Company: TVRD
Filing Date: 2025-05-30
Form Type: S-1
Source: 0001104659-25-054853
Chunk: 150

Company: Tvardi Therapeutics, Inc.
Filing Date: 2025-05-30
Form: S-1
Chunk 150
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 the accrued expense or the prepaid expense accordingly. Convertible Notes We have 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. As of March 31, 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 our common stock upon the 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 include 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 Convertible Notes under the reverse merger scenario, which was estimated using a forward contract structure. Stock-Based Compensation Expense and Fair Value of Stock-Based Awards Stock-Based Compensation Expense We measure and record the expense related to stock-based awards granted to employees, directors, consultants and advisors based upon their respective fair value at the date of grant. Generally, we issue stock option awards with service-based vesting conditions and record the expense for these awards using the straight-line method such that the aggregate amount of expense recognized is at least the fair value of what has legally vested. We estimate the grant date fair value of each common stock option using the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions and management