Company: TVRD
Filing Date: 2025-11-13
Form Type: 424B3
Source: 0001104659-25-111336
Chunk: 70

Company: Tvardi Therapeutics, Inc.
Filing Date: 2025-11-13
Form: 424B3
Chunk 70
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 timing of services performed may vary and may result in Tvardi reporting amounts that are
too high or too low in any particular period. To date, Tvardi has not made any material adjustments to its prior estimates of accrued
research and development expenses.

Tvardi also records advance payments to service
providers as prepaid expenses and other current assets, which are expensed when the contracted services are performed. If the actual timing
of the performance of services varies from the estimate, then Tvardi adjusts the amount of the accrued expense or the prepaid expense
accordingly.

Convertible Notes

Historically, Legacy Tvardi elected to account for
its Convertible Notes pursuant to the fair value option under Accounting Standards Codification (ASC) 825, Financial Instruments
(ASC 825). In accordance with ASC 825 and the fair value option, Legacy Tvardi recorded its Convertible Notes at fair value with
changes in fair value recorded as component of other income (expense), net in its condensed consolidated statements of operations and
comprehensive loss. As a result of the fair value option, any issuance costs related to the Convertible Notes were expensed as incurred
and were not deferred.

The fair value of the Convertible Notes was
determined using a scenario-based valuation analysis that requires a probability of inputs, including the probability of occurrence of
events that would trigger conversion of the Convertible Notes and the expected timing of such events.

Prior to the Merger with Cara in April 2025, Legacy
Tvardi assessed the probability of (i) an automatic conversion of the Convertible Notes into equity securities upon a Qualified
or non-Qualified Financing, (ii) an automatic conversion of the Convertible Notes into shares of Legacy Tvardi’s common
stock upon an IPO, (iii) an automatic conversion of the Convertible Notes into the combined company’s common stock upon
a reverse merger, and (iv) an event of default, dissolution, or liquidation, weighted with 2.5%, 0%, 95%, and 2.5%, respectively.

Additional assumptions and estimates used to estimate
the fair value of the Convertible Notes included the: (i) fixed price conversion option, which was valued using a Black-Scholes
option model, (ii) aggregate call value of each scenario, which was synthesized using a bond plus call option model, (iii) expected
volatility, (iv) risk-free interest rate, and (v) the fair value of the Convert