10q10k10q10k.net

What changed in Scilex Holding Co's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of Scilex Holding Co's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+1053 added−735 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-12)

Top changes in Scilex Holding Co's 2024 10-K

1053 paragraphs added · 735 removed · 576 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

223 edited+222 added−30 removed109 unchanged
Biggest changeFin 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.
Biggest changeFin ancial Statements SCILEX HOLDING COMPANY CONSOLIDATED BALANCE SHEETS (In thousands, except for par value and share amounts) December 31, 2024 December 31, 2023 ASSETS Current assets: Cash and cash equivalents $ 3,272 $ 3,921 Accounts receivable, net 26,442 34,597 Inventory 2,436 4,214 Prepaid expenses and other current assets 9,397 4,049 Total current assets 41,547 46,781 Property and equipment, net 708 722 Operating lease right-of-use asset 2,225 2,943 Intangibles, net 32,453 36,485 Investments 2,420 — Goodwill 13,481 13,481 Other long-term assets 119 897 Total assets $ 92,953 $ 101,309 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 52,620 $ 40,954 Accrued payroll 1,505 2,681 Accrued rebates and fees 162,517 89,658 Accrued expenses 2,841 7,408 Current portion of deferred consideration 447 491 Debt, current 34,876 108,429 Purchased revenue liability, current 4,115 — Current portion of operating lease liabilities 714 759 Total current liabilities 259,635 250,380 Long-term portion of deferred consideration 2,448 2,895 Debt, net of issuance costs 845 17,038 Purchased revenue liability, net of current portion 2,685 — Derivative liabilities 18,303 1,518 Operating lease liabilities, net of current portion 1,523 2,237 Other long-term liabilities 155 179 Total liabilities 285,594 274,247 Commitments and contingencies (See Note 11) Stockholders’ deficit: Preferred stock, $ 0.0001 par value, 45,000,000 shares authorized Series A, 29,057,097 shares issued and outstanding as of each of December 31, 2024 and December 31, 2023 — — Series 1, 5,000,000 shares declared as a stock dividend, not yet distributed as of December 31, 2024; no shares authorized, issued and outstanding as of December 31, 2023 1 — Common stock, $ 0.0001 par value, 740,000,000 shares authorized; 243,312,885 shares issued and 183,244,300 shares outstanding as of December 31, 2024; 160,084,250 shares issued and 100,015,665 shares outstanding as of December 31, 2023 24 16 Additional paid-in capital 454,591 407,813 Accumulated other comprehensive income 6,317 — Accumulated deficit ( 563,052 ) ( 490,245 ) Treasury stock, at cost; 60,068,585 shares as of each of December 31, 2024 and December 31, 2023 ( 90,522 ) ( 90,522 ) Total stockholders’ deficit ( 192,641 ) ( 172,938 ) Total liabilities and stockholders’ deficit $ 92,953 $ 101,309 See accompanying notes to audited consolidated financial statements F- 3 SCILEX HOLDING COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (In thousands, except for net loss per share amounts) Year Ended December 31, 2024 2023 Net revenue $ 56,590 $ 46,743 Net operating costs and expenses: Cost of revenue 16,689 15,681 Research and development 9,641 12,746 Selling, general and administrative 119,016 119,641 Intangible amortization 4,031 4,106 Legal settlements ( 9,391 ) — Total net operating costs and expenses 139,986 152,174 Loss from operations ( 83,396 ) ( 105,431 ) Other (income) expense, net: (Gain) loss on derivative liability ( 17,378 ) 512 Change in fair value of debt and liability instruments 4,782 7,189 Interest expense, net 1,963 1,068 Loss on foreign currency exchange 45 118 Total other (income) expense, net ( 10,588 ) 8,887 Loss before income taxes ( 72,808 ) ( 114,318 ) Income tax (benefit) expense ( 1 ) 13 Net loss $ ( 72,807 ) $ ( 114,331 ) Net loss per share attributable to common stockholders — basic $ ( 0.56 ) $ ( 1.28 ) Net loss per share attributable to common stockholders — diluted $ ( 0.61 ) $ ( 1.28 ) Weighted average number of shares during the period — basic 131,136 130,298 Weighted average number of shares during the period — diluted 134,075 130,298 Comprehensive loss: Net loss $ ( 72,807 ) $ ( 114,331 ) Other comprehensive income: Changes in fair value attributable to instrument-specific credit risk 6,317 — Total other comprehensive income 6,317 — Comprehensive loss $ ( 66,490 ) $ ( 114,331 ) See accompanying notes to audited consolidated financial statements F- 4 SCILEX HOLDING COMPANY CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY / (DEFICIT ) (In thousands) Preferred Stock Common Stock Additional Accumulated Other Accumulated Treasury Stock Stockholders’ Shares Amount Shares Amount Paid-in Capital Comprehensive Income Deficit Shares Amount Equity (Deficit) Balance, December 31, 2022 29,057 $ 3 141,349 $ 14 $ 412,136 $ — $ ( 375,914 ) — $ — $ 36,239 Shares issued under the 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 ) Shares issued under the Standby Equity Purchase Agreements and under the ATM Sales Agreement — — 2,861 — 2,671 — — — — 2,671 Shares issued under the February 2024 BDO — — 5,882 1 3,768 — — — — 3,769 Shares issued under the April 2024 RDO — — 15,000 1 5,918 — — — — 5,919 April 2024 RDO Placement Agent Warrants and February 2024 BDO Representative Warrants — — — — 956 — — — — 956 Retainer shares issued — — 10,000 1 — — — — — 1 Fee Warrant issued in connection with the Commitment Letter — — — — 310 — — — — 310 Repurchase of warrants — — — — ( 298 ) — — — — ( 298 ) Common stock issuable under the SIPA — — — — 345 — — — — 345 Placement Agent Shares and October 2024 Placement Agent Warrants — — 2,197 — 3,792 — — — — 3,792 Conversion of Tranche B Notes into common stock — — 9,215 1 9,255 — — — — 9,256 Shares issued under December 2024 RDO — — 26,355 3 325 — — — — 328 StockBlock Warrants issued in connection with the December 2024 RDO — — — — 1,265 — — — — 1,265 F- 5 Stock dividend declared, not yet distributed 5,000 1 — — ( 1 ) — — — — — Issuance of common stock upon warrants exercise — — 11,230 1 2,310 — — — — 2,311 Shares issued under ESPP — — 334 — 246 — — — — 246 Stock options exercised — — 154 — 227 — — — — 227 Stock-based compensation — — — — 15,689 — — — — 15,689 Other comprehensive income — — — — — 6,317 — — — 6,317 Net loss — — — — — — ( 72,807 ) — — ( 72,807 ) Balance, December 31, 2024 34,057 $ 1 243,312 $ 24 $ 454,591 $ 6,317 $ ( 563,052 ) ( 60,069 ) $ ( 90,522 ) $ ( 192,641 ) See accompanying notes to audited consolidated financial statements F- 6 SCILEX HOLDING COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2024 2023 Operating activities Net loss $ ( 72,807 ) $ ( 114,331 ) Adjustments to reconcile net loss to net cash proceeds from (used for) operating activities: Depreciation and amortization 4,046 4,146 Amortization of debt issuance costs and debt discount 316 65 Non-cash operating lease cost 718 507 Stock-based compensation 15,689 14,596 Issuance of shares under Settlement Agreement — 750 (Gain) loss on derivative liability ( 17,378 ) 512 Allocated expense for financial instruments at fair value 17,297 — Change in fair value of debt and liability instruments 4,782 7,189 Allowances for expected credit losses 1,186 — Other 661 57 Changes in operating assets and liabilities: Accounts receivables, net ( 6,267 ) ( 13,361 ) Inventory 1,462 ( 2,838 ) Prepaid expenses and other ( 479 ) ( 441 ) Other long-term assets ( 30 ) 855 Accounts payable 7,419 19,880 Accrued payroll ( 1,176 ) 1,327 Accrued expenses ( 8,167 ) 2,310 Accrued rebates and fees 72,859 58,765 Operating lease liability ( 758 ) ( 711 ) Other long-term liabilities ( 24 ) 16 Net cash proceeds from (used for) operating activities 19,349 ( 20,707 ) Investing activities Acquisition consideration paid in cash for Romeg intangible asset acquisition ( 600 ) ( 300 ) Purchase of equity securities ( 2,000 ) — Purchase of convertible promissory note from Denali ( 75 ) — Purchase of property and equipment — ( 30 ) Net cash used for investing activities ( 2,675 ) ( 330 ) Financing activities Proceeds from issuance of shares under Standby Equity Purchase Agreements and ATM Sales Agreement 2,671 35,458 Proceeds from issuance of Convertible Debentures — 24,000 Proceeds from issuance of Revolving Facility 95,438 86,354 Proceeds from issuance of FSF Deposit 10,000 — Proceeds from issuance of Tranche B Notes and purchased revenue liability 25,000 — Repayment of Revolving Facility ( 112,791 ) ( 69,001 ) Repayment of Oramed Note ( 64,200 ) ( 5,000 ) Cash consideration paid in connection with warrant repurchase ( 300 ) — Transaction costs paid related to the Business Combination — ( 1,372 ) Repayment of Convertible Debentures ( 4,375 ) ( 15,625 ) Repayment of Tranche B Notes ( 3,283 ) — Payments of debt issuance costs ( 4,172 ) ( 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 ) Excise tax paid in connection with share repurchase ( 450 ) — Proceeds from issuance of shares under direct offerings 41,967 — Payments of direct offering issuance costs ( 4,370 ) — Payments of deferred transaction costs related to Semnur Business Combination ( 1,379 ) — Proceeds from stock options and warrants exercised and ESPP 2,113 1,135 Net cash (used for) proceeds from financing activities ( 18,131 ) 23,582 Net change in cash, cash equivalents and restricted cash ( 1,457 ) 2,545 Cash, cash equivalents and restricted cash at beginning of period 4,729 2,184 Cash, cash equivalents and restricted cash at end of period $ 3,272 $ 4,729 Supplemental disclosure: Cash paid for interest $ 1,561 $ 1,426 F- 7 Non-cash investing and financing activities Issuance of shares to B.
The maturity date of the Convertible Debentures was also extended from December 21, 2023 to March 15, 2024 . The outstanding principal amount is to be repaid in equal installments that are due every 30 days beginning on May 20, 2023, which is 60 days after the date on which the first Convertible Debenture was issued to Yorkville.
The maturity date of the Convertible Debentures was also extended from December 21, 2023 to March 15, 2024 . The outstanding principal amount was to be repaid in equal installments that are due every 30 days beginning on May 20, 2023, which is 60 days after the date on which the first Convertible Debenture was issued to Yorkville.
Interest under the Oramed Note accrues at a fluctuating per annum interest rate equal to the sum of (1) greater of (x) 4 % and (y) Term SOFR (as defined in the Oramed Note) and (2) 8.5 %, payable in-kind on a monthly basis.
Interest under the Oramed Note accrues at a fluctuating per annum interest rate equal to the sum of (1) the greater of (x) 4 % and (y) Term SOFR (as defined in the Oramed Note) and (2) 8.5 %, payable in-kind on a monthly basis.
Former Employee Action On March 12, 2021, Scilex Pharma and Sorrento (the “Plaintiffs”) filed an action (the “Former Employee Action”) in the Delaware Court of Chancery against the former President of Scilex Pharma, Anthony Mack, and Virpax Pharmaceuticals, Inc. (“Virpax”, together with Mr. Mack, the “Defendants”), a company founded and then headed by Mr.
Former Employee Action On March 12, 2021, Scilex Pharma and Sorrento (the “Plaintiffs”) filed an action (the “Former Employee Action”) in the Delaware Court of Chancery against the former President of Scilex Pharma, Anthony Mack, and Virpax Pharmaceuticals, Inc. (“Virpax”, and together with Mr. Mack, the “Defendants”), a company founded and then headed by Mr.
Premium paid on redemption of Preferred Stock was added to the net loss to arrive at loss available for common stockholders as it represents a dividend to the preferred stockholder. Diluted earnings per share is computed using the weighted average number of Common Stock and, if dilutive, potential Common Stock outstanding during the period.
Premium paid on redemption of Series A Preferred Stock was added to the net loss to arrive at loss available for common stockholders as it represents a dividend to the Series A preferred stockholder. Diluted earnings per share is computed using the weighted average number of Common Stock and, if dilutive, potential Common Stock outstanding during the period.
The Yorkville SPA provides that the Convertible Debentures would be issued and sold at a purchase price equal to 96 % of the applicable principal amount in three tranches as follows: (i) $ 10.0 million upon the signing of the Yorkville SPA, which was funded on March 21, 2023; (ii) $ 7.5 million upon the filing of a registration statement on Form S-1 with the SEC to register the resale by Yorkville of any shares of Common Stock issuable upon conversion of the Convertible Debentures under the Securities Act of 1933, as amended (the “Securities Act”), which was funded on April 11, 2023 ; and (iii) $ 7.5 million at the time such registration statement was declared effective by the SEC, which was funded on April 20, 2023 .
The Yorkville SPA provided that the Convertible Debentures would be issued and sold at a purchase price equal to 96 % of the applicable principal amount in three tranches as follows: (i) $ 10.0 million upon the signing of the Yorkville SPA, which was funded on March 21, 2023; (ii) $ 7.5 million upon the filing of a registration statement on Form S-1 with the SEC to register the resale by Yorkville of any shares of Common Stock issuable upon conversion of the Convertible Debentures under the Securities Act of 1933, as amended (the “Securities Act”), which was funded on April 11, 2023 ; and (iii) $ 7.5 million at the time such registration statement was declared effective by the SEC, which was funded on April 20, 2023 .
On, and effective as of, February 16, 2024, the Company and B. Riley mutually agreed to terminate the B. Riley Purchase Agreement. As consideration for Yorkville’s and B. Riley’s respective commitment to purchase shares of Common Stock at the Company’s direction, the Company issued 250,000 commitment shares to each of Yorkville (the “Yorkville Commitment Shares”) and B. Riley (the “B.
As consideration for Yorkville’s and B. Riley’s respective commitment to purchase shares of Common Stock at the Company’s direction, the Company issued 250,000 commitment shares to each of Yorkville (the “Yorkville Commitment Shares”) and B. Riley (the “B. Riley Commitment Shares”). On, and effective as of, February 16, 2024, the Company and B. Riley mutually agreed to terminate the B.
The primary unobservable input utilized in determining the fair value of the warrant is the expected volatility of the Common Stock. The expected volatility assumption is based on historical volatilities of comparable companies whose share prices are publicly available as well as the implied volatility of the Public Warrants (see Note 9 ).
The primary unobservable input utilized in determining the fair value of the warrant is the expected volatility of the Common Stock. The expected volatility assumption is based on the Company's historical volatility, historical volatilities of comparable companies whose share prices are publicly available as well as the implied volatility of the Public Warrants (see Note 9 ).
Pursuant to the A&R Yorkville Purchase Agreement, the shares of Common Stock, if any, that the Company elects to sell to Yorkville pursuant to a sale of Common Stock will be purchased at a price equal to 98 % of the VWAP (as defined below) during the applicable pricing period for such advance, which shall be the period commencing upon receipt by Yorkville of an advance notice from the Company (or the open of regular trading hours, if later) and ending on 4:00 p.m. on the same day.
Pursuant to the A&R Yorkville Purchase Agreement, the shares of Common Stock, if any, that the Company elected to sell to Yorkville pursuant to a sale of Common Stock will be purchased at a price equal to 98 % of the VWAP (as defined below) during the applicable pricing period for such advance, which shall be the period commencing upon receipt by Yorkville of an advance notice from the Company (or the open of regular trading hours, if later) and ending on 4:00 p.m. on the same day.
Revenue from product sales is comprised of sales of ZTlido and ELYXYB. The Company’s performance obligation with respect to sales of ZTlido and ELYXYB is satisfied at a point in time, when control is transferred upon delivery of product to the customer.
Revenue from product sales is comprised of sales of ZTlido, ELYXYB and GLOPERBA. The Company’s performance obligation with respect to sales of ZTlido, ELYXYB and GLOPERBA is satisfied at a point-in-time, when control is transferred upon delivery of product to the customer.
In come Taxes The provisions of the FASB ASC Topic 740, Income Taxes, address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.
In come Taxes The provisions of the FASB ASC Topic 740, Income Taxes , address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements.
Before the closing of the Sorrento SPA transactions and in connection with the transactions contemplated by the Sorrento SPA, the Company formed two entities: (a) Scilex DRE Holdings LLC (“Holdco”), a single purpose entity F- 25 that is the Company’s direct wholly owned subsidiary and (b) Scilex Stock Acquisition Joint Venture LLC, a single purpose bankruptcy-remote entity that is the Company’s indirect wholly owned subsidiary (“SCLX JV”), which was formed to hold the Purchased Securities.
Before the closing of the Sorrento SPA transactions and in connection with the transactions contemplated by the Sorrento SPA, the Company formed two entities: (a) Scilex DRE Holdings LLC (“Holdco”), a single purpose entity that is the Company’s direct wholly owned subsidiary and (b) Scilex Stock Acquisition Joint Venture LLC, a single purpose bankruptcy-remote entity that is the Company’s indirect wholly owned subsidiary (“SCLX JV”), which was F- 34 formed to hold the Purchased Securities.
Internal Revenue Code Section 382 rules apply to limit a corporation’s ability to utilize existing net operating loss and tax credit carryforwards once the corporation experiences an ownership change as defined in Section 382. For the years ended December 31, 2023 and 2022, there was no impact of such limitations on the Company’s income tax provision.
Internal Revenue Code Section 382 rules apply to limit a corporation’s ability to utilize existing net operating loss and tax credit carryforwards once the corporation experiences an ownership change as defined in Section 382. For the years ended December 31, 2024 and 2023, there was no impact of such limitations on the Company’s income tax provision.
Under the terms of the eCapital Credit Agreement, interest will accrue daily on the principal amount outstanding at a rate per annum equal to the Wall Street Journal Prime Rate plus 1.5 % , based on a year consisting of 360 days, and which shall be payable by Scilex Pharma monthly in arrears, commencing July 1, 2023.
Under the terms of the eCapital Credit Agreement, interest would accrue daily on the principal amount outstanding at a rate per annum equal to the Wall Street Journal Prime Rate plus 1.5 % , based on a year consisting of 360 days, and which shall be payable by Scilex Pharma monthly in arrears, commencing July 1, 2023.
Such variable F- 13 consideration is estimated in the period of the sale and is estimated using a most likely amount approach based primarily upon provisions included in the Company’s customer contract, customary industry practices and current government regulations. Rebates and Chargebacks Rebates are discounts which the Company pays under either government or private health care programs.
Such variable consideration is estimated in the period of the sale and is estimated using a most likely amount approach based primarily upon provisions included in the Company’s customer contract, customary industry practices and current government regulations. Rebates and Chargebacks Rebates are discounts which the Company pays under either government or private health care programs.
The Company has the right, but not the obligation, in its sole discretion, to redeem, upon five business days’ prior written notice to Yorkville (the “Redemption Notice”), all or any portion of the amounts outstanding under the Convertible Debentures; provided that the trading price of the Common Stock is less than the Conversion Price at the time of the Redemption Notice.
The Company had the right, but not the obligation, in its sole discretion, to redeem, upon five business days’ prior written notice to Yorkville (the “Redemption Notice”), all or any portion of the amounts outstanding under the Convertible Debentures; provided that the trading price of the Common Stock is less than the Conversion Price at the time of the Redemption Notice.
In an asset acquisition, up-front payments allocated to IPR&D projects at the acquisition date and subsequent milestone payments are charged to expense in the Company`s consolidated statements of operations unless there is an alternative future use. The Company has acquired and may continue to acquire the rights to develop and commercialize new product candidates.
In an asset acquisition, up-front payments allocated to IPR&D projects at the acquisition date and subsequent milestone payments are charged to expense in the Company`s consolidated statements of operations and comprehensive loss unless there is an alternative future use. The Company has acquired and may continue to acquire the rights to develop and commercialize new product candidates.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. As of December 31, 2023 and 2022 , the Company maintained a full valuation allowance against its deferred tax assets. Leases The Company determines if an arrangement is a lease at inception.
Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. As of December 31, 2024 and 2023 , the Company maintained a full valuation allowance against its deferred tax assets. Leases The Company determines if an arrangement is a lease at inception.
Inventory costs resulting from these adjustments are recognized as cost of sales in the period in which they are incurred. When future commercialization is considered probable and the future economic benefit is expected to be realized, based on management’s judgment, the Company capitalizes pre-launch inventory costs prior to regulatory approval.
Inventory costs resulting from these adjustments are recognized as cost of sales in the period in which they are incurred. When future commercialization F- 11 is considered probable and the future economic benefit is expected to be realized, based on management’s judgment, the Company capitalizes pre-launch inventory costs prior to regulatory approval.
Acquisitions SP-104 Acquisition In May 2022, the Company acquired the Delayed Burst Release Low Dose Naltrexone asset and intellectual property rights for the treatment of chronic pain, fibromyalgia and chronic post-COVID syndrome (collectively, the “SP-104 Assets”). Pursuant to the acquisition provisions, the Company is obligated to pay Aardvark Therapeutics, Inc.
Acquisitions and License Agreements SP-104 Acquisition In May 2022, the Company acquired the Delayed Burst Release Low Dose Naltrexone asset and intellectual property rights for the treatment of chronic pain, fibromyalgia and chronic post-COVID syndrome (collectively, the “SP-104 Assets”). Pursuant to the acquisition provisions, the Company is obligated to pay Aardvark Therapeutics, Inc.
Junior DIP Facility and Sorrento Stock Purchase Agreement Junior DIP Facility In July 2023, the Company entered into an agreement to provide Sorrento with a non-amortizing super-priority junior secured term loan facility (“Junior DIP Facility”) in an aggregate principal amount of $ 20.0 million (the “Junior DIP Loan Agreement”), which was funded in the same month.
Junior DIP Facility and Sorrento Stock Purchase Agreement Junior DIP Facility F- 33 In July 2023, the Company entered into an agreement to provide Sorrento with a non-amortizing super-priority junior secured term loan facility (“Junior DIP Facility”) in an aggregate principal amount of $ 20.0 million (the “Junior DIP Loan Agreement”), which was funded in the same month.
For purposes of determining the inputs used in the calculation of stock-based compensation, the Company determines the expected life assumption for options issued using the simplified method, which is an average of the contractual F- 14 term of the option and its ordinary vesting period since the Company does not have historic exercise behavior.
For purposes of determining the inputs used in the calculation of stock-based compensation, the Company determines the expected life assumption for options issued using the simplified method, which is an average of the contractual term of the option and its ordinary vesting period since the Company does not have historic exercise behavior.
In April 2023, Yorkville elected to convert $ 5.0 million of the outstanding principal and accrued interest of the first Convertible Debentures issued to Yorkville, resulting in the issuance of 632,431 shares of Common Stock at a conversion price of $ 8.00 per share and reducing the outstanding Convertible Debentures fair value balance by $ 4.4 million .
In April 2023, Yorkville elected to convert $ 5.0 million of the outstanding principal and accrued interest of the first Convertible Debentures issued to Yorkville, resulting in the issuance of 632,431 shares of Common Stock at a conversion price of $ 8.00 per share and reducing the outstanding Convertible Debentures fair value balance by $ 7.7 million.
In connection with the eCapital Credit Agreement, Scilex Pharma and the Lender entered into blocked account control agreements with respect to Scilex Pharma’s collections and eCapital Credit Agreement funding accounts, which permit the Lender to sweep all funds in the collections account to an account of the Lender for application to the outstanding amounts under the Revolving Facility, and to exercise customary secured party remedies with respect to the eCapital Credit Agreement funding account.
In connection with the eCapital Credit Agreement, Scilex Pharma and the Lender entered into blocked account control agreements with respect to Scilex Pharma’s collections and eCapital Credit Agreement funding accounts, which permitted the Lender to sweep all funds in the collections account to an account of the Lender for application to the outstanding amounts under the Revolving Facility, and to exercise customary secured party remedies with respect to the eCapital Credit Agreement funding account.
F- 26 Excise Tax In December 2022, the Department of the Treasury and the Internal Revenue Service (the “IRS”) issued guidelines on the implementation of the new code section added by the Inflation Reduction Act of 2022, which imposes a 1% excise tax on the total fair market value of stock repurchases during the tax year, subject to adjustments.
Excise Tax In December 2022, the Department of the Treasury and the Internal Revenue Service (the “IRS”) issued guidelines on the implementation of the new code section added by the Inflation Reduction Act of 2022, which imposes a 1% excise tax on the total fair market value of stock repurchases during the tax year, subject to adjustments.
The Company has the option to repay either (i) in cash, with premium equal to 5 % in respect of the principal amount of such payment, or (ii) by submitting a notice for an advance under the A&R Yorkville Purchase Agreement , or a series of advances thereunder, or any combination of (i) or (ii) as determined by the Company.
The Company had the option to repay either (i) in cash, with premium equal to 5 % in respect of the principal amount of such payment, or (ii) by submitting a notice for an advance under the A&R Yorkville Purchase Agreement , or a series of advances thereunder, or any combination of (i) or (ii) as determined by the Company.
Significant unobservable inputs assumptions included the likelihood of receiving FDA approval for SP-104, expected timing for receipt of FDA approval for SP-104, and a discount rate of 10.2 % . As of December 31, 2023 and December 31, 2022, the fair value of contingent consideration related to the Development Milestone Payment was $ 0.2 million .
Significant unobservable inputs assumptions included the likelihood of receiving FDA approval for SP-104, expected timing for receipt of FDA approval for SP-104, and a discount rate of 10.0 % . As of December 31, 2024 and 2023, the fair value of contingent consideration related to the Development Milestone Payment was $ 0.2 million .
The Development Milestone Payment represents a liability, which will be measured at fair value for each reporting period. As of December 31, 2023 and December 31, 2022, the contingent consideration associated with the Development Milestone Payment was $ 0.2 million , recorded in the other long-term liabilities.
The Development Milestone Payment represents a liability, which will be measured at fair value for each reporting period. As of December 31, 2024 and December 31, 2023, the contingent consideration associated with the Development Milestone Payment was $ 0.2 million , recorded in the other long-term liabilities.
F- 28 Stock Issued under Settlement Agreement with Hudson Bay Parties In August 2023, the Company, along with Hudson Bay Capital Management LP (“Hudson Bay”), Cove Lane Onshore Fund, LLC (“Cove Lane”), and HBC Investments LLC (“HBC” and collectively, the “Hudson Bay Parties”), entered into several agreements.
F- 38 Stock Issued under Settlement Agreement with Hudson Bay Parties In August 2023, the Company, along with Hudson Bay Capital Management LP (“Hudson Bay”), Cove Lane Onshore Fund, LLC (“Cove Lane”), and HBC Investments LLC (“HBC” and collectively, the “Hudson Bay Parties”), entered into several agreements.
F- 12 Derivative Liabilities Derivative liabilities are recorded on the Company’s consolidated balance sheets at their fair value on the date of issuance and are revalued on each balance sheet date until such instruments are exercised or expire, with changes in the fair value between reporting periods recorded as other income or expense.
Derivative Liabilities Derivative liabilities are recorded on the Company’s consolidated balance sheets at their fair value on the date of issuance and are revalued on each balance sheet date until such instruments are exercised or expire, with changes in the fair value between reporting periods recorded as other income or expense.
The Company accounted for the Penny Warrants as an equity classified instrument as they are indexed to the Company’s own stock and meet the conditions to be classified in equity under FASB ASC 815, Derivatives and Hedging, including sufficient available shares for the Company to settle the exercise of the warrants in shares.
F- 35 The Company accounted for the Penny Warrants as an equity classified instrument as they are indexed to the Company’s own stock and meet the conditions to be classified in equity under FASB ASC 815, Derivatives and Hedging, including sufficient available shares for the Company to settle the exercise of the warrants in shares.
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.
Basis of Presentation and Principles of Consolidation The accompanying consolidated 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.
As a result, management has concluded that the aforementioned conditions, among other things, raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the consolidated financial statements are issued. F- 16 3.
As a result, management has concluded that the aforementioned conditions, among other things, raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the consolidated financial statements are issued. 3.
The Convertible Debentures provide a conversion right, in which any portion of the outstanding and unpaid principal and any accrued but unpaid interest may be converted into shares of Common Stock, at a conversion price of $ 8.00 per share at the option of the holder of the Convertible Debentures.
The Convertible Debentures provided a conversion right, in which any portion of the outstanding and unpaid principal and any accrued but unpaid interest, may be converted into shares of Common Stock, at a conversion price of $ 8.00 per share at the option of the holder of the Convertible Debentures.
Under this agreement, the Company and the Guarantors granted to the Agent (on behalf of and for the benefit of the holders of the Oramed Note and any Additional Notes as defined thereunder) a security interest in all or substantially all of the properties of the Company and each of the Guarantors.
Under this F- 29 agreement, the Company and the Guarantors granted to the Agent (on behalf of and for the benefit of the holders of the Oramed Note and any Additional Notes as defined thereunder) a security interest in all or substantially all of the properties of the Company and each of the Guarantors.
The Company allocated the total consideration between the repurchased instruments by allocating to the repurchased Private Warrants their full value, with the remaining consideration allocated to the Common Stock, Preferred Stock, and Public Warrants based on their relative fair values as of September 21, 2023.
The Company allocated the total consideration between the repurchased instruments by allocating to the repurchased Private Warrants their full value, with the remaining consideration allocated to the Common Stock, Series A Preferred Stock, and Public Warrants based on their relative fair values as of September 21, 2023.
The Company calculates the associated lease liability and corresponding ROU asset upon lease commencement using a discount rate based on a credit-adjusted secured borrowing rate commensurate with the term of the lease. As of December 31, 2023 , the Company has no finance leases .
The Company calculates the associated lease liability and corresponding ROU asset upon lease commencement using a discount rate based on a credit-adjusted secured borrowing rate commensurate with the term of the lease. As of December 31, 2024 , the Company has no finance leases .
Holdco was formed to hold all of the equity interests in SCLX JV. Holdco and SCLX JV are parties to the Security Agreement and Subsidiary Guarantee (see Note 7). Preferred Stock Pursuant to the terms of the Sorrento SPA, the Company repurchased all of the outstanding Preferred Stock .
Holdco was formed to hold all of the equity interests in SCLX JV. Holdco and SCLX JV are parties to the Security Agreement and Subsidiary Guarantee (see Note 7). Series A Preferred Stock Pursuant to the terms of the Sorrento SPA, the Company repurchased all of the outstanding Series A Preferred Stock .
The Company considers control to have transferred upon delivery because the customer has legal title to the product, physical possession of the product has been transferred to the customer, the customer has significant risks and rewards of ownership of the product, and the Company has a present right to payment at that time.
The Company considers control to have transferred upon delivery because the customer has legal title to the product, physical possession of the product has been transferred to the customer, the customer has significant risks and rewards of ownership of the product, and the F- 14 Company has a present right to payment at that time.
F- 11 Contingent Consideration The fair value of contingent consideration liabilities assumed in business combinations is recorded as part of the purchase price consideration of the acquisition, and is determined using a discounted cash flow model or Monte Carlo simulation model.
Contingent Consideration The fair value of contingent consideration liabilities assumed in business combinations is recorded as part of the purchase price consideration of the acquisition, and is determined using a discounted cash flow model or Monte Carlo simulation model.
This lawsuit sought, among other relief, damages and an injunction enjoining the defendants from continuing to make false or misleading statements of fact about their respective OTC lidocaine patch products. The defendants filed motions to dismiss, which narrowed slightly the Company’s claims, but which motions the court largely rejected. Discovery was proceeding.
This lawsuit sought, among other relief, damages and an injunction enjoining the defendants from continuing to make false or misleading statements of fact about their respective OTC lidocaine patch products. The defendants filed motions to dismiss, which narrowed slightly the Company’s claims, but which motions the court largely rejected. Discovery proceeded.
Invoicing typically occurs upon shipment and the length of time between invoicing and when payment is due is not significant. The aggregate dollar value of unfulfilled orders as of December 31, 2023 and 2022 were not material.
Invoicing typically occurs upon shipment and the length of time between invoicing and when payment is due is not significant. The aggregate dollar value of unfulfilled orders as of December 31, 2024 and 2023 were not material.
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.
F- 9 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.
The Convertible Debentures bear interest at an annual rate of 7.00 % and were initially set to mature on December 21, 2023 . On October 11, 2023, the Company and Yorkville amended the Convertible Debentures.
The Convertible Debentures bore interest at an annual rate of 7.00 % and were initially set to mature on December 21, 2023 . On October 11, 2023, the Company and Yorkville amended the Convertible Debentures.
The Company issued four Subsequent Penny Warrants, each for 2,125,000 shares of Common Stock, one of which shall vest and become exercisable on the date that is the later of (i) each of March 19, 2024 , June 17, 2024 , September 15, 2024 or December 14, 2024 (the “Subsequent Penny Warrant Vesting Date”) and (ii) the earliest of (A) March 14, 2025 , (B) the date on which the Oramed Note has been repaid in full and (C) the Management Sale Trigger Date (as defined therein), if any.
The Company issued four Subsequent Penny Warrants, each for 2,125,000 shares of Common Stock, one of which shall vest and become exercisable on the date that is the later of (i) each of March 19, 2024 (the “CS-2 Warrant”), June 17, 2024 (the “CS-3 Warrant”), September 15, 2024 (the “CS-4 Warrant”) or December 14, 2024 (the “CS-5 Warrant”) (each, the “Subsequent Penny Warrant Vesting Date”) and (ii) the earliest of (A) March 14, 2025 , (B) the date on which the Oramed Note has been repaid in full and (C) the Management Sale Trigger Date (as defined therein), if any.
Scilex Pharma’s obligations under the eCapital Credit Agreement are secured by a continuing security interest in Scilex Pharma’s accounts receivable, arising from customers in the ordinary course of business.
Scilex Pharma’s obligations under the eCapital Credit Agreement were secured by a continuing security interest in Scilex Pharma’s accounts receivable, arising from customers in the ordinary course of business.
The initial maximum number of shares available for grant under the Inducement Plan is 1,400,000 shares of Common Stock (subject to adjustment for recapitalizations, stock splits, reorganizations and similar transactions). No awards were granted under the Inducement Plan during the year ended December 31, 2023.
The initial maximum number of shares available for grant under the Inducement Plan is 1,400,000 shares of Common Stock (subject to adjustment for recapitalizations, stock splits, reorganizations and similar transactions). No awards were granted under the Inducement Plan during the years ended December 31, 2024 and 2023.
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.
Assets and liabilities recorded at fair F- 10 value are categorized based upon the level of judgment associated with the inputs used to measure their fair value.
The Product Development Agreement will renew automatically for subsequent successive one-year renewal periods unless Scilex Pharma or the Developers terminate it upon 6-month written notice. On February 16, 2017, Scilex Pharma entered into a Commercial Supply Agreement (as amended, the “Supply Agreement”) with the two Developers to provide commercial supply of ZTlido and SP-103 to Scilex Pharma.
The Product Development Agreement will renew automatically for subsequent successive one-year renewal periods unless Scilex Pharma or the Developers terminate it upon six months’ written notice. On February 16, 2017, Scilex Pharma entered into a Commercial Supply Agreement (as amended, the “Supply Agreement”) with the two Developers to provide commercial supply of ZTlido and SP-103 to Scilex Pharma.
The Company and Virpax provide mutual releases of all claims that exist as of the Effective Date, whether known or unknown, arising from any allegations set forth in the Former Employee Action. Plaintiffs’ release relates to claims against Virpax only, which does not affect its claims against Mr. Mack. Plaintiffs have not released Mr.
The Company and Virpax provided mutual releases of all claims that existed as of the Effective Date, whether known or unknown, arising from any allegations set forth in the Former Employee Action. Plaintiffs’ release relates to claims against Virpax only, which does not affect its claims against Mr. Mack. Plaintiffs have not released Mr.
F- 36 The Company is subject to taxation in U.S. federal and state tax jurisdictions. All of the Company’s tax years will remain open for three years for examination by the federal and state tax authorities from the date of utilizations of net operating loss. There are no active tax compliance audits as of December 31, 2023.
F- 48 The Company is subject to taxation in U.S. federal and state tax jurisdictions. All of the Company’s tax years will remain open for three years for examination by the federal and state tax authorities from the date of utilizations of net operating loss. There are no active tax compliance audits as of December 31, 2024.
On February 29, 2024, the Company and Virpax entered into a definitive settlement agreement, which provides for, among other things, that Virpax will be obligated to make the following payments to the Company to settle the Former Employee Action: (i) $ 3.5 million (the “Initial Payment”) by two business days after the Effective Date (as defined therein); (ii) $ 2.5 million by July 1, 2024 and (iii) to the extent any of the following drug candidates are ever sold, royalty payments of (a) 6 % of annual Net Sales (as defined therein) of Epoladerm; (b) 6 % of annual Net Sales of Probudur and (c) 6 % of annual Net Sales of Envelta during the Royalty Term (as defined therein).
On February 29, 2024, the Company and Virpax entered into a definitive settlement agreement, which provides for, among other things, that Virpax would be obligated to make the following payments to the Company to settle the Former Employee Action: (i) $ 3.5 million (the “Initial Payment”) by two business days after the Effective Date (as defined therein), which payment has been made; (ii) $ 2.5 million by July 1, 2024, which payment has been made on July 8, 2024 and (iii) to the extent any of the following drug candidates are ever sold, royalty payments of (a) 6 % of annual Net Sales (as defined therein) of Epoladerm; (b) 6 % of annual Net Sales of Probudur and (c) 6 % of annual Net Sales of Envelta during the Royalty Term (as defined therein).
As of December 31, 2023 and 2022 , the Company’s inventory was primarily comprised of finished goods. F- 10 Property and Equipment, Net Property and equipment are carried at cost less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which are generally five to seven years.
As of December 31, 2024 and 2023 , the Company’s inventory was primarily comprised of finished goods. Property and Equipment, Net Property and equipment are carried at cost less accumulated depreciation. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which are generally five to seven years.
T he following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that together reflect the same amounts shown in the consolidated statements of cash flows (in thousands): December 31, 2023 December 31, 2022 Cash and cash equivalents $ 3,921 $ 2,184 Restricted cash 808 — Total cash, cash equivalents, and restricted cash $ 4,729 $ 2,184 Accounts Receivable, Net Accounts receivable are presented net of allowances for expected credit losses and prompt payment discounts.
T he following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that together reflect the same amounts shown in the consolidated statements of cash flows (in thousands): December 31, 2024 December 31, 2023 Cash and cash equivalents $ 3,272 $ 3,921 Restricted cash — 808 Total cash, cash equivalents, and restricted cash $ 3,272 $ 4,729 Accounts Receivable, Net Accounts receivable are presented net of allowances for expected credit losses and prompt payment discounts.
F- 27 A&R Yorkville Purchase Agreement Pursuant to the A&R Yorkville Purchase Agreement, the Company has the right, but not the obligation, in its sole and absolute discretion, to sell to Yorkville up to $ 500.0 million of shares of Common Stock at its request and subject to certain conditions by delivering written notice to Yorkville at any time until the first day of the month following the 36-month anniversary of the date on which the Company’s registration statement on Form S-1 registering such shares has been declared effective by the SEC.
A&R Yorkville Purchase Agreement Pursuant to the A&R Yorkville Purchase Agreement, the Company had the right, but not the obligation, in its sole and absolute discretion, to sell to Yorkville up to $ 500.0 million of shares of Common Stock at its request and subject to certain conditions by delivering written notice to Yorkville at any time until the first day of the month following the 36-month anniversary of the date on which the Company’s registration statement on Form S-1 registering such shares was declared effective by the SEC.
Potential Common Stock consists of the incremental Common Stock issuable upon the exercise of stock options and warrants (using the treasury stock method). In the computation of net loss per share, treasury shares are not included as part of the outstanding shares.
Potential Common Stock consists of the incremental Common Stock issuable upon the exercise of stock options and warrants (using the treasury stock method or the reverse treasury stock method, as applicable). In the computation of net loss per share, treasury shares are not included as part of the outstanding shares.
The Company is currently developing three product candidates, SP-102 (10 mg, dexamethasone sodium phosphate viscous gel), a novel, viscous gel formulation of a widely used corticosteroid for epidural injections to treat lumbosacral radicular pain, or sciatica for which the Company has completed a Phase 3 study (“SP-102” or “SEMDEXA”), SP-103 (lidocaine topical system) 5.4% (“SP-103”), a next-generation, triple-strength formulation of ZTlido, for the treatment of chronic neck pain and for which the Company has recently completed a Phase 2 trial in low back pain, and SP-104 (4.5 mg, low-dose naltrexone hydrochloride delayed-burst release low dose naltrexone hydrochloride capsules) (“SP-104”), a novel low-dose delayed-release naltrexone hydrochloride being developed for the treatment of fibromyalgia, for which Phase 1 trials were completed in the second quarter of 2022 and a Phase 2 clinical trial is expected to commence in 2024.
The Company is currently developing three product candidates, SP-102 (10 mg, dexamethasone sodium phosphate viscous gel), a novel, viscous gel formulation of a widely used corticosteroid for epidural injections to treat lumbosacral radicular pain, or sciatica for which the Company has completed a Phase 3 study (“SP-102” or “SEMDEXA”), SP-103 (lidocaine topical system) 5.4% (“SP-103”), a next-generation, triple-strength formulation of ZTlido, for the treatment of chronic neck pain and for which the Company completed a Phase 2 trial in acute low back pain (“LBP”) in the third quarter of 2023, and SP-104 (4.5 mg, low-dose naltrexone hydrochloride delayed-burst release low dose naltrexone hydrochloride capsules) (“SP-104”), a novel low-dose delayed-release naltrexone hydrochloride being developed for the treatment of fibromyalgia, for which Phase 1 trials were completed in the second quarter of 2022.
Pursuant to the Product Development Agreement, Scilex Pharma is required to make aggregate royalty payments between 25 % and 35 % to the Developers based on net profits . For the years ended December 31, 2023 and 2022, Scilex Pharma made royalty payments in the amount of $ 8.3 million and $ 2.3 million .
Pursuant to the Product Development Agreement, Scilex Pharma is required to make aggregate royalty payments between 25 % and 35 % to the Developers based on net profits . For each of the years ended December 31, 2024 and 2023, Scilex Pharma made royalty payments in the amount of $ 8.3 million .
On January 26 and February 2, 2024, Scilex Pharma entered into two separate settlement agreements and mutual releases with the two manufacturers that resolve the Action. The terms of those agreements are confidential.
On January 26 and February 2, 2024, Scilex Pharma entered into two separate settlement agreements and mutual releases with the two manufacturers that resolved the OTC Action. The terms of those agreements are confidential.
From time to time the Company may become involved in various legal proceedings, including those that may arise in the ordinary course of business. F- 32 Sanofi-Aventis U.S. LLC and Hisamitsu America, Inc. Litigation On February 23, 2021, the Company filed an action (the “Action”) in the U.S. District Court for the Northern District of California against Sanofi-Aventis U.S.
From time to time the Company may become involved in various legal proceedings, including those that may arise in the ordinary course of business. F- 44 Sanofi-Aventis U.S. LLC and Hisamitsu America, Inc. Litigation On February 23, 2021, the Company filed an action (the “OTC Action”) in the U.S. District Court for the Northern District of California against Sanofi-Aventis U.S.
F- 29 Scilex Holding Company 2022 Equity Incentive Plan In October 2022, the Board of Directors of the Company adopted the Scilex Holding Company 2022 Equity Incentive Plan (the “Equity Incentive Plan”).
F- 41 Scilex Holding Company 2022 Equity Incentive Plan In October 2022, the Board of Directors of the Company adopted the Scilex Holding Company 2022 Equity Incentive Plan (the “Equity Incentive Plan”).
The ATM Shares may be offered only by means of a prospectus forming a part of the Shelf S-3 Registration Statement. The Sales Agents are entitled to a commission equal to 3.0 % of the gross proceeds from each sale of shares of Common Stock.
The ATM Shares were offered only by means of a prospectus forming a part of the Shelf S-3 Registration Statement. The Sales Agents were entitled to a commission equal to 3.0 % of the gross proceeds from each sale of shares of Common Stock.
As of December 31, 2023 and 2022, Scilex Pharma had ending balances of accrued royalty payables of $ 2.4 million and $ 2.2 million , respectively. Total royalty expense recorded within cost of revenue was $ 8.5 million and $ 4.5 million for the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2024 and 2023, Scilex Pharma had ending balances of accrued royalty payables of $ 4.0 million and $ 2.4 million , respectively. Total royalty expense recorded within cost of revenue was $ 9.9 million and $ 8.5 million for the years ended December 31, 2024 and 2023, respectively.
Revenues from product sales are recorded net of reserves established for commercial and government rebates, fees and chargebacks, wholesaler and distributor fees, sales returns and prompt payment discounts.
Revenues from product sales are recorded net of reserves established for commercial and government rebates, fees and chargebacks, wholesaler and distributor fees, sales returns, special marketing programs and prompt payment discounts.
The Agent’s rights and interests under that certain Subsidiary Guarantee, dated as of September 21, 2023, entered into by us and each of our subsidiaries with Oramed and the Agent (the “Subsidiary Guarantee”), would be secured by first priority liens on certain other collateral and second priority liens on the ABL Priority Collateral.
The Agent’s rights and interests under the Subsidiary Guarantee, dated as of September 21, 2023, entered into by the Company and each of its subsidiaries with Oramed and the Agent (the “Subsidiary Guarantee”), would be secured by first priority liens on certain other collateral and second priority liens on the ABL Priority Collateral.
The eCapital Credit Agreement contains customary events of default and also provides that an event of default includes a change of control of Scilex Pharma and the failure by the Company to issue at least $ 75.0 million of debt or equity by September 30, 2023, which condition was satisfied by the issuance of the Oramed Note.
The eCapital Credit Agreement contained customary events of default and also provided that an event of default included a change of control of Scilex Pharma and the failure by the Company to issue at least $ 75.0 million of debt or equity by September 30, 2023, which condition was satisfied by the issuance of the Oramed Note.
The Subsequent Penny Warrants to purchase up to an aggregate of 8,500,000 shares of Common Stock are not vested as of the closing date of September 21, 2023 and the vesting is based on the passage of time, the Company’s repayment of the Oramed Note or the occurrence of the Management Sale Trigger Date (as defined F- 37 therein).
The Subsequent Penny Warrants to purchase up to an aggregate of 8,500,000 shares of Common Stock were not vested as of the closing date of September 21, 2023 and the vesting was based on the passage of time, the Company’s repayment of the Oramed Note or the occurrence of the Management Sale Trigger Date (as defined therein).
Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in our consolidated statement of operations. Treasury Stock The Company uses the cost method to account for repurchases of its stock.
Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in our consolidated statements of operations and comprehensive loss. Treasury Stock The Company uses the cost method to account for repurchases of its stock.
Interest expense related to these financial instruments is included in the changes in fair value. As a result of applying the fair value option, direct costs and fees related to the Convertible Debentures and the Oramed Note were expensed as incurred.
Interest expense related to these financial instruments is included in the changes in fair value. As a result of applying the fair value option, direct costs and fees related to these financial instruments were expensed as incurred.
No interest or penalties have been recognized as of and for the periods ended December 31, 2023, 2022 and 2021. The Company believes that no material amount of the liabilities for uncertain tax positions are expected to reverse within 12 months of December 31, 2023 . 13.
No interest or penalties have been recognized as of and for the years ended December 31, 2024 and 2023. The Company believes that no material amount of the liabilities for uncertain tax positions are expected to reverse within 12 months of December 31, 2024 . 13.
All indebtedness incurred and outstanding under the eCapital Credit Agreement will be due and payable in full on July 1, 2026, unless the eCapital Credit Agreement is earlier terminated. The eCapital Credit Agreement contains a financial covenant requiring Scilex Pharma to maintain cash on hand of at least $ 1.0 million at all times.
All indebtedness incurred and outstanding under the eCapital Credit Agreement would be due and payable in full on July 1, 2026, unless the eCapital Credit Agreement was earlier terminated. The eCapital Credit Agreement contained a financial covenant requiring Scilex Pharma to maintain cash on hand of at least $ 1.0 million at all times.
Income Taxes Total loss before income taxes for the years ended December 31, 2023, 2022 and 2021 did not include a foreign component.
Income Taxes Total loss before income taxes for the years ended December 31, 2024 and 2023 did not include a foreign component.
Due to such uncertainties surrounding the realization of the deferred tax assets, the Company maintains a valuation allowance of $ 96.8 million against its deferred tax assets as of December 31, 2023. Realization of the deferred tax assets will be primarily dependent upon the Company’s ability to generate sufficient taxable income prior to the expiration of its net operating losses.
Due to such uncertainties surrounding the realization of the deferred tax assets, the Company maintains a valuation allowance of $ 113.7 million against its deferred tax assets as of December 31, 2024. Realization of the deferred tax assets will be primarily dependent upon the Company’s ability to generate sufficient taxable income prior to the expiration of its net operating losses.
The Company recorded the Convertible Debentures and the Oramed Note at fair value upon issuance with changes in fair value recorded as change in fair value of debt and liability instruments in the consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income.
The Company recorded these financial instruments at fair value upon issuance with changes in fair value recorded as change in fair value of debt and liability instruments in the consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income.
The ABL Priority Collateral consists of all of the Company’s properties identified in the description of collateral in the UCC-1 Financing Statement filed with the Delaware Secretary of State on June 27, 2023.
The ABL Priority Collateral consisted of all of the Company’s properties F- 28 identified in the description of collateral in the UCC-1 Financing Statement filed with the Delaware Secretary of State on June 27, 2023.
Lease expense was $ 1.1 million , $ 0.5 million and $ 0.6 million for the years ended December 31, 2023, 2022 and 2021, respectively, and was primarily comprised of operating lease costs. The lease expense also included variable lease costs and sublease income, which were immaterial for the periods presented.
Lease expense was $ 1.0 million and $ 1.1 million for the years ended December 31, 2024 and 2023, respectively, and was primarily comprised of operating lease costs. The lease expense also included variable lease costs and sublease income, which were immaterial for the periods presented.
Riley up to $ 500.0 million of shares of Common Stock, subject to certain limitations and conditions set forth therein, from time to time at the Company’s sole and absolute discretion, during the term of the B. Riley Purchase Agreement. The Company’s right to sell shares of Common Stock pursuant to the B.
Riley Purchase Agreement, the Company had the right, but not the obligation, to sell to B. Riley up to $ 500.0 million of shares of Common Stock, subject to certain limitations and conditions set forth therein, from time to time at the Company’s sole and absolute discretion, during the term of the B. Riley Purchase Agreement.
F- 34 Supplemental quantitative information related to leases includes the following: Year Ended December 31, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases (in thousands) $ ( 1,021 ) $ ( 746 ) Weighted average remaining lease term in years — operating leases 3.6 1.8 Weighted average discount rate — operating leases 11.1 % 11.8 % Approximate future minimum lease payments under operating leases were as follows (in thousands): Year Ended December 31, Amount 2024 $ 1,042 2025 916 2026 944 2027 724 Total lease payments 3,626 Less imputed interest ( 630 ) Total lease liabilities 2,996 Less current portion of lease liability 759 Lease liability, net of current portion $ 2,237 12.
F- 46 Supplemental quantitative information related to leases includes the following: Year Ended December 31, 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases (in thousands) $ ( 1,042 ) $ ( 1,021 ) Weighted average remaining lease term in years — operating leases 2.8 3.6 Weighted average discount rate — operating leases 11.0 % 11.1 % Approximate future minimum lease payments under operating leases were as follows (in thousands): Year Ended December 31, Amount 2025 $ 916 2026 944 2027 724 Total lease payments 2,584 Less imputed interest ( 347 ) Total lease liabilities 2,237 Less current portion of lease liability 714 Lease liability, net of current portion $ 1,523 12.
Riley Purchase Agreement shall end on the first day of the month following the 36-month anniversary of the date on which the B. Riley Registration Statement (as defined below) was initially declared effective by the SEC. Pursuant to the terms of the B.
The Company’s right to sell shares of Common Stock pursuant to the B. Riley Purchase Agreement shall end on the first day of the month following the 36-month anniversary of the date on which the B. Riley Registration Statement (as defined below) was initially declared effective by the SEC. Pursuant to the terms of the B.
Pursuant to the ATM Sales Agreement, the Company may offer and sell (the “Offering”) shares of Common Stock up to $ 170,000,000 (the “ATM Shares”), through or to the Sales Agents. The Company has no obligation to sell any shares of Common Stock under the ATM Sales Agreement and may suspend offers at any time.
Pursuant to the ATM Sales Agreement, the Company was able to offer and sell (the “Offering”) shares of Common Stock up to $ 170,000,000 (the “ATM Shares”), through or to the Sales Agents. The Company had no obligation to sell any shares of Common Stock under the ATM Sales Agreement and could suspend offers at any time.

… 395 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

248 edited+146 added−100 removed677 unchanged
Biggest changeAs of December 31, 2023, none of the outstanding Penny Warrants to purchase an aggregate of 13,000,000 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $0.01 per share.
Biggest changeAs of December 31, 2024, (i) outstanding Penny Warrants to purchase an aggregate of 6,500,000 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $0.01 per share, (ii) outstanding February 2024 BDO Firm Warrants to purchase an aggregate of 3,803,447 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $1.70 per share; (iii) outstanding February 2024 BDO Representative Warrants to purchase an aggregate of 470,588 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $2.125 per share; (iv) outstanding Deposit Warrant to purchase an aggregate of 3,250,000 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $1.20 per share, (v) outstanding April 2024 RDO Common Warrants to purchase an aggregate of 15,000,000 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $1.10 per share and (vi) outstanding April 2024 RDO Placement Agent Warrants to purchase an aggregate of 1,200,000 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $1.25 per share.
Risks Related to our Business and Operations • If we are unable to retain our key executives, it may delay our development efforts and harm our business, financial condition and results of operations. • Any disruption in our research and development facilities could adversely affect our business, financial condition and results of operations. 54 Risks Related to our Intellectual Property • We are substantially dependent on the intellectual property we in-license from Oishi and Itochu, and if we lose the right to license such intellectual property or if the Product Development Agreement is terminated for any reason, our ability to commercialize ZTlido and develop and commercialize SP-103 would be harmed. • We are party to the Romeg Agreement for the in-licensing of certain intellectual property rights from Romeg with respect to the commercialization of GLOPERBA, and if we lose the right to license such intellectual property or if the Romeg Agreement is terminated for any reason, our ability to commercialize GLOPERBA would be harmed. • If we are unable to maintain patent protection for ZTlido, GLOPERBA, ELYXYB and our product candidates, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
Risks Related to our Business and Operations • If we are unable to retain our key executives, it may delay our development efforts and harm our business, financial condition and results of operations. • Any disruption in our research and development facilities could adversely affect our business, financial condition and results of operations. 54 Risks Related to our Intellectual Property • We are substantially dependent on the intellectual property we in-license from Oishi and Itochu, and if we lose the right to license such intellectual property or if the Product Development Agreement is terminated for any reason, our ability to commercialize ZTlido and develop and commercialize SP-103 would be harmed. • We are party to the Romeg License Agreement for the in-licensing of certain intellectual property rights from Romeg with respect to the commercialization of GLOPERBA, and if we lose the right to license such intellectual property or if the Romeg License Agreement is terminated for any reason, our ability to commercialize GLOPERBA would be harmed. • If we are unable to maintain patent protection for ZTlido, GLOPERBA, ELYXYB and our product candidates, or if the scope of the patent protection obtained is not sufficiently broad, we may not be able to compete effectively in our markets.
Lifecore has the right to terminate the Lifecore Master Services Agreement under certain circumstances, including, but not limited to: (1) if we are in material breach of the agreement and fail to cure such breach within 30 days of written notice; (2) if we (a) become insolvent, (b) cease to function as a going concern, (c) become convicted of or plead guilty to a charge of violating any law relating to either party’s business, or (d) engage in any act which materially impairs goodwill associated with SEMDEXA or materially impairs the terminating party’s trademark or trade name; (3) if we fail to pay past due invoices upon 30 days’ written notice, or (4) if we reject or fail to respond to a major change proposed by Lifecore that does not change Semnur’s written and approved acceptance criteria in its product 62 specifications.
Lifecore has the right to terminate the Lifecore Master Services Agreement under certain circumstances, including, but not limited to: (1) if we are in material breach of the agreement and fail to cure such breach within 30 days of written notice; (2) if we (a) become insolvent, (b) 62 cease to function as a going concern, (c) become convicted of or plead guilty to a charge of violating any law relating to either party’s business, or (d) engage in any act which materially impairs goodwill associated with SEMDEXA or materially impairs the terminating party’s trademark or trade name; (3) if we fail to pay past due invoices upon 30 days’ written notice, or (4) if we reject or fail to respond to a major change proposed by Lifecore that does not change Semnur’s written and approved acceptance criteria in its product specifications.
Our ability to commercialize GLOPERBA and develop Licensed Products depends on the effectiveness and continuation of the Romeg Agreement. If we lose the right to license the intellectual property rights granted by the Romeg Agreement, our ability to develop GLOPERBA as well as new product candidates based on the licensed intellectual property would be harmed.
Our ability to commercialize GLOPERBA and develop Licensed Products depends on the effectiveness and continuation of the Romeg License Agreement. If we lose the right to license the intellectual property rights granted by the Romeg License Agreement, our ability to develop GLOPERBA as well as new product candidates based on the licensed intellectual property would be harmed.
Patents granted before the implementation of the UPC have the option of opting out of the jurisdiction of the UPC and remaining as national patents in the UPC countries.
Patents granted before the implementation of the UPC have the option of opting out of the jurisdiction of the UPC and remaining as national patents in the UPC countries.
Patents that remain under the jurisdiction of the UPC will be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries who are signatories to the UPC. We cannot predict with certainty the long-term effects of any potential changes.
Patents that remain under the jurisdiction of the UPC will be potentially vulnerable to a single UPC-based revocation challenge that, if successful, could invalidate the patent in all countries who are signatories to the UPC. We cannot predict with certainty the long-term effects of any potential changes.
Risks Related to Government Regulations The regulatory approval processes of the FDA and comparable non-U.S. regulatory authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business, financial condition and results of operations will be substantially harmed.
Risks Related to Government Regulations The regulatory approval processes of the FDA and comparable non-U.S. regulatory authorities are lengthy, time-consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business, financial condition and results of operations will be substantially harmed.
Conducting business internationally involves a number of risks, including: • multiple, sometimes conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, anti-bribery and anti-corruption laws, regulatory requirements and other governmental approvals, permits and licenses; • difficulties in enforcing our intellectual property rights and in defending against third-party threats and intellectual property enforcement actions against us, our distributors or any of our third-party suppliers; • failure by us or our distributors to obtain appropriate licenses or regulatory approvals for the sale or use of our product candidates, if approved, in various countries; • difficulties in managing foreign operations; • cost and availability of shipping and other means of product transportation; • foreign currency exchange rate fluctuations; • changes in duties and tariffs, license obligations and other non-tariff barriers to trade; • the imposition of new trade restrictions; • difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; • complexities associated with managing multiple payor-reimbursement regimes or self-pay systems; • natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and • failure to comply with the FCPA, including its books and records provisions and its anti-bribery provisions, and similar anti-bribery and anti-corruption laws in other jurisdictions, for example, by failing to maintain accurate information and control over sales or distributors’ activities.
Conducting business internationally involves a number of risks, including: • multiple, sometimes conflicting and changing laws and regulations such as tax laws, export and import restrictions, employment laws, anti-bribery and anti-corruption laws, regulatory requirements and other governmental approvals, permits and licenses; • difficulties in enforcing our intellectual property rights and in defending against third-party threats and intellectual property enforcement actions against us, our distributors or any of our third-party suppliers; • failure by us or our distributors to obtain appropriate licenses or regulatory approvals for the sale or use of our product candidates, if approved, in various countries; • difficulties in managing foreign operations; • cost and availability of shipping and other means of product transportation; • foreign currency exchange rate fluctuations; • changes in duties and tariffs, license obligations and other non-tariff barriers to trade; • the imposition of new trade restrictions; • difficulties in enforcing agreements and collecting receivables through certain foreign legal systems; • complexities associated with managing multiple payor-reimbursement regimes or self-pay systems; 76 • natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and • failure to comply with the FCPA, including its books and records provisions and its anti-bribery provisions, and similar anti-bribery and anti-corruption laws in other jurisdictions, for example, by failing to maintain accurate information and control over sales or distributors’ activities.
Our ability to execute on our business model and generate revenues depends on a number of factors including our ability to: • successfully complete ongoing pre-clinical studies and clinical trials and obtain regulatory approvals for our current and future product candidates; • identify new acquisition or in-licensing opportunities; • successfully identify new product candidates and advance those product candidates into pre-clinical studies and clinical trials; • raise additional funds when needed and on terms acceptable to us; • attract and retain experienced management and advisory teams; • add operational, financial and management information systems and personnel, including personnel to support clinical, pre-clinical manufacturing and planned future commercialization efforts and operations; • launch commercial sales of our product candidates, whether alone or in collaboration with others; • initiate and continue relationships with third-party suppliers and manufacturers and have commercial quantities of product candidates manufactured at acceptable cost and quality levels and in compliance with the FDA, and other regulatory requirements; 56 • set acceptable prices for product candidates and obtain coverage and adequate reimbursement from third-party payors; • achieve market acceptance of product candidates in the medical community and with third-party payors and consumers; and • maintain, expand and protect our intellectual property portfolio.
Our ability to execute on our business model and generate revenues depends on a number of factors including our ability to: • successfully complete ongoing clinical trials and obtain regulatory approvals for our current and future product candidates; • identify new acquisition or in-licensing opportunities; • successfully identify new product candidates and advance those product candidates into pre-clinical studies and clinical trials; • raise additional funds when needed and on terms acceptable to us; • attract and retain experienced management and advisory teams; • add operational, financial and management information systems and personnel, including personnel to support clinical, manufacturing and planned future commercialization efforts and operations; • launch commercial sales of our product candidates, whether alone or in collaboration with others; • initiate and continue relationships with third-party suppliers and manufacturers and have commercial quantities of product candidates manufactured at acceptable cost and quality levels and in compliance with the FDA, and other regulatory requirements; • set acceptable prices for product candidates and obtain coverage and adequate reimbursement from third-party payors; • achieve market acceptance of product candidates in the medical community and with third-party payors and consumers; and • maintain, expand and protect our intellectual property portfolio.
The laws that may affect our ability to operate include, but are not limited to: • the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual, or the furnishing, recommending, or arranging for an item or service for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs — a person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or special intent to violate the law in order to have committed a violation; in addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act; • federal civil and criminal false claims laws, including the False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds, or knowingly making, using, or causing to be made or used a false statement material to a false or fraudulent claim, or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government.
The laws that may affect our ability to operate include, but are not limited to: • the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual, or the furnishing, recommending, or arranging for an item or service for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs — a person or entity does not need to have actual knowledge of the federal Anti-Kickback Statute or special intent to violate the statute in order to have committed a violation; in addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act; • federal civil and criminal false claims laws, including the False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment of government funds, or knowingly making, using, or causing to be made or used a false statement material to a false or fraudulent claim, or knowingly concealing or knowingly and improperly avoiding or decreasing an obligation to pay money to the federal government.
Romeg has the right to terminate the Romeg Agreement under certain circumstances, including, among other things: (a) in the event we are in material breach of the Romeg Agreement, unless we have cured any such breach within 60 days after any notice thereof was provided; (b) upon notice to us, if we fail to timely pay any milestone payment, percentage royalties or minimum quarterly royalties or fail to timely deliver the requisite quarterly report, which termination will be effective 30 days after the date of such notice, unless we have made such payment in full or delivered such quarterly report within such 30 day period; (c) immediately, if we challenge the licensed patents under any court action or proceeding or before any patent office or assist any third party to conduct any of these activities; (d) by written notice to us if sales of Licensed Products do not commence or continue within specified periods agreed to by the parties; or (e) in the event of our bankruptcy or assignment for the benefit of creditors.
Romeg has the right to terminate the Romeg License Agreement under certain circumstances, including, among other things: (a) in the event we are in material breach of the Romeg License Agreement, unless we have cured any such breach within 60 days after any notice thereof was provided; (b) upon notice to us, if we fail to timely pay any milestone payment, percentage royalties or minimum quarterly royalties or fail to timely deliver the requisite quarterly report, which termination will be effective 30 days after the date of such notice, unless we have made such payment in full or delivered such quarterly report within such 30 day period; (c) immediately, if we challenge the licensed patents under any court action or proceeding or before any patent office or assist any third party to conduct any of these activities; (d) by written notice to us if sales of the Licensed Products do not commence or continue within specified periods agreed to by the parties; or (e) in the event of our bankruptcy or assignment for the benefit of creditors.
Patent and Trademark Office (“PTO”) and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process, the non-compliance with which can result in abandonment or lapse of a patent or patent application, and partial or complete loss of patent rights in the relevant jurisdiction; • patent applications may not result in any patents being issued; 80 • patents may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage; • our competitors, many of whom have substantially greater resources than we do and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with or block our ability to make, use and sell our product candidates; • there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns; • countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market competing products; • other parties may have designed around our claims or developed technologies that may be related or competitive to our platform, may have filed or may file patent applications and may have received or may receive patents that overlap or conflict with our patent applications, either by claiming the same methods or devices or by claiming subject matter that could dominate our patent position; • any successful intellectual property challenge to any patents owned by or licensed to us could deprive us of rights necessary for the practice of our technologies or the successful commercialization of any products or product candidates that we may develop; • because patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we or our licensors were the first to file any patent application related to our product candidates, proprietary technologies and their uses; and • an interference proceeding can be provoked by a third party or instituted by the PTO to determine who was the first to invent any of the subject matter covered by the patent claims of our applications for any application with an effective filing date before March 16, 2013.
Patent and Trademark Office (“PTO”) and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process, the non-compliance with which can result in abandonment or lapse of a patent or patent application, and partial or complete loss of patent rights in the relevant jurisdiction; • patent applications may not result in any patents being issued; • patents may be challenged, invalidated, modified, revoked, circumvented, found to be unenforceable or otherwise may not provide any competitive advantage; • our competitors, many of whom have substantially greater resources than we do and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with or block our ability to make, use and sell our product candidates; • there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns; • countries other than the United States may have patent laws less favorable to patentees than those upheld by U.S. courts, allowing foreign competitors a better opportunity to create, develop and market competing products; • other parties may have designed around our claims or developed technologies that may be related or competitive to our platform, may have filed or may file patent applications and may have received or may receive patents that overlap or 81 conflict with our patent applications, either by claiming the same methods or devices or by claiming subject matter that could dominate our patent position; • any successful intellectual property challenge to any patents owned by or licensed to us could deprive us of rights necessary for the practice of our technologies or the successful commercialization of any products or product candidates that we may develop; • because patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we or our licensors were the first to file any patent application related to our product candidates, proprietary technologies and their uses; and • an interference proceeding can be provoked by a third party or instituted by the PTO to determine who was the first to invent any of the subject matter covered by the patent claims of our applications for any application with an effective filing date before March 16, 2013.
Any claims of patent infringement asserted by third parties would be time-consuming and could: • result in costly litigation; • divert the time and attention of our technical personnel and management; • cause development delays; • prevent us from commercializing our product candidates until the asserted patent expires or is held finally invalid or not infringed in a court of law; • require us to develop non-infringing technology, which may not be possible on a cost-effective basis; • require us to pay damages to the party whose intellectual property rights we may be found to be infringing, which may include treble damages if we are found to have been willfully infringing such intellectual property; • require us to pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing; and/or • require us to enter into royalty or licensing agreements, which may not be available on commercially reasonable terms, or at all.
Any claims of patent infringement asserted by third parties would be time-consuming and could: • result in costly litigation; • divert the time and attention of our technical personnel and management; • cause development delays; • prevent us from commercializing our product candidates until the asserted patent expires or is held finally invalid or not infringed in a court of law; 83 • require us to develop non-infringing technology, which may not be possible on a cost-effective basis; • require us to pay damages to the party whose intellectual property rights we may be found to be infringing, which may include treble damages if we are found to have been willfully infringing such intellectual property; • require us to pay the attorney’s fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing; and/or • require us to enter into royalty or licensing agreements, which may not be available on commercially reasonable terms, or at all.
The future discovery of previously unknown problems with a product, including adverse events of unanticipated type, severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things: • investigation or additional study obligations; • communications to prescribers or patients about specific information or issues; 93 • restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls; • fines, warning or untitled letters or holds on clinical trials; • refusal by the FDA to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals; • product seizure or detention, or refusal to permit the import or export of products; and • injunctions or the imposition of civil or criminal penalties.
The future discovery of previously unknown problems with a product, including adverse events of unanticipated type, severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things: • investigation or additional study obligations; • communications to prescribers or patients about specific information or issues; • restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary or mandatory product recalls; • fines, warning or untitled letters or holds on clinical trials; • refusal by the FDA to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product license approvals; • product seizure or detention, or refusal to permit the import or export of products; and • injunctions or the imposition of civil or criminal penalties.
Patient enrollment is affected by many factors, including: • the size and nature of the patient population; 67 • the proximity of patients to clinical sites; • the eligibility and exclusion criteria for the trial; • the design of the clinical trial; • competing clinical trials; • the risk that enrolled patients will not complete a clinical trial; • ability to monitor patients adequately during and after treatment; • potential disruptions caused by COVID-19 (or other similar disruptions), including difficulties in initiating clinical sites, enrolling and retaining participants, diversion of healthcare resources away from clinical trials, travel or quarantine policies that may be implemented and other factors; • our ability to recruit clinical trial investigators with the appropriate competencies and experience; and • clinicians’ and patients’ perceptions as to the potential advantages of the product candidate in relation to other available products.
Patient enrollment is affected by many factors, including: • the size and nature of the patient population; • the proximity of patients to clinical sites; • the eligibility and exclusion criteria for the trial; • the design of the clinical trial; • competing clinical trials; • the risk that enrolled patients will not complete a clinical trial; • ability to monitor patients adequately during and after treatment; • potential disruptions caused by COVID-19 (or other similar disruptions), including difficulties in initiating clinical sites, enrolling and retaining participants, diversion of healthcare resources away from clinical trials, travel or quarantine policies that may be implemented and other factors; • our ability to recruit clinical trial investigators with the appropriate competencies and experience; and • clinicians’ and patients’ perceptions as to the potential advantages of the product candidate in relation to other available products.
Disputes may arise between us and our licensors regarding intellectual property rights subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • our financial or other obligations under the license agreement; • whether and the extent to which our technology and processes infringe on intellectual property rights of the licensor that are not subject to the licensing agreement; • our right to sublicense intellectual property rights to third parties under collaborative development relationships; • our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations; and • the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners.
Disputes may arise between us and our licensors regarding intellectual property rights subject to a license agreement, including: • the scope of rights granted under the license agreement and other interpretation-related issues; • our financial or other obligations under the license agreement; • whether and the extent to which our technology and processes infringe on intellectual property rights of the licensor that are not subject to the licensing agreement; • our right to sublicense intellectual property rights to third parties under collaborative development relationships; 80 • our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates, and what activities satisfy those diligence obligations; and • the ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners.
Regardless of the merits or eventual outcome, liability claims may result in: 74 • loss of revenue from product sales; • decreased demand for our product candidates or products that we develop; • injury to our reputation; • withdrawal of clinical trial participants; • initiation of investigations by regulators; • restrictions on labeling, the marketing or manufacturing of the product, withdrawal of the product from the market or voluntary or mandatory product recalls; • costs to defend the related litigation; • a diversion of management’s time and our resources; • substantial monetary awards to trial participants or patients; and • the inability to commercialize our product candidates.
Regardless of the merits or eventual outcome, liability claims may result in: • loss of revenue from product sales; • decreased demand for our product candidates or products that we develop; • injury to our reputation; • withdrawal of clinical trial participants; • initiation of investigations by regulators; • restrictions on labeling, the marketing or manufacturing of the product, withdrawal of the product from the market or voluntary or mandatory product recalls; • costs to defend the related litigation; • a diversion of management’s time and our resources; • substantial monetary awards to trial participants or patients; and • the inability to commercialize our product candidates.
Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, participants being exposed to unacceptable health risks, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.
Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or 65 our clinical protocols, inspection of the clinical trial operations or trial site by the FDA resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, participants being exposed to unacceptable health risks, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.
If the Romeg Agreement is terminated for certain reasons, such as our material breach of the agreement, our bankruptcy, or our failure to timely pay milestone payments, we will be required upon Romeg’s request to transfer all licensed intellectual property rights, including those relating to GLOPERBA and the Licensed Products, to Romeg or its designee, within thirty days after the termination of the Romeg Agreement at a price to be agreed upon by the parties.
If the Romeg License Agreement is terminated for certain reasons, such as our material breach of the agreement, our bankruptcy, or our failure to timely pay milestone payments, we will be required upon Romeg’s request to transfer all licensed intellectual property rights, including those relating to GLOPERBA and the Licensed Products, to Romeg or its designee, within thirty days after the termination of the Romeg License Agreement at a price to be agreed upon by the parties.
Pursuant to the Certificate of Incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) and any appellate court therefrom, will, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, employees or stockholders to us or our stockholders; (iii) any action asserting a claim against us or any of our current or former directors, officers, employees or stockholders arising pursuant to any provision of the DGCL, the Certificate of Incorporation or the Bylaws; (iv) any claim or cause of action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws; (v) any action or proceeding asserting a claim against us or any of our current or former directors, officers, employees or stockholders as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware and (vi) any action asserting an “internal corporate claim,” as that term is defined in Section 115 of the DGCL; 109 provided that , for the avoidance of doubt, the foregoing forum selection provision will not apply to claims arising under the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
Pursuant to the Certificate of Incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) and any appellate court therefrom, will, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, employees or stockholders to us or our stockholders; (iii) any action asserting a claim against us or any of our current or former directors, officers, employees or stockholders arising pursuant to any provision of the DGCL, the Certificate of Incorporation or the Bylaws; (iv) any claim or cause of action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws; (v) any action or proceeding asserting a claim against us or any of our current or former directors, officers, employees or stockholders as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware and (vi) any action asserting an “internal corporate claim,” as that term is defined in Section 115 of the DGCL; 111 provided that , for the avoidance of doubt, the foregoing forum selection provision will not apply to claims arising under the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
For the foreseeable future, we expect to continue to incur significant expenses related to the commercialization of ZTlido, GLOPERBA and ELYXYB and the research and development of our product candidates, SP-102 (10 mg dexamethasone sodium phosphate viscous gel) (“SEMDEXA”), SP-103 (lidocaine topical system) 5.4% (“SP-103”), and SP-104 (4.5mg, low-dose naltrexone hydrochloride delayed-release capsules) (“SP-104”).
For the foreseeable future, we expect to continue to incur significant expenses related to the commercialization of ZTlido, GLOPERBA and ELYXYB and the research and development of our product candidates, SP-102 (10 mg dexamethasone sodium phosphate viscous gel) (“SEMDEXA”), SP-103 (lidocaine topical system) 5.4% (“SP-103”), and SP-104 (4.5 mg, low-dose naltrexone hydrochloride delayed-release capsules) (“SP-104”).
Litigation relating to the ownership and use of intellectual property is expensive, and our position as a relatively small company in an industry dominated by very large companies may cause us to be at a significant disadvantage in defending our intellectual property 87 rights and in defending against claims that ZTlido, GLOPERBA, ELYXYB or any of our product candidates infringes or misappropriates third-party intellectual property rights.
Litigation relating to the ownership and use of intellectual property is expensive, and our position as a relatively small company in an industry dominated by very large companies may cause us to be at a significant disadvantage in defending our intellectual property rights and in defending against claims that ZTlido, GLOPERBA, ELYXYB or any of our product candidates infringes or misappropriates third-party intellectual property rights.
For example: • Others may be able to make products that are similar to ZTlido, GLOPERBA, ELYXYB or our product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed; • We or our licensors or strategic partners might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed; 90 • We or our licensors or strategic partners might not have been the first to file patent applications covering certain of our inventions; • Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • Our pending patent applications may not lead to issued patents; • Issued patents that we own or have exclusively licensed may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors; • Our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • We may not develop additional proprietary technologies that are patentable; and • The patents of others may have an adverse effect on our business.
For example: • Others may be able to make products that are similar to ZTlido, GLOPERBA, ELYXYB or our product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed; • We or our licensors or strategic partners might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed; 91 • We or our licensors or strategic partners might not have been the first to file patent applications covering certain of our inventions; • Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; • Our pending patent applications may not lead to issued patents; • Issued patents that we own or have exclusively licensed may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors; • Our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; • We may not develop additional proprietary technologies that are patentable; and • The patents of others may have an adverse effect on our business.
In addition, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our product candidates, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate.
In addition, regulatory authorities may approve any of our product candidates for fewer or more limited indications 93 than we request, may not approve the price we intend to charge for our product candidates, may grant approval contingent on the performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate.
Further, the global equity markets in general have recently experienced extreme price and volume fluctuations, including as a result of the COVID-19 pandemic, economic uncertainty and increased interest rates, inflation, the government closure of Silicon Valley Bank and Signature Bank, and liquidity concerns at other financial institutions that may be unrelated to our operating performance.
Further, the global equity markets in general have recently experienced extreme price and volume fluctuations, including as a result of the COVID-19 pandemic, economic uncertainty and increased interest rates, inflation, the government closure of Silicon Valley Bank 105 and Signature Bank, and liquidity concerns at other financial institutions that may be unrelated to our operating performance.
We may also face indirect competition from the off-label and unapproved use of branded and generic injectable steroids. 68 While there are currently no formulations containing naltrexone in clinical development for the treatment of fibromyalgia, we are aware of certain non-opioid therapeutics currently in a late-stage phase 3 pipeline containing two 505(b)(2) development programs.
We may also face indirect competition from the off-label and unapproved use of branded and generic injectable steroids. While there are currently no formulations containing naltrexone in clinical development for the treatment of fibromyalgia, we are aware of certain non-opioid therapeutics currently in a late-stage phase 3 pipeline containing two 505(b)(2) development programs.
Any negative publicity as a result of social media posts, whether or not such claims are accurate, could adversely impact us. If any of these events were to occur or we otherwise fail to comply 76 with applicable regulations, we could incur liability, face regulatory actions, or incur other harm to our business, financial condition and results of operations.
Any negative publicity as a result of social media posts, whether or not such claims are accurate, could adversely impact us. If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face regulatory actions, or incur other harm to our business, financial condition and results of operations.
Any potential material misstatements were identified and corrected as audit adjustments in the applicable periods and are properly reflected in our financial statements included in this Annual Report on Form 10-K. We hired a new Chief Financial Officer in May 2022 at Legacy Scilex and she served as Chief Financial Officer of the Company through September 2023.
Any potential material misstatements were identified and corrected as audit adjustments in the applicable periods and are properly reflected in our consolidated financial statements included in this Annual Report on Form 10-K. We hired a new Chief Financial Officer in May 2022 at Legacy Scilex and she served as Chief Financial Officer of the Company through September 2023.
Failure to comply with Section 61 404 of the Sarbanes-Oxley Act could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities. If additional material weaknesses exist or are discovered in the future, and we are unable to remediate any such material weakness, our business, financial condition and results of operations could suffer.
Failure to comply with Section 404 of the Sarbanes-Oxley Act could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities. If additional material weaknesses exist or are discovered in the future, and we are unable to remediate any such material weakness, our business, financial condition and results of operations could suffer.
In the United States, for small molecule drug products, such as ZTlido, GLOPERBA and ELYXYB, the Hatch-Waxman Act provides generic companies powerful incentives to seek to invalidate our pharmaceutical patents. As a result, we expect that our U.S. patents on major pharmaceutical products will be routinely challenged, and there can be no assurance that our patents will be upheld.
In the United States, for small molecule drug products, such as ZTlido, GLOPERBA and ELYXYB, the Hatch-Waxman Act provides generic companies powerful incentives to seek to invalidate our pharmaceutical patents. As a result, we expect that our U.S. patents on major pharmaceutical products will be 85 routinely challenged, and there can be no assurance that our patents will be upheld.
Efforts to ensure that our business practices and arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.
Efforts to ensure that our business practices and arrangements with third parties will 99 comply with applicable healthcare laws and regulations will involve substantial costs. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.
In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to it, because some patients who have opted to enroll in our trials may instead opt to enroll in a trial being conducted by a competitor.
In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to it, because some patients who have 67 opted to enroll in our trials may instead opt to enroll in a trial being conducted by a competitor.
In addition, regulation or legislation impacting the workforce, such as the proposed rule published by the Federal Trade Commission which would, if issued, generally prevent employers from entering into non-compete agreements with employees and require employers to rescind existing non-compete agreements, may lead to increased 73 uncertainty in hiring and competition for talent.
In addition, regulation or legislation impacting the workforce, such as the proposed rule published by the Federal Trade Commission which would, if issued, generally prevent employers from entering into non-compete agreements with employees and require employers to rescind existing non-compete agreements, may lead to increased uncertainty in hiring and competition for talent.
An adverse determination in any such proceeding could reduce the scope of, or invalidate, our owned or in-licensed patent rights, allow third parties to commercialize ZTlido, GLOPERBA, ELYXYB and our product candidates and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. Additionally, the U.S.
An adverse determination in any such proceeding could reduce the scope of, or invalidate, our owned or in-licensed patent rights, allow third parties to commercialize ZTlido, GLOPERBA, ELYXYB and our product candidates and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights. 86 Additionally, the U.S.
The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on the Board, our board committees or as executive officers. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.
The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on the Board, our board committees 112 or as executive officers. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.
Similarly, a change of control transaction triggers an event of default under the Oramed Note, which will result in the full unpaid principal amount of the Oramed Note, together with interest and other amounts owing in respect thereof, to the date of acceleration becoming, at the election of the holder of the Oramed Note, immediately due and payable in cash at the Mandatory Default Amount (as defined in the Oramed Note).
A change of control transaction triggers an event of default under the Oramed Note, which will result in the full unpaid principal amount of the Oramed Note, together with interest and other amounts owing in respect thereof, to the date of acceleration becoming, at the election of the holder of the Oramed Note, immediately due and payable in cash at the Mandatory Default Amount (as defined in the Oramed Note).
The American Taxpayer Relief Act of 2012 further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives.
The American Taxpayer Relief Act of 2012 further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. 100 Moreover, payment methodologies may be subject to changes in healthcare legislation and regulatory initiatives.
In the ordinary course of our business, we may enter into collaborations, additional in-licensing arrangements (such as, for example, the Romeg Agreement), joint ventures, or strategic alliances to develop proposed products and to pursue new markets. Proposing, negotiating and implementing collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships may be a lengthy and complex process.
In the ordinary course of our business, we may enter into collaborations, additional in-licensing arrangements (such as, for example, the Romeg License Agreement), joint ventures, or strategic alliances to develop proposed products and to pursue new markets. Proposing, negotiating and implementing collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships may be a lengthy and complex process.
If approved, our product candidates will face competition from commercially available drugs as well as drugs that are in the development pipelines of our competitors and later enter the market. Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make our product candidates less competitive.
If approved, our product 68 candidates will face competition from commercially available drugs as well as drugs that are in the development pipelines of our competitors and later enter the market. Established pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make our product candidates less competitive.
Because of a lower evidentiary standard in PTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a PTO proceeding sufficient 85 for the PTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action.
Because of a lower evidentiary standard in PTO proceedings compared to the evidentiary standard in U.S. federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a PTO proceeding sufficient for the PTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action.
The licensing and acquisition of third-party proprietary rights is a competitive area, and companies, which may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party proprietary rights that we may consider necessary or attractive in order to commercialize our product candidates.
The licensing and acquisition of third-party proprietary rights is a competitive area, and companies, which may be more established, or have greater resources than we do, may also be pursuing strategies to license or acquire third-party proprietary rights that we may 82 consider necessary or attractive in order to commercialize our product candidates.
Manufacturers that fail to pay refunds could be subject to civil monetary penalties of 125 percent of the refund amount. Congress further could enact a Medicare Part B inflation rebate, under which manufacturers would owe additional rebates if the average sales price of a drug were to increase faster than the pace of inflation.
Manufacturers that fail to pay refunds could be subject to civil monetary penalties of 125% of the refund amount. Congress further could enact a Medicare Part B inflation rebate, under which manufacturers would owe additional rebates if the average sales price of a drug were to increase faster than the pace of inflation.
Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use. 71 Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical development process.
Each product candidate must demonstrate an adequate risk versus benefit profile in its intended patient population and for its intended use. Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical development process.
While we have implemented and maintain security measures, our computer systems and those of our CROs and other contractors and consultants are vulnerable to computer viruses, unauthorized access, cybersecurity attacks, and other security incidents, including as perpetrated by hackers, or as the result of natural disasters, terrorism, war, or telecommunications or electrical failures.
While we have implemented and maintain security measures, our computer systems and those of our CROs and other contractors and consultants are vulnerable to, and have experienced, computer viruses, unauthorized access, cybersecurity attacks, and other security incidents, including as perpetrated by hackers, or as the result of natural disasters, terrorism, war, or telecommunications or electrical failures.
Our business would suffer if any such licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to enforce licensed 81 patents or trademarks against infringing third parties, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms.
Our business would suffer if any such licenses terminate, if the licensors fail to abide by the terms of the license, if the licensors fail to enforce licensed patents or trademarks against infringing third parties, if the licensed patents or other rights are found to be invalid or unenforceable, or if we are unable to enter into necessary licenses on acceptable terms.
In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other 84 non-litigious action or solution. Any of the foregoing may have a material adverse effect on our business, financial condition and results of operations.
In such cases, we may decide that the more prudent course of action is to simply monitor the situation or initiate or seek some other non-litigious action or solution. Any of the foregoing may have a material adverse effect on our business, financial condition and results of operations.
A product sponsor may apply for fast track designation from the FDA if a product is intended for the treatment of a serious or life-threatening condition and preclinical or clinical data demonstrate the potential to address an unmet medical need for this condition. The 94 FDA has broad discretion whether or not to grant this designation.
A product sponsor may apply for fast track designation from the FDA if a product is intended for the treatment of a serious or life-threatening condition and preclinical or clinical data demonstrate the potential to address an unmet medical need for this condition. The FDA has broad discretion whether or not to grant this designation.
In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.
In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission or contracting, customer incentive programs and other business arrangements.
If a manufacturer overcharges the government in connection with its arrangements with Federal Supply Schedule or Tricare, the manufacturer may be required to refund the difference to the government. Failure to make necessary disclosures or to identify contract overcharges can result in allegations against us under the False Claims Act and other laws and regulations.
If a manufacturer overcharges the government in connection with its arrangements with Federal Supply Schedule or Tricare, the manufacturer may be required to refund the difference to the government. Failure to make necessary disclosures or to identify contract overcharges can result in allegations 102 against us under the False Claims Act and other laws and regulations.
Accordingly, our historical financial statements may not necessarily be indicative of the conditions that would have existed or our results of operations if we had been operated as an unaffiliated company of Sorrento, and we have and will continue to incur incremental costs as a stand-alone public company.
Accordingly, our historical consolidated financial statements may not necessarily be indicative of the conditions that would have existed or our results of operations if we had been operated as an unaffiliated company of Sorrento, and we have and will continue to incur incremental costs as a stand-alone public company.
In addition, our ability to pay dividends may be limited by covenants in future outstanding indebtedness that we or our subsidiaries may incur. Since we do not intend to pay dividends, a stockholder’s ability to receive a return on such stockholder’s investment will depend on any future appreciation in the market value of our Common Stock.
In addition, our ability to pay dividends may be limited by covenants in future outstanding indebtedness that we or our subsidiaries may incur. Since we do not intend to pay cash dividends, a stockholder’s ability to receive a return on such stockholder’s investment will depend on any future appreciation in the market value of our Common Stock.
Failure can occur at any time during the clinical trial process. The results of 70 preclinical studies and early clinical trials may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials.
Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials.
To the extent that the results of the trials are not satisfactory to the FDA or comparable non-U.S. regulatory authorities for support of a marketing approval, we may be required to expend significant resources, which may not be available to us, to conduct additional trials in support of potential approval of our product candidates.
To the extent that the results of the trials are not satisfactory to the FDA or comparable non-U.S. regulatory authorities for support of a marketing approval, we may be required to expend significant resources, which may not be available to us, to conduct 71 additional trials in support of potential approval of our product candidates.
Any such failure could negatively affect the market price and trading liquidity of our Common Stock, lead to delisting, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and generally materially and adversely impact our business and financial condition.
Any such failure could negatively affect the market price and trading liquidity of our Common Stock, lead to delisting, cause investors to lose confidence in our reported financial information, 61 subject us to civil and criminal investigations and penalties, and generally materially and adversely impact our business and financial condition.
We could experience delays in satisfying regulatory authorities or manufacturing problems that result in delays in our development or commercialization programs, limit the supply of our product candidates, or otherwise harm our business. We currently depend on contract manufacturers to conduct the manufacturing and supply activities for ZTlido, GLOPERBA, ELYXYB and our product candidates.
We could experience delays in satisfying regulatory authorities or manufacturing problems that result in delays in our development or commercialization programs, limit the supply of our product candidates, or otherwise harm our business. 72 We currently depend on contract manufacturers to conduct the manufacturing and supply activities for ZTlido, GLOPERBA, ELYXYB and our product candidates.
Numerous third-party U.S. and foreign issued patents and pending patent 83 applications exist in the fields in which we are developing product candidates. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates.
Numerous third-party U.S. and foreign issued patents and pending patent applications exist in the fields in which we are developing product candidates. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates.
Litigation and legislation over the ACA and other healthcare reform measures are likely to continue, with unpredictable and uncertain results. Further, additional legislative changes to and regulatory changes under or related to the ACA remain possible. 98 In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted.
Litigation and legislation over the ACA and other healthcare reform measures are likely to continue, with unpredictable and uncertain results. Further, additional legislative changes to and regulatory changes under or related to the ACA remain possible. In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted.
If coverage 69 and reimbursement of our product candidates are unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability. Furthermore, the requirements governing medical product pricing vary widely from country to country.
If coverage and reimbursement of our product candidates are unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability. Furthermore, the requirements governing medical product pricing vary widely from country to country.
The loss of such licenses could materially harm our business, financial condition and results of operations. 79 Potential disputes over intellectual property rights that we have licensed may prevent or impair our ability to maintain our current licensing arrangements on acceptable terms.
The loss of such licenses could materially harm our business, financial condition and results of operations. Potential disputes over intellectual property rights that we have licensed may prevent or impair our ability to maintain our current licensing arrangements on acceptable terms.
The amount and timing of our future funding requirements will depend on many factors, some of which are outside of our control, including but not limited to: • the costs and expenses associated with our ongoing commercialization efforts for ZTlido, GLOPERBA and ELYXYB; • the degree of success we experience in commercializing ZTlido, GLOPERBA and ELYXYB; • the revenue generated by sales of ZTlido, GLOPERBA, ELYXYB and other products that may be approved, if any; • the scope, progress, results and costs of conducting studies and clinical trials for our product candidates, SEMDEXA, SP-103 and SP-104; • the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates; • the costs of manufacturing ZTlido, GLOPERBA, ELYXYB and our product candidates; • the timing and amount of any milestone, royalty or other payments we are required to make pursuant to any current or future collaboration or license agreements; • our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement; • the extent to which ZTlido, GLOPERBA, ELYXYB or any of our product candidates, if approved for commercialization, is adopted by the physician community; • our need to expand our research and development activities; • the costs of acquiring, licensing or investing in businesses, product candidates and technologies; • the effect of competing products and product candidates and other market developments; • the number and types of future products we develop and commercialize; • any product liability or other lawsuits related to our products; • the expenses needed to attract, hire and retain skilled personnel; • the costs associated with being a public company; • our need to implement additional internal systems and infrastructure, including financial and reporting systems; • the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; and • the extent and scope of our general and administrative expenses.
The amount and timing of our future funding requirements will depend on many factors, some of which are outside of our control, including but not limited to: • the costs and expenses associated with our ongoing commercialization efforts for ZTlido, GLOPERBA and ELYXYB; • the degree of success we experience in commercializing ZTlido, GLOPERBA and ELYXYB; • the revenue generated by sales of ZTlido, GLOPERBA, ELYXYB and other products that may be approved, if any; • the scope, progress, results and costs of conducting studies and clinical trials for our product candidates, SEMDEXA, SP-103 and SP-104; • the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates; • the costs of manufacturing ZTlido, GLOPERBA, ELYXYB and our product candidates; • the timing and amount of any milestone, royalty or other payments we are required to make pursuant to any current or future collaboration or license agreements; • our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement; • the extent to which ZTlido, GLOPERBA, ELYXYB or any of our product candidates, if approved for commercialization, is adopted by the physician community; • our need to expand our research and development activities; • the costs of acquiring, licensing or investing in businesses, product candidates and technologies; • the effect of competing products and product candidates and other market developments; • the number and types of future products we develop and commercialize; • any product liability or other lawsuits related to our products; • the expenses needed to attract, hire and retain skilled personnel; • the costs associated with being a public company; • our need to implement additional internal systems and infrastructure, including financial and reporting systems; • the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; • the costs related to servicing of our debt; • the costs of financing additional clinical, regulatory and commercial activities; and • the extent and scope of our general and administrative expenses.
It is possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations or the ownership or control of intellectual property developed during the collaboration.
It is 64 possible that conflicts may arise with our collaborators, such as conflicts concerning the achievement of performance milestones, or the interpretation of significant terms under any agreement, such as those related to financial obligations or the ownership or control of intellectual property developed during the collaboration.
Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation and on our business, financial condition or results of operations, including the sustainability of our business over time, and could cause the market value of our Common Stock to decline.
Any failure or perceived failure by us in this regard could have a material adverse effect on our reputation and on our business, financial condition or 78 results of operations, including the sustainability of our business over time, and could cause the market value of our Common Stock to decline.
Our ability to commercialize ZTlido and develop SP-103 depends on the effectiveness and 78 continuation of the Product Development Agreement. If we lose the right to license the intellectual property rights granted by the Product Development Agreement, our ability to develop ZTlido and SP-103 as well as new product candidates based on the licensed intellectual property would be harmed.
Our ability to commercialize ZTlido and develop SP-103 depends on the effectiveness and continuation of the Product Development Agreement. If we lose the right to license the intellectual property rights granted by the Product Development Agreement, our ability to develop ZTlido and SP-103 as well as new product candidates based on the licensed intellectual property would be harmed.
The final regulation has increased and will continue to increase costs and the complexity of compliance, has been and will continue to be time-consuming to implement, and could have a material adverse effect on the results of operations, particularly if CMS challenges the approach a manufacturer has taken in the implementation of the 99 final regulation.
The final regulation has increased and will continue to increase costs and the complexity of compliance, has been and will continue to be time-consuming to implement, and could have a material adverse effect on the results of operations, particularly if CMS challenges the approach a manufacturer has taken in the implementation of the final regulation.
As a result, such financial statements may not be reflective of conditions that would have existed or what our results of operations would have been had we been a stand-alone public company and no longer a majority-owned subsidiary of Sorrento during such periods.
As a result, such consolidated financial statements may not be reflective of conditions that would have existed or what our results of operations would have been had we been a stand-alone public company and no longer a majority-owned subsidiary of Sorrento during such periods.
If we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to timely and accurately report our financial results and such material weaknesses may result in a material misstatement of our financial statements.
If we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to timely and accurately report our financial results and such material weaknesses may result in a material misstatement of our consolidated financial statements.
The FDA, Department of Justice or other regulatory authorities could also request that we enter into a consent decree or a corporate integrity agreement, or seek a permanent injunction against us under which specified promotional conduct is monitored, changed or curtailed.
The FDA, Department of Justice or other regulatory authorities could also request that we enter into a consent decree or a corporate integrity agreement or corporate mentorship, or seek a permanent injunction against us under which specified promotional conduct is monitored, changed or curtailed.
We may be unable to control the timing of the delivery of ZTlido and ELYXYB to distributors, and any financial uncertainty or loss of key logistic employees of Cardinal Health 105, as our only third-party logistics provider, may negatively impact our sales.
We may be unable to control the timing of the delivery of ZTlido, ELYXYB and GLOPERBA to distributors, and any financial uncertainty or loss of key logistic employees of Cardinal Health 105, as our only third-party logistics provider, may negatively impact our sales.
If we fail to achieve certain milestones in our Product Development Agreement with Itochu and Oishi, we could lose rights that are important to our business. 63 Certain of our existing license and supply agreements impose various milestone and other obligations on us.
If we fail to achieve certain milestones in our Product Development Agreement with Itochu and Oishi, we could lose rights that are important to our business. Certain of our existing license and supply agreements impose various milestone and other obligations on us.
Even if we are able to identify an acquisition that we would like to consummate, we may not be able to complete the acquisition on commercially reasonable terms or the target may be acquired by another company. We may enter into negotiations for acquisitions that are not ultimately consummated.
Even if we are able to identify an acquisition that we would like to consummate, we may not be able to complete the acquisition on commercially reasonable 75 terms or the target may be acquired by another company. We may enter into negotiations for acquisitions that are not ultimately consummated.
There may be third-party patents, of which we are currently unaware, with claims to materials, formulations, methods of doing research, methods of manufacture or methods for treatment related to the use or manufacture of ZTlido, GLOPERBA, ELYXYB or our product candidates.
There may be third-party patents, of which we are currently unaware, with claims to materials, formulations, methods of doing research, methods of manufacture or methods for treatment related to the use or manufacture of ZTlido, 88 GLOPERBA, ELYXYB or our product candidates.
Additional payments will be due upon the achievement of certain cumulative net sales of Semnur products, as follows: • a $20.0 million payment upon the achievement of $100.0 million in cumulative net sales of a Semnur product; 59 • a $20.0 million payment upon the achievement of $250.0 million in cumulative net sales of a Semnur product; • a $50.0 million payment upon the achievement of $500.0 million in cumulative net sales of a Semnur product; and • a $150.0 million payment upon the achievement of $750.0 million in cumulative net sales of a Semnur product.
Additional payments will be due upon the achievement of certain cumulative net sales of Semnur products, as follows: • a $20.0 million payment upon the achievement of $100.0 million in cumulative net sales of a Semnur product; • a $20.0 million payment upon the achievement of $250.0 million in cumulative net sales of a Semnur product; • a $50.0 million payment upon the achievement of $500.0 million in cumulative net sales of a Semnur product; and • a $150.0 million payment upon the achievement of $750.0 million in cumulative net sales of a Semnur product.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis.
These decisions may not be consistent with the short-term expectations of our stockholders and may not produce the long-term benefits that we expect, in which case our business, financial condition and results of operations could be harmed.
These decisions, however, may not be consistent with the short-term expectations of our stockholders and may not produce the long-term benefits that we expect, in which case our business, financial condition and results of operations could be harmed.
If our assumptions change or if actual circumstances differ from our assumptions, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Common Stock. 108 Anti-takeover provisions in the Certificate of Incorporation and the Bylaws and under Delaware law could make an acquisition of our Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
If our assumptions change or if actual circumstances differ from our assumptions, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Common Stock. 110 Anti-takeover provisions in the Certificate of Incorporation and the Bylaws and under Delaware law could make an acquisition of our Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Events that may prevent successful or timely completion of clinical development include: • delays in obtaining regulatory authorizations to commence a clinical trial or reaching a consensus with regulatory authorities on trial design; • delays in identifying prospective clinical investigators or clinical trial sites that have necessary qualifications, interest and capacity to perform a requested protocol; • delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; • delays in obtaining approval from one or more institutional review boards (“IRBs”); • IRBs refusing to approve, suspending or terminating the trial at the investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial; • changes to the clinical trial protocol; • delays in recruiting suitable subjects to participate in our clinical trials; • failure by us, any CROs we engage or any other third parties to adhere to clinical trial requirements; • failure to perform in accordance with GCPs; • delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites, including delays by third parties with whom we have contracted to perform certain of those functions; • delays in subjects completing participation in a trial or returning for post-treatment follow-up, including, for example, as a result of reluctance to visit medical facilities as a result of COVID-19; • clinical trial sites or subjects dropping out of a trial; • key investigators departing their clinical sites; • lack of adequate funding to continue the trial; • selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data; • subjects experiencing severe or unexpected drug-related adverse effects; • imposition of a clinical hold by regulatory authorities as a result of a serious adverse event, after an inspection of our clinical trial operations, trial sites or manufacturing facilities, or for other reasons; • occurrence of serious adverse events in our trials or in trials of the same class of agents conducted by other sponsors; • changes in regulatory requirements or guidance that require amending or submitting new clinical protocols; • a facility manufacturing our product candidates or any of their components being ordered by the FDA to temporarily or permanently shut down due to violations of cGMP regulations or other applicable requirements; • any changes to our manufacturing process that may be necessary or desired; • third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials and/or not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, GCP, or other regulatory requirements; • third-party contractors not performing data collection or analysis in a timely or accurate manner; or 65 • third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by subcontractors in support of our marketing applications.
Events that may prevent successful or timely completion of clinical development include: • delays in obtaining regulatory authorizations to commence a clinical trial or reaching a consensus with regulatory authorities on trial design; • delays in identifying prospective clinical investigators or clinical trial sites that have necessary qualifications, interest and capacity to perform a requested protocol; • delays in reaching agreement on acceptable terms with prospective CROs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; • delays in obtaining approval from one or more institutional review boards (“IRBs”); • IRBs refusing to approve, suspending or terminating the trial at the investigational site, precluding enrollment of additional subjects, or withdrawing their approval of the trial; • changes to the clinical trial protocol; • delays in recruiting suitable subjects to participate in our clinical trials; • failure by us, any CROs we engage or any other third parties to adhere to clinical trial requirements; • failure to perform in accordance with GCPs; • delays in the testing, validation, manufacturing and delivery of our product candidates to the clinical sites, including delays by third parties with whom we have contracted to perform certain of those functions; • delays in subjects completing participation in a trial or returning for post-treatment follow-up; • clinical trial sites or subjects dropping out of a trial; • key investigators departing their clinical sites; • lack of adequate funding to continue the trial; • selection of clinical endpoints that require prolonged periods of clinical observation or analysis of the resulting data; • subjects experiencing severe or unexpected drug-related adverse effects; • imposition of a clinical hold by regulatory authorities as a result of a serious adverse event, after an inspection of our clinical trial operations, trial sites or manufacturing facilities, or for other reasons; • occurrence of serious adverse events in our trials or in trials of the same class of agents conducted by other sponsors; • changes in regulatory requirements or guidance that require amending or submitting new clinical protocols; • a facility manufacturing our product candidates or any of their components being ordered by the FDA to temporarily or permanently shut down due to violations of cGMP regulations or other applicable requirements; • any changes to our manufacturing process that may be necessary or desired; • third-party clinical investigators losing the licenses or permits necessary to perform our clinical trials and/or not performing our clinical trials on our anticipated schedule or consistent with the clinical trial protocol, GCP, or other regulatory requirements; • third-party contractors not performing data collection or analysis in a timely or accurate manner; or • third-party contractors becoming debarred or suspended or otherwise penalized by the FDA or other government or regulatory authorities for violations of regulatory requirements, in which case we may need to find a substitute contractor, and we may not be able to use some or all of the data produced by subcontractors in support of our marketing applications.
For example, tax legislation enacted at the end of 2017 included provisions that, effective January 1, 2019, eliminated the tax penalty for individuals who do not maintain sufficient health insurance coverage, or the so-called “individual mandate.” It is unclear how healthcare reform measures enacted by Congress or implemented by the Biden administration or efforts, if any, to modify the ACA or its implementing regulations, or portions thereof, will impact our business.
For example, tax legislation enacted at the end of 2017 included provisions that, effective January 1, 2019, eliminated the tax penalty for individuals who do not maintain sufficient health insurance coverage, or the so-called “individual mandate.” It is unclear how healthcare reform measures enacted by Congress or implemented by the Trump administration or efforts, if any, to modify the ACA or its implementing regulations, or portions thereof, will impact our business.
For calendar quarters beginning January 1, 2022, manufacturers are required to report the average sales price for certain drugs under the Medicare program regardless of whether they participate in the Medicaid Drug Rebate program.
For calendar quarters beginning January 1, 2022, manufacturers are required to report the average sales price for certain drugs under the Medicare program regardless of whether they participate in the Medicaid Drug 101 Rebate program.
We may not identify, secure or 64 complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms, or at all, and may not realize the anticipated benefits of any such transactions or arrangements.
We may not identify, secure or complete any such transactions or arrangements in a timely manner, on a cost-effective basis, on acceptable terms, or at all, and may not realize the anticipated benefits of any such transactions or arrangements.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in our combined consolidated financial statements and accompanying notes.
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.

… 414 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

6 edited+0 added−0 removed10 unchanged
Biggest changeThe Director of IT, in collaboration with a team of IT professionals, our legal counsel and Human Resources, are tasked with implementing a program designed to protect our information systems from cybersecurity threats and manage material risks. The Director of IT has served in various roles in information technology and information security for over 20 years.
Biggest changeThe Senior Director of IT, in collaboration with a team of IT professionals, our legal counsel and Human Resources, are tasked with implementing a program designed to protect our information systems from cybersecurity threats and manage material risks. The Senior Director of IT has served in various roles in information technology and information security for over 20 years.
The Director of IT acts as the Incident Manager and meets regularly with our Incident Response Team, including members of Financial Risk Management, IT Security and Human Resources senior management to discuss the necessary measures to take prior to and during an incident.
The Senior Director of IT acts as the Incident Manager and meets regularly with our Incident Response Team, including members of Financial Risk Management, IT Security and Human Resources senior management to discuss the necessary measures to take prior to and during an incident.
The Director of IT and senior management are informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and report such threats and incidents to the audit committee when appropriate.
The Senior Director of IT and senior management are informed about and monitor the prevention, detection, mitigation and remediation of cybersecurity threats and incidents in real time and report such threats and incidents to the Audit Committee when appropriate.
Our Board and the audit committee also receive prompt and timely information from the Director of IT and executive leadership regarding any cybersecurity risks that meet certain reporting thresholds, as well as ongoing updates regarding any such risk. Finally, the Incident Response Manager briefs corporate leadership on lessons learned from the incident during or after the recovery phase.
Our Board and the Audit Committee also receive prompt and timely information from the Senior Director of IT and executive leadership regarding any cybersecurity risks that meet certain reporting thresholds, as well as ongoing updates regarding any such risk. Finally, the Incident Response Manager briefs corporate leadership on lessons learned from the incident during or after the recovery phase.
Risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected and are not reasonably likely to materially affect our company, including our business strategy, results of operations, or financial condition as of December 31, 2023.
Risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected and are not reasonably likely to materially affect our Company, including our business strategy, results of operations, or financial condition as of December 31, 2024 .
For more information, please see the risk factor disclosures included in Item 1A of this Annual Report on Form 10-K. 114
For more information, please see the risk factor disclosures included in Item 1A of this Annual Report on Form 10-K. 116

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+5 added−9 removed0 unchanged
Biggest changeSecurities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III for information regarding securities authorized for issuance under our equity compensation plans. Unregistered Sales of Equity Securities Recent Sales of Unregistered Securities Between October 2023 and December 2023, we issued an aggregate of 1,161,754 shares of Common Stock (the “B.
Biggest changeFurther, our ability to pay dividends may be limited by covenants of any existing outstanding indebtedness and future outstanding indebtedness we or our subsidiaries incur. Securities Authorized for Issuance Under Equity Compensation Plans See Item 12 of Part III for information regarding securities authorized for issuance under our equity compensation plans. Unregistered Sales of Equity Securities 118 None.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our Common Stock and Warrants are currently listed on Nasdaq under the symbols “SCLX” and “SCLXW,” respectively.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our Common Stock and Public Warrants are currently listed on Nasdaq under the symbols “SCLX” and “SCLXW,” respectively.
We anticipate that we will retain all of our future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our capital stock will be at the discretion of our Board.
Dividends Except as set forth below, we have never declared or paid any dividends on shares of our Common Stock. We anticipate that we will retain all of our future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our capital stock will be at the discretion of our Board.
Holders As of March 7, 2024, there were 315 holders of record of our Common Stock and 3 holders of record of our Warrants, which amount does not include participants of The Depository Trust Company or beneficial owners holding shares through nominee names. Dividends We have never declared or paid any dividends on shares of our Common Stock.
Holders As of March 25, 2025, there were 315 holders of record of our Common Stock and two holders of record of our Public Warrants, which amount does not include participants of The Depository Trust Company or beneficial owners holding shares through nominee names.
It is the present intention of our Board to retain all earnings, if any, for use in our business operations and, accordingly, our Board does not anticipate declaring any dividends in the foreseeable future. Further, if we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
It is the present intention of our Board to retain all earnings, if any, for use in our business operations and, accordingly, our Board does not anticipate declaring any dividends in the foreseeable future.
Removed
Riley Shares”) pursuant to advances under the Standby Equity Purchase Agreement (the “B. Riley Purchase Agreement”), dated as of January 8, 2023, between us and B. Riley Principal Investments, LLC (“B. Riley”), for aggregate net proceeds of approximately $1.9 million.
Added
As previously disclosed on October 27, 2024, our Board declared a stock dividend (the “Dividend”) consisting of an aggregate of 5,000,000 shares (the “Dividend Stock”) of Series 1 Mandatory Exchangeable Preferred Stock, par value $0.0001 per share, to record holders of the following Company securities as of the close of business on November 7, 2024 (which date was subsequently changed to April 11, 2025) (the “Record Date”): (i) our Common Stock (such record holders, the “Record Common Holders”), (ii) certain warrants to purchase Common Stock that have not been exercised prior to the Record Date (and which have the right to participate in the Dividend pursuant to the terms of their respective warrants, other than, for the avoidance of doubt any warrants to purchase Common Stock with an exercise price of $11.50 per share, and any other warrants that by their terms have not vested and are therefore not entitled to participate in the Dividend) (such warrants, the “Participating Warrants” and such record holders, the “Record Warrant Holders”), (iii) the Tranche B Notes issued by us in October 2024 (such notes, the “Participating Notes” and such record holders, the “Record Note Holders”), and (iv) our Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock” and such record holder, the “Record Preferred Holder” and together with the Record Common Holders, the Record Warrant Holders, and the Record Note Holders, the “Record Holders”).
Removed
For more information, see “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Standby Equity Purchase Agreements ”.
Added
Subject to the Board’s right to change the Record Date, the Dividend (unless otherwise determined by the Board) shall be paid on such date to be determined by subsequent resolutions of the Board, which payment date shall be within 60 days following the Record Date (i.e., by June 10, 2025) (such date as determined by the Board, the “Payment Date”) and shall be apportioned on a pro rata basis among the Record Holders in accordance with each Record Holder’s ownership percentage of our common stock (assuming the full exercise of all Participating Warrants to purchase common stock held by the Record Warrant Holders, the conversion of all Participating Notes held by the Record Note Holders and deemed conversion of all outstanding Series A Preferred Stock held by the Record Preferred Holder) as of the Record Date as set forth in the records of our transfer agent (with respect to the Record Common Holders and Record Preferred Holder) and ours (with respect to the Record Warrant Holders and the Record Note Holders) as of the Record Date.
Removed
Between October 2023 and December 2023, we issued an aggregate of 4,713,001 shares of Common Stock (the “Yorkville Shares”) pursuant to advances under the A&R Yorkville Purchase Agreement, for aggregate net proceeds of approximately $5.9 million.
Added
As of the date of this Annual Report on Form 10-K, the Board has not yet set a Payment Date for the Dividend and retains the right to revoke the Dividend and change the Record Date.
Removed
For more information, see “ Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Standby Equity Purchase Agreements ”. Neither the issuance of the B.
Added
Should we decide in the future to declare a cash dividend or any other dividend, as a holding company, our ability to pay dividends on our capital stock and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries.
Removed
Riley Shares nor the issuance of the Yorkville Shares was registered under the Securities Act in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated by the SEC, and in reliance on similar exemptions under applicable state laws.
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers Total number of warrants purchased Average price paid per warrant September 1 – September 30, 2024 4,000,000 $0.075(1) Total 4,000,000 $0.075 (1) As previously disclosed on September 23, 2024, we entered into a letter agreement with Oramed (the “Oramed Letter Agreement”), dated as of September 20, 2024, pursuant to which we agreed to, among other things, pay Oramed $300,000 to repurchase 4,000,000 SPAC Warrants held by Oramed.
Removed
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. 116 Performance Graph The following information shall not be deemed to be “filed” with the SEC nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference into such future filing.
Removed
The following graph compares the cumulative total stockholder return on our Common Stock from March 3, 2021 to December 31, 2023 with the cumulative total return of (i) the Nasdaq Market Index and (ii) the Nasdaq Biotechnology Index.
Removed
This graph assumes the investment of $100.00 after the market closed on March 3, 2021 (the date on which the Vickers ordinary shares and redeemable warrants comprising the units of Vickers sold in the IPO of Vickers, our predecessor, began separate trading) in our common stock, and in the Nasdaq Market Index and the Nasdaq Biotechnology Index, and it assumes any dividends are reinvested.
Removed
The stock price performance included in this graph is not necessarily indicative of future stock price performance. Item 6. [Reserved] 117

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

93 edited+103 added−18 removed61 unchanged
Biggest changeResults of Operations The following tables summarize our results of operations for the years ended December 31, 2023 and 2022 (in thousands) : Year Ended December 31, 2023 2022 Changes Statements of Operations Data: Net revenue $ 46,743 $ 38,034 $ 8,709 Operating costs and expenses: Cost of revenue 15,681 10,797 4,884 Research and development 12,746 9,054 3,692 Selling, general and administrative 119,641 64,895 54,746 Intangible amortization 4,106 3,922 184 Total operating costs and expenses 152,174 88,668 63,506 Loss from operations (105,431 ) (50,634 ) (54,797 ) Other (income) expense: Loss (gain) on derivative liability 512 (8,310 ) 8,822 Change in fair value of debt and liability instruments 7,189 — 7,189 Gain on debt extinguishment, net — (28,634 ) 28,634 Interest expense, net 1,068 9,604 (8,536 ) Loss on foreign currency exchange 118 66 52 Total other expense (income) 8,887 (27,274 ) 36,161 Loss before income taxes (114,318 ) (23,360 ) (90,958 ) Income tax expense 13 4 9 Net loss $ (114,331 ) $ (23,364 ) $ (90,967 ) 121 For financial information and discussions pertaining to the year ended December 31, 2021, refer to the Annual Report on Form 10-K filed with the SEC on March 7, 2023 .
Biggest changeResults of Operations The following tables summarize our results of operations for the years ended December 31, 2024 and 2023 (in thousands) : Year Ended December 31, 2024 2023 Changes Statements of Operations Data: Net revenue $ 56,590 $ 46,743 $ 9,847 Net operating costs and expenses: Cost of revenue 16,689 15,681 1,008 Research and development 9,641 12,746 (3,105 ) Selling, general and administrative 119,016 119,641 (625 ) Intangible amortization 4,031 4,106 (75 ) Legal settlements (9,391 ) — (9,391 ) Total net operating costs and expenses 139,986 152,174 (12,188 ) Loss from operations (83,396 ) (105,431 ) 22,035 Other (income) expense, net: (Gain) loss on derivative liability (17,378 ) 512 (17,890 ) Change in fair value of debt and liability instruments 4,782 7,189 (2,407 ) Interest expense, net 1,963 1,068 895 Loss on foreign currency exchange 45 118 (73 ) Total other (income) expense, net (10,588 ) 8,887 (19,475 ) Loss before income taxes (72,808 ) (114,318 ) 41,510 Income tax (benefit) expense (1 ) 13 (14 ) Net loss $ (72,807 ) $ (114,331 ) $ 41,524 Comparison of the Years Ended December 31, 2024 and 2023 126 Net Revenue The following table summarizes net revenue by product for the years ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, 2024 2023 Increase (Decrease) ZTlido Net Revenue $ 52,094 $ 46,300 $ 5,794 ELYXYB Net Revenue 4,258 443 3,815 GLOPERBA Net Revenue 238 — 238 Total Net Revenue $ 56,590 $ 46,743 $ 9,847 Net revenue for the years ended December 31, 2024 and 2023 was $56.6 million and $46.7 million, respectively.
These provisions include, but are not limited to: • an exemption from compliance with the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”); • an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation; • reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; and • exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements.
These provisions include, but are not limited to: • an exemption from compliance with the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”); 139 • an exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation; • reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; and • exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements.
The amount and timing of our future funding requirements will depend on many factors, some of which are outside of our control, including but not limited to: • the costs and expenses associated with our ongoing commercialization efforts for ZTlido, GLOPERBA and ELYXYB; • the degree of success we experience in commercializing ZTlido, GLOPERBA and ELYXYB; • the revenue generated by sales of ZTlido, GLOPERBA, ELYXYB and other products that may be approved, if any; • the scope, progress, results and costs of conducting studies and clinical trials for our product candidates, SEMDEXA, SP-103 and SP-104; • the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates; • the costs of manufacturing ZTlido, GLOPERBA, ELYXYB and our product candidates; • the timing and amount of any milestone, royalty or other payments we are required to make pursuant to any current or future collaboration or license agreements; • our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement; • the extent to which ZTlido, GLOPERBA, ELYXYB or any of our product candidates, if approved for commercialization, is adopted by the physician community; • our need to expand our research and development activities; • the costs of acquiring, licensing or investing in businesses, product candidates and technologies; • the effect of competing products and product candidates and other market developments; • the number and types of future products we develop and commercialize; 125 • any product liability or other lawsuits related to our products; • the expenses needed to attract, hire and retain skilled personnel; • the costs associated with being a public company; • our need to implement additional internal systems and infrastructure, including financial and reporting systems; • the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; and • the extent and scope of our general and administrative expenses.
The amount and timing of our future funding requirements will depend on many factors, some of which are outside of our control, including but not limited to: • the costs and expenses associated with our ongoing commercialization efforts for ZTlido, GLOPERBA and ELYXYB; • the degree of success we experience in commercializing ZTlido, GLOPERBA and ELYXYB; • the revenue generated by sales of ZTlido, GLOPERBA, ELYXYB and other products that may be approved, if any; • the scope, progress, results and costs of conducting studies and clinical trials for our product candidates, SEMDEXA, SP-103 and SP-104; • the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates; • the costs of manufacturing ZTlido, GLOPERBA, ELYXYB and our product candidates; • the timing and amount of any milestone, royalty or other payments we are required to make pursuant to any current or future collaboration or license agreements; • our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement; • the extent to which ZTlido, GLOPERBA, ELYXYB or any of our product candidates, if approved for commercialization, is adopted by the physician community; • our need to expand our research and development activities; • the costs of acquiring, licensing or investing in businesses, product candidates and technologies; • the effect of competing products and product candidates and other market developments; • the number and types of future products we develop and commercialize; • any product liability or other lawsuits related to our products; • the expenses needed to attract, hire and retain skilled personnel; • the costs associated with being a public company; • our need to implement additional internal systems and infrastructure, including financial and reporting systems; • the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; • the costs related to servicing of our debt; and • the extent and scope of our general and administrative expenses.
Pursuant to the A&R Yorkville Purchase 124 Agreement, we have the right, but not the obligation, to sell to Yorkville up to $500.0 million of shares of Common Stock at our request during the 36 months following the date on which the initial registration statement filed with respect to the shares of Common Stock issuable pursuant thereto was declared effective by the SEC, subject to the terms therein.
Pursuant to the A&R Yorkville Purchase Agreement, we have the right, but not the obligation, to sell to Yorkville up to $500.0 million of shares of Common Stock at our request during the 36 months following the date on which the initial registration statement filed with respect to the shares of Common Stock issuable pursuant thereto was declared effective by the SEC, subject to the terms therein.
Materially different results can occur as circumstances change and additional information becomes known. We believe the following accounting policies and estimates are most critical to aid in understanding and evaluating our reported financial results. Revenue Recognition Our revenue to date has been generated from product sales of ZTlido and ELYXYB in the United States.
Materially different results can occur as circumstances change and additional information becomes known. We believe the following accounting policies and estimates are most critical to aid in understanding and evaluating our reported financial results. Revenue Recognition Our revenue to date has been generated from product sales of ZTlido, ELYXYB and GLOPERBA in the United States.
Interest expense related to these financial instruments is included in the changes in fair value. 129 Recent Accounting Pronouncements See Note 1 titled “ Nature of Operations and Basis of Presentation ” of the Notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.
Interest expense related to these financial instruments is included in the changes in fair value. Recent Accounting Pronouncements See Note 1 titled “ Nature of Operations and Basis of Presentation ” of the Notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements.
We also expect to incur increased expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, listing standards applicable to companies 120 listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.
We also expect to incur increased expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, listing standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.
Cash Flows from Financing Activities For the year ended December 31, 2023 , net cash provided by financing activities was approximately $23.6 million and is primarily related to $86.4 million in gross proceeds from the Revolving Facility between Scilex Pharma and eCapital Healthcare Corp., $35.5 million in proceeds from the Standby Equity Purchase Agreements, $24.0 million in proceeds from the Convertible Debentures and $1.1 million in proceeds from the exercise of stock options and warrants, partially offset by $89.6 million repayment of the borrowings under the Revolving Facility, Convertible Debentures, and Oramed Note, $20.0 million capital distribution to Sorrento, $10.0 million cash consideration paid for the Purchased Securities, $2.0 million payment of the transaction costs related to the Scilex-Oramed SPA and the Sorrento SPA and $1.8 million payment of the transaction costs related to the Business Combination and debt issuance costs.
For the year ended December 31, 2023, net cash provided by financing activities was approximately $23.6 million and is primarily related to $86.4 million in gross proceeds from the Revolving Facility between Scilex Pharma and eCapital Healthcare Corp., $35.5 million in proceeds from the Standby Equity Purchase Agreements, $24.0 million in proceeds from the Convertible Debentures and $1.1 million in proceeds from the exercise of stock options and warrants, partially offset by $89.6 million repayment of the borrowings under the Revolving Facility, Convertible Debentures, and Oramed Note, $20.0 million capital distribution to Sorrento, $10.0 million cash consideration paid for the securities purchased by the Company from Sorrento under the Sorrento SPA, $2.0 million payment of the transaction costs related to the Scilex-Oramed SPA and the Sorrento SPA and $1.8 million payment of the transaction costs related to the Business Combination and debt issuance costs.
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. We continually evaluate our estimates and judgments and base them on historical experience and other factors that we believe to be reasonable under the circumstances.
The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. We continually evaluate our estimates and judgments and base them on historical experience and other factors that we believe to be reasonable under the circumstances.
If we incur additional indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
If we incur additional indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on 135 our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.
In February 2023, we acquired the rights to patents, trademarks, regulatory approvals and other rights related to ELYXYB (celecoxib oral solution) and its commercialization in the U.S. and Canada. In April 2023, we launched ELYXYB in the U.S. for the treatment of acute migraine, with or without aura, in adults.
In February 2023, we acquired the rights to patents, trademarks, regulatory approvals and other rights related to ELYXYB (celecoxib oral solution) (“ELYXYB”) and its commercialization in the U.S. and Canada. In April 2023, we launched ELYXYB in the U.S. for the treatment of acute migraine, with or without aura, in adults.
Critical Accounting Estimates 127 This management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which are prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Critical Accounting Estimates This management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which are prepared in accordance with the accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Reserves for prompt payment discounts are included in accounts receivable, net on the consolidated balance sheets. Service Fees 128 We compensate our customers and others in the distribution chain for wholesaler and distribution services.
Reserves for prompt payment discounts are included in accounts receivable, net on the consolidated balance sheets. Service Fees We compensate our customers and others in the distribution chain for wholesaler and distribution services.
We will continue to analyze the SP-103 Phase 2 trial data along with an investigator study of ZTlido in patients with neck pain completed in the second half of 2023, which also has shown promising top-line efficacy and safety results. SP-103, if approved, could become the first FDA-approved lidocaine topical product for the treatment of chronic neck pain.
We will continue to analyze the SP-103 Phase 2 trial data along with an investigator study of ZTlido in patients with neck pain completed in the second half of 2023, which also has shown promising top-line efficacy and safety results. SP-103, if approved, could become the first FDA-approved lidocaine topical product for the treatment of acute pain.
Since our inception, we have invested substantial efforts and financial resources on acquiring product and technology rights while building our intellectual property portfolio and infrastructure. In June 2022, we in-licensed the exclusive right to commercialize GLOPERBA (colchicine USP) oral solution, an FDA-approved prophylactic treatment for painful gout flares in adults, in the U.S.
Since our inception, we have invested substantial efforts and financial resources on acquiring product and technology rights while building our intellectual property portfolio and infrastructure. In June 2022, we in-licensed the exclusive right to commercialize GLOPERBA oral solution, an FDA-approved prophylactic treatment for painful gout flares in adults, in the U.S.
Our performance obligations with respect to sales of ZTlido and ELYXYB are satisfied at a certain point in time, and we consider control to have transferred upon delivery to the customer, because, upon delivery, the customer has legal title to the asset, physical possession of the asset has been transferred to the customer, the customer has significant risks and rewards in connection with ownership of the asset, and we have a present right to payment from the customer at that time.
Our performance obligations with respect to sales of ZTlido, ELYXYB and GLOPERBA are satisfied at a certain point in time, and we consider control to have transferred upon delivery to the customer, because, upon delivery, the customer has legal title to the asset, physical possession of the asset has been transferred to the customer, the customer has significant risks and rewards in connection with 137 ownership of the asset, and we have a present right to payment from the customer at that time.
Contingent consideration obligations are comprised of regulatory milestones and additional payments that will be due upon the achievement of certain amounts of net sales (see Note 3 titled “ Acquisitions ” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information).
Contingent consideration obligations are comprised of regulatory milestones and additional payments that will be due upon the achievement of certain amounts of net sales (see Note 3 titled “ Acquisitions and License Agreements ” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information).
Cardinal Health 105 purchased 118 and shipped ZTlido to customer wholesale distribution centers. Cardinal Health 105 also performed order management services on our behalf. On April 2, 2022, we announced the expansion of our direct distribution network to national and regional wholesalers and pharmacies. Cardinal Health 105 will continue to provide traditional third-party logistics functions for us.
Cardinal Health 105 purchased and shipped ZTlido to customer wholesale distribution centers. Cardinal Health 105 also performed order management services on our 120 behalf. On April 2, 2022, we announced the expansion of our direct distribution network to national and regional wholesalers and pharmacies. Cardinal Health 105 will continue to provide traditional third-party logistics functions for us.
We monitor the sales trends and adjust for these rebates on a regular basis to reflect the most recent rebate experience and contractual obligations. Reserves for rebates and chargebacks are recorded as accrued rebates and fees under current liabilities within the Company’s consolidated balance sheet.
We monitor the sales trends and adjust for these rebates on a regular basis to reflect the most recent rebate experience and contractual obligations. Reserves for rebates and chargebacks are recorded as accrued rebates and fees under current liabilities within the Company’s consolidated balance sheets.
Selling, general and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services, travel expenses and facility-related expenses, which include direct depreciation costs, and allocated expenses from Sorrento for director and officer insurance as well as employee health benefits through the consummation of the transactions pursuant to the Sorrento SPA on September 21, 2023.
Selling, general and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services, travel expenses and facility-related expenses, which include direct depreciation costs, and allocated expenses from Sorrento for director and officer insurance as well as employee health benefits through the consummation of the transactions pursuant to the Sorrento SPA.
In February 2023, we acquired rights to FDA-approved ELYXYB (celecoxib oral solution) in the U.S. and Canada for the acute treatment of migraine. We intend to continue to explore and evaluate additional opportunities such as these to grow our business.
In February 2023, we acquired rights to FDA-approved ELYXYB in the U.S. and Canada for the acute treatment of migraine. We intend to continue to explore and evaluate additional opportunities such as these to grow our business.
The Representative Warrants are immediately exercisable and have the same terms as the Common Warrants described above, except that the exercise price of the Representative Warrants is $2.125 per share, which represents 125% of the combined public offering price per Firm Share and accompanying Firm Warrant.
The February 2024 BDO Representative Warrants are immediately exercisable and have the same terms as the February 2024 BDO Common Warrants described above, except that the exercise price of the February 2024 BDO Representative Warrants is $2.125 per share, which represents 125% of the combined public offering price per Firm Share and accompanying February 2024 BDO Firm Warrant.
Pursuant to the Product Development Agreement, Scilex Pharma is required to make aggregate royalty payments between 25% and 35% to the Developers based on net profits. During the year ended December 31, 2023, Scilex Pharma made royalty payments in the amount of $8.3 million.
Pursuant to the Product Development Agreement, Scilex Pharma is required to make aggregate royalty payments between 25% and 35% to the Developers based on net profits. During each of the years ended December 31, 2024 and 2023, Scilex Pharma made royalty payments in the amount of $8.3 million.
The Convertible Debentures and the Oramed Note are discussed in Note 7 titled “ Debt” of the Notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. These instruments are measured at fair value on a recurring basis using Level 3 inputs.
The Convertible Debentures, the Oramed Note, the Tranche B Notes and the purchased revenue liability are discussed in Note 7 titled “ Debt” of the Notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. These instruments are measured at fair value on a recurring basis using Level 3 inputs.
ZTlido and ELYXYB Royalties In February 2013, Scilex Pharma became a party to a product development agreement (as amended, the “Product Development Agreement”) with Itochu and Oishi Koseido Co., Ltd. (“Oishi”, and together with Itochu, the “Developers”), pursuant to which the Developers will manufacture and supply lidocaine tape products, including ZTlido and SP-103, for Scilex Pharma.
ZTlido, ELYXYB and GLOPERBA Royalties In February 2013, Scilex Pharma became a party to a product development agreement (as amended, the “Product Development Agreement”) with Itochu and Oishi (together, the “Developers”), pursuant to which the Developers will manufacture and supply lidocaine tape products, including ZTlido and SP-103, for Scilex Pharma.
The expected volatility assumption is based on historical volatilities of comparable companies whose share prices are publicly available as well as the implied volatility of the Public Warrants. Stock-Based Compensation We account for stock-based compensation in accordance with FASB ASC Topic 718 “ Compensation – Stock Compensation ”, which establishes accounting for equity instruments exchanged for employee and consulting services.
The expected volatility assumption is a blend of our own stock volatility and historical volatilities of comparable companies whose share prices are publicly available as well as the implied volatility of the Public Warrants. 138 Stock-Based Compensation We account for stock-based compensation in accordance with FASB ASC Topic 718 “ Compensation – Stock Compensation ”, which establishes accounting for equity instruments exchanged for employee and consulting services.
The exercise price of the Common Warrants is subject to certain adjustments, including (but not limited to) for stock dividends, stock splits, combinations and reclassifications of the Common Stock.
The exercise price of the February 2024 BDO Common Warrants is subject to certain adjustments, including (but not limited to) for stock dividends, stock splits, combinations and reclassifications of the Common Stock.
Subject to certain ownership limitations, the Common Warrants are exercisable immediately from the date of issuance, will expire on the five-year anniversary of the date of issuance and have an exercise price of $1.70 per share.
Subject to certain ownership limitations, the February 2024 BDO Common Warrants are exercisable immediately, will expire on the five-year anniversary of the date of issuance and have an exercise price of $1.70 per share.
We market ZTlido through a dedicated sales force of approximately 65 people, targeting 10,000 primary care physicians, pain specialists, neurologists and palliative care physicians who we believe treat the majority of PHN patients.
We market ZTlido through a dedicated sales force of over 70 people, targeting 10,000 primary care physicians, pain specialists, neurologists and palliative care physicians who we believe treat the majority of PHN patients.
We in-licensed the exclusive right to commercialize GLOPERBA (colchicine USP) oral solution, an FDA-approved prophylactic treatment for painful gout flares in adults, in the United States of America (“U.S.” or the “United States”). We expect to commercialize GLOPERBA in the first half of 2024 and believe we are well positioned to market and distribute the product.
We in-licensed the exclusive right to commercialize GLOPERBA (colchicine USP) oral solution (“GLOPERBA”), an FDA-approved prophylactic treatment for painful gout flares in adults, in the United States of America (“U.S.” or the “United States”). We launched GLOPERBA in June 2024 and believe we are well-positioned to market and distribute the product.
Pursuant to the Underwriting Agreement, we also granted the Underwriters an option for a period of 30 days from the date of the Underwriting Agreement to purchase up to 882,352 additional shares of Common Stock (the “Optional Shares”, and together with the Firm Shares, the “Shares”) and/or common warrants to purchase up to 882,352 shares of Common Stock (the “Optional Warrants”, and together with the Firm Warrants, the “Common Warrants”) that may be purchased by the Underwriters, at a price per Optional Share of $1.5548 and a price per Optional Warrant of $0.0092, which amounts reflect the public offering price of $1.69 per Optional Share and $0.01 per Optional Warrant, less underwriting discounts and commissions, as applicable (the “Underwriters’ Option”).
Pursuant to the February 2024 BDO Underwriting Agreement, we also granted the Underwriters an option for a period of 30 days from the date of the February 2024 BDO Underwriting Agreement to purchase up to 882,352 additional shares of Common Stock (the “February 2024 BDO Optional Shares”, and together with the February 2024 BDO Firm Shares, the “February 2024 BDO Shares”) and/or common warrants to purchase up to 882,352 shares of Common Stock (the “February 2024 BDO Optional Warrants”, and together with the February 2024 BDO Firm Warrants, the “February 2024 BDO Common Warrants”) that may be purchased by the Underwriters, at a price per February 2024 BDO Optional Share of $1.5548 and a price per February 2024 BDO Optional Warrant of $0.0092, which amounts reflect the public offering price of $1.69 per February 2024 BDO Optional Share and $0.01 per February 2024 BDO Optional Warrant, less underwriting discounts and commissions, as applicable (the “February 2024 BDO Underwriters’ Option”).
We employ the Binomial Lattice Model valuation technique and a discounted cash flow model to measure the fair value of the Convertible Debentures and the Oramed Note, respectively, with any changes in fair value recorded as change in fair value of debt and liability instruments in the consolidated statements of operations, except for changes due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income.
We employ the Binomial Lattice Model valuation technique to measure the fair value of the Convertible Debentures and Tranche B Notes, a Scenario-Based Method valuation technique to measure the fair value of the purchased revenue liability, and a discounted cash flow model to measure the fair value of the Oramed Note, respectively, with any changes in fair value recorded as change in fair value of debt and liability instruments in the consolidated statements of operations, except for changes due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income.
As of December 31, 2023 and 2022, Scilex Pharma had ending balances of accrued royalty payables of $2.4 million and $2.2 million, respectively.
As of December 31, 2024 and 2023, Scilex Pharma had ending balances of accrued royalty payables of $4.0 million and $2.4 million, respectively.
Deferred Consideration As of December 31, 2023, we have $3.4 million of deferred consideration related to minimum royalty payments that were included in the initial measurement of consideration transferred for the GLOPERBA license. Deferred consideration minimum royalty payments began in July 2023.
Deferred Consideration As of December 31, 2024, we have $2.9 million of deferred consideration related to minimum royalty payments that were included in the initial measurement of consideration transferred for the GLOPERBA license. Deferred consideration minimum royalty payments began in July 2023.
Our development pipeline consists of three product candidates, (i) SP-102 (“SEMDEXA”) (10 mg, dexamethasone sodium phosphate viscous gel), novel, viscous gel formulation of a widely used corticosteroid for epidural injections to treat lumbosacral radicular pain or sciatica with completed Phase 3 study, (ii) SP-103 (lidocaine topical system) 5.4%, a Phase 2, next-generation, triple-strength formulation of ZTlido, for the treatment of chronic neck pain and for which we have completed a Phase 2 trial in LBP in the third quarter of 2023, and (iii) SP-104 (4.5 mg, low-dose naltrexone hydrochloride delayed-release capsules), a novel low-dose delayed-release naltrexone hydrochloride formulation for treatment of fibromyalgia, for which Phase 1 trials were completed in the second quarter of 2022 and a Phase 2 clinical trial is expected to commence in 2024.
Our development pipeline consists of three product candidates, (i) SP-102 (“SEMDEXA”) (10 mg, dexamethasone sodium phosphate viscous gel), a novel, viscous gel formulation of a widely used corticosteroid for epidural injections to treat lumbosacral radicular pain or sciatica with completed Phase 3 study, (ii) SP-103 (lidocaine topical system) 5.4% (“SP-103”), a Phase 2, next-generation, triple-strength formulation of ZTlido, for the treatment of chronic neck pain associated with muscle spasms and for which we have completed a Phase 2 trial in acute low back pain (“LBP”) in the third quarter of 2023, and (iii) SP-104 (4.5 mg, low-dose naltrexone hydrochloride delayed-release capsules) (“SP-104”), a novel low-dose delayed-release naltrexone hydrochloride formulation for treatment of fibromyalgia, for which Phase 1 trials were completed in the second quarter of 2022.
Pursuant to the ATM Sales Agreement, we may offer and sell (the “Offering”) shares of Common Stock up to $170,000,000 (the "ATM Shares"), through or to the Sales Agents as part of the Offering. We have no obligation to sell any shares of Common Stock under the ATM Sales Agreement and may suspend offers at any time.
Pursuant to the ATM Sales Agreement, we were able to offer and sell (the “Offering”) shares of Common Stock up to $170,000,000 (the "ATM Shares"), through or to the Sales Agents as part of the Offering. We had no obligation to sell any shares of Common Stock under the ATM Sales Agreement and could suspend offers at any time.
We are obligated to make quarterly royalty payments on net sales of ELYXYB in the ELYXYB Territory that range from high single digits to the low double digits on net sales based on the volume of sales. In April 2023, we launched ELYXYB in the U.S.
We are obligated to make quarterly royalty payments on net sales of ELYXYB in the ELYXYB Territory that range from high single digits to the low double digits on net sales based on the volume of sales.
Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in our consolidated statement of operations.
Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in our consolidated statements of operations and comprehensive loss.
Our ability to generate revenue sufficient to achieve profitability will depend on the successful commercialization of our products, ZTlido, GLOPERBA and ELYXYB, and the development of our product candidates. We had a net loss of $114.3 million, $23.4 million and $88.4 million for the years ended December 31, 2023, 2022 and 2021 respectively.
Our ability to generate revenue sufficient to achieve profitability will depend on the successful commercialization of our products, ZTlido, GLOPERBA and ELYXYB, and the development of our product candidates. We had a net loss of $72.8 million and $114.3 million for the years ended December 31, 2024 and 2023, respectively.
In addition to the liquidity provided by revenue generating products, advances under the A&R Yorkville Purchase Agreement, the issuance of the Convertible Debentures under the Yorkville SPA and the issuance of the Common Stock under the ATM Sales Agreement, as of December 31, 2023, we will receive up to an aggregate of approximately $120.4 million from the exercise of the Private Warrants and public warrants to purchase Common Stock (the “Public Warrants”, and together with the Private Warrants, the “ SPAC Warrants”) (at an exercise price of $11.50 per share of Common Stock), assuming the exercise in full of all of the SPAC Warrants for cash, but will not receive any proceeds from the sale of the shares of our Common Stock issuable upon such exercise.
In addition to the liquidity provided by revenue generating products and the issuance of the Common Stock under the ATM Sales Agreement, the February 2024 BDO Underwriting Agreement, the April 2024 RDO Purchase Agreement, the Tranche B Securities Purchase Agreement and the December 2024 RDO Purchase Agreement, as of December 31, 2024, we will receive up to an aggregate of approximately $74.4 million from the exercise of the Private Warrants and public warrants to purchase Common Stock (the “Public Warrants”, and together with the Private Warrants, the “ SPAC Warrants”) (at an exercise price of $11.50 per share of Common Stock), assuming the exercise in full of all of the SPAC Warrants for cash, but will not receive any proceeds from the sale of the shares of our Common Stock issuable upon such exercise.
Each Firm Share was sold together with a Firm Warrant at a combined public offering price of $1.70. The combined price per Firm Share and accompanying Firm Warrant paid by the Underwriters was $1.564, which amount reflects the combined public offering price of $1.70, less underwriting discounts and commissions.
The combined price per Firm Share and accompanying February 2024 BDO Firm Warrant paid by the Underwriters was $1.564, which amount reflects the combined public offering price of $1.70, less underwriting discounts and commissions.
Sorrento Chapter 11 Filing On February 13, 2023, Sorrento, together with its wholly owned direct subsidiary, Scintilla Pharmaceuticals, Inc., commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas. The Chapter 11 proceedings are jointly administered under the caption In re Sorrento Therapeutics, Inc., et al.
(“Sorrento”), together with its wholly owned direct subsidiary, Scintilla Pharmaceuticals, Inc., commenced voluntary proceedings under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas. The 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”).
Recent Development On February 29, 2024, we entered into an underwriting agreement (the “Underwriting Agreement”) with Rodman & Renshaw LLC and StockBlock Securities LLC, as the representatives (the “Representatives”) of the underwriters named in Schedule A (the “Underwriters”).
February 2024 Bought Deal Offering 131 On February 29, 2024, we entered into an underwriting agreement (the “February 2024 BDO Underwriting Agreement”) with Rodman & Renshaw LLC and StockBlock, as the representatives (the “Representatives”) of the underwriters named in Schedule A (the “Underwriters”).
At-the-Market Sales Agreement On December 22, 2023, we entered into a Sales Agreement (the “ATM Sales Agreement”) with B. Riley Securities, Inc., Cantor Fitzgerald & Co. and H.C. Wainwright & Co., LLC (the “Sales Agents”).
At-the-Market Sales Agreement On December 22, 2023, we entered into a Sales Agreement (the “ATM Sales Agreement”) with B. Riley Securities, Inc., Cantor Fitzgerald & Co. and H.C. Wainwright & Co., LLC (the “Sales Agents”), which agreement was voluntarily terminated by us effective as of March 5, 2025.
Convertible Debentures and the Oramed Note We elected the fair value option to account for the Convertible Debentures in an aggregate principal amount of up to $25.0 million that were issued in March and April 2023 and for the Oramed Note in the principal amount of $101.9 million that was issued in September 2023.
Convertible Debentures, the Oramed Note, Tranche B Notes and Purchased Revenue Liability We elected the fair value option to account for the Convertible Debentures in an aggregate principal amount of up to $25.0 million that were issued in March and April 2023, the Oramed Note in the principal amount of $101.9 million that was issued in September 2023, Tranche B Notes in the principal amount of $50.0 million that were issued in October 2024 and purchased revenue liability pursuant to the ZTlido Royalty Purchase Agreement.
Cash Flows The following table summarizes our cash flows for each of the periods presented (in thousands): Year Ended December 31, 2023 2022 Cash Flow Data: Net cash used for operating activities $ (20,707 ) $ (21,258 ) Net cash used for investing activities (330 ) (2,067 ) Net cash proceeds from financing activities 23,582 21,171 Net change in cash, cash equivalents and restricted cash $ 2,545 $ (2,154 ) Cash Flows from Operating Activities For the year ended December 31, 2023, net cash used for operating activities was approximately $20.7 million, attributable to our net loss of $114.3 million, partially offset by other non-cash reconciling items of $27.9 million related to loss on derivative liabilities, stock-based compensation, change in fair value of debt and liability instruments, depreciation and amortization and non-cash operating lease cost, and changes in operating assets and liabilities that provided $65.7 million of cash.
Cash Flows The following table summarizes our cash flows for each of the periods presented (in thousands): Year Ended December 31, 2024 2023 Cash Flow Data: Net cash proceeds from (used for) operating activities $ 19,349 $ (20,707 ) Net cash used for investing activities (2,675 ) (330 ) Net cash (used for) proceeds from financing activities (18,131 ) 23,582 Net change in cash, cash equivalents and restricted cash $ (1,457 ) $ 2,545 Cash Flows from Operating Activities For the year ended December 31, 2024, net cash proceeds from operating activities was approximately $19.3 million, attributable to non-cash reconciling items of $27.3 million related to allocated expense for financial instruments at fair value, stock-based compensation, change in fair value of debt and liability instruments, allowances for expected credit losses, depreciation and amortization, non-cash operating lease cost and gain on derivative liabilities, and changes in operating assets and liabilities that provided $64.8 million of cash, partially offset by our net loss of $72.8 million.
As of December 31, 2023, we had an accumulated deficit of approximately $490.2 million . As of December 31, 2023, we had cash and cash equivalents of approximately $3.9 million.
As of December 31, 2024, we had an accumulated deficit of approximately $563.1 million . As of December 31, 2024, we had cash and cash equivalents of approximately $3.3 million.
Operating Costs and Expenses Cost of Revenue Cost of revenue consists of the cost of purchasing ZTlido and ELYXYB from our manufacturing partners, inventory write-downs related to expiration dates for on-hand inventory, cost of shipments, and royalty payments to our manufacturers. We expect the cost of revenue to fluctuate with related sales revenue.
We expect that any net revenue we generate will fluctuate from year to year as a result of the unpredictability of the demand for our product. 124 Operating Costs and Expenses Cost of Revenue Cost of revenue consists of the cost of purchasing ZTlido, ELYXYB and GLOPERBA from our manufacturing partners, inventory write-downs related to expiration dates for on-hand inventory, cost of shipments, and royalty payments to our manufacturers.
(“Yorkville”) pursuant to that certain securities purchase agreement dated as of March 21, 2023 and amended on October 11, 2023, between Yorkville and us (the “Yorkville SPA”) and a senior secured promissory note to Oramed Pharmaceuticals Inc. (“Oramed”) issued in September 2023 in the principal amount of $101.9 million (the “Oramed Note”).
(“Yorkville”) pursuant to that certain securities purchase agreement dated as of March 21, 2023 and amended on October 11, 2023, between Yorkville and us, (ii) the senior secured promissory note to Oramed Pharmaceuticals Inc.
Loss (Gain) on Derivative Liability Loss (gain) on derivative liability for the years ended December 31, 2023 and 2022 was $0.5 million and $(8.3) million, respectively. The loss recognized during the year ended December 31, 2023 was attributed to the change in the fair value of the derivative warrant liability associated with the Private Warrants.
The loss recognized during the year ended December 31, 2023 was attributed to the change in the fair value of the derivative warrant liability associated with the Private Warrants.
During the year ended December 31, 2023, we made royalty payments in the amount of $26.0 thousand As of December 31, 2023, we had ending balances of accrued royalty payables of $5.0 thousand.
In April 2023, we launched ELYXYB in the U.S. 130 During the year ended December 31, 2024 and 2023, we made royalty payments in the amount of $0.3 million and $26.0 thousand, respectively. As of December 31, 2024 and 2023, we had ending balances of accrued royalty payables of $0.1 million and $5.0 thousand, respectively.
Pursuant to the Underwriting Agreement, we agreed to sell, in an underwritten offering (the “Bought Deal Offering”), 5,882,353 shares (the “Firm Shares”) of the Common Stock, and accompanying common warrants to purchase up to an aggregate of 5,882,353 shares of Common Stock (the “Firm Warrants”).
Pursuant to the February 2024 BDO Underwriting Agreement, we sold, in an underwritten offering (the “February 2024 BDO”), 5,882,353 shares (the “February 2024 BDO Firm Shares”) of the Common Stock, and accompanying common warrants to purchase up to an aggregate of 5,882,353 shares of Common Stock (the “February 2024 BDO Firm Warrants”).
The following table summarizes the aggregate indebtedness of these issuances as of December 31, 2023 and December 31, 2022 (in thousands): 123 December 31, 2023 December 31, 2022 Oramed Note (Outstanding Principal Balance: $96.9 million) $ 104,089 $ — Convertible Debentures (Outstanding Principal Balance: $4.4 million) 4,340 — Revolving Facility 17,038 — Deferred Consideration with Romeg 3,386 3,651 Total indebtedness $ 128,853 $ 3,651 The Oramed Note As of December 31, 2023, we have $104.1 million outstanding under the Oramed Note pursuant to the Scilex-Oramed SPA (see Note 7 titled “ Debt ” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information).
The following table summarizes the aggregate indebtedness of these issuances as of December 31, 2024 and December 31, 2023 (in thousands): 129 December 31, 2024 December 31, 2023 Oramed Note (outstanding principal balance: $25.0 million and $100.9 million as of December 31, 2024 and 2023, respectively) $ 12,161 $ 104,089 Convertible Debentures (outstanding principal balance: nil and $4.4 million as of December 31, 2024 and 2023, respectively) — 4,340 Tranche B Notes (outstanding principal balance: $38.0 million and nil as of December 31, 2024 and 2023, respectively) 23,560 — Purchased Revenue Liability 6,800 — Revolving Facility — 17,038 Deferred Consideration with Romeg 2,895 3,386 Total indebtedness $ 45,416 $ 128,853 The Oramed Note As of December 31, 2024, the fair value of the Oramed Note outstanding was $12.2 million pursuant to the Scilex-Oramed SPA (see Note 7 titled “ Debt ” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information).
Revolving Facility As of December 31, 2023, we have $17.0 million outstanding under the Revolving Facility (see Note 7 titled “ Debt ” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information).
Revolving Facility We fully repaid the Revolving Facility in October 2024 (see Note 7 titled “ Debt ” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information).
SP-103 is a triple-strength lidocaine topical system designed to deliver a dose of lidocaine three times higher than any lidocaine topical product that we are aware of, either approved or in development.
SP-103 is a triple-strength lidocaine topical system designed to deliver a dose of lidocaine three times higher than any lidocaine topical product that we are aware of, either approved or in development. We currently contract with third parties for the manufacture, assembly, testing, packaging, storage and distribution of our products.
ZTlido possesses novel delivery and adhesion technology designed to address many of the limitations of current prescription lidocaine patches by providing significantly improved adhesion and continuous pain relief throughout the 12-hour administration period.
Food and Drug Administration (“FDA”) for the relief of neuropathic pain associated with post-herpetic neuralgia (“PHN”), which is a form of post-shingles nerve pain. ZTlido possesses novel delivery and adhesion technology designed to address many of the limitations of current prescription lidocaine patches by providing significantly improved adhesion and continuous pain relief throughout the 12-hour administration period.
Convertible Debentures As of December 31, 2023, we have $4.3 million in Convertible Debentures outstanding pursuant to the Yorkville SPA (see Note 7 titled “ Debt ” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information).
Convertible Debentures We fully repaid the Convertible Debentures in March 2024 (see Note 7 titled “ Debt ” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information).
Change in Fair Value of Debt and Liability Instruments Change in fair value of debt and liability instruments for the years ended December 31, 2023 and 2022 was $7.2 million and nil, respectively. The change in fair value of $7.2 million during the year ended December 31, 2023 was attributed to the Convertible Debentures and the Oramed Note.
Change in Fair Value of Debt and Liability Instruments Change in fair value of debt and liability instruments for the years ended December 31, 2024 and 2023 was $4.8 million and $7.2 million, respectively.
See Note 4 titled “Fair Value Measurements” to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. Interest Expense Interest expense for the year ended December 31, 2023 consists of interest related to the Revolving Facility.
See Note 4 titled “Fair Value Measurements” to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
If we raise additional funds by issuing equity or convertible debt securities, including pursuant to the A&R Yorkville Purchase Agreement and the ATM Sales Agreement, or as we have done pursuant to the Convertible Debentures and the Oramed Note, it could result in dilution to our existing stockholders or increased fixed payment obligations.
These conditions, among others, raise substantial doubt about our ability to continue as a going concern. If we raise additional funds by issuing equity or convertible debt securities or as we have done pursuant to the Oramed Note and the Tranche B Notes, it could result in dilution to our existing stockholders or increased fixed payment obligations.
The Sales Agents are entitled to a commission equal to 3.0% of the gross proceeds from each sale of shares of Common Stock. We will also reimburse the Sales Agents for certain expenses and have agreed to provide indemnification and contribution to the Sales Agents against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended.
We also agreed to reimburse the Sales Agents for certain expenses and provide indemnification and contribution to the Sales Agents against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended.
For product sales of ZTlido and ELYXYB, we record gross-to-net sales adjustments for government and commercial rebates, chargebacks, wholesaler and distributor fees, sales returns, special marketing programs, and prompt payment discounts. We expect that any net revenue we generate will fluctuate from year to year as a result of the unpredictability of the demand for our product.
Components of Our Results of Operations Net Revenue Net revenue consists of product sales of ZTlido, ELYXYB and GLOPERBA in the United States. For product sales of ZTlido, ELYXYB and GLOPERBA, we record gross-to-net sales adjustments for government and commercial rebates, chargebacks, wholesaler and distributor fees, sales returns, special marketing programs, and prompt payment discounts.
In connection with the Bought Deal Offering, we agreed, pursuant to the Underwriting Agreement, to issue the Representatives warrants (the “Representative Warrants”, and together with the Common Warrants, the “Warrants”) to purchase up to an aggregate of 470,588 shares of Common Stock (which represents 8.0% of the aggregate number of Firm Shares sold in the Bought Deal Offering), or up to an aggregate of 541,176 shares of Common Stock if the Underwriters exercise the Underwriters’ Option in full.
In connection with the February 2024 BDO, pursuant to the February 2024 BDO Underwriting Agreement, we issued to the Representatives warrants (the “February 2024 BDO Representative Warrants”, and together with the February 2024 BDO Common Warrants, the “February 2024 BDO Warrants”) to purchase up to an aggregate of 470,588 shares of Common Stock (which represents 8.0% of the aggregate number of February 2024 BDO Firm Shares sold in the February 2024 BDO).
While we were previously majority-owned by Sorrento, we were not a debtor in Sorrento’s voluntary Chapter 11 filing. As of December 31, 2023, Sorrento no longer holds a majority of the voting power of our outstanding capital stock entitled to vote. As of December 31, 2023, we had a $3.2 million receivable from Sorrento, which was fully reserved.
As a result, Sorrento no longer holds a majority of the voting power of our outstanding capital stock entitled to vote. As of December 31, 2024, we had a $3.2 million receivable from Sorrento, which was fully reserved. We evaluate the collectability of this receivable on a quarterly basis.
Our intangible assets, excluding goodwill, are composed of patent rights, acquired technology, acquired licenses and assembled workforce. Other (Income) Expense Loss (Gain) on Derivative Liability Loss (Gain) on derivative liability includes the remeasurement of the derivative warrant liability. See Note 4 titled “Fair Value Measurements” to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.
See Note 11 titled “ Commitments and Contingencies ” of the Notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. Other (Income) Expense (Gain) loss on Derivative Liability (Gain) loss on derivative liability includes the remeasurement of the derivative warrant liability.
We also agreed to pay certain expenses of the Representatives in connection with the Bought Deal Offering, including their legal fees and out-of-pocket expenses up to $200,000 and up to $15,950 for clearing expenses. 119 The Shares, the Warrants and the shares of Common Stock issuable upon exercise of the Warrants were offered and sold by us pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission (the “SEC”) on December 22, 2023, as amended, and was declared effective on January 11, 2024 (File No. 333-276245), a base prospectus dated January 11, 2024, and a final prospectus supplement dated February 29, 2024.
The February 2024 BDO Shares, the February 2024 BDO Warrants and the shares of Common Stock issuable upon exercise of the February 2024 BDO Warrants were offered and sold by us pursuant to an effective shelf registration statement on Form S-3 (which was initially filed with the SEC on December 22, 2023, as amended, and was declared effective on January 11, 2024 (File No. 333-276245) (the “Shelf S-3 Registration Statement”)), a base prospectus dated January 11, 2024 and a prospectus supplement dated February 29, 2024.
The ATM Shares offered and sold in the Offering will be issued pursuant to our Shelf S-3 Registration Statement. The ATM Shares may be offered only by means of a prospectus forming a part of the Shelf S-3 Registration Statement.
The ATM Shares offered and sold in the Offering were issued pursuant to our Shelf S-3 Registration Statement. The ATM Shares were offered by means of a prospectus forming a part of the Shelf S-3 Registration Statement. The Sales Agents were entitled to a commission equal to 3.0% of the gross proceeds from each sale of shares of Common Stock.
For the year ended December 31, 2022, net cash used for operating activities was approximately $21.3 million, primarily from our net loss of $23.4 million, other non-cash reconciling items of $43.6 million related to depreciation and amortization, stock-based compensation, non-cash operating lease cost, non-cash interest for debt issuance costs and debt discount, interest payments related to the debt discount on the Scilex Pharma Notes, net gain on debt extinguishment, and a gain on derivative liabilities and offset by changes in operating assets and liabilities that provided $45.7 million of cash.
For the year ended December 31, 2023, net cash used for operating activities was approximately $20.7 million, attributable to our net loss of $114.3 million, partially offset by other non-cash reconciling items of $27.9 million related to loss on derivative liabilities, stock-based compensation, change in fair value of debt and liability instruments, depreciation and amortization and non-cash operating lease cost, and changes in operating assets and liabilities that provided $65.7 million of cash.
Our existing cash and cash equivalents, proceeds from the Revolving Facility, proceeds from the issuance of the Convertible Debentures, proceeds from the issuance of the Oramed Note and the issuance of the Common Stock pursuant to the ATM Sales Agreement and any advances made 126 under the A&R Yorkville Purchase Agreement may be insufficient to enable us to fund our operating expenses, capital expenditure requirements, and to service our debt obligations (whether under the Oramed Note, the Convertible Debentures or otherwise) for at least the next 12 months.
Our existing cash and cash equivalents may be insufficient to enable us to fund our operating expenses, capital expenditure requirements, and to service our debt obligations (whether under the Oramed Note, the Tranche B Notes or otherwise) for at least the next 12 months.
The warrant liability associated with the Private Warrants was valued using the Black-Scholes option pricing model, which is considered to be Level 3 fair value meas urement. The primary unobservable input utilized in determining the fair value of the warrant is the expected volatility of the Common Stock.
The warrant liability associated with the Private Warrants, the February 2024 BDO Firm Warrants, the April 2024 RDO Common Warrants, the Deposit Warrant, the October 2024 Noteholder Warrants and the December 2024 RDO Common Warrants was valued using the Black-Scholes option pricing model, which is considered to be Level 3 fair value meas urement.
We currently estimate our product returns using historical trends and product return rates typically experienced in the industry and record this estimate as a reduction of revenue in the period the related product revenue is recognized. Co-payment Assistance Patients who have commercial insurance or pay cash and meet certain eligibility requirements may receive co- payment assistance.
Product Returns We are obligated to accept the return of products sold that are damaged or do not meet certain specifications. We currently estimate our product returns using historical trends and product return rates typically experienced in the industry and record this estimate as a reduction of revenue in the period the related product revenue is recognized.
We will seek to raise additional funds through various potential sources, such as equity and debt financings and license agreements. As discussed above, following the completion of the Business Combination, we entered into the A&R Yorkville Purchase Agreement, the B.
We will seek to raise additional funds through various potential sources, such as equity and debt financings and license agreements.
As of December 31, 2023, we had sold 1,414,554 shares of Common Stock pursuant to advances under the B. Riley Purchase Agreement for aggregate net proceeds of approximately $3.2 million. On, and effective as of, February 16, 2024, we and B. Riley mutually agreed to terminate the B. Riley Purchase Agreement.
During the year ended December 31, 2024, we have sold 96,982 shares of Common Stock under the A&R Yorkville Purchase Agreement for aggregate net proceeds of approximately $0.2 million. On, and effective as of, March 25, 2024, we and Yorkville mutually agreed to terminate the A&R Yorkville Purchase Agreement.
The Oramed Note was issued in September 2023 in the principal amount of $101.9 million, of which the principal amount of $96.9 million remained outstanding as of December 31, 2023. Gain on Debt Extinguishment, Net Gain on debt extinguishment, net for the years ended December 31, 2023 and 2022 was nil and $28.6 million, respectively.
The Oramed Note was issued in September 2023 in the principal amount of $101.9 million, of which the principal amount of $25.0 million remained outstanding as of December 31, 2024.
As of December 31, 2023, no sales of Common Stock had been made under the ATM Sales Agreement. Future Liquidity Needs We have based our anticipated operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect.
The gross proceeds to us from such exercise was approximately $1.0 million. 134 Future Liquidity Needs We have based our anticipated operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect.
The Company has determined such services received are not distinct from our sale of products to the customers, and therefore, these payments have been recorded as a reduction of revenue. Product Returns We are obligated to accept the return of products sold that are damaged or do not meet certain specifications.
The Company has determined such services received are not distinct from our sale of products to the customers, and therefore, these payments have been recorded as a reduction of revenue. Service fees are presented as accrued rebates and fees under current liabilities within the Company’s consolidated balance sheets.
Change in Fair Value of Debt and Liability Instruments Change in fair value of debt and liability instruments includes the remeasurement of the convertible debentures (the “Convertible Debentures”) issued to YA II, Ltd.
See Note 4 titled “Fair Value Measurements” to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. 125 Change in Fair Value of Debt and Liability Instruments Change in fair value of debt and liability instruments includes the remeasurement of (i) the convertible debentures (the “Convertible Debentures”) issued to YA II, Ltd.
The Convertible Debentures were issued in March and April 2023 in an aggregate principal amount of $25.0 million, of which the principal amount of $4.4 million remained outstanding as of December 31, 2023.
The loss recognized during the year ended December 31, 2023 was attributed to losses of $4.4 million for the Convertible Debentures and $2.8 million for the Oramed Note. The Convertible Debentures were issued in March and April 2023 in an aggregate principal amount of $25.0 million, which were fully repaid during the first quarter of 2024.
Riley financing pursuant to the B. Riley Purchase Agreement, the Revolving Facility, the issuance of the Convertible Debentures and the issuance of the Oramed Note in 2023. We also have deferred consideration related to the GLOPERBA license acquired in 2022.
We also have indebtedness pursuant to the Oramed Note and Tranche B Notes as well as deferred consideration related to the GLOPERBA license acquired from Romeg in 2022.
Research and Development Expenses The following table summarizes research and development expenses by project for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Increase (Decrease) SP-102 Contracted R&D $ 1,229 $ 1,488 $ (259 ) Personnel 254 250 4 Other 64 82 (18 ) Total SP-102 1,547 1,820 (273 ) SP-103 Contracted R&D 4,270 4,739 (469 ) Personnel 1,107 596 511 Other 474 1,147 (673 ) Total SP-103 5,851 6,482 (631 ) SP-104 Contracted R&D 925 388 537 Personnel 605 — 605 Other 149 163 (14 ) Total SP-104 1,679 551 1,128 GLOPERBA Contracted R&D 345 103 242 Personnel 658 — 658 Other 115 98 17 Total GLOPERBA 1,118 201 917 ELYXYB Contracted R&D 1,252 — 1,252 Personnel 908 — 908 Other 391 — 391 Total ELYXYB 2,551 — 2,551 Total Research and Development Expenses $ 12,746 $ 9,054 $ 3,692 Research and development expenses for the years ended December 31, 2023 and 2022 were $12.7 million and $9.0 million, respectively.
GLOPERBA sales commenced in June 2024. 127 Research and Development Expenses The following table summarizes research and development expenses by project for the years ended December 31, 2024 and 2023 (in thousands): Year Ended December 31, 2024 2023 Increase (Decrease) SP-102 Contracted R&D $ 1,160 $ 1,229 $ (69 ) Personnel 467 254 213 Other 57 64 (7 ) Total SP-102 1,684 1,547 137 SP-103 Contracted R&D 2,472 4,270 (1,798 ) Personnel 1,317 1,107 210 Other 188 474 (286 ) Total SP-103 3,977 5,851 (1,874 ) SP-104 Contracted R&D 50 925 (875 ) Personnel 292 605 (313 ) Other — 149 (149 ) Total SP-104 342 1,679 (1,337 ) GLOPERBA Contracted R&D 687 345 342 Personnel 813 658 155 Other 116 115 1 Total GLOPERBA 1,616 1,118 498 ELYXYB Contracted R&D 758 1,252 (494 ) Personnel 1,068 908 160 Other 196 391 (195 ) Total ELYXYB 2,022 2,551 (529 ) Total Research and Development Expenses $ 9,641 $ 12,746 $ (3,105 ) Research and development expenses for the years ended December 31, 2024 and 2023 were $9.6 million and $12.7 million, respectively.

… 134 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+1 added−2 removed0 unchanged
Biggest changeWe monitor the financial condition of our customers, limit our credit exposure by setting credit limits, and have not experienced any credit losses for the year ended December 31, 2023. Off-Balance Sheet Arrangements We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.
Biggest changeOff-Balance Sheet Arrangements We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.
Removed
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Interest Rate Risk Our exposure to market risk is confined to our cash and cash equivalents. We have cash and cash equivalents and invest primarily in high-quality money market funds, which we believe are subject to limited credit risk.
Added
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. As a “ smaller reporting company ” as defined by Item 10 of Regulation S-K, we are not required to provide the information specified under this Item 7A of this Annual Report on Form 10-K.
Removed
Due to the low risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our portfolio. Concentration Risk During the year ended December 31, 2023, we purchased inventory from our sole supplier, Itochu. This exposes us to concentration of customer and supplier risk.

Other SCLXW 10-K year-over-year comparisons