Form 10-Q - Quarterly report [Sections 13 or 15(d)]

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number: 001-41184

ZYVERSA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware		86-2685744
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2200 N. Commerce Parkway, Suite 208 Weston, FL		33326
(Address of principal executive offices)		(Zip Code)

(754) 231-1688
(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.0001 par value per share		ZVSA		The Nasdaq Capital Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes: ☒ No: ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: ☐ No: ☒

As of November 11, 2024, the number of shares outstanding of the registrant’s common stock, $0.0001 par value per share, was 2,344,191.

Except as otherwise indicated, all share and per share information in this Quarterly Report on Form 10-Q gives effect to the reverse stock split of the registrant’s outstanding common stock at a ratio of one-for-ten shares, which was effected as of 4:01 p.m. Eastern Time on April 25, 2024.

ZYVERSA THERAPEUTICS, INC.

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PART I FINANCIAL INFORMATION	1

Item 1. Financial Statements	1

Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023	1

Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023	2

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2024 and 2023	3

Unaudited Condensed Consolidated Statements of Cash flows for the Nine Months Ended September 30, 2024 and 2023	4

Notes to Unaudited Condensed Consolidated Financial Statements	5

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	13

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.	20

ITEM 4. Controls and Procedures.	20

PART II - OTHER INFORMATION	21

ITEM 1. Legal Proceedings.	21

ITEM 1A. Risk Factors.	21

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.	21

ITEM 3. Defaults Upon Senior Securities.	21

ITEM 4. Mine Safety Disclosures.	21

ITEM 5. Other Information.	21

ITEM 6. Exhibits.	22

SIGNATURES	23

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

ZYVERSA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2024			2023
	(Unaudited)
Assets

Current Assets:
Cash	$	122,921		$	3,137,674
Prepaid expenses and other current assets		267,494			215,459
Total Current Assets		390,415			3,353,133
Equipment, net		-			6,933
In-process research and development		18,647,903			18,647,903
Vendor deposit		178,476			98,476
Deferred offering costs		207,130			-
Operating lease right-of-use asset		-			7,839
Total Assets	$	19,423,924		$	22,114,284

Liabilities and Stockholders’ Equity

Current Liabilities:
Accounts payable	$	9,284,631		$	8,431,583
Accrued expenses and other current liabilities		2,257,372			1,754,533
Operating lease liability		-			8,656
Total Current Liabilities		11,542,003			10,194,772
Deferred tax liability		854,621			844,914
Total Liabilities		12,396,624			11,039,686

Commitments and contingencies (Note 6)		-

Stockholders’ Equity:
Preferred stock, $0.0001 par value, 1,000,000 shares authorized:
Series A preferred stock, 8,635 shares designated, 50 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively		-			-
Series B preferred stock, 5,062 shares designated, 5,062 shares issued and outstanding as of September 30, 2024 and December 31, 2023		1			1
Preferred stock value		1			1
Common stock, $0.0001 par value, 250,000,000 shares authorized; 1,074,203 and 405,212 shares issued at September 30, 2024 and December 31, 2023, respectively, and 1,074,196 and 402,205 shares outstanding as of September 30, 2024 and December 31, 2023, respectively		107			40
Common stock, value		107			40
Additional paid-in-capital		118,245,220			114,300,849
Accumulated deficit		(111,210,860	)		(103,219,124	)
Treasury stock, at cost, 7 shares at September 30, 2024 and December 31, 2023, respectively		(7,168	)		(7,168	)
Total Stockholders’ Equity		7,027,300			11,074,598

Total Liabilities and Stockholders’ Equity	$	19,423,924		$	22,114,284

The accompanying notes are an integral part of these condensed consolidated financial statements.

ZYVERSA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	2024			2023			2024			2023
	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
Operating Expenses:
Research and development	$	436,043		$	673,943		$	1,658,030		$	2,950,462
General and administrative		1,833,578			2,228,735			6,192,205			9,694,097
Impairment of in-process research and development		-			-			-			69,280,171
Impairment of goodwill		-			-			-			11,895,033
Total Operating Expenses		2,269,621			2,902,678			7,850,235			93,819,763
Loss From Operations		(2,269,621	)		(2,902,678	)		(7,850,235	)		(93,819,763	)

Other (Income) Expense:
Interest (income) expense		131,635			210			131,794			(555	)

Pre-Tax Net Loss		(2,401,256	)		(2,902,888	)		(7,982,029	)		(93,819,208	)
Income tax (provision) benefit		-			485			(9,707	)		8,859,762
Net Loss		(2,401,256	)		(2,902,403	)		(7,991,736	)		(84,959,446	)
Deemed dividend to preferred stockholders		-			(32,373	)		-			(7,948,209	)
Net Loss Attributable to Common Stockholders	$	(2,401,256	)	$	(2,934,776	)	$	(7,991,736	)	$	(92,907,655	)

Net Loss Per Share
- Basic and Diluted	$	(2.43	)	$	(30.18	)	$	(9.79	)	$	(1,591.46	)

Weighted Average Number of Common Shares Outstanding
- Basic and Diluted		988,378			97,252			816,293			58,379

The accompanying notes are an integral part of these condensed consolidated financial statements.

ZYVERSA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For The Three and Nine Months Ended September 30, 2024 and 2023

(Unaudited)

	Shares		Amount		Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Equity
	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		50	$	-		5,062	$	1		405,212	$	40		(7	)	$	(7,168	)	$	114,300,849		$	(103,219,124	)	$	11,074,598
Exercise of warrants		-		-		-		-		213,800		21		-			-			2,672,479			-			2,672,500
Exercise of pre-funded warrants		-		-		-		-		131,481		13		-			-			(13	)		-			-
Issuance of common stock pursuant to vendor agreements		-		-		-		-		9,000		1		-			-			79,199			-			79,200
Round up share adjustment due to reverse split		-		-		-		-		75,410		8		-			-			(8	)		-			-
Stock-based compensation		-		-		-		-		-		-		-			-			223,573			-			223,573
Net loss		-		-		-		-		-		-		-			-			-			(2,826,737	)		(2,826,737	)
Balance - March 31, 2024		50		-		5,062		1		834,903		83		(7	)		(7,168	)		117,276,079			(106,045,861	)		11,223,134
Stock-based compensation		-		-		-		-		-		-		-			-			160,664			-			160,664
Net loss		-		-		-		-		-		-		-			-			-			(2,763,743	)		(2,763,743	)
Balance - June 30, 2024		50		-		5,062		1		834,903		83		(7	)		(7,168	)		117,436,743			(108,809,604	)		8,620,055
Warrant inducement offer - exercise proceeds ^[1]		-		-		-		-		239,300		24		-			-			400,900			-			400,924
Warrant modification																				246,912						246,912
Stock-based compensation		-		-		-		-		-		-		-			-			160,665			-			160,665
Net loss		-		-		-		-		-		-		-			-			-			(2,401,256	)		(2,401,256	)
Balance - September 30, 2024		50	$	-		5,062	$	1		1,074,203	$	107		(7	)	$	(7,168	)	$	118,245,220		$	(111,210,860	)	$	7,027,300

	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		8,635		$	1			5,062	$	1		25,760	$	3		-		$	-		$	104,584,170		$	(4,921,178	)	$	99,662,997
Reclassification of formerly redeemable common stock		-			-			-		-		188		-		-			-			331,331			-			331,331
Issuance of common stock pursuant to vendor agreements		-			-			-		-		371		-		-			-			395,200			-			395,200
Registration costs associated with preferred stock issuance		-			-			-		-		-		-		-			-			(34,674	)		-			(34,674	)
Stock-based compensation		-			-			-		-		-		-		-			-			287,461			-			287,461
Net loss		-			-			-		-		-		-		-			-			-			(3,543,950	)		(3,543,950	)
Balance - March 31, 2023		8,635			1			5,062		1		26,319		3		-			-			105,563,488			(8,465,128	)		97,098,365
Registered offering of common stock ^[2]		-			-			-		-		31,473		3		-			-			9,831,016			-			9,831,019
Redemption of Series A Preferred Stock		(8,400	)		(1	)		-		-		-		-		-			-			(10,080,000	)		-			(10,080,001	)
Conversion of Series A Preferred Stock into common stock		(35	)		-			-		-		50		-		-			-			-			-			-
Shares issued as consideration for extension of lock-up period		-			-			-		-		8,698		1		-			-			1,156,777			-			1,156,778
Issuance of common stock pursuant to vendor agreements		-			-			-		-		1,086		-		-			-			210,000			-			210,000
Stock-based compensation		-			-			-		-		-		-		-			-			365,742			-			365,742
Treasury stock acquired, at cost		-			-			-		-		-		-		(7	)		(7,168	)		-			-			(7,168	)
Net loss		-			-			-		-		-		-		-			-			-			(78,513,093	)		(78,513,093	)
Balance - June 30, 2023		200			-			5,062		1		67,626		7		(7	)		(7,168	)		107,047,023			(86,978,221	)		20,061,642
Balance		200			-			5,062		1		67,626		7		(7	)		(7,168	)		107,047,023			(86,978,221	)		20,061,642
Registered offering of common stock ^[3]		-			-			-		-		9,303		1		-			-			1,575,937			-			1,575,938
Warrant modification		-			-			-		-		-		-		-			-			181,891			-			181,891
Redemption of Series A Preferred Stock		(150	)		-			-		-		-		-		-			-			(215,048	)		-			(215,048	)
Exercise of pre-funded warrants		-			-			-		-		27,061		3		-			-			944			-			947
Warrant inducement offer - exercise proceeds^[4]		-			-			-		-		20,346		2		-			-			757,645			-			757,647
Stock-based compensation		-			-			-		-		-		-		-			-			243,045			-			243,045
Net loss		-			-			-		-		-		-		-			-			-			(2,902,403	)		(2,902,403	)
Balance - September 30, 2023		50		$	-			5,062	$	1		124,336	$	13		(7	)	$	(7,168	)	$	109,591,437		$	(89,880,624	)	$	19,703,659
Balance		50		$	-			5,062	$	1		124,336	$	13		(7	)	$	(7,168	)	$	109,591,437		$	(89,880,624	)	$	19,703,659

[1]	Includes gross proceeds of $827,978 less issuance costs of $427,054

[2]	Includes gross proceeds of $11,015,500 less issuance costs of $1,184,481

[3]	Includes gross proceeds of $2,099,053 less issuance costs of $523,115

[4]	Includes gross proceeds of $966,349 less issuance costs of $208,703

The accompanying notes are an integral part of these condensed consolidated financial statements.

ZYVERSA THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2024			2023
	For the Nine Months Ended
	September 30,
	2024			2023

Cash Flows From Operating Activities:
Net loss	$	(7,991,736	)	$	(84,959,446	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment of in-process research and development		-			69,280,171
Impairment of goodwill		-			11,895,033
Stock-based compensation		544,902			896,248
Issuance of common stock pursuant to vendor agreements		79,200			605,200
Shares issued as consideration for extension of lock-up period		-			1,156,778
Depreciation of fixed assets		6,933			7,800
Non-cash rent expense		7,839			67,293
Deferred tax provision (benefit)		9,707			(8,883,001	)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(52,035	)		(201,172	)
Security deposit		-			46,659
Vendor deposits		(80,000	)		235,000
Deferred offering costs		(30,260	)		-
Accounts payable		676,178			2,871,889
Operating lease liability		(8,656	)		(74,407	)
Accrued expenses and other current liabilities		502,839			1,122,488

Net Cash Used In Operating Activities		(6,335,089	)		(5,933,467	)


Cash Flows From Financing Activities:
Proceeds from issuance of common stock in public offering		-			13,114,555
Registration and issuance costs associated with common stock issuance		(180,142	)		(1,763,584	)
Redemption of Series A Preferred Stock		-			(10,695,610	)
Purchase of treasury stock		-			(7,168	)
Exercise of pre-funded warrants		-			947
Exercise of warrants		2,672,500			-
Warrant inducement offer - exercise proceeds		827,978			966,349
Registration and issuance costs associated with preferred stock issuance		-			(5,500	)

Net Cash Provided By Financing Activities		3,320,336			1,609,989

Net Decrease in Cash		(3,014,753	)		(4,323,478	)

Cash - Beginning of Period		3,137,674			5,902,199

Cash - End of Period	$	122,921		$	1,578,721

Non-cash investing and financing activities:
Reclassification of formerly redeemable common stock	$	-		$	331,331
Accounts payable for deferred offering costs	$	176,870		$	44,892
Warrant modification - incremental value	$	-		$	181,891
Warrant inducement offer - incremental value	$	246,912		$	134,591

The accompanying notes are an integral part of these condensed consolidated financial statements.

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, the Company effected a reverse stock split of its common stock at a ratio of 1-for-35 (the “2023 Reverse Split”). Upon the effectiveness of the 2023 Reverse Split, every 35 issued shares of common stock were reclassified and combined into one share of common stock. In addition, the number of shares of common stock issuable upon the exercise of the Company’s equity awards, convertible securities and warrants was proportionally decreased, and the corresponding conversion price or exercise price was proportionally increased. No fractional shares were issued as a result of the 2023 Reverse Split.

On April 25, 2024, the Company effected a reverse stock split of its common stock at a ratio of 1-for-10 (the “2024 Reverse Split”). Upon the effectiveness of the 2024 Reverse Split, every 10 issued shares of common stock were reclassified and combined into one share of common stock. In addition, the number of shares of common stock issuable upon the exercise of the Company’s equity awards, convertible securities and warrants was proportionally decreased, and the corresponding conversion price or exercise price was proportionally increased. No fractional shares were issued as a result of the 2024 Reverse Split.

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 $0.1 million and a working capital deficit of approximately $11.2 million. During the nine months ended September 30, 2024, the Company incurred a net loss of approximately $8.0 million and used cash in operations of approximately $6.3 million. The Company has an accumulated deficit of approximately $111.2 million as of September 30, 2024.

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 $3.1 million from stock warrant exercises and its “at-the-market” facility. See Note 8 – Subsequent Events for additional details. Management believes that the Company has access to capital resources and continues to evaluate additional financing opportunities; however, there can be no assurance that it will be successful in securing additional capital or that the Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its development initiatives or attain profitable operations. The aforementioned conditions raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the issuance date of these financial statements.

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.

Net Loss Per Common Share

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.

The following table sets forth the outstanding potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to do so would be anti-dilutive:

	2024		2023
	As of September 30,
	2024		2023
Warrants ^[1]		928,593		103,929
Options		9,639		10,170
Series A Convertible Preferred Stock		72		72
Series B Convertible Preferred Stock		2,067		2,067
Total potentially dilutive shares		940,371		116,239

[1]	As part of the InflamaCORE, LLC license agreement, warrants to purchase 342 shares of common stock are to be issued upon the satisfaction of certain milestones and, accordingly, are not included in the amount currently reported.

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.

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	$	-	$	500,000
Payroll accrual		979,030		668,803
Other accrued expenses		163,269		41,969
Bonus accrual		1,107,812		536,500
Registration delay liability ^[1]		7,261		7,261
Total accrued expenses and other current liabilities	$	2,257,372	$	1,754,533

[1]

See Note 7 - Stockholders’ Permanent and Temporary Equity for details of the registration delay liability.

Note 5 – Income Taxes

Income tax expense and the effective tax rate were as follows:

(in thousands)	2024			2023
	For the Nine Months Ended
	September 30,
(in thousands)	2024			2023
Income tax (expense) benefit	$	(9,707	)	$	8,859,762

Effective tax rate		(0.12	)%		9.44	%

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 (0.12)% and 9.44% for the nine months ended September 30, 2024 and 2023, respectively. The decrease in the quarterly rates is primarily the result of the Company recording a full valuation allowance during the nine months ended September 30, 2024 due to the reversal of a significant deferred tax liability that existed as of September 30, 2023.

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 $992,176 and $162,800, respectively. The June 30, 2024 invoice represents retroactive interest on invoices going back to September 30, 2022. The July 1, 2024 invoice consisted of miscellaneous unsupported charges performed over the past several years. On August 1, 2024, ZyVersa management sent the vendor a letter disputing these invoices and has requested the vendor to rescind each of them. The Company received additional invoices dated July 31, 2024, August 31, 2024, and September 30, 2024 in the amounts of $76,453, $81,826, and $87,481, respectively. Similar to the prior invoices, management has requested the vendor to rescind each of them. Although the Company has requested the vendor to rescind each of them, the Company believes that in accordance with the agreement, the vendor can legally charge the Company interest from the point they were notified. As such, the Company included the calculated interest from July 1, 2024 to September 30, 2024 of $131,300 within accrued expenses and other current liabilities on the condensed consolidated balance sheet at September 30, 2024.

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, the Company and L&F executed an Amendment and Restatement Agreement that waived L&F’s right to terminate the L&F License Agreement or any other remedies, for non-payment of the First Milestone Payment, until (a) March 31, 2023 as to $1,000,000 of such milestone payments (“Waiver A”) and (b) January 31, 2024 as to $500,000 milestone payments (“Waiver B”). Waiver A was contingent upon (i) forgiveness by the Company of $351,579 in aggregate principal amount outstanding under a certain convertible note, and (ii) a cash payment by the Company to L&F in the amount of $648,421, on or before March 31, 2023. Waiver B was contingent upon a cash payment by the Company to L&F in the amount of $500,000 on or before the earlier of (x) January 31, 2024, and (y) ten business days from the date that the Company received net proceeds of at least $30,000,000 from the issuance of new equity capital. All other terms of the L&F License remain in effect.

On March 29, 2023, the Company paid the $648,421 of cash to L&F, thus meeting the conditions of Waiver A, which also had the effect of canceling the Note Receivable and the Put Option and resulted in a reclassification of 188 shares of common stock and $331,331 classified as temporary equity to permanent equity.

On January 30, 2024, the Company paid $500,000 of cash to L&F, thus meeting the conditions of Waiver B.

Operating Leases

On January 18, 2019, the Company entered into a lease agreement for approximately 3,500 square feet of office space in Weston, Florida for a term of five years. Under the lease agreement, the annual base rent, which excludes the Company’s share of taxes and operating costs, was approximately $89,000 for the first year and has increased approximately 3% every year thereafter for a total base rent lease commitment of approximately $497,000. On January 15, 2024, the Company extended the lease for an additional year for a total base rent lease commitment of $112,064. The Company used the short-term lease practical expedient which permits the Company to not capitalize leases with a term equal to or less than 12 months.

The Company recognized right-of-use asset amortization of $0 and $7,839 in connection with its operating lease for the three and nine months ending September 30, 2024, respectively, and the Company recognized rent expense of $42,696 and $127,439 in connection with its operating lease for the three and nine months ending September 30, 2024, respectively.

The Company recognized right-of-use amortization of $38,885 and $116,083 in connection with its operating lease for the three and nine months ending September 30, 2023, respectively.

A summary of the Company’s right-of-use assets and liabilities is as follows:

	2024		2023
	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	$	8,656	$	74,405

Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	-	$	-

Weighted Average Remaining Lease Term
Operating leases		-		0.34 Years

Weighted Average Discount Rate
Operating leases		-		6.5	%

ZYVERSA THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

Note 7 – Stockholders’ Permanent and Temporary Equity‌

Reverse Stock Split

On April 25, 2024, the Company effected the 2024 Reverse Split. Upon the effectiveness of the 2024 Reverse Split, every 10 issued shares of common stock were reclassified and combined into one share of common stock. In addition, the number of shares of common stock issuable upon the exercise of the Company’s equity awards, convertible securities and warrants was proportionally decreased, and the corresponding conversion price or exercise price was proportionally increased. No fractional shares were issued as a result of the 2024 Reverse Split. See Note 1 – Business Organization, Nature of Operations and Basis of Presentation for additional details.

Common Stock

On January 2, 2024, the Company entered into a marketing agreement with a vendor in which the Company issued an aggregate of 9,000 shares of common stock and cash in exchange for marketing services. The $79,200 fair value of the common stock was established as a prepaid expense and the Company recognized the expense over the six month contract term.

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 $160,665 (of which, $15,447 was included in research and development and $145,218 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 $243,045 (of which, ($38,224) was included in research and development expense and $281,269 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 $544,902 (of which, $46,342 was included in research and development expense and $498,560 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 $896,249 (of which, $117,320 was included in research and development expense and $778,929 was included in general and administrative expense) related to options issued to employees and consultants. As of September 30, 2024 there was $482,559 of unrecognized stock-based compensation expense, which the Company expects to recognize over a weighted average period of 1.3 years.

Stock Options

The grant date fair value of stock options granted during the nine months ended September 30, 2024 and 2023 was determined using the Black Scholes method, with the following assumptions used:

Schedule of Stock Options Granted

For the Three Months Ended

For the Nine Months Ended

September 30,

2024

2023

2024

2023

Fair value of common stock on date of grant

N/A

$0.44 - $2.23

Risk free interest rate

N/A

3.53% - 4.27

Expected term (years)

N/A

6.00

Expected volatility

N/A

120% - 123

Expected dividends

N/A

0.00

ZYVERSA THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

A summary of the option activity for the nine months ended September 30, 2024 is presented below:

Schedule of Stock Option Activity

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Life		Intrinsic
	Options			Price		In Years		Value

Outstanding, January 1, 2024		10,243		$	2,218.51
Granted		-			-
Exercised		-			-
Expired		(604	)		1,760.50
Outstanding, September 30, 2024		9,639		$	2,247.21		5.5	$	-

Exercisable, September 30, 2024		6,797		$	2,986.26		5.7	$	-

The following table presents information related to stock options as of September 30, 2024:

Options Outstanding				Options Exercisable
				Weighted
		Outstanding		Average		Exercisable
Exercise		Number of		Remaining Life		Number of
Price		Options		In Years		Options
$	152.50		4,157		8.6		1,674
$	738.50		286		8.3		96
$	791.00		38		8.4		13
$	1,760.50		1,306		2.1		1,306
$	3,965.50		37		7.7		37
$	4,053.00		2,095		4.5		2,095
$	5,726.00		1,720		6.7		1,576
			9,639		5.7		6,797

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 213,800 shares of common stock at an exercise price of $12.50 per share for total proceeds of $2,672,500.

Between January 17 and February 23, 2024, a December 2023 Offering investor exercised pre-funded warrants to purchase 131,500 shares of common stock on a cashless basis to purchase 131,481 shares of common stock at an exercise price of $0.001 per share.

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 $3.46 per share and granted new warrants to purchase up to (i) 392,000 shares of common stock which became exercisable upon stockholder approval with an exercise term of five years and (ii) 86,600 shares of common stock which became exercisable upon stockholder approval with an exercise term of 18 months. The Company received stockholder approval for the warrants on October 29, 2024 and the warrants have an exercise price of $3.46 per share. Under the program, the warrant holder submitted an exercise notice and the related aggregate cash exercise price to purchase 239,300 shares of common stock on August 1, 2024 for gross proceeds of $827,978 less issuance costs of $427,054. Issuance costs included placement agent fees of $50,000, placement agent legal fees of $50,000, Company legal fees of $57,267, other expenses of $22,875 and warrant modification costs of $246,912. Because the modification represented a short-term inducement, modification accounting was only performed on the warrants that were actually exercised under the program. The Company recognized the $246,912 modification date incremental value of the modified warrants and additional warrants issued as compared to the original warrants, as an issuance cost of the warrant exercise.

ZYVERSA THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

The issuance date fair value of stock warrants issued during the three and nine months ended September 30, 2024 and 2023 was determined using the Black Scholes method, with the following assumptions used:

	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	$	3.46			$47.50 - $57.75		$	3.46			$47.50 - $350.00
Risk free interest rate		3.62% - 4.62	%		4.09% - 4.42	%		3.62% - 4.62	%		3.51% - 4.42	%
Expected term (years)		0.9 - 5.5 years			4.9 - 5.5 years			0.9 - 5.5 years			5 years
Expected volatility		96% - 113	%		121% - 123	%		96% - 113	%		121% - 123	%
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:

Summary of Warrant Activity

						Weighted
				Weighted		Average
				Average		Remaining		Aggregate
	Number of			Exercise		Life		Intrinsic
	Warrants			Price		In Years		Value

Outstanding, January 1, 2024 ^[1]		903,320		$	123.44
Issued		478,600			3.46
Forfeited		(227	)		4,053
Exercised ^[2]		(453,100	)		7.73
Repriced - Old ^[3]		(239,300	)		12.50
Repriced - New ^[3]		239,300			3.46
Outstanding, September 30, 2024		928,593		$	114.83		3.73	$	-

Exercisable, September 30, 2024		928,393		$	114.48		3.73	$	-

[1]

Warrants outstanding exclude 131,500 pre-funded warrants, issued in the December 2023 Offering, outstanding with an exercise price of $0.001.

[2]		Warrants exercised exclude 131,500 pre-funded warrants, issued in the December 2023 Offering, exercised with an exercise price of $0.001.

[3]		Warrants represent the reset of the exercise price of certain December 11, 2023 Series A and Series B warrants to purchase 239,300 shares of common stock to a price of $3.46 per share.

ZYVERSA THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

The following table presents information related to stock warrants as of September 30, 2024:

Warrants Outstanding				Warrants Exercisable
		Outstanding		Weighted Average		Exercisable
Exercise		Number of		Remaining Life		Number of
Price		Warrants		In Years		Warrants
$	3.46		478,600		4.45		478,600
$	12.50		346,900		2.75		346,900
$	47.50		20,347		4.45		20,347
$	57.75		19,965		3.77		19,965
$	350.00		27,551		3.57		27,551
$	700.00		13,944		3.20		13,944
$	1,760.50		300		0.10		100
$	2,415.00		3,651		3.20		3,651
$	4,025.00		17,335		3.20		17,335
			928,593		3.73		928,393

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 1.5% of each investor’s purchase price on the date of the Effectiveness Failure and every thirty days thereafter that the Effectiveness Failure persists. Failure to make the Registration Delay Payments on a timely basis result in the accrual of interest at the rate of 2.0% per month. On April 28, 2023, the proceeds from the April 2023 Offering were used to make most of the Registration Delay Payments and redeem substantially all of the Series A Preferred Stock. As of September 30, 2024, the Company has accrued additional Registration Delay Payments of approximately $7,261 in the aggregate.

Note 8 – Subsequent Events

At-The-Market Offering

Subsequent to September 30, 2024, the Company received approximately $1.39 million in gross proceeds from the sale of 564,495 shares of its common stock pursuant to its ATM Agreement with A.G.P. for its “at-the-market” facility.

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 51,000 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 $47,670 of the expense over the six month term of one of the contracts and $69,000 of the expense over the three month term of the other contract.

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 339,900 of its December 2023 and 478,600 of its August 2024 Common Stock Purchase warrants at a reduced exercise price of $2.06 per share from $12.50 and $3.46 per share, respectively. New warrants were granted to purchase 1,637,000 shares of common stock at an exercise price of $2.06 per share with an exercise term of 5 years from stockholder approval.

Under the program, the warrant holders submitted exercise notices and the related aggregate cash exercise price to purchase an aggregate of 818,500 shares of common stock on November 5, 2024 for gross proceeds of $1,686,110. However, due to beneficial ownership limitations, only 654,500 of the 818,500 shares of common stock have been issued through the filing date. The remaining 164,000 unissued shares of common stock are held in abeyance pending availability under the beneficial ownership limitations. Issuance costs include financial advisor fees of $110,000 and reimbursement to the financial advisor for non-accountable fees of $10,000.

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 Mediator^TM 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.

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.

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.

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.

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.

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 m

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