Stockholders’ Deficiency | Note 9 – Stockholders’ Deficiency Series A Preferred Stock Financing On March 31, 2022, the Company sold 133,541 3.14 419,320 393,301 100,000 26,019 The Series A Preferred Stock is convertible, at the option of the holder, at any time into shares of common stock at a conversion price of $ 3.14 ZYVERSA THERAPEUTICS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Note 9 – Stockholders’ Deficiency - Continued Series A Preferred Stock Financing - Continued The Series A Preferred stockholders shall vote together with the common stockholders on an as-converted basis and dividends will only be paid on an as-converted basis when, and if paid to common stockholders. In the event of any liquidation, dissolution or winding up of the Company or upon a Deemed Liquidation Event, the Series A Preferred stockholders will be entitled to be paid, out of the assets of the Company available for distribution before any payments are made to common stockholders, one times the original purchase price, plus declared and unpaid dividends on each share of Series A Preferred Stock or, if greater, the amount that the Series A Preferred Stock holders would receive on an as-converted basis. The balance of any proceeds shall be distributed pro rata to the common stockholders. Deemed Liquidation Events include (a) a merger or consolidation in which ZyVersa or a subsidiary thereof is a constituent party which results in a change-of-control (a “Merger Event”); or (b) the sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of ZyVersa (a “Disposition Event”). The Series A Preferred Stock is not mandatorily redeemable and therefore it is not subject to classification as a liability. The Company determined that the Deemed Liquidation Events were within the control of the Company and, therefore, the Series A Preferred Stock should be classified as permanent equity. Specifically, Merger Events and Disposition Events require the approval of the board of directors pursuant to state law and the ZyVersa preferred stockholders are unable to control the vote of the board of directors. The Company determined that the embedded conversion options were clearly and closely related to the preferred stock host and, therefore, the embedded conversion options need not be bifurcated. However, if the conversion price is reset in connection with a subsequent issuance of securities, the Company will need to assess the accounting for the price reset. Due to the Company’s adoption of ASU 2020-06 on January 1, 2021, it wasn’t necessary to assess the embedded conversion options for a beneficial conversion feature. On May 10, 2022, the Company obtained the requisite approvals to (a) amend the Series A Preferred Stock Designation within the Company’s Certificate of Incorporation to reduce the effective conversion price of the Series A Preferred Stock from $ 3.14 2.78 150,832 3.20 expire in five years (the “Series A Warrants”) or upon an earlier change of control that doesn’t meet the definition of a Public Transaction 331,200 On July 8, 2022, the Company sold an additional 94,393 3.14 296,400 106,616 21,200 On September 16, 2022, the Company sold an additional 222,929 3.14 700,000 251,798 16,000 ZYVERSA THERAPEUTICS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Note 9 – Stockholders’ Deficiency – Continued Second Amendment of Series A Preferred Stock Designation On September 22, 2022, the Company filed with the Florida Department of State a second amendment to the Series A Preferred Stock Designation within the Company’s Certificate of Incorporation, which reduced the conversion price of the Series A Preferred Stock from $ 2.78 1.19 3.20 1.37 2,544,817 5,945,045 The Company determined that the reduction of the Series A Preferred Stock conversion price, combined with the revised terms associated with the contingent issuance of the Series A Warrants (collectively the “Second Amendment Securities”), represented a significant change requiring the application of extinguishment accounting. Accordingly, it was necessary to record the $ 9,684,637 Stock Options On January 28, 2022 and February 3, 2022, the Company granted ten-year stock options to purchase an aggregate of 920,000 three years 3.25 On March 8, 2022 and March 31, 2022, the Company granted ten-year stock options to purchase an aggregate of 111,122 3.25 On March 8, 2022, the Company granted an aggregate of 161,667 36,667 2.30 7.1 125,000 3.25 8.9 On April 15, 2022, and June 30, 2022, the Company granted ten-year stock options to purchase an aggregate of 91,380 30,000 3.25 61,380 2.25 A summary of the option activity during the nine months ended September 30, 2022 is presented below: Summary of Stock Options Activity Number of Options Weighted Average Exercise Price Weighted Average Remaining Life in Years Aggregate Intrinsic Value Outstanding, January 1, 2022 8,755,179 $ 2.00 Granted 1,284,169 3.18 Outstanding, September 30, 2022 10,039,348 $ 2.15 6.1 $ 3,138,441 Exercisable, September 30, 2022 8,258,023 $ 1.91 5.5 $ 3,138,441 ZYVERSA THERAPEUTICS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) Note 9 – Stockholders’ Deficiency – Continued The following table presents information related to stock options as of September 30, 2022: Schedule of Information Related to Stock Options Options Outstanding Options Exercisable Exercise Price Outstanding Number of Options Weighted Average Remaining Life In Years Exercisable Number of Options $ 1.00 3,338,767 3.3 3,338,767 $ 2.25 61,380 9.7 61,380 $ 2.3 3,668,913 6.5 3,644,468 $ 3.25 2,970,288 8.6 1,213,408 10,039,348 5.5 8,258,023 For the three and nine months ended September 30, 2022, the Company recorded stock-based compensation expense of $ 494,022 3,131,708 67,608 619,364 426,414 2,512,344 For the three and nine months ended September 30, 2021, the Company recorded stock-based compensation expense of $ 1,398,469 3,319,916 240,735 711,020 1,157,734 2,608,896 As of September 30, 2022, there was $ 3,451,070 1.9 In applying the Black-Scholes option pricing model to stock options granted, the Company used the following assumptions: Summary of Option Pricing Model to Stock Options Granted For the Three Months Ended For the Nine Months Ended September 30 2022 2021 2022 2021 Fair value of common stock on date of grant n/a $ 3.25 $ 2.27 3.00 $ 3.25 Risk free interest rate n/a 0.89 0.98 1.68 3.01 0.66 0.98 Expected term (years) n/a 5.00 3.53 6.00 5.00 6.00 Expected volatility n/a 120 124 111 119 120 125 Expected dividends n/a 0.00 0.00 0.00 During the nine months ended September 30, 2022, the fair value of the Company’s common stock was determined using a market approach based on the status of the business combination agreement arm’s length discussions with the acquirer at each valuation date and which agreement was ultimately entered into on July 20, 2022 with a Company valuation of $ 85 The options granted during the nine months ended September 30, 2022 had a contractual term between seven and ten years and a requisite service period of zero to three years. During the nine months ended September 30, 2021, the fair value of the Company’s common stock was determined by management with the assistance of a third-party valuation specialist using an income approach. The options granted during the nine months ended September 30, 2021 had a contractual term of ten years and a requisite service period of zero to three years. The weighted average estimated grant date fair value of the stock options granted during the three months ended September 30, 2021 were approximately $ 2.71 2.48 2.82 ZYVERSA THERAPEUTICS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) | | Note 11 — Stockholders’ Permanent and Temporary Equity Stockholders’ Deficiency Authorized Capital The Company is authorized to issue 75,000,000 0.00001 5,000,000 0.00001 2014 Equity Incentive Plan The Company is authorized to issue awards under its 2014 Equity Incentive Plan (the “2014 Plan”), as amended on October 9, 2018, February 2, 2019 and February 2, 2021. Under the 2014 Plan, 10,000,000 The number of shares of common stock available for issuance under the 2014 Plan shall automatically increase on the first trading day of January each calendar year during the term of the 2014 Plan, beginning with calendar year 2019, by an amount equal to five percent (5%) of the total number of shares of common stock outstanding on the last trading day in December of the immediately preceding calendar year, but in no event shall any such annual increase exceed 100,000 shares of common stock. 1,068,154 Common Stock On February 5, 2020, the Company closed on a private placement of 923,076 3.25 3,000,000 Put Option On December 13, 2020 (the “Effective Date”), in connection with the L&F Note Agreement (see Note 4 — Note Receivable for details), the Company and L&F entered into an agreement to provide L&F with a put option to cause the Company to purchase up to 331,331 1.00 th 331 ZYVERSA THERAPEUTICS, INC. Note 11 — Stockholders’ Permanent and Temporary Equity Stock-Based Compensation For the year ended December 31, 2021, the Company recorded stock-based compensation expense of $ 4,141,736 944,525 3,197,211 3,075,292 1.8 For the year ended December 31, 2020, the Company recorded stock-based compensation expense of $ 3,677,453 1,277,273 2,400,180 Stock Options In applying the Black-Scholes option pricing model to stock options granted, the Company used the following assumptions: Summary of Option Pricing Model to Stock Options Granted For the Years Ended 2021 2020 Fair value of common stock on date of grant $ 3.25 $ 3.25 Risk free interest rate 0.66 1.26 % 0.36 0.38 % Expected term (years) 5.00 6.00 5.00 Expected volatility 118 125 % 122 124 % Expected dividends 0.00 % 0.00 % During 2021, the fair value of the Company’s common stock was determined by management with the assistance of a third-party valuation specialist using an income approach. During 2020, the fair value of the Company’s common stock was determined using a market approach based on recent sales of the Company’s common stock to third parties. The 2021 options had a contractual term of ten years and requisite service period of zero to three years. The 2020 options had a contractual term of ten years and a requisite service period of zero years. The weighted average estimated grant date fair value of the stock options granted during the years ended December 31, 2021 and 2020 was approximately $ 2.81 2.87 A summary of the option activity during the years ended December 31, 2021 and 2020 is presented below: Summary of Stock Option Activity Number of Weighted Weighted Aggregate Outstanding, January 1, 2020 7,022,680 $ 1.68 Granted 188,570 3.25 Exercised (15,000 ) 1.00 Outstanding, January 1, 2021 7,196,250 1.72 Granted 1,720,596 3.25 Forfeited (161,667 ) 3.03 Outstanding, December 31, 2021 8,755,179 $ 2.00 6.4 $ 10,962,859 Exercisable, December 31, 2021 6,289,107 $ 1.69 5.7 $ 9,812,645 ZYVERSA THERAPEUTICS, INC. Note 11 — Stockholders’ Permanent and Temporary Equity The following table presents information related to stock options as of December 31, 2021: Schedule of Information Related to Stock Options Options Outstanding Options Exercisable Exercise Outstanding Weighted Exercisable $ 1.00 3,338,767 4.1 3,338,767 $ 2.30 3,632,246 7.3 2,421,494 $ 3.25 1,784,166 9.3 528,846 8,755,179 5.7 6,289,107 Stock Warrants On December 13, 2020, L&F exercised a warrant to purchase 351,579 1.00 351,579 A summary of the warrant activity during the years ended December 31, 2021 and 2020 is presented below: Summary of Warrant Activity Number of Weighted Weighted Aggregate Intrinsic Outstanding, January 1, 2020 2,505,931 $ 1.84 Issued — — Exercised (351,579 ) 1.00 Outstanding, January 1, 2021 2,154,352 1.98 Issued — — Outstanding, December 31, 2021 2,154,352 $ 1.98 1.5 $ 2,732,212 Exercisable, December 31, 2021 1,802,774 $ 2.17 1.8 $ 1,941,161 The following table presents information related to stock warrants as of December 31, 2021: Summary of Information Related to Stock Warrants Warrants Outstanding Warrants Exercisable Exercise Outstanding Weighted Exercisable $ 1.00 527,367 0.0 175,789 $ 2.30 1,626,985 2.0 1,626,985 2,154,352 1.8 1,802,774 |
Stockholders’ Deficiency | NOTE 7 — STOCKHOLDERS’ DEFICIT Stockholders’ Deficiency Preferred Stock 1,000,000 0.0001 no Class A Common Stock 200,000,000 0.0001 Holders of Class A common stock are entitled to one vote for each share 317,600 7,767,159 7,500,000 Class B Common Stock 20,000,000 0.0001 1,941,790 2,156,250 Holders of Class B common stock are entitled to one vote for each share Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise required by law. In connection with our initial business combination, we may enter into a stockholder agreement or other arrangements with the stockholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of this offering. The shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20 Warrants five years The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of residence of the exercising holder, or an exemption from registration is available. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. LARKSPUR HEALTH ACQUISITION CORP. NOTE 7 — STOCKHOLDERS’ DEFICIT Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $ 18.00 ● in whole and not in part; ● at a price of $ 0.01 ● upon a minimum of 30 days’ prior written notice of redemption, or the 30-day redemption period to each warrant holder; and ● if, and only if, the last reported sale price of the Class A common stock equals or exceeds $ 18.00 If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless. The Private Warrants, which are classified as equity, are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants and the Class A common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable or saleable until after the completion of a Business Combination, subject to certain limited exceptions. Further, there are no redemption rights or liquidating distributions from the trust account with respect to the private shares or private warrants, which will expire worthless if we do not consummate a business combination within 24 months from the closing of this offering. | NOTE 7 — STOCKHOLDERS’ DEFICIT Stockholders’ Deficiency Preferred Stock 1,000,000 0.0001 no Class A Common Stock 200,000,000 0.0001 Holders of Class A common stock are entitled to one vote for each share. 317,600 7,500,000 Class B Common Stock 20,000,000 0.0001 Holders of Class B common stock are entitled to one vote for each share. Only holders of the Class B common stock will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of our shareholders except as otherwise required by law. In connection with our initial business combination, we may enter into a stockholders agreement or other arrangements with the stockholders of the target or other investors to provide for voting or other corporate governance arrangements that differ from those in effect upon completion of this offering. The shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the then-outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20 LARKSPUR HEALTH ACQUISITION CORP. NOTE 7 — STOCKHOLDERS’ DEFICIT Warrants five years The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating to those shares of Class A common stock is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of residence of the exercising holder, or an exemption from registration is available. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file, and within 60 business days following a Business Combination to have declared effective, a registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. Redemption of Warrants When the Price per Share of Class A Common Stock Equals or Exceeds $ 18.00 ● in whole and not in part; ● at a price of $ 0.01 ● upon a minimum of 30 days’ prior written notice of redemption, or the 30-day redemption period to each warrant holder; and ● if, and only if, the last reported sale price of the Class A common stock equals or exceeds $ 18.00 If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. LARKSPUR HEALTH ACQUISITION CORP. NOTE 7 — STOCKHOLDERS’ DEFICIT If the Company calls the Public Warrants for redemption, as described above, its management will have the option to require any holder that wishes to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless. The Private Warrants, which are classified as equity, are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants and the Class A common stock issuable upon the exercise of the Private Warrants will not be transferable, assignable or saleable until after the completion of a Business Combination, subject to certain limited exceptions. Further, there is no redemption rights or liquidating distributions from the trust account with respect to the private shares or private warrants, which will expire worthless if we do not consummate a business combination within 24 months from the closing of this offering. | |