{"url_path":"/sec/zvsa/10-q/2026/cover-page","section_key":"cover-page","section_title":"Cover Page","topic":"sec","document":{"doc_type":"10-Q","doc_date":"2026-05-13","source_url":"https://www.sec.gov/Archives/edgar/data/1859007/0001493152-26-022759-index.html","accession_number":"0001493152-26-022759","cik":"0001859007","ticker":"ZVSA","issuer_name":"ZyVersa Therapeutics, Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1859007/0001493152-26-022759-index.html","primary_entity_key":"0001859007","primary_entity_name":"ZyVersa Therapeutics, 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EXCHANGE COMMISSION**\n\n**WASHINGTON,\nD.C. 20549**\n\n \n\n**FORM\n10-Q**\n\n** **\n\n**(Mark\nOne)**\n\n \n\n☒\n**QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**\n\n \n\n**For\nthe quarterly period ended March 31, 2026**\n\n \n\n**or**\n\n \n\n☐\n**TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**\n\n \n\n**For\nthe transition period from _________to_________**\n\n \n\n**Commission\nFile Number: 001-41184**\n\n \n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n(Exact\nname of registrant as specified in its charter)\n\n \n\n**Delaware**\n \n**86-2685744**\n\n(State\nor other jurisdiction\n\nof\nincorporation or organization)\n\n \n\n(I.R.S.\nEmployer\n\nIdentification\nNo.)\n\n \n \n \n\n**2436\nN. Federal Highway, Suite 466**\n\n**Lighthouse\nPoint, FL 33064**\n\n \n**33064**\n\n(Address\nof principal executive offices)\n \n(Zip\nCode)\n\n \n\n**(754)\n231-1688**\n\n(Registrant’s\ntelephone number, including area code)\n\n \n\nSecurities\nregistered pursuant to Section 12(b) of the Act:\n\n \n\n**Title\nof each class**\n \n**Trading\nSymbol(s)**\n \n**Name\nof each exchange on which registered**\n\nCommon\nStock, $0.0001 par value per share\n \nZVSA\n \n*\n\n \n\nIndicate\nby check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange\nAct of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)\nhas been subject to such filing requirements for the past 90 days. Yes: ☒ No: ☐\n\n \n\nIndicate\nby check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule\n405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant\nwas required to submit such files). Yes: ☒ No: ☐\n\n \n\nIndicate\nby check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting\ncompany, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”\n“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.\n\n \n\nLarge\naccelerated filer\n☐\nAccelerated\nfiler\n☐\n\nNon-accelerated\nfiler\n☒\nSmaller\nreporting company\n☒\n\n \n \nEmerging\ngrowth company\n☒\n\n \n\nIf\nan emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying\nwith any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐\n\n \n\nIndicate\nby check mark if the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes: ☐ No: ☒\n\n \n\n \n*\nThe\nCompany’s common stock is quoted on the OTCQB® Venture Market under the symbol “ZVSA.”\n\n \n\nAs\nof May 11, 2026, the number of shares outstanding of the registrant’s common stock, $0.0001 par value per share, was 8,095,921.\n\n \n\n \n\n \n\n \n\n \n\n \n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n**INDEX\nTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**\n\n \n\n**PART I - FINANCIAL INFORMATION**\n \n1\n\n \n \n \n\n[Item 1. Financial Statements.](#wg_001)\n \n1\n\n \n \n \n\n[Condensed Consolidated Balance Sheets as of March 31, 2026 (unaudited) and December 31, 2025](#wg_002)\n \n1\n\n \n \n \n\n[Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2026 and 2025](#wg_003)\n \n2\n\n \n \n \n\n[Unaudited Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity for the Three Months Ended March 31, 2026 and 2025](#wg_004)\n \n3\n\n \n \n \n\n[Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2026 and 2025](#wg_005)\n \n4\n\n \n \n \n\n[Notes to Unaudited Condensed Consolidated Financial Statements](#wg_006)\n \n5\n\n \n \n \n\n[ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.](#HK_001)\n \n14\n\n \n \n \n\n[ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.](#HK_002)\n \n21\n\n \n \n \n\n[ITEM 4. Controls and Procedures.](#HK_003)\n \n21\n\n \n \n \n\n**PART II - OTHER INFORMATION**\n \n22\n\n \n \n \n\n[ITEM 1. Legal Proceedings.](#HK_005)\n \n22\n\n \n \n \n\n[ITEM 1A. Risk Factors.](#HK_006)\n \n22\n\n \n \n \n\n[ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds.](#HK_007)\n \n22\n\n \n \n \n\n[ITEM 3. Defaults Upon Senior Securities.](#HK_008)\n \n22\n\n \n \n \n\n[ITEM 4. Mine Safety Disclosures.](#HK_009)\n \n22\n\n \n \n \n\n[ITEM 5. Other Information.](#HK_010)\n \n22\n\n \n \n \n\n[ITEM 6. Exhibits.](#HK_011)\n \n22\n\n \n \n \n\n**SIGNATURES**\n \n23\n\n \n\n \n\n \n\n \n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**CONDENSED\nCONSOLIDATED BALANCE SHEETS**\n\n \n\n  \nMarch 31,  \nDecember 31, \n\n  \n2026  \n2025 \n\n  \n(Unaudited)  \n  \n\nAssets \n   \n  \n\n  \n   \n  \n\nCurrent Assets: \n    \n   \n\nCash \n$302,660  \n$101,778 \n\nPrepaid expenses and other current assets \n 439,563  \n 347,189 \n\nVendor deposits \n -  \n 14,484 \n\nTotal Current Assets \n 742,223  \n 463,451 \n\n  \n    \n   \n\nTotal Assets \n$742,223  \n$463,451 \n\n  \n    \n   \n\nLiabilities and Stockholders’ Deficit \n    \n   \n\n  \n    \n   \n\nCurrent Liabilities: \n    \n   \n\nAccounts payable \n$10,235,276  \n$10,123,391 \n\nAccrued expenses and other current liabilities \n 3,303,242  \n 2,726,846 \n\nConvertible notes payable at fair value \n 1,200,000  \n - \n\nWarrant liabilities \n 128,000  \n - \n\nTotal Current Liabilities \n 14,866,518  \n 12,850,237 \n\n  \n    \n   \n\nTotal Liabilities \n 14,866,518  \n 12,850,237 \n\n  \n    \n   \n\nCommitments and contingencies (Note 7) \n -  \n - \n\n  \n    \n   \n\nStockholders’ Deficit: \n    \n   \n\nPreferred stock, $0.0001 par value, 1,000,000 shares authorized: \n    \n   \n\nSeries A preferred stock, 8,635 shares designated, 50 shares issued and outstanding as of March 31, 2026 and December 31, 2025 \n -  \n - \n\nSeries B preferred stock, 5,062 shares designated, 5,062 shares issued and outstanding as of March 31, 2026 and December 31, 2025 \n 1  \n 1 \n\nPreferred stock \n 1  \n 1  \n\nCommon stock, $0.0001 par value, 250,000,000 shares authorized; 8,095,928 shares issued as of March 31, 2026 and December 31, 2025 8,095,921 shares outstanding as of March 31, 2026 and December 31, 2025 \n 809  \n 809 \n\nCommon stock \n 809  \n 809 \n\nAdditional paid-in-capital \n 125,260,381  \n 125,204,509 \n\nAccumulated deficit \n (139,378,318) \n (137,584,937)\n\nTreasury stock, at cost, 7 shares at March 31, 2026 and December 31, 2025 \n (7,168) \n (7,168)\n\nTotal Stockholders’ Deficit \n (14,124,295) \n (12,386,786)\n\n  \n    \n   \n\nTotal Liabilities and Stockholders’ Deficit \n$742,223  \n$463,451 \n\n \n\nThe\naccompanying notes are an integral part of these condensed consolidated financial statements.\n\n \n\n1\n\n \n\n \n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**CONDENSED\nCONSOLIDATED STATEMENTS OF OPERATIONS**\n\n**(Unaudited)**\n\n \n\n  \n2026  \n2025 \n\n  \nFor the Three Months Ended March 31, \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nOperating Expenses: \n    \n   \n\nResearch and development \n$57,621  \n$258,876 \n\nGeneral and administrative \n 1,247,077  \n 1,885,695 \n\nTotal Operating Expenses \n 1,304,698  \n 2,144,571 \n\n  \n    \n   \n\nLoss From Operations \n (1,304,698) \n (2,144,571)\n\n  \n    \n   \n\nOther (Income) Expense: \n    \n   \n\nInterest expense \n 132,512  \n 119,559 \n\nFair value option loss on convertible notes \n 344,000  \n - \n\nChange in fair value of warrant liabilities \n (16,000) \n - \n\nChange in fair value of equity payable \n 28,171  \n (7,200)\n\n  \n    \n   \n\nNet Loss \n$(1,793,381) \n$(2,256,930)\n\n  \n    \n   \n\nNet Loss Per Share \n    \n   \n\n- Basic and Diluted \n$(0.22) \n$(0.73)\n\n  \n    \n   \n\nWeighted Average Number of Common Shares Outstanding \n    \n   \n\n- Basic and Diluted \n 8,095,921  \n 3,106,928 \n\n \n\nThe\naccompanying notes are an integral part of these condensed consolidated financial statements.\n\n \n\n2\n\n \n\n \n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**CONDENSED\nCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY**\n\n**(Unaudited)**\n\n \n\n  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nCapital  \nDeficit  \nDeficit \n\n  \nFor\nthe Three Months Ended March 31, 2026 \n\n  \nSeries\nA  \nSeries\nB  \n   \n   \n   \n   \nAdditional  \n   \nTotal \n\n  \nPreferred\nStock  \nPreferred\nStock  \nCommon\nStock  \nTreasury\nStock  \nPaid-In  \nAccumulated  \nStockholders’ \n\n  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nCapital  \nDeficit  \nDeficit \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\nBalance\n- December 31, 2025 \n 50  \n$-  \n 5,062  \n$      1  \n 8,095,928  \n$809  \n (7) \n$(7,168) \n$125,204,509  \n$(137,584,937) \n$(12,386,786)\n\nStock-based\ncompensation \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n 55,872  \n -  \n 55,872 \n\nNet\nloss \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n (1,793,381) \n (1,793,381)\n\nBalance\n- March 31, 2026 \n 50  \n$-  \n 5,062  \n$1  \n 8,095,928  \n$809  \n (7) \n$(7,168) \n$125,260,381  \n$(139,378,318) \n$(14,124,295)\n\n \n\n  \nFor\nthe Three Months Ended March 31, 2025 \n\n  \nSeries\nA  \nSeries\nB  \n   \n   \n   \n   \nAdditional  \n   \nTotal \n\n  \nPreferred\nStock  \nPreferred\nStock  \nCommon\nStock  \nTreasury\nStock  \nPaid-In  \nAccumulated  \nStockholders’ \n\n  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nShares  \nAmount  \nCapital  \nDeficit  \nEquity \n\n  \n   \n   \n   \n   \n   \n   \n   \n   \n   \n   \n  \n\nBalance\n- December 31, 2024 \n 50  \n$-  \n 5,062  \n$      1  \n 2,508,198  \n$251  \n (7) \n$(7,168) \n$121,155,922  \n$(112,632,559) \n$8,516,447 \n\nBalance \n 50  \n$-  \n 5,062  \n$      1  \n 2,508,198  \n$251  \n (7) \n$(7,168) \n$121,155,922  \n$(112,632,559) \n$8,516,447 \n\nIssuance\nof common stock pursuant to vendor agreements \n -  \n -  \n -  \n -  \n 60,000  \n 6  \n -  \n -  \n 81,594  \n -  \n 81,600 \n\nPrivate\nplacement of warrants [1] \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n 1,663,052  \n -  \n 1,663,052 \n\nWarrant\nmodification \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n 53,890  \n -  \n 53,890 \n\nStock-based\ncompensation \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n 72,291  \n -  \n 72,291 \n\nNet\nloss \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n -  \n (2,256,930) \n (2,256,930)\n\nBalance\n- March 31, 2025 \n 50  \n$-  \n 5,062  \n$1  \n 2,568,198  \n$257  \n (7) \n$(7,168) \n$123,026,749  \n$(114,889,489) \n$8,130,350 \n\nBalance \n 50  \n$-  \n 5,062  \n$1  \n 2,568,198  \n$257  \n (7) \n$(7,168) \n$123,026,749  \n$(114,889,489) \n$8,130,350 \n\n \n\n[1]Includes gross\nproceeds of $1,999,791 less cash issuance costs of $282,849 and a non-cash warrant modification charge of $53,890\n\n \n\nThe\naccompanying notes are an integral part of these condensed consolidated financial statements.\n\n \n\n3\n\n \n\n \n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**CONDENSED\nCONSOLIDATED STATEMENTS OF CASH FLOWS**\n\n**(Unaudited)**\n\n \n\n  \n2026  \n2025 \n\n  \nFor the Three Months Ended March 31, \n\n  \n2026  \n2025 \n\n  \n   \n  \n\nCash Flows From Operating Activities: \n    \n   \n\nNet loss \n$(1,793,381) \n$(2,256,930)\n\nAdjustments to reconcile net loss to net cash used in operating activities: \n    \n   \n\nStock-based compensation \n 55,872  \n 153,891 \n\nFair value option loss on convertible notes \n 344,000  \n - \n\nChange in fair value of equity payable \n 28,171  \n - \n\nChange in fair value of warrant liabilities \n (16,000) \n - \n\nChanges in operating assets and liabilities: \n    \n   \n\nPrepaid expenses and other current assets \n (92,374) \n (313,905)\n\nVendor deposits \n 14,484  \n - \n\nAccounts payable \n 111,885  \n 191,445 \n\nDeferred offering costs \n -  \n 8,386 \n\nAccrued expenses and other current liabilities \n 548,225  \n 445,061 \n\n  \n    \n   \n\nNet Cash Used In Operating Activities \n (799,118) \n (1,772,052)\n\n  \n    \n   \n\nCash Flows From Financing Activities: \n    \n   \n\nProceeds from issuance of convertible notes and warrants \n 1,000,000  \n - \n\nPrivate placement of warrants \n -  \n 1,999,791 \n\nRegistration and issuance costs associated with warrant issuance \n -  \n (147,131)\n\n  \n    \n   \n\nNet Cash Provided By Financing Activities \n 1,000,000  \n 1,852,660 \n\n  \n    \n   \n\nNet Increase in Cash \n 200,882  \n 80,608 \n\n  \n    \n   \n\nCash - Beginning of Period \n 101,778  \n 1,530,924 \n\n  \n    \n   \n\nCash - End of Period \n$302,660  \n$1,611,532 \n\n  \n    \n   \n\nSupplemental Disclosures of Cash Flow Information: \n    \n   \n\n  \n    \n   \n\nCash paid during the period for: \n    \n   \n\nInterest \n$-  \n$- \n\nIncome taxes \n$-  \n$- \n\n  \n    \n   \n\nNon-cash investing and financing activities: \n    \n   \n\nWarrant modification - incremental value \n$-  \n$53,890 \n\nPrivate placement costs reflected in accounts payable and accrued expenses \n$76,561  \n$135,718 \n\n \n\nThe\naccompanying notes are an integral part of these condensed consolidated financial statements.\n\n \n\n4\n\n \n\n \n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n \n\nNote\n1 – Business Organization, Nature of Operations and Basis of Presentation\n\n \n\n**Organization\nand Operations**\n\n \n\nZyVersa\nTherapeutics, Inc. (“ZyVersa” and the “Company”) is a clinical stage biopharmaceutical company leveraging proprietary\ntechnologies to develop first-in-class drugs for patients with chronic renal or inflammatory diseases with high unmet medical needs.\nThe Company’s mission is to develop drugs that optimize health outcomes and improve patients’ quality of life.\n\n \n\n**Basis\nof Presentation and Principles of Consolidation**\n\n \n\nThe\naccompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally\naccepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include\nall of the information and disclosures required by accounting principles generally accepted in the United States of America for annual\nfinancial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items)\nwhich are considered necessary for a fair presentation of the unaudited condensed consolidated financial statements of the Company as\nof March 31, 2026 and for the three months ended March 31, 2026 and 2025. The results of operations for the three months ended March\n31, 2026 are not necessarily indicative of the operating results for the full year. It is suggested that these unaudited condensed consolidated\nfinancial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s\nannual report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (“SEC”)\non March 31, 2026.\n\n \n\nNote\n2 – Going Concern and Management’s Plans\n\n \n\nThe\naccompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization\nof assets and the satisfaction of liabilities in the normal course of business. The condensed consolidated financial statements do not\ninclude any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that\nmight be necessary should the Company be unable to continue as a going concern.\n\n \n\nAs\nof March 31, 2026, the Company had cash of approximately $0.3 million and a working capital deficit of approximately $14.1 million. During\nthe three months ended March 31, 2026, the Company incurred a net loss of approximately $1.8 million and used cash in operations of approximately\n$0.8 million. The Company has an accumulated deficit of approximately $139.4 million as of March 31, 2026.\n\n \n\nThe\nCompany has not yet achieved profitability and expects to continue to incur cash outflows from operations. It is expected that significant\nresearch and development and general and administrative expenses will continue to be incurred, and, as a result, the Company will eventually\nneed to generate significant product revenues to achieve profitability. Consequently, the Company will be required to raise additional\nfunds through equity or debt financing. Management believes that the Company has access to capital resources and continues to evaluate\nadditional financing opportunities; however, there can be no assurance that it will be successful in securing additional capital or that\nthe Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds\nthe Company might raise will enable the Company to complete its development initiatives or attain profitable operations. The aforementioned\nconditions raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the issuance\ndate of these financial statements.\n\n \n\nNote\n3 – Summary of Significant Accounting Policies\n\n \n\nSince\nthe date the Company’s December 31, 2025 financial statements were issued in its 2025 Annual Report on Form 10-K, there have been\nno material changes to the Company’s significant accounting policies.\n\n \n\n5\n\n \n\n** **\n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n** **\n\n**Use\nof Estimates**\n\n \n\nPreparation of financial statements in conformity with U.S. GAAP requires\nmanagement to make estimates, judgments and assumptions that affect the amounts reported in the financial statements and the amounts disclosed\nin the related notes to the financial statements. The Company bases its estimates and judgments on historical experience and on various\nother assumptions that it believes are reasonable under the circumstances. The amounts of assets and liabilities reported in the Company’s\nbalance sheets and the amounts of expenses reported for each of the periods presented are affected by estimates and assumptions, which\nare used for, but not limited to, fair value calculations for equity securities, including warrants, share based compensation, and convertible\nnotes, as well as valuation allowances for deferred tax assets. Certain of the Company’s estimates could be affected by external\nconditions, including those unique to the Company and general economic conditions. It is reasonably possible that actual results could\ndiffer from those estimates.\n\n \n\n**Convertible\nNotes and Warrants Valuation**\n\n \n\nThe Company accounts for its Convertible Notes under the fair value option\n(“FVO”) pursuant to ASC 825, Financial Instruments, having elected the FVO because the Convertible Notes contain embedded\nfeatures that would otherwise require bifurcation under ASC 815. The Company accounts for the freestanding Warrants issued together with\nthe Convertible Notes as liabilities pursuant to ASC 480, Distinguishing Liabilities from Equity. The Convertible Notes and Warrants are\nmeasured at fair value on the date of issuance and remeasured at fair value at each reporting date, with changes in fair value recorded\nwithin non-operating other income or expense in the consolidated statements of operations, except that the portion of the change in fair\nvalue of the Convertible Notes attributable to instrument-specific credit risk is presented in other comprehensive income or loss pursuant\nto ASC 825-10-45-5. The fair value of the Convertible Notes and Warrants is determined using a Probability Weighted Expected Return Method\n(PWERM) in combination with Monte-Carlo simulations that classify both instruments within Level 3 of the fair value hierarchy due to\nthe use of significant unobservable inputs. Key assumptions may include the risk-free rate, expected term, expected stock price volatility,\nexpected credit risk, and management’s assumptions regarding the probabilities of various events occurring. Issuance costs allocable\nto the Convertible Notes and Warrants are expensed as incurred because ASC 825 and ASC 480 do not permit the deferral of transaction costs\nfor instruments carried at fair value through earnings or classified as liabilities, respectively. See Note 9 – Fair Value Measurement\nfor additional details regarding the valuation techniques and assumptions used in valuing Level 3 inputs.\n\n \n\n**Net\nLoss Per Common Share**\n\n \n\nBasic\nnet loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period.\nDiluted net loss per common share is computed by dividing net loss by the weighted average number of common and dilutive common-equivalent\nshares outstanding during each period.\n\n \n\nThe\nfollowing table sets forth the outstanding potentially dilutive securities that have been excluded from the calculation of diluted net\nloss per share because to do so would be anti-dilutive:\n\n Schedule of Anti-dilutive Securities Excluded from Calculation of Diluted Net Loss Per Share\n\n  \n2026  \n2025 \n\n  \nFor the Three Months Ended \n\n  \nMarch 31, \n\n  \n2026  \n2025 \n\nWarrants [1]  \n 6,911,773  \n 3,852,258 \n\nConvertible notes [2] \n6,304,795  \n - \n\nWarrant liabilities [3] \n 2,777,778  \n - \n\nOptions \n 387,328  \n 9,603 \n\nSeries A Convertible Preferred Stock \n 72  \n 72 \n\nSeries B Convertible Preferred Stock \n 2,067  \n 2,067 \n\nTotal potentially dilutive shares \n 16,383,812  \n 3,864,000 \n\n \n\n[1]\nAs\npart of the InflamaCORE, LLC license agreement, warrants to purchase 342 shares of common stock are to be issued upon the satisfaction\nof certain milestones and, accordingly, are not included in the amount currently reported.\n\n[2]\nThe\nConvertible Notes have embedded conversion options that result in the automatic issuance of common stock upon the consummation of\ncertain qualifying transactions. The conversion price is a function of the implied common stock price associated with the qualifying\ntransaction. For the purpose of disclosing the potentially dilutive securities in the table above, we used the number of shares of\ncommon stock issuable if a qualifying transaction occurred with an implied common stock price of $0.16, derived from a 20% discount\nto the fair value of the common stock of $0.20 per share as of March 31, 2026.\n\n[3]\nThe\nWarrant Liabilities have an exercise price derived as function of the implied common stock price upon the consummation of certain\nqualifying transactions or VWAP. For the purpose of disclosing the potentially dilutive securities in the table above, we used the\nnumber of shares of common stock issuable if a qualifying transaction occurred with an implied common stock price of $0.18 per share,\nderived from a 10% discount to the fair value of the common stock of $0.20 per share as of March 31, 2026.\n\n \n\n6\n\n \n\n \n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n \n\n**Segment\nReporting**\n\n \n\nThe\nCompany has one operating and reporting segment (clinical stage biopharmaceutical), namely, the development of drugs for patients with\nchronic renal or inflammatory diseases with high unmet medical needs. The accounting policies of the segment are the same as those described\nin the summary of significant accounting policies. The chief operating decision maker (“CODM”), who is the Company’s\nchief executive officer, utilizes the Company’s financial information on an aggregate, consolidated basis for purposes of making\noperating decisions, allocating resources and assessing financial performance, as well as for making strategic operations decisions and\nmanaging the organization. The CODM is not regularly provided with disaggregated actual expense information, other than the actual expense\ninformation included in the condensed consolidated statements of operations. The measure of segment assets is reported on the balance\nsheet as total assets. The Company has not yet generated any revenue from product sales.\n\n \n\n**Sequencing\nPolicy **\n\n** **\n\nAs\na result of the issuance of common stock purchase warrants on February 27, 2026 that are exercisable into the Company’s common\nstock at a variable exercise price with no floor (see Note 8 – Stockholders’ (Deficit) Equity – Stock Warrants for\ndetails), the Company adopted a sequencing policy under ASC 815-40-35, because the Company is unable to determine it has sufficient\nauthorized shares as a result of these warrants having a potentially indeterminable number of shares. Under the Company’s\nsequencing policy, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the\nearliest grants receiving the first allocation of shares. Pursuant to ASC 815, the issuance of securities to the Company’s\nemployees or directors is not subject to the sequencing policy. \n\n \n\n**Vendor\nConcentration**\n\n** **\n\nAs\nof March 31, 2026 and December 31, 2025, accounts payable to one vendor accounted for 56%, related to research and development. The Company\nrelies on this vendor to perform critical research and development.\n\n** **\n\n**Recently\nIssued Accounting Pronouncements**\n\n \n\nIn\nNovember 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures\n(Subtopic 220 – 04). This update requires an entity to disclose more detailed information regarding expenses for the entity. The\namendments require that at each interim and the annual reporting period, the entity must disclose amounts related to purchases of inventory,\nemployee compensation, depreciation, and intangible asset amortization. Including the amounts, the entity is required to disclose and\nqualitative description of the amounts remaining in relevant expense captions, and to disclose the total amount of selling expenses and\nthe definition of selling expenses. The amendments in this update should be applied prospectively to financial statements issued for\nreporting periods, and retrospectively to any prior periods presented in the financials. Although early adoption is permitted, the new\nguidance becomes effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after\nDecember 15, 2027. Since this new ASU addresses only disclosures, the Company does not expect the adoption of this ASU to have any material\neffects on its financial condition, results of operations or cash flows.\n\n \n\nIn\nDecember 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. This ASU clarifies and reorganizes\ninterim reporting disclosure requirements by introducing a disclosure principle that requires entities to disclose significant events\nand changes in circumstances that occur during interim periods. The amendments are intended to improve the consistency, usefulness, and\nunderstandability of interim financial reporting by focusing disclosures on matters that are material to an understanding of the entity’s\nfinancial position, cash flows, and results of operations. The amendments are effective for interim reporting periods within annual reporting\nperiods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact that adoption\nof this ASU will have on its condensed consolidated financial statements and related disclosures.\n\n** **\n\n7\n\n \n\n** **\n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n** **\n\n**Reclassifications**\n\n \n\nCertain\nprior year balances have been reclassified in order to conform to current year presentation. These reclassifications had no effect on\npreviously reported results of operations or loss per share.\n\n \n\nNote\n4 – Accrued Expenses and Other Current Liabilities\n\n \n\nAccrued\nexpenses and other current liabilities consisted of the following as of March 31, 2026 and December 31, 2025:\n\n Schedule of Accrued Expenses and Other Current Liabilities\n\n  \nMarch 31,  \nDecember 31, \n\n  \n2026  \n2025 \n\nPayroll accrual \n$1,593,775  \n$1,343,382 \n\nAccrued interest from disputed vendor invoice \n 911,783  \n 780,539 \n\nBonus accrual \n 700,688  \n 536,500 \n\nAccrued issuable equity \n 85,366  \n 57,195 \n\nOther accrued expenses \n 4,369  \n 1,969 \n\nRegistration delay liability \n 7,261  \n 7,261 \n\nTotal accrued expenses and other current liabilities \n$3,303,242  \n$2,726,846 \n\n \n\nNote\n5 – Convertible Notes\n\n \n\nOn\nFebruary 27, 2026, the Company entered into separate Securities Purchase Agreements (the “Securities Purchase Agreements”)\nwith certain accredited investors (the “Purchasers”), pursuant to which the Company issued and sold to the Purchasers convertible\npromissory notes in an aggregate principal amount of $1.0 million (the “Convertible Notes”) and Series A-4 Common Stock Purchase\nWarrants (the “Warrants”) to purchase shares of the Company’s common stock. The Convertible Notes bear interest at\na rate of 10% per annum (the “Interest Rate”), compounded annually, with interest accruing on the unpaid principal amount\nand payable on February 27, 2027 (the “Maturity Date”). Upon an event of default, interest accrues at 22% per annum (the\n“Default Interest Rate”), compounded annually, reverting to the Interest Rate upon remediation of default or written waiver\nat the election of the Purchasers. The Company may prepay the Convertible Notes in whole or in part at any time without premium or penalty.\n\n \n\nAdditionally,\nthe Securities Purchase Agreements contain customary representations, warranties, and covenants of the Company and the Purchasers. The\nCompany has agreed to certain covenants, including (i) within six months of the issuance date, filing a resale registration statement\ncovering the shares of common stock issuable upon conversion of the Convertible Notes, (ii) within 30 days of August 26, 2026, filing\na resale registration statement covering the shares of common stock issuable upon Warrant exercise, (iii) restrictions on redemption\nof, or payment of dividends on, the Company’s securities while the Convertible Notes or Warrants are outstanding, and (iv) restrictions\non variable rate transactions while the Convertible Notes are outstanding. Upon the occurrence and during the continuance of an event\nof default, (i) interest on the Convertible Notes would accrue at the Default Interest Rate of 22% per annum, compounded annually, in\nlieu of the 10% Interest Rate, and (ii) the Purchasers would be entitled, at their election, to accelerate and demand immediate repayment\nof all outstanding principal, accrued interest, and other amounts then payable under the Convertible Notes. In addition, if the Company\nfails to deliver conversion shares within the required share delivery deadline following a conversion notice, or if a resale registration\nstatement covering the conversion shares is not effective and available when required, the Company would be obligated to pay the applicable\nPurchaser a cash amount equal to 2% per month of the value of the conversion shares not timely delivered, subject to an aggregate cap\nof 10% of the value of such shares, and the Purchaser would have the right to void its conversion notice and pursue other remedies available\nat law or in equity. As of March 31, 2026, no event of default had occurred under the Convertible Notes and no penalty amounts had been\nincurred or paid. See Note 8 – Stockholders’ Equity for additional information on the Warrant Liabilities, including certain\nterms defined therein.\n\n \n\n8\n\n \n\n \n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n \n\nUpon\nthe issuance of equity securities pursuant to which the Company receives aggregate gross proceeds of at least $15.0\nmillion (a “Qualified Offering”), the Convertible Notes will automatically convert into the same equity securities\nissued in such Qualified Offering at a conversion price equal to 80%\nof the price per share paid in the Qualified Offering. Further, at the earlier of (i) six months after the date\nof issuance (on or after August 26, 2026) or (ii) an event of default, the Purchasers may elect, by delivering a written conversion\nnotice, to convert all or any portion of outstanding principal and accrued interest into common stock at a conversion price equal to 80%\nof the lowest daily volume-weighted average price (“VWAP”) of the common stock during the 10 trading days prior to\ndelivery of a conversion notice. This conversion price is subject to a floor price of $0.02\nper share (the “Floor Price”). If the conversion price on any conversion date would be less than the Floor Price, the\nCompany shall issue the number of conversion shares equal to the notional amount divided by the Floor Price, and additionally pay\nthe Purchasers a cash amount equal to the share shortfall multiplied by the lowest VWAP on the date immediately preceding the\ndelivery of a conversion notice (the “Floor Price True-Up”). Upon delivery of a conversion notice, the Company may elect\nto instead repay all outstanding principal and accrued interest in cash.\n\n \n\nThe\nCompany determined that the Convertible Notes contained (i) an automatic redemption feature pursuant to which the conversion price\nis equal to the price per share in a Qualified Offering with a 20%\ndiscount which required bifurcation, (ii) a holders’ conversion option pursuant to which the conversion price is equal to 80%\nof the lowest daily VWAP of common stock during the 10 trading days prior to delivery of a conversion notice, and subject to the\nFloor Price True-Up, which may require a combination of net share and cash settlement, which required bifurcation, (iii) an\nissuer’s election to cash settle upon holders’ written notices to convert which did not require bifurcation, and (iv) an\nautomatic conversion pursuant to and upon a change of control which did not require bifurcation.\n\n \n\nAs\na result of the embedded features on the Convertible Notes that required bifurcation, the Company elected the fair value option (“FVO”)\nfor fair value measurement of the Convertible Notes, which was determined to equal $1,200,000 in the aggregate as of March 31, 2026.\nThe FVO eliminates the requirement to separately bifurcate any of the embedded features because the FVO implicitly reflects the economics\nof all embedded features without requiring bifurcation. See Note 9 – Fair Value Measurement for additional details regarding the\nvaluation techniques and assumptions used in valuing Level 3 inputs.\n\n** **\n\nNote\n6 – Income Taxes\n\n \n\nThe\ntax provisions for the three months ended March 31, 2026 and 2025 were computed using the estimated effective tax rates applicable to\nthe taxable jurisdictions for the full year. The Company’s tax rate is subject to management’s quarterly review and revision,\nas necessary. The Company’s effective tax rate was 0.00% for the three months ended March 31, 2026 and 2025, because the Company\nhas significant net deferred tax assets, including those associated with net operating losses, that are subject to a full valuation allowance.\n\n \n\nNote\n7 – Commitments and Contingencies\n\n \n\n**Litigations,\nClaims and Assessments**\n\n \n\nThe\nCompany may be involved in legal proceedings, claims and assessments arising in the ordinary course of business. The Company records\ncontingent liabilities resulting from such claims, if any, when a loss is assessed to be probable and the amount of the loss is reasonably\nestimable.\n\n \n\n**Disputed\nVendor Invoices**\n\n \n\nOn\nJune 30, 2024 and July 1, 2024, the Company received two invoices from a vendor in the amounts of $923,880 and $144,300, respectively.\nThe June 30, 2024 invoice represents retroactive interest on invoices going back to September 30, 2022. The July 1, 2024 invoice included\nmiscellaneous unsupported charges performed over the past several years. On August 1, 2024, ZyVersa management sent the vendor a letter\ndisputing the interest and unsupported charges and has requested the vendor to rescind each of them. Although the Company has requested\nthe vendor to rescind the retroactive interest on invoices, the Company believes that in accordance with the agreement, the vendor can\nlegally charge the Company interest from the point they were notified of the vendor’s intent to charge interest. As such, the Company\nbegan accruing interest starting on July 1, 2024, and accordingly, has recorded $911,783 and $780,539 within accrued expenses and other\ncurrent liabilities on the condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025, respectively. The Company\nhas accounted for the unaccrued interest and unsupported charges of $1,068,180 as a loss contingency and because the liability is not\ndeemed probable, it has not been recorded as a liability in the condensed consolidated balance sheet as of March 31, 2026 or December\n31, 2025.\n\n \n\n9\n\n \n\n \n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n \n\nOn\nApril 15, 2026, the Company received four additional invoices from the vendor totaling $117,525. These invoices stated that they represented\nwork completed between 2019 and 2020, but the vendor didn’t provide support for the charges. The Company plans to dispute these\ncharges within thirty days as per the agreement. The Company does not believe these charges are supported and therefore the liability\nis not deemed probable and has not been recorded as a liability in the condensed consolidated balance sheet as of March 31, 2026.\n\n** **\n\n**Operating\nLeases**\n\n \n\nOn\nJanuary 18, 2019, the Company entered into a lease agreement for approximately 3,500 square feet of office space in Weston, Florida for\na term of five years. Under the lease agreement, the annual base rent, which excludes the Company’s share of taxes and operating\ncosts, was approximately $89,000 for the first year and has increased approximately 3% every year thereafter. On January 15, 2024, the\nCompany extended the lease for an additional year for a total annual base rent lease commitment of $112,064. On January 9, 2025, the\nCompany extended the lease for an additional year for a total base rent lease commitment of approximately $120,819. The Company used\nthe short-term lease practical expedient which permits the Company to not capitalize leases with a term equal to or less than 12 months.\nThe lease agreement ended on January 31, 2026 and it was not extended. The Company is currently operating without any formal designated\noffice space.\n\n \n\nThe\nCompany recognized rent expense in connection with its operating lease for the three months ended March 31, 2026 and 2025 of $19,845\nand $44,196, respectively.\n\n \n\nNote\n8 – Stockholders’ (Deficit) Equity\n\n \n\n**Equity\nPurchase Agreement**\n\n** **\n\nOn\nJune 24, 2025, the Company entered into an Equity Purchase Agreement (the “Purchase Agreement”) with Williamsburg Venture\nHoldings, LLC (the “Purchaser”), whereby the Company has the right, but not the obligation, to sell to the Purchaser, and\nthe Purchaser is obligated to purchase, up to an aggregate of $10.0 million of shares (the “ELOC Shares”) of the Company’s\ncommon stock. The term of the Purchase Agreement is the earlier of June 24, 2027, or the date on which the Purchaser has purchased ELOC\nShares for an aggregate purchase price of $10.0 million. The Company has also agreed to issue to the Purchaser 426,829 shares common\nstock (“Commitment Shares”), which will be issued on a pro rata basis as the Company draws down ELOC shares, with any remaining\nshares to be issued upon termination. The fair value of the Commitment Shares on the date of the Purchase Agreement of $265,957 was established\nas accrued issuable equity and was expensed, along with approximately $74,000 of additional issuance costs. The Company recorded the\nchange in fair value of this equity payable of $28,171 during the three months ended March 31, 2026. No shares have been purchased as\nof March 31, 2026.\n\n \n\n**Stock-Based\nCompensation**\n\n \n\nFor\nthe three months ended March 31, 2026 the Company recorded stock-based compensation expense of $55,872 (of which, $0 was included in\nresearch and development and $55,872 was included in general and administrative expense) related to options issued to employees and consultants.\nFor the three months ended March 31, 2025 the Company recorded stock-based compensation expense of $72,291 (of which, $15,447 was included\nin research and development and $56,844 was included in general and administrative expense) related to options issued to employees and\nconsultants. As of March 31, 2026 there was $152,444 of unrecognized stock-based compensation expense, which the Company expects to recognize\nover a weighted average period of 1.9 years.\n\n \n\n10\n\n \n\n** **\n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n** **\n\n**Stock\nOptions**\n\n \n\nA\nsummary of the option activity for the three months ended March 31, 2026 is presented below:\n\n Schedule of Stock Option Activity\n\n  \n   \n   \nWeighted  \n  \n\n  \n   \nWeighted  \nAverage  \n  \n\n  \n   \nAverage  \nRemaining  \nAggregate \n\n  \nNumber of  \nExercise  \nLife  \nIntrinsic \n\n  \nOptions  \nPrice  \nIn Years  \nValue \n\n  \n   \n   \n   \n  \n\nOutstanding, January 1, 2026 \n 387,357  \n$55.67  \n    \n            \n\nGranted \n -  \n -  \n    \n   \n\nExercised \n -  \n -  \n    \n   \n\nExpired \n (29) \n 1,760.50  \n    \n   \n\nOutstanding, March 31, 2026 \n 387,328  \n$55.25  \n 9.2  \n$- \n\n  \n    \n    \n    \n   \n\nExercisable, March 31, 2026 \n 8,123  \n$2,583.71  \n 4.9  \n$- \n\n \n\nThe\nfollowing table presents information related to stock options as of March 31, 2026:\n\n Schedule of Information Related to Stock Options\n\nOptions Outstanding  \nOptions Exercisable \n\n   \n   \nWeighted  \n  \n\n   \nOutstanding  \nAverage  \nExercisable \n\nExercise  \nNumber of  \nRemaining Life  \nNumber of \n\nPrice  \nOptions  \nIn Years  \nOptions \n\n$0.59  \n 377,964  \n -  \n - \n\n$152.50  \n 4,157  \n 7.1  \n 2,916 \n\n$738.50  \n 286  \n 6.8  \n 286 \n\n$791.00  \n 38  \n 6.9  \n 38 \n\n$1,760.50  \n 1,031  \n 1.0  \n 1,031 \n\n$3,965.50  \n 37  \n 6.3  \n 37 \n\n$4,053.00  \n 2,095  \n 3.0  \n 2,095 \n\n$5,726.00  \n 1,720  \n 5.2  \n 1,720 \n\n    \n 387,328  \n 4.9  \n 8,123 \n\n \n\n**Stock\nWarrants**\n\n \n\nOn\nFebruary 27, 2026, in connection with the Securities Purchase Agreements with the Purchasers, the Company issued warrants\n(“Warrant Liabilities”) to purchase shares of the Company’s common stock, par value $0.0001\nper share, with an aggregate fair value of $144,000.\nThe Warrants are exercisable beginning on the six-month anniversary of their issuance, on or after August 26, 2026 (the\n“Initial Exercise Date”), and expire on the five-year anniversary of the issuance date, on February\n27, 2031 (the “Expiration Date”). The\nexercise price of the Warrant Liabilities is equal to (i) 110% of the price per share paid in a Qualified Offering that occurs by\nthe Initial Exercise Date, or (ii) 110%\nof the VWAP for the five-trading-day period beginning on the 181st day and ending on the 185th day after the issuance date if a\nQualified Offering has not occurred by the Initial Exercise Date. The variable exercise price for the Warrants results in there\nbeing no floor for the exercise price if the exercise price is determined in the absence of a Qualified Offering, which creates the\npotential for an indeterminable number of shares underlying the Warrants. Accordingly, the Company was required to adopt a\nsequencing policy during the three months ended March 31, 2026 (see Note 3 – Summary of Significant Accounting Policies\n– *Sequencing Policy*).\n\n \n\nThe\nWarrant Liabilities contain standard anti-dilution adjustments, including adjustments for stock dividends, stock splits, and\nregistration right requirements. Further, upon any merger or consolidation, sale of all or substantially all assets, or transaction\nresulting in acquisition of more than 50%\nof outstanding voting power (a “Fundamental Transaction”), the Purchasers may elect to (a) exercise the Warrant\nLiabilities to be settled in the same form of consideration receivable by common stockholders (the “Alternate\nConsideration”), or (b) require the Company to repurchase the Warrant Liabilities for cash. Either election provides for\nsettlement amounts equal to the Black-Scholes Value which is computed using a Black-Scholes Option Pricing Model with inputs as\nfollows: (A) U.S. Treasury risk-free rate from announcement to the termination date; (B) 100-day historical volatility (Bloomberg\nHVT, 365-day basis) as of the trading day following announcement; (C) per-share consideration (cash and non-cash) in the Fundamental\nTransaction; (D) remaining option time from announcement to the termination date; and (E) zero annual rate of dividends. The\nexercise price used to compute the Black-Scholes Value is equal to the share price in a Fundamental Transaction.\n\n \n\n11\n\n \n\n \n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n \n\nThe\nCompany determined that the Warrants should be classified as liabilities in accordance with ASC 480-10-25-14(a) for instruments that\nan issuer must or may settle by issuing a variable number of shares and based on a fixed monetary amount known at inception. The\nWarrants contain certain adjustments to the settlement amount based on an exercise price equal to 110% of the price per share in a\nQualified Offering or VWAP that do not meet the criteria for equity treatment. The liability classification under ASC 480 is\ndeterminative and did not require further evaluation under ASC 815. As a result, the Warrants were measured at fair value on the\ndate of issuance and changes in fair value are recorded in non-operating other income or losses in the condensed consolidated\nstatements of operations. See Note 3 – Summary of Significant Accounting Policies and Note 9 – Fair Value Measurement\nfor additional details regarding the valuation techniques and assumptions used in valuing Level 3 inputs.\n\n \n\nOn\nMarch 7, 2025, the Company closed on a private placement (the “Private Placement”) with an institutional investor, pursuant\nto which the Company sold pre-funded warrants (the “March 2025 Pre-Funded Warrants”) to purchase 2,105,265 shares of common\nstock and Series A-3 common warrants (the “March 2025 Common Warrants”) to purchase 2,105,265 shares of common stock at a\ncombined purchase price of $0.9499 which resulted in gross proceeds of approximately $2.0 million. In addition, the Company and the investor\nentered into an amendment to certain November 5, 2024 common share purchase warrants to reduce the exercise price of certain outstanding\nwarrants to purchase 957,200 shares of common stock from $2.06 per share to $1.00 per share. The $53,890 incremental fair value of the\nmodified warrants as compared to the original warrants was recognized as an additional issuance cost of the Private Placement. The March\n2025 Common Warrants became exercisable upon stockholder approval on June 11, 2025 for a term of five years and had an exercise price\nof $1.00 per share. In 2025, all March 2025 Pre-Funded Warrants were exercised. Total cash issuance costs were $290,317, including $199,863\nof placement fees, $64,312 of legal fees, and $26,142 of other costs.\n\n \n\nNote\n9 – Fair Value Measurement\n\n \n\nThe aggregate fair value of the Convertible Notes and Warrant Liabilities\nissued and sold pursuant to the Securities Purchase Agreement on February 27, 2026 was equal to $1,344,000. Generally, the fair value\nof instruments sold in an arm’s length transaction equals total proceeds, however, in rare circumstances in which freestanding instruments\nare issued and liability classified, the aggregate fair value of such instruments may exceed total proceeds resulting in a day-1 gain\nor loss recorded in non-operating other income or loss. As such, the Company recognized a day-one fair value option loss on convertible\nnotes of $344,000, which represents the excess of fair value over total proceeds, in non-operating other expense in the Company’s\nstatement of operations during the three months ended March 31, 2026. Issuance costs in connection with the Securities Purchase Agreements\nin aggregate of $51,791 were expensed as incurred during the three months ended March 31, 2026.\n\n \n\n**Convertible\nNotes**\n\n \n\nThe\nCompany determined that the Convertible Notes should be accounted for as Level 3 FVO-elected liabilities and carried at their fair value\ncomputed using a combination of the Probability Weighted Expected Return Method (PWERM) and Monte-Carlo simulations that consider three\nscenarios: a Qualified Offering occurring by August 27, 2026, a Qualified Offering occurring by February 27, 2027, and no Qualified Offering\noccurring. The Convertible Notes are therefore classified within Level 3 of the fair value hierarchy because the inputs include significant\nunobservable credit risk inputs used in the PWERM, and summarized in the table below:\n\n Schedule\nof Fair Value Hierarchy Unobservable Credit Risks Inputs\n\n  \nFebruary 27,\n\n2026  \nMarch 31,\n\n2026 \n\n  \nAs of \n\n  \nFebruary 27,\n\n2026  \nMarch 31,\n\n2026 \n\nSelected credit rating \nCCC  \nCCC \n\nSelected credit spread \n 9.56% \n 9.95%\n\nPrivate placement premium \n 0.50% \n 0.50%\n\nSecurity-specific risk premium \n 25.00% \n 25.00%\n\n \n\n12\n\n \n\n \n\n**ZYVERSA\nTHERAPEUTICS, INC.**\n\n** **\n\n**Notes\nto Condensed Consolidated Financial Statements**\n\n \n\nDuring\nthe three months ended March 31, 2026, the Company did not record any amounts in other comprehensive income (loss) attributable to instrument-specific\ncredit risk. Additional significant unobservable inputs used in the Monte-Carlo simulations are summarized in the table below:\n\n Schedule of Fair Value of Unobservable Inputs\n\n  \nFebruary 27,\n\n2026  \nMarch 31,\n\n2026 \n\n  \nAs of \n\n  \nFebruary 27,\n\n2026  \nMarch 31,\n\n2026 \n\nRisk-free interest rate \n 3.48% \n 3.62%\n\nExpected term (years) \n 1.00  \n 0.91 \n\nExpected volatility \n 40.00% \n 40.00%\n\nMarket yield (discount rate) \n 38.50% \n 39.00%\n\n \n\nThe\nfollowing table sets forth a summary of the changes in the fair value of Level 3 Convertible Notes that are measured at fair value on\na recurring basis during the three months ended March 31, 2026:\n\n Schedule of Fair Value on a Recurring Basis\n\n  \n   \n\nBeginning balance as of February 27, 2026 \n$1,200,000 \n\nChange in fair value of convertible notes \n - \n\nEnding balance as of March 31, 2026 \n$1,200,000 \n\n \n\n**Warrant\nLiabilities**\n\n \n\nThe\nCompany determined that the Warrant Liabilities should be accounted for as Level 3 ASC 480 liabilities and carried at their fair value\ncomputed using a Monte Carlo simulation that considered a Qualified Offering scenario and a no Qualified Offering scenario. The Warrant\nLiabilities are therefore classified within Level 3 of the fair value hierarchy because the inputs include significant unobservable inputs\nused in the Monte Carlo simulations, summarized in the table below:\n\n  Schedule of Fair Value of Unobservable Inputs\n\n  \n\nFebruary 27,\n\n2026\n  \n\nMarch 31,\n\n2026\n \n\n  \nAs of \n\n  \n\nFebruary 27,\n\n2026\n  \n\nMarch 31,\n\n2026\n \n\nRisk-free interest rate \n 3.51% \n 3.78%\n\nExpected term (years) \n 5.00  \n 4.91 \n\nExpected volatility \n 40.00% \n 40.00%\n\nMarket yield (discount rate) \n 38.50% \n 39.00%\n\n \n\nThe\nfollowing table sets forth a summary of the changes in the fair value of Level 3 Warrant Liabilities that are measured at fair value\non a recurring basis during the three months ended March 31, 2026:\n\n  Schedule of Fair Value on a Recurring Basis\n\n  \n   \n\nBeginning balance as of February 27, 2026 \n$144,000 \n\nChange in fair value of warrant liabilities \n (16,000)\n\nEnding balance as of March 31, 2026 \n$128,000 \n\n \n\n \n\n13"}