Company: SXTPW
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001013762-25-003343
Chunk: 609

Company: 60 DEGREES PHARMACEUTICALS, INC.
Filing Date: 2025-03-27
Form: 10-K
Item: Item 1C
Chunk 609
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For awards that vest upon a liquidity event or
a change in control, the performance condition is not probable of being achieved until the event occurs. As a result, no compensation
expense is recognized until the performance-based vesting condition is achieved, at which time the cumulative compensation expense is
recognized. Compensation cost related to any remaining time-based service for share-based awards after the liquidity-based event is recognized
on a straight-line basis over the remaining service period.

For fully vested, nonforfeitable equity instruments
that are granted at the date we enter into an agreement for goods or services with a nonemployee, we recognize the fair value of the
equity instruments on the grant date. The corresponding cost is recognized as an immediate expense or a prepaid asset and expensed over
the service period depending on the specific facts and circumstances of the agreement with the nonemployee.

56

Derivative Liabilities

We assess the classification of our derivative
financial instruments each reporting period, which formerly consisted of bridge shares, convertible notes payable, and certain warrants,
and determined that such instruments initially qualified for treatment as derivative liabilities as they met the criteria for liability
classification under ASC 815. As of December 31, 2024, our derivative financial instruments consist of contingent payment arrangements.

We analyze all financial instruments with features of both liabilities
and equity under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic
No. 480, Distinguishing Liabilities from Equity (“ASC 480”), and FASB ASC Topic No. 815, Derivatives and Hedging
(“ASC 815”). Derivative liabilities are adjusted to reflect fair value at each reporting period, with any increase or decrease
in the fair value recorded in the results of operations, as a component of other income or expense as change in fair value of derivative
liabilities. We use a Monte Carlo simulation model or a probability-weighted expected return method to determine the fair value of these
instruments.

Upon conversion or repayment of a debt or equity
instrument in exchange for equity shares, where the embedded conversion option has been bifurcated and accounted for as a derivative
liability (generally convertible debt and warrants), we record the equity shares at fair value on the date of conversion, relieve all
related debt, derivative liabilities, and unamortized debt discounts, and recognize a net gain or loss on debt extinguishment, if any.

Equity or liability instruments that become subject
to reclassification under ASC