Exhibit 99.1
February 19, 2023
Sorrento Therapeutics, Inc.
$75,000,000
Debtor-in-Possession Term Loan Facility
Summary of Terms and Conditions
This term sheet (together with the exhibits
and schedules hereto, the “Term Sheet”) sets forth a summary of the terms and conditions with respect to the DIP Facility
(as defined below) from and after, and subject to, the entry of the Interim Order (as defined below). This Term Sheet shall be a binding
agreement from and after, and subject to, the entry of the Interim Order with respect to the DIP Loans (as defined below) but does not
purport to summarize all of the terms, conditions, representations and other provisions with respect to the DIP Facility, which will be
set forth in the DIP Documents (as defined below). The obligation of the DIP Lender (as defined below) to provide financing pursuant to
this Term Sheet is conditioned upon the execution and delivery of signature pages to this Term Sheet by each of the parties hereto and
shall be subject to the conditions precedent and other terms and conditions set forth herein. In the event of any conflict between this
Term Sheet and the terms of the Interim Order or the Final Order (as defined below), the terms of the Interim Order or the Final Order
(as applicable) shall govern.
The statements contained in this Term Sheet
and all discussions between and among the parties in connection herewith constitute privileged communications that shall not be disclosed
or introduced pursuant to Federal Rule of Evidence 408 and/or other applicable law, unless otherwise required by judicial order or applicable
law. All assumptions, principles and numbers are based upon and subject to continuing due diligence and are subject to change as the parties’
positions develop further.
| 1. |
Borrowers: |
· Sorrento
Therapeutics, Inc. and Scintilla Pharmaceuticals, Inc. (each a “Borrower” and collectively, the “Borrowers”),
as debtors and debtors-in-possession in Case No. 23-90085 (DRJ) (Jointly Administered) (the “Chapter 11 Cases”
(the Borrowers shall be referred to herein under the Chapter 11 Cases, each as a “Debtor” and collectively, the “Debtors”)
under chapter 11 of title 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) commenced in the United
States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”) on February 13, 2022 (the “Petition
Date”). |
| 2. |
Guarantors: |
· Each of Sorrento Therapeutics, Inc.’s existing and future, direct and indirect domestic or foreign subsidiaries that become debtors and debtors-in-possession in the Chapter 11 Cases (collectively, the “Guarantors” and together with the Borrowers, each a “Loan Party” and collectively, the “Loan Parties”). As of the date of the Interim Order, the only two Loan Parties shall be the Borrowers.
· The DIP Obligations (as defined below) of the Borrowers shall be unconditionally guaranteed, on a joint and several basis, by the Guarantors. |
| 3. |
DIP Lender: |
· JMB
Capital Partners Lending, LLC and/or its designees or its assignees |
| 4. |
Type and Amount of the DIP Facility: |
· A non-amortizing super-priority senior secured term loan facility in an aggregate principal amount not to exceed $75,000,000 consisting
of up to $75,000,000 in term loan commitments (the “DIP Facility”; the definitive documentation evidencing the DIP
Facility, the “DIP Documents”; the DIP Lender’s commitments under the DIP Facility, the “DIP Commitments”;
and the loans under the DIP Facility, the “DIP Loans”).
· The borrowing of DIP Loans shall permanently decrease the DIP Commitments, and DIP Loans repaid may not be reborrowed.
· Loan proceeds to be funded into newly established funding accounts, including a carve-out account each to be initially maintained
at Bank of America and subject to a control agreement in favor of the DIP Lender to be entered into within 10 Business Days of the entry
of the Interim Order, subject to a 30 day cure period if the Loan Parties are using commercially reasonable efforts to obtain a satisfactory
control agreement.
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| 5. |
Initial Availability: |
· Upon
the Bankruptcy Court’s entry of the Interim Order (as defined below), and satisfaction of all applicable conditions precedent described
herein, the Borrowers shall be entitled to make a single draw of the DIP Loans in the amount of $30,000,000 immediately upon entry of
the Interim Order (the “Initial Draw”) (the date of such Initial Draw shall be referred to herein as the “Closing
Date”). The closing of definitive DIP Documents (as hereafter defined) shall occur as soon after the Initial Draw as possible.
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| 6. |
Full Availability: |
· Upon
the Bankruptcy Court’s entry of the Final Order (as defined below), and satisfaction of all applicable conditions precedent described
herein, the full remaining amount of the DIP Facility shall be available to the Debtors, subject to compliance with the terms, conditions
and covenants described in the DIP Documents, in additional draws (each an “Other Draw” and collectively, the “Other
Draws,”, and together with the Initial Draw, and each Other Draw, each a “Draw” and collectively, the “Draws”)),
each in an amount not less than $5,000,000 upon five (5) business days’ written notice, up to the aggregate amount of the undrawn
DIP Commitments at any time prior to five (5) days before the DIP Termination Date (as defined below). . |
| 7. |
Maturity and Termination |
· All DIP Obligations (as defined below) shall be due and payable in full in cash (or such other form of consideration as the DIP
Lender and the Borrowers may mutually agree) on the earliest of:
i. July 31, 2023;
ii. the effective date of any chapter 11 plan of reorganization with respect to the Borrowers or any other Debtor (a “Plan”);
iii. the consummation of any sale or other disposition of all or substantially all of the assets of the Debtors pursuant to section 363
of the Bankruptcy Code;
iv. the date of the acceleration of the DIP Loans and the termination of the DIP Commitments in accordance with the DIP Documents;
v. dismissal of the Chapter 11 Cases or conversion of the Chapter 11 Cases into cases under chapter 7 of the Bankruptcy Code; and
vi. 45 days after the date on which a motion to approve the DIP Facility is filed (or such later date as agreed to by the DIP Lender),
unless the Final Order (as defined below) has been entered by the Bankruptcy Court on or prior to such date (such earliest date, the
“DIP Termination Date”).
· The occurrence of the DIP Termination Date shall terminate the ability of the Borrowers to borrow the Other Draws and shall terminate
any further obligation the DIP Lender has to make any DIP Loans under the DIP Documents.
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| 8. |
Interest Rate: |
· The DIP Loans shall bear interest at a per annum rate equal to 14% payable in cash on the first day of each month in arrears (the
“Non-Default Interest”).
· Notwithstanding the foregoing, after the occurrence and during the continuance of an Event of Default (as defined below), the DIP
Loans shall bear interest at an additional per annum rate of 3%, in each case payable in cash, plus the Non-Default Interest, on the first
day of each month.
|
| 9. |
Commitment, Exit & Funding Fee: |
· The Borrowers shall pay to the DIP Lender a commitment fee equal to 2.5% of the total amount of the DIP Commitments (the “Commitment
Fee”). The Commitment Fee shall be fully earned, non-refundable upon entry of the Interim Order, and shall be payable out of
the proceeds of the Initial Draw.
· The Borrowers shall pay to the DIP Lender a funding fee equal to 2.5% of the amount of each Draw, which shall be fully earned,
non-refundable, and payable at the time of such Draw (the “Funding Fee”).
· Upon repayment or satisfaction of the DIP Loans in whole or in part the Borrowers shall pay to the DIP Lender an exit fee equal
to the sum of (i) 7% of the amount of Initial Draw, which shall be fully earned and non-refundable upon the Bankruptcy Court’s
entry of the Interim Order, and (ii) 7% of the amount of the DIP Commitments less the amount of the Initial Draw, which shall be fully
earned and nonrefundable upon the Bankruptcy Court’s entry of the Final Order (the “Exit Fee”). The Exit Fee
shall be due and payable upon the DIP Termination Date regardless of the amount of Other Draws made under the DIP Facility, provided,
however, if the DIP Termination Date has occurred solely as a result of the occurrence and continuation of an Event of Default
under the DIP Documents, then the Exit Fee shall not be payable until the DIP Obligations have been accelerated by the DIP Lender.
· The Commitment Fee, the Exit Fee, and the Funding Fee shall be approved by the Bankruptcy Court as part of the Interim Order and
the Final Order, respectively. If such premiums are not approved by the Bankruptcy Court, this Term Sheet shall automatically terminate
and be of no further force and effect.
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| 10. |
Use of Proceeds: |
· The proceeds of the DIP Facility shall be used only for the following purposes and, excluding payments pursuant to clauses (ii),
(iii), and (iv) below, subject to the Budget and 20% permitted variances as set forth below:
i. working capital and other general corporate purposes of the Borrowers and the Guarantors and certain subsidiaries;
ii. professional fees and expenses of administering the Chapter 11 Cases, to the extent the Bankruptcy Court authorizes payment (including
fees incurred prior to the Closing Date);
iii. fees
and expenses payable under the DIP Facility, including, without limitation, the Commitment Fee, the Funding Fee the Exit Fee and legal
expenses of the DIP Lender; and
iv.
interest and other amounts payable under the DIP Facility.
· Notwithstanding any other provision of this Term Sheet, from and after the Closing Date, no DIP Loans or DIP Collateral (as defined
below), or any portion of the Carve-Out may be used directly or indirectly by any Debtor, any Guarantor, any official committee appointed
in the Chapter 11 Cases, or any trustee appointed in the Chapter 11 Cases or any successor cases, including any chapter 7 cases, or any
other person, party or entity:
i. in connection with the investigation, initiation or prosecution of any claims, causes of action, adversary proceedings or other
litigation
a. against the DIP Lender, or its respective predecessors-in-interest, agents, affiliates, representatives, attorneys, or advisors,
or any action purporting to do the foregoing in respect of the DIP Obligations, DIP Liens (as defined below), DIP Claims (as defined below),
or
b. challenging the amount, validity, perfection, priority or enforceability of or asserting any defense, counterclaim or offset to,
the DIP Obligations and/or the liens, claims, rights, or security interests granted under the Orders, the DIP Documents, including, in
each case, without limitation, for lender liability or pursuant to section 105, 510, 544, 547, 548, 549, 550, or 552 of the Bankruptcy
Code, applicable non-bankruptcy law or otherwise;
ii. to prevent, hinder, or otherwise delay the DIP Lender’s enforcement or realization on the DIP Obligations, DIP Collateral,
and the liens, claims and rights granted to such parties under the Interim Order or the Final Order, as applicable, each in accordance
with the DIP Documents and the Interim Order or the Final Order, as applicable; provided, however, this shall not apply to objections
to the Final Order;
iii. to seek to modify any of the rights and remedies granted to the DIP Lender under the Orders (other than with the consents contemplated
thereunder), or the DIP Documents, as applicable; or
iv. to apply to the Bankruptcy Court for authority to approve superpriority claims or grant liens (other than the liens permitted
pursuant to the DIP Documents) or security interests in the DIP Collateral or any portion thereof that are senior to, or on parity with,
the DIP Liens, DIP Claims, unless permitted under the DIP Documents or unless all DIP Obligations, and claims granted to the DIP Lender
under the Interim Order or the Final Order, as applicable, have been refinanced or paid in full in cash or otherwise agreed to in writing
by the DIP Lender.
v. Reserved.
|
| 11. |
Voluntary Prepayments: |
· Voluntary
prepayments of the DIP Loans shall be permitted at any time, subject to (i) payment of the Exit Fee due thereon, which shall be due and
payable on the date of such voluntary prepayment; and (ii) in minimum amounts of at least $5,000,000 of principal. |
| 12. |
Security: |
· As security for the DIP Obligations, subject to the Carve Out, each Loan Party shall grant to the DIP Lender a security interest
in and continuing lien on all of such Loan Party’s right, title and interest in, to and under all the Loan Parties’ assets,
including, but not limited to the following, in each case, whether now owned or existing or hereafter acquired, created or arising and
wherever located: all assets and property of such Loan Party and its estate, real or personal, tangible or intangible, now owned or hereafter
acquired, whether arising before or after the Petition Date, including, without limitation, all contracts, contract rights, licenses,
general intangibles, instruments, equipment, accounts, documents, goods, inventory, fixtures, documents, cash, cash equivalents, chattel
paper, letters of credit and letter of credit rights, investment property, commercial tort claims, arbitration awards, money, insurance,
receivables, receivables records, deposit accounts, collateral support, supporting obligations and instruments, fixtures, all interests
in leaseholds and real properties, all patents, copyrights, trademarks, all trade names and other intellectual property (whether such
intellectual property is registered in the United States or in any foreign jurisdiction), including, without limitation, all including,
without limitation the property listed in Schedule A together with all books and records relating to the foregoing, all proceeds,
products, accessions, rents and profits of or in respect of any of the foregoing (as such terms are defined in the Uniform Commercial
Code as in effect from time to time in the State of New York) and subject to the entry of a Final Order proceeds of any actions under
sections 544, 545, 547, 548 and 550 of the Bankruptcy Code, other than, in each case “Excluded Assets” as defined on Schedule
A (collectively, the “DIP Collateral”).
· Negative pledge on all assets of the Loan Parties subject to permitted liens to be agreed upon.
· In addition to appropriate orders of the Bankruptcy Court granting and perfecting such liens, the Loan Parties shall take all
other commercially reasonable steps (including the execution and filing of UCC financing statements) requested by DIP Lender with respect
to such security interests and liens.
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| 13. |
Priority and Security: |
· Subject to the Carve-Out, all obligations of the Loan Parties under the DIP Documents, including, without limitation, all principal,
accrued interest, costs, fees and premiums provided for therein, and all obligations of the Loan Parties under the DIP Facility (the “DIP
Obligations”) shall be entitled to super priority claim status pursuant to section 364(c)(1) of the Bankruptcy Code, with priority
over any and all administrative expense claims and unsecured claims, of any kind or nature whatsoever, now existing or hereafter arising
under the Bankruptcy Code (the “DIP Claims”).
·
Subject to the Carve-Out and any equipment liens which were validly perfected as of the Petition Date, all DIP Obligations in respect
of the DIP Facility shall be:
i. pursuant
to Section 364(c)(1) of the Bankruptcy Code, be entitled to superpriority claim status in the Chapter 11 Cases (which claims shall
be payable from and have recourse to all DIP Collateral); and
ii. secured, pursuant to Section 364(c)(2) of the Bankruptcy Code, by a valid, enforceable, fully perfected and automatic first-priority
lien on the DIP Collateral.
· The liens securing the DIP Facility (the “DIP Liens”) shall mean the liens described above and in the priority
set forth in the Interim Order and Final Order. The DIP Liens described herein shall, to the fullest extent permitted by applicable law,
be effected and perfected upon entry of the Interim Order and without the necessity of the execution of mortgages, landlord agreements,
security agreements, pledge agreements, control agreements, financing statements or other agreements.
·
DIP Collateral shall also include litigation claim, judgements and any arbitration awards as more fully described on Schedule
B and any such awards hereafter granted or arising at any time before the DIP Obligations are indefeasibly paid in full and the DIP
Commitments are terminated.
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| 14. |
Remedies |
·
All remedies customarily available including (in the Chapter 11 Cases) without limitation those remedies customarily available
to senior secured, administrative expense claim of a debtor-in-possession lender, including, without limitation:
i. declare that the DIP Commitments are terminated, whereupon the DIP Commitments shall be terminated;
ii. declare the unpaid amount of the DIP Obligations to be immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived by the Loan Parties; or
iii. take any other action or exercise any other right or remedy (including, without limitation, with respect to the liens in favor
of the DIP Lender permitted under the DIP Documents, or by applicable law.
Any exercise of remedies by the DIP Lender shall
be subject in all respects to the terms of the DIP Order.
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| 15. |
Conditions Precedent to Initial Draw |
· entry of the Interim Order on or before February 24, 2023, which order shall not be stayed or subject to appeal;
· delivery of the Initial Budget acceptable to the DIP Lender in its reasonable discretion;
· all out-of-pocket costs, fees and expenses required to be paid to the DIP Lender pursuant to this Term Sheet, the DIP Documents
or the Interim Order shall have been paid;
· the representations and warranties of the Loan Parties under the DIP Documents shall be true and correct in all material respects
(or in the case of representations and warranties with a “materiality” qualifier, true and correct in all respects);
· no Material Adverse Effect (as defined below) shall have occurred and be continuing; and
· the Borrowers shall have delivered to the DIP Lender a customary borrowing notice.
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| 16. |
Conditions Precedent to Full Availability of DIP Loans |
· The DIP Documents shall contain conditions precedent as are usual and customary in loan documents for similar debtor-in possession
financings and other conditions precedent deemed by the DIP Lender appropriate to the specific transaction, including, without limitation:
i. execution and delivery of a credit agreement (the “DIP Credit Agreement”) and other DIP Documents evidencing
the DIP Facility, in each case, which shall be in form and substance substantially consistent with this Term Sheet and otherwise in form
and substance acceptable to the DIP Lender and the Borrowers and the Guarantors;
ii. Interim Order shall not be stayed or subject to appeal;
iii. delivery of any Budget subsequent to the Initial Budget, acceptable to the DIP Lender in its reasonable discretion;
vii. no trustee, examiner, or receiver shall have been appointed or designated with respect to the Loan Parties’ business, properties
or assets and no motion shall be pending seeking similar relief or any other relief, which, if granted, would result in a person other
than the Loan Parties exercising control over their assets;
viii. the representations and warranties of the Loan Parties under the DIP Documents shall be true and correct in all material respects
(or in the case of representations and warranties with a “materiality” qualifier, true and correct in all respects);
x. the Borrowers shall have delivered to the DIP Lender a customary borrowing notice;
xi. not later than 45 days following the date on which a motion to approve the DIP Facility is filed, the Final Order as to the
DIP Facility shall have been entered by the Bankruptcy Court, which Final Order shall be in the form of the Interim Order with such changes
as are customary for a final order or otherwise are acceptable to the DIP Lender;
xii. the Final Order shall be in full force and effect, and shall not (in whole or in part) have been reversed, modified, amended,
stayed, vacated, appealed, or subject to a stay pending appeal;
xiii. the Debtors shall be in compliance in all respects with the Final Order and the Loan Parties shall be in compliance in all respects
with the DIP Documents;
xiv. no default or event of default shall have occurred and be continuing under the DIP Documents;
xv. accuracy of representations and warranties in the DIP Documents in all material respects (or in the case of representations and
warranties with a “materiality” qualifier, true and correct in all respects);
xvi. no order has been entered reversing, amending, staying, vacating, terminating or otherwise modifying in any manner adverse to
the DIP Lender the Interim Order or the Final Order, as applicable;
xvii.
delivery of a notice of borrowing;
xviii. since the Petition Date, there shall not have occurred or there shall not exist any event, condition, circumstance or contingency
that, individually, or in the aggregate, (a) has had or could reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, performance or financial condition of the Loan Parties and their subsidiaries, taken as a whole, (b) has
resulted in, or could reasonably be expected to result in, a material adverse effect on the validity or enforceability of, or the rights,
remedies or benefits available to the DIP Lender, or (c) has had or could reasonably be expected to have, a material adverse effect on
the ability of the Loan Parties to perform their obligations under any DIP Document (and of the foregoing being a “Material Adverse
Effect”);
xix. DIP Lender shall have received such fixture filings, financing statements, security documents other documentation necessary for
the DIP Lender to perfect its lien and security interest in the DIP Collateral and all insurance policies maintained by Loan Parties
shall name DIP Lender as additional insured and lender/mortgagee loss payee, as applicable; and
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iv. all costs, fees, expenses (including, without limitation, legal fees and expenses) set forth in the DIP Documents or otherwise to be paid to the DIP Lender shall have been paid. |
| 17. |
Documentation |
· Definitive financing documentation (including the Orders) with respect to the DIP Loans shall be reasonably satisfactory to DIP Lender and (the “DIP Documents”). |
| 18. |
Representations and Warranties: |
· The
DIP Documents shall contain representations and warranties with respect to the Loan Parties as are usual and customary in loan documents
for similar debtor-in-possession financings and as acceptable to the DIP Lender and Borrowers, including without limitation, due organization
and authorization, enforceability, financial condition, no material adverse changes, title to properties, liens, litigation, payment
of taxes, compliance with laws and regulations, employee benefit liabilities, environmental liabilities, perfection and priority of liens
securing the DIP Facility and a representation that the Securities are owned exclusively by the Loan Parties and no other person (including
an affiliate or subsidiary who is not a Loan Party) has any interest, lien or security interest in the Securities other than customary
involuntary permitted liens to be agreed upon by the Loan Parties and the DIP Lender. |
| 19. |
Affirmative Covenants: |
· The DIP Documents shall contain affirmative covenants as are usual and customary with respect to the Loan Parties in loan documents for similar debtor-in-possession financings and as are acceptable to the DIP Lender and the Borrowers, including, without limitation, the requirement that the Securities be held at the accounts in effect as of the Closing Date and shall not be transferred from such account(s) without prior notice and consent of the DIP Lender. |
| 20. |
Negative Covenants: |
· The
DIP Documents shall contain negative covenants with respect to the Loan Parties as are usual and customary in loan documents for debtor-in-possession
financings and as are acceptable to the DIP Lender and the Borrowers; provided that the DIP Documents will permit: (i) so long
as no Default or Event of Default has occurred and is continuing or would occur after giving effect to any proposed sale, the sale of
DIP Collateral (not to exceed a fair market value of $20 million) after June 15, 2023 if the Debtors have filed a Plan that is acceptable
to the DIP Lender (or otherwise provides for the payment in full in cash of the DIP Obligations in a manner satisfactory to the DIP Lender)
in its sole discretion and the proceeds thereof are used solely to fund working capital of Borrowers in accordance with the Budget, (ii)
the ability to reject or modify contracts, and (iii) post-petition employment arrangements subject to maximum thresholds agreed upon
by the DIP Lender and the Borrowers. |
| 21. |
DIP Budget / Variance Reporting: |
· The DIP Lender shall receive an extended weekly budget commencing with the week during which the Interim Order is entered, containing
line items of sufficient detail to reflect the consolidated operating cash flow of the Debtors through projected emergence (the “Initial
Budget”) (the Initial Budget, as modified from time to time in accordance herewith, shall be the “Budget”).
· The Budget shall be updated and provided to the DIP Lender on the fourth Wednesday following the prior Budget’s approval
and every fourth Wednesday thereafter, or more frequently at the reasonable discretion of both the Borrowers and DIP Lender, with such
updated Budget extending the term thereof and the DIP Lender, in its reasonable discretion, shall have the right to approve any such updates
(or any amendments) by providing the Borrowers specific notice thereof within 5 business days after the delivery by the Borrowers of any
such update or amendment (“Updated Budget”) and, (ii) to the extent the DIP Lender provides written notice rejecting
the updates (or any amendments), the then existing Budget shall continue to constitute the applicable Budget until such time as an update
or amendment is approved by the DIP Lender. In the event the DIP Lender does not provide written notice of its rejection of the proposed
updates within such five day period, the Updated Budget shall become effective as the Budget.
· On a weekly basis thereafter, the Borrowers shall deliver to the DIP Lender a variance report for the four-week period ending
the prior Friday comparing the difference/variance, expressed as a percentage (each, a “Budget Variance”), between:
(x) total receipts for such period to total receipts for such period as set forth in the Budget on a cumulative 4 week rolling basis;
(y) total disbursements (excluding professional fees) for such period to total disbursements (excluding professional fees) for such period
as set forth in the Budget on a cumulative 4 week rolling basis (each a “Measuring Period”) and explaining in reasonable
detail all material variances, it being understood that any variance solely with respect to net operating disbursements that exceeds
20% shall be material and shall constitute an Event of Default under the DIP Documents (each such report, a “Variance Report,”
which shall be in a form satisfactory to the DIP Lender).
· For purposes of each Measuring Period, the Borrowers shall calculate: the numerical difference between “net operating disbursements”
plus “net capital expenditures” (such terms reflecting those line items illustrated in the Budget) for such period to “net
operating disbursements” plus “net capital expenditures” for such period as set forth in the Budget on a cumulative
4 week rolling basis, and to the extent the difference is a positive number, the percentage such difference is of the cumulative budgeted
amount for disbursements for such period (the “Disbursements and Capital Expenditure Variance”). For purposes herein,
a “Permitted Variance” shall be limited to not greater than 20% for budget variances with respect to the Disbursements
and Capital Expenditure Variance, each as set forth in the applicable Variance Report.
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| 22. |
Interim Order: |
· The interim order approving the DIP Facility, which shall be in form and substance reasonably acceptable to the DIP Lender (the “Interim
Order”), shall, among other things, authorize and approve:
i. the Interim Draw;
ii. the making of the DIP Loans;
iii. the granting of the superpriority claims and liens against the Debtors and their assets in accordance with this Term Sheet and
the DIP Documents with respect to the DIP Collateral;
iv. the payment of all fees and expenses (including the fees and expenses of outside counsel and financial advisors) required to be
paid to the DIP Lender as described herein under the heading “Indemnification and Reimbursement of Expenses” by the
Debtors; and
v. the payment of the Commitment Fee, the Exit Fee and the Funding Fee, which Commitment Fee, Exit Fee and Funding Fee payments shall
not be subject to reduction, setoff or recoupment for any reason, and shall be fully earned upon entry of the Interim Order, in each
case only to the extent such fee is earned (in accordance with the DIP Documents) upon entry of the Interim Order.
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| 23. |
Final Order: |
· The
final order approving the DIP Facility, which shall be substantially in the same form as the Interim Order (with such modifications as
are necessary to convert the Interim Order into a final order) and otherwise in form and substance acceptable to the DIP Lender (the
“Final Order” and together with the Interim Order, the “Orders”), shall, among other things, authorize
and approve the DIP Facility on a final basis, and the total amount of the DIP Commitments. |
| 24. |
Carve outs: |
· The
liens and security interests in the DIP Collateral, and the superpriority administrative claims shall be subject to the Carve-Out, which
shall be defined in the Interim Order. |
| 25. |
Events of Default: |
· The DIP Documents shall contain events of default (collectively, “Events of Default”) consistent with this
Term Sheet and customary for debtor-in-possession financing facilities of this type, including, without limitation:
i. Payment, non-compliance with covenants set forth in the DIP Documents, judgements in excess of specified amounts, impairment of
security interest in the DIP Collateral and other customary defaults, including the loss of the chief restructuring officer (unless a
replacement reasonably acceptable to the DIP Lender is appointed within 7 days) and a final non-appealable order vacating the arbitration
award in the Nant Litigation as more fully described on Schedule B hereto;
ii. the entry of the Final Order shall have not occurred within 45 days after the date on which a motion to approve the DIP Facility
is filed;
iii. the dismissal of any of the Chapter 11 Cases or the conversion of any of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy
Code;
iv.
non-compliance, subject to any applicable grace and/or cure periods, by any Loan Party or any of its subsidiaries with the terms
of the Interim Order or the Final Order;
v. the entry of an order staying, reversing, vacating or otherwise modifying the Interim Order or the Final Order, in each case without
the prior written consent of the DIP Lender;
vi. the entry of an order appointing a trustee, responsible officer, or an examiner having expanded powers (beyond those set forth
under Sections 1106(a)(3) and (4) of the Bankruptcy Code) under Bankruptcy Code section 1104 (other than a fee examiner) in the Chapter
11 Cases, or the Bankruptcy Court shall have entered an order providing for such appointment, in each case without the prior written
consent of the DIP Lender in its sole discretion;
vii. the entry of an order in any of the Chapter 11 Cases granting relief from any stay or proceeding (including, without limitation,
the automatic stay) so as to allow a third party to proceed with foreclosure against any material assets of the Loan Parties to which
the fair market value of which exceeds $30,000,000;
viii. the entry of an order (a) surcharging any of the DIP Collateral under Sections 105, 506(c), or any other section of the Bankruptcy
Code, (b) allowing any administrative expense claim having priority over or ranking in parity with the DIP Claims or the rights of the
DIP Lender, or (c) resulting in the marshaling of any DIP Collateral.
ix. any action by any Debtor to (a) challenge the rights and remedies of the DIP Lender under the DIP Facility in any of the Chapter
11 Cases or acting in a manner inconsistent with the DIP Documents or (b) avoid or require disgorgement by the DIP Lender of any amounts
received in respect of the obligations under the DIP Facility;
x. entry of an order without the express written consent of the DIP Lender obtaining additional financing from a party other than
the DIP Lender under Section 364(d) of the Bankruptcy Code except if such financing contemplates payment in full of the DIP Facility;
xi. the making of any material payments in respect of prepetition obligations other than (a) as permitted by the Interim Order or the
Final Order, (b) as permitted by any “first day” or “second day” orders reasonably satisfactory to the DIP Lender,
(c) as permitted by any other order of the Bankruptcy Court reasonably satisfactory to the DIP Lender, (d) as permitted under the DIP
Documents, or (e) as otherwise agreed to by the DIP Lender;
xii. entry of an order by the Bankruptcy Court terminating or modifying the exclusive right of any Debtor to file a chapter 11 plan
pursuant to section 1121 of the Bankruptcy Code, without the prior written consent of the DIP Lender;
xiii. the Debtors shall seek to, or support any other person’s motion to, (a) disallow in whole or in part the DIP Obligations,
(b) challenge the validity and enforceability of the DIP Liens, (c) contest any material provision of any DIP Document; and
|
| |
|
xiv. any Debtor shall fail to execute and deliver to the DIP Lender any agreement, financing statement, trademark filing, copyright
filing, notices of lien or similar instruments or other documents that the DIP Lender may reasonably request from time to time to more
fully evidence, confirm, validate, perfect, preserve and enforce the DIP Liens created in favor of the DIP Lender (provided that mortgages
shall not be required), subject to the time periods set forth in this Term Sheet. |
| 26. |
Indemnification and Reimbursement of Expenses: |
· The DIP Documents shall contain customary indemnification provisions for the benefit of the DIP Lender, and its related parties,
including, without limitation, indemnification against losses, claims, damages, liabilities or expenses incurred in respect of the financing
contemplated by the DIP Documents or the use or the proposed use of proceeds thereof.
·
Subject to the DIP Documents, all out-of-pocket accrued and unpaid fees, costs, disbursements, and expenses of (i) the DIP Lender,
including the fees and expenses of Lowenstein Sandler LLP, as counsel to the DIP Lender, and as necessary, other local counsel in their
capacity as counsel to the DIP Lender, incurred in connection with the DIP Facility and the Chapter 11 Cases shall be paid on a current
basis.
|
| 27. |
Release: |
· The Orders shall include a customary release of the DIP Lender, with respect to any and all claims and causes of action arising from or related to the DIP Facility. |
| 28. |
Waivers: |
· The
Orders shall include terms and conditions customary for final DIP financing orders and shall be acceptable to the DIP Lender, including,
without limitation, waiver of the automatic stay, credit-bidding rights, “no marshaling” provisions, and waivers of the imposition
of costs pursuant to Section 506(c) of the Bankruptcy code and the “equities of the case” exception in Section 552(b) of
the Bankruptcy Code, in each case, to the extent applicable. |
| 29. |
Governing Law: |
· New York (and to the extent applicable, the Bankruptcy Code). |
IN WITNESS WHEREOF, the parties hereto have caused this Term
Sheet to be executed as of the date first set forth above.
SORRENTO THERAPEUTICS, INC., as a Borrower
SCINTILLA PHARMACEUTICALS, INC., as a Borrower
| By: |
/s/ Henry Ji |
|
| |
Name: Henry Ji |
|
| |
Title: Chief Executive Officer |
|
JMB CAPITAL PARTNERS LENDING, LLC
| By: |
/s/ Vikas Tandon |
|
| |
Name: Vikas Tandon |
|
| |
Title: Chief Investment Officer |
|
[Signature Page to Term Sheet]
SCHEDULE A
| a) | 59,726,590 shares of common stock of Scilex Holding Company; |
| b) | 29,057,097 Shares of Series A Preferred Equity of Scilex Holding Company; |
| c) | 4,490,617 common stock warrants of Scilex Holding Company; |
| d) | 32% equity interest in ImmuneOncia Joint Venture; |
| e) | 20,422,124 shares of common stock in Celularity Inc.; |
| f) | 7,777,864 shares of Series B Preferred Equity of Aardvark Therapuetics; |
| g) | 10,000,000 shares of Series A Preferred Equity in Elsie Biotechnologies; |
| h) | All of the outstanding equity interests of Scintilla Pharmaceuticals, Inc. and any other wholly owned subsidiary of a Loan Party that
becomes a debtor in possession under the Chapter 11 Cases; |
(the foregoing in clauses (a) through (h) shall be referred
to herein as the “Securities”); and
| i) | All litigation and arbitration claims and awards and all publicly filed commercial tort claims to be granted to DIP Lender as collateral
security as more fully described in Schedule B attached hereto together with all other commercial tort claims held by DIP Lender. |
“Excluded Assets”
“shall mean, with respect to any Loan Party, (a) Excluded Accounts and (b) the capital stock held by any Loan Party in (i) any foreign
subsidiary that is not a direct subsidiary of a Loan Party and (ii) any direct subsidiary of any Loan Party that is a foreign subsidiary
or a subsidiary of a foreign subsidiary, except for (A) sixty-five percent (65.0%) of the issued and outstanding capital stock in any
such subsidiary entitled to vote (within the meaning of Treasury Regulations Section 1.956- 2(c)(2)) and (B) one hundred percent (100.0%)
of the issued and outstanding capital stock in any such subsidiary not entitled to vote (within the meaning of Treasury Regulations Section
1.956-2(c)(2)).
“Excluded Accounts”
shall mean: (a) deposit and/or securities accounts, the balance of which consists exclusively of (i) withheld income taxes and federal,
state or local employment taxes, in such amounts as are required, in the reasonable judgment of the Borrowers, to be paid to the IRS or
state or local government agencies within the following two (2) months, with respect to employees of any of the Loan Parties, or (ii)
amounts required to be paid over to an employee benefit plan pursuant to DOL Reg. §–2510.3–102 on behalf of, or for the
benefit of, employees of one (1) or more Loan Parties; and (b) all tax accounts (including, without limitation, sales tax accounts), accounts
used solely for payroll, accounts maintained solely in trust for the benefit of third parties and fiduciary purposes, escrow accounts,
zero balance or swept accounts, and employee benefit accounts (including 401(k) accounts and pension fund accounts), in each case of this
clause (b), so long as such account is used solely for such purpose.
SCHEDULE B
Publicly Filed Litigation/Arbitration
Including Commercial Tort Claims
| 1. | Sorrento Therapeutics, Inc. v. NantPhama, LLC, Case No. 23STCP00295 (LA Superior Court filed Feb 2, 2023) |
| 2. | Sorrento Therapeutics, Inc. v. NantCell, Inc., et. al, Case No. 19STCV11328 (filed April 3, 2019) |
| 3. | Immunotherapy NANTibody, LLC, et al. v. Sorrento Therapeutics, Inc., et. al, Case No. 19STCV18304 (filed May 24, 2019) |
| 4. | Sorrento Therapeutics, Inc. v. Patrick Soon-Shiong, Case No. 20STCV08789 (filed March 3, 2020) |
| 5. | Sorrento Therapeutics, Inc. v. NantPharma, LLC, Case No. 23STCP00295 (LA Superior Court filed Feb 2, 2023) |
| 6. | Sorrento Therapeutics, Inc., et al. v. Miao, et al., Case No. 37-2018-00032934 (filed July 2, 2018 S.D. Superior Court) |
| 7. | Sorrento Therapeutics, Inc., et al. v. Li, et al., Case No. 37-2021-00026791 (filed June 21, 2021 S.D. Superior Court) |
| 8. | Sorrento Therapeutics, Inc., et al. v. Li, et al., CAUSE NO: FSD 183 OF 2022 (CRJ) (Grand Court of the Cayman Islands) |
| 9. | Sorrento Therapeutics, Inc. v. CBC Group Investment Mgm’t, HKIAC/A21102 (Hong Kong International Arbitration Centre) |
| 10. | Sorrento Therapeutics, Inc. v. Deverra Therapeutics, Inc. et al., Case No. 37-2022-00034031-CU-BC-CTL (San Diego Superior Court) |
Exhibit 99.2
FOR IMMEDIATE RELEASE
February 21, 2023
Sorrento
Therapeutics, Inc. Receives Court Approval
for $75 Million Financing in Chapter 11 Case
SAN DIEGO, February 21, 2023 -- Sorrento
Therapeutics, Inc. (Nasdaq: SRNE, “Sorrento”), a biopharmaceutical company dedicated to the development of life-saving therapeutics
to treat cancer, intractable pain, and infectious disease, today announced that the U.S. Bankruptcy Court for the Southern District of
Texas granted interim approval of Sorrento’s $75 million debtor-in-possession financing from JMB Capital Partners, in connection
with Sorrento’s chapter 11 case, which was filed on February 13, 2023.
The financing will provide Sorrento
with immediate liquidity so that it can continue operating its business as usual during its chapter 11 case. A hearing for final approval
of the financing is currently set for March 29, 2023.
Dr. Henry Ji, Ph.D., Chairman and Chief
Executive Officer of Sorrento, commented: “We are pleased to have received approval from the Court for this financing, which will
ensure Sorrento has the liquidity and ability to continue normal business operations, including the payment of employee wages and benefits
and post-petition vendor obligations. We will continue our important work of developing new and innovative therapies for patients struggling
with cancer, intractable pain, infectious disease, and more.”
As of its chapter 11 filing, Sorrento
had over approximately $1 billion in assets. However, due to the possibility of certain actions by a litigation creditor, Sorrento and
its wholly-owned, non-operating subsidiary Scintilla Pharmaceuticals, Inc. sought chapter 11 relief to safeguard its business and ensure
the continuation of business operations, while protecting and maximizing value for stakeholders.
Scilex Holding Company (Nasdaq: SCLX,
“Scilex”), which is majority-owned by Sorrento, is not a debtor in Sorrento’s chapter 11 case. Scilex is continuing
to operate its business as usual, focusing on growing revenues, offering innovative, non-opioid pain management products, and developing
meaningfully differentiated programs that address significant unmet needs and lead to better health outcomes for the millions of acute
and chronic pain patients.
Latham & Watkins LLP and Jackson
Walker LLP are serving as legal counsel to Sorrento. M3 Partners is serving as restructuring advisor.
About Sorrento Therapeutics, Inc.
Sorrento is a clinical and commercial
stage biopharmaceutical company developing new therapies to treat cancer, pain (non-opioid treatments), autoimmune disease and COVID-19.
Sorrento’s multimodal, multipronged approach to fighting cancer is made possible by its extensive immuno-oncology platforms, including
key assets such as next-generation tyrosine kinase inhibitors (“TKIs”), fully human antibodies (“G-MAB™ library”),
immuno-cellular therapies (“DAR-T™”), antibody-drug conjugates (“ADCs”), and oncolytic virus (“Seprehvec™”).
Sorrento is also developing potential antiviral therapies and vaccines against coronaviruses, including STI-1558, COVI-MSCTM;
and diagnostic test solutions, including COVIMARK™.
Sorrento’s commitment to life-enhancing
therapies for patients is also demonstrated by our effort to advance a TRPV1 agonist, non-opioid pain management small molecule, resiniferatoxin
(“RTX”), and SP-102 (10 mg, dexamethasone sodium phosphate viscous gel) (SEMDEXA™), a novel, viscous gel formulation
of a widely used corticosteroid for epidural injections to treat lumbosacral radicular pain, or sciatica, and to commercialize ZTlido®
(lidocaine topical system) 1.8% for the treatment of postherpetic neuralgia (PHN). RTX has been cleared for a Phase II trial for intractable
pain associated with cancer and a Phase II trial in osteoarthritis patients. Positive final results from the Phase III Pivotal Trial
C.L.E.A.R. Program for SEMDEXA™, its novel, non-opioid product for the treatment of lumbosacral radicular pain (sciatica), were
announced in March 2022. ZTlido® was approved by the FDA on February 28, 2018.
For more information visit www.sorrentotherapeutics.com.
About Scilex Holding Company
Scilex Holding
Company, majority-owned by Sorrento Therapeutics, Inc., 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. Scilex is
uncompromising in its focus to become the global pain management leader committed to social, environmental, economic, and ethical
principles to responsibly develop pharmaceutical products to maximize quality of life. Results from the Phase III Pivotal Trial
C.L.E.A.R Program for SEMDEXA™, its novel, non-opioid product for the treatment of lumbosacral radicular pain (sciatica), were
announced in March 2022. Scilex has applied for breakthrough therapy designation and expects to seek priority review for
SEMDEXA™ for the treatment of sciatica. Scilex targets indications with high unmet needs and large market opportunities with
non-opioid therapies for the treatment of patients with moderate to severe pain. Scilex launched its first commercial product in
October 2018, in-licensed a commercial product in June 2022, and is developing its late-stage pipeline, which includes a pivotal
Phase 3 candidate and one Phase 2 and one Phase 1 candidate. Its commercial product, ZTlido® (lidocaine topical system) 1.8%, or
ZTlido®, is a prescription lidocaine topical product approved by the U.S. Food and Drug Administration for the relief of pain
associated with postherpetic neuralgia, which is a form of post-shingles nerve pain. Scilex in-licensed the exclusive right to
commercialize Gloperba® (colchicine USP) oral solution, an FDA-approved prophylactic treatment for painful gout flares in
adults, in the U.S. Scilex is planning to commercialize Gloperba® in 2023 and is well-positioned to market and distribute the
product. Scilex’s three product candidates are SP-102 (injectable dexamethasone sodium phosphate viscous gel product
containing 10 mg dexamethasone), or SEMDEXA™, a Phase 3, novel, viscous gel formulation of a widely used corticosteroid for
epidural injections to treat lumbosacral radicular pain, or sciatica, with FDA Fast Track status; SP-103 (lidocaine topical system)
5.4%, a Phase 2, triple-strength formulation of ZTlido®, for the treatment of low back pain, with FDA Fast Track status; and
SP-104, 4.5 mg Delayed Burst Release Low Dose Naltrexone Hydrochloride (DBR-LDN) Capsule, for the treatment of chronic pain,
fibromyalgia that has completed multiple Phase 1 trial programs and expected to initiate Phase 2 trials this year. For further
information regarding the SP-102 Phase 3 efficacy trial, see NCT identifier NCT03372161 – Corticosteroid Lumbar Epidural
Analgesia for Radiculopathy – Full Text View – ClinicalTrials.gov.
Scilex Holding Company is headquartered
in Palo Alto, California, with operations in both Palo Alto and San Diego, California. For further information please visit www.scilexholding.com.
Forward-Looking Statements
This press release and any statements
made for and during any presentation or meeting concerning the matters discussed in this press release contain forward-looking statements
related to Scilex, Sorrento and their subsidiaries under the safe harbor provisions of Section 21E of the Private Securities Litigation
Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from those projected.
Forward-looking statements include statements regarding Sorrento’s ability to safeguard its business operations and protect and
maximize value for stakeholders, Scilex’s and Sorrento’s long-term objectives and commercialization plans, future opportunities
for Scilex and Sorrento, Scilex’s and Sorrento’s future business strategies, the expected cash resources of Scilex and Sorrento
and the expected uses thereof; Scilex’s and Sorrento’s current and prospective product candidates, planned clinical trials
and preclinical activities and potential product approvals, as well as the potential for market acceptance of any approved products and
the related market opportunity; statements regarding ELYXYB™, SP-102 (SEMDEXA™), SP-103, SP-104 or any of Sorrento’s
product candidates, if approved by the FDA; Scilex’s and Sorrento’s development and commercialization plans; and Sorrento’s
products, product candidates, technologies and prospects and Scilex’s products, product candidates, technologies and prospects.
Risks and
uncertainties that could cause Sorrento’s and Scilex’s actual results to differ materially and adversely from those
expressed in our forward-looking statements, include, but are not limited to: general economic, political and business conditions;
risks related to the ongoing COVID-19 pandemic; the risk that the potential product candidates that Scilex or Sorrento develops may
not progress through clinical development or receive required regulatory approvals within expected timelines or at all; risks
relating to uncertainty regarding the regulatory pathway for Scilex’s or Sorrento’s product candidates; the risk that
Scilex or Sorrento will be unable to successfully market or gain market acceptance of their product candidates; the risk that
Scilex’s or Sorrento’s product candidates may not be beneficial to patients or successfully commercialized; the risk
that Scilex or Sorrento has overestimated the size of the target patient population, their willingness to try new therapies and the
willingness of physicians to prescribe these therapies; risks that the results of the Phase 2 trial for SP-103 or Phase 1 trials for
SP-104 may not be successful; risks that the prior results of the clinical trials of SP-102 (SEMDEXA™), SP-103 or SP-104 may
not be replicated; regulatory and intellectual property risks; and other risks and uncertainties indicated from time to time and
other risks set forth in Sorrento’s and Scilex’s filings with the SEC, and with respect to Sorrento, specifically,
relating to the voluntary proceedings under Chapter 11 in the Bankruptcy Court (the “Chapter 11 Cases”),
Sorrento’s ability to continue operating in the ordinary course while the Chapter 11 Cases are pending, the timing and outcome
of the Chapter 11 Cases, Sorrento’s ability to obtain timely approval by the Bankruptcy Court of the motions filed in the
Chapter 11 Cases, employee attrition and Sorrento’s ability to retain senior management and other key personnel due to the
distractions and uncertainties of the Chapter 11 Cases, Sorrento’s ability to maintain relationships with suppliers,
customers, employees and other third parties and regulatory authorities as a result of the Chapter 11 Cases, the Bankruptcy
Court’s rulings in the Chapter 11 Cases, the length of time that Sorrento will operate under Chapter 11 protection and the
continued availability to Sorrento of operating capital during the pendency of the Chapter 11 Cases, risks associated with any third
party motions in the Chapter 11 Cases, increased administrative and legal costs related to the chapter 11 process, exposure to
potential litigation and inherent risks involved in a bankruptcy process, the potential adverse effects of the Chapter 11 Cases on
Sorrento’s liquidity or results of operations, or Sorrento’s ability to timely file its periodic reports or meet
periodic reporting requirements with the SEC. Investors are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this release, and we undertake no obligation to update any forward-looking statement
in this press release except as may be required by law.
Contacts:
For Sorrento Therapeutics, Inc.
Media Contact
The Levinson Group
212-202-2754
Email: sorrento@tlgcommunications.com
Website: www.sorrentotherapeutics.com
Sorrento® and
the Sorrento logo are registered trademarks of Sorrento Therapeutics, Inc.
G-MAB™, DAR-T™,
Seprehvec™, SOFUSA™, COVISHIELD™, COVIDROPS™, COVI-MSC™, COVIMARK™,Fujovee™ and OvydsoTM
are trademarks of Sorrento Therapeutics, Inc.
SEMDEXA™
(SP-102) is a trademark of Semnur Pharmaceuticals, Inc. A proprietary name review by the FDA is planned.
All other trademarks
are the property of their respective owners.
©2023 Sorrento
Therapeutics, Inc. All Rights Reserved.
Exhibit 99.3
13 Week Cash Flow DIP Budget February 2023
2 Disclaimer Cautionary Note Regarding Projections The cash flow budget, financial projections, prospective financial information or forecasts (collectively, the “Projections”) in cluded in these Cleansing Materials were not prepared with a view towards public disclosure or compliance with the published guidelines of the Securiti es and Exchange Commission (the “SEC”) or the guidelines established by the Public Company Accounting Oversight Board for the presentation an d p reparation of “prospective financial information.” Sorrento Therapeutics, Inc. (the “Company”) generally does not publicly disclose detailed prospective financial information. The Projections were prepared for the internal use of the Company and were provided pursuant to the Confidential ity Agreements for the limited purpose of providing information in connection with the Company’s discussions about a potential financing transaction . T he Projections have been prepared by, and are the responsibility of the Company’s management. The Projections do not purport to present the Compa ny’ s financial condition in accordance with accounting principles generally accepted in the United States. Neither the independent registere d p ublic accounting firm of the Company nor any other independent accountant has audited, reviewed, examined, compiled, or performed any procedures with res pect to the Projections and, accordingly, none has expressed any opinion or any other form of assurance on such information or its achiev abi lity and none assumes any responsibility for the Projections. The inclusion of the Projections should not be regarded as an indication that the Com pan y or any other person considered, or now consider, the Projections to be a reliable prediction of future events, and does not constitute an admissi on or representation by any person that the expectations, beliefs, opinions, and assumptions that underlie such forecasts remain the same as of the date of this Current Report on Form 8 - K, and readers are cautioned not to place undue reliance on the prospective financial information. The estimates and assu mptions underlying the Projections are subject to significant economic and competitive uncertainties and contingencies, which are difficult or i mpo ssible to predict accurately and many of which are beyond the control of the Company and may not prove to be accurate. The Projections also do no t reflect future changes in general business or economic conditions, or any other transaction or event that may occur and that was not anticip ate d at the time this information was prepared. The Projections are not, and should not be regarded as, a representation that any of the expectatio ns contained in, or forming a part of, the Projections will be achieved. The Projections are forward - looking in nature and such information by its nature be comes less predictive with each succeeding day. Accordingly, the Company cannot provide any assurance that the Projections will be realized; actual futu re financial results will vary from such forward - looking information and may vary materially. The above considerations should be taken into account in rev iewing the Cleansing Materials. See “Cautionary Note Concerning Forward - Looking Statements” below.
3 Disclaimer Cautionary Note Concerning Forward - Looking Statements This Current Report on Form 8 - K includes certain statements that are not historical facts but are forward - looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995 . Forward - looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters . These forward - looking statements include, but are not limited to, statements regarding the future trading market for the Company’s common stock, the Chapter 11 process and the Chapter 11 Cases . The Company’s actual results or outcomes and the timing of certain events may differ significantly from those discussed in any forward - looking statements . These statements are based on various assumptions and on the current expectations of the Company’s management and are not predictions of actual performance . These forward - looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability . Actual events and circumstances are difficult or impossible to predict and will differ from assumptions . Many actual events and circumstances are beyond the control of the Company . These forward - looking statements are subject to a number of risks and uncertainties, including risks associated with the unpredictability of trading markets and whether a market will be established for the Company’s common stock ; the potential adverse impact of the Chapter 11 Cases on the Company’s liquidity and results of operations ; changes in the Company’s ability to meet its financial obligations during the Chapter 11 process and to maintain contracts that are critical to its operations ; the outcome and timing of the Chapter 11 process ; the effect of the Chapter 11 Cases on the Company’s relationships with vendors, regulatory authorities, employees and other third parties ; possible proceedings that may be brought by third parties in connection with the Chapter 11 process ; the timing or amount of any recovery, if any, to the Company’s stakeholders ; objections to the DIP Facility in connection with the Chapter 11 proceedings and the related approvals of the terms and conditions of the DIP Facility; the Company’s ability to comply with the restrictions imposed by the proposed terms and conditions of the DIP Facility ; the expected delisting of the Company’s common stock from Nasdaq and the expected trading of the Company’s common stock on the Pink Open Market ; and those factors discussed in the Company’s Annual Report on Form 10 - K for the year ended December 31 , 2021 and subsequent Quarterly Reports on Form 10 - Q filed with the Securities and Exchange Commission, in each case under the heading “Risk Factors,” and other documents of the Company filed, or to be filed, with the SEC . If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward - looking statements . There may be additional risks that the Company presently does not know or that the Company currently believes are immaterial that could also cause actual results to differ from those contained in the forward - looking statements . In addition, forward - looking statements reflect the Company’s expectations, plans or forecasts of future events and views as of the date of this document . The Company anticipates that subsequent events and developments will cause its assessments to change . However, while the Company may elect to update these forward - looking statements at some point in the future, the Company specifically disclaims any obligation to do so . These forward - looking statements should not be relied upon as representing the Company’s assessments as of any date subsequent to the date of this document . Accordingly, undue reliance should not be placed upon the forward - looking statements .
4 13 - Week Cash Flow DIP Budget Months Elapsed 0.2 0.4 0.6 0.9 1.1 1.3 1.6 1.8 2.0 2.3 2.5 2.7 3.0 Week # 1 2 3 4 5 6 7 8 9 10 11 12 13 Week Ending 2/18 2/25 3/4 3/11 3/18 3/25 4/1 4/8 4/15 4/22 4/29 5/6 5/13 ($ in millions) Cash Receipts Operating Receipts – – – – – – – – – – – – – Non-Operating Receipts – – – – – – – – – – – – – DIP Funding – 30.0 – – – – 10.0 – 10.0 – 10.0 – 10.0 Total Cash Receipts – $30.0 – – – – $10.0 – $10.0 – $10.0 – $10.0 Cash Disbursements Operating Disbursements Payroll, Taxes, and Medical ($3.6) – ($3.6) – ($3.6) – ($3.6) – ($3.6) – ($2.7) – ($2.7) Rent / Operating Leases – – (1.6) – – – (1.6) – – – – (1.6) – Licensing , Taxes, and Insurance – (0.6) (0.0) (0.0) (0.0) (0.6) (0.5) (0.0) (0.0) (0.0) (0.6) (0.0) (0.0) SG&A Other – (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) Total Operating Disbursements ($3.6) ($0.8) ($5.4) ($0.2) ($3.8) ($0.8) ($5.9) ($0.2) ($3.8) ($0.2) ($3.5) ($1.8) ($2.9) Non-Operating Disbursements Professional Fees ($1.4) ($2.1) ($1.9) ($1.4) ($2.8) ($2.1) ($3.2) ($1.9) ($1.4) ($1.4) ($2.1) ($2.2) ($0.7) DIP Interest and Fees – (2.6) (0.1) – – – (0.6) – (0.3) – (0.3) (0.7) (0.3) Critical Vendor Payments – (2.0) – – – – – – – – – – – Contingency (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) (0.2) Total Non-Operating Disbursements ($1.6) ($6.9) ($2.2) ($1.6) ($3.0) ($2.3) ($4.0) ($2.1) ($1.9) ($1.6) ($2.5) ($3.1) ($1.2) Total Disbursements ($5.2) ($7.7) ($7.6) ($1.8) ($6.8) ($3.1) ($9.9) ($2.3) ($5.7) ($1.8) ($6.0) ($4.8) ($4.1) Cash Roll-Forward Net Cash Flow ($5.2) $22.3 ($7.6) ($1.8) ($6.8) ($3.1) $0.1 ($2.3) $4.3 ($1.8) $4.0 ($4.8) $5.9 Beginning Cash $7.2 $2.0 $24.3 $16.7 $14.9 $8.0 $5.0 $5.1 $2.8 $7.1 $5.3 $9.3 $4.5 Net Cash Flow (5.2) 22.3 (7.6) (1.8) (6.8) (3.1) 0.1 (2.3) 4.3 (1.8) 4.0 (4.8) 5.9 Ending Cash $2.0 $24.3 $16.7 $14.9 $8.0 $5.0 $5.1 $2.8 $7.1 $5.3 $9.3 $4.5 $10.5