Filing summary
Entity mismatch: The supplied filing is Vickers Vantage Corp. I’s Form 10-Q, not a Scilex Holding Co. 10-Q. It reports the quarter ended June 30, 2022, and discusses Vickers’s proposed business combination with Scilex. The figures below are Vickers’s, not Scilex’s.
Business context and reporting period
Vickers was a blank-check company seeking to complete a business combination. It had not commenced operations and had no operating revenue as of June 30, 2022. The filing is unaudited and covers the three and six months ended June 30, 2022, with comparisons to 2021.
Key financial metrics
| Metric | Three months ended June 30, 2022 | Six months ended June 30, 2022 |
|---|---|---|
| Operating revenue | None | None |
| Operating and formation costs | $1.43 million | $1.75 million |
| Net income | $1.56 million | $754,903 |
| Net income per share | $0.09 | $0.04 |
| Cash used in operating activities | Six months: $1.62 million |
- Quarterly net income compared with a $233,749 net loss in Q2 2021. Six-month net income declined from $1.10 million in 2021.
- Reported profit primarily reflected non-operating, fair-value items: a $2.53 million quarterly gain and $2.12 million six-month gain from revaluing warrant liabilities. Trust investments generated $203,904 and $205,859 of income, respectively. These gains are not operating revenue or operating cash flow.
- At June 30, cash outside the trust was $351,272; prepaid expenses were $261,576; current liabilities were $598,646; and reported working capital was $14,202. Trust investments were $141.69 million.
- Balance-sheet liabilities included $2.03 million of related-party convertible notes, $2.00 million of related-party simple notes, $5.19 million of deferred underwriting fees, $1.23 million of warrant liability, and $41.82 million of mandatorily redeemable shares. Separately, $100.19 million of shares subject to possible redemption was classified as temporary equity.
- Cash declined by $156,649 during the first half of 2022: operating cash use of $1.62 million and trust-account investment of $2.07 million were partly offset by $3.54 million in financing proceeds, principally sponsor loans.
Material changes and transaction developments
- Operating and formation costs rose to $1.43 million in Q2 2022 from $172,140 in Q2 2021, and to $1.75 million for the first half from $337,296.
- Vickers entered into a merger agreement with Scilex on March 17, 2022. The proposed consideration was calculated as $1.5 billion less specified Scilex long-term debt, divided by $10 per share. Assuming no Vickers shareholder redemptions and no debt adjustment, Scilex’s existing stockholders were expected to own approximately 88% of the combined company.
- The merger remained subject to shareholder approvals, an effective registration statement, regulatory clearances and other closing conditions. Management expected completion in Q3 2022; this was an expectation, not a guarantee.
- At a June 30 extension vote, holders redeemed 4,073,605 public shares at $10.25 per share, representing about $41.8 million. The filing says approximately $99.8 million would remain in trust after those redemptions. Subsequent sponsor deposits included $647,776 to extend the deadline to September 11, 2022; the filing also describes further monthly extension rights, potentially through January 11, 2023.
Outlook, risks and unusual items
- Management disclosed substantial doubt about Vickers’s ability to continue as a going concern through September 11, 2022, citing limited operating liquidity and the deadline to complete a business combination. Without additional capital, it could need to conserve cash or suspend its search. Sponsor financing was discretionary and not assured.
- If Vickers failed to complete a business combination within the permitted period, it would have to wind up and redeem public shares; warrants could expire worthless. Trust funds were subject to shareholder redemptions and transaction-related obligations.
- Vickers reported no long-term debt, leases or off-balance-sheet arrangements in its MD&A, but did have sponsor notes and a deferred underwriting fee payable. The underwriters’ $5.19 million deferred fee was payable upon a business-combination closing, subject to amended terms that could defer half as a note if post-redemption trust funds were $25 million or less.
- Fair-value changes in private warrants and other liabilities materially affected earnings; the warrant valuation used Level 3 inputs and management estimates. The filing also identified COVID-19 as a potential, not readily quantifiable, risk to the company’s financial position and target search.
- Management stated that a previously identified material weakness in internal control was remediated by March 31, 2022, and that disclosure controls and internal control over financial reporting were effective at quarter-end.
Important facts for investors to verify
- Confirm the correct issuer and filing: this is Vickers Vantage Corp. I’s SPAC filing, not Scilex’s operating-company filing.
- Verify the final merger status, closing conditions, consideration calculation and Scilex debt adjustment against later filings.
- Check actual shareholder redemptions, trust balance, sponsor extension funding and the operative business-combination deadline after the filing date.
- Assess Vickers’s limited cash outside the trust, sponsor-loan terms, going-concern disclosure and deferred underwriting fee treatment.
- Separate reported net income from cash generation and from non-cash warrant-liability remeasurement gains.