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, 2023 December 31, 2022 Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ Current Assets ​ ​ Cash and cash equivalents ​ $ 31,160 ​ $ 41,786 Tax credit receivable ​ ​ 1,399 ​ ​ — Prepaid expenses and other current assets ​ 2,208 ​ 3,734 Total Current Assets ​ 34,767 ​ 45,520 ​ ​ ​ ​ ​ ​ ​ Non-Current Assets ​ ​ ​ ​ ​ ​ Property and equipment, net ​ 389 ​ 345 Restricted cash ​ ​ 97 ​ ​ 99 Right of use assets ​ ​ 1,831 ​ ​ 1,199 In-process research and development ​ 18,925 ​ 19,150 Goodwill ​ ​ 5,460 ​ ​ 5,525 Deposits and other assets ​ 76 ​ 23 Total Assets ​ $ 61,545 ​ $ 71,861 ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders‘ Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Current Liabilities: ​ ​ ​ Accounts payable ​ $ 833 ​ $ 915 Accrued expenses ​ 5,590 ​ 1,496 Accrued employee benefits ​ 1,269 ​ 1,403 Contingent consideration, current portion ​ ​ — ​ ​ 2,973 Deferred research and development tax credit-current portion ​ ​ 525 ​ ​ — Loans payable-current portion ​ ​ 65 ​ ​ 57 Operating lease liability-current portion ​ 461 ​ 216 Total Current Liabilities ​ 8,743 ​ 7,060 ​ ​ ​ ​ ​ ​ ​ Non-current Liabilities ​ ​ ​ ​ ​ ​ Non-current contingent consideration ​ ​ 5,935 ​ ​ 7,211 Non-current loans payable ​ ​ 150 ​ ​ 221 Deferred tax liabilities, net ​ ​ 413 ​ ​ 1,618 Non-current deferred research and development tax credit ​ ​ 874 ​ ​ — Non-current operating lease liability ​ ​ 1,546 ​ ​ 1,187 Total Liabilities ​ 17,661 ​ 17,297 ​ ​ ​ ​ ​ ​ ​ Commitments and Contingencies (Note 14) ​ ​ ​ Temporary Equity ​ ​ ​ ​ ​ ​ Series C convertible preferred stock, $ 0.001 par value; 10,000,000 authorized; 275,000 issued and outstanding ​ ​ 2,006 ​ ​ 2,006 Series D convertible preferred stock, $ 0.001 par value; 10,000,000 authorized; 100,000 issued and outstanding ​ 728 ​ 728 Stockholders’ Equity: ​ ​ ​ Common stock, $ 0.001 par value; 350,000,000 shares authorized, 17,762,998 issued and 17,042,765 outstanding at September 30, 2023 and 15,844,294 issued and 15,124,061 outstanding at December 31, 2022 ​ 18 ​ 16 Additional paid-in capital ​ 346,312 ​ 343,750 Treasury stock at cost, 720,233 shares at September 30, 2023 and at December 31, 2022 ​ ​ ( 288 ) ​ ​ ( 288 ) Accumulated other comprehensive loss ​ ​ ( 1,058 ) ​ ​ ( 679 ) Accumulated deficit ​ ( 303,834 ) ​ ( 290,969 ) Total Stockholders’ Equity ​ 41,150 ​ 51,830 ​ ​ ​ ​ ​ ​ ​ Total Liabilities, Temporary Equity, and Stockholders’ Equity ​ $ 61,545 ​ $ 71,861 ​ 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, ​ 2023 2022 2023 2022 Operating Costs and Expenses: ​ ​ ​ ​ General and administrative ​ ​ 212 ​ ​ 2,416 ​ ​ 5,099 ​ ​ 5,612 Research and development ​ 4,006 ​ 2,570 ​ 10,115 ​ 8,652 Total Operating Costs and Expenses ​ 4,218 ​ 4,986 ​ 15,214 ​ 14,264 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss from Operations ​ ( 4,218 ) ​ ( 4,986 ) ​ ( 15,214 ) ​ ( 14,264 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other Expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Exchange gain (loss) ​ 6 ​ ( 9 ) ​ 7 ​ ( 40 ) Interest income ​ 382 ​ 170 ​ 1,127 ​ 197 Total Other Income (Expense) ​ 388 ​ 161 ​ 1,134 ​ 157 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss Before Income Taxes ​ ​ ( 3,830 ) ​ ​ ( 4,825 ) ​ ​ ( 14,080 ) ​ ​ ( 14,107 ) Income tax benefit ​ ​ 527 ​ ​ 335 ​ ​ 1,216 ​ ​ 867 Net Loss Attributable to Theriva Biologics, Inc. and Subsidiaries ​ $ ( 3,303 ) ​ $ ( 4,490 ) ​ $ ( 12,864 ) ​ $ ( 13,240 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Effect of Warrant exercise price adjustment ​ ​ — ​ ​ ( 340 ) ​ ​ — ​ ​ ( 340 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss Attributable to Common Stockholders ​ $ ( 3,303 ) ​ $ ( 4,830 ) ​ $ ( 12,864 ) ​ $ ( 13,580 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss Per Share - Basic and Diluted ​ $ ( 0.19 ) ​ $ ( 0.30 ) ​ $ ( 0.81 ) ​ $ ( 0.87 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of shares outstanding during the period - Basic and Diluted ​ 17,042,701 ​ 15,844,061 ​ 15,784,685 ​ 15,176,927 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Loss ​ ​ ( 3,303 ) ​ ​ ( 4,490 ) ​ ​ ( 12,864 ) ​ ​ ( 13,240 ) Loss on foreign currency translation ​ ​ ( 702 ) ​ ​ ( 1,527 ) ​ ​ ( 379 ) ​ ​ ( 2,844 ) Total comprehensive loss ​ $ ( 4,005 ) ​ $ ( 6,017 ) ​ $ ( 13,243 ) ​ $ ( 16,084 ) ​ ​ See accompanying notes to unaudited condensed consolidated financial statements. ​ 4 Table of Contents Theriva Biologics, Inc. and Subsidiaries Condensed Consolidated Statements of Stockholders’ Equity (In thousands, except share and par value amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock $0.001 Par Value ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ Paid-in ​ Accumulated ​ Comprehensive ​ ​ ​ ​ Stockholders’ ​ Shares Amount Capital Deficit income Treasury Stock Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2022 ​ 15,844,061 ​ $ 16 ​ $ 343,750 ​ $ ( 290,969 ) ​ $ ( 679 ) ​ $ ( 288 ) ​ $ 51,830 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation ​ — ​ ​ — ​ ​ 126 ​ ​ — ​ ​ — ​ ​ — ​ ​ 126 Translation gains ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 374 ​ ​ — ​ ​ 374 Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 4,478 ) ​ ​ — ​ ​ — ​ ​ ( 4,478 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at March 31, 2023 ​ 15,844,061 ​ $ 16 ​ $ 343,876 ​ $ ( 295,447 ) ​ $ ( 305 ) ​ $ ( 288 ) ​ $ 47,852 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation ​ — ​ ​ — ​ ​ 146 ​ ​ — ​ ​ — ​ ​ — ​ ​ 146 Stock issued under “at-the-market” offering ​ 1,917,716 ​ ​ 2 ​ ​ 2,154 ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,156 Translation loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 51 ) ​ ​ — ​ ​ ( 51 ) Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 5,084 ) ​ ​ — ​ ​ — ​ ​ ( 5,084 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at June 30, 2023 ​ 17,761,777 ​ $ 18 ​ $ 346,176 ​ $ ( 300,531 ) ​ $ ( 356 ) ​ $ ( 288 ) ​ $ 45,019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation ​ — ​ ​ — ​ ​ 135 ​ ​ — ​ ​ — ​ ​ — ​ ​ 135 Stock issued under “at-the-market” offering ​ 988 ​ ​ — ​ ​ 1 ​ ​ — ​ ​ — ​ ​ — ​ ​ 1 Translation loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 702 ) ​ ​ — ​ ​ ( 702 ) Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 3,303 ) ​ ​ — ​ ​ — ​ ​ ( 3,303 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, 2023 ​ 17,762,765 ​ $ 18 ​ $ 346,312 ​ $ ( 303,834 ) ​ $ ( 1,058 ) ​ $ ( 288 ) ​ $ 41,150 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock $0.001 Par Value ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ Comprehensive ​ Stockholders’ ​ 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) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,442 ) ​ ​ ( 1,442 ) Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 4,477 ) ​ ​ — ​ ​ ( 4,477 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at June 30, 2022 ​ 15,844,061 ​ $ 16 ​ $ 343,500 ​ $ ( 280,034 ) ​ $ ( 1,261 ) ​ $ 62,221 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation ​ — ​ ​ — ​ ​ 121 ​ ​ — ​ ​ — ​ ​ 121 Translation gains (losses) ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,464 ) ​ ​ ( 1,464 ) Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 4,490 ) ​ ​ — ​ ​ ( 4,490 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at September 30, 2022 15,844,061 $ 16 $ 343,621 $ ( 284,524 ) $ ( 2,725 ) ​ $ 56,388 ​ 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, ​ 2023 2022 Cash Flows From Operating Activities: ​ ​ Net loss ​ $ ( 12,864 ) ​ $ ( 13,240 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Stock-based compensation ​ 407 ​ 346 Income tax benefit ​ ​ ( 1,216 ) ​ ( 867 ) Change in fair value of contingent consideration ​ ( 999 ) ​ ( 244 ) Non-cash lease expense ​ ​ 283 ​ ​ 137 Depreciation ​ 96 ​ 60 Changes in operating assets and liabilities: ​ ​ ​ ​ Prepaid expenses and other current assets ​ 1,524 ​ 780 Deposits and other assets ​ ( 54 ) ​ — Accounts payable ​ ( 74 ) ​ ( 504 ) Accrued expenses ​ 883 ​ ( 326 ) Accrued employee benefits ​ ( 129 ) ​ 271 Operating lease liability ​ ( 312 ) ​ ( 127 ) Net Cash Used In Operating Activities ​ ( 12,455 ) ​ ( 13,714 ) ​ ​ ​ ​ ​ ​ ​ Cash Flows from Investing Activities ​ ​ ​ ​ Purchase of property and equipment ​ ​ ( 146 ) ​ ​ ( 25 ) Cash paid for business combination, net of cash acquired ​ ​ — ​ ​ ( 3,863 ) Pre-acquisition loan to VCN ​ ​ — ​ ​ ( 417 ) Net Cash Used in Investing Activities ​ ​ ( 146 ) ​ ​ ( 4,305 ) ​ ​ ​ ​ ​ ​ ​ Cash Flows from Financing Activities ​ ​ ​ ​ Payment of loans payable ​ ​ ( 75 ) ​ ​ ( 1,376 ) Proceeds from issuance under at-the-market offering, net of issuance costs ​ ​ 2,157 ​ ​ — 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 Net Cash Provided by Financing Activities ​ ​ 2,082 ​ ​ 1,358 ​ ​ ​ ​ ​ ​ ​ Effects of exchange rate changes on cash and cash equivalents ​ ​ ( 109 ) ​ ​ ( 84 ) Net decrease in cash and cash equivalents and restricted cash ​ ​ ( 10,628 ) ​ ​ ( 16,745 ) Cash and cash equivalents and restricted at the beginning of this period ​ 41,885 ​ 67,325 Cash and cash equivalents and restricted cash at the end of this period ​ $ 31,257 ​ $ 50,580 ​ ​ ​ ​ ​ ​ ​ Reconciliation of cash, cash equivalents, and restricted cash reported in the consolidated balance sheet ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 31,160 ​ $ 50,490 Restricted cash included in other long-term assets ​ ​ 97 ​ ​ 90 Total cash, cash equivalents, and restricted cash shown in the statement of cash flows ​ $ 31,257 ​ $ 50,580 ​ ​ ​ ​ ​ ​ ​ Supplemental non-cash investing and financing activities: ​ ​ ​ ​ Right of use assets obtained in exchange for lease liabilities ​ $ 937 ​ $ — 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 ​ 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 Theriva Biologics S.L. (“VCN”, formerly known as VCN Biosciences, S.L.) (the “Acquisition”), described in more detail below, the Company transitioned 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, to improve access of co-administered cancer therapies to the tumor, and to 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 its 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 thereby preventing overgrowth and infection by pathogenic organisms such as Clostridioides difficile infection (CDI), and vancomycin resistant Enterococci (VRE), and reducing the incidence and severity of 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. On October 12, 2022, the Company changed its name to Theriva Biologics, Inc. In connection with the name change, its common stock began trading on the NYSE American LLC under the new ticker symbol “TOVX” effective as of the opening of trading hours on October 13, 2022. Effective November 15, 2022, the Company’s acquired subsidiary VCN Biosciences, S.L. rebranded to Theriva Biologics, S.L. without other changes to its corporate structure. Basis of Presentation 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 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 2022 Form 10-K. The interim results for the nine months ended September 30, 2023 are not necessarily indicative of results for the full year. 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. As of September 30, 2023 the Company has one operating segment (which includes the legacy Company business and the VCN business) and therefore one reporting segment. Liquidity As of September 30, 2023, the Company has a significant accumulated deficit, the Company has experienced significant losses and incurred negative cash flows since inception. The Company expects to continue incurring losses for the foreseeable future, with the recognition of revenue being contingent on successful phase 3 clinical trials and requisite approvals by the FDA or foreign equivalents. 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 Company’s cash and cash equivalents totaled $ 31.2 million as of September 30, 2023, a decrease of $ 10.6 million from December 31, 2022. During the three and nine months ended September 30, 2023, the primary use of cash was for working capital requirements and operating activities which resulted in a net loss of $ 3.3 million and $ 12.9 million, respectively. With the Company’s cash position of $ 26.1 million in early November 2023, the Company believes it will be able to fund its operations through the fourth quarter of 2024 and into the first quarter of 2025. Management believes its plan, which includes the advancement of current trials for VCN-01 and the on-going testing of SYN-004 (ribaxamase) will allow it to meet its financial obligations, further advance key products, and maintain its planned operations for at least one year from the issuance date of these consolidated financial statements. However, the actual amount of additional capital needed by the Company will also depend upon the costs to advance its VCN-01 clinical programs and whether it continues to develop SYN-004 internally, or out-licenses or partners such development. If necessary, the Company may attempt to utilize the at-the-market offering facility (“ATM”) or seek to raise additional capital in other financing transactions, neither of which is guaranteed. Form S-3 that currently registers the sale of the shares under the ATM Sales Agreement expires in May 2024. The ATM Sales Agreement can be amended so that shares issued would be registered under a new universal shelf registration statement on Form S-3. The Company anticipates filing the amendment prior to May 2024, but cannot guarantee filing such amendment. Use of the ATM is limited by certain restrictions and management’s plan does not rely on additional capital from either of these sources. If the Company is not able to obtain additional capital (which is not assured at this time), its long-term business plan may not be accomplished, and it may be forced to cease certain development activities. More specifically, the completion of any later stage clinical trial will require significant financing or a significant partnership. 2. Summary of Significant Accounting Policies There have been no new or material changes to the significant accounting policies discussed in the Company’s audited financial statements and the notes thereto included in the 2022 Form 10-K, except as noted below. 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 4), 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. 8 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 2. Summary of Significant Accounting Policies – (continued) 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. 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 payments include milestone payments to 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. 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, 2023 and 2022. ​ 9 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 3. Research and Development Tax Credits The Company, through its Theriva S.L. subsidiary, participates in a Research and Development program sponsored by the Spanish government. The program provides for reimbursement of certain expenses incurred in research and development efforts the Company incurs in Spain. The reimbursements can be through either tax credits or direct refunds. The program provides for certain limits on the types and amounts of expenses and requires participants to complete a certification and apply for the refund annually. Subsequent to the period in which expenses are incurred, the program requires participants to maintain certain workforce levels and research and development expenditures over a 24-month period. In the quarter ended June 30, 2023, the Company completed the certification and applied for direct reimbursement, as opposed to a tax credit, for its qualifying research and development expenses incurred in the year ended December 31, 2022. The Company received approvals from the Spanish government in September and October 2023. The Company evaluated the program and concluded that it qualified to be accounted for as government assistance. Accordingly, the Company, as allowed by U.S. GAAP, elected to account for the grant by analogizing to the guidance provided by International Accounting Standards (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance. Accordingly, the Company recognized a tax credit receivable related to amounts that had been approved by the Spanish government prior to September 30, 2023 and a corresponding deferred research and development tax credit as it was determined that amounts became probable of being received upon the receipt of the approval. Additionally, the Company has elected to account for the tax credit as a contra-expense as this most appropriately reflects the nature of the transaction and will reduce future research and development expenditures as the Company continues to incur expenses in the upcoming 24-month period. ​ ​ 10 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 4. BUSINESS COMBINATION Summary On March 10, 2022 (the “Closing”), the Company completed the acquisition of all the outstanding shares of Theriva Biologics, S.L, which at the time was known as VCN Biosciences, S.L.(the “VCN Shares”) from the shareholders of VCN. VCN is a clinical-stage biopharmaceutical company developing new oncolytic adenoviruses for the treatment of cancer. The Company’s lead product candidate, VCN-01, is being studied in a Company sponsored Phase 2 clinical trial for pancreatic cancer with additional investigator sponsored trials in indications including head and neck squamous cell carcinoma (HNSCC), retinoblastoma, brain tumors and ovarian cancers. VCN-01 is designed to be administered systemically, intratumorally or intravitreally, either as a monotherapy or in combination with standard of care chemotherapies or immunotherapies, 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 immunotherapies. Importantly, degrading the stroma exposes tumor antigens, turning “cold” tumors “hot” and enabling a sustained anti-tumor immune response. VCN has the exclusive rights to four patent families 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 and pursuant to the terms of a purchase agreement that the parties entered into (the “Purchase Agreement”), the Company paid $ 4,700,000 to Grifols Innovation and New Technologies Limited (“Grifols”), 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, $ 0.001 par value per share (the “Common Stock”). In addition to the consideration described above, under the terms of the purchase agreement that the parties entered into, 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 Company received approval from the FDA to proceed with the Phase 2 clinical trial of VCN-01 in metastatic pancreatic ductal adenocarcinoma (“PDAC”). Due to this approval, the Company paid Grifols $ 3.0 million in the fourth quarter of 2022. In August 2023, the Company initiated patient dosing in the U.S. in its Phase 2 clinical trial of VCN-01 in PDAC. As a result, the Company paid Grifols $ 3.25 million in the fourth quarter of 2023. 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 general and administrative expenses within a budgetary plan of approximately $ 27.8 million. Total purchase consideration including cash, shares of common stock and contingent consideration was valued at approximately $ 22.8 million, as follows (in thousands): ​ ​ ​ ​ Cash paid at Closing $ 4,700 Receivable from VCN “effectively settled” ​ 417 Fair value of common shares issued ​ 6,599 Fair value of contingent consideration ​ 11,093 ​ ​ $ 22,809 ​ ​ 11 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 4. BUSINESS COMBINATION - (continued) As of September 30, 2023 and December 31, 2022, the fair value of the contingent consideration was approximately $ 5.9 million and $ 10.2 million, respectively. During the three and nine months ended September 30, 2023, the Company recognized in operating expense a $ 1.6 million and $ 1.0 million, respectively, decrease in the fair value of the contingent consideration. Upon initiation of patient dosing in the U.S. during the three months ended September 30, 2023, $ 3.25 million that had previously been included as contingent consideration, became payable to Grifols and is included in accrued expenses as of September 30, 2023. During the three and nine months ended September 30, 2022, the Company recognized in operating expense a $ 227,000 and a $ 244,000 decrease in the fair value of the contingent consideration for the nine months ended September 30, 2022, respectively. The allocation of the fair value of the VCN Acquisition updated for measurement period and other adjustments is shown in the table below. ​ ​ ​ ​ ​ ​ Estimated fair value ​ ​ ($in thousands) Cash and cash equivalents ​ $ 837 Receivables ​ 1,889 Property and equipment ​ 216 In-process research and development intangible asset ​ 19,742 Goodwill ​ 5,696 Deferred tax liabilities, net ​ ( 3,209 ) Accounts payable ​ ( 522 ) Accrued expenses ​ ( 113 ) Accrued employee benefits ​ ( 90 ) Loans payable-current ​ ( 67 ) Other long-term liabilities ​ ( 1,570 ) ​ ​ ​ ​ Total purchase consideration ​ $ 22,809 ​ 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, the Company recognized $ 19.7 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 $ 5.7 million was established as a result of the Acquisition and is not tax deductible. VCN operations recorded a net loss of $ 11.9 million from the date of Acquisition through September 30, 2023. During the year ended December 31, 2022, the Company recognized the following measurement period adjustments: ● estimate of acquired liabilities resulting in a $ 277,000 reduction in accrued expenses and goodwill, ● estimate in the receivable from the prior owner resulting in a $ 176,000 increase in other receivables and reduction in goodwill. ● 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 during the measurement period, was a reduction in accrued liabilities of $ 277,000 , an increase in other receivables of $ 176,000 , 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 $ 1,061,000 . 12 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 4. BUSINESS COMBINATION - (continued) 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, 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 ​ Net revenues ​ $ — ​ $ — ​ ​ — ​ $ — ​ Net loss ​ $ ( 3,303 ) ​ $ ( 4,853 ) ​ ​ ( 12,864 ) ​ $ ( 14,956 ) ​ ​ Transaction Costs In conjunction with the Acquisition, the Company incurred approximately $ 0.2 million in transaction costs during the nine months ended September 30, 2022, which were expensed as general, and administrative expense in the consolidated statements of operations. There were no acquisition costs incurred during the three and nine months ended September 30, 2023. 5. Goodwill and Intangibles The following table provides the Company’s Goodwill as of September 30, 2023. ​ ​ ​ ​ ​ ​ Goodwill (in thousands) Balance at December 31, 2022 ​ $ 5,525 Effects of exchange rates ​ ​ ( 65 ) Balance at September 30, 2023 ​ $ 5,460 ​ The following table provides the Company’s in-process R&D as of September 30, 2023. ​ ​ ​ ​ ​ ​ In-process ​ ​ R&D (in thousands) Balance at December 31, 2022 ​ $ 19,150 Effects of exchange rates ​ ​ ( 225 ) Balance at September 30, 2023 ​ $ 18,925 ​ During the quarters ended September 30, 2023 and December 31, 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 for impairment. The Company performed an impairment analysis and concluded that the Goodwill and IPR&D were not impaired as of September 30, 2023 and December 31, 2022. ​ 13 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 6. Fair Value of Financial Instruments Accounting Standards Codification (“ASC”) 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 classified on a three-tier hierarchy as follows: ● Level 1 inputs: Quoted prices (unadjusted) for identical assets or liabilities in active markets; ● Level 2 inputs: Inputs, other than quoted prices, 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, accounts payable and accrued liabilities, approximate fair value due to the relatively short period to maturity for these level 1 instruments. As a result of the acquisition of VCN the Company acquired interest-free or below-market interest rate loans extended by Spanish government. The carrying value of the loans payable approximate fair value and are classified under level 2. In connection with the Acquisition of VCN, the Company will be required to pay up to $ 70.2 million in additional consideration upon the achievement of certain milestones, including regulatory filings completed noted in Note 4. In September 2022, the Company received approval from the FDA to proceed with the Phase 2 clinical trial of VCN-01 in PDAC. Due to this approval the Company paid Grifols $ 3.0 million in the fourth quarter 2022. In August 2023, the Company initiated patient dosing in the U.S. in its Phase 2 clinical trial of VCN-01 in PDAC. As a result, payment was made subsequent to September 30, 2023 in the amount of $ 3.25 million. The discounted cash flow method used to value this contingent consideration includes inputs of not readily observable market data, which are Level 3 inputs. The fair value of the contingent consideration was $ 5.9 million as of September 30, 2023 and is all reflected as non-current contingent consideration liability. There were no transfers in or out of the level 3 liabilities during the three and nine months ended September 30, 2023 and 2022 , with the exception of the reclassification of $ 3.25 million related to the milestone that was met in the current period and reclassified to accrued expenses. The following table summarizes the change in the fair value as determined by Level 3 inputs for the contingent consideration liabilities for the three and nine months ended September 30, 2023: ​ ​ ​ ​ ​ ​ (in thousands) Balance at March 10, 2022 ​ $ 12,158 Change in fair value ​ ( 1,506 ) Balance at June 30, 2022 ​ $ 10,652 Change in fair value ​ 199 Balance at September 30, 2022 ​ $ 10,851 ​ ​ ​ ​ Contingent consideration, current portion ​ $ 8,614 Contingent consideration, net of current portion ​ 2,237 Balance at September 30, 2022 ​ $ 10,851 ​ 14 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 6. Fair Value of Financial Instruments – (continued) ​ ​ ​ ​ ​ (in thousands) Balance at December 31, 2022 ​ $ 10,184 Change in fair value ​ 135 Balance at March 30, 2023 ​ 10,319 Change in fair value ​ 432 Balance at June 30, 2023 ​ $ 10,751 Change in fair value ​ ( 1,566 ) Reclassification of amounts to accrued expenses due to milestone being achieved ​ ( 3,250 ) Balance at September 30, 2023 ​ $ 5,935 ​ ​ ​ ​ Contingent consideration, current portion ​ $ — Contingent consideration, net of current portion ​ 5,935 Balance at September 30, 2023 ​ $ 5,935 ​ The fair value of financial instruments measured on a recurring basis is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of September 30, 2023 Description Total Level 1 Level 2 Level 3 Liabilities: ​ ​ ​ ​ Contingent consideration ​ $ 5,935 $ — $ — ​ $ 5,935 Loans payable ​ ​ 215 ​ — ​ 215 ​ ​ — Total liabilities ​ $ 6,150 $ — $ 215 ​ $ 5,935 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 Description Total Level 1 Level 2 Level 3 Liabilities: ​ ​ ​ ​ Contingent consideration ​ $ 10,184 $ — $ — ​ $ 10,184 Loans payable ​ ​ 278 ​ — ​ 278 ​ ​ — Total liabilities ​ $ 10,462 $ — $ 278 ​ $ 10,184 ​ 15 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 6. 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 September 30, 2023 ​ ​ Valuation ​ Significant ​ Weighted Average ​ Methodology Unobservable Input (range, if applicable) Contingent Consideration Discounted Cash Flows Milestone dates 2025-2028 ​ ​ ​ ​ ​ ​ ​ Discount rate 13.8 % to 14.4 % ​ Weighted Average Discount rate 14.09 % ​ Probability of Occurrence (periodic for each Milestone) 11.7 % to 92.0 % ​ Probability of occurrence (cumulative through each Milestone) 6.9 % to 24.6 % ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 ​ ​ Valuation ​ Significant ​ Weighted Average ​ Methodology Unobservable Input (range, if applicable) Contingent Consideration Discounted Cash Flows Milestone dates 2023-2028 ​ ​ ​ ​ ​ ​ ​ ​ ​ Discount rate ​ 13.4 % to 14.1 % ​ ​ ​ ​ Weighted Average Discount rate ​ 13.6 % ​ ​ ​ ​ Probability of Occurrence (periodic for each Milestone) ​ 11.7 % to 95.0 % ​ ​ Probability of occurrence (cumulative through each Milestone) ​ 6.9 % to 95.0 % ​ ​ 7. Selected Balance Sheet Information ​ Prepaid expenses and other current assets (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2023 2022 Prepaid clinical research organizations ​ $ 1,190 ​ $ 2,293 Prepaid manufacturing expenses ​ ​ 501 ​ ​ 418 Prepaid consulting, subscriptions and other expenses ​ ​ 227 ​ ​ 155 Prepaid insurance ​ ​ 114 ​ ​ 637 VAT receivable ​ ​ 176 ​ ​ 87 Receivable from Grifols ​ ​ — ​ ​ 144 ​ ​ ​ ​ ​ ​ ​ Total ​ $ 2,208 ​ $ 3,734 ​ 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. Receivable from Grifols includes amounts due related to research and development tax rebates, VAT and corporate taxes. 16 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 7. Selected Balance Sheet Information – (continued) ​ Property and equipment, net (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2023 2022 Computers and office equipment ​ $ 901 ​ $ 897 Other property, plant and equipment ​ ​ 342 ​ ​ 208 Leasehold improvements ​ 94 ​ 94 Software ​ 11 ​ 11 ​ ​ 1,348 ​ 1,210 Less: accumulated depreciation and amortization ​ ( 959 ) ​ ( 865 ) ​ ​ ​ ​ ​ ​ ​ Total ​ $ 389 ​ $ 345 ​ Accrued expenses (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2023 2022 Milestone due to Grifols ​ $ 3,250 ​ $ — Accrued clinical consulting services ​ ​ 1,353 ​ ​ 807 Accrued manufacturing costs ​ 640 ​ 197 Accrued vendor payments ​ ​ 347 ​ ​ 492 ​ ​ ​ ​ ​ ​ ​ Total ​ $ 5,590 ​ $ 1,496 ​ Accrued employee benefits (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ 2023 2022 Accrued bonus expense ​ $ 933 ​ $ 1,216 Accrued compensation expense ​ ​ 206 ​ ​ 87 Accrued vacation expense ​ 130 ​ 100 ​ ​ ​ ​ ​ ​ ​ Total ​ $ 1,269 ​ $ 1,403 ​ ​ 8. 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, 2023, there were 86 options issued and outstanding under the 2007 Stock Plan. ​ 17 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 8. 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. From time to time the number of shares authorized for options was increased such that 400,000 were authorized as of September 5, 2019. 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, 2023, there were 202,095 options issued and outstanding under the 2010 Stock Plan. There are no shares available to be issued under this 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. The number of shares authorized for options was increased such that 7,000,000 were authorized as of September 30, 2023. As of September 30, 2023, there were 2,082,155 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 option forfeitures are recognized as incurred. 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 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, 2023 and 3,000 option were granted during the nine months ended September 30, 2022. ​ 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 prior 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. 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, ​ 18 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 8. Stock-Based Compensation – (continued) ● 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. A summary of stock option activity for the nine months ended September 30, 2023 and the year ended December 31, 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Weighted Average Aggregate ​ ​ ​ ​ Average Exercise ​ Remaining ​ Intrinsic ​ Options Price Contractual Life Value Balance - December 31, 2021 625,565 ​ $ 16.12 5.58 years ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Granted 1,728,000 ​ ​ 0.58 ​ ​ ​ Expired ( 43,126 ) ​ ​ 67.81 ​ ​ ​ Forfeited ( 14,541 ) ​ ​ 3.61 ​ ​ ​ Balance - December 31, 2022 ​ 2,295,898 ​ ​ 3.53 ​ 6.44 years ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expired ​ ( 715 ) ​ ​ 615.30 ​ ​ ​ ​ ​ Forfeited ​ ( 10,847 ) ​ ​ 1.11 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance - September 30, 2023 - outstanding 2,284,336 ​ $ 3.35 5.42 years ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance - September 30, 2023 - exercisable 1,147,007 ​ $ 5.92 4.70 years ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Grant date fair value of options granted – year ended December 31, 2022 ​ ​ ​ $ 706,264 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average grant date fair value – year ended December 31, 2022 ​ ​ ​ $ 0.41 ​ ​ ​ 19 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 8. Stock-Based Compensation – (continued) 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, 2023 was $ 61,000 and $ 187,000 , respectively, and $ 46,000 and $ 124,000 for the three and nine months ended September 30, 2022. 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, 2023 was $ 29,000 and $ 87,000 , respectively, and $ 21,000 and $ 62,000 for the three and nine months ended September 30, 2022, 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, 2023 was $ 34,000 and $ 101,000 , respectively, and $ 47,000 and $ 141,000 for the three and nine months ended September 30, 2022, 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, 2023 was $ 11,000 and $ 32,000 , respectively, and $ 7,000 and $ 21,000 for the three and nine months ended September 30, 2022, respectively. As of September 30, 2023, total unrecognized stock-based compensation expense related to stock options was $ 539,000 , which is expected to be expensed through July 2025. 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 nine months ended September 30, 2023 and 2022. 9. 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, warrants 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 and then again to $ 1.22 (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, to $ 6.90 per Warrant per full share of Common Stock in accordance with the antidilution terms of the Warrant. The reduction was the result of the issuance of shares of Common Stock by the Company through its ATM 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. 20 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 9. Stock Warrants – (continued) 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 year ended December 31, 2022, or the nine months ended September 30, 2023. The Warrants have expired in October 2023 and are no longer outstanding. 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 year ended December 31, 2022, which reduces the income available to common stockholders. A summary of all warrant activity for the Company for the nine months ended September 30, 2023 and the year ended December 31, 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ Number of Weighted Average Remaining ​ ​ Warrants ​ Exercise Price Contractual Life Balance at December 31, 2021 634,497 ​ ​ 1.24 ​ 1.78 years Granted — ​ — ​ ​ Exercised — ​ — ​ ​ Forfeited ( 71 ) ​ 182 ​ ​ Balance at December 31, 2022 634,426 ​ $ 1.22 ​ 0.78 years Granted ​ — ​ ​ — ​ ​ Exercised ​ — ​ ​ — ​ ​ Forfeited ​ — ​ ​ — ​ ​ Balance at September 30, 2023 ​ 634,426 ​ $ 1.22 ​ 0.03 years ​ ​ 10. 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, 2023 was $ 3.3 million and 12.9 , respectively. Net loss attributable to common stockholders for the three and nine months ended September 30, 2022 was approximately $ 4.8 million and $ 13.6 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 . 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, 2023 were 2,284,336 and 634,426 , respectively and for the three and nine months ended September 30, 2022 were 607,370 and 634,497 , respectively, because their effect is anti-dilutive. 21 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 11. Related Party On December 15, 2022, the Company approved the retention of MaryAnn Shallcross, the wife of Steven Shallcross, as director of Clinical Operations, for compensation of $ 145,000 and the grant of an option to purchase 50,000 shares of common stock having a value of $ 20,000 . During the three and nine months ended September 30, 2023, Ms. Shallcross had $ 36,000 and $ 108,000 in compensation expense, respectively. Ms. Shallcross had been performing services for the Company during 2022 for total compensation of less than $ 120,000 . 12. 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.(the “Securities Purchase Agreement”), pursuant to which the Company issued and sold 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 are 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, at the option of the holders of the Preferred Stock and, in certain circumstances, by the Company. The Securities 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 (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 Articles of Incorporation, as amended 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) to adjourn any meeting of stockholders called for the purpose of voting on the Authorized Common Stock Increase (collectively, the “Stockholder Items”). The purchaser of the Preferred Stock 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), and (ii) vote the shares of the Series C Preferred Stock purchased in the Offering in favor of the Stockholder Items. Pursuant to the Securities Purchase Agreement, the Company 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 and to 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. 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 are 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. 22 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 12. Common and Preferred Stock – (continued) 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. B. Riley Securities Sales Agreement On August 5, 2016, the Company entered into the Sales Agreement (the “Original Sales Agreement”) with FBR Capital Markets & Co. (now known as B. Riley Securities) to act as a sales agent, which agreement was amended and restated on February 9, 2021 to add Alliance Global Partners as a sale agent. The amended and restated Sales Agreement (the “Amended and Restated Sales Agreement”) enables the Company to offer and sell shares of common stock from time to time through B. Riley Securities, Inc. and A.G.P./Alliance Global Partners as the Company’s sales agent. Sales of common stock under the Sales Agreement are made in sales deemed to be “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities Act. The sales agents are 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. During the three and nine months ended September 30, 2023, the Company sold through the Amended and Restated Sales Agreement approximately 988 and 1.9 million shares, respectively, of the Company’s common stock and received net proceeds of approximately $ 1,000 and $ 2.2 million, respectively. 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. 13. 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 (CDIT loans). The maturities of these loans are between 2024 and 2028. As a result of the VCN Acquisition, the Company maintains a restricted cash collateral account of $ 97,000 relating to the RETOS loan, which is reflected as a non-current asset on the balance sheet. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2023 September 30, 2023 December 31, 2022 December 31, 2022 ​ ​ Current ​ Non-current ​ Current ​ Non-current ​ ​ ​ ​ ​ NEBT Loan ​ ​ 8 ​ $ 24 ​ ​ 13 ​ ​ 31 RETOS 2015 ​ ​ 57 ​ ​ 126 ​ ​ 44 ​ ​ 190 ​ ​ $ 65 ​ $ 150 ​ $ 57 ​ $ 221 ​ A maturity analysis of the debt as of September 30, 2023 is as follows (amounts in thousands of dollars) : ​ ​ ​ ​ 2024 ​ 65 2025 ​ 59 2026 ​ 49 2027 ​ 32 2028 ​ 10 Total ​ 215 ​ ​ 23 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 14. Commitments and Contingencies The Company’s existing leases as of September 30, 2023 for its U.S. and Spanish facilities are classified as operating leases. 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 its 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 for its 100 percent owned Theriva S.L. subsidiary. The lease that was in existence from December 2021 to December 2022 was a short term agreement with a 90-day termination notice provision that can be exercised by either party. On the closing date of the Theriva S.L. acquisition, a sublease was executed for Theriva S.L. to lease research and office facilities at a new location in Parets del Valles (Barcelona) from the former owner of Theriva S.L.. This lease was executed for an initial term to begin in January 2023 until October 2026, with an option to renew for an additional five years . On January 15, 2023, Theriva S.L. moved into the facilities and the new lease commenced and the prior lease terminated. 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, 2023 approximated $ 156,000 and $ 454,000 , respectively and $ 163,000 and $ 409,000 for the three and nine months ended September 30, 2022, respectively. For the Barcelona lease, the day one non-cash addition of right of use assets due to adoption of ASC 842 was $ 937,000 . A maturity analysis of the Company’s operating leases as of September 30, 2023 is as follows (amounts in thousands of dollars) : ​ ​ ​ ​ ​ Future undiscounted cash flow for the years ending December 31, ​ ​ ​ ​ ​ 2023 ​ ​ 161 2024 ​ ​ 654 2025 ​ ​ 664 2026 ​ ​ 582 2027 ​ ​ 368 Total ​ ​ 2,429 ​ ​ ​ ​ Discount factor ​ ​ ( 422 ) Operating lease liability ​ ​ 2,007 Operating lease liability – current ​ ​ ( 461 ) Operating lease liability – long term ​ $ 1,546 ​ ​ 24 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements 14. 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 the Company’s business in the future. The Company and its third-party contract manufacturers, contract research organizations, and clinical sites may also face disruptions in procuring items that are essential to the Company’s 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 has 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 that these disruptions and increasing inflation could have on its operations. Through the VCN Acquisition, the Company has operations in Spain related to conducting research and development, manufacturing, and clinical trials in Western European countries. The invasion of Ukraine by Russia, the war in the Middle East, 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 the Company’s supply chain, and despite the fact that it currently does not plan any clinical trials in Eastern Europe, may adversely impact the cost and conduct of R&D, manufacturing, and international clinical trials of its product candidates. ​ ​ ​ 25 Table of Contents