Business Context and Reporting Period
This Form 8-K, dated December 13, 2020, reports the entry into a Material Definitive Agreement by Big Rock Partners Acquisition Corp. (BRPA) to merge with NeuroRx, Inc. (NeuroRx). NeuroRx is a clinical-stage small molecule pharmaceutical company developing therapeutics for central nervous system disorders and pulmonary diseases. The transaction is expected to be consummated in the first half of 2021, subject to stockholder approvals and other conditions.
Key Financial Metrics and Transaction Terms
The filing details the merger consideration rather than historical financial performance metrics such as revenue or profit, as NeuroRx is a clinical-stage company. Key financial terms include:
- Closing Consideration: 50,000,000 shares of BRPA common stock.
- Earnout Shares: Up to 25,000,000 additional shares of BRPA common stock contingent on FDA Emergency Use Authorization and New Drug Application filing for the NeuroRx COVID-19 Drug (RLF-100/SamiAir) by December 31, 2022.
- Earnout Cash: Up to $100,000,000 in cash contingent on FDA approval and Orange Book listing for either the NeuroRx COVID-19 Drug or the NeuroRx Antidepressant Drug Regimen (NRX-100/101) by December 31, 2022.
- Net Tangible Assets Requirement: BRPA must have at least $5,000,001 of net tangible assets at closing.
- Debt Limit: Outstanding loans to BRPA must not exceed $3,000,000 at closing.
Material Changes and Governance
Upon consummation, NeuroRx will become a wholly-owned subsidiary of BRPA. The current officers and directors of BRPA will resign, and the current officers of NeuroRx will become the officers of the combined company. Approximately 63% of NeuroRx stockholders will be subject to a lock-up agreement restricting the transfer of shares for six months or until the stock price reaches $12.00 per share for 20 trading days within a 30-day period.
Guidance, Risks, and Contingencies
The transaction is subject to numerous conditions, including stockholder approvals from both BRPA and NeuroRx, the effectiveness of a Form S-4 registration statement, and Nasdaq listing approval. A termination fee of $10,000,000 is payable to BRPA if NeuroRx terminates the agreement to pursue a superior proposal. Significant risks include the uncertainty of FDA approvals for NeuroRx's drug candidates, the ability to complete the business combination by the April 23, 2021 deadline, and the potential disruption of NeuroRx's operations.
Investor Verification Checklist
- Verify the status of stockholder approvals required from both BRPA and NeuroRx.
- Confirm the filing and effectiveness of the Form S-4 registration statement.
- Monitor the progress of FDA reviews for RLF-100 (SamiAir) and NRX-100/101 to assess the likelihood of earning the $100 million cash and 25 million share earnouts.
- Review the upcoming proxy statement for details on the combined company's capital structure and pro forma financials.
- Check for any updates regarding the $3,000,000 debt limit condition for BRPA.