Scilex Holding Company Common Stock

Item 1A. Risk Factors.

Investing in our Common Stock involves a high degree of risk. Before making an investment decision, you should carefully consider the risks described herein, as well as the risks and uncertainties discussed above under Cautionary Note Regarding Forward-Looking Statements, before deciding whether to invest in our common stock. Our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 12, 2024, in Part IItem 1A, Risk Factors, describes important risk factors that could cause our business, financial condition, liquidity, results of operations and growth prospects to differ materially from those indicated or suggested by forward-looking statements made in this Quarterly Report on Form 10-Q or presented elsewhere by management from time to time. Except as set forth below, there have been no material changes in the risk factors that appear in Part IItem 1A of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 12, 2024 (the Annual Report on Form 10-K). Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business.

Risks Related to our Limited Operating History, Financial Condition and Capital Requirements

We currently have three commercial products, ZTlido, ELYXYB and GLOPERBA; but we are currently heavily dependent on the commercial success of ZTlido, as ELYXYB and GLOPERBA are in the initial stages of commercialization, and we may be unable to generate sufficient revenue to support our operations.

We currently have three commercial products, ZTlido, ELYXYB and GLOPERBA; but we are currently heavily dependent upon ZTlido sales to generate revenue, as ELYXYB and GLOPERBA are in the initial stages of commercialization. In February 2018, we obtained FDA regulatory approval for ZTlido for the relief of neuropathic pain associated with post-herpetic neuralgia (PHN) in adults, which is a form of post-shingles nerve pain, and we began commercializing ZTlido in the United States in October 2018. In late February 2023, we acquired ELYXYB, a potential first-line treatment and the only FDA-approved, ready-to-use oral solution for the acute treatment of migraine, with or without aura, in adults, in the U.S. We launched ELYXYB in April of 2023. In June 2022, we acquired certain rights to GLOPERBA, the first and only liquid oral version of the anti-gout medicine colchicine indicated for the prophylaxis of painful gout flares in adults. We launched GLOPERBA in June 2024. As a result, it is difficult to evaluate our current business and predict our future prospects. We cannot assure that ZTlido, ELYXYB or GLOPERBA will gain market acceptance among physicians, health care payors, patients and the medical community, which is critical to our commercial success. We have limited experience engaging in commercial activities and limited relationships with physicians, hospitals and payors. Market acceptance of ZTlido, ELYXYB and GLOPERBA depends on a number of factors, including:

acceptance by physicians, major operators of clinics and patients of ZTlido, ELYXYB and GLOPERBA as a safe and effective treatment for the relief of neuropathic pain associated with PHN (ZTlido), acute migraine pain (ELYXYB), and prevention of gout flares (GLOPERBA);

the availability, cost and potential advantages of alternative treatments, including less expensive generic products;

the effectiveness of our sales and marketing efforts;

the availability of coverage, adequacy of reimbursement and favorability of pricing policies by third-party payors and government authorities;

the timing of market introduction of other competitive products;

the product labeling or any product inserts required by the FDA; and

the prevalence and severity of adverse side effects.

To successfully commercialize ZTlido, ELYXYB and GLOPERBA, we will need to expand our marketing efforts to develop new relationships and expand existing relationships. Physicians may decide not to prescribe ZTlido, ELYXYB or GLOPERBA for a variety of reasons, including changes in available offerings, adverse publicity, perceived safety issues, inadequate coverage or reimbursement for ZTlido, ELYXYB or GLOPERBA or the utilization of products developed by other parties, all of which are circumstances outside of our control. Demand for ZTlido may not increase, or may not develop for ELYXYB or GLOPERBA, as quickly as we predict, and we may be unable to increase our revenue to the level that we currently expect. Even if we succeed in increasing market acceptance of ZTlido or developing market acceptance of ELYXYB and GLOPERBA, and maintaining and creating relationships with physicians, we may be unable to reach or sustain a level of profitability.

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Our ability to effectively promote ZTlido, ELYXYB and GLOPERBA will also depend on pricing and cost-effectiveness, including our ability to produce and market our products at a competitive price. In addition, our efforts to educate the medical community and third-party payors on the benefits of ZTlido, ELYXYB and GLOPERBA may require significant resources, may be constrained by FDA rules and policies on product promotion and may never be successful.

We have a limited operating history and have incurred significant losses since our inception. We anticipate that we will incur continued losses for the foreseeable future.

We have a limited operating history. Prior to March 2019, our operations were conducted through Scilex Pharmaceuticals Inc. (Scilex Pharma)a, which was formed in September 2012 and is now our wholly owned subsidiary. In March 2019, we effected a corporate reorganization and acquired Semnur, which was formed in June 2013. Since our inception, we have focused on organizing and staffing our company, business planning, raising capital, identifying potential non-opioid pain therapy candidates, undertaking preclinical studies and clinical trials of our product candidates and establishing research and development and manufacturing collaborations. Most of our revenue to date is attributable to sales of ZTlido, and we expect that sales of ZTlido will account for most of our revenue for at least the near term. Our relatively short operating history as a company makes any assessment of our future success and viability subject to significant uncertainty.

Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable. We will encounter risks and difficulties frequently experienced by early-stage biopharmaceutical companies in rapidly evolving fields, and we have not yet demonstrated an ability to overcome such risks and difficulties successfully. Our ability to execute on our business model and generate revenues depends on a number of factors including our ability to:

successfully complete ongoing clinical trials and obtain regulatory approvals for our current and future product candidates;

identify new acquisition or in-licensing opportunities;

successfully identify new product candidates and advance those product candidates into pre-clinical studies and clinical trials;

raise additional funds when needed and on terms acceptable to us;

attract and retain experienced management and advisory teams;

add operational, financial and management information systems and personnel, including personnel to support clinical, manufacturing and planned future commercialization efforts and operations;

launch commercial sales of our product candidates, whether alone or in collaboration with others;

initiate and continue relationships with third-party suppliers and manufacturers and have commercial quantities of product candidates manufactured at acceptable cost and quality levels and in compliance with the FDA and other regulatory requirements;

set acceptable prices for product candidates and obtain coverage and adequate reimbursement from third-party payors;

achieve market acceptance of product candidates in the medical community and with third-party payors and consumers; and

maintain, expand and protect our intellectual property portfolio.

If we cannot successfully execute any one of the foregoing, our business may not succeed or become profitable.

Since our inception, we have incurred significant net losses, with net losses of $114.3 million, $23.4 million and $88.4 million for the years ended December 31, 2023, 2022 and 2021, respectively. For the sixnine months ended JuneSeptember 30, 2024 and 2023, we had net losses of $62.06.3 million and $57.492.9 million, respectively. As of JuneSeptember 30, 2024 and December 31, 2023, we had an accumulated deficit of approximately $552.26.6 million and $490.2 million, respectively. For the foreseeable future, we expect to continue to incur significant expenses related to the commercialization of ZTlido, GLOPERBA and ELYXYB and the research and development of our product candidates, SP-102 (10 mg dexamethasone sodium phosphate viscous gel) (SEMDEXA), SP-103 (lidocaine topical system) 5.4% (SP-103), and SP-104 (4.5 mg, low-dose naltrexone hydrochloride delayed-release capsules) (SP-104). We anticipate that our expenses will increase substantially due to any future trials related to SEMDEXA and SP-103 and initiation of the

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Phase 2 clinical trial for SP-104. Consequently, we expect to incur substantial losses for the foreseeable future and may never become profitable.

We are subject to risks incidental to the development of new biopharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.

If we are unable to raise capital through a registered offering, we would be required to conduct our equity financing transactions on a private placement basis, which may be subject to pricing, size and other limitations imposed under the Nasdaq Listing Rules, or seek other sources of capital. 

The terms of the Oramed Note s and the Senior Convertible Notes place restrictions on our operating and financial flexibility.

On September 21, 2023 (the Oramed Closing Date), we issued and sold to Oramed a senior secured promissory note due 18 months from the date of issuance, in the principal amount of $101,875,000 (the Oramed Note) pursuant to that certain securities purchase agreement we entered into with Oramed, dated as of September 21, 2023 (the Scilex-Oramed SPA). The Oramed Note matures on March 21, 2025 and is payable in six principal installments, with the first installment in the principal amount of $5,000,000 paid on December 21, 2023, the second installment in the principal amount of $15,000,000 voluntarily paid early on March 14 and March 18, 2024, the third installment in the principal amount of $20,000,000 satisfied in full on June 21, 2024 and the next two installments each in the principal amount of $20,000,000 payable on each of September 21, 2024 and December 21, 2024 and the last installment in the entire remaining principal balance of the Oramed Note payable on March 21, 2025.  Interest under the Oramed Note accrues at a fluctuating per annum interest rate equal to the sum of (1) greater of (x) four percent (4%) and (y) Term SOFR (as defined in the Oramed Note) and (2) eight and one-half percent (8.5%), payable in-kind on a monthly basis. As of September 30, 2024, the outstanding principal amount, as well as the accrued interest and fees of the Oramed Note was $76,183,811.

Pursuant to the Oramed Note, since the outstanding principal of the Oramed Note was not repaid in full on or prior to March 21, 2024, an exit fee of $3,056,250 has been earned with respect to the Oramed Note, which shall be due and payable on the date on which the outstanding principal amount of the Oramed Note is paid in full. Upon the occurrence and during the continuance of an event of default under the Oramed Note, holders of more than 50% of the aggregate unpaid principal amount of the Oramed Notes may elect to cause all outstanding amounts under the Oramed Note to accrue interest at a default rate equal to the lesser of (i) Term SOFR plus fifteen percent (15%) or (ii) the maximum rate permitted under applicable law.

Any voluntary prepayments of the Oramed Note occurring prior to the one-year anniversary of the Oramed Closing Date are required to be paid together with a make-whole amount equal to 50% of the amount of additional interest that would accrue on the principal amount so prepaid under the Oramed Note from the date of such prepayment through and including the maturity date. The make-whole amount was waived by Oramed for our voluntary prepayments in March 2024. If the Oramed Note is accelerated upon an event of default, we are required to repay the principal amount of the Oramed Note at a mandatory default rate of 125% of such principal amount (together with 100% of accrued and unpaid interest thereon and all other amounts due in respect of the Oramed Note). The Oramed Note contains mandatory prepayment provisions requiring us and our subsidiaries to, following the earlier of (x) April 1, 2024, and (y) the date on which the Acceptable Indebtedness (as defined in the Oramed Note) is repaid in full, use 70% of the net cash proceeds of any Cash Sweep Financing (as defined in the Oramed Note) or advance under the ELOCs (as defined in the Oramed Note) to prepay the outstanding principal amount of the Oramed Note (the Mandatory Prepayment Sweep). Following each of the Registered Direct Offering and the receipt of the FSF Deposit, we made a mandatory prepayment of $9,578,835 and $7,000,000, respectively, to Oramed, which equals 70% of the net cash proceeds we received from the Registered Direct Offering and the FSF Deposit. Given such payment was not a voluntary prepayment, such prepayment did not trigger the make-whole amount under the Oramed Note.

TOn October 8, 2024 (the Oramed Note contIssuance Date), we issued and sold in a registered offering to certains affirma institutional investors (collective ly, Investors) and negativeOramed (together with the Investors, the Tranche B Noteholders) senior secured covenants binding on us and our subsidiaries which restrict, amonvertible notes in the aggregate principal amount of $50,000,000 (the Senior Convertible Notes), which notes will be convertible into shares of Common Stock, pursuant to that certain securities purchase agreement we entered into with the Tranche B Noteholders, dated as of October 7, 2024 (the Tranche B Securities Purchase Agreement). Following other things, us and our the transaction contemplated by the Tranche B Securities Purchase Agreement, the remaining balance on the Oramed Note is approximately $43,000,000, of which $15,000,000 was paid on December 21, 2024 with the remaining amount due on March 21, 2025.

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Unlesubsidiaries from incurring indebtedness or liens, amens earlier converted or redeemed, the Senior Convertible Notes mature on the two-year anniversary of the Issuance Date (the Maturity Date), subject to extension at the option of the holder in certain circumstances as provided therein. The Senior Convertible Notes bear interest at a rate of 5.5% per annum, payable in arrears on the first trading char day of each calendar quarter and organizational documents, repaying , beginning January 2, 2025, payable, at our option, either in cash or in shares of Common Stock, subject to certain conditions.

The Oramed Note and the Senior repurchasing stock,Convertible Notes contain affirmative and negative covenants binding on us and our subsidiaries which repaying, repurchasstrict, among other thing, or acquis, us and our subsidiaries from incurring indebtedness,  or liens, repaying certain indebtedness, or declaring or paying any cash dividends, assigning or distribution, selling, transferring  or otherwise disposing of assets, making or holding investmenny assets, entering into transactions with affiliates, and entering into settlement agreements, in ea in each case as more fully set forth

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in, and subject to certain qualifications, exceptions, and baskets set forth in the Oramed Note and the Senior Convertible Notes. The Oramed Note also contains covenants requiring us to maintain a segregated bank account under specific terms and conditions, for purposes of receiving the Mandatory Prepayment Sweep, requiring SCLX Stock Acquisition JV LLC, our indirect wholly owned subsidiary (SCLX JV), to comply with the separateness representations and covenants in its organizational documents, and requiring our subsidiary, SCLX DRE Holdings LLC, to maintain its status as a passive holding company.

 The Oramed Note contains certain customary eventsSenior Convertible Notes also require us to, at the request of default, including, without limitation, a cross-default to other specifiedthe holder, not more frequently than once per fiscal year, hire an indebtedness or any otherpendent, reputable indebtednessvestment bank to involving an obligation of greater than $1,000,000, as well asestigate whether any breach of the Senior Convertible Notes has occurred if an event constituting an event of default upon a Change of Control Transaction or Fundamental Transaction (in each case, as defined in thas occurred and is continuing or any holder reasonably believes that an event constituting an event of default has occurred or is continuing.

The Oramed Note). See and the risk factSenior titled We may not have the ability to raise the funds necessConvertible Notes contain certain customary to settle the Oramed Note in cash upon a change of control orevents of default, including, without limitation, a cross-default to other event of default, andspecified indebtedness or any future other indebt may contain limitedness involving an obligations on our ability to pay cash in the Annual Report on Form 10-K for additional inform of certain amount, a failure in payment of principal, as well as any bankruptcy, insolvency, reorganization regarding such eevent of default provisions. The Oramed Note also contains additional events of default with respect to certain events relating to our obligations under that certain registration rights agreement, dated as of September 21, 2023, between us and Oramed and relating to (i) the warrants to purchase up to an aggregate of 13,000,000 shares of Common Stock, with an exercise price of $0.01 per share (the Penny Warrants), that we issued to Oramed pursuant to the Scilex-Oramed SPA, (ii) the warrants to purchase up to 4,000,000 shares of Common Stock, with an exercise price of $11.50 per share (the Transferred Warrants), that we transferred to Oramed pursuant to the Scilex-Oramed SPA and/or (iii) the shares of Common Stock underlying the Penny Warrants or Transferred Warrants, in each case as more fully set forth in the Oramed Note.

In addition, failure to comply with the covenants under the Oramed Note could result in an event of default. The events of default include, among others, a change of control of the Cour company. Upon an event of default, subject to notice requirements in the case of certain events of default, all amounts outstanding under the Oramed Note may become immediately due and payable. We may not have sufficient funds or may be unable to arrange for additional financing to repay such indebtedness or to make any accelerated payments, and Oramed could seek to enforce its security interests in the collateral securing such indebtedness or other remedies available to it under the Oramed Note or as provided by applicable law. Oramed could also seek to enforce the guaranty under the Subsidiary Guarantee entered into by us and each of our subsidiaries (collectively, the Guarantors), , dated as of September 21, 2023, to carry out our payment obligations under the Oramed Note. Any failure by us to comply with the obligations under the Oramed Note could have a negative effect on our business, financial condition and results of operations.

In addition, the Senior Convertible Notes prohibit us from entering into specified fundamental transactions unless the successor entity assumes all of our obligations under the Senior Convertible Notes under a written agreement approved by the required holders of the Senior Convertible Notes before the transaction is completed. Upon consummation of specified fundamental transactions, the successor entity must confirm that upon conversion or redemption of the Senior Convertible Notes thereafter, shares of the successor entity will be issuable upon such conversion or redemption. The holders of the Senior Convertible Notes also have certain redemption rights upon a fundamental transaction constituting a change of control.

Our outstanding indebtedness and any future indebtedness we may incur, combined with our other financial obligations, could increase our vulnerability to adverse changes in general economic, industry and market conditions, limit our flexibility in planning for, or reacting to, changes in our business and the industry and impose a competitive disadvantage compared to our competitors that have less debt or better debt servicing options. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.

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The Oramed Note and Tranche B Notes impose certain operating and financial covenants and any failure to comply with such covenants could result in an event of default that could adversely affect our business, financial condition and results of operations.

We will require substantial ahave entered into that certain Waiver under Senior Secured Promissory Note, dated November 21, 2024, with Oramed and that certain Waiver and Consent, dated November 21, 2024, with each of (i) Nomis Bay Ltd and BPY Limited, (ii) Oramed and (iii) 3i, LP, respectively, the result of which is that there is not presently an event of default under the Oramed Note and the Tranche B Notes (the Existing Notes) as a result of our failure to timely file our Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (the Q3 Form 10-Q). If an event of default occurs under the Existing Notes (including with respect to our ability to remain listed on The Nasdaq Stock Market LLC (Nasdaq)), the holder of the Oramed Note could elect to immediately accelerate the due date of such note and, in the case of the Tranche B Notes, all of the holders thereof could require that we redeem such notes in accordance with the terms thereof, including any default interest rates, liquidated damages or similar penalties that would arise pursuant to the terms of such Existing Notes upon an event of default that is not cured within the applicable periods set forth in the Existing Notes.

We may not have sufficient funds or may be unable to arrange for additional fundinancing to repay our indebtedness under the Existing, whi Notes or to make any accelerated or redemption payments, and the lenders could seek to enforce their respective security interests in the collateral securing such indebtedness or other remedies available to such lenders under the Existing Notes or as provided by applicable law. The lenders could also seek to enforce the guaranty under the Subsidiary Guarantee entered into by us and each may not be available to us on acceptablof our subsidiaries, dated as of September 21, 2023 and amended as of October 8, 2024, to carry out our payment obligations under the Existing Notes. Any failure by us to comply with the obligations under the Existing Notes could cause our stock price to decrease significantly, result in substantial dilution or cause us to be unable to raise additional capital, which could have a material negative effect on our business, financial condition and results of operations. See the risk factor titled We may not have the ability to raise the funds necessary to settle the Oramed Note in cash upon a change of control or other event of default, and any future debt may contain limitations on our ability to pay cash for additional information.

We may not have the ability to raise terms, ohe funds necessary to settle the Oramed Note or the Senior Convertible Notes in cash upon a change of control or other event of default, and any future debt may contain limitations on our at all. 

Our operations have consubility to pay cash upon conversion of the Senior Convertible Notes.

A change of control transaction triggers an event of default under the Oramed Note, which will result in the full unpaid principal amount of the Oramed Note, together with interest and other amounts owing in respect thereof, to the date of acceleration becoming, at the election of the holder of the Oramed Note, immediately due and payable in cash at the Mandatory Default Amount (as defined in the Oramed Note). Similarly, a change of control transaction (including any fundamental transaction in which our successor is not a public company) triggers the redemption rights of the holders under the Senior Convertible Notes. If the Senior Convertible Notes are not retired in connection with such change of control transaction, each holder may require us to redeem in cash all, or any portion, of the Senior Convertible Notes at a 30% redemption premium to the greater of (i) the amounts then outstanding under the Senior Convertible Notes to be redeemed; (ii) the equity value of our Common Stock underlying such Senior Convertible Notes; and (iii) the equity value of the change of control consideration payable to the holders of our Common Stock underlying such Senior Convertible Notes.

In such events or in the event of any other redemption event or event of default under the Oramed Note or the Senior Convertible Notes, we may not have enough available cash or be able to obtain financing at the time we are required to pay cash with respect to the Oramed Note or the Senior Convertible Notes. In addition, our ability to pay cash upon default of the Oramed Note or the Senior Convertible Notes may be limited by law, regulatory authority, or any agreements governing our future indebtedness.

We will require substantial additional funding, which may not be available to us on acceptable terms, or at all. 

Our operations have consumed substantial amounts of cash since inception. We expect to significantly increase our spending to continue our commercialization efforts for ZTlido, GLOPERBA and ELYXYB, advance development of our current product candidates and launch and commercialize any product candidates for which we receive regulatory approval. Furthermore, we expect to incur additional costs associated with operating as a public company. We will also require additional capital to fund our other operating expenses and capital expenditures.

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As of JuneSeptember 30, 2024, our cash and cash equivalents were approximately $6.90.1 million and we had an accumulated deficit of approximately $552.26.6 million. The amount and timing of our future funding requirements will depend on many factors, some of which are outside of our control, including but not limited to:

the costs and expenses associated with our ongoing commercialization efforts for ZTlido, GLOPERBA and ELYXYB;

the degree of success we experience in commercializing ZTlido, GLOPERBA and ELYXYB;

the revenue generated by sales of ZTlido, GLOPERBA, ELYXYB and other products that may be approved, if any;

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the scope, progress, results and costs of conducting studies and clinical trials for our product candidates, SEMDEXA, SP-103 and SP-104;

the timing of, and the costs involved in, obtaining regulatory approvals for our product candidates;

the costs of manufacturing ZTlido, GLOPERBA, ELYXYB and our product candidates;

the timing and amount of any milestone, royalty or other payments we are required to make pursuant to any current or future collaboration or license agreements;

our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement;

the extent to which ZTlido, GLOPERBA, ELYXYB or any of our product candidates, if approved for commercialization, is adopted by the physician community;

our need to expand our research and development activities;

the costs of acquiring, licensing or investing in businesses, product candidates and technologies;

the effect of competing products and product candidates and other market developments;

the number and types of future products we develop and commercialize;

any product liability or other lawsuits related to our products;

the expenses needed to attract, hire and retain skilled personnel;

the costs associated with being a public company;

our need to implement additional internal systems and infrastructure, including financial and reporting systems;

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; and

the extent and scope of our general and administrative expenses.

Until we are able to generate significant revenue, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, government contracts or other strategic transactions. We cannot be sure that any additional funding, if needed, will be available on terms favorable to us, or at all. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. Furthermore, any additional equity or equity-related financing may be dilutive to our stockholders, and debt or equity financing, if available, may subject us to restrictive covenants and significant interest costs. If we raise additional funds through collaborations or strategic alliances with third parties, we may have to relinquish valuable rights to our product candidates, future revenue streams, research programs or technologies, or grant licenses on terms that may not be favorable to us. If we are unsuccessful in our efforts to raise additional financing on acceptable terms, we may be required to significantly reduce or cease our operations.

We may not be able to generate sufficient cash to service our indebtedness and other liquidity needs.

Our ability to make payments on and to refinance our indebtedness and to fund our other obligations, planned capital expenditures and other strategic investments will depend on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may not generate sufficient cash flow from operations, and we cannot assure you that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

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If we do not generate cash flow from operations sufficient to pay our debt service or other obligations, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. Our ability to refinance our debt and fund other obligations will depend on the condition of the capital markets and our financial condition at that time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. See Note 2 titled Liquidity and Going Concern of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, for a discussion regarding our ability to continue as a going concern.

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Our recurring losses from operations, negative cash flows and substantial cumulative net losses raise substantial doubt about our ability to continue as a going concern.

In Note 2 titled Liquidity and Going Concern of our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, we disclose that there is substantial doubt about our ability to continue as a going concern. We have negative working capital and have incurred significant operating losses and negative cash flows from operations and expect to continue incurring losses for the foreseeable future. Further, we had an accumulated deficit of approximately $552.26.6 million as of JuneSeptember 30, 2024 and approximately $490.2 million as of December 31, 2023. These conditions raise substantial doubt about our ability to continue as a going concern. Our unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Our ability to become a profitable operating company is dependent upon our ability to generate revenue and obtain financing adequate to fulfill our development and commercialization activities, and achieving a level of revenue adequate to support our cost structure. We have plans to obtain additional resources to fund our currently planned operations and expenditures through additional debt and equity financing. We will need to seek additional financing to fund our current operations, including the commercialization of ZTlido, GLOPERBA and ELYXYB, as well as the development of our other material product candidates for the next 12 months. Our plans are substantially dependent upon the success of future sales of ZTlido, GLOPERBA and ELYXYB, among which GLOPERBA and ELYXYB are still in the early stages of commercialization, and are dependent upon, among other things, the success of our marketing of ZTlido, GLOPERBA and ELYXYB and our ability to secure additional payor contracts with terms that are consistent with our business plan. If we are unable to obtain sufficient funding, our financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern. Future financial statements may disclose substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to us on commercially reasonable terms or at all.

Risks Related to our Commercial Operations and Product Development

We obtain o, or historically have obtained, our commercial supply of certain of our products, the clinical supply of our product candidates and certain of the raw materials used in our product candidates from sole or single source suppliers and manufacturers. In the event of a loss of one of these suppliers or manufacturers, or a failure by any such supplier or manufacturer to comply with FDA regulations, we may not be able to find an alternative source on commercially reasonable terms, or at all.

We rely on a number of sole or single source suppliers and manufacturers, including:

the manufacturer and supplier for the commercial supply of ZTlido, ELYXYB and GLOPERBA;

the manufacturer and supplier for the clinical supply of SP-103;

the manufacturer and supplier for the clinical supply of SP-104;

the supplier of sodium hyaluronate, one of the excipients for SEMDEXA; and

the manufacturer for the clinical supply of SEMDEXA.

Under the Product Development Agreement and the Commercial Supply Agreement, we license the rights to ZTlido from, and rely exclusively on, Oishi and Itochu for the manufacturing and supply of ZTlido and SP-103. Oishi and

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Itochu have the right to terminate the Product Development Agreement and the Commercial Supply Agreement under certain circumstances, including, among other things: (1) if we are in material breach of the agreement and the breach is not curable or if the breach is curable and we fail to cure such material breach within 180 days after notice requesting to cure; (2) if, at any time during the term of the Product Development Agreement and the Commercial Supply Agreement, the market conditions are such that (a) our total net profits for ZTlido and SP-103 are equal to or less than five percent of our net sales of ZTlido and SP-103 for a period of four or more consecutive quarters, or (b) the economic viability of ZTlido and SP-103 is affected significantly as evidenced by documentation and substantial information by any external circumstances deemed detrimental to all parties as agreed to by us, on the one hand, and Oishi and Itochu, on the other hand, and the parties are unable to resolve the concerns under the foregoing clauses (a) and (b) after 30 days of good-faith discussion; and (3) in the event of our bankruptcy or assignment for the benefit of

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creditors. As of DecSeptember 310, 20234, our net profits for ZTlido and SP-103 have not exceeded five percent of net sales. Accordingly, Oishi and Itochu have the right to terminate the Product Development Agreement and Commercial Supply Agreement. As of DecSeptember 310, 20234, neither Oishi nor Itochu has exercised its right of termination. If the Product Development Agreement and the Commercial Supply Agreement are terminated, we would lose access to the intellectual property and proprietary manufacturing process upon which ZTlido and SP-103 depend.

We expect our third-party manufacturers and suppliers of both GLOPERBA and ELYXYB are capable of providing sufficient quantities of these products to meet anticipated commercial demands; however, if third parties with whom we currently work are unable to meet our manufacturing and supply requirements, we will need to secure alternate manufacturers and suppliers or face potential delays or shortages. While we believe that there are other contract manufacturers and suppliers with the technical capabilities to manufacture and supply these products, we cannot be certain that identifying and establishing relationships with such sources would not result in significant delay or material additional costs.

Under the Genzyme Supply AgreementHistorically, we depend on Genzyme to fulfill ohave purchased our clinical and commercial supply requirements for sodium hyaluronate, one of the excipients for SEMDEXA, and we are aware of only a limited number of suppliers of the excipient. P-102, solely from Genzyme Corporation (Genzyme has the right to terminate the Genzyme S) pursuant to a supply Aagreement under certain circumstances, including, but not limi, which terminated to, if Genzyme decides to discontinue manufacturing the product at its facility for economic or strategic reasons and provides us with 24 months notice. Genzyme previously notified us of its intas of May 31, 2024. We anticipate that our current supply of sodium hyaluronate will be sufficiention to terminate the Genzyme Ssatisfy our clinical and commercial supply Agrerequirement and discontinued manufacturing the product at its for sodium hyaluronate for at least 12 months facility. The Genzyme Supply Agreement terminated asollowing our expected commercial launch of May 31,SP-102 in 20247. Although we are currently in discussions with Sanofi to extend the S.A. (Sanofi), an affiliate of Genzyme Supply Agreement as well as , and are in the process of identifying and certifying new suppliers , in each case to fulfill our future supply requirements for sodium hyaluronate, we may not be able to extend the Genzyme Supply Areach agreement owith Sanofi or find an alternative supplier of sodium hyaluronate on commercially reasonable terms, or at all.

Under the Lifecore Master Services Agreement, we depend on Lifecore to manufacture clinical supplies of SEMDEXA. Lifecore has the right to terminate the Lifecore Master Services Agreement under certain circumstances, including, but not limited to: (1) if we are in material breach of the agreement and fail to cure such breach within 30 days of written notice; (2) if we (a) become insolvent, (b) cease to function as a going concern, (c) become convicted of or plead guilty to a charge of violating any law relating to either partys business, or (d) engage in any act which materially impairs goodwill associated with SEMDEXA or materially impairs the terminating partys trademark or trade name; (3) if we fail to pay past due invoices upon 30 days written notice, or (4) if we reject or fail to respond to a major change proposed by Lifecore that does not change Semnurs written and approved acceptance criteria in its product specifications. In the event that Lifecore decides to terminate the Lifecore Master Services Agreement, finding an alternative manufacturer on commercially reasonable terms, or at all, may be difficult. On June 23, 2023, we entered into the Second Amendment to Lifecore Master Services Agreement with Lifecore, which extended the term of the agreement until December 31, 2028.

Under the Tulex Master Services Agreement and the statement of work with Tulex, we depend on Tulex to develop, test and manufacture clinical supplies of SP-104. Tulex has the right to terminate the Tulex Master Services Agreement under certain circumstances, including, but not limited to: (1) if we are in material breach of the agreement or a statement of work and fail to cure such breach within 15 days after receipt of notice of such breach (or such other time period expressly stated in the applicable statement of work) or (2) in the event of our insolvency, bankruptcy, reorganization, liquidation or receivership, or a failure to remove any insolvency, bankruptcy, reorganization, liquidation or receivership proceedings within ten days from the date of institution of such proceedings. In addition, we may terminate the agreement or any statement of work (a) without cause upon 30 days prior written notice to Tulex or (b) immediately upon written notice in the event Tulex is dissolved or undergoes a change in control. In the event

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that the Tulex Master Services Agreement or a statement of work is terminated, we may not be able to find an alternative manufacturer and supplier on commercially reasonable terms.

Additionally, the manufacturing facilities used by our third-party suppliers and manufacturers must continue to comply with FDA regulations and are subject to periodic announced or unannounced inspections. We have limited control over the ability of our third-party suppliers and manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If our third-party suppliers and manufacturers fail to comply with FDA regulations, the FDA may not authorize the manufacture of our products and product candidates at these facilities, and we may be unable to find alternative manufacturing facilities in a timely manner or at all. The failure by such third parties to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines,

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injunctions, import detention, civil penalties, delays, suspension or withdrawal of approvals, seizures or recalls of our product, operating restrictions and criminal prosecutions.

In addition, our product candidates may compete with other product candidates and products for access to manufacturing facilities and other supplies. There are a limited number of manufacturers that operate under cGMP regulations and that might be capable of manufacturing for us. Also, prior to the approval of our product candidates, we would need to identify a contract manufacturer that could produce our products at a commercial scale and that could successfully complete FDA pre-approval inspection and inspections by other health authorities. Agreements with such manufacturers or suppliers may not be available to us at the time we would need to have that capability and capacity.

If the commercial supply of our commercial products, clinical supply of our product candidates and certain of the raw materials used in our product candidates are disrupted or delayed, there can be no assurance that alternative sources can serve as adequate replacements or that supplies will be available on terms that are favorable to us, if at all. Any disruption in supply could affect the profitability of ZTlido, the commercialization of GLOPERBA and ELYXYB, and the development of SEMDEXA, SP-103 and SP-104.

We rely on a single third-party logistics distribution provider for ZTlido, ELYXYB and GLOPERBA, Cardinal Health 105, which until recently had also been our only customer.

We currently rely on Cardinal Health 105, LLC (Cardinal Health 105) as our third-party logistics distribution provider for ZTlido, ELYXYB and GLOPERBA in the United States. Cardinal Health 105 also performs the following services on our behalf: customer service, credit checks, invoicing, chargebacks, distributor fee for service, government reporting, customer returns, accounts receivable, inventory control, product security (DSCSA serialization) inquiries and recall assistance. If we are unable to maintain a favorable relationship with Cardinal Health 105, we expect that our revenue would decline and our business would be harmed as a result. We may be unable to control the timing of the delivery of ZTlido, ELYXYB and GLOPERBA to distributors, and any financial uncertainty or loss of key logistic employees of Cardinal Health 105, as our only third-party logistics provider, may negatively impact our sales.

In the years ended December 31, 2020 and 2021 and the first quarter of 2022, Cardinal Health 105 was also our only customer for ZTlido and sales to Cardinal Health 105 represented all of our net revenue for such periods. As we continue to expand the commercialization of ZTlido, we discontinued our use of title model services provided by Cardinal Health 105 in the second quarter of 2022 and expanded our direct distribution network to national and regional distributors and pharmacies. Beginning on April 1, 2022, we began selling ZTlido directly to three large distributors, McKesson, Cardinal Health 110 and AmerisourceBergen, as well as to numerous pharmacies. We expect that Cardinal Health 105 will continue to perform other third-party logistics services for us.

Any disruption in the above-mentioned distribution channel would adversely affect our business, financial condition and results of operations.

Even if we complete the necessary clinical trials, we cannot predict when, or if, we will obtain regulatory approval for our product candidates and the approval may be for a more narrow indication than we seek.

We cannot commercialize our product candidates until the appropriate regulatory authorities have reviewed and approved the product candidates. The process of obtaining regulatory approvals and the subsequent compliance with appropriate federal, state and local statutes and regulations require the expenditure of substantial time and financial resources and we may not be able to obtain the required regulatory approvals. Even if our product candidates meet the

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safety and efficacy endpoints in clinical trials, the data may not be considered sufficient by regulatory authorities, those regulatory authorities may not complete their review processes in a timely manner, or we may not be able to obtain regulatory approval. Additional delays may result if an FDA advisory committee is convened, including if such advisory committee recommends non-approval or restrictions on approval. In addition, we may experience delays or rejections based upon additional government regulation from future legislation or administrative action or changes in regulatory authority policy or data requirements during the period of product development, clinical trials and the regulatory review process.

Even if we receive regulatory approval, the FDA may approve a product candidate for more limited indications than requested or they may impose significant limitations in the form of narrow indications, black box warnings or a Risk

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Evaluation and Mitigation Strategy (REMS). The FDA may require labeling that includes warnings and precautions or contra-indications with respect to conditions of use, or may grant approval subject to the performance of costly post-marketing clinical trials. In addition, the FDA may not approve the labeling claims that are considered necessary or desirable for the successful commercialization of our product candidates. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

Additionally, if the results of any clinical trials are inconclusive or if there are safety concerns or serious adverse events associated with our product candidates, we may:

be delayed or fail in obtaining marketing approval for our product candidates;

obtain approval for indications or patient populations that are not as broad as we intended or desired;

obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;

be subject to changes in the way the products are administered;

be required to perform additional clinical trials to support approval or be subject to additional post-marketing testing requirements;

have regulatory authorities withdraw, or suspend, their approval of the product or impose restrictions on its distribution in the form of a modified REMS;

be sued and held liable for harm caused to patients; or

experience damage to our reputation.

Drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

Clinical testing is expensive, difficult to design and implement, and can take many years to complete, in part because it is subject to rigorous regulatory requirements. The FDA or other regulatory authorities may not agree with the proposed analysis plans or trial design for the clinical trials of our product candidates. They may also not agree with the scope of our proposed investigational plan. In addition, the outcome of our clinical trials is risky and uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. It is not uncommon for companies in the pharmaceutical industry to suffer significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Our future clinical trial results may not be successful.

This product candidate development risk is heightened by any changes in the planned clinical trials compared to the completed clinical trials. As product candidates are developed through preclinical to early and late stage clinical trials towards approval and commercialization, it is customary that various aspects of the development program, such as manufacturing and methods of administration, are altered along the way in an effort to optimize processes and results. While these types of changes are common and are intended to optimize the product candidates for late stage clinical trials, approval and commercialization, such changes carry the risk that they will not achieve their intended objectives.

A Phase 3 trial was completed for SEMDEXA for the treatment of sciatica, a Phase 2 trial completed for SP-103, and multiple Phase 1 trials were completed in the first half of 2022 for SP-104. We may not have the necessary capabilities, including adequate staffing, to successfully manage the execution and completion of such clinical trials in a way that leads to our obtaining marketing approval for our product candidates in a timely manner, or at all. Our clinical trials may produce negative or inconclusive results, and, in the future, we may decide, or regulators may require us, to conduct additional clinical trials and preclinical studies in addition to those we have planned.

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In March 2022, we announced final results from our Phase 3 trial for SEMDEXA, which reflect positive results with respect to primary and secondary endpoints, and we intend to use the results to support an NDA submission seeking approval for the treatment of sciatica. However, the FDA may disagree with our assumptions or disagree that these results are sufficient for filing or approval of an NDA, and require us to conduct an additional Phase 3 trial before submitting an NDA. Our failure to adequately demonstrate the safety and effectiveness of our product candidates would prevent regulatory approval and, ultimately, the commercialization of that product for the proposed indication for use.

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Risks Related to our Business and Operations

We may need to increase the size of our company and may not effectively manage our growth.

As of JuneSeptember 30, 2024, we had approximately 113117 full-time employees. We may need to continue to expand our managerial, operational, sales and marketing, finance and other resources in order to manage our operations, clinical trials, research and development activities, regulatory filings, manufacturing and supply activities, and any marketing and commercialization activities, including co-promotion activities. Future growth would impose significant added responsibilities on members of management, including:

identifying, recruiting, integrating, maintaining and motivating additional employees;

managing our internal development efforts effectively, including the clinical, FDA and internal regulatory review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and

improving our operational, financial and management controls, reporting systems and procedures.

Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage any future growth, if any, which may cause a significant strain on our management, and our operational, financial and other resources. Our ability to manage our growth effectively will require us to implement and improve our operational, financial and management systems and to expand, train, manage and motivate our employees. These demands may require the hiring of additional management personnel and the development of additional expertise by management. Any increase in resources devoted to research and product development without a corresponding increase in our operational, financial and management systems could have a material adverse effect on our business, financial condition and results of operations.

There is no assurance that we will enter into a definitive agreementcomplete the Business Combination with respect to the sale of our wholly owned subsidiary, Semnur, and/or our SP-102 product candidate, under the terms of the letter of intent or otherwiseMerger Agreement or otherwise and the failure to complete the Business Combination could adversely affect our stock price and future business and financial results.

As previously announced, our Board authorized our management to explore ways in which to maximize the value of Semnur and SP-102 (SEMDEXA), the product candidate held by Semnur, for us and our stockholders, including by way of conducting a spin-off, merger, dividend, reclassification or other similar transaction. As previously disclosed, on July 2On August 30, 2024, we announcSemnur entered tinto the signing of a lettSemnur Merger Agreement with Denali and Denali Merger ofSub intent for a potential connection with a business combination of Semnur with Denali Capital Acquisi(the Business Combination). The consummation of the Business Combination is subject to the satisfaction Corp., a Cayman Islands corporation (Nasdaq: DECA) (Denali). There ior waiver of a number of closing conditions of the respective parties. The completion of the Business Combination is not assurance that we will enter into a definitive agreement with Denali or any oted and is subject to risks, including, among others, the risk that approval of the Business Combination by Denalis shareholders is not obtained or that other closing conditions are not satisfied. Ther party with respect to te is also no assurance the Business Combination will actually maximize the salvalue of Semnur and/or the SP-102 asset, whether under the terms of the letter of inte for us or our stockholders. In addition, we will remain liable for significant with Denali or otherwise. Even if we do enter into such detransaction costs, including legal, accounting and finitive agreementancial advisory fees. Furthermore, there is no assurance that any such transac market price of our Common Stock may reflect various market assumption would be completed os as to whether that any such transace Business Combination will actually maximizoccur. Consequently, the failure to complete the value of Semnur and/or the SP-102 assBusiness Combination could result in a significant change in the market for us or our sprice of our Common Stockholders.

Our business and operations would suffer in the event of a system failure.

While we have implemented and maintain security measures, our computer systems and those of our CROs and other contractors and consultants are vulnerable to computer viruses, unauthorized access, cybersecurity attacks, and other security incidents, including as perpetrated by hackers, or as the result of natural disasters, terrorism, war, or

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telecommunications or electrical failures. For example, there was a cyberattack on Change Healthcare in March 2024. We worked diligently with our co-pay savings card adjudicators to resolve the breakdown of processing of insurance claims by Change Healthcare, and restored the co-pay savings card processing for ZTlido and ELYXYB has been restored to normal operations. A material system failure or security breach, if such an event were to occur, could result in a material disruption of our product development programs or a loss of our trade secrets or other proprietary information. For example, the loss of clinical trial data from completed, ongoing, or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce such data. To the extent that any disruption or security breach were to result in the loss of or damage to our data or applications, or the unauthorized disclosure of confidential or proprietary information, including personal data, we could incur material legal liability or be the subject of legal claims, suffer damage to our reputation, lose or harm our intellectual property rights, and delay the continued research, development and commercial efforts of ZTlido, GLOPERBA, ELYXYB and our product candidates, if approved. If we are held liable for a claim against which we are not insured or for damages

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exceeding the limits of our insurance coverage, whether arising out of cybersecurity matters or some other matter, that claim could have a material adverse effect on our business, financial condition, and results of operations.

Further, a security incident or privacy violation that leads to the unauthorized acquisition, interruption, modification, loss, theft, corruption, interference, or other unauthorized disclosure of, or prevents access to, personal data, including patient data or other protected health information, could harm our reputation, compel us to comply with federal or state breach notification laws and foreign equivalents, subject us to mandatory corrective action, require us to verify the correctness of database contents, and otherwise subject us to liability under laws and regulations that protect personal data, resulting in increased costs or loss of revenue. Our ability to effectively manage and maintain our internal business information, and to ship products to customers and invoice them on a timely basis, depends significantly on our enterprise resource planning system and other information systems. Portions of our information technology systems may experience interruptions, delays, or cessations of service or produce errors in connection with ongoing systems implementation work. Cybersecurity attacks in particular are continually evolving and include, but are not limited to, malicious software, ransomware, attempts to gain unauthorized access to data under our custody or control, and other electronic security breaches that could lead to disruptions in systems, misappropriation of confidential or otherwise protected information, and corruption of data. If we are unable to prevent such cybersecurity attacks or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, we may suffer loss of reputation, we may be the subject of governmental investigations, legal claims, or litigation, or we may incur financial loss or other regulatory penalties, each of which may not be covered by our insurance. In addition, these breaches and other unauthorized access to our systems can be difficult to detect, and any delay in identifying any such event may lead to increased harm of the type described above.

Risks Related to our Intellectual Property

Third-party claims of intellectual property infringement may prevent or delay our drug discovery and development efforts.

There is a substantial amount of litigation involving patent and other intellectual property rights in the biotechnology and pharmaceutical industries, including PTO administrative proceedings, such as inter partes reviews, post-grant reviews, and reexamination proceedings before the PTO or oppositions and revocations and other comparable proceedings in foreign jurisdictions. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that the development and/or commercialization of ZTlido, GLOPERBA, ELYXYB or our product candidates may give rise to claims of infringement of the patent rights of others.

Despite safe harbor provisions for products prior to commercial launch, third parties may assert that we are employing their proprietary technology without authorization. There may be third-party patents, of which we are currently unaware, with claims to materials, formulations, methods of doing research, methods of manufacture or methods for treatment related to the use or manufacture of ZTlido, GLOPERBA, ELYXYB or our product candidates. Because patent applications can take many years to issue, there may be currently pending unpublished patent applications which may later result in issued patents that ZTlido, GLOPERBA, ELYXYB or our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that the use of our technologies infringes these patents. If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of ZTlido, GLOPERBA, ELYXYB or any of our product candidates, any molecules formed during the manufacturing

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process or any final product itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtain a license under the applicable patents, or until such patents expire or they are finally determined to be held invalid or unenforceable.

Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or methods of use, including combination therapy or patient selection methods, the holders of any such patent may be able to block our ability to develop and commercialize the applicable product candidate unless we obtain a license, limit our uses, or until such patent expires or is finally determined to be held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms, or at all.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to further commercialize ZTlido, GLOPERBA and ELYXYB, or develop and commercialize one or more of

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our product candidates. For example, Takeda Pharmaceuticals U.S.A., Inc. and Takeda Pharmaceutical Company Ltd. (together, Takeda) filed a complaint (the Action) against us and Scilex Pharma on November 6, 2023 in the U.S. District Court for the District of Delaware, alleging that our filing with the FDA of an application for approval of a proposed revision to the product label for our GLOPERBA product infringed certain Orange Book listed patents covering Takedas colchicine product, Colcrys. Takeda sought an order that the effective date of any FDA approval of our labeling revision be no earlier than the expiration date of the asserted patents listed in the Orange Book, and such further and other relief as the court may deem appropriate. On March 7, 2024, we entered into a Settlement Agreement (the Settlement Agreement) with Takeda to resolve the Action and entered into a license agreement with Takeda pursuant to which Takeda granted a non-exclusive license to us and our affiliates of certain patents owned by Takeda. The Settlement Agreement was subject to review by the Federal Trade Commission and the U.S. Department of Justice, neither of which objected during the review period. After the expiration of the review period, the U.S. District Court for the District of Delaware entered a final consent judgment on May 3, 2024. See the section of this Quarterly Report on Form 10-Q titled Legal Proceedings for additional information regarding such proceedings. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble damages and attorneys fees for willful infringement, obtain one or more licenses from third parties, cease marketing ZTlido, GLOPERBA or ELYXYB, or developing our product candidates, limit our uses, pay royalties or redesign our infringing product candidates, which may be impossible or require substantial time and monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of ZTlido, GLOPERBA or ELYXYB or our product candidates, if approved. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further commercialize ZTlido, GLOPERBA or ELYXYB, or develop and commercialize one or more of our product candidates, which could harm our business, financial condition and results of operations significantly.

If we do not obtain patent term extension and data exclusivity for any of our product candidates we are developing or may develop, our business may be materially harmed.

Depending upon the timing, duration and conditions of any FDA marketing approval of our product candidates, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Amendments, and similar legislation in the European Union. The Hatch-Waxman Amendments permit a patent term extension of up to five years for a patent covering an approved product as compensation for effective patent term lost during product development and the FDA regulatory review process. However, we may not receive an extension if we fail to exercise due diligence during the testing phase or regulatory review process, fail to apply within applicable deadlines, fail to apply prior to expiration of relevant patents or otherwise fail to satisfy applicable requirements. Moreover, the length of the extension could be less than we request. Only one patent per approved product can be extended; the extension cannot extend the total patent term beyond 14 years from approval; and only those claims covering the approved drug, a method for using it or a method for manufacturing it may be extended. If we are unable to obtain patent term extension or the term of any such extension is less than we request, the period during which we can enforce our patent rights for the applicable product candidate will be shortened, and our competitors may obtain approval to market competing products sooner. As a result, our revenue from applicable products could be reduced. Further, if this occurs, our competitors may take advantage of our investment in development and trials by referencing our clinical and preclinical data and launch their

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product earlier than might otherwise be the case, and our competitive position, business, financial condition, results of operations, and prospects could be materially harmed.

Risks Related to our Relationship with Sorrento

Our Executive Chairman may have actual or potential conflicts of interest because of his position with Sorrento.

Dr. Henry Ji, who is the Executive Chairman of our Board of Directors (tthe Board), is also a member of the board of directors of Sorrento, and serves as the President and Chief Executive Officer of Sorrento.

Service as an overlapping director or officer of Sorrento and us could create, or appear to create, conflicts of interest with respect to matters involving or affecting more than one of the companies to which Dr. Ji owes fiduciary duties. For example, these matters could relate to potential acquisitions of businesses or products, the development and

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ownership of technologies and product candidates, the sale of products, markets and other matters in which our best interest and the best interests of our stockholders may conflict with the best interests of Sorrento and its stockholders. In particular, it is possible that we may be precluded from participating in certain business opportunities that we might otherwise have participated in as those opportunities may be presented to Sorrento because Dr. Ji may deem such opportunities to have a greater benefit to Sorrento than to us.

In addition, Dr. Ji may own shares of Sorrento common stock, options to purchase shares of Sorrento common stock or other Sorrento equity awards. The holdings of such common stock, options or other equity awards of Sorrento may be significant for Dr. Ji compared to his total assets. Such ownership of any Sorrento equity or equity awards creates, or may create the appearance of, conflicts of interest when Dr. Ji is faced with decisions that could have different implications for Sorrento than the decisions have for us.

Any potential conflict that qualifies as a related party transaction (as defined in Item 404 of Regulation S-K under the Securities Act) is subject to review by our audit committee in accordance with our related person transaction policy. There can be no assurance that the terms of any such transactions will be as favorable to us or our stockholders as would be the case where there are no overlapping officers or directors.

Risks Related to Ownership of our Common Stock

The market price of our Common Stock may fluctuate significantly, and investors in our Common Stock may

lose all or a part of their investment.

The market prices for securities of biotechnology and pharmaceutical companies have historically been highly volatile, and the market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. For example, from November 11, 2022 (the first trading day following the closing of the Business Combination) to August 9January 14, 20245, our closing stock price ranged from $0.7539 to $14.80. The market price of our Common Stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:

our ability to commercialize ZTlido, GLOPERBA, ELYXYB or our product candidates, if approved;

legal disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for ZTlido, GLOPERBA, ELYXYB or our product candidates, government investigations and the results of any proceedings or lawsuits, including, but not limited to, patent or stockholder litigation;

Sorrentos voluntary proceedings under Chapter 11 of the United States Bankruptcy Code;

extension of the lock-up restriction by court order in the Chapter 11 Cases on the 76,000,000 shares of our Common Stock that were previously distributed by Sorrento to Sorrento equityholders as a dividend;

announcements of the introduction of new products by our company and our competitors;

issuances of debt or equity securities;

market conditions and trends in the pharmaceutical and biotechnology sectors;

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overall performance of the equity markets and other factors that may be unrelated to our operating performance or the operating performance of our competitors, including changes in market valuations of similar companies;

trading volume of our Common Stock;

ineffectiveness of our internal controls; and

other events or factors, many of which are beyond our control.

See the risk factor titled If our operations and performance do not meet the expectations of investors or securities analysts, the market price of our securities may decline in our Annual Report on Form 10-K for more factors affecting the trading price of our securities. The realization of any of the above risks or any of a broad range of other risks,

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including those described in these Risk Factors, could have a dramatic and material adverse impact on the market price of our Common Stock.

The equity markets in general have recently experienced extreme price and volume fluctuations. Continued market fluctuations could result in extreme volatility in the price of our Common Stock. Further, price volatility of our Common Stock might worsen if the trading volume of our Common Stock is low. Although we have had periods of high-volume daily trading in our Common Stock, generally our stock is thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. If an active trading market for our Common Stock does not continue, the price of our Common Stock may be more volatile and it may be more difficult and time consuming to complete a transaction in our Common Stock, which could have an adverse effect on the realized price of our Common Stock. In addition, an adverse development in the market price for our Common Stock could negatively affect our ability to issue new equity to fund our activities.

Future sales, or the perception of future sales, of a substantial number of shares of our Common Stock may cause the price of our Common Stock to decline.

If our existing stockholders sell, or indicate an intention to sell, substantial amounts of our Common Stock, the trading price of our Common Stock could decline and it could impair our ability to raise capital through the sale of additional equity securities.

On December 30, 2022, Sorrento announced that its board of directors authorized Sorrento to dividend to Sorrento equity holders of record as of January 9, 2023 an aggregate of 76,000,000 shares of our Common Stock that were held by Sorrento (the Dividend Shares). Such shares weare initially subject to a lock-up restriction prohibiting the sale, pledge or other transfer until May 11, 2023. Such lock-up restriction was extended to March 31, 2024 by court order in the Chapter 11 Cases, and on March 26, 2024, the Bankruptcy Court approved a motion to extend the lock-up period of the Dividend Shares to the earlier of (i) September 30January 31, 2024 or (ii) the date on which Sorrento and its Official Committee of Unsecured Creditors agree in writing or on the record in the Chapter 11 Cases that certain claims that may be asserted in potential litigation to avoid Sorrentos distribution of Dividend Shares and to recover such Dividend Shares should not be pursued, or on such date that the Bankruptcy Court deems just and proper5.

As the restrictions on resale end, the market price of shares of our Common Stock could drop significantly if the holders of these shares of Common Stock sell them or are perceived by the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future offerings of our shares of Common Stock or other securities.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to ZTlido or our product candidates.

We may issue additional equity securities to fund future expansion and pursuant to equity incentive or employee benefit plans. We may also issue additional equity for other purposes. These securities may have the same rights as our Common Stock or, alternatively, may have dividend, liquidation or other preferences to our Common Stock. The issuance of additional equity securities, whether upon conversion of the Tranche B Notes into Common Stock or pursuant to the ATM Sales Agreement, dated as of December 22, 2023, between us and B. Riley Securities, Inc., Cantor Fitzgerald  Co. and H.C. Wainwright  Co., LLC (pursuant to which we may sell up to $170 million of shares of our Common Stock, as more fully described elsewhere in this Quarterly Report on Form 10-Q) or otherwise, will dilute the holdings of existing stockholders and may reduce the share price of our Common Stock.

Pursuant to the Scilex Holding Company 2022 Equity Incentive Plan (the Equity Incentive Plan), which became effective on November 9, 2022, we are authorized to grant equity awards to our employees, directors and consultants.

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In addition, pursuant to the Scilex Holding Company 2022 Employee Stock Purchase Plan (the ESPP), which became effective on November 9, 2022, we are authorized to sell shares to our employees. Further, pursuant to the Scilex Holding Company 2023 Inducement Plan (the Inducement Plan), which was adopted on January 17, 2023, we are authorized to grant equity awards to individuals as a material inducement to join the Company. A total of 20,129,644 (which number of shares accounts for the automatic annual increase on January 1, 2024), 4,476,601 (which number of shares accounts for the annual increase on January 1, 2024) and 1,400,000 shares of our Common Stock have been reserved for future issuance under the Equity Incentive Plan, the ESPP and the Inducement Plan,

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respectively. In addition, the Equity Incentive Plan and ESPP provide for annual automatic increases in the number of shares reserved thereunder, in each case, beginning on January 1, 2023. As a result of such annual increases, our stockholders may experience additional dilution, which could cause the price of our Common Stock to fall.

Pursuant to the Amended and Restated Registration Rights Agreement, dated as of November 10, 2022, by and among us, Vickers Venture Fund VI Pte Ltd, Vickers Venture Fund VI (Plan) Pte Ltd, Sorrento Therapeutics, Inc. and certain security holders set forth on the signature pages thereto (the Registration Rights Agreement), which was entered into in connection with the Business Combination, certain stockholders of Vickers and Legacy Scilex can each demand that we register their registrable securities under certain circumstances and will each also have piggyback registration rights for these securities. In addition, we are required to file and maintain an effective registration statement under the Securities Act covering such securities and certain of our other securities. We have filed a registration statement on Form S-1 (File No. 333-268603) which was initially declared effective by the SEC on December 27, 2022, in order to satisfy these obligations. The registration of these securities will permit the public sale of such securities, subject to certain contractual restrictions imposed by the Registration Rights Agreement and the Merger Agreement. The presence of these additional shares of our Common Stock trading in the public market may have an adverse effect on the market price of our securities.

If we raise additional funds through collaboration, licensing or other similar arrangements, we may have to relinquish valuable rights to ZTlido, GLOPERBA, ELYXYB or our product candidates, or grant licenses on terms unfavorable to us. If adequate funds are not available, our ability to achieve profitability or to respond to competitive pressures would be significantly limited and we may be required to delay, significantly curtail or eliminate the development of our product candidates.

We aOur failure no longer ato meet the continued listing standards of Nasdaq controlled company underuld result in a delisting of our Common Stock.

On November 1, 2024, we received a letter from Nasdaq notifying us that, because the corporate governance rules of Nasdaq. However, during losing bid price for our shares of Common Stock, has been below $1.00 per share for 30 consecutive business days, we no longer comply with the minimum bid price requirement for continued listing on the applicable phase-in periods, we may rely on exemptions from certain corporate governanNasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share (the Minimum Bid Price Requirement), and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the Minimum Bid Price rRequirements, which may limi exists if the deficiency continues for a period of 30 consecutive business days.

Pursuant the presence ofo Nasdaq Listing Rule 5810(c)(3)(A), we have been provided an independent directors on our Board oritial compliance period of 180 calendar days, or until April 30, 2025, to regain compliance with the Minimum Bid Price Requirement. If we do not regain committees of our Board.

Previouslpliance with the Minimum Bid Price Requirement by April 30, 2025, we may be afforded a second 180 calendar day grace period. To qualify, Sorrenwe would be required to beneficially owned, in meet the continued listing requirements for market value of publicly held shares and all othe aggregate, morer initial listing standards for the Nasdaq Capital Market, with than 50%e exception of the combined v Minimum Bid Price Requirement. In addition, we would be required to provide written noting power force of our intention to cure the election of our Board. However, on September 21, 2023,minimum bid price deficiency during this second 180-day compliance period by effecting a reverse stock split, if necessary.

If it appears to the Staff that we will not be able to cure the deficiency in connection with the Scilex-Oramed SPA, Minimum Bid Price Requirement, or if we and Sorrento entered into andre otherwise not eligible for the additional consummated the transactionsmpliance period, and we do not regain contemplatediance by April 30, 2025 for that certain Stock Purchase Agree Minimum Bid Price Requirement, dated as of such date, pursuant to which, among otherNasdaq will provide written notification to us that our shares of Common Stock are subject to delisting. At thingsat time, we purchased from Sorrenmay appeal the delisting determination to (i) 60,068,585 shaa hearings panel pursuant to the procedures of Common Stock, (ii) 29,057,097 sharset forth in the applicable Nasdaq Listing Rules.

If Nasdaq determines of Series A Preferred Stock,to delist our securities from trading on its exchange and (iii) warrantwe are unable to obtain listing on another national securities exercisable for 4,490,617change, some or all of the following may occur, each of which could have a material adverse effect on our stockholders:

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causing our shares of Common Stock, each with an exercise price of $11.50 ( to be transferred to a more limited market than Nasdaq, which constitutesuld affect the entirety of the holdings market price, trading volume, liquidity and resale price of our capital stock that was held by Sorrento, other thansuch shares;

causing an event of default under our existing debt instruments;

reducing the 1,917,210 additinumber of investors, including institutional shares ofinvestors, willing to hold or acquire our Common Stock he, which could by Sorrento in abeyance fornegatively impact our ability to raise equity;

decreasing the amount of news and analyst coverage relating to us;

reducing the benefitavailability of certain holders of warrants to purchase sharesinformation concerning the trading prices and volume of c our Common sStock of Sorrento) ((i) through (iii) collectively, the Purchased Securities, and such

limiting our ability to issue additional securities, obtain additional financing or pursue strategic restructuring, refinancing or other transactions, the Equity R; and

impacting our repurchase Transactation and, as a consequence, our business and operation). As a result of s.

On November 21, 2024, we received a letter (the consummation of the Equity Repurchase Transaction, Sorrento no longer controls a majority of tNasdaq Notice) from Nasdaq advising us that we were not in compliance with Nasdaqs continued listing requirements under the Nasdaq Listing Rule 5250(c)(1) (the Listing Rule) as a result of our failure to file the Q3 Form 10-Q in a timely manner. The voListing power of our outstanding capital stock and at such timeRule requires listed companies to timely file all required periodic reports (the Timely Reporting Requirement) with the SEC Under Nasdaq rules, we ceased to be a controlledhave 60 calendar days from receipt of the Nasdaq Notice, or until January 20, 2025, to submit a plan to regain companyliance within the meanListing oRule. If Nasdaqs corporate governance sta accepts our plan, then Nasdaq may grant an exception of up to 180 calendards. As a result, we are subject  days from the due date of the Q3 Form 10-Q, or until May 19, 2025, to additionalregain corporate governmpliance. We regained compliance requirements, includwith the Listing Rule by filing the requis Quarterly Report on Form 10-Q.

We and/or our direments that (i) a majority of our Board consistsctors and officers may be subject to litigation or other actions as a result of independent directors, (ii) our Boaror relating to our internal investigation and our failure to timely file this Quarterly Report on Form 10-Q with the SEC and an unfavorable outcome with respect to such matters could has arm our business, financial compensndition and results of operation cos.

As previously disclosed, the audit committee that isof the Board recently composmmenced entirelyan investigation with the assistance of independent directorscounsel with a written charter addressingrespect to an evaluation of the following contracts: (i) the cCommittees purpose and responsibilitiement Side Letter entered into with FSF 33433 LLC (a copy of which was filed with the SEC as and (iii) director nominees must be selected or recommended for the boards selection, ei exhibit to our Current Report on Form 8-K filed on June 12, 2024), (ii) a distribution agreement entered into with Endeavor (Distributor) in June 2024, and (iii) ther by independ Satisfaction Agreement ent directors constituting a majoritered into with FSF 33433 LLC and Distributor (a copy of the boards independent directors in a vote in whichwhich was filed with the SEC as an exhibit to our Current Report on Form 8-K filed only independent directors participate, or a nominating September 18, 2024). The investigation relates to the accounting treatment of such contracts and corporrelate governanced matters.

Failure to committee comprised solely of independent directors with a written charply with applicable laws or regulations, as interpreted and applied, or our reporting obligations with the SEC could have a material addressingverse effect on our reputation, the committees purposeprice of its securities and responsibilits business, financial condities.

Nasdaq Listing Rules provide for phase-in periods for theson and results of operations. We cannot predict the outcome of the above-referenced matters. Our management may be requirements (includingd to devote significant time and attention to that each suchese matters. An unfavorable outcome committee consistuld have a material adverse impact on our financial position, results of a majoroperations or liquidity of independent r the market for its securities, and could subject we and/or our directors within 90 days of nand officers to longer being a controlled company), but we must be fully compliant withitigation or other actions from third parties or regulatory bodies related to the requirements within one year ofabove-referenced matters.

As a result of our failure to timely file the date on whichis Quarterly Report on Form 10-Q, we cease to be a controlled company.

Aare currently ineligible to file new short form registration statements of June 30, 2024, a majorin Form S-3, which may impair our ability of the directors on our Board are independent, and each of the directors serving on our audit, nominatto raise capital on terms favorable to us, in a timely manner or at all.

Form S-3 permits eligible issuers to conduct registered offerings using a short form registration statement that allows the issuer to incorporate by reference its past and future filings and correporate governance and compensationts made under the Exchange Act. In addition, Form S-3 enables eligible issuers to committees are independent. Wnduct primary offerings off the shelf under Rule 415 of the Securities Act. The shelf registration process, combined with the also adopted bility to forward incorporate informal written charters for each of our audit, nominating tion, allows issuers to avoid delays and interruptions in the offering process and to access the capital markets in a more expeditious and efficient manner than raising capital in a stand corporate governance, and our compensation comard registered offering pursuant to a Registration Statement on Form S-1. The ability to register securities for resale may also be limitteeed as at  result of the closings of thForm S-3 eligibility.

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As a re Business Combination. Whsult of our failure to timely file as of June 30, 2024this Quarterly Report on Form 10-Q, we are in compliance with the additional Nasdaq corporate governance requirements lcurrently ineligible to file new short form registration statements on Form S-3, which may impair our ability to raise necessary capital to repay our debt obligations as they become due, pursue acquisition and development opportunities, and execute our business strategy. If we seek to access the capital markets through a registered above, we may boffering during the period of time that we are unable to retain the number of independent directors needed to comply with such rules during the  use a registration statement on Form S-3, we may experience delays in the offering process due to SEC review of a registration statement on Form S-1, experience downward pressure on our share price given that we will have to disclose the offering prior to formal commencement, and incur increased offering and transiaction period. Moreover, until we are fully scosts. If we are unable to raise capital through a registered offering, we would be required to conduct financing transactions on a private placement basis, subject to pricing, size and othese 

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r limitations for equirementty raises under Nasdaq rules, our stockholders will eek other sources of capital, which are not have tguaranteed. The same protections affordedforegoing limitations on our financing approaches could impair our ability to raise capital on terms favorable to stockholders of companies that are subjectus, in a timely manner or at all, which could have a material adverse effect on our results of operations, liquidity and financial position.

Assuming we continue to all of the cortimely file our required Exchange Act reporate governance requirements of Nasdaqts, the earliest we would regain the ability to use Form S-3 is February 1, 2026.

Our Warrants are exercisable for our Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

As of JuneSeptember 30, 2024, outstanding SPAC Warrants (as defined below) to purchase an aggregate of 106,958,309 shares of our Common Stock are exercisable in accordance with the terms of the Warrant Agreement (the Warrant Agreement), dated as of January 6, 2021, between Continental Stock Transfer  Trust Company, as warrant agent, and Vickers, governing those securities. The exercise price of these SPAC Warrants is $11.50 per share. SPAC Warrants means (i) the redeemable warrants that were included in the Units (each of which consisted of one Vickers ordinary share and one-half of one redeemable warrant) that entitle the holder of each whole warrant to purchase one Vickers ordinary share at a price of $11.50 per share (the Public Warrants), and (ii) the 6,840,000 warrants sold in a private placement to Vickers Venture Fund VI Pte Ltd and Vickers Venture Fund VI (Plan) Pte Ltd consummated on January 11, 2021 (of which 2,736,000 were subsequently forfeited and 3,104,000 were transferred to Sorrento, in each case in connection with the Business Combination) (the Private Warrants).

As of JuneSeptember 30, 2024, (i) none of the ooutstanding Penny Warrants to purchase an aggregate of 13,06,500,000 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $0.01 per share; (ii) outstanding Firm Warrants to purchase an aggregate of 5,882,352568,153 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $1.70 per share; (iii) outstanding Representative Warrants to purchase an aggregate of 470,588 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $2.125 per share and; (iv) outstanding Deposit Warrant t and Fee Warrant to purchase an aggregate of 3,25500,000 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $1.20 per share.

As described above, on April 23, 2024, the Company issued, (v) outstanding RDO Common Warrants to purchase an aggregate of 15,000,000 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $1.10 per share, and (vi) outstanding Placement Agent Warrants to purchase an aggregate of 1,200,000 shares of our Common Stock are exercisable under the terms thereof, the exercise price of which is $1.25 per shares. T.

On October 8, 2024, we issued the RDOOctober Common Warrants and the  to purchase an aggregate of 3,750,000 shares of Common Stock, which are exercisable as of the date of this Quarterly Report on Form 10-Q. On the same date, we also issued the October Placement Agent Warrants to purchase an aggregate of 3,669,724 shares of Common Stock, which will become exercisable on180 days following the six-date of issuance. The exercise price of both the October Common Warrants and the October Placement Agent Warrants was initially $1.09 per share (which was automatically reduced to $1.04 per share of Commonth anniversary of  Stock subsequent to the December RDO in accordance with the terms of such warrants).

On December 13, 2024, we issued the Pre-Funded Warrants to purchase an aggregate of 2,401,132 shares of Common Stock, which have been fully exercised as of the date of this Quarterly Report on Form 10-Q. On the same date, we also issued the December Common Warrants to purchase an aggregate of 57,512,958 shares of Common Stock and the date  StockBlock Warrants to purchase an aggregate of 4,601,036 shares of Common Stock, which will become exercisable 180 days following the date of issuance.

 The exercise price of both the December Common Warrants and the StockBlock Warrants is $$0.649 per share and $0.7375 per share, respectively.

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To the extent the SPAC Warrants, the Penny Warrants, the Firm Warrants, the Representative Warrants, the Deposit Warrant, the Fee Warrant, the RDO Common Warrants and/or t, the Placement Agent Warrants, the October Common Warrants, the October Placement Agent Warrants , the December Common Warrants and/or the StockBlock Warrants (collectively, the Warrants) are exercised, additional shares of our Common Stock will be issued, which will result in dilution to the holders of our Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market, or the fact that such Warrants may be exercised, could adversely affect the prevailing market prices of our Common Stock. With respect to the SPAC Warrants, there is no guarantee that the SPAC Warrants will ever be in the money prior to their expiration, and as such, the SPAC Warrants may expire worthless. See below risk factor, The SPAC Warrants may never be in the money, they may expire worthless and the terms of the SPAC Warrants may be amended in a manner adverse to a holder if holders of a majority of the then-outstanding SPAC Warrants approve of such amendment.

The SPAC Warrants may never be in the money, they may expire worthless and the terms of the SPAC Warrants may be amended in a manner adverse to a holder if holders of a majority of the then-outstanding SPAC Warrants approve of such amendment.

As of JuneSeptember 30, 2024, the exercise price for our SPAC Warrants is $11.50 per share of Common Stock. On August 9January 14, 20245, the closing price of our Common Stock on the Nasdaq Capital Market was $1.270.45. If the price of our shares of Common Stock remains below $11.50 per share, which is the exercise price of our SPAC Warrants, we believe our warrant holders will be unlikely to cash exercise their SPAC Warrants, resulting in little or no cash proceeds to us. There is no guarantee that our SPAC Warrants will be in the money prior to their expiration and, as such, our SPAC Warrants may expire worthless.

In addition, the SPAC Warrants were issued in registered form under the Warrant Agreement. The Warrant Agreement provides that the terms of the SPAC Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision or correct any mistake, but requires the approval by the holders of a majority of the then-outstanding SPAC Warrants to make any change that adversely affects the interests of the registered holders of

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SPAC Warrants. Accordingly, we may amend the terms of the SPAC Warrants in a manner adverse to a holder if holders of a majority of the then-outstanding SPAC Warrants approve of such amendment. Although our ability to amend the terms of the SPAC Warrants with the consent of majority of the then-outstanding SPAC Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the SPAC Warrants, convert the SPAC Warrants into cash, shorten the exercise period, or decrease the number of shares of our Common Stock purchasable upon exercise of a SPAC Warrant.

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