Salarius Pharmaceuticals(SLRX) - 2025 Q2 - Quarterly Report

Special Note Regarding Forward-Looking Statements This section highlights that forward-looking statements are subject to risks and uncertainties, including those related to the proposed merger, going concern status, and Nasdaq compliance - Forward-looking statements involve risks and uncertainties, including the proposed merger with Decoy Therapeutics, the company's ability to continue as a going concern, and Nasdaq listing compliance[8][9][10][11][12][14] PART I. Financial Information This part presents the company's unaudited financial statements, management's discussion, market risk disclosures, and internal controls Item 1. Financial Statements (Unaudited) This section presents Salarius Pharmaceuticals' unaudited condensed consolidated financial statements, including balance sheets, operations, cash flows, and equity, with explanatory notes Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates Condensed Consolidated Balance Sheet Highlights | Metric | June 30, 2025 (Unaudited) | December 31, 2024 (Audited) | Change | | :-------------------------- | :------------------------ | :-------------------------- | :----- | | Cash and cash equivalents | $794,886 | $2,434,528 | $(1,639,642) | | Total current assets | $1,359,578 | $2,987,562 | $(1,627,984) | | Total assets | $1,392,778 | $3,022,974 | $(1,630,196) | | Total liabilities | $2,222,502 | $1,511,279 | $711,223 | | Total stockholders' equity (deficit) | $(829,724) | $1,511,695 | $(2,341,419) | Condensed Consolidated Statements of Operations This section outlines the company's financial performance over periods, including research and development, general and administrative expenses, and net loss Condensed Consolidated Statements of Operations Highlights | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Research and development | $116,383 | $214,447 | $191,915 | $457,449 | | General and administrative | $849,182 | $1,253,070 | $2,492,345 | $2,781,683 | | Total operating expenses | $965,565 | $1,467,517 | $2,684,260 | $3,239,132 | | Net loss | $(957,825) | $(1,424,433) | $(2,667,358) | $(3,139,723) | | Loss per common share (basic and diluted) | $(0.45) | $(2.37) | $(1.41) | $(5.62) | Condensed Consolidated Statements of Cash Flows This section details the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows Highlights | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(2,044,011) | $(2,426,147) | | Net cash provided by (used in) financing activities | $404,369 | $(200,940) | | Net decrease in cash and cash equivalents | $(1,639,642) | $(2,627,087) | | Cash and cash equivalents at end of period | $794,886 | $3,272,823 | Condensed Consolidated Statements of Stockholders' Equity (Deficit) This section tracks changes in the company's stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit Stockholders' Equity (Deficit) Changes | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------- | :---------------- | :-------------- | | Common Stock (Shares) | 1,441,157 | 2,127,286 | | Common Stock (Amount) | $144 | $213 | | Additional Paid-In Capital | $83,435,169 | $83,761,039 | | Accumulated Deficit | $(81,923,618) | $(84,590,976) | | Total Stockholders' Equity (Deficit) | $1,511,695 | $(829,724) | - A 1-for-8 reverse stock split was effected on June 14, 2024, and all historical share and per share amounts have been retroactively adjusted[33][34] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and additional information supporting the condensed consolidated financial statements NOTE 1. Organization and Operations This note describes Salarius's business as a clinical-stage biopharmaceutical company, its proposed merger with Decoy Therapeutics, and going concern uncertainties - Salarius is a clinical-stage biopharmaceutical company developing two small molecule drugs: SP-3164 (targeted protein degrader) and seclidemstat (SP-2577) (targeted protein inhibitor) for cancer treatment[29] - The company entered into a Merger Agreement with Decoy Therapeutics Inc. on January 10, 2025, to combine operations[30] - Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses and no product revenue, requiring additional capital or potential dissolution if the merger is not consummated[31][32] - A 1-for-8 reverse stock split was effected on June 14, 2024, retroactively adjusting all historical share and per share amounts[33][34] NOTE 2. Basis of Presentation and Significant Accounting Policies This note outlines the basis for preparing the financial statements and the key accounting policies applied, including estimates and revenue recognition - Unaudited condensed consolidated financial statements are prepared in conformity with GAAP and SEC rules for interim financial information, not including all disclosures required for complete annual statements[35][37] - Key accounting policies include consolidating wholly-owned subsidiaries, using estimates, classifying highly liquid investments with original maturities of three months or less as cash equivalents, and assessing warrants for liability or equity classification[36][38][39][41] - Research and development costs are expensed as incurred, and equity-based compensation is measured at grant date fair value and recognized over the vesting period using the Black-Scholes model[43][44][45] - Basic and diluted net loss per share are the same due to the company's loss position, and a full valuation allowance is established against net deferred tax assets due to uncertainty of realization[46][48] NOTE 3. Prepaid Expenses and Other Current Assets This note details the composition of prepaid expenses and other current assets, including insurance and deferred offering costs Prepaid Expenses and Other Current Assets | Category | June 30, 2025 | December 31, 2024 | | :------------------------------ | :-------------- | :---------------- | | Insurance | $28,310 | $287,785 | | Deferred offering cost | $509,931 | $221,580 | | Other prepaid and current assets | $26,451 | $43,669 | | Total | $564,692 | $553,034 | - The note payable for directors' and officers' insurance, which was $0.2 million at December 31, 2024, was $0 million at June 30, 2025[50] NOTE 4. Commitments and Contingencies This note discloses the company's contractual obligations, including a Cancer Research Grant Contract and a license agreement with the University of Utah - The company has a Cancer Research Grant Contract with CPRIT (up to $16.1 million, expired 2023) with ongoing revenue-sharing payment obligations on net sales of covered products[51][53] - A 2011 license agreement with the University of Utah grants exclusive rights to LSD1, requiring 2% equity ownership, revenue sharing on commercial sales, and milestone payments[54] NOTE 5. Fair Value of Financial Instruments This note explains the fair value measurement of financial instruments and the hierarchy used for valuation inputs - Recorded values of financial instruments (cash, accounts payable, notes payable) approximate fair values due to their short-term nature[55] - Fair value hierarchy uses Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (significant unobservable inputs)[60] NOTE 6. Stockholders' Equity This note details changes in stockholders' equity, including common stock sales, warrant activity, and the impact of a reverse stock split - During the six months ended June 30, 2025, the company sold 399,291 shares of common stock through an ATM offering for $0.4 million and 286,772 shares under an ELOC agreement for $0.7 million[56][57] - Outstanding warrants decreased significantly from approximately 1,250,850 at June 30, 2024, to 86,661 at June 30, 2025[64] - A Series A-1 Common Stock Purchase Warrant for 454,546 shares was canceled on January 10, 2025, in exchange for $350,000 cash[62][105] NOTE 7. Equity-Based Compensation This note describes the company's equity incentive plan, stock option activity, and unrecognized compensation costs - The 2015 Equity Incentive Plan expired in January 2025, with no shares remaining for future awards[66] Stock Option Activity Highlights | Metric | June 30, 2025 | June 30, 2024 | | :----------------------------------- | :------------ | :------------ | | Stock options granted (6 months) | 0 | 21,125 | | Outstanding at period end (shares) | 31,554 | 31,554 | | Weighted Average Exercise Price (Outstanding) | $66.75 | $66.75 | | Exercisable at period end (shares) | 28,896 | 8,692 | - Unrecognized compensation cost related to unvested stock options was approximately $0.1 million as of June 30, 2025, to be recognized over a weighted-average period of 0.35 years[70] NOTE 8. Segment Reporting This note clarifies that the company operates as a single segment focused on cancer treatment development, with no revenue-generating products - The company operates as one operating and reportable segment, focused on developing cancer treatments with SP-3164 and SP-2577, and has no revenue-generating products[72][73] Segment Expenses and Net Loss | Expense Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Research and development: SP-3164 | $8,406 | $125,974 | $29,443 | $212,860 | | Research and development: SP-2577 | $107,977 | $88,473 | $162,472 | $244,589 | | General and administrative: Professional services and Consulting | $515,414 | $764,432 | $1,749,109 | $1,332,897 | | General and administrative: Personnel cost | $180,933 | $247,539 | $432,041 | $1,088,980 | | General and administrative: Facility cost | $152,835 | $241,099 | $311,195 | $359,806 | | Net loss | $957,825 | $1,424,432 | $2,667,358 | $3,139,723 | NOTE 9. Subsequent Event This note reports events occurring after the balance sheet date, including further equity sales and Nasdaq delisting notices - Subsequent to June 30, 2025, the company issued 5,518,308 shares of common stock for $3.8 million under the ELOC Agreement[75] - On April 23, 2025, Salarius received a Nasdaq delisting notice for non-compliance with the Minimum Bid Price Requirement ($1.00 per share) and the Equity Standard ($2.5 million stockholders' equity)[76][77] - Nasdaq granted an extension until mid-August 2025 for the Equity Standard and late August 2025 for the Minimum Bid Price Requirement, contingent on achieving scheduled milestones[81] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, condition, and outlook, emphasizing the clinical-stage focus, recurring losses, capital needs, merger developments, and Nasdaq compliance challenges Overview This overview describes Salarius as a clinical-stage biopharmaceutical company, its accumulated deficit, and the substantial doubt regarding its going concern ability - Salarius is a clinical-stage biopharmaceutical company focused on developing cancer treatments, with two small molecule drugs in its pipeline: SP-3164 and seclidemstat (SP-2577)[85] - The company has an accumulated deficit of $84.6 million as of June 30, 2025, and has never been profitable, with no product revenue to date[86] - Substantial doubt exists about the company's ability to continue as a going concern, requiring significant additional capital to fund operations beyond Q2 2026; failure to raise capital could lead to cessation of operations[88][89][91] - As of the filing date, cash and cash equivalents are approximately $3.4 million, and stockholders' equity is above $2.5 million, following recent equity sales[86] Recent Developments This section details recent corporate actions, including equity sales, amendments to the Decoy Therapeutics merger agreement, and Nasdaq delisting notices - In July 2025, Salarius issued 5,463,671 common shares for $3.5 million under the ELOC Agreement, and stockholders approved removing the ELOC Exchange Cap and a reverse stock split[93][94][95] - The merger agreement with Decoy Therapeutics has been amended multiple times, resulting in Salarius's legacy stockholders retaining 7.6% of the combined company (down from 14.1%) and introducing post-closing anti-dilution price protection for preferred stockholders[96][99][101][102][103][104] - Nasdaq issued delisting notices for non-compliance with the Minimum Bid Price Requirement and the Equity Standard; an appeal was granted, extending compliance deadlines to mid-August 2025 for Equity Standard and late August 2025 for Minimum Bid Price Requirement[106][107][111] Results of Operations This section analyzes the company's operating expenses and net loss, comparing performance across periods and explaining key drivers of change Operating Expenses and Net Loss (YoY Comparison) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | | :-------------------------- | :--------------------------- | :--------------------------- | :--------- | :--------------------------- | :--------------------------- | :--------- | | Research and development | $116,383 | $214,447 | $(98,064) | $191,915 | $457,449 | $(265,534) | | General and administrative | $849,182 | $1,253,070 | $(403,888) | $2,492,345 | $2,781,683 | $(289,338) | | Net loss | $(957,825) | $(1,424,433) | $(466,608) | $(2,667,358) | $(3,139,723) | $(472,365) | - The decrease in R&D expenses is primarily due to a cost-savings plan implemented in Q3 2023, including a significant reduction in operating personnel and curtailment of sponsored clinical trials[115][120] - G&A expenses decreased due to lower personnel, insurance, and facility costs, partially offset by higher professional expenses related to the merger[117][122][123] Liquidity and Capital Resources This section assesses the company's cash position, capital needs, and ability to fund operations, highlighting the going concern risk - The company has an accumulated deficit of $84.6 million as of June 30, 2025, and has never generated revenue from product sales[125] Cash Flow Summary | Cash Flow Category | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :----------------------------- | :----------------------------- | | Operating activities | $(2,044,011) | $(2,426,147) | | Financing activities | $404,369 | $(200,940) | | Net decrease in cash | $(1,639,642) | $(2,627,087) | - Cash and cash equivalents were $0.8 million at June 30, 2025, but increased to approximately $3.4 million as of the report date due to $3.8 million in July 2025 ELOC sales, expected to fund operations into Q2 2026[127][128] - Substantial doubt about the company's ability to continue as a going concern persists, and failure to close the merger or secure additional capital could lead to a wind-down of operations[126][128] Critical Accounting Policies and Estimates This section discusses the significant judgments and assumptions management uses in preparing the financial statements - Financial statements require management estimates and assumptions in accordance with GAAP[132] - No material changes to critical accounting policies have occurred since the Annual Report on Form 10-K filed on March 21, 2025[133] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Salarius Pharmaceuticals is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[134] Item 4. Controls and Procedures Management evaluated the effectiveness of disclosure controls and procedures, concluding they were effective, with no significant changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of the reporting date - Disclosure controls and procedures were evaluated as effective at a reasonable assurance level as of June 30, 2025[136] Changes in Internal Control over Financial Reporting This section reports that no significant changes in internal control over financial reporting occurred during the period - No significant changes in internal control over financial reporting occurred during the three months ended June 30, 2025[137] PART II. Other Information This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, and exhibits Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings but may become involved in ordinary course business litigation in the future - The company is not a party to any material legal proceedings as of the report date[139] Item 1A. Risk Factors This section highlights risks including potential dissolution if the Decoy Therapeutics merger and financing fail, and Nasdaq delisting due to non-compliance with minimum bid price and equity standards - Failure to complete the Qualified Financing and the merger with Decoy Therapeutics in the near term would likely lead to Salarius's dissolution and liquidation, with no assurances of distributions to stockholders[141][143][145][146] - The company's common stock is subject to delisting from Nasdaq due to non-compliance with the minimum bid price and stockholders' equity requirements, which would seriously harm liquidity and ability to raise capital[150][151][152] - Delisting could result in trading on less recognized markets (e.g., 'Pink Sheets'), reduced liquidity, lower market price, and limited access to capital, potentially leading to a 'penny stock' designation[157][158] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report in this period - No unregistered sales of equity securities or use of proceeds to report[159] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report in this period - No defaults upon senior securities to report[159] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[160] Item 5. Other Information No other information is reported under this item - No other information to report[161] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including merger agreement amendments, corporate documents, certifications, and XBRL data - Exhibits include multiple amendments to the Agreement and Plan of Merger with Decoy Therapeutics, corporate organizational documents, certifications (e.g., SOX 302, 906), and XBRL financial data[163] SIGNATURES This section provides the official signatures of the company's principal executive and financial officers, certifying the report - The report was signed by David J. Arthur (President and CEO) and Mark J. Rosenblum (CFO and EVP of Finance) on August 12, 2025[169]