Shuttle Pharmaceuticals (SHPH) - 2025 Q1 - Quarterly Report

Part I Item 1. Unaudited Condensed Consolidated Financial Statements Unaudited Q1 2025 financials show no revenue, a widening net loss, and significant cash burn, despite a $5.0 million equity raise strengthening the balance sheet, with substantial going concern risk Unaudited Condensed Consolidated Balance Sheets Total assets grew to $5.31 million by March 31, 2025, driven by a $4.51 million cash increase from financing, turning stockholders' equity positive to $3.29 million from a $0.71 million deficit Condensed Consolidated Balance Sheet Data (Unaudited) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $4,959,397 | $2,210,917 | | Total Assets | $5,310,190 | $2,506,290 | | Total Current Liabilities | $1,782,177 | $1,533,769 | | Total Liabilities | $2,024,925 | $1,797,138 | | Total Stockholders' Equity | $3,285,265 | $709,152 | - Cash and cash equivalents increased significantly to $4,512,607 from $1,920,144 at the end of the previous year[9] Unaudited Condensed Consolidated Statements of Operations Q1 2025 saw no revenue, with net loss widening to $3.05 million from $1.73 million, primarily due to a significant increase in R&D expenses to $1.57 million Statement of Operations Summary (Three Months Ended March 31) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Revenue | $0 | $0 | | Research and Development | $1,573,928 | $586,104 | | Total Operating Expenses | $2,951,241 | $1,384,847 | | Net Loss | ($3,053,007) | ($1,731,031) | | Net Loss Per Share | ($0.30) | ($0.83) | Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $3.29 million, primarily driven by a $5.0 million capital raise from common stock and pre-funded warrants, partially offset by the $3.05 million net loss - The issuance of common stock and pre-funded warrants, net of issuance costs, added $5,038,574 to stockholders' equity[15] - The net loss for the quarter of $3,053,007 was the primary reduction to stockholders' equity[15] Unaudited Condensed Consolidated Statements of Cash Flows Q1 2025 cash and cash equivalents increased by $2.59 million, driven by $5.12 million from financing activities, offsetting $2.53 million used in operations Cash Flow Summary (Three Months Ended March 31) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,526,924) | ($1,239,083) | | Net cash provided by investing activities | $0 | $101,295 | | Net cash provided by (used in) financing activities | $5,119,387 | ($40,000) | | Net change in cash and cash equivalents | $2,592,463 | ($1,177,788) | Notes to Unaudited Condensed Consolidated Financial Statements Notes highlight substantial 'going concern' risk due to recurring losses and insufficient cash, despite a $5.0 million March 2025 equity raise, with significant future commitments including $5.3 million for clinical trials and a $2.0 million marketing payment - The company's financial statements are prepared on a going concern basis, but management has identified conditions that raise substantial doubt about its ability to continue as a going concern within one year[24][26] - In March 2025, the company completed a public offering of common stock and pre-funded warrants, resulting in net proceeds of approximately $5.0 million[88][89] - The company has significant commitments, including an agreement with its primary CRO for clinical trials with a total cost limit of $5.3 million, and a subsequent event in April 2025 where it paid $2.0 million for a three-month marketing agreement[114][119] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's development-stage status, Phase II clinical study, Nasdaq non-compliance, and a 76% increase in net loss driven by 169% higher R&D expenses, reiterating substantial going concern doubt despite recent financing - The company is a discovery and development stage pharmaceutical firm whose Phase II clinical study for Ropidoxuridine commenced in October 2024[125][126] - The company is not in compliance with Nasdaq's $1.00 minimum bid price requirement and faces potential delisting if compliance is not regained by June 30, 2025[127][128] - Management concludes there is substantial doubt about the company's ability to continue as a going concern as existing cash resources are not expected to be sufficient to fund operations for the next twelve months[144] Results of Operations Q1 2025 net loss increased 76% to $3.05 million, primarily driven by a 169% rise in Research and Development expenses due to clinical trial initiation Comparison of Operations (Three Months Ended March 31) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Research and development | $1,573,928 | $586,104 | 169% | | General and administrative | $596,886 | $324,609 | 84% | | Legal and professional | $780,427 | $474,134 | 65% | | Net loss | ($3,053,007) | ($1,731,031) | 76% | - The $1.0 million increase in R&D expense is primarily related to the start of work on clinical trials, including CRO expenses and other regulatory activities[134] Liquidity and Capital Resources Working capital improved to $3.2 million due to a $5.0 million equity raise, but significant commitments, including a $2.0 million marketing payment, mean funds are insufficient for the next 12 months, reiterating going concern risk - Working capital increased by $2.5 million to $3.2 million as of March 31, 2025, primarily due to the March 2025 equity raise[147] - In February 2025, the company secured a $2.0 million revolving loan facility, which remained undrawn as of the report date[145] - Subsequent to the quarter end, on April 5, 2025, the company paid $2.0 million for a three-month marketing and advertising services agreement[143] Critical Accounting Policies and Significant Judgments and Estimates Critical accounting policies involve significant judgments and estimates, particularly for R&D expenses and fair value measurement of complex financial instruments using Monte Carlo simulations with subjective inputs - The most critical accounting policies are identified as Research and Development Expenses, Fair Value of Convertible Notes, and Fair Value of Warrants and Derivative Financial Instruments[163] - The valuation of convertible notes and certain warrants utilizes Monte Carlo simulation models, which depend on significant unobservable inputs and management judgment, making them subject to material changes[158][164][167] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a 'smaller reporting company,' the company is exempt from providing disclosures on quantitative and qualitative market risk - As a 'smaller reporting company,' the company is exempt from the disclosure requirements of this Item[169] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were ineffective as of March 31, 2025, due to material weaknesses including inadequate policies, lack of segregation of duties, and IT control deficiencies, despite remediating prior issues - Management concluded that disclosure controls and procedures were ineffective as of March 31, 2025[171] - Identified material weaknesses include limited written policies, lack of segregation of duties, improper R&D expense classification, and issues with IT general controls[171][175] - The company successfully remediated previously disclosed material weaknesses related to the accounting for significant unusual transactions (debt/equity) and stock-based compensation as of March 31, 2025[173] Part II. Other Information Item 1. Legal Proceedings The company reports no pending or threatened legal proceedings that would materially adversely affect its business - There are no legal proceedings pending or threatened against the company[177] Item 1A. Risk Factors As a 'smaller reporting company,' the company is exempt from providing risk factor disclosures - The company is exempt from this disclosure requirement due to its status as a 'smaller reporting company'[178] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds occurred during the reported period - No unregistered sales of securities occurred during the quarter[179] Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter - No directors or executive officers adopted or terminated a Rule 10b5-1 trading plan during the quarter[182] Item 6. Exhibits This section lists all exhibits filed, including forms of warrants, financing agreement amendments, a Revolving Loan Agreement, and executive employment agreements - The report includes several key exhibits, such as the Revolving Loan Agreement with Bowery Consulting Group Inc. and an amendment to the agreement with Alto Opportunity Master Fund[183] Signatures