v3.26.1
Summary of Significant Accounting Policies (Policies)
 3 Months Ended
Mar. 31, 2026
Accounting Policies [Abstract]  
Use of Estimates

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, including warrants, share based compensation, and convertible notes, as well as 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.

 
Convertible Notes and Warrants Valuation

Convertible Notes and Warrants Valuation

 

The Company accounts for its Convertible Notes under the fair value option (“FVO”) pursuant to ASC 825, Financial Instruments, having elected the FVO because the Convertible Notes contain embedded features that would otherwise require bifurcation under ASC 815. The Company accounts for the freestanding Warrants issued together with the Convertible Notes as liabilities pursuant to ASC 480, Distinguishing Liabilities from Equity. The Convertible Notes and Warrants are measured at fair value on the date of issuance and remeasured at fair value at each reporting date, with changes in fair value recorded within non-operating other income or expense in the consolidated statements of operations, except that the portion of the change in fair value of the Convertible Notes attributable to instrument-specific credit risk is presented in other comprehensive income or loss pursuant to ASC 825-10-45-5. The fair value of the Convertible Notes and Warrants is determined using a Probability Weighted Expected Return Method (PWERM) in combination with Monte-Carlo simulations that classify both instruments within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs. Key assumptions may include the risk-free rate, expected term, expected stock price volatility, expected credit risk, and management’s assumptions regarding the probabilities of various events occurring. Issuance costs allocable to the Convertible Notes and Warrants are expensed as incurred because ASC 825 and ASC 480 do not permit the deferral of transaction costs for instruments carried at fair value through earnings or classified as liabilities, respectively. See Note 9 – Fair Value Measurement for additional details regarding the valuation techniques and assumptions used in valuing Level 3 inputs.

 
Net Loss Per Common Share

Net Loss Per Common Share

 

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss 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:

 

   2026   2025 
   For the Three Months Ended 
   March 31, 
   2026   2025 
Warrants [1]    6,911,773    3,852,258 
Convertible notes [2]  6,304,795    - 
Warrant liabilities [3]   2,777,778    - 
Options   387,328    9,603 
Series A Convertible Preferred Stock   72    72 
Series B Convertible Preferred Stock   2,067    2,067 
Total potentially dilutive shares   16,383,812    3,864,000 

 

[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.
[2] The Convertible Notes have embedded conversion options that result in the automatic issuance of common stock upon the consummation of certain qualifying transactions. The conversion price is a function of the implied common stock price associated with the qualifying transaction. For the purpose of disclosing the potentially dilutive securities in the table above, we used the number of shares of common stock issuable if a qualifying transaction occurred with an implied common stock price of $0.16, derived from a 20% discount to the fair value of the common stock of $0.20 per share as of March 31, 2026.
[3] The Warrant Liabilities have an exercise price derived as function of the implied common stock price upon the consummation of certain qualifying transactions or VWAP. For the purpose of disclosing the potentially dilutive securities in the table above, we used the number of shares of common stock issuable if a qualifying transaction occurred with an implied common stock price of $0.18 per share, derived from a 10% discount to the fair value of the common stock of $0.20 per share as of March 31, 2026.

 

 

ZYVERSA THERAPEUTICS, INC.

 

Notes to Condensed Consolidated Financial Statements

 
Segment Reporting

Segment Reporting

 

The Company has one operating and reporting segment (clinical stage biopharmaceutical), namely, the development of drugs for patients with chronic renal or inflammatory diseases with high unmet medical needs. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. The chief operating decision maker (“CODM”), who is the Company’s chief executive officer, utilizes the Company’s financial information on an aggregate, consolidated basis for purposes of making operating decisions, allocating resources and assessing financial performance, as well as for making strategic operations decisions and managing the organization. The CODM is not regularly provided with disaggregated actual expense information, other than the actual expense information included in the condensed consolidated statements of operations. The measure of segment assets is reported on the balance sheet as total assets. The Company has not yet generated any revenue from product sales.

 
Sequencing Policy

Sequencing Policy 

 

As a result of the issuance of common stock purchase warrants on February 27, 2026 that are exercisable into the Company’s common stock at a variable exercise price with no floor (see Note 8 – Stockholders’ (Deficit) Equity – Stock Warrants for details), the Company adopted a sequencing policy under ASC 815-40-35, because the Company is unable to determine it has sufficient authorized shares as a result of these warrants having a potentially indeterminable number of shares. Under the Company’s sequencing policy, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, the issuance of securities to the Company’s employees or directors is not subject to the sequencing policy. 

 
Vendor Concentration

Vendor Concentration

 

As of March 31, 2026 and December 31, 2025, accounts payable to one vendor accounted for 56%, related to research and development. The Company relies on this vendor to perform critical research and development.

 
Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

 

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220 – 04). This update requires an entity to disclose more detailed information regarding expenses for the entity. The amendments require that at each interim and the annual reporting period, the entity must disclose amounts related to purchases of inventory, employee compensation, depreciation, and intangible asset amortization. Including the amounts, the entity is required to disclose and qualitative description of the amounts remaining in relevant expense captions, and to disclose the total amount of selling expenses and the definition of selling expenses. The amendments in this update should be applied prospectively to financial statements issued for reporting periods, and retrospectively to any prior periods presented in the financials. Although early adoption is permitted, the new guidance becomes effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. 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.

 

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. This ASU clarifies and reorganizes interim reporting disclosure requirements by introducing a disclosure principle that requires entities to disclose significant events and changes in circumstances that occur during interim periods. The amendments are intended to improve the consistency, usefulness, and understandability of interim financial reporting by focusing disclosures on matters that are material to an understanding of the entity’s financial position, cash flows, and results of operations. The amendments are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact that adoption of this ASU will have on its condensed consolidated financial statements and related disclosures.

 

 

ZYVERSA THERAPEUTICS, INC.

 

Notes to Condensed Consolidated Financial Statements

 
Reclassifications

Reclassifications

 

Certain prior year balances have been reclassified in order to conform to current year presentation. These reclassifications had no effect on previously reported results of operations or loss per share.