Scilex Holding Co quarterly report, Q3 FY2022

Business context and reporting period

This is Vickers Vantage Corp. I’s unaudited Form 10-Q for the quarter ended September 30, 2022, filed November 4, 2022—not an operating-company 10-Q for Scilex Holding Co. Vickers was a blank-check company with no operating revenue or business operations; it was pursuing a merger with Scilex, a majority-owned subsidiary of Sorrento Therapeutics.

Financial results and position

• Net income for the first nine months was primarily supported by a $2.19 million noncash gain from the change in fair value of warrant liabilities and $665,000 of Trust Account investment income. These items do not represent operating performance.
• At September 30, cash outside the Trust Account was $34,961; Trust Account investments were $101.29 million. Working capital deficit was $643,543.
• Total liabilities were $12.17 million, including $2.04 million of related-party convertible notes, $2.97 million of related-party simple promissory notes, and a $5.19 million deferred underwriting fee payable. The filing reports no conventional long-term debt or lease obligations.
• Trust Account funds are restricted primarily for a business combination or shareholder redemptions; they should not be treated as ordinary operating liquidity.

Changes versus prior comparable periods

• Third-quarter net loss narrowed to $131,387 from $1.44 million in 2021, as the prior-year period included a $1.16 million warrant-liability fair-value loss.
• Nine-month results improved to net income of $623,516 from a $349,248 loss in 2021, largely reflecting fair-value gains and higher Trust Account interest, partly offset by higher operating costs.
• Cash outside the Trust Account fell from $507,921 at December 31, 2021 to $34,961 at September 30, 2022. The Trust Account declined from $139.41 million to $101.29 million, mainly reflecting $41.82 million paid to redeem 4,073,605 public shares, partly offset by interest and extension deposits.

Merger, outlook, and risks

• The March 2022 merger agreement, amended September 12, contemplated Vickers merging with Scilex and becoming Scilex Holding Company. The stated common-stock consideration was based on $1.5 billion less specified Scilex long-term debt, divided by $10 per share; preferred-stock consideration and option conversion terms also applied. The filing’s ownership estimates assumed no further redemptions and were subject to transaction terms.
• Closing depended on shareholder approvals, an effective registration statement, regulatory clearances, Nasdaq listing conditions, and other customary conditions. The merger was expected in the fourth quarter of 2022; the agreement’s stated outside date was November 11, 2022, subject to extension provisions.
• Shareholders had already redeemed about 29.5% of the original public shares. Further redemptions could affect available funds, ownership percentages, listing requirements, and satisfaction of the net tangible asset condition.
• Management disclosed substantial doubt about Vickers’ ability to continue as a going concern through November 11, 2022 if the merger was not completed. It had limited operating cash and said additional financing might not be available on acceptable terms.
• After quarter-end, sponsors made an additional $323,889 Trust Account deposit to extend the deadline to November 11. Other disclosed steps included sponsor debt contribution arrangements, a Sorrento funding commitment related to the net tangible asset condition, and warrant-transfer and share-release arrangements tied to redemption and Nasdaq requirements. The proxy statement/prospectus became effective October 28, with a shareholder meeting scheduled for November 9.
• Other risks include merger failure or delay, liquidation if no combination is completed by the applicable deadline, warrants expiring worthless upon liquidation, and uncertainty from COVID-19. Changes in Level 3 warrant valuations also materially affected reported earnings.

Investor verification priorities

1. Confirm the merger’s status, shareholder approvals, regulatory and Nasdaq conditions, and any extension or termination of the November 11, 2022 deadline.
2. Verify actual redemptions, Trust Account proceeds available at closing, post-redemption ownership, and satisfaction of the $5,000,001 net tangible asset condition.
3. Review the final treatment of Scilex debt, preferred consideration, sponsor loans and contributions, Sorrento’s funding commitment, and deferred underwriting fees.
4. Distinguish Vickers’ shell-company financials and noncash valuation gains from Scilex’s operating results; this filing does not provide a clear set of Scilex standalone quarterly operating metrics.