Company: TVRD
Filing Date: 2025-10-20
Form Type: S-1/A
Source: 0001104659-25-100896
Chunk: 158

Company: Tvardi Therapeutics, Inc.
Filing Date: 2025-10-20
Form: S-1/A
Chunk 158
---
 of services or the level of effort varies from our estimate, or if we receive any change orders from our third-party providers, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

We also record 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 we adjust the amount of the accrued expense or the prepaid expense accordingly.

#### Convertible Notes
We elected to account for the 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, we recorded the Convertible Notes at fair value with changes in fair value recorded as component of other income (expense), net in our statements of operations. 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.

<div align='center'>94</div>

TABLE OF CONTENTS

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