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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

  ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2024

 

or

 

  ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ______________ to ______________

 

Commission File Number: 001-41488

 

SHUTTLE PHARMACEUTICALS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   82-5089826
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

401 Professional Drive, Suite 260

Gaithersburg, MD 20879

(Address of principal executive offices) (Zip Code)

 

(240) 403-4212

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock   SHPH   The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer ☐ Accelerated filer ☐
  Non-accelerated filer ☒ Smaller reporting company ☒
      Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

The number of shares outstanding of the registrant’s common stock on November 13, 2024 was 3,664,919

 

 

 

 
 

 

TABLE OF CONTENTS

 

      Page No.
       
  PART I. Financial Information    
       
Item 1. Unaudited Condensed Consolidated Financial Statements   3
       
  Unaudited Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023   3
       
  Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2024 and 2023   4
       
  Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2024 and 2023   5
       
  Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023   6
       
  Notes to Unaudited Condensed Consolidated Financial Statements   7
       
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations   21
       
Item 3. Quantitative and Qualitative Disclosures About Market Risk   27
       
Item 4. Controls and Procedures   27 
       
  PART II. Other Information    
       
Item 1. Legal Proceedings   28
       
Item 1A. Risk Factors   28
       
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds   29
       
Item 3. Defaults Upon Senior Securities   29
       
Item 4. Mine Safety Disclosures   29
       
Item 5. Other Information   29
       
Item 6. Exhibits   29
       
  Signatures   30

 

2
 

 

PART I. Financial Information

 

Item 1. Unaudited Condensed Consolidated Financial Statements

 

Shuttle Pharmaceuticals Holdings, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

 

   September 30,   December 31, 
   2024   2023 
Assets          
Current assets          
Cash and cash equivalents  $156,656   $2,576,416 
Prepaid expenses   103,040    114,473 
Marketable securities   -    2,887,215 
Accrued interest income   4    14,901 
Deferred costs   101,651    - 
Total Current Assets   361,351    5,593,005 
Property and equipment, net   21,160    24,827 
Operating lease right-of-use asset   291,057    333,904 
Total Assets  $673,568   $5,951,736 
           
Liabilities and Stockholders’ Equity          
Current Liabilities          
Accounts payable and accrued expenses  $1,348,444   $282,860 
Accounts payable and accrued expenses related party   -    446 
Accrued interest payable   -    110,453 
Accrued interest payable - related parties   2,137    - 
Notes payable to related parties   250,000    - 
Convertible notes payable, net   -    595,999 
Operating lease liability   58,652    52,479 
Total Current Liabilities   1,659,233    1,042,237 
Convertible notes payable non-current, net   -    135,089 
Derivative liability   74,107    414,512 
Operating lease liability non-current   255,605    304,127 
Total Liabilities   1,988,945    1,895,965 
           
Stockholders’ Equity (Deficit)          
Series A Convertible Preferred Stock, $0.00001 par value; $1,000 per share liquidation value; 20,000,000 shares authorized; no shares outstanding   -    - 
Common stock, $0.00001 par value; 100,000,000 shares authorized; 2,946,099 and 2,008,689 shares issued and outstanding, respectively   29    20 
Additional paid in capital   31,664,226    29,489,055 
Accumulated deficit   (32,979,632)   (25,433,304)
Total Stockholders’ Equity (Deficit)   (1,315,377)   4,055,771 
Total Liabilities and Stockholders’ Equity (Deficit)  $673,568   $5,951,736 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3
 

 

Shuttle Pharmaceuticals Holdings, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                 
Revenue  $-   $-   $-   $- 
                     
Operating expenses                    
Research and development   1,400,564    1,045,177    2,632,387    2,806,644 
General and administrative   328,995    265,553    963,642    730,186 
Legal and professional   1,322,002    288,416    2,323,013    1,072,728 
Total operating expenses   3,051,561    1,599,146    5,919,042    4,609,558 
                     
Loss from operations   (3,051,561)   (1,599,146)   (5,919,042)   (4,609,558)
                     
Other income (expense)                    
Interest expense - related parties   (2,137)   -    (2,137)   (6,825)
Interest expense   (270,538)   (623,465)   (1,198,738)   (1,952,147)
Interest income   2,524    20,765    38,135    56,720 
Finance fee   -    -    -    (104,245)
Change in fair value of derivative liabilities   286,316    442,900    340,405    2,118,175 
Gain on sale of marketable securities   56,398    -    100,118    1,744 
Change in fair value of marketable securities   (42,898)   9,606    (71,568)   21,134 
Loss on settlement of convertible debt   (762,186)   (43,414)   (833,501)   (477,221)
Total other income (expense)   (732,521)   (193,608)   (1,627,286)   (342,665)
                     
Net loss attributable to common stockholders  $(3,784,082)  $(1,792,754)  $(7,546,328)  $(4,952,223)
                     
Weighted average common shares outstanding - basic and diluted   2,384,177    1,969,904    2,189,366    1,820,006 
Net loss per shares - basic and diluted  $(1.59)  $(0.91)  $(3.45)  $(2.72)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4
 

 

Shuttle Pharmaceuticals Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(Unaudited)

 

For the Nine Months Ended September 30, 2024

 

   Shares   Amount   Capital   Deficit   Equity (Deficit) 
           Additional       Total 
   Common Stock   Paid in   Accumulated   Stockholders’ 
   Shares   Amount   Capital   Deficit   Equity (Deficit) 
                     
Balance - December 31, 2023   2,008,689   $20   $29,489,055   $(25,433,304)  $4,055,771 
                          
Common stock issued for conversion of accrued interest and principal   78,197    1    325,297    -    325,298 
Common stock issued for restricted stock units   15,625    -    -    -    - 
Stock-based compensation   -    -    111,449    -    111,449 
Net loss   -    -    -    (1,731,031)   (1,731,031)
Balance - March 31, 2024   2,102,511    21    29,925,801    (27,164,335)   2,761,487 
                          
Common stock issued for restricted stock units   3,722    -    -    -    - 
Stock-based compensation   -    -    71,162    -    71,162 
Net loss   -    -    -    (2,031,215)   (2,031,215)
Balance - June 30, 2024   2,106,233   $21   $29,996,963   $(29,195,550)  $801,434 
                          
Common stock issued for conversion of convertible debt accrued interest and principal   719,148    7    1,621,989    -    1,621,996 
Common stock issued for restricted stock units   5,002    -    -    -    - 
Common stock issued for reverse stock split fractional share round up   115,716    1    (1)   -    - 
Stock-based compensation   -    -    45,275    -    45,275 
Net loss   -    -    -    (3,784,082)   (3,784,082)
Balance - September 30, 2024   2,946,099   $29   $31,664,226   $(32,979,632)  $(1,315,377)

 

For the Nine Months Ended September 30, 2023

 

           Additional       Total 
   Common Stock   Paid in   Accumulated   Stockholders’ 
   Shares   Amount   Capital   Deficit   Equity 
                     
Balance - December 31, 2022   1,700,414    17   $26,518,433   $(18,840,581)  $7,677,869 
                          
Warrants issued for financing costs, net of issuance fees of $8,727   -    -    90,816    -    90,816 
Common stock issued for conversion of accrued interest and principal   6,375    -    104,547    -    104,547 
Stock-based compensation   -    -    8,333    -    8,333 
Net loss   -    -    -    (975,097)   (975,097)
Balance - March 31, 2023   1,706,789    17    26,722,129    (19,815,678)   6,906,468 
                          
Common stock issued for conversion of accrued interest and principal   228,489    2    2,163,990    -    2,163,992 
Stock-based compensation   -    -    49,522    -    49,522 
Net loss   -    -    -    (2,184,372)   (2,184,372)
Balance - June 30, 2023   1,935,278   $19   $28,935,641   $(22,000,050)  $6,935,610 
                          
Common stock issued for conversion of convertible debt accrued interest and principal   62,761    1    429,309    -    429,310 
Common stock issued for restricted stock units   1,876    -    -    -    - 
Stock-based compensation   -    -    37,583    -    37,583 
Net loss   -    -    -    (1,792,754)   (1,792,754)
Balance - September 30, 2023   1,999,915   $20   $29,402,533   $(23,792,804)  $5,609,749 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5
 

 

Shuttle Pharmaceuticals Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   2024   2023 
   Nine Months Ended 
   September 30, 
   2024   2023 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(7,546,328)  $(4,952,223)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   3,667    4,828 
Change in fair value of derivative liabilities   (340,405)   (2,118,175)
Amortization of debt discount and finance fees   1,079,444    1,654,724 
Gain on marketable securities   (100,118)   (1,744)
Change in fair value of marketable securities   71,568    (21,134)
Accrued interest settled with common stock   54,670    294,927 
Loss on settlement of convertible debt   833,501    477,221 
Stock-based compensation   227,886    95,438 
Changes in operating assets and liabilities:          
Accrued interest income   14,897    (12,435)
Prepaid expenses   11,433    (8,956)
Accounts payable and accrued expenses   1,065,584    63,255 
Accounts payable and accrued expenses - related parties   (446)   (12,500)
Accrued interest payable   (15,056)   106,578 
Accrued interest payable - related parties   2,137    (98,135)
Change in operating lease asset and liability   498    9,358 
Net cash used in operating activities   (4,637,068)   (4,518,973)
CASH FLOWS FROM INVESTING ACTIVITIES:          
Investment in marketable securities   (43,587)   (2,977,714)
Proceeds from disposition of marketable securities   2,959,352    80,000 
Purchase of equipment   -    (19,046)
Net cash used in investing activities   2,915,765    (2,916,760)
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from note payable-related party   250,000    - 
Repayment of note payable-related party   -    (685,473)
Proceeds from convertible notes payable and warrants   -    3,935,000 
Payment for finance costs related to convertible note payable   -    (345,000)
Payment for finance costs   (101,651)   - 
Payment of convertible note payable   (846,806)   - 
Net cash provided by financing activities   (698,457)   2,904,527 
Net change in cash and cash equivalents   (2,419,760)   (4,531,206)
Cash and cash equivalents, beginning of period   2,576,416    8,417,203 
Cash and cash equivalents, end of period  $156,656   $3,885,997 
Cash paid for:          
Interest  $79,682   $102,373 
Income taxes  $-   $- 
Supplemental non-cash financing activities:          
Common stock issued for settlement of debt  $1,947,294   $2,697,849 
Warrants issued for financing fees, net of issuance fees of $0 and $8,727, respectively  $-   $90,816 
Initial recognition of right of use asset and liability  $-   $365,556 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6
 

 

Shuttle Pharmaceuticals Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

 

Note 1 – Organization and Liquidity

 

Organization and Line of Business

 

Shuttle Pharmaceuticals Holdings, Inc. (“we,” “us,” “our,” or the “Company”) was originally formed as Shuttle Pharmaceuticals, LLC in the State of Maryland on December 18, 2012. On August 12, 2016, the Company filed articles of conversion with the State of Maryland to convert from an LLC to a C corporation, at which time the Company changed its name to Shuttle Pharmaceuticals, Inc. (“Shuttle”). In connection with the conversion the Company issued 5,625,000 shares of common stock in exchange for 100% of the outstanding membership interests in Shuttle prior to conversion. On June 4, 2018, Shuttle completed a reverse merger with Shuttle Pharmaceuticals Holdings, Inc. (then known as Shuttle Pharma Acquisition Corp, Inc.), a Delaware corporation, pursuant to which Shuttle, our operating entity, became a wholly-owned subsidiary of the Company. All share numbers referenced herein reflect a 1-for-8 reverse split of our common stock on a post-split basis, which was effective as of August 13, 2024 (see Note 2).

 

The Company’s primary purpose is to develop and commercialize unique drugs for the sensitization of cancers and protection of normal tissues, with the goal of improving outcomes for cancer patients receiving radiation therapy. Shuttle has deployed its proprietary technology to develop novel cancer immunotherapies, producing a pipeline of selective HDAC inhibitors for cancer and immunotherapy applications. The Company’s HDAC platform is designed to target candidate molecules with potential roles in therapeutics beyond cancer, including autoimmune, inflammatory, metabolic, neurological and infectious diseases. The Company’s Ropidoxuridine product, which is used with radiation therapy to sensitize cancer cells, was initially funded by a Small Business Innovation Research (“SBIR”) contract provided by the National Cancer Institute (“NCI”), a unit of the National Institutes of Health (“NIH”). Ropidoxuridine has been further developed though the Company’s collaborations with scientists at the University of Virginia for use in combination with proton therapy to improve patient survival. Historically, and prior to the Company’s initial public offering in September 2022, the Company has obtained funding to develop products through NIH grants, including a product to predict late effects of radiation with metabolite biomarkers and develop prostate cancer cell lines in health disparities research.

 

The production and marketing of the Company’s products and its ongoing research and development activities will be and are subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any products or combination of products developed by the Company must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the Food and Drug Administration (“FDA”) under the Food, Drug and Cosmetic Act. There can be no assurance that the Company will not encounter problems in its clinical trials that will cause the Company or the FDA to delay or suspend the clinical trials.

 

The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and in other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company now or in the future.

 

Liquidity and Going Concern

 

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 $7.5 million and no revenues for the nine months ended September 30, 2024 and has a working capital deficit of approximately $1.3 million as of September 30, 2024. The Company does not expect to generate positive cash flows from operating activities in the near future.

 

7
 

 

In September 2024, the Company’s CEO provided $250 thousand to the Company in exchange for a promissory note repayable in equal monthly installments of principal and interest over a term of one year. In October 2024, the Company completed an offering of senior secured convertible bridge notes, receiving $790 thousand in cash. The notes have a term of one-year and were accompanied by 329,461 warrants with a weighted-average exercise price of $1.42. Also in October 2024, the Company completed an equity raise that provided $3.9 million net cash for the issuance of 2.9 million shares / pre-funded warrants, and by 2.9 million warrants with an exercise price of $1.40. However, the Company’s existing cash resources and the cash received from the equity offering and senior convertible note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months.

 

The Company’s capital raises have to date supported operations, the manufacture of drug product and FDA approval of the IND for the Phase II clinical trial of Ropidoxuridine and radiation therapy in glioblastoma and other radiation sensitizer discovery and therapy. The FDA recommended and the Company agreed to an expansion of the Phase II clinical trial, necessitating additional capital to complete the trial as well as fund ongoing operations. Additionally, the Phase II clinical trial of Ropidoxuridine has evolved with finalized agreements with all six of the planned site enrollment locations to administer the Phase II clinical trial of Ropidoxuridine and the enrollment of the first three patients.

 

The ability of the Company to continue as a going concern is dependent upon its ability to continue 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. These 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.

 

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.

 

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and notes required by GAAP for annual financial statements. A complete discussion of the Company’s significant accounting policies is included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023.

 

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all of the adjustments necessary to present the financial position of the Company as of September 30, 2024 and the results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements of the Company have not been audited by the Company’s independent registered public accounting firm, except that the year-end consolidated balance sheet was derived from audited financial statements. The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the restated financial statements and related notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K/A filed with the SEC on September 4, 2024.

 

Reverse Stock Split

 

On August 13, 2024, in order to meet Nasdaq’s minimum bid price requirement of $1.00 per share (the “Minimum Bid Price Requirement”), the Company effectuated a 1-for-8 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares (the “Reverse Stock Split”). The Reverse Stock Split had no effect on the Company’s authorized shares of common stock or preferred stock and the par value will remain unchanged at $0.00001, respectively. All common stock share, option, warrant and per share amounts (except our authorized but unissued shares and previously reserved shares) have been retroactively adjusted in these financial statements and related disclosures.

 

8
 

 

Basis of Consolidation

 

The unaudited condensed consolidated financial statements have been prepared on a consolidated basis with those of the Company’s wholly-owned subsidiaries, Shuttle Pharmaceuticals, Inc. and Shuttle Diagnostics Inc. All intercompany transactions and balances have been eliminated.

 

Correction of an Immaterial Error in the Prior Period Financial Statements

 

During the fourth quarter of 2023, the Company determined that the prior year consolidated financial statements had a misstatement caused by an immaterial classification error of certain research and development expenses in accordance with Accounting Standards Codification (“ASC”) 730. As a result, certain prior year amounts have been corrected for consistency with the current year presentation. The Company assessed the materiality of this change in presentation on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” (ASC Topic 250, Accounting Changes and Error Corrections). Based on this assessment, the Company concluded that these error corrections in its unaudited condensed consolidated statements of operations are not material to any previously presented financial statements based upon overall considerations of both quantitative and qualitative factors. The corrections had no impact on the unaudited condensed consolidated balance sheet, unaudited condensed consolidated statements of cash flows, or unaudited condensed consolidated statement of changes in stockholders’ equity, to these financial statements, or for any previously presented interim or annual financial statements. Further, the corrections did not result in a change in quarterly or year-to-date operating losses, basic or diluted earnings per share, or working capital. The quarterly correction required for the three and nine months ended September 30, 2023 was $95,129 and $277,844, respectively. Accordingly, the Company corrected the previously reported immaterial error for the three and nine months ended September 30, 2023 in this Quarterly Report on Form 10-Q.

 

   September 30, 2023   Correction   Corrected
September 30, 2023		 
Research and development expense  $3,084,488   $(277,844)  $2,806,644 
General and administrative expense   452,342    277,844    730,186 
Net Loss  $3,536,830   $-   $3,536,830 

 

Use of Estimates

 

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates are contained in the accompanying unaudited condensed consolidated financial statements for the recognition of research and development expenses, valuation of warrants and valuation of bifurcated derivative liabilities and other financial instruments.

 

9
 

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash in bank accounts and money market funds with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. As of September 30, 2024 and December 31, 2023, cash and cash equivalents consisted of the following:

 

   September 30,   December 31, 
   2024   2023 
Cash  $155,652   $1,550,098 
Money market funds   1,004    1,026,318 
Total cash and cash equivalents  $156,656   $2,576,416 

 

Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of September 30, 2024 was $0. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.

 

Marketable Securities

 

Our investments in debt securities are carried at fair value. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading of debt securities are charged to income.

 

The marketable securities held by the Company, which are classified as trading marketable securities, consisted of an outstanding balance of $0 and $2.9 million as of September 30, 2024 and December 31, 2023, respectively. During the three months ended September 30, 2024 and 2023, the Company recognized interest income of $2,524 and $20,765, realized gains of $56,398 and $0, and unrealized losses of $42,898 and unrealized gains of $9,606, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized interest income of $38,135 and $56,720, realized gains of $100,118 and $1,744, and unrealized loss of $71,568 and unrealized gain of $21,134, respectively.

 

Fair Value of Financial Instruments

 

The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair Value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments:

 

  ● Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments.
     
  ● Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace.
     
  ● Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation.

 

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires the Company to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded, may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange.

 

10
 

 

The carrying amounts of the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments.

 

Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of September 30, 2024 and December 31, 2023:

 

September 30, 2024  Level 1   Level 2   Level 3   Carrying Value 
Assets                    
Marketable Securities:                    
United States Treasury Bonds  $-   $-   $-   $- 
Total Assets  $-   $-   $-   $- 
Liabilities                    
Derivative Liability - Warrants  $-   $-   $74,107   $74,107 
Derivative Liability - Accelerated feature   -    -    -    - 
Total Liabilities  $-   $-   $74,107   $74,107 

 

December 31, 2023  Level 1   Level 2   Level 3   Carrying Value 
Assets                    
Marketable Securities:                    
United States Treasury Bonds  $2,887,215   $-   $-   $2,887,215 
Total Assets  $2,887,215   $-   $-   $2,887,215 
Liabilities                    
Derivative Liability - Warrants  $-   $-   $410,660   $410,660 
Derivative Liability - Accelerated feature   -    -    3,852    3,852 
Total Liabilities  $-   $-   $414,512   $414,512 

 

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. 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. For our liability classified derivative financial instruments, the Company used a Monte Carlo valuation model to value the derivative instruments at inception and on subsequent valuation dates. For our equity classified derivative financial instruments, we used a Black-Scholes option-pricing model at the grant date to value the derivative instrument. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the unaudited condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date.

 

Warrants

 

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

 

11
 

 

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed consolidated statements of operations. The fair value of the warrants is estimated using a Black-Scholes pricing model or a Monte Carlo simulation.

 

Research and Development Expenses

 

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 our chief executive officer, chief operating officer, chief financial officer and directors’ compensation. For the three and nine months ended September 30, 2024 and 2023, a portion of personnel-related expenses and stock-based compensation expense for these individuals totaling $0.1 million and $0.4 million, respectively, and $0.1 million and $0.7 million, respectively, was included within research and development due to their active involvement in the research and development activities, materials, supplies, related subcontract expenses, and consulting costs. In June 2024, the Company recruited a new chief financial officer who is substantially devoted to administrative functions and our then existing chief financial officer, who also handled research and development compliance functions, transitioned to substantially research and development functions.

 

Regarding the accounting treatment for reimbursements, GAAP provides limited guidance on the accounting for government grants received by for-profit companies. In accordance with ASC Topic 832, Government Assistance, as adopted January 1, 2022, we disclose certain types of government assistance received in the notes to the consolidated financial statements that includes: a) the nature of the transaction including the nature of the assistance being given, b) the accounting policies being used to account for the transaction and c) other provisions of relevance, where required. Depending on the type of grant or contract, we understand there is more than one acceptable alternative for the accounting treatment – a reduction of costs, a deferred credit to be amortized, revenue or other income. The Company has concluded that reimbursements received for R&D expenses incurred, are more akin to a reduction of costs and applies reimbursements against incurred research costs. There were no reimbursements received for the three and nine months ended September 30, 2024 and 2023.

 

Net Loss Per Common Stock

 

Net loss per share of common stock requires presentation of basic earnings per share on the face of the unaudited condensed consolidated statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying unaudited condensed consolidated financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive.

 

The dilutive effect of restricted stock units subject to vesting and other stock-based payment awards is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting shares of common stock are included in the denominator of the diluted calculation for the entire period being presented.

 

12
 

 

For the nine months ended September 30, 2024 and 2023, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive.

 

   September 30,   September 30, 
   2024   2023 
Convertible notes (Note 5)   -    137,729 
Warrants (Note 6)   184,000    184,000 
Restricted stock units (Note 6)   41,338    21,006 
    225,338    342,735 

 

Deferred Offering Costs

 

Pursuant to ASC 340-10-S99-1, costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of an offering as a reduction of additional paid-in capital. Deferred offering costs may consist of underwriting, legal, accounting, and other expenses incurred through the balance sheet date that are directly related to a proposed public offering. Should the proposed public offering prove to be unsuccessful, any deferred costs, as well as additional expenses to be incurred, will be expensed.

 

Recent Accounting Pronouncements

 

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting Topic 280, “Segment Reporting-Improvements to Reportable Segment Disclosures,” which allows disclosure of one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires enhanced disclosures of significant segment expenses and other segment items, as well as incremental qualitative disclosures on both an annual and interim basis. This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting periods after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The adoption of this new guidance is not expected to have a significant impact on our consolidated financial statements.

 

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes Topic 740, “Income Tax-Improvements to Income Tax Disclosures,” which requires enhanced disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is effective for annual reporting periods beginning after December 15, 2024. Early adoption is permitted and should be applied on a prospective basis, however retrospective application is permitted. The Company is currently evaluating the impact of adopting this guidance on its consolidated and condensed financial statements and disclosures included within notes to consolidated and condensed financial statements.

 

Note 3 – Leases

 

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the present value of the future lease payments as of the lease commencement date. Operating lease expense is recognized on a straight-line basis over the lease term.

 

During the nine months ended September 30, 2023, the Company had a lease agreement which allowed for the use of a laboratory facility for a monthly payment of $6,480. The laboratory lease commenced on October 1, 2018 and expired on October 31, 2023.

 

The Company currently has a lease agreement which allows for the use of a laboratory facility, entered into on February 16, 2023, with base rent of $7,206 per month for a period of 64 months, which increases at the rate of 3% per year, that commenced June 1, 2023. The lease included a six-month 50% rent abatement upon commencement. Additional common area maintenance (“CAM”) fees are charged monthly and revised annually. The estimated monthly CAM fees are $3,300 per month for the first year of the lease, which are being expensed as incurred. An irrevocable letter of credit (“LOC”) for the security deposit of $43,234 and base rent of $3,891, including 50% abatement, and $3,315 of CAM cost, was due and paid on execution of the lease agreement. Alexandria Real Estate (ARE-QRS-CORP) is the beneficiary of the LOC, and the expiry date of the LOC is March 1, 2025.

 

13
 

 

The following summarizes the ROU lease expense components and cash flow information for the Company’s operating leases:

 

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
Operating lease cost  $22,947   $40,491   $68,841   $83,230 
Variable lease cost   10,440    10,408    30,817    13,723 
Sublease income   (2,163)   (2,135)   (6,489)   (6,377)
Total lease cost  $31,224   $48,764   $93,169   $90,576 
Cash paid for operating cash flows from operating leases  $23,156   $31,113   $68,345   $73,884 
Right-of-use assets obtained in exchange for new operating lease liability  $-   $-   $-   $365,556 

 

Supplemental balance sheet information related to operating leases was as follows:

 

   September 30,   December 31, 
   2024   2023 
Weighted-average remaining lease term (year)   3.92    4.67 
Weighted-average discount rate   10.48%   10.48%

 

Future non-cancelable minimum lease payments under the operating lease liability as of September 30, 2024, are as follows:

 

Years Ended December 31,    
2024 (excluding the nine months ended September 30, 2024)  $23,156 
2025   94,247 
2026   97,074 
2027   99,986 
2028   68,235 
Total future minimum lease payments  $382,698 
Less imputed interest   (68,441)
Present value of payments  $314,257 

 

Note 4 – Notes Payable-Related Party

 

On September 4, 2024, the Company issued a $250,000 promissory note (the “Promissory Note”) to an officer of the Company for $250,000. The Promissory Note accrues interest at 12% per annum and is repayable in 12 substantially equal installments over a period of one year. During the three and nine months ended September 30, 2024 the Company incurred $2,137 and $2,137, respectively, in interest expense relating to this Promissory Note. During the three and nine months ended September 30, 2024 the Company did not pay any principal or accrued interest.

 

On December 1, 2020, the Company consolidated all of the outstanding loans owed to an officer of the Company and to his spouse, resulting in the following two loans: (i) a single loan from the spouse of an officer of the Company, dated December 1, 2020, with a principal balance of $426,243, bearing interest at the rate of 7.5% per annum, with a maturity date of December 31, 2021; and (ii) a single loan owed to an officer of the Company in the principal amount of $139,229, bearing interest at the rate of 7.5% per annum, with a maturity date of December 31, 2021. In December of 2021, the maturity dates of these loans were further extended to June 30, 2022. In July of 2022, the notes were extended to June 30, 2023.

 

14
 

 

On June 21, 2021, the Company entered into a loan from the spouse of an officer of the Company in the amount of $120,000 (principal) with an interest rate of 7.5% per annum due June 21, 2022. In July of 2022, the loan was extended to June 30, 2023.

 

During the three and nine months ended September 30, 2023 the Company incurred $0 and $6,825, respectively, in interest expense for the related party notes payable with maturity dates on June 30, 2023. During the three and nine months ended September 30, 2023 principal payments of $0 and $685,473, respectively, and accrued interest of $0 and $102,373 were paid, respectively, on notes to these related parties. The principal and accrued interest for these notes were fully paid by December 31, 2023.

 

Note 5 – Convertible Notes

 

Alto Opportunity Master Fund, SPC

 

On January 11, 2023, the Company entered into a securities purchase agreement (the “SPA”) with Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B, a Cayman entity (the “Investor”), pursuant to which the Company sold to the Investor a $4,300,000 convertible note (the “Alto Convertible Note”) and warrant (the “Warrant”) to purchase 127,260 shares of common stock, exercisable at $1.93 per share, as adjusted, in exchange for gross proceeds of $3,935,000 (the “Investment Amount”) (See Note 7). The Company determined that the Warrant contains a net cash settlement feature at inception and categorized the Warrant as a liability in the accompanying unaudited condensed consolidated financial statements. The Alto Convertible Note matures on March 11, 2025, but may be extended at the option of the noteholder. The Alto Convertible Note amortizes on a monthly basis and the Company can make such monthly amortization payments in cash or, subject to certain equity conditions, in registered shares of common stock or a combination thereof. Installments may be deferred by the noteholder, resulting in a variable interest rate. However, the effective interest rate is approximately 214% based on the internal rate of return calculated on a series of cash flows that occur at regular intervals. For equity repayment, the Alto Convertible Note is convertible into shares of common stock at a price per share equal to the lower of (i) $18.80, (ii) 90% of the three lowest daily VWAPs of the 15 trading days prior to the payment date, or (iii) 90% of the VWAP of the trading day prior to payment date. The noteholder may convert at any time at a fixed price of $18.80 per share. The noteholder has an acceleration of installment amount conversion option (the “Acceleration Option”), whereby the noteholder, with certain share percentage limitations, can convert to common stock any outstanding installment amount at an amount equal to the installment amount plus five times (5x) the installment amount at any time. The Company has determined the Acceleration Option is an embedded derivative within the host instrument and has bifurcated it from the host instrument and recorded it as a derivative liability valued at $1,442,000 at inception, using a Monte Carlo simulation model (Note 7). The Convertible Note is repayable over 26 months and bears interest at the rate of 5% per annum. Additionally, the note contains certain redemption options and “Make Whole” provisions.

 

In conjunction with entry into the SPA, the Company entered into a series of related agreements, including a security agreement (the “Security Agreement”), an intellectual property security agreement (the “IP Security Agreement”) and a subsidiary guaranty (the “Subsidiary Guaranty”). The security agreements and guaranty allow, among other things, for the Investor to have a security interest in and place a lien on all of the Company’s assets and intellectual property until such time as the Alto Convertible Note is paid off. In addition, the SPA called for the Company to enter into a springing deposit account control agreement (the “Springing DACA”), which, in the event the Company defaults on its repayment of the Alto Convertible Note, would allow the Investor to assume control of the Company’s bank account only with regard to any funds remaining outstanding under the Alto Convertible Note. As such, in conjunction with entry into the SPA, the Company established a separate bank account in which it deposited the Investment Amount and pursuant to which the Company, the Investor and the bank holding the Investment Amount, First Republic Bank, entered into the Springing DACA agreement. As the Investment Amount had been held at First Republic Bank, in light of certain banking crises then affecting smaller banks, on March 12, 2023, the Company and the Investor moved the Investment Amount from First Republic Bank, after which time the Springing DACA was no longer in effect. Further, pursuant to amendments to the SPA entered into in May and June of 2023, the Company and the Investor agreed that all of the Investment Amount would be released to the Company and the relevant provision of the SPA which required the Springing DACA would no longer be deemed applicable. In addition, the Company granted the Investor the option to purchase up to an additional $10.0 million in convertible notes and warrants on substantially the same terms as the Alto Convertible Note and Warrant, excluding the Springing DACA requirement, with such option to be effective through December 31, 2025. The agreement offers the investor an opportunity to participate in future capital raises at substantially similar terms as the January 11, 2023 agreement. The Company expects that such subsequent convertible notes and warrants would be issued on substantially similar terms as the January 11, 2023 initial agreement, as amended, thus providing the Company the opportunity to negotiate certain aspects of the agreement.

 

15
 

 

Boustead Securities, LLC (“Boustead”) served as a placement agent for the Alto Convertible Note and Warrant offering and received $345,000 cash compensation and a warrant to purchase 8,909 shares of common stock, exercisable at $18.80 per share. The Boustead warrant was determined to be an equity instrument valued on a non-recurring basis. The Company used the Black Scholes valuation model using a term of five years, volatility of 110%, a risk-free rate of 3.53% for a value of $99,543.

 

The Company allocated the finance costs related to the Boustead placement agent fee of $345,000, based on the relative fair market values of the Convertible Note and warrants issued. The allocation of the financing costs applied $232,027 to the debt component as a debt discount that is being amortized to interest expense over the term of the Convertible Note, $104,245 to the warrant derivative liability component, expensed as a finance fee, and $8,727 to the equity warrant as a reduction in additional paid in capital.

 

The Company allocated to the debt component of the note an original discount of $300,000, legal fees of $65,000, $215,000 for additional interest fees on day one added to note principal, $1,442,000 for the accelerated conversion feature, and $1,288,543 for the fair value of warrants, resulting in an additional $3,310,543 debt discount that is being amortized to interest expense over the term of the Alto Convertible Note.

 

On August 6, 2024, the Company entered into an amendment to the SPA with Alto. Under the Amendment Agreement, the Company and Alto agreed as follows: (i) that the Company would pay $600,000 (the “Cash Collateral”) in cash by wire transfer of immediately available funds to Alto, which would be held as collateral on the remaining $1.2 million outstanding under the Alto Note; (ii) Alto will defer the monthly installment payment due on September 3, 2024 under the Alto Note until the Alto Note’s March 11, 2025 maturity date; and (iii) Alto would grant a waiver of any default Section 4(a)(xvi) of the Note related to the restatement and reaudit of the Company’s financial statements for the years ended December 31, 2022 and 2023. The amendment was accounted for as a troubled debt restructuring as the Company determined it was experiencing financial difficulties and was provided a concession through the deferral of one monthly principal and interest payment. As the future undiscounted cash flows exceeded the carrying value of the Alto Convertible Note, the Company did not recognize any gain or loss associated with the troubled debt restructuring.

 

During the three and nine months ended September 30, 2024, the Company recorded interest expense of $270,538 and $1,198,738, respectively, which included amortization of debt discount as interest expense of $247,430 and $1,079,444, respectively. During the three and nine months ended September 30, 2024, the Company settled $1,172,850 and $1,408,050 of principal, and $35,888 and $54,670 of accrued interest, which settlements were made in the form of 719,148 and 797,345 shares of common stock. During the three months ended September 30, 2024, the Company also paid $345,139 of principal and $22,724 of accrued interest for a total of $367,863. During the nine months ended September 30, 2024, the Company paid $846,806 of principal and $79,682 of accrued interest for a total of $926,488. In relation to the settlements described above, the Company recognized a loss on settlement of convertible debt of $762,186 and $833,501 for the three and nine months ended September 30, 2024.

 

During the three and nine months ended September 30, 2023, the Company recorded interest expense of $623,465 and $1,952,147 respectively, which included amortization of debt discount as interest expense of $538,302 and $1,550,479 respectively. During the three and nine months ended September 30, 2023, the Company settled $331,800 and $1,925,700 of principal, respectively, and settled $54,096 and $294,927, respectively, of accrued interest, which settlements were made in the form of 62,761 and 297,625 shares of common stock, respectively, during the three and nine months ended September 30, 2023.

 

As of September 30, 2024, the outstanding principal, debt discount and net carry value for the convertible note was $0.

 

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Note 6 – Stockholders’ Equity

 

Common Stock

 

During the three and nine months ended September 30, 2024, the Company issued:

 

  ● 719,148 and 797,345 shares of common stock to settle $1,172,850 and $1,408,050 of principal and $35,888 and $54,670 of interest on a convertible note and incurred $762,186 and $833,501 of loss on settlement, respectively.
  ● 5,002 and 24,349 shares of common stock issued for vesting of restricted stock units, respectively.
  ● 115,716 shares of common stock issued for the round up of reverse split fractional shares.

 

During the three and nine months ended September 30, 2023, the Company issued:

 

  ● 62,761 and 297,625 shares of common stock to settle $331,800 and $1,925,700 of principal and $54,096 and $294,927 of interest, respectively, on a Convertible Note and incurred $43,414 and $477,221 of loss on settlement, respectively.
  ● 1,876 and 1,876 shares of common stock issued for vesting of restricted stock units.

 

Warrants

 

In connection with the January 2023 Alto Convertible Note, Boustead was granted warrants to purchase 8,909 shares of common stock, at an exercise price of $18.80 per share (Note 5). Effective with the recent reverse split, the exercise price was adjusted to $1.93 per share, as provided for in the underlying agreement. In addition, Alto was granted warrants to purchase 127,260 shares of common stock, at an exercise price of $1.93 per share, as adjusted (Note 5, 7).

 

A summary of activity regarding all warrants issued for the nine months ended September 30, 2024 were as follows:

 

   Number of   Weighted Average   Average 
   warrants   Exercise Price   Life (years) 
Outstanding, December 31, 2023   184,000   $23.20    2.77 
Granted   -    -    - 
Outstanding, September 30, 2024   184,000   $11.54    2.04 

 

The intrinsic value of the warrants as of September 30, 2024 is $0. All of the outstanding warrants are exercisable as of September 30, 2024.

 

Equity Incentive Plan

 

Our 2018 Equity Incentive Plan (the “2018 Plan”) provides for equity incentives to be granted to our employees, executive officers, directors and key advisers and consultants. Equity incentive grants may be made in the form of stock options with an exercise price of not less than the fair market value of the underlying shares as determined pursuant to the 2018 Equity Incentive Plan, restricted stock awards, other stock-based awards, or any combination of the foregoing. The 2018 Equity Incentive Plan is administered by the Company’s compensation committee. We have reserved 3,000,000 shares of our common stock for issuance under the 2018 Equity Incentive Plan. As of September 30, 2024, 125,734 shares have been granted under the 2018 Equity Incentive Plan, of which 84,396 shares have vested.

 

Restricted Stock Units

 

We may grant restricted stock units (“RSU”) under our 2018 Plan. RSUs are bookkeeping entries representing an amount equal to the fair market value of one share of our common stock. Subject to the provisions of our 2018 Plan, the administrator determines the terms and conditions of RSUs, including the vesting criteria and the form and timing of payment. Notwithstanding the foregoing, the administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. RSUs granted typically vest annually in one third increments from the date of appointment.

 

During the three and nine months ended September 30, 2024 and 2023, pursuant to agreements with officers and consultants, 0 and 53,455, respectively and 12,500 and 19,916 RSUs, respectively with a value of $0 and $141,840, respectively, and $196,000 and $291,400, respectively, were granted and compensation expense for RSUs of $45,275 and $227,886, and $37,583 and $95,438 respectively, was incurred. During the three and nine months ended September 30, 2024 and 2023, $13,033 and $60,019, respectively, and $0 and $41,190, respectively was included in compensation under Research and Development.

 

17
 

 

As of September 30, 2024, there was $145,504 of unrecognized RSU compensation cost related to non-vested stock-based compensation arrangements which is expected to be recognized over a weighted-average period of 2.14 years.

 

A summary of activity regarding the Restricted Stock Units issued follows:

 

   Number of RSU   Weighted Average Fair Value Per RSU 
Outstanding, December 31, 2023   24,731   $11.76 
Granted   53,455    2.65 
Forfeiture   (12,500)   - 
Vested   (24,348)   9.06 
Outstanding, September 30, 2024   41,338   $5.14 

 

Rights Offering and Financing Commitment

 

On February 7, 2024, the Company and its wholly-owned subsidiary, Shuttle Diagnostics, Inc., entered into a securities purchase agreement (the “Purchase Agreement”) with SRO, LLC, a Nevada limited liability company, pursuant to which SRO LLC agreed to commit to purchasing from the Company $2,250,000 of units from the Company, with each Unit consisting of (i) one share of the Company’s common stock, (ii) a warrant to purchase one share of the Company’s common stock exercisable at a purchase price of $18.80 per share, and (iii) a percentage of equity interest in Diagnostics such that, assuming the sale of all $2,250,000 of Units, SRO LLC will own a 22% interest in Diagnostics. Pursuant to the terms of the Purchase Agreement, the Units will be sold at a per Unit price equal to 90% of the VWAP of the Company’s common stock for the five trading days immediately preceding closing. The parties entered into the Purchase Agreement in anticipation of the Company commencing a rights offering (the “Rights Offering”) pursuant to which the Company intends to offer a total of $4,500,000 of Units to existing stockholders, which includes the $2,250,000 of Units being sold to SRO LLC, an entity which is controlled by Keith Moore, Executive Chairman of Boustead & Company Limited, an affiliate of Boustead.

 

The Company filed an initial registration statement on Form S-1 (the “Form S-1”) with the SEC in April 2024 related to the registration of subscription rights to purchase the Units to be sold in the Rights Offering. The Form S-1 has not been declared effective as of the date these unaudited condensed consolidated financial statements were issued. Upon the Form S-1 being declared effective, the Purchase Agreement allows SRO LLC up to 60 days to raise the initial $2,250,000, which funds will be placed in escrow with Sutter Securities, Inc. (“SSI”), an affiliate of BSL, pursuant to the terms of an escrow agreement entered into between the Company, Shuttle Diagnostics, Inc., BSL and SSI on February 7, 2024 (the “Escrow Agreement”). The funds will remain in escrow up until closing on the Rights Offering. In addition, in the event the Company fails to raise the full $4,500,000 in the Rights Offering, SRO LLC agreed to a backstop commitment pursuant to which it would have the right to purchase any remaining Units not purchased by existing Company stockholders in the Rights Offering, up to an additional $2,250,000 (the “Back-up Contingency”). Unless the parties waive the conditions to closing, in the event the full $4,500,000 is not raised, whether through SRO LLC or through the Company’s existing stockholders, the Company will not close on the offering and any funds raised and held in escrow will be returned to investors.

 

In conjunction with its entry into the Purchase Agreement, on February 7, 2024, the Company entered into a placement agent and advisory services agreement (the “Placement Agent Agreement”) with BSL, pursuant to which BSL and BSL’s affiliates agreed to provide the Company with regular and customary financial consulting advice and act as placement agent, on a best efforts basis, for the Rights Offering. In exchange for its services, BSL will receive a commitment fee equal to $112,500 upon the earlier of the Company filing the registration statement on Form S-1 registering the Rights Offering or upon such date as the Company terminates the Rights Offering, a commission equal 8% of the gross proceeds disbursed to the Company upon closing the Rights Offering, and $40,000 in diligence and related expenses.

 

18
 

 

The Company has incurred $142,000 in costs directly related to the planned Rights Offering and initially deferred these costs in 2024, then expensed them at June 30, 2024, as the Rights Offering has not yet consummated.

 

Alliance Global Partners

 

On July 30, 2024, the Company entered into an agreement with A.G.P./Alliance Global Partners (“AGP”), as the exclusive underwriter, placement agent, or advisor in a public or private offering of up to $10,000,000 of the Company’s securities, and bridge financing of up to $1,350,000. AGP was paid a $50,000 retainer fee.

 

As of September 30, 2024, the Company has incurred $101,651 of expenses included in deferred costs recorded on the Company’s unaudited condensed consolidated balance sheet.

 

See Note 9, Subsequent Events, Alliance Global Partners.

 

Note 7 – Derivative Liabilities

 

Fair Value Assumptions Used in Accounting for Derivative Liabilities

 

ASC 815 requires us to assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense.

 

In January 2023, in connection with the Alto Convertible Note, the Company issued warrants to purchase 127,260 shares of common stock, with an exercise price of $1.93 per share, as adjusted for the recent reverse split, valued at inception at $1,189,000 and as of September 30, 2024, at $74,107. The Company determined our derivative liabilities from the warrants issued in relation to the Alto Convertible Note do not satisfy the classification as equity instruments due to the existence of a certain net cash settlement provision that is not within the sole control of the Company. In addition, there are certain down round provisions that could reduce the exercise price if the Company issues securities at lower prices in the future.

 

The Company has determined the Acceleration Option is an embedded derivative within the host instrument and has bifurcated it from the host instrument and recorded it as a derivative liability valued at $1,442,000, using a Monte Carlo simulation model. The Company determined our derivative liability from the noteholder’s Acceleration Option for the Alto Convertible Note is not clearly and closely related to the host and should be thus accounted for as a bifurcated derivative liability.

 

The Company classified these derivative liabilities as a Level 3 fair value measurement and used the Monte Carlo pricing model to calculate the fair value as of January 11, 2023 ($2,631,000 included in debt discount) and September 30, 2024 ($74,107). Key inputs for the simulation are summarized below. The Monte Carlo simulation uses an implied VWAP for the January 11, 2023 valuation date. The implied VWAP was backsolved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds. The simulation was then iterated and manipulated to solve for the implied share price, which was approximately $12.64 per share (or an approximate 14% discount to the quoted market VWAP on January 11, 2023).

 

The key inputs for the Monte Carlo simulation as of September 30, 2024, were as follows:

 

   September 30, 2024 
Net cash settlement and down round key valuation inputs – warrants*    
Annualized volatility   92.04% - 101.79% 
Risk-free interest rate   3.64% - 4.93% 
Quoted VWAP  $1.31 
Exercise price  $1.93 
Probability assessment   0% - 40% 
Illiquidity discount   (14%)
Time period (years)   0.08 - 2.28 

 

*Based on a Monte Carlo simulation analysis of 250,000 iterations

 

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The following table summarizes the changes in the derivative liabilities:

 

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
   Warrants   Accelerated Feature 
Balance - December 31, 2023  $410,660   $3,852 
Gain on change in fair value   (196,045)   (1,817)
Balance - March 31, 2024  $214,615   $2,035 
Loss (gain) on change in fair value   145,304    (1,531)
Balance - June 30, 2024  $359,919   $504 
Gain on change in fair value of the derivative   (285,812)   (504)
Balance - September 30, 2024  $74,107   $- 

 

Note 8 –Other Related Party transactions

 

On September 14, 2022, we entered into a manufacturing agreement with TCG GreenChem, Inc. (“TCG GreenChem”), the U.S. subsidiary of TCG Lifesciences Pvt Ltd., a global contract research and manufacturing services company located in India. Dr. Chis Senanayake, one of our independent directors, is CEO and CSO of TCG GreenChem and CSO of TCG Lifesciences Pvt Ltd. TCG GreenChem was contracted for process research, development and cGMP compliant manufacture of IPdR. During the nine months ended September 30, 2024 and 2023, the Company expensed $0 and $1,058,348, respectively, related to these services.

 

Note 9 – Subsequent Events

 

Convertible Bridge Notes

 

On October 14, 2024, the Company issued an aggregate of $600,000 (of an up to $1.3 million authorized financing) senior secured convertible notes due in October 2025, which accrue interest at 14.5% interest per year. The notes include a 5% original issue discount and the Company received $570,000 in proceeds. The notes are convertible beginning three months after the date of issuance, and the conversion price will be the lower of a 15% discount to (i) the 5-day VWAP immediately prior to Closing or (ii) the price of any offering entered into by the Company during the term of the notes. The Company has the option to prepay the notes at any time for 107% of total outstanding balance and any outstanding principal will be paid in conversion of shares of common stock at the end of the term, subject to the Company’s exercise of the optional prepayment right. Any accrued interest will be repaid quarterly in cash. The Company also issued warrants to the lenders to purchase an aggregate 240,917 shares of common stock, exercisable at $1.40 per share, with such warrants expiring five years from issuance. In addition, the Company’s Chief Executive Officer, Dr. Anatoly Dritschilo, invested a total of $237,500 in this financing round, in exchange for a $250,000 convertible note.

 

On October 21, 2024, the Company issued an additional $231,579 in senior secured convertible notes due in October 2025, with substantially similar terms as the October 14, 2024, issuance. The notes include a 5% original issue discount and the Company received $220,000 in proceeds. The Company also issued warrants to the lenders to purchase an aggregate 88,544 shares of common stock, exercisable at $1.49 per share, with such warrants expiring five years from issuance. Upon completing this issuance, the Company closed the senior secured convertible note offering after receiving a total of $790,000 in proceeds.

 

Alliance Global Partners

 

On October 31, 2024, the Company consummated a public offering of an aggregate of (i) 395,574 shares of common stock and 2,555,246 pre-funded warrants to purchase up to 2,555,246 shares of common stock, and (ii) 2,950,820 common stock purchase warrants to purchase up to 2,950,820 shares of common stock. Each share of common stock, or a pre-funded warrant in lieu thereof, was sold together with an accompanying warrant to purchase one share of common stock. AGP served as lead underwriter along with Boustead as co-underwriter.

 

The public offering price for each share of common stock and one accompanying warrant was $1.525. The public offering price of each pre-funded warrant and one accompanying common warrant was $1.524, which equals the price at which one share of common stock and accompanying warrant was sold to the public in this offering, minus $0.001. The exercise price of each pre-funded warrant is $0.001 per share. Each warrant offered in the offering is exercisable for one share of common stock and has an initial exercise price equal to $1.40. The Company received aggregate gross proceeds from the offering of approximately $4.5 million, before deducting placement agents’ fees and other offering expenses.

 

20
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) should be read in conjunction with our unaudited financial statements and the related notes thereto included elsewhere in this quarterly report. The MD&A 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.

 

Overview

 

Founded by Georgetown University Medical School faculty members, Shuttle Pharmaceuticals Holdings, Inc. (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 of the current standard of care.

 

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 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 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, produce the capsules, and 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 U.S. Food and Drug Administration (FDA) to begin the clinical trial. The FDA made recommendations to expand the clinical trial and the Company agreed with the recommendation. With this change incorporated into the revised protocol, the Company commenced its Phase II clinical study with finalized agreements with all six of the planned site enrollment locations to administer the Phase II clinical trial of Ropidoxuridine and has enrolled the first three patients in October 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.

 

Reverse Stock Split

 

On August 13, 2024, in order to meet the Nasdaq minimum bid price requirement, the Company effectuated a 1-for-8 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares (the “Reverse Stock Split”). The Reverse Stock Split had no effect on the Company’s authorized shares of common stock or preferred stock. All share, option, warrant and per share amounts (except our authorized outstanding and previously reserved shares) have been retroactively recast in our most recent filings, and are presented as such in these financial statements and related disclosures.

 

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Nasdaq Listing Compliance

 

On September 10, 2024, the Company received a letter (the “Notification”) from The Nasdaq Capital Market (“Nasdaq”), notifying the Company that it is no longer in compliance with the minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(b)(1) requires listed companies to maintain stockholders’ equity of at least $2,500,000. In the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2024, the Company reported stockholders’ equity of $801,434, which is below the minimum stockholders’ equity required for continued listing pursuant to Nasdaq Listing Rule 5550(b)(1). In addition, presently, the Company does not meet the alternatives of market value of listed securities or net income from continuing operations.

 

This Notification has no immediate effect on the listing of the Company’s securities on the Nasdaq Capital Market. Nasdaq has provided the Company with 45 calendar days, or until October 25, 2024, to submit a plan to regain compliance with the minimum stockholders’ equity standard. If the Company’s plan to regain compliance is accepted, Nasdaq may grant an extension of up to 180 calendar days from September 10, 2024 for the Company to regain compliance.

 

On October 15, 2024, the Company submitted a plan to Nasdaq to regain compliance. However, there can be no assurance that the Company’s plan will be accepted or that, if it is, that the Company will be able to regain compliance and maintain its listing on the Nasdaq Capital Market. If the Company’s plan to regain compliance is not accepted or if Nasdaq does not grant an extension and the Company does not regain compliance, or if the Company fails to satisfy another Nasdaq requirement for continued listing, Nasdaq could provide notice that the Company’s securities will become subject to delisting. In that event, the Company will have an opportunity to appeal Nasdaq’s decision to a hearings panel.

 

Results of Operations

 

Comparison of the three months ended September 30, 2024 and 2023

 

The following table summarizes the results of our operations:

 

   Three Months Ended         
   September 30,         
   2024   2023   Change   % 
Revenue  $-   $-   $-    - 
Operating expenses:                    
Research and development   1,400,564    1,045,177    355,387    34%
General and administrative   328,995    265,553    63,442    24%
Legal and professional   1,322,002    288,416    1,033,586    358%
Total operating expenses and loss of operations   3,051,561    1,599,146    1,452,415    91%
Other income (expense):                    
Interest expense - related parties   (2,137)   -    (2,137)   (100%)
Interest expense   (270,538)   (623,465)   352,927    56%
Gain on sale of marketable securities   56,398    -    56,398    100%
Change in fair value of marketable securities   (42,898)   9,606    (52,504)   (547%)
Interest income   2,524    20,765    (18,241)   (88%)
Change in fair value of derivative liabilities   286,316    442,900    (156,584)   (35%)
Loss on settlement of convertible debt   (762,186)   (43,414)   (718,772)   1656%
Total other expense   (732,521)   (193,608)   (538,913)   278%
Net loss  $(3,784,082)  $(1,792,754)  $(1,991,328)   111%

 

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Research and Development. Research and development (“R&D”) expenses were $1.4 million for the three months ended September 30, 2024, as compared to $1.0 million for three months ended September 30, 2023. The increase of $0.4 million, or 34%, is primarily related to the Company having completed production of the drug product and the start of work related to the initiation of trials.

 

R&D compensation related expenses were $0.3 million in the three months ended September 30, 2024 as compared to $0.3 million in the three months ended September 30, 2023. Compensation related expenses were 22% for the three months ended September 30, 2024, representing a decrease from 29% of total R&D in the three months ended September 30, 2023. Subcontract work made up 73% of total R&D expenses in the three months ended September 30, 2024 and 65% of total R&D expenses during the three months ended September 30, 2023.

 

General and Administrative Expenses. General and Administrative expenses in the three months ended September 30, 2024 increased by $63 thousand, or 24% to $0.33 million in the three months ended June 30, 2024, compared to $0.27 million in the three months ended September 30, 2023, largely due to costs associated with the additional focus on financial reporting and capital needs.

 

Legal and Professional Expenses. During the three months ended September 30, 2024, legal and professional expenses increased by $1.0 million or 358% to $1.3 million compared to $0.3 million in the same period in the prior year. The increase in legal and professional fees was primarily due to increases in our expenses related to our public filing requirements, reaudits, contracts, and financing related work.

 

Other Income Expense. Other expense was $0.7 million for the three months ended September 30, 2024, which consisted primarily of $0.3 million in interest expense on convertible loans, loss on settlement of debt of $0.8 million, and a gain on change in fair value of derivative liabilities of $0.3 million. Other expense was $0.2 million for the three months ended September 30, 2023, which consisted primarily of $0.4 million in interest expense on convertible loans, loss on settlement of convertible debt of $0.8 million, and a gain on change in fair value of derivative liabilities of $0.4 million. The $0.4 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. These amounts were largely attributable to the Alto Convertible Note conversions and cash management activities.

 

Comparison of the nine months ended September 30, 2024 and 2023

 

The following table summarizes the results of our operations:

 

   Nine Months Ended         
   September 30,         
   2024   2023   Change   % 
Revenue  $-   $-   $-    - 
Operating expenses:                    
Research and development   2,632,387    2,806,644    (174,257)   (6%)
General and administrative   963,642    730,186    233,456    32%
Legal and professional   2,323,013    1,072,728    1,250,285    117%
Total operating expenses and loss of operations   5,919,042    4,609,558    1,309,484    28%
Other income (expense):                    
Interest expense - related parties   (2,137)   (6,825)   4,688    (69%)
Interest expense   (1,198,738)   (1,952,147)   753,409    39%
Interest income   38,135    56,720    (18,585)   (33%)
Finance fee   -    (104,245)   104,245    (100%)
Change in fair value of derivative liabilities   340,405    2,118,175    (1,777,770)   (84%)
Gain on sale of marketable securities   100,118    1,744    98,374    5,641%
Change in fair value of marketable securities   (71,568)   21,134    (92,702)   (439%)
Loss on settlement of convertible debt   (833,501)   (477,221)   (356,280)   (75%)
Total other expense   (1,627,286)   (342,665)   (1,284,621)   375%
Net loss  $(7,546,328)  $(4,952,223)  $(2,594,105)   52%

 

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Research and Development. Research and development (“R&D”) expenses were $2.6 million for the nine months ended September 30, 2024, as compared to $2.8 million for nine months ended September 30, 2023. The decrease of $0.2 million, or 6%, is primarily related to the Company having completed production of the drug product in the prior period substantially offset by costs incurred for the start of work related to the initiation of trials in the current period.

 

R&D compensation related expenses were $0.9 million in the nine months ended September 30, 2024 as compared to $1.2 million in the nine months ended September 30, 2023. Compensation related expenses were 36% for the nine months ended September 30, 2024, representing a decrease from 42% of total R&D in the nine months ended September 30, 2023. Subcontract work made up 57% of total R&D expenses in the nine months ended September 30, 2024 and 53% of total R&D expenses during the nine months ended September 30, 2023.

 

General and Administrative Expenses. General and Administrative expenses in the nine months ended September 30, 2024 increased by $0.2 million, or 32% to $1.0 million in the nine months ended September 30, 2024. The increase in general and administrative expenses was primarily due to increases in marketing, advertising and filing expenses.

 

Legal and Professional Expenses. During the nine months ended September 30, 2024, legal and professional expenses increased by $1.3 million or 117%. The increase in legal and professional fees was primarily due to increases in our expenses related to our public filing requirements, reaudits, contracts and financing related work.

 

Other Income Expense. Other expense was $1.6 million for the nine months ended September 30, 2024, which consisted primarily of $1.2 million in interest expense on convertible loans, loss on settlement of convertible debt of $0.8 million, change in marketable securities of $0.1 million, and a gain on change in fair value of derivative liabilities of $0.3 million. Other expense was $0.3 million for the nine months ended September 30, 2023, which consisted primarily of $2.0 million in interest expense on convertible loans, finance fee on convertible loans of $0.1 million, loss on settlement of convertible debt of $0.5 million, and a gain on change in fair value of derivative liabilities of $2.1 million. The $2.1 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. These amounts were largely attributable to the Alto Convertible Note conversions and cash management activities.

 

Liquidity and Capital Resources

 

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 $7.5 million and no revenues for the nine months ended September 30, 2024 and has a working capital deficit of approximately $1.3 million as of September 30, 2024. The Company does not expect to generate positive cash flows from operating activities in the near future.

 

In September 2024, the Company’s CEO provided $250 thousand to the Company in exchange for a promissory note repayable in equal monthly installments of principal and interest over a term of one year. In October 2024, the Company completed an offering of senior secured convertible bridge notes, receiving $790 thousand in cash. The notes have a term of one-year and were accompanied by 329,461 warrants with a weighted-average exercise price of $1.42. Also in October 2024, the Company completed an equity raise that provided $3.9 million net cash for the issuance of 2.9 million shares / pre-funded warrants, and by 2.9 million warrants with an exercise price of $1.40. However, the Company’s existing cash resources and the cash received from the equity offering and senior convertible note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months.

 

24
 

 

The Company’s capital raises have to date supported operations, the manufacture of drug product and FDA approval of the IND for the Phase II clinical trial of Ropidoxuridine and radiation therapy in glioblastoma and other radiation sensitizer discovery and therapy. The FDA recommended and the Company agreed to an expansion of the Phase II clinical trial, necessitating additional capital to complete the trial as well as fund ongoing operations. Additionally, the Phase II clinical trial of Ropidoxuridine has evolved with finalized agreements with all six of the planned site enrollment locations to administer the Phase II clinical trial of Ropidoxuridine and the enrollment of the first three patients.

 

The ability of the Company to continue as a going concern is dependent upon its ability to continue 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. These 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.

 

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.

 

Balance Sheet Data:

 

   September 30,   December 31,         
   2024   2023   Change   % 
Current assets  $361,351   $5,593,005   $(5,231,654)   (94%)
Current liabilities   1,659,233    1,042,237    616,996    59%
Working capital (deficiency)  $(1,297,882)  $4,550,768   $(5,848,650)   (129%)

 

As of September 30, 2024, total current assets were $0.4 million and total current liabilities were $1.7 million, resulting in a working capital deficiency of $1.3 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 September 30, 2024, the current assets were from $0.2 million cash, $0.1 million in prepaid expenses and $0.1 million in deferred costs, with the decrease from December 31, 2023 being primarily due to ongoing cash burn from our R&D programs, filing expenses, reaudits, and general operations. The increase in current liabilities is primarily due to an increase in accounts payable of $1.1 million compared to December 31, 2023, partially offset by the net change in amounts owed under convertible notes and notes payable of $0.5 million.

 

Cash Flows from Operating Activities

 

   Nine Months Ended         
   September 30,         
   2024   2023   Change   % 
Cash used in operating activities  $(4,637,068)  $(4,518,973)  $(118,095)   3%
Cash provided by (used in) investing activities  $2,915,761   $(2,916,760)  $5,832,521    (200%)
Cash provided by (used in) financing activities  $(698,457)  $2,904,527   $(3,602,984)   (124%)
Cash on hand  $156,652   $3,885,997   $(3,729,345)   (96%)

 

To date, we have not generated positive cash flows from operating activities. For the nine months ended September 30, 2024, and 2023, net cash flows used in operating activities were $4.6 million and $4.5 million, respectively, with a shift in 2024 from a majority of research and development activity costs in 2023 to additional administrative costs in 2024 associated with financing and financial reporting matters.

 

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Cash Flows from Investing Activities

 

For the nine months ended September 30, 2024, we invested in trading marketable securities for $44 thousand and received $3.0 million in proceeds from disposition of marketable securities. For the nine months ended September 30, 2023, we invested in trading marketable securities for $3.0 million and received $80 thousand in proceeds from disposition of marketable securities and purchased $19 thousand of equipment.

 

Cash Flows from Financing Activities

 

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, and received $0.3 million of proceeds from a related party notes payable. For the nine months ended September 30, 2023, we received a net of $3.6 million from the sale and issuance of convertible notes payable and warrants and repaid $0.7 million in related party notes payable.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

Critical Accounting Policies and Significant Judgments and Estimates

 

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.

 

Our most critical accounting policies and estimates relate to the following:

 

  ● Research and Development Expenses
  ● Fair Value of Derivative Financial Instruments
  ● Initial Measurement of Equity-Based Warrants

 

Research and Development

 

Research and development expenses are expensed as incurred and, prior to our initial public offering in September 2022, have historically been offset by contract receivable payments from an NIH SBIR contract that has supported our scientific research. This is stated in the financials as research and development-net of contract expense reimbursements.

 

Fair Value of Financial Instruments

 

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.

 

26
 

 

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 weighted based on significant unobservable inputs including the average volatility of a population set and 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.

 

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.

 

Initial Measurement of Equity-Based Warrants

 

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 equity, the derivative instrument is initially recorded at its fair value and recorded to additional paid in capital. The classification of derivative instruments, including whether such instruments should be recorded as equity, is evaluated at the end of each reporting period.

 

For our derivative financial instruments classified as equity, the Company used a Black Scholes valuation model, to calculate the fair value on issuance date, without revaluation.

 

The use of Black Scholes valuation model requires the input of highly subjective assumptions, including the expected price volatility, that is based on an analysis of the historical volatility of the common stock of a group of comparable entities. Any change to these inputs could produce significantly higher or lower fair value measurements.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a “smaller reporting company,” we are not required to provide the information required by this Item.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Disclosure controls and procedures (as defined in Securities Exchange Act of 1934, as amended, or the Exchange Act Rule 15d-15(e)) are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

 

As of September 30, 2024, our management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Such evaluation was carried out under the supervision of our Chief Executive Officer with the participation of our President and Chief Operating Officer, and our Chief Financial Officer, and our third-party financial service provider. Based on this evaluation, management concluded that our disclosure controls and procedures were, and continue to be, ineffective as of September 30, 2024. Based on the foregoing, our management concluded that our internal controls over the following financial reporting areas to be material weaknesses:

 

  ● Our written accounting policies and documentation of management’s contemplation of the accounting treatment and implications over significant unusual transactions, including complex accounting associated with debt and equity transactions, is limited and resulted in ineffective monitoring of financial reporting. These were contributing factors which lead to untimely filings.

 

27
 

 

  ● Due to our size and stage of development, segregation of all conflicting duties may not always be possible and may not be economically feasible. During the reporting period, we lacked sufficient review procedures and segregation of duties such that a proper review had not been performed by someone other than a preparer, including manual journal entries, and that process documentation is lacking for review and monitoring controls over financial statements close process and financial reporting.
  ● As a result of the Company’s evolution since the date of our initial formation, when we were focused on NIH SBIR research contracts with related costing allocation allowances until when we completed our IPO and continued our development process, management lacks a formal process to identify and properly classify operating expenses such as R&D.
  ● We identified findings related to overall information technology general controls including issues with access and segregation of duties for systems supporting the Company’s internal control processes and controls.
  ● Our accounting policies and oversight regarding certain technical aspects of financial reporting for stock-based compensation transactions, particularly relating to grant date valuations and expense attribution, is limited and resulted in the incorrect recording of related compensation expense and related disclosures.

 

Except as noted below, there has been no change in the Company’s internal control over financial reporting during the three months ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management will continue to monitor and evaluate the effectiveness of our internal controls and procedures over financial reporting on an ongoing basis and is committed to taking further action and implementing additional improvements as necessary.

 

Management’s Remediation Measures

 

The aforementioned material weaknesses were identified in 2023 and 2024 and the ineffective monitoring of financial reporting weaknesses resulted in the Company needing to restate its 2023 and 2022 financial statements. While the Company has improved its organizational capabilities, the Company’s remediation efforts will continue to take place. Management is committed to maintaining a strong internal control environment. In response to the identified material weaknesses in the overall control environment, management is currently implementing additional measures which include:

 

● Hired a new Chief Financial Officer (“CFO”) during the second quarter of 2024 to bolster the Company’s internal technical accounting and financial reporting experience and provide bandwidth for the prior CFO to focus on the Company’s expanding clinical trial.
   
● Engaged a third-party consulting firm to assist with the preparation of SEC reporting and other technical accounting matters.

 

The Company will continue to review and improve its internal controls over financial reporting to address the underlying causes of the material weaknesses and control deficiencies. Such material weaknesses and control deficiencies will not be fully remediated until the Company has concluded that its internal controls are operating effectively for a sufficient period of time.

 

PART II — OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not presently party to any pending or other threatened legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results, although from time to time, we may become involved in legal proceedings in the ordinary course of business. We maintain insurance policies in amounts and with the coverage and deductibles we believe are adequate, based on the nature and risks of our business, historical experience and industry standards.

 

ITEM 1A. RISK FACTORS

 

As a smaller reporting company, we are not required to provide the information required by this item.

 

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

Item 6. Exhibits

 

The following exhibits are filed or furnished with this report:

 

Exhibit No.   Description of Exhibit
3.1   Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 (File No. 333-265429) filed on June 3, 2022).
3.2   Certificate of Amendment to Amended and Restated Certificate of Incorporation, effective March 30, 2022 (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (File No. 333-265429) filed on June 3, 2022).
3.3   Certificate of Amendment to Amended and Restated Certificate of Incorporation, effective June 22, 2022 (incorporated by reference to Exhibit 3.5 to the Registration Statement on Form S-1/A (File No. 333-265429) filed on June 23, 2022).
3.4   Second Amended and Restated By-Laws (incorporated by reference to Exhibit 3.1 to the current Report on Form 8-K filed on November 1, 2022).
3.5   Certificate of Amendment of Shuttle Pharmaceuticals Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on August 7, 2024).
4.1   Form of Convertible Note, dated January 11, 2023, issued by Shuttle Pharmaceuticals Holdings, Inc. to Alto Capital Master Fund, SPC – Segregated Master Portfolio B (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed January 12, 2023).
4.2   Form of Warrant, dated January 11, 2023, issued by Shuttle Pharmaceuticals Holdings, Inc. to Alto Capital Master Fund, SPC – Segregated Master Portfolio B (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed January 12, 2023).
4.3   Form of Promissory Note, dated September 4, 2024, between Shuttle Pharmaceuticals and Anatoly Dritschilo (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on September 10, 2024).
4.4   Form of Senior Secured Convertible Notes (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on October 17, 2024).
4.5   Form of Common Warrants (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on October 17, 2024).
4.6   Form of Common Warrants (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on November 1, 2024).
4.7   Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K filed on November 1, 2024).
10.1   Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on October 17, 2024).
10.2   Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 1, 2024).
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1   Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2   Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS   Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH   Inline XBRL Taxonomy Schema Document
101.CAL   Inline XBRL Taxonomy Calculation Linkbase Document
101.DEF   Inline XBRL Taxonomy Definition Linkbase Data
101.LAB   Inline XBRL Taxonomy Label Linkbase Document
101.PRE   Inline XBRL Taxonomy Presentation Linkbase Document
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* Filed herewith.

**Furnished herewith.

Certain portions of the exhibit have been redacted in accordance with Item 601(b) of Regulation S-K. The Company will supplementally furnish an unredacted copy to the SEC upon requested; provided however, that the Company may request confidential treatment pursuant to Ruel 24b-2 of the Securities Exchange Act of 1934, as amended, to the extent so furnished.

 

29
 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  SHUTTLE PHARMACEUTICALS HOLDINGS, INC.
     
November 13, 2024 By: /s/ Anatoly Dritschilo
    Anatoly Dritschilo, M.D.
    Chief Executive Officer
    (Principal Executive Officer)
     
November 13, 2024 By: /s/ Timothy J. Lorber
    Timothy J. Lorber
    Chief Financial Officer
    (Principal Financial and Accounting Officer)

 

30

 

 

Exhibit 31.1

 

CERTIFICATION

 

I, Anatoly Dritschilo, M.D., certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q Pursuant to Rule 15d-2 under the Securities Exchange Act of 1934 for the period ended September 30, 2024 of Shuttle Pharmaceuticals Holdings, Inc. (the “registrant”);

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 13, 2024 /s/ Anatoly Dritschilo
  Anatoly Dritschilo, M.D.
 

Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

Exhibit 31.2

 

CERTIFICATION

 

I, Timothy J. Lorber, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q Pursuant to Rule 15d-2 under the Securities Exchange Act of 1934 for the period ended September 30, 2024 of Shuttle Pharmaceuticals Holdings, Inc. (the “registrant”);

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 13, 2024 /s/ Timothy J. Lorber
  Timothy J. Lorber
 

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Shuttle Pharmaceuticals Holdings, Inc. (the “Company”) on Form 10-Q pursuant to Rule 15d-2 under the Securities Exchange Act of 1934 for the period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Anatoly Dritschilo, M.D., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 13, 2024

 

  /s/ Anatoly Dritschilo
  Anatoly Dritschilo, M.D.
 

Chief Executive Officer

(Principal Executive Officer)

 

 

 

Exhibit 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Shuttle Pharmaceuticals Holdings, Inc. (the “Company”) on Form 10-Q pursuant to Rule 15d-2 under the Securities Exchange Act of 1934 for the period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Timothy J. Lorber, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 13, 2024

 

  /s/ Timothy J. Lorber
  Timothy J. Lorber
 

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 
v3.24.3
Cover - shares
 9 Months Ended
Sep. 30, 2024
Nov. 13, 2024
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2024  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --12-31  
Entity File Number 001-41488  
Entity Registrant Name SHUTTLE PHARMACEUTICALS HOLDINGS, INC.  
Entity Central Index Key 0001757499  
Entity Tax Identification Number 82-5089826  
Entity Incorporation, State or Country Code DE  
Entity Address, Address Line One 401 Professional Drive  
Entity Address, Address Line Two Suite 260  
Entity Address, City or Town Gaithersburg  
Entity Address, State or Province MD  
Entity Address, Postal Zip Code 20879  
City Area Code (240)  
Local Phone Number 403-4212  
Title of 12(b) Security Common Stock  
Trading Symbol SHPH  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Elected Not To Use the Extended Transition Period false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   3,664,919
v3.24.3
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Current assets    
Cash and cash equivalents $ 156,656 $ 2,576,416
Prepaid expenses 103,040 114,473
Marketable securities 2,887,215
Accrued interest income 4 14,901
Deferred costs 101,651
Total Current Assets 361,351 5,593,005
Property and equipment, net 21,160 24,827
Operating lease right-of-use asset 291,057 333,904
Total Assets 673,568 5,951,736
Current Liabilities    
Convertible notes payable, net 595,999
Operating lease liability 58,652 52,479
Total Current Liabilities 1,659,233 1,042,237
Convertible notes payable non-current, net 135,089
Derivative liability 74,107 414,512
Operating lease liability non-current 255,605 304,127
Total Liabilities 1,988,945 1,895,965
Stockholders’ Equity (Deficit)    
Series A Convertible Preferred Stock, $0.00001 par value; $1,000 per share liquidation value; 20,000,000 shares authorized; no shares outstanding
Common stock, $0.00001 par value; 100,000,000 shares authorized; 2,946,099 and 2,008,689 shares issued and outstanding, respectively 29 20
Additional paid in capital 31,664,226 29,489,055
Accumulated deficit (32,979,632) (25,433,304)
Total Stockholders’ Equity (Deficit) (1,315,377) 4,055,771
Total Liabilities and Stockholders’ Equity (Deficit) 673,568 5,951,736
Nonrelated Party [Member]    
Current Liabilities    
Accounts payable and accrued expenses 1,348,444 282,860
Accrued interest payable 110,453
Related Party [Member]    
Current Liabilities    
Accounts payable and accrued expenses 446
Accrued interest payable 2,137
Notes payable to related parties $ 250,000
v3.24.3
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares
Sep. 30, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Preferred stock, par value $ 0.00001 $ 0.00001
Preferred stock, liquidation preference per share $ 1,000 $ 1,000
Preferred stock, shares authorized 20,000,000 20,000,000
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.00001 $ 0.00001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 2,946,099 2,008,689
Common stock, shares outstanding 2,946,099 2,008,689
v3.24.3
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Defined Benefit Plan Disclosure [Line Items]        
Revenue
Operating expenses        
Research and development 1,400,564 1,045,177 2,632,387 2,806,644
General and administrative 328,995 265,553 963,642 730,186
Legal and professional 1,322,002 288,416 2,323,013 1,072,728
Total operating expenses 3,051,561 1,599,146 5,919,042 4,609,558
Loss from operations (3,051,561) (1,599,146) (5,919,042) (4,609,558)
Other income (expense)        
Interest income 2,524 20,765 38,135 56,720
Finance fee (104,245)
Change in fair value of derivative liabilities 286,316 442,900 340,405 2,118,175
Gain on sale of marketable securities 56,398 100,118 1,744
Change in fair value of marketable securities (42,898) 9,606 (71,568) 21,134
Loss on settlement of convertible debt (762,186) (43,414) (833,501) (477,221)
Total other income (expense) (732,521) (193,608) (1,627,286) (342,665)
Net loss attributable to common stockholders $ (3,784,082) $ (1,792,754) $ (7,546,328) $ (4,952,223)
Weighted average common shares outstanding - basic 2,384,177 1,969,904 2,189,366 1,820,006
Weighted average common shares outstanding - diluted 2,384,177 1,969,904 2,189,366 1,820,006
Net loss per shares - basic $ (1.59) $ (0.91) $ (3.45) $ (2.72)
Net loss per shares - diluted $ (1.59) $ (0.91) $ (3.45) $ (2.72)
Related Party [Member]        
Other income (expense)        
Interest expense $ (2,137) $ (2,137) $ (6,825)
Nonrelated Party [Member]        
Other income (expense)        
Interest expense $ (270,538) $ (623,465) $ (1,198,738) $ (1,952,147)
v3.24.3
Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited) - USD ($)
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Total
Balance at Dec. 31, 2022 $ 17 $ 26,518,433 $ (18,840,581) $ 7,677,869
Balance, shares at Dec. 31, 2022 1,700,414      
Common stock issued for conversion of accrued interest and principal 104,547 104,547
Common stock issued for conversion of accrued interest and principal, shares 6,375      
Stock-based compensation 8,333 8,333
Net loss (975,097) (975,097)
Warrants issued for financing costs, net of issuance fees of $8,727 90,816 90,816
Balance at Mar. 31, 2023 $ 17 26,722,129 (19,815,678) 6,906,468
Balance, shares at Mar. 31, 2023 1,706,789      
Balance at Dec. 31, 2022 $ 17 26,518,433 (18,840,581) 7,677,869
Balance, shares at Dec. 31, 2022 1,700,414      
Common stock issued for restricted stock units, shares 1,876      
Net loss       (4,952,223)
Common stock issued for conversion of convertible debt accrued interest and principal, shares 297,625      
Balance at Sep. 30, 2023 $ 20 29,402,533 (23,792,804) 5,609,749
Balance, shares at Sep. 30, 2023 1,999,915      
Balance at Mar. 31, 2023 $ 17 26,722,129 (19,815,678) 6,906,468
Balance, shares at Mar. 31, 2023 1,706,789      
Common stock issued for conversion of accrued interest and principal $ 2 2,163,990 2,163,992
Common stock issued for conversion of accrued interest and principal, shares 228,489      
Stock-based compensation 49,522 49,522
Net loss (2,184,372) (2,184,372)
Balance at Jun. 30, 2023 $ 19 28,935,641 (22,000,050) 6,935,610
Balance, shares at Jun. 30, 2023 1,935,278      
Common stock issued for restricted stock units
Common stock issued for restricted stock units, shares 1,876      
Stock-based compensation 37,583 37,583
Net loss (1,792,754) (1,792,754)
Common stock issued for conversion of convertible debt accrued interest and principal $ 1 429,309 429,310
Common stock issued for conversion of convertible debt accrued interest and principal, shares 62,761      
Balance at Sep. 30, 2023 $ 20 29,402,533 (23,792,804) 5,609,749
Balance, shares at Sep. 30, 2023 1,999,915      
Balance at Dec. 31, 2023 $ 20 29,489,055 (25,433,304) 4,055,771
Balance, shares at Dec. 31, 2023 2,008,689      
Common stock issued for conversion of accrued interest and principal $ 1 325,297 325,298
Common stock issued for conversion of accrued interest and principal, shares 78,197      
Common stock issued for restricted stock units
Common stock issued for restricted stock units, shares 15,625      
Stock-based compensation 111,449 111,449
Net loss (1,731,031) (1,731,031)
Balance at Mar. 31, 2024 $ 21 29,925,801 (27,164,335) 2,761,487
Balance, shares at Mar. 31, 2024 2,102,511      
Balance at Dec. 31, 2023 $ 20 29,489,055 (25,433,304) 4,055,771
Balance, shares at Dec. 31, 2023 2,008,689      
Common stock issued for restricted stock units, shares 24,349      
Net loss       (7,546,328)
Common stock issued for conversion of convertible debt accrued interest and principal, shares 797,345      
Common stock issued for reverse stock split fractional share round up, shares 115,716      
Balance at Sep. 30, 2024 $ 29 31,664,226 (32,979,632) (1,315,377)
Balance, shares at Sep. 30, 2024 2,946,099      
Balance at Mar. 31, 2024 $ 21 29,925,801 (27,164,335) 2,761,487
Balance, shares at Mar. 31, 2024 2,102,511      
Common stock issued for restricted stock units
Common stock issued for restricted stock units, shares 3,722      
Stock-based compensation 71,162 71,162
Net loss (2,031,215) (2,031,215)
Balance at Jun. 30, 2024 $ 21 29,996,963 (29,195,550) 801,434
Balance, shares at Jun. 30, 2024 2,106,233      
Common stock issued for restricted stock units
Common stock issued for restricted stock units, shares 5,002      
Stock-based compensation 45,275 45,275
Net loss (3,784,082) (3,784,082)
Common stock issued for conversion of convertible debt accrued interest and principal $ 7 1,621,989 1,621,996
Common stock issued for conversion of convertible debt accrued interest and principal, shares 719,148      
Common stock issued for reverse stock split fractional share round up $ 1 (1)
Common stock issued for reverse stock split fractional share round up, shares 115,716      
Balance at Sep. 30, 2024 $ 29 $ 31,664,226 $ (32,979,632) $ (1,315,377)
Balance, shares at Sep. 30, 2024 2,946,099      
v3.24.3
Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited) (Parenthetical) - USD ($)
 3 Months Ended 9 Months Ended
Mar. 31, 2023
Sep. 30, 2024
Sep. 30, 2023
Statement of Stockholders' Equity [Abstract]      
Warranst of issuance fees $ 8,727 $ 0 $ 8,727
v3.24.3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (7,546,328) $ (4,952,223)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation 3,667 4,828
Change in fair value of derivative liabilities (340,405) (2,118,175)
Amortization of debt discount and finance fees 1,079,444 1,654,724
Gain on marketable securities (100,118) (1,744)
Change in fair value of marketable securities 71,568 (21,134)
Accrued interest settled with common stock 54,670 294,927
Loss on settlement of convertible debt 833,501 477,221
Stock-based compensation 227,886 95,438
Changes in operating assets and liabilities:    
Accrued interest income 14,897 (12,435)
Prepaid expenses 11,433 (8,956)
Accounts payable and accrued expenses 1,065,584 63,255
Accounts payable and accrued expenses - related parties (446) (12,500)
Accrued interest payable (15,056) 106,578
Accrued interest payable - related parties 2,137 (98,135)
Change in operating lease asset and liability 498 9,358
Net cash used in operating activities (4,637,068) (4,518,973)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Investment in marketable securities (43,587) (2,977,714)
Proceeds from disposition of marketable securities 2,959,352 80,000
Purchase of equipment (19,046)
Net cash used in investing activities 2,915,765 (2,916,760)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from note payable-related party 250,000
Repayment of note payable-related party (685,473)
Proceeds from convertible notes payable and warrants 3,935,000
Payment for finance costs related to convertible note payable (345,000)
Payment for finance costs (101,651)
Payment of convertible note payable (846,806)
Net cash provided by financing activities (698,457) 2,904,527
Net change in cash and cash equivalents (2,419,760) (4,531,206)
Cash and cash equivalents, beginning of period 2,576,416 8,417,203
Cash and cash equivalents, end of period 156,656 3,885,997
Cash paid for:    
Interest 79,682 102,373
Income taxes
Supplemental non-cash financing activities:    
Common stock issued for settlement of debt 1,947,294 2,697,849
Warrants issued for financing fees, net of issuance fees of $0 and $8,727, respectively 90,816
Initial recognition of right of use asset and liability $ 365,556
v3.24.3
Condensed Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) - USD ($)
 3 Months Ended 9 Months Ended
Mar. 31, 2023
Sep. 30, 2024
Sep. 30, 2023
Statement of Cash Flows [Abstract]      
Warrants issuance fees $ 8,727 $ 0 $ 8,727
v3.24.3
Organization and Liquidity
 9 Months Ended
Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Liquidity

Note 1 – Organization and Liquidity

 

Organization and Line of Business

 

Shuttle Pharmaceuticals Holdings, Inc. (“we,” “us,” “our,” or the “Company”) was originally formed as Shuttle Pharmaceuticals, LLC in the State of Maryland on December 18, 2012. On August 12, 2016, the Company filed articles of conversion with the State of Maryland to convert from an LLC to a C corporation, at which time the Company changed its name to Shuttle Pharmaceuticals, Inc. (“Shuttle”). In connection with the conversion the Company issued 5,625,000 shares of common stock in exchange for 100% of the outstanding membership interests in Shuttle prior to conversion. On June 4, 2018, Shuttle completed a reverse merger with Shuttle Pharmaceuticals Holdings, Inc. (then known as Shuttle Pharma Acquisition Corp, Inc.), a Delaware corporation, pursuant to which Shuttle, our operating entity, became a wholly-owned subsidiary of the Company. All share numbers referenced herein reflect a 1-for-8 reverse split of our common stock on a post-split basis, which was effective as of August 13, 2024 (see Note 2).

 

The Company’s primary purpose is to develop and commercialize unique drugs for the sensitization of cancers and protection of normal tissues, with the goal of improving outcomes for cancer patients receiving radiation therapy. Shuttle has deployed its proprietary technology to develop novel cancer immunotherapies, producing a pipeline of selective HDAC inhibitors for cancer and immunotherapy applications. The Company’s HDAC platform is designed to target candidate molecules with potential roles in therapeutics beyond cancer, including autoimmune, inflammatory, metabolic, neurological and infectious diseases. The Company’s Ropidoxuridine product, which is used with radiation therapy to sensitize cancer cells, was initially funded by a Small Business Innovation Research (“SBIR”) contract provided by the National Cancer Institute (“NCI”), a unit of the National Institutes of Health (“NIH”). Ropidoxuridine has been further developed though the Company’s collaborations with scientists at the University of Virginia for use in combination with proton therapy to improve patient survival. Historically, and prior to the Company’s initial public offering in September 2022, the Company has obtained funding to develop products through NIH grants, including a product to predict late effects of radiation with metabolite biomarkers and develop prostate cancer cell lines in health disparities research.

 

The production and marketing of the Company’s products and its ongoing research and development activities will be and are subject to extensive regulation by numerous governmental authorities in the United States. Prior to marketing in the United States, any products or combination of products developed by the Company must undergo rigorous preclinical (animal) and clinical (human) testing and an extensive regulatory approval process implemented by the Food and Drug Administration (“FDA”) under the Food, Drug and Cosmetic Act. There can be no assurance that the Company will not encounter problems in its clinical trials that will cause the Company or the FDA to delay or suspend the clinical trials.

 

The Company’s success will depend in part on its ability to obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and in other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company now or in the future.

 

Liquidity and Going Concern

 

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 $7.5 million and no revenues for the nine months ended September 30, 2024 and has a working capital deficit of approximately $1.3 million as of September 30, 2024. The Company does not expect to generate positive cash flows from operating activities in the near future.

 

 

In September 2024, the Company’s CEO provided $250 thousand to the Company in exchange for a promissory note repayable in equal monthly installments of principal and interest over a term of one year. In October 2024, the Company completed an offering of senior secured convertible bridge notes, receiving $790 thousand in cash. The notes have a term of one-year and were accompanied by 329,461 warrants with a weighted-average exercise price of $1.42. Also in October 2024, the Company completed an equity raise that provided $3.9 million net cash for the issuance of 2.9 million shares / pre-funded warrants, and by 2.9 million warrants with an exercise price of $1.40. However, the Company’s existing cash resources and the cash received from the equity offering and senior convertible note are not expected to provide sufficient funds to carry out the Company’s operations and clinical trials through the next twelve months.

 

The Company’s capital raises have to date supported operations, the manufacture of drug product and FDA approval of the IND for the Phase II clinical trial of Ropidoxuridine and radiation therapy in glioblastoma and other radiation sensitizer discovery and therapy. The FDA recommended and the Company agreed to an expansion of the Phase II clinical trial, necessitating additional capital to complete the trial as well as fund ongoing operations. Additionally, the Phase II clinical trial of Ropidoxuridine has evolved with finalized agreements with all six of the planned site enrollment locations to administer the Phase II clinical trial of Ropidoxuridine and the enrollment of the first three patients.

 

The ability of the Company to continue as a going concern is dependent upon its ability to continue 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. These 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.

 

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.

 
v3.24.3
Summary of Significant Accounting Policies
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and notes required by GAAP for annual financial statements. A complete discussion of the Company’s significant accounting policies is included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023.

 

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all of the adjustments necessary to present the financial position of the Company as of September 30, 2024 and the results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements of the Company have not been audited by the Company’s independent registered public accounting firm, except that the year-end consolidated balance sheet was derived from audited financial statements. The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the restated financial statements and related notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K/A filed with the SEC on September 4, 2024.

 

Reverse Stock Split

 

On August 13, 2024, in order to meet Nasdaq’s minimum bid price requirement of $1.00 per share (the “Minimum Bid Price Requirement”), the Company effectuated a 1-for-8 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares (the “Reverse Stock Split”). The Reverse Stock Split had no effect on the Company’s authorized shares of common stock or preferred stock and the par value will remain unchanged at $0.00001, respectively. All common stock share, option, warrant and per share amounts (except our authorized but unissued shares and previously reserved shares) have been retroactively adjusted in these financial statements and related disclosures.

 

 

Basis of Consolidation

 

The unaudited condensed consolidated financial statements have been prepared on a consolidated basis with those of the Company’s wholly-owned subsidiaries, Shuttle Pharmaceuticals, Inc. and Shuttle Diagnostics Inc. All intercompany transactions and balances have been eliminated.

 

Correction of an Immaterial Error in the Prior Period Financial Statements

 

During the fourth quarter of 2023, the Company determined that the prior year consolidated financial statements had a misstatement caused by an immaterial classification error of certain research and development expenses in accordance with Accounting Standards Codification (“ASC”) 730. As a result, certain prior year amounts have been corrected for consistency with the current year presentation. The Company assessed the materiality of this change in presentation on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” (ASC Topic 250, Accounting Changes and Error Corrections). Based on this assessment, the Company concluded that these error corrections in its unaudited condensed consolidated statements of operations are not material to any previously presented financial statements based upon overall considerations of both quantitative and qualitative factors. The corrections had no impact on the unaudited condensed consolidated balance sheet, unaudited condensed consolidated statements of cash flows, or unaudited condensed consolidated statement of changes in stockholders’ equity, to these financial statements, or for any previously presented interim or annual financial statements. Further, the corrections did not result in a change in quarterly or year-to-date operating losses, basic or diluted earnings per share, or working capital. The quarterly correction required for the three and nine months ended September 30, 2023 was $95,129 and $277,844, respectively. Accordingly, the Company corrected the previously reported immaterial error for the three and nine months ended September 30, 2023 in this Quarterly Report on Form 10-Q.

 

   September 30, 2023   Correction   Corrected
September 30, 2023		 
Research and development expense  $3,084,488   $(277,844)  $2,806,644 
General and administrative expense   452,342    277,844    730,186 
Net Loss  $3,536,830   $-   $3,536,830 

 

Use of Estimates

 

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates are contained in the accompanying unaudited condensed consolidated financial statements for the recognition of research and development expenses, valuation of warrants and valuation of bifurcated derivative liabilities and other financial instruments.

 

 

Cash and Cash Equivalents

 

Cash and cash equivalents include cash in bank accounts and money market funds with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. As of September 30, 2024 and December 31, 2023, cash and cash equivalents consisted of the following:

 

   September 30,   December 31, 
   2024   2023 
Cash  $155,652   $1,550,098 
Money market funds   1,004    1,026,318 
Total cash and cash equivalents  $156,656   $2,576,416 

 

Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of September 30, 2024 was $0. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.

 

Marketable Securities

 

Our investments in debt securities are carried at fair value. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading of debt securities are charged to income.

 

The marketable securities held by the Company, which are classified as trading marketable securities, consisted of an outstanding balance of $0 and $2.9 million as of September 30, 2024 and December 31, 2023, respectively. During the three months ended September 30, 2024 and 2023, the Company recognized interest income of $2,524 and $20,765, realized gains of $56,398 and $0, and unrealized losses of $42,898 and unrealized gains of $9,606, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized interest income of $38,135 and $56,720, realized gains of $100,118 and $1,744, and unrealized loss of $71,568 and unrealized gain of $21,134, respectively.

 

Fair Value of Financial Instruments

 

The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair Value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments:

 

  ● Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments.
     
  ● Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace.
     
  ● Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation.

 

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires the Company to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded, may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange.

 

 

The carrying amounts of the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments.

 

Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of September 30, 2024 and December 31, 2023:

 

September 30, 2024  Level 1   Level 2   Level 3   Carrying Value 
Assets                    
Marketable Securities:                    
United States Treasury Bonds  $-   $-   $-   $- 
Total Assets  $-   $-   $-   $- 
Liabilities                    
Derivative Liability - Warrants  $-   $-   $74,107   $74,107 
Derivative Liability - Accelerated feature   -    -    -    - 
Total Liabilities  $-   $-   $74,107   $74,107 

 

December 31, 2023  Level 1   Level 2   Level 3   Carrying Value 
Assets                    
Marketable Securities:                    
United States Treasury Bonds  $2,887,215   $-   $-   $2,887,215 
Total Assets  $2,887,215   $-   $-   $2,887,215 
Liabilities                    
Derivative Liability - Warrants  $-   $-   $410,660   $410,660 
Derivative Liability - Accelerated feature   -    -    3,852    3,852 
Total Liabilities  $-   $-   $414,512   $414,512 

 

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. 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. For our liability classified derivative financial instruments, the Company used a Monte Carlo valuation model to value the derivative instruments at inception and on subsequent valuation dates. For our equity classified derivative financial instruments, we used a Black-Scholes option-pricing model at the grant date to value the derivative instrument. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the unaudited condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date.

 

Warrants

 

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

 

 

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed consolidated statements of operations. The fair value of the warrants is estimated using a Black-Scholes pricing model or a Monte Carlo simulation.

 

Research and Development Expenses

 

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 our chief executive officer, chief operating officer, chief financial officer and directors’ compensation. For the three and nine months ended September 30, 2024 and 2023, a portion of personnel-related expenses and stock-based compensation expense for these individuals totaling $0.1 million and $0.4 million, respectively, and $0.1 million and $0.7 million, respectively, was included within research and development due to their active involvement in the research and development activities, materials, supplies, related subcontract expenses, and consulting costs. In June 2024, the Company recruited a new chief financial officer who is substantially devoted to administrative functions and our then existing chief financial officer, who also handled research and development compliance functions, transitioned to substantially research and development functions.

 

Regarding the accounting treatment for reimbursements, GAAP provides limited guidance on the accounting for government grants received by for-profit companies. In accordance with ASC Topic 832, Government Assistance, as adopted January 1, 2022, we disclose certain types of government assistance received in the notes to the consolidated financial statements that includes: a) the nature of the transaction including the nature of the assistance being given, b) the accounting policies being used to account for the transaction and c) other provisions of relevance, where required. Depending on the type of grant or contract, we understand there is more than one acceptable alternative for the accounting treatment – a reduction of costs, a deferred credit to be amortized, revenue or other income. The Company has concluded that reimbursements received for R&D expenses incurred, are more akin to a reduction of costs and applies reimbursements against incurred research costs. There were no reimbursements received for the three and nine months ended September 30, 2024 and 2023.

 

Net Loss Per Common Stock

 

Net loss per share of common stock requires presentation of basic earnings per share on the face of the unaudited condensed consolidated statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying unaudited condensed consolidated financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive.

 

The dilutive effect of restricted stock units subject to vesting and other stock-based payment awards is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting shares of common stock are included in the denominator of the diluted calculation for the entire period being presented.

 

 

For the nine months ended September 30, 2024 and 2023, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive.

 

   September 30,   September 30, 
   2024   2023 
Convertible notes (Note 5)   -    137,729 
Warrants (Note 6)   184,000    184,000 
Restricted stock units (Note 6)   41,338    21,006 
    225,338    342,735 

 

Deferred Offering Costs

 

Pursuant to ASC 340-10-S99-1, costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of an offering as a reduction of additional paid-in capital. Deferred offering costs may consist of underwriting, legal, accounting, and other expenses incurred through the balance sheet date that are directly related to a proposed public offering. Should the proposed public offering prove to be unsuccessful, any deferred costs, as well as additional expenses to be incurred, will be expensed.

 

Recent Accounting Pronouncements

 

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting Topic 280, “Segment Reporting-Improvements to Reportable Segment Disclosures,” which allows disclosure of one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires enhanced disclosures of significant segment expenses and other segment items, as well as incremental qualitative disclosures on both an annual and interim basis. This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting periods after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The adoption of this new guidance is not expected to have a significant impact on our consolidated financial statements.

 

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes Topic 740, “Income Tax-Improvements to Income Tax Disclosures,” which requires enhanced disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is effective for annual reporting periods beginning after December 15, 2024. Early adoption is permitted and should be applied on a prospective basis, however retrospective application is permitted. The Company is currently evaluating the impact of adopting this guidance on its consolidated and condensed financial statements and disclosures included within notes to consolidated and condensed financial statements.

 
v3.24.3
Leases
 9 Months Ended
Sep. 30, 2024
Leases [Abstract]  
Leases

Note 3 – Leases

 

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at the present value of the future lease payments as of the lease commencement date. Operating lease expense is recognized on a straight-line basis over the lease term.

 

During the nine months ended September 30, 2023, the Company had a lease agreement which allowed for the use of a laboratory facility for a monthly payment of $6,480. The laboratory lease commenced on October 1, 2018 and expired on October 31, 2023.

 

The Company currently has a lease agreement which allows for the use of a laboratory facility, entered into on February 16, 2023, with base rent of $7,206 per month for a period of 64 months, which increases at the rate of 3% per year, that commenced June 1, 2023. The lease included a six-month 50% rent abatement upon commencement. Additional common area maintenance (“CAM”) fees are charged monthly and revised annually. The estimated monthly CAM fees are $3,300 per month for the first year of the lease, which are being expensed as incurred. An irrevocable letter of credit (“LOC”) for the security deposit of $43,234 and base rent of $3,891, including 50% abatement, and $3,315 of CAM cost, was due and paid on execution of the lease agreement. Alexandria Real Estate (ARE-QRS-CORP) is the beneficiary of the LOC, and the expiry date of the LOC is March 1, 2025.

 

 

The following summarizes the ROU lease expense components and cash flow information for the Company’s operating leases:

 

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
Operating lease cost  $22,947   $40,491   $68,841   $83,230 
Variable lease cost   10,440    10,408    30,817    13,723 
Sublease income   (2,163)   (2,135)   (6,489)   (6,377)
Total lease cost  $31,224   $48,764   $93,169   $90,576 
Cash paid for operating cash flows from operating leases  $23,156   $31,113   $68,345   $73,884 
Right-of-use assets obtained in exchange for new operating lease liability  $-   $-   $-   $365,556 

 

Supplemental balance sheet information related to operating leases was as follows:

 

   September 30,   December 31, 
   2024   2023 
Weighted-average remaining lease term (year)   3.92    4.67 
Weighted-average discount rate   10.48%   10.48%

 

Future non-cancelable minimum lease payments under the operating lease liability as of September 30, 2024, are as follows:

 

Years Ended December 31,    
2024 (excluding the nine months ended September 30, 2024)  $23,156 
2025   94,247 
2026   97,074 
2027   99,986 
2028   68,235 
Total future minimum lease payments  $382,698 
Less imputed interest   (68,441)
Present value of payments  $314,257 

 
v3.24.3
Notes Payable-Related Party
 9 Months Ended
Sep. 30, 2024
Notes Payable-related Party  
Notes Payable-Related Party

Note 4 – Notes Payable-Related Party

 

On September 4, 2024, the Company issued a $250,000 promissory note (the “Promissory Note”) to an officer of the Company for $250,000. The Promissory Note accrues interest at 12% per annum and is repayable in 12 substantially equal installments over a period of one year. During the three and nine months ended September 30, 2024 the Company incurred $2,137 and $2,137, respectively, in interest expense relating to this Promissory Note. During the three and nine months ended September 30, 2024 the Company did not pay any principal or accrued interest.

 

On December 1, 2020, the Company consolidated all of the outstanding loans owed to an officer of the Company and to his spouse, resulting in the following two loans: (i) a single loan from the spouse of an officer of the Company, dated December 1, 2020, with a principal balance of $426,243, bearing interest at the rate of 7.5% per annum, with a maturity date of December 31, 2021; and (ii) a single loan owed to an officer of the Company in the principal amount of $139,229, bearing interest at the rate of 7.5% per annum, with a maturity date of December 31, 2021. In December of 2021, the maturity dates of these loans were further extended to June 30, 2022. In July of 2022, the notes were extended to June 30, 2023.

 

 

On June 21, 2021, the Company entered into a loan from the spouse of an officer of the Company in the amount of $120,000 (principal) with an interest rate of 7.5% per annum due June 21, 2022. In July of 2022, the loan was extended to June 30, 2023.

 

During the three and nine months ended September 30, 2023 the Company incurred $0 and $6,825, respectively, in interest expense for the related party notes payable with maturity dates on June 30, 2023. During the three and nine months ended September 30, 2023 principal payments of $0 and $685,473, respectively, and accrued interest of $0 and $102,373 were paid, respectively, on notes to these related parties. The principal and accrued interest for these notes were fully paid by December 31, 2023.

 
v3.24.3
Convertible Notes
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Convertible Notes

Note 5 – Convertible Notes

 

Alto Opportunity Master Fund, SPC

 

On January 11, 2023, the Company entered into a securities purchase agreement (the “SPA”) with Alto Opportunity Master Fund, SPC – Segregated Master Portfolio B, a Cayman entity (the “Investor”), pursuant to which the Company sold to the Investor a $4,300,000 convertible note (the “Alto Convertible Note”) and warrant (the “Warrant”) to purchase 127,260 shares of common stock, exercisable at $1.93 per share, as adjusted, in exchange for gross proceeds of $3,935,000 (the “Investment Amount”) (See Note 7). The Company determined that the Warrant contains a net cash settlement feature at inception and categorized the Warrant as a liability in the accompanying unaudited condensed consolidated financial statements. The Alto Convertible Note matures on March 11, 2025, but may be extended at the option of the noteholder. The Alto Convertible Note amortizes on a monthly basis and the Company can make such monthly amortization payments in cash or, subject to certain equity conditions, in registered shares of common stock or a combination thereof. Installments may be deferred by the noteholder, resulting in a variable interest rate. However, the effective interest rate is approximately 214% based on the internal rate of return calculated on a series of cash flows that occur at regular intervals. For equity repayment, the Alto Convertible Note is convertible into shares of common stock at a price per share equal to the lower of (i) $18.80, (ii) 90% of the three lowest daily VWAPs of the 15 trading days prior to the payment date, or (iii) 90% of the VWAP of the trading day prior to payment date. The noteholder may convert at any time at a fixed price of $18.80 per share. The noteholder has an acceleration of installment amount conversion option (the “Acceleration Option”), whereby the noteholder, with certain share percentage limitations, can convert to common stock any outstanding installment amount at an amount equal to the installment amount plus five times (5x) the installment amount at any time. The Company has determined the Acceleration Option is an embedded derivative within the host instrument and has bifurcated it from the host instrument and recorded it as a derivative liability valued at $1,442,000 at inception, using a Monte Carlo simulation model (Note 7). The Convertible Note is repayable over 26 months and bears interest at the rate of 5% per annum. Additionally, the note contains certain redemption options and “Make Whole” provisions.

 

In conjunction with entry into the SPA, the Company entered into a series of related agreements, including a security agreement (the “Security Agreement”), an intellectual property security agreement (the “IP Security Agreement”) and a subsidiary guaranty (the “Subsidiary Guaranty”). The security agreements and guaranty allow, among other things, for the Investor to have a security interest in and place a lien on all of the Company’s assets and intellectual property until such time as the Alto Convertible Note is paid off. In addition, the SPA called for the Company to enter into a springing deposit account control agreement (the “Springing DACA”), which, in the event the Company defaults on its repayment of the Alto Convertible Note, would allow the Investor to assume control of the Company’s bank account only with regard to any funds remaining outstanding under the Alto Convertible Note. As such, in conjunction with entry into the SPA, the Company established a separate bank account in which it deposited the Investment Amount and pursuant to which the Company, the Investor and the bank holding the Investment Amount, First Republic Bank, entered into the Springing DACA agreement. As the Investment Amount had been held at First Republic Bank, in light of certain banking crises then affecting smaller banks, on March 12, 2023, the Company and the Investor moved the Investment Amount from First Republic Bank, after which time the Springing DACA was no longer in effect. Further, pursuant to amendments to the SPA entered into in May and June of 2023, the Company and the Investor agreed that all of the Investment Amount would be released to the Company and the relevant provision of the SPA which required the Springing DACA would no longer be deemed applicable. In addition, the Company granted the Investor the option to purchase up to an additional $10.0 million in convertible notes and warrants on substantially the same terms as the Alto Convertible Note and Warrant, excluding the Springing DACA requirement, with such option to be effective through December 31, 2025. The agreement offers the investor an opportunity to participate in future capital raises at substantially similar terms as the January 11, 2023 agreement. The Company expects that such subsequent convertible notes and warrants would be issued on substantially similar terms as the January 11, 2023 initial agreement, as amended, thus providing the Company the opportunity to negotiate certain aspects of the agreement.

 

 

Boustead Securities, LLC (“Boustead”) served as a placement agent for the Alto Convertible Note and Warrant offering and received $345,000 cash compensation and a warrant to purchase 8,909 shares of common stock, exercisable at $18.80 per share. The Boustead warrant was determined to be an equity instrument valued on a non-recurring basis. The Company used the Black Scholes valuation model using a term of five years, volatility of 110%, a risk-free rate of 3.53% for a value of $99,543.

 

The Company allocated the finance costs related to the Boustead placement agent fee of $345,000, based on the relative fair market values of the Convertible Note and warrants issued. The allocation of the financing costs applied $232,027 to the debt component as a debt discount that is being amortized to interest expense over the term of the Convertible Note, $104,245 to the warrant derivative liability component, expensed as a finance fee, and $8,727 to the equity warrant as a reduction in additional paid in capital.

 

The Company allocated to the debt component of the note an original discount of $300,000, legal fees of $65,000, $215,000 for additional interest fees on day one added to note principal, $1,442,000 for the accelerated conversion feature, and $1,288,543 for the fair value of warrants, resulting in an additional $3,310,543 debt discount that is being amortized to interest expense over the term of the Alto Convertible Note.

 

On August 6, 2024, the Company entered into an amendment to the SPA with Alto. Under the Amendment Agreement, the Company and Alto agreed as follows: (i) that the Company would pay $600,000 (the “Cash Collateral”) in cash by wire transfer of immediately available funds to Alto, which would be held as collateral on the remaining $1.2 million outstanding under the Alto Note; (ii) Alto will defer the monthly installment payment due on September 3, 2024 under the Alto Note until the Alto Note’s March 11, 2025 maturity date; and (iii) Alto would grant a waiver of any default Section 4(a)(xvi) of the Note related to the restatement and reaudit of the Company’s financial statements for the years ended December 31, 2022 and 2023. The amendment was accounted for as a troubled debt restructuring as the Company determined it was experiencing financial difficulties and was provided a concession through the deferral of one monthly principal and interest payment. As the future undiscounted cash flows exceeded the carrying value of the Alto Convertible Note, the Company did not recognize any gain or loss associated with the troubled debt restructuring.

 

During the three and nine months ended September 30, 2024, the Company recorded interest expense of $270,538 and $1,198,738, respectively, which included amortization of debt discount as interest expense of $247,430 and $1,079,444, respectively. During the three and nine months ended September 30, 2024, the Company settled $1,172,850 and $1,408,050 of principal, and $35,888 and $54,670 of accrued interest, which settlements were made in the form of 719,148 and 797,345 shares of common stock. During the three months ended September 30, 2024, the Company also paid $345,139 of principal and $22,724 of accrued interest for a total of $367,863. During the nine months ended September 30, 2024, the Company paid $846,806 of principal and $79,682 of accrued interest for a total of $926,488. In relation to the settlements described above, the Company recognized a loss on settlement of convertible debt of $762,186 and $833,501 for the three and nine months ended September 30, 2024.

 

During the three and nine months ended September 30, 2023, the Company recorded interest expense of $623,465 and $1,952,147 respectively, which included amortization of debt discount as interest expense of $538,302 and $1,550,479 respectively. During the three and nine months ended September 30, 2023, the Company settled $331,800 and $1,925,700 of principal, respectively, and settled $54,096 and $294,927, respectively, of accrued interest, which settlements were made in the form of 62,761 and 297,625 shares of common stock, respectively, during the three and nine months ended September 30, 2023.

 

As of September 30, 2024, the outstanding principal, debt discount and net carry value for the convertible note was $0.

 

 
v3.24.3
Stockholders’ Equity
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
Stockholders’ Equity

Note 6 – Stockholders’ Equity

 

Common Stock

 

During the three and nine months ended September 30, 2024, the Company issued:

 

  ● 719,148 and 797,345 shares of common stock to settle $1,172,850 and $1,408,050 of principal and $35,888 and $54,670 of interest on a convertible note and incurred $762,186 and $833,501 of loss on settlement, respectively.
  ● 5,002 and 24,349 shares of common stock issued for vesting of restricted stock units, respectively.
  ● 115,716 shares of common stock issued for the round up of reverse split fractional shares.

 

During the three and nine months ended September 30, 2023, the Company issued:

 

  ● 62,761 and 297,625 shares of common stock to settle $331,800 and $1,925,700 of principal and $54,096 and $294,927 of interest, respectively, on a Convertible Note and incurred $43,414 and $477,221 of loss on settlement, respectively.
  ● 1,876 and 1,876 shares of common stock issued for vesting of restricted stock units.

 

Warrants

 

In connection with the January 2023 Alto Convertible Note, Boustead was granted warrants to purchase 8,909 shares of common stock, at an exercise price of $18.80 per share (Note 5). Effective with the recent reverse split, the exercise price was adjusted to $1.93 per share, as provided for in the underlying agreement. In addition, Alto was granted warrants to purchase 127,260 shares of common stock, at an exercise price of $1.93 per share, as adjusted (Note 5, 7).

 

A summary of activity regarding all warrants issued for the nine months ended September 30, 2024 were as follows:

 

   Number of   Weighted Average   Average 
   warrants   Exercise Price   Life (years) 
Outstanding, December 31, 2023   184,000   $23.20    2.77 
Granted   -    -    - 
Outstanding, September 30, 2024   184,000   $11.54    2.04 

 

The intrinsic value of the warrants as of September 30, 2024 is $0. All of the outstanding warrants are exercisable as of September 30, 2024.

 

Equity Incentive Plan

 

Our 2018 Equity Incentive Plan (the “2018 Plan”) provides for equity incentives to be granted to our employees, executive officers, directors and key advisers and consultants. Equity incentive grants may be made in the form of stock options with an exercise price of not less than the fair market value of the underlying shares as determined pursuant to the 2018 Equity Incentive Plan, restricted stock awards, other stock-based awards, or any combination of the foregoing. The 2018 Equity Incentive Plan is administered by the Company’s compensation committee. We have reserved 3,000,000 shares of our common stock for issuance under the 2018 Equity Incentive Plan. As of September 30, 2024, 125,734 shares have been granted under the 2018 Equity Incentive Plan, of which 84,396 shares have vested.

 

Restricted Stock Units

 

We may grant restricted stock units (“RSU”) under our 2018 Plan. RSUs are bookkeeping entries representing an amount equal to the fair market value of one share of our common stock. Subject to the provisions of our 2018 Plan, the administrator determines the terms and conditions of RSUs, including the vesting criteria and the form and timing of payment. Notwithstanding the foregoing, the administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. RSUs granted typically vest annually in one third increments from the date of appointment.

 

During the three and nine months ended September 30, 2024 and 2023, pursuant to agreements with officers and consultants, 0 and 53,455, respectively and 12,500 and 19,916 RSUs, respectively with a value of $0 and $141,840, respectively, and $196,000 and $291,400, respectively, were granted and compensation expense for RSUs of $45,275 and $227,886, and $37,583 and $95,438 respectively, was incurred. During the three and nine months ended September 30, 2024 and 2023, $13,033 and $60,019, respectively, and $0 and $41,190, respectively was included in compensation under Research and Development.

 

 

As of September 30, 2024, there was $145,504 of unrecognized RSU compensation cost related to non-vested stock-based compensation arrangements which is expected to be recognized over a weighted-average period of 2.14 years.

 

A summary of activity regarding the Restricted Stock Units issued follows:

 

   Number of RSU   Weighted Average Fair Value Per RSU 
Outstanding, December 31, 2023   24,731   $11.76 
Granted   53,455    2.65 
Forfeiture   (12,500)   - 
Vested   (24,348)   9.06 
Outstanding, September 30, 2024   41,338   $5.14 

 

Rights Offering and Financing Commitment

 

On February 7, 2024, the Company and its wholly-owned subsidiary, Shuttle Diagnostics, Inc., entered into a securities purchase agreement (the “Purchase Agreement”) with SRO, LLC, a Nevada limited liability company, pursuant to which SRO LLC agreed to commit to purchasing from the Company $2,250,000 of units from the Company, with each Unit consisting of (i) one share of the Company’s common stock, (ii) a warrant to purchase one share of the Company’s common stock exercisable at a purchase price of $18.80 per share, and (iii) a percentage of equity interest in Diagnostics such that, assuming the sale of all $2,250,000 of Units, SRO LLC will own a 22% interest in Diagnostics. Pursuant to the terms of the Purchase Agreement, the Units will be sold at a per Unit price equal to 90% of the VWAP of the Company’s common stock for the five trading days immediately preceding closing. The parties entered into the Purchase Agreement in anticipation of the Company commencing a rights offering (the “Rights Offering”) pursuant to which the Company intends to offer a total of $4,500,000 of Units to existing stockholders, which includes the $2,250,000 of Units being sold to SRO LLC, an entity which is controlled by Keith Moore, Executive Chairman of Boustead & Company Limited, an affiliate of Boustead.

 

The Company filed an initial registration statement on Form S-1 (the “Form S-1”) with the SEC in April 2024 related to the registration of subscription rights to purchase the Units to be sold in the Rights Offering. The Form S-1 has not been declared effective as of the date these unaudited condensed consolidated financial statements were issued. Upon the Form S-1 being declared effective, the Purchase Agreement allows SRO LLC up to 60 days to raise the initial $2,250,000, which funds will be placed in escrow with Sutter Securities, Inc. (“SSI”), an affiliate of BSL, pursuant to the terms of an escrow agreement entered into between the Company, Shuttle Diagnostics, Inc., BSL and SSI on February 7, 2024 (the “Escrow Agreement”). The funds will remain in escrow up until closing on the Rights Offering. In addition, in the event the Company fails to raise the full $4,500,000 in the Rights Offering, SRO LLC agreed to a backstop commitment pursuant to which it would have the right to purchase any remaining Units not purchased by existing Company stockholders in the Rights Offering, up to an additional $2,250,000 (the “Back-up Contingency”). Unless the parties waive the conditions to closing, in the event the full $4,500,000 is not raised, whether through SRO LLC or through the Company’s existing stockholders, the Company will not close on the offering and any funds raised and held in escrow will be returned to investors.

 

In conjunction with its entry into the Purchase Agreement, on February 7, 2024, the Company entered into a placement agent and advisory services agreement (the “Placement Agent Agreement”) with BSL, pursuant to which BSL and BSL’s affiliates agreed to provide the Company with regular and customary financial consulting advice and act as placement agent, on a best efforts basis, for the Rights Offering. In exchange for its services, BSL will receive a commitment fee equal to $112,500 upon the earlier of the Company filing the registration statement on Form S-1 registering the Rights Offering or upon such date as the Company terminates the Rights Offering, a commission equal 8% of the gross proceeds disbursed to the Company upon closing the Rights Offering, and $40,000 in diligence and related expenses.

 

 

The Company has incurred $142,000 in costs directly related to the planned Rights Offering and initially deferred these costs in 2024, then expensed them at June 30, 2024, as the Rights Offering has not yet consummated.

 

Alliance Global Partners

 

On July 30, 2024, the Company entered into an agreement with A.G.P./Alliance Global Partners (“AGP”), as the exclusive underwriter, placement agent, or advisor in a public or private offering of up to $10,000,000 of the Company’s securities, and bridge financing of up to $1,350,000. AGP was paid a $50,000 retainer fee.

 

As of September 30, 2024, the Company has incurred $101,651 of expenses included in deferred costs recorded on the Company’s unaudited condensed consolidated balance sheet.

 

See Note 9, Subsequent Events, Alliance Global Partners.

 
v3.24.3
Derivative Liabilities
 9 Months Ended
Sep. 30, 2024
Derivative Liabilities  
Derivative Liabilities

Note 7 – Derivative Liabilities

 

Fair Value Assumptions Used in Accounting for Derivative Liabilities

 

ASC 815 requires us to assess the fair market value of derivative liabilities at the end of each reporting period and recognize any change in the fair market value as other income or expense.

 

In January 2023, in connection with the Alto Convertible Note, the Company issued warrants to purchase 127,260 shares of common stock, with an exercise price of $1.93 per share, as adjusted for the recent reverse split, valued at inception at $1,189,000 and as of September 30, 2024, at $74,107. The Company determined our derivative liabilities from the warrants issued in relation to the Alto Convertible Note do not satisfy the classification as equity instruments due to the existence of a certain net cash settlement provision that is not within the sole control of the Company. In addition, there are certain down round provisions that could reduce the exercise price if the Company issues securities at lower prices in the future.

 

The Company has determined the Acceleration Option is an embedded derivative within the host instrument and has bifurcated it from the host instrument and recorded it as a derivative liability valued at $1,442,000, using a Monte Carlo simulation model. The Company determined our derivative liability from the noteholder’s Acceleration Option for the Alto Convertible Note is not clearly and closely related to the host and should be thus accounted for as a bifurcated derivative liability.

 

The Company classified these derivative liabilities as a Level 3 fair value measurement and used the Monte Carlo pricing model to calculate the fair value as of January 11, 2023 ($2,631,000 included in debt discount) and September 30, 2024 ($74,107). Key inputs for the simulation are summarized below. The Monte Carlo simulation uses an implied VWAP for the January 11, 2023 valuation date. The implied VWAP was backsolved by setting the summation of the parts (e.g., derivatives and debt without derivatives) equal to the cash proceeds. The simulation was then iterated and manipulated to solve for the implied share price, which was approximately $12.64 per share (or an approximate 14% discount to the quoted market VWAP on January 11, 2023).

 

The key inputs for the Monte Carlo simulation as of September 30, 2024, were as follows:

 

   September 30, 2024 
Net cash settlement and down round key valuation inputs – warrants*    
Annualized volatility   92.04% - 101.79% 
Risk-free interest rate   3.64% - 4.93% 
Quoted VWAP  $1.31 
Exercise price  $1.93 
Probability assessment   0% - 40% 
Illiquidity discount   (14%)
Time period (years)   0.08 - 2.28 

 

*Based on a Monte Carlo simulation analysis of 250,000 iterations

 

 

The following table summarizes the changes in the derivative liabilities:

 

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
   Warrants   Accelerated Feature 
Balance - December 31, 2023  $410,660   $3,852 
Gain on change in fair value   (196,045)   (1,817)
Balance - March 31, 2024  $214,615   $2,035 
Loss (gain) on change in fair value   145,304    (1,531)
Balance - June 30, 2024  $359,919   $504 
Gain on change in fair value of the derivative   (285,812)   (504)
Balance - September 30, 2024  $74,107   $- 

 
v3.24.3
Other Related Party transactions
 9 Months Ended
Sep. 30, 2024
Related Party Transactions [Abstract]  
Other Related Party transactions

Note 8 –Other Related Party transactions

 

On September 14, 2022, we entered into a manufacturing agreement with TCG GreenChem, Inc. (“TCG GreenChem”), the U.S. subsidiary of TCG Lifesciences Pvt Ltd., a global contract research and manufacturing services company located in India. Dr. Chis Senanayake, one of our independent directors, is CEO and CSO of TCG GreenChem and CSO of TCG Lifesciences Pvt Ltd. TCG GreenChem was contracted for process research, development and cGMP compliant manufacture of IPdR. During the nine months ended September 30, 2024 and 2023, the Company expensed $0 and $1,058,348, respectively, related to these services.

 
v3.24.3
Subsequent Events
 9 Months Ended
Sep. 30, 2024
Subsequent Events [Abstract]  
Subsequent Events

Note 9 – Subsequent Events

 

Convertible Bridge Notes

 

On October 14, 2024, the Company issued an aggregate of $600,000 (of an up to $1.3 million authorized financing) senior secured convertible notes due in October 2025, which accrue interest at 14.5% interest per year. The notes include a 5% original issue discount and the Company received $570,000 in proceeds. The notes are convertible beginning three months after the date of issuance, and the conversion price will be the lower of a 15% discount to (i) the 5-day VWAP immediately prior to Closing or (ii) the price of any offering entered into by the Company during the term of the notes. The Company has the option to prepay the notes at any time for 107% of total outstanding balance and any outstanding principal will be paid in conversion of shares of common stock at the end of the term, subject to the Company’s exercise of the optional prepayment right. Any accrued interest will be repaid quarterly in cash. The Company also issued warrants to the lenders to purchase an aggregate 240,917 shares of common stock, exercisable at $1.40 per share, with such warrants expiring five years from issuance. In addition, the Company’s Chief Executive Officer, Dr. Anatoly Dritschilo, invested a total of $237,500 in this financing round, in exchange for a $250,000 convertible note.

 

On October 21, 2024, the Company issued an additional $231,579 in senior secured convertible notes due in October 2025, with substantially similar terms as the October 14, 2024, issuance. The notes include a 5% original issue discount and the Company received $220,000 in proceeds. The Company also issued warrants to the lenders to purchase an aggregate 88,544 shares of common stock, exercisable at $1.49 per share, with such warrants expiring five years from issuance. Upon completing this issuance, the Company closed the senior secured convertible note offering after receiving a total of $790,000 in proceeds.

 

Alliance Global Partners

 

On October 31, 2024, the Company consummated a public offering of an aggregate of (i) 395,574 shares of common stock and 2,555,246 pre-funded warrants to purchase up to 2,555,246 shares of common stock, and (ii) 2,950,820 common stock purchase warrants to purchase up to 2,950,820 shares of common stock. Each share of common stock, or a pre-funded warrant in lieu thereof, was sold together with an accompanying warrant to purchase one share of common stock. AGP served as lead underwriter along with Boustead as co-underwriter.

 

The public offering price for each share of common stock and one accompanying warrant was $1.525. The public offering price of each pre-funded warrant and one accompanying common warrant was $1.524, which equals the price at which one share of common stock and accompanying warrant was sold to the public in this offering, minus $0.001. The exercise price of each pre-funded warrant is $0.001 per share. Each warrant offered in the offering is exercisable for one share of common stock and has an initial exercise price equal to $1.40. The Company received aggregate gross proceeds from the offering of approximately $4.5 million, before deducting placement agents’ fees and other offering expenses.
v3.24.3
Summary of Significant Accounting Policies (Policies)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”). Accordingly, they do not contain all information and notes required by GAAP for annual financial statements. A complete discussion of the Company’s significant accounting policies is included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2023.

 

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all of the adjustments necessary to present the financial position of the Company as of September 30, 2024 and the results of operations and cash flows for the periods presented. The accompanying condensed consolidated financial statements of the Company have not been audited by the Company’s independent registered public accounting firm, except that the year-end consolidated balance sheet was derived from audited financial statements. The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the restated financial statements and related notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K/A filed with the SEC on September 4, 2024.

 
Reverse Stock Split

Reverse Stock Split

 

On August 13, 2024, in order to meet Nasdaq’s minimum bid price requirement of $1.00 per share (the “Minimum Bid Price Requirement”), the Company effectuated a 1-for-8 reverse stock split of its issued and outstanding common stock, rounding up to account for any fractional shares (the “Reverse Stock Split”). The Reverse Stock Split had no effect on the Company’s authorized shares of common stock or preferred stock and the par value will remain unchanged at $0.00001, respectively. All common stock share, option, warrant and per share amounts (except our authorized but unissued shares and previously reserved shares) have been retroactively adjusted in these financial statements and related disclosures.

 

 
Basis of Consolidation

Basis of Consolidation

 

The unaudited condensed consolidated financial statements have been prepared on a consolidated basis with those of the Company’s wholly-owned subsidiaries, Shuttle Pharmaceuticals, Inc. and Shuttle Diagnostics Inc. All intercompany transactions and balances have been eliminated.

 
Correction of an Immaterial Error in the Prior Period Financial Statements

Correction of an Immaterial Error in the Prior Period Financial Statements

 

During the fourth quarter of 2023, the Company determined that the prior year consolidated financial statements had a misstatement caused by an immaterial classification error of certain research and development expenses in accordance with Accounting Standards Codification (“ASC”) 730. As a result, certain prior year amounts have been corrected for consistency with the current year presentation. The Company assessed the materiality of this change in presentation on prior period consolidated financial statements in accordance with SEC Staff Accounting Bulletin No. 99, “Materiality,” (ASC Topic 250, Accounting Changes and Error Corrections). Based on this assessment, the Company concluded that these error corrections in its unaudited condensed consolidated statements of operations are not material to any previously presented financial statements based upon overall considerations of both quantitative and qualitative factors. The corrections had no impact on the unaudited condensed consolidated balance sheet, unaudited condensed consolidated statements of cash flows, or unaudited condensed consolidated statement of changes in stockholders’ equity, to these financial statements, or for any previously presented interim or annual financial statements. Further, the corrections did not result in a change in quarterly or year-to-date operating losses, basic or diluted earnings per share, or working capital. The quarterly correction required for the three and nine months ended September 30, 2023 was $95,129 and $277,844, respectively. Accordingly, the Company corrected the previously reported immaterial error for the three and nine months ended September 30, 2023 in this Quarterly Report on Form 10-Q.

 

   September 30, 2023   Correction   Corrected
September 30, 2023		 
Research and development expense  $3,084,488   $(277,844)  $2,806,644 
General and administrative expense   452,342    277,844    730,186 
Net Loss  $3,536,830   $-   $3,536,830 

 
Use of Estimates

Use of Estimates

 

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates are contained in the accompanying unaudited condensed consolidated financial statements for the recognition of research and development expenses, valuation of warrants and valuation of bifurcated derivative liabilities and other financial instruments.

 

 
Cash and Cash Equivalents

Cash and Cash Equivalents

 

Cash and cash equivalents include cash in bank accounts and money market funds with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. As of September 30, 2024 and December 31, 2023, cash and cash equivalents consisted of the following:

 

   September 30,   December 31, 
   2024   2023 
Cash  $155,652   $1,550,098 
Money market funds   1,004    1,026,318 
Total cash and cash equivalents  $156,656   $2,576,416 

 

Periodically, the Company may carry cash balances at financial institutions in excess of the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of September 30, 2024 was $0. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.

 
Marketable Securities

Marketable Securities

 

Our investments in debt securities are carried at fair value. Investments in debt securities that are not classified as held-to-maturity are carried at fair value and classified as either trading or available-for-sale. Realized and unrealized gains and losses on trading of debt securities are charged to income.

 

The marketable securities held by the Company, which are classified as trading marketable securities, consisted of an outstanding balance of $0 and $2.9 million as of September 30, 2024 and December 31, 2023, respectively. During the three months ended September 30, 2024 and 2023, the Company recognized interest income of $2,524 and $20,765, realized gains of $56,398 and $0, and unrealized losses of $42,898 and unrealized gains of $9,606, respectively. During the nine months ended September 30, 2024 and 2023, the Company recognized interest income of $38,135 and $56,720, realized gains of $100,118 and $1,744, and unrealized loss of $71,568 and unrealized gain of $21,134, respectively.

 
Fair Value of Financial Instruments

Fair Value of Financial Instruments

 

The Company follows accounting guidelines on fair value measurements for financial instruments measured on a recurring basis, as well as for certain assets and liabilities that are initially recorded at their estimated fair values. Fair Value is defined as the exit price, or the amount that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The Company uses the following three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs to value its financial instruments:

 

  ● Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical instruments.
     
  ● Level 2: Quoted prices for similar instruments that are directly or indirectly observable in the marketplace.
     
  ● Level 3: Significant unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires a significant judgment or estimation.

 

Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires the Company to make judgments and consider factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed, or initial amounts recorded, may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange.

 

 

The carrying amounts of the Company’s financial instruments including cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities approximate fair value due to the short-term maturities of these instruments.

 

Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of September 30, 2024 and December 31, 2023:

 

September 30, 2024  Level 1   Level 2   Level 3   Carrying Value 
Assets                    
Marketable Securities:                    
United States Treasury Bonds  $-   $-   $-   $- 
Total Assets  $-   $-   $-   $- 
Liabilities                    
Derivative Liability - Warrants  $-   $-   $74,107   $74,107 
Derivative Liability - Accelerated feature   -    -    -    - 
Total Liabilities  $-   $-   $74,107   $74,107 

 

December 31, 2023  Level 1   Level 2   Level 3   Carrying Value 
Assets                    
Marketable Securities:                    
United States Treasury Bonds  $2,887,215   $-   $-   $2,887,215 
Total Assets  $2,887,215   $-   $-   $2,887,215 
Liabilities                    
Derivative Liability - Warrants  $-   $-   $410,660   $410,660 
Derivative Liability - Accelerated feature   -    -    3,852    3,852 
Total Liabilities  $-   $-   $414,512   $414,512 

 
Derivative Financial Instruments

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. 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. For our liability classified derivative financial instruments, the Company used a Monte Carlo valuation model to value the derivative instruments at inception and on subsequent valuation dates. For our equity classified derivative financial instruments, we used a Black-Scholes option-pricing model at the grant date to value the derivative instrument. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the unaudited condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within twelve (12) months of the balance sheet date.

 
Warrants

Warrants

 

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

 

 

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the unaudited condensed consolidated statements of operations. The fair value of the warrants is estimated using a Black-Scholes pricing model or a Monte Carlo simulation.

 
Research and Development Expenses

Research and Development Expenses

 

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 our chief executive officer, chief operating officer, chief financial officer and directors’ compensation. For the three and nine months ended September 30, 2024 and 2023, a portion of personnel-related expenses and stock-based compensation expense for these individuals totaling $0.1 million and $0.4 million, respectively, and $0.1 million and $0.7 million, respectively, was included within research and development due to their active involvement in the research and development activities, materials, supplies, related subcontract expenses, and consulting costs. In June 2024, the Company recruited a new chief financial officer who is substantially devoted to administrative functions and our then existing chief financial officer, who also handled research and development compliance functions, transitioned to substantially research and development functions.

 

Regarding the accounting treatment for reimbursements, GAAP provides limited guidance on the accounting for government grants received by for-profit companies. In accordance with ASC Topic 832, Government Assistance, as adopted January 1, 2022, we disclose certain types of government assistance received in the notes to the consolidated financial statements that includes: a) the nature of the transaction including the nature of the assistance being given, b) the accounting policies being used to account for the transaction and c) other provisions of relevance, where required. Depending on the type of grant or contract, we understand there is more than one acceptable alternative for the accounting treatment – a reduction of costs, a deferred credit to be amortized, revenue or other income. The Company has concluded that reimbursements received for R&D expenses incurred, are more akin to a reduction of costs and applies reimbursements against incurred research costs. There were no reimbursements received for the three and nine months ended September 30, 2024 and 2023.

 
Net Loss Per Common Stock

Net Loss Per Common Stock

 

Net loss per share of common stock requires presentation of basic earnings per share on the face of the unaudited condensed consolidated statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying unaudited condensed consolidated financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive.

 

The dilutive effect of restricted stock units subject to vesting and other stock-based payment awards is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting shares of common stock are included in the denominator of the diluted calculation for the entire period being presented.

 

 

For the nine months ended September 30, 2024 and 2023, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive.

 

   September 30,   September 30, 
   2024   2023 
Convertible notes (Note 5)   -    137,729 
Warrants (Note 6)   184,000    184,000 
Restricted stock units (Note 6)   41,338    21,006 
    225,338    342,735 

 
Deferred Offering Costs

Deferred Offering Costs

 

Pursuant to ASC 340-10-S99-1, costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of an offering as a reduction of additional paid-in capital. Deferred offering costs may consist of underwriting, legal, accounting, and other expenses incurred through the balance sheet date that are directly related to a proposed public offering. Should the proposed public offering prove to be unsuccessful, any deferred costs, as well as additional expenses to be incurred, will be expensed.

 
Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting Topic 280, “Segment Reporting-Improvements to Reportable Segment Disclosures,” which allows disclosure of one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires enhanced disclosures of significant segment expenses and other segment items, as well as incremental qualitative disclosures on both an annual and interim basis. This guidance is effective for annual reporting periods beginning after December 15, 2023, and interim reporting periods after December 15, 2024. Early adoption is permitted and retrospective application is required for all periods presented. The adoption of this new guidance is not expected to have a significant impact on our consolidated financial statements.

 

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes Topic 740, “Income Tax-Improvements to Income Tax Disclosures,” which requires enhanced disclosures, including specific categories and disaggregation of information in the effective tax rate reconciliation, disaggregated information related to income taxes paid, income or loss from continuing operations before income tax expense or benefit, and income tax expense or benefit from continuing operations. This guidance is effective for annual reporting periods beginning after December 15, 2024. Early adoption is permitted and should be applied on a prospective basis, however retrospective application is permitted. The Company is currently evaluating the impact of adopting this guidance on its consolidated and condensed financial statements and disclosures included within notes to consolidated and condensed financial statements.
v3.24.3
Summary of Significant Accounting Policies (Tables)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Schedule of the Error Correction

 

   September 30, 2023   Correction   Corrected
September 30, 2023		 
Research and development expense  $3,084,488   $(277,844)  $2,806,644 
General and administrative expense   452,342    277,844    730,186 
Net Loss  $3,536,830   $-   $3,536,830 
Schedule of Cash and Cash Equivalents

 

   September 30,   December 31, 
   2024   2023 
Cash  $155,652   $1,550,098 
Money market funds   1,004    1,026,318 
Total cash and cash equivalents  $156,656   $2,576,416 
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

Set out below are the Company’s financial instruments that are required to be remeasured at fair value on a recurring basis and their fair value hierarchy as of September 30, 2024 and December 31, 2023:

 

September 30, 2024  Level 1   Level 2   Level 3   Carrying Value 
Assets                    
Marketable Securities:                    
United States Treasury Bonds  $-   $-   $-   $- 
Total Assets  $-   $-   $-   $- 
Liabilities                    
Derivative Liability - Warrants  $-   $-   $74,107   $74,107 
Derivative Liability - Accelerated feature   -    -    -    - 
Total Liabilities  $-   $-   $74,107   $74,107 

 

December 31, 2023  Level 1   Level 2   Level 3   Carrying Value 
Assets                    
Marketable Securities:                    
United States Treasury Bonds  $2,887,215   $-   $-   $2,887,215 
Total Assets  $2,887,215   $-   $-   $2,887,215 
Liabilities                    
Derivative Liability - Warrants  $-   $-   $410,660   $410,660 
Derivative Liability - Accelerated feature   -    -    3,852    3,852 
Total Liabilities  $-   $-   $414,512   $414,512 
Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share

For the nine months ended September 30, 2024 and 2023, the following common stock equivalents were excluded from the computation of diluted net loss per share as the result of the computation was anti-dilutive.

 

   September 30,   September 30, 
   2024   2023 
Convertible notes (Note 5)   -    137,729 
Warrants (Note 6)   184,000    184,000 
Restricted stock units (Note 6)   41,338    21,006 
    225,338    342,735 
v3.24.3
Leases (Tables)
 9 Months Ended
Sep. 30, 2024
Leases [Abstract]  
Schedule of Right-of Use Asset and Lease Information about Operating Lease

The following summarizes the ROU lease expense components and cash flow information for the Company’s operating leases:

 

   2024   2023   2024   2023 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
Operating lease cost  $22,947   $40,491   $68,841   $83,230 
Variable lease cost   10,440    10,408    30,817    13,723 
Sublease income   (2,163)   (2,135)   (6,489)   (6,377)
Total lease cost  $31,224   $48,764   $93,169   $90,576 
Cash paid for operating cash flows from operating leases  $23,156   $31,113   $68,345   $73,884 
Right-of-use assets obtained in exchange for new operating lease liability  $-   $-   $-   $365,556 
Schedule of Balance Sheet Information Related to Operating Leases

Supplemental balance sheet information related to operating leases was as follows:

 

   September 30,   December 31, 
   2024   2023 
Weighted-average remaining lease term (year)   3.92    4.67 
Weighted-average discount rate   10.48%   10.48%
Schedule of Future Non-cancelable Minimum Lease Payments Under Operating Lease Liability

Future non-cancelable minimum lease payments under the operating lease liability as of September 30, 2024, are as follows:

 

Years Ended December 31,    
2024 (excluding the nine months ended September 30, 2024)  $23,156 
2025   94,247 
2026   97,074 
2027   99,986 
2028   68,235 
Total future minimum lease payments  $382,698 
Less imputed interest   (68,441)
Present value of payments  $314,257 
v3.24.3
Stockholders’ Equity (Tables)
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
Schedule of Warrants Activity

A summary of activity regarding all warrants issued for the nine months ended September 30, 2024 were as follows:

 

   Number of   Weighted Average   Average 
   warrants   Exercise Price   Life (years) 
Outstanding, December 31, 2023   184,000   $23.20    2.77 
Granted   -    -    - 
Outstanding, September 30, 2024   184,000   $11.54    2.04 
Schedule of Restricted Stock Units (RSUs)

A summary of activity regarding the Restricted Stock Units issued follows:

 

   Number of RSU   Weighted Average Fair Value Per RSU 
Outstanding, December 31, 2023   24,731   $11.76 
Granted   53,455    2.65 
Forfeiture   (12,500)   - 
Vested   (24,348)   9.06 
Outstanding, September 30, 2024   41,338   $5.14 
v3.24.3
Derivative Liabilities (Tables)
 9 Months Ended
Sep. 30, 2024
Derivative Liabilities  
Schedule of Monte Carlo Simulation Assumption

The key inputs for the Monte Carlo simulation as of September 30, 2024, were as follows:

 

   September 30, 2024 
Net cash settlement and down round key valuation inputs – warrants*    
Annualized volatility   92.04% - 101.79% 
Risk-free interest rate   3.64% - 4.93% 
Quoted VWAP  $1.31 
Exercise price  $1.93 
Probability assessment   0% - 40% 
Illiquidity discount   (14%)
Time period (years)   0.08 - 2.28 

 

*Based on a Monte Carlo simulation analysis of 250,000 iterations
Schedule of Derivative Liabilities

The following table summarizes the changes in the derivative liabilities:

 

Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
   Warrants   Accelerated Feature 
Balance - December 31, 2023  $410,660   $3,852 
Gain on change in fair value   (196,045)   (1,817)
Balance - March 31, 2024  $214,615   $2,035 
Loss (gain) on change in fair value   145,304    (1,531)
Balance - June 30, 2024  $359,919   $504 
Gain on change in fair value of the derivative   (285,812)   (504)
Balance - September 30, 2024  $74,107   $- 
v3.24.3
Organization and Liquidity (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 9 Months Ended
Aug. 12, 2016
Oct. 31, 2024
Sep. 30, 2024
Sep. 30, 2024
Jun. 30, 2024
Mar. 31, 2024
Sep. 30, 2023
Jun. 30, 2023
Mar. 31, 2023
Sep. 30, 2024
Sep. 30, 2023
Jan. 31, 2023
Net loss       $ 3,784,082 $ 2,031,215 $ 1,731,031 $ 1,792,754 $ 2,184,372 $ 975,097 $ 7,546,328 $ 4,952,223  
Revenues                
Working capital                   $ 1,300,000    
Number of warrants issued                       127,260
Exercise price                       $ 1.93
Subsequent Event [Member]                        
Notes term   1 year                    
Number of warrants issued   329,461                    
Exercise price   $ 1.42                    
Proceeds from issuance of equity   $ 3,900,000                    
Senior Secured Convertible Bridge Notes [Member] | Subsequent Event [Member]                        
Proceeds from issuance of debt   $ 790,000                    
Chief Executive Officer [Member] | Promissory Note [Member]                        
Proceeds from issuance of debt     $ 250,000                  
Notes term     1 year                  
Common Stock [Member]                        
Number of shares issued 5,625,000                      
Sale of stock membership percentage 100.00%                      
Net loss            
Pre-Funded Warrants [Member] | Subsequent Event [Member]                        
Number of warrants issued   2,900,000                    
Warrant [Member] | Subsequent Event [Member]                        
Number of warrants issued   2,900,000                    
Exercise price   $ 1.40                    
v3.24.3
Schedule of the Error Correction (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Research and development expense $ 1,400,564 $ 1,045,177 $ 2,632,387 $ 2,806,644
General and administrative expense 328,995 $ 265,553 963,642 730,186
Net Loss       3,536,830
Previously Reported [Member]        
Research and development expense       3,084,488
General and administrative expense       452,342
Net Loss       3,536,830
Revision of Prior Period, Error Correction, Adjustment [Member]        
Research and development expense       (277,844)
General and administrative expense $ 95,129   $ 277,844 277,844
Net Loss      
v3.24.3
Schedule of Cash and Cash Equivalents (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Accounting Policies [Abstract]    
Cash $ 155,652 $ 1,550,098
Money market funds 1,004 1,026,318
Total cash and cash equivalents $ 156,656 $ 2,576,416
v3.24.3
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Assets    
Total Assets $ 2,887,215
Liabilities    
Total Liabilities 74,107 414,512
Warrant [Member]    
Liabilities    
Derivative Liability 74,107 410,660
Accelerated Feature [Member]    
Liabilities    
Derivative Liability 3,852
US Treasury Securities [Member]    
Assets    
United States Treasury Bonds 2,887,215
Fair Value, Inputs, Level 1 [Member]    
Assets    
Total Assets 2,887,215
Liabilities    
Total Liabilities
Fair Value, Inputs, Level 1 [Member] | Warrant [Member]    
Liabilities    
Derivative Liability
Fair Value, Inputs, Level 1 [Member] | Accelerated Feature [Member]    
Liabilities    
Derivative Liability
Fair Value, Inputs, Level 1 [Member] | US Treasury Securities [Member]    
Assets    
United States Treasury Bonds 2,887,215
Fair Value, Inputs, Level 2 [Member]    
Assets    
Total Assets
Liabilities    
Total Liabilities
Fair Value, Inputs, Level 2 [Member] | Warrant [Member]    
Liabilities    
Derivative Liability
Fair Value, Inputs, Level 2 [Member] | Accelerated Feature [Member]    
Liabilities    
Derivative Liability
Fair Value, Inputs, Level 2 [Member] | US Treasury Securities [Member]    
Assets    
United States Treasury Bonds
Fair Value, Inputs, Level 3 [Member]    
Assets    
Total Assets
Liabilities    
Total Liabilities 74,107 414,512
Fair Value, Inputs, Level 3 [Member] | Warrant [Member]    
Liabilities    
Derivative Liability 74,107 410,660
Fair Value, Inputs, Level 3 [Member] | Accelerated Feature [Member]    
Liabilities    
Derivative Liability 3,852
Fair Value, Inputs, Level 3 [Member] | US Treasury Securities [Member]    
Assets    
United States Treasury Bonds
v3.24.3
Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Anti-dilutive securities 225,338 342,735
Convertible Debt Securities [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Anti-dilutive securities 137,729
Warrant [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Anti-dilutive securities 184,000 184,000
Restricted Stock Units (RSUs) [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Anti-dilutive securities 41,338 21,006
v3.24.3
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Aug. 13, 2024
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Minimum bid price $ 1.00          
Reverse stock split 1-for-8          
Common stock, par value $ 0.00001 $ 0.00001   $ 0.00001   $ 0.00001
Preferred stock, par value $ 0.00001 $ 0.00001   $ 0.00001   $ 0.00001
General and administrative expense   $ 328,995 $ 265,553 $ 963,642 $ 730,186  
Cash FDIC insured amount   250,000   250,000    
Cash, uninsured amount   0   0    
Marketable securities, outstanding balance       $ 2,887,215
Interest income   2,524 20,765 38,135 56,720  
Gain on sale of marketable securities   56,398 100,118 1,744  
Unrealized gain (loss)   (42,898) 9,606 (71,568) 21,134  
Share based compensation       227,886 95,438  
Research and Development Expense [Member]            
Share based compensation   100,000 $ 400,000 100,000 700,000  
Revision of Prior Period, Error Correction, Adjustment [Member]            
General and administrative expense   $ 95,129   $ 277,844 $ 277,844  
v3.24.3
Schedule of Right-of Use Asset and Lease Information about Operating Lease (Details) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Leases [Abstract]        
Operating lease cost $ 22,947 $ 40,491 $ 68,841 $ 83,230
Variable lease cost 10,440 10,408 30,817 13,723
Sublease income (2,163) (2,135) (6,489) (6,377)
Total lease cost 31,224 48,764 93,169 90,576
Cash paid for operating cash flows from operating leases 23,156 31,113 68,345 73,884
Right-of-use assets obtained in exchange for new operating lease liability $ 365,556
v3.24.3
Schedule of Balance Sheet Information Related to Operating Leases (Details)
Sep. 30, 2024
Dec. 31, 2023
Leases [Abstract]    
Weighted-average remaining lease term (year) 3 years 11 months 1 day 4 years 8 months 1 day
Weighted-average discount rate - operating leases 10.48% 10.48%
v3.24.3
Schedule of Future Non-cancelable Minimum Lease Payments Under Operating Lease Liability (Details)
Sep. 30, 2024
USD ($)
Leases [Abstract]  
2024 (excluding the nine months ended September 30, 2024) $ 23,156
2025 94,247
2026 97,074
2027 99,986
2028 68,235
Total future minimum lease payments 382,698
Less imputed interest (68,441)
Present value of payments $ 314,257
v3.24.3
Leases (Details Narrative) - USD ($)
 9 Months Ended
Feb. 16, 2023
Sep. 30, 2023
Lessee, Lease, Description [Line Items]    
Lease payment   $ 6,480
Expiry date   Oct. 31, 2023
Lease Agreement [Member]    
Lessee, Lease, Description [Line Items]    
Payments for rent $ 7,206  
Lease term 64 months  
Rent variable rate 3.00%  
Lease commencement commenced June 1, 2023  
Percentage of rent abatement 50.00%  
Estimated monthly common area maintenance cost $ 3,300  
Lease Agreement [Member] | Letter of Credit [Member]    
Lessee, Lease, Description [Line Items]    
Expiry date Mar. 01, 2025  
Payments for rent $ 3,891  
Percentage of rent abatement 50.00%  
Security deposit $ 43,234  
Common area maintenance cost $ 3,315  
v3.24.3
Notes Payable-Related Party (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 04, 2024
Dec. 01, 2020
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Jun. 21, 2021
Short-Term Debt [Line Items]              
Interest expense       $ 623,465   $ 1,952,147  
Debt instrument, maturity date, description         In December of 2021, the maturity dates of these loans were further extended to June 30, 2022. In July of 2022, the notes were extended to June 30, 2023.    
Accrued interest         $ 79,682 102,373  
Officer [Member]              
Short-Term Debt [Line Items]              
Related party transaction, amounts of transaction   $ 139,229          
Interest rate   7.50%          
Debt instrument, maturity date   Dec. 31, 2021          
Officers Spouse [Member]              
Short-Term Debt [Line Items]              
Related party transaction, amounts of transaction   $ 426,243         $ 120,000
Interest rate   7.50%         7.50%
Debt instrument, maturity date   Dec. 31, 2021          
Related Party [Member]              
Short-Term Debt [Line Items]              
Interest expense       0   6,825  
Proceeds from (repayments of) related party debt       0   685,473  
Accrued interest       $ 0   $ 102,373  
Promissory Note [Member] | Officer [Member]              
Short-Term Debt [Line Items]              
Proceeds from issuance of debt $ 250,000            
Related party transaction, amounts of transaction $ 250,000            
Interest rate 12.00%            
Notes term 1 year            
Interest expense     $ 2,137   $ 2,137    
v3.24.3
Convertible Notes (Details Narrative)
 3 Months Ended 9 Months Ended
Jan. 11, 2023
USD ($)
$ / shares
shares
Sep. 30, 2024
USD ($)
$ / shares
shares
Sep. 30, 2023
USD ($)
shares
Sep. 30, 2024
USD ($)
$ / shares
shares
Sep. 30, 2023
USD ($)
shares
Aug. 06, 2024
USD ($)
Dec. 31, 2023
USD ($)
Jan. 31, 2023
USD ($)
$ / shares
shares
Short-Term Debt [Line Items]                
Warrants to purchase common stock | shares               127,260
Warrants exerciable shares | $ / shares               $ 1.93
Proceeds from convertible note payable       $ 3,935,000      
Convertible notes payable   $ 10,000,000.0   10,000,000.0        
Allocation of financing costs       101,651      
Warrant derivative liability   74,107   74,107     $ 414,512 $ 1,189,000
Legal fees   1,322,002 $ 288,416 2,323,013 1,072,728      
Interest expense debt     538,302   1,550,479      
Convertible note payable         $ 595,999  
Amortization of debt discount       1,079,444 1,654,724      
Principal, settled   345,139 331,800 846,806 1,925,700      
Accrued interest, settled     54,096   294,927      
Interest paid   22,724   79,682        
Payment including principal and accrued interest   367,863   926,488        
Loss on settlement of convertible debt   762,186   833,501        
Interest expense     623,465   1,952,147      
Common Stock [Member]                
Short-Term Debt [Line Items]                
Principal, settled   $ 1,172,850 $ 331,800 $ 1,408,050 $ 1,925,700      
Settlements in form of shares | shares   719,148 62,761 797,345 297,625      
Alto Convertible Note [Member]                
Short-Term Debt [Line Items]                
Warrants to purchase common stock | shares               8,909
Warrants exerciable shares | $ / shares               $ 18.80
Cash collateral           $ 600,000    
Convertible note payable           $ 1,200,000    
Measurement Input, Expected Term [Member]                
Short-Term Debt [Line Items]                
Expected years   5 years   5 years        
Measurement Input, Price Volatility [Member]                
Short-Term Debt [Line Items]                
Warrants and rights outstanding measurement input   110   110        
Measurement Input, Risk Free Interest Rate [Member]                
Short-Term Debt [Line Items]                
Warrants and rights outstanding measurement input   3.53   3.53        
Boustead Securities LLC [Member]                
Short-Term Debt [Line Items]                
Warrants to purchase common stock | shares   8,909   8,909        
Warrants exerciable shares | $ / shares   $ 18.80   $ 18.80        
Payment for placement agent       $ 345,000        
Fair value of warrants       99,543        
Allocation of financing costs       232,027        
Warrant derivative liability   $ 104,245   104,245        
Equity warrant as reduction in additional paid in capital   8,727   8,727        
Interest expense debt   270,538   1,198,738        
Amortization of debt discount   247,430   1,079,444        
Principal, settled   1,172,850   1,408,050        
Accrued interest, settled   35,888   54,670        
Boustead Securities LLC [Member] | Convertible Note [Member]                
Short-Term Debt [Line Items]                
Fair value of warrants       1,288,543        
Debt discount   300,000   300,000        
Legal fees       65,000        
Interest fee       215,000        
Debt principal amount   $ 1,442,000   1,442,000        
Interest expense debt       $ 3,310,543        
Securities Purchase Agreement [Member]                
Short-Term Debt [Line Items]                
Convertible debt $ 4,300,000              
Warrants to purchase common stock | shares 127,260              
Warrants exerciable shares | $ / shares $ 1.93              
Proceeds from convertible note payable $ 3,935,000              
Effective interest rate 214.00%              
Debt description the Alto Convertible Note is convertible into shares of common stock at a price per share equal to the lower of (i) $18.80, (ii) 90% of the three lowest daily VWAPs of the 15 trading days prior to the payment date, or (iii) 90% of the VWAP of the trading day prior to payment date. The noteholder may convert at any time at a fixed price of $18.80 per share.              
Derivative liability $ 1,442,000              
Debt interest rate 5.00%              
v3.24.3
Schedule of Warrants Activity (Details) - Warrant [Member] - $ / shares
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Accumulated Other Comprehensive Income (Loss) [Line Items]    
Number of warrants outstanding, balance 184,000  
Weighted average exercise price, outstanding balance $ 23.20  
Weighted average life (years) 2 years 14 days 2 years 9 months 7 days
Number of warrants, granted  
Weighted average exercise price, granted  
Number of warrants outstanding, balance 184,000 184,000
Weighted average exercise price, outstanding balance $ 11.54 $ 23.20
v3.24.3
Schedule of Restricted Stock Units (RSUs) (Details) - Restricted Stock Units (RSUs) [Member]
 9 Months Ended
Sep. 30, 2024
$ / shares
shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]  
Number of RSUs, Outstanding, Beginning Balance | shares 24,731
Weighted Average Grant Date Fair Value Per RSU, Beginning Balance | $ / shares $ 11.76
Number of Stock Option Outstanding, Granted | shares 53,455
Weighted Average Exercise Price, Granted | $ / shares $ 2.65
Number of Stock Option Outstanding, Forfeiture | shares (12,500)
Weighted Average Grant Date Fair Value Per RSU, Forfeiture | $ / shares
Number of RSUs, Vested | shares (24,348)
Weighted Average Grant Date Fair Value Per RSU, Vested | $ / shares $ 9.06
Number of RSUs, Outstanding, Ending Balance | shares 41,338
Weighted Average Grant Date Fair Value Per RSU, Ending Balance | $ / shares $ 5.14
v3.24.3
Stockholders’ Equity (Details Narrative) - USD ($)
 1 Months Ended 3 Months Ended 9 Months Ended
Jul. 30, 2024
Feb. 07, 2024
Jun. 30, 2024
Sep. 30, 2024
Jun. 30, 2024
Mar. 31, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Dec. 31, 2023
Jan. 31, 2023
Dec. 31, 2018
Accumulated Other Comprehensive Income (Loss) [Line Items]                        
Debt, principal       $ 345,139     $ 331,800 $ 846,806 $ 1,925,700      
Loss on settlement of convertible debt       762,186     43,414 833,501 477,221      
Number of warrants to purchase                     127,260  
Exercise price per share                     $ 1.93  
Aggregate intrinsic value of warrants       0       0        
Restricted stock award granted value                
Share based compensation               227,886 95,438      
Sale of stock consideration received per transaction   $ 2,250,000                    
Share based compensation arrangement by share based payment award description   (i) one share of the Company’s common stock, (ii) a warrant to purchase one share of the Company’s common stock exercisable at a purchase price of $18.80 per share, and (iii) a percentage of equity interest in Diagnostics such that, assuming the sale of all $2,250,000 of Units, SRO LLC will own a 22% interest in Diagnostics.                    
Proceeds from issuance of common stock   $ 4,500,000                    
Direct cost     $ 142,000                  
Deferred costs       101,651       101,651      
Alliance Global Partners [Member]                        
Accumulated Other Comprehensive Income (Loss) [Line Items]                        
Retainer fee $ 50,000                      
Alliance Global Partners [Member] | Offering [Member] | Maximum [Member]                        
Accumulated Other Comprehensive Income (Loss) [Line Items]                        
Offering price 10,000,000                      
Purchase Agreement [Member]                        
Accumulated Other Comprehensive Income (Loss) [Line Items]                        
Escrow deposit   2,250,000                    
Right offering   4,500,000                    
Escrow deposit   $ 2,250,000                    
Initial public offering description   Unless the parties waive the conditions to closing, in the event the full $4,500,000 is not raised, whether through SRO LLC or through the Company’s existing stockholders, the Company will not close on the offering and any funds raised and held in escrow will be returned to investors                    
Commitment fee   $ 112,500                    
Related expense   $ 40,000                    
Research and Development Expense [Member]                        
Accumulated Other Comprehensive Income (Loss) [Line Items]                        
Share based compensation       100,000     400,000 100,000 700,000      
Compensation under research and development       13,033     0 60,019 41,190      
Restricted Stock Units (RSUs) [Member]                        
Accumulated Other Comprehensive Income (Loss) [Line Items]                        
Share based compensation       45,275     $ 37,583 227,886 $ 95,438      
Unrecognized compensation cost       $ 145,504       $ 145,504        
Weighted average term               2 years 1 month 20 days        
Restricted Stock Units (RSUs) [Member] | Directors and Officers [Member]                        
Accumulated Other Comprehensive Income (Loss) [Line Items]                        
Restricted stock award granted shares       0     12,500 53,455 19,916      
Restricted stock award granted value       $ 0     $ 196,000 $ 141,840 $ 291,400      
2018 Equity Incentive Plan [Member]                        
Accumulated Other Comprehensive Income (Loss) [Line Items]                        
Common stock reserved for future issuance                       3,000,000
Share granted under equity incentive plan       125,734       125,734        
Number of shares vested under plan               84,396        
Alto Convertible Note [Member]                        
Accumulated Other Comprehensive Income (Loss) [Line Items]                        
Number of warrants to purchase                     8,909  
Exercise price per share                     $ 18.80  
Bridge Financing [Member] | Alliance Global Partners [Member] | Maximum [Member]                        
Accumulated Other Comprehensive Income (Loss) [Line Items]                        
Offering price $ 1,350,000                      
Common Stock [Member]                        
Accumulated Other Comprehensive Income (Loss) [Line Items]                        
Common stock issued for conversion of convertible debt, shares       719,148     62,761 797,345 297,625      
Debt, principal       $ 1,172,850     $ 331,800 $ 1,408,050 $ 1,925,700      
Accrued interest settled with common stock       35,888     54,096 54,670 294,927      
Loss on settlement of convertible debt       $ 762,186     $ 43,414 $ 833,501 $ 477,221      
Restricted stock award granted shares       5,002 3,722 15,625 1,876 24,349 1,876      
Shares issued for round up of reverse split fractional shares       115,716       115,716        
Restricted stock award granted value                
v3.24.3
Schedule of Monte Carlo Simulation Assumption (Details)
Sep. 30, 2024
$ / shares
Measurement Input, Price Volatility [Member]  
Warrants measurement input 110
Measurement Input, Price Volatility [Member] | Minimum [Member] | Warrant [Member]  
Warrants measurement input 92.04 [1]
Measurement Input, Price Volatility [Member] | Maximum [Member] | Warrant [Member]  
Warrants measurement input 101.79 [1]
Measurement Input, Risk Free Interest Rate [Member]  
Warrants measurement input 3.53
Measurement Input, Risk Free Interest Rate [Member] | Minimum [Member] | Warrant [Member]  
Warrants measurement input 3.64 [1]
Measurement Input, Risk Free Interest Rate [Member] | Maximum [Member] | Warrant [Member]  
Warrants measurement input 4.93 [1]
Measurement Input Volume Weighted Average Price [Member] | Warrant [Member]  
Warrants measurement input 1.31 [1]
Measurement Input, Exercise Price [Member] | Warrant [Member]  
Warrants measurement input 1.93 [1]
Measurement Input, Default Rate [Member] | Minimum [Member] | Warrant [Member]  
Warrants measurement input 0 [1]
Measurement Input, Default Rate [Member] | Maximum [Member] | Warrant [Member]  
Warrants measurement input 40 [1]
Illiquidity Discount [Member] | Warrant [Member]  
Warrants measurement input (14) [1]
Measurement Input, Expected Term [Member]  
Time period (years) 5 years
Measurement Input, Expected Term [Member] | Minimum [Member] | Warrant [Member]  
Time period (years) 29 days [1]
Measurement Input, Expected Term [Member] | Maximum [Member] | Warrant [Member]  
Time period (years) 2 years 3 months 10 days [1]
[1] Based on a Monte Carlo simulation analysis of 250,000 iterations
v3.24.3
Schedule of Derivative Liabilities (Details) - USD ($)
 3 Months Ended
Sep. 30, 2024
Jun. 30, 2024
Mar. 31, 2024
Accelerated Feature [Member]      
Platform Operator, Crypto Asset [Line Items]      
Beginning balance $ 504 $ 2,035 $ 3,852
Gain on change in fair value of the derivative (504) (1,531) (1,817)
Ending balance 504 2,035
Fair Value, Inputs, Level 3 [Member]      
Platform Operator, Crypto Asset [Line Items]      
Beginning balance 359,919 214,615 410,660
Gain on change in fair value of the derivative (285,812) 145,304 (196,045)
Ending balance $ 74,107 $ 359,919 $ 214,615
v3.24.3
Derivative Liabilities (Details Narrative) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Jan. 31, 2023
Jan. 11, 2023
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]        
Number of warrants issued     127,260  
Exercise price per share     $ 1.93  
Derivative liability non-current $ 74,107 $ 414,512 $ 1,189,000  
Derivative fair value $ 74,107     $ 2,631,000
Measurement Input Volume Weighted Average Price [Member] | Warrant [Member]        
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]        
Share price       12.64
Derivative discount percentage       14.00%
Securities Purchase Agreement [Member]        
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]        
Number of warrants issued       127,260
Exercise price per share       $ 1.93
Derivative liability       $ 1,442,000
v3.24.3
Other Related Party transactions (Details Narrative) - USD ($)
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Related Party Transactions [Abstract]    
Research, development expense $ 0 $ 1,058,348
v3.24.3
Subsequent Events (Details Narrative) - USD ($)
 1 Months Ended 9 Months Ended
Oct. 31, 2024
Oct. 21, 2024
Oct. 14, 2024
Oct. 31, 2024
Sep. 30, 2024
Sep. 30, 2023
Jan. 31, 2023
Subsequent Event [Line Items]              
Convertible notes payable         $ 10,000,000.0    
Exercise price             $ 1.93
Convertible note         $ 3,935,000  
Repayment of convertible note         $ 846,806  
Warrants to purchase common stock             127,260
Subsequent Event [Member]              
Subsequent Event [Line Items]              
Exercise price $ 1.42     $ 1.42      
Warrants to purchase common stock 329,461     329,461      
Gross proceeds from offering       $ 3,900,000      
Subsequent Event [Member] | Alliance Global Partners [Member]              
Subsequent Event [Line Items]              
Exercise price $ 1.40     $ 1.40      
Price per share $ 1.525     $ 1.525      
Gross proceeds from offering $ 4,500,000            
Subsequent Event [Member] | Alliance Global Partners [Member] | Common Stock [Member]              
Subsequent Event [Line Items]              
Shares issued 395,574     395,574      
Issuance of common stock 2,950,820            
Warrants to purchase common stock 2,950,820     2,950,820      
Subsequent Event [Member] | Alliance Global Partners [Member] | Pre-Funded Warrant [Member]              
Subsequent Event [Line Items]              
Exercise price $ 0.001     $ 0.001      
Issuance of common stock 2,555,246            
Warrants to purchase common stock 2,555,246     2,555,246      
Price per share $ 1.524     $ 1.524      
Sale of stock price per share $ 0.001     $ 0.001      
Convertible Bridge Notes [Member] | Subsequent Event [Member]              
Subsequent Event [Line Items]              
Convertible notes payable     $ 600,000        
Accruing interest percentage     14.50%        
Original issue discount percentage   5.00% 5.00%        
Proceeds from issuance of debt   $ 220,000 $ 570,000        
Outstanding balance percentage     107.00%        
Secured debt   231,579          
Proceeds from secured debt   $ 790,000          
Convertible Bridge Notes [Member] | Subsequent Event [Member] | Chief Executive Officer [Member]              
Subsequent Event [Line Items]              
Convertible note     $ 237,500        
Repayment of convertible note     $ 250,000        
Convertible Bridge Notes [Member] | Subsequent Event [Member] | Lenders [Member]              
Subsequent Event [Line Items]              
Warrants to purchase shares of common stock   88,544 240,917        
Exercise price   $ 1.49 $ 1.40        
Warrants expiring   5 years 5 years        
Convertible Bridge Notes [Member] | Subsequent Event [Member] | Maximum [Member]              
Subsequent Event [Line Items]              
Convertible notes payable     $ 1,300,000        
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