Company: SHPH
Filing Date: 2025-02-26
Form Type: 10-K
Source: 0001493152-25-008300
Chunk: 606

Company: Shuttle Pharmaceuticals Holdings, Inc.
Filing Date: 2025-02-26
Form: 10-K
Item: Item 2
Chunk 606
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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 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 Convertible  Note (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
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