What changed in Scilex Holding Co's 10-K — 2022 vs 2023

Fin ancial Statements SCILEX HOLDING COMPANY CONSOLIDATED BALANCE SHEETS (In thousands, except for par value and share amounts) December 31, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 3,921 $ 2,184 Accounts receivable, net 34,597 21,236 Inventory 4,214 1,378 Prepaid expenses and other 4,049 4,810 Total current assets: 46,781 29,608 Property and equipment, net 722 772 Operating lease right-of-use asset 2,943 1,131 Intangibles, net 36,485 40,591 Goodwill 13,481 13,481 Other long-term assets 897 944 Total assets $ 101,309 $ 86,527 LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY Current liabilities: Accounts payable $ 40,954 $ 8,450 Accrued payroll 2,681 1,354 Accrued rebates and fees 89,658 30,893 Accrued expenses 7,408 3,136 Current portion of deferred consideration 491 264 Debt, current 108,429 — Current portion of operating lease liabilities 759 745 Total current liabilities: 250,380 44,842 Long-term portion of deferred consideration 2,895 3,387 Debt, net of issuance costs 17,038 — Derivative liabilities 1,518 1,231 Operating lease liabilities 2,237 665 Other long-term liabilities 179 163 Total liabilities $ 274,247 $ 50,288 Commitments and contingencies (See Note 11) Stockholders’ (deficit) equity: Preferred stock, $ 0.0001 par value, 45,000,000 shares authorized; 29,057,097 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively — 3 Common stock, $ 0.0001 par value, 740,000,000 shares authorized; 160,084,250 shares issued and 100,015,665 shares outstanding as of December 31, 2023; 141,348,856 shares issued and outstanding as of December 31, 2022 16 14 Additional paid-in capital 407,813 412,136 Accumulated deficit ( 490,245 ) ( 375,914 ) Treasury stock, at cost; 60,068,585 shares and nil shares as of December 31, 2023 and December 31, 2022, respectively ( 90,522 ) — Total stockholders’ (deficit) equity ( 172,938 ) 36,239 Total liabilities and stockholders’ (deficit) equity $ 101,309 $ 86,527 See accompanying notes to audited consolidated financial statements F- 3 SCILEX HOLDING COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except for net loss per share amounts) Year Ended December 31, 2023 2022 2021 Net revenue $ 46,743 $ 38,034 $ 31,317 Operating costs and expenses: Cost of revenue 15,681 10,797 3,634 Research and development 12,746 9,054 9,201 Selling, general and administrative 119,641 64,895 50,582 Intangible amortization 4,106 3,922 3,738 Total operating costs and expenses 152,174 88,668 67,155 Loss from operations ( 105,431 ) ( 50,634 ) ( 35,838 ) Other (income) expense: Loss (gain) on derivative liability 512 ( 8,310 ) 300 Change in fair value of debt and liability instruments 7,189 — — (Gain) loss on debt extinguishment, net — ( 28,634 ) 12,463 Scilex Pharma Notes principal increase — — 28,000 Interest expense, net 1,068 9,604 11,764 Loss on foreign currency exchange 118 66 54 Total other (income) expense 8,887 ( 27,274 ) 52,581 Loss before income taxes ( 114,318 ) ( 23,360 ) ( 88,419 ) Income tax expense 13 4 5 Net loss $ ( 114,331 ) $ ( 23,364 ) $ ( 88,424 ) Net loss per share attributable to common stockholders — basic and diluted $ ( 1.28 ) $ ( 0.17 ) $ ( 0.67 ) Weighted average number of shares during the period — basic and diluted 130,298 134,226 132,858 See accompanying notes to audited consolidated financial statements F- 4 SCILEX HOLDING COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) / EQUITY (In thousands) Preferred Stock Common Stock Additional Accumulated Treasury Stock Stockholders’ Shares Amount Shares Amount Paid-in Capital Deficit Shares Amount (Deficit) Equity Balance, December 31, 2020 — $ — 132,858 $ 13 $ 122,430 $ ( 264,126 ) — $ — $ ( 141,683 ) Stock-based compensation — — — — 5,822 — — — 5,822 Adjustment to shares issued in Semnur Acquisition — — — — 409 — — — 409 Net loss — — — — — ( 88,424 ) — — ( 88,424 ) Balance, December 31, 2021 — — 132,858 13 128,661 ( 352,550 ) — — ( 223,876 ) Stock options exercised — — 202 — 96 — — — 96 Aardvark SP-104 license transfer from Sorrento, net of discount — — — — ( 4,127 ) — — — ( 4,127 ) Aardvark SP-104 discount amortization — — — — ( 35 ) — — — ( 35 ) Shares issued pursuant to the terms of the Debt Exchange Agreement 29,057 3 2,906 — 289,730 — — — 289,733 Shares issued as a result of the Business Combination, net of transaction activities — — 5,133 1 ( 8,707 ) — — — ( 8,706 ) Shares issued to Yorkville pursuant to Yorkville Purchase Agreement — — 250 — 1,238 — — — 1,238 Stock-based compensation — — — — 5,280 — — — 5,280 Net loss — — — — — ( 23,364 ) — — ( 23,364 ) Balance, December 31, 2022 29,057 3 141,349 14 412,136 ( 375,914 ) — — 36,239 Shares issued under Standby Equity Purchase Agreements — — 13,218 1 34,256 — — — 34,257 Disbursement of funds to Sorrento — — — — ( 20,000 ) — — — ( 20,000 ) Repurchase of Treasury Stock, Preferred Stock, and warrants — ( 3 ) — — ( 53,196 ) — ( 60,069 ) ( 90,522 ) ( 143,721 ) Issuance of Penny Warrants — — — — 10,401 — — — 10,401 Issuance of common stock in connection with Settlement Agreement — — 475 — 750 — — — 750 Conversion of Convertible Debentures into common stock — — 632 — 7,735 — — — 7,735 Retainer shares issued — — 4,000 1 — — — — 1 Issuance of common stock upon warrants exercise — — 45 — 521 — — — 521 Stock options exercised — — 365 — 614 — — — 614 Stock-based compensation — — — — 14,596 — — — 14,596 Net loss — — — — — ( 114,331 ) — — ( 114,331 ) Balance, December 31, 2023 29,057 $ — 160,084 $ 16 407,813 $ ( 490,245 ) ( 60,069 ) $ ( 90,522 ) $ ( 172,938 ) See accompanying notes to audited consolidated financial statements F- 5 SCILEX HOLDING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2023 2022 2021 Operating activities Net loss $ ( 114,331 ) $ ( 23,364 ) $ ( 88,424 ) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 4,146 3,961 3,779 Amortization of debt issuance costs and debt discount 65 3,142 7,909 Scilex Pharma Notes principal increase — — 28,000 Payment on the Scilex Pharma Notes attributed to accreted interest related to the debt discount — ( 21,190 ) ( 12,487 ) (Gain) loss on debt extinguishment, net — ( 28,634 ) 12,463 Non-cash operating lease cost 507 492 372 Stock-based compensation 14,596 5,280 5,822 Issuance of shares under Settlement Agreement 750 — — Loss (gain) on derivative liability 512 ( 8,310 ) 300 Forfeitures of private warrants — 1,697 — Change in fair value of debt and liability instruments 7,189 — — Other 57 — — Changes in operating assets and liabilities: Accounts receivables, net ( 13,361 ) ( 6,968 ) ( 1,142 ) Inventory ( 2,838 ) 1,184 ( 1,417 ) Prepaid expenses and other ( 441 ) ( 2,629 ) 1,479 Other long-term assets 855 350 — Accounts payable 19,880 2,806 ( 3,836 ) Accrued payroll 1,327 ( 2,379 ) ( 21 ) Accrued expenses 2,310 ( 123 ) 664 Accrued rebates and fees 58,765 23,531 ( 255 ) Other liabilities ( 711 ) ( 392 ) ( 80 ) Related party payable — 30,125 18,210 Other long-term liabilities 16 163 — Net cash used for operating activities ( 20,707 ) ( 21,258 ) ( 28,664 ) Investing activities Acquisition consideration paid in cash for Romeg intangible asset acquisition ( 300 ) ( 2,060 ) — Purchase of property and equipment ( 30 ) ( 7 ) — Net cash used for investing activities ( 330 ) ( 2,067 ) — Financing activities Proceeds from issuance of shares under Standby Equity Purchase Agreements 35,458 — — Proceeds from issuance of Convertible Debentures 24,000 — — Repayment of Convertible Debentures ( 15,625 ) — — Proceeds from issuance of Revolving Facility 86,354 — — Repayment of Revolving Facility ( 69,001 ) — — Repayment of Oramed Note ( 5,000 ) — — Transaction costs paid related to the Business Combination ( 1,372 ) ( 2,949 ) — Payments of debt issuance costs ( 380 ) — — Disbursement of funds to Sorrento ( 20,000 ) — — Cash consideration paid in connection with share repurchase ( 10,000 ) — — Transaction costs paid in connection with share repurchase ( 1,987 ) — — Proceeds from the Business Combination — 3,375 — Proceeds from stock options and warrants exercised 1,135 96 — Proceeds from related party payable — 51,900 47,850 Proceeds from related party note payable — 62,500 14,700 Proceeds from other loans — 9,857 47,832 Repayment of principal on the Scilex Pharma Notes — ( 84,808 ) ( 33,387 ) Repayment on other loans — ( 18,800 ) ( 48,832 ) Net cash proceeds from financing activities 23,582 21,171 28,163 Net change in cash, cash equivalents and restricted cash 2,545 ( 2,154 ) ( 501 ) Cash, cash equivalents and restricted cash at beginning of period 2,184 4,338 4,839 Cash, cash equivalents and restricted cash at end of period $ 4,729 $ 2,184 $ 4,338 Supplemental disclosure: Cash paid for interest $ 1,426 $ — $ — Non-cash investing and financing activities Issuance of shares to B.

Riley Purchase Agreement $ 1,869 $ — $ — Conversion of Convertible Debentures into common stock $ 7,735 $ — $ — Right-of-use assets obtained in exchange for operating lease liabilities with lease modification $ 2,523 $ — $ — Oramed Note issuance at fair value $ 106,252 $ — $ — F- 6 Year Ended December 31, 2023 2022 2021 Other non-cash consideration in connection with share repurchase $ 26,154 $ — $ — Excise tax in connection with share repurchase included in accrued expenses $ 1,310 $ — $ — Related party debt converted to equity pursuant to Debt Exchange Agreement $ — $ 289,733 $ — Deferred consideration for Romeg intangible asset acquisition $ — $ 3,650 $ — Promissory Note issued to Sorrento in exchange for the SP-104 license $ — $ 4,162 $ — Fair value adjustment to derivative liability in troubled debt restructuring $ — $ 30,400 $ — Scilex Pharma Notes principal increase $ — $ — $ 28,000 Transaction costs obligation assumed by Sorrento $ — $ 5,148 $ — See accompanying notes to audited consolidated financial statements F- 7 SCILEX HOLDING COMPANY NOTES TO CONSOLIDATE D FINANCIAL STATEMENTS 1.

Nature of Operations and Basis of Presentation Organization and Principal Activities Scilex Holding Company (“Scilex” and together with its wholly owned subsidiaries, the “Company”) is the successor entity to Vickers Vantage Corp. I (“Vickers”), a special purpose acquisition company.

(“Semnur”), SCLX DRE Holdings LLC and SCLX Stock Acquisition JV LLC. The business combination with Vickers (the “Business Combination”) was closed in November 2022.

The Company in-licensed the exclusive right to commercialize GLOPERBA (colchicine USP) oral solution (“GLOPERBA”), a U.S. Food and Drug Administration (“FDA”)-approved prophylactic treatment for painful gout flares in adults, in the United States (“U.S.”). In February 2023, the Company acquired the rights related to ELYXYB (celecoxib oral solution) (“ELYXYB”) and the commercialization thereof in the U.S. and Canada.

Since inception, the Company has devoted substantially all of its efforts to the development of SP-102, SP-103 and SP-104, and the commercialization of ZTlido. In 2024, the Company will also devote efforts on the commercialization of GLOPERBA and ELYXYB. Sorrento Chapter 11 Filing On February 13, 2023, Sorrento Therapeutics, Inc.

(“Sorrento”), the Company’s then-controlling stockholder, and Sorrento’s wholly owned direct subsidiary, Scintilla Pharmaceuticals, Inc. (“Scintilla” and together with Sorrento, the “Debtors”), commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).

The Debtors’ Chapter 11 proceedings are jointly administered under the caption In re Sorrento Therapeutics, Inc., et al., Case Number 23-90085 (DRJ) (the “Chapter 11 Cases”). While the Company was majority-owned by Sorrento, the Company was not a debtor in the Chapter 11 Cases.

As of December 31, 2023, Sorrento no longer holds a majority of the voting power of the Company’s outstanding capital stock entitled to vote. As of December 31, 2023, the Company had a $ 3.2 million receivable from Sorrento, which was fully reserved. The Company evaluates the collectability of this receivable on a quarterly basis.

Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.

F- 8 The accompanying consolidated financial statements include the accounts of the Company as well as its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Segments Operating segments are identified as components of an entity where separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assessing performance.

The Company has determined that its chief operating decision maker is its Chief Executive Officer, as he is responsible for making decisions regarding the allocation of resources and assessing performance as well as for strategic operational decisions.

The Company is engaged primarily in the development of non-opioid products focused on pain management based on its platform technologies and all sales are based in the United States. Accordingly, the Company has determined that it operates its business as a single reportable segment. Use of Estimates The preparation of these consolidated financial statements in conformity with U.S.

GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of these consolidated financial statements and the reported amounts of expenses during the reporting period. Management believes that these estimates are reasonable; however, actual results may differ from these estimates.

Customer Concentration Risk Prior to April 2022, sales to the Company’s sole distributor represented 100 % of net revenue. In April 2022, the Company announced the expansion of its direct distribution network to national and regional wholesalers and pharmacies.

The Company had three and four customers during the years ended December 31, 2023 and 2022 , respectively, each of which individually generated 10 % or more of the Company’s total revenue.

These customers accounted for 85 % and 83 % of the Company’s revenue for the years ended December 31, 2023 and 2022, respectively, individually ranging from 22 % to 32 % and 19 % to 24 %, respectively.

As of December 31, 2023 and 2022, these customers represented 91 % and 90 % of the Company’s outstanding accounts receivable, respectively, individually ranging between 24 % and 36 % for both periods. Additionally, during the years ended December 31, 2023 and 2022, the Company purchased ZTlido inventory from its sole supplier, Itochu Chemical Frontier Corporation (“Itochu”).

This exposes the Company to concentration of customer and supplier risk. The Company monitors the financial condition of its customers, limits its credit exposure by setting credit limits, and has not experienced any credit losses during the years ended December 31, 2023 and 2022 .

Fair Value Measurements Financial assets and liabilities are recorded at fair value on a recurring basis in the consolidated balance sheets.

The carrying values of the Company’s financial assets and liabilities, including cash and cash equivalents, restricted cash, prepaid and other current assets, accounts payable and accrued expenses approximate to their fair value due to the short-term nature of these instruments.

The derivative warrant liability associated with the Private Warrants (as defined below) is valued using the Black-Scholes option pricing model, which is further discussed in Note 4.

The Company elected the fair value option to account for the Convertible Debentures (as defined below) in an aggregate principal amount of up to $ 25.0 million that were issued in March and April 2023 and for the Oramed Note (as defined below) in the principal amount of $ 101.9 million that was issued in September 2023 (see Note 7 titled “ Debt” below).

These instruments are measured at fair value on a recurring basis using Level 3 inputs. The Binomial Lattice Model valuation technique and a discounted cash flow model were employed to measure the fair value of the Convertible Debentures and the Oramed Note, respectively.

The Revolving Facility (as defined below) in an aggregate principal amount of up to $ 30.0 million was issued in June 2023 (see Note 7 titled “ Debt” below). The Company accounts for the Revolving Facility using the amortized cost basis and recognizes interest expense over the expected term using the effective interest rate method.

The carrying value of the Revolving Facility approximates its fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date.

Assets and liabilities recorded at fair value are categorized based F- 9 upon the level of judgment associated with the inputs used to measure their fair value.

Hierarchical levels are directly related to the amount of subjectivity with the inputs to the valuation of these assets or liabilities as follows: Level 1 - Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; Level 2 - Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable inputs for similar assets or liabilities.

These include quoted prices for identical or similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.