What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-25 compared with 2023-03-30 · 541 added, 826 removed, 659 unchanged (67% of the section changed)

Financial Statements and Supplementary Data .

Report of Independent Registered Public Accounting Firm (BDO USA, LLP;

Potomac, Maryland;

Report of Independent Registered Public Accounting Firm (BDO USA, P.C.;

PCAOB ID# 243 )

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Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of (Deficit) Equity

Consolidated Statements of Stockholder’s Equity

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of Theriva Biologics, Inc.

as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ (deficit) equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

(the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has not generated positive cash flows from operations which raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Business combination – Fair value measurement of certain acquired intangible assets

As described in Note 3 to the consolidated financial statements, during 2022 the Company completed the acquisition of VCN Biosciences, S.L., now known as Theriva Biologics, S.L.

(“VCN”), for total consideration of $22.8 million.

The Company accounted for the transaction under the acquisition method of accounting for business combinations.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values on the acquisition date, including identifiable intangible assets related to in-progress research and development (“IPR&D”).

Additionally, the Company recorded an adjustment to the preliminary estimates of fair value of the IPR&D within the measurement period of up to one year from the date of acquisition.

related to forecasted development costs to bring the drug candidates to market, forecasted revenue to be derived from the drug candidates and associated cost of sales and selling, general and administrative expenses, and discount rates.

We identified the determination of the fair value of certain of the IPR&D as a critical audit matter because of the significant estimates and assumptions the Company makes to calculate its fair value for purposes of recording the acquisition and the measurement period adjustment.

This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of the Company’s forecasts of future cash flows, specifically forecasted revenues to be derived from the drug candidate and associated cost of sales and selling, general and administrative expenses, and discount rates used in the valuation of the IPR&D, including the need to involve our internal fair value specialists.

Contingent Consideration – Fair value measurement

As discussed in Notes 3 and 5 to the consolidated financial statements, during 2022 the Company completed the acquisition of VCN Biosciences (“VCN”).

The purchase consideration transferred included contingent consideration of up to $70.25 million based on the

achievement of certain clinical and commercialization milestones of an acquired product, VCN-01, and was initially recorded at its estimated fair value as of the date of acquisition.

Subsequent to the date of acquisition, the Company reassesses the fair value at each balance sheet date and the contingent consideration liability was recorded at an estimated fair value of $6.3 million as of December 31, 2023 utilizing the discounted cash flow method.

We identified the determination of the fair value of the contingent consideration liability as a critical audit matter.

Under the discounted cash flow method, the key estimates and assumptions used in the valuation of the contingent consideration liability included management’s determination of the probability weighted estimates of future earn-out payments based on successful achievement of certain clinical and commercialization milestones, and the estimated discount rate applicable to the future payment periods.

Changes to these key estimates and assumptions could have a significant impact on the fair value of the contingent consideration liability.

Auditing management’s valuation methods and these assumptions involve especially challenging and subjective auditor judgment due to the nature and extent of auditor effort required to address these matters, including the specialized knowledge and skill needed.

The primary procedures we performed to address this critical audit matter included:

● Testing the completeness and accuracy of the underlying data supporting the determination of the various inputs.

● Evaluating the reasonableness of the Company’s forecasted revenues to be derived from the drug candidate and associated cost of sales and selling, general and administrative expenses by comparing these assumptions to those of those of comparable companies, as well as evaluated potentially contradictory information.

● Utilizing our valuation specialists, to evaluate the reasonableness of the valuation methodology and discount rates by:

o Evaluating the reasonableness of the Company's valuation methods and testing the mathematical accuracy of the calculations.

o Developing a range of independent estimates for the discount rate and comparing those to the discount rate selected by the Company.

IPR&D Impairment Assessment

As described in Notes 4 and 14 to the consolidated financial statements, the Company’s consolidated IPR&D intangible asset balances at September 30 and December 31, 2022 were $17.5 million and $19.2 million, respectively.

The Company performs an annual impairment test of IPR&D, and on a quarterly basis, monitors IPR&D for potential indicators of impairment.

During 2022, the Company concluded that triggering events occurred at both September 30 and December 31, 2022.

No impairment charges were recorded as a result of the Company's interim and annual impairment tests.

The Company estimated the fair value of certain of the IPR&D intangible assets using expected cash flows and industry standard valuation techniques, which required the Company to make significant estimates and assumptions related to future cash flows, including those related to forecasted development costs to bring the drug candidates to market, forecasted revenue to be derived from the drug candidates and associated cost of sales and selling, general and administrative expenses, and discount rates.

- Assessing the reasonableness of management’s probability weighted estimates of future earn-out payments based on successful achievement of certain clinical and commercialization milestones by comparing to relevant industry studies.

- Utilizing personnel with specialized knowledge and skills in valuation to assist in:

o evaluating the appropriateness of the valuation method;

o testing the mathematical accuracy of the Company’s calculations;

o evaluating the discount rate applied to future milestone payment periods.

In-Process Research and Development and Goodwill Impairment Assessment

As described in Notes 3 and 6 to the consolidated financial statements, the Company’s consolidated balances of In-process Research and Development (“IPR&D”) indefinite-lived intangible asset and Goodwill were $19.8 million and $5.7 million, respectively, as of December 31, 3023.

The Company reviews goodwill for impairment at least annually and or more frequently if events or circumstances indicate the carrying value at the reporting unit level might exceed its fair value.

The IPR&D indefinite-lived intangibles are tested annually for impairment, or more frequently if events or circumstances indicate it is more likely than not the fair value is less than their carrying value.

The Company estimates the fair value of its reporting unit and certain IPR&D using an income approach.

The Company identified a triggering event during 2023 and performed an impairment analysis for Goodwill and certain IPR&D resulting in no impairment charges being recorded.

We identified the determination of the fair value of the Company’s reporting unit and certain IPR&D as a critical audit matter.

Under the income approach, the key assumptions used in the determination of the fair value of the reporting unit include estimates of future cash flows, the discount rate applicable to those future cash flow periods, and the implied control premium.

The key assumptions used in the determination of the fair value of certain IPR&D assets using the income approach include estimates of future cash flows and the discount rate applicable to those future cash flow periods.

Changes to these key assumptions could have a significant impact on the measurement of the fair value of the reporting unit and certain IPR&D.

The primary procedures we performed to address this critical audit matter included:

● Testing the completeness and accuracy of the underlying data supporting the determination of the various inputs.

● Utilizing our valuation specialists, to evaluate the reasonableness of the valuation methodology and discount rates by:

o Evaluating the reasonableness of the Company’s valuation methods and testing the mathematical accuracy of the calculations.

o Developing a range of independent estimates for the discount rate and comparing those to the discount rate selected by the Company.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2012.

Potomac, Maryland

- Evaluating reasonableness of estimated future cash flows by comparing forecasts to historical results.

- Utilizing personnel with specialized knowledge and skills in valuation to assist in:

o evaluating the reasonableness of valuation methods;

o testing the mathematical accuracy of the Company’s calculations;

o evaluating the reasonableness of assumptions for goodwill, including the discount rate applied to future cash flows, and implied control premium;

o evaluating the reasonableness of assumptions for IPR&D, including the discount rate applied to future cash flow assumptions;

o evaluating the reasonableness of the implied control premium by comparing the market capitalization of the Company to the fair value determined for the Company’s reporting unit.

/s/ BDO USA, P.C .

Raleigh, North Carolina

March 25, 2024

We have served as the Company's auditor since 2012.

Theriva Biologics, Inc.

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Cash and cash equivalents

Tax credit receivable

Prepaid expenses and other current assets

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Contingent consideration, current portion

Deferred research and development tax credit-current portion

Loans payable-current

Operating lease liability

Operating lease liability-current portion

Total Current Liabilities

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Non-current contingent consideration

Loan Payable - Long term

Loan Payable - non-current

Deferred tax liabilities, net

Lease liability - Long term

Non-current deferred research and development tax credit

Non-current operating lease liability

Total Liabilities

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Additional paid-in capital

Treasury stock at cost, 720,000 shares, at December 31, 2022

Accumulated other comprehensive loss

Treasury stock at cost, 720,233 shares at December 31, 2023 and at December 31, 2022

Accumulated other comprehensive income (loss)

Accumulated deficit

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Other Income:

Exchange loss

Foreign currency exhange gain (loss)

Interest income

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Income tax benefit

Net Loss Attributable to Non-controlling Interest

Net Loss Attributable to Theriva Biologics, Inc.

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Effect of Warrant exercise price adjustment

Series A Preferred Stock Dividends

Series B Preferred Stock Dividends

Effect of Series A Preferred Stock price adjustment

Net Loss Attributable to Common Stockholders

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Weighted average number of shares outstanding during the period - basic and dilutive

Loss on foreign currency translation

Gain (loss) on foreign currency translation

Total comprehensive loss

Comprehensive loss attributable to non-controlling interest

Comprehensive loss attributable to Theriva Biologics, Inc.

and Subsidiaries

See accompanying notes to consolidated financial statements

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and Subsidiaries

Consolidated Statements of Stockholders (Deficit) Equity

Consolidated Statements of Stockholder’s Equity

(In thousands, except share and par value amounts)

Series B Preferred

Non-Controlling

Common Stock $0.001 Par Value

Comprehensive

Stockholders’

(Deficit) Equity

Treasury Stock

Balance at December 31, 2021

Stock-based compensation

Stock issued under "at-the-market"

Series A Preferred Stock Dividends

Warrants Exercised

Effect of Series A Preferred Stock price adjustment

Conversion of Series A Preferred Stock to Common

Conversion of Series B Preferred Stock to Common

Reversal of noncontrolling interest due to return of Syn Biomics shares

Issuance of Common Stock for VCN Acquisition

Foreign currency exhange loss

Treasury Stock

Balance at December 31, 2022

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Stock-based compensation

Issuance of Common Stock for VCN Acquisition

Translation gains (losses)

Treasury Stock

Stock issued under “at-the-market” offering

Foreign currency exhange gains

Balance at December 31, 2023

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Change in fair value of contingent consideration

Right of use asset

Payment of contingent consideration

Non - cash lease expense

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Deposits and other assets

Accounts payable

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Accrued employee benefits

Lease liability

Operating lease liability

Net Cash Used In Operating Activities

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Cash Flows From Financing Activities:

Payment of debt

Payment of loans payable

Proceeds from issuance under at - the - market offering, net of issuance cost

Proceeds from sale of Series C Preferred Stock, net of issuance cost

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Purchase of treasury stock

Proceeds from “at-the-market” stock issuance

Proceeds from issuance of common stock for warrant exercises

Net Cash (used in) Provided By Financing Activities

Effects of FX on cash

Net (decrease) increase in cash and cash equivalents and restricted cash

Net Cash Provided By (Used In) Financing Activities

Effects of foreign currency on cash

Net decrease in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted at the beginning of this period

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Supplemental non-cash investing and financing activities:

Right of use assets obtained in exchange for lease liabilities

Fair value of contingent consideration issued in a business combination

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Effect of Warrant exercise price adjustment

Conversion of Series A Preferred Stock

Effect of Series A Preferred Stock price adjustment

Return of SYN Biomics Stock

Conversion of Series B Preferred Stock

Deemed dividends for accretion of Series B Preferred Stock discount

Right of use assets from operating lease

In-kind dividends in preferred stock

See accompanying notes to consolidated financial statements

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(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.

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, our acquired subsidiary VCN Biosciences S.L.

rebranded to Theriva Biologis S.L.

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.

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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 and then increased to 350,000,000 at the 2022 annual meeting of stockholders.

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.

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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.

As of December 31, 2022, the Company had eight subsidiaries, Pipex Therapeutics, Inc.

All affected share amounts and exercise/conversion prices in the condensed consolidated financial statements and footnotes below have been adjusted retrospectively for the Reverse Stock Split.

As of December 31, 2023, the Company had nine subsidiaries, Theriva Biologics, S.L., Pipex Therapeutics, Inc.

(“Pipex Therapeutics”), Effective Pharmaceuticals, Inc.

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(“SYN Biomics”).

Pipex Therapeutics, EPI, Healthmine, Putney and SYN Biomics are wholly owned, and Solovax, CD4, and Epitope are majority-owned.

For financial reporting purposes, the outstanding common stock of the Company is that of Theriva Biologics, Inc.

All statements of operations, (deficit) equity and cash flows for each of the entities are presented as consolidated.

All subsidiaries were formed under the laws of the State of Delaware on January 8, 2001, except for EPI, which was incorporated in Delaware on December 12, 2000, Epitope which was incorporated in Delaware in January 2002, Putney which was incorporated in Delaware in November 2006, Healthmine which was incorporated in Delaware in December 2007 and SYN Biomics which was incorporated in Nevada in December 2013.

Theriva Biologics, S.L.,Pipex Therapeutics, EPI, Healthmine, Putney and SYN Biomics are wholly owned, and Solovax, CD4, and Epitope are majority-owned.

Theriva Biologics, Inc.

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Organization and Nature of Operations and Basis of Presentation – (continued)

As of December 31, 2022, the Company has a significant accumulated deficit, and with the exception of the three months ended June 30, 2010 and the three months ended December 31, 2017, the Company has experienced significant losses and incurred negative cash flows since inception.

For financial reporting purposes, the outstanding common stock of the Company is that of Theriva Biologics, Inc.

All statements of operations, equity and cash flows for each of the entities are presented as consolidated.

As of December 31, 2023, the Company had a significant accumulated deficit of $ 309,318 , and 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.

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The Company has spent, and expects to continue to spend, a substantial amount of funds in connection with implementing its business strategy, including planned product development efforts, clinical trials and research and discovery efforts.

Cash and cash equivalents totaled approximately $ 41.8 million as of December 31, 2022, which includes the net proceeds from sales of our Series C and D Convertible Preferred Stock issued during the three months ended September 30, 2022, the net proceeds of approximately $ 66 million from sales of its Common Stock in “at-the-market” (ATM) equity offerings during 2021 and cash proceeds of approximately $ 8.0 million through the exercise of a portion of the October 2018 warrants.

With these additional sources of liquidity, the Company believes it will be able to fund its operations through the next twelve months from the issuance date of these financial statements.

Management believes its plan, which includes the advancement of VCN-01, VCN-11, the further development of SYN-004 (ribaxamase) as well as other discovery initiatives, will allow the Company to meet its financial obligations, further advance key products, and maintain the Company’s planned operations for at least one year from the issuance date of these consolidated financial statements.

If necessary, the Company may attempt to utilize the ATM or seek to raise additional capital on the open market, neither of which is guaranteed.

The Company’s cash and cash equivalents totaled $ 23.2 million as of December 31, 2023, a decrease of $ 18.6 million from December 31, 2022.

During the year ended December 31, 2023, the primary use of cash was for working capital requirements and operating activities which resulted in a net loss of $ 18.3 million.

The Company believes it will be able to fund its operations through the fourth quarter of 2024 and into the first quarter of 2025.

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.

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), our long-term business plan may not be accomplished and we may be forced to cease certain development activities.

If the Company is not able to obtain additional capital (which is not assured at this time), its 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.

Going Concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

The Company continues to incur losses and, as of December 31, 2023, the Company had an accumulated deficit of approximately $ 309.3 million.

Since inception, the Company has financed its activities principally from the proceeds from the issuance of equity securities.

The Company’s ability to continue as a going concern is dependent upon the Company’s ability to raise additional debt and equity capital.

There can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to the Company.

These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The accompanying consolidated financial statements do not include any adjustments relating to the recoverability of the recorded assets or the classification of liabilities that may be necessary should the Company be unable to continue as a going concern.

The Company does not have sufficient capital to fund its operations beyond the next twelve months.

In order to address the Company’s capital needs, including its planned clinical trials, the Company is actively pursuing additional equity or debt financing in the form of either a private placement or a public offering.

The Company has been in ongoing discussions with strategic institutional investors and investment banks with respect to such possible offerings.

Such additional financing opportunities might not be available to the Company when and if needed, on acceptable terms or at all.

If the Company is unable to obtain additional financing in sufficient amounts or on acceptable terms under such circumstances, the Company’s operating results and prospects will be adversely affected.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Going Concern – (continued)

At December 31, 2023 the Company had cash and cash equivalents of approximately $ 23.2 million.

Based upon the Company’s current business plans, management believes that the Company’s current cash on hand will be sufficient to fully execute its plans through December 31, 2024.

Commencement of planned future clinical trials is subject to the Company’s successful pursuit of opportunities that will allow it to establish the clinical infrastructure and financial resources necessary to successfully initiate and complete its plan.

The Company anticipates its current cash will allow it to cover overhead costs, manufacturing costs for clinical supply, commercial scale up costs and limited research efforts, including completing its funding requirements for its ongoing current trials for VCN-01 and the on-going testing of SYN-004 (ribaxamase).

The Company will be required to obtain additional funding in order to continue the development of its current product candidates within the anticipated time periods (including initiation of its planned future clinical trials), if at all, and to continue to fund operations at the current cash expenditure levels.

Currently, the Company does not have commitments from any third parties to provide it with capital.

Potential sources of financing include strategic relationships, public or private sales of equity (including through the ATM sales agreement) or debt and other sources.

The Company cannot assure that it will meet the requirements for use of the ATM Sales Agreement or that additional funding will be available on favorable terms, or at all.

Current cash is expected to cover overhead costs, manufacturing costs for clinical supply, commercial scale up costs and limited research efforts.

If the Company fails to obtain additional funding for its clinical trials, whether through the sale of securities or a partner or collaborator, and otherwise when needed, it will not be able to execute its business plan as planned and will be forced to cease certain development activities (including initiation of planned clinical trials) until funding is received and its business will suffer, which would have a material adverse effect on its financial position, results of operations and cash flows.

The actual amount of funds the Company will need to operate is subject to many factors, some of which are beyond its control.

These factors include the following:

● the progress of its research activities;

● the number and scope of its research programs;

● the ability to recruit patients for clinical studies in a timely manner;

● the progress of its preclinical and clinical development activities;

● the progress of the development efforts of parties with whom the Company has entered into research and development agreements and amount of funding received from partners and collaborators;

● its ability to maintain current research and development licensing arrangements and to establish new research and development and licensing arrangements;

● the Company’s ability to achieve its milestones under licensing arrangements;

● the costs associated with manufacturing-related services to produce material for use in its clinical trials;

● the costs involved in prosecuting and enforcing patent claims and other intellectual property rights;

● the costs and timing of regulatory approvals.

The Company has based its estimates of funding requirements on assumptions that may prove to be wrong.

The Company may need to obtain additional funds sooner or in greater amounts than it currently anticipates.

If the Company raises funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of the existing stockholders will be diluted.

If the Company is not able to obtain financing when needed, it may be unable to carry out its business plan.

As a result, the Company may have to significantly limit its operations and its business, financial condition and results of operations would be materially harmed.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Summary of Significant Accounting Policies

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Accordingly, actual results could differ from those estimates.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Summary of Significant Accounting Policies – (continued)

Non-controlling Interest

The Company’s non-controlling interest represents the minority stockholder’s ownership interest related to the Company’s subsidiary, SYN Biomics.

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 on the face of the Consolidated Statements of Operations.

On September 5, 2018, the Company entered into an agreement with the minority stockholder for an investigator-sponsored Phase 2 clinical study of SYN-010.

Prior to this agreement and IRB approval in December 2018, the Company’s equity interest in SYN Biomics was 88.5 % and the non-controlling stockholder’s interest was 11.5 %.

In consideration of the support, the Company issued additional shares of stock to the minority stockholder, resulting in the Company’s equity interest in SYN Biomics being 83.0 % and the non-controlling stockholder’s interest is 17.0 %.

During 2021, the minority stockholder returned its shares of SYN Bionics to the Company for no consideration.

The Company's interest in SYN Biomics is now 100 %.

This is reflected in the Consolidated Statements of Equity (Deficit).

Risks and Uncertainties

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All interest bearing and non-interest bearing accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $250 thousand.

The majority of our cash balances are in excess of FDIC coverage.

We consider this to be a normal business risk.

The majority of the Company’s cash balances are in excess of FDIC coverage.

The Company considers this to be a normal business risk.

Property and Equipment

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Estimated Useful Life

Office equipment and furniture

Computer, office equipment, furniture and software

Leasehold improvements and fixtures

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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 3), the Company recorded two intangible assets, in-process research and development (“IPR&D”) and goodwill.

As a result of the acquisition of VCN (see Note 5), 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.

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If the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess.

The key assumptions used to value IPR&D include estimates of future cash flows and to the discount rate applicable to the future cash flow periods.

During the quarter ended September 30, 2023, 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.

As a result the Company performed an impairment analysis and concluded that there was no impairment as of September 30, 2023.

This interim analysis satisfied the requirements of the annual impairment test as the same information would be required for both measurement dates.

There were no impairment charges recorded during 2023 and 2022.

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.

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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 December 31, 2022, the Company has determined that it has one reporting unit.

The key assumptions used to value the reporting unit include estimates of future cash flows, the discount rate applicable and those future cash flow periods, and the implied control premium.

Theriva Biologics, Inc.

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Summary of Significant Accounting Policies – (continued)

As a result the Company performed an impairment analysis and concluded that there was no impairment as of September 30, 2023.

This interim analysis satisfied the requirements of the annual impairment test as the same information would be required for both measurement dates.

There were no impairment charges as of December 31, 2023 and 2022.

Contingent Consideration

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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.

Payments for amounts not in excess of original fair values established at acquisition date (including measurement period adjustments), and not paid within a period considered to be close to the transaction date, are reflected as financing activities in the statement of cash flows.

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.

The discounted cash flow is method used to value the contingent consideration which includes inputs of not readily observable market data, which are level 3 inputs.

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

See Fair Value of Financial Instruments below.

Long-Lived Assets Impairment

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 judgments made related to the expected useful lives of long-lived assets, definitions of lease terms and the Company’s ability to realize undiscounted cash flows in excess of the carrying amounts of these assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions, changes in usage or operating performance and other factors.

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.

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Net loss attributable to common stockholders for the year ended December 31, 2022 includes the effect of the Series C and D preferred stock price adjustment of $ 0.3 million.

Net loss attributable to common stockholders for the year ended December 31, 2021 includes the effect of the Series A preferred stock price adjustment of $ 7.4 million, the accretion of the Series B preferred discount of $ 1.5 million on converted shares and Series A preferred stock accrued dividends of $ 0.1 million.

The number of shares of common stock underlying Series C and D Preferred shares convertible to common stock that were excluded from the computation of the net loss per common share for the year ended December 31, 2022 was 2,459,016 .

The number of options and warrants for the purchase of common stock that were excluded from the computations of net loss per common share for the year ended December 31, 2022 were 2,295,898 and 634,425 , respectively, and for the year ended December 31, 2021 were 625,565 and 634,497 , respectively, because their effect is anti-dilutive.

The number of eligible options and warrants for the purchase of common stock that were excluded from the computations of net loss per common share for the year ended December 31, 2023 were 4,375,781 and zero , respectively, and for the year ended December 31, 2022 were 2,295,898 and 634,426 , respectively, because their effect is anti-dilutive.

Theriva Biologics, Inc.

4 unchanged sentences

The Company expenses research and development costs associated with developmental products not yet approved by the FDA to research and development expense as incurred.

Research and development costs consist primarily of license fees (including upfront payments), milestone payments, manufacturing costs, salaries, stock-based compensation and related employee costs, fees paid to consultants and outside service providers for laboratory development, legal expenses resulting from intellectual property prosecution and other expenses relating to the design, development, testing and enhancement of our product candidates.

Research and development expenses include external contract research organization (“CRO”) services.

2 unchanged sentences

Accrued CRO costs are subject to revisions as such studies progress to completion.

At December 31, 2022 and 2021, we have accrued CRO expenses of $ 0.8 million and $ 0.7 million, respectively, that are included in accrued expenses.

As of December 31, 2022, and 2021, we have prepaid CRO costs of $ 2.3 million and $ 0.5 million, respectively, that are included in prepaid expenses.

At December 31, 2023 and 2022, the Company has accrued CRO expenses of $ 1.7 million and $ 0.8 million, respectively, that are included in accrued expenses.

As of December 31, 2023, and 2022, the Company has prepaid CRO costs of $ 1.1 million and $ 2.3 million, respectively, that are included in prepaid expenses.

The Company assesses all contracts at inception to determine whether a lease exists.

The Company’s leases are all classified as operating leases per ASC 842.

The Company leases office space under operating leases that typically provide for the payment of minimum annual rentals and may include scheduled rent increases.

The Company made an accounting policy election to use the practical expedient that allows lessees to treat the lease and non-lease components of leases as a single lease component.

Leases with an initial term of 12 months or less are not recorded on the Company's consolidated balance sheets and to recognize those lease payments on a straightline basis in its consolidated statements of operations and comprehensive loss.

Operating lease ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

The Company used the incremental borrowing rate for all of its leases, as the implicit interest rate was not readily determinable.

In determining the Company’s incremental borrowing rate of each lease, the Company considered recent observable credit spreads correlating to the Company's creditworthiness and the term of each of the Company's lease agreements.

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 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.

The Company accounts for the reimbursement as a tax credit receivable related to amounts that had been approved by the Spanish government 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.

Stock Warrants

The Company’s Warrants are exercisable at any time and from time to time, in whole or in part, following the date of issuance and ending five years from the date of the execution of the Warrant Agreement.

The Warrants were measured at fair value at the date of issuance, which was recorded in additional paid-in capital as a reduction of the gross proceeds raised in the public offering.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Summary of Significant Accounting Policies – (continued)

Preferred Stock

The Company’s Series C and D Preferred Stock is classified as temporary equity on the accompanying consolidated balance sheet in accordance with authoritative guidance for the classification and measurement of convertible securities.

Fair Value of Financial Instruments

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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 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.

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 was required to pay up to $ 70.2 million in additional consideration upon the achievement of certain milestones, including regulatory filings completed noted in Note 5.

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 Innovation and New Technologies Limited (“Grifols”) $ 3.0 million in Q4 2022.

Due to this approval the Company paid Grifols Innovation and New Technologies Limited (“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.

As of the March 10, 2022 acquisition date, the contingent consideration had a fair value of $ 11.1 million.

The fair value of the contingent consideration was $ 10.1 million as of December 31, 2022 and is reflected as current accrued contingent consideration of $ 3.0 million and non-current contingent consideration liability of $ 7.1 million in the consolidated balance sheet.

During the year ended December 31, 2022 the Company recognized in operating expense a $ 2.1 million fair value adjustment increase to contingent consideration.

The fair value of the contingent consideration was $ 6.3 million as of December 31, 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 years ended December 31, 2023 and 2022 , with the exception of the reclassification of $ 3.25 million related to the milestone that was met in the current year and reclassified to accrued expenses and paid prior to year end.

Theriva Biologics, Inc.

2 unchanged sentences

Summary of Significant Accounting Policies – (continued)

The fair value of financial instruments measured on a recurring basis is as follows (in thousands):

As of March 10, 2022

Contingent consideration

As of December 31, 2022

Contingent consideration

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 year ended December 31, 2022 (in thousands):

Consideration

The following table summarizes the change in the fair value as determined by Level 3 inputs for the contingent consideration liabilities for the year ended December 31, 2023 and 2022:

(in thousands)

Balance at March 10, 2022

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Balance at December 31, 2022

Contingent consideration, current portion

Contingent consideration, net of current portion

Balance at December 31, 2022

(in thousands)

Balance at December 31, 2022

Payment of contingent consideration

Change in fair value

Balance at December 31, 2023

Contingent consideration, current portion

Contingent consideration, net of current portion

Balance at December 31, 2023

The fair value of financial instruments measured on a recurring basis is as follows:

As of December 31, 2023

Contingent consideration

Total liabilities

As of December 31, 2022

Contingent consideration

Total liabilities

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Summary of Significant Accounting Policies – (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

As of December 31, 2023

Weighted Average

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Discounted Cash Flows

Timing of Milestone Achievment

Milestone dates

Discount rate

12.9 % to 13.6

Weighted Average Discount rate

Probability of Occurrence (periodic for each Milestone)

11.7 % to 92.0

Probability of occurrence (cumulative through each Milestone)

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Discounted Cash Flows

Timing of Milestone Achievment

Milestone dates

Discount rate

5 unchanged sentences

6.9 % to 95.0

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Summary of Significant Accounting Policies – (continued)

Stock-Based Payment Arrangements

Generally, all forms of stock-based payments, including stock option grants, warrants, restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date typically using the Black-Scholes option pricing model, based on the estimated number of awards that are ultimately expected to vest.

Forfeitures are recognized in the period they occur.

Stock-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the stock-based payment, whichever is more readily determinable.

1 unchanged sentence

Segment information

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

The Company operates in one operating segment engaged in the research, development and commercialization of therapeutic drugs in which revenues are derived from product, license, and contract revenues.

2 unchanged sentences

Foreign Currencies

The functional currency of the Company’s VCN subsidiary is the Euro.

The functional currency of the Company’s Theriva S.L.

subsidiary is the Euro.

VCN’s Assets and liabilities are translated to U.S.

3 unchanged sentences

Transaction gains and losses are classified as other income (expense) net in the accompanying consolidated statements of operations.

Summary of Significant Accounting Policies – (continued)

The Company accounts for income taxes under the liability method;

1 unchanged sentence

Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.

The portion of any deferred tax asset for which it is more likely than not that a tax benefit will not be realized must then be offset by recording a valuation allowance.

The Company utilizes a two-step approach to recognize and measure uncertain tax positions.

2 unchanged sentences

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) :

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 ASU is 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 third quarter, specifically the cash conversion and beneficial conversion features.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Summary of Significant Accounting Policies – (continued)

In October 2021, the FASB issued Accounting Standards Update 2021-08 that address the accounting for Contract Assets and Liabilities from Contracts with Customers in a business combination (“ASU 2021-08”), with an effective date for SYN of January 1, 2024 (earlier adoption permitted).

ASU 2021-08 provides that existing contract assets and liabilities (including deferred costs to obtain and deferred revenue) are measured in a business combination under the measurement and recognition requirements of ASC 606.

ASU 2021-08 should generally “result in an acquirer recognizing and measuring the acquired contract assets and liabilities consistent with how they were recognized and measured in the acquiree’s financial statements.” The Company is currently assessing the impact of ASU 2021-08 on its consolidated financial statements.

Restatement of Previously Issued Unaudited Interim Consolidated Financial Statements

In connection with the preparation of its consolidated financial statements for the twelve months ended December 31, 2022, the Company determined that its previously issued unaudited interim consolidated financial statements for the periods ended June 30, and September 30, 2022 contained errors in the application of U.S.

generally accepted accounting principles as summarized below.

Application of FASB ASC 740 Income taxes

During the preparation of its annual tax provision for the year ended December 31, 2022, the Company determined that a deferred tax asset related to VCN’s indefinite-lived net operating loss generated during the second and third quarters of 2022 should have been established.

Further, because of an existing deferred tax liability associated with an indefinite-lived intangible asset is considered a source of income for the deferred tax asset, the deferred tax asset was determined to be more likely than not recoverable.

Since the deferred tax asset was determined to be more likely than not recoverable it would have resulted in an income tax benefit during the interim periods thereby reducing the Company’s consolidated net loss and loss per share for the three- and six-months periods ended June 30, 2022 and the three- and nine-month periods ended September 30, 2022.

In accordance with Staff Accounting Bulletin ("SAB") No.

99, Materiality, the Company evaluated these misstatements and, based on an analysis of quantitative and qualitative factors, determined that the impact of these misstatements was material to its reporting periods ended June 30, 2022 and September 30, 2022.

Accordingly, the Company has restated its unaudited interim consolidated financial statements for the interim reporting periods as of June 30, 2022 and for the three- and six-months then ended and as of September 30, 2022 and for the three- and nine-months then ended, and has included those restated financial statements within this annual report.

Immaterial Adjustments

Because we are restating prior periods, we are also reflecting other immaterial adjustments related to the valuation of the contingent consideration liabilities and the in process research and development asset, which has a corresponding effect on the associated deferred tax liability and recorded goodwill.

It was determined that incorrect clinical trial success rates were used in the determination of the fair value of the contingent consideration liabilities and the in process research and development asset for the interim reporting periods as of June 30, 2022 and for the three and six-months then ended and as of September 30, 2022 and for the three and nine-months then ended.

See Note 14 - Restatement of Previously Reported Unaudited Interim Consolidated Financial Statements (Unaudited) for restatement of the Company's previously reported unaudited interim consolidated financial statements that were impacted by these misstatements.

In December 2023, the FASB issued final guidance in ASU No.

2023-09, Income Taxes (ASC 740):

Improvements to Income Tax Disclosures requiring entities to provide additional information in the rate reconciliation and disclosures about income taxes paid.

For public business entities, the guidance is effective for annual periods beginning after December 15, 2024.

The Company is not early adopting, and therefore, this ASU is not adopted in the current period.

The Company does not expect this ASU to have a material impact on the consolidated financial statements.

In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures which requires public entities to disclose significant segment expenses regularly provided to the chief operating decision-maker.

Public entities with a single reporting segment have to provide all disclosures required by ASC 280, including the significant segment expense disclosures.

For public business entities, the guidance is effective for annual periods beginning after December 15, 2024.

The Company is not early adopting, and therefore is not adopted in the current period.

The Company does not expect this ASU to have a material impact on the consolidated financial statements.

Theriva Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

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.

Research and Development Tax Credits – (continued)

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 recognized in future periods.

Business Combination

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 (which changed its name to Theriva Biologics, S.L.) is a clinical-stage biopharmaceutical company developing new oncolytic adenoviruses for the treatment of cancer.

Theriva’s lead product candidate, VCN-01, is being studied in clinical trials for pancreatic cancer and retinoblastoma with additional investigator sponsored trials in indications including head and neck squamous cell carcinoma (HNSCC) and brain tumors.

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.

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 immuno-therapies.

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, the Company paid $ 4,700,000 to 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 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 Company received approval from the FDA to proceed with the Phase 2 clinical trial of VCN-01 in PDAC.

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.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

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, common shares and contingent consideration was valued at approximately $ 22.8 million, as follows (in thousands):

At the Closing, VCN and Grifols entered into a sublease agreement for laboratory and office space which didn’t commence until January 2023 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.

Business Combination – (continued)

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

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Fair value of contingent consideration

As of March 31, 2022, the fair value of the contingent consideration was approximately $ 11.1 million.

During the year ended December 31, 2022 the Company recognized in operating expense a $ 2.1 million fair value adjustment increase to contingent consideration.

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.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

BUSINESS COMBINATION – (continued)

As of December 31, 2023 and December 31, 2022, the fair value of the contingent consideration was approximately $ 6.3 million and $ 10.2 million, respectively.

During the year ended December 31, 2023, the Company recognized in operating expense a $ 0.7 million, 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, was paid to Grifols during the quarter ending December 31, 2023.

During the year ended December 31, 2022, the Company recognized in operating expense a $ 2.1 million increase in the fair value of the contingent consideration.

The allocation of the fair value of the VCN Acquisition updated for measurement period and other adjustments is shown in the table below.

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In-process research and development intangible asset

Deferred tax assets (liabilities), net

Deferred tax liabilities, net

Accounts payable

1 unchanged sentence

Accrued employee benefits

Loan Payable-current

Loans payable-current

Other long-term liabilities

2 unchanged sentences

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 $ 19.7 million of indefinite-lived in-process research and development intangible assets.

In connection with the Acquisition, the Company recognized $ 19.7 million of indefinite-lived in-process research and development intangible assets.

Working capital balances were recorded at their carrying value as they approximated fair value due to nature of the assets and short term duration of the liabilities.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

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.

Theriva Biologics S.L.

operations recorded a net loss of $ 5.8 million from the date of acquisition through December 31, 2022.

Business Combination – (continued)

VCN operations recorded a net loss of $ 5.8 million from the date of Acquisition through December 31, 2022 and $ 11.4 million for the year ended December 31, 2023.

During the year ended December 31, 2022, the Company recognized the following measurement period adjustments:

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● 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 year ended December 31, 2022 was a reduction in accrued liabilities of $ 277,000 , and increase in other receivables or $ 176,000 , an increase in in-process R&D of $ 810,000 ;

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 .

See Note 14 - Restatement of Previously Reported Unaudited Interim Consolidated Financial Statements (Unaudited) for restatement of the Company’s previously reported unaudited interim consolidated financial statements that were impacted by these misstatements.

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):

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

BUSINESS COMBINATION – (continued)

Year Ended December 31

(in thousands)

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.

In conjunction with the Acquisition, the Company incurred approximately $ 0.2 million in transaction costs during the year ended December 31, 2022, which were expensed as general, and administrative expense in the consolidated statements of operations.

There were no acquisition costs incurred during the year ended December 31, 2023.

Goodwill and Intangibles

2 unchanged sentences

Balance at December 31, 2022

Goodwill from Acquisition of VCN

Goodwill impairment loss

Measurement Period Adjustments

Effects of exchange rates

3 unchanged sentences

Balance at December 31, 2022

Acquired IPR&D

Measurement Period Adjustments

Effects of exchange rates

Balance at December 31, 2023

During the quarter ending September 30, 2022 and the quarter ended 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 trigger event for impairment.

The Company performed an impairment analysis and concluded that the Goodwill and IPR&D was not impaired as of September 30, 2022 and December 31,2022.

Theriva Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

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 interim impairment analysis and concluded that the Goodwill and IPR&D were not impaired as of September 30, 2023.

This interim analysis also satisfied the requirements of the annual impairment test.

There were no impairment charges recorded during 2023 and 2022.

Selected Balance Sheet Information

1 unchanged sentence

Prepaid clinical research organizations

Prepaid manufacturing expenses

Prepaid insurance

Receivable from prior owner

Prepaid manufacturing expenses

Prepaid consulting, subscriptions and other expenses

VAT receivable

Prepaid CRO expense is classified as a current asset.

Receivable from Grifols

Total prepaid expsnese and other current assets

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.

PROPERTY AND EQUIPMENT (in thousands)

3 unchanged sentences

accumulated depreciation and amortization

During the years ended December 31, 2022 and 2021 the Company recognized depreciation exprense of $ 85,000 and 87,000 respectively.

Total property and equipment, net

During the years ended December 31, 2023 and 2022 the Company recognized depreciation expense of $ 135,000 and 85,000 respectively.

ACCRUED EXPENSES (in thousands)

Accrued clinical consulting services

Accrued vendor payments

Accrued manufacturing costs

ACCRUED EMPLOYEE BENEFITS (in thousands)

Accrued bonus expense

Accrued vacation expense

Accrued compensation expense

Accrued vendor payments

Total accrued expesnes

Theriva Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Stock-Based Compensation and Warrants

Selected Balance Sheet Information – (continued)

ACCRUED EMPLOYEE BENEFITS (in thousands)

Accrued bonus expense

Accrued compensation expense

Accrued vacation expense

Total accrued employee benefits

Stock-Based Compensation

Stock Incentive Plan

3 unchanged sentences

As of December 31, 2023, there were 86 options issued and outstanding under the 2007 Stock Plan.

Only options were issued under the plan.

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.

4 unchanged sentences

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.

Only options were issued under the plan.

The number of shares authorized for options was increased such that 7,000,000 were authorized as of December 31, 2022.

As of December 31, 2023, there were 4,177,155 options issued and outstanding under the 2020 Stock Plan.

Only options were issued under the 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.

Stock option forfeitures are recognized as incurred.

The fair value of the stock-based payment is recognized over the stated vesting period.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Stock-Based Compensation – (continued)

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.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model.

The assumptions used for the years ended December 31, 2023 and 2022 are as follows:

8 unchanged sentences

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.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Stock-Based Compensation and Warrants – (continued)

Risk-free interest rate —The assumed risk-free rate used is a zero coupon U.S.

1 unchanged sentence

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.

Options granted during the years ended 2022 and 2023 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.

12 unchanged sentences

● monthly over three years.

During the years ended December 31, 2022 and 2021, the Company granted 1,728,000 and 2,260,000 options to employees and directors having an approximate fair value of $ 0.7 million and $ 0.5 million based upon the Black-Scholes option pricing model, respectively.

Stock-based compensation expense included in general and administrative expenses and research and development expenses relating to stock options issued to employees for the years ended December 31, 2022 and 2021 was $ 260,000 and $ 204,000 , respectively.

Stock-based compensation expense included in general and administrative expenses and research and development expenses relating to stock options issued to consultants for the years ended December 31, 2022 and 2021 was $ 215,000 and $ 212,000 , respectively.

Theriva Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

Stock-Based Compensation and Warrants (continued)

Stock-Based Compensation – (continued)

During the years ended December 31, 2023 and 2022, the Company granted 2,195,000 and 1,728,000 options to employees and directors having an approximate fair value of $ 0.9 million and $ 0.7 million based upon the Black-Scholes option pricing model, respectively.

Stock-based compensation expense included in general and administrative expenses and research and development expenses relating to stock options issued to employees for the years ended December 31, 2023 and 2022 was $ 373,000 and $ 260,000 , respectively.

Stock-based compensation expense included in general and administrative expenses and research and development expenses relating to stock options issued to consultants for the years ended December 31, 2023 and 2022 was $ 179,000 and $ 215,000 , respectively.

A summary of stock option activity for the years ended December 31, 2023 and 2022 is as follows:

17 unchanged sentences

701.00 – $ 1000.00

As of December 31, 2022, total unrecognized stock-based compensation expense related to stock options was $ 997,000 , which is expected to be expensed through April 2025.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Stock-Based Compensation – (continued)

As of December 31, 2023, total unrecognized stock-based compensation expense related to stock options was $ 1.3 million which is expected to be expensed through December 2026.

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.

2 unchanged sentences

Cash received from option exercises under the Company’s stock-based compensation plans for the years ended December 31, 2023 and 2022 was zero .

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

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 antidilution 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.

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.

7 unchanged sentences

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.

There were no Warrants exercised during the years ended December 31, 2023 and 2022.

The Warrants have expired in October 2023 and are no longer outstanding.

Upon expiration, the balance in additional paid-in capital related to the warrants was transferred to the additional paid-in capital balance related to common stock with no effect on additional paid-in capital.

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.

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 and had no impact to the Stockholders equity.

Theriva Biologics, Inc.

2 unchanged sentences

Stock Warrants – (continued)

A summary of all warrant activity for the Company for the years ended December 31, 2022 and 2021 is as follows:

A summary of all warrant activity for the Company the year ended December 31, 2023 and December 31, 2022 is as follows:

Weighted Average

Exercise Price

Contractual Life

Balance at December 31, 2021

( 1,165,575 )

Balance at December 31, 2022

Balance at December 31, 2023

A summary of all outstanding and exercisable warrants as of December 31, 2022 is as follows:

Weighted Average

Exercise Price

Contractual Life

Stockholders’ Equity

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 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.

(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 and (ii) vote the shares of the Series C Preferred Stock purchased in the Offering in favor of the Stockholder Items.

Theriva Biologics, Inc.

2 unchanged sentences

Stockholders’ Equity – (continued)

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.

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 is classified as temporary equity as a result of the deemed liquidation provision.

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.

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.

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 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.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Stockholders’ Equity (continued)

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.

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 year ended December 31, 2022 there were no shares remaining outstanding as all shares were converted in 2021 and 2020.

Stock Repurchase

On December 22, 2022, The Company repurchased an aggregate of 720,000 shares of its common stock, par value $ 0.001 from three founders of its subsidiary Theriva Biologics S.L.

On December 22, 2022, the Company repurchased an aggregate of approximately 720,000 shares of its common stock, par value $ 0.001 from three founders of its subsidiary Theriva Biologics S.L.

(formerly known as VCN Biosciences S.L.) in a privately negotiated transaction pursuant to the terms of a Share Repurchase Agreement entered into on December 20, 2022 with each of the Selling Stockholders.

4 unchanged sentences

The Selling Stockholders acquired the shares of the Company’s Common Stock as consideration for the sale of their shares of the subsidiary to the Company in March 2022.

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 on 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.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Stockholders’ Equity – (continued)

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”).

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 least20 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.

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 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 years ended December 31, 2021 and 2020, the Company accrued dividends of $ 24,000 and $ 254,000 , respectively.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Stockholders’ Equity – (continued)

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.

Riley Securities Sales Agreement

On August 5, 2016, the Company entered into the B.

Riley FBR Sales Agreement with FBR Capital Markets & Co.

Riley Securities and Alliance Global Partners 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), which enables the Company to offer and sell shares of the 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.

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) 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.

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”).

During the year ended December 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.

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 year ended December 31, 2023, the Company sold through the Amended and Restated Sales Agreement approximately 2.0 million shares of the Company’s common stock and received net proceeds of approximately $ 2.2 million.

During the year ended December 31, 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.

2 unchanged sentences

Notes to Consolidated Financial Statements

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.

Loans payable

The maturities of these loans are between 2024 and 2028.

The Company is required to maintain a restricted cash collateral account of $ 99,000 relating to the RETOS 2015 loan, which is reflected as a non-current asset on the balance sheet.

As a result of the VCN Acquisition, the Company maintains a restricted cash collateral account of $ 102,000 relating to the RETOS loan, which is reflected as a non-current asset on the balance sheet.

December 31, 2023

RETOS 2015 Loan

December 31, 2022

A maturity analysis of the debt as of December 31, 2023 is as follows (amounts in thousands of dollars) :

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 50,000 shares of common stock of the Company;

and (ii) transferred to CSMC an additional 2,420,000 shares of common stock of its subsidiary SYN Biomics, Inc.

(“SYN Biomics”) owned by the Company, such that after such issuance CSMC owned an aggregate of 7,480,000 shares of common stock of SYN Biomics, representing 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 are based overall on the fair value of the shares ($ 285,000 ) as determined at the date of IRB approval.

During the year ended December 31, 2022, there was no research and development expense recorded related to this transaction.

During the year ended December 31, 2021, $ 1,000 of research and development expense was recorded.

The Stock Purchase Agreement also provides 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 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 provides for tag-along rights in the event of the sale by the Company of its shares of SYN Biomics.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Non-controlling Interest and Related Party (continued)

On September 30, 2020, CSMC Medically Associated Science and Technology Program (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 to 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 is 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.

During 2021, the minority shareholders returned all remaining shares of SYN Biomics to the Company for no consideration.

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 .

On December 14, 2023 the Company approved the retention of MaryAnn Shallcross for compensation of $ 152,000 , a bonus of $ 70,000 and the grant of an option to purchase 75,000 shares of common stock having a value of $ 30,000 .

During the year ended December 31, 2023, Ms.

Shallcross had $ 145,000 in compensation expense.

Shallcross had been performing services for the Company during 2022 for total compensation of less than $ 120,000 .

License, Collaborative and Employment Agreements and Commitments

4 unchanged sentences

Further, under the terms of certain licensing agreements, the Company may have the obligation to pay certain milestones contingent upon the achievement of specific levels of sales.

Due to the long-range nature of such commercial milestone amounts, they are neither probable at this time nor predictable and consequently are not included in this disclosure.

Due to the long-range nature of such commercial milestone liability amounts, they are neither probable at this time nor predictable and consequently are not recorded in the financial statements or included in this disclosure.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment Agreements and Commitments – (continued)

On August 31, 2010, VCN entered into a Technology Transfer Agreement (the “Technology Transfer Agreement”) with the Bellvitge Biomedical Research Institute (“IDIBELL”) for the exclusive license of the right to use a Spanish patent number P200901201 titled “Oncolytic adenoviruses for treating cancer” which is co-owned by IDIBELL and Catalan Oncology Institute (“ICO”) for the term of the patent.

The Technology Transfer Agreement provides that IDIBELL is entitled to a low single digit percentage royalty on the income collected by VCN from the utilization of products derived from the licensed technology, prior to applying any value-added tax, if any, and low single digit percentage royalty on other income received by VCN arising from the use of the licensed technology, including income related to sublicenses of the licensed technology to third parties and advance payments or payments made for goals that were met and/or services associated with the licensed technology.

The Technology Transfer Agreement terminates upon the expiration of the patent rights and is subject to early termination by either party in the event of a breach by the other party of its obligations thereunder.

In addition, IDIBELL has the right to revoke the license if VCN ceases business activities for a continuous year or ceases to utilize the technology subject of the Technology Transfer Agreement, uses the technology in violation of the principals of IDIBELL or ICO or stops maintaining the patent licensed under the Technology Transfer Agreement.

No amounts incurred in 2023 and 2022.

ICO Marketing License

On May 16, 2009, VCN entered into a Contract to Grant a Marketing License (the “ICO License Agreement”) with the Catalan Institute of Oncology (the “ICO”) for a manufacturing and marketing license of a patent P200700665 titled “Adenovirus with mutations in the area of endoplasmic retention of protein E3-19k and their use in the treatment of cancer” in connection with a sublicense identified therein.

The validity period of the license granted is unlimited with the only applicable limit being the patent’s own validity.

The ICO License Agreement provides that the ICO is entitled to a royalty of low double digit percentage of the net value of the income from the concession of the identified sublicense and low double digit precentage on other lump sums received thereunder.

VCN and its sublicensees have an obligation to use all diligent and commercially reasonable efforts for the exploitation of the patent, otherwise, ICO may proceed to recover the license.

The ICO License terminates upon the expiration of the patent rights and is subject to early termination by either party in the event of a breach by the other party of its obligations thereunder.

No amounts incurred in 2023 and 2022.

IDIBELL/ICO License Agreement

On March 4, 2016, VCN entered into a License Agreement (the “IDIBELL/ICO License Agreement”) with IDIBELL and the ICO, for the exclusive license of the right to use a family of patents whose priority application is European patent application EP 14 38 2162.7 titled “Adenovirus comprising an albumin-binding molety”.

The License Agreement provides that IDIBELL and ICO, as licensors, are entitled to share a low single digit percentage royalty on the annual Net Sales (as defined in the IDIBELL/ICO License Agreement)collected by VCN from the utilization of products derived from the licensed technology and a royalty on sublicensing income received from the licensed technology at a rate of:

low double digit percentage during the first 3 years following the effective date of the agreement, mid single digit percentage during the term of 3 to 7 years following the effective date and low single digit percentage thereafter.

The IDIBELL/ICO License Agreement also provides for certain fixed payments, including a payment 25 days following the date of concession of the licensed patent in a minimum of three European jurisdictions and a payment 25 days following the date of concession of an American patent derived from the licensed patent.

The IDIBELL/ICO License is for an indefinite term subject to early termination (i) by mutual agreement of the parties;

(ii) by licensor in the event of at least two successive breaches or three alternate breaches calculated annually of the obligation to pay any consideration;

(iii) by VCN at its discretion due to certain patent infringements of rights protected by the patents or due to the absence of protection of the patent in any countries in the territory which is worldwide or (iv) in the event of a breach by the other party of its obligations thereunder which are not remedied within thirty (30) days.

In addition, the licensors have the right to revoke the IDIBELL/ICO License Agreement if VCN during a continuous period of two years abandons its research or development activities of the licensed patent or activities aimed at exploitation of the resulting products, VCN has undertaken no marketing whatsoever during the term of the IDIBELL/ICO License Agreement or uses the patent licensed for purposes other those as set forth in the IDIBELL/ICO License Agreement.

No amounts incurred in 2023 and 2022.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment Agreements and Commitments – (continued)

Saint Joan De Déu Collaboration and License Agreement

On February 15, 2016, VCN entered into a Collaboration Agreement to Conduct a Clinical Trial and Grant an Operating License (the “Collaboration and License Agreement”) with the Saint Joan De Déu Hospital (the “Hospital”) and the Saint Joan De Déu Foundation (the “Foundation”, and together with the Hospital, the “Institution”) regarding the conduct of a clinical trial to evaluate the safety and activity of VCN-01 in patients with refractory retinoblastoma.

The Collaboration and License Agreement provides that if the trial results are positive and VCN is interested in continuing with the development of VCN-01 for the treatment of retinoblastoma;

(a) the parties undertake to apply their best efforts to negotiate and, where appropriate, sign an agreement to collaborate in the development and execution of the following phases of the development of VCN-01 for the treatment of retinoblastoma;

(b) the Institution shall grant to VCN an exclusive, worldwide and indefinite license to use and exploit the trial results and their possible patents exclusively for the treatment of retinoblastoma;

(c) VCN shall pay the Foundation five hundred thousand Euros (€ 500,000 ), subject to reduction for any public and/or private economic aid that third parties may grant to the Institution for the conduct of the trial and/or any advance payments made by VCN before the end of the trial;

(d) VCN shall pay the Foundation three hundred twenty thousand Euros (€ 320,000 ) once following the trial results of a pivotal study, to be carried out by VCN, has been completed which allows it to obtain the marketing authorization of the product following from the results, which payment must be made within a maximum period of four ( 4 ) years from the date on which Institution has delivered the final report of the trial to VCN ;

and (e) the parties will use their best efforts to negotiate and, where appropriate, sign a product supply agreement in order that the Hospital can use VCN-01 for compassionate use in the treatment of retinoblastoma.

The Collaboration and License Agreement continues in force and effect until all obligations arising from the trial have been fulfilled, subject to early termination for a material breach by a party of any of their contractual and/or legal obligations, or, in the case of any other type of breach, when the breaching party has been asked in writing to remedy the breach and the breach is not cured within thirty (30) days from the date on which the written request was sent.

On November 2, 2023, VCN and Sant Joan de Déu-Barcelona Children’s Hospital announced an agreement for an exclusive worldwide option to negotiate an exclusive license of certain Sant Joan de Deu intellectual property rights related to the use of VCN-01 in combination with topoisomerase I inhibitor chemotherapies for the treatment of cancer.

During the year ended December 31, 2023 the Company paid a Euros (€ 25,000 ) option fee.

Washington University School of Medicine in St.

Louis Clinical Trial Agreement

In August 7, 2019, the Company entered into a clinical trial agreement (“CTA”) with Washington University School of Medicine in St.

On August 7, 2019, the Company entered into a clinical trial agreement (“CTA”) with Washington University School of Medicine in St.

Louis (“Washington University”) to conduct a Phase 1b/2a single-center, randomized, double-blinded, placebo-controlled clinical trial designed to evaluate the safety, tolerability and pharmacokinetics of oral SYN-004 (ribaxamase) in up to 36 adult allogeneic hematopoietic cell transplant (HCT) recipients (the “Study”).

Under the terms of the CTA, the Company will serve as the sponsor of the Study and supply SYN-004 (ribaxamase), as well as compensate Washington University for all research services to be provided in connection with the Study which is estimated to cost approximately $ 3,200,000 .

Dubberke, Professor of Medicine and Clinical Director, Transplant Infectious Diseases at Washington University will serve as the principal investigator of the trial in collaboration with his Washington University colleague Dr.

Schroeder, Associate Professor of Medicine, Division of Oncology, Bone Marrow Transplantation and Leukemia.

Theriva Biologics, Inc.

7 unchanged sentences

The Company has the right to terminate the CTA (i) effective immediately if Washington University fails to perform the study in accordance with the terms of the protocol, the CTA or applicable laws or regulations or if Washington University or the principal investigator become debarred or (ii) upon 14 days written notice and Washington University has the right to terminate the CTA upon 14 days notice if the principal investigator becomes unable to perform or complete the Study and the parties have not, prior to the expiration of such fourteen (14) day period, agreed to an alternative principal investigator.

The Company paid $ 1.1 million related to this agreement during the year ended 2022.

There we no payments during 2023.

Massachusetts General Hospital Exclusive Option License Agreement

On May 27, 2020, the Company entered into an agreement with Massachusetts General Hospital (“MGH”) granting us an option for an exclusive license to intellectual property and technology related to the use of intestinal alkaline phosphatase (“IAP”) to maintain gastrointestinal (GI) and microbiome health, diminish systemic inflammation, and treat age-related diseases.

If executed, the Company plans to use this license in the advancement of an expanded clinical development program for SYN-020, its proprietary recombinant version of bovine IAP currently in pre-clinical development.

Under the terms of the agreement, the Company is granted exclusive rights to negotiate a worldwide license with MGH to commercially develop SYN-020 to treat and prevent metabolic and inflammatory diseases associated with aging.

During the second quarter of 2021, the Company announced an amendment to its option for an exclusive license agreement with MGH to include intellectual property and technology related to the use of SYN-020 to inhibit liver fibrosis in select diseases, including NAFLD.

In January 2023, the company paid $ 7,500 to extend the option period until July 2024.

University of Texas Austin Agreement

4 unchanged sentences

provided, however that the License Agreement is subject to early termination by the Company in its discretion and by UT Austin for a breach of the License Agreement by the Company.

No amounts incurred in 2023 and 2022.

In connection with the License Agreement, the Company and UT Austin also entered into a Sponsored Research Agreement pursuant to which UT Austin will perform certain research work related to pertussis.

2 unchanged sentences

The Sponsored Research Agreement expired January 17, 2023.

provided, however, the Sponsored Research Agreement is subject to early termination upon the written agreement of the parties, a default in the material obligations under the Research Agreement which remain uncured for 60 days after receipt of notice, automatically upon the Company’s bankruptcy or insolvency and by the Company in its sole discretion at any time after the one year anniversary of the date of execution thereof upon no less than 90 days’ notice.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment Agreements and Commitments – (continued)

Prev ABR LLC (“Prev”) Agreement

13 unchanged sentences

and for territories outside the U.S.

With exception of the first milestone payment, the remaining milestones are payable 50% in cash and 50% in our stock , however, at Prev’s option the entire milestone may be payable in shares of the Company’s stock.

As of December 31, 2015, the first three milestones have been met, and at Prev’s option, Prev elected to receive 18,724 shares of the Company’s common stock.

With exception of the first milestone payment, the remaining milestones are payable 50% in cash and 50% in the Company’s stock , however, at Prev’s option the entire milestone may be payable in shares of the Company’s stock.

As of December 31, 2015, the first three milestones had been met, and at Prev’s option, Prev elected to receive 18,724 shares of the Company’s common stock.

Currently, assets licensed under this agreement are used in the Company’s Phase 1b/2a Clinical Study in Allogeneic HCT Recipients.

No milestones were achieved or such payments were made during the years ended December 31, 2022 and 2021.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment Agreements and Commitments (continued)

No milestones were achieved or such payments were made subsequent to 2015.

Employment Agreements

On December 6, 2018, the Company entered into a three-year employment agreement with Steven A.

Shallcross, (the “Employment Agreement”), to serve as the Chief Executive Officer and to continue to serve as the Chief Financial Officer of the Company.

On January 3, 2022, the Company entered into a three-year employment agreement with Steven A.

Shallcross, (the “2022 Shallcross Employment Agreement”), to serve as the Chief Executive Officer and to continue to serve as the Chief Financial Officer of the Company.

The Employment Agreement has a stated term of three years but may be terminated earlier pursuant to its terms.

7 unchanged sentences

On December 15, 2022, the Board of Directors of the Company awarded Steven A.

Shallcross (i) a cash bonus equal to 62 % of his prior base salary and (ii) an option to purchase 450,000 shares of the Company’s common stock.

On December 23, 2021, the Board of Directors of the Company awarded Steven A.

Shallcross (i) a cash bonus equal to approximately 62.5 % of his current base salary, and (ii) an option to purchase 650,000 shares of the Company’s common stock.

On December 15, 2022, the Board of Directors of the Company awarded Steven A.

(i) a cash bonus equal to $ 385,000 , and (ii) an option to purchase 475,000 shares of the Company's common stock.

1 unchanged sentence

Shallcross's Employment Agreement to increase his base salary to $ 614,250 .

On December 14, 2023, the Board of Directors of the Company awarded Steven A.

(i) a cash bonus equal to $ 350,000 , and (ii) an option to purchase 700,000 shares of the Company's common stock.

In addition, on December 14, 2023, the Company increased his base salary to $ 644,963 due to a merit increase.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment Agreements and Commitments – (continued)

On March 22, 2022, Synthetic Biologics, Inc.

(the "Company") entered into an employment agreement with Frank Tufaro (the "Employment Agreement") to serve as the Chief Operating Officer of the Company.

(the “Company”) entered into an employment agreement with Frank Tufaro (the “Employment Agreement”) to serve as the Chief Operating Officer of the Company.

Pursuant to the Employment Agreement, Dr.

Tufaro will receive an annual base salary of $ 375,000 and is eligible to earn an annual performance bonus of up to forty percent ( 40 )% of his annual base salary.

The annual bonus will be based upon the assessment of the Company's Board of Directors (the "Board") of Dr.

Tufaro had received an annual base salary of $ 375,000 and was eligible to earn an annual performance bonus of up to forty percent ( 40 %) of his annual base salary.

The annual bonus was based upon the assessment of the Company’s Board of Directors (the “Board”) of Dr.

Tufaro’s performance and the Company’s attainment of targeted goals set by the Board.

In addition, Dr.

Tufaro will also be eligible to receive annual equity awards pursuant to the Company's incentive equity plans, such awards (including the number and type of awards), if any, will be in the sole discretion of the Board.

The Employment Agreement also includes confidentiality obligations and inventions assignments by Dr.

Tufaro was also be eligible to receive annual equity awards pursuant to the Company’s incentive equity plans, such awards (including the number and type of awards), if any, was to be in the sole discretion of the Board.

The Employment Agreement also included confidentiality obligations and inventions assignments by Dr.

Tufaro and non-solicitation and non-competition provisions.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment Agreements and Commitments (continued)

The Employment Agreement has a stated term of three (3) years but may be terminated earlier pursuant to its terms.

Tufaro's employment is terminated for any reason, he or his estate as the case may be, will be entitled to receive the accrued base salary, any unpaid annual bonus earned with respect to any calendar year ending on or preceding the date of termination, vacation pay, expense reimbursement and any other entitlements accrued by him to the extent not previously paid (the "Accrued Obligations");

provided, however, that if his employment is terminated (i) by the Company without Cause or by Dr.

Tufaro for Good Reason (as each is defined in the Employment Agreement) then in addition to paying the Accrued Obligations, (a) the Company will continue to pay his then current base salary and continue to provide benefits at least equal to those that were provided at the time of termination for a period of six (6) months and (b) all unvested stock options and other equity awards will immediately vest and he will be entitled to exercise any vested equity awards until the earlier of six (6) months after termination or the remaining term of the awards;

The employment agreement had a stated term of three (3) years but may be terminated earlier pursuant to its terms.

The employment agreement provided that if Dr.

Tufaro’s employment was terminated for any reason, he or his estate as the case may be, would be entitled to receive the accrued base salary, any unpaid annual bonus earned with respect to any calendar year ending on or preceding the date of termination, vacation pay, expense reimbursement and any other entitlements accrued by him to the extent not previously paid (the “Accrued Obligations”);

provided, however, that if his employment was terminated (i) by the Company without Cause or by Dr.

Tufaro for Good Reason (as each is defined in the Employment Agreement) then in addition to paying the Accrued Obligations, (a) the Company would continue to pay his then current base salary and continue to provide benefits at least equal to those that were provided at the time of termination for a period of six (6) months and (b) all unvested stock options and other equity awards would immediately vest and he would be entitled to exercise any vested equity awards until the earlier of six (6) months after termination or the remaining term of the awards;

or (ii) by reason of his death or Disability (as defined in the employment agreement), then in addition to paying the Accrued Obligations, Dr.

Tufaro, or his estate as the case may be, would have the right to exercise any vested options until the earlier of six (6) months after termination or the remaining term of the awards.

Tufaro commenced employment with another employer and becomes eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits to be provided by the Company as described herein would terminate.

Tufaro commenced employment with another employer and became eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits to be provided by the Company as described herein would terminate.

On December 15, 2022, the Board awarded Frank Tufaro, the Company's Chief Operating Officer:

2 unchanged sentences

Tufaro's Employment Agreement to increase his base salary to $ 393,750 .

Effective May 10, 2023, the Company entered into a Separation Agreement and Release with Frank Tufaro (the “Separation Agreement”) and a consulting agreement with Mr.

In accordance with the terms of the Employment Agreement, the Separation Agreement provides for (i) the payment to Mr.

Tufaro of a total of $ 196,875 , paid in bi-monthly installments, less applicable withholding, for a period of six months, (ii) reimbursement of COBRA coverage for himself, his spouse and other eligible dependents for the lesser of:

six months or until he commences new employment or substantial self-employment, and (iii) acceleration of the vesting of his outstanding stock options (the “Option Awards”)and (iv) the extension of the period of time for which Mr.

Tufaro has the right to exercise any vested shares subject to options until the earlier of (i) the expiration date of the Option Awards, or (ii) six (6) months from the separation date.

The Company recorded $ 22,000 of stock option expense due to the acceleration of the vesting.

The Separation Agreement contains mutual general releases of claims and non-disparagement provisions.

The Consulting Agreement has a term of six months unless sooner terminated.

Either party may terminate the Consulting Agreement without cause at any time upon thirty (days’ prior written notice or with cause immediately.

Tufaro will be compensated a set daily rate for each full day that he provides consulting services, pro-rated for any days services are provided less than eight hours.

There were no amounts paid under this conlsuting agreement during the year ended December 31, 2023.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment Agreements and Commitments – (continued)

Operating Lease

The Company’s existing lease as of December 31, 2022 for its U.S.

location is classified as an operating lease.

As of December 31, 2022, the Company has two operating leases for facilities.

The Company’s existing leases as of December 31, 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 their space by giving notice to the landlord before December 31, 2021.

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.

1 unchanged sentence

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 Vallès (Barcelona) from the former majority 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.

The Company also leases research and office facilities in Barcelona, Spain for its 100 percent owned Theriva S.L.

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 year ended December 31, 2023 and 2022 approximated $ 624,000 and $ 569,000 , respectively.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

License, Collaborative and Employment Agreements and Commitments (continued)

A maturity analysis of our operating leases as of December 31, 2022 is as follows (amounts in thousands of dollars) :

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 December 31, 2023 is as follows (amounts in thousands of dollars) :

Future undiscounted cash flow for the years ending December 31,

Discount factor

Lease liability

Lease liability - current

Lease liability - long term

Operating lease liability

Operating lease liability - current

Operating lease liability - long term

Consulting Fees

3 unchanged sentences

The achievement of the milestones is not probable at this time.

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.

No amounts incurred in 2023 and 2022.

Theriva Biologics, Inc.

1 unchanged sentence

Notes to Consolidated Financial Statements

There was an income tax benefit for the year ended December 31, 2022 of $ 1.4 million.

For the year ended December 31, 2021 there was no income tax expense due to the Company’s domestic net losses.

The Company’s tax expense differs from the “expected” tax expense for the years ended December 31, 2022, and 2021.

For 2022, the “expected” tax expense is computed by applying the Federal corporate statutory tax rate of 21 % and a net, after Federal benefit state tax rate of 6.47 % (state blended rate was 8.19 %) to loss before taxes.

In addition, the tax benefit impact from foreign operations represents the impact of VCN’s statutory foreign tax rate on its operations adjusted for the difference and between US and Spanish tax rates.

For 2021, the “expected” tax expense is computed by applying the Federal corporate statutory tax rate of 21 % and a net, after Federal benefit state tax rate of 6.46 % (state blended rate was 8.18 %) to loss before taxes.

These results are as follows (in thousands):

Computed “expected” tax-benefit - Federal

Computed “expected” tax-benefit - State

Non-deductible stock-based compensation

State Tax Rate Adjustment

Foreign Tax Rate Adjustment

Forfeited NQSO Trueup

Transaction Costs

Fair Market Value Adjustment - Contingent Consideration

Other Permanent Differences

Change in valuation allowance

License, Collaborative and Employment Agreements and Commitments – (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 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.

Losses before income taxes for the years ended December 31, 2023 and 2022 was as follows:

Year Ended December 31,

Income/(Loss) before Income Taxes

The components of income tax benefit consisted of the following for the years ended December 31, 2023 and 2022:

Year Ended December 31,

Total Current

Total Deferred

Provision (Benefit) for income taxes

Theriva Biologics, Inc.

2 unchanged sentences

Income Taxes – (continued)

Income tax (benefit) provision related to continuing operations differ from the amounts computed by applying the statutory income tax rate of 21 % to pretax loss as follows (in thousands):

Year Ended December 31, 2023

Year Ended December 31, 2022

US Federal Statutory Tax Rate

State and Local Income Taxes, Net of Federal Income Tax Effect

Foreign Tax Effects-Spain

Statutory tax rate difference between Spain and United States

Changes in Valuation Allowances

Nontaxable or Nondeductible Items

Other Adjustments

Effective Tax Rate

Deferred Tax Assets and Liabilities

Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of our deferred tax assets for federal and state income taxes are as follows (in thousands):

Significant components of the Company’s deferred tax assets for federal and state income taxes are as follows (in thousands):

Year Ended December 31,

Deferred Tax Assets:

Federal & State NOL Carryforward

Federal, State and Foreign NOL Carryforward

Accrued Compensation

2 unchanged sentences

Stock Issued for License Agreement

Stock Issued For Milestone Payment

Amortizable License Fee

1 unchanged sentence

Total Gross DTA

Valuation Allowance

Total Deferred Tax Assets

Deferred Tax Liabilities:

ASC 842 Net ROU Assets

Total Gross DTL

Net Deferred Tax Assets

Net Deferred Tax Asset (Liability)

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Income Taxes – (continued)

On March 10, 2022, the Company acquired VCN, a Spanish Company in a tax-free stock acquisition.

3 unchanged sentences

At December 31, 2023, the Company has a gross Federal net operating loss carry-forward of approximately $ 72.7 million available to offset future United States taxable income.

The Company’s pre-2018 net operating losses expire on various dates through 2037 .

In addition, it was determined that the utilization of gross Federal net operating losses of approximately $ 228.3 million was limited by $ 155.6 .

million as a result change of control ownership changes that occurred under Section 382 of the Internal Revenue Code.

million as a result of change of control ownership changes that occurred under Section 382 of the Internal Revenue Code.

State NOL’s are also limited by Section 382 of the Internal Revenue Code and were limited accordingly.

At December 31, 2023, the Company has a gross Foreign net operating loss carry forward of approximately $ 25.2 million USD.

The foreign net operating loss carries forward indefinitely.

In 2020, the Company completed an Internal Revenue Code Section 382 analysis of its historical net operating loss carry-forward amount.

2 unchanged sentences

Updated section 382 analysis were performed in 2021, 2022, and 2023 to identify if any additional ownership shifts occurred in these years.

It was determined that an ownership shift occurred on January 20, 2021.

The result of the updated Section 382 analysis produced an IRC 382 limit due to the 2021 ownership shift.

There was no ownership shift determined for 2022.

The result of the updated Section 382 analysis produced an IRC 382 limit due to the 2021 ownership change.

There was no ownership change determined for 2022 or 2023.

All previously limited net operating losses remain available for use in future periods.

The Company’s pre-2018 net operating losses expire on various dates through 2037 while the net operating loss carry-forward originating in the 2018 year and later carryforward indefinitely and are subject to additional limitations based on taxable income.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Income Taxes (continued)

At December 31, 2023, the Company has a gross Foreign net operating loss carryforward of approximately $ 25.2 million related to its newly acquired Spanish subsidiary, VCN.

6 unchanged sentences

As of December 31, 2023 and 2022, management has established a full valuation allowance against its net deferred tax assets in all US tax jurisdictions.

The Company has not established a valuation allowance in its Spanish tax jurisdictions since it is in a net deferred tax liability position in Spain."

Undistributed earnings of our foreign subsidiary, VCN, are considered to be permanently reinvested and, accordingly, no deferred U.S.

The Company has also established a valuation allowance in its Spanish tax jurisdictions as it is no longer in a net deferred tax liability position in Spain.

Undistributed earnings of the Company’s foreign subsidiary, VCN, are considered to be permanently reinvested and, accordingly, no deferred U.S.

income taxes have been provided thereon.

2 unchanged sentences

income taxes that might be payable if these earnings were repatriated.

The Company continually evaluates expiring statutes of limitation, audits, proposed settlements, changes in tax law, and new authoritative rulings.

Due to the existence of net operating carryforwards since inception, all of the Company’s income tax filings remain open.

We have incurred net operating losses since inception, and we do not have any significant unrecognized tax benefits.

Subsequent Events

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.

On January 15, 2023, the company moved into the facilities and the lease commenced.

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Restatement Of Previously Reported Unaudited Interim Consolidated Financial Statements (Unaudited)

Subsequent to filing the Company’s unaudited interim consolidated financial statements for the periods ended June 30, 2022, and September 30, 2022, as reported in the Company’s Quarterly Reports on Form 10-Q filed on August 8, 2022, and November 10, 2022, respectively, the Company determined that certain of the amounts in the Company's previously reported unaudited interim consolidated financial statements and accompanying footnote disclosures contained misstatements.

See Note 2 – Restatement of Previously Issued Unaudited Interim Consolidated Financial Statements for additional information.

In accordance with SAB No.

99, Materiality , the Company evaluated these misstatements, and based upon an analysis of quantitative and qualitative factors, determined that the impact of these misstatements was material to its unaudited interim consolidated financial statements as of and for the three and six-months ended June 30, 2022 and as of and for the three and nine-months ended September 30, 2022, and a restatement of the previously reported unaudited interim consolidated financial statements was required.

The Company has not filed, and does not intend to file, an amendment to the Company’s previously filed Quarterly Reports on Form 10-Q for the quarters ended June 30, 2022 and September 30, 2022, but instead is restating its unaudited interim financial statements in this Annual Report on Form 10-K

The effects of the restatement and immaterial out of period adjustments of the previously reported Consolidated Balance Sheets are presented below:

As of June 30, 2022

As Previously

Other Immaterial

(amounts in thousands, except per share data)

Current Assets

Cash and cash equivalents

Prepaid expenses and other current assets

Total Current Assets

Non-Current Assets

Property and equipment, net

Restricted cash

Right of use asset

In-process research and development

Deposits and other assets

Liabilities and Stockholders’ Equity

Current Liabilities:

Accounts payable

Accrued expenses

Accrued employee benefits

Contingent consideration, current portion

Loans Payable-current

Operating lease liability

Total Current Liabilities

Non-current Liabilities

Non-current contingent consideration

Loan Payable - Long term

Deferred tax liabilities, net

Lease liability - Long term

Total Liabilities

Commitments and Contingencies

Stockholders’ Equity (Deficit):

Common stock, $ 0.001 par value;

20,000,000 shares authorized, 15,844,294 issued and 15,844,061 outstanding at June 30, 2022 and 13,204,487 issued and 13,204,254 outstanding at December 31, 2021

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2022

As Previously

Other Immaterial

(amounts in thousands, except per share data)

Current Assets

Cash and cash equivalents

Prepaid expenses and other current assets

Total Current Assets

Non-Current Assets

Property and equipment, net

Restricted cash

Right of use asset

In-process research and development

Deposits and other assets

Liabilities and Stockholders’ Equity

Current Liabilities:

Accounts payable

Accrued expenses

Accrued employee benefits

Contingent consideration, current portion

Loans Payable-current

Operating lease liability

Total Current Liabilities

Non-current Liabilities

Non-current contingent consideration

Loan Payable - Long term

Deferred tax liabilities, net

Lease liability - Long term

Total Liabilities

Commitments and Contingencies

Series C convertible preferred stock, $ 0.001 par value;

275,000 issued and outstanding

Series D convertible preferred stock, $ 0.001 par value;

100,000 issued and outstanding

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

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

The effect of the restatement and immaterial out of period adjustments of the previously reported Consolidated Statements of Income (Loss) is presented below:

Three-months ended June 30, 2022

As Previously

Other Immaterial

(amounts in thousands, except per share data)

Operating Costs and Expenses:

General and administrative

Research and development

Total Operating Costs and Expenses

Loss from Operations

Other Expense:

Exchange loss

Interest income

Total Other Income(Expense)

Net Loss before income taxes

Income tax benefit

Net Loss Attributable to Non-controlling Interest

Net Loss Attributable to Synthetic Biologics, Inc.

and Subsidiaries

Series A Preferred Stock Dividends

Effect of Series A Preferred Stock price adjustment

Series B Preferred Stock Dividends

Net Loss Attributable to Common Stockholders

Net Loss Per Share - Basic and Dilutive

Weighted average number of shares outstanding during the period - Basic and Dilutive

Loss on foreign currency translation

Total comprehensive loss

Comprehensive loss attributable to non-controlling interest

Comprehensive loss attributable to Synthetic Biologics, Inc.

and Subsidiaries

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Six-months ended June 30, 2022

As Previously

Other Immaterial

(amounts in thousands, except per share data)

Operating Costs and Expenses:

General and administrative

Research and development

Total Operating Costs and Expenses

Loss from Operations

Other Expense:

Exchange loss

Interest income

Total Other Income(Expense)

Net Loss before income taxes

Income tax benefit

Net Loss Attributable to Non-controlling Interest

Net Loss Attributable to Synthetic Biologics, Inc.

and Subsidiaries

Series A Preferred Stock Dividends

Effect of Series A Preferred Stock price adjustment

Series B Preferred Stock Dividends

Net Loss Attributable to Common Stockholders

Net Loss Per Share - Basic and Dilutive

Weighted average number of shares outstanding during the period - Basic and Dilutive

Loss on foreign currency translation

Total comprehensive loss

Comprehensive loss attributable to non-controlling interest

Comprehensive loss attributable to Synthetic Biologics, Inc.

and Subsidiaries

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Three-months ended September 30, 2022

Other Immaterial

(amounts in thousands, except per share data)

As Previously Reported

Operating Costs and Expenses:

General and administrative

Research and development

Total Operating Costs and Expenses

Loss from Operations

Other Expense:

Exchange loss

Interest income

Total Other Income(Expense)

Net Loss before income taxes

Income tax benefit

Net Loss Attributable to Non-controlling Interest

Net Loss Attributable to Synthetic Biologics, Inc.

and Subsidiaries

Effect of Warrant exercise price adjustment

Effect of Series A Preferred Stock price adjustment

Series B Preferred Stock Dividends

Net Loss Attributable to Common Stockholders

Net Loss Per Share - Basic and Dilutive

Weighted average number of shares outstanding during the period - Basic and Dilutive

Loss on foreign currency translation

Total comprehensive loss

Comprehensive loss attributable to non-controlling interest

Comprehensive loss attributable to Synthetic Biologics, Inc.

and Subsidiaries

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Nine-months ended September 30, 2022

As Previously

Other Immaterial

(amounts in thousands, except per share data)

Operating Costs and Expenses:

General and administrative

Research and development

Total Operating Costs and Expenses

Loss from Operations

Other Expense:

Exchange loss

Interest income

Total Other Income(Expense)

Net Loss before income taxes

Income tax benefit

Net Loss Attributable to Non-controlling Interest

Net Loss Attributable to Synthetic Biologics, Inc.

and Subsidiaries

Effect of Warrant exercise price adjustment

Effect of Series A Preferred Stock price adjustment

Series B Preferred Stock Dividends

Net Loss Attributable to Common Stockholders

Net Loss Per Share - Basic and Dilutive

Weighted average number of shares outstanding during the period - Basic and Dilutive

Loss on foreign currency translation

Total comprehensive loss

Comprehensive loss attributable to non-controlling interest

Comprehensive loss attributable to Synthetic Biologics, Inc.

and Subsidiaries

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

The effect of the restatement and immaterial out of period adjustments of the previously reported Consolidated Statements of Changes in Shareholders’ Equity is presented in the tables below:

As Previously Reported

Common Stock $0.001 Par Value

Series B Preferred

Comprehensive

Stockholders’

(amounts in thousands, except per share data)

Balance at December 31, 2021

Stock-based compensation

Issuance of Common Stock for VCN Acquisition

Translation gains (losses)

Balance at March 31, 2022

Stock-based compensation

Translation gains (losses)

Balance at June 30, 2022

Stock-based compensation

Translation gains (losses)

Balance at September 30, 2022

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Restatement Adjustments

Common Stock $0.001 Par Value

Series B Preferred

Comprehensive

Stockholders’

(amounts in thousands, except per share data)

Balance at December 31, 2021

Stock-based compensation

Issuance of Common Stock for VCN Acquisition

Translation gains (losses)

Balance at March 31, 2022

Stock-based compensation

Translation gains (losses)

Net loss-other immaterial adjustments

Balance at June 30, 2022

Stock-based compensation

Translation gains (losses)

Net loss-other immaterial adjustments

Balance at September 30, 2022

Common Stock $0.001 Par Value

Series B Preferred

Comprehensive

Stockholders’

(amounts in thousands, except per share data)

Balance at December 31, 2021

Stock-based compensation

Issuance of Common Stock for VCN Acquisition

Translation gains (losses)

Balance at March 31, 2022

Stock-based compensation

Translation gains (losses)

Balance at June 30, 2022

Stock-based compensation

Translation gains (losses)

Balance at September 30, 2022

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

The effect of the restatement of the previously reported Consolidated Statements of Cash Flows is presented below:

Six-months ended June 30, 2022

Other Immaterial

(amounts in thousands, except per share data)

As Previously Reported

Cash Flows From Operating Activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation

Income tax benefit

Change in fair value of contingent consideration

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Right of use asset

Accounts payable

Accrued expenses

Accrued employee benefits

Lease liability

Net Cash Used In Operating Activities

Cash Flows from Investing Activities

Purchase of property and equipment

Cash paid for business combination, net of cash acquired

Pre-acquisition loan to VCN

Net Cash Used in Investing Activities

Cash Flows from Financing Activities

Payment of VCN's CDTI loan

Proceeds from "at the market"

stock issuance

Proceeds from issuance of common stock for warrant exercises

Net Cash Provided (used in) by Financing Activities

Effects of FX on cash

Net increase (decrease) in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted at the beginning of this period

Cash and cash equivalents and restricted cash at the end of this period

Reconciliation of cash, cash equivalents, and restricted cash reported in the statement of financial position

Cash and cash equivalents

Restricted cash included in other long-term assets

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

Supplemental non-cash investing and financing activities:

Fair value of contingent consideration issued in a business combination

Fair value of equity issued as consideration in a business combination

Effective settlement of pre-closing VCN financing

Goodwill measurement period adjustment

Theriva Biologics, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements

Nine-months ended September 30, 2022

Other Immaterial

(amounts in thousands, except per share data)

As Previously Reported

Cash Flows From Operating Activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation

Income tax benefit

Change in fair value of contingent consideration

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Right of use asset

Accounts payable

Accrued expenses

Accrued employee benefits

Lease liability

Net Cash Used In Operating Activities

Cash Flows from Investing Activities

Purchase of property and equipment

Cash paid for business combination, net of cash acquired

Pre-acquisition loan to VCN

Net Cash Used in Investing Activities

Cash Flows from Financing Activities

Payment of VCN's CDTI loan

Proceeds from sale of Series C Preferred Stock, net of issuance cost

Proceeds from sale of Series D Preferred Stock, net of issuance cost

Proceeds from "at the market"

stock issuance

Proceeds from issuance of common stock for warrant exercises

Net Cash Provided (used in) by Financing Activities

Effects of FX on cash

Net increase (decrease) in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted at the beginning of this period

Cash and cash equivalents and restricted cash at the end of this period

Reconciliation of cash, cash equivalents, and restricted cash reported in the statement of financial position

Cash and cash equivalents

Restricted cash included in other long-term assets

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

Supplemental non-cash investing and financing activities:

Fair value of contingent consideration issued in a business combination

Fair value of equity issued as consideration in a business combination

Effective settlement of pre-closing VCN financing

Goodwill measurement period adjustment

In-process R&D measurement period adjustment

Deferred tax liability measurement period adjustment

Effect of Warrant exercise price adjustment

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data