DEF: Decoy Therapeutics Seeks Stockholder Approval for Equity Plan, Reverse Split

Decoy Therapeutics Inc. is calling a special meeting on February 24, 2026, to seek stockholder approval for a new equity incentive plan and a reverse stock split aimed at meeting Nasdaq's listing requirements following its merger.

Summary

• Decoy Therapeutics Inc. (formerly Salarius Pharmaceuticals, Inc.) will hold a Special Meeting of Stockholders on February 24, 2026, to vote on three proposals.
• The company completed a merger with Decoy Therapeutics in November 2025 and subsequently changed its name from Salarius Pharmaceuticals, Inc. on January 8, 2026.
• Proposal No. 1 seeks approval for the Decoy Therapeutics Inc. 2026 Equity Incentive Plan, which would replace the expired 2015 plan and initially reserve 1,100,000 shares of common stock for awards.
• Proposal No. 2 requests approval for an amendment to the company's Certificate of Incorporation to effect a reverse stock split at a ratio between 1-for-4 and 1-for-15, to be determined by the Board by February 24, 2027.
• The primary purpose of the reverse stock split is to increase the common stock's per-share price to meet Nasdaq's initial listing criteria, specifically the $4.00 minimum market price.
• The company received a Nasdaq delisting notice on December 31, 2025, for failing to meet the $1.00 minimum bid price requirement and has appealed this determination.
• Proposal No. 3 is to approve the adjournment or postponement of the Special Meeting, if necessary, to solicit additional votes for the other proposals.
• The Board of Directors unanimously recommends voting FOR all three proposals.
• A previous reverse stock split of 1-for-15 was effected on August 15, 2025, by Salarius.
• The merger involved issuing Series A and Series B Preferred Stock to former Decoy stakeholders, which are not convertible into common stock until future stockholder approval and Nasdaq initial listing approval.
• A November financing triggered an anti-dilution floor price of $3.75, resetting the conversion ratio for preferred stock from 1-for-1000 to 2,800 to 1.

Sentiment

Score: 3

Explanation: The company is facing significant challenges, including a Nasdaq delisting notice and a very low stock price, necessitating a reverse stock split. The dilutive nature of recent financing and the reset of preferred stock conversion ratio are concerning. While management is taking steps (merger, equity plan, reverse split) to address these issues and regain Nasdaq compliance, the current situation is unfavorable.

Positives

• The proposed 2026 Equity Incentive Plan aims to attract and retain motivated employees, directors, and consultants by aligning their interests with stockholders.
• The reverse stock split, if approved and implemented, is intended to help the company meet Nasdaq's initial listing criteria, potentially increasing investor interest and avoiding delisting.
• The company has appealed the Nasdaq delisting determination, staying the suspension of its securities.

Negatives

• The company currently does not satisfy Nasdaq's initial listing criteria, including the minimum stock price.
• Received a Nasdaq delisting notice on December 31, 2025, for failing to meet the $1.00 minimum bid price requirement.
• The market price of the company's common stock was $0.77 per share as of January 8, 2026, significantly below the $4.00 Nasdaq initial listing requirement.
• A previous 1-for-15 reverse stock split was effected on August 15, 2025, indicating prior struggles with stock price.
• The conversion ratio for preferred stock was reset from 1-for-1000 to 2,800 to 1 due to a dilutive November financing, indicating significant dilution for preferred stockholders.
• The company has never declared or paid cash dividends and intends to retain all future earnings.

Risks

• The Combined Company may not be able to maintain its Nasdaq listing and may not be able to satisfy the initial listing standards of Nasdaq.
• The market price of the Combined Company's common stock may continue to decline.
• The Combined Company may never earn a profit.
• The Combined Company will be subject to the uncertainties associated with the clinical development and regulatory approval of its product candidates, including potential delays in the commencement, enrollment and completion of clinical trials and that the results of prior clinical trials may not be predictive of future results.
• The Combined Company will be required to raise additional funds to finance its operations and remain a going concern and may be required to do so sooner than expected.
• The Combined Company may not be able to raise additional funds when necessary, and/or on acceptable terms.
• The Combined Company's small public float, low market capitalization, limited operating history, and lack of revenue may make it difficult and expensive to raise additional funds.
• The Combined Company may not be able to protect its intellectual property rights.
• There may be changes in expected or existing competition for the Combined Company's product candidates.
• The Decoy transaction resulting in changes to the Combined Company's board of directors that may affect the Combined Company's business strategy and operations.
• The price of the Combined Company's common stock may be volatile and may fluctuate substantially following the Decoy Transaction.
• If the Combined Company were to be delisted from Nasdaq, it could reduce the visibility, liquidity, and price of its common stock.
• A significant portion of the Combined Company's total outstanding shares of common stock may be sold into the public market at any point, which could cause the market price to drop significantly.
• There may be adverse reactions or changes in business relationships resulting from completion of the Decoy Transaction.
• The Combined Company will have broad discretion in the use of its cash reserves and may not use them effectively.
• The Combined Company expects to continue to incur increased costs as a result of continuing to operate as a public company, and its management will be required to devote substantial time to compliance initiatives and corporate governance practices.
• Provisions in the Combined Company's certificate of incorporation, its bylaws, or Delaware law might discourage, delay, or prevent a change in control or changes in its management, which may depress the price of its common stock.
• Securities analysts' published reports could cause a decline in the price of the Combined Company's stock.
• There can be no assurance that the total market capitalization of the Common Stock after the implementation of the reverse stock split will be equal to or greater than the total market capitalization before the reverse stock split or that the per share market price of the Common Stock following the reverse stock split will increase in proportion to the reduction in the number of shares of the Common Stock outstanding in connection with the reverse stock split.
• There is no guarantee that the reverse stock split would lead to a sustained increase in the trading price of the Common Stock.
• The liquidity of the Common Stock may be harmed by the proposed reverse stock split given the reduced number of shares that would be outstanding after the reverse stock split, particularly if the expected increase in stock price as a result of the reverse stock split is not sustained.
• The proposed reverse stock split may increase the number of stockholders who hold odd lots (less than 1,000 shares) of common stock, creating the potential for such stockholders to experience an increase in the cost of selling their shares and greater difficulty effecting sales than shares in round lots of even multiples of 100 shares.
• The resulting per-share stock price may nevertheless fail to attract institutional investors and may not satisfy the investing guidelines of such investors and, consequently, the trading liquidity of the Common Stock may not improve.
• A reverse stock split would increase the number of authorized but unissued shares of stock, which could be used in dilutive equity financing transactions, or to oppose a hostile takeover attempt or delay or prevent changes in control or changes in or removal of management, including transactions that are favored by a majority of the stockholders or in which the stockholders might otherwise receive a premium for their shares over then-current market prices or benefit in some other manner.

Future Outlook

The company intends to call an additional special meeting at a later date to seek approval for the conversion of preferred stock into common stock, contingent on the approval of the current proposals and meeting Nasdaq's initial listing standards. They also plan to register the issuance of common stock underlying the preferred stock shortly after this proxy statement. The company expects to continue incurring increased costs as a public company and does not anticipate paying cash dividends in the foreseeable future, intending to retain earnings for business operations, development, and growth.

Management Comments

• "Our Board believes a compensation policy that includes a balanced mix of cash and equity is the most effective way to attract and retain talented employees whose interests are aligned with stockholders."
• "Our Board believes that the 2026 Plan is necessary to the Combined Company's ability to attract and retain motivated employees, directors, and independent contractors upon whose judgment, interest and special effort the successful conduct of the Combined Company's operations will largely depend."
• "We believe we would be at a disadvantage if we could not use stock-based awards covering a meaningful number of shares to recruit and retain key talent in this competitive market for human capital."
• "Our Board is seeking stockholder approval of the Reverse Stock Split with the primary intent of increasing the price of our common stock in order to meet the Nasdaq's minimum price per share criteria for initial listing on that exchange."
• "We believe that a higher stock price may generate investor interest in the common stock of the Combined Company following the Decoy Transaction."
• "The Board believes that stockholder approval of the range of reverse stock split ratios (as opposed to approval of a single reverse stock split ratio) provides the Board with maximum flexibility to achieve the purpose of a reverse stock split, as discussed below, and therefore is in the best interests of the Company and its stockholders."

Industry Context

The filing highlights the competitive market for human capital in the biotechnology/pharmaceutical industry, necessitating equity incentive plans to attract and retain talent. The company's struggle to meet Nasdaq listing requirements and its appeal against delisting reflect challenges faced by smaller, development-stage biotechnology companies in maintaining public market visibility and access to capital. The merger and subsequent financing activities are common strategies for such companies to consolidate resources and pursue new therapeutic pipelines.

Comparison to Industry Standards

• The company's common stock price of $0.77 (as of Jan 8, 2026) is significantly below Nasdaq's $1.00 minimum bid price for continued listing and $4.00 minimum market price for initial listing, indicating underperformance relative to exchange standards.
• The need for a reverse stock split to meet listing requirements is a common measure for companies whose stock price has fallen, often seen in smaller biotech firms that have not yet achieved significant commercial milestones or profitability. Many micro-cap biotech companies face similar challenges in maintaining Nasdaq compliance.
• The reset of preferred stock conversion ratio from 1-for-1000 to 2,800 to 1 due to a dilutive financing suggests a significant devaluation of the company's equity, which is a red flag compared to more stable, established pharmaceutical companies.
• The proposed 2026 Equity Incentive Plan with an initial reserve of 1,100,000 shares and automatic annual increases (6% then 5% of outstanding shares) is a substantial allocation of equity, comparable to plans seen in growth-oriented biotech companies, but its effectiveness depends on future performance and stock price appreciation.

Corporate Governance

Legal Proceedings

• Received a Nasdaq delisting notice on December 31, 2025, for non-compliance with the $1.00 minimum bid price requirement (Rule 5550(a)(2)).
• Filed an appeal of the delisting determination with a Nasdaq Hearings Panel on January 7, 2026, which has stayed the suspension of securities and the filing of Form 25-NSE pending the panel's decision.

Related Party Transactions

• Entered into stockholder support agreements with certain officers and directors, who collectively own approximately 0.07% of outstanding common stock, agreeing to vote in favor of the Salarius Stockholder Matters.

Stakeholder Impact

• Shareholders: Potential for increased stock price and Nasdaq compliance if reverse split is successful, but also risks of further price decline, reduced liquidity, and increased odd lot costs. Voting on equity plan could dilute existing shareholders but aims to attract talent. Preferred stockholders face significant dilution from the reset conversion ratio.
• Employees, Directors, Consultants: The 2026 Equity Incentive Plan aims to attract, retain, and motivate these groups by providing stock-based awards, aligning their interests with the company's success.
• Creditors: Series B Preferred Stock has mandatory redemption provisions tied to proceeds from ATM equity program and equity line of credit, which could impact cash flow available for other creditors.
• Nasdaq: The company is actively working to meet Nasdaq's listing requirements and has appealed a delisting notice, indicating ongoing engagement with the exchange.

Next Steps

• Hold Special Meeting of Stockholders on February 24, 2026, to vote on the Equity Compensation Plan, Reverse Stock Split, and Adjournment Proposals.
• If approved, the Board will determine the exact ratio and timing of the reverse stock split, to be effected by February 24, 2027.
• Present plans to regain compliance with Nasdaq's Minimum Bid Price Requirement to the Nasdaq Hearings Panel.
• Following the reverse stock split and meeting Nasdaq's other initial listing standards, file an initial listing application for the Combined Company on the Nasdaq Capital Market.
• Once Nasdaq initial listing application is approved, call a separate special meeting to seek stockholder approval for the conversion of the Preferred Stock into common stock.
• Register the issuance of common stock underlying the Preferred Stock shortly after the publishing of this proxy statement.
• File a current report on Form 8-K within four business days after the Special Meeting to announce preliminary or final voting results.

Key Dates

Recommendation

The company is in a precarious position, having received a Nasdaq delisting notice and trading significantly below listing requirements. While the proposed reverse stock split is an attempt to regain compliance, such actions often fail to provide sustained price increases and can signal underlying operational weaknesses. The substantial reset of the preferred stock conversion ratio due to dilutive financing indicates significant value erosion. The company's limited operating history, lack of revenue, and need for future capital raises, coupled with the inherent risks of clinical development in the biotech sector, suggest a high-risk investment profile. Investors should consider selling to avoid further potential losses from delisting or continued stock price decline.

Keywords

Decoy Therapeutics, Salarius Pharmaceuticals, SEC filing, Proxy Statement, Special Meeting, Equity Incentive Plan, Reverse Stock Split, Nasdaq Listing, Delisting Risk, Corporate Governance, Stock Options, Preferred Stock, Merger, DCOY, SLRX, Biotechnology, Pharmaceuticals