COVER PAGE
COVER PAGE - shares | 3 Months Ended | |
Mar. 31, 2020 | May 05, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | SALARIUS PHARMACEUTICALS, INC. | |
Entity Central Index Key | 0001615219 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q/A | |
Document Period End Date | Mar. 31, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Common Stock, Shares Outstanding | 13,650,752 | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Title of 12(b) Security | Common Stock, $ 0.0001 par value | |
Trading Symbol | SLRX | |
Security Exchange Name | NASDAQ | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity File Number | 001-36812 | |
Entity Incorporation, State or Country Code | DE | |
Entity Address, Address Line One | 2450 Holcombe Blvd | |
Entity Address, Address Line Two | Suite J 608 | |
Entity Address, City or Town | Houston | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 77021 | |
Entity Tax Identification Number | 46-5087339 | |
City Area Code | 346 | |
Local Phone Number | 772-0346 | |
Entity Interactive Data Current | Yes |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 9,646,940 | $ 3,738,900 |
Grants receivable from CPRIT | 591,129 | 0 |
Prepaid expenses and other current assets | 646,360 | 955,899 |
Total current assets | 10,884,429 | 4,694,799 |
Property and equipment, net | 21,889 | 25,016 |
Goodwill | 8,865,909 | 8,865,909 |
Other assets | 293,147 | 308,674 |
Total assets | 20,065,374 | 13,894,398 |
Current liabilities: | ||
Accounts payable | 979,823 | 1,790,966 |
Accrued expenses and other current liabilities | 795,567 | 160,783 |
Note payable | 252,679 | 502,332 |
Deferred revenue | 0 | 541,701 |
Warrant liability | 34,692 | 317,762 |
Total liabilities | 2,062,761 | 3,313,544 |
Commitments and Contingencies | ||
Stockholders' equity (deficit): | ||
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; 468,694 issued and outstanding | 47 | 0 |
Common stock, $0.0001 par value; 100,000,000 shares authorized; 13,650,838 and 4,519,533 shares issued at March 31, 2020 and December 31, 2019, and 13,645,677 and 4,511,174 shares outstanding at March 31, 2020 and December 31, 2019, respectively | 1,364 | 451 |
Additional paid-in capital | 32,161,718 | 22,657,103 |
Accumulated deficit | (14,160,516) | (12,076,700) |
Total stockholders' equity | 18,002,613 | 10,580,854 |
Total liabilities and stockholders' equity | $ 20,065,374 | $ 13,894,398 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 468,694 | 468,694 |
Preferred stock, shares outstanding | 468,694 | 468,694 |
Common stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 13,650,838 | 4,519,533 |
Common stock, shares outstanding | 13,645,677 | 4,511,174 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Statement [Abstract] | ||
Grant revenue | $ 1,132,830 | $ 655,635 |
Operating expenses: | ||
Research and development | 1,643,371 | 699,929 |
General and administrative | 1,859,017 | 1,488,490 |
Total operating expenses | 3,502,388 | 2,188,419 |
Loss before other income (expense) | (2,369,558) | (1,532,784) |
Change in fair value of warrant liability | 283,070 | 0 |
Interest income net | 2,672 | 10,708 |
Net loss | $ (2,083,816) | $ (1,522,076) |
Net loss per share (usd per share) | $ (0.22) | $ (0.64) |
Weighted-average number of common shares outstanding — basic and diluted | 9,534,842 | 2,372,940 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Operating activities | ||
Net loss | $ (2,083,816) | $ (1,522,076) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation, amortization and impairment | 4,233 | 114,707 |
Equity-based compensation expense | 38,409 | 35,407 |
Change in fair value of warrant liability | (283,070) | 0 |
Changes in operating assets and liabilities: | ||
Grants receivable | (591,129) | 0 |
Prepaid expenses and other current assets | 298,959 | 30,743 |
Accounts payable | (911,301) | 589,700 |
Accrued expenses and other current liabilities | 361,382 | (462,816) |
Due to/from related party | 0 | 1,256 |
Deferred revenue | (541,701) | (655,634) |
Net cash used in operating activities | (3,708,034) | (1,868,713) |
Financing activities | ||
Proceeds from issuance of equity securities, net | 9,865,727 | 1,508,179 |
Payments on note payable | (249,653) | 0 |
Net cash provided by financing activities | 9,616,074 | 1,508,179 |
Net increase (decrease) in cash, cash equivalents and restricted cash | 5,908,040 | (360,534) |
Cash, cash equivalents and restricted cash at beginning of period | 3,738,900 | 6,131,781 |
Cash, cash equivalents and restricted cash at end of period | 9,646,940 | 5,771,247 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 3,061 | 0 |
Non-cash investing and financing activities: | ||
Accrued issuance costs for public offering | 398,561 | 0 |
Issuance of shares for license | 0 | 110,474 |
Conversion of liabilities to equity | $ 0 | $ 2,869,412 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) - USD ($) | Total | Common Stock | Preferred Stock | Additional Paid-In Capital | Accumulated Deficit |
Equity, beginning balance (shares) at Dec. 31, 2018 | 2,032,763 | 0 | |||
Equity, beginning balance at Dec. 31, 2018 | $ (1,271,114) | $ 203 | $ 0 | $ 3,869,120 | $ (5,140,437) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of equity securities (shares) | 960,489 | ||||
Issuance of equity securities | 4,377,591 | $ 96 | 4,377,495 | ||
Issuance of equity securities for license (shares) | 12,907 | ||||
Issuance of equity securities for license | 110,474 | $ 1 | 110,473 | ||
Equity-based compensation expense (shares) | 9,550 | ||||
Equity-based compensation expense | 35,407 | $ 1 | 35,406 | ||
Net loss | (1,522,076) | (1,522,076) | |||
Equity, ending balance (shares) at Mar. 31, 2019 | 3,015,709 | ||||
Equity, ending balance at Mar. 31, 2019 | 1,730,282 | $ 301 | 8,392,494 | (6,662,513) | |
Equity, beginning balance (shares) at Dec. 31, 2019 | 4,511,174 | 0 | |||
Equity, beginning balance at Dec. 31, 2019 | 10,580,854 | $ 451 | $ 0 | 22,657,103 | (12,076,700) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of equity securities (shares) | 8,353,480 | 1,246,519 | |||
Issuance of equity securities | 9,467,166 | $ 835 | $ 125 | 9,466,206 | |
Preferred shares converted to common shares (shares) | 777,825 | (777,825) | |||
Preferred shares converted to common shares | 0 | $ 78 | $ (78) | ||
Equity-based compensation expense (shares) | 3,198 | ||||
Equity-based compensation expense | 38,409 | 38,409 | |||
Net loss | (2,083,816) | (2,083,816) | |||
Equity, ending balance (shares) at Mar. 31, 2020 | 13,645,677 | 468,694 | |||
Equity, ending balance at Mar. 31, 2020 | $ 18,002,613 | $ 1,364 | $ 47 | $ 32,161,718 | $ (14,160,516) |
ORGANIZATION AND OPERATIONS
ORGANIZATION AND OPERATIONS | 3 Months Ended |
Mar. 31, 2020 | |
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 biotechnology company focused on developing effective treatments for cancers with high unmet medical need caused by dysregulated gene expression. Epigenetics refers to the regulatory system that affects gene expression and the Company's lead epigenetic enzyme technology was licensed from the University of Utah Research Foundation in 2011. The Company is located in Houston, Texas. Merger with Flex Pharma, Inc. On January 3, 2019, Flex Pharma, Inc. ("Flex Pharma"), Salarius Pharmaceuticals LLC ("Private Salarius") and Falcon Acquisition Sub, LLC (“Merger Sub”), a wholly owned subsidiary of Flex Pharma, entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub merged with and into Private Salarius, with Private Salarius continuing as a wholly owned subsidiary of Flex Pharma. The merger was completed on July 19, 2019. After the merger, Flex Pharma was renamed Salarius Pharmaceuticals, Inc. The merger was accounted for as a reverse acquisition with Private Salarius being deemed the acquiring company for accounting purposes. See Note 3. Risks Related to Covid-19 Pandemic The outbreak of COVID-19 has spread worldwide. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. The COVID-19 pandemic is affecting the United States and global economies and may affect the Company’s operations and those of third parties on which the Company relies. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact the Company’s long-term liquidity. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. The Company does not yet know the full extent of potential delays or impacts on its business, financing or other activities or on healthcare systems or the global economy as a whole. However, these effects could have a material impact on the Company’s liquidity, capital resources, operations and business and those of the third parties on which we rely. |
BASIS OF PRESENTATION AND SIGNI
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying 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"). As described above, the merger with Flex Pharma closed on July 19, 2019. The merger was accounted for as a reverse acquisition with Private Salarius being deemed the acquiring company for accounting purposes. Private Salarius’ historical financial statements have replaced Flex Pharma’s historical consolidated financial statements with respect to periods prior to the completion of the merger with retroactive adjustments to Private Salarius' legal capital to reflect the legal capital of Flex Pharma. Flex Pharma (renamed Salarius Pharmaceuticals, Inc.) remains the continuing registrant and reporting company. Accordingly, the historical financial and operating data of Salarius Pharmaceuticals, Inc., which covers periods prior to the closing date of the merger, reflects the assets, liabilities and results of operations of Private Salarius and does not reflect the assets, liabilities and results of operations of Flex Pharma for the periods prior to July 19, 2019. The Company has retrospectively adjusted its Statement of Changes in Stockholders’ Equity (Deficit) and the weighted average shares used in determining loss per common share to reflect the conversion of the outstanding common unit, profits interest common unit and Series A Preferred unit of Private Salarius that converted into shares of the Company’s common stock upon the merger, and to reflect the effect of the 25 to 1 reverse stock split of the Company’s common stock which occurred upon the merger. 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, 2019 included elsewhere in the Company's Annual Report on Form 10-K filed with the SEC on March 23, 2020. 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 March 31, 2020 and the results of operations for the three months ended March 31, 2020 and 2019. The interim results of operations are not necessarily indicative of the results that may occur for the full fiscal year. The December 31, 2019 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. At March 31, 2020 and December 31, 2019, Salarius also held approximately $0 and $1.0 million, respectively, which represents funds received from Cancer Prevention and Research Institution of Texas ("CPRIT"). These funds were used for costs for allowable expenses, primarily research and development expenses. The grant has a mandatory fund matching requirement. Subject to CPRIT review, the Company believes that all matching fund requirements have been met at March 31, 2020. 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. During the three months ended March 31, 2020 and March 31, 2019 , impairment charges related to long-lived assets were $0 and $110,474, respectively. 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. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. The first step in the impairment process is to determine the fair value of the reporting unit and then compare it to the carrying value, including goodwill. If the fair value exceeds the carrying value, no further action is required and no impairment loss is recognized. 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. There was no impairment of goodwill during the three months ended March 31, 2020 or March 31, 2019, respectively. 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 In conjunction with the reverse merger transaction, the Company issued rights to receive warrants to purchase the Company’s common stock. Further, on February 11, 2020, the Company issued warrants to purchase the Company's common stock in a registered public offering. The Company determines whether the 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. 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. When grant funds are received after costs have been incurred, the Company records revenue and a corresponding grants receivable. 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. 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 and the Backsolve method (which is similar to the Black-Scholes valuation model and produces similar results) 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, (iii) unvested restricted stock, (iv) convertible preferred stock and (v) 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 10,597,729 and 30,395 shares as of March 31, 2020 and 2019, 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 March 31, 2020 and December 31, 2019, 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. Subsequent Events The Company’s management reviewed all material events through the date that the financial statements were issued for subsequent event disclosure consideration. Application of New Accounting Standards In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other,” which is intended to simplify the subsequent measurement of goodwill. The pronouncement allows an entity, during its annual or interim goodwill impairment evaluation, to compare the fair value of a reporting unit with its carrying amount. An impairment charge is immediately recognized by which the carrying amount exceeds the fair value. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company does not expect adoption of this ASU to have a material impact on its consolidated financial statements. Pronouncements Not Yet Adopted In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The guidance eliminates certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods. This guidance also includes guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact this change will have on its consolidated financial statements. 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 842), 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. |
REVERSE ACQUISITION AND DISPOSA
REVERSE ACQUISITION AND DISPOSAL | 3 Months Ended |
Mar. 31, 2020 | |
Business Combinations [Abstract] | |
REVERSE ACQUISITION AND DISPOSAL | REVERSE ACQUISITION AND DISPOSAL Reverse Acquisition On January 3, 2019, Flex Pharma, Private Salarius and Merger Sub entered into the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub merged with and into Private Salarius, with Private Salarius continuing as a wholly owned subsidiary of Flex Pharma, with Flex Pharma deemed the legal acquiror and Private Salarius deemed the accounting acquiror, as described below. The merger was completed on July 19, 2019. After the merger, Flex Pharma was renamed Salarius Pharmaceuticals, Inc. The merger was accounted for as a reverse acquisition business acquisition with Private Salarius being deemed the acquiring company for accounting purposes. Private Salarius, as the accounting acquirer, recorded the assets acquired and liabilities assumed of Flex Pharma in the merger at their fair values as of the acquisition date. Private Salarius’ historical financial statements have replaced Flex Pharma’s historical consolidated financial statements with respect to periods prior to the completion of the merger with retroactive adjustments to Private Salarius' legal capital to reflect the legal capital of Flex Pharma. Flex Pharma (which was renamed Salarius Pharmaceuticals, Inc. in connection with the merger) remains the continuing registrant and reporting company. Private Salarius was determined to be the accounting acquirer based on the following facts and circumstances: (1) members of Private Salarius owned approximately 80.7% of the voting interests of the combined company immediately following the closing of the transaction; (2) the majority of the board of directors of the combined company was composed of directors designated by Private Salarius under the terms of the Merger Agreement; and (3) existing members of Private Salarius management became the management of the combined company. The business purposes of the merger included, among other purposes, obtaining the following potential advantages: (i) the combined organization’s resources would be immediately available to support Private Salarius’ research on Seclidemstat; and (ii) the public company status would allow the Company greater potential access to additional capital. At the closing of the merger, each outstanding common unit, profits interest common unit and Series A Preferred unit of Private Salarius converted into shares of the Company’s common stock (subject to the payment of cash in lieu of fractional shares and after giving effect to a 25 to 1 reverse stock split of the Company’s common stock) at the conversion ratio formulae described in the Merger Agreement. In addition, at the closing of the merger, the Company distributed one right per share of common stock to stockholders of record as of the close of business on July 18, 2019. Each right entitles such stockholders to receive a warrant to purchase shares of the Company’s common stock six months and one day following the closing date of the merger. See Note 8. The Company accounted for the acquisition as a reverse merger using purchase accounting. Because the merger qualifies as a reverse acquisition and given that Private Salarius was a private company at the time of the merger and therefore its value was not readily determinable, the fair value of the merger consideration was deemed to be equal to the sum of the quoted market capitalization of the Company at the merger date, the fair value of the Flex Pharma options that fully vested upon the merger together, and the fair value of the rights to receive warrants that were granted to the pre-merger Flex Pharma stockholders. Total purchase consideration is as follows: Flex Pharma market capitalization at closing $ 10,963,526 Fair value of rights to warrants 1,629,095 Fair value of Flex Pharma outstanding options on the merger date 132,227 Total purchase consideration $ 12,724,848 The Company recorded all tangible and intangible assets acquired and liabilities assumed at their preliminary estimated fair values on the merger date. The following represents the allocation of the estimated purchase consideration: Fair value of assets acquired Cash $ 5,405,826 Accounts receivable 15,168 Inventory 122,235 Prepaid expense and other current assets 106,319 Goodwill and intangibles 8,937,899 Total fair value of assets acquired 14,587,447 Fair value of liabilities assumed Accounts payable, accrued liabilities and other current liabilities 1,862,599 Total fair value of liabilities assumed 1,862,599 Net assets acquired $ 12,724,848 Unaudited Pro Forma Disclosure The following unaudited pro forma financial information summarizes the results of operations for the three months ended March 31, 2020 and 2019 as if the merger described above had been completed as of January 1, 2019. Pro forma information primarily reflects adjustments relating to the reversal of transaction costs. Assuming that the merger had been completed as of January 1, 2019, the transaction costs would have been expensed in the prior period. Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 Revenues $ 1,132,830 $ 655,635 Net loss (2,083,816) (9,415,074) Net loss per share (0.22) (3.97) |
GRANTS RECEIVABLE
GRANTS RECEIVABLE | 3 Months Ended |
Mar. 31, 2020 | |
Receivables [Abstract] | |
GRANTS RECEIVABLE | GRANTS RECEIVABLEGrants receivable represents qualifying costs incurred and 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 $591,129 and $0 as of March 31, 2020 and December 31, 2019, respectively. |
PREPAID EXPENSES AND OTHER CURR
PREPAID EXPENSES AND OTHER CURRENT ASSETS | 3 Months Ended |
Mar. 31, 2020 | |
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 March 31, 2020 and December 31, 2019 consisted of the following: March 31, 2020 December 31, 2019 Prepaid clinical trial expenses $ 140,964 $ 202,743 Prepaid insurance 360,608 617,096 Other prepaid and current assets 144,788 136,060 Total prepaid expenses and other current assets $ 646,360 $ 955,899 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2020 | |
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 and epigenetic enzyme lysine specific demethylase 1 ("LSD 1"). 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 and subject to certain adjustments specified in the agreement, 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. Pursuant to the contract, CPRIT awarded the Company a grant of up to $18.7 million to fund the development of LSD-1 inhibitor. This is a 3-year grant award which originally expired on May 31, 2019. However, a six six 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 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. |
FAIR VALUE OF FINANCIAL INSTRUM
FAIR VALUE OF FINANCIAL INSTRUMENTS | 3 Months Ended |
Mar. 31, 2020 | |
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 warrant associated with the Flex Pharma merger measured at fair value on a recurring basis for the three months ended March 31, 2020: Description Balance at December 31, 2019 Change in Fair Value Balance at March 31, 2020 Warrant liability $ 317,762 $ 283,070 $ 34,692 |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | STOCKHOLDERS' EQUITY The accompanying condensed consolidated statements of stockholders' equity (deficit) and the footnotes to the interim financial statements have been retroactively adjusted to reflect the equity structure (that is, the number and type of equity interests issued) of Flex Pharma, the legal parent (accounting acquiree) of the merger closed on July 19, 2019, with the retained earnings and other equity balances of the Private Salarius before the merger. Private Salarius' equity was restated using the exchange ratio established in the merger agreement to reflect the number of shares of Flex Pharma issued in the merger. Concurrent with the merger, the Company's shareholders approved a 1-for-25 reverse stock split, which became effective on July 19, 2019. Total shares owned by Flex Pharma pre-merger shareholders (net of fraction shares paid in cash) was 8,353,480 shares after reverse stock-split. Common Stock and Preferred Stock On February 11, 2020, the Company completed a public offering with total gross proceeds of approximately $11.0 million, which includes the full exercise of the underwriter's over-allotment option to purchase an additional 1,252,173 shares and warrants prior to deducting underwriting discounts and commissions and offering expenses payable by Salarius. The offering is comprised of 7,101,307 Class A units, priced at a public offering price of $1.15 per unit, with each unit consisting of one share of common stock and a five common stock at an exercise price of $1.15 per share, and 1,246,519 Class B units, priced at a public offering price of $1.15 per unit, with each unit consisting of one share of Series A convertible preferred stock and a five In February 2020, 777,825 shares of Series A convertible preferred stock were converted to common stock. During the three months ended March 31, 2019 the Company issued 960,489 common shares (4,035 Series A preferred units and 350 profit interest units of Private Salarius) for $4,377,591 (net of offering cost of $10,617). In December 2018, the Company agreed to issue an unrelated party 12,907 common shares (91 common units of Private Salarius) to acquire licenses for the DNMT1 inhibitor. The issuance was approved in January 2019 and the license was granted in 2018. . Right to Warrants Pursuant to the Merger Agreement (See Note 3), Flex Pharma distributed one right per share of common stock to stockholders of record as of the close of business on July 18, 2019. Each right entitles such stockholders to receive a warrant to purchase the Company's common shares on January 20, 2020. These warrants are exercisable, in the aggregate, into 142,711 shares of the Company's common stock with a 5-year term from January 20, 2020, and an exercise price of $15.17 per share. The warrants are subject to a cashless exercise, at the option of the Company, at the closing of an issuance and sale of the Company’s common stock in certain qualified financing, upon the closing of which the holders of warrants shall be entitled to receive a number of shares of common stock equal to the greater of two formulae defined by the Merger Agreement, which are based on the volume weighted average price of the Company's common stock during the 10 consecutive trading days ending on the trading day immediately preceding the date of exercise. As a result, the warrants have been classified as a liability. The Company accounted for these warrants at fair value using Level 3 inputs. The Company determined the fair value of this warrant liability using a Black-Scholes valuation model as the Company believes the value will closely approximate the value from the binomial asset pricing model that consisted of a conditional probability weighted expected return method that values the Company’s equity securities assuming various possible future outcomes to estimate the allocation of value within one or more of the scenarios. Using this method, unobservable inputs included the Company’s equity value, expected timing of possible outcomes, risk free interest rates and stock price volatility. Variables used in the Black-Scholes model are as follows: March 31, 2020 December 31, 2019 Discount rate 0.37% 1.69% Expected life (years) 4.81 years 5.06 years Expected volatility 113.17% 103.07% Expected dividend —% —% Wedbush Warrant On July 19, 2019, upon the closing of the merger, the Company elected to issue warrants to purchase 42,928 common shares to Wedbush Securities Inc. ("Wedbush") to satisfy $500,000 of the $1,000,000 success fee payable to Wedbush at the closing of the merger. The remaining $500,000 success fee was paid in cash. These warrants have an exercise price of $18.90 and a 5-year term. As of March 31, 2020, all warrants issued to Wedbush were outstanding. |
EQUITY-BASED COMPENSATION
EQUITY-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2020 | |
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"). On July 19, 2019, the Company completed a merger with Flex Pharma and Flex Pharma had fully vested options to purchase 90,279 common shares outstanding as of the date of the merger that continue to be exercisable. 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 March 31, 2020, there were 34,087 shares remaining available for the grant of stock awards under the 2015 Plan. On March 23, 2020, the Company awarded 182,000 stock options to its employees and directors, pursuant to the plan described above. Stock options generally vest over one Risk-free interest rate 0.48 % Volatility 113.17 % Expected life (years) 5.80 Expected dividend yield 0 % The following table summarizes stock option activity for employees and non-employees for the three months ended March 31, 2020: Shares Weighted-Average Weighted-Average Aggregate Outstanding at December 31, 2019 166,233 $ 34.42 6.53 $ — Granted 182,000 0.61 Forfeited (10,000) — Outstanding at March 31, 2020 338,233 $ 17.01 8.18 $ — Exercisable at March 31, 2020 84,711 $ 59.85 3.23 $ — As of March 31, 2020, there was approximately $489,641 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 3.27 years. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS On April 9, 2020, the Company was notified (the “Notice”) by Nasdaq Stock Market, LLC (“Nasdaq”) that on April 8, 2020 the average closing price of the Company’s common stock (the “Common Stock”) over the prior 30 consecutive trading days had fallen below $1.00 per share, which is the minimum average closing price required to maintain listing on Nasdaq under Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Requirement”). The Notice has no immediate effect on the listing or trading of the Company’s common stock. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days, to regain compliance with the Minimum Bid Requirement. To regain compliance, the closing bid price of the Company’s common stock must be at least $1.00 per share for a minimum of ten consecutive business days during this 180-day period. On April 20, 2020, the Company was notified by Nasdaq that it has determined to toll the compliance periods for bid price and market value of publicly held shares (“MVPHS”) requirements (collectively, the “Price-based Requirements”) through June 30, 2020. In that regard, on April 16, 2020, Nasdaq filed an immediately effective rule change with the Securities and Exchange Commission. As a result, companies presently in compliance periods for any Price-based Requirements will remain at that same stage of the process and will not be subject to being delisted for these concerns. Starting on July 1, 2020, companies will receive the balance of any pending compliance period in effect at the start of the tolling period to regain compliance. Accordingly, since the Company had 173 calendar days remaining in its bid price compliance period as of April 16, 2020, it will, upon reinstatement of the Price-based Requirements, still has 173 calendar days from July 1, 2020, or until December 21, 2020, subject to any extensions granted by Nasdaq, to regain compliance. The Company can regain compliance, either during the suspension or during the compliance period resuming after the suspension by evidencing compliance with the Price-based Requirements for a minimum of 10 consecutive trading days. |
BASIS OF PRESENTATION AND SIG_2
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying 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"). As described above, the merger with Flex Pharma closed on July 19, 2019. The merger was accounted for as a reverse acquisition with Private Salarius being deemed the acquiring company for accounting purposes. Private Salarius’ historical financial statements have replaced Flex Pharma’s historical consolidated financial statements with respect to periods prior to the completion of the merger with retroactive adjustments to Private Salarius' legal capital to reflect the legal capital of Flex Pharma. Flex Pharma (renamed Salarius Pharmaceuticals, Inc.) remains the continuing registrant and reporting company. Accordingly, the historical financial and operating data of Salarius Pharmaceuticals, Inc., which covers periods prior to the closing date of the merger, reflects the assets, liabilities and results of operations of Private Salarius and does not reflect the assets, liabilities and results of operations of Flex Pharma for the periods prior to July 19, 2019. The Company has retrospectively adjusted its Statement of Changes in Stockholders’ Equity (Deficit) and the weighted average shares used in determining loss per common share to reflect the conversion of the outstanding common unit, profits interest common unit and Series A Preferred unit of |
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. |
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. |
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. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. The first step in the impairment process is to determine the fair value of the reporting unit and then compare it to the carrying value, including goodwill. If the fair value exceeds the carrying value, no further action is required and no impairment loss is recognized. 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 |
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. |
Warrants | Warrants In conjunction with the reverse merger transaction, the Company issued rights to receive warrants to purchase the Company’s common stock. Further, on February 11, 2020, the Company issued warrants to purchase the Company's common stock in a registered public offering. The Company determines whether the 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. |
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. When grant funds are received after costs have been incurred, the Company records revenue and a corresponding grants receivable. |
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. |
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. |
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. |
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 March 31, 2020 and December 31, 2019, 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. |
Subsequent Events | Subsequent Events The Company’s management reviewed all material events through the date that the financial statements were issued for subsequent event disclosure consideration. |
Application of New Accounting Standards and Pronouncements Not Yet Adopted | Application of New Accounting Standards In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other,” which is intended to simplify the subsequent measurement of goodwill. The pronouncement allows an entity, during its annual or interim goodwill impairment evaluation, to compare the fair value of a reporting unit with its carrying amount. An impairment charge is immediately recognized by which the carrying amount exceeds the fair value. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2019. The Company does not expect adoption of this ASU to have a material impact on its consolidated financial statements. Pronouncements Not Yet Adopted In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The guidance eliminates certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods. This guidance also includes guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. ASU 2019-12 is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is currently evaluating the impact this change will have on its consolidated financial statements. 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 842), 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. |
REVERSE ACQUISITION AND DISPO_2
REVERSE ACQUISITION AND DISPOSAL (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Business Combinations [Abstract] | |
Summary of Purchase Consideration | Total purchase consideration is as follows: Flex Pharma market capitalization at closing $ 10,963,526 Fair value of rights to warrants 1,629,095 Fair value of Flex Pharma outstanding options on the merger date 132,227 Total purchase consideration $ 12,724,848 |
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The following represents the allocation of the estimated purchase consideration: Fair value of assets acquired Cash $ 5,405,826 Accounts receivable 15,168 Inventory 122,235 Prepaid expense and other current assets 106,319 Goodwill and intangibles 8,937,899 Total fair value of assets acquired 14,587,447 Fair value of liabilities assumed Accounts payable, accrued liabilities and other current liabilities 1,862,599 Total fair value of liabilities assumed 1,862,599 Net assets acquired $ 12,724,848 |
Schedule of Unaudited Pro Forma Results | The following unaudited pro forma financial information summarizes the results of operations for the three months ended March 31, 2020 and 2019 as if the merger described above had been completed as of January 1, 2019. Pro forma information primarily reflects adjustments relating to the reversal of transaction costs. Assuming that the merger had been completed as of January 1, 2019, the transaction costs would have been expensed in the prior period. Three Months Ended March 31, 2020 Three Months Ended March 31, 2019 Revenues $ 1,132,830 $ 655,635 Net loss (2,083,816) (9,415,074) Net loss per share (0.22) (3.97) |
PREPAID EXPENSES AND OTHER CU_2
PREPAID EXPENSES AND OTHER CURRENT ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets at March 31, 2020 and December 31, 2019 consisted of the following: March 31, 2020 December 31, 2019 Prepaid clinical trial expenses $ 140,964 $ 202,743 Prepaid insurance 360,608 617,096 Other prepaid and current assets 144,788 136,060 Total prepaid expenses and other current assets $ 646,360 $ 955,899 |
FAIR VALUE OF FINANCIAL INSTR_2
FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
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 warrant associated with the Flex Pharma merger measured at fair value on a recurring basis for the three months ended March 31, 2020: Description Balance at December 31, 2019 Change in Fair Value Balance at March 31, 2020 Warrant liability $ 317,762 $ 283,070 $ 34,692 |
STOCKHOLDERS' EQUITY (Tables)
STOCKHOLDERS' EQUITY (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
Schedule of Variables used in Black-Scholes Model | Variables used in the Black-Scholes model are as follows: March 31, 2020 December 31, 2019 Discount rate 0.37% 1.69% Expected life (years) 4.81 years 5.06 years Expected volatility 113.17% 103.07% Expected dividend —% —% |
EQUITY-BASED COMPENSATION (Tabl
EQUITY-BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Fair Value Assumptions | The fair value of the option grants of $92,007 has been estimated with the following assumptions for the three months ended March 31, 2020: Risk-free interest rate 0.48 % Volatility 113.17 % Expected life (years) 5.80 Expected dividend yield 0 % |
Summary of Stock Option Activity | The following table summarizes stock option activity for employees and non-employees for the three months ended March 31, 2020: Shares Weighted-Average Weighted-Average Aggregate Outstanding at December 31, 2019 166,233 $ 34.42 6.53 $ — Granted 182,000 0.61 Forfeited (10,000) — Outstanding at March 31, 2020 338,233 $ 17.01 8.18 $ — Exercisable at March 31, 2020 84,711 $ 59.85 3.23 $ — |
BASIS OF PRESENTATION AND SIG_3
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details) | Jul. 19, 2019 | Mar. 31, 2020USD ($)shares | Mar. 31, 2019USD ($)shares | Dec. 31, 2019USD ($) |
Class of Stock [Line Items] | ||||
Grant contract amount | $ 0 | $ 1,000,000 | ||
Impairment charges of long-lived assets | $ 0 | $ 110,474 | ||
Antidilutive securities excluded from computation of earnings per share (shares) | shares | 10,597,729 | 30,395 | ||
Common Stock | ||||
Class of Stock [Line Items] | ||||
Conversion ratio | 25 |
REVERSE ACQUISITION AND DISPO_3
REVERSE ACQUISITION AND DISPOSAL - Narrative (Details) | Jul. 19, 2019shares |
Business Acquisition [Line Items] | |
Period the right is unexercisable | 6 months |
Common Stock | |
Business Acquisition [Line Items] | |
Conversion ratio | 25 |
Number of rights per share | 1 |
Flex Pharma | |
Business Acquisition [Line Items] | |
Voting interest acquired | 80.70% |
REVERSE ACQUISITION AND DISPO_4
REVERSE ACQUISITION AND DISPOSAL - Summary of Purchase Consideration (Details) - Flex Pharma | Jul. 19, 2019USD ($) |
Business Acquisition [Line Items] | |
Flex Pharma market capitalization at closing | $ 10,963,526 |
Fair value of rights to warrants | 1,629,095 |
Fair value of Flex Pharma outstanding options on the merger date | 132,227 |
Total purchase consideration | $ 12,724,848 |
REVERSE ACQUISITION AND DISPO_5
REVERSE ACQUISITION AND DISPOSAL - Schedule of Recognized Identified Assets Acquired and Liabilities Assumed (Details) - Flex Pharma | Jul. 19, 2019USD ($) |
Business Acquisition [Line Items] | |
Cash | $ 5,405,826 |
Accounts receivable | 15,168 |
Inventory | 122,235 |
Prepaid expense and other current assets | 106,319 |
Goodwill and intangibles | 8,937,899 |
Total fair value of assets acquired | 14,587,447 |
Accounts payable, accrued liabilities and other current liabilities | 1,862,599 |
Total fair value of liabilities assumed | 1,862,599 |
Net assets acquired | $ 12,724,848 |
REVERSE ACQUISITION AND DISPO_6
REVERSE ACQUISITION AND DISPOSAL - Schedule of Unaudited Pro Forma Results (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Business Combinations [Abstract] | ||
Revenues | $ 1,132,830 | $ 655,635 |
Net loss | $ (2,083,816) | $ (9,415,074) |
Net loss per share (in dollars per share) | $ (0.22) | $ (3.97) |
GRANTS RECEIVABLE (Details)
GRANTS RECEIVABLE (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Grants receivable from CPRIT | $ 591,129 | $ 0 |
PREPAID EXPENSES AND OTHER CU_3
PREPAID EXPENSES AND OTHER CURRENT ASSETS - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid clinical trial expenses | $ 140,964 | $ 202,743 |
Prepaid insurance | 360,608 | 617,096 |
Other prepaid and current assets | 144,788 | 136,060 |
Total prepaid expenses and other current assets | $ 646,360 | $ 955,899 |
PREPAID EXPENSES AND OTHER CU_4
PREPAID EXPENSES AND OTHER CURRENT ASSETS - Narrative (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 | Jul. 31, 2019 |
Short-term Debt [Line Items] | |||
Note payable | $ 252,679 | $ 502,332 | |
Note Payable | |||
Short-term Debt [Line Items] | |||
Principal amount | $ 900,000 | ||
Interest rate | 4.61% |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) | 1 Months Ended | 3 Months Ended | |||
May 31, 2019 | Jun. 30, 2016 | Mar. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2011 | |
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
Award amount | $ 18,700,000 | ||||
Award term | 3 years | ||||
Extension term | 6 months | ||||
Continued payments, percent of net sales | 1.00% | ||||
Matching funds requirement | 50.00% | ||||
Aggregate amount received | $ 9,600,000 | ||||
Current funding available | 9,100,000 | ||||
Current funding received | 0 | ||||
Deferred revenue | 0 | $ 541,701 | |||
Grants receivable from CPRIT | $ 591,129 | $ 0 | |||
University of Utah Research Foundation | |||||
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items] | |||||
Ownership percentage by noncontrolling Owner | 2.00% |
FAIR VALUE OF FINANCIAL INSTR_3
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Change in Fair Value | $ 283,070 | $ 0 |
Level 3 | Recurring | ||
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | ||
Balance at December 31, 2019 | 317,762 | |
Change in Fair Value | 283,070 | |
Balance at March 31, 2020 | $ 34,692 |
STOCKHOLDERS' EQUITY - Narrativ
STOCKHOLDERS' EQUITY - Narrative (Details) | Feb. 11, 2020USD ($)$ / sharesshares | Jul. 19, 2019USD ($)trading_Days$ / sharesshares | Dec. 31, 2018shares | Mar. 31, 2020USD ($)shares | Mar. 31, 2019USD ($)shares | Dec. 31, 2019shares | Jan. 20, 2019 |
Class of Stock [Line Items] | |||||||
Common stock, shares outstanding | 13,645,677 | 4,511,174 | |||||
Shares issued, value | $ | $ 9,467,166 | $ 4,377,591 | |||||
Expected life (years) | 4 years 9 months 21 days | 5 years 21 days | 5 years | ||||
Exercise price (in dollars per share) | $ / shares | $ 15.17 | ||||||
Number of shares called by warrants | 142,711 | ||||||
Offering costs | $ | 10,617 | ||||||
Consecutive trading days | trading_Days | 10 | ||||||
Over-Allotment Option | |||||||
Class of Stock [Line Items] | |||||||
Shares issued, value | $ | $ 11,000,000 | ||||||
Shares issued | 1,252,173 | ||||||
Common Stock | |||||||
Class of Stock [Line Items] | |||||||
Conversion ratio | 25 | ||||||
Shares issued, value | $ | $ 835 | $ 96 | |||||
Shares issued | 8,343,480 | 8,353,480 | 960,489 | ||||
Number of rights per share | 1 | ||||||
Number of shares called by warrants | 9,599,999 | ||||||
Preferred shares converted to common shares (shares) | 777,825 | ||||||
Issuance of equity securities for license (shares) | 12,907 | 12,907 | |||||
Common Stock | Over-Allotment Option | |||||||
Class of Stock [Line Items] | |||||||
Expected life (years) | 5 years | ||||||
Number of rights per share | 1 | ||||||
Exercise price (in dollars per share) | $ / shares | $ 1.15 | ||||||
Common Stock | Flex Pharma | |||||||
Class of Stock [Line Items] | |||||||
Conversion ratio | 25 | ||||||
Common stock, shares outstanding | 8,353,480 | ||||||
Preferred Stock | |||||||
Class of Stock [Line Items] | |||||||
Shares issued, value | $ | $ 125 | ||||||
Shares issued | 1,246,519 | ||||||
Preferred shares converted to common shares (shares) | (777,825) | ||||||
Class A | Common Stock | Over-Allotment Option | |||||||
Class of Stock [Line Items] | |||||||
Number of shares issued | 7,101,307 | ||||||
Price per share (usd per share) | $ / shares | $ 1.15 | ||||||
Class B | Preferred Stock | Over-Allotment Option | |||||||
Class of Stock [Line Items] | |||||||
Number of shares issued | 1,246,519 | ||||||
Price per share (usd per share) | $ / shares | $ 1.15 | ||||||
Series A Preferred | Common Stock | |||||||
Class of Stock [Line Items] | |||||||
Shares issued | 4,035 | ||||||
Preferred shares converted to common shares (shares) | 777,825 | ||||||
Series A Preferred | Preferred Stock | |||||||
Class of Stock [Line Items] | |||||||
Shares issued | 1,246,519 | ||||||
Profit Interest Units | Common Stock | |||||||
Class of Stock [Line Items] | |||||||
Shares issued | 350 | ||||||
Common Units | Common Stock | |||||||
Class of Stock [Line Items] | |||||||
Issuance of equity securities for license (shares) | 91 | ||||||
Wedbush | Satisfy success fee | |||||||
Class of Stock [Line Items] | |||||||
Expected life (years) | 5 years | ||||||
Exercise price (in dollars per share) | $ / shares | $ 18.90 | ||||||
Number of shares called by warrants | 42,928 | ||||||
Warrant value | $ | $ 500,000 | ||||||
Due to related party | $ | 1,000,000 | ||||||
Cash payment to related party | $ | $ 500,000 |
STOCKHOLDERS' EQUITY - Schedule
STOCKHOLDERS' EQUITY - Schedule of Variables used in Black-Scholes Model (Details) | Mar. 31, 2020 | Dec. 31, 2019 | Jan. 20, 2019 |
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Expected life (years) | 4 years 9 months 21 days | 5 years 21 days | 5 years |
Discount rate | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 0.37% | 1.69% | |
Expected volatility | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 113.17% | 103.07% | |
Expected dividend | |||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | |||
Warrants measurement input | 0.00% | 0.00% |
EQUITY-BASED COMPENSATION - Nar
EQUITY-BASED COMPENSATION - Narrative (Details) - USD ($) | Sep. 10, 2019 | Mar. 31, 2020 | Dec. 31, 2019 | Jul. 19, 2019 |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of shares outstanding | 338,233 | 166,233 | 90,279 | |
Number of stock options granted (shares) | 182,000 | 182,000 | ||
Fair value | $ 92,007 | |||
Unrecognized compensation cost, options | $ 489,641 | |||
Unrecognized compensation cost, recognition period | 3 years 3 months 7 days | |||
Employee stock option | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock options, contractual term | 10 years | |||
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 (shares) | 34,087 |
EQUITY-BASED COMPENSATION - Sch
EQUITY-BASED COMPENSATION - Schedule of Fair Value Assumptions (Details) | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Risk-free interest rate | 0.48% |
Volatility | 113.17% |
Expected life (years) | 5 years 9 months 18 days |
Expected dividend yield | 0.00% |
EQUITY-BASED COMPENSATION - Sum
EQUITY-BASED COMPENSATION - Summary of stock option activity (Details) - USD ($) | Sep. 10, 2019 | Mar. 31, 2020 | Dec. 31, 2019 |
Shares | |||
Outstanding, Beginning Balance (shares) | 166,233 | ||
Granted (shares) | 182,000 | 182,000 | |
Forfeited (shares) | (10,000) | ||
Outstanding, Ending Balance (shares) | 338,233 | 166,233 | |
Exercisable (shares) | 84,711 | ||
Weighted-Average Exercise Price | |||
Weighted-average exercise price, Beginning Balance (in usd per share) | $ 34.42 | ||
Granted, weighted-average exercise price (in usd per share) | 0.61 | ||
Forfeited, weighted-average exercise price (in usd per share) | 0 | ||
Weighted-average exercise price, Ending Balance (in usd per share) | 17.01 | $ 34.42 | |
Exercisable, weighted-average exercise price (in usd per share) | $ 59.85 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract] | |||
Outstanding, weighted-average remaining contractual term | 8 years 2 months 4 days | 6 years 6 months 10 days | |
Exercisable, weighted-average remaining contractual term | 3 years 2 months 23 days | ||
Outstanding, aggregate intrinsic value | $ 0 | $ 0 | |
Exercisable, aggregate intrinsic value | $ 0 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent Event - Loan Payable $ in Thousands | Apr. 13, 2020USD ($) |
Subsequent Event [Line Items] | |
Principal amount | $ 180 |
Interest rate | 0.50% |