Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to 2450 Holcombe Blvd., Suite X, Houston, TX 77021 (Address of principal executive offices)(Zip Code) (713)913-5608 Registrant's telephone n ...

"It's an honor to have Dr. Langer join our SAB," commented Michael M. Lipp, PhD, Chief Technology Officer of Decoy. "Having worked in Dr. Langer's lab and at start-up companies that were founded on innovations arising from his lab, I've seen first-hand the impact he brings in discovering transformational therapies and advancing their development. We are confident that Dr. Langer's tremendous experience and know-how will provide invaluable support as we use our proprietary IMP3ACT platform to advance a portf ...

Core Viewpoint - Decoy Therapeutics Inc. is advancing its IMP3ACT™ platform to develop antiviral drug candidates effective against paramyxoviridae family viruses, including measles and Nipah viruses, and is merging with Salarius Pharmaceuticals to enhance its capabilities in infectious disease and oncology drug development [1][2][4]. Company Overview - Decoy Therapeutics is a preclinical-stage biotechnology company focused on designing peptide-conjugate drug candidates using machine learning (ML) and artificial intelligence (AI) [9]. - The company aims to address serious unmet medical needs, particularly in respiratory viruses and gastrointestinal cancers, and has received funding from various institutional investors and programs [9]. Technology and Platform - The IMP3ACT platform utilizes AI and ML to create peptide-conjugate therapeutics that directly target viral machinery, potentially changing the economics of antiviral drug development [2][4]. - Decoy's technology allows for rapid design and synthesis of antiviral candidates, optimizing them for various properties such as binding specificity and manufacturability [4][8]. Merger Details - Decoy and Salarius Pharmaceuticals have signed a definitive merger agreement, with Decoy investors expected to own approximately 86% of the combined company post-merger [11][12]. - The merger aims to integrate Decoy's expertise with Salarius' resources to advance a diversified pipeline of antiviral and cancer drugs [4][11]. Current Health Context - There is a rising need for new antiviral drugs due to vaccine skepticism and ongoing measles outbreaks, with over 320 cases reported in Texas and additional cases in at least 12 other states [6]. - Measles is highly contagious and can lead to severe health complications, highlighting the urgency for effective treatments [5][6].

Contemplated merger with Decoy Therapeutics progressing as planned; upon closing, combined company expected to accelerate clinical development of novel peptide conjugate therapeutics for treating respiratory viruses and cancer Updates expected later this year from the MD Anderson Cancer Center (MDACC) investigator-initiated Phase 1/2 clinical trial of seclidemstat in combination with azacitidine to treat hematologic cancers HOUSTON, March 24, 2025 (GLOBE NEWSWIRE) -- Salarius Pharmaceuticals, Inc. (Nasdaq: ...

Merger and Acquisition - The Merger Agreement allows for adjustments in the Exchange Ratio based on the Parent Cash Amount and Company Cash Amount, which could lead to Salarius stockholders owning approximately 14.1% of the combined company if the Parent Cash Amount is $0 and the Company Cash Amount is $2.0 million[113]. - Salarius anticipates a Parent Cash Amount of approximately $0, which may lead to additional dilution for stockholders, with a floor of 10% ownership in the combined company[115]. - The Merger may not be completed if there is a Material Adverse Effect on either Salarius or Decoy, which could negatively impact Salarius' stock price and future business[123]. - The combined company may need to raise additional capital sooner than planned, which could lead to significant dilution for stockholders and restrictive covenants on operations[130]. - If the Merger is not completed, Salarius may face liquidity issues and could consider dissolution and liquidation, impacting stockholder returns[132]. - Stockholders of both Salarius and Decoy will have reduced ownership and voting interest in the combined company following the Merger[128]. - The Merger Agreement includes provisions that may discourage third parties from submitting alternative takeover proposals, potentially limiting strategic options for Salarius[118]. - Salarius is required to recommend the conversion of all outstanding shares of its Series A Preferred Stock into Common Stock, which may not be approved by stockholders[119]. - The combined company may become involved in securities class action litigation following the Merger, which could divert management's attention and resources[122]. - The merger is expected to result in Decoy stockholders owning approximately 85.9% of the combined entity[343]. - The company has agreed to call a special stockholder meeting to approve the conversion of preferred stock into common stock and a new equity incentive plan[344]. Financial Performance - As of December 31, 2024, Salarius had cash and cash equivalents totaling $2.4 million and an accumulated deficit of $81.9 million[134]. - For the twelve months ended December 31, 2024, Salarius reported net losses of $5.5 million[134]. - Salarius' stockholders' equity was approximately $2.3 million as of June 30, 2024, and after selling 564,730 shares, it regained compliance with the Stockholders' Equity Requirement[140]. - As of December 31, 2024, Salarius had total stockholders' equity of approximately $1.5 million and did not have net income in any period during the last two fiscal years[141]. - Salarius' common stock is currently trading below the $1.00 minimum bid price requirement, risking delisting from Nasdaq[143]. - The net loss for 2024 was $5,575,777, compared to a net loss of $12,542,693 in 2023, representing a decrease in loss of approximately 55.5%[274]. - Total current assets decreased from $6,519,673 in 2023 to $2,987,562 in 2024, a decline of approximately 54.2%[272]. - Total liabilities increased from $1,299,241 in 2023 to $1,511,279 in 2024, an increase of approximately 16.3%[272]. - The total stockholders' equity decreased from $5,287,282 in 2023 to $1,511,695 in 2024, a decline of approximately 71.5%[272]. - Interest income decreased from $352,251 in 2023 to $158,539 in 2024, a decline of approximately 55.0%[274]. - The company issued equity securities netting $1,526,460 in 2024, compared to $6,920,529 in 2023, a decrease of about 78.0%[278]. - The company has suffered recurring losses from operations since its inception, with substantial doubt existing regarding its ability to fund operations through one year from the issuance date of the financial statements[291]. Operational Challenges - Salarius has never generated any revenue from product sales and does not anticipate doing so in the foreseeable future[150]. - The company may face significant costs associated with commercializing any approved product candidates, including royalty and milestone payments to third parties[151]. - Salarius' ability to maintain liquidity is uncertain, raising substantial doubt about its ability to continue as a going concern[138]. - The failure to secure necessary financing or complete the Merger could lead to delays or abandonment of future clinical development plans[135]. - Salarius currently does not have the funds to advance its planned clinical trials, which are costly and time-consuming[154]. - The successful development of Salarius' product candidates is uncertain, as clinical trials may fail to demonstrate safety and efficacy[156]. - Salarius has not received approval from regulatory authorities to market any product candidate in any jurisdiction, which could impair its ability to generate revenue[167]. - Difficulty in enrolling patients for clinical trials is a common hurdle that could delay or prevent the trials[157]. - Salarius' product candidates may cause undesirable side effects, which could delay or prevent regulatory approval[155]. - Reliance on government funding for Salarius' programs may add uncertainty to its research and commercialization efforts[168]. - Salarius currently relies on third parties for clinical trials and manufacturing, which poses risks if these parties fail to comply with regulatory requirements or provide sufficient product quality[194][196]. - The company does not have the infrastructure to manufacture its clinical supplies internally and plans to continue relying on external vendors for production[197]. - Salarius' current manufacturing costs are not commercially feasible, which could adversely affect the viability of its product candidates[198]. Intellectual Property and Regulatory Risks - Salarius relies on a combination of patents, trade secret protection, and confidentiality agreements to protect its intellectual property, which is critical for its business[174]. - The patent position of Salarius is highly uncertain, and there is no assurance that its patent applications will result in issued patents[177]. - Salarius' commercial success is dependent on its ability to develop and market product candidates without infringing third-party patents, which may delay or prevent commercialization efforts[186]. - The company is aware of numerous third-party patents in the area of epigenetic enzyme inhibitors, which could affect its ability to manufacture or market its product candidates without obtaining licenses[187]. - Salarius may not have sufficient patent term protections for its product candidates, which could expose the company to competition from generic medications after patent expiration[180]. - The company relies on patent term extensions under the Hatch-Waxman Act, but there are no assurances that such extensions will be granted or for how long[181]. - Changes in U.S. patent law and recent Supreme Court rulings have created uncertainties regarding the value and enforceability of patents, potentially impacting Salarius' ability to protect its products[183]. Capital and Funding - The company is evaluating additional capital options, including the sale of equity securities and new collaborations, but cannot assure success in these endeavors[285]. - Salarius announced a merger agreement with Decoy Therapeutics, which involves a two-step merger process, with Decoy becoming a wholly owned subsidiary of Salarius[284]. - The company implemented multiple cost-savings plans to extend its expected cash runway into the later part of the second quarter of 2025[283]. - Grants receivable balances were $0 as of December 31, 2024 and December 31, 2023, with the Company receiving $1.5 million from the Cancer Prevention and Research Institute of Texas on February 15, 2023[314]. - The Company was awarded a grant of up to $16.1 million from CPRIT for the development of LSD 1 inhibitor, which expired during 2023[316]. - The Company entered into a Securities Purchase Agreement in May 2023, raising approximately $6 million from the sale of common stock and warrants[325]. - The company has a federal net operating loss carryforward of $39.8 million with an indefinite life, while R&D credits of $3.5 million will begin to expire in 2039[336]. Stock and Shareholder Information - The weighted-average number of common shares outstanding increased from 408,078 in 2023 to 962,210 in 2024, an increase of about 135.5%[274]. - Future sales of a significant number of shares could depress the market price of Salarius' common stock, impacting its ability to raise capital[199]. - The company does not intend to pay dividends in the foreseeable future, with returns to investors expected only from potential increases in stock price[200]. - As of December 31, 2024, approximately 560,839 warrants remained outstanding, a decrease from 1,355,598 in 2023[331]. - The Company has 9,844 shares remaining available for the grant of stock options under the 2015 Equity Incentive Plan as of December 31, 2024[333]. - The company granted 21,125 stock options in 2024, with an average exercise price of $3.02, compared to 0 options in 2023[334]. - The total unrecognized compensation cost related to unvested stock options was approximately $0.1 million as of December 31, 2024, down from $0.3 million in 2023[334].

Core Insights - Salarius Pharmaceuticals has resumed patient enrollment in a Phase 1/2 clinical trial for seclidemstat combined with azacitidine, targeting myelodysplastic syndrome (MDS) and chronic myelomonocytic leukemia (CMML) [1][4] - Seclidemstat is a novel oral reversible inhibitor of the LSD1 enzyme, showing promising results in preclinical models by reprogramming cancer cell differentiation and reducing tumor burden [2] - Interim results from the trial indicated a 43% overall response rate among 14 higher-risk MDS and CMML patients, with a median overall survival of 18.5 months [3] Clinical Trial Updates - The trial is being conducted at the University of Texas MD Anderson Cancer Center and is listed on clinicaltrials.gov [1] - The FDA had previously placed the trial under a partial clinical hold due to a serious adverse event, which has now been lifted [4][5] Merger and Strategic Developments - Salarius has signed a definitive agreement to merge with Decoy Therapeutics, which will create a new company focused on peptide conjugate therapeutics [6] - The merger is expected to enhance value through Decoy's innovative pipeline, which addresses unmet needs in respiratory infectious diseases and gastroenterology oncology [6][9] - The combined company plans to integrate Salarius' SP-3164 into a targeted peptide-based drug candidate while continuing the development of seclidemstat [7]

Market Performance - The Dow traded up 0.64% to 42,206.46 while the NASDAQ dipped 0.79% to 19,010.47 The S&P 500 fell 0.11% to 5,820.34 [1] - Energy shares rose by 1.6% while utilities shares tumbled by 1.8% [1] - European shares closed lower with the eurozone's STOXX 600 declining 0.55%, Germany's DAX 40 falling 0.41%, and France's CAC 40 dipping 0.30% [7] - Asian markets closed lower with China's Shanghai Composite Index falling 0.25%, Hong Kong's Hang Seng Index declining 1%, and India's BSE Sensex falling 1.36% [8] Commodities - Oil traded up 2.7% to $78.66 while gold traded down 1.4% at $2,677.60 Silver traded down 3.1% to $30.345 and copper rose 0.4% to $4.3195 [6] Equities Movement - Phio Pharmaceuticals Corp PHIO shares surged 426% to $6.43 after reporting promising results from its clinical study [10] - Salarius Pharmaceuticals Inc SLRX shares surged 159% to $4.04 following a merger agreement with Decoy Therapeutics [10] - Intra-Cellular Therapies Inc ITCI shares gained 34% to $127.42 after Johnson & Johnson agreed to acquire the company for $132.00 per share [10] - Moderna Inc MRNA shares dropped 20% to $33.67 after updating its 2025 revenue range to $1.5 billion to $2.5 billion, below analyst estimates [10] - Abercrombie & Fitch Co ANF shares fell 18% to $132.09 after issuing mixed guidance [10] - Comtech Telecommunications Corp CMTL shares fell 48% to $2.15 after announcing downbeat quarterly results [10] Economic Indicators - U S consumer inflation expectations for the year ahead remained unchanged at 3% in December [3][9]

Core Viewpoint - Salarius Pharmaceuticals and Decoy Therapeutics are merging to create a new company focused on developing peptide conjugate therapeutics for respiratory viruses and cancer, leveraging Decoy's IMPACT™ platform and non-dilutive funding of approximately $7 million [1][2][10]. Company Overview - Salarius Pharmaceuticals is a clinical-stage biopharmaceutical company with a focus on cancer therapies, including seclidemstat and SP-3164 [13]. - Decoy Therapeutics is a preclinical-stage biotechnology company utilizing machine learning and AI to design peptide conjugate drug candidates targeting unmet medical needs in respiratory viruses and GI cancers [12]. Merger Details - The merger will result in Decoy investors owning approximately 86% and Salarius stockholders owning about 14% of the combined company, subject to adjustments [10]. - The newly formed company will be named Decoy Therapeutics and will be led by Decoy's executive team [4][10]. Product Pipeline - Decoy's pipeline includes a pan-coronavirus antiviral and other broad-acting antivirals targeting flu, COVID-19, and respiratory syncytial virus (RSV), as well as peptide drug conjugates for GI cancers [8]. - The merger is expected to facilitate the rapid development of Decoy's peptide conjugate therapeutics, addressing significant unmet needs in respiratory infectious diseases and oncology [2][8]. Leadership and Management - The combined company will be led by Decoy's co-founders and key executives, with a Board of Directors comprising members from both companies [4][10]. - Rick Pierce, with over 25 years of experience in life sciences and investment banking, will serve as CEO [5][6]. Upcoming Milestones - Decoy plans to file an Investigational New Drug (IND) application with the FDA for its lead asset within the next 12 months [8]. - Data from ongoing clinical trials at MD Anderson Cancer Center for seclidemstat will also be reported during this period [9].

Financial Performance - The company reported an accumulated deficit of $80.5 million as of September 30, 2024, with cash and cash equivalents of $3.3 million[65]. - The net loss for the three months ended September 30, 2024, was $972,121, significantly lower than the $2,442,816 loss reported for the same period in 2023, a reduction of approximately 60%[78]. - For the nine months ended September 30, 2024, the net loss was $4,111,844, compared to $11,660,897 for the same period in 2023, indicating a decrease of about 65%[83]. - The company has incurred operating losses since inception and expects this trend to continue for the foreseeable future[91]. Expenses - Research and development expenses decreased to $137,234 for the three months ended September 30, 2024, compared to $1,036,354 for the same period in 2023, a reduction of approximately 87%[78]. - General and administrative expenses were $869,237 for the three months ended September 30, 2024, down from $1,495,831 in the same period in 2023, reflecting a decrease of about 42%[78]. - Net cash used in operating activities was $3.8 million for the nine months ended September 30, 2024, a decrease of approximately $7.6 million from the same period last year[95]. - The company anticipates continuing to incur operating losses and significant expenses while exploring strategic alternatives[91]. Cash Flow and Capital Needs - As of September 30, 2024, cash and cash equivalents totaled $3.3 million, with working capital at $2.9 million[88]. - The company anticipates needing substantial additional capital within the next several months to continue operations beyond the first half of 2025[68]. - Net cash provided by financing activities for the nine months ended September 30, 2024 was $1.2 million, compared to $6.8 million for the same period in 2023[96]. - The net decrease in cash and cash equivalents for the nine months ended September 30, 2024 was $2.6 million[94]. Strategic Alternatives - The ongoing Phase 1/2 clinical trial for seclidemstat for Ewing sarcoma has been closed to conserve cash while exploring strategic alternatives[63]. - The company is exploring strategic alternatives, including potential acquisitions, mergers, or divestitures, to maximize shareholder value[64]. - The company may consider various strategic transactions, including mergers or licensing arrangements, to fund future operations[89]. - The company has reduced expenditures and is exploring opportunities to extend its resources[90]. - If the company fails to raise capital or engage a strategic partner in the coming months, it may need to cease operations and liquidate assets[93]. Stockholder Information - The company sold 564,730 shares of common stock in an ATM offering, generating gross proceeds of $1.5 million during the three months ended September 30, 2024[65]. - Stockholders' equity balance was $2.9 million as of September 30, 2024[88]. - The company has no products approved for commercial sale and has not generated any revenue from product sales to date[65].

Financial Performance - The company reported a net loss of $1.4 million for the three months ended June 30, 2024, a decrease of 63.2% compared to a net loss of $3.9 million for the same period in 2023[78]. - The company has not generated any revenue from product sales and has incurred operating losses since inception[70]. - The company anticipates continuing to incur operating losses for the foreseeable future and is exploring strategic alternatives to enhance shareholder value[88]. - The company has incurred operating losses since inception and expects significant fluctuations in operating losses from quarter to quarter[92]. Research and Development - Research and development expenses decreased to $214,447 for the three months ended June 30, 2024, down from $2.4 million in the same period of 2023, reflecting a reduction of $2.1 million[79]. - Total research and development costs for the six months ended June 30, 2024, were $244,589, a decrease of approximately 89.9% from $2,418,955 in the same period of 2023[86]. - The ongoing Phase 1/2 clinical trial for seclidemstat in Ewing sarcoma was closed to conserve cash while exploring strategic alternatives[66]. - A clinical trial for seclidemstat in combination with azacitidine is on partial clinical hold due to a serious adverse event, with no new patients being enrolled[65]. - The company plans to continue supporting the clinical trial at MDACC while evaluating options for the future development of its drug candidates[66]. Cash Position and Financing - The company had an accumulated deficit of $79.5 million as of June 30, 2024, with cash and cash equivalents of $3.3 million[70]. - As of June 30, 2024, cash and cash equivalents totaled $3.3 million, with working capital at $2.3 million, indicating a decrease primarily due to cash used in operating activities[90]. - Net cash used in operating activities was $2.4 million for the six months ended June 30, 2024, a decrease of approximately $5.2 million from the same period in 2023[97]. - Net cash used by financing activities was $0.2 million for the six months ended June 30, 2024, compared to $7.0 million provided in the same period of 2023[98]. - The company believes its current cash position, along with additional proceeds from stock sales, is sufficient to fund operations into the first half of 2025[90]. - If the company fails to raise capital or engage a strategic partner in the coming months, it may be forced to cease operations and liquidate assets[94]. Strategic Alternatives - The company is exploring strategic alternatives, including potential acquisitions or partnerships, to maximize shareholder value[69]. - The company may consider various strategic transactions, including mergers or collaborations, to fund future operations and modulate liquidity needs[91]. - General and administrative expenses decreased to $1.3 million for the three months ended June 30, 2024, compared to $1.6 million for the same period in 2023[82]. - General and administrative expenses decreased to $2.8 million for the six months ended June 30, 2024, down from $3.3 million in the same period of 2023, reflecting cost-saving measures[87]. - The company sold 564,730 shares of common stock in July 2024, generating gross proceeds of $1.5 million[67].