Market Overview

Flex Pharma Reports First Quarter 2019 Financial Results

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Flex
Pharma, Inc.
(NASDAQ:FLKS), today announced its financial results
for the three months ended March 31, 2019.

On January 3, 2019, Flex Pharma (the "Company") and Salarius
Pharmaceuticals, LLC ("Salarius") entered into an Agreement and Plan of
Merger (the "Merger Agreement") pursuant to which, among other things,
Falcon Acquisition Sub, LLC, a wholly owned subsidiary of the Company,
will merge with and into Salarius, with Salarius continuing as a wholly
owned subsidiary of the Company and the surviving company. The Company
has filed a registration statement on Form S-4 with the Securities and
Exchange Commission (the "SEC") that provides additional information
related to the merger. The Company is holding a special meeting of its
stockholders on June 14, 2019, in order to obtain the necessary
stockholder approvals to complete the merger and related matters. The
merger is expected to close in the first half of 2019. The Company
continues to sell HOTSHOT, its consumer product that helps to prevent
and treat exercise associated muscle cramps.

The Merger Agreement (i) values Flex Pharma at $10.5 million, subject to
adjustment, on a dollar-for-dollar basis, based on Flex Pharma's net
cash balance at the closing of the merger compared to a target net cash
of $3.3 million, and (ii) values Salarius at $36.6 million, subject to
adjustment, on a dollar-for-dollar basis, based on the sale of Series A
Preferred Units pursuant to subscription agreements that Salarius
entered into prior to the Merger Agreement compared to the target sale
of $7.0 million of Series A Preferred Units.

Under the Merger Agreement, immediately following the effective time of
the merger, Flex Pharma's current stockholders will own approximately
19.9% of the combined company, on a partially-diluted basis, and
Salarius' current members will own approximately 80.1% of the combined
company, on a partially-diluted basis.

In addition, at or prior to the closing of the merger, Flex Pharma will
pay a dividend of or distribute one right per share of the Company's
common stock to its stockholders of record as of a date and time
determined by the Company's board of directors. Each right will entitle
such stockholders to receive a warrant to purchase shares of Flex
Pharma's common stock ("Warrant") six months and one day following the
closing date of the merger.

The aggregate value of all of the Warrants to be issued to Flex Pharma's
stockholders generally represents the difference between (i) Flex
Pharma's value per the Merger Agreement and (ii) the value of Flex
Pharma's common stock that Flex Pharma's current stockholders will have
in the combined company.

"We continue to believe that a merger with Salarius is the best
opportunity for significant near- and long-term value creation for Flex
stockholders. Salarius' lead compound, Seclidemstat, is currently
enrolling patients in an open-label Phase 1 dose escalation/dose
expansion study in Ewing sarcoma and Salarius is also preparing to
initiate additional studies in advanced solid tumors, including
prostate, breast and ovarian cancers. We believe that Salarius could be
poised to address significant unmet needs in oncology and we look
forward to completing the merger with Salarius," stated William McVicar,
Ph.D., Flex Pharma's President and Chief Executive Officer.

First Quarter 2019 Financial Results

  • Cash Position: As of March 31, 2019, Flex Pharma had cash and
    cash equivalents of $7.3 million. The Company held no marketable
    securities at March 31, 2019. During the three months ended March 31,
    2019, cash and cash equivalents decreased by $2.5 million.
  • Total Revenue: Total revenue for the three months ended March
    31, 2019 was approximately $105,000.
  • Cost of Product Revenue: Cost of product revenue for the three
    months ended March 31, 2019 was approximately $47,000. There were no
    inventory write-offs during the three months ended March 31, 2019.
  • R&D Expense: Research and development expense for the three
    months ended March 31, 2019 was approximately $2,000.
  • SG&A Expense: Selling, general and administrative expense
    for the three months ended March 31, 2019 was $2.3 million, including
    merger related costs of $1.2 million. Selling, general and
    administrative expense for this period also included personnel costs
    (including salaries and stock-based compensation costs), fulfillment
    costs related to HOTSHOT, legal and professional costs, and external
    consultant costs.
  • Net Loss and Cash Flow: Net loss for the three months ended
    March 31, 2019 was ($2.2) million, or ($0.12) per share and included
    $0.2 million of stock-based compensation expense. As of March 31,
    2019, Flex Pharma had 18,068,017 shares of common stock outstanding.
    The net loss for the first quarter of 2019, was primarily driven by
    the Company's operating expenses related to its merger related costs,
    costs associated with HOTSHOT, and general and administrative costs.

About Flex Pharma

Flex Pharma, Inc. is a clinical-stage biotechnology company founded
by National Academy of Science members Rod MacKinnon, M.D. (2003 Nobel
Laureate), and Bruce Bean, Ph.D., recognized leaders in the fields of
ion channels and neurobiology.

Forward-Looking Statements

This press release contains forward-looking statements for purposes of
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements include statements
regarding our intentions, beliefs, projections, outlook, analyses or
current expectations concerning, among other things, the proposed
transaction with Salarius and other related transactions (including
statements relating to the expected ownership of the combined company
and the anticipating timing and effects of the transaction, including as
to value creation and growth opportunities). These forward-looking
statements are usually identified by the use of words such as
"anticipates," "believes," "estimates," "expects," "intends," "may,"
"plans," "projects," "seeks," "should," "will," and variations of such
words or similar expressions. These forward-looking statements are based
on management's expectations and assumptions as of the date of this
press release and are subject to numerous risks and uncertainties, which
could cause actual results to differ materially from those expressed or
implied by such statements. These risks and uncertainties include,
without limitation: inability to complete the proposed transaction and
other contemplated transactions; costs and potential litigation
associated with the proposed transaction; failure or delay in obtaining
required approvals by the SEC, Nasdaq or any other governmental or
quasi-governmental entity necessary to consummate the proposed
transaction, which may also result in unexpected additional transaction
expenses and operating cash expenditures on the parties; failure to
obtain the necessary stockholder and member approvals or to satisfy
other conditions to the closing of the proposed transaction and the
other contemplated transactions; a superior proposal being submitted to
either party; the ability of the proposed transaction to increase
stockholder value; an inability or delay in obtaining required
regulatory approvals for product candidates, which may result in
unexpected cost expenditures; risks inherent in drug development in
general; uncertainties in obtaining successful clinical results for
product candidates and unexpected costs that may result therefrom;
failure to realize any value of certain product candidates developed and
being developed in light of inherent risks and difficulties involved in
successfully bringing product candidates to market; inability to develop
new product candidates and support existing products; the approval by
the Food and Drug Administration and any other similar foreign
regulatory authorities of other competing or superior products brought
to market; risks resulting from unforeseen side effects; risk that the
market for the combined company's products may not be as large as
expected; inability to obtain, maintain and enforce patents and other
intellectual property rights or the unexpected costs associated with
such enforcement or litigation; inability to obtain and maintain
commercial manufacturing arrangements with third-party manufacturers or
establish commercial scale manufacturing capabilities; loss of or
diminished demand from one or more key customers or distributors;
unexpected cost increases and pricing pressures; continuing or deepening
economic recession and its negative impact on customers, vendors or
suppliers; uncertainties of cash flows, expenses and inability to meet
working capital needs; cost reductions that may not result in
anticipated level of cost savings or cost reductions prior to or after
the consummation of the proposed transaction; risks associated with the
possible failure to realize certain benefits of the proposed
transaction, including future financial, tax, accounting treatment and
operating results; failure to maintain the combined company's management
team or board of directors; and other risks and uncertainties detailed
in the risk factors section of Flex Pharma's registration statement on
Form S-4, Form 10-K and Forms 10-Q filed with the SEC, as well as other
filings Flex Pharma makes with the SEC from time-to-time. You are
encouraged to read our filings with the SEC, available at www.sec.gov,
for a discussion of these and other risks and uncertainties. Any
forward-looking statements that we make in this press release speak only
as of the date of this press release. We assume no obligation to update
our forward-looking statements whether as a result of new information,
future events or otherwise, after the date of this press release except
as required by law.

Additional Information and Where to Find It

This communication may be deemed to be solicitation material in respect
of the proposed transaction. On February 14, 2019, and as amended on
March 26, 2019 and April 18, 2019, in connection with the proposed
transaction, Flex Pharma filed a registration statement with the SEC on
Form S-4 containing a proxy statement/prospectus/information statement.
On April 30,2019, Flex Pharma filed a definitive proxy
statement/prospectus/information statement with the SEC. Flex Pharma
will mail the definitive proxy statement/prospectus/information
statement to Flex Pharma stockholders of record as of the close of
business on April 17, 2019 and members of Salarius. FLEX PHARMA
URGES INVESTORS AND EQUITYHOLDERS OF FLEX PHARMA AND SALARIUS TO READ
THE DEFINITIVE PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT
REGARDING THE PROPOSED TRANSACTION, AS WELL AS OTHER DOCUMENTS FILED OR
THAT WILL BE FILED WITH THE SEC, BECAUSE THEY CONTAIN OR WILL CONTAIN
IMPORTANT INFORMATION ABOUT FLEX PHARMA, SALARIUS AND THE PROPOSED
TRANSACTION.
 This communication is not a substitute for the
registration statement, definitive proxy
statement/prospectus/information statement or any other documents that
Flex Pharma has filed or may file with the SEC or send to Flex Pharma or
Salarius equity holders in connection with the proposed transaction.
Before making any voting decision, investors and equity holders are
urged to read the registration statement, definitive proxy
statement/prospectus/information statement and all other relevant
documents filed or that will be filed with the SEC in connection with
the proposed transaction as they become available because they will
contain important information about the proposed transaction and related
matters.

You may obtain free copies of the registration statement, definitive
proxy statement/prospectus/information statement and all other documents
filed or that will be filed with the SEC regarding the proposed
transaction at the website maintained by the SEC, www.sec.gov. Once
they are filed, copies of the registration statement and definitive
proxy statement/prospectus/information statement will be available free
of charge on Flex Pharma's website at www.flex-pharma.com or
by contacting John McCabe at jmccabe@flex-pharma.com.

Participants in Solicitation

Flex Pharma, Salarius and their respective directors or managers and
executive officers may be deemed to be participants in the solicitation
of proxies from the holders of Flex Pharma common stock in connection
with the proposed transaction. Information about Flex Pharma's directors
and executive officers is set forth in Flex Pharma's Annual Report on
Form 10-K for the period ended December 31, 2018, which was filed with
the SEC on March 6, 2019, and amended on April 16, 2019. Other
information regarding the interests of such individuals, as well as
information regarding Salarius' managers and executive officers and
other persons who may be deemed participants in the proposed
transaction, is set forth in the definitive proxy
statement/prospectus/information statement. You may obtain free copies
of these documents as described in the preceding paragraph.

Non-Solicitation

This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to buy
any securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of any
such jurisdiction. No public offer of securities in connection with the
merger shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as amended.

- Financial Tables to Follow -

Flex Pharma, Inc.
Unaudited Selected Consolidated
Balance Sheet Information

(in thousands)
       

March 31,
2019

 

December 31,
2018

 

Assets:
Cash and cash equivalents $ 7,297 $ 9,830
Accounts receivable 9 10
Inventory 165 187
Prepaid expenses and other current assets 675 289
Property and equipment, net 38   74
Total assets $ 8,184   $ 10,390
 
Liabilities and stockholders' equity:
Accounts payable and accrued expenses $ 911 $ 1,107
Stockholders' equity 7,273   9,283
Total liabilities and stockholders' equity $ 8,184   $ 10,390
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