Business context and reporting period
This is Vickers Vantage Corp. I’s Form 10-Q for the three months ended March 31, 2022, not a standalone Scilex Holding Co. operating-company 10-Q. Vickers was a blank-check company with no operations or operating revenue; Scilex was its proposed merger target. The financial statements are unaudited.
Financial performance and position
- Revenue and margins: No operating revenue; margins are not applicable. The company reported operating and formation costs of $320,415, up from $165,156 in Q1 2021.
- Net result: Net loss was $806,222, or $0.05 per share, versus net income of $1,328,853, or $0.09 per share, a year earlier. The comparison was heavily affected by noncash warrant fair-value changes: a $410,400 expense in Q1 2022 versus a $4.104 million gain in Q1 2021. Q1 2022 also included a $69,896 conversion-option fair-value expense and $7,466 of debt-discount amortization.
- Cash flow: Operating cash use was $880,481, compared with $494,332 in Q1 2021. Investing cash use was $1.035 million, comprising an additional deposit into the trust account. Financing provided $1.535 million from sponsor-related promissory notes. Cash declined to $127,440 from $507,921 at year-end 2021.
- Liquidity and assets: Trust investments, primarily U.S. Treasury money-market funds, were $140.448 million. Working capital was $483,338. Total assets were $140.972 million.
- Debt and obligations: Sponsor convertible promissory-note principal totaled $2.035 million at March 31, 2022. The balance sheet also showed a $5.190 million deferred underwriting fee payable and $3.762 million warrant liability. Deferred underwriting fees are payable upon a business combination, subject to the underwriting agreement.
- Equity and redemptions: 13.8 million public shares were subject to redemption, recorded at $140.415 million, or approximately $10.18 per share. The trust balance and redemption amount are not equivalent to unrestricted operating cash.
Material changes versus the prior comparable period
Results shifted from income to loss, primarily because the prior-year period included a substantial noncash gain from the change in warrant fair value. Operating costs also increased. Cash used in operations rose, while Q1 2022 financing included $1.535 million of sponsor-related borrowing; no comparable borrowing proceeds were reported in Q1 2021.
Outlook, risks, and unusual items
- Proposed Scilex transaction: On March 17, 2022, Vickers agreed to merge with Scilex. The stated consideration was based on $1.5 billion less specified Scilex long-term debt, divided by $10 per share. Assuming no public-share redemptions and no debt adjustment, existing Scilex stockholders were expected to own approximately 88% of the combined company. Closing was anticipated by Q3 2022, subject to shareholder approvals, regulatory and listing conditions, and other customary conditions; completion was not assured.
- Extension and deadline: The business-combination deadline was extended after quarter-end to July 11, 2022. Sponsors deposited a further $1.035 million into the trust in connection with that extension. The filing states that failure to complete a transaction by the deadline would require redemption of public shares and liquidation, and warrants could expire worthless.
- Going concern: Management said limited operating liquidity and the mandatory liquidation date raised substantial doubt about the company’s ability to continue as a going concern through July 11, 2022. The company warned that it might need additional financing or to conserve cash; availability of financing was not assured.
- Controls and reporting: Management concluded disclosure controls and internal control over financial reporting were ineffective because of a material weakness involving complex financial instruments. The filing describes remediation efforts but provides no assurance they will succeed. It also refers to a note on restatement of previously issued financial statements, but the supplied filing text does not provide a clear restatement description or quantified effect.
- Other uncertainties: Management said the financial effects of COVID-19 and the Russia-Ukraine conflict were not determinable. Level 3 fair-value estimates for warrants and conversion options rely on unobservable assumptions and can affect reported results.
Important facts for investors to verify
- Confirm the issuer and security: this filing is for Vickers Vantage Corp. I, the SPAC, rather than Scilex’s operating-company financial statements.
- Review the merger agreement, including debt adjustments, redemption outcomes, closing conditions, and the transaction’s eventual completion or termination.
- Verify the July 11, 2022 deadline, extension funding, and sponsor-loan repayment or forgiveness terms.
- Review the full disclosures on the identified material weakness and any restatement, including remediation and resulting financial-statement effects.
- Reconcile the balance-sheet date: the supplied text labels the first balance-sheet column “March 31, 2021,” although the filing period and accompanying figures indicate March 31, 2022; the source text is internally inconsistent.