(Mark One) | |||||
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended | |||||
OR | |||||
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the Transition Period from to |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Large Accelerated Filer | ☐ | Accelerated Filer | ☐ | ☒ | Smaller Reporting Company | Emerging Growth Company | |||||||||||||||||||||||
Page | ||||||||
Item 1. | Financial Statements |
9/30/2022 | 12/31/2021 | ||||||||||
(Unaudited) | |||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Grants receivable from CPRIT | |||||||||||
Other assets | |||||||||||
Goodwill | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities and stockholders' equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses and other current liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (Note 5) | |||||||||||
Stockholders' equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Total stockholders' equity | |||||||||||
Total liabilities and stockholders' equity | $ | $ |
Three Months Ended September 30 | Nine Months Ended September 30 | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenue: | |||||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | |||||||||||||||||||||||
General and administrative | |||||||||||||||||||||||
Loss on impairment of goodwill | |||||||||||||||||||||||
Total operating expenses | |||||||||||||||||||||||
Loss before other income (expense) | ( | ( | ( | ( | |||||||||||||||||||
Change in fair value of warrant liability | |||||||||||||||||||||||
Interest income (expense), net | ( | ||||||||||||||||||||||
Loss from continuing operations | ( | ( | ( | ( | |||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Loss per common share — basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Weighted-average number of common shares outstanding — basic and diluted |
Nine Months Ended September 30 | |||||||||||
2022 | 2021 | ||||||||||
Operating activities | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Loss on impairment of goodwill | |||||||||||
Equity-based compensation expense | |||||||||||
In-process research and development technology | |||||||||||
Change in fair value of warrant liability | ( | ( | |||||||||
Changes in operating assets and liabilities: | |||||||||||
Grants receivable | |||||||||||
Prepaid expenses and other current assets | ( | ( | |||||||||
Accounts payable | ( | ||||||||||
Accrued expenses and other current liabilities | ( | ||||||||||
Net cash used in operating activities | ( | ( | |||||||||
Investing activities | |||||||||||
Purchase in-process research and development technology | ( | ||||||||||
Net cash used in investing activities | ( | ||||||||||
Financing activities | |||||||||||
Proceeds from issuance of equity securities, net | |||||||||||
Proceeds from warrants exercised for cash | |||||||||||
Payments on note payable | ( | ||||||||||
Net cash provided by financing activities | |||||||||||
Net (decrease) increase in cash, cash equivalents and restricted cash | ( | ||||||||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
Supplemental disclosure of cash flow information: | |||||||||||
Cash paid for interest | $ | $ | |||||||||
Non-cash investing and financing activities: | |||||||||||
Common stock issued for in-process research and development technology | $ | $ | |||||||||
Accrued issuance costs for public offering | $ | $ | |||||||||
Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Equity (Deficit) | ||||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||
Balance at December 31, 2020 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Issuance of equity securities, net | — | ||||||||||||||||||||||||||||
Warrants exercised for cash | — | ||||||||||||||||||||||||||||
Equity-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
Balance at March 31, 2021 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Equity-based compensation expense | — | ||||||||||||||||||||||||||||
Issuance of equity securities for services | — | — | — | — | |||||||||||||||||||||||||
Net loss | — | — | ( | ( | |||||||||||||||||||||||||
Balance at June 30, 2021 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Equity-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Issuance of equity securities, net | — | ||||||||||||||||||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
Balance at September 30, 2021 | ( | ||||||||||||||||||||||||||||
Balance at December 31, 2021 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Common stock issued for in-process research and development technology | — | ||||||||||||||||||||||||||||
Equity-based compensation expense | — | ||||||||||||||||||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
Balance at March 31, 2022 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Issuance of equity securities, net | — | ||||||||||||||||||||||||||||
Equity-based compensation expense | — | ||||||||||||||||||||||||||||
Issuance of equity securities for services | — | — | — | ||||||||||||||||||||||||||
Net loss | — | — | — | ( | ( | ||||||||||||||||||||||||
Balance at June 30, 2022 | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Equity-based compensation expense | — | — | — | ||||||||||||||||||||||||||
Issuance of equity securities for services | — | — | |||||||||||||||||||||||||||
Net loss | — | — | — | ( | ( |
Balance at September 30, 2022 | ( | ||||||||||||||||||||||||||||
September 30, 2022 | December 31, 2021 | ||||||||||
Prepaid clinical trial expenses | $ | $ | |||||||||
Prepaid insurance | |||||||||||
Other prepaid and current assets | |||||||||||
Total prepaid expenses and other current assets | $ | $ |
Description | Balance at December 31, 2021 | Change in Fair Value | Balance at September 30, 2022 | ||||||||||||||
Warrant liability | $ | $ | $ |
Nine Months Ended September 30 | |||||||||||
2022 | 2021 | ||||||||||
Risk-free interest rate | |||||||||||
Volatility | |||||||||||
Expected life (years) | |||||||||||
Expected dividend yield |
Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | ||||||||||||||||||||
Outstanding at December 31, 2020 | $ | $ | |||||||||||||||||||||
Granted | $ | ||||||||||||||||||||||
Exercised | |||||||||||||||||||||||
Forfeited | ( | ||||||||||||||||||||||
Expired | |||||||||||||||||||||||
Outstanding at September 30, 2021 | $ | $ | |||||||||||||||||||||
Exercisable at September 30, 2021 | $ | $ | |||||||||||||||||||||
Outstanding at December 31, 2021 | $ | $ | |||||||||||||||||||||
Granted | $ | ||||||||||||||||||||||
Exercised | |||||||||||||||||||||||
Forfeited | ( | ||||||||||||||||||||||
Expired | ( | ||||||||||||||||||||||
Outstanding at September 30, 2022 | $ | $ | |||||||||||||||||||||
Exercisable at September 30, 2022 | $ | $ | |||||||||||||||||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Three months ended September 30, | $ Change | |||||||||||||||||||
2022 | 2021 | |||||||||||||||||||
Grant revenue | $ | — | $ | — | $ | — | ||||||||||||||
Research and development expenses | 3,790,123 | 2,015,930 | 1,774,193 | |||||||||||||||||
General and administrative expenses | 1,832,032 | 1,730,730 | 101,302 | |||||||||||||||||
Loss on Impairment of Goodwill | 8,865,909 | — | 8,865,909 | |||||||||||||||||
Change in fair value of warrant liability | 335 | 9,073 | (8,738) | |||||||||||||||||
Interest income(expense), net | 78,272 | 487 | 77,785 | |||||||||||||||||
Net loss | $ | (14,409,457) | $ | (3,737,100) | $ | (10,672,357) |
SP-2577 | SP-3164 | ||||||||||||||||||||||
Research and development costs by candidates and by categories: | Three months ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Outsourced research and development costs | $ | 1,047,906 | $ | 1,128,499 | 982,646 | $ | — | ||||||||||||||||
Employee-related costs | 510,877 | 420,195 | 48,049 | — | |||||||||||||||||||
Manufacturing and laboratory costs | 136,751 | 467,236 | 1,063,894 | — | |||||||||||||||||||
Total research and development costs | $ | 1,695,534 | $ | 2,015,930 | $ | 2,094,589 | $ | — |
Nine months ended September 30, | $ Change | |||||||||||||||||||
2022 | 2021 | |||||||||||||||||||
Grant revenue | $ | — | $ | 1,840,216 | $ | (1,840,216) | ||||||||||||||
Research and development expenses | 11,151,170 | 5,852,887 | 5,298,283 | |||||||||||||||||
General and administrative expenses | 5,346,181 | 4,655,404 | 690,777 | |||||||||||||||||
Loss on Impairment of Goodwill | 8,865,909 | — | 8,865,909 | |||||||||||||||||
Change in fair value of warrant liability | 12,570 | 5,205 | 7,365 | |||||||||||||||||
Interest income(expense), net | 113,670 | (495) | 114,165 | |||||||||||||||||
Net loss | $ | (25,237,020) | $ | (8,663,365) | $ | (16,573,655) |
SP-2577 | SP-3164 | ||||||||||||||||||||||
Research and development costs by candidates and by categories: | Nine months ended September 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Outsourced research and development costs | $ | 3,698,339 | $ | 3,225,900 | $ | 1,441,875 | $ | — | |||||||||||||||
Employee-related costs | 1,648,713 | 1,138,833 | 136,815 | — | |||||||||||||||||||
Manufacturing and laboratory costs | 717,045 | 1,488,154 | 1,520,483 | — | |||||||||||||||||||
In process research and development costs | — | — | 1,987,900 | — | |||||||||||||||||||
Total research and development costs | $ | 6,064,097 | $ | 5,852,887 | $ | 5,087,073 | $ | — |
Nine months ended September 30, | |||||||||||
2022 | 2021 | ||||||||||
Net cash (used in) provided by in: | |||||||||||
Operating activities | $ | (12,881,535) | $ | (7,479,594) | |||||||
Investing activities | (1,500,000) | — | |||||||||
Financing activities | 1,987,375 | 28,264,707 | |||||||||
Net (decrease) increase in cash and cash equivalents | $ | (12,394,160) | $ | 20,785,113 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 6. | Exhibits |
Exhibit number | Description of Document | |||||||
3.1 | ||||||||
3.2 | ||||||||
3.3 | ||||||||
3.4 | ||||||||
31.1 | ||||||||
31.2 | ||||||||
32.1* | ||||||||
101.0 | The following materials from Salarius Pharmaceuticals, Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in XBRL (eXtensible Business Reporting Language):(i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Operations (iii) Unaudited Condensed Consolidated Statements of Stockholders' Equity (Deficit), (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Unaudited Consolidated Financial Statements. | |||||||
SALARIUS PHARMACEUTICALS, INC. | |||||||||||||||||
By: | /s/ David J. Arthur | ||||||||||||||||
David J. Arthur President and Chief Executive Officer (Principal Executive Officer) | |||||||||||||||||
By: | /s/ Mark J. Rosenblum | ||||||||||||||||
Mark J. Rosenblum Chief Financial Officer and Executive Vice President of Finance (Principal Financial Officer and Principal Accounting Officer) | |||||||||||||||||
Date: | November 10, 2022 |
/s/ David J. Arthur | ||||||||
David J. Arthur | ||||||||
November 10, 2022 | President and Chief Executive Officer (Principal Executive Officer) |
/s/ Mark J. Rosenblum | ||||||||
Mark J. Rosenblum | ||||||||
November 10, 2022 | Executive Vice President and Interim Chief Financial Officer (Principal Financial and Accounting Officer) |
/s/ David J. Arthur | ||||||||
David J. Arthur | ||||||||
November 10, 2022 | President and Chief Executive Officer (Principal Executive Officer) |
/s/ Mark J. Rosenblum | ||||||||
Mark J. Rosenblum | ||||||||
November 10, 2022 | Executive Vice President and Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollar per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollar per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 2,249,371 | 1,809,593 |
Common stock, shares outstanding (in shares) | 2,249,371 | 1,809,593 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Income Statement [Abstract] | ||||
Grant revenue | $ 0 | $ 0 | $ 0 | $ 1,840,216 |
Operating expenses: | ||||
Research and development | 3,790,123 | 2,015,930 | 11,151,170 | 5,852,887 |
General and administrative | 1,832,032 | 1,730,730 | 5,346,181 | 4,655,404 |
Loss on impairment of goodwill | 8,865,909 | 0 | 8,865,909 | 0 |
Total operating expenses | 14,488,064 | 3,746,660 | 25,363,260 | 10,508,291 |
Loss before other income (expense) | (14,488,064) | (3,746,660) | (25,363,260) | (8,668,075) |
Change in fair value of warrant liability | 335 | 9,073 | 12,570 | 5,205 |
Interest income (expense), net | 78,272 | 487 | 113,670 | (495) |
Loss from continuing operations | (14,409,457) | (3,737,100) | (25,237,020) | (8,663,365) |
Net loss | $ (14,409,457) | $ (3,737,100) | $ (25,237,020) | $ (8,663,365) |
Loss per common share, basic ( in dollar per share) | $ (6.41) | $ (2.09) | $ (12.13) | $ (5.41) |
Loss per common share, diluted ( in dollar per share) | $ (6.41) | $ (2.09) | $ (12.13) | $ (5.41) |
Weighted average number of shares outstanding, basic (in shares) | 2,247,753 | 1,792,190 | 2,081,023 | 1,602,565 |
Weighted average number of shares outstanding, diluted (in shares) | 2,247,753 | 1,792,190 | 2,081,023 | 1,602,565 |
Revenue from Contract with Customer, Product and Service [Extensible Enumeration] | Grant [Member] | Grant [Member] | Grant [Member] | Grant [Member] |
ORGANIZATION AND OPERATIONS |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND OPERATIONS | ORGANIZATION AND OPERATIONS Nature of Business Salarius Pharmaceuticals, Inc. (“Salarius” or the “Company”), together with its subsidiaries, Salarius Pharmaceuticals, LLC, Flex Innovation Group LLC, and TK Pharma, Inc., is a clinical-stage biopharmaceutical company focused on developing effective treatments for cancers with high, unmet medical need. Specifically, the Company is developing treatments for cancers caused by dysregulated gene expression, i.e., genes that are incorrectly turned on or off. The Company is developing two classes of drugs that address gene dysregulation: epigenetic inhibitors and targeted protein degraders. The Company's technologies have the potential to work in both liquid and solid tumors. The Company's current pipeline consists of two small molecule drugs: 1) seclidemstat (SP-2577), a targeted protein inhibitor and 2) SP-3164, a targeted protein degrader. The Company is located in Houston, Texas. Going Concern Salarius has no products approved for commercial sale, has not generated any revenue from product sales to date and has suffered recurring losses from operations since its inception. The lack of revenue from product sales to date and recurring losses from operations since its inception raise substantial doubt as to the Company's ability to continue as a going concern. The accompanying financial statements are prepared using accounting principles generally accepted in the United States applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should the Company be unable to continue as a going concern. Salarius will require substantial additional capital to fund its research and development expenses related to its oncology drug. Based on Salarius’ expected cash requirements, Salarius believes that there is substantial doubt that its existing cash and cash equivalents, will be sufficient to fund its operations through one year from the financial statements issuance date. The Company intends to obtain additional capital through the sale of equity securities in one or more offerings or through issuances of debt instruments, and may also consider new collaborations or selectively partnering its technology. However, the Company cannot provide any assurance that it will be successful in accomplishing any of its plans. The Company believes that its $16.8 million in cash and cash equivalents on hand as of September 30, 2022, is sufficient to fund its anticipated operations into the second half of 2023. Recent Developments Reverse Stock Split On October 14, 2022, the Company filed a Certificate of Amendment to the Company’s restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a 1-for-25 reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.0001 per share (the “Reverse Stock Split”) which became effective as of October 14, 2022. All historical share and per share amounts reflected throughout this report have been adjusted to reflect the Reverse Stock Split. Partial Clinical Hold On October 18, 2022, the Company voluntarily paused new patient enrollment in its Phase 1/2 trial of seclidemstat as a treatment for Ewing sarcoma and FET-rearranged sarcomas per protocol design. The pause in new patient enrollment was due to a metastatic FET-rearranged sarcoma patient death that was classified as a suspected unexpected serious adverse reaction (SUSAR). Upon review of the SUSAR and available information by the Company’s independent Safety Review Committee for the clinical trial, patients currently receiving seclidemstat treatment may continue treatment after consulting with their physician. During a conference call with the U.S. Food and Drug Administration (FDA) on November 1, 2022, the FDA informed the Company that the agency agreed with the voluntary enrollment pause and, as an administrative action, the FDA provided verbal notification that the Ewing sarcoma and FET-rearranged sarcoma trial was on partial clinical hold. While on partial clinical hold, FDA informed the Company that the pause in patient enrollment shall remain in place and patients currently receiving seclidemstat treatment may continue treatment after consulting with their physician. FDA’s clinical hold procedures provide the Company with an administrative process to work with the FDA to analyze the available data, adjust clinical protocols, and make other changes that may be needed in order to restart patient enrollment. Acquisition and Strategic Collaboration Agreement On January 12, 2022, the Company, entered into an Acquisition and Strategic Collaboration Agreement (the “ASCA”), with DeuteRx, LLC, a Delaware limited liability company (the “DeuteRx”), pursuant to which DeuteRx agreed to sell, and the Company agreed to purchase and assume from DeuteRx, all of DeuteRx’s rights, title, and interest in and to certain assets of DeuteRx, including SP-3164, DeuteRx’s intellectual property, information and data related to SP-3164, tangible materials or reagents related to SP-3164, goodwill, rights and claims, other than certain excluded assets (collectively, the “Purchased Assets”), all as more specifically set forth in the ASCA, and assume certain assumed liabilities, upon the terms and subject to the conditions set forth in the ASCA. The Aggregate purchase price paid under the ASCA was $2.0 million consisting of $1.5 million cash payment and the delivery of 40,000 shares of the Company's common stock, valued at $0.5 million. Total cost incurred in obtaining in-process research and development technology ("IPRD") that has no alternative future use are charged to research and development expense as acquired, and presented as investing activity cash outflow on the Statement of Cash Flow. In addition, the Company agreed to pay to DeuteRx potential future milestone payments upon the occurrence of an applicable Milestone Event (as defined in the ASCA) and potential future royalty payments. A member of the Company’s Board of Directors also serves as a consultant to DeuteRx and is employed by an affiliate of DeuteRx.
|
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP"). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standard Codification ("ASC") and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB"). Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Unaudited Interim Financial Information The accompanying interim financial statements are unaudited. These unaudited interim financial statements have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and accompanying notes for the year ended December 31, 2021 included elsewhere in the Company's Annual Report on Form 10-K filed with the SEC on March 25, 2022. In the opinion of management, the unaudited interim financial statements reflect all the adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, 2022 and the results of operations for the three and nine months ended September 30, 2022 and 2021. The interim results of operations are not necessarily indicative of the results that may occur for the full fiscal year. The December 31, 2021 balance sheet included herein was derived from the audited financial statements, but does not include all disclosures, including notes, required by GAAP for complete financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America as defined by the FASB ASC requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents Salarius considers all highly-liquid investments with original maturities of three months or less to be cash equivalents. Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no impairment charges related to long-lived assets for the three and nine months ended September 30, 2022 and 2021. Goodwill Goodwill is not amortized, but is tested at least annually for impairment at the reporting unit level. The Company has determined that the reporting unit is the single operating segment disclosed in its current financial statements. Additional impairment assessments may be performed on an interim basis if the Company encounters events or changes in circumstances that would indicate that, more likely than not, the carrying value of goodwill has been impaired. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. The Company utilizes the option to perform a qualitative assessment for its reporting unit and if the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company utilizes the two-step quantitative assessment. The Company’s qualitative assessment is sensitive to assumptions related to potential adverse events and circumstances, including current market trends in control premiums and involves judgement in determining comparable peer companies to include in the control premium evaluation. The Company recorded goodwill impairment loss of $8.9 million during the three and nine month ended September 30, 2022. Please refer to NOTE 9 for further discussion. Financial Instruments and Credit Risks Financial instruments that potentially subject the Company to credit risk include cash and cash equivalents and restricted cash. Cash is deposited in demand accounts in federally insured domestic institutions to minimize risk. Insurance is provided through the Federal Deposit Insurance Corporation (“FDIC”). Although the balances in these accounts exceed the federally insured limit from time to time, the Company has not incurred losses related to these deposits. Warrants The Company determines whether warrants should be classified as a liability or equity. For warrants classified as liabilities, the Company estimates the fair value of the warrants at each reporting period using Level 3 inputs with changes in fair value recorded in the Condensed Consolidated Statement of Operations within change in fair value of warrant liability. The estimates in valuation models are based, in part, on subjective assumptions, including but not limited to stock price volatility, the expected life of the warrants, the risk-free interest rate and the fair value of the common stock underlying the warrants, and could differ materially in the future. The Company will continue to adjust the fair value of the warrant liability at the end of each reporting period for changes in fair value from the prior period until the earlier of the exercise or expiration of the applicable warrant. For warrants classified as equity contracts, the Company allocates the transaction proceeds to the warrants and any other free-standing instruments issued in the transaction based on an allowable allocation method. Clinical Trial Accruals The Company’s preclinical and clinical trials are performed by third party contract research organizations (CROs) and/or clinical investigators, and clinical supplies are manufactured by contract manufacturing organizations (CMOs). Invoicing from these third parties may be monthly based upon services performed or based upon milestones achieved. The Company accrues these expenses based upon its assessment of the status of each clinical trial and the work completed, and upon information obtained from the CROs and CMOs. The Company’s estimates are dependent upon the timeliness and accuracy of data provided by the CROs and CMOs regarding the status and cost of the studies, and may not match the actual services performed by the organizations. This could result in adjustments to the Company’s research and development expenses in future periods. To date the Company has had no significant adjustments. Grants Receivable and Revenue Recognition Salarius’ source of revenue has been from a grant received from CPRIT. Grant revenue is recognized when qualifying costs are incurred and there is reasonable assurance that conditions of the grant have been met. Cash received from grants in advance of incurring qualifying costs is recorded as deferred revenue and recognized as revenue when qualifying costs are incurred. Research and Development Costs Research and development costs consist of expenses incurred in performing research and development activities, including pre-clinical studies and clinical trials. Research and development costs include salaries and personnel-related costs, consulting fees, fees paid for contract research services, the costs of laboratory equipment and facilities, license fees and other external costs. Research and development costs are expensed when incurred. Costs incurred in obtaining IPRD that has no alternative future use are charged to research and development expense as acquired, and presented as investing activity cash outflows on the Statement of Cash Flow. Equity-Based Compensation Salarius measures equity-based compensation based on the grant date fair value of the awards and recognizes the associated expense in the financial statements over the requisite service period of the award, which is generally the vesting period. The Company uses the Black-Scholes option valuation model to estimate the fair value of the stock-based compensation and incentive units. Assumptions utilized in these models including expected volatility calculated based on implied volatility from traded stocks of peer companies, dividend yield and risk-free interest rate. Additionally, forfeitures are accounted for in compensation cost as they occur. Loss Per Share Basic net loss per share is calculated by dividing the net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Since the Company was in a loss position for all periods presented, diluted net loss per share is the same as basic net loss per share for all periods, as the inclusion of all potential common shares outstanding is anti-dilutive. The number of anti-dilutive shares, consisting of common shares underlying (i) common stock options, (ii) stock purchase warrants, and (iii) rights entitling holders to receive warrants to purchase the Company's common shares, which have been excluded from the computation of diluted loss per share, was approximately 706,400 and 381,248 shares as of September 30, 2022 and 2021, respectively. Income Taxes Income taxes are recorded in accordance with FASB ASC Topic 740, Income Taxes ("ASC 740"), which provides for deferred taxes using an asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and the tax reporting basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized. The Company has evaluated available evidence and concluded that the Company may not realize the benefit of its deferred tax assets; therefore, a valuation allowance has been established for the full amount of the deferred tax assets. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of September 30, 2022 and December 31, 2021, the Company did not have any significant uncertain tax positions and no interest or penalties have been charged. The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company is subject to routine audits by taxing jurisdictions. Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement of all expected credit losses for financial assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Subsequent to the issuance of ASU 2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. This ASU does not change the core principle of the guidance in ASU 2016-13, instead these amendments are intended to clarify and improve operability of certain topics included within the credit losses guidance. The FASB also subsequently issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Derivatives and Hedging (Topic 815), and Financial Instruments (Topic 825), which did not change the core principle of the guidance in ASU 2016-13 but clarified that expected recoveries of amounts previously written off and expected to be written off should be included in the valuation account and should not exceed amounts previously written off and expected to be written off. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019 for public business entities, excluding smaller reporting companies. Early adoption is permitted. As a smaller reporting company, the guidance will be effective for the Company during the first quarter of 2023. The Company is in the process of assessing the impact adoption will have on its consolidated financial statements.
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GRANT RECEIVABLE FROM CPRIT |
9 Months Ended |
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Sep. 30, 2022 | |
Receivables [Abstract] | |
GRANT RECEIVABLE FROM CPRIT | GRANT RECEIVABLE FROM CPRITGrants receivable represents qualifying costs incurred where there is reasonable assurance that conditions of the grant have been met but the corresponding funds have not been received as of the reporting date. Grants receivable balances are $1.6 million at both September 30, 2022 and December 31, 2021. |
PREPAID EXPENSES AND OTHER CURRENT ASSETS |
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Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PREPAID EXPENSES AND OTHER CURRENT ASSETS | PREPAID EXPENSES AND OTHER CURRENT ASSETS Prepaid expenses and other current assets at September 30, 2022 and December 31, 2021 consisted of the following:
Prepaid insurance is mainly comprised of prepaid directors' and officers' insurance.
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COMMITMENTS AND CONTINGENCIES |
9 Months Ended |
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Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | COMMITMENTS AND CONTINGENCIES License Agreement with the University of Utah Research Foundation In 2011, the Company entered into a license agreement with the University of Utah, under which, the Company acquired an exclusive license to an epigenetic enzyme lysine specific demethylase 1 ("LSD1"). In exchange for the license, the Company issued 2% equity ownership in the Company based on a fully diluted basis at the effective date of the agreement subject to certain adjustments specified in the agreement, such as granted revenue sharing rights on any resulting products or processes to commence on first commercial sale, and milestone payments based upon regulatory approval of any resulting product or process as well as on the second anniversary of first commercial sale. Cancer Prevention and Research Institute of Texas In June 2016, the Company entered into a Cancer Research Grant Contract with CPRIT. The Company will retain ownership over any intellectual property developed under the contract ("Project Result"). With respect to non-commercial use of any Project Result, the Company agreed to grant to CPRIT a nonexclusive, irrevocable, royalty-free, perpetual, worldwide license with right to sublicense any necessary additional intellectual property rights to exploit all Project Results by CPRIT, other governmental entities and agencies of the State of Texas, and private or independent institutions of higher education located in Texas, for education, research and other non-commercial purposes. The Company is obligated to make revenue-sharing payments to CPRIT with respect to net sales of any product covered by the contract, up to a maximum repayment of a certain percentage of the aggregate amount paid to the Company by CPRIT under the CPRIT contract. The payments are determined as a percentage of net sales, which may be reduced if the Company is required to obtain a license from a third party to sell any such product. In addition, upon meeting the foregoing limitation on revenue-sharing payments, the Company agreed to make continued revenue-sharing payments to CPRIT of less than 1% of net sales. Lease Agreement The Company presently leases office space under operating lease agreements on a month to month basis.
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FAIR VALUE OF FINANCIAL INSTRUMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, are used to measure fair value: Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Significant unobservable inputs including Salarius’ own assumptions in determining fair value. The Company believes the recorded values of its financial instruments, including cash and cash equivalents, accounts payable and note payable approximate their fair values due to the short-term nature of these instruments. The following table sets forth a summary of changes in the fair value of Level 3 liabilities, the warrants issued in connection with the Company's merger with Flex Pharma in 2019 ("Flex Warrants"), which are measured at fair value on a recurring basis for the nine months ended September 30, 2022:
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STOCKHOLDERS' EQUITY |
9 Months Ended |
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Sep. 30, 2022 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS' EQUITY On October 14, 2022, the Company filed a Certificate of Amendment to the Company’s restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a 1-for-25 reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.0001 per share (the “Reverse Stock Split”) , which became effective on October 14, 2022. All historical share and per share amounts reflected throughout this report have been adjusted to reflect the Reverse Stock Split. Common Stock Issuances On January 12, 2022, the Company issued 40,000 shares of the Company's common stock, valued at $0.5 million to purchase in-process research and development technology SP-3164, please refer to NOTE 1 for further discussion. On April 22, 2022, the Company entered into a securities purchase agreement with certain institutional and accredited investors for the sale by the Company of approximately 373,577 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) at a purchase price of $6.25 per share. Concurrently, the Company also sold unregistered warrants exercisable for an aggregate of approximately 280,183 shares of Common Stock, which represents 75% of the shares of Common Stock sold, with an exercise price of $8.4975 per share. The transaction closed on April 26, 2022 with gross proceeds of $2.3 million before deducting certain fees due to the placement agent and other estimated transaction expenses. On February 5, 2021, the Company entered into an At the Market Offering Agreement (the “Sales Agreement”) with Ladenburg Thalmann & Co. Inc. (“Ladenburg”). Under the Sales Agreement the Company was able to issue and sell, from time to time, shares of its common stock having an aggregate offering price of up to $6.3 million (the “ATM Shares”) with Ladenburg acting as an agent for sales. Sales of the ATM Shares may be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended, including, without limitation, sales made directly on or through the NASDAQ Capital Market. No shares were issued under the Sales Agreement during the nine months ended September 30, 2022. During the nine months ended September 30, 2021, the Company issued approximately 128,569 shares under the Sales Agreement for gross proceeds of $6.7 million. On March 8, 2021, the Company completed a public offering of approximately 672,269 shares of its common stock at a price to the public of $34.2125 per share. Total gross proceeds from the offering were approximately $23.0 million prior to deducting underwriting discounts and commissions and offering expenses payable by the Company. Warrants Exercised for Cash The Company has five-year warrants outstanding that were issued in February 2020 and subsequently modified in December 2020 in connection with the issuance of additional inducement warrants. The warrants are exercisable at a price per share of $28.75. The inducement warrants expire on June 11, 2026 and are exercisable at a price per share of $29.55. The Company has 5.5 year warrants outstanding that were issued in April 2022, with an exercise price of $8.4975 per share. The warrants will be exercisable six months following the issuance date and will expire five and one-half years from the issuance date. During the nine months ended September 30, 2022, no warrants were exercised. During the nine months ended September 30, 2021, the Company issued approximately 51,942 common shares as a result of warrant exercises, and received cash proceeds of approximately $1.5 million. As of September 30, 2022, approximately 590,087 warrants remain outstanding, excluding Flex Warrants and Wedbush Warrants.
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EQUITY-BASED COMPENSATION |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY-BASED COMPENSATION | EQUITY-BASED COMPENSATION Equity Incentive Plans The Company has granted options to employees, directors, and consultants under the 2015 Equity Incentive Plan (the "2015 Plan"). The 2015 Plan provides for the grant of incentive stock options ("ISOs"), nonstatutory stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance-based stock awards and other stock-based awards. Additionally, the 2015 Plan provides for the grant of performance-based cash awards. ISOs may be granted only to the Company's employees. All other awards may be granted to the Company's employees, including officers, and to non-employee directors and consultants. As of September 30, 2022, there were approximately 45,468 shares remaining available for the grant of option awards under the 2015 Plan. During the nine-month periods ended September 30, 2022 and 2021, the Company awarded 51,360 and 3,160 stock options, respectively, to its employees and directors, pursuant to the plan described above. Stock options generally vest over to four years and have a contractual term of ten years. Stock options are valued using the Black-Scholes option pricing model and compensation cost is recognized based on the resulting value over the service period. Expected volatilities utilized in the model are based on implied volatilities from traded stocks of peer companies. Similarly, the dividend yield is based on historical experience and the estimate of future dividend yields. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The expected term of the options is based on the average period the stock options are expected to remain outstanding. The fair value of the option grants awarded during each of the nine-months periods ended September 30, 2022 and 2021 was $0.5 million and $0.1 million, respectively, which has been estimated with the following assumptions on the grant date.
The following table summarizes stock option activity for employees and non-employees for the nine months ended September 30, 2022 and 2021:
As of both September 30, 2022 and 2021, there was approximately $1.0 million of total unrecognized compensation cost related to unvested stock options. Total unrecognized compensation cost will be adjusted for future changes in employee and non-employee forfeitures, if any. The Company expects to recognize that cost over a remaining weighted-average period of 2.4 years.
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GOODWILL |
9 Months Ended |
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Sep. 30, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL | GOODWILLThe recent decline in the Company’s market capitalization, along with other qualitative considerations was determined to be a triggering event for potential goodwill impairment and accordingly, the Company performed the goodwill impairment analysis for the third quarter ended September 30, 2022. In determining the fair value utilized in the goodwill impairment assessment, the Company considers qualitative factors such as changes in strategy, cash flows, the regulatory environment, overall market conditions, as well as the market capitalization of the Company’s publicly traded common stock. The Company operates as a single reporting unit and estimates the fair value of its single reporting unit using the Company’s market capitalization plus an estimated control premium. Market capitalization is determined by multiplying the shares outstanding on the assessment date by the market price of the Company’s common stock. As a result of the impairment assessment during the three months ended September 30, 2022, the Company recorded an impairment charge to write off the entire balance of the goodwill of $8.9 million. The impairment charge was recorded in the consolidated statement of operations and comprehensive loss. |
SUBSEQUENT EVENTS |
9 Months Ended |
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Sep. 30, 2022 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTSThe Company’s management reviewed all material events through the date that the financial statements were issued for subsequent event disclosure consideration. Please refer to Recent Developments in NOTE 1. |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
9 Months Ended |
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Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP"). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standard Codification ("ASC") and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB").
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Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America as defined by the FASB ASC requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
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Cash and Cash Equivalents | Cash and Cash EquivalentsSalarius considers all highly-liquid investments with original maturities of three months or less to be cash equivalents. |
Impairment of Long-Lived Assets | Impairment of Long-Lived AssetsLong-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying value may not be recoverable. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. |
Goodwill | Goodwill Goodwill is not amortized, but is tested at least annually for impairment at the reporting unit level. The Company has determined that the reporting unit is the single operating segment disclosed in its current financial statements. Additional impairment assessments may be performed on an interim basis if the Company encounters events or changes in circumstances that would indicate that, more likely than not, the carrying value of goodwill has been impaired. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. The Company utilizes the option to perform a qualitative assessment for its reporting unit and if the Company concludes it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company utilizes the two-step quantitative assessment. The Company’s qualitative assessment is sensitive to assumptions related to potential adverse events and circumstances, including current market trends in control premiums and involves judgement in determining comparable peer companies to include in the control premium evaluation.
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Financial Instruments and Credit Risks | Financial Instruments and Credit Risks Financial instruments that potentially subject the Company to credit risk include cash and cash equivalents and restricted cash. Cash is deposited in demand accounts in federally insured domestic institutions to minimize risk. Insurance is provided through the Federal Deposit Insurance Corporation (“FDIC”). Although the balances in these accounts exceed the federally insured limit from time to time, the Company has not incurred losses related to these deposits.
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Warrants | Warrants The Company determines whether warrants should be classified as a liability or equity. For warrants classified as liabilities, the Company estimates the fair value of the warrants at each reporting period using Level 3 inputs with changes in fair value recorded in the Condensed Consolidated Statement of Operations within change in fair value of warrant liability. The estimates in valuation models are based, in part, on subjective assumptions, including but not limited to stock price volatility, the expected life of the warrants, the risk-free interest rate and the fair value of the common stock underlying the warrants, and could differ materially in the future. The Company will continue to adjust the fair value of the warrant liability at the end of each reporting period for changes in fair value from the prior period until the earlier of the exercise or expiration of the applicable warrant. For warrants classified as equity contracts, the Company allocates the transaction proceeds to the warrants and any other free-standing instruments issued in the transaction based on an allowable allocation method.
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Grants Receivable and Revenue Recognition | Grants Receivable and Revenue Recognition Salarius’ source of revenue has been from a grant received from CPRIT. Grant revenue is recognized when qualifying costs are incurred and there is reasonable assurance that conditions of the grant have been met. Cash received from grants in advance of incurring qualifying costs is recorded as deferred revenue and recognized as revenue when qualifying costs are incurred. |
Research and Development Costs | Research and Development Costs Research and development costs consist of expenses incurred in performing research and development activities, including pre-clinical studies and clinical trials. Research and development costs include salaries and personnel-related costs, consulting fees, fees paid for contract research services, the costs of laboratory equipment and facilities, license fees and other external costs. Research and development costs are expensed when incurred. Costs incurred in obtaining IPRD that has no alternative future use are charged to research and development expense as acquired, and presented as investing activity cash outflows on the Statement of Cash Flow.
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Equity-Based Compensation | Equity-Based Compensation Salarius measures equity-based compensation based on the grant date fair value of the awards and recognizes the associated expense in the financial statements over the requisite service period of the award, which is generally the vesting period. The Company uses the Black-Scholes option valuation model to estimate the fair value of the stock-based compensation and incentive units. Assumptions utilized in these models including expected volatility calculated based on implied volatility from traded stocks of peer companies, dividend yield and risk-free interest rate. Additionally, forfeitures are accounted for in compensation cost as they occur.
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Loss Per Share | Loss Per Share Basic net loss per share is calculated by dividing the net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Since the Company was in a loss position for all periods presented, diluted net loss per share is the same as basic net loss per share for all periods, as the inclusion of all potential common shares outstanding is anti-dilutive.
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Income Taxes | Income Taxes Income taxes are recorded in accordance with FASB ASC Topic 740, Income Taxes ("ASC 740"), which provides for deferred taxes using an asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and the tax reporting basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized. The Company has evaluated available evidence and concluded that the Company may not realize the benefit of its deferred tax assets; therefore, a valuation allowance has been established for the full amount of the deferred tax assets. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of September 30, 2022 and December 31, 2021, the Company did not have any significant uncertain tax positions and no interest or penalties have been charged. The Company's practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company is subject to routine audits by taxing jurisdictions.
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Pronouncements Not Yet Adopted | Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires the measurement of all expected credit losses for financial assets including trade receivables held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Subsequent to the issuance of ASU 2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. This ASU does not change the core principle of the guidance in ASU 2016-13, instead these amendments are intended to clarify and improve operability of certain topics included within the credit losses guidance. The FASB also subsequently issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Derivatives and Hedging (Topic 815), and Financial Instruments (Topic 825), which did not change the core principle of the guidance in ASU 2016-13 but clarified that expected recoveries of amounts previously written off and expected to be written off should be included in the valuation account and should not exceed amounts previously written off and expected to be written off. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019 for public business entities, excluding smaller reporting companies. Early adoption is permitted. As a smaller reporting company, the guidance will be effective for the Company during the first quarter of 2023. The Company is in the process of assessing the impact adoption will have on its consolidated financial statements.
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PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets at September 30, 2022 and December 31, 2021 consisted of the following:
|
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Changes in Fair Value of Level 3 Liabilities | The following table sets forth a summary of changes in the fair value of Level 3 liabilities, the warrants issued in connection with the Company's merger with Flex Pharma in 2019 ("Flex Warrants"), which are measured at fair value on a recurring basis for the nine months ended September 30, 2022:
|
EQUITY-BASED COMPENSATION (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value Assumptions |
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Summary of Stock Option Activity | The following table summarizes stock option activity for employees and non-employees for the nine months ended September 30, 2022 and 2021:
|
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Accounting Policies [Abstract] | ||||
Impairment charges of long-lived assets | $ 0 | $ 0 | $ 0 | $ 0 |
Loss on impairment of goodwill | $ 8,865,909 | $ 0 | $ 8,865,909 | $ 0 |
Antidilutive securities excluded from computation of earnings per share (in shares) | 706,400 | 381,248 |
GRANT RECEIVABLE FROM CPRIT (Details) - USD ($) $ in Millions |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Receivables [Abstract] | ||
Grants receivable from CPRIT | $ 1.6 | $ 1.6 |
PREPAID EXPENSES AND OTHER CURRENT ASSETS - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid clinical trial expenses | $ 11,185 | $ 97,557 |
Prepaid insurance | 885,974 | 678,672 |
Other prepaid and current assets | 248,653 | 172,986 |
Total prepaid expenses and other current assets | $ 1,145,812 | $ 949,215 |
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - Level 3 - Recurring |
9 Months Ended |
---|---|
Sep. 30, 2022
USD ($)
| |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Balance at December 31, 2021 | $ 14,518 |
Change in Fair Value | 12,570 |
Balance at September 30, 2022 | $ 1,948 |
EQUITY-BASED COMPENSATION - Narrative (Details) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of stock options granted (in shares) | 51,360 | 3,160 |
Fair value | $ 0.5 | $ 0.1 |
Unrecognized compensation cost, options | $ 1.0 | $ 1.0 |
Employee Stock Option | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock options, contractual term | 10 years | |
Unrecognized compensation cost, recognition period | 2 years 4 months 24 days | |
Minimum | Employee Stock Option | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period | 1 year | |
Maximum | Employee Stock Option | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period | 4 years | |
2015 Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares remaining available for grant of stock awards (in shares) | 45,468 |
EQUITY-BASED COMPENSATION - Schedule of Fair Value Assumptions (Details) |
9 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free interest rate, minimum | 1.62% | 0.93% |
Risk-free interest rate, maximum | 1.70% | 1.00% |
Volatility, minimum | 125.19% | 130.44% |
Volatility, maximum | 126.42% | 133.35% |
Expected life (years) | 6 years | |
Expected dividend yield | 0.00% | 0.00% |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected life (years) | 5 years | |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected life (years) | 6 years |
GOODWILL (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Loss on impairment of goodwill | $ 8,865,909 | $ 0 | $ 8,865,909 | $ 0 |
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