Company: SXTPW
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-043779
Chunk: 105

Company: 60 DEGREES PHARMACEUTICALS, INC.
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 8
Chunk 105
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, which consisted of  principal and accumulated interest. As a result
of the completion of the IPO, the cumulative outstanding principal as of March 31, 2022 converted to 18,473 shares of common stock (representing
19.9% ownership of the Company’s common stock after giving effect to the IPO), and the entirety of the accumulated interest as
of March 31, 2022 converted into 80,965 shares of Series A Preferred Stock, in full satisfaction of the Company’s obligations with
respect to the outstanding principal and accumulated interest.

●The Parties agreed that the
Company will make a milestone payment of $10 million to Knight if, after the IPO, the Company sells Arakoda™ or if a Change of
Control (as per the definition included in the original loan agreement dated on December 10, 2015) occurs, provided that the purchaser
of Arakoda™ or individual or entity gaining control of the Borrower is not the Lender or an affiliate of the Lender.

●For the period ending upon
the earlier of (i) 10 years after the closing of the IPO, or (ii) the conversion or redemption in full of the Series A Preferred Stock,
the Company will pay to Knight a royalty equal to 3.5% of the Company’s net sales (the “Royalty”) on a quarterly basis,
where “Net Sales” has the same meaning as in the Company’s license agreement with the U.S. Army for tafenoquine.

Upon consummation of the IPO, the Company concluded
that the contingent milestone payment is a freestanding financial instrument that meets the definition of a derivative under ASC 815,
and accordingly, the fair value of the derivative liability is marked to market each reporting period until settled. The Royalty due to
Knight was determined to be an embedded component of the Series A Preferred Stock, however, is exempt from derivative accounting under
the ASC 815 scope exception for specified volumes of sales or service revenues. Therefore, the Company accrues a royalty expense as sales
are made.

The valuation of the contingent milestone payment
includes significant unobservable inputs such as the timing and probability of discrete potential exit scenarios, forward interest rate
curves, and discount rates based on implied and market yields.

A reconciliation of the beginning and ending balances
for the derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows
for the three months ended March 31