Company: SXTPW
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-043779
Chunk: 32

Company: 60 DEGREES PHARMACEUTICALS, INC.
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 1
Chunk 32
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, 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, 2025:

    Contingent Milestone Payment  
    Total 
  
    Derivative liabilities - December 31, 2024 
    $640,830  
    $640,830 
  
    Change in fair value 
     (5,105) 
     (5,105)
  
    Derivative liabilities - March 31, 2025 
    $635,725  
    $635,725 

19

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, 2024:

    Contingent Milestone Payment  
    Total 
  
    Derivative liabilities - December 31,