Company: SHPH
Filing Date: 2025-02-26
Form Type: 10-K
Source: 0001493152-25-008300
Chunk: 103

Company: Shuttle Pharmaceuticals Holdings, Inc.
Filing Date: 2025-02-26
Form: 10-K
Item: Item 1
Chunk 103
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 expenses are expensed as incurred, net of contract expense reimbursements, if applicable. Research and development expenses
include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, and are
subject to allocation.

Fair
Value of Convertible Notes

As
permitted under ASC 825, Financial Instruments (“ASC 825”), the Company 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 Consolidated Statement of Operations, or for
changes due to the Company’s credit worthiness, if any, as a component of other comprehensive income.

Fair
Value of Warrants to Purchase Common Stock

The
Company has issued warrants to investors in our debt and equity offerings. The Company has also issued warrants to service providers
in relation to our financing offerings.

64

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