Shuttle Pharmaceuticals Holdings Inc

Previous wording

The following Management’s Discussion and Analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Annual Report. The Management’s Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Annual Report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors including, but not limited to, those noted under “Risk Factors” in this Annual Report.

Current wording

The following Management’s Discussion and Analysis should be read in conjunction with our unaudited financial statements and the related notes thereto included elsewhere in this quarterly report, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 21, 2024. The Management’s Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this quarterly report. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors including, but not limited to, those noted under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and in subsequent reports that we file with the U.S. Securities and Exchange Commission (the “SEC”).

Previous wording

Founded by Georgetown University Medical School faculty members, Shuttle Pharmaceuticals Holdings, Inc. is a discovery and development stage pharmaceutical company leveraging our proprietary technology to develop novel therapies that are designed to cure cancer. Originally formed as Shuttle Pharmaceuticals, LLC in 2012, our goal is to extend the benefits of cancer treatments by leveraging insights into cancer therapy with surgery, radiation therapy, chemotherapy and immunotherapy. While there are several therapies being developed with the goal of curing cancer, one of the most effective and proven approaches to this is radiation therapy (RT). We are developing a pipeline of products designed to address the limitations of the current standard of cancer therapies. We believe that our product candidates will enable us to deliver cancer treatments that are safer, more reliable and at a greater scale than that available with the current standard of care.

Current wording

Founded by Georgetown University Medical School faculty members, Shuttle Pharmaceuticals Holdings, Inc. (“Shuttle” or the “Company”) is a discovery and development stage pharmaceutical company leveraging our proprietary technology to develop novel therapies that are designed to cure cancer. Originally formed as Shuttle Pharmaceuticals, LLC in 2012, our goal is to extend the benefits of cancer treatments by leveraging insights into cancer therapy with surgery, radiation therapy, chemotherapy and immunotherapy. While there are several therapies being developed with the goal of curing cancer, one of the most effective and proven approaches to this is radiation therapy (RT). We are developing a pipeline of products designed to address the limitations of the current standard of cancer therapies. We believe that our product candidates will enable us to deliver cancer treatments that are safer, more reliable and at a greater scale than that available with the current standard of care.

Previous wording

Operations to date have focused on continuing our research and development efforts to advance Ropidoxuridine clinical testing and improved drug formulation, to advance HDAC6 inhibitor (SP-2-225) preclinical development and explore new SBIR contract work on predictive biomarkers of radiation response, as well as prostate cell lines for health disparities research. We have received Small Business Innovation Research (“SBIR”) contract funding from the National Institutes of Health (“NIH”) for the aforementioned projects. The clinical development of Ropidoxuridine has shown drug bioavailability and a maximum tolerated dose has been established for use in Phase II clinical trials. TCG GreenChem, Inc. (“TCG GreenChem”), with whom we have contracted for process research, development and cGMP compliant manufacture of IPdR, has successfully completed the manufacturing campaign for the active pharmaceutical ingredient (API) of Ropidoxuridine for use in the Company’s upcoming Phase II clinical trial in brain cancer patients undergoing radiation therapy. Shuttle also worked with University of Iowa Pharmaceuticals to develop the formulation and produce the capsules, which have been shipped to contract research organization (CRO) Theradex Oncology for distribution to clinical trial sites. Both activities have now been completed. In addition, Shuttle received approval from the FDA to begin the clinical trial. The FDA made recommendations to expand the clinical trial and we agreed with the recommendation. Meetings with clinical sites to review the protocol documents have occurred and FDA required Institutional Review Board approval has been received from the central internal review board, or IRB. With FDA recommended changes incorporated into the revised protocol, the Company believes it remains on track to commence its Phase II clinical study in the second quarter of 2024. The radiation biomarker project and the health disparities project have been completed and the company is following up with plans for clinical validation and potential commercialization. Changes in operational, administrative, legal and professional expenses related to our operations are set forth in more detail in the discussion below.

Current wording

Operations to date have focused on continuing our research and development efforts to advance Ropidoxuridine clinical testing and improved drug formulation, to advance HDAC6 inhibitor (SP-2-225) preclinical development and explore new Small Business Innovation Research (SBIR) contract work on predictive biomarkers of radiation response, as well as prostate cell lines for health disparities research. We have received SBIR contract funding from the National Institutes of Health (“NIH”) for the aforementioned projects. The clinical development of Ropidoxuridine has shown drug bioavailability and a maximum tolerated dose has been established for use in Phase 2 clinical trials. TCG GreenChem, Inc. (“TCG GreenChem”), with whom we have contracted for process research, development and cGMP compliant manufacture of IPdR, has successfully completed the manufacturing campaign for the active pharmaceutical ingredient (API) of Ropidoxuridine for use in the Company’s upcoming Phase 2 clinical trial in brain cancer patients undergoing radiation therapy. Shuttle has also worked with University of Iowa Pharmaceuticals to develop the formulation and produce the capsules, which have been shipped to contract research organization (CRO) Theradex Oncology for distribution to clinical trial sites. Both activities have now been completed. In addition, Shuttle received approval from the FDA to begin the clinical trial. The FDA made recommendations to expand the clinical trial and we agreed with the recommendation. Meetings with clinical sites to review the protocol documents have occurred and FDA required Institutional Review Board approval has been received from the central internal review board, or IRB. With FDA recommended changes incorporated into the revised protocol, the Company believes it remains on track to commence the Phase 2 clinical study in the second quarter of 2024. The radiation biomarker project and the health disparities project have each been completed and the company is following up with plans for clinical validation and potential commercialization. Changes in operational, administrative, legal and professional expenses related to our operations are set forth in more detail in the discussion below.

Previous wording

Research and Development. Research and development (“R&D”) expense was $0.6 million for the three months ended March 31, 2024, as compared to $0.9 million for three months ended March 31, 2023. The decrease of $0.3 million, or 36%, is primarily related to the Company having completed production of the drug product and waiting for the initiation of trials.

Current wording

Research and Development. Research and development (“R&D”) expense was $0.6 million for the three months ended June 30, 2024, as compared to $0.8 million for three months ended June 30, 2023. The decrease of $0.2 million, or 23%, is primarily related to the Company having completed production of the drug product and waiting for the initiation of trials.

Previous wording

R&D compensation related expenses were $0.3 million in the three months ended March 31, 2024 as compared to $0.6 million in the three months ended March 31, 2023. Compensation related expenses were 56% for the three months ended March 31, 2024, representing a decrease from 61% of total R&D in the three months ended March 31, 2023. Subcontract work made up 34% of total R&D expenses in the three months ended March 31, 2024 and 37% of total R&D expenses during the three months ended March 31, 2023.

Current wording

R&D compensation related expenses were $0.3 million in the three months ended June 30, 2024 as compared to $0.3 million in the three months ended June 30, 2023. Compensation related expenses were 48% for the three months ended June 30, 2024, representing an increase from 39% of total R&D in the three months ended June 30, 2023. Subcontract work made up 42% of total R&D expenses in the three months ended June 30, 2024 and 56% of total R&D expenses during the three months ended June 30, 2023.

Previous wording

General and Administrative Expenses. General and Administrative expenses in the three months ended March 31, 2024 increased by $0.1 million, or 27% to $0.3 million in the three months ended March 31, 2024. The increase in general and administrative expenses was primarily due to a restricted stock-based grant to an officer of the Company valued at $41,840.

Current wording

General and Administrative Expenses. General and Administrative expenses in the six months ended June 30, 2024 increased by $0.2 million, or 37% to $0.6 million in the six months ended June 30, 2024. The increase in general and administrative expenses was primarily due to a restricted stock-based grant to an officer of the Company valued at $42 thousand, and increases in marketing, advertising and filing expenses.

Previous wording

Legal and Professional Expenses. During the three months ended March 31, 2024, legal and professional expenses increased by $0.1 million or 29%. The increase in legal and professional fees was primarily due to increases in our expenses related to our public filing requirements, contracts and financing related work.

Current wording

Legal and Professional Expenses. During the six months ended June 30, 2024, legal and professional expenses increased by $0.2 million or 28%. The increase in legal and professional fees was primarily due to increases in our expenses related to our public filing requirements, contracts and financing related work.

Previous wording

Other Income Expense. Other expense was $0.3 million for the three months ended March 31, 2024, which consisted of $0.5 million in interest expense on convertible loans, interest income of $21 thousand, loss on settlement of convertible debt of $71 thousand, change in marketable securities of $4 thousand, and a gain on change in fair value of derivative liabilities of $0.2 million. Other income was $0.6 million for the three months ended March 31, 2023, which consisted of $0.6 million in interest expense on convertible loans, $4 thousand in interest expense on related party loans, interest income of $17 thousand, finance fee on convertible loans of $0.1 million, loss on settlement of convertible debt of $18 thousand, unrealized gain on marketable securities of $38 thousand, and a gain on change in fair value of derivative liability of $1.2 million. The $1.0 million gain in fair value of derivative liability resulted from the fair value measurement using the Monte Carlo pricing model and the impact of the decrease in the market price of warrant shares.

Current wording

Other Income Expense. Other expense was $0.9 million for the six months ended June 30, 2024, which consisted of $0.9 million in interest expense on convertible loans, interest income of $36 thousand, loss on settlement of convertible debt of $71 thousand, change in marketable securities of $29 thousand, and a gain on change in fair value of derivative liabilities of $54 thousand. Other expense was $0.1 million for the six months ended June 30, 2023, which consisted of $1.3 million in interest expense on convertible loans, $7 thousand in interest expense on related party loans, interest income of $36 thousand, finance fee on convertible loans of $0.1 million, loss on settlement of convertible debt of $0.4 million, gain on sale of marketable securities of $2 thousand, unrealized gain on marketable securities of $12 thousand, and a gain on change in fair value of derivative liabilities of $1.7 million. The $1.7 million gain in fair value of derivative liability resulted from the fair value measurement using the Monte Carlo pricing model and the impact of the decrease in the market price of warrant shares.

Previous wording

Our condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception and had a net loss of approximately $1.7 million and no revenues for the three months ended March 31, 2024 and has working capital of approximately $2.9 million as of March 31, 2024. In addition, the convertible note payable outstanding at March 31, 2024 includes covenants and certain cash payment requirements. These conditions, and the Company’s ability to comply with such conditions, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.

Current wording

Our unaudited condensed consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred losses since inception and has a net loss of approximately $3.8 million and no revenues for the six months ended June 30, 2024 and has working capital of approximately $1.1 million as of June 30, 2024. In addition, the convertible note payable outstanding at June 30, 2024 includes covenants and certain cash payment requirements. On July 12, 2024, the Company informed the investor of its convertible note that the Company’s expected restatement of its financial statements for the years ended December 31, 2022 and 2023 constituted an event of default under the terms of the convertible note. On August 6, 2024, the Company paid $0.6 million to the investor of the convertible note and received a waiver from the investor related to the default. The funds paid are restricted and will be held as collateral to the balance owed under the convertible note (see Note 9). These conditions, and the Company’s ability to comply with such conditions, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements are issued.

Previous wording

In September 2022, the Company completed its IPO, generating net proceeds of approximately $10.0 million. Additionally, in January 2023, the Company entered into a securities purchase agreement with an institutional investor through which the Company sold a convertible note with a principal value of $4.3 million, along with a four-year warrant to purchase 1,018,079 shares of common stock, exercisable at $2.35 per share, providing the Company with approximately $3.6 million in net proceeds. To date, the warrant has not yet been exercised. However, the Company’s existing cash resources, marketable securities and the cash received from the equity offering and convertible note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months.

Current wording

In January 2023, the Company entered into a securities purchase agreement with an institutional investor through which the Company sold a convertible note with a principal value of $4.3 million, along with a four-year warrant to purchase 127,260 shares of common stock, exercisable at $18.80 per share, providing the Company with approximately $3.6 million in net proceeds. To date, the warrant has not yet been exercised. However, the Company’s existing cash resources, marketable securities and the cash received from the equity offering and convertible note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months.

Previous wording

The IPO and subsequent capital raise have supported operations leading up to the manufacture of drug product and FDA approval of the IND for the Phase II clinical trial of Ropidoxuridine and radiation therapy in glioblastoma. The FDA recommended and the Company agreed to an expansion of the clinical trial, necessitating additional capital to complete the trial as well as fund ongoing operations. As a result, management is in the process of initiating a $4.5 million rights offering and has submitted an application for a Small Business Innovation Research (“SBIR”) grant for non-dilutive funding for pre-clinical project through the National Institutes of Health (“NIH”). The ability of the Company to continue as a going concern is dependent upon its ability to successfully raise additional equity or debt financing to allow it to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues.

Current wording

The IPO and subsequent capital raise have supported operations, the manufacture of drug product and FDA approval of the IND for the Phase 2 clinical trial of Ropidoxuridine and radiation therapy in glioblastoma. The FDA recommended and the Company agreed to an expansion of the clinical trial, necessitating additional capital to complete the trial as well as fund ongoing operations. As a result, management has submitted an application for a SBIR grant for non-dilutive funding for pre-clinical project through the NIH. The Phase II clinical trial was also approved by the Institutional Review Board “IRB” in June, 2024. In August 2024, the Company took action to pursue a separate capital raise of up to $10.0 million and entered into a work order with a contract research organization (“CRO”) for purposes of supporting the Company’s Phase II Study of Ropidoxuridine. Under the terms of the work order, the CRO will oversee the studies for a period of 53 months in exchange for a fee of approximately $2.3 million, payable in stages and based upon services performed during the study. The ability of the Company to continue as a going concern is dependent upon its ability to successfully raise additional equity or debt financing to allow it to fund ongoing operations, conduct clinical trials and bring a drug candidate to commercialization to generate revenues.

Previous wording

The accompanying condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company is unable to continue as a going concern.

Current wording

The accompanying unaudited condensed consolidated financial statements do not include any adjustments to reflect the future effects on the recoverability and classification of assets or the amounts and classification of liabilities if the Company is unable to continue as a going concern.

Previous wording

As of March 31, 2024, total current assets were $4.4 million and total current liabilities were $1.5 million, resulting in working capital of $2.9 million. As of December 31, 2023, total current assets were $5.6 million and total current liabilities were $1.0 million, resulting in a working capital of $4.6 million. As of March 31, 2024, the current assets primarily resulted from $1.4 million cash and $2.8 million marketable securities, with the decrease from December 31, 2023 being primarily due to ongoing cash burn from our R&D programs, filing expenses and general operations. The increase in current liabilities is primarily due to the current portion of the $4,300,000 convertible note and accrued interest that increased $0.4 million and an increase in accounts payable of $65 thousand.

Current wording

As of June 30, 2024, total current assets were $2.5 million and total current liabilities were $1.4 million, resulting in working capital of $1.1 million. As of December 31, 2023, total current assets were $5.6 million and total current liabilities were $1.0 million, resulting in a working capital of $4.6 million. As of June 30, 2024, the current assets primarily resulted from $0.7 million cash and $1.6 million marketable securities, with the decrease from December 31, 2023 being primarily due to ongoing cash burn from our R&D programs, filing expenses and general operations. The increase in current liabilities is primarily due to the current portion of the $1.0 million convertible note and accrued interest that increased $0.3 million and an increase in accounts payable of $82 thousand.

Previous wording

To date, we have not generated positive cash flows from operating activities. For the three months ended March 31, 2024, net cash flows used in operating activities was $1.2 million, consisting of a net loss of $1.7 million, increased by a gain on change in derivative liabilities of $0.2 million, offset by amortization of debt discount of $0.4 million, loss on settlement of convertible debt of $71 thousand, accrued interest settled with common stock of $19 thousand, stock-based compensation of $111 thousand and increased by a net change in working capital of $50 thousand. For the three months ended March 31, 2023, net cash flows used in operating activities was $1.3 million, consisting of a net loss of $1.0 million, increased by a gain on change in derivative liability of $1.2 million, offset by amortization of debt discount of $0.6 million, and further reduced by a net change in working capital of $0.3 million.

Current wording

To date, we have not generated positive cash flows from operating activities. For the six months ended June 30, 2024, net cash flows used in operating activities was $2.6 million, consisting of a net loss of $3.8 million, increased by a gain on change in derivative liabilities of $54 thousand, offset by amortization of debt discount of $0.8 million, loss on settlement of convertible debt of $71 thousand, accrued interest settled with common stock of $19 thousand, stock-based compensation of $183 thousand and increased by a net change in working capital of $85 thousand. For the six months ended June 30, 2023, net cash flows used in operating activities was $3.0 million, consisting of a net loss of $3.2 million, increased by a gain on change in derivative liabilities of $1.7 million, offset by amortization of debt discount of $1.1 million, loss on settlement of convertible debt of $0.4 million, accrued interest settled with common stock of $0.2 million, stock-based compensation of $58 thousand and further reduced by a net change in working capital of $12 thousand.

Previous wording

For the three months ended March 31, 2024, we invested in trading marketable securities for $19 thousand and received $120 thousand in proceeds from disposition of marketable securities. For the three months ended March 31, 2023, we invested in trading marketable securities for $3.0 million.

Current wording

For the six months ended June 30, 2024, we invested in trading marketable securities for $36 thousand and received $1.3 million in proceeds from disposition of marketable securities. For the six months ended June 30, 2023, we invested in trading marketable securities for $3.0 million and received $80 thousand in proceeds from disposition of marketable securities.

Previous wording

For the three months ended March 31, 2024, we paid $40,000 related to financing activities. For the three months ended March 31, 2023, we received a net of $3,590,000 from the sale and issuance of convertible notes payable and warrants and repaid $546,244 in related party notes payable.

Current wording

For the six months ended June 30, 2024, we paid $0.5 million related to payments on a convertible note. For the six months ended June 30, 2023, we received a net of $3.6 million from the sale and issuance of a convertible note payable and warrants and repaid $0.7 million in related party notes payable.

Previous wording

This discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our condensed consolidated financial statements included elsewhere in this report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Current wording

This discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our unaudited condensed consolidated financial statements included elsewhere in this report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Previous wording

We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. 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 condensed 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.

Current wording

We evaluate all of our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. 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 unaudited condensed 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.

Previous wording

The use of Monte Carlo valuation models require key inputs, some of which are based on estimates and judgements by management and/or external consultants. Any change to these key inputs could produce significantly higher or lower fair value measurements.

Current wording

The use of Monte Carlo valuation models require key inputs, some of which are based on estimates and judgements by management. Any change to these key inputs could produce significantly higher or lower fair value measurements.