ZyVersa Therapeutics Inc

Previous wording

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 June 30, 2024 and for the three and six months ended June 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.

Current wording

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.

Previous wording

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 TMVAR 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.

Current wording

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.

Previous wording

We have not generated any revenue to date and have incurred significant operating losses. Our net losses were $5.6 million for the period from January 1, 2024 through June 30, 2024, compared to $82.1 million for the period from January 1, 2023 through June 30, 2023. As of June 30, 2024, we had an accumulated deficit of approximately $108.8 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:

Current wording

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:

Previous wording

Research and development expenses were approximately $0.7 million for the three months ended June 30, 2024, a decrease of approximately $0.5 million or 41.9% from the three months ended June 30, 2023. The decrease is primarily attributable to a decrease of $0.4 million in the costs of manufacturing of IC 100 and a decrease in payroll expenses due to employee attrition of $0.1 million.

Current wording

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.

Previous wording

General and administrative expenses were approximately $2.0 million for the three months ended June 30, 2024, a decrease of approximately $1.9 million or 48.0% from the three months ended June 30, 2023. The decrease is primarily attributable to $1.2 million of common stock granted to certain members of Larkspur Health LLC, a Delaware limited liability company (the “Sponsor”), recognized in 2023 in exchange for increasing the duration of the period during which they are not permitted to sell their common stock, a $0.2 million decrease in professional fees due to reduced fees related to changes in 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, 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 February 2024.

Current wording

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.

Previous wording

Comparison of the six months ended June 30, 2024 and the six months ended June 30, 2023

Current wording

Comparison of the nine months ended September 30, 2024 and the nine months ended September 30, 2023

Previous wording

The following table summarizes our results of operations for the six months ended June 30, 2024 and for the six months ended June 30, 2023.

Current wording

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.

Previous wording

Research and development expenses were approximately $1.2 million for the six months ended June 30, 2024, a decrease of approximately $1.1 million or 46.3% from the six months ended June 30, 2023. The decrease is primarily attributable to a decrease of $0.8 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 $0.3 million in CRO expenses for the production of VAR 200.

Current wording

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.

Previous wording

General and administrative expenses were approximately $4.4 million for the six months ended June 30, 2024, a decrease of approximately $3.1 million or 41.6% from the six months ended June 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 changes in 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 $0.4 million decrease in payments for the Effectiveness Failure related to shares issued to investors pursuant to a securities purchase agreement in July 2022, a $0.3 million decrease in director and officer insurance due to reduced costs in the second year of being a public company, and $0.5 million decrease in payroll expenses as a result of a bonus accrual recognized upon board approval.

Current wording

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

Previous wording

For the three months ended June 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 three months ended June 30, 2024.

Current wording

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.

Previous wording

The following table summarizes our cash flows from operating and financing activities for the six months ended June 30, 2024 and for the six months ended June 30, 2023:

Current wording

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:

Previous wording

Net cash used in operating activities was approximately $5.7 million and approximately $5.0 million for the six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024 and for the six months ended June 30, 2023, the net cash used in operating activities was primarily attributable to the net loss of approximately $5.6 million and $82.1 million, respectively, offset by $0.5 million and $74.8 million, respectively, of net non-cash expenses, and approximately ($0.6) million and $2.3 million, respectively, of cash (used in) generated by the levels of operating assets and liabilities, respectively.

Current wording

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.

Previous wording

Net Cash Provided By (Used In) Financing Activities

Current wording

Net Cash Provided By Financing Activities

Previous wording

Net cash provided by (used in) financing activities was $2.7 million and ($0.7) million for the six months ended June 30, 2024 and 2023, respectively. Cash provided by financing activities during the six months ended June 30, 2024 represented proceeds from the exercise of warrants. Cash used in financing activities during the six months ended June 30, 2023 primarily represented $10.5 million in cash paid for the redemption of Series A Preferred Stock and $1.2 million in registration and issuance costs associated with common stock issuances. This was partially offset by $11.0 million in proceeds from the issuance of common stock in a public offering.

Current wording

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.

Previous wording

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 $5.6 million for the six months ended June 30, 2024 and a net loss of $82.1 million for the six months ended June 30, 2023, and we had an accumulated deficit of $108.8 million at June 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.

Current wording

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.

Previous wording

Cash requirements for our current liabilities as of June 30, 2024 include approximately $10.0 million for accounts payable and accrued expenses.

Current wording

Cash requirements for our current liabilities as of September 30, 2024 include approximately $11.5 million for accounts payable and accrued expenses.