DCOY

Business Context and Reporting Period

Company: Decoy Therapeutics Inc. (formerly Salarius Pharmaceuticals, Inc.)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2025
Business Overview: Decoy is a pre-clinical stage biotechnology company focused on peptide conjugate therapeutics using its proprietary IMP 3 ACT platform, which leverages AI and machine learning. The company completed a merger with Legacy Decoy in November 2025 and changed its name to Decoy Therapeutics Inc. in January 2026. It has no approved products and has not generated revenue from product sales.

Key Financial Metrics

Debt and Liquidity: The company had no long-term debt as of December 31, 2025. Current liabilities totaled $5.17 million, primarily consisting of deferred revenue ($3.23 million) related to grant agreements. Cash flow from financing activities provided $12.34 million in 2025, driven by equity issuances.

Material Changes vs. Prior Period

• Net Loss Increase: Net loss increased by $6.94 million (124%) year-over-year. This was primarily driven by $8.52 million in acquired in-process research and development (IPR&D) expenses recognized upon the closing of the Legacy Decoy merger.
• Operating Expenses: Total operating expenses rose from $5.73 million to $12.61 million. While R&D and G&A cash expenses decreased slightly, the non-cash IPR&D charge significantly impacted the bottom line.
• Capital Structure: The company executed a 1-for-15 reverse stock split in August 2025 and a 1-for-12 reverse stock split in March 2026. It also completed a public offering in November 2025 raising approximately $6.3 million in net proceeds.
• Merger Completion: The acquisition of Legacy Decoy was accounted for as an asset acquisition, resulting in the immediate expensing of IPR&D assets with no alternative future use.

Guidance, Outlook, and Risks

Going Concern: The filing explicitly states that the company's financial condition raises substantial doubt regarding its ability to continue as a going concern. Management believes existing cash resources ($10.7 million, of which $3.0 million is restricted for grant use) are insufficient to fund operations for the next 12 months. Additional capital is required to continue operations and advance clinical development.

Outlook and Strategy:

• Clinical Timeline: The company plans to file an Investigational New Drug (IND) application for its lead pan-Coronavirus prophylactic (DCOY101) in the first half of 2027.
• Funding Strategy: The company intends to pursue non-dilutive funding (grants from Gates Foundation, BARDA, etc.) and strategic partnerships to support development.
• Nasdaq Compliance: The company faced delisting risks due to low bid price but regained compliance in March 2026 via a reverse stock split, achieving a closing bid price of $7.47.

Key Risks:

• Liquidity Risk: Inability to raise additional capital could force the company to cease operations.
• Development Risk: All product candidates are pre-clinical; there is no guarantee of regulatory approval or commercial success.
• AI Regulation: Reliance on AI for drug discovery exposes the company to evolving regulatory frameworks and potential liability.
• Delisting Risk: Continued failure to meet Nasdaq listing standards could result in delisting.

Investor Verification Checklist

• Cash Runway: Verify the specific timeline for cash exhaustion and the status of any new financing efforts post-filing.
• Grant Restrictions: Confirm the utilization terms of the $3.0 million restricted cash from the Gates Foundation and the likelihood of receiving the remaining $600,000 tranche.
• Merger Integration: Assess the progress of integrating Legacy Decoy's assets and the status of the preferred stock conversion requirements for Nasdaq initial listing.
• IPR&D Expense: Understand the specific assets expensed as IPR&D and the remaining value of the acquired technology pipeline.
• Nasdaq Status: Monitor the company's ability to maintain the $1.00 minimum bid price requirement following the March 2026 compliance demonstration.