Theriva Biologics, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) Theriva Biologics, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (In thousands except share and par value amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 December 31, 2021 Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ Current Assets ​ ​ Cash and cash equivalents ​ $ 50,490 ​ $ 67,325 Prepaid expenses and other current assets ​ 2,241 ​ 1,533 Total Current Assets ​ 52,731 ​ 68,858 ​ ​ ​ ​ ​ ​ ​ Non-Current Assets ​ ​ ​ ​ ​ ​ Property and equipment, net ​ 262 ​ 101 Restricted cash ​ ​ 90 ​ ​ — Right of use asset ​ ​ 1,246 ​ ​ 1,383 In-process research and development ​ 20,089 ​ — Goodwill ​ ​ 4,254 ​ ​ — Deposits and other assets ​ 23 ​ 23 ​ ​ ​ ​ ​ ​ ​ Total Assets ​ $ 78,695 ​ $ 70,365 ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders‘ Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current Liabilities: ​ ​ ​ Accounts payable ​ $ 770 ​ $ 524 Accrued expenses ​ 1,411 ​ 1,928 Accrued employee benefits ​ 1,319 ​ 978 Contingent consideration, current portion ​ ​ 9,483 ​ ​ — Loans Payable-current ​ ​ 52 ​ ​ — Operating lease liability ​ 157 ​ 124 Total Current Liabilities ​ 13,192 ​ 3,554 ​ ​ ​ ​ ​ ​ ​ Non-current Liabilities ​ ​ ​ ​ ​ ​ Non-current contingent consideration ​ ​ 2,419 ​ ​ — Loan Payable - Long term ​ ​ 202 ​ ​ — Deferred tax liabilities, net ​ ​ 3,489 ​ ​ — Lease liability - Long term ​ ​ 1,244 ​ ​ 1,403 Total Liabilities ​ 20,546 ​ 4,957 ​ ​ ​ ​ ​ ​ ​ Commitments and Contingencies ​ ​ ​ Series C convertible preferred stock, $ 0.001 par value; 10,000,000 ; 275,000 issued and outstanding ​ ​ 2,006 ​ ​ — Series D convertible preferred stock, $ 0.001 par value; 10,000,000 ; 100,000 issued and outstanding ​ 728 ​ — Stockholders’ Equity (Deficit): ​ ​ ​ Common stock, $ 0.001 par value; 20,000,000 shares authorized, 15,844,294 issued and 15,844,061 outstanding at September 30, 2022 and 13,204,487 issued and 13,204,254 outstanding at December 31, 2021 ​ 16 ​ 13 Additional paid-in capital ​ 343,621 ​ 336,679 Accumulated other comprehensive loss ​ ​ ( 2,844 ) ​ ​ — Accumulated deficit ​ ( 285,378 ) ​ ( 271,284 ) Total Stockholders‘ Equity ​ 55,415 ​ 65,408 ​ ​ ​ ​ ​ ​ ​ Total Liabilities and Stockholders‘ Equity ​ $ 78,695 ​ $ 70,365 ​ See accompanying notes to unaudited condensed consolidated financial statements. ​ 3 Table of Contents Theriva Biologics, Inc. and Subsidiaries Condensed Consolidated Statements of Operations and Comprehensive Loss (In thousands, except share and per share amounts) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended September 30, For the nine months ended September 30, ​ 2022 2021 2022 2021 Operating Costs and Expenses: ​ ​ ​ ​ General and administrative ​ $ 2,444 ​ $ 1,303 ​ $ 5,599 ​ $ 3,988 Research and development ​ 2,570 ​ 1,972 ​ 8,652 ​ 5,021 Total Operating Costs and Expenses ​ 5,014 ​ 3,275 ​ 14,251 ​ 9,009 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss from Operations ​ ( 5,014 ) ​ ( 3,275 ) ​ ( 14,251 ) ​ ( 9,009 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exchange loss ​ ( 9 ) ​ — ​ ( 40 ) ​ — Interest income ​ 170 ​ 2 ​ 197 ​ 4 Total Other Income(Expense) ​ 161 ​ 2 ​ 157 ​ 4 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss ​ ( 4,853 ) ​ ( 3,273 ) ​ ( 14,094 ) ​ ( 9,005 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss Attributable to Non-controlling Interest ​ — ​ — ​ — ​ ( 1 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss Attributable to Theriva Biologics, Inc. and Subsidiaries ​ $ ( 4,853 ) ​ $ ( 3,273 ) ​ $ ( 14,094 ) ​ $ ( 9,004 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of Warrant exercise price adjustment ​ ​ ( 340 ) ​ ​ — ​ ​ ( 340 ) ​ ​ — Series A Preferred Stock Dividends ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 24 ) Effect of Series A Preferred Stock price adjustment ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 7,402 ) Series B Preferred Stock Dividends ​ — ​ — ​ — ​ ( 1,497 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss Attributable to Common Stockholders ​ $ ( 5,193 ) ​ $ ( 3,273 ) ​ $ ( 14,434 ) ​ $ ( 17,926 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss Per Share - Basic and Dilutive ​ $ ( 0.33 ) ​ $ ( 0.25 ) ​ $ ( 0.95 ) ​ $ ( 1.51 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of shares outstanding during the period - Basic and Dilutive ​ 15,844,061 ​ 13,204,254 ​ 15,176,927 ​ 11,844,863 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss ​ ​ ( 4,853 ) ​ ​ ( 3,273 ) ​ ​ ( 14,094 ) ​ ​ ( 9,005 ) Loss on foreign currency translation ​ ​ ( 1,527 ) ​ ​ — ​ ​ ( 2,844 ) ​ ​ — Total comprehensive loss ​ ​ ( 6,380 ) ​ ​ ( 3,273 ) ​ ​ ( 16,938 ) ​ ​ ( 9,005 ) Comprehensive loss attributable to non-controlling interest ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1 ) Comprehensive loss attributable to Theriva Biologics, Inc. and Subsidiaries ​ ​ ( 6,380 ) ​ ​ ( 3,273 ) ​ ​ ( 16,938 ) ​ ​ ( 9,004 ) ​ ​ See accompanying notes to unaudited condensed consolidated financial statements. ​ 4 Table of Contents Theriva Biologics, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders Equity (Deficit) (In thousands, except share and par value amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock $0.001 Par Value ​ Series B Preferred ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ Comprehensive ​ Stockholders’ ​ Shares Amount Shares Amount APIC Deficit income Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2021 13,204,531 ​ $ 13 — ​ $ — ​ $ 336,679 ​ $ ( 271,284 ) ​ $ — ​ $ 65,408 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation — ​ — — ​ — ​ 112 ​ — ​ — ​ 112 Issuance of Common Stock for VCN Acquisition 2,639,530 ​ 3 — ​ — ​ 6,596 ​ — ​ — ​ 6,599 Translation gains (losses) — ​ — — ​ — ​ — ​ — ​ 181 ​ 181 Net loss — ​ — — ​ — ​ — ​ ( 4,273 ) ​ — ​ ( 4,273 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at March 31, 2022 15,844,061 ​ $ 16 — ​ $ — ​ $ 343,387 ​ $ ( 275,557 ) ​ $ 181 ​ $ 68,027 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ ​ 113 ​ ​ — ​ ​ — ​ ​ 113 Translation gains (losses) ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,498 ) ​ ​ ( 1,498 ) Net loss ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 4,968 ) ​ ​ — ​ ​ ( 4,968 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at June 30, 2022 ​ 15,844,061 ​ $ 16 ​ — ​ $ — ​ $ 343,500 ​ $ ( 280,525 ) ​ $ ( 1,317 ) ​ $ 61,674 Stock-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ ​ 121 ​ ​ — ​ ​ — ​ ​ 121 Translation gains (losses) ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,527 ) ​ ​ ( 1,527 ) Net loss ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 4,853 ) ​ ​ — ​ ​ ( 4,853 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, 2022 ​ 15,844,061 ​ $ 16 ​ — ​ $ — ​ $ 343,621 ​ $ ( 285,378 ) ​ $ ( 2,844 ) ​ $ 55,415 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock $0.001 Par Value ​ Series B Preferred ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Non- ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ Controlling ​ Stockholders’ ​ Shares Amount Shares Amount APIC Deficit Interest Deficit Balance at December 31, 2020 ​ 2,924,993 ​ $ 3 ​ 3,973 ​ $ 2,477 ​ $ 240,847 ​ $ ( 248,094 ) ​ $ ( 2,773 ) ​ $ ( 7,540 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ ​ 101 ​ ​ — ​ ​ — ​ ​ 101 Stock issued under “at-the-market“ offering ​ 7,868,532 ​ ​ 8 ​ — ​ ​ — ​ ​ 65,952 ​ ​ — ​ ​ — ​ ​ 65,960 Warrants Exercised ​ 1,165,575 ​ ​ 1 ​ — ​ ​ — ​ ​ 8,041 ​ ​ — ​ ​ — ​ ​ 8,042 Series A Preferred Stock Dividends ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 24 ) ​ ​ — ​ ​ ( 24 ) Effect of Series A Preferred Stock price adjustment ​ — ​ ​ — ​ — ​ ​ — ​ ​ 7,402 ​ ​ ( 7,402 ) ​ ​ — ​ ​ — Conversion of Series A Preferred Stock to Common ​ 899,677 ​ ​ 1 ​ — ​ ​ — ​ ​ 12,821 ​ ​ — ​ ​ — ​ ​ 12,822 Conversion of Series B Preferred Stock to Common ​ 345,478 ​ ​ — ​ ( 3,973 ) ​ ​ ( 2,477 ) ​ ​ 3,974 ​ ​ ( 1,497 ) ​ ​ — ​ ​ — Net loss ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 2,536 ) ​ ​ — ​ ​ ( 2,536 ) Non-controlling interest ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1 ) ​ ​ ( 1 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at March 31, 2021 ​ 13,204,255 $ 13 — $ — $ 339,138 $ ( 259,553 ) $ ( 2,774 ) $ 76,824 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ ​ 102 ​ ​ — ​ ​ — ​ ​ 102 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 3,195 ) ​ ​ — ​ ​ ( 3,195 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at June 30, 2021 ​ 13,204,255 ​ $ 13 ​ — ​ $ — ​ $ 339,240 ​ $ ( 262,748 ) ​ $ ( 2,774 ) ​ $ 73,731 Stock-based compensation ​ — ​ ​ — ​ — ​ ​ — ​ ​ 102 ​ ​ — ​ ​ — ​ ​ 102 Net loss ​ — ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 3,273 ) ​ ​ — ​ ​ ( 3,273 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, 2021 13,204,255 $ 13 — $ — $ 339,342 $ ( 266,021 ) $ ( 2,774 ) $ 70,560 ​ See accompanying notes to unaudited condensed consolidated financial statements. ​ ​ 5 Table of Contents Theriva Biologics, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Nine Months Ended September 30, ​ 2022 2021 Cash Flows From Operating Activities: ​ ​ Net loss ​ $ ( 14,094 ) ​ $ ( 9,005 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Stock-based compensation ​ 346 ​ 305 Change in fair value of contingent consideration ​ ( 257 ) ​ — Depreciation ​ 60 ​ 74 Changes in operating assets and liabilities: ​ ​ ​ ​ Prepaid expenses and other current assets ​ 780 ​ 285 Right of use asset ​ 137 ​ 123 Accounts payable ​ ( 504 ) ​ 368 Accrued expenses ​ ( 326 ) ​ 85 Accrued employee benefits ​ 271 ​ ( 147 ) Lease liability ​ ( 127 ) ​ ( 168 ) Net Cash Used In Operating Activities ​ ( 13,714 ) ​ ( 8,080 ) ​ ​ ​ ​ ​ ​ ​ Cash Flows from Investing Activities ​ ​ ​ ​ Purchase of property and equipment ​ ​ ( 25 ) ​ ​ ( 14 ) Cash paid for business combination; net of cash acquired ​ ​ ( 3,863 ) ​ ​ — Pre-acquisition loan to VCN ​ ​ ( 417 ) ​ ​ — Net Cash Used in Investing Activities ​ ​ ( 4,305 ) ​ ​ ( 14 ) ​ ​ ​ ​ ​ ​ ​ Cash Flows from Financing Activities ​ ​ ​ ​ Payment of VCN’s CDTI loan ​ ​ ( 1,376 ) ​ ​ — Proceeds from sale of Series C Preferred Stock, net of issuance cost ​ ​ 2,006 ​ ​ — Proceeds from sale of Series D Preferred Stock, net of issuance cost ​ ​ 728 ​ ​ — Proceeds from “at the market“ stock issuance ​ — ​ 65,960 Proceeds from issuance of common stock for warrant exercises ​ ​ — ​ ​ 8,042 Net Cash Provided by Financing Activities ​ ​ 1,358 ​ ​ 74,002 ​ ​ ​ ​ ​ ​ ​ Effects of FX on cash ​ ​ ( 84 ) ​ ​ — Net (decrease) increase in cash and cash equivalents and restricted cash ​ ​ ( 16,661 ) ​ ​ 65,908 Cash and cash equivalents and restricted at the beginning of this period ​ 67,325 ​ 6,227 Cash and cash equivalents and restricted cash at the end of this period ​ $ 50,580 ​ $ 72,135 ​ ​ ​ ​ ​ ​ ​ Reconciliation of cash, cash equivalents, and restricted cash reported in the statement of financial position ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 50,490 ​ $ 72,135 Restricted cash included in other long-term assets ​ ​ 90 ​ ​ — Total cash, cash equivalents, and restricted cash shown in the statement of cash flows ​ $ 50,580 ​ $ 72,135 ​ ​ ​ ​ ​ ​ ​ Supplemental non-cash investing and financing activities: ​ ​ ​ ​ Fair value of contingent consideration issued in a business combination ​ $ 12,158 ​ $ — Fair value of equity issued as consideration in a business combination ​ $ 6,599 ​ $ — Effective settlement of pre-closing VCN financing ​ $ 417 ​ $ — Goodwill measurement period adjustment ​ $ ( 884 ) ​ $ — In-process R&D measurement period adjustment ​ $ 810 ​ $ — Deferred tax liability measurement period adjustment ​ $ 202 ​ $ — Effect of Warrant exercise price adjustment ​ $ 340 ​ $ — Effect of Series A Preferred Stock price adjustment ​ $ — ​ $ 7,402 Right of use asset from operating lease ​ $ — ​ $ 1,270 Conversion of Series B Preferred Stock ​ $ — ​ $ 2,477 Deemed dividends for accretion of Series B Preferred Stock discount ​ $ — ​ $ 1,497 In-kind dividends paid in preferred stock ​ $ — ​ $ 24 ​ See accompanying notes to unaudited condensed consolidated financial statements. ​ ​ 6 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) ​ 1. Organization, Nature of Operations and Basis of Presentation Description of Business Theriva Biologics, Inc. (the “Company” or “Theriva Biologics”) is a diversified clinical-stage company developing therapeutics in areas of high unmet need. As a result of the acquisition of VCN (the “Acquisition”), described in more detail below, the Company began transitioning its strategic focus to oncology through the development of VCN’s new oncolytic adenovirus platform designed for intravenous and intravitreal delivery to trigger tumor cell death, improve access of co-administered cancer therapies to the tumor, and promote a robust and sustained anti-tumor response by the patient’s immune system. Prior to the Acquisition, the Company’s focus was on developing therapeutics designed to treat gastrointestinal (GI) diseases in areas which included our lead clinical development candidates: (1) SYN-004 (ribaxamase) which is designed to degrade certain commonly used intravenous (IV) beta-lactam antibiotics within the GI tract to prevent microbiome damage, Clostridioides difficile infection (CDI), overgrowth of pathogenic organisms, the emergence of antimicrobial resistance (AMR), and acute graft-versus-host-disease (aGVHD) in allogeneic hematopoietic cell transplant (HCT) recipients, and (2) SYN-020, a recombinant oral formulation of the enzyme intestinal alkaline phosphatase (IAP) produced under cGMP conditions and intended to treat both local GI and systemic diseases. Basis of Presentation On July 11, 2022, the Board of Directors of the Company approved a reverse stock split of the Company’s authorized, issued and outstanding shares of common stock, par value $ 0.001 per share, at a ratio of one (1) share of common stock for every ten ( 10 ) shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split was effective on July 25, 2022 (the “Effective Time). As a result of the Reverse Stock Split, each ten (10) pre-split shares of common stock outstanding automatically combined into one (1) new share of common stock without any action on the part of the holders, and the number of outstanding shares of common stock was reduced from 158,437,840 shares to 15,844,061 shares (subject to rounding of fractional shares) and the number of authorized shares of common stock was reduced from 200,000,000 share to 20,000,000 shares. Stockholders who otherwise were entitled to receive fractional shares because they held a number of pre-reverse stock split shares of the Company’s common stock not evenly divisible by 10, received, in lieu of a fractional share, that number of shares rounded up to the nearest whole share. The Reverse Stock Split did not alter the par value of the Company’s common stock or modify any voting rights or other terms of the common stock. In addition, pursuant to their terms, a proportionate adjustment was made to the per share conversion exercise price and number of shares issuable under all of the Company’s outstanding shares of convertible preferred stock and stock options and warrants to purchase shares of common stock, and the number of shares authorized and reserved for issuance pursuant to the Company’s equity incentive plans was reduced proportionately. All share amounts and exercise/conversion prices in the condensed consolidated financial statements and footnotes below have been adjusted retrospectively for the Reverse Stock Split. The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by Accounting Principles Generally Accepted in the United States of America (“U.S. GAAP”) for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, comprised of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position and cash flows. The operating results for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2021 Form 10-K. The interim results for the three and nine months ended September 30, 2022 are not necessarily indicative of results for the full year. ​ 7 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 1. Organization, Nature of Operations and Basis of Presentation – (continued) The condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the amounts of assets and liabilities at the reporting date and the amounts of revenue and expenses in the periods presented. The Company believes that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual results may differ from the original estimates, requiring adjustments to these balances in future periods. The Company has one operating segment (which includes the legacy Company business and the VCN business) and therefore one reporting segment which represents the consolidated entity. Business Combination The Company accounts for acquisitions using the acquisition method of accounting, which requires that all identifiable assets acquired, and liabilities assumed be recorded at their estimated fair values. The excess of the fair value of purchase consideration over the fair values of identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from acquired patented technology. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. As a result of the acquisition of VCN (see Note 2), the Company recorded two intangible assets, in-process research and development (“IPR&D”) and goodwill. The IPR&D and goodwill are deemed to have indefinite lives and therefore not amortized. IPR&D IPR&D assets represent the fair value assigned to technologies that the Company acquired, which at the time of acquisition have not reached technological feasibility and have no alternative future use. IPR&D assets are considered to have indefinite-lives until the completion or abandonment of the associated research and development projects. If and when development is complete, which generally occurs upon regulatory approval and the ability to commercialize products associated with the IPR&D assets, these assets are then deemed to have definite lives and are amortized based on their estimated useful lives at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value. During the period that the assets are considered indefinite-lived, they are tested for impairment on an annual basis on October 1, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that could indicate an impairment. The impairment test consists of a comparison of the estimated fair value of the IPR&D with its carrying amount. If the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess. Goodwill The Company tests the carrying amounts of goodwill for recoverability on an annual basis on October 1 or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company performs a one-step test in its evaluation of the carrying value of goodwill if qualitative factors determine it is necessary to complete a goodwill impairment test. In the evaluation, the fair value of the relevant reporting unit is determined and compared to its carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable, and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value, and a charge is reported in impairment of goodwill in the Company’s consolidated statements of operations. As of September 30, 2022, the Company has determined that it has one reporting unit. ​ 8 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 1. Organization, Nature of Operations and Basis of Presentation – (continued) Contingent Consideration Consideration paid in a business combination may include potential future payments that are contingent upon the acquired business achieving certain milestones in the future (“contingent consideration”). Contingent consideration liabilities are measured at their estimated fair value as of the date of acquisition, with subsequent changes in fair value recorded in the consolidated statements of operations. The Company estimates the fair value of the contingent consideration as of the acquisition date using the estimated future cash outflows based on the probability of meeting future milestones. The milestone payments will be made upon the achievement of clinical and commercialization milestones as well as single low digit royalty payments and payments upon receipt of sublicensing income. Subsequent to the date of acquisition, the Company reassesses the actual consideration earned and the probability-weighted future earn-out payments at each balance sheet date. Any adjustment to the contingent consideration liability will be recorded in the consolidated statements of operations. Contingent consideration liabilities expected to be settled within 12 months after the balance sheet date are presented in current liabilities, with the non-current portion recorded under long term liabilities in the consolidated balance sheets. Impairment of Long-Lived Assets Long-lived assets include property, equipment and right-of-use assets. Management reviews the Company’s long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as whether there is reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying value of the asset. No impairment charges were recorded during the three and nine months ended September 30, 2022 and 2021. Recent Accounting Pronouncements and Developments In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (subtopic 815-40) : Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2023 and interim periods within those annual periods and early adoption is permitted in annual reporting periods ending after December 15, 2020. The Company has adopted ASU 2020-06 on January 1, 2022. The ASU impacted the analysis of the accounting treatment for the issuance of Convertible Preferred Series C & D stock during the current quarter, specifically the cash conversion and beneficial conversion features. ​ 9 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 2. BUSINESS COMBINATION Summary On March 10, 2022, the Company completed the acquisition of all the outstanding shares of VCN (the “VCN Shares”) from the shareholders of VCN. VCN is a clinical-stage biopharmaceutical company developing new oncolytic adenoviruses for the treatment of cancer. VCN’s lead product candidate, VCN-01, is being studied by the Company in clinical trials for pancreatic cancer and retinoblastoma with additional investigator sponsored trials in indications including head and neck squamous cell carcinoma (HNSCC). VCN-01 is designed to be administered systemically, intratumorally or intravitreally, either as a monotherapy or in combination with standard of care, to treat a wide variety of cancer indications. VCN-01 is designed to replicate selectively and aggressively within tumor cells, and to degrade the tumor stroma barrier that serves as a significant physical and immunosuppressive barrier to cancer treatment. Degrading the tumor stroma has been shown to improve access to the tumor by the virus and additional therapies such as chemo- and immuno-therapies. Importantly, degrading the stroma exposes tumor antigens, turning “cold” tumors “hot” and enabling a sustained anti-tumor immune response. VCN has the rights to four exclusive patents for proprietary technologies, as well as technologies developed in collaboration with the Virotherapy Group of the Catalan Institute of Oncology (ICO-IDIBELL) and with Hospital Sant Joan de Deu (HSJD), with a number of additional patents pending. As consideration for the purchase of the VCN Shares, the Company paid $ 4,700,000 to Grifols Innovation and New Technologies Limited, the owner of approximately 86 % of the equity of VCN, and issued to the remaining sellers and certain key VCN employees and consultants of VCN an aggregate of 2,639,530 shares of its common stock In addition to the consideration described above, under the terms of the Purchase Agreement, the Company assumed up to $ 2,390,000 of existing liabilities of VCN and has agreed to make cash payments of up to $ 70.2 million to Grifols upon the achievement of certain clinical and commercialization milestones. In September 2022, the trial received “safe to proceed” from the FDA for its phase 2 clinical trial of VCN-01. Due to this approval, the company will pay Grifols $ 3.0 million in Q4 2022. In anticipation of the Acquisition, prior to the Closing, the Company loaned VCN $ 417,000 to help finance the costs of certain of VCN’s research and development activities. At the Closing, VCN and Grifols entered into a sublease agreement for the sublease by VCN of laboratory and office space as well as a transitional services agreement. As a post-Closing covenant, the Company has agreed to commit to fund VCN’s research and development programs, including but not limited to VCN-01 in a pancreatic ductal adenocarcinoma PDAC phase 2 trial, VCN-01 in a retinoblastoma (RB) phase 2/3 trial and necessary G&A within a budgetary plan of approximately $ 27.8 million. Total purchase consideration including cash, restricted shares and contingent consideration was valued at approximately $ 23.9 million, as follows (in thousands): ​ ​ ​ ​ Cash paid at Closing $ 4,700 Receivable from VCN “effectively settled“ ​ 417 FV of common shares issued ​ 6,599 FV of contingent consideration ​ 12,159 ​ ​ $ 23,875 ​ As of March 31, 2022, the fair value of the contingent consideration was approximately $ 12.2 million. During the nine months ended September 30, 2022 the Company recognized a non-cash gain of $ 257,000 related to the decrease in the fair value of the contingent consideration. This gain was recorded as a reduction of general and administrative expense in the accompanying condensed consolidated statement of operations. The Company acquired VCN due to its track record of being a research and development engine capable of fueling sustainable growth, to expand the Company’s research and development pipeline, and to diversify the Company’s potential future revenue opportunities. 10 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 2. BUSINESS COMBINATION - (continued) The preliminary allocation of the fair value of the VCN acquisition is shown in the table below. ​ ​ ​ ​ ​ ​ Estimated fair value ​ ​ ($in thousands) Cash and cash equivalents ​ $ 837 Receivables ​ 1,707 Property and equipment ​ 216 In-process research and development intangible asset ​ 21,703 Goodwill ​ 5,765 Deferred tax assets (liabilities), net ​ ( 3,699 ) Accounts payable ​ ( 814 ) Accrued expenses ​ ( 113 ) Accrued employee benefits ​ ( 90 ) Loan Payable-current ​ ( 67 ) Other long-term liabilities ​ ( 1,570 ) ​ ​ ​ ​ Total purchase consideration ​ $ 23,875 ​ The above allocation of the purchase price is based upon certain preliminary valuations and other analyses that have not been finalized as of the date of this filing. Any changes in the estimated fair values of the purchase consideration and of the net assets recorded for this business combination upon the finalization of more detailed analyses of the facts and circumstances that existed at the date of the transaction may change the amount and allocation of the purchase price. As such, the purchase price amount and allocations for this transaction are preliminary estimates including in-process research and development, goodwill and contingent consideration, which may be subject to change within the measurement period. The net assets were recorded at their estimated fair value. In valuing acquired assets and liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions for contractual obligations, and appropriate discount rates. In connection with the acquisition, we recognized $ 21.7 million of indefinite-lived in-process research and development intangible assets. Goodwill is considered an indefinite-lived asset and relates primarily to intangible assets that do not qualify for separate recognition, such as the assembled workforce and synergies between the entities. Goodwill of $ 5.8 million was established as a result of the Acquisition and is not tax deductible. VCN operations recorded a net loss of $ 5.8 million from the date of acquisition through September 30, 2022. During the three months ended June 30, 2022 the Company recognized a measurement period adjustment related to the estimate of acquired liabilities resulting in a $ 277,000 reduction in accrued expenses and goodwill and during the three months ended September 30, 2022 the Company recognized another measurement period adjustment related to the estimated fair value of its in-process R&D resulting in a $ 810,000 increase in in-process R&D, an increase of $ 202,000 in deferred tax liabilities and a decrease of $ 607,000 in goodwill. The cumulative impact of the re-measurements as of the nine month ended September 30, 2022 was a reduction in accrued liabilities of $ 277,000 , an increase in in-process R&D of $ 810,000 ; an increase in deferred tax liabilities of $ 202,000 and a decrease in goodwill of $ 884,000 . 11 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements Pro Forma Consolidated Financial Information (unaudited) The following unaudited pro forma consolidated financial information summarizes the results of operations for the periods indicated as if the VCN acquisition had been completed as of January 1, 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, (in thousands) 2022 2021 2022 2021 Net revenues ​ $ — ​ $ — ​ ​ — ​ $ — Net loss ​ $ ( 4,853 ) ​ $ ( 3,808 ) ​ ​ ( 14,956 ) ​ $ ( 10,810 ) ​ 2. BUSINESS COMBINATION - (continued) Transaction Costs In conjunction with the Acquisition, the Company incurred approximately $ 1.2 million and $ 0.2 million in 2021 and 2022, respectively, in transaction costs, which were expensed as general, and administrative expense in the consolidated statements of operations. 3. Goodwill and Intangibles Goodwill of $ 5.8 million and in-process R&D of $ 21.7 million were recorded in connection with the Acquisition of VCN, as described in Note 2. During the quarter ending September 30, 2022, the Company experienced a sustained decline in the quoted market price of the Company’s common stock and the Company deemed this to be a triggering event. The Company performed an interim impairment analysis and concluded that the Goodwill and IPRD was not impaired as of September 30,2022. The following table provides the Company’s goodwill as of September 30, 2022. During the three months ended June 30, 2022 the Company recognized a measurement period adjustment related to the estimate of acquired expenses resulting in a $ 277,000 reduction in accrued liabilities and goodwill and during the three months ended September 30, 2022 the Company recognized another measurement period adjustment related to the estimated fair value of its in-process R&D resulting in an $ 810,000 increase in in-process R&D, an increase of $ 202,000 in deferred tax liabilities and a decrease of $ 607,000 in goodwill. The cumulative impact of the re-measurements as of the nine month ended September 30, 2022 was a reduction in accrued liabilities of $ 277,000 , an increase in in-process R&D of $ 810,000 ; an increase in deferred tax liabilities of $ 202,000 and a decrease in goodwill of $ 884,000 . ​ ​ ​ ​ ​ ​ Goodwill (in thousands) Balance at December 31, 2021 ​ $ — Goodwill from Acquisition of VCN ​ 5,765 Goodwill impairment loss ​ — Measurement Period Adjustments ​ ​ ( 884 ) Effects of exchange rates ​ ​ ( 627 ) Balance at September 30, 2022 ​ $ 4,254 ​ The following table provides the Company’s in-process R&D as of September 30, 2022. ​ ​ ​ ​ ​ ​ In-process ​ ​ R&D (in thousands) Balance at December 31, 2021 ​ $ — Acquired IPR&D ​ 21,703 Measurement Period Adjustment ​ 810 Effects of exchange rates ​ ​ ( 2,424 ) Balance at September 30, 2022 ​ $ 20,089 ​ ​ 12 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 4. Fair Value of Financial Instruments Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement , defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing an asset or liability. Fair value measurements are rated on a three-tier hierarchy as follows: ● Level 1 inputs: Quoted prices (unadjusted) for identical assets or liabilities in active markets; 4. Fair Value of Financial Instruments – (continued) ● Level 2 inputs: Inputs, other than quoted prices, included in Level 1 that are observable either directly or indirectly; and ● Level 3 inputs: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. The carrying amounts of the Company’s short-term financial instruments, including cash and cash equivalents, other current assets, accounts payable and accrued liabilities approximate fair value due to the relatively short period to maturity for these instruments. In connection with the Acquisition of VCN, the Company will be required pay up to $ 70.2 million in additional consideration upon the achievement of certain milestones, including regulatory filings completed noted in Note 3. In September 2022 the trial received “safe to proceed” from the FDA for its phase 2 clinical trial of VCN-01. Due to this approval the company will pay Grifols $ 3.0 million in Q4 2022. The discounted cash flow method used to value this contingent consideration includes inputs of not readily observable market data, which are Level 3 inputs. As of the March 10, 2022 acquisition date, the contingent consideration had a fair value of $ 12.2 million. The fair value of the contingent consideration was $ 11.9 million as of September 30, 2022 and is reflected as current accrued contingent consideration of $ 9.5 million and non-current contingent consideration liability of $ 2.4 million in the consolidated balance sheet. During the three months ended September 30, 2022 the Company recognized in operating expense a $ 226,000 fair value adjustment increase to contingent consideration. During the nine months ended September 30, 2022 the Company recognized in operating expense a $ 257,000 fair value adjustment decrease to contingent consideration. The fair value of financial instruments measured on a recurring basis is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of March 10, 2022 Description Total Level 1 Level 2 Level 3 Liabilities: ​ ​ Contingent consideration ​ $ 12,159 — — ​ $ 12,159 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of September 30, 2022 Description Total Level 1 Level 2 Level 3 Liabilities: ​ ​ Contingent consideration ​ $ 11,902 — — ​ $ 11,902 ​ The following table summarizes the change in fair value, as determined by Level 3 inputs, for all assets and liabilities using unobservable Level 3 inputs for the nine months ended September 30, 2022 (in thousands): ​ 13 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements ​ ​ ​ ​ ​ Contingent ​ ​ Consideration Balance at March 10, 2022 ​ $ 12,159 Change in fair value ​ ( 257 ) Balance at September 30, 2022 ​ $ 11,902 ​ 4. Fair Value of Financial Instruments – (continued) The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include the following significant unobservable inputs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of March 10, 2022 ​ ​ Valuation ​ Significant ​ Weighted Average ​ Methodology Unobservable Input (range, if applicable) Contingent Consideration Probability weighted Milestone dates 2022-2027 ​ ​ income approach ​ ​ ​ ​ ​ ​ Discount rate 7.3 % to 8.6 % ​ ​ Weighted Average Discount rate 7.77 % ​ ​ Probability of Occurrence (periodic for each Milestone) 9.9 % to 82.4 % ​ ​ Probability of occurrence (cumulative through each Milestone) 5.1 % to 62.8 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of September 30, 2022 ​ ​ Valuation ​ Significant ​ Weighted Average ​ Methodology Unobservable Input (range, if applicable) Contingent Consideration Probability weighted Milestone dates 2022-2027 ​ ​ ​ income approach ​ ​ ​ ​ ​ ​ ​ Discount rate ​ 12.4 % to 13.6 % ​ ​ ​ ​ ​ Weighted Average Discount rate ​ 13.0 % ​ ​ ​ ​ ​ Probability of Occurrence (periodic for each Milestone) ​ 9.9 % to 82.4 % ​ ​ ​ Probability of occurrence (cumulative through each Milestone) ​ 5.1 % to 62.8 % ​ ​ ​ 5. Selected Balance Sheet Information ​ Prepaid expenses and other current assets (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2022 2021 Prepaid clinical research organizations ​ $ 1,169 ​ $ 458 Prepaid manufacturing expenses ​ ​ 573 ​ ​ — VAT receivable ​ ​ 214 ​ ​ — Prepaid consulting, subscriptions and other expenses ​ ​ 180 ​ ​ 272 Prepaid insurances ​ ​ 105 ​ ​ 803 ​ ​ ​ ​ ​ ​ ​ Total ​ $ 2,241 ​ $ 1,533 ​ Prepaid clinical research organizations (CROs) expense is classified as a current asset. The Company makes payments to the CROs based on agreed upon terms that include payments in advance of study services. 14 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 5. Selected Balance Sheet Information – (continued) Property and equipment, net (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2022 2021 Computers and office equipment ​ $ 802 ​ $ 827 Other Property, Plant and Equipment ​ ​ 190 ​ ​ — Leasehold improvements ​ 94 ​ 94 Software ​ 11 ​ 11 ​ ​ 1,097 ​ 932 Less: accumulated depreciation and amortization ​ ( 835 ) ​ ( 831 ) ​ ​ ​ ​ ​ ​ ​ Total ​ $ 262 ​ $ 101 ​ Accrued expenses (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2022 2021 Accrued clinical consulting services ​ $ 773 ​ $ 696 Accrued vendor payments ​ 366 ​ 1,028 Accrued manufacturing costs ​ ​ 173 ​ ​ 204 VAT payable ​ ​ 99 ​ ​ — Total ​ $ 1,411 ​ $ 1,928 ​ Accrued employee benefits (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2022 2021 Accrued bonus expense ​ $ 1,067 ​ $ 886 Accrued vacation expense ​ ​ 146 ​ ​ 92 Accrued compensation expense ​ 106 ​ — ​ ​ ​ ​ ​ ​ ​ Total ​ $ 1,319 ​ $ 978 ​ ​ ​ 6. Stock-Based Compensation Stock Incentive Plans On March 20, 2007, the Company’s Board of Directors approved the 2007 Stock Incentive Plan (the “2007 Stock Plan”) for the issuance of up to 7,143 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries. This plan was approved by the stockholders on November 2, 2007. The exercise price of stock options under the 2007 Stock Plan was determined by the compensation committee of the Board of Directors and could be equal to or greater than the fair market value of the Company’s common stock on the date the option is granted. As of September 30, 2022, there were 515 options issued and outstanding under the 2007 Stock Plan. 15 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 6. Stock-Based Compensation – (continued) On November 2, 2010, the Board of Directors and stockholders adopted the 2010 Stock Incentive Plan (“2010 Stock Plan”) for the issuance of up to 8,572 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries. On October 22, 2013, the stockholders approved and adopted an amendment to the Company’s 2010 Stock Plan to increase the number of shares of Company’s common stock reserved for issuance under the Plan from 8,572 to 17,143 ; on May 15, 2015, increased the number of shares from 17,143 to 22,858 ; on August 25, 2016, increased the number of shares from 22,858 to 40,000 ; on September 7, 2017, increased the number of shares from 40,000 to 50,000 ; on September 24, 2018 increased the number of shares from 50,000 to 100,000 ; and on September 5, 2019, increased the number of shares from 100,000 to 400,000 The exercise price of stock options under the 2010 Stock Plan is determined by the compensation committee of the Board of Directors and may be equal to or greater than the fair market value of the Company’s common stock on the date the option is granted. Options become exercisable over various periods from the date of grant and expire between five and ten years after the grant date. As of September 30, 2022, there were 238,853 options issued and outstanding under the 2010 Stock Plan. On September 17, 2020, the stockholders approved and adopted the 2020 Stock Incentive Plan (“2020 Stock Plan”) for the issuance of up to 400,000 shares of Common Stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries. On September 30, 2022, the stockholders approved and adopted an amendment to the Company’s 2010 Stock Plan to increase the number of shares of Company’s common stock reserved for issuance under the Plan from 400,000 to 7,000,000 . As of September 30, 2022, there were 368,002 options issued and outstanding under the 2020 Stock Plan. In the event of an employee’s termination, the Company will cease to recognize compensation expense for that employee. Stock forfeitures are recognized as incurred. There is no deferred compensation recorded upon initial grant date. Instead, the fair value of the stock-based payment is recognized over the stated vesting period. The Company has applied fair value accounting for all stock-based payment awards since inception. The fair value of each option or warrant granted is estimated on the date of grant using the Black-Scholes option pricing model. There were no options granted during the three and nine months ended September 30, 2021. The assumptions used for the nine months ended September 30, 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ 2022 Exercise price ​ $ 2.60 ​ Expected dividends ​ 0 % Expected volatility ​ 95 % Risk free interest rate ​ 2.65 % Expected life of option (years) ​ 4.3 ​ ​ Expected dividends — The Company has never declared or paid dividends on its common stock and has no plans to do so in the foreseeable future. Expected volatility —Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The expected volatility assumption is derived from the historical volatility of the Company’s common stock over a period approximately equal to the expected term. Risk-free interest rate —The assumed risk-free rate used is a zero coupon U.S. Treasury security with a maturity that approximates the expected term of the option. Expected life of the option —The period of time that the options granted are expected to remain unexercised. Options granted during the year have a maximum term of seven years. The Company estimates the expected life of the option term based on the weighted average life between the dates that options become fully vested and the maximum life of options granted. 16 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 6. Stock-Based Compensation – (continued) The Company records stock-based compensation based upon the stated vesting provisions in the related agreements. The vesting provisions for these agreements have various terms as follows: ● immediate vesting, ● in full on the one-year anniversary date of the grant date, ● half vesting immediately and the remaining over three years, ● quarterly over three years, ● annually over three years, ● one-third immediate vesting and the remaining annually over two years, ● one-half immediate vesting and the remaining over nine months, ● one-quarter immediate vesting and the remaining over three years, ● one-quarter immediate vesting and the remaining over 33 months, ● monthly over one year, and ● monthly over three years During the nine months ended September 30, 2022, the Company granted 3,000 options to employees having an approximate fair value of $ 5,000 based upon the Black-Scholes option pricing model, respectively. There were no options granted during the three and nine months ended September 30, 2021. 17 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 6. Stock-Based Compensation – (continued) A summary of stock option activity for the nine months ended September 30, 2022 and the year ended December 31, 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Weighted Average Aggregate ​ ​ ​ ​ Average Exercise ​ Remaining ​ Intrinsic ​ Options Price Contractual Life Value Balance - December 31, 2020 399,779 ​ $ 23.52 6.09 years ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Granted 226,000 ​ ​ 3.30 ​ ​ ​ Exercised — ​ ​ — ​ ​ ​ ​ ​ Expired ( 214 ) ​ ​ 431.50 ​ ​ ​ Forfeited — ​ ​ — ​ ​ ​ Balance - December 31, 2021 ​ 625,565 ​ ​ 16.12 ​ 5.58 years ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Granted ​ 3,000 ​ ​ 2.60 ​ ​ ​ ​ ​ Exercised ​ — ​ ​ — ​ ​ ​ ​ ​ Expired ​ ( 6,654 ) ​ ​ 39.92 ​ ​ ​ ​ ​ Forfeited ​ ( 14,541 ) ​ ​ 3.61 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance - September 30, 2022 - outstanding 607,370 ​ $ 16.09 4.82 years ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance - September 30, 2022 - exercisable 403,250 ​ $ 22.42 4.33 years ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grant date fair value of options granted – nine months ended September 30, 2022 ​ ​ ​ $ 5,408 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average grant date fair value – nine months ended September 30, 2022 ​ ​ ​ $ 1.80 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grant date fair value of options granted – year ended December 31, 2021 ​ ​ ​ $ 50,100 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average grant date fair value – year ended December 31, 2021 ​ ​ ​ $ 2.20 ​ ​ Stock-based compensation expense included in general and administrative expenses relating to stock options issued to employees for the three and nine months ended September 30, 2022 was $ 46,000 and $ 124,000 , respectively, and $ 34,000 and $ 101,000 for the three and nine months ended September 30, 2021, respectively. Stock-based compensation expense included in research and development expenses relating to stock options issued to employees for the three and nine months ended September 30, 2022 was $ 21,000 and $ 62,000 , respectively, and $ 16,000 and $ 47,000 for the three and nine months ended September 30, 2021, respectively. Stock-based compensation expense included in general and administrative expenses relating to stock options issued to consultants for the three and nine months ended September 30, 2022 was $ 47,000 and $ 141,000 , respectively, and $ 49,000 and $ 147,000 for the three and nine months ended September 30, 2021, respectively. Stock-based compensation expense included in research and development expenses relating to stock options issued to consultants for the three and nine months ended September 30, 2022 was $ 7,000 and $ 21,000 , respectively, and $ 3,000 and $ 10,000 for the three and nine months ended September 30, 2021. As of September 30, 2022, total unrecognized stock-based compensation expense related to stock options was $ 395,000 , which is expected to be expensed through May 2024. 18 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 6. Stock-Based Compensation – (continued) The FASB’s guidance for stock-based payments requires cash flows from excess tax benefits to be classified as a part of cash flows from operating activities. Excess tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to stock compensation costs for such options. The Company did not record any excess tax benefits during the three and nine months ended September 30, 2022 and 2021. 7. Stock Warrants On October 15, 2018, the Company closed its underwritten public offering pursuant to which it received gross proceeds of approximately $ 18.6 million before deducting underwriting discounts, commissions and other offering expenses payable by the Company and sold (i)Class A Units (the “Class A Units”), consisting of an aggregate of 252,000 shares of the Common Stock, and five-year warrant to purchase an aggregate of 252,000 shares of Common Stock at an exercise price of $ 13.80 per share, which subsequently was reduced to $ 6.90 per share (each a “Warrant” and collectively, the “Warrants”) and (ii) Class B Units (the “Class B Units”, and together with the Class A Units, the “Units”), consisting of an aggregate of 15,723 shares of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”), with a stated value of $ 1,000 and convertible into shares of Common Stock at the stated value divided by a conversion price of $ 11.50 per share, with all shares of Series B Preferred Stock convertible into an aggregate of 1,367,218 shares of Common Stock, and issued with a warrant to purchase an aggregate of 1,367,218 shares of Common Stock. On November 16, 2020, the exercise price of the Warrants was reduced from $ 13.80 per Warrant per full share of the Company’s common stock, $ 0.001 par value per share (the “Common Stock”), to $ 6.90 per Warrant per full share of Common Stock in accordance with the anti-dilution terms of the Warrant. The reduction was the result of the issuance of shares of Common Stock by the Company through its “at the market offering” facility. The effect of the change in the exercise price of the warrants as a result of the triggering of the down round protection clause in the Warrants was recorded as a deemed dividend of $ 0.9 million during the year ended December 31, 2020, which reduces the income available to common stockholders. In addition, pursuant to the underwriting agreement that the Company had entered into with A.G.P./Alliance Global Partners (the “Underwriters”), as representative of the underwriters, the Company granted the Underwriters a 45 day option (the “Over-allotment Option”) to purchase up to an additional 242,883 shares of Common Stock and/or additional Warrants to purchase an additional 242,883 shares of Common Stock. The Underwriters partially exercised the Over-allotment Option by electing to purchase from the Company additional Warrants to purchase 180,783 shares of Common Stock. If, at the time of exercise, there is no effective registration statement registering, or no current prospectus available for, the issuance of the shares of Common Stock to the holder, then the Warrants may only be exercised through a cashless exercise. No fractional shares of Common Stock will be issued in connection with the exercise of a Warrant. In lieu of fractional shares, the holder will receive an amount in cash equal to the fractional amount multiplied by the fair market value of any such fractional shares. The Company has concluded that the Warrants are required to be equity classified. The Warrants were valued on the date of grant using Monte Carlo simulations. During the three months ended March 31, 2021, 1,165,575 warrants were exercised for cash proceeds of $ 8.0 million. There were no warrants exercised during the three and nine months ended September 30, 2022. On August 3, 2022 the Company announced the exercise price of warrants issued by the Company in October 2018 was reduced from $ 6.90 per Warrant per full share of the Company’s common stock, $ 0.001 par value per share to $ 1.22 per Warrant per full share of Common Stock. The reduction was the result of the issuance of shares of Preferred Stock by the Company in a private placement. The effect of the change in the exercise price of the warrants as a result of the triggering of the down round protection clause in the Warrants was recorded as a deemed dividend of $ 340,000 during the three and nine months ended September 30, 2022, which reduces the income available to common stockholders. 19 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 7. Stock Warrants – (continued) A summary of all warrant activity for the Company for the quarter ended September 30, 2022 and the year ended December 31, 2021 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ Number of Weighted Average ​ ​ Warrants ​ Exercise Price Balance at December 31, 2020 1,800,072 ​ ​ 1.24 Granted — ​ — Exercised ( 1,165,575 ) ​ 1.24 Forfeited — ​ — Balance at December 31, 2021 634,497 ​ $ 1.24 Granted ​ — ​ ​ — Exercised ​ — ​ ​ — Forfeited ​ — ​ ​ — Balance at September 30, 2022 ​ 634,497 ​ $ 1.24 ​ On December 26, 2017, the Company entered into a consulting agreement for advisory services for a period of six months. As compensation for such services, the consultant was paid an upfront payment, a monthly fee and on January 24, 2018 was issued a warrant exercisable for 71 shares of the Company’s common stock on the date of issue. The warrant is equity classified and the fair value of the warrant approximated $ 9,000 and was measured using the Black-Scholes option pricing model. A summary of all outstanding and exercisable common stock warrants as of September 30, 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ ​ Warrants ​ Warrants ​ Remaining Exercise Price ​ Outstanding ​ Exercisable ​ Contractual Life $ 1.22 634,426 634,426 1.03 years ​ 182.00 71 71 0.23 years $ 1.24 634,497 634,497 1.03 years ​ ​ 8. Net Loss per Share Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding including the effect of common share equivalents. Diluted net loss per share assumes the issuance of potential dilutive common shares outstanding for the period and adjusts for any changes in income and the repurchase of common shares that would have occurred from the assumed issuance, unless such effect is anti-dilutive. Net loss attributable to common stockholders for the three and nine months ended September 30, 2022 was approximately $ 5.2 million and $ 14.4 million, respectively. Net loss attributable to common stockholders for the three and nine months ended September 30, 2022 includes the effect of the warrant exercise price adjustment of $ 340,000 . Net loss attributable to common stockholders for the three and nine months ended September 30, 2021 was approximately $ 3.3 million and $ 17.9 million, respectively. Net loss attributable to common stockholders for the nine months ended September 30, 2021 excludes net loss attributable to non-controlling interest of $ 0.1 million and includes the accretion of the Series B preferred discount of $ 1.5 million as a result of converted shares and Series A preferred stock accrued dividends of $ 0.1 million and the deemed dividend of $ 7.4 million resulting from the effect of the Series A preferred stock price adjustment during the first quarter of 2021. There were no shares of common stock underlying Series B Preferred shares convertible to common stock that were excluded from the computations of net loss per common share for the three and nine months ended September 30, 2021 since all remaining Series B preferred stock were converted to common stock in 2021. The number of options and warrants for the purchase of common stock that were excluded from the computations of net loss per common share and for the three and nine months ended September 30, 2022 were 607,370 and 634,497 , respectively and for the three and nine months ended September 30, 2021 were 399,742 and 634,497 , respectively, because their effect is anti-dilutive. 20 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 9. Non-controlling Interest and Related Party On September 5, 2018, the Company entered into an agreement (the ‘Stock Purchase Agreement”) with Cedars-Sinai Medical Center (CSMC) for an investigator-sponsored Phase 2b clinical study of SYN-010 to be co-funded by the Company and CSMC (the “Study”). The Study will provide further evaluation of the efficacy and safety of SYN-010, the Company’s modified-release reformulation of lovastatin lactone, which is exclusively licensed to the Company by CSMC. SYN-010 is designed to reduce methane production by certain microorganisms (M. smithii) in the gut to treat an underlying cause of irritable bowel syndrome with constipation (IBS-C). In consideration of the support provided by CSMC for the Study, the Company paid $ 328,000 to support the Study and the Company entered into a Stock Purchase Agreement with CSMC pursuant to which the Company, upon the approval of the Study protocol by the Institutional Review Board (IRB): (i) issued to CSMC five thousand ( 5,000 ) shares of common stock of the Company; and (ii) transferred to CSMC an additional two million four hundred twenty thousand ( 2,420,000 ) shares of common stock of its subsidiary SYN Biomics, Inc. (“Synbiomics”) owned by the Company, such that after such issuance CSMC owned an aggregate of seven million four hundred eighty thousand ( 7,480,000 ) shares of common stock of SYN Biomics, representing seventeen percent ( 17 %) of the issued and outstanding shares of SYN Biomics’ common stock. The services rendered are recorded to research and development expense in proportion with the progress of the study and based overall on the fair value of the shares ($ 285,000 ) as determined at the date of IRB approval. There was no expense recorded related to this transaction during the three and nine months ended September 30, 2022 and 2021. The Agreement also provided CSMC with a right, commencing on the six month anniversary of issuance of the stock under certain circumstances in the event that the shares of stock of SYN Biomics are not then freely tradeable, and subject to NYSE American, LLC approval, to exchange its SYN Biomics shares for unregistered shares of the Company’s common stock, with the rate of exchange based upon the relative contribution of the valuation of SYN Biomics to the public market valuation of the Company at the time of each exchange. The Stock Purchase Agreement also provided for tag-along rights in the event of the sale by the Company of its shares of SYN Biomics. On September 30, 2020, CSMC MAST formally agreed to discontinue the ongoing Phase 2b investigator-sponsored clinical study of SYN-010 following the results of a planned interim futility analysis. Although it was concluded that SYN-010 was well tolerated, SYN-010 was unlikely to meet its primary endpoint by the time enrollment is completed. On November 9, 2020, the Company and its subsidiary, Synthetic Biomics, Inc. and CSMC mutually agreed to terminate the exclusive license agreement dated December 5, 2013 and all amendments thereto and the clinical trial agreement relating to SYN-010. The determination to terminate the SYN-010 license agreement was agreed following the completion of a planned interim futility analysis of the Phase 2b investigator-sponsored clinical trial of SYN-010. On September 30, 2020, CSMC (the Company’s SYN-010 clinical development partner) informed the Company that it discontinued the ongoing Phase 2b investigator-sponsored clinical study of SYN-010 IBS-C patients. During 2021, CSMC returned its shares of SYN Biomics to the Company. The Company’s interest in SYN Biomics is now 100 %. This is reflected in the Consolidated Statements of Equity (Deficit). The Company’s non-controlling interest was accounted for under ASC 810, Consolidation and represents the minority stockholder’s ownership interest related to the Company’s subsidiary, SYN Biomics. In accordance with ASC 810, the Company reports its non-controlling interest in subsidiaries as a separate component of equity in the Consolidated Balance Sheets and reports both net loss attributable to the non-controlling interest and net loss attributable to the Company’s common stockholders in the face of the Consolidated Statements of Operations. ​ 21 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 10. Common and Preferred Stock Series C and D Preferred Stock On July 29, 2022, the Company closed a private placement offering pursuant to the terms of a Securities Purchase Agreement dated as of July 28, 2022 entered into with MSD Credit Opportunity Master Fund, L.P., pursuant to which the Company agreed to issue and sell 275,000 shares of the Company’s Series C Convertible Preferred Stock, par value $ 0.001 per share (the “Series C Preferred Stock”), and 100,000 shares of the Company’s Series D Convertible Preferred Stock, par value $ 0.001 per share (the “Series D Preferred Stock,” and together with the Series C Preferred Stock, the “Preferred Stock”), at an offering price of $ 8.00 per share, for gross proceeds of approximately $ 3.0 million in the aggregate, before the deduction of discounts, fees and offering expenses. The shares of Preferred Stock will be convertible, at a conversion price (the “Conversion Price”) of $ 1.22 per share (subject in certain circumstances to adjustments), into an aggregate of 2,459,016 shares of the Company’s common stock, par value $ 0.001 per share (the “Common Stock”), at the option of the holders of the Preferred Stock and, in certain circumstances, by the Company. The Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. The Company included certain proposals at its 2022 annual meeting of stockholders, including to consider (i) an amendment to the Company’s Articles of Incorporation, as amended (the “Charter”), to change the name of the Company to “Theriva Biologics, Inc.” (the “Name Change”), (ii) an amendment to the Charter to increase the number of authorized shares of Common Stock from 20,000,000 to 350,000,000 (the “Authorized Common Stock Increase”) and (iii) any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Authorized Common Stock Increase (collectively, the “Stockholder Items”). The Investor has agreed in the Purchase Agreement to (i) not transfer, offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of the shares of the Preferred Stock until the earlier of the date that the Authorized Common Stock Increase is effected or October 26, 2022 (which may be extended to December 31, 2022 if certain conditions are met), (ii) vote the shares of the Series C Preferred Stock purchased in the Offering in favor of the Stockholder Items and (iii) vote the shares of the Series D Preferred Stock purchased in the Offering in the same proportion as shares of Common Stock and any other shares of capital stock of the Company that are entitled to vote thereon (excluding any shares of Common Stock that are not voted) on the Stockholder Items. Pursuant to the Purchase Agreement, the Company has filed certificates of designation (the “Certificates of Designation”) with the Secretary of the State of Nevada designating the rights, preferences and limitations of the shares of Series C Preferred Stock and Series D Preferred Stock. The Certificate of Designation for the Series C Preferred Stock provides, in particular, that the Series C Preferred Stock will have no voting rights other than the right to vote as a class on the Stockholder Items and the right to cast votes on an as converted to Common Stock basis on the Stockholder Items. The Certificate of Designation for the Series D Preferred Stock provides, in particular, that the Series D Preferred Stock will have no voting rights other than the right to vote as a class on the Stockholder Items and the right to cast 20,000 votes per share of Series D Preferred Stock on the Stockholder Items. The holders of Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to dividends actually paid, if any, on shares of Common Stock. The Conversion Price may be adjusted pursuant to the Certificates of Designation for stock dividends and stock splits, subsequent rights offering, pro rata distributions of dividends or the occurrence of a fundamental transaction (as defined in the applicable Certificate of Designation). The Series C Preferred Stock and Series D Preferred Stock is classified as temporary equity as a result of the deemed liquidation provision. Transaction expenses paid to third parties will be charged to temporary equity and will not be accreted as deemed dividends until redemption becomes probable. In order to comply with Section 122 of the NYSE American Company Guide, on August 9, 2022 the Company and the holder of the Company’s Series C preferred stock and Series D preferred stock amended the Securities Purchase Agreement entered into between them on July 28, 2022 to provide that the holder may only submit 1,549,295 of the votes relating to the Series C Preferred Stock that it would otherwise be entitled to vote. 22 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 10. Common and Preferred Stock – (continued) Series B Preferred Stock On October 15, 2018, the Company closed its underwritten public offering pursuant to which it received gross proceeds of approximately $ 18.6 million before deducting underwriting discounts, commissions and other offering expenses payable by the Company and sold (i) Class A Units (the “Class A Units”) consisting of an aggregate of 252,000 shares of the Common Stock, and five-year warrant to purchase an aggregate of 252,000 shares of Common Stock at an exercise price of $ 13.80 per share, which subsequently was reduced to $ 1.22 per share (each a “Warrant” and collectively, the “Warrants”), and (ii) Class B Units (the “Class B Units”, and together with the Class A Units, the “Units”), consisting of an aggregate of 15,723 share of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”), with a stated value of $ 1,000 and convertible into shares of Common Stock at the stated value divided by a conversion price of $ 11.50 per share, with all shares of Series B Preferred Stock convertible into an aggregate of 1,367,218 shares of Common Stock, and issued with a warrant to purchase an aggregate of 1,367,218 shares of Common Stock.. Since the above units are equity instruments, the proceeds were allocated on a relative fair value basis which created the Series B Preferred Stock discount. In addition, pursuant to the Underwriting Agreement that the Company entered into with the Underwriters on October 10, 2018, the Company granted the Underwriters a 45 day option (the “Over-allotment Option”) to purchase up to an additional 242,883 shares of Common Stock and/or additional warrants to purchase an additional 242,883 shares of Common Stock. Each Warrant is exercisable for one share of common stock. The Underwriters partially exercised the Over-allotment Option by electing to purchase from the Company additional Warrants to purchase 180,783 shares of Common Stock. The conversion price of the Series B Preferred Stock and exercise price of the October 2018 Warrants is subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Common Stock. The exercise price of the Warrants is subject to adjustment in the event of certain dilutive issuances. On November 16, 2020, the exercise price of the Warrants was reduced from $ 13.80 per Warrant per full share of Common Stock to $ 6.90 per Warrant per full share of common stock. The reduction was the result of the issuance of shares of Common Stock by the Company through its “at the market offering” facility. The effect of the change in the exercise price of the warrants as a result of the triggering of the down round protection clause in the Warrants was recorded as a deemed dividend in accumulated deficit of $ 880,000 , which reduces the income available to common stockholders for the year ended December 31, 2020. On August 3, 2022 the Company announced the exercise price of warrants issued by the Company in October 2018 was reduced from $ 6.90 per Warrant per full share of the Company’s common stock, $ 0.001 par value per share to $ 1.22 per Warrant per full share of Common Stock. The reduction was the result of the issuance of shares of Preferred Stock by the Company in a private placement. The effect of the change in the exercise price of the warrants as a result of the triggering of the down round protection clause in the Warrants was recorded as a deemed dividend of $ 340,000 during the three and nine months ended September 30, 2022, which reduces the income available to common stockholders. Since the effective conversion price of the Series B Preferred Stock is less than the fair value of the underlying Common Stock at the date of issuance, there is a beneficial conversion feature (“BCF”) at the issuance date. Because the Series B Preferred Stock has no stated maturity or redemption date and is immediately convertible at the option of the holder, the discount created by the BCF is immediately charged to accumulated deficit as a “deemed dividend” and impacts earnings per share. During the three months ended March 31, 2021, 398 shares were converted resulting in the recognition of a deemed dividends of $ 1.5 million for the amortization of the Series B Preferred Stock discount upon conversion. During the three and nine months ended September 30, 2022 there were no shares remaining outstanding as all shares were converted in 2021 and 2020. 23 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 10. Common and Preferred Stock – (continued) Series A Preferred Stock On September 11, 2017, the Company entered into a share purchase agreement (the “Purchase Agreement”) with an investor (the “Investor”), pursuant to which the Company offered and sold in a private placement 12,000 shares of its Series A Convertible Preferred Stock, par value $ 0.001 per share (the “Series A Preferred Stock”) for an aggregate purchase price of $ 12 million, or $ 10 per share. The Series A Preferred Stock ranks senior to the shares of the Company’s common stock, and any other class or series of stock issued by the Company with respect to dividend rights, redemption rights and rights to the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. Holders of Series A Preferred Stock are entitled to a cumulative dividend at the rate of 2.0 % per annum, payable quarterly in arrears, as set forth in the Certificate of Designation of Series A Preferred Stock classifying the Series A Preferred Stock. The Series A Preferred Stock is convertible at the option of the holders at any time into shares of common stock at an initial conversion price of $ 5.40 per share which was increased to $ 189.0 after taking into account the 2018 reverse stock split, subject to certain customary anti-dilution adjustments and was decreased to $ 15.0 on January 27, 2021, see below. Any conversion of Series A Preferred Stock may be settled by the Company in shares of common stock only. The holder’s ability to convert the Series A Preferred Stock into common stock is subject to (i) a 19.99% blocker provision to comply with NYSE American Listing Rules, (ii) if so elected by the Investor, a 4.99% blocker provision that will prohibit beneficial ownership of more than 4.99% of the outstanding shares of the Company’s common stock or voting power at any time, and (iii) applicable regulatory restrictions. In the event of any liquidation, dissolution or winding-up of the Company, holders of the Series A Preferred Stock are entitled to a preference on liquidation equal to the greater of (i) an amount per share equal to the stated value plus any accrued and unpaid dividends on such share of Series A Preferred Stock (the “Accreted Value”), and (ii) the amount such holders would receive in such liquidation if they converted their shares of Series A Preferred Stock (based on the Accreted Value and without regard to any conversion limitation) into shares of the common stock immediately prior to any such liquidation, dissolution or winding-up (the greater of (i) and (ii), is referred to as the “Liquidation Value”). Except as otherwise required by law, the holders of Series A Preferred Stock have no voting rights, other than customary protections against adverse amendments and issuance of pari passu or senior preferred stock. Upon certain change of control events involving the Company, prior to the filing of the amendment to the Certificate of Designation for the Series A Preferred Stock described below, the Company will be required to repurchase all of the Series A Preferred Stock at a redemption price equal to the greater of (i) the Accreted Value and (ii) the amount that would be payable upon a change of control (as defined in the Certificate of Designation) in respect of common stock issuable upon conversion of such share of Series A Preferred Stock if all outstanding shares of Series A Preferred Stock were converted into common stock immediately prior to the change of control. On or at any time after (i) the VWAP (as defined in the Certificate of Designation) for at least 20 trading days in any 30 trading day period is greater than $ 70.00 , subject to adjustment in the case of stock split, stock dividends or the like the Company has the right, after providing notice not less than 6 months prior to the redemption date, to redeem, in whole or in part, on a pro rata basis from all holders thereof based on the number of shares of Series A Preferred Stock then held, the outstanding Series A Preferred Stock, for cash, at a redemption price per share of Series A Preferred Stock of $ 7,875.00 , subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Convertible Preferred Stock or (ii) the five year anniversary of the issue date, the Company shall have the right to redeem, in whole or in part, on a pro rata basis from all holders thereof based on the number of shares of Series A Convertible Preferred Stock then held, the outstanding Series A Preferred Stock, for cash, at a redemption price per share equal to the Liquidation Value. 24 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 10. Common and Preferred Stock – (continued) The Series A Preferred Stock was classified as temporary equity due to the shares being redeemable based on contingent events outside of the Company’s control. Since the effective conversion price of the Series A Preferred Stock is less than the fair value of the underlying common stock at the date of issuance, there is a beneficial conversion feature (“BCF”) at the issuance date. Because the Series A Preferred Stock has no stated maturity or redemption date and is immediately convertible at the option of the holder, the discount created by the BCF is immediately charged to accumulated deficit as a “deemed dividend” and impacts earnings per share. During the year ended December 31, 2017, the Company recorded a discount of $ 6.9 million. Because the Series A Preferred Stock is not currently redeemable, the discount arising from issuance costs was allocated to temporary equity and will not be accreted until such time that redemption becomes probable. The stated dividend rate of 2 % per annum is cumulative and the Company accrues the dividend on a quarterly basis (in effect accreting the dividend regardless of declaration because the dividend is cumulative). During the three months ended March 31,2021 and 2020, the Company accrued dividends of $ 24,000 and $ 62,000 , respectively. Once the dividend is declared, the Company will reclassify the declared amount from temporary equity to a dividends payable liability. When the redemption of the Series A Preferred Stock becomes probable, the temporary equity will be accreted to redemption value as a deemed dividend. On January 27, 2021, the Company filed an amendment to the Certificate of Designation for the Series A Preferred Stock to (i) lower the stated Conversion Price through September 30, 2021 and (ii) remove their change in control put, as an inducement for the holder to fully convert its Series A Preferred Stock. The Amendment to the Certificate of Designation for its Series A Convertible Preferred Stock (the “Certificate of Amendment”) with the Secretary of State of the State of Nevada adjusted the conversion price from $ 189 per share to $ 15 per share and removed the redemption upon change of control. The Company received notice from the holder of the Series A Preferred Stock that it was increasing the Maximum Percentage as defined in the “Certificate of Designation” from 4.99 % to 9.99 %, such increase to be effective 61 days from the date hereof. During the three months ended March 31, 2021, all outstanding shares of Series A Convertible Preferred Stock were converted to approximately 0.9 million shares of the Company’s common stock. There are no remaining shares of the Series A Convertible Preferred stock outstanding after these conversions. During January and February 2021, the Company issued 899,677 shares of its common stock upon the conversion effected on such date by the holder of 12,000 shares of its Series A Convertible Preferred Stock. The fair value of the consideration issued to the holder to induce conversion is accounted for as a deemed dividend and increased net loss available to common shareholders for purposes of calculating loss per share. The Company estimated fair value of the inducement consideration of $ 7.4 million and as a result has recorded a corresponding deemed dividend of $ 7.4 million during the three months ended March 31, 2021. B. Riley Securities Sales Agreement On August 5, 2016, the Company entered into the B. Riley FBR Sales Agreement with FBR Capital Markets & Co. (now known as B. Riley Securities), which enables the Company to offer and sell shares of common stock from time to time through B. Riley Securities, Inc. as the Company’s sales agent. Sales of common stock under the B. Riley Securities Sales Agreement are made in sales deemed to be “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities Act. B. Riley Securities, Inc. is entitled to receive a commission rate of up to 3.0 % of gross sales in connection with the sale of the Common Stock sold on the Company’s behalf. On February 9, 2021, the Company entered into an amended and restated sales agreement with B. Riley Securities, Inc. (“B. Riley”) and A.G.P./Alliance Global Partners (“AGP”) in order to include AGP as an additional sales agent for the Company’s “at the market offering” program (the “Amended and Restated Sales Agreement”). The Sales Agreement amended and restated the At Market Issuance Sales Agreement, dated August 5, 2016, with B. Riley Securities, Inc. (formerly known as B. Riley FBR, Inc.), as amended by amendment no. 1, dated May 7, 2018, to the At Market Issuance Sales Agreement. During the three months ended March 31, 2021, the Company sold through the At Market Issuance Sales Agreement and the Amended and Restated Sales Agreement approximately 7.9 million shares of the Company’s common stock and received net proceeds of approximately $ 66.0 million. During the three and nine months ended September 30, 2022, there were no sales of the Company’s common stock through the At Market Issuance Sales Agreement and the Amended and Restated Sales Agreement. 25 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 11. INDEBTEDNESS As a result of the acquisition of VCN the Company acquired interest-free or below-market interest rates loans ( 0 %- 1 %) extended by Spanish governmental institutions of Ministerio de Ciencia, Innovacion y Universidades and ACC10 Generalitat de Catalunya. The maturities of these loans are between 2027 and 2028. The Company is required to maintain a restricted cash collateral account of $ 90,000 relating to the RETOS 2015 loan, which is reflected as a non-current asset on the balance sheet. ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2022 September 30, 2022 ​ ​ Current ​ Non-current ​ ​ ​ NEBT Loan ​ $ 5 ​ $ 35 RETOS 2015 ​ ​ 47 ​ ​ 167 ​ ​ $ 52 ​ $ 202 ​ The difference between the fair value of these liabilities (when relevant conditions associated with the grants are met) and the amount received is recognized as a government grant and classified as other operating income in the statement of profit and loss. A maturity analysis of the debt as of September 30, 2022 is as follows (amounts in thousands of dollars) : ​ ​ ​ ​ 2023 $ 52 2024 ​ 57 2025 ​ 56 2026 ​ 46 2027 ​ 28 2028 ​ 15 Total $ 254 ​ ​ 26 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 12. Commitments and Contingencies The Company’s existing lease as of September 30, 2022 for its U.S. location is classified as an operating lease. As of September 30, 2022, the Company has two operating leases for facilities. During the quarter ended June 30, 2021, the Company renewed its Rockville MD facility lease by entering into a Second Lease Amendment which extends the lease term for 63 months beginning on September 1, 2022 and ending on December 31, 2027 at stated rental rates and including a 3-month rent abatement. The Second Amendment also has options for a Tenant Improvement Allowance and a Second Extension Term. The Second Amendment also gives the Company the right to expand their space by giving notice to the landlord before December 31, 2021. The Company did not give notice to expand the space during 2021. The Second Extension Term is offered at market rates and there is no economic incentive for the lessee, therefore the Company has determined that it is not part of the original lease term. There is an option in this Second Amendment to Lease for the Company to borrow funds for tenant improvements subject to an 8.5 % interest rate. The Company also leases research and office facilities in Barcelona Spain. The current lease is short term agreement with a 90-day termination notice provision that can be exercised by either party. On the closing date of the VCN Acquisition, a sublease was executed for the Company to lease research and office facilities at a new location in Parets del Valles (Barcelona) from the former owner of VCN. This lease was executed for an initial term estimated to begin in January 2023 until October 2026, with an option to renew for an additional five years . Operating lease costs are presented as part of general and administrative expenses in the condensed consolidated statements of operations, and for the three and nine months ended September 30, 2022 approximated $ 163,000 and $ 409,000 , respectively and for the three and nine months ended September 30, 2021 approximated $ 77,000 and $ 195,000 , respectively. For the three and nine months ended September 30, 2022, operating cash flows used for operating leases approximated $ 142,000 and $ 399,000 , respectively. For the three and nine months ended September 30, 2021, operating cash flows used for operating leases approximated $ 80,000 and $ 240,000 , respectively, and the right of use assets exchanged for operating the lease obligation was $ 1.3 million. The day one non-cash addition of right of use assets due to adoption of ASC 842 was $ 538,000 . A maturity analysis of our operating leases as of September 30, 2022 is as follows (amounts in thousands of dollars) : ​ ​ ​ ​ ​ Future undiscounted cash flow for the years ending September 30, ​ 2022 ​ $ 27 2023 ​ ​ 327 2024 ​ ​ 337 2025 ​ ​ 347 2026 ​ ​ 357 2027 ​ ​ 368 Total ​ ​ 1,763 ​ ​ ​ ​ Discount factor ​ ​ ( 362 ) Lease liability ​ ​ 1,401 Lease liability – current ​ ​ ( 157 ) Lease liability – long term ​ $ 1,244 ​ ​ 27 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 12. Commitments and Contingencies – (continued) Risks and Uncertainties The uncertain financial markets, disruptions in supply chains, mobility restraints, and changing priorities as well as volatile asset values could impact our business in the future. The outbreak and government measures taken in response to the pandemic have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, have spiked, while demand for other goods and services, such as travel, have fallen. The future progression of the pandemic and its effects on the Company’s business and operations are uncertain. The Company may face difficulties recruiting or retaining patients in its ongoing and planned clinical trials if patients are affected by the virus or are fearful of traveling to our clinical trial sites because of the outbreak. We and our third-party contract manufacturers, contract research organizations, and clinical sites may also face disruptions in procuring items that are essential to our research and development activities, including, for example, medical and laboratory supplies used in its clinical trials or preclinical studies, in each case, that are sourced from abroad or for which there are shortages because of ongoing efforts to address the outbreak. Further, although the Company have not experienced any material adverse effects on its business due to increasing inflation, it has raised operating costs for many businesses and, in the future, could impact demand or pricing manufacturing of its drug candidates or services providers, foreign exchange rates or employee wages. The Company is actively monitoring the effects these disruptions and increasing inflation could have on its operations. Through the VCN Acquisition, the Company has operations in Spain and may conduct research and development, manufacturing, and clinical trials in Western European countries. The invasion of Ukraine by Russia and the retaliatory measures that have been taken, or could be taken in the future, by the United States, NATO, and other countries have created global security concerns that could result in a regional conflict and otherwise have a lasting impact on regional and global economies, any or all of which could disrupt our supply chain, and despite the fact that we currently do not plan any clinical trials in Eastern Europe, may adversely impact the cost and conduct of R&D, manufacturing, and international clinical trials of our product candidates. ​ 13. Subsequent Events Effective October 12, 2022, the “Company, changed its name to Theriva Biologics, Inc. by filing a Certificate of Amendment to its Articles of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Nevada on October 11, 2022. In addition, effective October 12, 2022, the Company amended and restated its Amended and Restated Bylaws (the “Bylaws”) to reflect the Name Change (the “Amended and Restated Bylaws”). The Amended and Restated Bylaws contain no other changes. In accordance with the Nevada Revised Statutes and the Bylaws, the Board approved the Amended and Restated Bylaws, and stockholder approval was not required for such amendment. On October 11, 2022, the Company filed a Certificate of Change to its Articles of Incorporation (the “Certificate of Change”) with the Secretary of State of the State of Nevada that was effective on October 12, 2022 that increased the number of the Company’s authorized shares of common stock, $ 0.001 par value per share (the “Common Stock”), from 20,000,000 shares to 350,000,000 shares. ​ ​ 28 Table of Contents