Equity

9 Months Ended

Sep. 30, 2023

Equity

Equity

9. Equity

Common Stock

Pursuant to the terms of the Company’s Second Amended and Restated Certificate of Incorporation, the Company has authorized 500,000,000 shares of common stock with a par value of $0.001.

As discussed above in Note 2, on March 8, 2023, NRx Pharmaceuticals entered into a securities purchase agreement with the March Investors, providing for the issuance and sale of 3,866,666 shares of Common Stock and the March Investor Warrants to purchase up to 3,866,666 shares of Common Stock in a registered direct offering priced at-the-market under Nasdaq rules for a purchase price of $0.75 per share. The March Investor Warrants have an exercise price of $0.75 per share, are exercisable beginning on September 8, 2023 and will expire 5 years from the March Initial Exercise Date. The March Investors agreed not to transfer the Common Stock for six months following the date of issuance. The aggregate gross proceeds to the Company from the March Offering were approximately $2.9 million. The Company intends to use the net proceeds from such offering for working capital and general corporate purposes. The closing of the sale of these securities occurred on March 9, 2023. The securities were issued pursuant to the Company’s registration statement on Form S-3 filed with the SEC on June 9, 2022 (File No. 333-265492) which became effective on June 21, 2022.

On February 8, 2023, the Company entered into a letter agreement with H.C. Wainwright & Co., LLC. Although they did not act as the placement agent with respect to the March Offering, H.C. Wainwright & Co., LLC was paid a cash fee equal to 3.0% of the amount raised, or approximately $0.1 million, pursuant to the letter agreement.

On June 6, 2023, the Company entered into a securities purchase agreement with the June Investors, providing for the issuance and sale of 9,670,002 shares of the Company’s Common Stock and the June Investor Warrants to purchase up to 9,670,002 shares of Common Stock. The Common Stock was issued in a registered direct offering for a purchase price of $0.65 per share and the June Investor Warrants were offered pursuant to a private placement under Section 4(a)(2) of the Securities Act. The aggregate net cash proceeds to the Company from the June Offering were approximately $5.7 million. The Company intends to use the net proceeds from the June Offering for working capital and general corporate purposes.

H.C. Wainwright & Co. LLC acted as the exclusive placement agent (the “Placement Agent”) for the June 2023 Offering. The Placement Agent was paid a cash fee equal to 6.5% of the gross proceeds received by the Company from the sale of the securities at the closing of the June Offering or approximately $0.6 million. The Company intends to use the net proceeds from such offering for working capital and general corporate purposes.

The Company sold 7,824,727 shares of common stock during the nine months ended September 30, 2022 and received gross proceeds of $23.0 million.

Preferred Stock

Pursuant to the terms of the Company’s Second Amended and Restated Certificate of Incorporation, the Company has authorized 50,000,000 shares of preferred stock with a par value of $0.001.

Series A Convertible Preferred Stock

On August 30, 2023, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (“Series A Preferred Stock”) with the Delaware Secretary of State (the “Certificate of Designation”) authorizing up to 12,000,000 shares of Series A Preferred Stock.  

During the three months ended September 30, 2023, the Company sold and issued 3.0 million shares of Series A Preferred Stock. Each share of Series A Preferred Stock was sold with one warrant (a “Unit") for an aggregate cash purchase price of $1,200,000 or $0.40 per Unit.  

Dividend Rights 

The holders of Series A Preferred Stock are not be entitled to receive any dividends in respect to the Series A Preferred Stock. 

Voting Rights 

The holders of Series A Preferred Stock have no voting rights other than for an affirmative vote in order for the Company to (a) disproportionally alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend the Certificate of Designation, (b) amend its certificate of incorporation or other charter documents in any manner that disproportionally adversely affects any rights of the Holders, (c) increase or decrease the number of authorized shares of Series A Preferred Stock or (d) enter into any agreement with respect to any of the foregoing.  

Conversion Rights 

The holders of the Series A Preferred Stock have the right to convert their shares to common stock at any time after the six (6) month anniversary from issuance unless the closing share price of the Company’s Common Stock equals or exceeds $1.20 per share on any trading day. Each share of Series A Preferred Stock is initially convertible into a number of shares

of Common Stock equal to the number of shares of Series A Preferred Stock being converted. Notwithstanding the foregoing, no share of Series A Preferred Stock shall be convertible during the six (6) month period following the issuance date; provided, however, if the Common Stock trades at or above $1.20 per share (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events), as reported on Bloomberg, L.P. on any trading day, holder may convert the Series A Preferred Stock prior to the six (6) month anniversary of the issuance date. No fractional shares will be issued upon conversion. Conversion is subject to certain limitations, including the holder not owning more than 4.9% of the outstanding shares of Common Stock.  

Liquidation Rights 

Upon any liquidation, dissolution or winding up of the Company (a “Liquidation”), whether voluntary or involuntary, each holder of Series A Preferred Stock shall be entitled to receive the amount of cash, securities or other property to which such holder would be entitled to receive if such shares had been converted to Common Stock immediately prior to such Liquidation, subject to certain rights and limitations. 

Common Stock Warrants

Substitute Warrants

In connection with the Merger, each warrant to purchase shares of common stock of NeuroRx that was outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) was assumed by BRPA and converted into a warrant, based on the Exchange Ratio (of 3.16), that will continue to be governed by substantially the same terms and conditions, including vesting, as were applicable to the former warrant (the “Substitute Warrants”). As these Substitute Warrants meet the definition of a derivative as contemplated in ASC 815, the Substitute Warrants were recorded as derivative liabilities on the balance sheet and measured at fair value at inception (on the date of the Merger) and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the statements of operations in the period of change. 

The Company recognized a gain and loss on the change in fair value of the Substitute Warrants for the three months ended September 30, 2023 and 2022 of less than $0.1 million and less than $0.1 million, respectively. The Company recognized a gain on the change in fair value of the Substitute Warrants for the nine months ended September 30, 2023 and 2022 of less than $0.1 million and $0.1 million, respectively. Refer to Note 11 for further discussion of fair value measurement of the warrant liabilities.

Assumed Public Warrants

Prior to the Merger, the Company had 3,450,000 Public Warrants outstanding (the “Public Warrants”). Each Public Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $11.50 per share. The Public Warrants became exercisable at the Effective Time of the Merger and expire five years after the Effective Time or earlier upon their redemption or liquidation of the Company.

During the three and nine months ended September 30, 2023 and 2022 no Public Warrants were exercised.

Assumed Private Placement Warrants

Prior to the Merger, the Company had outstanding 136,250 Private Placement Warrants (the “Private Placement Warrants”). The Private Placement Warrants are not indexed to the Company’s common shares in the manner contemplated by ASC 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity

shares. The Company classifies the Private Placement Warrants as derivative liabilities in its Unaudited Condensed Consolidated Balance Sheet as of September 30, 2023. The Company measures the fair value of the Private Placement Warrants at the end of each reporting period and recognizes changes in the fair value from the prior period in the Company’s statements of operations for the current period.

The Company recognized a gain on the change in fair value of the Private Placement Warrants for the three months ended September 30, 2023 and 2022 of less than $0.1 million and less than $0.1 million, respectively. The Company recognized a gain on the change in fair value of the Private Placement Warrants for the nine months ended September 30, 2023 and 2022 of less than $0.1 million and $0.2 million, respectively. Refer to Note 11 for discussion of the fair value measurement of the Company’s warrant liabilities.

Investor Warrants

As discussed above, on March 8, 2023, in conjunction with the issuance and sale of 3,866,666 shares of the Company’s Common Stock, the Company issued 3,866,666 March Investor Warrants which were classified in stockholder’s equity. The measurement of fair value of the March Investor Warrants were determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $0.72, exercise price of $0.75, term of five and a half years, volatility of 123.6%, risk-free rate of 4.34%, and expected dividend rate of 0%). The March Investor Warrants have an exercise price of $0.75 per share, are initially exercisable beginning six months following the March Initial Exercise Date and will expire five and a half years from the March Initial Exercise Date.  The grant date fair value of these March Investor Warrants was estimated to be $2.4 million on March 8, 2023 and is reflected within additional paid-in capital.

The Company issued warrants to the Placement Agent with an exercise price of $0.81 (the “June Placement Agent Warrants”). As these June Placement Agent Warrants were issued for services provided in facilitating the June Offering, the Company recorded the fair value of such June Placement Agent Warrants of approximately $0.1 million as a cost of capital on the issuance date. The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $0.53, exercise price of $0.81, term of five and a half years, volatility of 175.1%, risk-free rate of 3.85%, and expected dividend rate of 0%).

In connection with the June Offering, the Company also entered into a warrant amendment agreement (the “Warrant Amendment Agreement”) with certain investors to amend certain existing warrants to purchase up to 9,622,778 shares of Common Stock that were previously issued in August 2021 and February 2022 to such investors, with an exercise price of $3.07 and $12.00 per share, respectively (the “Amended Warrants”) as follows: (i) lower the exercise price of the Amended Warrants to $0.6525 per share, and (ii) provide that the Amended Warrants, as amended, will not be exercisable until six months following the closing date of the June Offering, and (iii) extend the original expiration date of the Amended Warrants so that they will terminate five and one half years from the closing of the June Offering.

The Company recorded the incremental change in fair value of such Amended Warrants of $1.7 million as a cost of capital to issue the June Investor Warrants. The measurement of fair value for the Amended Warrants was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $0.53, exercise price of $0.65, term of five and a half years, volatility of 175.1%, risk-free rate of 3.85%, and expected dividend rate of 0%).

As discussed above, On August 28, 2023, in conjunction with the issuance and sale of 3,000,000 shares of the Company’s Series A Convertible Preferred Stock, the Company issued 3,000,000 August Investor Warrants which were classified in stockholder’s equity. The measurement of fair value of the August Investor Warrants were determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $0.30, exercise price of $0.40, term of five years, volatility of 175.1%, risk-free rate of 4.38%, and expected dividend rate of 0%). The grant

date fair value of these August Investor Warrants was estimated to be $0.8 million on August 28, 2023 and is reflected within additional paid-in capital. 

The following table provides the activity for all warrants for the respective periods.

		Weighted
		Average	Weighted		Aggregate
		Remaining	Average		Intrinsic Value
	Total Warrants	Term	Exercise Price		(in thousands)
Outstanding as of December 31, 2022	16,484,923	3.59	$	6.49		—
Issued	3,866,666	4.69		0.75		—
Outstanding as of March 31, 2023	20,351,589	3.65		5.40		—
Issued	9,670,002	4.94		0.65		—
Outstanding as of June 30, 2023	30,021,591	4.36	$	2.51		—
Issued	3,000,000	4.92		0.40		—
Outstanding as of September 30, 2023	33,021,591	4.28	$	2.32	$	—