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Nature of Operations and Basis of Presentation | 3 Months Ended
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Mar. 31, 2026
Accounting Policies [Abstract] |
Nature of Operations and Basis of Presentation | 1. Nature of Operations and Basis of Presentation Organization and Principal Activities Scilex Holding Company (“Scilex” and together with its consolidated subsidiaries, the “Company”) is an innovative revenue-generating company focused on acquiring, developing and commercializing non-opioid pain management products for the treatment of acute and chronic pain. The Company was originally formed in 2019 and currently has eight subsidiaries, of which the following five are wholly owned: Scilex Inc. (“Legacy Scilex”), Scilex Pharmaceuticals Inc. (“Scilex Pharma”), SCLX DRE Holdings LLC, SCLX Stock Acquisition JV LLC (“SCLX JV”) and Scilex BVI Limited ("Scilex BVI"); and the following three subsidiaries are controlled by Scilex: Scilex Bio, Inc. (“Scilex Bio”), Semnur Pharmaceuticals, Inc. (“Semnur”) and Vivasor Holding Company (“Vivasor”). The business combination with Vivasor closed in December 2025. The business combination with Vickers (the “Scilex Business Combination”) closed in November 2022. The Company launched its first commercial product in October 2018, ZTlido (lidocaine topical system) 1.8% (“ZTlido”), a prescription lidocaine topical system that is designed with novel technology to address the limitations of current prescription lidocaine therapies by providing significantly improved adhesion and continuous pain relief throughout the 12-hour administration period. In June 2022, the Company in-licensed the exclusive right to commercialize GLOPERBA (colchicine USP) oral solution (“GLOPERBA”), a U.S. Food and Drug Administration (“FDA”)-approved prophylactic treatment for painful gout flares in adults, in the United States (“U.S.”). In February 2023, the Company acquired the rights related to ELYXYB (celecoxib oral solution) (“ELYXYB”) and the commercialization thereof in the U.S. and Canada. ELYXYB is a 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. The Company launched ELYXYB in the U.S. in April 2023 and commercialized GLOPERBA in the U.S. in June 2024. In January 2025, the Company received approval from Health Canada’s Pharmaceutical Drugs Directorate, Bureau of Cardiology, Allergy and Neurological Sciences for ELYXYB for the acute treatment of migraine with or without aura in Canada and in-licensed the rights to commercialize GLOPERBA outside the U.S. The Company is currently developing three product candidates, SP-102 (10 mg, dexamethasone sodium phosphate viscous gel), a novel, viscous gel formulation of a widely used corticosteroid for epidural injections to treat lumbosacral radicular pain, or sciatica, for which the Company initiated a second Phase 3 study (“SP-102” or “SEMDEXA”) in September 2025, SP-103 (lidocaine topical system) 5.4% (“SP-103”), a next-generation, triple-strength formulation of ZTlido, for the treatment of chronic neck pain and for which the Company completed a Phase 2 trial in acute low back pain (“LBP”), and SP-104 (4.5 mg, low-dose naltrexone hydrochloride delayed-release capsules) (“SP-104”), a novel low-dose delayed-release naltrexone hydrochloride being developed for the treatment of fibromyalgia, for which Phase 1 trials were completed. The Company has devoted substantially all of its efforts to the development of SP-102, SP-103 and SP-104, and the commercialization of ZTlido, ELYXYB and GLOPERBA. Basis of Presentation and Principles of Consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include all adjustments necessary for the fair presentation of the Company's financial position for the periods presented. The condensed consolidated financial statements include 100% of the accounts of the wholly owned and majority owned subsidiaries as well as a variable interest entity for which the Company is the primary beneficiary. The proportion of profit and loss and changes in equity allocated to the shareholders of the Company and the noncontrolling interests are determined on the basis of existing ownership interest. All intercompany balances and transactions have been eliminated. The Company consolidates those entities in which it has a direct or indirect controlling financial interest based on either the variable interest model (the “VIE model”) or the voting interest model (the “VOE model”). Variable interest entities (“VIEs”) are entities that, by design, either lack sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties, or have equity investors that do not have the ability to make significant decisions relating to the entity’s operations through voting rights, or do not have the obligation to absorb the expected losses, or do not have the right to receive the residual returns of the entity. The Company consolidates its VIEs under the VIE model if the Company is considered the primary beneficiary due to (i) the power to direct activities of the VIE that most significantly impact the entity's economic performance; and (iii) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. If the Company is not deemed to be the primary beneficiary in a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with the applicable GAAP. Upon the occurrence of certain significant events, as required by the VIE model, the Company reassesses whether a legal entity in which the Company is involved is a VIE. The reassessment process considers whether the Company has acquired or divested the power to direct the activities of the VIE through changes in governing documents or other circumstances. The reassessment also considers whether the Company has acquired or disposed of a financial interest that could be significant to the VIE, or whether an interest in the VIE has become significant or is no longer significant. The consolidation status of the entities with which the Company is involved may change as a result of such reassessments. Changes in consolidation status are applied prospectively, with assets and liabilities of a newly consolidated VIE initially recorded at fair value. These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, include all adjustments of a normal recurring nature necessary to present fairly, in all material respects, the Company’s consolidated financial position, results of operations and cash flows. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 as filed with the SEC on April 10, 2026 (the “Annual Report on Form 10-K”). The interim results for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for the year ending December 31, 2026 or for any future periods. Revers e Stock Split On April 3, 2025, the Board of Directors of the Company (the “Board”) approved a reverse stock split of the Common Stock at a ratio of 1-for-35 (the “Reverse Stock Split”), which was effected on April 15, 2025. As a result of the Reverse Stock Split, every 35 shares of pre-Reverse Stock Split Common Stock was combined into one share of post-Reverse Stock Split Common Stock, without any change in par value per share. No fractional shares were issued as a result of the Reverse Stock Split, as fractional shares of Common Stock were rounded down to the nearest whole share. Stockholders who would have otherwise received a fractional share of Common Stock pursuant to the Reverse Stock Split, received cash-in-lieu of the fractional share. All Common Stock amounts and references hav e been retroactively adjusted for all figures presented to reflect the Reverse Stock Split unless specifically stated otherwise. The Company also adjusted the amounts for shares of Common Stock reserved for issuance upon the exercise of outstanding warrants, outstanding stock options and shares reserved under the Company’s stock-based compensation plans, except for the outstanding Penny Warrants and Deposit Warrant (each as defined below), which do not contain antidilution provisions and therefore were not adjusted in connection with the Reverse Stock Split, to the extent they were outstanding at the time of the Reverse Stock Split. As a result, a deemed dividend of $43.8 million was recognized, representing the increase in value to Penny Warrant holders. The Company has an accumulated deficit, as a result, the deemed dividend was not recorded as a reduction in additional paid-in capital, resulting in a net impact of zero to additional paid-in capital in the accompanying unaudited condensed consolidated balance sheet. The non-cash deemed dividend has been included as an increase to the net loss allocated to common shareholders, and thus, increases the net loss per share for both basic and diluted net loss per share. Segments Operating segments are identified as components of an entity where separate discrete financial information is available for evaluation by the chief operating decision maker (the “CODM”) in making decisions on how to allocate resources and assessing performance. The Company has determined that its CODM is its Chief Executive Officer. The Company is engaged primarily in the development of non-opioid products focused on pain management based on its platform technologies and all sales are based in the United States. Accordingly, the Company has determined that it operates its business as a single, reportable segment. The CODM reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire Company based on consolidated results that are reported on the unaudited condensed consolidated statements of operations and comprehensive loss. The Company has also evaluated the significant segment expenses incurred by the single segment that are regularly provided to the CODM and concluded they are consistent with those reported on the unaudited condensed consolidated statements of operations and comprehensive loss and include cost of revenue, research and development, selling, general and administrative. The Company manages assets on a consolidated basis as reported on the unaudited condensed consolidated balance sheets. Accordingly, the unaudited condensed consolidated financial statements and accompanying notes contained herein include the measure of profit or loss, net revenue, categories of expenses, assets and other financial information that is evaluated by the CODM. Use of Estimates The preparation of these unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of these unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period. These estimates include, but are not limited to, revenue recognition, fair value of financial instruments and certain assumptions used in estimating stock-based compensation, the fair value of assets acquired and liabilities assumed in acquisitions, and the noncontrolling interests recognized in acquisitions. Management believes that these estimates are reasonable; however, actual results may differ from these estimates. Customer and Supplier Concentration Risk The Company had four customers during the three months ended March 31, 2026, each of which individually generated 10% or more of the Company’s total revenue. These customers accounted for 95% of the Company’s revenue for the three months ended March 31, 2026, with each individually ranging from 13% to 28%. As of each of March 31, 2026 and 2025, these customers represented 86% and 89% of the Company’s outstanding accounts receivable, individually ranging between 6% and 31%, and 18% and 37% for respective periods. Additionally, during the three months ended March 31, 2026, the Company purchased ZTlido and ELYXYB inventories from its sole suppliers, Itochu Chemical Frontier Corporation (“Itochu”), Contract Pharmaceuticals Ltd. Canada (“CPL”) and Ferndale Laboratories, Inc. During the three months ended March 31, 2025, the Company purchased ZTlido, ELYXYB and Gloperba inventories from its sole suppliers, Itochu, CPL and Ferndale Laboratories, Inc. This exposes the Company to concentration of customer and supplier risk. The Company monitors the financial condition of its customers, limits its credit exposure by setting credit limits, and has not experienced any credit losses during the three months ended March 31, 2026 and 2025. Significant Accounting Policies There have been no significant changes to the accounting policies during the three months ended March 31, 2026, as compared to the significant accounting policies described in Note 1 of the Notes to Consolidated Financial Statements in the Company’s audited consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2025. Digital Assets In September 2025, the Company adopted a cryptocurrency treasury strategy and began acquiring Bitcoin. The Company accounts for all digital assets held as crypto assets, a subset of indefinite-lived intangible assets in accordance with ASC 350-60, Intangibles - Goodwill and Other - Crypto Assets. The Company has ownership of and control over the digital assets, which are held in custody accounts and are not considered cash equivalents. The digital assets are initially recorded at cost on a first-in, first-out basis and are subsequently remeasured on the condensed consolidated balance sheets at fair value at each reporting period. The Company determines and records the fair value of its digital assets in accordance with ASC 820, Fair Value Measurement (“ASC 820”), based on quoted prices on the active exchange(s) that the Company has determined is the principal market for such assets (Level 1 inputs). Realized and unrealized gains and losses are recorded to Other (income) expense, net in the condensed consolidated statement of operations and comprehensive loss. Noncontrolling Interests The Company consolidates entities in which it has a controlling financial interest, including variable interest entities (VIEs) where it is the primary beneficiary. Noncontrolling interests represent the portion of equity in consolidated subsidiaries not attributable to the Company and are presented separately in the condensed consolidated balance sheets and statements of operations and comprehensive loss. Profit or loss and changes in equity attributable to noncontrolling interests are allocated based on ownership percentages as well as the preferential rights and obligations associated with the respective equity class of noncontrolling interests. Datavault Investment As of March 31, 2026, the Company holds approximately 21% of Datavault’s outstanding voting shares and has the ability to nominate two out of nine board seats. As such, the Company believes it is able to exercise significant influence over Datavault, and thus, accounts for its investment in Datavault under the equity method in accordance with Accounting Standards Codification (“ASC”) 323, Investments - Equity Method and Joint Ventures. Fair Value Measurements Financial assets and liabilities are recorded at fair value on a recurring basis in the condensed consolidated balance sheets. The carrying values of the Company’s financial assets and liabilities, including cash and cash equivalents, prepaid and other current assets, accounts payable and accrued expenses approximate to their fair value due to the short-term nature of these instruments. Equity method investments and digital assets are also recorded at fair value in our unaudited condensed consolidated balance sheets. The valuation of the derivative warrant liability for the Private Warrants, the February 2024 BDO Firm Warrants, the Deposit Warrant, the October 2024 Noteholder Warrants, the December 2024 RDO Common Warrants, the Exchange Warrants, the September 2025 Warrants, the November 2025 Warrants and the February 2026 Warrants (each as defined below) is outlined in Note 5, utilizing the Black-Scholes option pricing model. The Company has chosen the fair value option for the Oramed Note, FSF Deposit and Tranche B Notes (each as defined below), with the valuation methodologies detailed in Note 8. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. Assets and liabilities recorded at fair value are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels are directly related to the amount of subjectivity with the inputs to the valuation of these assets or liabilities as follows: Level 1 - Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; Level 2 - Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable inputs for similar assets or liabilities. These include quoted prices for identical or similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Cash and Cash Equivalents and Marketable Securities The Company considers all highly liquid investments that are readily convertible into cash without penalty and with original maturities of three months or less at the date of purchase to be cash equivalents. The carrying amounts reported in the unaudited condensed consolidated balance sheets for cash and cash equivalents are valued at cost, which approximate their fair value. Cash equivalents were immaterial as of March 31, 2026 and December 31, 2025. The Company considers marketable securities as current investments if the maturity date is less than or equal to one year from the balance sheet date. The Company considers marketable securities as non-current investments if the maturity date is in excess of one year from the balance sheet date. Accounts Receivable, Net Accounts receivable are presented net of allowances for expected credit losses and prompt payment discounts. Accounts receivable consists of trade receivables from product sales to customers, which are generally unsecured. Estimated credit losses related to trade accounts receivable are recorded as general and administrative expenses and as an allowance for expected credit losses within accounts receivable, net. The Company reviews reserves and makes adjustments based on historical experience and known collectability issues and disputes. When internal collection efforts on accounts have been exhausted, the accounts are written off by reducing the allowance for expected credit losses. As of March 31, 2026 and December 31, 2025, allowances for credit losses on accounts receivable were nil. As of March 31, 2026 and December 31, 2025, allowances for prompt payment discounts were $0.3 million and $0.4 million, respectively. Inventory The Company determines inventory cost on a first-in, first-out basis, with the exception of Vivasor which determines inventory cost using the average cost method. The Company reduces the carrying value of inventories to a lower of cost or net realizable value for those items that are potentially excess, obsolete or slow- moving. The Company reserves for excess and obsolete inventory based upon historical experience, sales trends, and specific categories of inventory and expiration dates for on-hand inventory. Inventory costs resulting from these adjustments are recognized as cost of sales in the period in which they are incurred. When future commercialization is considered probable and the future economic benefit is expected to be realized, based on management’s judgment, the Company capitalizes pre-launch inventory costs prior to regulatory approval. As of March 31, 2026 and 2025, the Company’s inventory was composed of equal parts of raw material and finished goods. Acquisitions The Company accounts for business combinations using the acquisition method of accounting, which requires that assets acquired, including in-process research and development (“IPR&D”) projects and liabilities assumed be recorded at their fair values as of the acquisition date on the Company`s condensed consolidated balance sheets. Any excess of purchase price over the fair value of net assets acquired is recorded as goodwill. The determination of estimated fair value requires the Company to make significant estimates and assumptions. As a result, the Company may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date) with the corresponding offset to goodwill. Transaction costs associated with business combinations are expensed as they are incurred. When the Company determines net assets acquired do not meet the definition of a business combination under the acquisition method of accounting, the transaction is accounted for as an acquisition of assets and, therefore, no goodwill is recorded and contingent consideration such as payments upon achievement of various developmental, regulatory and commercial milestones generally is not recognized at the acquisition date. In an asset acquisition, up-front payments allocated to IPR&D projects at the acquisition date and subsequent milestone payments are charged to expense in the Company`s condensed consolidated statements of operations and comprehensive loss unless there is an alternative future use. The Company has acquired and may continue to acquire the rights to develop and commercialize new product candidates. Intangible assets acquired in a business combination that are used for IPR&D activities are considered indefinite-lived until the completion or abandonment of the associated research and development efforts. Upon commercialization of the relevant research and development project, the Company amortizes the acquired IPR&D over its estimated useful life. Capitalized IPR&D is reviewed annually for impairment or more frequently as changes in circumstance or the occurrence of events suggest that the remaining value may not be recoverable. Goodwill and Other Long-Lived Assets Goodwill, which has an indefinite life, represents the excess cost over fair value of net assets acquired. Goodwill is reviewed for impairment at least annually during the fourth quarter, or more frequently if events occur indicating the potential for impairment. The Company has two reporting units, Scilex and Vivasor, for goodwill assessment purposes. During its goodwill impairment review, the Company may assess qualitative factors to determine whether it is more likely than not that the fair value of its reporting unit is less than its carrying amount, including goodwill. The qualitative factors include, but are not limited to, macroeconomic conditions, industry and market considerations, and the overall financial performance of the Company. If, after assessing the totality of these qualitative factors, the Company determines that it is not more likely than not that the fair value of its reporting unit is less than its carrying amount, then no additional assessment is deemed necessary. Otherwise, the Company performs a quantitative goodwill impairment test. The Company may also elect to bypass the qualitative assessment in a period and elect to proceed to perform the quantitative goodwill impairment test. The Company evaluates its long-lived and intangible assets with definite lives, such as property and equipment, patent rights, and acquired technology, for impairment by considering competition by products prescribed for the same indication, the likelihood and estimated future entry of non-generic and generic competition with the same or similar indication and other related factors. The factors that drive the estimate of useful life are often uncertain and are reviewed on a periodic basis or when events occur that warrant review. Recoverability is measured by comparison of the assets’ book value to future net undiscounted cash flows that the assets are expected to generate to determine if a write-down to the recoverable amount is appropriate. If such assets are written down, an impairment will be recognized as the amount by which the book value of the asset group exceeds the recoverable amount. Valuation of Purchased In-Process Research and Development, Goodwill, and Other Intangible Assets When we acquire another company, the purchase price is allocated, as applicable, between in-process research and development, other identifiable intangible assets, tangible assets, liabilities assumed and goodwill as required by generally accepted accounting principles in the U.S. Purchased in-process research and development is defined as the value assigned to those projects for which the related products have not received regulatory approval and have no alternative future use. Determining the portion of the purchase price allocated to in-process research and development and other intangible assets requires us to make significant estimates. The amount of the purchase price allocated to purchased in-process research and development and other intangible assets is determined by estimating the future cash flows of each project or technology and discounting the net cash flows back to their present values. The discount rate used is determined at the time of the acquisition in accordance with accepted valuation methods. For purchased in-process research and development, these methodologies include consideration of the risk of the project not achieving commercial feasibility. Goodwill represents the excess of the aggregate purchase price over the fair value of net assets, including in-process research and development, of the acquired businesses, net of the fair value of liabilities assumed. Goodwill is tested for impairment annually, or more frequently if changes in circumstance or the occurrence of events suggest an impairment exists. The test for impairment requires us to make several estimates about fair value, most of which are based on projected future cash flows. Our estimates associated with the goodwill impairment tests are considered critical due to the amount of goodwill recorded on our consolidated balance sheets and the judgment required in determining fair value amounts, including projected future cash flows. The purchase price allocation in connection with the purchase of Vivasor is preliminary and subject to adjustment. As the Company continues to evaluate the fair value of assets acquired, including in-process research and development (IPR&D), adjustments may result in a reallocation between goodwill and identified intangible assets. Any such measurement period adjustments will be recorded in accordance with ASC 805, with corresponding offsets to goodwill, and will be finalized no later than one year from the acquisition date. Contingent Consideration The fair value of contingent consideration liabilities assumed in business combinations is recorded as part of the purchase price consideration of the acquisition, and is determined using a discounted cash flow model or Monte Carlo simulation model. The significant inputs of such models are not observable in the market, such as certain financial metric growth rates, volatility rates, projections associated with applicable milestones, discount rates and the related probabilities and payment structure in the contingent consideration arrangement. Fair value adjustments to contingent consideration liabilities are recorded through operating expenses in the condensed consolidated statements of operations and comprehensive loss. Other than contingent consideration that is accounted for in accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity, and Topic 815, Derivatives and Hedging, contingent consideration arrangements assumed in an asset acquisition will be measured and accrued when such contingency is resolved. Warrants In accordance with ASC Subtopic No. 815-40, Contracts on an Entity’s Own Equity, the Company determines how to account for warrants either assumed in business combinations or issued under various financing arrangements. Warrants classified as equity are recorded at their issuance cost and are not subject to remeasurement at each subsequent balance sheet date. The Company records them in additional paid-in capital in the Company’s consolidated balance sheets. Warrants accounted for as liabilities are recorded at their estimated fair value on the date of issuance and are revalued at each subsequent balance sheet date, with fair value changes recognized in the consolidated statement of operations. The Company estimates the value of these warrants using a Black-Scholes option pricing formula. Debt The Company may enter into financing arrangements, the terms of which involve significant assumptions and estimates. This involves estimating future net product sales, determining interest expense, determining the amortization period of the debt discount, as well as determining the classification between current and long-term portions. Debt assumed in connection with the Vivasor Business Combination (as defined below) was recorded at fair value at the acquisition date. Subsequent to initial recognition, such debt is carried at amortized cost, with any difference between fair value and contractual amounts accreted or amortized to interest expense over the remaining term of the instrument using the effective interest method. The Oramed Note, FSF Deposit and Tranche B Notes The Company has elected the fair value option to account for the FSF Deposit and the Tranche B Notes (each as defined in Note 2 “Liquidity and Going Concern” below) and the Oramed Note (as defined in Note 5 “Fair Value Measurements” below) that were issued in June 2024, October 2024 and September 2023, respectively, as discussed further in Note 8. The Company recorded these financial instruments at fair value upon issuance with changes in fair value recorded as change in fair value of debt and liability instruments in the unaudited condensed consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income. Interest expense related to these financial instruments is included in the changes in fair value. As a result of applying the fair value option, direct costs and fees related to these financial instruments were expensed as incurred. The weighted-average interest rates for the short-term loans, including these financial instruments, were 10.60% and 12.35%. for the period ended March 31, 2026 and December 31, 2025, respectively. Scilex-St. James Loans The Company accounted for Scilex-St. James Loans (as defined below) using amortized cost model. Transaction fees paid to the lender are treated as debt discounts which are recorded as reduction to the principal of the loans. The debt discounts are amortized over the contractual term of the loan, using the effective interest method, and recorded as interest expense in the condensed consolidated statements of operations and comprehensive loss. Purchased Revenue Liability The purchased revenue liability is associated with the Purchase and Sale Agreement that the Company entered into in October 2024 with certain institutional investors (collectively, the “ZTlido Royalty Investors”) and Oramed (the “ZTlido Royalty Purchase Agreement”) and the Purchase and Sale Agreement that the Company entered into in February 2025 with certain institutional investors (collectively, the “Gloperba-Elyxyb Royalty Investors”) and Oramed (the “Gloperba-Elyxyb Royalty Purchase Agreement”, and together with the ZTlido Royalty Purchase Agreement, the “Royalty Purchase Agreements”) (Note 8). The Company elected the fair value option to account for the purchased revenue liability (as described in Note 5 “Fair Value Measurements” below). The Company recorded the Royalty Purchase Agreements at fair value upon issuance with changes in fair value recorded as change in fair value of debt and liability instruments in the condensed consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income. Interest expense related to these financial instruments is included in the changes in fair value. As a result of applying the fair value option, direct costs and fees related to the purchased revenue liability were expensed as incurred. Derivative Liabilities Derivative liabilities are recorded on the Company’s unaudited condensed consolidated balance sheets at their fair value on the date of issuance and are revalued on each balance sheet date until such instruments are exercised or expire, with changes in the fair value between reporting periods recorded as other income or expense. Revenue Recognition The Company’s revenue is primarily generated from product sales within the United States. The Company does not incur significant direct costs to obtain contracts with its customers. Revenue from product sales is comprised of sales of ZTlido, ELYXYB and GLOPERBA. The Company’s performance obligation with respect to sales of ZTlido, ELYXYB and GLOPERBA is satisfied at a point-in-time, when control is transferred upon delivery of product to the customer. The Company considers control to have transferred upon delivery because the customer has legal title to the product, physical possession of the product has been transferred to the customer, the customer has significant risks and rewards of ownership of the product, and the Company has a present right to payment at that time. Invoicing typically occurs upon shipment and the length of time between invoicing and when payment is due is not significant. The aggregate dollar value of unfulfilled orders as of March 31, 2026 and 2025 was not material. Revenues from product sales are recorded net of reserves established for commercial and government rebates, fees and chargebacks, wholesaler and distributor fees, sales returns, special marketing programs and prompt payment discounts. Such variable consideration is estimated in the period of the sale and is estimated using a most likely amount approach based primarily upon provisions included in the Company’s customer contract, customary industry practices and current government regulations. Deductions from Revenues The Company’s gross product revenues are subject to a variety of deductions, which generally are estimated and recorded in the same period that the revenues are recognized. Such variable consideration represents chargebacks, rebates, sales allowances and sales returns. These deductions represent estimates of the related obligations and, as such, knowledge and judgment are required when estimating the impact of these product revenue deductions on net sales for a reporting period. Rebates and Chargebacks Rebates are discounts which the Company pays under either government or private health care programs. Government rebate programs include state Medicaid drug rebate programs, the Medicare coverage gap discount programs and the Tricare programs. Commercial rebate and fee programs relate to contractual agreements with commercial healthcare providers, under which the Company pays rebates and fees for access to and position on that provider’s patient drug formulary. Rebates and chargebacks paid under government programs are generally mandated under law, whereas private rebates and fees are generally contractually negotiated by the Company with commercial healthcare providers. Both types of rebates vary over time. The Company records a reduction to gross product sales at the time the customer takes title to the product based on estimates of expected rebate claims. The Company monitors the sales trends and adjusts for these rebates on a regular basis to reflect the most recent rebate experience and contractual obligations. Reserves for rebates and chargebacks are separately presented as accrued rebates and fees under current liabilities within the Company’s condensed consolidated balance sheets. Prompt Payment Discounts The Company provides its customers with prompt payment discounts which may result in adjustments to the price that is invoiced for the product transferred, in the case that payments are made within a defined period. The prompt payment discount reserve is based on actual gross sales and contractual discount rates. Reserves for prompt payment discounts are included in accounts receivable, net on the condensed consolidated balance sheets. Service Fees The Company compensates its customer and others in the distribution chain for wholesaler and distribution services. The Company has determined such services received to date are not distinct from the Company’s sale of products to the customer and, therefore, these payments have been recorded as a reduction of revenue. Service fees are presented as accrued rebates and fees under current liabilities within the Company’s condensed consolidated balance sheets. Product Returns The Company is obligated to accept the return of products sold that are expiring within six months, damaged or do not meet certain specifications. The Company may authorize the return of products sold in accordance with the term of its sales contracts, and estimates allowances for such amounts at the time of sale. The Company estimates the amount of its product sales that may be returned by its customer and records this estimate as a reduction of revenue in the period the related product revenue is recognized. Product returns are presented as accrued rebates and fees under current liabilities within the Company’s condensed consolidated balance sheets. The allowance for product returns is determined based on historical return rates, product shelf life, and inventory levels within the distribution channel. This estimated rate is applied to gross sales to accrue the sales allowance. Discounts Discounts, typically 2% of sales, are offered to wholesalers for prompt payment. Upon receipt of actual product returns, the Company updates its balances accordingly, while continuing to refine its estimates based on historical trends. Co-Payment Assistance Patients who have commercial insurance or pay cash and meet certain eligibility requirements may receive co-payment assistance. The Company accrues for co-payment assistance based on actual program participation and estimates of program redemption using data provided by third-party administrators. Co-payment assistance is presented as accrued rebates and fees under current liabilities within the Company’s condensed consolidated balance sheets. Net Loss per Share Basic and diluted net loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. Under the two-class method, basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share attributable to common stockholders adjusts basic earnings per share for the potentially dilutive impact of stock options and warrants, which consists of the incremental Common Stock issuable upon the exercise of stock options and warrants (using the treasury stock method or the reverse treasury stock method, as applicable). In accordance with FASB ASC 260, Earnings Per Share, Penny Warrants are warrants that would be exercised for no or little consideration and therefore should be included in the calculation of weighted average shares outstanding for purposes of calculating basic and diluted net income (loss) per share to the extent all vesting conditions or exercise contingencies are removed except for the passage of time. Related Party Transactions iLeukon Intellectual Property License Agreement iLeukon Therapeutics, Inc. ("iLeukon") is considered a related party of the Company due to certain overlapping roles between officers and directors of the Company and iLeukon. Henry Ji, the Executive Chairperson of the Board of Directors of the Company, also serves as Chairman of the Board of Directors of iLeukon. Additionally, Xiao Xu, the Chief Executive Officer of ACEA Therapeutics, Inc. ("ACEA"), a consolidated subsidiary of Vivaso, itself a consolidated subsidiary of the Company, serves as Co-Chair of the Board of Directors of iLeukon. In December 2024, Vivasor entered into an Intellectual Property License Agreement with iLeukon pursuant to which Vivasor agreed to license certain patents to iLeukon in exchange for 400,000 shares of iLeukon common stock, representing approximately 2% of iLeukon's outstanding equity, for an aggregate value of approximately $1.1 million, and a $1.0 million payment contingent upon the closing of a future Series A financing. The licensed intellectual property was not transferred and the shares were not issued until the three months ended March 31, 2026. The Company recognized approximately $1.1 million of revenue in connection with this transaction during the three months ended March 31, 2026. As of March 31, 2026, the carrying value of the Company's investment in iLeukon was approximately $1.1 million. For further discussion of the accounting for this investment, refer to Note 6. EOS Technology Holdings Patent Agreement On January 11, 2026 (“Effective Date”), the Company entered into the Agreement with EOS. Under the Agreement, EOS sold the Company a single patent which comprised a remote medication delivery system (i.e. “Purchased Assets”, “Purchased Asset”, “Intellectual Property” or “IP”). The patented technology covers a system and method for routing medication from a dispensary to a patient's location via a determined route, including a pneumatic delivery system connecting residences or facilities to a dispensary, a secured lockbox for delivery, and biometric user authentication (e.g., fingerprint/retina scan) before medication is released. Additionally, it encompasses real-time patient monitoring via wearables, cameras, and sensors to trigger medication delivery on an as needed basis (Note 4). Datavault Chief Executive Officer also serve as EOS Chief Executive Officer. The Company's ownership of Datavault Common Stock was approximately 21% and d oes not have any other existing agreements with EOS. EOS is considered a related party of the Company for the purposes of ASC 850, Related Party Disclosures and Item 404 of Regulation S-K. Vivasor Secondary Stock Purchase During January 2026, the Company purchased a total of 355,919 shares of Vivasor Series A-2 Preferred Stock for total cash consideration of $1,050,000 from two existing shareholders of Vivasor, Jaisim Shah and Three I Fund. Pursuant to the Share Transfer Agreement dated January 20, 2026 the Company purchased a total of 254,228 shares from Mr. Shah for a total amount of $0.8 million. Mr. Shah, is the former Chief Executive Officer and President of the Company, who resigned on August 16, 2025 and also the former Chief Executive Officer of Semnur, a subsidiary of the Company (see Note 3), he resigned on March 13, 2026, and currently serves as a consultant of the Company. Mr. Shah is considered a related party of the Company for the purposes of ASC 850, Related Party Disclosures and Item 404 of Regulation S-K. Consulting Agreement — ACEA Therapeutics, Inc. ACEA Therapeutics, Inc. (“ACEA Therapeutics”), a subsidiary of Vivasor, is a biopharmaceutical company in which Henry Ji, Ph.D., the Executive Chairperson of the Board of Directors of the Company and Executive Chairperson of the Board of Directors of Vivasor, holds a greater than 50% ownership interest. As a result of Dr. Ji’s position as Executive Chairperson of the Company and his greater than 50% ownership interest in ACEA Therapeutics, ACEA Therapeutics is considered a related party of the Company for purposes of ASC 850, Related Party Disclosures, and Item 404 of Regulation S-K. In the three months ended March 31, 2025, the Company engaged ACEA Therapeutics to provide regulatory strategy consulting services in seeking regulatory approval in the People’s Republic of China. The consulting services provided by ACEA Therapeutics included advisory support with respect to the regulatory processes, submissions, and related strategic guidance required for the Company’s product candidates under the National Medical Products Administration (“NMPA”) and other applicable Chinese regulatory authorities. During the three months ended March 31, 2025, the Company paid $0.7 million in consulting fees to ACEA Therapeutics under this arrangement. Upon the Vivasor Business Combination (See Note 3 below), any transactions between ACEA Therapeutics, Inc. and the Company were eliminated upon consolidation. Quantum Scan Holdings, Inc. In January 2026, the Company entered into certain transactions with Quantum Scan Holdings, Inc. (“QScan”), a medical technology company focused on preventive diagnostics. Stephen Ma, the Company's Chief Financial Officer and a member of its Board of Directors, has served as QScan's interim Chief Financial Officer since January 16, 2026, establishing QScan as a related party. See Note 6 for further details. Recent Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures, which will require additional expense disclosures for all public entities. The amendments require that at each interim and annual reporting period, an entity will disclose certain disaggregated expenses included in each relevant expense caption, as well as the total amount of selling expenses and, in annual periods, an entity’s definition of selling expenses. ASU 2024-03 is effective for annual reporting periods beginning with the fiscal year ending December 31, 2027, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the incremental disclosures that will be required in its condensed consolidated financial statements. In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options, which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. ASU 2024-04 is effective for annual reporting periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in ASU 2020-06. The Company assessed the provisions of this ASU and concluded this ASU does not have a material impact on its condensed consolidated financial statements. In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this update provide a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current classified accounts receivable and contract assets. This update is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years. Adoption of this ASU can be applied prospectively for reporting periods after its effective date. Early adoption is permitted. The Company assessed the provisions of this ASU and concluded this ASU does not have a material impact on its condensed consolidated financial statements. In January 2026, the FASB issued ASU 2026‑01, Equity (Topic 505)—Initial Measurement of Paid‑in‑Kind Dividends on Equity‑Classified Preferred Stock. The amendments clarify the initial measurement of paid‑in‑kind dividends on equity‑classified preferred stock to reduce diversity in practice and improve consistency in financial reporting. The amendments are effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The amendments should be applied on a prospective basis. The Company is currently evaluating the amendments and the effect on its future consolidated financial statements.

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