美國
證券和交易委員會
華盛頓特區20549
表格
（Mark One）
對於
季度期結束
or
在從______到過渡期間 _______
委員會
文件編號：
（公司章程中指定的準確公司名稱）
（或其他轄區 （組織）的註冊地點 |
（美國國稅局僱主號碼） 識別號碼。 | |
| ||
| (主要 執行人員之地址) | (郵政 編 碼) | |
| （註冊人電話號碼，包括區號） | ||
不適用
(如果自上次報告以來名稱、地址和財政年度有所改變，請說明)
根據法案第12(b)節註冊的證券:
| 每一類別的名稱 | 交易符號 | 在每個交易所註冊的名稱 | ||
| 股 |
根據該法第12(g)條登記的證券： 無
請勾選以下選項說明報告人是否：（1）在過去12個月內（或報告人需要報告的較短時間）提交了《1934年證券交易法》第13條或第15(d)條規定要提交的所有報告；（2）過去90天一直被要求提交此類報告。
通過勾選圓圈表明註冊者是否在過去12個月內(或註冊者需要提交這些文件的較短期限內)已經遞交規章S-T(本章第232.405條)規定的每個交互式數據文件。
在勾選標記處表示註冊人是大型加速提交人、加速提交人、非加速提交人、小型報告公司還是新興增長公司。請參閱證券交易法120億條規則中「大型加速提交人」、「加速提交人」、「小型報告公司」和「新興增長公司」的定義。
| 大型加速文件提交人 | ☐ | 加速文件提交人 | ☐ | |
| ☒ | 小型報告公司 | |||
| 新興成長公司 |
如果是新興成長公司，請勾選，如果註冊人已選擇不使用根據交易所法案第13(a)條提供的任何新的或修改的財務會計準則的延長過渡期，請勾選。
如果註冊者是交易所法案規定的殼公司（如規則120億.2定義的），請用勾號表示。是：☐ 否：
截至2024年11月11日，註冊公司的普通股流通股數量爲$ 每股面值爲的股票數量爲 .
除非另有說明，本季度10-Q表格中的所有股份和每股信息已考慮到登記人在2024年4月25日下午4:01（東部時間）進行的每十股合併爲一股的反向股票分割。
ZYVERSA THERAPEUTICS, INC。
指數 至簡化合並基本報表
第一部分財務信息
項目 1. 基本報表
ZYVERSA THERAPEUTICS, INC。
彙編簡明資產負債表
| 九月 30日, | 12月 31日, | |||||||
| 2024 | 2023 | |||||||
| (未經審計) | ||||||||
| 資產 | ||||||||
| 流動資產： | ||||||||
| 現金 | $ | $ | ||||||
| 預付的費用和其他流動資產 | ||||||||
| 總流動資產 | ||||||||
| 設備淨值 | ||||||||
| 研發中的項目 | ||||||||
| 供應商存入資金 | ||||||||
| 延遲募資成本 | ||||||||
| 經營租賃 資產 | ||||||||
| 資產總額 | $ | $ | ||||||
| 負債和股東權益 | ||||||||
| 流動負債: | ||||||||
| 應付賬款 | $ | $ | ||||||
| 應計費用及其他流動負債 | ||||||||
| 營業租賃負債 | ||||||||
| 總計 流動負債 | ||||||||
| 遞延所得稅負債 | ||||||||
| 總負債 | ||||||||
| 承諾和或可能負債 （附註6） | ||||||||
| 股東權益： | ||||||||
| 優先股，$0.0001 票面價值， 股份授權: | ||||||||
| A輪優先股， 股份指定, 截至2024年9月30日和2023年12月31日分別已發行和流通的股份 | ||||||||
| B輪優先股， 股份指定, 截至2024年9月30日和2023年12月31日的已發行在外股份 | ||||||||
| 普通股，每股面值爲 $0.0001； par 值， 授權股份數; 和 2024年9月30日和2023年12月31日分別發行的股票， 和 和 截至2024年9月30日和2023年12月31日，股份流通量分別爲 | ||||||||
| 額外的實收資本 | ||||||||
| 累計虧損 | ( | ) | ( | ) | ||||
| 庫藏股 成本 2024年9月30日和2023年12月31日的股份，分別 | ( | ) | ( | ) | ||||
| 股東權益合計 | ||||||||
| 負債和股東權益合計 | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 1 |
ZYVERSA THERAPEUTICS, INC。
精簡 合併損益表
(未經審計)
| 截至三個月結束 | 截至九個月結束 | |||||||||||||||
| 9月30日, | 9月30日, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 營業費用： | ||||||||||||||||
| 研發 | $ | $ | $ | $ | ||||||||||||
| 一般和行政 | ||||||||||||||||
| 正在進行的研發的減值 | ||||||||||||||||
| 商譽減值 | ||||||||||||||||
| 總營業費用 | ||||||||||||||||
| 業務損失 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他（收入）支出： | ||||||||||||||||
| 利息（收入）費用 | ( | ) | ||||||||||||||
| 稅前淨虧損 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 所得稅（負債）益額 | ( | ) | ||||||||||||||
| 淨損失 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 視爲優先股東的紅利 | ( | ) | ( | ) | ||||||||||||
| 歸屬於普通股股東的淨虧損 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 每股淨虧損 | ||||||||||||||||
| -基本和稀釋 | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| 加權平均普通股發行數量 | ||||||||||||||||
| -基本和稀釋 | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 2 |
ZYVERSA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
For The Three and Nine Months Ended September 30, 2024 and 2023
(Unaudited)
| For the Three and Nine Months Ended September 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Additional | Total | |||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common Stock | Treasury Stock | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||||||||
| Balance - December 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| Exercise of warrants | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Exercise of pre-funded warrants | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to vendor agreements | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Round up share adjustment due to reverse split | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance - March 31, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2024 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Warrant inducement offer - exercise proceeds [1] | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Warrant modification | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance - September 30, 2024 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| For the Three and Nine Months Ended September 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||
| Series A | Series B | Additional | Total | |||||||||||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common Stock | Treasury Stock | Paid-In | Accumulated | Stockholders’ | ||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||||||||
| Balance - December 31, 2022 | $ | $ | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||||||
| Reclassification of formerly redeemable common stock | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to vendor agreements | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Registration costs associated with preferred stock issuance | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance - March 31, 2023 | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Registered offering of common stock [2] | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Redemption of Series A Preferred Stock | ( | ) | ( | ) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Conversion of Series A Preferred Stock into common stock | ( | ) | - | - | ||||||||||||||||||||||||||||||||||||||||
| Shares issued as consideration for extension of lock-up period | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to vendor agreements | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Treasury stock acquired, at cost | - | - | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance - June 30, 2023 | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Registered offering of common stock [3] | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Warrant modification | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Redemption of Series A Preferred Stock | ( | ) | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Exercise of pre-funded warrants | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Warrant inducement offer - exercise proceeds[4] | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance - September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||||
| [1] |
| [2] |
| [3] |
| [4] |
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 3 |
ZYVERSA THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Impairment of in-process research and development | ||||||||
| Impairment of goodwill | ||||||||
| Stock-based compensation | ||||||||
| Issuance of common stock pursuant to vendor agreements | ||||||||
| Shares issued as consideration for extension of lock-up period | ||||||||
| Depreciation of fixed assets | ||||||||
| Non-cash rent expense | ||||||||
| Deferred tax provision (benefit) | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Security deposit | ||||||||
| Vendor deposits | ( | ) | ||||||
| Deferred offering costs | ( | ) | ||||||
| Accounts payable | ||||||||
| Operating lease liability | ( | ) | ( | ) | ||||
| Accrued expenses and other current liabilities | ||||||||
| Net Cash Used In Operating Activities | ( | ) | ( | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from issuance of common stock in public offering | ||||||||
| Registration and issuance costs associated with common stock issuance | ( | ) | ( | ) | ||||
| Redemption of Series A Preferred Stock | ( | ) | ||||||
| Purchase of treasury stock | ( | ) | ||||||
| Exercise of pre-funded warrants | ||||||||
| Exercise of warrants | ||||||||
| Warrant inducement offer - exercise proceeds | ||||||||
| Registration and issuance costs associated with preferred stock issuance | ( | ) | ||||||
| Net Cash Provided By Financing Activities | ||||||||
| Net Decrease in Cash | ( | ) | ( | ) | ||||
| Cash - Beginning of Period | ||||||||
| Cash - End of Period | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Reclassification of formerly redeemable common stock | $ | $ | ||||||
| Accounts payable for deferred offering costs | $ | $ | ||||||
| Warrant modification - incremental value | $ | $ | ||||||
| Warrant inducement offer - incremental value | $ | $ | ||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
| 4 |
ZYVERSA THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
Note 1 – Business Organization, Nature of Operations and Basis of Presentation
Organization and Operations
ZyVersa Therapeutics, Inc. (“ZyVersa” and the “Company”) is a clinical stage biopharmaceutical company leveraging proprietary technologies to develop first-in-class drugs for patients with chronic renal or inflammatory diseases with high unmet medical needs. The Company’s mission is to develop drugs that optimize health outcomes and improve patients’ quality of life.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023. The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the operating results for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on March 25, 2024 and as amended on May 15, 2024.
On
December 4, 2023,
On
April 25, 2024,
Accordingly, all share and per share amounts for all periods presented in these financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the 2023 Reverse Split and the 2024 Reverse Split and adjustment of the conversion price or exercise price of each outstanding equity award, convertible security and warrant as if the transaction had occurred as of the beginning of the earliest period presented. See Note 7 – Stockholders’ Permanent and Temporary Equity – Reverse Stock Split.
Note 2 - Going Concern and Management’s Plans
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
As
of September 30, 2024, the Company had cash of approximately $
The Company has not yet achieved profitability and expects to continue to incur cash outflows from operations. It is expected that its research and development and general and administrative expenses will continue to increase and, as a result, the Company will eventually need to generate significant product revenues to achieve profitability.
Consequently,
the Company will be required to raise additional funds through equity or debt financing. Subsequent to September 30, 2024, the Company
raised an aggregate of $
| 5 |
ZYVERSA THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
Note 3 – Summary of Significant Accounting Policies
Since the date the Company’s December 31, 2023 financial statements were issued in its 2023 Annual Report on Form 10-K, there have been no material changes to the Company’s significant accounting policies.
Use of Estimates
Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and the amounts disclosed in the related notes to the financial statements. The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities reported in the Company’s balance sheets and the amounts of expenses reported for each of the periods presented are affected by estimates and assumptions, which are used for, but not limited to, fair value calculations for equity securities, share based compensation and acquired intangible assets, as well as establishment of valuation allowances for deferred tax assets. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that actual results could differ from those estimates.
Deferred Offering Costs
Deferred offering costs, which primarily consist of direct, incremental professional fees incurred in connection with a debt or equity financing, are capitalized as deferred offering costs (a non-current asset) on the balance sheet. Once the financing closes, the Company reclassifies such costs as either discounts to notes payable or as a reduction of proceeds received from equity transactions so that such costs are recorded as a reduction of additional paid-in capital. If the completion of a contemplated financing was deemed to be no longer probable, the related deferred offering costs would be charged to general and administrative expense in the consolidated financial statements.
Basic net loss per common share is computed by dividing net loss by the weighted average number of vested common shares outstanding during the period. Diluted net income per common share is computed by dividing net income by the weighted average number of common and dilutive common-equivalent shares outstanding during each period.
| As of September 30, | ||||||||
| 2024 | 2023 | |||||||
| Warrants [1] | ||||||||
| Options | ||||||||
| Series A Convertible Preferred Stock | ||||||||
| Series B Convertible Preferred Stock | ||||||||
| Total potentially dilutive shares | ||||||||
| [1] |
Segment Reporting
The Company operates and manages its business as one reportable and operating segment. All assets and operations are in the U.S. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance.
Reclassifications
Certain prior period balances have been reclassified from security deposits to vendor deposits on the condensed consolidated balance sheet in order to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or loss per share.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segments Disclosures (Topic 280), which updates reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses on both an annual and interim basis. The guidance becomes effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material effects on its financial condition, results of operations or cash flows. The Company is currently evaluating any new disclosures that may be required upon adoption of ASU 2023-07.
| 6 |
ZYVERSA THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
Note 4 – Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following as of September 30, 2024 and December 31, 2023:
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| L&F milestone payment liability | $ | $ | ||||||
| Payroll accrual | ||||||||
| Other accrued expenses | ||||||||
| Bonus accrual | ||||||||
| Registration delay liability [1] | ||||||||
| Total accrued expenses and other current liabilities | $ | $ | ||||||
| [1] |
Note 5 – Income Taxes
Income tax expense and the effective tax rate were as follows:
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| (in thousands) | 2024 | 2023 | ||||||
| Income tax (expense) benefit | $ | ( | ) | $ | ||||
| Effective tax rate | ( | )% | % | |||||
The
tax provisions for the nine months ended September 30, 2024 and 2023 were computed using the estimated effective tax rates applicable
to the taxable jurisdictions for the full year. The Company’s tax rate is subject to management’s quarterly review and revision,
as necessary. The Company’s effective tax rate was (
Note 6 – Commitments and Contingencies
Litigations, Claims and Assessments
In the normal course of business, the Company may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. The Company records contingent liabilities resulting from such claims, if any, when a loss is assessed to be probable and the amount of the loss is reasonably estimable.
Disputed Vendor Invoices
On
June 30, 2024 and July 1, 2024, the Company received two invoices from a vendor in the amounts of $
| 7 |
ZYVERSA THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
License Agreements
L&F Research LLC
The Company entered into a License Agreement with L&F Research LLC (“L&F”) effective December 15, 2015, as amended (the “L&F License Agreement”) pursuant to which L&F granted the Company an exclusive royalty-bearing, worldwide, sublicensable license under the patent and intellectual property rights and know-how specific to and for the development and commercialization of VAR 200, for the treatment, inhibition or prevention of kidney disease in humans and symptoms thereof, including focal segmental glomerulosclerosis.
On
February 28, 2023,
On
March 29, 2023, the Company paid the $
On
January 30, 2024, the Company paid $
Operating Leases
On
January 18, 2019, the Company entered into a lease agreement for approximately
The
Company recognized right-of-use asset amortization of $
The
Company recognized right-of-use amortization of $
A summary of the Company’s right-of-use assets and liabilities is as follows:
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows used in operating activities | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease obligations | ||||||||
| Operating leases | $ | $ | ||||||
| Weighted Average Remaining Lease Term | ||||||||
| Operating leases | - | |||||||
| Weighted Average Discount Rate | ||||||||
| Operating leases | - | % | ||||||
| 8 |
ZYVERSA THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
Note 7 – Stockholders’ Permanent and Temporary Equity
Reverse Stock Split
On
April 25, 2024,
Common Stock
On
January 2, 2024, the Company entered into a marketing agreement with a vendor in which the Company issued an aggregate of shares
of common stock and cash in exchange for marketing services. The $
Temporary Equity
See Note 6 – Commitments and Contingencies – License Agreements for discussion of the movement of temporary equity to permanent equity on March 29, 2023.
Stock-Based Compensation
For the three months ended September 30, 2024 the Company recorded stock-based compensation expense of $ (of which, $ was included in research and development and $ was included in general and administrative expense) related to options issued to employees and consultants. For the three months ended September 30, 2023 the Company recorded stock-based compensation expense of $ (of which, ($) was included in research and development expense and $ was included in general and administrative expense) related to options issued to employees and consultants.
For the nine months ended September 30, 2024 the Company recorded stock-based compensation expense of $ (of which, $ was included in research and development expense and $ was included in general and administrative expense) related to options issued to employees and consultants. For the nine months ended September 30, 2023 the Company recorded stock-based compensation expense of $ (of which, $ was included in research and development expense and $ was included in general and administrative expense) related to options issued to employees and consultants. As of September 30, 2024 there was $ of unrecognized stock-based compensation expense, which the Company expects to recognize over a weighted average period of years.
Stock Options
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Fair value of common stock on date of grant | N/A | N/A | N/A | $ - $ | ||||||||||||
| Risk free interest rate | N/A | N/A | N/A | % - | % | |||||||||||
| Expected term (years) | N/A | N/A | N/A | |||||||||||||
| Expected volatility | N/A | N/A | N/A | % - | % | |||||||||||
| Expected dividends | N/A | N/A | N/A | % | ||||||||||||
| 9 |
ZYVERSA THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Number of | Exercise | Life | Intrinsic | |||||||||||||
| Options | Price | In Years | Value | |||||||||||||
| Outstanding, January 1, 2024 | $ | |||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Expired | ( | ) | ||||||||||||||
| Outstanding, September 30, 2024 | $ | $ | ||||||||||||||
| Exercisable, September 30, 2024 | $ | $ | ||||||||||||||
| Options Outstanding | Options Exercisable | |||||||||||||
| Weighted | ||||||||||||||
| Outstanding | Average | Exercisable | ||||||||||||
| Exercise | Number of | Remaining Life | Number of | |||||||||||
| Price | Options | In Years | Options | |||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
Stock Warrants
Between
February 26, 2024 and March 6, 2024, investors in the public offering completed on December 11, 2023 (the “December 2023 Offering”) exercised warrants to
purchase
Between
January 17 and February 23, 2024, a December 2023 Offering investor exercised pre-funded warrants to purchase
On
August 1, 2024, the Company initiated a limited time program, which was immediately accepted by the warrant holder, that permitted
the holder to exercise its December 2023 Offering warrants at a reduced exercise price of $per
share and granted new warrants to purchase up to (i) shares
of common stock which became exercisable upon stockholder approval with an exercise term of five years and (ii) shares
of common stock which became exercisable upon stockholder approval with an exercise term of months.
The Company received stockholder approval for the warrants on October 29, 2024 and the warrants have an exercise price of $
| 10 |
ZYVERSA THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Fair value of common stock on date of grant | $ | $ - $ | $ | $ - $ | ||||||||||||
| Risk free interest rate | % - | % | % - | % | % - | % | % - | % | ||||||||
| Expected term (years) | - years | - years | - years | years | ||||||||||||
| Expected volatility | % - | % | % - | % | % - | % | % - | % | ||||||||
| Expected dividends | n/a | n/a | n/a | n/a | ||||||||||||
A summary of the warrant activity for the nine months ended September 30, 2024, is presented below:
| Weighted | ||||||||||||||||
| Weighted | Average | |||||||||||||||
| Average | Remaining | Aggregate | ||||||||||||||
| Number of | Exercise | Life | Intrinsic | |||||||||||||
| Warrants | Price | In Years | Value | |||||||||||||
| Outstanding, January 1, 2024 [1] | $ | |||||||||||||||
| Issued | ||||||||||||||||
| Forfeited | ( | ) | ||||||||||||||
| Exercised [2] | ( | ) | ||||||||||||||
| Repriced - Old [3] | ( | ) | ||||||||||||||
| Repriced - New [3] | ||||||||||||||||
| Outstanding, September 30, 2024 | $ | $ | ||||||||||||||
| Exercisable, September 30, 2024 | $ | $ | ||||||||||||||
| [1] |
| [2] | ||
| [3] |
| 11 |
ZYVERSA THERAPEUTICS, INC.
Notes to Condensed Consolidated Financial Statements
| Warrants Outstanding | Warrants Exercisable | |||||||||||||
| Outstanding | Weighted Average | Exercisable | ||||||||||||
| Exercise | Number of | Remaining Life | Number of | |||||||||||
| Price | Warrants | In Years | Warrants | |||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
Effectiveness Failure
In
connection with the business combination with Larkspur Health Acquisition Corp., the Company conducted the Series A Preferred Stock Financing.
On or about February 20, 2023, the Company failed to have the SEC declare a registration statement effective (the “Effectiveness
Failure”) which covered the Series A Preferred Stock registrable securities within the time period prescribed by the Securities
Purchase Agreement (the “SPA”). The SPA entitles the investors to receive registration delay payments (“Registration
Delay Payments”) equal to
Note 8 – Subsequent Events
At-The-Market Offering
Subsequent
to September 30, 2024, the Company received approximately $
Common Stock
Subsequent
to September 30, 2024, the Company entered into marketing agreements with two vendors, pursuant to which the Company issued an
aggregate of
shares of common stock in exchange for marketing services. The fair value of the common stock was established as a prepaid expense
and the Company is recognizing $
Stock Warrants
On
November 5, 2024, the Company initiated a limited time program, which was immediately accepted by warrant holders, that permitted the
holders to exercise
Under
the program, the warrant holders submitted exercise notices and the related aggregate cash exercise price to purchase an aggregate of
| 12 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations and financial condition of ZyVersa Therapeutics, Inc. (the “Company,” “we,” “us” or “our”) as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023 should be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis should be read in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2023 and for the year then ended, which are included in the Form 10-K (the “Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 25, 2024, as amended on May 15, 2024. This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risk, uncertainties and other factors. These statements are often identified by the use of words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” or “continue,” and similar expressions or variations. Actual results could differ materially because of the factors discussed in “Risk Factors” in our Annual Report, and other factors that we may not know. Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements above, to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q.
Business Overview
We are a clinical stage specialty biopharmaceutical company leveraging advanced proprietary technologies to develop first-in-class drugs for patients with inflammatory or kidney diseases with high unmet medical needs. We are well positioned in the rapidly emerging inflammasome space with a highly differentiated monoclonal antibody, Inflammasome ASC Inhibitor IC 100, and in kidney disease with phase 2 Cholesterol Efflux MediatorTM VAR 200. The lead indication for IC 100 is obesity and its associated metabolic complications, and for VAR 200, focal segmental glomerulosclerosis (FSGS). Each therapeutic area offers a “pipeline within a product,” with potential for numerous indications. The total accessible market is over $100 billion.
Financial Operations Overview
We have not generated any revenue to date and have incurred significant operating losses. Our net losses were $8.0 million for the period from January 1, 2024 through September 30, 2024, compared to $85.0 million for the period from January 1, 2023 through September 30, 2023. As of September 30, 2024, we had an accumulated deficit of approximately $111.2 million and cash of $0.1 million. We expect to continue to incur significant expenses for the foreseeable future and to incur operating losses. We expect our expenses will increase in connection with our ongoing activities as we:
| ● | progress development of VAR 200 and IC 100; | |
| ● | prepare and file regulatory submissions; | |
| ● | begin to manufacture our product candidates for clinical trials; | |
| ● | hire additional research and development, finance, and general and administrative personnel; | |
| ● | protect and defend our intellectual property; and | |
| ● | meet the requirements of being a public company. |
We will need additional financing to support our continuing operations. We will seek to fund our operations through public or private equity or debt financings or other sources, which may include government grants and collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenues to achieve profitability, and we may never do so.
| 13 |
Components of Operating Results
Revenue
Since inception, we have not generated any revenue and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for our product candidates are successful and result in regulatory approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements.
Operating Expenses
Research and Development Expenses
Research and development expenses consist of costs incurred in the discovery and development of our product candidates, and primarily include:
| ● | expenses incurred under third party agreements with contract research organizations (“CROs”), and investigative sites, that conducted or will conduct our clinical trials and a portion of our pre-clinical activities; | |
| ● | costs of raw materials, as well as manufacturing cost of our materials used in clinical trials and other development testing; | |
| ● | expenses, including salaries, stock-based compensation and benefits of employees engaged in research and development activities; | |
| ● | costs of equipment, depreciation and other allocated expenses; and | |
| ● | fees paid for contracted regulatory services as well as fees paid to regulatory authorities including the U.S. Food and Drug Administration (the “FDA”) for review and approval of our product candidates. |
We expense research and development costs as incurred. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid expenses or accrued expenses.
Research and development activities are central to our business model. We expect that our research and development expenses will continue to increase for the foreseeable future as we continue clinical development for our product candidates. As products enter later stages of clinical development, they will generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Historically, our research and development costs have primarily related to the development of VAR 200 and IC 100. As we advance VAR 200 and IC 100, as well as identify any other potential product candidates, we will continue to allocate our direct external research and development costs to the products. We expect to fund our research and development expenses from our current cash and cash equivalents and any future equity or debt financings, or other capital sources, including potential collaborations with other companies or other strategic transactions.
The successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of, or when, if ever, material net cash inflows may commence from our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with the duration and cost of clinical trials, which vary significantly over the life of a project as a result of many factors, including:
| ● | the number of clinical sites included in the clinical trials; | |
| ● | the length of time required to enroll suitable patients; | |
| ● | the size of patient populations participating in the clinical trials; | |
| ● | the number of doses a patient receives; | |
| ● | the duration of patient follow-ups; | |
| ● | the development state of the product candidates; and | |
| ● | the efficacy and safety profile of the product candidates. |
Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals, and the expense of filing, prosecuting, defending and enforcing any patent claims or other intellectual property rights. We may never succeed in achieving regulatory approval for our product candidates. We may obtain unexpected results from our clinical trials. We may elect to discontinue, delay or modify clinical trials of our product candidates. A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development. Product commercialization will take several years and likely millions of dollars in development costs.
| 14 |
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, stock-based compensation and related costs for our employees in administrative, executive and finance functions. General and administrative expenses also include professional fees for legal, accounting, audit, tax and consulting services, insurance, human resource, information technology, office, and travel expenses.
We expect that our general and administrative expenses will increase in the future as we increase our general and administrative headcount to support our continued research and development and potential commercialization of our product candidates. We also expect to incur substantial expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax compliance services, director and officer insurance, and investor and public relations costs.
Results of Operations
Comparison of the three months ended September 30, 2024 and the three months ended September 30, 2023
The following table summarizes our results of operations for the three months ended September 30, 2024 and for the three months ended September 30, 2023.
| For the Three Months Ended | Favorable | |||||||||||||||
| September 30, | (Unfavorable) | |||||||||||||||
| (in thousands) | 2024 | 2023 | $ Change | % Change | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 436 | $ | 674 | $ | 238 | 35.3 | % | ||||||||
| General and administrative | 1,834 | 2,229 | 395 | 17.7 | % | |||||||||||
| Total Operating Expenses | 2,270 | 2,903 | 633 | 21.8 | % | |||||||||||
| Loss from Operations | (2,270 | ) | (2,903 | ) | 633 | 21.8 | % | |||||||||
| Other (Income) Expense, Net | 131 | - | (131 | ) | (100.0 | )% | ||||||||||
| Pre-tax net loss | (2,401 | ) | (2,903 | ) | 502 | 17.3 | % | |||||||||
| Income tax benefit | - | 1 | (1 | ) | (100.0 | )% | ||||||||||
| Net loss | $ | (2,401 | ) | $ | (2,902 | ) | $ | 501 | 17.3 | % | ||||||
Research and Development Expenses
Research and development expenses were approximately $0.4 million for the three months ended September 30, 2024, a decrease of approximately $0.2 million or 35.3% from the three months ended September 30, 2023. The decrease is primarily attributable to a decrease of $0.2 million in the manufacturing and pre-clinical costs of IC 100 and VAR 200.
General and Administrative Expenses
General and administrative expenses were approximately $1.8 million for the three months ended September 30, 2024, a decrease of approximately $0.4 million or 17.7% from the three months ended September 30, 2023. The decrease is attributable to a $0.1 million decrease in professional fees due to reduced fees of public auditors and legal counsel, a $0.2 million decrease in director and officer insurance due to reduced costs in the second year of being a public company, and a $0.1 million decrease in stock-based compensation as a result of options becoming fully amortized in 2024.
Other (Expense) Income, Net
Interest expense was approximately $0.1 million for the three months ended September 30, 2024, an increase of approximately $0.1 million or 100% from the three months ended September 30, 2023. The increase is primarily attributable to an increase in interest charged by a vendor for outstanding amounts owed.
| 15 |
Comparison of the nine months ended September 30, 2024 and the nine months ended September 30, 2023
The following table summarizes our results of operations for the nine months ended September 30, 2024 and for the nine months ended September 30, 2023.
| For the Nine Months Ended | Favorable | |||||||||||||||
| September 30, | (Unfavorable) | |||||||||||||||
| (in thousands) | 2024 | 2023 | $ Change | % Change | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | $ | 1,658 | $ | 2,951 | $ | 1,293 | 43.8 | % | ||||||||
| General and administrative | 6,192 | 9,694 | 3,502 | 36.1 | % | |||||||||||
| Impairment of in-process research and development | - | 69,280 | 69,280 | 100.0 | % | |||||||||||
| Impairment of goodwill | - | 11,895 | 11,895 | 100.0 | % | |||||||||||
| Total Operating Expenses | 7,850 | 93,820 | 85,970 | 91.6 | % | |||||||||||
| Loss from Operations | (7,850 | ) | (93,820 | ) | 85,970 | 91.6 | % | |||||||||
| Other (Income) Expense, Net | 132 | (1 | ) | 133 | 13300.0 | % | ||||||||||
| Pre-tax net loss | (7,982 | ) | (93,819 | ) | 85,837 | 91.5 | % | |||||||||
| Income tax (provision) benefit | (10 | ) | 8,860 | (8,870 | ) | (100.0 | )% | |||||||||
| Net loss | $ | (7,992 | ) | $ | (84,959 | ) | $ | 76,967 | 90.6 | % | ||||||
Research and Development Expenses
Research and development expenses were approximately $1.7 million for the nine months ended September 30, 2024, a decrease of approximately $1.3 million or 43.8% from the nine months ended September 30, 2023. The decrease is primarily attributable to a decrease of $1.2 million in the manufacturing and pre-clinical costs of IC 100 and a decrease of approximately $0.5 million in payroll expenses due to employee attrition. This was slightly offset by an increase of approximately $0.4 million in contract research organization expenses for the production of VAR 200.
General and Administrative Expenses
General and administrative expenses were approximately $6.2 million for the nine months ended September 30, 2024, a decrease of approximately $3.5 million or 36.1% from the nine months ended September 30, 2023. The decrease is primarily attributable to $1.2 million of common stock granted to certain members of the Sponsor and recognized in 2023 in exchange for increasing the duration of the period during which they are not permitted to sell their common stock, a $0.5 million decrease in professional fees due to reduced fees related to public auditors and legal counsel, a $0.2 million decrease in marketing costs for investor and public relations as a result of a reduction in marketing vendors in 2024, and a $0.4 million decrease in expense for the Effectiveness Failure related to shares issued to investors pursuant to a securities purchase agreement in July 2022, a $0.5 million decrease in director and officer insurance due to reduced costs in the second year of being a public company, a $0.5 million decrease in payroll expenses as a result of a prior period bonus accrual recognized upon board approval and a $0.2 million for decrease in stock-based compensation as a result of options becoming fully amortized in 2024
Impairment of In-Process Research and Development and Goodwill
For the nine months ended September 30, 2023, impairment of in-process research and development and impairment of goodwill were $69.3 million and $11.9 million, respectively. The impairment was a result of the decline in stock value and market capitalization of the Company at June 30, 2023. There was no impairment for the nine months ended September 30, 2024.
| 16 |
Cash Flows
The following table summarizes our cash flows from operating and financing activities for the nine months ended September 30, 2024 and for the nine months ended September 30, 2023:
| For the Nine Months Ended September 30, | Increase | |||||||||||
| (in thousands) | 2024 | 2023 | (decrease) | |||||||||
| Net cash provided by (used in) | ||||||||||||
| Operating activities | $ | (6,335 | ) | $ | (5,933 | ) | $ | (402 | ) | |||
| Financing activities | 3,320 | 1,610 | 1,710 | |||||||||
| Net Decrease in Cash | $ | (3,015 | ) | $ | (4,323 | ) | $ | 1,308 | ||||
Cash Flows from Operating Activities
Net cash used in operating activities was approximately $6.3 million and approximately $5.9 million for the nine months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, the net cash used in operating activities was primarily attributable to the net loss of approximately $8.0 million and $85.0 million, respectively, offset by $0.6 million and $75.0 million, respectively, of net non-cash expenses, and approximately $1.0 million and $4.0 million, respectively, of cash generated by the levels of operating assets and liabilities, respectively.
Net Cash Provided By Financing Activities
Net cash provided by financing activities was $3.3 million and $1.6 million for the nine months ended September 30, 2024 and 2023, respectively. Cash provided by financing activities during the nine months ended September 30, 2024 primarily represented proceeds from the exercise of warrants. Cash provided by financing activities during the nine months ended September 30, 2023 primarily represented $13.1 million in proceeds from the issuance of common stock in a public offering. This was partially offset by $10.7 million in cash paid for the redemption of Series A Preferred Stock and $1.8 million in registration and issuance costs associated with common stock issuances.
Liquidity and Capital Resources
The following table summarizes our total current assets, liabilities and working capital deficiency at September 30, 2024 and 2023, respectively:
| September 30, | December 31, | |||||||
| (in thousands) | 2024 | 2023 | ||||||
| Current Assets | $ | 390 | $ | 3,353 | ||||
| Current Liabilities | $ | 11,542 | $ | 10,195 | ||||
| Working Capital Deficiency | $ | (11,152 | ) | $ | (6,842 | ) | ||
Since our inception in 2014 through September 30, 2024, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations. Based on our current operating plan, we expect our cash of $0.1 million as of September 30, 2024 will only be sufficient to fund our operating expenses and capital expenditure requirements on a month-to-month basis. However, it is difficult to predict our spending for our product candidates prior to obtaining FDA approval. Moreover, changing circumstances may cause us to expend cash significantly faster than we currently anticipate, and we may need to spend more cash than currently expected because of circumstances beyond our control.
Going Concern
Since inception we have been engaged in organizational activities, including raising capital and research and development activities. We have not generated revenues and have not yet achieved profitable operations, nor have we ever generated positive cash flow from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. We are subject to those risks associated with any pre-revenue stage pharmaceutical company that has substantial expenditures for research and development. There can be no assurance that our research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, we operate in an environment of rapid technological change and are largely dependent on the services of our employees and consultants. Further, our future operations are dependent on the success of our efforts to raise additional capital. These uncertainties raise substantial doubt about our ability to continue as a going concern for 12 months after the issuance date of our financial statements. The accompanying financial statements have been prepared on a going concern basis. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of us to continue as a going concern, which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business. We incurred a net loss of $8.0 million for the nine months ended September 30, 2024 and a net loss of $85.0 million for the nine months ended September 30, 2023, and we had an accumulated deficit of $111.2 million at September 30, 2024. We anticipate incurring additional losses until such time, if ever, that we can generate significant revenue from our product candidates currently in development. Our primary source of capital has been the issuance of debt and equity securities. We believe that current cash is only sufficient to fund operations and capital requirements on a month-to-month basis. Additional financing will be needed by us to fund our operations, to complete development of and to commercially develop our product candidates. There is no assurance that such financing will be available when needed or on acceptable terms.
| 17 |
Subsequent to September 30, 2024, the Company raised an aggregate of $3.1 million from stock warrant exercises and its “at-the-market” facility with A.G.P.
Contractual Obligations
The following summarizes our contractual obligations as of September 30, 2024 that will affect our future liquidity. Based on our current operating plan, we plan to satisfy the obligations identified below from our current cash balance and future financing.
Cash requirements for our current liabilities as of September 30, 2024 include approximately $11.5 million for accounts payable and accrued expenses.
Capital Needs
On September 16, 2024, we entered into a Sales Agreement (the “ATM Agreement”) with A.G.P. pursuant to which we may offer and sell shares of common stock up to an aggregate offering proceeds of $1,397,396 from time to time. Sales of our common stock under the ATM Agreement may be made in sales deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. Subsequent to September 30, 2024, the Company raised $1.39 million in gross proceeds under the ATM Agreement.
We intend to raise additional capital in the future to fund continued development of VAR200 and IC100.
We expect to raise additional capital by issuing equity, equity-linked securities, or debt in subsequent offerings. If we are unable to raise additional capital on terms favorable to us, we may not have sufficient liquidity to execute on our business strategy. We have various warrants outstanding that can be exercised for our common stock, many of which must be exercised in exchange for cash paid to us by the holders of such warrants. If the market price of our common stock is less than the exercise price of a holder’s warrants, it is unlikely that holders will exercise their warrants. As such, we do not expect to receive significant proceeds in the near term from the exercise of most of our warrants based on the current market price of our common stock and the exercise prices of such warrants.
Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity while producing a modest return on investment. Accordingly, our cash equivalents will be invested primarily in money market funds.
We expect to continue to incur substantial additional operating losses for at least the next several years as we continue to develop our product candidates and seek marketing approval and, subject to obtaining such approval, the eventual commercialization of our product candidates. If we obtain marketing approval for our product candidates, we will incur significant sales, marketing and outsourced manufacturing expenses. In addition, we expect to incur additional expenses to add operational, financial and information systems and personnel, including personnel to support our planned product commercialization efforts. We also expect to incur significant costs to comply with corporate governance, internal controls and similar requirements applicable to us as a public company.
Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:
| ● | the initiation, progress, timing, costs and results of clinical trials for our product candidates; | |
| ● | the clinical development plans we establish for each product candidate; | |
| ● | the number and characteristics of product candidates that we develop or may in-license; | |
| ● | the terms of any collaboration agreements we may choose to execute; | |
| ● | the outcome, timing and cost of meeting regulatory requirements established by the FDA or other comparable foreign regulatory authorities; | |
| ● | the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights; | |
| ● | the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us; | |
| ● | the cost and timing of the implementation of commercial scale manufacturing activities; and | |
| ● | the cost of establishing, or outsourcing, sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products on our own. |
To continue to grow our business over the longer term, we plan to commit substantial resources to research and development, clinical trials of our product candidates, and other operations and potential product acquisitions and in-licensing. We have evaluated and expect to continue to evaluate a wide array of strategic transactions as part of our plan to acquire or in-license and develop additional products and product candidates to augment our internal development pipeline. Strategic transaction opportunities that we may pursue could materially affect our liquidity and capital resources and may require us to incur additional indebtedness, seek equity capital or both. In addition, we may pursue development, acquisition or in-licensing of approved or development products in new or existing therapeutic areas or continue the expansion of our existing operations. Accordingly, we expect to continue to opportunistically seek access to additional capital to license or acquire additional products, product candidates or companies to expand our operations, or for general corporate purposes. Strategic transactions may require us to raise additional capital through one or more public or private debt or equity financings or could be structured as a collaboration or partnering arrangement. We have no arrangements, agreements, or understandings in place at the present time to enter into any acquisition, in-licensing or similar strategic business transaction. In addition, we continue to evaluate commercial collaborations and strategic relationships with established pharmaceutical companies, which would provide us with more immediate access to marketing, sales, market access and distribution infrastructure.
If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences that are not favorable to us or our existing stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.
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JOBS Act Accounting Election
ZyVersa is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. The JOBS Act permits companies with emerging growth company status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. ZyVersa expects to use this extended transition period to enable it to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date the Company (1) is no longer an emerging growth company or (2) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
In addition, the Company intends to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on financial conditions, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
Critical Accounting Estimates
We prepare our condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information. We evaluate these estimates on an ongoing basis.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. There are items within our financial statements that require estimation but are not deemed critical, as defined above.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer (who serve as our Principal Executive Officer and Principal Financial and Accounting Officer, respectively), to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2024. Based upon their evaluation and due to the material weakness cited below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were ineffective.
Specifically, management’s conclusion was based on the following material weakness which existed as of December 31, 2023 and September 30, 2024:
| ● | Business process controls across the entity’s financial reporting processes were not effectively designed and implemented to properly address the risk of material misstatement, including controls without proper segregation of duties between preparer and reviewer |
Our management is committed to taking further action and implementing necessary enhancements or improvements, including actions to address the material weakness identified as of December 31, 2023. Management expects to complete the development and implementation of its remediation plan during 2024.
Changes in Internal Control over Financial Reporting
Management has implemented additional controls to address the material weakness identified as of December 31, 2023. This includes the implementation of proper segregation of duties controls between preparer and reviewer. However, the material weakness will not be deemed to be remediated until the controls have been operational for a period of time and have been verified to be operating effectively.
Inherent Limitations of the Effectiveness of Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all error and fraud. A control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
As a “smaller reporting company”, we are not required to provide information required by this Item. However, investors are encouraged to review our current risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 25, 2024, as amended on May 15, 2024.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
Insider Trading Plans
During
the nine months ended September 30, 2024, no director or officer (as defined in Rule 16a-1(f) under the Exchange Act) of the Company
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ITEM 6. EXHIBITS.
| # | Management contract or compensatory plan or arrangement. |
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: November 14, 2024 | By: | /s/ Stephen C, Glover |
| Stephen C. Glover | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Dated: November 14, 2024 | By: | /s/ Peter Wolfe |
| Peter Wolfe | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
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