What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-03-12 · 277 added, 131 removed, 257 unchanged (61% of the section changed)

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We target indications with high unmet needs and large market opportunities with non-opioid therapies for the treatment of patients with acute and chronic pain and are dedicated to advancing and improving patient outcomes.

We launched our first commercial product in October 2018 and are developing our late-stage pipeline.

Our commercial product, ZTlido, is a prescription lidocaine topical product approved by the federal 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.

We launched our first commercial product in October 2018, in-licensed two commercial products in 2022 and 2023, and are developing our late-stage pipeline.

Our commercial product, ZTlido (lidocaine topical system) 1.8% (“ZTlido”), is a prescription lidocaine topical product approved by the U.S.

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.

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 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.

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.

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 (“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.

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.

In April 2023, we launched ELYXYB in the U.S.

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We filed a New Drug Submission (“NDS”) to Health Canada’s Pharmaceutical Drugs Directorate, Bureau of Cardiology, Allergy and Neurological Sciences for the approval of ELYXYB for acute treatment of migraine with or without aura in Canada.

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.

SEMDEXA has been granted fast track designation by the FDA and, if approved, could become the first FDA-approved alternative to off-label epidural steroid injections, which are administered over 12 million times annually in the United States.

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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.

SP-103, if approved, could become the first FDA-approved lidocaine topical product for the treatment of acute pain.

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 are examining SP-103 as a treatment for chronic neck pain, a condition with high unmet need which we expect could affect over 20 million patients in the United States as of 2023.

Once the data analysis has been completed from both studies, we will request end of Phase 2 meeting with the FDA to discuss next steps to Phase 3.

We currently contract with third parties for the manufacture, assembly, testing, packaging, storage and distribution of our products.

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Prior to April 2022, we relied on a single third-party logistics distribution provider, Cardinal Health 105, for ZTlido distribution in the United States.

Cardinal Health 105 purchased

and shipped ZTlido to customer wholesale distribution centers.

Cardinal Health 105 also performed order management services on our behalf.

Cardinal Health 105 purchased and shipped ZTlido to customer wholesale distribution centers.

Cardinal Health 105 also performed order management services on our

On April 2, 2022, we announced the expansion of our direct distribution network to national and regional wholesalers and pharmacies.

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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.

In February 2023, we acquired rights to FDA-approved ELYXYB (celecoxib oral solution) in the U.S.

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.

In February 2023, we acquired rights to FDA-approved ELYXYB in the U.S.

and Canada for the acute treatment of migraine.

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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.

We had a net loss of $72.8 million and $114.3 million for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, we had an accumulated deficit of approximately $563.1 million .

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If adequate funds on acceptable terms are not available when needed, we may be required to reduce the scope of the commercialization of ZTlido, GLOPERBA and ELYXYB or delay, scale back or discontinue the development of one or more of our product candidates.

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”).

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 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”).

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.

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.

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.

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.

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.

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.

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.

Recent Developments

Deferral and Consent under Tranche B Senior Secured Convertible Note

Pursuant to the Tranche B Notes, commencing on January 2, 2025 (the “First Amortization Payment Date”), we are required to redeem in cash (the “First Amortization Payment”) such portion of the principal amount of the Tranche B Notes equal to each Tranche B Noteholder’s Holder Pro Rata Amount (as defined in the Tranche B Notes) of $6,250,000 per fiscal quarter at a redemption price equal to 100% of such Amortization Amount (as defined in the Tranche B Notes).

On January 2, 2025, we entered into a deferral and consent letter with each of (i) Nomis Bay Ltd and BPY Limited (the “Nomis Bay Consent”), (ii) Oramed (the “Oramed Consent”) and (iii) 3i, LP (the “3i Consent” and, together with the Nomis Bay Consent and the Oramed Consent, the “Tranche B Consents”), respectively, pursuant to which the Tranche B Noteholders agreed to defer our obligation to make the First Amortization Payment until January 31, 2025.

In consideration of such deferral, and to limit the Tranche B Noteholders’ right to exercise certain secured creditor remedies (including recourse against the assets of SCLX JV as a grantor under the Security Agreement (as defined in the Tranche B Consents)), SCLX JV delivered to the Tranche B Noteholders (or their designee) by deposit/withdrawal at custodian with the Depository Trust Company an aggregate of 5,000,000 Scilex Shares (as defined in, and contemplated pursuant to, the Term Sheet that is an exhibit to the Tranche B Consents (the “Term Sheet”)) held by SCLX JV, of which 2,500,000 shares were delivered to Oramed, 720,000 shares were delivered to BPY Limited, 1,280,000 shares were delivered to Nomis Bay Ltd, and 500,000 shares were delivered to 3i, LP.

In addition, pursuant to the Tranche B Consents, effective as of the latest of (i) the time of execution and delivery of the Tranche B Consents, (ii) the time of the delivery of the Scilex Shares and (iii) the time of grant of the Royalty and Exclusive Rights (each as defined in, and contemplated pursuant to, the Term Sheet), the Tranche B Noteholders agreed to further defer our obligation to make the First Amortization Payment until October 8, 2026, provided that, as contemplated in the Term Sheet, we pay an aggregate of $1.1 million in respect of a portion of the First Amortization Payment and related make-whole interest (which amount has been paid).

The Term Sheet provided that we and the Tranche B Noteholders would enter into an agreement pursuant to which the Tranche B Noteholders shall collectively receive a 10 year, assignable, freely transferable, 4% royalty on the worldwide Net Sales (as defined

therein) of GLOPERBA and ELYXYB, excluding sales of ELYXYB in Canada.

Please see section below titled “ Gloperba-Elyxyb Royalty Purchase Agreement ” for a description of such royalty agreement entered into by us.

Amendment to the Oramed Note

On January 21, 2025, we entered into an amendment letter with Oramed (the “Oramed Amendment”), pursuant to which, among other things, Oramed agreed to extend the Maturity Date under and as set forth in the Oramed Note from March 21, 2025 to December 31, 2025.

In consideration of such extension, SCLX JV agreed to deliver to Oramed an aggregate of 3,250,000 shares of Common Stock held by SCLX JV.

ZTlido Rest of World License Agreement

On February 22, 2025 (the “ Lido Effective Date ”), Scilex Pharma entered into a License Agreement (the “ Lido License Agreement ”) with RoyaltyVest Ltd.

(the “ Licensee ”) with respect to services, compositions, products, dosages and formulations comprising lidocaine that have been or are later developed by or on behalf of Scilex Pharma, including the product and any future product defined as a “Product” under Scilex Pharma’s existing (i) Product Development Agreement, dated as of May 11, 2011, with Oishi and Itochu, as amended, and (ii) the associated Commercial Supply Agreement, dated February 16, 2017, between Scilex Pharma, Oishi and Itochu, as amended, which include (a) ZTlido (lidocaine topical system) 1.8%, including the composition of matter with the NDC 69557-111-30 and (b) SP-103 (collectively, the “ Lido Product ”).

The Lido License Agreement supersedes and replaces the that certain Rest of World License Term Sheet parties entered into on October 8, 2024.

Under the Lido License Agreement, Scilex Pharma granted to the Licensee during the Lido License Term (as defined below) a worldwide (other than the United States and certain territories stated in the Lido License Agreement), exclusive, non-transferable right, license and interest in, to, and under all Product Rights Controlled (each as defined therein) by Scilex Pharma to develop, manufacture, obtain and maintain regulatory approvals for, commercialize and otherwise exploit all Lido Products, in all cases solely for commercialization of the Lido Products outside of the United States and certain territories stated in the Lido License Agreement (the “ Lido Licensee Territory ”).

The Licensee granted to Scilex Pharma a non-exclusive, non-transferable, right and license under the Licensee Non-Blocking Patents (as defined therein) (i) in the Licensor Territory (as defined therein), to develop, manufacture, obtain and maintain regulatory approvals for, commercialize and otherwise exploit Lido Product for commercialization of Lido Products in the Licensor Territory in the Field (each as defined therein), and (ii) worldwide, to develop and manufacture Lido Product for commercialization in the Licensor Territory in the Field (each as defined therein).

Each of the Licensee and Scilex Pharma will receive 50% of the Net Revenue (as defined therein) generated, and the Licensee shall effect the foregoing by paying to Scilex Pharma its share of the Net Revenue on a quarterly basis.

Pursuant to the Lido License Agreement, the Licensee shall (i) use commercially reasonable efforts to obtain and maintain regulatory approval for the Lido Product in at least one Major Market Country (as defined therein) within 18 months after the Lido Effective Date, and (ii) commit $200,000, or its equivalent in kind, annually towards such efforts until it obtains regulatory approval for the Lido Product in the Lido Licensee Territory.

Scilex Pharma shall use commercially reasonable and diligent efforts to obtain and maintain regulatory approvals for SP-103 and all existing Lido Products in each country or jurisdiction in the Licensor Territory (as defined therein).

Promptly after the Lido Effective Date, Scilex Pharma is required to (i) facilitate an introduction between Oishi, Itochu, and the Licensee, and (ii) use reasonable efforts to cause each of Oishi and Itochu to accept a direct engagement with the Licensee for the manufacturing or supply of the Lido Product in finished dosage form.

In addition, Scilex Pharma agreed to appoint the Licensee as its exclusive distributor of the Lido Product in the Licensee Territory during the Lido License Term.

The term of the Lido License Agreement commences on the Lido Effective Date and continues until expiration of the last to expire Licensed Patents (as defined therein), unless earlier terminated (the “ Lido License Term ”).

Parent Guarantee for Lido License Agreement

On February 22, 2025, in connection with Lido License Agreement, we entered into that certain Parent Guarantee for Lidocaine License Agreement (the “ Parent Guarantee ”) with the Licensee, pursuant to which we agreed to guarantee the due and proper performance of Scilex Pharma’s obligations under the Lido License Agreement on the terms and conditions set forth in the Parent Guarantee.

Pursuant to the terms of the Parent Guarantee, we shall provide the Licensee with written notice of any Change of Control (as defined therein) of

Scilex Pharma within five business days after the consummation of such Change of Control, and the Parent Guarantee and the guarantee obligations shall automatically terminate upon the consummation of such Change of Control.

Gloperba-Elyxyb Royalty Purchase Agreement

As contemplated by the Term Sheet in respect of the Royalty and Exclusive Rights described therein, on February 28, 2025 (the “Gloperba-Elyxyb Closing Date”), we entered into a Purchase and Sale Agreement (the “Gloperba-Elyxyb Royalty Purchase Agreement”) with Scilex Pharma, certain institutional investors (collectively, the “Gloperba-Elyxyb Royalty Investors”) and Oramed (together with the Gloperba-Elyxyb Royalty Investors, the “Gloperba-Elyxyb RPA Purchasers”).

Pursuant to the Gloperba-Elyxyb Royalty Purchase Agreement, Scilex Pharma sold to the Gloperba-Elyxyb RPA Purchasers the right to receive 4% of all aggregate net sales worldwide (the “Gloperba-Elyxyb Purchased Receivables”) with respect to Gloperba, Elyxyb, and any related, improved, successor, replacement and/or varying dosage forms of the foregoing (the “Gloperba-Elyxyb Covered Products”).

In consideration of the Further Deferral and representing the “grant of the Royalty and Exclusive Rights” (as defined in the Term Sheet), during the period commencing on the Gloperba-Elyxyb Closing Date and expiring on the tenth anniversary of the Gloperba-Elyxyb Closing Date (the “Gloperba-Elyxyb Payment Term”), Scilex Pharma shall pay to each Gloperba-Elyxyb RPA Purchaser, by wire transfer of immediately available funds in U.S.

dollars to such Gloperba-Elyxyb RPA Purchaser’s account such Gloperba-Elyxyb RPA Purchaser’s Specified Percentage (as defined in the Gloperba-Elyxyb Royalty Purchase Agreement) of the Covered Product Revenue Payments (each as defined in the Gloperba-Elyxyb Royalty Purchase Agreement) for each calendar quarter (commencing with the calendar quarter beginning January 1, 2025) promptly, but in any event no later than 60 calendar days after the end of each calendar quarter.

The Gloperba-Elyxyb Royalty Purchase Agreement shall terminate six months following receipt by the Gloperba-Elyxyb RPA Purchasers of all payments of the Purchased Receivables to which each Gloperba-Elyxyb RPA Purchaser is entitled during the Payment Term.

Royalty Security Agreement

Pursuant to the terms of the Gloperba-Elyxyb Royalty Purchase Agreement, we entered into a Security Agreement with Scilex Pharma and the collateral agent (as identified therein) for the benefit of the Gloperba-Elyxyb RPA Purchasers, dated as of February 28, 2025 (the “Gloperba-Elyxyb Royalty Security Agreement”).

Under the Gloperba-Elyxyb Royalty Security Agreement, each of our and Scilex Pharma’s due performance and payment under the Gloperba-Elyxyb Royalty Purchase Agreement is secured by certain collateral, including a collection account and certain material contracts, intellectual property rights and regulatory approvals, in each case related to the Gloperba-Elyxyb Covered Products.

Subordination Agreement

In connection with the Gloperba-Elyxyb Royalty Purchase Agreement and the Gloperba-Elyxyb Royalty Security Agreement, we entered into that certain Subordination Agreement, dated as of February 28, 2025 (the “Gloperba-Elyxyb Subordination Agreement”), by and among us, Scilex Pharma the Gloperba-Elyxyb RPA Purchasers and the Note Agent (each as defined in the Subordination Agreement).

Pursuant to the Gloperba-Elyxyb Subordination Agreement, the parties agreed that all obligations, liabilities and indebtedness under the Gloperba-Elyxyb Royalty Purchase Agreement are secured by first priority liens on the collateral under the Gloperba-Elyxyb Royalty Security Agreement (the “Gloperba-Elyxyb Royalty Collateral”) and the Note Agent’s lien on the Gloperba-Elyxyb Royalty Collateral is subordinated and becomes a second priority lien.

Amendment No.

1 to ZTlido Royalty Purchase Agreement

On February 28, 2025, we and Scilex Pharma entered into an Amendment No.

1 to Purchase and Sale Agreement (the “ZTlido Royalty Amendment”) with the purchasers (the “ZTlido Royalty Purchasers”) under that certain Purchase and Sale Agreement, dated as of October 8, 2024 (the “ZTlido Royalty Purchase Agreement”).

Pursuant to the Royalty Amendment, we and Scilex Pharma may assign our respective rights or delegate our respective obligations under the ZTlido Royalty Purchase Agreement without the prior written consent of the Purchasers if we receive a commitment, contingent upon an asset purchase of Covered Products (as defined in the ZTlido Royalty Purchase Agreement), that would allow us to pay in full all obligations owed under the Debt Instruments (as defined therein),

provided that such purchaser of Covered Products agrees to assume all of the obligations of our company and Scilex Pharma under the ZTlido Royalty Purchase Agreement.

Gloperba Rest of World License Agreement

On February 28, 2025 (the “Effective Date”), we entered into a License Agreement (the “Gloperba License Agreement”) with Scilex Pharma and the Licensee with respect to (i) services, compositions, products, dosages and formulations comprising Gloperba that have been or are later developed by or on behalf of us, including the product and any future product defined as a “Licensed Product” under the Romeg License Agreement, as amended and as may be further amended or restated from time to time, and (ii) any related, improved, successor or replacement forms of any such product Controlled (as defined therein) by us ((i) and (ii) collectively, the “Gloperba Product”).

Under the Gloperba License Agreement, we granted to the Licensee during the Gloperba License Term (as defined below) a worldwide, exclusive, non-transferable (except in connection with a permitted assignment of the Gloperba License Agreement) right, license and interest in, to, and under all Product Rights Controlled (each as defined therein) by us to develop, manufacture, obtain and maintain regulatory approvals for, commercialize and otherwise exploit all Gloperba Products, in all cases solely for commercialization of the Gloperba Products outside of the United States in the Field (as defined therein).

The Licensee granted to us a non-exclusive, non-transferable (except in connection with a permitted assignment of the Gloperba License Agreement), right and license under the Licensee Non-Blocking Patents (as defined therein) (i) in the United States, to develop, manufacture, obtain and maintain regulatory approvals for, commercialize and otherwise exploit Gloperba Product for commercialization of Gloperba Products in the United States in the Field (as defined therein), and (ii) worldwide, to develop and manufacture Gloperba Product for commercialization in the United States in the Field (as defined therein).

Each of the Licensee and we will receive 50% of the Net Revenue (as defined therein) generated based on Licensee’s sale of the Gloperba Products, and the Licensee shall effect the foregoing by paying to us an amount required for us to receive its share of the Net Revenue on a quarterly basis.

Pursuant to the Gloperba License Agreement, the Licensee shall obtain and maintain regulatory approval for the Gloperba Product outside of the United States in accordance with its own business judgment and in its sole and absolute discretion.

Promptly after the Effective Date, we are required to (i) facilitate an introduction between the Licensee and our contract manufacturer of the Gloperba Product (the “Gloperba CMO”) as of the Effective Date, and (ii) use reasonable efforts to cause such Gloperba CMO to accept a direct engagement with the Licensee for the manufacturing or supply of the Gloperba Product in finished dosage form.

In addition, we agreed to appoint the Licensee as its exclusive distributor of the Gloperba Product in the entire world other than the United States during the Gloperba License Term.

The term of the Gloperba License Agreement commences on the Effective Date and continues until expiration of the last to expire Licensed Patents (as defined therein), unless earlier terminated (the “Gloperba License Term”).

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.

On February 13, 2023, Sorrento Therapeutics, Inc.

(“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”).

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.

Pursuant to that certain Stock Purchase Agreement that we entered into with Sorrento on September 21, 2023 (the “the Sorrento SPA”), we repurchased shares of our Common Stock and Series A Preferred Stock from Sorrento.

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.

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Components of Our Results of Operations

Net revenue consists of product sales of ZTlido and ELYXYB in the United States.

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.

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.

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.

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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.

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.

We expect the cost of revenue to fluctuate with related net sales revenue.

Research and Development

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Selling, general and administrative expenses consist primarily of costs related to our contract sales force, salaries and other related costs, including stock-based compensation, for personnel in our executive, marketing, finance, corporate and business development and administrative functions.

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.

We expect that our selling, general and administrative expenses will vary year over year in the future as we adapt our commercial strategies to changes in the business environment.

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.

We also expect to adjust the size of our administrative, finance and legal functions to adapt to the changes above and the anticipated growth of our business.

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Our intangible assets, excluding goodwill, are composed of patent rights, acquired technology, acquired licenses and assembled workforce.

Legal Settlements

Legal settlements consist of gains on litigation settlements that were entered into during the first quarter of 2024.

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

Loss (Gain) on Derivative Liability

Loss (Gain) on derivative liability includes the remeasurement of the derivative warrant liability.

(Gain) loss on Derivative Liability

(Gain) loss 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.

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.

(“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”).

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.

(“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.

(“Oramed”) issued in September 2023 in the principal amount of $101.9 million (the “Oramed Note”), (iii) the non-refundable deposit in the aggregate principal amount of $10.0 million (the “FSF Deposit”) pursuant to that certain Commitment Side Letter (the “Commitment Letter”) dated as of June 11, 2024, entered into with FSF 33433 LLC (“FSF Lender”), (iv) senior secured convertible notes issued in October 2024 in the principal amount of $50.0 million (the “Tranche B Notes”) and (v) the purchased revenue liability associated with the ZTlido Royalty Purchase Agreement with certain institutional investors (collectively, the “ZTlido Royalty Investors”) and Oramed.

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.

Interest expense for the year ended December 31, 2022 consists of interest related to the senior secured notes issued by Scilex Pharma in September 2018 (the “Scilex Pharma Notes”) and related party note payables to Sorrento.

Interest Expense, Net

Interest expense, net consists of interest related to the loans in an aggregate principal amount of up to $30.0 million (the “Revolving Facility”) made available by eCapital Healthcare Corp.

pursuant to a Credit and Security Agreement (the “eCapital Credit Agreement”) that Scilex Pharma entered into on June 27, 2023.

Loss on Foreign Currency Exchange

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Statements of Operations Data:

Operating costs and expenses:

Net operating costs and expenses:

Cost of revenue

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Intangible amortization

Total operating costs and expenses

Legal settlements

Total net operating costs and expenses

Loss from operations

Other (income) expense:

Loss (gain) on derivative liability

Other (income) expense, net:

(Gain) loss on derivative liability

Change in fair value of debt and liability instruments

Gain on debt extinguishment, net

Interest expense, net

Loss on foreign currency exchange

Total other expense (income)

Total other (income) expense, net

Loss before income taxes

Income tax expense

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 .

Income tax (benefit) expense

Comparison of the Years Ended December 31, 2024 and 2023

The following table summarizes net revenue by product for the years ended December 31, 2024 and 2023 (in thousands):

Year Ended December 31,

Total Net Revenue

Net revenue for the years ended December 31, 2024 and 2023 was $56.6 million and $46.7 million, respectively.

The increase of $8.7 million was driven by the increase in gross product sales of ZTlido by approximately 55% and launch of ELYXYB with sales commencing in April 2023, offset by an increase in rebates.

The increase of $9.9 million was comprised of $5.8 million, $3.8 million and $0.2 million increase in net product sales of ZTlido, ELYXYB and GLOPERBA, respectively, with GLOPERBA sales commencing in June 2024.

The increase in net sales of ZTlido and ELYXYB was driven by an increase in gross sales by approximately 6% and 49%, respectively, as a result of an increase in the sales volume due to higher demand and a standard industry annual price increase, partially offset by an increase in rebates.

The commercial launch of ELYXYB has been met with a strong response from the prescribing community since its commercial launch in April 2023 and continued to show growth during 2024, the first full year of commercialization.

Cost of Revenue

The following table summarizes cost of revenue by product for the years ended December 31, 2024 and 2023 (in thousands):

Year Ended December 31,

Cost of Revenue

Cost of Revenue - Royalties

Other Cost of Revenue

Cost of Revenue

Cost of Revenue - Royalties

Cost of Revenue

Total GLOPERBA

Total Cost of Revenue

Cost of revenue for the years ended December 31, 2024 and 2023 was $16.7 million and $15.7 million, respectively.

The increase of $4.9 million was primarily due to an increase in gross product sales of approximately 61% for the year ended December 31, 2023 compared to the year ended December 31, 2022, and royalty expense of $8.6 million and $4.5 million in the years ended December 31, 2023 and 2022, respectively, that started to accrue in the second quarter of 2022.

Cost of revenue for ZTlido increased by $0.5 million due to higher royalties primarily driven by an increase in gross product sales by approximately 6%, partially offset by a decrease due to favorable foreign currency exchange rate fluctuations affecting purchases from our foreign supplier, Itochu, and decrease in logistics costs due to the absence of air shipments in 2024 compared to 2023.

Cost of revenue for ELYXYB increased by $0.5 million and was primarily due to the increase in gross product sales by approximately 49% with the sales commencing in April 2023.

GLOPERBA sales commenced in June 2024.

Research and Development Expenses

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Research and development expenses for the years ended December 31, 2024 and 2023 were $9.6 million and $12.7 million, respectively.

The $3.7 million increase was primarily attributed to the costs associated with planning for Phase 2 clinical trials of SP-104 and development costs of our new products GLOPERBA and ELYXYB for the year ended December 31, 2023.

The $3.1 million decrease was primarily attributed to reduced costs of SP-103 due to the completion of the Phase 2 clinical study and reduced development costs of SP-104.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the years ended December 31, 2023 and 2022 were $119.6 million and $64.9 million,

respectively.

The increase of approximately $54.7 million was primarily due to a $16.8 million increase in advisory expenses, which primarily includes an aggregate of $9.4 million fees paid to 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”) (which amount includes shares of Common Stock worth approximately $0.8 million at the date of issuance), a $16.6 million increase in personnel expense due to increase in headcount, a 7% merit increase starting January 2023 and new stock-based compensation from January 2023 and October 2023 equity grants, a $10.1 million increase in legal expenses primarily related to an assumption of third-party legal fees and expenses in connection with recent financing transactions, a $4.4 million increase in contracted services, a $3.5 million increase in marketing expense, a $1.4 million increase in travel and business development expenses, and a $1.9 million increase in other expenses.

Selling, general and administrative expenses for the years ended December 31, 2024 and 2023 were $119.0 million and $119.6 million, respectively.

The decrease of approximately $0.6 million was primarily due to a $10.1 million decrease in legal fees, a $1.6 million decrease in insurance costs, a $0.4 million decrease in advisory and financing expenses and a $0.2 million decrease as a result of a $1.4 million decrease related to allowance for credit losses that was made in March 2023 for the receivable from Sorrento offset by a $1.2 million increase related to allowances for expected credit losses on accounts receivable, partially offset by a $5.5 million increase in rebate expense related to future shipments of the Additional Product (as defined below) under the Satisfaction Agreement, a $2.9 million increase in contracted services, a $1.7 million increase in personnel expense due to increase in headcount and a merit increase starting January 2024, a $0.5 million increase in travel expenses, a $0.1 million increase in marketing expenses and a $1.0 million increase in other expenses.

Intangible Amortization Expense

Intangible amortization expense for the years ended December 31, 2024 and 2023 was $4.0 million and $4.1 million, respectively.

The increase of $0.2 million is related to the amortization of the acquired exclusive license of GLOPERBA.

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 decrease of $0.1 million is related to the full amortization of the assembled workforce intangible asset (see Note 6 titled “ Goodwill and Intangible Assets ” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information).

Legal Settlements

Legal settlements for the years ended December 31, 2024 and 2023 were $9.4 million and nil, respectively.

The increase was attributed to litigation settlements that were entered into during the first quarter of 2024.

See Note 11 titled “ Commitments and Contingencies ” to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K.

(Gain) Loss on Derivative Liability

(Gain) loss on derivative liability for the years ended December 31, 2024 and 2023 was ($17.4) million and $0.5 million, respectively.

The gain recognized during the year ended December 31, 2024 was attributed to the change in the fair value of the derivative 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 (each as defined below).

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 gain recognized during the year ended December 31, 2022 was attributed to the change in the fair value of the derivative liability pertaining to the Scilex Pharma Notes, as described in Note 4 of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K filed with the SEC on March 7, 2023, taking into account a risk adjusted sales forecast and the derivative warrant liability associated with the Private Warrants assumed in the Business Combination.

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.

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.

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.

The loss recognized during the year ended December 31, 2024 was attributed to losses of $35.0 thousand for the Convertible Debentures, $3.6 million for the Oramed Note, $4.7 million for the FSF Deposit, $0.9 million for the purchased revenue liability pursuant to the ZTlido Royalty Purchase Agreement and a $2.6 million loss recognized upon issuance of the Tranche B Notes, partially offset by a gain of $6.6 million in change in fair value of the Tranche B Notes and $0.4 million gain on partial extinguishment of the Oramed Note pursuant to the Oramed Letter Agreement.

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.

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.

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 gain recognized during the year ended December 31, 2022 was attributed to Scilex Pharma’s repurchase of the Scilex Pharma Notes of $20.0 million and $41.4 million in February 2022 and June 2022, respectively, as well as the early paydown provision of such Scilex Pharma Notes of $39.7 million in September 2022 (see Note 7 titled “ Debt ” included in the Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 7, 2023 for additional information).

The FSF Deposit was received in June 2024 in the principal amount of $10.0 million and was satisfied in November 2024 by the delivery of the Additional Product (as defined below) to Endeavor.

The Tranche B Notes were issued in October 2024 in the principal amount of $50.0 million, of which the principal amount of $38.0 million remained outstanding as of December 31, 2024.

Interest Expense, Net

Interest expense for the years ended December 31, 2023 and 2022 was $1.1 million and $9.6 million, respectively.

The decrease was attributed to the repayment of Scilex Pharma Notes in September 2022 and the conversion of related party notes payable to Sorrento that were outstanding as of the closing of the Business Combination into shares of Preferred Stock and Common Stock in November 2022 in connection with the closing of the Business Combination.

Interest expense for the year ended December 31, 2023 consists of interest related to the Revolving Facility.

Interest expense, net for the years ended December 31, 2024 and 2023 was $2.0 million and $1.1 million, respectively.

The increase was attributed to $0.8 million of interest related to the Revolving Facility and $0.1 million of interest related to deferred consideration for GLOPERBA license acquired from Romeg in 2022.

Liquidity and Capital Resources

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We have funded our operations primarily through the Yorkville financing pursuant to the A&R Yorkville Purchase Agreement (as defined below), the B.

Riley Principal Capital II, LLC (“B.

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.

Riley Purchase Agreement (as defined below), the Revolving Facility, the issuance of the Convertible Debentures and financing pursuant to the ATM Sales Agreement (as defined below).

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.

The following table summarizes the aggregate indebtedness of these issuances as of December 31, 2024 and December 31, 2023 (in thousands):

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Oramed Note (outstanding principal balance:

$96.9 million)

$25.0 million and $100.9 million as of December 31, 2024 and 2023, respectively)

Convertible Debentures (outstanding principal balance:

$4.4 million)

nil and $4.4 million as of December 31, 2024 and 2023, respectively)

Tranche B Notes (outstanding principal balance:

$38.0 million and nil as of December 31, 2024 and 2023, respectively)

Purchased Revenue Liability

Revolving Facility

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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).

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).

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).

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).

Tranche B Notes

As of December 31, 2024, the fair value of the Tranche B Notes outstanding was $23.6 million pursuant to the Tranche B Securities Purchase Agreement (see Note 7 titled “ Debt ” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information).

Purchased Revenue Liability

As of December 31, 2024, the fair value of the purchased revenue liability was $6.8 million pursuant to the ZTlido Royalty Purchase Agreement (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).

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).

Deferred Consideration

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Deferred consideration minimum royalty payments began in July 2023.

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.

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.

During each of the years ended December 31, 2024 and 2023, Scilex Pharma made royalty payments in the amount of $8.3 million.

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.

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In April 2023, we launched ELYXYB in the U.S.

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.

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.

In June 2022, we entered into the Romeg License Agreement with Romeg, which agreement was subsequently amended in January 2025, to acquire certain rights to GLOPERBA and the exclusive license to use the trademark “GLOPERBA®”.

As consideration for the license under the Romeg License Agreement, we are obligated to make royalty payments on net sales of GLOPERBA that range from low-single digit to mid-single digit percentages based on annual net sales.

During the years ended December 31, 2024 and 2023, we made royalty payments in the amount of $0.6 million and $0.3 million, respectively.

Contingent Consideration

We have $280.0 million, $13.0 million and $23.0 million in aggregate contingent consideration obligations in connection with the SEMDEXA, GLOPERBA and SP-104 acquisitions, respectively, that are contingent upon achieving certain specified milestones or the occurrence of certain events.

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).

Standby Equity Purchase Agreements

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On February 8, 2023, we entered into an amended and restated standby equity purchase agreement with Yorkville (the “A&R Yorkville Purchase Agreement”), amending, restating and superseding the Original Purchase Agreement.

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.

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.

The registration statement filed with the SEC in connection with the Original Purchase Agreement was initially declared effective by the SEC on December 9, 2022 and we are now able to offer and sell shares of our Common Stock under that agreement, subject to the limitations set forth therein.

As of December 31, 2023, we have sold 11,552,074 shares of Common Stock under the A&R Yorkville Purchase Agreement for aggregate net proceeds of approximately $32.3 million.

On January 8, 2023, we entered into the B.

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.

On January 8, 2023, we entered into a standby equity purchase agreement (the “B.

Riley Purchase Agreement”, together with the A&R Yorkville Purchase Agreement, the “Standby Equity Purchase Agreements”) with B.

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Riley Purchase Agreement was initially declared effective by the SEC on January 20, 2023 and we were able to offer and sell shares of our Common Stock under that agreement, subject to the limitations set forth therein and the limitations set forth in the Convertible Debentures.

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.

During the year ended December 31, 2024, we did not sell any shares of Common Stock under the B.

Riley Purchase Agreement.

On, and effective as of, February 16, 2024, we and B.

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Riley Securities, Inc., Cantor Fitzgerald & Co.

Wainwright & Co., LLC (the “Sales Agents”).

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.

The Offering will be terminated upon (i) the election of the Sales Agents upon the occurrence of certain adverse events, (ii) three business days’ advance notice from us to the Sales Agents or a Sales Agent to us, or (iii) the sale of all $170,000,000 of shares of Common Stock thereunder.

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 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.

As of December 31, 2023, no sales of Common Stock had been made under the ATM Sales Agreement.

Wainwright & Co., LLC (the “Sales Agents”), which agreement was voluntarily terminated by us effective as of March 5, 2025.

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.

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.

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.

During the year ended December 31, 2024, we sold 2,764,187 shares of Common Stock pursuant to the ATM Sales Agreement for net proceeds of approximately $2.7 million.

There were no sales made under the ATM Sales Agreement subsequent to December 31, 2024.

February 2024 Bought Deal Offering

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”).

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”).

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”).

The February 2024 BDO Underwriters’ Option was not exercised.

Each Firm Share was sold together with a February 2024 BDO Firm Warrant at a combined public offering price of $1.70.

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.

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.

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.

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).

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.

We also agreed to pay certain expenses of the Representatives in connection with the February 2024 BDO, including their legal fees and out-of-pocket expenses up to $200,000 and up to $15,950 for clearing expenses.

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.

April 2024 Registered Direct Offering

On April 23, 2024, we entered into a securities purchase agreement (the “April 2024 RDO Purchase Agreement”) with the investor named therein, pursuant to which we sold and issued, in a registered direct offering (the “April 2024 RDO”):

(i) an aggregate of 15,000,000 shares (the “April 2024 RDO Shares”) of Common Stock, and (ii) common warrants to purchase up to 15,000,000 shares of Common Stock (the “April 2024 RDO Common Warrants”).

The offering price per share and accompanying April 2024 RDO Common Warrant to purchase one share of Common Stock was $1.00, for aggregate gross proceeds to us of $15,000,000, before deducting the placement agent fees and other offering expenses.

Subject to certain ownership limitations, the April 2024 RDO Common Warrants are exercisable on the six-month anniversary from the date of issuance, will expire on the five-year anniversary of the date of issuance and have an exercise price of $1.10 per share.

The exercise price of the April 2024 RDO Common Warrants is subject to certain adjustments, including stock dividends, stock splits, combinations and reclassifications of the Common Stock.

StockBlock and its affiliate, Rodman & Renshaw LLC acted as exclusive placement agents (the “Placement Agents”) in connection with the April 2024 RDO.

As compensation for such placement agent services, we paid the Placement Agents an aggregate cash fee equal to 8.0% of the gross proceeds actually received by us from the April 2024 RDO.

We also reimbursed the Placement Agents $100,000 for actual, reasonable and documented fees and expenses, inclusive of fees and expenses of legal counsel and out-of-pocket expenses and $15,950 for clearing expenses.

We also issued to the Placement Agents or their respective designees common warrants, substantially in the form of the April 2024 RDO Common Warrants, to purchase up to 1,200,000 shares of Common Stock (the “April

2024 RDO Placement Agent Warrants” and together with the “April 2024 RDO Common Warrants”, the “April 2024 RDO Warrants”), representing up to 8.0% of the total number of the April 2024 RDO Shares issued in the April 2024 RDO.

The April 2024 RDO Placement Agent Warrants have an exercise price of $1.25 per share (which represents 125% of the combined offering price per share of Common Stock and the April 2024 RDO Common Warrant sold in the April 2024 RDO), will become exercisable on the six-month anniversary of the date of issuance and expire five years from the commencement of sales in the April 2024 RDO.

The April 2024 RDO Shares, the April 2024 RDO Warrants, and the shares of Common Stock issuable upon exercise of such warrants were offered and sold by us pursuant to the Shelf S-3 Registration Statement, a base prospectus dated January 11, 2024 and a prospectus supplement dated April 23, 2024.

The April 2024 RDO closed on April 25, 2024.

Commitment Letter

On June 11, 2024, we entered into that certain Commitment Letter with FSF Lender, pursuant to which the FSF Lender committed to provide us a loan in the aggregate amount of $100 million (the “Commitment Amount”).

The Commitment Amount shall be payable as follows:

(i) $85 million no later than the date that is 70 days following the date on which we receive the FSF Deposit (the “Outside Date” and the funding of the initial $85 million, the “Initial Closing”) and (ii) the remaining $15 million within 60 days following the Initial Closing.

Pursuant to the Commitment Letter, the FSF Lender provided us the non-refundable FSF Deposit in immediately available funds in the aggregate principal amount of $10 million on June 18, 2024 (the “Deposit Date”), which amount will be creditable towards the $85 million required to be funded by FSF Lender at the Initial Closing.

On the Deposit Date, we issued to FSF Lender a warrant to purchase up to an aggregate of 3,250,000 shares of Common Stock (subject to adjustment for any stock dividend, stock split, reverse stock split or similar transaction) (the “Deposit Warrant”), with an exercise price of $1.20 per share.

Subject to certain ownership limitations, the Deposit Warrant is immediately exercisable and will expire five years from the date of issuance.

In connection with the transactions contemplated by the Commitment Letter, we also entered into a letter agreement with FSF Lender and the FSF Lender’s strategic consultant, IVI 66766 LLC (“IVI”), dated July 16, 2024, pursuant to which we agreed to reimburse the actual, reasonable and documented consulting fees incurred by the FSF Lender in connection with the preparation, negotiation and execution of the Commitment Letter and the definitive documents with respect to the transactions contemplated thereby, which fees were satisfied in full by us issuing to IVI a warrant to purchase up to an aggregate of 250,000 shares of Common Stock (the “Fee Warrant”) on July 16, 2024, with an exercise price of $1.20 per share.

Subject to certain ownership limitations, the Fee Warrant is immediately exercisable and will expire five years from the date of issuance.

The shares of Common Stock issuable upon exercise of the Deposit Warrant and the Fee Warrant were offered and sold by us in a private placement and were subsequently registered for resale on our registration statement on Form S-3 (the “Perigrove Form S-3 Registration Statement”) (which was initially filed with the SEC on July 18, 2024, and was declared effective on July 25, 2024 (File No.

333-280882)).

On September 17, 2024, we entered into the Satisfaction Agreement with FSF Lender and Endeavor, pursuant to which the remaining obligations in respect of the FSF Deposit shall be fully satisfied by our delivery of 28,000 cartons of ZTlido to Endeavor (the “Additional Product”), which delivery shall occur no later than December 31, 2024.

Upon satisfaction of such remaining obligations, the Commitment Letter shall be terminated and of no further force or effect and neither FSF Lender nor we shall have any further liability or obligations thereunder.

In consideration of Endeavor assuming our payment obligation in respect of the FSF Deposit, Endeavor will not be responsible for making any payment to us for (i) the product already delivered as of the date of such agreement in an amount of approximately $13.2 million and (ii) the Additional Product.

In November 2024, we delivered the Additional Product to Endeavor and fully satisfied the remaining obligations in respect of the FSF Deposit.

Tranche B Notes

On October 8, 2024, we entered into a securities purchase agreement (the “Tranche B Securities Purchase Agreement”) with certain institutional investors (collectively, the “Tranche B Investors”) and Oramed (together with the Tranche B Investors, the “Tranche B Noteholders”), to refinance a portion of the Oramed Note and pay off certain other indebtedness.

Pursuant to the Tranche B Securities Purchase Agreement, we agreed to issue and sell, in a registered offering directly to the Tranche B Noteholders:

(i) a new tranche B of senior secured convertible notes in the aggregate principal amount of $50.0 million (the “Tranche B Notes”), which notes will mature on the two-year anniversary of the issuance date and will be convertible into shares of our Common Stock at a conversion price equal to $1.09 per share (which was automatically reduced to $1.04 per share of Common Stock subsequent to the December 2024 RDO (as defined below) in accordance with the terms of such notes) and (ii) warrants (the “October 2024 Noteholder Warrants”) to purchase up to 7,500,000 shares of our Common Stock directly to the Tranche B Noteholders.

We received in exchange for the issuance of the Tranche B Notes to the Tranche B Investors an aggregate amount in cash of $22,500,000, excluding fees and expenses payable by us.

We received from Oramed in consideration for the Tranche B Notes issued to Oramed an exchange and reduction of the principal balance under the Oramed Note of $22,500,000.

The October 2024 Noteholder Warrants are immediately exercisable for cash at an exercise price equal to $1.09 per share of Common Stock (which was automatically reduced to $1.04 per share of Common Stock subsequent to the December 2024 RDO (as defined below) in accordance with the terms of such warrants) and will expire five years from the issuance date.

The October 2024 Noteholder Warrants issued to the Tranche B Investors are initially exercisable for 3,750,000 shares of Common Stock in the aggregate.

The October 2024 Noteholder Warrants issued to Oramed are initially exercisable for 3,750,000 shares of Common Stock.

Pursuant to the terms and conditions contained in the Tranche B Securities Purchase Agreement, we also agreed to reimburse the Tranche B Investors for all reasonable costs and expenses incurred by it or its affiliates in connection with the Tranche B Securities Purchase Agreement, the Tranche B Notes, the October 2024 Noteholder Warrants, the ZTlido Royalty Purchase Agreement (as defined below) and certain other transaction documents, and an aggregate amount of $950,000 non-accountable legal fees of outside counsel and special finance and collateral counsel, which shall be withheld by the Tranche B Investors from its purchase price at the closing of the transaction, less $20,000 previously paid by us.

We shall also be responsible for the payment of a $2,000,000 fee to the placement agent in addition to the payment of any placement agent’s reasonable fees, financial advisory fees relating to or arising out of the transactions contemplated by the Tranche B Securities Purchase Agreement.

In addition, in conjunction with and pursuant to the letter agreement we entered into with Oramed, dated as of October 2, 2025 (the “Tranche B Letter Agreement”), we are also responsible for the payment of legal fees of outside counsel for Oramed relating to or arising out of the transactions contemplated hereby and the payment date extensions described under the Tranche B Letter Agreement.

We shall also be responsible for the payment of any fees of the Agent and the legal fees incurred thereby relating to or arising out of the transactions contemplated by the Tranche B Securities Purchase Agreement.

In connection with the offering of the Tranche B Notes, we issued to StockBlock Securities LLC (“StockBlock”) and its affiliate, Rodman & Renshaw LLC (the “Placement Agents”) or their respective designees, (i) 2,197,802 shares of Common Stock (the “Placement Agent Shares”) and (ii) Placement Agent Warrants to purchase up to 3,669,724 shares of Common Stock (the “October 2024 Placement Agent Warrants”).

The Placement Agent Shares were subject to a 120-day lock-up, which is now expired.

In addition, during such 120-day period, the Placement Agents (whether directly or indirectly through their respective affiliates) shall be prohibited from hedging, pledging or similar transactions and from short-selling our securities, subject to certain exceptions.

The October 2024 Placement Agent Warrants will have the same terms as the October 2024 Noteholder Warrants, except that the Placement Agents have agreed not to exercise the October 2024 Placement Agent Warrants for a period of 180 days following the date of issuance.

December 2024 Registered Direct Offering

On December 11, 2024, we entered into a securities purchase agreement (the “December 2024 RDO Purchase Agreement”) with the investors named therein, pursuant to which we agreed to sell and issue, in a registered direct offering (the “December 2024 RDO”):

(i) an aggregate of 26,355,347 shares of Common Stock, (ii) pre-funded warrants to purchase up to 2,401,132 shares of Common Stock (the “December 2024 RDO Pre-Funded Warrants”) and (iii) common warrants to purchase up to 57,512,958 shares of Common Stock (the “December 2024 RDO Common Warrants” and together with the December 2024 RDO Pre-Funded Warrants and the warrants issued to StockBlock pursuant to certain contractual obligations between us and StockBlock (the “StockBlock Warrants”), the “December 2024 RDO Warrants”).

The combined offering price (a) per share of Common Stock and accompanying December 2024 RDO Common Warrants was $0.59 and (b) per Pre-Funded Warrant and accompanying December 2024 RDO Common Warrants was $0.5899.

We received approximately $17.0 million in gross proceeds from the December 2024 RDO, before deducting offering fees and expenses.

We intend to use the net proceeds from the December 2024 RDO for working capital and general corporate purposes, which may include capital expenditures, commercialization expenditures, research and development expenditures, regulatory affairs expenditures, clinical trial expenditures, acquisitions of new technologies and investments, business combinations and the repayment, refinancing, redemption or repurchase of indebtedness or capital stock.

Amendment to Common Stock Purchase Warrant

On December 11, 2024, we entered into a warrant amendment (the “Warrant Amendment”) with one of the investors to exercise the outstanding amount of certain warrants that we issued to such investor in the February 2024 BDO on March 5, 2024.

Pursuant to the Warrant Amendment, the investor agreed to exercise outstanding warrants to purchase an aggregate of 1,764,706 shares of Common Stock in cash at an amended exercise price of $0.59 per share.

The gross proceeds to us from such exercise was approximately $1.0 million.

Future Liquidity Needs

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• 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 extent and scope of our general and administrative expenses.

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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.

Riley Purchase Agreement (which was terminated in February 2024), the Yorkville SPA, the eCapital Credit Agreement and the ATM Sales Agreement.

The registration statements filed with the SEC in connection with the Original Purchase Agreement, the Convertible Debentures and the Shelf S-3 Registration Statement were initially declared effective by the SEC on December 9, 2022, April 19, 2023 and January 11, 2024, respectively, and we are now able to offer and sell shares of our Common Stock under the A&R Yorkville Purchase Agreement and the ATM Sales Agreement, subject to any limitations set forth therein, which will provide us with an additional source of liquidity.

We have issued all of the Convertible Debentures under the Yorkville SPA.

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.

However, our ability to generate proceeds will depend on the market price of our Common Stock.

If the price of our Common Stock remains below $11.50 per share, we believe warrant holders will be unlikely to cash exercise their SPAC Warrants, resulting in little or no cash proceeds to us.

To the extent any of the February 2024 BDO Firm Warrants, February 2024 BDO Representative Warrants, April 2024 RDO Common Warrants, April 2024 RDO Placement Agent Warrants, Deposit Warrant, October 2024 Noteholder Warrants, October 2024 Placement Agent Warrants, December 2024 RDO Common Warrants and StockBlock Warrants is exercised, we will receive additional proceeds.

We can give no assurances that we will be able to secure additional sources of funds to support our operations on acceptable terms, or at all, or, if such funds are available to us, that such additional financing will be sufficient to meet our needs.

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, 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.

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.

In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders.

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

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.

Additionally, any future collaborations we enter into with third parties may provide capital in the near term but we may have to relinquish valuable rights to ZTlido, GLOPERBA, ELYXYB, or our product candidates or grant licenses on terms that are not favorable to us.

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See Note 2 titled “ Liquidity and Going Concern ” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information.

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

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.

If these sources are insufficient to satisfy our liquidity requirements, we may seek to raise additional funds through equity offerings, debt financings, collaborations, government contracts or other strategic transactions.

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Cash Flow Data:

Net cash used for operating activities

Net cash proceeds from (used for) operating activities

Net cash used for investing activities

Net cash proceeds from financing activities

Net cash (used for) proceeds from financing activities

Net change in cash, cash equivalents and restricted cash

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.

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.

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.

Cash Flows from Investing Activities

For the year ended December 31, 2024, net cash used for investing activities was approximately $2.7 million and was related to $0.6 million payments of deferred consideration for Romeg intangible asset acquisition under the Romeg License Agreement, $2.0 million purchase of the Class B ordinary shares of Denali and $0.1 million purchase of a convertible promissory note from Denali (see Note 5 titled “ Balance Sheet Components ” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information).

For the year ended December 31, 2023, net cash used for investing activities was approximately $0.3 million, related to payments of deferred consideration for Romeg intangible asset acquisition and $30.0 thousand attributed to cash paid for property and equipment purchases.

For the year ended December 31, 2022 , net cash used for investing activities was approximately $2.1 million attributed to cash paid for the acquisition of GLOPERBA licenses from Romeg and $7.0 thousand attributed to cash paid for property and equipment purchases.

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, 2022 , net cash provided by financing activities was approximately $21.2 million and is primarily related to $62.5 million in proceeds from related party note payables, $51.9 million in proceeds from related party payables, $9.8 million in proceeds from the revolving loan we previously had with CNH Finance Fund I., L.P.

(the “CNH Revolving Loan”), $3.4 million in proceeds from the Business Combination, and $0.1 million in proceeds from the exercise of stock options offset by $84.8 million repayment of the Scilex Pharma Notes, $18.8 million repayment on the CNH Revolving Loan, and $2.9 million on transaction costs payment related to the Business Combination.

For the year ended December 31, 2024 , net cash used for financing activities was approximately $18.1 million and is primarily related to the repayment of an aggregate of $184.6 million of borrowings under the Revolving Facility, the Oramed Note, the Convertible Debentures and the Tranche B Notes, the payment of an aggregate of $4.4 million of transaction costs related to the February 2024 BDO, the April 2024 RDO and the December 2024 RDO, the payment of an aggregate of $4.2 million of transaction cost related to the Tranche B Notes and the ZTlido Royalty Purchase Agreement, a $1.4 million payment of deferred transaction costs related to the Semnur Business Combination, a $0.5 million payment of excise tax on stock repurchases, and a payment of $0.3 million cash in consideration of the repurchase of a certain portion of the SPAC Warrants, partially offset by $95.5 million in gross proceeds from the Revolving Facility, an aggregate of $42.0 million in gross proceeds from the issuance of shares under the February 2024 BDO, April 2024 RDO, December 2024 RDO and the exercise of the February 2024 BDO Firm Warrants, an aggregate of $25.0 million in gross proceeds from issuance of Tranche B Notes and ZTlido Royalty Purchase Agreement, $10.0 million in proceeds from receiving the FSF Deposit, an aggregate of $2.7 million in proceeds from the Standby Equity Purchase Agreements and the ATM Sales Agreement and an aggregate of $2.1 million in proceeds from the exercise of stock options and warrants and purchases under the ESPP.

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.

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.

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.

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.

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Revenue Recognition

Our revenue to date has been generated from product sales of ZTlido and ELYXYB in the United States.

Our revenue to date has been generated from product sales of ZTlido, ELYXYB and GLOPERBA in the United States.

We do not have significant costs associated with obtaining contracts with our customers.

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We recognize revenue for satisfied performance obligations only when we determine there are no uncertainties regarding payment terms or transfer of control.

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

ownership of the asset, and we have a present right to payment from the customer at that time.

Invoicing typically occurs upon shipment and the length of time between invoicing and the date on which payment is due is not significant.

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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.

Reserves for rebates and chargebacks are recorded as accrued rebates and fees under current liabilities within the Company’s consolidated balance sheets.

Prompt Payment Discounts

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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.

Product Returns

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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.

Product returns are presented as accrued rebates and fees under current liabilities within the Company’s consolidated balance sheets.

Co-payment Assistance

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We accrue for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators.

Co-payment assistance is presented as accrued rebates and fees under current liabilities within the Company’s consolidated balance sheets.

Derivative Liability

Derivative liabilities are recorded on our 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.

Upon the closing of the Business Combination, the Company assumed a derivative warrant liability of $2.5 million related to Private Warrants (See Note 8 titled “Stockholders’ Equity” to our Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 7, 2023 for additional information).

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 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.

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.

The primary unobservable input utilized in determining the fair value of the warrants is the expected volatility of the Common Stock.

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.

Stock-Based Compensation

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We use these estimates as variables in the Black-Scholes option pricing model.

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.

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.

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.

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.

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.

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.

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.

Interest expense related to these financial instruments is included in the changes in fair value.

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References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.

Smaller Reporting Company

Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.

Scilex qualifies and will remain a smaller reporting company until the last day of the fiscal year in which (i) Scilex has annual revenue of at least $100 million and a public float that equals or exceeds $700 million as of the last business day of its most recently completed second fiscal quarter or (ii) Scilex has a public float that equals or exceeds $250 million as of the last business day of its most recently completed second fiscal quarter.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis