Company: SHPH
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001641172-25-009325
Chunk: 11

Company: Shuttle Pharmaceuticals Holdings, Inc.
Filing Date: 2025-05-08
Form: 10-Q
Item: Item 2
Chunk 11
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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
unaudited condensed consolidated statements of operations, or for changes due to our credit worthiness, if any, as a component of other
comprehensive income.

Fair Value of Warrants to Purchase Common Stock

We have issued warrants to investors in our debt and
equity offerings. We have also issued warrants to service providers in relation to our financing offerings.

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 unaudited condensed 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.

29

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
warrants (as defined in Note 5). For derivative financial instruments that are accounted for as liabilities, the derivative instrument
is