SEC Form 10-Q filed by 60 Degrees Pharmaceuticals Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
(Mark One)
FOR THE QUARTERLY PERIOD ENDED
or
FOR THE TRANSITION PERIOD FROM _________ to __________
COMMISSION FILE NUMBER
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
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 | ☐ | |
| ☒ | Smaller reporting company | |||
| Emerging growth company |
If an emerging growth company, indicate by check
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standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
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No
As of May 15, 2025, the registrant had a total
of
INDEX
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends impacting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.
Forward-looking statements include all statements that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “intend,” “seek,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “might,” “forecast,” “continue,” or the negative of those terms, and similar expressions and comparable terminology intended to reference future periods. Forward-looking statements include, but are not limited to, statements about:
| ● | Our ability to effectively operate our business segment; |
| ● | Our ability to manage our research, development, expansion, growth and operating expenses; |
| ● | Our ability to evaluate and measure our business, prospects and performance metrics; |
| ● | Our ability to compete, directly and indirectly, and succeed in a highly competitive and evolving industry; |
| ● | Our ability to respond and adapt to changes in technology and customer behavior; and |
| ● | Our ability to protect our intellectual property and to develop, maintain and enhance a strong brand. |
Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results, levels of activity, performance or achievements. Accordingly, the forward-looking statements in this Quarterly Report should not be regarded as representations that the results or conditions described in such statements will occur or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements.
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PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Condensed Financial Statements
60 DEGREES PHARMACEUTICALS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
| March 31, 2025 | December 31, | |||||||
| (Unaudited) | 2024 | |||||||
| ASSETS: | ||||||||
| Current Assets: | ||||||||
| Cash and Cash Equivalents | $ | $ | ||||||
| Accounts Receivable | ||||||||
| Prepaid and Other Assets | ||||||||
| Short-Term Investments | ||||||||
| Inventory (Note 3) | ||||||||
| Total Current Assets | ||||||||
| Property and Equipment, net (Note 4) | ||||||||
| Other Assets: | ||||||||
| Long-Term Prepaid Expense | ||||||||
| Intangible Assets, net (Note 5) | ||||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY: | ||||||||
| Current Liabilities: | ||||||||
| Accounts Payable and Accrued Expenses | $ | $ | ||||||
| SBA EIDL (including accrued interest) (Note 7) | ||||||||
| Derivative Liabilities (Note 8) | ||||||||
| Total Current Liabilities | ||||||||
| Long-Term Liabilities: | ||||||||
| SBA EIDL (including accrued interest) (Note 7) | ||||||||
| Total Long-Term Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 11) | ||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||
| Series A Preferred Stock, $ | ||||||||
| Common Stock, $ | ||||||||
| Additional Paid-in Capital(1) | ||||||||
| Accumulated Other Comprehensive Income | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| 60P Shareholders’ Equity: | ||||||||
| Noncontrolling Interest | ( | ) | ( | ) | ||||
| Total Shareholders’ Equity | ||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of these unaudited
consolidated condensed financial statements.
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60 DEGREES PHARMACEUTICALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME (UNAUDITED)
| For The Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Product Revenues – net of Discounts and Rebates | $ | $ | ||||||
| Cost of Revenues | ||||||||
| Gross Profit | ||||||||
| Research Revenues | ||||||||
| Net Revenue | ||||||||
| Operating Expenses: | ||||||||
| Research and Development | ||||||||
| General and Administrative Expenses | ||||||||
| Total Operating Expenses | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Interest Expense | ( | ) | ( | ) | ||||
| Change in Fair Value of Derivative Liabilities | ||||||||
| Other Income, net | ||||||||
| Total Interest and Other Income, net | ||||||||
| (Loss) Income from Operations before Provision for Income Taxes | ( | ) | ||||||
| Provision for Income Taxes (Note 9) | ||||||||
| Net (Loss) Income including Noncontrolling Interest | ( | ) | ||||||
| Net Loss – Noncontrolling Interest | ( | ) | ( | ) | ||||
| Net (Loss) Income – attributed to 60 Degrees Pharmaceuticals, Inc. | ( | ) | ||||||
| Comprehensive (Loss) Income: | ||||||||
| Net (Loss) Income | ( | ) | ||||||
| Unrealized Foreign Currency Translation Loss | ( | ) | ( | ) | ||||
| Total Comprehensive (Loss) Income | ( | ) | ||||||
| Net Loss – Noncontrolling Interest | ( | ) | ( | ) | ||||
| Comprehensive (Loss) Income – attributed to 60 Degrees Pharmaceuticals, Inc. | ( | ) | ||||||
| Cumulative Dividends on Series A Preferred Stock | ( | ) | ( | ) | ||||
| Net (Loss) Income - attributed to common stockholders | $ | ( | ) | $ | ||||
| Net (Loss) Income per Common Share: | ||||||||
| Basic and Diluted | $ | ( | ) | $ | ||||
| Weighted Average Number of Common Shares Outstanding(1) | ||||||||
| Basic and Diluted | ||||||||
| (1) |
The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.
2
60 DEGREES PHARMACEUTICALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)
| For the Three Months Ended March 31, 2025 | ||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Common Stock(1) | Additional Paid-In | Accumulated | Accumulated Other Comprehensive | Total Shareholders’ Equity Attributable | Noncontrolling Interest on | Total Shareholders’ | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital(1) | Deficit | Income (Loss) | to 60P | Shareholders | Equity | |||||||||||||||||||||||||||||||
| Balance—December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Issuance of common stock and warrants pursuant to January 2025 Offering, net of offering costs paid at closing and deferred offering costs (Note 6) | - | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock and warrants pursuant to February 2025 Offering, net of offering costs paid at closing and deferred offering costs (Note 6) | - | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of Pre-Funded Warrants | - | |||||||||||||||||||||||||||||||||||||||
| Issuance of shares for annual performance bonuses, net of shares withheld for taxes | - | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation expense | - | - | ||||||||||||||||||||||||||||||||||||||
| Net foreign translation loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Share rounding adjustment for reverse stock split | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance— March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| (1) |
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| For the Three Months Ended March 31, 2024 | ||||||||||||||||||||||||||||||||||||||||
| Series A Preferred Stock | Common Stock(1) | Additional Paid-In | Accumulated | Accumulated Other Comprehensive | Total Shareholders’ Equity Attributable | Noncontrolling Interest on | Total Shareholders’ | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital(1) | Deficit | Income (Loss) | to 60P | Shareholders | Equity | |||||||||||||||||||||||||||||||
| Balance—December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Issuance of common stock and warrants, net of underwriting discounts and offering costs paid at closing and deferred offering costs (Note 6) | - | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon exercise of Pre-Funded Warrants | - | |||||||||||||||||||||||||||||||||||||||
| Issuance of shares for RSUs | - | |||||||||||||||||||||||||||||||||||||||
| Net foreign translation loss | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance— March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| (1) |
The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.
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60 DEGREES PHARMACEUTICALS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
| For the Three Months Ended March 31, | 2025 | 2024 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net (Loss) Income | $ | ( | ) | $ | ||||
| Adjustments to Reconcile Net (Loss) Income to Net Cash Used in Operating Activities: | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Amortization of ROU Asset | ||||||||
| Amortization of Capitalized Share-Based Payments | ||||||||
| Share-Based Compensation under Equity Incentive Plan | ||||||||
| Change in Fair Value of Derivative Liabilities | ( | ) | ( | ) | ||||
| Write-offs of Capitalized Patents | ||||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Accounts Receivable | ( | ) | ( | ) | ||||
| Prepaid and Other Assets | ||||||||
| Inventory | ( | ) | ||||||
| Accounts Payable and Accrued Liabilities | ||||||||
| Accrued Interest, net | ( | ) | ||||||
| Reduction of Lease Liability | ( | ) | ||||||
| Net Cash Used in Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Capitalization of Patents | ( | ) | ( | ) | ||||
| Purchases of Fixed Assets | ( | ) | ||||||
| Acquisition of Intangibles | ( | ) | ||||||
| Maturities of Short-Term Investments | ||||||||
| Net Cash Provided by (Used in) Investing Activities | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Net Proceeds from January 2024 Offering | ||||||||
| Net Proceeds from January 2025 Offering | ||||||||
| Net Proceeds from February 2025 Offering | ||||||||
| Shares Withheld for Net Share Settlement of Performance Bonuses | ( | ) | ||||||
| Proceeds from Exercise of Pre-Funded Warrants | ||||||||
| Net Cash Provided by Financing Activities | ||||||||
| Effect of Exchange Rate Changes on Cash | ( | ) | ( | ) | ||||
| Change in Cash and Cash Equivalents | ||||||||
| Cash and Cash Equivalents—Beginning of Period | ||||||||
| Cash and Cash Equivalents—End of Period | $ | $ | ||||||
| NONCASH INVESTING/FINANCING ACTIVITIES | ||||||||
| Fair Value of Warrants Issued to Underwriters | $ | $ | ||||||
| Purchases of Fixed Assets included in Accounts Payable | $ | $ | ||||||
| Gross Shares Issued for Annual Performance Bonuses | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated condensed financial statements.
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60 DEGREES PHARMACEUTICALS, INC.
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS
60 Degrees Pharmaceuticals, Inc. was incorporated in Delaware on June 1, 2022 and merged on the same day with 60 Degrees Pharmaceuticals, LLC, a District of Columbia limited liability company organized on September 9, 2010 (“60P LLC”). 60 Degrees Pharmaceuticals, Inc. and its subsidiary (referred to collectively as the “Company”, “60P”, or “60 Degrees Pharmaceuticals”) is a specialty pharmaceutical company that specializes in the development and marketing of new medicines for the treatment and prevention of infectious diseases. 60P achieved FDA approval of its lead product, ARAKODA® (tafenoquine), for malaria prevention, in 2018. Currently, 60P’s pipeline under development covers development programs for tick-borne fungal and other viral diseases utilizing three of the Company’s future products: (i) new products that contain the Arakoda regimen of tafenoquine; (ii) new products that contain tafenoquine; and (iii) celgosivir and/or botanical extracts from Australian Chestnut Trees. The Company’s headquarters are located in Washington, D.C., with a majority-owned subsidiary in Australia.
Initial Public Offering
On July 14, 2023, the Company closed its initial
public offering consisting of
Risks and Uncertainties
The Company is subject to risks common to companies in the biopharmaceutical industry including, but not limited to, the risks associated with developing product candidates and successfully launching and commercializing its drug/device combination products, the Company’s ability to obtain regulatory approval of such products in the United States and other geography markets, the uncertainty of the broad adoption of its approved products by physicians and consumers, and significant competition.
In addition, higher rates of inflation have resulted in the U.S. Federal Reserve raising interest rates. Increases in interest rates, especially if coupled with reduced government spending and volatility in financial markets, may further increase economic uncertainty and heighten these risks. Furthermore, if additional banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting the banking system and financial markets, the Company or its partners’ ability to access existing cash, cash equivalents and investments may be threatened and could have a material adverse effect on the Company’s business and financial condition, including the Company’s ability to access additional capital on favorable terms, or at all, which could in the future negatively affect the Company’s ability to pursue its business strategy.
Going Concern
The Company’s future results are subject to substantial risks
and uncertainties. Since its inception, the Company has not demonstrated the ability to generate enough revenues to date to cover operating
expenses and has accumulated losses to date. At March 31, 2025, the Company had cash and cash equivalents totaling $
To date, the Company has funded its operations primarily with proceeds from sales of common stock and warrants for the purchase of common stock, sales of preferred stock, proceeds from the issuance of convertible debt and borrowings under loan and security agreements.
6
Continuation as a going concern is dependent upon the Company’s ability to meet its financial requirements, raise additional capital, and achieve gross profitability from the Company’s single marketed product. To achieve profitability, the Company expects it will need to raise additional capital to fund its activities relating to commercial support for its existing product and any future clinical research trials and operating activities. However, there can be no assurance that it will ever achieve or maintain profitability. These conditions, among others, raise substantial doubt about the ability of the Company to continue as a going concern for one year from the date these consolidated condensed financial statements are issued.
Management plans to fund operations of the Company through third party and related party debt/advances, private placement of restricted securities and the issuance of stock in a subsequent offering until such a time as the business achieves profitability or a business combination may be achieved. However, there can be no assurance that the Company will be successful in raising additional capital or that such capital, if available, will be on terms that are favorable to the Company. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If the Company raises funds through collaborations, or other similar arrangements with third parties, it may have to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to the Company and/or may reduce the value of its common stock. If the Company is unable to raise additional funds through equity or debt financings when needed, it may be required to delay, limit, reduce or terminate its product development or future commercialization efforts or grant rights to develop and market its product candidates even if the Company would otherwise prefer to develop and market such product candidates itself.
As such, management concluded that such plans do not alleviate the substantial doubt about the ability of the Company to continue as a going concern for one year from the date these consolidated condensed financial statements are issued.
The consolidated condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of obligations in the normal course of business, and do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should the Company be unable to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements of 60P and its subsidiary are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company has prepared the accompanying consolidated condensed financial statements pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (“SEC”). These financial statements are unaudited and, in the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows have been included and are of a normal and recurring nature. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2025 due to various factors. These consolidated condensed financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto as of and for the years ended December 31, 2024 and 2023, included in the Company’s annual report on Form 10-K, as filed with the SEC on March 27, 2025 (the “Annual Report”). Certain information, footnote disclosures, and significant accounting policies that would substantially duplicate the disclosures contained in the Annual Report have been omitted.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and those estimates may be material. Significant estimates include the reserve for inventory, the fair value of derivative liabilities, and stock-based compensation.
7
Reverse Stock Splits
Following stockholder approval in July 2024, the
Company effected a reverse stock split at a ratio of 1:12, which was effective as of August 12, 2024 (the “
Proportional adjustments were made to the number of shares of common stock issuable upon exercise or conversion of the Company’s equity awards, warrants, and other equity instruments convertible into common stock, as well as the respective exercise prices, if applicable, in accordance with the terms of the instruments. Unless otherwise noted, all references to numbers of shares of the Company’s common stock and per share information presented in these consolidated condensed financial statements have been retroactively adjusted, as appropriate, to reflect the Reverse Stock Splits, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.
Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, accounts receivable, inventory purchases, and borrowings.
Significant customers represent any customer whose
business makes up 10% of receivables or revenues. At March 31, 2025, significant customers represented
Currently, the Company has exclusive relationships with distributors in Australia and Europe. A failure to perform by any of our current distributors would create disruption for patients in those markets.
Since the Company first started working on tafenoquine all inventory has been acquired in a collaborative relationship from a sole vendor. Should the vendor cease to supply tafenoquine it would take significant costs and efforts to rebuild the supply chain with a new sole vendor sourcing the active pharmaceutical ingredient (“API”).
Segment Information
Since its inception, the Company operates and manages its business as a single identifiable segment, focused on the development and marketing of new medicines for the treatment and prevention of infectious diseases. The determination of a single business segment is consistent with the consolidated financial information regularly provided to the Company’s chief operating decision maker (“CODM”).
The Company’s CODM is its Chief Executive Officer, who reviews and evaluates consolidated net income or loss for purposes of evaluating performance, making operating decisions, allocating resources, and planning and forecasting for future periods. The significant components of consolidated net income or loss regularly provided to the CODM include net product revenues and the significant expense categories presented in the accompanying Consolidated Condensed Statements of Operations and Comprehensive (Loss) Income (cost of revenues, research and development, and general and administrative expenses). These are presented at the consolidated level and used by the CODM to monitor budgeted versus actual results to make key operating decisions. The information and operating expense categories presented in the accompanying Consolidated Condensed Statements of Operations and Comprehensive (Loss) Income are fully reflective of the significant expense categories and amounts that are regularly provided to the CODM.
8
The measure of segment assets that is regularly
reported to the CODM includes cash and cash equivalents and short-term investments, each as reported on the Consolidated Balance Sheets.
Total consolidated cash and cash equivalents and short-term investments were $
Derivative Liabilities
The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic No. 480, Distinguishing Liabilities from Equity (“ASC 480”), and FASB ASC Topic No. 815, Derivatives and Hedging (“ASC 815”). The classification of derivative financial instruments is reassessed each reporting period. Derivative liabilities are adjusted to reflect fair value at each reporting period, with any increase or decrease in the fair value recorded in the results of operations, as a component of other income or expense as change in fair value of derivative liabilities. As of March 31, 2025, derivative liabilities consist of contingent payment arrangements. The Company uses a probability-weighted expected return method to determine the fair value of these instruments.
Upon conversion or repayment of a debt or equity instrument in exchange for equity shares, where the embedded conversion option has been bifurcated and accounted for as a derivative liability (generally convertible debt and warrants), the Company records the equity shares at fair value on the date of conversion, relieves all related debt, derivative liabilities, and unamortized debt discounts, and recognizes a net gain or loss on debt extinguishment, if any.
Equity or liability instruments that become subject to reclassification under ASC Topic 815 are reclassified at the fair value of the instrument on the reclassification date.
Equity-Classified Warrants
As of March 31, 2025, the Company accounts for all outstanding warrants to purchase common stock as equity-classified instruments based on an assessment of the warrants’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815. This assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, 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 common stock 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 respective issuance dates and as of each subsequent reporting period while the warrants are outstanding.
Revenue Recognition
The Company recognizes revenue in accordance with FASB ASC Topic No. 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied. As part of the accounting for these arrangements, the Company may be required to make significant judgments, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation.
Revenues from product sales are recorded at the net sales price, or “transaction price,” which may include estimates of variable consideration that result from product returns. The Company determines the amount of variable consideration by using either the expected value method or the most-likely-amount method. The Company includes the unconstrained amount of estimated variable consideration in the transaction price, which reflects the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment. Reserves are established for the estimates of variable consideration based on the amounts the Company expects to be earned or to be claimed on the related sales.
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The Company receives the majority of its revenues from sales of its Arakoda product to resellers in the US and abroad. The Company records US commercial revenues as a receivable when our American distributor transfers shipped product to their title model for 60P. Foreign sales to both Australia and Europe are recognized as a receivable at the point product is shipped to distributor. The shipments to Australia and Europe are further subject to profit sharing agreements for boxes sold to customers.
Research and Development Costs
The Company accounts for research and development costs in accordance with FASB ASC Subtopic No. 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, research and development costs are expensed as incurred. Accordingly, internal research and development costs are expensed as incurred. Prepayments for research and development services are deferred and amortized over the service period as the services are provided. Advance payments for specific materials, equipment, or facilities determined to have no alternative future use are initially deferred and recognized as research and development expense when the related goods are delivered.
The Company recorded $
Fair Value of Financial Instruments
The carrying value of the Company’s financial instruments included in current assets and current liabilities (such as cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses) approximate their fair value due to the short-term nature of such instruments.
The inputs used to measure fair value are based on a hierarchy that prioritizes observable and unobservable inputs used in valuation techniques. These levels, in order of highest to lowest priority, are described below:
| Level 1 | - | Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. |
| Level 2 | - | Observable prices that are based on inputs not quoted on active markets but corroborated by market data. |
| Level 3 | - | Unobservable inputs reflecting the Company’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. |
The Company’s financial instruments recorded at fair value on a recurring basis at March 31, 2025 and December 31, 2024 include the derivative liability associated with the contingent milestone payment due to Knight upon a future sale of Arakoda or a Change of Control, which is carried at fair value based on Level 3 inputs. The Company uses a probability-weighted expected return method to determine the fair value of the contingent milestone payment using significant inputs such as the timing and probability of discrete potential exit scenarios, forward interest rate curves, and discount rates based on implied and market yields. See Note 8 for more information on Derivative Liabilities.
10
Liabilities measured at fair value at March 31, 2025 and December 31, 2024 are as follows:
| March 31, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative Liabilities | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| December 31, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative Liabilities | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
There were no transfers of financial instruments between Level 1, Level 2, and Level 3 during the periods presented.
A rollforward of liabilities measured at fair value using Level 3 inputs for the three months ended March 31, 2025 and 2024 is presented in Note 8 (Derivative Liabilities).
Assets and Liabilities Not Measured at Fair Value on a Recurring Basis
In addition to assets and liabilities that are measured at fair value on a recurring basis, the Company also measures certain assets and liabilities at fair value on a nonrecurring basis. The Company’s non-financial assets, including Intangible Assets and Property and Equipment, are measured at fair value when there is an indication of impairment and the carrying amount exceeds the asset’s projected undiscounted cash flows. These assets are recorded at fair value only when an impairment charge is recognized.
As of March 31, 2025 and December 31, 2024, the carrying value of the Company’s financial instruments included in current assets and current liabilities (such as cash, accounts receivable, accounts payable, and accrued expenses) approximate their fair value due to the short-term nature of such instruments. Certificates of deposit, classified as cash equivalents or short-term investments depending on the instrument’s original time to maturity, are measured at amortized cost, which approximates fair value as of March 31, 2025 and December 31, 2024.
Foreign Currency Transactions and Translation
The individual financial statements of each group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated condensed financial statements of the Company are presented in United States dollars, which is the functional currency of the Company and the presentation currency for the consolidated condensed financial statements.
For the purpose of presenting consolidated condensed financial statements, the assets and liabilities of the Company’s foreign operations are mostly translated at exchange rates prevailing on the reporting date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized as a component of other comprehensive income (loss) as Unrealized Foreign Currency Translation Gain or Loss.
11
Exchange rates along with historical rates used in these financial statements are as follows:
| Average Exchange Rate | ||||||||||||||||
| Three Months ended March 31, | As of | |||||||||||||||
| Currency | 2025 | 2024 | March 31, 2025 | December 31, 2024 | ||||||||||||
| 1 AUD = | ||||||||||||||||
Reclassifications
Certain prior period interim amounts have been reclassified for consistency with the current period presentation. These reclassifications had no material effect on the consolidated condensed results of operations and comprehensive (loss) income, shareholders’ equity, or cash flows.
Share-Based Payments
On November 22, 2022, the Company adopted the 2022 Equity Incentive Plan also referred to as (“2022 Plan”). The 2022 Plan and related share-based awards are discussed more fully in Note 10.
The Company accounts for share-based payments in accordance with ASC Subtopic 718, Compensation - Stock Compensation (“ASC 718”). The Company measures compensation for all share-based payment awards granted to employees, directors, and nonemployees, based on the estimated fair value of the awards on the date of grant. For awards that vest based on continued service, the service-based compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the awards. For service vesting awards with compensation expense recognized on a straight-line basis, at no point in time does the cumulative grant date value of vested awards exceed the cumulative amount of compensation expense recognized. The grant date is determined based on the date when a mutual understanding of the key terms of the share-based awards is established. The Company accounts for forfeitures as they occur.
The Company estimates the fair value of all stock option awards as of the grant date by applying the Black-Scholes option pricing model. The application of this valuation model involves assumptions, including the fair value of the common stock, expected volatility, risk-free interest rate, expected dividends and the expected term of the option. Due to the lack of a public market for the Company’s common stock prior to the IPO and lack of company-specific historical implied volatility data, the Company has based its computations of expected volatility on the historical volatility of a representative group of public companies with similar characteristics of the Company, including stage of development and industry focus. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The Company generally uses the simplified method as prescribed by the SEC Staff Accounting Bulletin Topic 14, Share-Based Payment, to estimate the expected term for stock options, whereby, the expected term equals the midpoint of the weighted average remaining time to vest, vesting period and the contractual term of the options due to its lack of historical exercise data. For certain options granted out-of-the-money, the Company’s best estimate of the expected term is the contractual term of the award. The risk-free interest rate is based on U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. The assumptions used in calculating the fair value of share-based awards represent management’s best estimates and involve inherent uncertainties and the application of significant judgment.
Compensation expense for restricted stock units (“RSUs”) with only service-based vesting conditions is recognized on a straight-line basis over the vesting period. Compensation cost for service-based RSUs is based on the grant date fair value of the award, which is the closing market price of the Company’s common stock on the grant date multiplied by the number of shares awarded.
For awards that vest upon a liquidity event or a change in control, the performance condition is not probable of being achieved until the event occurs. As a result, no compensation expense is recognized until the performance-based vesting condition is achieved, at which time the cumulative compensation expense is recognized. Compensation cost related to any remaining time-based service for share-based awards after the liquidity-based event is recognized on a straight-line basis over the remaining service period.
For fully vested, nonforfeitable equity instruments that are granted at the date the Company and a nonemployee enter into an agreement for goods or services, the Company recognizes the fair value of the equity instruments on the grant date. The corresponding cost is recognized as an immediate expense or a prepaid asset and expensed over the service period depending on the specific facts and circumstances of the agreement with the nonemployee. See Note 10 for further details.
12
Net (Loss) Income per Common Share
Net (Loss) Income per Common Share is computed by dividing net (loss) income attributable to common shareholders by the weighted average number of common shares outstanding during each period. The Company includes pre-funded warrants, which carry a nominal exercise price per share, in its computation of basic and diluted net loss per share beginning on the date of issuance. The cumulative dividends accrued on the Series A Preferred Stock during the period are reflected as an addition to net loss or a reduction of net income in determining basic and diluted net (loss) income attributable to common stockholders.
As the Company reported a net loss for the three months ended March 31, 2025, the calculation of diluted net loss per common share is the same as basic net loss per common share. For the three months ended March 31, 2024, all securities that could potentially dilute basic net income per share in the future have been excluded from the diluted calculation because the effect would be antidilutive.
As a result of the Reverse Stock Splits, which
were effective as of August 12, 2024 at a ratio of
Related Parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
Subsequent Events
The Company considers events or transactions that occur after the balance sheet date, but prior to the issuance of the financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated through May 15, 2025, which is the date the financial statements were issued. See Note 12.
Recently Adopted and Issued Accounting Pronouncements
From time to time, the FASB issues Accounting Standards Updates (“ASU”) to amend the authoritative literature in the ASC. The Company regularly evaluates new ASUs to determine the impact that these pronouncements may have on the consolidated condensed financial statements. Other than the pronouncements listed below, the Company believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, or (iii) are not applicable to the Company’s consolidated condensed financial statements or related disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses and segment profit or loss. ASU 2023-07 also requires entities with a single reportable segment to provide all segment disclosures under ASC 280, including the new required disclosures under the ASU. The Company adopted ASU 2023-07 on a retrospective basis for the 2024 annual period, and for interim periods beginning in 2025. The impact is limited to the Company’s financial statement disclosures, which are presented in the Segment Information section above.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (ASC 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that ASU 2023-09 will have on its financial statement disclosures.
13
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which applies to all public business entities that file financial statements with the SEC. The amendments in this ASU require public business entities to disclose on an annual and interim basis, disaggregated information about certain income statement expense line items. The new standard is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact that ASU 2024-03 will have on its financial statement disclosures.
3. INVENTORY
Inventory consists of the following major classes:
| March 31, 2025 | December 31, 2024 | |||||||
| Raw Material (API) | $ | $ | ||||||
| Work in Process | ||||||||
| Finished Goods | ||||||||
| Inventory | $ | $ | ||||||
The Company regularly monitors its inventory levels to identify inventory that may expire or has a cost basis in excess of its estimated net realizable value, and records write-downs for inventory that has expired, inventory that has a cost basis in excess of its expected net realizable value, and inventory in excess of expected sales requirements. Any write-downs of inventories are charged to Cost of Revenues in the Consolidated Condensed Statements of Operations and Comprehensive (Loss) Income. During the three months ended March 31, 2025 and 2024, write-downs for expired inventory were immaterial.
4. PROPERTY AND EQUIPMENT
Property and Equipment, net consists of:
| March 31, 2025 | December 31, 2024 | |||||||
| Lab Equipment | $ | |||||||
| Machinery | ||||||||
| Computer Equipment | ||||||||
| Furniture | ||||||||
| Property and Equipment, at cost | ||||||||
| Accumulated Depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, net | $ | $ | ||||||
Depreciation expense for the three months ended
March 31, 2025 and 2024 was in the amount of $
5. INTANGIBLE ASSETS
Intangible Assets, net consists of:
| March 31, 2025 | December 31, 2024 | |||||||
| Patents | $ | $ | ||||||
| Website Development Costs | ||||||||
| Intangible Assets, at cost | ||||||||
| Accumulated Amortization | ( | ) | ( | ) | ||||
| Intangible Assets, net | $ | $ | ||||||
14
During the three months ended March 31, 2025 and
2024, the Company capitalized website development related costs of $
The following table summarizes the estimated future amortization expense for our patents and website development costs as of March 31, 2025:
| Period | Patents | Website Development Costs | ||||||
| 2025 (remaining nine months) | $ | $ | ||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| Thereafter | ||||||||
| Total | $ | $ | ||||||
The Company has recorded $
6. STOCKHOLDERS’ EQUITY
Pursuant to the Certificate of Incorporation of
60 Degrees Pharmaceuticals, Inc., the Company’s authorized shares consist of (a)
Following stockholder approval in July 2024, on
July 30, 2024, the Company filed an Amendment to the Certificate of Incorporation with the Secretary of State of Delaware to effect the
Following stockholder approval in November 2024,
on February 18, 2025, the Company filed an additional Amendment to the Certificate of Incorporation with the Secretary of State of Delaware
to effect the
No fractional shares of common stock were issued in connection with the Reverse Stock Splits. All fractional shares were rounded up to the nearest whole share with respect to outstanding shares of common stock. The Reverse Stock Splits did not change the authorized number of shares of common stock or preferred stock, the par value of the common stock, or the number of issued and outstanding shares of Series A Preferred Stock. All references to numbers of shares of the Company’s common stock and per share information in these consolidated condensed financial statements have been retroactively adjusted, as appropriate, to reflect the Reverse Stock Splits, including reclassifying an amount equal to the reduction in par value of common stock to additional paid-in capital.
15
Common Stock
January 2025 Offering
On January 28, 2025, the Company entered into
a securities purchase agreement with certain institutional investors pursuant to which the Company sold, in a registered direct offering
priced at-the-market under the rules of Nasdaq, an aggregate of
As compensation for acting as the placement agent
for the January 2025 Offering, in addition to certain cash fees, the Company issued H.C. Wainwright & Co., LLC (the “Placement
Agent”) warrants to purchase up to
February 2025 Offering
On February 5, 2025, the Company entered into
a securities purchase agreement with certain institutional investors pursuant to which the Company sold, in a registered direct offering
priced at-the-market under the rules of Nasdaq, an aggregate of
As compensation for acting as the placement agent
for the February 2025 Offering, in addition to certain cash fees, the Company issued the Placement Agent warrants to purchase up to
January 2024 Offering
On January 29, 2024, the Company closed its public
offering (the “January 2024 Offering”) consisting of (i)
The Company granted WallachBeth Capital LLC a
45-day over-allotment option to purchase additional shares of common stock, additional January 2024 Warrants, or additional January 2024
Pre-Funded Warrants, or any combination thereof. WallachBeth Capital LLC partially exercised its over-allotment option with respect to
The Company also issued to WallachBeth Capital
LLC warrants (the “January 2024 Representative Warrants”) to purchase
16
Warrant Exercises
During the three months ended March 31, 2025,
the Company issued
Common Stock Warrants
As of March 31, 2025, the Company accounts for all issued and outstanding warrants to purchase common stock as equity-classified instruments based on the guidance in ASC 480 and ASC 815.
The following table presents a summary of the activity for the Company’s equity-classified warrants during the three months ended March 31, 2025:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| Total outstanding, December 31, 2024(1) | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Forfeited | ||||||||||||
| Expired | ||||||||||||
| Total outstanding, March 31, 2025 | $ | |||||||||||
| Total exercisable, March 31, 2025 | $ | |||||||||||
| (1) |
During the three months ended March 31, 2025,
the Company received aggregate cash proceeds of $
The following table presents a summary of the activity for the Company’s equity-classified warrants during the three months ended March 31, 2024:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| Total outstanding, December 31, 2023 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Forfeited | ||||||||||||
| Expired | ||||||||||||
| Total outstanding, March 31, 2024 | $ | |||||||||||
| Total exercisable, March 31, 2024 | $ | |||||||||||
During the three months ended March 31, 2024,
the Company received aggregate cash proceeds of $
17
Series A Preferred Stock
The holders of shares of Series A Preferred Stock have the rights, preferences, powers, restrictions, and limitations as set forth below.
Voting Rights - The holders of shares of Series A Preferred Stock are not entitled to any voting rights.
Dividends - From and after the date of
issuance of any share of Series A Preferred Stock, cumulative dividends shall accrue, whether or not declared by the Board and whether
or not there are funds legally available for the payment of dividends, on a daily basis in arrears at the rate of
Liquidation Rights - In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of shares of Series A Preferred Stock then outstanding will share ratably in any distribution of the remaining assets and funds of the Company with all other stockholders as if each share of Series A Preferred Stock had been converted by the Company to Common Stock as described below.
Conversion Rights - The Company has the
right, in its sole discretion, to convert all or any portion of the outstanding shares of Series A Preferred Stock (including any fraction
of a share), plus the aggregate accrued or accumulated and unpaid dividends thereon into a number of shares of Common Stock determined
by (i) multiplying the number of shares to be converted by $
7. DEBT
On May 14, 2020, the Company received COVID-19
EIDL lending from the Small Business Administration (SBA) in the amount of $
18
The current future payment obligations of the principal are as follows:
| Period | Principal Payments | |||
| 2025 (remaining nine months) | $ | |||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| Thereafter | ||||
| Total | $ | |||
8. DERIVATIVE LIABILITIES
In accordance with the provisions of ASC 815, derivative liabilities are initially measured at fair value at the commitment date and subsequently remeasured at each reporting period, with any increase or decrease in the fair value recorded in the results of operations within other income/expense as the change in fair value of derivative liabilities.
As of March 31, 2025 and December 31, 2024, derivative liabilities consist of the contingent milestone payment due to Knight Therapeutics, Inc. (“Knight”), a former lender of the Company, as required by the Debt Conversion Agreement executed between the Company and Knight on January 9, 2023, as subsequently amended (the “Knight Debt Conversion Agreement”). Key points of this agreement were as follows:
| ● | The Parties agreed to fix Knight’s
cumulative debt to the value as it stood on March 31, 2022, which consisted of principal and accumulated interest. As a result
of the completion of the IPO, the cumulative outstanding principal as of March 31, 2022 converted to |
| ● | The Parties agreed that the
Company will make a milestone payment of $ |
| ● | For the period ending upon
the earlier of (i) |
Upon consummation of the IPO, the Company concluded that the contingent milestone payment is a freestanding financial instrument that meets the definition of a derivative under ASC 815, and accordingly, the fair value of the derivative liability is marked to market each reporting period until settled. The Royalty due to Knight was determined to be an embedded component of the Series A Preferred Stock, however, is exempt from derivative accounting under the ASC 815 scope exception for specified volumes of sales or service revenues. Therefore, the Company accrues a royalty expense as sales are made.
The valuation of the contingent milestone payment includes significant unobservable inputs such as the timing and probability of discrete potential exit scenarios, forward interest rate curves, and discount rates based on implied and market yields.
A reconciliation of the beginning and ending balances for the derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows for the three months ended March 31, 2025:
| Contingent Milestone Payment | Total | |||||||
| Derivative liabilities - December 31, 2024 | $ | $ | ||||||
| Change in fair value | ( | ) | ( | ) | ||||
| Derivative liabilities - March 31, 2025 | $ | $ | ||||||
19
A reconciliation of the beginning and ending balances for the derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows for the three months ended March 31, 2024:
| Contingent Milestone Payment | Total | |||||||
| Derivative liabilities - December 31, 2023 | $ | $ | ||||||
| Change in fair value | ( | ) | ( | ) | ||||
| Derivative liabilities - March 31, 2024 | $ | $ | ||||||
Changes in the fair value of derivative liabilities
are included in other income in the accompanying consolidated condensed statements of operations and comprehensive (loss) income. During
the three months ended March 31, 2025 and 2024, the Company recorded a net change in the fair of derivative liabilities of ($
9. INCOME TAXES
The Company did record a federal income tax
provision or benefit for the three months ended March 31, 2025 and 2024 due to taxable losses. The Company recorded a provision for income
taxes for DC of $
10. SHARE-BASED COMPENSATION
The following is a summary of share-based compensation expenses reported in the Consolidated Condensed Statements of Operations and Comprehensive (Loss) Income for the three months ended March 31, 2025 and 2024:
| For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| General and Administrative Expenses | $ | $ | ||||||
| Total Share-Based Compensation Expense Included in Operating Expenses | $ | $ | ||||||
Share-Based Compensation under 2022 Equity Incentive Plan
On November 22, 2022, the Company adopted the
2022 Equity Incentive Plan (the “2022 Plan”), which provides for the grant of stock options, stock appreciation rights, restricted
stock, restricted stock units and performance awards to eligible employees, directors and consultants, to be granted from time to time
by the Board of Directors of the Company. To date, the Company has granted shares of common stock, restricted stock units, stock options
to employees, non-employees, and directors under the 2022 Plan. As of March 31, 2025, the number of remaining shares available for issuance
under the 2022 Plan is equal to
Stock Options
The Company grants stock options to employees, non-employees, and directors with exercise prices equal to the closing price of the underlying shares of the Company’s common stock on the Nasdaq Capital Market on the date that the options are granted. Options granted generally have a term of five to ten years from the grant date and are subject to vesting as determined in the individual award agreement. The Company estimates the fair value of stock options on the grant date by applying the Black-Scholes option pricing valuation model.
20
During the three months ended March 31, 2025,
the Company granted a total of
The following table summarizes the significant assumptions used in determining the fair value of options granted during the three months ended March 31, 2025 and 2024:
| For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Weighted-average grant date fair value | $ | |||||||
| Risk-free interest rate | % | |||||||
| Expected volatility | % | |||||||
| Expected term (years) | ||||||||
| Expected dividend yield | % | |||||||
For the three months ended March 31, 2025, the
Company recognized $
Restricted Stock Units
Compensation cost for service-based RSUs is based on the grant date fair value of the award, which is the closing market price of the Company’s common stock on the grant date multiplied by the number of shares awarded.
During the three months ended March 31, 2025 and
2024,
Annual Performance Bonus
In December 2024,
the Board approved the payment of 2024 performance bonuses to executives of the Company. Each executive was provided the option of receiving
up to $
Share-Based Payments to Vendors for Services
In 2023, the Company issued shares of common stock
as share-based payments to certain vendors in exchange for services to be rendered to the Company in the future. For fully vested, nonforfeitable
equity instruments that are granted at the date the Company and a nonemployee enter into an agreement for goods or services, the Company
recognizes the fair value of the equity instruments as a prepaid asset on the grant date, as defined in ASC 718. The corresponding cost
is expensed over the service period depending on the specific facts and circumstances of the agreement with the nonemployee. As of March
31, 2025, the remaining unamortized balance of prepaid assets related to these share-based payments for which the grant date criteria
has been met and the services are expected to be rendered within one year is $
The agreements with the nonemployees do not include any provisions to claw back the share-based payments in the event of nonperformance by the nonemployees. Subject to applicable federal and state securities laws, the nonemployees can sell the received equity instruments.
21
11. COMMITMENTS AND CONTINGENCIES
Leases
The Company is a party to a single lease for its
office space located in Washington, DC, which was most recently renewed for an additional one-year term that expires March 31, 2026. As
the term of the office lease is 12 months, the lease is not recorded on the balance sheet. The Company recognizes lease expense on this
lease as short-term lease costs. Operating lease costs, including short-term leases, were in the amount of $
Board of Directors
In November and December 2022, the Company signed
agreements with four director nominees (Cheryl Xu, Paul Field, Charles Allen, and Stephen Toovey) which came into effect on July 11, 2023,
the date the Company’s Registration Statement was declared effective. Each director is entitled to receive cash compensation of
$
Contingencies
The Company’s operations are subject to a variety of local and state regulations. Failure to comply with one or more of those regulations could result in fines, restrictions on its operations, or losses of permits that could result in the Company ceasing operations.
Contingent Compensation
Following the Company’s IPO and the conversion
of the outstanding debt pursuant to the Knight Debt Conversion Agreement as discussed in Note 8, the Company is obligated to pay Knight
a contingent milestone payment of $
On July 15, 2015, the Company entered into the
Exclusive License Agreement with the U.S. Army Medical Materiel Development Activity (the “U.S. Army”), which was subsequently
amended (the “U.S. Army Agreement”), in which the Company obtained a license to develop and commercialize the licensed technology
with respect to all therapeutic applications and uses excluding radical cure of symptomatic vivax malaria. The term of the U.S. Army Agreement
will continue until the expiration of the last to expire of the patent application or valid claim of the licensed technology, or
On December 20, 2024, the Company entered into
a Patent License Agreement with Tufts Medical Center (“Tufts MC”), in which the Company obtained a license to research and
commercialize the licensed technology with respect the use of tafenoquine for treatment and/or prevention of babesiosis (the “Tufts
MC Agreement”). The term of the Tufts MC Agreement will continue until the expiration or final abandonment of the last patent application
or issued patent for the use of tafenoquine for treatment and/or prevention of babesiosis, unless terminated earlier by the parties. On
the earlier of (x) the date of patent issuance or (y) the date of regulatory approval for the use of tafenoquine product in treatment
of babesiosis, the Company must make royalty payments equal to
Litigation, Claims and Assessments
From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of March 31, 2025, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of the Company’s operations.
12. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through May 15, 2025, which is the date the financial statements were issued. There have been no events or transactions during this time which would have a material effect on these consolidated condensed financial statements.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our unaudited consolidated condensed financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and the other information set forth in certain of our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 27, 2025. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the SEC.
Overview
We are a specialty pharmaceutical company with a goal of using cutting-edge biological science and applied research to further develop and commercialize new therapies for the prevention and treatment of infectious diseases. We have successfully achieved regulatory approval of Arakoda® (“Arakoda”), a malaria preventative treatment that has been on the market since late 2019. Currently, 60P’s pipeline under development covers development programs for vector-borne, fungal, and viral diseases utilizing three of the Company’s future products: (i) new products that contain the Arakoda regimen of Tafenoquine; (ii) new products that contain Tafenoquine; and (iii) Celgosivir and/or botanical extracts from Australian Chestnut Trees.
Following our initial public offering in July 2023, our initial strategic priority was to conduct a Phase IIB study that would have evaluated the potential of the Arakoda regimen of Tafenoquine to accelerate disease recovery in COVID-19 patients with low risk of disease progression. In October 2023, we made a decision to suspend this study. This was a consequence of advice previously received from the U.S. Food and Drug Administration (FDA), which we interpreted to mean that the agency would not have granted clearance for the study to proceed unless we redesigned it to (i) enroll a patient population in which receipt of Paxlovid or Lagevrio would be medically contraindicated, or (ii) compare Tafenoquine to placebo in patients taking a “standard of care” regimen (defined by the FDA as Lagevrio or Paxlovid). The FDA’s position was somewhat surprising given that neither Paxlovid nor Lagevrio is indicated for treatment of COVID-19 in low-risk patients. We determined that conducting our study in an alternate population in the United States would be unfeasible, and that conducting an add-on-to standard of care study might not be Phase III enabling. Accordingly, we made a decision to pivot back to continue commercialization of Arakoda for malaria, and further evaluation of the Arakoda regimen of Tafenoquine for babesiosis and other diseases. We believe such an approach is both less risky and less expensive.
Moving forward, our general strategy to achieve profitability and grow shareholder value has three facets: (i) increase sales of Arakoda; (ii) conduct clinical trials to expand the number of patients who can use Tafenoquine for new indications in the future; and (iii) reposition small molecule therapeutics with good clinical safety profiles for new indications.
Business Developments
The following highlights significant business developments in our business during the quarter ended March 31, 2025.
| ● | On January 8, 2025, we announced that the first patient has been enrolled in NCT06478641, an expanded access clinical study intended to confirm the activity of tafenoquine in treating patients with persistent babesiosis who have failed standard of care treatment and are at high risk of experiencing a relapse. |
| ● | On January 20, 2025, we issued a total of 15,809 shares of common stock and paid $60,000 in cash to our executives in settlement of 2024 performance bonuses, as approved by our Board in December 2024. |
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| ● | On January 28, 2025, we announced the approval by an Investigational Review Board (IRB) of a new Phase II clinical study. The study (NCT06656351) will evaluate the efficacy and safety of the ARAKODA® regimen (tafenoquine) over 90 days for treating patients with a presumptive diagnosis of chronic babesiosis who have experienced severe fatigue with significant functional impairment for at least six months upon enrollment. Patient enrollment is expected to begin in Q3 2025. |
| ● | In February 2025, the FDA authorized the importation of Kodatef from Australia, to cover any future disruption of Arakoda in the U.S. market. Kodatef is the branded version of tafenoquine for malaria prevention approved by the TGA for use in Australia. The Company made this request of the FDA due to robust demand for Arakoda in late 2024 and early 2025, and the potential for delays in the completion of new lots of Arakoda currently being commercially validated by our key supplier, PCI. Although we anticipate that new commercial Arakoda lots will enter the supply chain prior to the exhaustion of existing inventory, Kodatef will be available to cover any shortage through a specialty pharmacy that already carries Arakoda, and has the capacity to ship to customers in all 50 states. |
| ● | We issued an aggregate of 385,200 shares of common stock during the quarter upon the exercise of 385,200 pre-funded warrants issued in September 2024, resulting in proceeds of $1,926. |
1:5 Reverse Stock Split
On November 6, 2024, our Board of Directors (“Board”) approved a reverse stock split of our common stock at a split ratio ranging between 1:3 and 1:5, as determined by the Board in its sole discretion. On November 6, 2024, a majority of our stockholders approved the proposed reverse stock split. On February 10, 2025, the Board approved a 1-for-5 reverse split ratio. On February 18, 2025, we filed a Certificate of Amendment to the Certificate of Incorporation, as corrected, with the Secretary of State of the State of Delaware that provides for a 1-for-12 split. On February 24, 2025, we effectuated a 1-for-5 reverse stock split of our common stock (the “1:5 Reverse Stock Split”). Beginning February 24, 2025, our common stock traded on The Nasdaq Capital Market on a split adjusted basis.
As a result of the 1:5 Reverse Stock Split, proportional adjustments were made to the number of shares of common stock issuable upon exercise or conversion of our equity awards, warrants, and other equity instruments convertible into common stock, as well as the respective exercise prices, if applicable in accordance with the terms of the instruments. No fractional shares of common stock were issued in connection with the 1:5 Reverse Stock Split and all fractional shares were rounded up to the nearest whole share with respect to outstanding shares of common stock. Unless otherwise noted, all references to numbers of shares of our common stock and per share information presented in this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect the effects of the 1:5 Reverse Stock Split.
January 2025 Offering
On January 28, 2025, we entered into a securities purchase agreement (the “January 2025 Securities Purchase Agreement”) with certain institutional investors (the “January 2025 Purchasers”) pursuant to which we sold an aggregate of 204,312 shares of common stock at a purchase price of $5.105 per share in a registered direct offering priced at-the-market under the rules of The Nasdaq Stock Market LLC (“Nasdaq”). In a concurrent private placement, we also issued to the January 2025 Purchasers unregistered warrants (the “January 2025 Warrants”) to purchase up to an aggregate of 408,621 shares of common stock at an exercise price of $3.855 per share. The January 2025 Warrants are exercisable upon issuance and expire twenty-four months from the date of issuance.
The shares were offered pursuant to a “shelf” registration statement on Form S-3 (Registration No. 333-280796), which was declared effective by the Securities and Exchange Commission (the “SEC”) on July 18, 2024 as supplemented by a prospectus supplement dated January 28, 2025, filed with the SEC on January 30, 2025, and accompanying base prospectus, pursuant to Rule 424(b)(5) promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
H.C. Wainwright & Co., LLC (the “Placement Agent”) acted as our exclusive placement agent in connection with the offering. Pursuant to the terms of the placement agent agreement, we paid the Placement Agent a cash transaction fee equal to 7.5% of the aggregate gross cash proceeds in the offering and a management fee equal to 1.0% of the aggregate gross cash proceeds in the offering. In addition, we paid for certain non-accountable expenses in the amount of $15,000 and a clearing fee in the amount of $10,000. We also issued to the Placement Agent (or its designees) warrants to purchase up to 15,325 shares of common stock (the “January 2025 Placement Agent Warrants”). The January 2025 Placement Agent Warrants have an exercise price equal to $6.382 per share and are exercisable upon issuance and expire twenty-four months from the date of issuance.
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The registered direct offering and the concurrent private placement (collectively, the “January 2025 Offering”) closed on January 30, 2025, resulting in net proceeds of approximately $804,346, after deducting estimated offering expenses paid by us, including the Placement Agent fees.
Pursuant to the January 2025 Securities Purchase Agreement, within 45 days from the date of the January 2025 Securities Purchase Agreement, we were required to file a registration statement with the SEC providing for the resale by the January 2025 Purchasers of the shares of common stock issuable upon exercise of the January 2025 Warrants. The registration statement was declared effective by the SEC on April 2, 2025. The Company shall use commercially reasonable efforts to keep such registration statement effective at all times until no January 2025 Purchaser owns any January 2025 Warrants or shares underlying the January 2025 Warrants issuable upon exercise thereof.
February 2025 Offering
On February 5, 2025, we entered into a securities purchase agreement (the “February 2025 Securities Purchase Agreement”) with certain institutional investors (the “February 2025 Purchasers”) pursuant to which we sold an aggregate of 300,700 shares of common stock at a purchase price of $3.575 per share in a registered direct offering priced at-the-market under the rules of Nasdaq. In a concurrent private placement, we also issued to the February 2025 Purchasers unregistered warrants (the “February 2025 Warrants”) to purchase up to an aggregate of 300,700 shares of common stock at an exercise price of $2.95 per share. The February 2025 Warrants are exercisable upon issuance and expire twenty-four months from the date of issuance.
The shares were offered pursuant to a “shelf” registration statement on Form S-3 (Registration No. 333-280796), which was declared effective by the Securities and Exchange Commission (the “SEC”) on July 18, 2024 as supplemented by a prospectus supplement dated February 5, 2025, filed with the SEC on February 6, 2025 and accompanying base prospectus, pursuant to Rule 424(b)(5) promulgated under the Securities Act.
The Placement Agent acted as our exclusive placement agent in connection with the offering. Pursuant to the terms of the placement agent agreement, we paid the Placement Agent a cash transaction fee equal to 7.5% of the aggregate gross cash proceeds in the offering and a management fee equal to 1.0% of the aggregate gross cash proceeds in the offering. In addition, we paid for certain non-accountable expenses in the amount of $15,000 and a clearing fee in the amount of $10,000. We also issued to the Placement Agent (or its designees) warrants to purchase up to 22,554 shares of Common Stock (the “February 2025 Placement Agent Warrants”). The February 2025 Placement Agent Warrants have an exercise price equal to $4.469 per share and are exercisable upon issuance and expire twenty-four months from the date of issuance.
The registered direct offering and the concurrent private placement (collectively, the “February 2025 Offering”) closed on February 6, 2025, resulting in net proceeds of approximately $908,627, after deducting estimated offering expenses paid by us, including the Placement Agent fees.
Pursuant to the February 2025 Securities Purchase Agreement, within 45 days from the date of the February 2025 Securities Purchase Agreement, we were required to file a registration statement with the SEC providing for the resale by the February 2025 Purchasers of the shares of common stock issuable upon exercise of the February 2025 Warrants. The registration statement was declared effective by the SEC on April 2, 2025. The Company shall use commercially reasonable efforts to keep such registration statement effective at all times until no February 2025 Purchaser owns any February 2025 Warrants or shares underlying the February 2025 Warrants issuable upon exercise thereof.
Liquidity and Capital Resources
As of March 31, 2025, we had cash and cash equivalents of $3,451,500 ($1,659,353 as of December 31, 2024). For the three months ended March 31, 2025 and 2024, our net cash used in operating activities was $1,597,366 and $1,140,438, respectively. To date, we have financed our operations primarily through the issuance of common stock, warrants to purchase common stock, and proceeds from the issuance of convertible debt and promissory notes. Based on current internal projections, taking into consideration the net proceeds of approximately $1.9 million received under the ATM Agreement, an additional $5.127 million in cumulative net proceeds received from the September 2024 Private Placement and the January and February 2025 Offerings, and recent growth in Arakoda sales, we estimate that we will have sufficient funds to remain viable through August 31, 2025, excluding the additional costs of conducting the Phase II study for chronic babesiosis patients (currently being planned), and assuming no additional capital raises. We cannot give assurance that we can increase our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future acquisitions. Future business demands may lead to cash utilization at levels greater than recently experienced. We may need to raise additional capital in the future. However, we cannot assure you that we will be able to raise additional capital on acceptable terms, or at all.
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Going Concern
In their audit report for the fiscal year ended December 31, 2024, our auditors have expressed their concern as to our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate cash flows from operations and obtain financing. The audited consolidated financial statements for the year ended December 31, 2024 included an explanatory note referring to our recurring operating losses and expressing substantial doubt in our ability to continue as a going concern.
Our future results are subject to substantial risks and uncertainties. Since our inception, we have not demonstrated the ability to generate enough revenues to date to cover operating expenses and we have accumulated losses to date. To date, we have funded our operations primarily with proceeds from sales of common stock and warrants for the purchase of common stock, sales of preferred stock, proceeds from the issuance of convertible debt and borrowings under loan and security agreements.
Continuation as a going concern is dependent upon our ability to meet our financial requirements, raise additional capital, and achieve gross profitability from our single marketed product. To achieve profitability, we expect we will need to raise additional capital to fund our activities relating to commercial support for our existing product and any future clinical research trials and operating activities. However, there can be no assurance that we will ever achieve or maintain profitability. These conditions, among others, raise substantial doubt about our ability to continue as a going concern for one year from the date these financial statements are issued.
We plan to fund our operations through third party and related party debt/advances, private placement of restricted securities and the issuance of stock in a subsequent offering until such a time as the business achieves profitability or a business combination may be achieved. However, there can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are favorable to us. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
As such, we have concluded that such plans do not alleviate the substantial doubt about our ability to continue as a going concern for one year from the date the accompanying financial statements are issued.
The accompanying consolidated condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of obligations in the normal course of business, and do not include any adjustments to the amount and classification of assets and liabilities that may be necessary should we be unable to continue as a going concern.
Contractual Obligations
The following table summarizes our contractual obligations as of March 31, 2025:
| Payments Due By Period | ||||||||||||||||||||
| Total | Less than 1 year | 1-3 years | 4-5 years | More than 5 Years | ||||||||||||||||
| Principal obligations on the debt arrangements | $ | 150,000 | $ | - | $ | 4,455 | $ | 6,870 | $ | 138,675 | ||||||||||
| Interest obligations on the debt arrangements | 102,604 | 8,772 | 13,089 | 10,674 | 70,069 | |||||||||||||||
| Accounts payable and accrued expenses | 1,157,979 | 1,157,979 | - | - | - | |||||||||||||||
| Total | $ | 1,410,583 | $ | 1,166,751 | $ | 17,544 | $ | 17,544 | $ | 208,744 | ||||||||||
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Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the achievement of certain milestones. These contingent milestones may or may not be achieved. We have not included any of these amounts in the table above as we cannot estimate or predict when, or if, these amounts will become due.
Components of Results of Operations
Product Revenues - net of Discounts and Rebates
We receive the majority of our product revenues from sales of our Arakoda product to resellers in the U.S. and abroad. Foreign sales to both Australia and Europe are further subject to profit sharing agreements for boxes sold to customers. Sales to resellers in the US are subject to considerable discounts and rebates for services provided by our third-party logistics (“3PL”) partner and wholesalers and pharmacy benefit managers (“PBMs”).
Cost of Revenues, Gross Profit, and Gross Margin
Cost of revenues associated with our products is primarily comprised of direct materials, shipping, manufacturing-related costs incurred in the production process, serialization costs, and inventory write-downs due to expiration.
Other Operating Revenues
Other operating revenues for the periods presented include research revenue earned from the Australian Tax Authority for research activities conducted in Australia. Beginning in the third quarter of 2024, we began to recognize research revenues associated with our new contract with the United States Army Medical Materiel Development Activity (USAMMDA) for Arakoda supply chain upgrade support. Research revenue under this contract is recognized when we incur the direct costs eligible for reimbursement, up to the maximum allowable amount.
Operating Expenses
Research and Development
Research and development costs for the periods presented primarily consist of contracted R&D services and costs associated with preparation for and conducting our Babesiosis trial. We expense all research and development costs in the period in which they are incurred. Payments made prior to the receipt of goods or services to be used in research and development are recognized as prepaid assets and expensed over the service period as the services are provided. We have also issued shares of our common stock to vendors in exchange for research and development services.
General and Administrative Expenses
Our general and administrative expenses primarily consist of salaries, advertising and promotion expenses, professional services fees, such as consulting, audit, accounting and legal fees, general corporate costs and allocated costs, including facilities, information technology and amortization of intangibles.
Interest and Other Income (Expense), Net
We earn interest income from cash invested in interest-bearing accounts, as well as cash equivalents and short-term investments consisting of certificates of deposits with original maturities ranging from three to six months. Interest expense for the periods presented is limited to a single $150,000 SBA loan that bears interest at 3.75%. Other components of other income (expense) include changes in the fair value of derivative liabilities and other miscellaneous income or expenses.
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Results of Operations
The following table sets forth our results of operations for the periods presented:
| For the Three Months Ended March 31, | ||||||||
| Consolidated Statements of Operations Data: | 2025 | 2024 | ||||||
| Product Revenues – net of Discounts and Rebates | $ | 163,552 | $ | 105,674 | ||||
| Cost of Revenues | 73,272 | 65,437 | ||||||
| Gross Profit | 90,280 | 40,237 | ||||||
| Research Revenues | 92,731 | 29,631 | ||||||
| Net Revenue | 183,011 | 69,868 | ||||||
| Operating Expenses: | ||||||||
| Research and Development | 407,622 | 337,182 | ||||||
| General and Administrative Expenses | 1,686,264 | 1,075,134 | ||||||
| Total Operating Expenses | 2,093,886 | 1,412,316 | ||||||
| Loss from Operations | (1,910,875 | ) | (1,342,448 | ) | ||||
| Interest Expense | (1,790 | ) | (1,402 | ) | ||||
| Change in Fair Value of Derivative Liabilities | 5,105 | 1,740,847 | ||||||
| Other Income, net | 30,322 | 31,051 | ||||||
| Total Interest and Other Income, net | 33,637 | 1,770,496 | ||||||
| (Loss) Income from Operations before Provision for Income Taxes | (1,877,238 | ) | 428,048 | |||||
| Provision for Income Taxes | 63 | 63 | ||||||
| Net (Loss) Income including Noncontrolling Interest | (1,877,301 | ) | 427,985 | |||||
| Net Loss – Noncontrolling Interest | (752 | ) | (2,485 | ) | ||||
| Net (Loss) Income – attributed to 60 Degrees Pharmaceuticals, Inc. | $ | (1,876,549 | ) | $ | 430,470 | |||
The following table sets forth our results of operations as a percentage of revenue:
| For the Three Months Ended March 31, | ||||||||
| Consolidated Statements of Operations Data: | 2025 | 2024 | ||||||
| Product Revenues – net of Discounts and Rebates | 100.00 | % | 100.00 | % | ||||
| Cost of Revenues | 44.80 | 61.92 | ||||||
| Gross Profit | 55.20 | 38.08 | ||||||
| Research Revenues | 56.70 | 28.04 | ||||||
| Net Revenue | 111.90 | 66.12 | ||||||
| Operating Expenses: | ||||||||
| Research and Development | 249.23 | 319.08 | ||||||
| General and Administrative Expenses | 1,031.03 | 1,017.41 | ||||||
| Total Operating Expenses | 1,280.26 | 1,336.48 | ||||||
| Loss from Operations | (1,168.36 | ) | (1,270.37 | ) | ||||
| Interest Expense | (1.09 | ) | (1.33 | ) | ||||
| Change in Fair Value of Derivative Liabilities | 3.12 | 1,647.37 | ||||||
| Other Income, net | 18.54 | 29.38 | ||||||
| Total Interest and Other Income, net | 20.57 | 1,675.43 | ||||||
| (Loss) Income from Operations before Provision for Income Taxes | (1,147.79 | ) | 405.06 | |||||
| Provision for Income Taxes | 0.04 | 0.06 | ||||||
| Net (Loss) Income including Noncontrolling Interest | (1,147.83 | ) | 405.01 | |||||
| Net Loss – Noncontrolling Interest | (0.46 | ) | (2.35 | ) | ||||
| Net (Loss) Income – attributed to 60 Degrees Pharmaceuticals, Inc. | (1,147.37 | )% | 407.36 | % | ||||
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Comparison of the Three Months Ended March 31, 2025 and 2024
Product Revenues - net of Discounts and Rebates, Cost of Revenues, Gross Profit, and Gross Margin
| For the Three Months Ended March 31, | ||||||||||||||||
| Consolidated Statements of Operations Data: | 2025 | 2024 | $ Change | % Change | ||||||||||||
| Product Revenues – net of Discounts and Rebates | $ | 163,552 | $ | 105,674 | $ | 57,878 | 54.77 | % | ||||||||
| Cost of Revenues | 73,272 | 65,437 | 7,835 | 11.97 | ||||||||||||
| Gross Profit | $ | 90,280 | $ | 40,237 | $ | 50,043 | 124.37 | % | ||||||||
| Gross Margin % | 55.20 | % | 38.08 | % | ||||||||||||
Product Revenues - net of Discounts and Rebates
Our product revenues - net of discounts and rebates were $163,552 for the three months ended March 31, 2025, as compared to $105,674 for the three months ended March 31, 2024. For the three months ended March 31, 2025, our U.S. pharmaceutical distributor and Infuserve America accounted for 85% and 6% of our total net product sales of Arakoda, respectively, and Kodatef sales to our Australian distributor accounted for 9% of total net product sales (99%, 0%, and 1% for the three months ended March 31, 2024, respectively). Domestic, commercial product sales are primarily driving increased sales volume during the period.
We offer discounts and rebates to the civilian U.S. supply chain distribution channel. We record sales when our 3PL partner transfers boxes into their title model. Discounts and rebates offered to our 3PL partner amount to 12% (lower rates available upon reaching larger revenue tiers) along with a $5,500 fixed monthly fee. The product is then transferred usually to one of the three large U.S. pharmaceutical distributors where rebates are 10%. Lastly, we have relationships with several large pharmacy benefit managers (“PBMs”) that allow patients to purchase Arakoda at a discount. The rebate associated with PBMs ranges from 30% to 41.25% depending on the amount of coverage provided. For the three months ended March 31, 2025, discounts and rebates were $91,401 compared to $94,869 for the three months ended March 31, 2024.
Arakoda entered the U.S. civilian supply chain in the third quarter of 2019. For the three months ended March 31, 2024, 1,022 boxes were sold to pharmacies and dispensaries. Sales volume increased by 55% to 1,579 boxes sold to pharmacies and dispensaries for the three months ended March 31, 2025. Based on IQVIA data, this growth in sales volume appears to be driven primarily by organic growth in the Lyme disease community, whose prescribers utilize Arakoda for treatment of babesiosis. The sales volume growth to pharmacies and dispensaries ties more closely to the growth in discounts and rebates previously discussed than our reported sales to our 3PL.
Kodatef sales to our distributor Biocelect in Australia for the three months ended March 31, 2025 were $12,066 ($1,004 for the three months ended March 31, 2024). A historical portion of sales to Biocelect remain subject to a profit share distribution once the original transfer price has been recouped. Biocelect, which acts as a distributor in the Australian and New Zealand market, reported (42%) year-over-year decline, the equivalent of 386 boxes sold for the three months ended March 31, 2025, compared to 665 boxes for the three months ended March 31, 2024. As of March 31, 2025, Biocelect’s unsold inventory that remains subject to profit share was the equivalent of 109.5 boxes. Additionally, under a new agreement executed during the quarter, Biocelect began to purchase from the latest manufactured lot of Kodatef at $45 AUD per box which are not subject to historical profit share. For the quarter ended March 31, 2025, 200 boxes of Kodatef were sold to Biocelect. As of March 31, 2025, $5,826 of profit share was due to us ($1,004 as of March 31, 2024).
Arakoda sales volume in Europe continues to grow. We first shipped Arakoda to our distributor Scandinavian Biopharma (“SB”) in September 2022. For the three months ended March 31, 2025, SB reported 73 boxes sold (27 boxes sold for the three months ended March 31, 2024). According to our distributor, this is due to greater interest in treating babesiosis.
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Cost of Revenues, Gross Profit, and Gross Margin
Cost of revenues was $73,272 for the three months ended March 31, 2025, as compared to $65,437 for the three months ended March 31, 2024. The increase in cost of goods sold is primarily driven by the inflationary increase in fixed COGS charges for serialization and inventory material charges. Despite the increase, the Gross Margin % increased from 38.08% for the three months ended March 31, 2024 to 55.20% for the three months ended March 31, 2025. This is primarily attributable to the growth in revenues. As the sales volume has increased, the gross margin has improved as the variable cost of goods of each unit sold is substantially less than the sales price.
Other Operating Revenues
| For the Three Months Ended March 31, | ||||||||||||||||
| Consolidated Statements of Operations Data: | 2025 | 2024 | $ Change | % Change | ||||||||||||
| Research Revenues | $ | 92,731 | $ | 29,631 | $ | 63,100 | 212.95 | % | ||||||||
The research revenues earned by us were $92,731 for the three months ended March 31, 2025, as compared to $29,631 for the three months ended March 31, 2024. The increase in research revenues is due to the new USAMMDA contract we were awarded in July 2024 to facilitate commercial validation of a new bottle and replacement blister packaging of Arakoda. We recognized research revenues of $77,966 related to this grant for the three months ended March 31, 2025 ($0 for the three months ended March 31, 2024). We also recognized research revenues from the Australian Tax Authority for research activities conducted in Australia of $5,138 for the three months ended March 31, 2025 ($29,631 for the three months ended March 31, 2024).
Operating Expenses
| For the Three Months Ended March 31, | ||||||||||||||||
| Consolidated Statements of Operations Data: | 2025 | 2024 | $ Change | % Change | ||||||||||||
| Research and Development | $ | 407,622 | $ | 337,182 | $ | 70,440 | 20.89 | % | ||||||||
| General and Administrative Expenses | 1,686,264 | 1,075,134 | 611,130 | 56.84 | ||||||||||||
| Total Operating Expenses | $ | 2,093,886 | $ | 1,412,316 | $ | 681,570 | 48.26 | % | ||||||||
Research and Development
Research and development costs increased by $70,440 for the three months ended March 31, 2025 when compared to the three months ended March 31, 2024. Research and development costs incurred for the three months ended March 31, 2025 and 2024 primarily consisted of costs related to our babesiosis trial for tafenoquine. Direct trial-related costs represent 68% of the total research and development costs at $275,633 for the three months ended March 31, 2025, compared to 55% of the costs at $186,091 for the three months ended March 31, 2024. We also recorded $63,015 in research and development expenses related to commercial validation and packaging of Arakoda, for which a majority qualifies for reimbursement under the USAMMDA grant discussed above.
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General and Administrative Expenses
For the three months ended March 31, 2025, our general and administrative expenses increased by approximately 57% or $611,130 from the three months ended March 31, 2024. For the three months ended March 31, 2025, we incurred significantly higher sales, advertising and promotion expenses and investor outreach expenses at $285,287 and $393,687 for the three months ended March 31, 2025, up from $104,064 and $182,164 for the three months ended March 31, 2024, respectively. Additionally, for the three months ended March 31, 2025, we recognized $142,645 in stock-based compensation expense ($0 for the three months ended March 31, 2024). This increase was in part due to new partially vested option grants awarded to two executives in January 2025, as well as the quarterly expense recognized for additional stock options granted in the third quarter of 2024.
Interest and Other Income, net
| For the Three Months Ended March 31, | ||||||||||||||||
| Consolidated Statements of Operations Data: | 2025 | 2024 | $ Change | % Change | ||||||||||||
| Interest Expense | $ | (1,790 | ) | $ | (1,402 | ) | $ | (388 | ) | 27.67 | % | |||||
| Change in Fair Value of Derivative Liabilities | 5,105 | 1,740,847 | (1,735,742 | ) | (99.71 | ) | ||||||||||
| Other Income, net | 30,322 | 31,051 | (729 | ) | (2.35 | ) | ||||||||||
| Total Interest and Other Income, net | $ | 33,637 | $ | 1,770,496 | $ | (1,736,859 | ) | (98.10 | )% | |||||||
Interest Expense
For the three months ended March 31, 2025, we recognized $1,790 of interest expense ($1,402 for the three months ended March 31, 2024). Our interest expense for the periods presented relates entirely to our single outstanding loan from the SBA. Cash paid for interest expense was $2,193 and $2,193 for the three months ended March 31, 2025 and March 31, 2024, respectively.
Change in Fair Value of Derivative Liabilities
For the three months ended March 31, 2025, we recognized a gain on the change in fair value of derivative liabilities of $5,105 compared to $1,740,847 for the three months ended March 31, 2024. During the periods presented, derivative liabilities include the contingent milestone payment due to Knight upon a future sale of Arakoda or a Change of Control. We use a probability-weighted expected return method to estimate the fair value of this derivative liability.
Other Income, net
For the three months ended March 31, 2025, we recognized $30,322 in other income compared to $31,051 for the three months ended March 31, 2024. For the three months ended March 31, 2025, we recognized interest income from cash invested in interest-bearing accounts and investments in certificates of deposit of $31,897 ($21,888 for the three months ended March 31, 2024). Other income for the three months ended March 31, 2024 also includes $10,789 of storage revenue recognized in association with final payment under the legacy contract with the USAMMDA for storing Arakoda purchases. We did not recognize storage revenue for the three months ended March 31, 2025.
Cash Flows
| For the Three Months Ended March 31, | ||||||||||||||||
| 2025 | 2024 | $ Change | % Change | |||||||||||||
| Net Cash (Used In) Provided By : | ||||||||||||||||
| Operating Activities | $ | (1,597,366 | ) | $ | (1,140,438 | ) | $ | (456,928 | ) | 40.07 | % | |||||
| Investing Activities | 1,702,518 | (9,814 | ) | 1,712,332 | (17,447.85 | ) | ||||||||||
| Financing Activities | 1,696,899 | 1,903,291 | (206,392 | ) | (10.84 | ) | ||||||||||
| Effect of Foreign Currency Translation on Cash Flow | (9,904 | ) | (824 | ) | (9,080 | ) | 1,101.94 | |||||||||
| Net Increase in Cash and Cash Equivalents | $ | 1,792,147 | $ | 752,215 | $ | 1,039,932 | 138.25 | % | ||||||||
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Cash Used in Operating Activities
Net cash used in operating activities was $1,597,366 for the three months ended March 31, 2025, as compared to $1,140,438 for the three months ended March 31, 2024. Our net cash used in operating activities increased, primarily due to higher general and administrative expenses at $1,686,264 for the three months ended March 31, 2025 ($1,075,134 for the three months ended March 31, 2024), as a result of higher sales, advertising and promotion costs and investor outreach expenses, as discussed above. In addition, we incurred higher research and development costs at $407,622 for the three months ended March 31, 2025 ($337,182 for the three months ended March 31, 2024), primarily related to conducting our tafenoquine-babesiosis trial.
Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities was $1,702,518 for the three months ended March 31, 2025, as compared to net cash used in investing activities of $9,814 for the three months ended March 31, 2024. For the three months ended March 31, 2025, we received proceeds of $1,708,000 from maturities of certain short-term investments in certificates of deposit ($0 for the three months ended March 31, 2024). The cash proceeds are partially offset by higher capitalized patent costs of $2,804 and fixed asset purchases of $2,678 for the three months ended March 31, 2025 ($726 and $0 for the three months ended March 31, 2024, respectively). However, we did not capitalize website development costs for the three months ended March 31, 2025 ($9,088 capitalized for the three months ended March 31, 2024 associated with enhancements to the functionality of our corporate website).
Cash Provided by Financing Activities
Net cash provided by financing activities was $1,696,899 for the three months ended March 31, 2025, as compared to $1,903,291 for the three months ended March 31, 2024. The decrease in net cash provided by financing activities is mainly attributable to net proceeds of $1,898,296 received in connection with our common stock and warrant offering in January 2024, which exceeded the aggregate net proceeds of $1,712,973 received in connection with our common stock and warrant offerings completed in January 2025 and February 2025. We also received lower proceeds from the exercise of warrants at $1,926 for the three months ended March 31, 2025, compared to $4,995 for the three months ended March 31, 2024. Additionally, for the three months ended March 31, 2025, we withheld shares valued at $18,000 to cover tax withholdings for net share settlement of certain 2024 performance bonuses awarded to our executives ($0 for the three months ended March 31, 2024).
Effect of Foreign Currency Translation on Cash
Our foreign operations were small relative to U.S. operations for the three months ended March 31, 2025 and March 31, 2024, thus effects of foreign currency translation have been minor.
Critical Accounting Policies, Significant Judgments, and Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
We recognize revenue in accordance with FASB ASC Topic No. 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration we expect to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied. As part of the accounting for these arrangements, we may be required to make significant judgments, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each performance obligation.
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Revenues from product sales are recorded at the net sales price, or “transaction price,” which may include estimates of variable consideration that result from product returns. We determine the amount of variable consideration by using either the expected value method or the most-likely-amount method. We include the unconstrained amount of estimated variable consideration in the transaction price, which reflects the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment. Reserves are established for the estimates of variable consideration based on the amounts we expect to be earned or to be claimed on the related sales.
We record U.S. commercial revenues as a receivable when our American distributor transfers shipped product to their title model for 60P. Foreign sales to both Australia and Europe are recognized as a receivable at the point product is shipped to distributor. The shipments to Australia and Europe are further subject to profit sharing agreements for boxes sold to customers.
Share-Based Payments
We account for share-based payments in accordance with ASC Subtopic 718, Compensation - Stock Compensation (“ASC 718”). We measure compensation for all share-based payment awards granted to employees, directors, and nonemployees, based on the estimated fair value of the awards on the date of grant. For awards that vest based on continued service, the service-based compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the awards. For service vesting awards with compensation expense recognized on a straight-line basis, at no point in time does the cumulative grant date value of vested awards exceed the cumulative amount of compensation expense recognized. The grant date is determined based on the date when a mutual understanding of the key terms of the share-based awards is established. We account for forfeitures as they occur.
We estimate the fair value of all stock option awards as of the grant date by applying the Black-Scholes option pricing model. The application of this valuation model involves assumptions, including the fair value of the common stock, expected volatility, risk-free interest rate, expected dividends and the expected term of the option. Due to the lack of a public market for our common stock prior to the IPO and lack of company-specific historical implied volatility data, we base our computations of expected volatility on the historical volatility of a representative group of public companies with similar characteristics of the Company, including stage of development and industry focus. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. We generally use the simplified method as prescribed by the SEC Staff Accounting Bulletin Topic 14, Share-Based Payment, to estimate the expected term for stock options, whereby, the expected term equals the midpoint of the weighted average remaining time to vest, vesting period and the contractual term of the options due to our lack of historical exercise data. For certain options granted out-of-the-money, our best estimate of the expected term is the contractual term of the award. The risk-free interest rate is based on U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The expected dividend yield is assumed to be zero as we have never paid dividends and have no current plans to pay any dividends on our common stock. The assumptions used in calculating the fair value of share-based awards represent our best estimates and involve inherent uncertainties and the application of significant judgment.
We recognize compensation expense for restricted stock units (“RSUs”) with only service-based vesting conditions on a straight-line basis over the vesting period. Compensation cost for service-based RSUs is based on the grant date fair value of the award, which is the closing market price of our common stock on the grant date multiplied by the number of shares awarded.
For awards that vest upon a liquidity event or a change in control, the performance condition is not probable of being achieved until the event occurs. As a result, no compensation expense is recognized until the performance-based vesting condition is achieved, at which time the cumulative compensation expense is recognized. Compensation cost related to any remaining time-based service for share-based awards after the liquidity-based event is recognized on a straight-line basis over the remaining service period.
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For fully vested, nonforfeitable equity instruments that are granted at the date we enter into an agreement for goods or services with a nonemployee, we recognize the fair value of the equity instruments on the grant date. The corresponding cost is recognized as an immediate expense or a prepaid asset and expensed over the service period depending on the specific facts and circumstances of the agreement with the nonemployee.
Derivative Liabilities
We analyze all financial instruments with features of both liabilities and equity under ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC Topic 815, Derivatives and Hedging (“ASC 815”). The classification of derivative financial instruments is reassessed each reporting period. Derivative liabilities are adjusted to reflect fair value at each reporting period, with any increase or decrease in the fair value recorded in the results of operations (other income/expense) as change in fair value of derivative liabilities. As of March 31, 2025, derivative liabilities consist of contingent payment arrangements. We use a probability-weighted expected return method to determine the fair value of these instruments.
Upon conversion or repayment of a debt or equity instrument in exchange for equity shares, where the embedded conversion option has been bifurcated and accounted for as a derivative liability (generally convertible debt and warrants), we record the equity shares at fair value on the date of conversion, relieve all related debt, derivative liabilities, and unamortized debt discounts, and recognize a net gain or loss on debt extinguishment, if any.
Equity or liability instruments that become subject to reclassification under ASC Topic 815 are reclassified at the fair value of the instrument on the reclassification date.
Off-Balance Sheet Arrangements
During 2025 and 2024, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
JOBS Act Accounting Election
In April 2012, the JOBS Act was enacted. Section 107(b) of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Recent Accounting Pronouncements
From time to time, the FASB issues Accounting Standards Updates (“ASU”) to amend the authoritative literature in the ASC. The Company regularly evaluates new ASUs to determine the impact that these pronouncements may have on the consolidated condensed financial statements. Other than the pronouncements listed below, management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, or (iii) are not applicable to the Company’s consolidated condensed financial statements or related disclosures.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses and segment profit or loss. ASU 2023-07 also requires entities with a single reportable segment to provide all segment disclosures under ASC 280, including the new required disclosures under the ASU. We adopted ASU 2023-07 on a retrospective basis for the 2024 annual period, and for interim periods beginning in 2025. The impact is limited to our financial statement disclosures, which are presented in Note 2 to the accompanying consolidated condensed financial statements.
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In December 2023, the FASB issued ASU 2023-09, Income Taxes (ASC 740): Improvements to Income Tax Disclosures (“ASU 2023-09”) which requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact that ASU 2023-09 will have on our financial statement disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which applies to all public business entities that file financial statements with the SEC. The amendments in this ASU require public business entities to disclose on an annual and interim basis, disaggregated information about certain income statement expense line items. The new standard is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. We are currently evaluating the impact that ASU 2024-03 will have on our financial statement disclosures.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act of 1934, as amended and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item.
ITEM 4. Controls and Procedures. Disclosure Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2025. Based on that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer have concluded that as of March 31, 2025, due to the existence of the material weakness in the Company’s internal control over financial reporting described below, the Company’s disclosure controls and procedures were not effective.
Management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Management has used the framework set forth in the report entitled “Internal Control-Integrated Framework (2013)” published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of our internal control over financial reporting. Based on that assessment, our management has identified certain material weaknesses in our internal control over financial reporting.
Our management concluded that as of March 31, 2025, our internal control over financial reporting was not effective, and that material weaknesses existed in the following areas:
| (1) | we do not employ full time in-house personnel with the technical knowledge to identify and address some of the reporting issues surrounding certain complex or non-routine transactions. With respect to material, complex and non-routine transactions, management has and will continue to seek guidance from third-party experts and/or consultants to gain a thorough understanding of these transactions; |
| (2) | we have inadequate segregation of duties consistent with the control objectives including but not limited to the disbursement process, transaction or account changes, and the performance of account reconciliations and approval; and |
| (3) | we have ineffective controls over the period end financial disclosure and reporting process caused by insufficient accounting staff. |
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS
From time to time, claims are made against us in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting us from selling one or more products or engaging in other activities. There were no reportable litigation events during the quarter ended March 31, 2025.
ITEM 1A. RISK FACTORS
As a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and in item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item. In any event, there have been no material changes in our risk factors as previously disclosed in the Registration Statement.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
| (A) | Unregistered Sales of Equity Securities |
January 2025 Securities Purchase Agreement
On January 28, 2025, the Company entered into a securities purchase agreement (the “January 2025 Securities Purchase Agreement”) with certain institutional investors (the “January 2025 Purchasers”) pursuant to which the Company sold an aggregate of 204,312 shares of common stock at a purchase price of $5.105 per share in a registered direct offering priced at-the-market under the rules of The Nasdaq Stock Market LLC.
The shares were offered pursuant to a “shelf” registration statement on Form S-3 (Registration No. 333-280796), which was declared effective by SEC on July 18, 2024 as supplemented by a prospectus supplement dated January 28, 2025, filed with the SEC on January 30, 2025, and accompanying base prospectus, pursuant to Rule 424(b)(5) promulgated under the Securities Act.
In a concurrent private placement, the Company also issued to the January 2025 Purchasers unregistered warrants (the “January 2025 Warrants”) to purchase up to an aggregate of 408,621 shares of common stock at an exercise price of $3.855 per share. The January 2025 Warrants are exercisable upon issuance and expire twenty-four months from the date of issuance.
Any holder will not have the right to exercise any portion of the January 2025 Warrants if the holder (together with its affiliates) would beneficially own more than 4.99% (or, upon the election of the holder, 9.99%) of the number of shares of the common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease such percentage, provided that any increase will not be effective until the 61st day after such election.
The exercise price of the January 2025 Warrants is subject to customary adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock and also upon any distributions of assets, including cash, stock or other property to the stockholders of the Company.
The issuance of the January 2025 Warrants pursuant to the January 2025 Securities Purchase Agreement and issuance of the January 2025 Placement Agent Warrants, as defined below, and the shares of common stock issuable thereunder were made pursuant to the exemption from the registration requirements under the Securities Act, available to the Company under Section 4(a)(2) promulgated thereunder and Rule 506 of Regulation D promulgated under the Securities Act due to the fact that the offering of the January 2025 Warrants and the January 2025 Placement Agent Warrants thereunder did not involve a public offering of securities.
The January 2025 Securities Purchase Agreement contained customary representations and warranties. The offering closed on January 30, 2025.
Pursuant to an engagement letter agreement between the Company and the Placement Agent dated August 30, 2024, as amended on September 3, 2024 and January 24, 2025, the Placement Agent acted as the Company’s exclusive placement agent in connection with the offering.
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Pursuant to the terms of the Engagement Agreement, the Company paid the Placement Agent a cash transaction fee equal to 7.5% of the aggregate gross cash proceeds in the offering and a management fee equal to 1.0% of the aggregate gross cash proceeds in the offering. In addition, the Company paid for certain non-accountable expenses in the amount of $15,000 and a clearing fee in the amount of $10,000. The Company also issued to the Placement Agent (or its designees) warrants (the “January 2025 Placement Agent Warrants”) to purchase up to 15,325 shares of common stock. The January 2025 Placement Agent Warrants have an exercise price equal to $6.382 per share and are exercisable upon issuance and expire twenty-four months from the date of issuance.
The Company received net proceeds of approximately $804,346 from the offering, after deducting estimated offering expenses paid by the Company, including the Placement Agent fees. The Company intends to use the net proceeds from the offering for general corporate purposes, including working capital.
February 2025 Securities Purchase Agreement
On February 5, 2025, the Company entered into a securities purchase agreement (the “February 2025 Securities Purchase Agreement”) with certain institutional investors (the “February 2025 Purchasers”) pursuant to which the Company sold an aggregate of 300,700 shares of common stock at a purchase price of $3.575 per share in a registered direct offering priced at-the-market under the rules of The Nasdaq Stock Market LLC.
The shares were offered pursuant to a “shelf” registration statement on Form S-3 (Registration No. 333-280796), which was declared effective by the Securities and Exchange Commission (the “SEC”) on July 18, 2024 as supplemented by a prospectus supplement dated February 5, 2025, filed with the SEC on February 6, 2025, and accompanying base prospectus, pursuant to Rule 424(b)(5) promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
In a concurrent private placement, the Company also issued to the February 2025 Purchasers unregistered warrants (the “February 2025 Warrants”) to purchase up to an aggregate of 300,700 shares of common stock at an exercise price of $2.95 per share. The February 2025 Warrants are exercisable upon issuance and expire twenty-four months from the date of issuance.
Any holder will not have the right to exercise any portion of the February 2025 Warrants if the holder (together with its affiliates) would beneficially own more than 4.99% (or, upon the election of the holder, 9.99%) of the number of shares of the common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the warrants. However, any holder may increase or decrease such percentage, provided that any increase will not be effective until the 61st day after such election.
The exercise price of the February 2025 Warrants is subject to customary adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Common Stock and also upon any distributions of assets, including cash, stock or other property to the stockholders of the Company.
The issuance of the February 2025 Warrants pursuant to the February 2025 Securities Purchase Agreement and the issuance of the February 2025 Placement Agent Warrants, as defined below, and the shares of common stock issuable thereunder, were made pursuant to the exemption from the registration requirements under the Securities Act of 1933, as amended (the “Securities Act”), available to the Company under Section 4(a)(2) promulgated thereunder and Rule 506 of Regulation D promulgated under the Securities Act due to the fact that the offering of the February 2025 Warrants and the February 2025 Placement Agent Warrants thereunder did not involve a public offering of securities.
The February 2025 Securities Purchase Agreement contained customary representations and warranties. The offering closed on February 6, 2025.
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Pursuant to an engagement letter agreement between the Company and H.C. Wainwright & Co., LLC (the “Placement Agent”) dated August 30, 2024, as amended on September 3, 2024 and January 24, 2025 (the “Engagement Agreement”), the Placement Agent acted as the Company’s exclusive placement agent in connection with the offering.
Pursuant to the terms of the Engagement Agreement, the Company paid the Placement Agent a cash transaction fee equal to 7.5% of the aggregate gross cash proceeds in the offering and a management fee equal to 1.0% of the aggregate gross cash proceeds in the offering. In addition, the Company paid for certain non-accountable expenses in the amount of $15,000 and a clearing fee in the amount of $10,000. The Company also issued to the Placement Agent (or its designees) warrants (the “February 2025 Placement Agent Warrants”) to purchase up to 22,554 shares of common stock. The February 2025 Placement Agent Warrants have an exercise price equal to $4.469 per share and are exercisable upon issuance and expire twenty-four months from the date of issuance.
The Company received net proceeds of approximately $908,627 from the offering, after deducting estimated offering expenses paid by the Company, including the Placement Agent fees. The Company intends to use the net proceeds from the offering for general corporate purposes, including working capital.
Registration of the Shares of Common Stock Underlying Warrants
Pursuant to the January and February 2025 Securities Purchase Agreement, the Company was required to file a registration statement with the SEC within 45 days after the date of the respective Securities Purchase Agreements to register the shares underlying the warrants under the Securities Act. The Company agreed to use commercially reasonable efforts to cause such registration statement to become effective within 75 days following the respective closing dates, and to keep such registration statement effective at all times until no purchaser owns any warrants or warrant shares issuable upon exercise thereof. Subsequently, the Company filed a registration statement on Form S-1 (File No. 333-284983) on February 14, 2025, which was declared effective by the Securities and Exchange Commission on April 2, 2025 (the “Registration Statement”).
The Registration Statement covered the resale of: (i) 408,621 shares of our common stock issuable upon exercise of the January 2025 Warrants at an exercise price of $3.855 per share; (ii) 300,700 shares of our common stock issuable upon exercise of the February 2025 Warrants at an exercise price of $2.95 per share; (iii) 15,325 shares of our common stock issuable upon exercise of the January 2025 Placement Agent Warrants at an exercise price of $6.382 per share; and (iv) 22,554 shares of our common stock issuable upon exercise of the February 2025 Placement Agent Warrants at an exercise price of $4.469 per share.
(B) Use of Proceeds
None.
(C) Issuer Purchases of Equity Securities
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
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ITEM 5. OTHER INFORMATION
Securities Trading Plans
During the three months ended March 31, 2025,
none of our Section 16 officers or directors (as defined in Rule 16a-1(f) of the Exchange Act)
ITEM 6. EXHIBITS
EXHIBIT INDEX
| * | Filed herewith. |
| ** | Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| 60 DEGREES PHARMACEUTICALS, INC. | |
| Dated: May 15, 2025 | /s/ Geoffrey Dow |
| Geoffrey Dow | |
|
Chief Executive Officer and President, Director (Principal Executive Officer) | |
| Dated: May 15, 2025 | /s/ Tyrone Miller |
| Tyrone Miller | |
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
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