Theriva Biologics, Inc. 10-K

Item 8. Financial Statements and Supplementary Data . Page Report of Independent Registered Public Accounting Firm (BDO USA, P.C.; Raleigh, NC; PCAOB ID# 243 ) 70 Consolidated Balance Sheets 73 Consolidated Statements of Operations and Comprehensive Loss 74 Consolidated Statements of Stockholder’s Equity 75 Consolidated Statements of Cash Flows 76 Notes to Consolidated Financial Statements 77 ​ ​ ​ 69 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Theriva Biologics, Inc. Rockville, Maryland Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Theriva Biologics, Inc. (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 These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. 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. 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 70 Table of Contents 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: - 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; and 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. 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: - 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; 71 Table of Contents 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. ​ ​ ​ 72 Table of Contents Theriva Biologics, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands except share and par value amounts) ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2023 ​ 2022 Assets ​ ​ ​ ​ ​ Current Assets ​ ​ Cash and cash equivalents ​ $ 23,177 ​ $ 41,786 Tax credit receivable ​ ​ 1,812 ​ ​ — Prepaid expenses and other current assets ​ 2,414 ​ 3,734 Total Current Assets ​ 27,403 ​ 45,520 ​ ​ ​ ​ Non-Current Assets ​ ​ ​ ​ Property and equipment, net ​ 422 ​ 345 Restricted cash ​ ​ 102 ​ ​ 99 Right of use asset ​ ​ 1,759 ​ ​ 1,199 In-process research and development ​ 19,755 ​ 19,150 Goodwill ​ 5,700 ​ 5,525 Deposits and other assets ​ ​ 78 ​ ​ 23 Total Assets ​ $ 55,219 ​ $ 71,861 Liabilities and Stockholders’ Equity ​ ​ ​ ​ ​ ​ Current Liabilities: ​ ​ Accounts payable ​ $ 770 ​ $ 915 Accrued expenses ​ 2,995 ​ 1,496 Accrued employee benefits ​ ​ 1,517 ​ ​ 1,403 Contingent consideration, current portion ​ — ​ 2,973 Deferred research and development tax credit-current portion ​ ​ 906 ​ ​ — Loans payable-current ​ ​ 63 ​ ​ 57 Operating lease liability-current portion ​ ​ 487 ​ ​ 216 Total Current Liabilities ​ 6,738 ​ 7,060 ​ ​ ​ ​ ​ ​ ​ Non-current Liabilities ​ ​ ​ ​ ​ ​ Non-current contingent consideration ​ ​ 6,274 ​ ​ 7,211 Loan Payable - non-current ​ ​ 162 ​ ​ 221 Deferred tax liabilities, net ​ ​ — ​ ​ 1,618 Non-current deferred research and development tax credit ​ ​ 906 ​ ​ — Non-current operating lease liability ​ ​ 1,442 ​ ​ 1,187 Total Liabilities ​ 15,522 ​ 17,297 ​ ​ ​ ​ ​ ​ ​ Commitments and Contingencies ​ — ​ — Temporary Equity ​ ​ ​ ​ ​ ​ Series C convertible preferred stock, $ 0.001 par value; 10,000,000 authorized; 275,000 issued and outstanding ​ 2,006 ​ 2,006 Series D convertible preferred stock, $ 0.001 par value; 10,000,000 authorized; 100,000 issued and outstanding ​ ​ 728 ​ ​ 728 Stockholders’ Equity: ​ ​ Common stock, $ 0.001 par value; 350,000,000 shares authorized, 17,868,282 issued and 17,148,049 outstanding at December 31, 2023 and 15,844,061 issued and 15,123,828 outstanding at December 31, 2022 ​ 18 ​ 16 Additional paid-in capital ​ 346,519 ​ 343,750 Treasury stock at cost, 720,233 shares at December 31, 2023 and at December 31, 2022 ​ ​ ( 288 ) ​ ​ ( 288 ) Accumulated other comprehensive income (loss) ​ ​ 32 ​ ​ ( 679 ) Accumulated deficit ​ ( 309,318 ) ​ ( 290,969 ) Total Stockholders‘ Equity ​ ​ 36,963 ​ ​ 51,830 ​ ​ ​ ​ ​ ​ ​ Total Liabilities and Stockholders’ Equity ​ $ 55,219 ​ $ 71,861 ​ See accompanying notes to consolidated financial statements ​ 73 Table of Contents Theriva Biologics, Inc. and Subsidiaries Consolidated Statements of Operations and Comprehensive Loss (In thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended ​ ​ December 31, ​ 2023 2022 Operating Costs and Expenses: ​ ​ General and administrative ​ $ 7,120 ​ $ 9,858 Research and development ​ 14,311 ​ 11,723 Total Operating Costs and Expenses ​ 21,431 ​ 21,581 Loss from Operations ​ ( 21,431 ) ​ ( 21,581 ) Other Income: ​ ​ Foreign currency exhange gain (loss) ​ ​ 3 ​ ​ ( 41 ) Interest income ​ 1,439 ​ 512 Total Other Income ​ ​ 1,442 ​ ​ 471 ​ ​ ​ ​ ​ ​ ​ Net Loss before income taxes ​ ​ ( 19,989 ) ​ ​ ( 21,110 ) Income tax benefit ​ ​ 1,640 ​ ​ 1,425 ​ ​ ​ ​ ​ ​ ​ Net Loss Attributable to Theriva Biologics, Inc. and Subsidiaries ​ $ ( 18,349 ) ​ $ ( 19,685 ) ​ ​ ​ ​ ​ ​ ​ Effect of Warrant exercise price adjustment ​ — ​ ( 340 ) ​ ​ ​ ​ ​ ​ ​ Net Loss Attributable to Common Stockholders ​ $ ( 18,349 ) ​ $ ( 20,025 ) ​ ​ ​ Net Loss Per Share - Basic and Dilutive ​ $ ( 1.14 ) ​ $ ( 1.31 ) ​ ​ ​ Weighted average number of shares outstanding during the period - basic and dilutive ​ 16,107,014 ​ 15,327,328 ​ ​ ​ ​ ​ ​ ​ Net Loss ​ ​ ( 18,349 ) ​ ​ ( 19,685 ) Gain (loss) on foreign currency translation ​ ​ 711 ​ ​ ( 679 ) Total comprehensive loss ​ ​ ( 17,638 ) ​ ​ ( 20,364 ) ​ See accompanying notes to consolidated financial statements ​ 74 Table of Contents Theriva Biologics, Inc. and Subsidiaries Consolidated Statements of Stockholder’s Equity (In thousands, except share and par value amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock $0.001 Par Value ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ Other ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ Paid-in ​ Accumulated ​ Comprehensive ​ ​ ​ Stockholders’ ​ Shares Amount Capital Deficit Loss Treasury Stock Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2021 13,204,531 ​ $ 13 $ 336,679 ​ $ ( 271,284 ) ​ $ — ​ — ​ $ 65,408 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation — ​ — ​ 475 ​ — ​ — ​ — ​ 475 Issuance of Common Stock for VCN Acquisition 2,639,530 ​ 3 ​ 6,596 ​ — ​ — ​ — ​ 6,599 Foreign currency exhange loss — ​ — ​ — ​ — ​ ( 679 ) ​ — ​ ( 679 ) Treasury Stock ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ( 288 ) ​ ​ ( 288 ) Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 19,685 ) ​ ​ — ​ — ​ ​ ( 19,685 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2022 15,844,061 ​ $ 16 $ 343,750 ​ $ ( 290,969 ) ​ $ ( 679 ) ​ ( 288 ) ​ $ 51,830 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock $0.001 Par Value ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ Paid-in ​ Accumulated ​ Comprehensive ​ ​ ​ Stockholders’ ​ Shares Amount Capital Deficit Income Treasury Stock Equity ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2022 15,844,061 ​ $ 16 ​ $ 343,750 ​ $ ( 290,969 ) ​ $ ( 679 ) ( 288 ) ​ $ 51,830 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation — ​ — ​ 552 ​ — ​ — — ​ 552 Stock issued under “at-the-market” offering 2,024,221 ​ 2 ​ 2,217 ​ — ​ — — ​ 2,219 Foreign currency exhange gains — ​ — ​ — ​ — ​ 711 — ​ 711 Net loss — ​ — ​ — ​ ( 18,349 ) ​ — — ​ ( 18,349 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2023 17,868,282 ​ $ 18 ​ $ 346,519 ​ $ ( 309,318 ) ​ $ 32 ( 288 ) ​ $ 36,963 ​ See accompanying notes to consolidated financial statements ​ 75 Table of Contents Theriva Biologics, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the year ended December 31, ​ 2023 2022 Cash Flows From Operating Activities: ​ ​ Net loss ​ $ ( 18,349 ) ​ $ ( 19,685 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ Stock-based compensation ​ 552 ​ 475 Income tax benefit ​ ( 1,640 ) ​ ( 1,425 ) Change in fair value of contingent consideration ​ ​ ( 660 ) ​ ​ 2,091 Payment of contingent consideration ​ ​ ( 1,731 ) ​ ​ — Non - cash lease expense ​ ​ 388 ​ ​ 183 Depreciation ​ 135 ​ 85 Changes in operating assets and liabilities: ​ ​ ​ ​ Prepaid expenses and other current assets ​ 1,368 ​ ( 363 ) Deposits and other assets ​ ​ ( 54 ) ​ ​ — Accounts payable ​ ( 157 ) ​ ( 385 ) Accrued expenses ​ 1,470 ​ ( 267 ) Accrued employee benefits ​ 104 ​ 333 Operating lease liability ​ ​ ( 422 ) ​ ​ ( 124 ) Net Cash Used In Operating Activities ​ ( 18,996 ) ​ ( 19,082 ) ​ ​ ​ Cash Flows From Investing Activities: ​ ​ Purchases of property and equipment ​ ( 202 ) ​ ( 116 ) Cash paid for business combination; net of cash acquired ​ — ​ ( 3,863 ) Pre-acquisition loan to VCN ​ — ​ ( 417 ) Net Cash Used In Investing Activities ​ ​ ( 202 ) ​ ​ ( 4,396 ) ​ ​ ​ ​ ​ ​ ​ Cash Flows From Financing Activities: ​ ​ Payment of loans payable ​ $ ( 75 ) ​ ( 1,376 ) Proceeds from issuance under at - the - market offering, net of issuance cost ​ ​ 2,219 ​ ​ — Proceeds from sale of Series C Preferred Stock, net of issuance cost ​ ​ — ​ 2,006 Proceeds from sale of Series D Preferred Stock, net of issuance cost ​ — ​ 728 Payment of contingent consideration ​ ​ ( 1,519 ) ​ ​ ( 3,000 ) Purchase of treasury stock ​ ​ — ​ ​ ( 288 ) Net Cash Provided By (Used In) Financing Activities ​ ​ 625 ​ ​ ( 1,930 ) ​ ​ ​ ​ ​ ​ ​ Effects of foreign currency on cash ​ ​ ( 33 ) ​ ​ ( 32 ) Net decrease in cash and cash equivalents and restricted cash ​ ​ ( 18,606 ) ​ ​ ( 25,408 ) Cash and cash equivalents and restricted at the beginning of this period ​ ​ 41,885 ​ ​ 67,325 Cash and cash equivalents and restricted cash at the end of this period ​ $ 23,279 ​ $ 41,885 ​ ​ ​ ​ ​ ​ ​ Reconciliation of cash, cash equivalents, and restricted cash reported in the statement of financial position ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ 23,177 ​ ​ 41,786 Restricted cash included in other long-term assets ​ ​ 102 ​ ​ 99 Total cash, cash equivalents, and restricted cash shown in the statement of cash flows ​ $ 23,279 ​ $ 41,885 ​ ​ ​ ​ ​ ​ ​ Supplemental non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Right of use assets obtained in exchange for lease liabilities ​ $ 937 ​ $ — Fair value of contingent consideration issued in a business combination ​ $ — ​ $ 11,093 Fair value of equity issued as consideration in a business combination ​ $ — ​ $ 6,599 Effective settlement of pre-closing VCN financing ​ $ — ​ $ 417 Goodwill measurement period adjustment ​ $ — ​ $ ( 1,061 ) In-process R&D measurement period adjustment ​ $ — ​ $ 810 Deferred tax liability measurement period adjustment ​ $ — ​ $ 202 Effect of Warrant exercise price adjustment ​ $ — ​ $ 340 ​ See accompanying notes to consolidated financial statements ​ ​ 76 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements ​ 1. Organization and Nature of Operations and Basis of Presentation Description of Business Theriva Biologics, Inc. (the “Company” or “Theriva Biologics”) is a diversified clinical-stage company developing therapeutics in areas of high unmet need. As a result of the acquisition of Theriva Biologics S.L. (“VCN”, formerly known as VCN Biosciences, S.L.) (the “Acquisition”), described in more detail below, the Company transitioned its strategic focus to oncology through the development of VCN’s new oncolytic adenovirus platform designed for intravenous and intravitreal delivery to trigger tumor cell death, to improve access of co-administered cancer therapies to the tumor, and to promote a robust and sustained anti-tumor response by the patient’s immune system. Prior to the Acquisition, the Company’s focus was on developing therapeutics designed to treat gastrointestinal (GI) diseases in areas which included its clinical development candidates: (1) SYN-004 (ribaxamase) which is designed to degrade certain commonly used intravenous (IV) beta-lactam antibiotics within the GI tract to prevent microbiome damage thereby preventing overgrowth and infection by pathogenic organisms such as Clostridioides difficile infection (CDI), and vancomycin resistant Enterococci (VRE), and reducing the incidence and severity of acute graft-versus-host-disease (aGVHD) in allogeneic hematopoietic cell transplant (HCT) recipients, and (2) SYN-020, a recombinant oral formulation of the enzyme intestinal alkaline phosphatase (IAP) produced under cGMP conditions and intended to treat both local GI and systemic diseases. On October 12, 2022, the Company changed its name to Theriva Biologics, Inc. In connection with the name change, its common stock began trading on the NYSE American LLC under the new ticker symbol “TOVX” effective as of the opening of trading hours on October 13, 2022. Effective November 15, 2022, the Company’s acquired subsidiary VCN Biosciences, S.L. rebranded to Theriva Biologics, S.L. without other changes to its corporate structure. Corporate Structure and Basis of Presentation On July 11, 2022, the Board of Directors of the Company approved a reverse stock split of the Company’s authorized, issued and outstanding shares of common stock, par value $ 0.001 per share, at a ratio of one (1) share of common stock for every ten ( 10 ) shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split was effective on July 25, 2022 (the “Effective Time). As a result of the Reverse Stock Split, each ten (10) pre-split shares of common stock outstanding automatically combined into one (1) new share of common stock without any action on the part of the holders, and the number of outstanding shares of common stock was reduced from 158,437,840 shares to 15,844,061 shares (subject to rounding of fractional shares) and the number of authorized shares of common stock was reduced from 200,000,000 share to 20,000,000 shares and then increased to 350,000,000 after obtaining approval of the Company’s shareolders 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. The Reverse Stock Split did not alter the par value of the Company’s common stock or modify any voting rights or other terms of the common stock. In addition, pursuant to their terms, a proportionate adjustment was made to the per share conversion exercise price and number of shares issuable under all of the Company’s outstanding shares of convertible preferred stock and stock options and warrants to purchase shares of common stock, and the number of shares authorized and reserved for issuance pursuant to the Company’s equity incentive plans was reduced proportionately. All 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. (“EPI”), Solovax, Inc. (“Solovax”), CD4 Biosciences, Inc. (“CD4”), Epitope Pharmaceuticals, Inc. (“Epitope”), Healthmine, Inc. (“Healthmine”), Putney Drug Corp. (“Putney”) and Synthetic Biomics, Inc. (“SYN Biomics”). Theriva Biologics, S.L.,Pipex Therapeutics, EPI, Healthmine, Putney and SYN Biomics are wholly owned, and Solovax, CD4, and Epitope are majority-owned. 77 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 1. Organization and Nature of Operations and Basis of Presentation – (continued) 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. 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. Liquidity 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. Historically, the Company has financed its operations primarily through public and private sales of its common stock and a private placement of its preferred stock, and it expects to continue to seek to obtain required capital in a similar manner. 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. 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), 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. ​ 2. 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. 78 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 2. 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; and ● 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. ​ 79 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 3. Summary of Significant Accounting Policies Principles of Consolidation All intercompany transactions and accounts have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions impact, among others, the following: the estimated useful lives for property and equipment, research and development costs, business combinations, contingent consideration, fair value of long-lived assets, warrants, preferred stock and stock options granted for services or compensation, respectively, and the valuation allowance for deferred tax assets due to continuing and expected future operating losses. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of consolidated financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, actual results could differ from those estimates. Risks and Uncertainties The Company’s operations could be subject to significant risks and uncertainties including financial, operational and regulatory risks and the potential risk of business failure. These conditions may not only limit the Company’s access to capital, but also make it difficult for its customers, its vendors and its ability to accurately forecast and plan future business activities. Cash and Cash Equivalents Cash and cash equivalents include cash and highly liquid short-term investments with original maturities of three months or less. All interest bearing and non-interest bearing accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $250 thousand. 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 Property and equipment is recorded at cost and depreciated or amortized using the straight-line method over the estimated useful life of the asset or the underlying lease term for leasehold improvements, whichever is shorter. The estimated useful life by asset description is noted in the following table. ​ Asset Description Estimated Useful Life Computer, office equipment, furniture and software 3 – 5 years Leasehold improvements and fixtures Lesser of estimated useful life or lease term ​ Depreciation and amortization expense was approximately $ 135,000 and $ 85,000 for the years ended December 31, 2023 and 2022, respectively. When assets are disposed of, the cost and accumulated depreciation are removed from the accounts with any gain or loss reported in the consolidated statement of operations. Repairs and maintenance are charged to expense as incurred. The Company reviews property and equipment for impairment to determine if assets are impaired due to obsolescence. As a result of this review, there was no impairment recognized for the years ended December 31, 2023 and 2022. 80 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 3. Summary of Significant Accounting Policies – (continued) Business Combination The Company accounts for acquisitions using the acquisition method of accounting, which requires that all identifiable assets acquired, and liabilities assumed be recorded at their estimated fair values. The excess of the fair value of purchase consideration over the fair values of identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from acquired patented technology. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. As a result of the acquisition of VCN (see Note 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. IPR&D IPR&D assets represent the fair value assigned to technologies that the Company acquired, which at the time of acquisition have not reached technological feasibility and have no alternative future use. IPR&D assets are considered to have indefinite-lives until the completion or abandonment of the associated research and development projects. If and when development is complete, which generally occurs upon regulatory approval and the ability to commercialize products associated with the IPR&D assets, these assets are then deemed to have definite lives and are amortized based on their estimated useful lives at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value. During the period that the assets are considered indefinite-lived, they are tested for impairment on an annual basis on October 1, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that could indicate an impairment. The impairment test consists of a comparison of the estimated fair value of the IPR&D with its carrying amount. If the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess. 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. Goodwill The Company tests the carrying amounts of goodwill for recoverability on an annual basis on October 1 or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company performs a one-step test in its evaluation of the carrying value of goodwill if qualitative factors determine it is necessary to complete a goodwill impairment test. In the evaluation, the fair value of the relevant reporting unit is determined and compared to its carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable, and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value, and a charge is reported in impairment of goodwill in the Company’s consolidated statements of operations. 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. ​ 81 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 3. Summary of Significant Accounting Policies – (continued) 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 as of December 31, 2023 and 2022. Contingent Consideration Consideration paid in a business combination may include potential future payments that are contingent upon the acquired business achieving certain milestones in the future (“contingent consideration”). Contingent consideration liabilities are measured at their estimated fair value as of the date of acquisition, with subsequent changes in fair value recorded in the consolidated statements of operations. The Company estimates the fair value of the contingent consideration as of the acquisition date using the estimated future cash outflows based on the probability of meeting future milestones. 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. 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. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying value of the asset. No impairment charges were recorded during the year ended December 31, 2023 and 2022. Loss per Share Basic net loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of common shares outstanding. Diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding including the effect of common share equivalents. Diluted net loss per share assumes the issuance of potential dilutive common shares outstanding for the period and adjusts for any changes in income and the repurchase of common shares that would have occurred from the assumed issuance, unless such effect is anti-dilutive. Net loss attributable to common stockholders for the year ended December 31, 2022 includes the effect of the Series C and D preferred stock price adjustment of $ 0.3 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, 2023 and 2022 was 2,459,016 . 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. ​ 82 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 3. Summary of Significant Accounting Policies – (continued) Research and Development Costs 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 the Company’s product candidates. Research and development expenses include external contract research organization (“CRO”) services. The Company makes payments to the CROs based on agreed upon terms and may include payments in advance of study services. The Company reviews and accrues CRO expenses based on services performed and relies on estimates of those costs applicable to the stage of completion of a study as provided by the CRO. Accrued CRO costs are subject to revisions as such studies progress to completion. 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. Leases 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. 83 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 3. 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 Accounting Standards Codification (“ASC”) 820, Fair Value Measurement , defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing an asset or liability. Fair value measurements are classified on a three-tier hierarchy as follows: ● Level 1 inputs: Quoted prices (unadjusted) for identical assets or liabilities in active markets; ● Level 2 inputs: Inputs, other than quoted prices, that are observable either directly or indirectly; and ● Level 3 inputs: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. The carrying amounts of the Company’s short-term financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, approximate fair value due to the relatively short period to maturity for these level 1 instruments. As a result of the acquisition of VCN the Company acquired interest-free or below-market interest rate loans extended by Spanish government. The carrying value of the loans payable approximate fair value and are classified under level 2. In connection with the Acquisition of VCN, the Company 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 the fourth quarter 2022. In August 2023, the Company initiated patient dosing in the U.S. in its Phase 2 clinical trial of VCN-01 in PDAC. As a result, payment was made subsequent to September 30, 2023 in the amount of $ 3.25 million. The discounted cash flow method used to value this contingent consideration includes inputs of not readily observable market data, which are Level 3 inputs. The fair value of the contingent consideration was $ 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. 84 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 3. Summary of Significant Accounting Policies – (continued) 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 ​ $ 11,093 Payment of contingent consideration ​ ( 3,000 ) Change in fair value ​ 2,091 Balance at December 31, 2022 ​ $ 10,184 ​ ​ ​ ​ Contingent consideration, current portion ​ $ 2,973 Contingent consideration, net of current portion ​ 7,211 Balance at December 31, 2022 ​ $ 10,184 ​ ​ ​ ​ ​ ​ (in thousands) Balance at December 31, 2022 ​ $ 10,184 Payment of contingent consideration ​ ( 3,250 ) Change in fair value ​ ( 660 ) Balance at December 31, 2023 ​ $ 6,274 ​ ​ ​ ​ Contingent consideration, current portion ​ $ — Contingent consideration, net of current portion ​ 6,274 Balance at December 31, 2023 ​ $ 6,274 ​ The fair value of financial instruments measured on a recurring basis is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 Description ​ Total ​ Level 1 ​ Level 2 ​ Level 3 Liabilities: ​ ​ ​ ​ Contingent consideration ​ $ 6,274 ​ $ — ​ $ — ​ $ 6,274 Total liabilities ​ $ 6,274 ​ $ — ​ $ — ​ $ 6,274 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 Description Total ​ Level 1 ​ Level 2 Level 3 Liabilities: ​ ​ ​ ​ Contingent consideration ​ $ 10,184 ​ $ — ​ $ — ​ $ 10,184 Total liabilities ​ $ 10,184 ​ $ — ​ $ — ​ $ 10,184 ​ 85 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 3. 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 December 31, 2023 ​ ​ Valuation ​ Significant ​ Weighted Average ​ Methodology Unobservable Input (range, if applicable) Contingent Consideration Discounted Cash Flows Milestone dates 2025-2028 ​ ​ ​ ​ ​ ​ ​ ​ ​ Discount rate 12.9 % to 13.6 % ​ Weighted Average Discount rate 13.16 % ​ Probability of Occurrence (periodic for each Milestone) 11.7 % to 92.0 % ​ Probability of occurrence (cumulative through each Milestone) 5.3 % to 48.8 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 ​ ​ Valuation ​ Significant ​ Weighted Average ​ Methodology Unobservable Input (range, if applicable) Contingent Consideration Discounted Cash Flows Milestone dates 2023-2028 ​ ​ ​ ​ ​ ​ ​ ​ ​ Discount rate 13.4 % to 14.1 % ​ Weighted Average Discount rate 13.6 % ​ Probability of Occurrence (periodic for each Milestone) 11.7 % to 95.0 % ​ Probability of occurrence (cumulative through each Milestone) 6.9 % to 95.0 % ​ 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. 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. The expense resulting from stock-based payments is recorded in research and development expense or general and administrative expense in the Consolidated Statements of Operations, depending on the nature of the services provided. Segment information 86 Table of Contents 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. Operating segments are defined as components of an enterprise where separate financial information is evaluated regularly by the chief operating decision maker (CODM), the chief executive officer, in deciding how to allocate resources and assessing performance. The Company’s CODM allocates resources and assesses performance based upon discrete financial information at the consolidated level. Foreign Currencies The functional currency of the Company’s Theriva S.L. subsidiary is the Euro. VCN’s Assets and liabilities are translated to U.S. dollars based on exchange rates at the end of each reporting period. Income and expense items are translated at weighted average exchange rates prevailing during the reporting period. Translation adjustments are accumulated in a separate component of stockholders’ equity in the accompanying consolidated balance sheets. Transaction gains and losses are classified as other income (expense) net in the accompanying consolidated statements of operations. 3. Summary of Significant Accounting Policies – (continued) Income Taxes The Company accounts for income taxes under the liability method; under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. 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. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. Recent Accounting Pronouncements and Developments In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity . This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity's own equity and improves and amends the related earnings per share guidance for both Subtopics. The ASU 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. 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. 87 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements ​ 4. 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. 4. 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. 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 over a 24-month period beginning January 1, 2024 ​ 5. Business Combination Summary On March 10, 2022 (the “Closing”), the Company completed the acquisition of all the outstanding shares of Theriva Biologics, S.L, which at the time was known as VCN Biosciences, S.L. (the “VCN Shares”) from the shareholders of VCN. VCN is a clinical-stage biopharmaceutical company developing new oncolytic adenoviruses for the treatment of cancer. The Company’s lead product candidate, VCN-01, is being studied in a Company sponsored Phase 2 clinical trial for pancreatic cancer with additional investigator sponsored trials in indications including head and neck squamous cell carcinoma (HNSCC), retinoblastoma, brain tumors and ovarian cancers. VCN-01 is designed to be administered systemically, intratumorally or intravitreally, either as a monotherapy or in combination with standard of care chemotherapies or immunotherapies, to treat a wide variety of cancer indications. VCN-01 is designed to replicate selectively and aggressively within tumor cells, and to degrade the tumor stroma barrier that serves as a significant physical and immunosuppressive barrier to cancer treatment. Degrading the tumor stroma has been shown to improve access to the tumor by the virus and additional therapies such as chemo and immunotherapies. Importantly, degrading the stroma exposes tumor antigens, turning “cold” tumors “hot” and enabling a sustained anti-tumor immune response. VCN has the exclusive rights to four patent families for proprietary technologies, as well as technologies developed in collaboration with the Virotherapy Group of the Catalan Institute of Oncology (ICO-IDIBELL) and with Hospital Sant Joan de Deu (HSJD), with a number of additional patents pending. As consideration for the purchase of the VCN Shares and pursuant to the terms of a purchase agreement that the parties entered into (the “Purchase Agreement”), the Company paid $ 4,700,000 to Grifols Innovation and New Technologies Limited (“Grifols”), the owner of approximately 86 % of the equity of VCN, and issued to the remaining sellers and certain key VCN employees and consultants of VCN an aggregate of 2,639,530 shares of its common stock, $ 0.001 par value per share (the “Common Stock”). In addition to the consideration described above, under the terms of the purchase agreement that the parties entered into, the Company assumed up to $ 2,390,000 of existing liabilities of VCN and has agreed to make cash payments of up to $ 70.2 million to Grifols upon the achievement of certain clinical and commercialization milestones. In September 2022, the Company received approval from the FDA to proceed with the Phase 2 clinical trial of VCN-01 in metastatic pancreatic ductal adenocarcinoma (“PDAC”). Due to this approval, the Company paid Grifols $ 3.0 million in the fourth quarter of 2022. In August 2023, the Company initiated patient dosing in the U.S. in its Phase 2 clinical trial of VCN-01 in PDAC. As a result, the Company paid Grifols $ 3.25 million in the fourth quarter of 2023. 88 Table of Contents 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 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. 5. 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 $ 4,700 Receivable from VCN “effectively settled“ ​ ​ 417 Fair value of common shares issued ​ ​ 6,599 Fair value of contingent consideration ​ ​ 11,093 ​ ​ $ 22,809 ​ 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. ​ ​ ​ ​ ​ ​ ​ Estimated fair value ​ ​ ($in thousands) Cash and cash equivalents $ 837 Receivables ​ 1,889 Property and equipment ​ 216 In-process research and development intangible asset ​ 19,742 Goodwill ​ 5,696 Deferred tax liabilities, net ​ ( 3,209 ) Accounts payable ​ ( 522 ) Accrued expenses ​ ( 113 ) Accrued employee benefits ​ ( 90 ) Loans payable-current ​ ( 67 ) Other long-term liabilities ​ ( 1,570 ) ​ ​ ​ ​ Total purchase consideration ​ $ 22,809 ​ The net assets were recorded at their estimated fair value. In valuing acquired assets and liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions for contractual obligations, and appropriate discount rates. In connection with the Acquisition, the Company recognized $ 19.7 million of indefinite-lived in-process research and development intangible assets. 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. 89 Table of Contents 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. 5. 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: ● estimate of acquired liabilities resulting in a $ 277,000 reduction in accrued expenses and goodwill, ● estimate in the receivable from the prior owner resulting in a $ 176,000 increase in other receivables and reduction in goodwill. ● estimated fair value of its in-process R&D resulting in a $ 810,000 increase in in-process R&D, an increase of $ 202,000 in deferred tax liabilities and a decrease of $ 607,000 in goodwill. The cumulative impact of the re-measurements during the measurement period, was a reduction in accrued liabilities of $ 277,000 , an increase in other receivables of $ 176,000 , an increase in in-process R&D of $ 810,000 ; an increase in deferred tax liabilities of $ 202,000 and a decrease in goodwill of $ 1,061,000 . 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): ​ ​ ​ ​ (in thousands) 2022 Net revenues $ — Net loss ​ $ ( 20,546 ) ​ Transaction Costs 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. ​ 6. Goodwill and Intangibles The following table provides the Company’s Goodwill as of December 31, 2023. ​ ​ ​ ​ ​ ​ Goodwill (in thousands) Balance at December 31, 2022 ​ $ 5,525 Effects of exchange rates ​ 175 Balance at December 31, 2023 ​ $ 5,700 ​ The following table provides the Company’s in-process R&D as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ In-process ​ R&D (in thousands) Balance at December 31, 2022 ​ $ 19,150 Effects of exchange rates ​ 605 Balance at December 31, 2023 ​ $ 19,755 ​ 90 Table of Contents Theriva Biologics, Inc. and Subsidiaries 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. 7. Selected Balance Sheet Information PREPAID EXPENSES AND OTHER CURRENT ASSETS (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2023 ​ 2022 Prepaid clinical research organizations ​ $ 1,119 ​ $ 2,293 Prepaid insurance ​ ​ 496 ​ ​ 637 Prepaid manufacturing expenses ​ ​ 491 ​ ​ 418 Prepaid consulting, subscriptions and other expenses ​ ​ 180 ​ ​ 155 VAT receivable ​ 128 ​ 87 Receivable from Grifols ​ — ​ 144 ​ ​ ​ ​ ​ ​ ​ Total prepaid expsnese and other current assets ​ $ 2,414 ​ $ 3,734 ​ Prepaid clinical research organizations (CROs) expense is classified as a current asset. The Company makes payments to the CROs based on agreed upon terms that include payments in advance of study services. Receivable from Grifols includes amounts due related to research and development tax rebates, VAT and corporate taxes. PROPERTY AND EQUIPMENT (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2023 ​ 2022 Computers and office equipment ​ $ 902 ​ $ 897 Other property, plant and equipment ​ ​ 417 ​ ​ 208 Leasehold improvements ​ 94 ​ 94 Software ​ 11 ​ 11 ​ ​ 1,424 ​ 1,210 Less: accumulated depreciation and amortization ​ ( 1,002 ) ​ ( 865 ) ​ ​ ​ Total property and equipment, net ​ $ 422 ​ $ 345 ​ 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) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2023 ​ 2022 Accrued clinical consulting services ​ $ 1,700 ​ $ 807 Accrued manufacturing costs ​ ​ 843 ​ ​ 197 Accrued vendor payments ​ ​ 452 ​ ​ 492 ​ ​ ​ Total accrued expesnes ​ $ 2,995 ​ $ 1,496 ​ 91 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 7. Selected Balance Sheet Information – (continued) ACCRUED EMPLOYEE BENEFITS (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2023 ​ 2022 Accrued bonus expense ​ $ 1,307 ​ $ 1,216 Accrued compensation expense ​ 127 ​ 87 Accrued vacation expense ​ ​ 83 ​ ​ 100 ​ ​ ​ ​ Total accrued employee benefits ​ $ 1,517 ​ $ 1,403 ​ ​ 8 . Stock-Based Compensation Stock Incentive Plan On March 20, 2007, the Company’s Board of Directors approved the 2007 Stock Incentive Plan (the “2007 Stock Plan”) for the issuance of up to 7,143 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries. This plan was approved by the stockholders on November 2, 2007. The exercise price of stock options under the 2007 Stock Plan was determined by the compensation committee of the Board of Directors and could be equal to or greater than the fair market value of the Company’s common stock on the date the option is granted. As of 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. From time to time the number of shares authorized for options was increased such that 400,000 were authorized as of September 5, 2019. The exercise price of stock options under the 2010 Stock Plan is determined by the compensation committee of the Board of Directors and may be equal to or greater than the fair market value of the Company’s common stock on the date the option is granted. Options become exercisable over various periods from the date of grant and expire between five and ten years after the grant date. As of December 31, 2023, there were 198,540 options issued and outstanding under the 2010 Stock Plan. There are no shares available to be issued under this plan. Only options were issued under the plan. On September 17, 2020, the stockholders approved and adopted the 2020 Stock Incentive Plan ("2020 Stock Plan") for the issuance of up to 400,000 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries. The number of shares authorized for options was increased such that 7,000,000 were authorized as of 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 option forfeitures are recognized as incurred. The fair value of the stock-based payment is recognized over the stated vesting period. 92 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 8. 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 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2023 2022 Exercise price ​ $ 0.59 ​ $ 0.58 - 2.61 ​ Expected dividends ​ 0 % ​ 0 % Expected volatility ​ 90 % ​ 95 % Risk free interest rate ​ 4.02 % ​ 2.65 - 3.77 % Expected life of option (years) ​ 4.25 ​ ​ 4.3 ​ ​ Expected dividends — The Company has never declared or paid dividends on its common stock and has no plans to do so in the foreseeable future. Expected volatility —Volatility is a measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The expected volatility assumption is derived from the historical volatility of the Company’s common stock over a period approximately equal to the expected term. Risk-free interest rate —The assumed risk-free rate used is a zero coupon U.S. Treasury security with a maturity that approximates the expected term of the option. Expected life of the option —The period of time that the options granted are expected to remain unexercised. Options granted during the 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. The Company records stock-based compensation based upon the stated vesting provisions in the related agreements. The vesting provisions for these agreements have various terms as follows: ● immediate vesting, ● in full on one-year anniversary date of grant date, ● half vesting immediately and remaining over three years, ● quarterly over three years, ● annually over three years, ● one-third immediate vesting and remaining annually over two years, ● one-half immediate vesting and remaining over nine months, ● one-quarter immediate vesting and remaining over three years, ● one-quarter immediate vesting and remaining over 33 months, ● monthly over one year, and ● monthly over three years. 93 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 8. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Weighted Average Aggregate ​ ​ ​ ​ Average Exercise ​ Remaining ​ Intrinsic ​ ​ Options ​ Price ​ Contractual Life ​ Value Balance - December 31, 2021 625,565 ​ $ 16.12 5.58 years ​ $ — ​ ​ ​ Granted 1,728,000 ​ ​ 0.58 ​ Exercised — ​ ​ — ​ ​ ​ Expired ( 43,126 ) ​ ​ 67.81 ​ Forfeited ( 14,541 ) ​ ​ 3.61 ​ Balance - December 31, 2022 2,295,898 ​ ​ 3.53 6.44 years ​ ​ — ​ ​ ​ Granted 2,195,000 ​ ​ 0.59 ​ Exercised — ​ ​ — ​ ​ ​ Expired ( 104,270 ) ​ ​ 14.73 ​ Forfeited ( 10,847 ) ​ ​ 1.11 ​ ​ ​ ​ Balance -December 31, 2023 - outstanding 4,375,781 ​ $ 1.80 7.70 years ​ $ — ​ ​ ​ ​ Balance - December 31, 2023 - exercisable 1,251,477 ​ $ 4.70 5.05 years ​ $ — ​ ​ ​ Grant date fair value of options granted - December 31, 2023 ​ $ 873,140 ​ ​ ​ ​ Weighted average grant date fair value - December 31, 2023 ​ $ 0.40 ​ ​ ​ ​ ​ Grant date fair value of options granted - December 31, 2022 ​ $ 706,264 ​ ​ ​ ​ Weighted average grant date fair value - December 31, 2022 ​ $ .41 ​ ​ The options outstanding and exercisable at December 31, 2023 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding ​ Options Exercisable ​ ​ ​ ​ ​ Weighted ​ ​ ​ Weighted ​ ​ ​ ​ ​ Weighted ​ Average ​ ​ ​ Weighted ​ Average ​ ​ ​ ​ ​ Average ​ Remaining ​ ​ ​ Average ​ Remaining Range of ​ ​ ​ Exercise ​ Contractual ​ ​ ​ Exercise ​ Contractual Exercise Price ​ Options ​ Price ​ Life ​ Options ​ Price ​ Life $ 0.00 – $ 350.00 4,372,338 ​ $ 1.20 8 years 1,248,004 ​ $ 2.62 5 years ​ 351.00 – $ 700.00 270 ​ 511.00 1 years 270 ​ 511 1 years ​ 701.00 – $ 1000.00 3,173 ​ ​ 779.83 2 years 3,173 ​ ​ 779.83 2 years ​ 94 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 8. 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. Excess tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to stock compensation costs for such options. The Company did not record any excess tax benefits in 2023 or 2022. Cash received from option exercises under the Company’s stock-based compensation plans for the years ended December 31, 2023 and 2022 was zero . 9. Stock Warrants On October 15, 2018, the Company closed its underwritten public offering pursuant to which it received gross proceeds of approximately $ 18.6 million before deducting underwriting discounts, commissions and other offering expenses payable by the Company and sold (i)Class A Units (the “Class A Units”), consisting of an aggregate of 252,000 shares of the Common Stock, warrants to purchase an aggregate of 252,000 shares of Common Stock at an exercise price of $ 13.80 per share, which subsequently was reduced to $ 6.90 per share and then again to $ 1.22 (each a “Warrant” and collectively, the “Warrants”) and (ii) Class B Units (the “Class B Units”, and together with the Class A Units, the “Units”), consisting of an aggregate of 15,723 shares of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”), with a stated value of $ 1,000 and convertible into shares of Common Stock at the stated value divided by a conversion price of $ 11.50 per share, with all shares of Series B Preferred Stock convertible into an aggregate of 1,367,218 shares of Common Stock, and issued with a warrant to purchase an aggregate of 1,367,218 shares of Common Stock. On November 16, 2020, the exercise price of the Warrants was reduced from $ 13.80 per Warrant per full share of the Company’s Common Stock, to $ 6.90 per Warrant per full share of Common Stock in accordance with the antidilution terms of the Warrant. The reduction was the result of the issuance of shares of Common Stock by the Company through its ATM facility. The effect of the change in the exercise price of the Warrants as a result of the triggering of the down round protection clause in the Warrants was recorded as a deemed dividend of $ 0.9 million during the year ended December 31, 2020, which reduces the income available to common stockholders. In addition, pursuant to the underwriting agreement that the Company had entered into with A.G.P./Alliance Global Partners (the “Underwriters”), as representative of the underwriters, the Company granted the Underwriters a 45 day option (the “Over-allotment Option”) to purchase up to an additional 242,883 shares of Common Stock and/or additional Warrants to purchase an additional 242,883 shares of Common Stock. The Underwriters partially exercised the Over-allotment Option by electing to purchase from the Company additional Warrants to purchase 180,783 shares of Common Stock. If, at the time of exercise, there is no effective registration statement registering, or no current prospectus available for the issuance of the shares of Common Stock to the holder, then the Warrants may only be exercised through a cashless exercise. No fractional shares of Common Stock will be issued in connection with the exercise of a Warrant. In lieu of fractional shares, the holder will receive an amount in cash equal to the fractional amount multiplied by the fair market value of any such fractional shares. The Company has concluded that the Warrants are required to be equity classified. The Warrants were valued on the date of grant using Monte Carlo simulations. During the three months ended March 31, 2021, 1,165,575 Warrants were exercised for cash proceeds of $ 8.0 million. There were no Warrants exercised during the 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 and had no impact to the Stockholders equity. 95 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 9. Stock Warrants – (continued) A summary of all warrant activity for the Company the year ended December 31, 2023 and December 31, 2022 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Average ​ Number of Weighted Average ​ Remaining ​ ​ Warrants ​ Exercise Price ​ Contractual Life Balance at December 31, 2021 634,497 ​ ​ 1.24 ​ 1.78 years Granted — ​ — ​ ​ Exercised — ​ — ​ ​ Forfeited ( 71 ) ​ 182 ​ ​ Balance at December 31, 2022 634,426 ​ $ 1.22 ​ 0.78 years Granted — ​ — ​ ​ Exercised — ​ — ​ ​ Forfeited ( 634,426 ) ​ 1.22 ​ ​ Balance at December 31, 2023 — ​ $ — ​ — ​ ​ 10. 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. (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. ​ 96 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 10. Stockholders’ Equity – (continued) Pursuant to the Securities Purchase Agreement, the Company filed certificates of designation (the "Certificates of Designation") with the Secretary of the State of Nevada designating the rights, preferences and limitations of the shares of Series C Preferred Stock and Series D Preferred Stock. The Certificate of Designation for the Series C Preferred Stock provides, in particular, that the Series C Preferred Stock will have no voting rights other than the right to vote as a class on the Stockholder Items and the right to cast votes on an as converted to Common Stock basis on the Stockholder Items. The Certificate of Designation for the Series D Preferred Stock provides, in particular, that the Series D Preferred Stock will have no voting rights other than the right to vote as a class on the Stockholder Items and the right to cast 20,000 votes per share of Series D Preferred Stock on the Stockholder Items and to vote the shares of the Series D Preferred Stock purchased in the Offering in the same proportion as shares of Common Stock and any other shares of capital stock of the Company that are entitled to vote thereon (excluding any shares of Common Stock that are not voted) on the Stockholder Items. The holders of Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to dividends actually paid, if any, on shares of Common Stock. The Conversion Price may be adjusted pursuant to the Certificates of Designation for stock dividends and stock splits, subsequent rights offering, pro rata distributions of dividends or the occurrence of a fundamental transaction (as defined in the applicable Certificate of Designation). The Series C Preferred Stock and Series D Preferred Stock are classified as temporary equity as a result of the deemed liquidation provision. Transaction expenses paid to third parties will be charged to temporary equity and will not be accreted as deemed dividends until redemption becomes probable. 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. Stock Repurchase 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. The price per share was $ 0.4001 , which was the closing price of the Common Stock on the day prior to the closing for an aggregate purchase price was $ 288,072 . The closing was subject to fulfillment of certain conditions, including delivery of certain closing documents. The Share Repurchase Agreement contains customary representations, warranties and covenants of the parties. The repurchase was funded from the Company’s cash on hand and the shares to be repurchased will be held as treasury stock. 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. B. 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) to act as a sales agent, which agreement was amended and restated on February 9, 2021 to add Alliance Global Partners as a sale agent. The amended and restated Sales Agreement (the “Amended and Restated Sales Agreement”) enables the Company to offer and sell shares of common stock from time to time through B. Riley Securities, Inc. and A.G.P./Alliance Global Partners as the Company’s sales agent. Sales of common stock under the Sales Agreement are made in sales deemed to be “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities Act. The sales agents are entitled to receive a commission rate of up to 3.0 % of gross sales in connection with the sale of the Common Stock sold on the Company’s behalf. During the 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. 97 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 11. Loans payable As a result of the acquisition of VCN the Company acquired interest-free or below-market interest rates loans ( 0 %- 1 %) extended by Spanish governmental institutions of Ministerio de Ciencia, Innovacion y Universidades and ACC10 Generalitat de Catalunya (CDIT loans). The maturities of these loans are between 2024 and 2028. As a result of the VCN Acquisition, the Company maintains a restricted cash collateral account of $ 102,000 relating to the RETOS loan, which is reflected as a non-current asset on the balance sheet. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ December 31, 2023 ​ December 31, 2022 ​ December 31, 2022 ​ Current Non-current Current Non-current ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ NEBT Loan ​ ​ 8 ​ $ 24 ​ ​ 13 ​ ​ 31 RETOS 2015 ​ ​ 55 ​ ​ 138 ​ 44 ​ 190 ​ ​ $ 63 ​ $ 162 ​ $ 57 ​ $ 221 ​ A maturity analysis of the debt as of December 31, 2023 is as follows (amounts in thousands of dollars) : ​ ​ ​ ​ 2024 ​ $ 63 2025 ​ 65 2026 ​ 54 2027 ​ 33 2028 ​ 10 Total ​ $ 225 ​ ​ 12. 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. Ms. Shallcross had been performing services for the Company during 2022 for total compensation of less than $ 120,000 . ​ 13. License, Collaborative and Employment Agreements and Commitments License and Collaborative Agreements As described below, the Company has entered into several license and collaborative agreements for the right to use research, technology and patents. Some of these license and collaborative agreements may contain milestones. The specific timing of such milestones cannot be predicted and is dependent on future developments as well as regulatory actions which cannot be predicted with certainty (including actions which may never occur). 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 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. 98 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 13. 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. 99 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 13. 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 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 . Dr. Erik R. 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. Mark A. Schroeder, Associate Professor of Medicine, Division of Oncology, Bone Marrow Transplantation and Leukemia. ​ 100 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 13. License, Collaborative and Employment Agreements and Commitments – (continued) The CTA continues in effect until completion of all obligations under the CTA. Either party may terminate the CTA prior to completion of its obligations (i) if authorization of the study is withdrawn by the FDA; (ii) if the emergence of any adverse reaction or side effect with SYN-004 (ribaxamase) administered in the Study is of such magnitude or incidence in the opinion of either party to support termination; or (iii) upon a breach of the terms of the CTA if the breaching party fails to cure the breach within 30 days after receipt of notice. 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 On December 19, 2012, the Company entered into a License Agreement with University of Texas Austin (“UT”) for the exclusive license of the right to use, develop, manufacture, market and commercialize certain research and patents related to pertussis antibodies. The License Agreement provides that UT Austin is entitled to payment of past patent expenses, an annual payment of $ 50,000 per year commencing on the effective date through December 31, 2014, a $ 25,000 payment on December 31, 2015 and milestone payments of $ 50,000 upon commencement of Phase 1 clinical trials, $ 100,000 upon commencement of Phase 3 clinical trials, $ 250,000 upon NDA submission in the U.S., $ 100,000 upon European Medicines Agency approval and $ 100,000 upon regulatory approval in an Asian country. In addition, UT Austin is entitled to a running royalty upon net sales. The License Agreement terminates upon the expiration of the patent rights; 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. The Sponsored Research Agreement may be renewed annually, in the sole discretion of the Company, after the first year for two additional one year terms with a fixed fee for the first year of $ 303,000 . The Sponsored Research Agreement was renewed for the second and third years for a fixed fee of $ 316,000 and $ 329,000 respectively, all payable in quarterly installments. The Sponsored Research Agreement expired January 17, 2023. 101 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 13. License, Collaborative and Employment Agreements and Commitments – (continued) Prev ABR LLC (“Prev”) Agreement On November 28, 2012, the Company entered into an agreement (“Prev Agreement”) to acquire the C. diff program assets of Prev, including the pre-Investigational New Drug (IND) package, Phase 1 and Phase 2 clinical data, manufacturing process data and all issued and pending U.S. and international patents. Upon execution and closing of the Prev Agreement, the Company paid Prev cash payments of $ 235,000 and issued 17,858 unregistered shares of its common stock to Prev. As set forth in the Prev Agreement, Prev may be entitled to receive additional consideration upon the achievement of certain milestones, including: (i) commencement of an IND; (ii) commencement of a Phase 1 clinical trial; (iii) commencement of a Phase 2 clinical trial; (iv) commencement of a Phase 3 clinical trial; (v) filing a Biologic License Application (BLA) in the U.S. and for territories outside of the U.S. (as defined in the Prev Agreement); and (vi) approval of a BLA in the U.S. 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 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 subsequent to 2015. Employment Agreements 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. If Mr. Shallcross’ employment is terminated for any reason, he or his estate as the case may be, will be entitled to receive the accrued base salary, 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 Mr. Shallcross 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 twelve (12) months and (b) he shall have the right 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, Mr. Shallcross 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. In such event, if Mr. Shallcross 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. On December 15, 2022, the Board of Directors of the Company awarded Steven A. Shallcross: (i) a cash bonus equal to $ 385,000 , and (ii) an option to purchase 475,000 shares of the Company's common stock. In addition, on December 15, 2022, the Company entered into an Amendment to Mr. 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. Shallcross: (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. 102 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 13. 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. Pursuant to the Employment Agreement, 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 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. 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. If Dr. 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: (i) a cash bonus equal to approximately 23 % of his current base salary, and (ii) an option to purchase 100,000 shares of the Company's Common Stock. In addition, on December 15, 2022, the Company entered into an Amendment to Dr. 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. Tufaro. 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. Mr. 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. 103 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 13. License, Collaborative and Employment Agreements and Commitments – (continued) Operating Lease 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 its space by giving notice to the landlord before December 31, 2021. The Company did not give notice to expand the space during 2021. The Second Extension Term is offered at market rates and there is no economic incentive for the lessee, therefore the Company has determined that it is not part of the original lease term. There is an option in this Second Amendment to Lease for the Company to borrow funds for tenant improvements subject to an 8.5 % interest rate. The Company also leases research and office facilities in Barcelona, Spain for its 100 percent owned Theriva S.L. subsidiary. The lease that was in existence from December 2021 to December 2022 was a short term agreement with a 90-day termination notice provision that can be exercised by either party. On the closing date of the Theriva S.L. acquisition, a sublease was executed for Theriva S.L. to lease research and office facilities at a new location in Parets del Valles (Barcelona) from the former owner of Theriva S.L.. This lease was executed for an initial term to begin in January 2023 until October 2026, with an option to renew for an additional five years. On January 15, 2023, Theriva S.L. moved into the facilities and the new lease commenced and the prior lease terminated. Operating lease costs are presented as part of general and administrative expenses in the condensed consolidated statements of operations, and for the year ended December 31, 2023 and 2022 approximated $ 624,000 and $ 569,000 , respectively. For the Barcelona lease, the day one non-cash addition of right of use assets due to adoption of ASC 842 was $ 937,000 . A maturity analysis of the Company’s operating leases as of December 31, 2023 is as follows (amounts in thousands of dollars) : ​ ​ ​ ​ Future undiscounted cash flow for the years ending December 31, ​ 2024 ​ ​ 654 2025 ​ ​ 664 2026 ​ ​ 582 2027 ​ 368 Total ​ ​ 2,268 ​ ​ ​ ​ Discount factor ​ ​ ( 339 ) Operating lease liability ​ ​ 1,929 Operating lease liability - current ​ ​ ( 487 ) Operating lease liability - long term ​ $ 1,442 ​ Consulting Fees In November 2017, the Company engaged a regulatory consultant to assist in the Company’s efforts to prepare, file and obtain FDA approval for ribaxamase. The term of the engagement is on a monthly basis, provided that either party may terminate the agreement at any time by providing the other party a six-month notice period. The Company was obligated to pay the consultant a monthly retainer in addition to success fee payments of up to an aggregate of $ 4,500,000 for attainment of certain regulatory milestones. The achievement of the milestones is not probable at this time. No amounts incurred in 2023 and 2022. 104 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 13. 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. 14. Income Taxes Losses before income taxes for the years ended December 31, 2023 and 2022 was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ ​ ​ ​ Domestic ​ $ ( 8,568 ) ​ $ ( 15,325 ) Foreign ​ ( 11,421 ) ​ ( 5,785 ) ​ ​ ​ ​ ​ ​ ​ Income/(Loss) before Income Taxes ​ $ ( 19,989 ) ​ $ ( 21,110 ) ​ The components of income tax benefit consisted of the following for the years ended December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2023 2022 Current: ​ ​ ​ ​ ​ ​ Federal ​ $ — ​ $ — State ​ — ​ 2 Foreign ​ — ​ — Total Current ​ — ​ 2 ​ ​ ​ ​ ​ ​ ​ Deferred: ​ ​ Federal ​ $ — ​ $ — State ​ — ​ — Foreign ​ ( 1,640 ) ​ ( 1,427 ) Total Deferred ​ ( 1,640 ) ​ ( 1,427 ) Provision (Benefit) for income taxes ​ ( 1,640 ) ​ ( 1,425 ) ​ ​ 105 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 14. 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 ​ Amount Rate Amount Rate US Federal Statutory Tax Rate $ ( 4,198 ) 21.00 % ( 4,433 ) 21.00 % State and Local Income Taxes, Net of Federal Income Tax Effect ​ ( 532 ) 2.66 % ( 678 ) 3.22 % Foreign Tax Effects-Spain ​ ​ ​ ​ ​ ​ ​ ​ Statutory tax rate difference between Spain and United States ​ ( 457 ) 2.29 % ( 231 ) 1.10 % Changes in Valuation Allowances ​ 1,332 ( 6.66 ) % — 0.00 % Changes in Valuation Allowances ​ ​ 2,291 ​ ( 11.46 ) % 2,901 ​ ( 13.74 ) % Nontaxable or Nondeductible Items ​ ( 187 ) 0.93 % 575 ( 2.72 ) % Other Adjustments ​ 111 ( 0.56 ) % 441 ( 2.11 ) % Effective Tax Rate $ ( 1,640 ) 8.20 % ( 1,425 ) 6.75 % ​ 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 the Company’s deferred tax assets for federal and state income taxes are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Deferred Tax Assets: ​ ​ Federal, State and Foreign NOL Carryforward ​ $ 27,356 ​ $ 22,235 Accrued Compensation ​ 24 ​ 29 Stock Issued For Services ​ 957 ​ 1,053 Stock Issued for Acquisition of Program ​ 1,457 ​ 1,456 Stock Issued for License Agreement ​ ​ 1,124 ​ ​ 1,362 Amortizable License Fee ​ ​ 3 ​ ​ 4 Capitalized Research & Development costs ​ ​ 2,422 ​ ​ 1,592 ​ ​ ​ ​ ​ ​ ​ Total Gross DTA ​ 33,343 ​ 27,731 Less: Valuation Allowance ​ ( 28,351 ) ​ ( 24,562 ) Total Deferred Tax Assets ​ 4,992 ​ 3,169 Deferred Tax Liabilities: ​ ​ ​ ​ ​ ​ IPR&D ​ ​ ( 4,939 ) ​ ​ ( 4,787 ) ASC 842 Net ROU Assets ​ ( 53 ) ​ — Total Gross DTL ​ ( 4,992 ) ​ ( 4,787 ) ​ ​ ​ ​ ​ ​ ​ Net Deferred Tax Asset (Liability) ​ $ — ​ $ ( 1,618 ) ​ 106 Table of Contents Theriva Biologics, Inc. and Subsidiaries Notes to Consolidated Financial Statements 14. Income Taxes – (continued) ​ On March 10, 2022, the Company acquired VCN, a Spanish Company in a tax-free stock acquisition. Due to this acquisition, VCN is a wholly owned subsidiary of the company. As a result of the acquisition, a deferred tax liability was established with purchase accounting related to acquired In Process Research and Development. A deferred tax asset was also established with purchase accounting related to VCN’s unlimited life net operating loss carryover. 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. 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 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. As a result, the prior year net operating loss carry-forward was limited by $ 155.6 million. The decrease in the prior year net operating loss is attributable to control ownership changes which were determined for the years 2013 and 2018 which caused the reduction in the value of the historical net operating loss carry-forward amounts. Updated section 382 analysis were performed in 2021, 2022, and 2023 to identify if any additional ownership shifts occurred in these years. 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. 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. The net operating loss does not expire and is available to offset future Spanish taxable income. The Company’s valuation allowance at December 31, 2023 was approximately $ 28.4 million. The net change in valuation allowance during the year ended December 31, 2023, was an increase of approximately $ 3.8 million primarily due to increases in gross federal and state deferred tax assets in 2023. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. 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 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. Upon distribution of any earnings in the form of dividends or otherwise, those earnings would be subject to U.S. income tax. At the present time, VCN does not have any earnings and thus it is not necessary to estimate the amount of U.S. 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. ​ ​ ​ ​ 107 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . None.