| SUBSEQUENT EVENTS | NOTE 9 - SUBSEQUENT EVENTS: Stock Purchase Agreement On August 7, 2023, the Company entered into a Stock Purchase Agreement,
as amended by a First Amendment to Stock Purchase Agreement, dated as of August 9, 2023 (together, the “Stock Purchase Agreement”),
with Sorrento Therapeutics, Inc. (“Sorrento”), to acquire certain securities of Scilex Holding Company (“Scilex”)
owned by Sorrento, including (A) 59,726,737 shares of common stock of Scilex; provided, that the Company will have an option to purchase
up to 2,259,058 additional shares of common stock of Scilex, which Sorrento is holding in abeyance on behalf of certain warrant holders
of Sorrento (the “Option Shares”), at an exercise price of $1.13 per Option Share; (B) 29,057,096 shares of Series A preferred
stock of Scilex; and (C) public warrants exercisable for 1,386,617 shares of common stock of Scilex, and private placement warrants exercisable
for 3,104,000 shares of common stock of Scilex, (collectively, the “Purchased Securities”) (such acquisition of the Purchased
Securities, the “Transaction”) for a total purchase price of $105,000. The consideration for the Transaction consists of a
credit bid by the Company on a dollar-for-dollar basis of the full amount of outstanding obligations as of the closing date under the
DIP Facility (as defined below), with the remaining balance of the purchase price to be paid in cash at closing. Sorrento and its wholly-owned
subsidiary (collectively, the “Debtors”) are debtors in Chapter 11 bankruptcy proceedings pending before the United States
Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) which commenced on February 13, 2023. The Transaction
is being conducted through a Bankruptcy Court-supervised process and is subject to the receipt of higher or otherwise better offers from
competing bidders at an auction and approval of the sale by the Bankruptcy Court. Scilex is a company focused on acquiring, developing
and commercializing non-opioid pain management products for the treatment of acute and chronic pain. Completion of the Transaction is subject to the satisfaction or waiver
of customary and certain other closing conditions, including governmental and bankruptcy court approvals, the approval of an amendment
to Scilex’s governance documents, the grant of an irrevocable proxy and call option (with an exercise price of $1 (not in thousands))
with respect to the remaining share of Scilex Series A preferred stock retained by Sorrento, no trigger event in Scilex’s governance
documents having occurred and the Purchased Securities shall represent at least a majority in voting power of Scilex, entry by the Company
and Scilex into a new registration rights agreement, and no event of default under the DIP Facility. Sorrento has also agreed to provide
certain transition services for a period of 90 days following the closing. The Company may also terminate the Stock Purchase Agreement
(a) if the auction has not commenced on or before August 14, 2023 or if the sale order has not been entered by the Bankruptcy Court by
August 21, 2023, (b) if Sorrento’s bankruptcy case is converted to chapter 7, or (c) if Sorrento materially breaches the DIP Facility
or the Company is unable to credit bid in payment of the DIP Facility. The Stock Purchase Agreement provides for certain termination rights
including, but not limited to, by mutual written consent of the parties, and by either party in the event that the Transaction is not
consummated by September 30, 2023, or pursuant to any legal prohibition or injunction. The Stock Purchase Agreement provides for payment
to the Company by Sorrento of a termination fee of $3,413 and expense reimbursement of up to $1,000 for outside counsel upon termination
of the Stock Purchase Agreement under certain circumstances, including if Sorrento enters into a transaction involving the disposition
of any portion of the Purchased Securities to a person other than the Company. DIP Loan Agreement On August 9, 2023, the Company entered into a Senior Secured,
Super-Priority Debtor-in-Possession Loan and Security Agreement by and among the Debtors, the Company and the guarantors from time to
time party thereto (the “DIP Loan Agreement”), pursuant to which the Company will provide to the Debtors a non-amortizing
super-priority senior secured debtor-in-possession term loan financing facility in an aggregate principal amount of $100,000 (the “DIP
Facility”). The DIP Facility proceeds will be used (i) to refinance and pay in full the approximately $82,000 of obligations outstanding
under the Debtors’ current DIP facility (the “Existing DIP Facility”), (ii) for working capital and other general corporate
purposes of the Debtors (subject to an agreed budget), and (iii) the payment of certain statutory fees and bankruptcy-related expenses
and fees. The DIP Facility is provided on substantially the same terms
and conditions as those of the Existing DIP Facility, subject to, among other things, (a) mutually agreed-upon permitted asset sales of
collateral, the proceeds of such asset sales are included in the DIP Facility collateral package; (b) agreed-upon “stalking horse”
bidder protections; (c) agreed-upon milestones and other deadlines for, among other things, the auction, the sale hearing and the outside
date for consummation of the Transaction; (d) an agreed budget, or the DIP budget; and (e) the Bankruptcy Court order. On August 7, 2023,
the Bankruptcy Court entered an order, approving the Debtors’ entry into the DIP Loan Agreement and the “stalking horse”
bidder protections, among other things. The DIP Facility bears interest at
a per annum rate equal to 15%, payable in cash (and a default interest rate that shall accrue at an additional per annum rate of 3% plus
the non-default interest) and other fees and charges. The DIP Facility is secured by first-priority liens on substantially all of the
Debtors’ assets, subject to certain enumerated exceptions. The DIP Facility matures on the earliest of: (i) October 15,
2023; (ii) the effective date of a plan of reorganization in the Debtors’ Chapter 11 case; (iii) the sale or other disposition of
all or substantially all of the collateral; (iv) the date of the acceleration of the obligations in accordance with the DIP Loan Agreement;
(v) the dismissal of the Chapter 11 cases or conversion into Chapter 7 cases; (vi) the date of termination of the Stock Purchase Agreement
or other related definitive documentation as a result of a material breach by the Debtors; and (vii) the date on which a trigger event
in Scilex’s governance documents has occurred. The DIP Loan Agreement includes the following milestones:
By no later than: Event
August 14, 2023 The auction for the sale of the Purchased Securities shall have commenced.
August 18, 2023 The Bankruptcy Court shall commence a hearing to consider approval of the sale of the Purchased Securities.
August 21, 2023 The Bankruptcy Court shall have entered an order approving the sale of the Purchased Securities in form and substance acceptable to the Company.
September 30, 2023 The closing of the sale of the Purchased Securities shall have occurred. |
