale of common stock and pre-funded warrants as part of the March 2025 equity financing, net of placement agent costs of $0.3 million, and proceeds of $4.1 million, from the sale of common stock and pre-funded warrants as part of the June 2025 equity financing, net of placement agent costs of $0.2 million, partially offset by $0.6 million of payments of other issuance costs for issuance of common stock and equity-classified warrants in the March 2025 and June 2025 equity financings, $0.1 million for finance costs, and $0.2 million of repayment of note payable-related party used to finance our ongoing operations. For the nine months ended September 30, 2024, we paid $0.8 million related to payments on a convertible note and $0.1 million for finance costs. + +31 +--- + +**Off-Balance Sheet Arrangements** + +We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. + +**Critical Accounting Policies and Significant Judgments and Estimates** + +This discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While the significant accounting policies are described in more detail in the notes to the unaudited condensed consolidated financial statements included elsewhere in this report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. + +Our most critical accounting policies and estimates relate to the following: + +| ● | Research and Development Expenses +---|---|--- +| ● | Fair Value of Convertible Notes +| ● | Fair Value of Warrant to Purchase Common Stock +| ● | Fair Value of Derivative Financial Instruments + +_Research and Development Expense_ + +Research and development expenses are charged to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, which may include portions of the Company’s executives to the extent they are actively involved in the research and development activities, materials, supplies, related subcontract expenses, and consulting costs. The periods presented include a portion of the Company’s former chief executive officer (prior to his transition to chief scientific officer), former chief operating officer, former vice president regulatory (formerly the chief financial officer) and directors’ compensation, prior to the individuals’ departures from the Company. + +_Fair Value of Convertible Notes_ + +__ + +As permitted under ASC 825, Financial Instruments (“ASC 825”), we elected the fair value option to account for the October 2024 Convertible Bridge Notes. In prior periods, the valuation of the October 2024 Convertible Bridge Notes utilized a Monte Carlo simulation model. Monte Carlo simulation models require the use of simulations that are weighted based on projected future stock prices, the volatility of a set of guideline companies and significant unobservable inputs including probabilities assigned to not achieving a successful capital raise and a registration of related securities. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. + +The significant inputs and assumptions used to estimate the fair value also include: (i) the expected timing of conversion, (ii) the amount subject to equity conversion, (iii) the sum of the notes’ principal and unpaid accrued interest, (iv) expected volatility, (v) risk-free interest rate, (vi) the discount rate, (vii) volume-weighted average price (“VWAP”), (viii) illiquidity discounts, and (ix) probabilities assigned. + +In the current reporting period, the Company calculated the fair value of the October 2024 Convertible Bridge Notes assuming a mandatory conversion due to the relatively short duration between the balance sheet date and the maturities in October 2025. The fair value was determined by calculating the number of shares into which the October 2024 Convertible Bridge Notes will convert in a mandatory conversion scenario, multiplied by the fair value per share of the Company’s common stock at the balance sheet date. + +32 +--- + +The October 2024 Convertible Bridge Notes are subject to revaluation at the end of each reporting period, with changes in fair value recognized in the accompanying unaudited condensed consolidated statements of operations, or for changes due to our credit worthiness, if any, as a component of other comprehensive income. + +__ + +_Fair Value of Warrants to Purchase Common Stock_ + +We have issued warrants to investors in our debt and equity offerings. We have also issued warrants to service providers in relation to our financing offerings. + +We evaluate all warrants issued to determine the appropriate classification under ASC 480 and ASC 815 (as well as under ASC 718 for warrants issued as share-based payments). In addition to determining classification, we evaluate these instruments to determine if such instruments meet the definition of a derivative. + +For warrants that are determined to be equity-classified, we estimate the fair value at issuance and record the amounts to additional paid in capital (potentially on a relative fair value basis if issued in a basket transaction with other financial instruments). Warrants that are equity-classified are not subsequently remeasured unless modified or required to be reclassified as liabilities. For warrants that are determined to be liability-classified, we estimate the fair value at issuance and each subsequent reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. The classification of all outstanding warrants, including whether such instruments should be recorded as equity, is evaluated at the end of each reporting period. + +For warrants with uncertain or more complex terms (such as variability in the warrant shares or exercise price), we may utilize more complex models to address such provisions, including Monte Carlo simulations or Probability-Weighted Expected Return Methods (“PWERM”). Monte Carlo simulation models require the use of simulations that are weighted based on projected future stock prices, the volatility of a set of guideline companies and significant unobservable inputs including probabilities assigned. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. PWERM models require the estimate of an entity’s per share value of its common stock at various future outcomes and assigns a probability to each scenario. The value per share is then weighted based on the respective probabilities to determine a weighted-average expected return. + +The use of these valuation models requires the input of highly subjective assumptions. Any change to these inputs could produce significantly higher or lower fair value measurements. + +__ + +_Fair Value of Financial Instruments_ + +We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, such as the Acceleration Option in the Alto warrants (as defined in Note 5). For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities are evaluated at the end of each reporting period. + +For our derivative financial instruments classified as a liability, we use a Monte Carlo valuation model to value the derivative instruments at inception and on subsequent valuation dates. The model requires the use of simulations that are weighted based the volatility of a set of guideline companies and significant unobservable inputs including probabilities assigned. Each simulation is based on the range of inputs in a scenario with the mean of the output on each simulation calculated as an average. The Monte Carlo simulation uses an implied VWAP for valuation. The implied VWAP was back solved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds and is updated each period. + +The use of Monte Carlo valuation models require key inputs, some of which are based on estimates and judgments by management. Any change to these key inputs could produce significantly higher or lower fair value measurements. + +33 +--- + +**Item 3\. Quantitative and Qualitative Disclosures About Market Risk** + +As a “smaller reporting company,” we are not required to provide the information required by this Item. + +**Item 4\. Controls and Procedures** + +Evaluation of Disclosure Controls and Procedures + +Disclosure controls and procedures (as defined in Securities Exchange Act of 1934, as amended, or the Exchange Act Rule 15d-15(e)) are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. + +As of September 30, 2025, our management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Such evaluation was carried out under the supervision of our Chief Executive Officer and our Chief Financial Officer, and our third-party financial service provider. Based on this evaluation, management concluded that our disclosure controls and procedures were, and continue to be, ineffective as of September 30, 2025. Based on the foregoing, our management concluded that our internal controls over the following financial reporting areas to be material weaknesses: + +● | Our written policies and procedures over accounting transaction processing and period end financial close and reporting are limited, which has resulted in ineffective oversight in the establishment of proper monitoring controls over accounting and financial reporting; in addition, we lacked sufficient review and segregation of duties for certain financial transactions, manual journal entries, and critical financial spreadsheets, such that a proper review had not been performed by someone other than preparer, and that process documentation is lacking for review and monitoring controls over accounting and financial reporting. These were contributing factors which led to untimely filings for certain periods in fiscal year 2024. +---|--- +| +● | We identified findings related to overall information technology general controls (“ITGCs”) including issues with super-user access and segregation of duties for systems supporting the Company’s internal control processes and controls. +| +● | We identified deficiencies in our entity level controls specifically related to timely communication of material contracts and other communications for consideration in the Company’s accounting and financial reporting processes. + +Management’s Remediation Measures + +While the Company has improved its organizational capabilities, the Company’s remediation efforts will continue to take place. Management is committed to maintaining a strong internal control environment. In response to the identified material weaknesses in the overall control environment, management is currently implementing additional measures which include: + +● | Hired a new Chief Financial Officer during the second quarter of 2024 to bolster the Company’s internal technical accounting and financial reporting experience and provide bandwidth for the prior Chief Financial Officer to focus on the Company’s expanding clinical trial. +---|--- +| +● | Engaged a third-party consulting firm to assist with the preparation of SEC reporting and other technical accounting matters. +| +● | Redesigned and implemented certain management review controls around the proper classification of operating expenses as research and development and general and administrative. +| +● | Redesigned and implemented formal communication by the Compensation Committee to and review of approved grants by executive management. +| +● | Committed to more formal and disciplined approach to significant actions and decisions made by the Board with the inclusion of the Company’s Chief Financial Officer. + +The Company will continue to review and improve its internal controls over financial reporting to address the underlying causes of the material weaknesses and control deficiencies. Such material weaknesses and control deficiencies will not be fully remediated until the Company has concluded that its internal controls are operating effectively for a sufficient period of time. + +Changes in Internal Control over Financial Reporting + +Except for the remediation efforts described above, there has been no change in the Company’s internal control over financial reporting during the three months ended September 30, 2025 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional improvements as necessary. + +34 +--- + +**PART II - OTHER INFORMATION** + +**Item 1\. Legal Proceedings.** + +We are not party to, and our property is not the subject of, any material legal proceedings. + +**Item 1A. Risk Factors.** + +As a smaller reporting company, we are not required to provide the information required by this item. + +**Item 2\. Unregistered Sales of Equity Securities and Use of Proceeds.** + +None. + +**Item 3\. Defaults Upon Senior Securities.** + +None. + +**Item 4\. Mine Safety Disclosures.** + +Not applicable. + +**Item 5\. Other Information.** + +During the quarter ended September 30, 2025, none of our directors or executive officers adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each item is defined Item 408(a) of Regulation S-K). + +**Item 6\. Exhibits.** + +The following exhibits are filed or furnished with this report: + +**Exhibit No.** | | **Description of Exhibit** +---|---|--- +10.1 | | [The Consulting Agreement, dated September 15, 2025, between Shuttle Pharmaceuticals Holdings, Inc. and IR Agency LLC (incorporated by reference to the Current Report on Form 8-K filed on September 22, 2025).]() +31.1 | | [Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*]() +31.2 | | [Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*]() +32.1 | | [Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **]() +32.2 | | [Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **]() +101 | | Inline XBRL Document Set for the financial statements and accompanying notes in Part I, Item 1, of this Quarterly Report on Form 10-Q. +104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) + +* Filed herewith. + +**Furnished herewith. + +35 +--- + +**SIGNATURES** + +Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. + +| **SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** +---|--- +| | +November 13, 2025 | By: | _/s/ Christopher Cooper_ +| | Christopher Cooper +| | Interim Chief Executive Officer +| | (Principal Executive Officer) +| | +November 13, 2025 | By: | _/s/ Timothy J. Lorber_ +| | Timothy J. Lorber Chief Financial Officer +| | (Principal Financial and Accounting Officer) + +36 +--- diff --git a/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 8-K. 2022-09-02 (0001493152-22-025074).md b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 8-K. 2022-09-02 (0001493152-22-025074).md new file mode 100644 index 0000000000000000000000000000000000000000..fe11d3316ac82ae2b0ead8071effc96dd4cdfd03 --- /dev/null +++ b/data/filings/SHPH/Shuttle Pharmaceuticals Holdings, Inc. (SHPH) - Form 8-K. 2022-09-02 (0001493152-22-025074).md @@ -0,0 +1,99 @@ +8-K 1 form8-k.htm + +**UNITED STATES** + +**SECURITIES AND EXCHANGE COMMISSION** + +**Washington, D.C. 20549** + +**FORM 8-K** + +**CURRENT REPORT** + +**Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934** + +Date of report (date of earliest event reported): **September 2, 2022** + +**SHUTTLE PHARMACEUTICALS HOLDINGS, INC.** + +(Exact name of registrant as specified in its charter) + +_Delaware_ | | _2834_ | | _82-5089826_ +---|---|---|---|--- +(State of Incorporation) | | (Primary Standard Industrial Classification Code Number.) | | (IRS Employer Identification No.) + +SHUTTLE PHARMACEUTICALS HOLDINGS, INC. + +One Research Court, Suite 450 + +_Rockville, Maryland 20850_ + +(Address Of Principal Executive Offices) (Zip Code) + +_240-430-4212_ + +(Registrant’s Telephone Number, Including Area Code) + +Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: + +☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) +---|--- +| +☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) +| +☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) +| +☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) + +Securities registered pursuant to Section 12(b) of the Act: + +Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered +---|---|---|---|--- +Common Stock $0.00001 per share | | SHPH | | The Nasdaq Stock Market LLC + +Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). + +Emerging growth company ☒ + +If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ + +--- + +**Item 1.01** | **Entry into a Material Definitive Agreement.** +---|--- + +On September 2, 2022, Shuttle Pharmaceuticals Holdings, Inc., a Delaware corporation (the “Company”), in accordance with the terms of a previously disclosed underwriting agreement (the “Underwriting Agreement”) with Boustead Securities, LLC, a Delaware limited liability company (“Boustead”), closed on a firm commitment initial public offering (“IPO”) pursuant to which Boustead purchased a total of 1,225,888 units (the “Units”), with each Unit consisting of (i) one share of common stock of the Company, par value $0.00001 per share (the “Common Stock”), and (ii) one warrant (“Warrant”) to purchase one share of Common Stock, at a public offering price of $8.125 per Unit. The Warrants were exercised simultaneously with closing. In addition, in accordance with the terms of the Underwriting Agreement, the Company granted the underwriters a 45-day option to purchase up to an additional 183,883 Units at the public offering price less discounts and commissions. Boustead acted as lead underwriter and Valuable Capital, Ltd., a Hong Kong company (“Valuable”), acted as co-underwriter for the IPO. Gross proceeds, before underwriting discounts and commissions and estimated offering expenses, were $9,960,340. + +The Offering was conducted pursuant to the Company’s registration statement on Form S-1, as amended from time to time (File No. 333-265429), previously filed with and subsequently declared effective by the Securities and Exchange Commission (“SEC”) on August 29, 2022\. A prospectus relating to the IPO was filed with the SEC and is available on the SEC’s website at http://www.sec.gov. Electronic copies of the prospectus relating to the IPO may be obtained from Boustead Securities, LLC, 6 Venture, Suite 395, Irvine, California 92618, at 949-502-4408. + +On September 6, 2022, the Company issued a press release announcing the closing. A copy of the press release is filed herewith as Exhibit 99.1. + +**Item** **9.01** | **Financial Statements and Exhibits.** +---|--- + +(d) | Exhibits +---|--- + +Exhibit No. | | Description +---|---|--- +| | +99.1 | | [Press Release, dated September 6, 2022.]() + +--- + +**** + +**SIGNATURES** + +Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. + +Dated: September 6, 2022 | +---|--- +| +SHUTTLE PHARMACEUTICALS HOLDINGS, INC. | +| | +By: | _/s/ Anatoly Dritschilo_ | +Name: | **Anatoly Dritschilo** | +Title: | **Chief Executive Officer** | + +---