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Item 1. Financial Statements

2022-05-16 compared with 2021-11-15 · 231 added, 574 removed, 375 unchanged (68% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2021

(in thousands, except share and per share data)

March 31, 2022

December 31, 2021

Current assets:

Account receivable, net of allowance of $ 257,463 as of December 31, 2020

Prepaid expenses and other current assets

Total current assets

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Warrant liabilities

Notes payable and accrued interest

Accrued settlement expense

Total current liabilities

Notes payable and accrued interest

Note payable and accrued interest

Total liabilities

Stockholders’ equity (deficit):

Stockholders’ equity:

Preferred stock, $ 0.001 par value, 50,000,000 shares authorized;

0 shares issued and outstanding at September 30, 2021 and December 31, 2020

0 shares issued and outstanding at March 31, 2022 and December31, 2021, respectively

Common stock, $ 0.001 par value, 500,000,000 shares authorized;

54,810,338 and 42,973,462 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

66,641,314 and 58,810,550 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

Accumulated deficit

( 152,449,666 )

( 90,179,720 )

Total stockholders’ equity (deficit)

( 43,770,883 )

Total stockholders’ equity

Total liabilities and stockholders' equity

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

Three months ended

Nine months ended

September 30,

Operating expenses:

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Reimbursement of expenses from Relief Therapeutics

( 2,936,214 )

( 4,957,145 )

Total operating expenses

Loss from operations

( 20,099,151 )

( 5,149,199 )

( 62,820,469 )

( 6,264,363 )

Other (income) expenses:

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Change in fair value of warrant liability

( 1,208,412 )

Change in fair value of Earnout Cash liability

Change in fair value of embedded put

Loss on conversion of convertible notes payable

Total other (income) expenses

Loss before tax

( 20,773,099 )

( 5,161,712 )

( 62,269,946 )

( 6,649,481 )

Provision for income taxes

( 20,773,099 )

( 5,161,712 )

( 62,269,946 )

( 6,649,481 )

Deemed dividend - warrants

( 2,691,799 )

Deemed dividend - Earnout Shares

( 253,130,272 )

Net loss attributable to common stockholders

( 20,773,099 )

( 5,161,712 )

( 318,092,017 )

( 6,649,481 )

Net loss per share:

Basic and diluted

Net loss per share attributable to common stockholders:

Basic and diluted

Weighted average common shares outstanding:

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NRX PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

Stockholders’

Equity (Deficit)

Balance - December 31, 2020 (as previously reported)

( 90,179,720 )

( 43,778,472 )

Retroactive application of reverse recapitalization (Note 4)

( 1,000,000 )

( 1,050,695 )

Balance - December 31, 2020 effect of Merger (Note 4)

( 90,179,720 )

( 43,770,883 )

Common stock issued

Proceeds from issuance of common stock for exercise of warrant

Reclassification of settlement liability upon issuance of warrant

Stock-based compensation

( 25,488,874 )

Balance - March 31, 2021

( 115,668,594 )

Common stock issued

Effect of Merger and recapitalization, net of redemptions and issuance costs of $ 1,412,846

( 26,618,326 )

( 26,615,796 )

Common stock issued pursuant to PIPE financing, net of issuance costs of $ 1,900,000

Common stock issued for advisor services

Modification of option awards pursuant to Merger

Modification of warrants pursuant to Merger

Stock-based compensation

( 16,007,973 )

Balance - June 30, 2021

( 131,676,567 )

( 17,437,343 )

Common stock issued

Balance December 31, 2021

Common stock and warrants issued in private placement, net of issuance costs of $ 2,020

Issuance of common stock for exercise of warrants and Unit Purchase Options

Common stock issued for consulting services

Stock-based compensation

( 20,773,099 )

Balance - September 30, 2021

( 152,449,666 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NRX PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

Preferred Stock

Balance - March 31, 2022

Stockholders’

Equity (Deficit)

Balance - December 31, 2019 (as previously reported)

( 38,402,816 )

( 4,850,950 )

Retroactive application of reverse recapitalization (Note 4)

( 1,000,000 )

( 1,050,695 )

Balance - December 31, 2019, effect of Merger (Note 4)

( 38,402,816 )

( 4,843,405 )

Balance - December 31, 2020

Common stock issued

Series B-2 convertible preferred stock issued

Proceeds from issuance of common stock for exercise of warrant

Reclassification of settlement liability upon issuance of warrant

Stock-based compensation

( 1,590,056 )

Balance - March 31, 2021

( 39,992,872 )

( 6,117,620 )

Stock-based compensation

Balance - June 30, 2020

( 39,890,585 )

( 5,921,867 )

Common stock issued

Common stock issued to settle note conversion

Warrants issued as compensation for services

Stock-based compensation

( 5,161,712 )

Balance - September 30, 2020

( 45,052,297 )

( 2,828,954 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended September 30,

(in thousands)

Three months ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

( 62,269,946 )

( 6,649,481 )

Adjustments to reconcile net loss to net cash used in operating activities:

1 unchanged sentence

Stock-based compensation

Warrant expense

Gain on extinguishment of debt

Change in fair value of warrant liabilities

( 1,208,412 )

Change in fair value of earnout cash liability

Change in fair value of embedded put

Amortization of debt discount

Non-cash interest expense

Non-cash settlement expense

Non-cash consulting expense

Loss on conversion of notes payable

Changes in operating assets and liabilities:

Accounts receivable

( 1,254,090 )

Prepaid expenses and other assets

( 6,051,045 )

Accounts payable

1 unchanged sentence

Net cash used in operating activities

( 26,423,097 )

( 1,858,294 )

CASH FLOWS FROM INVESTING ACTIVITIES

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CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from notes payable

Proceeds from issuance of series B-2 Preferred stock

Proceeds from issuance of common stock and exercise of stock options, net of transaction costs

Proceeds from issuance of common stock, net of transaction costs

Proceeds from issuance of common stock for exercise of warrant

Proceeds from issuance of common stock and warrants issued in private placement, net of issuance costs

Effect of Merger, net of transaction costs

Repayment of notes payable assumed in Merger

( 1,100,000 )

Repayment of notes payable - related party

Net cash provided by financing activities

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Reclassification of settlement liability upon issuance of warrant

Extinguishment of Paycheck Protection Program Loan

Issuance of common stock warrants as offering costs

Conversion of notes payable into common stock

The accompanying notes are an integral part of these consolidated financial statements.

Extinguishment of Paycheck Protection Program Loan

Issuance of common stock for settlement of accrued liability

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

NRX PHARMACEUTICALS, INC.

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On May 24, 2021 (“Effective Time”), we consummated the business combination (“Merger”) contemplated by the Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated December 13, 2020, by and among our company (formerly known as Big Rock Partners Acquisition Corp.

(“BRPA”)), NeuroRx, Inc., a Delaware corporation (“NeuroRx”), Big Rock Merger Corp., a Delaware corporation and wholly-owned, direct subsidiary of BRPA (“Merger Sub”), pursuant to which Merger Sub was merged with and into NeuroRx, with NeuroRx surviving the Merger.

(“BRPA”)), NeuroRx, Inc., a Delaware corporation (“NeuroRx”), and Big Rock Merger Corp., a Delaware corporation and wholly-owned, direct subsidiary of BRPA (“Merger Sub”), pursuant to which Merger Sub was merged with and into NeuroRx, with NeuroRx surviving the Merger.

As a result of the Merger, and upon consummation of the Merger and other transactions contemplated by the Merger Agreement, NeuroRx became a wholly-owned, direct subsidiary of BRPA.

Upon the closing of the Merger, we changed our name to NRX Pharmaceuticals, Inc., with the stockholders of NeuroRx becoming stockholders of NRX Pharmaceuticals.

Unless the context suggests otherwises, references to “NRx Pharmaceuticals,” “NeuroRx”, “NRXP,” “we,” or the “Company” refer to NRX Pharmaceuticals, Inc.

Upon the closing of the Merger, we changed our name to NRX Pharmaceuticals, Inc., with the stockholders of NeuroRx becoming stockholders of NRX Pharmaceuticals, Inc.

Unless the context suggests otherwise, references to “NRx Pharmaceuticals,” “NeuroRx”, “NRXP,” “we,” or the “Company” refer to NRX Pharmaceuticals, Inc.

and, where appropriate, its subsidiaries.

The Company is a clinical-stage pharmaceutical company that develops novel therapeutics for the treatment of central nervous system disorders and both the treatment and prevention of life-threatening pulmonary diseases through its wholly-owned operating subsidiary, NeuroRx.

The Company's foundation product, NRX-101 (d-Cyloserine/Lurasidone), for the treatment of suicidal bipolar depression, has been awarded Fast Track designation, Breakthrough Therapy designation, a Special Protocol Agreement, and a Biomarker Letter of Support by the US Food and Drug Administration (FDA).

NRX-101 is covered by multiple US and foreign patents, including a recently-issued Composition of Matter patent (U.S.

10,583,138) that was transferred to NRx by Glytech, Inc.

On September 18, 2020, the Company entered into a collaboration agreement with Relief Therapeutics Holding AG (“Relief”) for the clinical development and, if approved, the sale of Aviptadil.

The collaboration agreement provides for funding by Relief of certain clinical trials, formulation and manufacturing of Aviptadil as well as establishing specified sales territories for each party and share of the profits in those territori es.

Relief has reimbursed the Company $ 10.9 million for expenses but has subsequently declined to reimburse the Company for additional costs of the IV clinical trial, formulation and manufacture of Aviptadil (reformulated as ZYESAMI®).

Relief has additionally declined to fund the costs of the inhaled ZYESAMI clinical trial.

The Company advised Relief that the Company is funding those costs with other capital.

See Note 9 “Commitments and Contingencies” for additional Information regarding the Company and Relief .

In July 2021 the Company was granted exclusive worldwide development rights to an investigational COVID-19 vaccine called BriLife™ pursuant to a Memorandum of Understanding with the Government of Israel, Ministry of Defense.

The Company is commencing a registration trial of the BriLife vaccine in the nations of Georgia, Ukraine, Israel, and additional countries.

The Company expects to enter into a long-term royalty-bearing licensing agreement for the commercialization of the vaccine.

As of September 30, 2021, the Company had $ 38,883,569 in cash.

The Company is a clinical-stage pharmaceutical company that develops novel therapeutics for the treatment of central nervous system disorders and the treatment and prevention of life-threatening pulmonary diseases through its wholly-owned operating subsidiary, NeuroRx.

The Company's foundation product, NRX-101 (d-Cylcoserine/Lurasidone), for the treatment of suicidal bipolar depression, has been awarded Fast Track designation, Breakthrough Therapy designation, a Special Protocol Agreement, and a Biomarker Letter of Support by the U.S.

Food and Drug Administration (the “FDA”).

NRX-101 is covered by multiple U.S.

and foreign patents, including a Composition of Matter patent (U.S.

10,583,138) that was transferred to NRx Pharmaceuticals by Glytech, LLC.

The Company’s product for the treatment of acute respiratory distress in Critical COVID-19 patients, ZYESAMI ® , has been awarded Fast Track designation by the FDA.

ZYESAMI is included in the National Institutes of Health (“NIH”) ACTIV-3b Phase III clinical study.

As of March 31, 2022, the Company had $ 40.2 million in cash.

Since inception, the Company has experienced net losses and negative cash flows from operations each fiscal year.

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The Company is dependent on its ability to continue to raise equity and/or debt financing to continue operations.

On August 23, 2021, the Company completed a private placement (the “Private Placement”) and issued 2,727,273 shares of common stock for a purchase price of $ 11.00 per share and Preferred Investment Options (the “Preferred Investment Options”, and, collectively with the shares of common stock issued under the Private Placement, the “Securities”) to purchase up to an aggregate of 2,727,273 shares of common stock for a purchase price of $ 12.00 .

The aggregate gross proceeds to the Company from the Private Placement were approximately $ 30,000,000 , before deducting placement agent fees and other offering expenses.

Accordingly, the Company believes that it currently has sufficient funds and, if necessary, the ability to reduce expenditures, to support operations through the next twelve months from the date the condensed consolidated financial statements are issued.

The Company cannot make any assurances that additional financings will be available to it and, if available, on acceptable terms or at all.

On August 23, 2021, the Company completed a private placement and issued 2,727,273 shares of common stock and preferred investment options to purchase up to an aggregate of 2,727,273 shares of common stock.

The purchase price for one share of common stock and one preferred investment option was $ 11.00 .

The preferred investment options have an exercise price of $ 12.00 .

The net proceeds to the Company from the Private Placement were approximately $ 27.4 million.

On February 2, 2022, the Company completed a private placement and issued 7,824,727 shares of common stock and preferred investment options to purchase up to an aggregate of 7,824,727 shares of common stock.

The purchase price for one share of common stock and one preferred investment option was $ 3.195 .

The preferred investment options have an exercise price of $ 3.07 per share.

The net proceeds to the Company were approximately $ 23.0 million.

The Company believes that it currently has sufficient funds and, if necessary, the ability to reduce expenditures, to support operations through at least the next twelve months from the date the condensed consolidated financial statements are issued.

The Company cannot make any assurances that additional financing will be available to it and, if available, on acceptable terms or at all.

This could negatively impact the Company’s business and operations and could also lead to the reduction of the Company’s operations.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

COVID-19 Outbreak

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus originating in Wuhan, China (the “COVID-19 Outbreak”) and the risks to the international community as the virus spreads globally beyond its point of origin.

In March 2020, the WHO classified the COVID-19 Outbreak as a pandemic, based on the rapid increase in exposure globally.

Aside from our COVID-19 related trials, as a result of the COVID-19 Outbreak, most of our other trials have been halted.

Except as otherwise discussed in the preceding sentence and otherwise in this Quarterly Report on Form 10-Q, there have been no material changes or impact of COVID-19 on our business.

However, the full impact of the COVID-19 Outbreak continues to evolve as of the date hereof.

If the COVID-19 Outbreak continues, it may have a material adverse effect on the Company’s financial condition, liquidity, and future results of operations.

Management is actively monitoring the impact of the global pandemic on its financial condition, liquidity, operations, industry, and workforce.

Summary of Significant Accounting Policies

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The net assets of BRPA are stated at historical cost, with no goodwill or other intangible assets recorded.

NeuroRx was determined to be the accounting acquirer based on the following predominant factors:

● NeuroRx’s shareholders have the largest portion of voting rights in the Company;

● the Board and Management are primarily composed of individuals associated with NeuroRx;

● NeuroRx was the larger entity based on historical operating activity and NeuroRx had the larger employee base at the time of the Merger.

The consolidated assets, liabilities and results of operations prior to the Reverse Recapitalization are those of NeuroRx.

The consolidated results of operations prior to the Reverse Recapitalization are those of NeuroRx.

The shares and corresponding capital amounts and losses per share, prior to the Merger, have been retroactively restated based on shares reflecting the exchange ratio established in the Merger.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in its financial statements and the reported amounts of expenses during the reporting period.

The most significant estimates in the Company’s financial statements relate to the valuation of common and preferred stock, stock options, warrants, contingent consideration and the valuation allowance of deferred tax assets resulting from net operating losses.

The most significant estimates in the Company’s financial statements relate to the Earnout Cash liability, valuation of common and preferred stock, stock options, warrants, and the valuation allowance of deferred tax assets resulting from net operating losses.

These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.

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Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

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(Refer to Note 11)

Accounts Receivable

Accounts receivable consist of balances due from collaborative partners.

In determining collectability, historical trends are evaluated, and specific partner issues are reviewed on a periodic basis to arrive at appropriate allowances.

Concentration of Credit Risk and Off-Balance Sheet Risk

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The Company’s cash is deposited in accounts at large financial institutions, and amounts may exceed federally insured limits.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash is held.

The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash is held.

The Company has no financial instruments with off-balance sheet risk of loss.

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All stock-based compensation costs are recorded in general and administrative or research and development costs in the consolidated statements of operations based upon the underlying individual’s role at the Company.

Modification of stock options and warrants

A change in any of the terms or conditions of stock options and warrants is accounted for as a modification.

Incremental stock-based compensation cost is measured as the excess, if any, of the fair value of the modified option/warrant over the fair value of the original option/warrant immediately before its terms are modified, measured based on the fair value of the ordinary shares and other pertinent factors at the modification date.

For vested stock options and warrants to board members, we recognize incremental compensation cost in the period the modification occurs.

For unvested stock options, we recognize over the remaining requisite service period, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification date.

If the fair value of the modified option is lower than the fair value of the original option immediately before modification, the minimum compensation cost we recognize is the cost of the original award.

The accounting for incremental fair value of warrants is based on the specific facts and circumstances related to the modification which may result in a reduction of additional paid-in capital, recognition of costs for services rendered, or recognized as a deemed dividend.

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.

For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance,

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

and each balance sheet date thereafter.

assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.

For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.

Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations.

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The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense.

Earnings (Loss) Per Share

Loss Per Share

Basic loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period.

Diluted earnings per share excludes, when applicable, the potential impact of stock options, common stock warrant shares, and other dilutive instruments because their effect would be anti-dilutive in the periods in which the Company incurs a net loss.

The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net earnings (loss) per share attributable to common stock for the periods in which a net loss is presented because their effect would have been anti-dilutive.

Three Months Ended September 30,

Nine Months Ended September 30,

The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net loss per share attributable to common stock for the periods in which a net loss is presented because their effect would have been anti-dilutive.

Three Months Ended March 31,

Stock options

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Earnout Shares from exercised Substitute Options and Substitute Warrants

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes:

Simplifying the Accounting for Income Taxes .

This guidance removes certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences.

This guidance also clarifies and simplifies other areas of ASC 740.

This ASU will be effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

The Company does not expect this guidance to have a significant impact on its financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation

Since the closing of the Merger, of the 516,025 shares of common stock issued for the exercise of stock options, 185,472 shares of common stock are contingently issuable Earnout Shares and are excluded from the weighted average shares outstanding for computing EPS until the contingent conditions are satisfied.

There are 1,044,453 shares of common stock issued pursuant to the GEM warrants which are contingently issuable Earnout Shares and are excluded from the weighted average shares outstanding for computing EPS until the contingent conditions are satisfied.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

in certain areas.

The ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020 and adoption must be as of the beginning of the Company’s annual fiscal year.

We adopted ASU 2020-06 on January 1, 2021, with no material impact on our financial statements.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718) and Derivatives and Hedging - Contracts in an Entity's Own Equity (Subtopic 815-40) - Issuer's Accounting for Certain Modifications or Exchange of Freestanding Equity-Classified Written Call Options , which provides guidance for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share (EPS) effects, if any, or (2) an expense and, if so, the manner and pattern of recognition.

The amendments in this ASU are effective January 1, 2022, including interim periods.

Early adoption is permitted.

We adopted ASU 2021-04 on January 1, 2021, with no material impact on our financial statements.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are adopted by the Company as of the specified effective date.

For the three-months ended March 31, 2022, there were no new accounting pronouncements or updates to recently issued accounting pronouncements disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, that management believes materially affect the Company’s present or future results of operations, overall financial condition, liquidity or disclosures.

Reverse Recapitalization

As discussed in Note 1, on May 24, 2021 (the “Closing Date”), BRPA closed the Merger with NeuroRx, as a result of which NeuroRx became a wholly-owned subsidiary of BRPA.

As discussed in Note 1, on May 24, 2021 (the “Closing Date”), BRPA and Merger Sub closed the Merger with NeuroRx, as a result of which NeuroRx became a wholly-owned subsidiary of BRPA.

While BRPA was the legal acquirer of NeuroRx in the Merger, for accounting purposes, the Merger is treated as a Reverse Recapitalization whereby NeuroRx is deemed to be the accounting acquirer and the historical financial statements of NeuroRx became the historical financial statements of BRPA (renamed NRX Pharmaceuticals, Inc.) upon the closing of the Merger.

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The net assets of BRPA were stated at historical cost, with no goodwill or other intangible assets recorded.

Pursuant to the Merger Agreement, the aggregate consideration payable to stockholders of NeuroRx at the Closing Date consists of 50,000,000 shares (“Closing Consideration”) of BRPA common stock, par value $ 0.001 per share (“Common Stock”).

At the effective time of the Merger (the “Effective Time”), and subject to the terms and conditions of the Merger Agreement, each share of NeuroRx common stock, par value $ 0.001 per share, and each share of the NeuroRx convertible preferred stock that was convertible into a share of NeuroRx common stock at a one-to-one ratio pursuant to the NeuroRx certificate of incorporation, was converted into Common Stock equal to 3.16 (the “Exchange Ratio”).

At the effective time of the Merger (the “Effective Time”) each share of NeuroRx common stock and each share of the NeuroRx convertible preferred stock that was convertible into a share of NeuroRx common stock at a one-to-one ratio pursuant to the NeuroRx certificate of incorporation, was converted into Common Stock equal to 3.16 (the “Exchange Ratio”).

Each option and warrant of NeuroRx that was outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) was assumed by BRPA and converted into an option or warrant to acquire an adjusted number of shares of Common Stock at an adjusted exercise price per share, in each case, pursuant to the terms of the Merger Agreement (the “Substitute Options” and the “Substitute Warrants,” respectively), based on an exchange ratio of 4.96 :1 (the “Option Exchange Ratio”), and will continue to be governed by substantially the same terms and conditions, including vesting, as were applicable to the original instrument.

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At the Effective Time, each outstanding share of NeuroRx common stock, including shares of NeuroRx common stock resulting from the conversion of outstanding shares of NeuroRx preferred stock (as calculated pursuant to the NeuroRx certificate of incorporation), immediately prior to the Effective Time, was converted into the right to receive a pro rata portion of the Closing Consideration and the contingent right to receive a pro rata portion of the Earnout Shares and Earnout Cash.

Pursuant to the terms of the Merger Agreement, NeuroRx’s securityholders (including option holders and warrant holders) who own NeuroRx securities immediately prior to the Effective Time will have the contingent right to receive their pro rata portion of (i) an aggregate of 25,000,000 shares of Common Stock (“Earnout Shares”), of which 935,608 and 1,920,492 are subject to the terms and conditions of the Substitute Options and Substitute Warrants, if, prior to December 31, 2022, the NRX COVID-19 Drug (as defined in the Merger Agreement) receives emergency use authorization by the

Pursuant to the terms of the Merger Agreement, NeuroRx’s securityholders (including option holders and warrant holders) who owned NeuroRx securities immediately prior to the Effective Time have the contingent right to receive their pro rata portion of (i) an aggregate of 25,000,000 shares of Common Stock (“Earnout Shares”), of which 935,608 and 1,920,492 are subject to the terms and conditions of the Substitute Options and Substitute Warrants, if, prior to December 31, 2022, the NRX COVID-19 Drug (as defined in the Merger Agreement) receives emergency use authorization by the FDA and NeuroRx submits and the FDA files for review a new drug application for the NRX COVID-19 Drug (the occurrence of the foregoing, the “Earnout Shares Milestone”), and (ii) an aggregate of $ 100.0 million in cash (“Earnout Cash”) upon the earlier to occur of (x) FDA approval of the NRX COVID-19 Drug and the listing of the NRX COVID-19 Drug in the FDA’s “Orange Book” and (y) FDA approval of the NeuroRx Antidepressant Drug Regimen (i.e., NRX-100/101) and the listing of the NeuroRx Antidepressant Drug Regimen (i.e., NRX-100/101) in the FDA’s “Orange Book,” in each case prior to December 31, 2022 (the occurrence of either of clauses (x) or (y), the “Earnout Cash Milestone”).

If the Earnout Shares

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FDA and NeuroRx submits and the FDA files for review a new drug application for the NRX COVID-19 Drug (the occurrence of the foregoing, the “Earnout Shares Milestone”), and (ii) an aggregate of $ 100,000,000 in cash (“Earnout Cash”) upon the earlier to occur of (x) FDA approval of the NRX COVID-19 Drug and the listing of the NRX COVID-19 Drug in the FDA’s “Orange Book” and (y) FDA approval of the NeuroRx Antidepressant Drug Regimen (i.e., NRX-100/101) and the listing of the NeuroRx Antidepressant Drug Regimen (i.e., NRX-100/101) in the FDA’s “Orange Book,” in each case prior to December 31, 2022 (the occurrence of either of clauses (x) or (y), the “Earnout Cash Milestone”).

If the Earnout Shares Milestone is achieved, the Earnout Shares will be issued within five ( 5 ) Business Days after the occurrence of the Earnout Shares Milestone.

Milestone is achieved, the Earnout Shares will be issued within five ( 5 ) Business Days after the occurrence of the Earnout Shares Milestone.

If the Earnout Cash Milestone is achieved, the Merger Agreement does not require the Earnout Cash to be delivered to NeuroRx securityholders within any specified period of time, and the board of directors of NRx Pharmaceuticals will use its good faith judgment to determine the date to pay the Earnout Cash.

The Earnout Cash Milestone was recognized as a contingent liability and measured at an estimated fair value at the Closing Date and will be each period end thereafter until earned or December 31, 2022 (see Note 12).

The Earnout Shares Milestone was recognized in equity and, upon closing of the Merger, the estimated fair value of the Earnout Shares was $ 253,130,272 with such amount recognized as a deemed dividend (see Note 12).

The benefit of the contingent right to receive Earnout Shares and Earnout Cash for option and warrant holders occurs through the Option Exchange Ratio and therefore the amount of Earnout Shares and Earnout Cash for common stockholders is approximately 22,209,280 shares and $ 88,837,121 .

The Earnout Cash Milestone was recognized as a contingent liability and measured at an estimated fair value at the Closing Date and will be remeasured at estimated fair value at each period end thereafter until earned or December 31, 2022 (see Note 11).

The Earnout Shares Milestone was recognized in equity.

In the event that either the Earnout Shares Milestone or the Earnout Cash Milestone does not occur prior to December 31, 2022, each Substitute Option and Substitute Warrant will be adjusted such that the number of shares of Common Stock subject to each adjusted Substitute Option or Substitute Warrant, the exercise price per share of each adjusted Substitute Option or Substitute Warrant and the aggregate intrinsic value of each adjusted Substitute Option or Substitute Warrant will equal the respective number of shares, exercise price per share and aggregate intrinsic value that would have resulted following the adjustment of the applicable underlying option or warrant had the conversion of the legacy NeuroRx option and warrants into the Substitute Options or Substitute Warrants been applied using the Exchange Ratio ( 3.16 :1).

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Following the determination of that adjustment, NRx Pharmaceuticals will retain any shares forfeited by the option or warrant holder in connection with the adjustment and return any remaining shares to the option or warrant holder.

In connection with the Merger, a number of subscribers (each, a “Subscriber”) purchased from the Company an aggregate of 1,000,000 shares of Common Stock (the “PIPE”), for a purchase price of $ 10.00 per share and an aggregate purchase price of $ 10,000,000 (the “PIPE Shares”), pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into prior to the Closing Date.

The following table reconciles the elements of the Merger to the Unaudited Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2021:

Recapitalization

Cash - BRPA trust and cash, net of redemptions

Cash - PIPE financing, net of transaction costs

transaction costs and advisory fees allocated to NRXP equity

( 1,412,846 )

Effect of Merger, net of redemptions and transaction costs

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles the elements of the Merger to the Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the nine months ended September 30, 2021:

Recapitalization

Cash - BRPA trust and cash, net of redemptions

Non-cash net working capital assumed from BRPA

notes payable assumed from BRPA

( 1,100,000 )

fair value of assumed Placement Warrants

( 1,983,674 )

fair value of Earnout Cash

( 25,520,195 )

transaction costs and advisory fees allocated to NRXP equity

( 1,412,846 )

Effect of Merger, net of redemptions and transaction costs

( 26,615,796 )

The following table details the number of shares of common stock issued immediately following the consummation of the Merger:

Number of Shares

Common stock, outstanding prior to Merger

redemption of BRPA shares

Common stock of BRPA

BRPA Founder and private shares, net of forfeited shares of 875,216

Shares issued in PIPE Financing

Shares issued for services

Shares issued pursuant to conversion of Public and Private Rights

Merger and PIPE financing shares - common stock

NeuroRx shares - common stock (1)

Total shares of common stock immediately after Merger

(1) The number of NeuroRx common stock was determined from the 14,200,586 shares of NeuroRx common stock outstanding immediately prior to the closing of the Merger converted at the Exchange Ratio.

All fractional shares were rounded down.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following at the dates indicated:

September 30, 2021

Prepaid expenses and other current assets consisted of the following at the dates indicated (in thousands):

March 31, 2022

December 31, 2021

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Other prepaid expenses

Other current assets

Total prepaid expenses and other current assets

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following at the dates indicated:

September 30,

Accrued and other current liabilities consisted of the following at the dates indicated (in thousands):

March 31, 2022

December 31, 2021

Accrued and other current liabilities:

Professional services

Accrued research and development expenses

Accrued employee expenses

Professional services

Accrued insurance expenses

Other accrued expenses

Total accrued and other current liabilities

Convertible Notes Payable

On February 12, 2020, a Qualified Financing Event (as defined below) occurred when the Company received cumulative investment proceeds in excess of $ 10,000,000 from the sale and issuance of common shares.

The fair value of the Company’s common shares was $ 10.63 per share.

The 2017 Notes (as defined below) and the 2018 Notes (as defined below) in the aggregate principal amount of $ 2,800,000 were converted into 1,005,458 common shares (at the discounted price of $ 2.78 per share), and the related unpaid and accrued interest totaling $ 369,660 were also converted into 132,739 common shares of the Company (at the discounted price of $ 2.78 per share).

Additionally, the Company recognized a loss on extinguishment for the difference between the carrying value of the convertible notes, unamortized debt discount, and the value of the embedded put option and the fair value of the common shares of $ 0 and $ 306,641 during the three months ended and nine months ended September 30, 2020, respectively.

The Company issued the shares of common stock pursuant to this conversion on September 23, 2020.

2017 Convertible Notes Payable

On November 16, 2017 and November 19, 2017, the Company issued convertible notes (“2017 Notes”), as amended for aggregate gross proceeds of $ 2,500,000 .

The 2017 Notes accrued interest at a rate of 6 % per annum and principal and interest were due and payable four years from the date of issuance.

Upon either a sale of the Company’s assets or all of its capital stock, or a change of control, the principal balance would double and be repaid.

Upon closing of either a sale of the Company’s shares for at least $ 10,000,000 or a public offering of the Company’s securities (“Qualified Financing Event”), the outstanding principal balance will be converted into the number of such securities sold at a conversion price equal to 80% of the securities negotiated share price .

2018 Convertible Notes Payable

On January 5, 2018 and April 25, 2018, the Company issued convertible notes (“2018 Notes”), as amended for aggregate gross proceeds of $ 300,000 .

The 2018 Notes accrued interest at a rate of 6 % per annum and were due and payable four years from the date of issuance.

Upon either a sale of the Company’s assets or all of its capital stock, or a change of control, the principal balance would double and be repaid.

Upon closing of a Qualified Financing Event, the outstanding principal balance will be converted into the number of such securities sold at a conversion price equal to 80% of the securities negotiated share price.

The January 5, 2018 note for $ 100,000 was not amended and interest was unpaid, as such, the January 5, 2018 note and related accrued interest were classified as current liabilities.

The April 25, 2018 note for $ 200,000 was amended similar to the 2017 Notes to accrue interest and to be paid at maturity with the principal.

The proceeds received upon issuing the 2017 Notes and the 2018 Notes were first allocated to the fair value of the embedded put with the remainder to the debt host instrument.

The Company recognized a loss of $ 0 and $ 0 during the

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

three months ended September 30, 2021 and 2020, respectively, and $ 0 and $ 27,160 during the nine months ended September 30, 2021 and 2020, respectively, due to the estimated increase in fair value of the embedded put.

The discount is amortized to interest expense over the term of the debt.

The Company amortized debt discount of $ 0 to interest expense during the three months ended September 30, 2021 and 2020, and $ 0 and $ 16,475 during the nine months ended September 30, 2021 and 2020, respectively.

The Company paid no interest during the three months ended and nine months ended September 30, 2021 and 2020.

Notes Payable

Relief Therapeutics Loan

On April 6, 2020, the Company entered into a loan agreement with Relief (the “Relief Therapeutics Loan”) in the amount of $ 500,000 .

The loan matures on April 6, 2022 and bears interest at 2 % per annum payable in arrears.

On April 6, 2020, the Company entered into a loan agreement (the “Relief Therapeutics Loan”) with Relief Therapeutics Holding S.A.

(“Relief Therapeutics”) in the amount of $ 0.5 million.

The Relief Therapeutics Loan matured on April 6, 2022 and bears interest at 2 % per annum payable in arrears.

The Relief Therapeutics Loan was paid in full on April 6, 2022.

Paycheck Protection Program Loan

On April 28, 2020, the Company received $ 119,842 in loan funding from the Paycheck Protection Program (the “PPP Loan”), established pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S.

On April 28, 2020, the Company received $ 0.1 million in loan funding from the Paycheck Protection Program (the “PPP Loan”), established pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and administered by the U.S.

Small Business Administration (“SBA”).

The unsecured PPP Loan accrues interest on the outstanding principal at the rate of 1 % per annum, and there is a six month deferment period until equal installment payments of $6,744 of principal and interest are due.

The term of the PPP Loan is two years .

To the extent the loan amount is not forgiven under the PPP Loan, the Company is obligated to make equal monthly payments of principal and interest, beginning seven months from the date of the PPP Loan note, until the maturity date.

The PPP Loan amount may be eligible for forgiveness in the event that (1) at least 75% of the PPP Loan proceeds are used to cover payroll costs and the remainder is used for mortgage interest, rent and utility costs over the eight week period after the PPP Loan is made, and (2) the number of employees and compensation levels are generally maintained.

Forgiveness of the PPP Loan is dependent on the Company having initially qualified for the PPP Loan and qualifying for the forgiveness of such PPP Loan based on future adherence to the forgiveness criteria.

The Company used the entire PPP Loan for qualifying payroll expenses, and filed for loan forgiveness on December 30, 2020.

The unsecured PPP Loan accrued interest on the outstanding principal at the rate of 1 % per annum.

The Company received full forgiveness of all outstanding principal and accrued and unpaid interest on the PPP Loan as of February 11, 2021.

The forgiveness of the PPP Loan qualified for debt extinguishment in accordance with ASC 470-50, Debt Modifications and Extinguishments , and as a result, the outstanding principal and accrued and unpaid interest was written off in the amount of $ 119,842 and $ 968 , respectively, and the Company recorded a gain on extinguishment totaling $ 120,810 for the nine months ended September 30, 2021.

Note Payable -- Vendor

On July 1, 2019, the Company converted certain accounts payable into a loan (the “Note Payable — Vendor”) with a vendor in the amount of $ 154,190 .

The loan matured on July 1, 2020.

The loan bears interest, compounded daily, at 6 % annual interest.

As of September 30, 2021, the note payable was paid in full.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the Company's outstanding notes payable as of the respective periods.

September 30,

The forgiveness of the PPP Loan qualified for debt extinguishment in accordance with ASC 470-50, Debt Modifications and Extinguishment s, and as a result, the outstanding principal and accrued and unpaid interest was written off in the amount of $ 0.1 million and less than $ 0.1 million, respectively, and the Company recorded a gain on extinguishment totaling $ 0.1 million for the three months ended March 31, 2021.

The following table summarizes the Company's outstanding notes payable as of the respective periods (in thousands).

March 31, 2022

December 31, 2021

Relief Therapeutics loan

Paycheck Protection Program loan

Note payable — vendor

Carrying value of notes payable

Carrying value of note payable

Accrued interest

Notes payable and accrued interest, current

Notes payable and accrued interest, non-current

Note payable and accrued interest, current

Commitments and Contingencies

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The Company leases office space on a month-to-month basis.

The rent expense for the three months ended September 30, 2021 and 2020 was $ 9,162 and $ 14,174 , respectively, and for the nine months ended September 30, 2021 and 2020 was $ 64,555 and $ 32,076 , respectively.

The rent expense for the three months ended March 31, 2022 and 2021 was $ 0.1 million and $ 0.1 million, respectively.

Sponsored Research Agreement with National Jewish Health

On February 8, 2021, the Company entered into a Sponsored Research Agreement (“Research Agreement”) with National Jewish Health (“NJ Health”), a Colorado not-for-profit institution.

Under the terms of the Research Agreement, NRx Pharmaceuticals agreed to sponsor a research study at NJ Health relating to the impact of NRx Pharmaceuticals' Aviptadil on propagation of SARS-CoV-2 in alveolar type II cells in vitro (the “Study”).

In return for performance of the Study under the Research Agreement, NRx Pharmaceuticals has committed to pay NJ Health approximately $ 399,320 .

During the three months ended and nine months ended September 30, 2021, NRx Pharmaceuticals paid NJ Health $ 90,112 and $ 216,269 , respectively, of the total committed amount.

Aviptadil Manufacturing, Production, Supply and Distribution Agreements

Under the terms of the Research Agreement, the Company agreed to sponsor a research study at NJ Health relating to the impact of the Company’s' Aviptadil on propagation of SARS-CoV-2 in alveolar type II cells in vitro (the “Study”).

In return for performance of the Study under the Research Agreement, the Company has committed to pay NJ Health approximately $ 0.4 million.

As of March 31, 2022, the Company has paid NJ Health $ 0.3 million of the total committed amount.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ZYESAMI Manufacturing, Production, Supply and Distribution Agreements

On August 25, 2020, the Company and Nephron Pharmaceuticals Corporation (“Nephron”) signed an agreement for the manufacturing of finished pharmaceutical product of Aviptadil intravenous formulation and the development of an inhaled (nebulizer) formulation of Aviptadil.

Nephron will serve as the exclusive and primary supplier of the product for both clinical and commercial purposes, supplying 100 % of the Company’s annual requirements.

The Company has agreed to purchase products from Nephron for a fixed price.

On September 29, 2020, the Company and Cardinal Health signed an exclusive distribution agreement, as well as a 3rd party logistics agreement on October 1, 2020.

Cardinal Health will manage warehousing, distribution, invoicing for the potential sale of Aviptadil in the United States and Puerto Rico.

On October 9, 2020, the Company signed an agreement with PolyPeptide Group, North America for the supply of Good Manufacturing Practice (GMP) grade Active Pharmaceutical Ingredient (API) Aviptadil (VIP).

On September 29, 2020, the Company and Cardinal Health signed an exclusive distribution agreement, as well as a third-party logistics agreement on October 1, 2020.

Cardinal Health will manage warehousing, distribution, and invoicing for the potential sale of Aviptadil in the U.S.

and Puerto Rico.

On October 9, 2020, the Company signed an agreement with PolyPeptide Group, North America for the supply of Good Manufacturing Practice Grade Active Pharmaceutical Ingredient (“API”) Aviptadil.

This gives NRx Pharmaceuticals a significant reduction in the cost of procuring API.

The Company has agreed to purchase a total of $ 5,255,000 worth of product and services, of which $ 1,407,500 has been paid for and recorded as a prepaid asset on the Company’s balance sheet as of September 30, 2021.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On January 4, 2021 the Company and Aerogen Limited (“Aerogen”) signed a supply agreement for the supply of certain products, including the Aerogen Solo Nebulizer System and Aerogen Ultra, solely for the purposes of carrying out clinical trials relating to inhalation delivery of Aviptadil for treatment of pulmonary insufficiency and respiratory distress in COVID-19 patients.

Pill Tracker Ltd.

(PillTracker) is an agent of the Company per the supply agreement (see Note 14) and is managing the supply agreement at the Company’s request.

On July 1, 2021, NRx Pharmaceuticals and BriLife LLC signed an agreement for a Phase II Inhaled clinical trial of Aviptadil in the nation of Georgia with a total cost of approximately $ 7,400,000 .

The contract is cancelable with 60 days’ notice.

The Phase II Inhaled clinical trial of Aviptadil in the nation of Georgia has not begun and the Company may decide not to proceed with this trial.

The Company has agreed to purchase a total of $ 5.3 million worth of product and services, of which $ 2.4 million has not been paid for as of March 31, 2022.

Relief Therapeutics Collaboration Agreement

On September 18, 2020, the Company entered into a collaboration agreement with Relief for the clinical development and, if approved, the sale of Aviptadil.

The collaboration agreement provides for funding by Relief of certain clinical trials, formulation and manufacturing of Aviptadil, as well as establishing specified sales territories for each party and share of the profits in those territories for “Product” as defined in the collaboration agreement.

Relief has reimbursed the Company $ 10.9 million for expenses related to COVID-19 but has subsequently declined to reimburse the Company for additional costs of Research and Development, including the IV clinical trial, the inhaled use trial, formulation and manufacture of ZYESAMI (Aviptadil), statistical analysis, and regulatory filings.

The financial statements reflect $ 13.8 million in unreimbursed Research and Development costs in the nine months ended September 30, 2021, prior to the allocation of corporate overhead.

Additional unreimbursed costs were reported for the year ended December 31, 2020.

The Company advised Relief that the Company is funding those costs with other capital.

On October 6, 2021, Relief filed a lawsuit against the Company and its CEO claiming that the Company failed to honor its obligations under the collaboration agreement.

Relief’s complaint seeks several remedies, including damages for alleged breaches of the terms of the collaboration agreement.

On September 18, 2020, the Company entered into a collaboration agreement (the “Collaboration Agreement”) with Relief Therapeutics for the clinical development and, if approved, the sale of Aviptadil.

The Collaboration Agreement provides for funding by Relief Therapeutics of certain clinical trials, formulation and manufacturing of Aviptadil, as well as establishing specified sales territories for each party and share of the profits in those territories for “Product” as defined in the Collaboration Agreement.

Relief Therapeutics reimbursed the Company $ 10.9 million but has subsequently declined to reimburse the Company for additional costs of research and development.

The Company advised Relief Therapeutics that the Company is funding those costs with other capital.

On October 6, 2021, Relief Therapeutics filed a lawsuit against the Company and its former CEO claiming that the Company failed to honor its obligations under the Collaboration Agreement.

Relief Therapeutics’ complaint seeks several remedies, including damages for alleged breaches of the terms of the Collaboration Agreement.

The Company believes the lawsuit is baseless and without merit.

However, the parties to the lawsuit have agreed to engage in an effort to amicably resolve the litigation and have agreed to hold a mediation in early January 2022.

If the mediation does not resolve the dispute, the Company intends to defend itself vigorously and to prosecute significant counterclaims against Relief.

On January 10, 2022, the Company filed a complaint in New York State Court, claiming Relief Therapeutics breached and repudiated the Collaboration Agreement.

The Company’s complaint seeks damages of at least $ 185.0 million.

The parties to the lawsuit have agreed to engage in mediation in an effort to amicably resolve the litigation.

If the mediation does not resolve the dispute, the Company intends to defend itself vigorously and to prosecute its claims against Relief Therapeutics.

Legal Proceedings

From time to time the Company is involved in litigation, claims, and other proceedings arising in the ordinary course of business.

Litigation and other disputes are inherently unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur.

Share Subscription Facility Agreement - GEM

NeuroRx previously entered into a share subscription facility agreement (“GEM Agreement”) with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, referred to as “GEM”) with a three-year term.

Subject to the successful listing of the shares of NeuroRx on an Exchange (any nationally recognized stock exchange or exchange platform in the world on which the Company will list its shares), GEM grants NeuroRx an option to require GEM to subscribe for shares from the Company for up to an aggregate value of approximately $ 95.6 million.

In 2019, NeuroRx entered into a share subscription facility agreement (the “GEM Agreement”) with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, referred to as “GEM”) with a three-year term.

Subject to the successful listing of the shares of NeuroRx on an exchange (any nationally recognized stock exchange or exchange platform in the world on which the Company will list its shares), GEM granted NeuroRx an option to require GEM to subscribe for shares from the Company for up to an aggregate value of approximately $ 95.6 million.

The agreement also included certain provisions which would not meet the U.S.

requirements to issue registered shares.

If NeuroRx was listed or completes a private transaction which results in a change of control of the Company, NeuroRx would issue GEM a warrant and pay a commitment fee of $ 1.9 million.

Absent a listing of NeuroRx shares or a private transaction with a change of control during the three-year term, NeuroRx would have no obligations under the agreement.

The reverse merger contemplated by the Merger Agreement would not have resulted in a listing of NeuroRx shares or a change in control.

In November 2020, GEM introduced NeuroRx to BRPA.

To resolve uncertainties around the application of the GEM Agreement post-Merger, NeuroRx and GEM agreed in March 2021 to issue a warrant to GEM and for the parties to use their good faith efforts to amend the GEM Agreement to meet U.S.

requirements to issue registered shares.

The warrant is not conditional upon any further events or completion of the merger.

The warrant was issued March 28, 2021, for 3,329,812 shares of NeuroRx common stock at an exercise price of $ 3.19 per share (the “GEM Warrant”) and the parties agreed that GEM would immediately partially exercise the warrant for the purchase of 1,496,216 shares (“Initial Exercised Shares”) for $ 7,500,018 .

The GEM Warrant were valid for a period of

If NeuroRx were listed or completed a private transaction resulting in a change of control of the Company, NeuroRx would be required to issue GEM a warrant and pay a commitment fee of $ 1.9 million.

Absent a listing of NeuroRx shares or a private transaction with a change of control during the three-year term, NeuroRx would have no obligations under the GEM Agreement.

The reverse merger contemplated by the Merger Agreement did not result in a listing of NeuroRx shares or a change in control.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

three years from the date NeuroRx’s stock is listed for trading on a national securities exchange or consummation of a reverse merger transaction of the type contemplated by the Merger Agreement.

In November 2020, GEM introduced NeuroRx to BRPA.

To resolve uncertainties around the application of the GEM Agreement post-Merger, NeuroRx and GEM agreed in March 2021 to issue warrants to GEM and for the parties to use their good faith efforts to amend the GEM Agreement to meet U.S.

requirements to issue registered shares.

The warrants are not conditional upon any further events or completion of the merger.

The warrants were issued March 28, 2021, for 3,329,812 shares of NeuroRx common stock at an exercise price of $ 3.19 per share (the “GEM Warrants”) and the parties agreed that GEM would immediately exercise a portion of the warrants for the purchase of 1,496,216 shares (“Initial Exercised Shares”) for $ 7.5 million.

The GEM Warrants are valid for a period of three years from the date of the consummation of the reverse merger transaction contemplated by the Merger Agreement, which was May 24, 2021.

This contingent liability at December 31, 2020, represented an obligation that resulted in the issuance of certain equity at a discounted per share price.

As the amount was deemed probable and estimable at December 31, 2020, NeuroRx recorded a liability of $ 39,486,139 to reflect the fair value of the GEM Warrant.

On March 28, 2021, NeuroRx recorded additional settlement liability of $ 21,365,641 to reflect the change in the fair value of the Company’s common stock.

On March 28, 2021, NeuroRx reclassed the settlement liability to equity upon the issuance of the GEM Warrant.

NeuroRx was required to register the Initial Exercised Shares on (a) the same registration statement on Form S-4 (or such other registration statement, if changed) in connection with the Merger, or (b) such other registration statement in connection with any other transaction which results in a public listing of NeuroRx.

In addition, no later than 90 days following the consummation of the Merger, the Company was required to file with the SEC a registration statement to register under the Securities Act the resale by GEM of all shares issuable under the GEM Warrant other than the Initial Exercised Shares, which was filed with the Company's S-1 in July 2021.

The GEM Warrant also includes “piggyback” registration rights.

On July 27, 2021, GEM exercised the remaining GEM Warrant for the purchase of 1,833,596 shares (adjusted for the Merger, discussed in Note 10) for gross proceeds to the Company of $ 9,186,316 and the GEM Warrant was extinguished.

As the amount was deemed probable and estimable at December 31, 2020, NeuroRx recorded a liability of $ 39.5 million to reflect the fair value of the GEM Warrants.

On March 28, 2021, NeuroRx recorded additional settlement liability of $ 21.4 million to reflect the change in the fair value of the Company’s common stock.

On March 28, 2021, NeuroRx reclassed the settlement liability to equity upon the issuance of the GEM Warrants.

On July 27, 2021, GEM exercised the remaining GEM Warrants for the purchase of 1,833,596 shares (adjusted for the Merger, discussed in Note 9) for gross proceeds to the Company of $ 9.2 million and the GEM Warrants were extinguished.

Upon closing of the Merger, pursuant to the terms of the Second Amended and Restated Certificate of Incorporation, the Company authorized 500,000,000 shares of common stock with a par value $ 0.001 .

As discussed in Note 4, we have retroactively adjusted the shares issued and outstanding prior to May 24, 2021 to give effect to the Exchange Ratio established in the Merger Agreement to determine the number of shares of common stock into which they were converted.

The Company sold 3,238,338 and 3,642,515 shares of common stock during the three and nine months ended September 30, 2021, respectively, generating gross proceeds of $ 31,134,816 and $ 39,624,175 , respectively.

Of the 511,065 shares of common stock issued for the exercise of stock options, 185,472 shares of common stock are contingently issuable Earnout Shares and are excluded from the weighted average shares outstanding for computing EPS until the contingent conditions are satisfied.

The Company issued 2,334,370 and 3,830,586 shares of common stock pursuant to warrants and Unit Purchase Options exercised during the three and nine months ended September 30, 2021, and received gross proceeds from the warrant exercise of $ 9,199,471 and $ 16,699,489 , repectively.

The Company issued 634,045 and 834,045 shares of common stock for consulting services during the three and nine months ended September 30, 2021, and recognized non-cash consulting expense in general and administrative expenses of $ 7,925,511 and $ 12,775,511 , respectively.

The Company sold 292,534 and 343,378 shares of common stock during the three and nine months ended September 30, 2020, and received gross proceeds of $ 1,412,067 and $ 1,589,092 , respectively.

The Company issued 1,138,199 shares of common stock to settle the notes conversion during the three and nine months ended September 30, 2020 and recorded a loss of $ 306,641 .

Pursuant to the Merger Agreement, BRPA and EarlyBirdCapital, Inc., the representative of the underwriters of BRPA’s initial public offering (“EBC”), entered into an amendment (“BCMA Amendment Agreement”) to the Business

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Combination Marketing Agreement, dated as of November 20, 2017 (“BCMA”), by and between BRPA and EBC.

The BCMA Amendment Agreement provided that, in lieu of the cash fee payable to EBC pursuant to the BCMA, BRPA will issue to EBC at the Effective Time an aggregate of 200,000 shares of Common Stock and the BCMA (as amended by the BCMA Amendment Agreement) will terminate immediately following the Effective Time.

The Company recognized the fair value of the 200,000 shares of Common Stock issued pursuant to the BCMA of $ 4,850,000 within general and administrative in the Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2021.

Refer to Note 12 for discussion of fair value measurement of the warrant liabilities.

The Company sold 7,824,727 shares of common stock during the three months ended March 31, 2022, generating net proceeds of $ 23.0 million.

The Company sold 1,829,337 shares of common stock during the three months ended March 31, 2021, and received gross proceeds of $ 14.4 million.

Preferred Stock

Upon closing of the Merger, pursuant to the terms of the Second Amended and Restated Certificate of Incorporation, the Company authorized 50,000,000 shares of preferred stock with a par value $ 0.001 .

Series A, B-1, and B-1A Preferred Stock

Prior to the Merger, the Company had authorized and issued 1,000,000 shares of Series A convertible preferred stock, 1,050,695 shares of Series B-1 convertible preferred stock, and 316,848 shares of Series B-1A convertible preferred stock, par value of $ 0.001 per share, which was convertible into one share of common stock for each preferred share (collectively, the “Preferred Stock”) at any time, at the option of the holder.

The Preferred Stock were not redeemable and the related stockholders were entitled to a subordinated liquidation preference should NeuroRx liquidate or wind up operations.

The preferences also included voting rights on an as-converted basis, ride-along rights, and an anti-dilution provision.

The liquidation preference was $ 1.00 per share for the Series A convertible preferred stock, $ 7.58 per share for the Series B-1 convertible preferred stock, and $ 6.82 per share for the Series B-1A convertible preferred stock, plus any declared but unpaid dividends.

Upon an initial public offering or merger under certain conditions the Preferred Stock automatically converted into common stock.

On May 24, 2021, pursuant to the Merger (as described in Note 4), 2,367,543 outstanding shares of Preferred Stock were automatically converted into 7,480,836 shares of common stock pursuant to the Exchange Ratio.

Series B-2 Preferred Stock

In 2020, the Company authorized the issuance of 100,000 shares of Series B-2 Convertible Preferred Stock (the “B-2 Preferred Stock”), par value of $ 0.001 per share, convertible into one share of common stock for each share of B-2 Preferred Stock held.

In March 2020, 4,167 shares of B-2 Preferred Stock were issued.

The B-2 Preferred stock were not redeemable and the related stockholders were entitled to a subordinated liquidation preference should NeuroRx liquidate or wind up operations.

The preferences also included voting rights on an as-converted basis, ride-along rights, and an anti-dilution provision.

The liquidation preference was $ 12.00 per share plus any declared but unpaid dividends.

The B-2 Preferred Stock could be converted into one share of common stock (subject to adjustments for stock splits, recapitalization) at any time, at the option of the holder.

Upon an initial public offering or merger under certain conditions the B-2 Preferred Stock automatically converted into common stock.

On May 24, 2021, pursuant to the Merger (as described in Note 4), 4,167 outstanding shares of B-2 Preferred stock were automatically converted into 13,168 shares of common stock pursuant to the Exchange Ratio.

The Company has no shares of preferred stock outstanding.

Common Stock Warrants

On March 28, 2021, NeuroRx issued 3,329,812 fully vested common stock warrants, exercisable at a per share price of $ 3.19 until they expire on March 27, 2024 to GEM (See Note 8).

The fair value on the date of issuance was $ 60,851,779 .

Upon issuance, 1,496,216 warrants were immediately exercised generating gross proceeds of $ 7,500,018 .

On July 27, 2021, GEM exercised the remaining GEM Warrant for the purchase of 1,833,596 shares for gross proceeds of $ 9,186,316 and the GEM Warrant was extinguished.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Substitute Warrants

In connection with the Merger, each warrant of NeuroRx that was outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) was assumed by BRPA and converted into the Substitute Warrants, based on the Option Exchange Ratio (of 4.96 ), and will continue to be governed by substantially the same terms and conditions, including vesting, as were applicable to the former warrant.

Each Substitute Warrant will be exercisable for a number of whole shares of Common Stock equal to the product of the number of shares of NeuroRx common stock underlying such NeuroRx warrant multiplied by the Option Exchange Ratio, and the per share exercise price of such Substitute Warrant will be equal to the quotient determined by dividing the exercise price per share of NeuroRx common stock by the Option Exchange Ratio.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

will be equal to the quotient determined by dividing the exercise price per share of NeuroRx common stock by the Option Exchange Ratio.

As discussed in Note 4, this ratio incorporates the achievement of the Earnout Shares Milestone and Earnout Cash Milestone.

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Further, the Substitute Warrants were determined to contain both service-based and performance-based vesting conditions (i.e., the achievement of the Earnout Cash Milestone and/or Earnout Shares Milestone).

The Company determined it was not probable that the Earnout Cash Milestone or Earnout Shares Milestone would be met on the Effective Date and at September 30, 2021.

Accordingly, the Company will only recognize incremental compensation cost related to the portion of the Substitute Warrants subject to

The Company determined it was not probable that the Earnout Cash Milestone or Earnout Shares Milestone would be met on the Effective Date and at March 31, 2022.

Accordingly, the Company will only recognize incremental compensation cost related to the portion of the Substitute Warrants subject to service-based vesting conditions only.

The Company will reevaluate the probability of the Earnout Cash Milestone and/or Earnout Shares Milestone being met and recognize any unamortized incremental compensation cost accordingly in the period during which it becomes probable the milestones will be met.

The Company recognized incremental compensation in the second quarter of 2021 on the modification date totaling $ 2.3 million which was recognized in general and administrative in the Consolidated Statement of Operations.

Unamortized compensation costs related to performance-based vesting conditions of the Substitute Warrants as of the modification date was $ 23.8 million.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

service-based vesting conditions only.

The Company recognized incremental compensation on the modification date totaling $ 2,330,572 which was recognized in General and administrative in the Unaudited Condensed Consolidated Statements of Operations for nine months ended September 30, 2021.

Unamortized compensation costs related to performance-based vesting conditions of the Substitute Warrants as of the modification date was $ 23,760,993 .

With respect to the remaining outstanding warrants, the incremental fair value of the Substitute Warrants of $ 2,691,799 was recognized as a deemed dividend as the Company concluded there is a transfer of value from the common shareholders to the holders of the Substitute Warrants as the change in the number of underlying shares and the decreased exercise price would result in the common shareholders becoming more diluted if and when the Substitute Warrants are converted.

As the Company is in an accumulated deficit position as of the modification date, the resulting deemed dividend is recorded as a reduction of additional paid-in capital with a corresponding offset recorded to additional paid-in capital (i.e., net impact to additional paid-in capital of $ 0 ).

Further, in the event the Earnout Shares Milestone and Earnout Cash Milestones are met, the Company will recognize an additional deemed dividend of $ 24,379,657 and $ 3,068,732 , respectively, if and when such conditions are met.

In the event the Earnout Shares Milestone and Earnout Cash Milestones are met, the Company will recognize an additional deemed dividend of $ 24.4 million and $ 3.1 million, respectively, if and when such conditions are met.

Assumed Public Warrants

Prior to the Merger, the Company had outstanding 3,450,000 Public Warrants.

Prior to the Merger, the Company had 3,450,000 Public Warrants outstanding.

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 and expire five years after the Effective Time or earlier upon redemption or liquidation.

The Public Warrants became exercisable at the Effective Time and expire five years after the Effective Time or earlier upon their redemption or liquidation of the Company.

The Company may redeem the Public Warrants:

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Additionally, in no event will the Company be required to net cash settle the warrants.

During the three months ended September 30, 2021, 1,144 Public Warrants were exercised for gross proceeds of $ 13,156 .

During the three months ended March 31, 2022, no Public Warrants were exercised.

Assumed Placement Warrants

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Prior to the Merger, the Company had outstanding 136,250 Placement Warrants.

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The 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 Placement Warrants as derivative liabilities in its Unaudited Condensed Consolidated Balance Sheet as of September 30, 2021.

The Company classifies the Placement Warrants as derivative liabilities in its Unaudited Condensed Consolidated Balance Sheet as of March 31, 2022.

The Company measures the fair value of the warrants at the end of each reporting period and recognizes changes in the fair value from the prior period in the Company’s operating results for the current period.

The Company recognized a loss on the change in fair value of the Placement Warrants for the three months ended September 30, 2021 and 2020 of $ 260,238 and $ 0 , respectively.

The Company recognized a gain on the change in fair value for the nine months ended September 30, 2021 and 2020 of $ 1,208,412 and $ 0 , respectively.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company recognized a gain on the change in fair value of the Placement Warrants for the three months ended March 31, 2022 of $ 0.2 million.

Refer to Note 11 for discussion of fair value measurement of the warrant liabilities.

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

Intrinsic Value

Total Warrants

Term (in years)

Exercise Price

Intrinsic Value

Outstanding as of December 31, 2020 (as previously reported)

Retroactive application of reverse recapitalization (Note 4)

Outstanding as of December 31, 2020, effect of Merger (Note 4)

( 1,496,216 )

( 49,913,766 )

(in thousands)

Outstanding as of December 31, 2021

Outstanding as of March 31, 2022

Outstanding as of June 30, 2021

( 1,834,740 )

( 17,498,538 )

( 1,500,566 )

Outstanding as of September 30, 2021

Assumed Unit Purchase Options

Prior to the Merger, the Company had outstanding options to purchase up to 600,000 Units exercisable at $ 10.00 per Unit (or an aggregate exercise price of $ 6,000,000 ) commencing at the Effective Time.

Each Unit consists of one share of Common Stock, one Public Right and one-half of one Public Warrant.

Each Public Right will convert into one-tenth (1/10) of one share of Common Stock upon exercise of the Units.

The unit purchase option may be exercised for cash or on a cashless basis, at the holder’s option, and expires five years from November 20, 2017.

The option grants to holders demand and “piggy back” rights for periods of five and seven years , respectively, from the effective date of the Company's registration statement with respect to the registration under the Securities Act of the securities directly and indirectly issuable upon exercise of the option.

The exercise price and number of units issuable upon exercise of the option may be adjusted in certain circumstances including in the event of a stock dividend, or the Company’s recapitalization, reorganization, merger or consolidation.

However, the option will not be adjusted for issuances of common stock at a price below its exercise price.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On July 23, 2021, the outstanding 600,000 Units were converted on a cashless basis into 499,630 shares of the Company’s common stock.

Conversion of Rights

Prior to the Merger, the Company had outstanding 6,900,000 and 272,500 Public Rights and Placement Rights, respectively.

At the Effective Time, each holder of a right received one-tenth (1/10) of one share of Common Stock at the Effective Time, even if the holder of such right redeemed all shares held by it in connection with the Merger, resulting in the issuance of 717,250 shares of Common Stock to holders of such rights.

No fractional shares were issued upon conversion of the rights.

No additional consideration was paid at the Effective Time, as the consideration related thereto had been included in the original unit purchase price paid for by investors in the Company's Initial Public Offering or the concurrent private placement, as applicable.

August 2021 Private Placement

On August 23, 2021, the Company completed a Private Placement and issued 2,727,273 shares of common stock for a purchase price of $ 11.00 per share and the Preferred Investment Options (warrants) to purchase up to an aggregate of 2,727,273 shares of common stock for a purchase price of $ 12.00 per share until they expire on August 23, 2024.

The aggregate gross proceeds to the Company from the Private Placement were approximately $ 30.0 million, before deducting placement agent fees and other offering expenses.

In connection with the Private Placement, the Company entered into a Registration Rights Agreement with the purchasers of the Securities.

The Company’s registration statement on Form S-1 to register the Securities became effective on September 15, 2021.

Transaction costs incurred related to the Private Placement include the following:

(i) placement fees of $ 2,250,000 (ii) issuance of Preferred Investment Options to the placement agent to purchase up to an aggregate of 136,364 shares with an exercise price of $ 13.75 per share and a three year term with a fair value of $ 1,026,957 , and (iii) legal, professional and printing fees of $ 391,781 .

Preferred Investment Options (included in above warrants table)

On February 2, 2022, the Company completed a private placement and issued 7,824,727 shares of common stock and Preferred Investment Options to purchase up to an aggregate of 7,824,727 shares of common stock.

The Preferred Investment Options have an exercise price of $ 3.07 per share and may be exercised any time on or after August 2, 2022.

The form of the Preferred Investment Option is a warrant.

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 $ 13.78 , exercise price of $ 12.00 , term of three years , volatility of 85.9 %, risk-free rate of 0.43 %, and expected dividend rate of 0 %).

The grant date fair value of these Preferred Investment Options was estimated to be $ 21,695,457 on August 23, 2021 and is reflected within additional paid-in capital as of September 30, 2021.

As noted above, the Company issued fully vested Preferred Investment Options to the placement agent with an exercise price of $ 13.75 .

The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at February 2, 2022, the date of issuance (i.e., share price of $ 2.94 , exercise price of $ 3.07 , term of five years beginning August 2, 2022, volatility of 82.8 %, risk-free rate of 1.60 %, and expected dividend rate of 0 %).

The grant date fair value of these Preferred Investment Options was estimated to be $ 15.5 million on February 2, 2022 and is reflected within additional paid-in capital as of March 31, 2022.

In addition, on February 2, 2022, the Company issued fully vested Preferred Investment Options to the placement agent with an exercise price of $ 3.99 .

As these Preferred Investment Options were issued for services provided in facilitating the private placement, the Company recorded the fair value of such Preferred Investment Options 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 $ 13.78 , exercise price of $ 13.75 , term of three years , volatility of 85.9 %, risk-free rate of 0.43 %, and expected dividend rate of 0 %).

The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at February 2, 2022, the date of issuance (i.e., share price of $ 2.94 , exercise price of $ 3.99 , term of five years beginning August 2, 2022, volatility of 82.8 %, risk-free rate of 1.60 %, and expected dividend rate of 0 %).

Stock-Based Compensation

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Prior to the Merger, NeuroRx maintained its 2016 Omnibus Incentive Plan (the “2016 Plan”), under which NeuroRx granted incentive stock options, restricted stock awards, other stock-based awards, or other cash-based awards to employees, directors, and non-employee consultants.

The maximum aggregate shares of common stock that was subject to awards and issuable under the 2016 Plan was 3,472,000 .

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The maximum aggregate shares of common stock that were subject to awards and issuable under the 2016 Plan was 3,472,000 .

In connection with the Merger, each option of NeuroRx that was outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) was assumed by BRPA and converted into an option to acquire an adjusted number of shares of Common Stock at an adjusted exercise price per share (the “Substitute Options”), based on the Option Exchange Ratio (of 4.96 ), and will continue to be governed by substantially the same terms and conditions, including vesting, as were applicable to the former option.

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The incremental shares above the Exchange Ratio (of 3.16 ) upon exercise would be held back pending the outcome of the contingencies and only released if such are achieved.

The percentage of total shares of Common Stock subject to each Substitute Option that is vested immediately following the Effective Time will equal the percentage of total shares of NeuroRx common stock subject to each NeuroRx option that is vested immediately prior to the Effective Time.

The percentage of total shares of Common Stock

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

subject to each Substitute Option that is vested immediately following the Effective Time will equal the percentage of total shares of NeuroRx common stock subject to each NeuroRx option that is vested immediately prior to the Effective Time.

In the event that either the Earnout Shares Milestone or the Earnout Cash Milestone does not occur prior to December 31, 2022, each Substitute Option will be adjusted such that the number of shares of Common Stock subject to each adjusted Substitute Option, the exercise price per share of each adjusted Substitute Option and the aggregate intrinsic value of each adjusted Substitute Option will equal the respective number of shares, exercise price per share and aggregate intrinsic value that would have resulted following the adjustment of the applicable underlying Substitute Option had the conversion of NeuroRx options into the Substitute Options been applied using the Exchange Ratio as adjusted accordingly to reflect the impact of the respective milestone not being met.

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Dividend yield

The Substitute Options contain both service-based and performance-based vesting conditions (i.e., the achievement of the Earnout Cash Mileston and/or Earnout Shares Milestone).

The Company determined it was not probable that the Earnout Cash Mileston or Earnout Shares Milestone would be met on the Effective Date and at September 30, 2021.

The Substitute Options contain both service-based and performance-based vesting conditions (i.e., the achievement of the Earnout Cash Milestone and/or Earnout Shares Milestone).

The Company determined it was not probable that the Earnout Cash Milestone or Earnout Shares Milestone would be met on the Effective Date and at March 31, 2022.

Accordingly, the Company will only recognize incremental compensation cost related to the portion of the Substitute Options subject to service-based vesting conditions only.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For vested Substitute Options, the Company recognized incremental compensation on the modification date totaling $ 1,014,640 of which $ 993,500 and $ 21,140 was recognized in General and Administrative and Research and Development, respectively, in the Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2021.

For unvested Substitute Options, the Company will recognize incremental compensation over the remaining requisite service period, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification date, taking into consideration the probability of the achievement of the Earnout Cash Milestone and/or Earnout Shares Milestone.

Incremental compensation costs related to unvested Substitute Options as of the modification date was $ 25,877,473 .

Incremental compensation costs related to unvested Substitute Options as of the modification date was $ 25.9 million.

2021 Omnibus Incentive Plan

At the Effective Time, the Company adopted the 2021 Omnibus Incentive Plan (the “2021 Plan”).

As of September 30, 2021, 5,373,049 shares of Common Stock are authorized for issuance pursuant to awards under the 2021 Plan, inclusive of any shares of Common Stock subject to stock options, restricted stock awards or other awards that were assumed in the Merger and terminate as a result of being unexercised or are forfeited or repurchased by the Company, with the maximum number of shares to be added to the 2021 Plan equal to 5,373,049 shares of Common Stock.

As of March 31, 2022, 6,049,178 shares of Common Stock are authorized for issuance pursuant to awards under the 2021 Plan.

As of January 1,

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2022, 676,129 shares were added to the 2021 Plan under an evergreen feature that automatically increases the reserve with additional shares of Common Stock for future issuance under the Incentive Plan each calendar year, beginning January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (A) 1% of the shares of Common Stock outstanding on the final day of the immediately preceding calendar year or (B) a smaller number of shares determined by the Board.

The Substitute Options do not reduce the number of shares authorized for grant under the 2021 Plan.

As of September 30, 2021, 732,460 shares have been awarded and 4,640,589 shares remain available for issuance under the 2021 Plan.

As of March 31, 2022, 5,154,123 shares have been awarded and 895,055 shares remain available for issuance under the 2021 Plan.

The 2021 Plan permits the granting of incentive stock options, restricted stock awards, other stock-based award or other cash-based awards to employees, directors, and non-employee consultants.

1 unchanged sentence

The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model.

The Company is a public company and lacks company-specific historical and implied volatility information.

Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies.

Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards.

The Company is a public company and has limited company-specific historical and implied volatility information.

Therefore, it estimates its expected stock volatility based on the limited company-specific historical volatility and implied volatility as well as historical volatility of a publicly traded set of peer companies.

The expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards.

The risk-free interest rate is determined by reference to the U.S.

4 unchanged sentences

The following assumptions were used during the following periods:

September 30, 2021

March 31, 2022

December 31, 2021

4 unchanged sentences

1.80 %- 2.56 %

0.69 %- 1.45 %

Expected term (years)

Expected stock price volatility

80.0 %- 85.9 %

Dividend yield

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the Company’s employee and non-employee stock option activity under the Plan for the following periods:

exercise price

Outstanding as of December 31, 2020 (as previously reported)

Retroactive application of reverse recapitalization

Outstanding as of December 31, 2020, effect of Merger

Options granted

( 6,587,328 )

(in thousands)

Outstanding as of December 31, 2021

Outstanding as of March 31, 2022

Options granted

Outstanding as of June 30, 2021

Options granted

( 3,602,645 )

Outstanding as of September 30, 2021

Options vested and exercisable as of September 30, 2021

The aggregate intrinsic value in the above table is calculated as the difference between fair value of the Company’s common stock price and the exercise price of the stock options.

The weighted average grant date fair value per share for employee stock and non-employee option grants during the three months ended and nine months ended September 30, 2021, respectively was $ 9.80 and $ 16.53 .

The weighted average grant date fair value per share for employee stock and non-employee option grants during the three months ended and nine months ended September 30, 2020, respectively was $ 11.62 and $ 4.44 .

At September 30, 2021, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted, including unrecognized compensation costs related to Substitute Options of $ 25,877,473 , was $ 32,644,383 , of which the Company expects to recognize $ 8,152,105 over a weighted-average period of approximately 1.23 years.

The following table summarizes the Company’s recognition of stock-based compensation for the following periods:

Three months ended September 30,

Nine months ended September 30,

Options vested and exercisable as of March 31, 2022

The weighted average grant date fair value per share for employee stock and non-employee option grants during the three months ended March 31, 2022 was $ 2.27 .

The weighted average grant date fair value per share for employee stock and non-employee option grants during the three months ended March 31, 2021 was $ 10.00 .

At March 31, 2022, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted, including

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

unrecognized compensation costs related to Substitute Options of $ 25.9 million, was $ 30.4 million, of which the Company expects to recognize $ 5.9 million over a weighted-average period of approximately 1.87 years.

The following table summarizes the Company’s recognition of stock-based compensation for the following periods (in thousands):

Three months ended March 31,

Stock-based compensation expense

General and administrative

Regulatory and process development

Research and development

Total stock-based compensation expense

Fair Value Measurements

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the nine months ended September 30, 2021 and the year ended December 31, 2020.

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the three months ended March 31, 2022 and the year ended December 31, 2021.

The carrying amount of accounts payable approximated fair value as they are short term in nature.

The fair value of warrants issued for settlement and services are estimated based on the Black-Scholes model during the nine months ended September 30, 2021 and the year ended December 31, 2020.

The fair value of warrants issued for settlement and services are estimated based on the Black-Scholes model during the three months ended March 31, 2022 and the year ended December 31, 2021.

The carrying value of notes payable approximated the estimated fair values due to their recent issuances.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value on a Recurring Basis

1 unchanged sentence

The estimated fair value of the warrant liabilities and Earnout Cash contingent consideration represent Level 3 measurements.

The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at September 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:

September 30, 2021

December 31, 2020

The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis at March 31, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value (in thousands):

Warrant liabilities (Note 10)

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The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The significant unobservable inputs used in the Black-Scholes model to measure the warrant liability that are categorized within Level 3 of the fair value hierarchy are as follows:

September 30, 2021

At Effective Time

March 31, 2022

Stock price on valuation date

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Fair value of warrants

A reconciliation of warrant liabilities is included below:

A reconciliation of warrant liabilities is included below (in thousands):

March 31, 2022

Balance as of December 31, 2021

Additions pursuant to Merger

Gain upon re-measurement

( 1,468,649 )

Balance as of June 30, 2021

Loss upon re-measurement

Balance as of September 30, 2021

Balance as of March 31, 2022

Earnout Cash liability

The fair value of the Earnout Cash liability has been estimated using probability-weighted discounted cash flow models (DCFs) with significant inputs that are not observable in the market, including the probability of achievement, and thus

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

represents a Level 3 fair value measurement as defined in ASC 820.

The DCFs incorporate Level 3 inputs including estimated discount rates that we believe market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed, considering the uncertainties associated with the obligations.

A reconciliation of the Earnout Cash liability is included below:

The fair value of the Earnout Cash liability has been estimated using probability-weighted discounted cash flow models (DCFs) with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820.

The most significant inputs include whether (a) if the Company files an NDA, that the FDA approves the Company’s NDA for ZYESAMI and/or NRX-101, (b) if such approval is granted, whether such approval will be received on or before December 31, 2022, and (c) if such approval is granted, whether ZYESAMI and/or NRX-101 will be listed in the FDA’s Orange Book on or before December 31, 2022.

The DCFs incorporate Level 3 inputs including estimated discount rates that the Company believes market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed, considering the uncertainties associated with the obligations.

A reconciliation of the Earnout Cash liability is included below (in thousands):

March 31, 2022

Balance as of December 31, 2021

Additions pursuant to Merger

Loss upon re-measurement

Balance as of June 30, 2021

Loss upon re-measurement

Balance as of September 30, 2021

Fair Value on a Non-Recurring Basis

The fair value of the contingent Earnout Shares has been estimated using the trading price of our Common Stock at the Effective Time ($ 24.25 ), discounted based on the probability of the Earnout Shares Milestone being met as determined at the Effective Time, and thus represents a Level 2 fair value measurement as defined in ASC 820.

The contingent Earnout Shares, if achieved, would be issued to legacy NeuroRx shareholders.

The Earnout Shares are a fixed number of shares to be issued to such shareholders on a pro rata basis.

The fair value of the contingent Earnout Shares were recognized as a deemed dividend.

Upon closing of the Merger, the estimated fair value of the contingent Earnout Shares was $ 253,130,272 with such amount recognized as a deemed dividend.

As the Company is in an accumulated deficit position as of the measurement date, the resulting deemed dividend is recorded as a reduction of additional paid-in capital with a corresponding offset recorded to additional paid-in capital (i.e., net impact to additional paid-in capital of $ 0 ).

The Company recorded no provision or benefit for income tax expense for the nine months ended September 30, 2021.

Gain upon re-measurement

Balance as of March 31, 2022

The Company recorded no provision or benefit for income tax expense for the three months ended March 31, 2022 and 2021, respectively.

For all periods presented, the pretax losses incurred by the Company received no corresponding tax benefit because the Company concluded that it is more likely than not that the Company will be unable to realize the value of any resulting deferred tax assets.

The Company will continue to assess its position in future periods to determine if it is appropriate to reduce a portion of its valuation allowance in the future.

On March 27, 2020, Congress enacted the CARES Act to provide certain relief as a result of the COVID-19 pandemic.

The CARES Act, among other things, includes provisions relating to net operating loss carryback periods, alternative minimum tax credit refunds, and modification to the net interest deduction limitations.

The CARES Act did not have a material impact on the Company’s consolidated financial statements for the nine months ended September 30, 2021.

The Company continues to monitor any effects on its financial statements that may result from the CARES Act.

Upon consummation of the Merger, a change in control was deemed to have occurred and the Company's net operating loss carrybacks could be subject to limitations.

The Company has no open tax audits with any taxing authority as of September 30, 2021.

Related Party Transactions

All related party transactions are governed by and implemented in accordance with the Company’s Related Person Transactions Policy which relates to the review, approval, ratification and disclosure of transactions or arrangements

The Company has no open tax audits with any taxing authority as of March 31, 2022.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

between the Company and its directors, executive officers and other related persons, All Related Person Transactions are submitted to the General Counsel of the Company and the Chair of the Audit Committee for approval.

Related Party Transactions

The Company licenses patents that are owned by Glytech, LLC (“Glytech”), pursuant to a license agreement (the “Glytech Agreement”).

Glytech is owned by a co-founder and former Director of the Company, and therefore, a related party.

Glytech is owned by a co-founder and former Director of the Company.

The Glytech Agreement requires that the Company pay Glytech for ongoing scientific support and also reimburse Glytech for expenses of obtaining and maintaining patents that are licensed to NRx Pharmaceuticals.

During the three months ended September 30, 2021 and 2020 the Company paid a co-founder $ 0 and $ 0 , respectively, and during the nine months ended September 30, 2021 and 2020, $ 125,000 and $ 82,569 , respectively, for continuing technology support services and reimbursed expenses.

During the three months ended March 31, 2022, the Company paid a co-founder $ 0.1 million for continuing technology support services and reimbursed expenses.

These support services are ongoing.

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This definition would cover pharmaceutical formulations, including some that NRx Pharmaceuticals considers “pipeline” or “future product” opportunities, that contain a combination of pharmaceutical components different from those contained in NRX-100 and NRX-101.

The Excluded Technology will transfer to the Company for no additional consideration if aggregate the value of NRx Pharmaceuticals equity held by Glytech exceeds $50,000,000 on any date prior to August 6, 2022, based on the average daily value of the equity held by Glytech during a period of 20 consecutive days prior to such date.

The Excluded Technology will transfer to the Company for no additional consideration if aggregate the value of NRx Pharmaceuticals equity held by Glytech exceeds $ 50.0 million on any date prior to August 6, 2022, based on the average daily value of the equity held by Glytech during a period of 20 consecutive days prior to such date.

The Company believes the criteria have been met pending the registration of Glytech shares.

The CEO of the Company is a major shareholder in the Company.

The Chief Scientist of the Company, Dr.

Jonathan Javitt, is a major shareholder in the Company and a member of the Board of Directors.

Therefore, his services are deemed to be a related party transaction.

He serves the company on a full-time basis and has an employment agreement with the Company and received compensation of $ 68,750 and $ 128,750 during the three months ended September 30, 2021 and 2020, respectively, and $ 355,000 and $ 250,625 during the nine months ended September 30, 2021 and 2020, respectively.

The services are ongoing.

Zachary Javitt provides services related to website, IT, and marketing support under the supervision of the Company’s Chief Commercial Officer, who is responsible for assuring that the services are provided on financial terms that are at market.

The Company paid this family member a total of $ 28,580 and $ 19,585 during the three months ended September 30, 2021 and 2020, respectively, and $ 58,320 and $ 60,355 during the nine months ended September 30, 2021 and 2020, respectively.

He served the Company on a full-time basis as CEO under an employment agreement with the Company until March 8, 2022 and currently serves under a Consulting Agreement with the Company as Chief Scientist thereafter and received compensation of $ 0.4 million and $ 0.1 million during the three months ended March 31, 2022 and 2021, respectively.

These services are ongoing.

Zachary Javitt is the son of Dr.

Jonathan Javitt.

Zachary Javitt provides services related to website, IT, and marketing support under the supervision of the Company’s Interim CEO and the Company’s Senior Director of Global Communications, who are responsible for assuring that the services are provided on financial terms that are at market.

The Company paid this family member a total of $ 0.1 million during the three months ended March 31, 2022.

These services are ongoing.

In addition, the Company pays PillTracker for digital health product development required to track the use of Aviptadil in clinical trials.

FDA guidance recommends such solutions and the FDA specifically directed the Company to implement a digital health tracking solution.

FDA guidance recommends such solutions.

Zachary Javitt and Jonathan Javitt are the chief executive officer and board chairman, respectively, of PillTracker.

As PillTracker is a Related Person, all PillTracker agreements and transactions are submitted to the General Counsel of the Company and the Chair of the Audit Committee for approval in accordance with the terms of the Company’s Related Person Transactions Policy.

PillTracker agreements and transactions are submitted to the General Counsel of the Company and the Chair of the Audit Committee for approval in accordance with the terms of the Company’s Related Person Transactions Policy.

On July 26, 2021, the Company and PillTracker entered into a statement of work (“SOW”) under the Master Service Agreement dated April 1, 2020 (“MSA”).

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PillTracker’s responsibilities include set-up, patient monitoring, and the provision of tablets and other necessary hardware.

The total cost under the SOW is $ 157,110 .

NRx Pharmaceuticals paid PillTracker $ 289,308 and $ 118,642 during the three months ended September 30, 2021 and 2020, respectively, and $ 685,066 and $ 118,642 during the nine months ended September 30, 2021 and 2020, respectively.

The total cost under the SOW is $ 0.2 million.

The work under this SOW has been suspended by mutual agreement pending the Company’s review of its inhaled trial.

On November 15, 2021, NRx Pharmaceuticals and Pill Tracker entered into a Supplemental Task Order (“STO”) amending SOW No.

1, under the MSA.

The additional work under the STO focuses on study preparation and custom, software interface buildout of a connected medication adherence and patient-monitoring platform to support participants of the AVICOVID-2 clinical trial of inhaled ZYESAMI in the U.S., and future studies of ZYESAMI with compatible protocol designs.

The expected cost of the STO is $ 0.4 million.

The STO has been suspended by mutual agreement pending the Company’s review of its inhaled trial.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Included in accounts payable were $ 138,501 and $ 149,067 due to the above related parties as of September 30, 2021 and December 31, 2020, respectively.

Subsequent Events

VaccineCo Agreement and Issuance of Additional Shares

On October 15, 2021, the Company entered into a Shareholder Agreement (“Agreement”) with Shimshon Hen and David Sepiashvili, each an Israeli citizen (collectively, the “Shareholders”) which sets out the framework for the establishment of a new joint venture between the Company and the Shareholders (“VaccineCo”) that will be responsible for the development and commercialization of the BriLife TM vaccine (the “Vaccine”).

The Agreement provides that the Company will hold 60 % of the equity interest in VaccineCo with the Shareholders holding the remaining 40 %.

VaccineCo is expected to have a four-member board of directors (the “Board”), and the Company and the Shareholders will each be entitled to appoint two members to the Board.

All financial decisions of the Board will require the consent of 75% of its members.

Among others, the Agreement requires the Shareholders to:

– take any and all necessary actions to support the negotiation and execution of an exclusive license agreement to the Company and/or VaccineCo for the development and marketing of the Vaccine;

– assist in obtaining all permits, licenses and approvals from all local, regional and national governmental departments and other regulatory health authorities, including the European Medicines Agency and the World Health Organization, as applicable, which are necessary for the Company and/or VaccineCo to advance the current clinical trials of the Vaccine in the nation of Georgia and to commence clinical trials of the Vaccine in Ukraine and such other countries as the parties shall agree;

– assist the Company and/or VaccineCo in furthering, organizing and/or commencing clinical trials of the Vaccine in each of the above mentioned countries;

– market and sell the Vaccine, once approved, in all countries of the Caucasus region, Russia, Peru, and such other countries as the parties shall agree;

– pay 40 % of all costs of developing, marketing, and selling the Vaccine.

In consideration for the Shareholders’ commencement of work under the Agreement, the Agreement provides that the Company will grant the Shareholders 4,000,000 shares of the Company’s Common Stock.

On October 20, 2021, the Shares were issued by the Company to the Shareholders under the Company’s 2021 Omnibus Incentive Plan.

NRx Pharmaceuticals paid PillTracker $ 0.2 million and $ 0.1 million during the three months ended March 31, 2022 and 2021, respectively.

Included in accounts payable were less than $ 0.1 million and $ 0.1 million due to the above related parties as of March 31, 2022 and December 31, 2021, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements