Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

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 June 30, 2025 and for the three and six months ended June 30, 2025 and 2024 should be read together 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. Additionally this discussion and analysis should be read together with the Company's audited financial statements and related disclosures as of December 31, 2024 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 27, 2025. 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 renal or inflammatory diseases with high unmet medical needs.

Our renal drug candidate, which we refer to as Cholesterol Efflux Mediator^TM VAR 200 (2-hydroxypropyl-beta-cyclodextrin or "2HβCD"), is in development to treat multiple renal indications. The lead indication is focal segmental glomerulosclerosis (FSGS). Our anti-inflammatory drug candidate, which we refer to as Inflammasome ASC Inhibitor IC 100, is a humanized monoclonal IgG4 antibody targeting ASC in development to treat multiple inflammatory diseases. The lead indication is obesity with cardiometabolic comorbidities.

Financial Operations Overview

We have not generated any revenue to date and have incurred significant operating losses. Our net losses were $4.5 million for the period from January 1, 2025 through June 30, 2025, compared to $5.6 million for the period from January 1, 2024 through June 30, 2024. As of June 30, 2025, we had an accumulated deficit of approximately $117.1 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.

Recent Developments

On July 15, 2025, we received a determination letter (the "Letter") from The Nasdaq Stock Market LLC ("Nasdaq") indicating that the Nasdaq Hearings Panel (the "Panel") has determined to deny our request to continue our listing on The Nasdaq Capital Market. Trading of our common stock was suspended at the open of trading on July 17, 2025. As a result of the suspension in trading and expected delisting, there may be a very limited market in which our shares are traded, our stockholders may find it difficult to sell their shares of our common stock, and the trading price of our securities, if any, may be adversely affected. We applied for trading on the OTCQB® Venture Market ("OTCQB") maintained by the OTC Markets Group Inc. to mitigate the risk of delisting from Nasdaq. Our application was approved on July 25, 2025, and our common stock began trading on OTCQB on July 28, 2025, under the symbol "ZVSA."

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 US 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 preclinical and 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 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 resulting from 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 resources, 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 increased 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

As we continue to explore commercial opportunities and partners in both U.S. and international markets, we remain attentive to evolving global economic conditions, including uncertainties related to international trade policies, tariffs, and supply chain dynamics. Although these factors have not had a material impact on our operations to day, future changes in trade regulations, tariff structures, or logistical constraints could influence the cost, availability, or timing of materials, services and other components associated with the development of our product candidates and manufacturing capabilities. We continue to monitor these developments closely to maintain operational efficiency and help mitigate potential future impacts.

Comparison of the three months ended June 30, 2025 and the three months ended June 30, 2024

The following table summarizes our results of operations for the three months ended June 30, 2025 and for the three months ended June 30, 2024.

		For the Three Months Ended								Favorable
		June 30,								(Unfavorable)
(in thousands)		2025				2024				$ Change				% Change
Operating expenses:
Research and development		$	410			$	709			$	299				42.2	%
General and administrative			1,634				2,045				411				20.1	%
Total Operating Expenses			2,044				2,754				710				25.8	%
Loss from Operations			(2,044	)			(2,754	)			710				25.8	%
Other (Income) Expense, Net			167				-				(167	)			(100.0	%)
Pre-tax net loss			(2,211	)			(2,754	)			543				19.7	%
Income tax benefit			-				(10	)			10				(100.0	%)
Net loss		$	(2,211	)		$	(2,764	)		$	553				20.0	%

Research and development expenses

Research and development expenses were $0.4 million for the three months ended June 30, 2025, a decrease of $0.3 million or 42.2% from the three months ended June 30, 2024. The decrease is attributable to lower CRO fees of $0.1 million for VAR 200 and lower research and development consultant costs of $0.1 million due to fewer consultants, lower pre-clinical costs of IC 100 of $0.1 million, partially offset by an increase in VAR 200 manufacturing stability testing.

General and administrative expenses

General and administrative expenses were $1.6 million for the three months ended June 30, 2025, a decrease of $0.4 million or 20.1% from the three months ended June 30, 2024. The decrease is primarily attributable to a decrease of $0.1 million due to lower director and officer insurance premiums, a $0.1 million decrease in investor relations marketing expense, a $0.1 million decrease in professional fees due to lower accounting and legal expense, and a decrease of $0.1 million in stock-based compensation expense due to options becoming fully amortized in 2025, offset by a $0.1 million increase in public company costs due to additional costs for our annual shareholder meeting and Nasdaq hearings.

Other (Income) Expense, Net

Other (income) expense, net was $0.2 million for the three months ended June 30, 2025, an increase of $0.2 million from the three months ended June 30, 2024. The increase in expense is primarily attributable to interest charged by a vendor for outstanding amounts owed.

Comparison of the six months ended June 30, 2025 and the six months ended June 30, 2024

The following table summarizes our results of operations for the six months ended June 30, 2025 and for the six months ended June 30, 2024.

		For the Six Months Ended								Favorable
		June 30,								(Unfavorable)
(in thousands)		2025				2024				$ Change				% Change
Operating expenses:
Research and development		$	669			$	1,222			$	553				45.3	%
General and administrative			3,520				4,358				838				19.2	%
Total Operating Expenses			4,189				5,580				1,391				24.9	%
Loss from Operations			(4,189	)			(5,580	)			1,391				24.9	%
Other (Income) Expense, Net			279				-				(279	)			(100.0	%)
Pre-tax net loss			(4,468	)			(5,580	)			1,112				19.9	%
Income tax benefit			-				(10	)			10				(100.0	%)
Net loss		$	(4,468	)		$	(5,590	)		$	1,122				20.1	%

Research and development expenses

Research and development expenses were $0.7 million for the six months ended June 30, 2025, a decrease of $0.6 million or 45.3% from the six months ended June 30, 2024. The decrease is attributable to lower CRO fees of $0.2 million for VAR 200 and lower research and development consultant costs of $0.2 million due to fewer consultants, lower pre-clinical costs of IC 100 of $0.1 million, partially offset by an increase in VAR 200 manufacturing stability testing.

General and administrative expenses

General and administrative expenses were $3.5 million for the six months ended June 30, 2025, a decrease of $0.8 million or 19.2% from the six months ended June 30, 2024. The decrease is primarily attributable to a decrease of $0.3 million due to lower director and officer insurance premiums, a $0.2 million decrease in investor and public relations marketing expense, a $0.1 million decrease in professional fees due to lower accounting and legal expense, and a decrease of $0.3 million in stock-based compensation expense due to options becoming fully amortized in 2025, offset by a $0.1 million increase in legal patent fees for IC100 and public company costs due to additional costs for our annual shareholder meeting and Nasdaq hearings.

Other (Income) Expense, Net

Other (income) expense, net was $0.3 million for the six months ended June 30, 2025, an increase of $0.3 million from the six months ended June 30, 2024. The increase in expense is primarily attributable to interest charged by a vendor for outstanding amounts owed.

Cash Flows

The following table summarizes our cash flows from operating and financing activities for the six months ended June 30, 2025 and for the six months ended June 30, 2024:

		For the Six Months Ended June 30,								Increase
(in thousands)		2025				2024				(decrease)
Net cash provided by (used in)
Operating activities		$	(3,294	)		$	(5,691	)		$	2,397
Financing activities			1,835				2,673				(838	)
Net Decrease in Cash		$	(1,459	)		$	(3,018	)		$	1,559

Cash Flows from Operating Activities

Net cash used in operating activities was approximately $3.3 million and approximately $5.7 million for the six months ended June 30, 2025 and 2024, respectively. For the six months ended June 30, 2025 and for the six months ended June 30, 2024, the net cash used in operating activities was primarily attributable to the net loss of approximately $4.5 million and $5.6 million, respectively, offset by $0.3 million and $0.5 million, respectively, of net non-cash expenses, and approximately $0.8 million and ($0.6) million, respectively, of cash generated by (used in) the levels of operating assets and liabilities, respectively.

Net Cash Provided By (Used In) Financing Activities

Net cash provided by financing activities was $1.8 million and $2.7 million for the six months ended June 30, 2025 and 2024, respectively. Cash provided by financing activities during the six months ended June 30, 2025 represented $2.0 million of proceeds from the private placement of warrants. This was partially offset by ($0.2) million in registration and issuance costs associated with warrant issuance. Cash provided by financing activities during the six months ended June 30, 2024 represented proceeds from the exercise of warrants

Liquidity and Capital Resources

The following table summarizes our total current assets, liabilities and working capital deficiency at June 30, 2025 and 2024, respectively:

		June 30,				December 31,
(in thousands)		2025				2024
Current Assets		$	549			$	1,716
Current Liabilities		$	12,690			$	11,231
Working Capital Deficiency		$	(12,141	)		$	(9,515	)

Since our inception in 2014 through June 30, 2025, 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 June 30, 2025 will only be sufficient to fund our operating expenses and capital expenditure requirements on a month-to-month basis. 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-clinical 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 $4.5 million for the six months ended June 30, 2025 and had an accumulated deficit of $117.1 million on June 30, 2025. 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, and 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.

Contractual Obligations

Cash requirements for our current liabilities as of June 30, 2025 include approximately $12.7 million for accounts payable and accrued expenses. Based on our current operating plan, we plan to satisfy the obligations identified below from our current cash balance and future financing. See Note 4, Accrued Expenses and Other Current Liabilities and Note 6, Commitments and Contingencies-Operating Leases of the accompanying notes to the unaudited condensed consolidated financial statements included elsewhere in this report for more information regarding our contractual obligations relating to our current liabilities and lease agreements, respectively.

Future Capital Needs

We expect our cash on hand will enable us to make investments in our continued development of VAR 200 and IC 100 on a month-to-month basis as cash is available. We intend to raise additional capital in the future to fund continued development.

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 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 exceeding our immediate requirements in investments designed to preserve the principal balance and provide liquidity while producing a modest return on investment. Accordingly, our excess 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, to support our planned product development efforts, among other initiatives. We also expect to incur significant costs to comply with corporate governance, internal controls, and similar requirements applicable to public companies.

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.

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. Our critical accounting estimates are described below.

Impairment of Long-Lived Assets and Goodwill

The Company reviews for the impairment of long-lived assets and goodwill whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized for the amount by which the carrying value of the asset exceeds its fair value. The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being evaluated. These assumptions require significant judgment and actual results may differ from assumed and estimated amounts.

There are other items within our financial statements that require estimation but are not deemed critical, as defined above.