Company: SHPH
Filing Date: 2025-02-26
Form Type: 10-K
Source: 0001493152-25-008300
Chunk: 605

Company: Shuttle Pharmaceuticals Holdings, Inc.
Filing Date: 2025-02-26
Form: 10-K
Item: Item 2
Chunk 605
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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 Expenses

Research
and development 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.

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