S-1/A: Virpax Pharmaceuticals Eyes $15 Million Capital Infusion Through Securities Offering

Virpax Pharmaceuticals is seeking to raise capital through an offering of common stock, warrants, and pre-funded warrants, aiming to bolster its financial position and advance its drug development programs.

Summary

• Virpax Pharmaceuticals is offering up to 1,886,792 shares of common stock, along with Series A-1 and A-2 common warrants, based on an assumed offering price of $2.65 per share.
• The company is also offering pre-funded warrants as an alternative to common stock for investors who would exceed beneficial ownership limitations.
• Each pre-funded warrant will be immediately exercisable for one share of common stock at a nominal exercise price of $0.00001.
• The Series A-1 warrants will have an exercise price equal to the offering price and expire five years from issuance, while the Series A-2 warrants will have the same exercise price but expire after 18 months.
• The offering is being conducted on a best efforts basis with A.G.P./Alliance Global Partners acting as the exclusive placement agent.
• The offering is expected to terminate on May 25, 2024, unless fully subscribed or terminated earlier.
• Net proceeds are estimated at $4.4 million, which will be used to pay $2.5 million related to a settlement agreement, fund product development, and for general corporate purposes.
• The company's stock is listed on the Nasdaq Capital Market under the symbol VRPX.
• The company has agreed to pay the Placement Agent a total cash fee equal to 6.5% of the gross proceeds of the offering except that, with respect to proceeds raised in this offering from shares of Common Stock to be sold to certain identified investors, the placement agent fee will be 3.25% of such proceeds, inclusive of a financial advisory fee payable to Maxim Group LLC in the amount of $75,000.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While the capital raise is necessary for the company's operations, it also presents risks of dilution and potential market price decrease. The company's need for additional funding and the lack of profitability contribute to the neutral outlook.

Positives

• The offering provides capital to address a $2.5 million settlement obligation.
• The offering provides capital to fund product development activities.
• The offering provides capital for working capital and other general corporate purposes.

Negatives

• The company may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received by us.
• The company may need to raise additional funds, which may not be available or available on terms acceptable to us.
• Investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient to pursue the business goals outlined in this prospectus.
• If you purchase shares of our Common Stock sold in this offering, you will experience immediate and substantial dilution in the net tangible book value of your shares.
• There is no public market for the Pre-Funded Warrants and Common Warrants being offered in this offering.
• Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a de-listing of our common stock.

Risks

• The company will need additional future financing which may not be available on acceptable terms, if at all and will result in the issuance of additional securities being issued which will cause investors to experience further dilution.
• The company may issue securities convertible or exchangeable into Common Stock, in future transactions.
• The issuance of any such derivative securities, which is at the discretion of our Board of Directors, may further dilute the equity ownership of our stockholders.
• Even if we raise the maximum offering amount, we will need substantial additional financing in order to file our Investigational New Drug Application (IND) for Probudur.
• If we do not succeed in raising additional funds on acceptable terms, we will be unable to file our IND or obtain approval of our product candidate from the FDA and other regulatory authorities.
• Even if we do succeed in raising additional funds on acceptable terms, we may not be able to file our IND or obtain approval of our product candidate from the FDA and other regulatory authorities.
• In addition, we could be forced to delay, discontinue or curtail product development, forego research and development activities.
• Our management has broad discretion in using the net proceeds from this offering.
• If Mr. Mack were to seek indemnification and/ or damages from us, we will be required to use the proceeds from this offering to make such payments.
• This is a reasonable best efforts offering, with no minimum amount of Securities required to be sold, and we may sell fewer than all of the Securities offered hereby.
• This offering may cause the trading price of our Common Stock to decrease.
• Because we will not declare cash dividends on our Common Stock in the foreseeable future, stockholders must rely on appreciation of the value of our Common Stock for any return on their investment.
• Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a de-listing of our common stock.

Future Outlook

The company intends to use the net proceeds from this offering to pay the $2.5 million that we are obligated to pay to the Plaintiffs pursuant to the Settlement Agreement and for working capital and other general corporate purposes.

Industry Context

The announcement reflects a common strategy for preclinical-stage pharmaceutical companies to raise capital to fund research and development activities.

Comparison to Industry Standards

• Comparable companies in the biopharmaceutical sector, such as [insert names of comparable companies], often utilize similar financing methods, including offerings of common stock and warrants.
• The terms of the warrants, including exercise price and expiration dates, are generally consistent with industry standards for similar offerings.
• The use of a placement agent and the associated fees are also typical for this type of transaction.

Legal Proceedings

• The company entered into a Settlement Agreement and Mutual Release with Sorrento Therapeutics, Inc. and Scilex Pharmaceuticals Inc. to fully resolve all claims by the Plaintiffs against the Company related to the litigation captioned Sorrento Therapeutics, Inc. and Scilex Pharmaceuticals Inc. v. Anthony Mack and Virpax Pharmaceuticals, Inc., Case No. 2021-0210-PAF (the Action), subject to the entry by the United States Bankruptcy Court for the Southern District of Texas, which is handling the Sorrento bankruptcy filing (the Bankruptcy Court), of an order approving the Settlement Agreement (the Settlement Order).

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares and warrants.
• The capital raised will support the company's operations and development programs, potentially benefiting employees and other stakeholders.
• The company's ability to meet its financial obligations, including the settlement payment, is dependent on the success of the offering.

Next Steps

• The company will seek to close the offering by May 25, 2024.
• The company will apply to list the shares and warrant shares on the Nasdaq Capital Market.
• The company will use the net proceeds to fund its operations and development programs.

Key Dates

Keywords

common stock, warrants, pre-funded warrants, securities offering, capital raise, Virpax Pharmaceuticals, placement agent, stock dilution, Nasdaq, biopharmaceutical