Shuttle Pharmaceuticals Holdings, Inc.

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 the application of the PC-RAD Test, predictive biomarkers of radiation response. The clinical development of Ropidoxuridine has included completion of a Phase I clinical trial to establish drug bioavailability and a maximum tolerated dose for use in Phase II clinical trials. TCG GreenChem, with whom we have contracted for process research, development and cGMP compliant manufacture of IPdR, has manufactured the API of Ropidoxuridine and the University of Iowa Pharmaceuticals has formulated the drug product for use in our upcoming Phase II clinical trial in brain cancer patients undergoing radiation therapy. The drug product (capsules) were shipped to CRO Theradex Oncology and distributed to clinical trial sites that are fully approved to enroll patients in the trial. Shuttle received approval from the FDA to begin the clinical trial. The FDA thereafter made recommendations to expand the clinical trial to include a randomized dose “optimization” step and we agreed with the recommendation. Meetings with engaged clinical sites to review the protocol documents have occurred and FDA required IRB approvals have been received. With FDA recommended changes incorporated into the revised protocol and the completion of site initiation visits, we commenced our Phase II clinical study in October 2024. The Company’s radiation biomarker project and the health disparities project have been completed and we are proceeding with plans for clinical validation and potential for commercialization of Ropidoxuridine as a radiation sensitizer.

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 the application of the PC-RAD Test, predictive biomarkers of radiation response. The clinical development of Ropidoxuridine has included completion of a Phase I clinical trial to establish drug bioavailability and a maximum tolerated dose for use in Phase II clinical trials. TCG GreenChem, with whom we have contracted for process research, development andcGMP compliant manufacture of IPdR, has manufactured the API of Ropidoxuridine and the University of Iowa Pharmaceuticals has formulated the drug product for use in our upcoming Phase II clinical trial in brain cancer patients undergoing radiation therapy. The drug product (capsules) were shipped to CRO Theradex Oncology and distributed to clinical trial sites that are fully approved to enroll patients in the trial. Shuttle received approval from the FDA to begin the clinical trial. The FDA thereafter made recommendations to expand the clinical trial to include a randomized dose “optimization” step and we agreed with the recommendation. Meetings with engaged clinical sites to review the protocol documents have occurred and FDA required IRB approvals have been received. With FDA recommended changes incorporated into the revised protocol and the completion of site initiation visits, we commenced our Phase II clinical study in October 2024. The Company’s radiation biomarker project and the health disparities project have been completed and we are proceeding with plans for clinical validation and potential for commercialization of Ropidoxuridine as a radiation sensitizer.

Previous wording

On December 31, 2024, we received a letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) stating that for the 30 consecutive business day period between November 15, 2024 to December 30, 2024 our common stock had failed to maintain a minimum closing bid price of $1.00 per share, as required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we had a period of 180 calendar days, or until June 30, 2025 (the “Compliance Period”), to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days.

Current wording

On December 31, 2024, we received a letter from the Nasdaq Listing Qualifications Staff of The Nasdaq Stock Market LLC (“Nasdaq”) stating that for the 30 consecutive business day period between November 15, 2024 to December 30, 2024 our common stock had failed to maintain a minimum closing bid price of $1.00 per share, as required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until June 30, 2025 (the “Compliance Period”), to regain compliance with the Minimum Bid Price Requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days.

Previous wording

R&D compensation related expenses were $0.3 million in the three months ended June 30, 2025 as compared to $0.3 million in the three months ended June 30, 2024. For the three months ended June 30, 2025, R&D compensation related expenses were 25% of total R&D expense, representing a decrease from the 48% of total R&D incurred in the three months ended June 30, 2024. The decrease is largely attributable to the retirement of our former CEO and Chief Scientific Officer in early May 2025. Subcontractor expense made up 71% of total R&D expenses in the three months ended June 30, 2025 and 42% of total R&D expenses during the three months ended June 30, 2024.

Current wording

*Research and Development.*Total research and development (“R&D”) expense was $0.9 million for the three months ended September 30, 2025, as compared to $1.4 million to the three months ended September 30, 2024. The decrease in total R&D expense of $0.5 million, or 33%, is primarily related to a $0.5 million decrease in subcontractor expenses and $0.2 million decrease in R&D compensation related expenses in the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Subcontractor expense made up 78% of total R&D expenses in the three months ended September 30, 2025 and 73% of total R&D expenses during the three months ended September 30, 2024. R&D compensation related expenses were $0.2 million in the three months ended September 30, 2025 as compared to $0.3 million in the three months ended September 30, 2024. For the three months ended September 30, 2025, R&D compensation related expenses were 16% as a percent of total R&D expense, representing a decrease from the 22% of total R&D incurred in the three months ended September 30, 2024. The decrease is largely attributable to the lower employee headcount year over year and retirement of our CSO.

Previous wording

General and Administrative Expenses. General and administrative expenses in the three months ended June 30, 2025 increased by $2.0 million, or 657%, from $0.3 million in the three months ended June 30, 2024 to $2.3 million in the three months ended June 30, 2025. The increase in general and administrative expenses was primarily due to costs associated with advertising for investor relations of $2.0 million and other administrative costs.

Current wording

General and Administrative Expenses. General and administrative expenses in the three months ended September 30, 2025 increased by $0.6 million, or 169%, from $0.3 million in the three months ended September 30, 2024 to $0.8 million in the three months ended September 30, 2025. The increase in general and administrative expenses was primarily due to costs associated with advertising for investor relations of $0.5 million for the three months ended September 30, 2025.

Previous wording

Legal and Professional Expenses. During the three months ended June 30, 2025, legal and professional expenses increased by less than $0.1 million or 2% compared to the same period in 2024. The increase in legal and professional fees was primarily due to increases in legal costs associated with corporate matters and our accounting expenses related to our public filing requirements.

Current wording

Legal and Professional Expenses. During the three months ended September 30, 2025, legal and professional expenses decreased by $0.9 million or 67% compared to the same period in 2024. The decrease in legal and professional fees was primarily due to higher accounting expenses in the three months ended September 30, 2024 compared to the three months ended September 30, 2025 related to the restatement and reaudit of the Company’s financial statements, which occurred and concluded in 2024.

Previous wording

*Other Income (expense).*During the three months ended June 30, 2025, other expense decreased by $0.8 million or 137% compared to the same period in 2024. The decrease was primarily driven by a $0.4 million decrease in interest expense, a $0.2 million decrease in change in fair value of derivative liabilities and a $0.2 million increase in change in fair value of convertible notes.

Current wording

*Other Expense.*During the three months ended September 30, 2025, other expense decreased by $0.7 million or 89% compared to the same period in 2024. The decrease was primarily driven by a $0.3 million decrease in interest expense, $0.8 million decrease in loss on settlement of convertible debt, partially offset by a $0.3 million decrease in change in fair value of derivative liabilities, $0.1 million decrease in loss on change in fair value of convertible notes, and $0.1 million decrease in gain on sale of marketable securities.

Previous wording

Research and Development. Research and development (“R&D”) expense was $2.6 million for the six months ended June 30, 2025, as compared to $1.2 million for six months ended June 30, 2024. The increase of $1.4 million, or 111%, is primarily related to the Company having completed production of the drug product and the start of work related to the initiation of trials including contract research organization (“CRO”) expenses, clinical trial sites, other regulatory activities.

Current wording

Research and Development. Research and development (“R&D”) expense was $3.5 million for the nine months ended September 30, 2025, as compared to $2.6 million for nine months ended September 30, 2024. The increase of $0.9 million, or 35%, is primarily related to the Company having completed production of the drug product and the start of work related to the initiation of trials including contract research organization (“CRO”) expenses, clinical trial sites, other regulatory activities.

Previous wording

R&D compensation related expenses were $0.9 million in the six months ended June 30, 2025 as compared to $0.6 million in the six months ended June 30, 2024. For the six months ended June 30, 2025, R&D compensation related expenses were 34% of total R&D expense, representing a decrease from the 52% of total R&D incurred in the six months ended June 30, 2024. The decrease is largely attributable to the retirement of our former CEO and Chief Scientific Officer in early May 2025. Subcontractor expense made up 63% of total R&D expenses in the six months ended June 30, 2025 and 38% of total R&D expenses during the six months ended June 30, 2024.

Current wording

R&D compensation related expenses were $1.0 million in the nine months ended September 30, 2025 as compared to $0.9 million in the nine months ended September 30, 2024. For the nine months ended September 30, 2025, R&D compensation related expenses were 29% as a percent of total R&D expense, representing a decrease from the 36% of total R&D incurred in the nine months ended September 30, 2024. The decrease in R&D compensation related expenses is largely attributable to the retirement of our former CEO and Chief Scientific Officer in early May 2025. Subcontractor expense made up 67% of total R&D expenses in the nine months ended September 30, 2025 and 38% of total R&D expenses during the nine months ended September 30, 2024.

Previous wording

General and Administrative Expenses. General and Administrative expenses in the six months ended June 30, 2025 increased by $2.3 million, or 364% from $0.6 million in the six months ended June 30, 2024 to $2.9 million in the six months ended June 30, 2025. The increase in general and administrative expenses was primarily due to costs associated with advertising for investor relations and filing expenses of $2.0 million, $0.1 million increase in general and administrative stock-based compensation expense, and other administrative costs.

Current wording

General and Administrative Expenses. General and Administrative expenses in the nine months ended September 30, 2025 increased by $2.9 million, or 297% from $1.0 million in the nine months ended September 30, 2024 to $3.8 million in the nine months ended September 30, 2025. The increase in general and administrative expenses was primarily due to costs associated with advertising for investor relations and filing expenses of $2.5 million, $0.3 million increase in general and administrative stock-based compensation expense, and other administrative costs.

Previous wording

Legal and Professional Expenses. During the six months ended June 30, 2025, legal and professional expenses increased by $0.3 million or 32%. 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 nine months ended September 30, 2025, legal and professional expenses decreased by $0.6 million or 24%. The decrease in legal and professional fees was primarily due to higher expenses related to our public filing requirements including the restatement and reaudit of the Company’s financial statements, contracts and financing related work that occurred in the nine months ended September 30, 2024 than compared to the nine months ended September 30, 2025.

Previous 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. We have incurred losses since inception and had a net loss of $6.8 million and no revenues generated during the six months ended June 30, 2025 and working capital of approximately $3.5 million as of June 30, 2025. We do not expect to generate positive cash flows from operating activities in the near future.

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. We have incurred losses since inception and had a net loss of $9.1 million and no revenues generated during the nine months ended September 30, 2025 and working capital of approximately $1.3 million as of September 30, 2025. We do not expect to generate positive cash flows from operating activities in the near future.

Previous wording

In January 2025, we entered into a change order to the existing agreement with Theradex Systems, Inc., our primary third-party CRO, for purposes of supporting our clinical trials of Ropidoxuridine. Following the change order, our total cost limit increased by $3.0 million, for an aggregate of $5.3 million, of which $2.0 million had not yet been incurred as of June 30, 2025.

Current wording

In January 2025, we entered into a change order to the existing agreement with Theradex Systems, Inc., our primary third-party CRO, for purposes of supporting our clinical trials of Ropidoxuridine. Following the change order, our total cost limit increased by $3.0 million, for an aggregate of $5.3 million, of which $0.6 million had not yet been incurred as of September 30, 2025. On October 15, 2025, the Company received a letter from Theradex Systems, Inc., providing written notice of termination of the master agreement, dated November 1, 2018 (the “Master Agreement”), between us and Theradex, and all work orders thereunder, and demanding immediate payment of all outstanding amounts owed thereunder in the aggregate amount of $1.1 million. The Company has accrued for the outstanding amount and it is included in accounts payable and accrued expenses on the condensed consolidated balance sheet as of September 30, 2025. The termination of the Master Agreement with Theradex introduces uncertainty regarding the continuity and timing of our Ropidoxuridine clinical trials, as Theradex was our primary CRO. We are currently evaluating options and alternatives and assessing the potential impact on business, which could materially affect our development plans and financial position.

Previous wording

In March 2025, we entered into a consulting services agreement (the “Bowery Consulting Agreement”) with Bowery Consulting Group Inc. (the “Consultant”). According to the Bowery Consulting Agreement, the Consultant will provide consulting services in connection with our business, advising on viability of plans for scaling activities, growth and capital raising strategies and cost minimization associated with technological platform improvements and marketing spend. We agreed to pay the Consultant $260,000 for their services, which we were not obligated to pay until we regained full Nasdaq listing requirement. We received notice from Nasdaq on July 2, 2025 that we had regained compliance with the listing requirement and have since paid the fee.

Current wording

In March 2025, we entered into a consulting services agreement (the “Bowery Consulting Agreement”) with Bowery Consulting Group Inc. (the “Consultant”). According to the Bowery Consulting Agreement, the Consultant will provide consulting services in connection with our business, advising on viability of plans for scaling activities, growth and capital raising strategies and cost minimization associated with technological platform improvements and marketing spend. On September 8, 2025, the managing partner of the Consultant was appointed to the Company’s Board of Directors. As a result, the Consultant became a related party effective as of that date. We agreed to pay the Consultant $260,000 for their services, which we are not obligated to pay until we regain full Nasdaq listing requirement. We received notice from Nasdaq on July 2, 2025 that we had regained compliance with the listing requirement and have since paid the fee.

Previous wording

In April 2025, we entered into a consulting agreement (the “IR Agency Consulting Agreement”) with IR Agency LLC (the “IR Agency”). Pursuant to the IR Agency Consulting Agreement, IR Agency agrees to provide certain marketing and advertising services to communicate information about us to the financial community (the “Services”), including, but not limited to, creating company profiles, media distribution and building a digital community with respect to us. As consideration for the performance of the Services, we paid IR Agency $2.0 million on April 5, 2025. The term of the IR Agency Consulting Agreement was three months commencing April 3, 2025.

Current wording

On April 3, 2025, the Company entered into a consulting agreement with the IR Agency LLC (the “IR Agency”). Pursuant to theconsulting agreement, IR Agency agreed to provide certain marketing and advertising services to communicate information about the Company to the financial community, including, but not limited to, creating company profiles, media distribution and building a digital community with respect to the Company. As consideration for the performance of the Services, the Company paid the IR Agency $2.0 million on April 5, 2025. The term of the consulting agreement was three months starting on April 3, 2025. For the nine months ended September 30, 2025, the Company incurred $2.0 million of costs under the consulting agreement.

Previous wording

On February 27, 2025, we entered into a Revolving Loan Agreement (the “Revolving Loan Agreement”) with a lender. Pursuant to and under the terms of the Revolving Loan Agreement, we issued a revolving note dated February 28, 2025 in the principal amount of up to $2.0 million (the “Revolving Note”), which we may draw upon at our discretion from time to time through its maturity on February 28, 2026. The Revolving Note bears interest at the rate of 18% per annum calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue interest daily commencing from the date of any draw down until paid in full.

Current wording

On February 27, 2025, we entered into a Revolving Loan Agreement (the “Revolving Loan Agreement”) with a single lender. Pursuant to and under the terms of the Revolving Loan Agreement, we issued a revolving note dated February 28, 2025 in the principal amount of up to $2.0 million (the “Revolving Note”), which we may draw upon at our discretion from time to time through its maturity on February 28, 2026. The Revolving Note bears interest at the rate of 18% per annum calculated on the basis of a 360-day year, consisting of twelve 30 calendar day periods, and shall accrue interest daily commencing from the date of any draw down until paid in full.

Previous wording

On March 12, 2025, we consummated a public offering of an aggregate of (i) 53,637 shares of common stock, of the Company, at a public offering price of $0.30 per share and (ii) pre-funded warrants to purchase 713,030 shares of common stock at an exercise price of $0.025 per share, at a public offering price of $7.48 per pre-funded warrant (the “Offering”). The Offering closed on March 13, 2025. We received gross proceeds of approximately $5.7 million and net proceeds of approximately $5.0 million, reflecting approximately $0.7 million of legal costs and other expenses connected with the Offering.

Current wording

On March 12, 2025, we consummated a public offering of an aggregate of (i) 53,637 shares of common stock, of the Company, at a public offering price of $7.50 per share and (ii) pre-funded warrants to purchase 713,030 shares of common stock at an exercise price of $0.025 per share, at a public offering price of $7.48 per pre-funded warrant (the “Offering”). The Offering closed on March 13, 2025. We received gross proceeds of approximately $5.7 million and net proceeds of approximately $5.0 million, reflecting approximately $0.7 million of legal costs and other expenses connected with the Offering.

Previous wording

As of June 30, 2025, total current assets were $5.2 million and total current liabilities were $1.7 million, resulting in working capital of $3.5 million. As of December 31, 2024, total current assets were $2.2 million and total current liabilities were $1.5 million, resulting in a working capital of $0.7 million. The Company’s current assets as of June 30, 2025 are comprised of $4.8 million of cash and cash equivalents and $0.4 million of prepaid expenses, with the increase from December 31, 2024 being primarily due to the March 2025 equity raise that provided $5.0 million in net cash and the June 2025 private placement that provided $3.9 million in net cash.

Current wording

As of September 30, 2025, total current assets were $3.3 million and total current liabilities were $2.0 million, resulting in working capital of $1.3 million. As of December 31, 2024, total current assets were $2.2 million and total current liabilities were $1.5 million, resulting in a working capital of $0.7 million. The Company’s current assets as of September 30, 2025 are comprised of $2.1 million of cash and cash equivalents and $1.2 million of prepaid expenses and other current assets, with the increase from December 31, 2024 being primarily due to the March 2025 equity raise that provided $5.0 million in net cash and the June 2025 private placement that provided $3.9 million in net cash.

Previous wording

In addition, we continued progress on our R&D programs during the six months ended June 30, 2025 that resulted in increased cash expenditures. The Company’s current liabilities as of June 30, 2025 are primarily comprised of $0.4 million of convertible notes payable, $1.2 million of accounts payable and accrued expenses, $0.1 million of notes payable to related parties, and the current portion of our operating lease liability of $0.1 million. The increase in current liabilities is primarily due to an increase in accounts payable and accrued expenses of $0.6 million, partially offset by a $0.1 million decrease in convertible notes payable and a $0.1 million decrease in notes payable to related parties. This is primarily attributable to our efforts to preserve cash while we strive to raise funds to finance ongoing business and operations.

Current wording

In addition, we continued progress on our R&D programs during the nine months ended September 30, 2025 that resulted in increased cash expenditures. The Company’s current liabilities as of September 30, 2025 are primarily comprised of $1.5 million of accounts payable and accrued expenses and $0.4 million of convertible notes payable carried at fair value. The increase in current liabilities is primarily due to an increase in accounts payable and accrued expenses of $0.9 million, partially offset by a $0.1 million decrease in convertible notes payable and a $0.2 million decrease in notes payable to related parties. This is primarily attributable to our efforts to preserve cash while we strive to raise funds to finance ongoing business and operations.

Previous wording

During the six months ended June 30, 2025, net cash used in operating activities of $5.9 million was primarily due to our net loss of $6.8 million, change in fair value of convertible notes of $0.1 million, and interest payments on convertible notes accounted for at fair value of $0.1 million, partially offset by stock-based compensation of $0.6 million and the net change in operating assets and liabilities of $0.5 million.

Current wording

During the nine months ended September 30, 2025, net cash used in operating activities of $8.5 million was primarily due to our net loss of $9.1 million, change in fair value of convertible notes of $0.1 million, and interest payments on convertible notes accounted for at fair value of $0.1 million, partially offset by stock-based compensation of $0.7 million.

Previous wording

During 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.

Current wording

During the nine months ended September 30, 2024, net cash flows used in operating activities was $4.6 million, consisting of a net loss of $7.5 million and change in fair value of derivative liabilities of $0.3 million, partially offset by loss on settlement of convertible debt of $0.8 million, amortization of debt discount and finance fees of $1.1 million, accrued interest settled with common stock of $0.1 million, stock-based compensation of $0.2 million, and the net change in operating assets and liabilities of $1.1 million.

Previous wording

For the six months ended June 30, 2025, we did not have investing activities. For the six months ended June 30, 2024, cash provided by investing activities was primarily attributable to $1.3 million in proceeds from the disposition of marketable securities.

Current wording

For the nine months ended September 30, 2025, we did not have cash flows from investing activities. For the nine months ended September 30, 2024, cash provided by investing activities was primarily attributable to $3.0 million in proceeds from the disposition of marketable securities.

Previous wording

For the six months ended June 30, 2025, cash flows from financing activities was primarily comprised of proceeds of $5.4 million, from the sale of common stock and pre-funded warrants as part of the March 2025 equity financing, net of placement agent costs of $0.3 million, proceeds of $4.1 million, from the sale of common stock and pre-funded warrants as part of the June 2025 equity financing, net of placement agent costs of $0.2 million, partially offset by $0.5 million payment of other issuance costs for issuance of common stock and equity-classified warrants in the March 2025 and June 2025 equity financings, and $0.1 million of repayment of note payable-related party used to finance our ongoing operations. For the six months ended June 30, 2024, we paid $0.5 million related to payments on a convertible note.

Current wording

For the nine months ended September 30, 2025, cash flows from financing activities was primarily comprised of proceeds of $5.4 million from the sale of common stock and pre-funded warrants as part of the March 2025 equity financing, net of placement agent costs of $0.3 million, and proceeds of $4.1 million, from the sale of common stock and pre-funded warrants as part of the June 2025 equity financing, net of placement agent costs of $0.2 million, partially offset by $0.6 million of payments of other issuance costs for issuance of common stock and equity-classified warrants in the March 2025 and June 2025 equity financings, $0.1 million for finance costs, and $0.2 million of repayment of note payable-related party used to finance our ongoing operations. For the nine months ended September 30, 2024, we paid $0.8 million related to payments on a convertible note and $0.1 million for finance costs.

Previous wording

Research and development expenses are charged to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, which include a certain portion of the Company’s former chief executive officer (prior to his transition to chief scientific officer), chief operating officer, vice president regulatory (formerly the chief financial officer) and directors’ compensation. Both the chief scientific officer and the vice president regulatory resigned in May and June 2025, respectively..

Current wording

Research and development expenses are charged to expense as incurred. Research and development expenses include, but are not limited to, product development, clinical and regulatory expenses, payroll and other personnel expenses, which may include portions of the Company’s executives to the extent they are actively involved in the research and development activities, materials, supplies, related subcontract expenses, and consulting costs. The periods presented include a portion of the Company’s former chief executive officer (prior to his transition to chief scientific officer), former chief operating officer, former vice president regulatory (formerly the chief financial officer) and directors’ compensation, prior to the individuals’ departures from the Company.

Previous wording

As permitted under ASC 825, Financial Instruments (“ASC 825”), we elected the fair value option to account for the October 2024 Convertible Bridge Notes. The valuation of the October 2024 Convertible Bridge Notes utilizes a Monte Carlo simulation model. 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 to not achieving a successful capital raise and a registration of related securities. 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.

Current wording

As permitted under ASC 825, Financial Instruments (“ASC 825”), we elected the fair value option to account for the October 2024 Convertible Bridge Notes. In prior periods, the valuation of the October 2024 Convertible Bridge Notes utilized a Monte Carlo simulation model. 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 to not achieving a successful capital raise and a registration of related securities. 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.

Previous wording

The significant inputs and assumptions used to estimate the fair value also include: (i) the expected timing of conversion, (ii) the amount subject to equity conversion, (iii) the sum of the notes’ principal and unpaid accrued interest, (iv) expected volatility, (v) risk-free interest rate, (vi) the discount rate, (vii) volume-weighted average price (“VWAP”), (viii) illiquidity discounts, and (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.

Current wording

The significant inputs and assumptions used to estimate the fair value also include: (i) the expected timing of conversion, (ii) the amount subject to equity conversion, (iii) the sum of the notes’ principal and unpaid accrued interest, (iv) expected volatility, (v) risk-free interest rate, (vi) the discount rate, (vii) volume-weighted average price (“VWAP”), (viii) illiquidity discounts, and (ix) probabilities assigned.

Previous wording

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.

Current wording

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 simulations or Probability-Weighted Expected Return Methods (“PWERM”). 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. PWERM models require the estimate of an entity’s per share value of its common stock at various future outcomes and assigns a probability to each scenario. The value per share is then weighted based on the respective probabilities to determine a weighted-average expected return.

Previous wording

For our derivative financial instruments classified as a liability, we use 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 weighted based 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 Monte Carlo simulation uses an implied VWAP for valuation. The implied VWAP was backsolved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds and is updated each period.

Current wording

For our derivative financial instruments classified as a liability, we use 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 weighted based 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 Monte Carlo simulation uses an implied VWAP for valuation. The implied VWAP was back solved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds and is updated each period.

Previous 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.

Current wording

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