Salarius Pharmaceuticals amends merger agreement to allow debt-for-equity exchange

Salarius Pharmaceuticals, Inc. (NASDAQ:SLRX), currently trading at $0.61 with a market capitalization of $1.31 million, announced Monday that it has entered into a third amendment to its previously disclosed merger agreement with Decoy Therapeutics Inc. The company’s stock has experienced significant pressure, declining over 75% in the past six months, according to InvestingPro data. The amendment, signed Friday, enables certain holders of Decoy’s non-convertible promissory notes to exchange their debt for shares of a newly created Series B Non-Voting Convertible Preferred Stock.

According to a statement based on the SEC filing, the Series B Preferred Stock will have terms identical to the Series A Preferred Stock, except for specific conversion and redemption provisions. InvestingPro analysis reveals that while Salarius maintains more cash than debt on its balance sheet, the company’s overall financial health score is rated as weak, with particularly concerning metrics in profitability and price momentum. The number of common shares underlying the Series B Preferred Stock will be determined by dividing the principal and interest owed on the exchanged promissory notes by the per-share offering price in a required minimum $6.0 million financing.

The amendment also adjusts the number of common shares underlying the Series A Preferred Stock to ensure that the pre-financing ownership percentages of legacy Salarius and Decoy stockholders remain at 7.6% and 92.4%, respectively, on a fully-diluted basis. The changes do not alter the previously disclosed relative ownership percentages.

The Series B Preferred Stock allows holders to convert their shares into common stock upon the later of stockholder approval and the company meeting Nasdaq’s initial listing standards. After one year from this conversion approval date, any remaining Series B Preferred Stock will be automatically converted into common shares at the prevailing conversion ratio.

Fifty percent of net proceeds from post-closing drawdowns or sales under Salarius’s At-the-Market Program with Ladenburg Thalmann & Co. Inc. or equity lines with C/M Capital Master Fund, LP must be used to redeem outstanding Series B Preferred Stock until fully redeemed. Salarius also retains the option to redeem any or all outstanding Series B Preferred Stock at any time after the merger, with seven days’ notice.

The redemption price per share of Series B Preferred Stock will be the lower of the public offering price times 1,000 or 1,000 times the weighted average effective price of any subsequent offering of at least $2.0 million.

The amendment requires the company to effectuate the note exchange agreements immediately following the merger closing. All other terms of the merger agreement remain unchanged.

This information is based on a press release statement included in a Form 8-K filing with the Securities and Exchange Commission. With the company’s next earnings report due in 18 days, investors seeking deeper insights into Salarius’s financial position and growth prospects can access comprehensive analysis and 11 additional key ProTips through InvestingPro’s advanced company research platform.

In other recent news, Salarius Pharmaceuticals is facing potential delisting from the Nasdaq Capital Market due to non-compliance with the minimum bid price requirement of $1.00 for 30 consecutive business days. The company, which had conducted a reverse stock split within the past year, does not qualify for the usual 180-day compliance period. Salarius has until April 30, 2025, to appeal the delisting decision. In a move to address these challenges, Salarius has amended its merger agreement with Decoy Therapeutics, adjusting the exchange ratio to issue approximately 17 million additional shares to Decoy stockholders. This amendment aims to secure necessary consents from Decoy noteholders and includes anti-dilution protections for Series A Preferred Stock holders. Additionally, Salarius shareholders have approved a reverse stock split and the issuance of more than 20% of the company’s outstanding shares under a securities purchase agreement. These developments reflect Salarius Pharmaceuticals’ efforts to navigate market shifts and regulatory requirements.

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