| Summary of Significant Accounting Policies | Note
2 – Summary of Significant Accounting Policies Basis
of Presentation These
consolidated financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”). The consolidated financial statements and disclosures have been prepared using the accrual
basis of accounting in accordance with U.S. generally accepted accounting principles (“GAAP”). Basis
of Consolidation The
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. Reclassifications Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications
had no effect on the reported results of operations. 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 expense in accordance with ASC 730. As a result,
c Consolidated
Statements of Operations Balance
Sheet, 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
corrections for 2023 include $ 89,007 93,708 95,129 A summary of corrections reflecting the prior period impact to the Company’s Consolidated Statement of Operations,
for the year ended December 31, 2022, are shown below: Schedule of the Error Correction
December 31, 2022 Correction As Corrected
General and administrative expense $ 198,978 $ 339,818 $ 538,796
Research and development expense 1,488,530 (339,818 ) 1,148,712
Net Loss $ 1,687,508 $ - $ 1,687,508 Use
of Estimates The
preparation of 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 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 consolidated financial statements for the valuation of derivatives and initial measurement of equity-based
warrants. 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 December 31, 2023 and 2022, cash and cash equivalents consisted of the following: Schedule of Cash and Cash Equivalents
December 31, December 31,
2023 2022
Cash $ 1,550,098 $ 5,411,378
Money market funds 1,026,318 3,005,825
Total cash
and cash equivalents $ 2,576,416 $ 8,417,203 Periodically,
the Company may carry cash balances at financial institutions in excess of the federally insured limit of $ 250,000 1,849,000 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. As
of December 31, 2023, the marketable securities held by the Company, which are classified as trading marketable securities, consisted
of an outstanding balance of $ 2,887,215 52,855 4,970 71,568 no 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 December 31, 2023 (none for December 31, 2022): Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis
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 Leases We
determine if an arrangement is a lease at inception. Operating leases are included in operating
lease right-of-use asset (“ROU”), operating lease liability - current, and operating lease liability - noncurrent on the
consolidated balance sheets. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities
in our consolidated balance sheets. The Company did not utilize any financing that required recognition of finance leases during the
years ended December 31, 2023 and 2022. ROU
assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease
payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present
value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based
on the estimated rate of interest for collateralized borrowing, over a similar term of the lease payments at commencement date. The operating
lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or
terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on
a straight-line basis over the lease term. Leases
with a lease term of 12 months or less at inception are not recorded on our consolidated
balance and are expensed on a straight-line
basis over the lease term in our statement of operations. The
Company determines the present value of minimum future lease payments for operating leases by estimating a rate of interest that it would
have to pay to borrow on a collateralized basis over a similar term, an amount equal to the lease payments and a similar economic environment
(the “incremental borrowing rate” or “IBR”). The Company determines the appropriate IBR by identifying a reference
rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference
rate, the Company used an equity built up, risk adjusted rate, as the implicit interest rate. Property
and Equipment Property
and equipment are stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred;
additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost
and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of
property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows: Schedule of Useful Lives for Property Plant Equipment
Furniture 5
Computers and equipment 5
Research Equipment 10 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 consolidated statements of operations. For
our derivative financial instruments, the Company used a Monte Carlo valuation model to value the derivative instruments at inception
and on subsequent valuation dates. 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 consolidated
balance sheet 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. Convertible
Note The
Company bifurcates conversion options from their host instruments and accounts for them as free standing derivative financial instruments
if certain criteria are met. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative
instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument
that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable
generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument
with the same terms as the embedded derivative instrument would be considered a derivative instrument. 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 consolidated
statements of operations. The fair value of the warrants is estimated using a Black-Scholes pricing
model or a Monte Carlo simulation. Impairment
of Long-Lived Assets The
Company reviews its long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying
amount of the asset may not be fully recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset
to the estimated undiscounted cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated
future cash flows, an impairment charge will be recognized in the amount by which the carrying amount of the asset exceeds the fair value
of the asset. There were no impairments of long-lived assets during the periods presented. Stock-Based Compensation Compensation
cost for stock awards, which include restricted stock units (“RSUs”), is measured at the fair value on the grant date and
recognized as expense, over the related service or performance period. The fair value of stock awards is based on the quoted price of
our common stock on the grant date. Compensation expense related to the RSUs is reduced by the fair value of the units that are forfeited
by employees that leave the Company prior to vesting as they occur. Compensation cost for RSUs are recognized using the straight-line
method over the requisite service period. 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 year
ended December 31, 2023 and 2022, a portion of personnel-related expenses and stock-based compensation expense for these individuals totaling
$ 0.8 0.6 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 0 211,455 Income
Taxes The
Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes Under
ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained
in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that
is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test,
no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented. Net
Loss Per Common Stock Net
loss per share of common stock requires presentation of basic earnings per share on the face of the 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 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 years ended December 31, 2023 and 2022, 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. Schedule of Anti-dilutive Securities Excluded from Computation of Earnings Per Share
December 31, December 31,
2023 2022
Convertible notes (Note 5) 959,513 -
Warrant (Note 6) 1,446,155 356,810
Restricted stock units (Note 6) 197,855 -
2,603,523 356,810 Recent
Accounting Pronouncements In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,”
which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income
taxes paid. The guidance is effective for the Company’s fiscal years beginning after February 1, 2025, with early adoption permitted.
The Company does not expect the adoption of this standard to
have any material impact on its financial statements. There have been no other recent accounting pronouncements,
changes in accounting pronouncements or recently adopted accounting guidance during the year ended December 31, 2023 that are of significance
or potential significance to the Company. |
