Salarius Pharmaceuticals Inc.
06/11/2025 | Press release | Distributed by Public on 06/11/2025 06:39
Material Agreement (Form 8-K)
Item 1.01. Entry into Material Definitive Agreement.
As previously disclosed in a Current Report on Form 8-K filed by Salarius Pharmaceuticals, Inc. (the "Company") on January 13, 2025, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Decoy Therapeutics MergerSub I, Inc., a Delaware corporation and a wholly owned subsidiary of the Company ("First Merger Sub"), Decoy Therapeutics MergerSub II, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company ("Second Merger Sub"), and Decoy Therapeutics Inc. ("Decoy"). Pursuant to the Merger Agreement, wholly owned subsidiaries of the Company will merge with Decoy (the "Merger"), with the Decoy business emerging as a wholly owned subsidiary of the Company. The closing of the Merger (the "Closing") is conditioned upon, among other things, minimum proceeds from offerings of at least $6.0 million (collectively, the "Qualified Financing") and the continued listing of the Company's common stock ("Common Stock") on Nasdaq (as the term is defined below). The Merger Agreement was subsequently amended on March 28, 2025 ("Amendment No. 1"), pursuant to which the parties agreed to eliminate the adjustment based on the relative balance sheet cash available to the Company and Decoy at Closing and to effectively fix the relative ownership percentages of the combined Company, with the Company's legacy stockholders retaining 14.1% and Decoy's legacy stockholders retaining 85.9% of the combined Company following the completion of the Merger.
On June 10, 2025, the Company entered into a Second Amendment to the Merger Agreement ("Amendment No. 2") to address significant changes in market conditions and secure necessary consents from Decoy noteholders for the completion of the transaction.
Since the execution of the original Merger Agreement in January 2025 and following the execution of Amendment No. 1, the Company's Common Stock price has experienced substantial deterioration, materially affecting the relative valuations underlying the exchange ratio. As a result, the parties have agreed to reduce the Company's relative valuation from $4.6 million at the time of the original Merger Agreement to $2.31 million. This reduction results in a change in the exchange ratio such that the number of shares of Common Stock underlying the Company's Series A Preferred Stock to be issued to Decoy stockholders at Closing will be increased by approximately 17 million shares. Accordingly, under Amendment No. 2, the relative ownership percentages of the combined company will result in Company legacy stockholders retaining 7.6% and Decoy's legacy stockholders retaining 92.4% of the combined company following the completion of the Merger, in each case calculated on a fully-diluted basis, and before taking into account the dilutive effects of the Qualified Financing and any issuance of shares pursuant to such Qualified Financing after June 10, 2025, the date of Amendment No. 2.
In addition, Amendment No. 2 revises the form of Certificate of Designation (the "Certificate of Designation") for Series A Non-Voting Convertible Preferred Stock (the "Series A Preferred Stock") that will be filed upon Closing to include post-closing anti-dilution price protection for holders of Series A Preferred Stock whereby if, following completion of the Qualified Financing and the Merger, the Company conducts any subsequent dilutive financing of at least $2 million at a weighted average effective price per share below the offering price offered to the public in the Qualified Financing, the conversion ratio will be reset to provide additional shares to preferred stockholders in an amount proportional to the dilution caused by such offering, with such protection applying for one year from issuance. The revised Certificate of Designation also provides that the Series A Preferred Stock will not be convertible until the combined company meets the relevant initial listing standards of Nasdaq and contains a provision designed to prevent holders of Series A Preferred Stock from engaging in short sales of the Company's common stock. As provided in the original Certificate of Designation, the Series A Preferred Stock will also not convert until the Company obtains stockholder approval pursuant to Nasdaq listing rule 5635.
Except as modified by Amendment No. 2, the terms of the Merger Agreement and Amendment No. 1 remain in full force and effect.
The foregoing descriptions of Amendment No. 2 and the Certificate of Designation are not complete and are qualified in their entirety by reference to the full text of Amendment No. 2 and the Certificate of Designation, copies of which are filed as Exhibit 2.1 and Exhibit 2.2, respectively, to this Current Report on Form 8-K and are incorporated by reference herein.
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