What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-16 compared with 2021-11-15 · 127 added, 185 removed, 86 unchanged (78% of the section changed)

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Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section entitled “Risk Factors” included elsewhere herein.

All amounts in this report are in U.S.

dollars, unless otherwise noted.

On May 24, 2021, Big Rock Partners Acquisition Group ("BRPA"), a special purpose acquisition company, consummated the Agreement and Plan of Merger (as amended, the “Merger Agreement”) with 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 the Merger Agreement, on May 24, 2021 (the “Closing Date”), which has been accounted for as a reverse recapitalization, Merger Sub was merged with and into NeuroRx, with NeuroRx surviving the merger (“Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions”).

On May 24, 2021, Big Rock Partners Acquisition Group (“BRPA”), a special purpose acquisition company, consummated the Agreement and Plan of Merger (as amended, the “Merger Agreement”) with 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 the Merger Agreement, on May 24, 2021 (the “Closing Date”), which has been accounted for as a reverse recapitalization, Merger Sub was merged with and into NeuroRx, with NeuroRx surviving the merger (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”).

On the Closing Date, BRPA changed its name to NRX Pharmaceuticals, Inc.

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

and, where appropriate, its subsidiaries.

NRx Pharmaceuticals is a clinical stage pharmaceutical company that is developing NRX-101, the first investigational oral therapeutic for the treatment of Acute Suicidal Behavior/Ideation (ASIB) in Bipolar Disorder and Aviptadil (reformulated as ZYESAMI ® ), an investigational intravenous and inhaled drug to treat respiratory failure in COVID-19.

The NRx Pharmaceuticals Antidepressant Regime was developed based upon 30 years of basic science and clinical expertise contributed by Prof.

Daniel Javitt, PhD, MD, related to the role of the brain’s N-methyl-D-aspartate (NMDA) receptor in regulating human thought processes in general and in regulating depression and suicidality.

The NRx Pharmaceuticals Antidepressant Regime begins with a single dose of ketamine, an FDA approved anesthetic, followed by approximately six weeks of daily oral NRX-101.

NRX-101 is being developed and investigated as a rapid-onset and sustained treatment for acute suicidal crisis associated with bipolar depression.

NRX-101 combines DCS, a NMDA receptor modulator, and lurasidone, a 5-HT2a receptor antagonist.

NRX-101 has been awarded Fast Track designation, Breakthrough Therapy designation, and a Special Protocol Agreement by the FDA.

Peer-reviewed and published results from multiple Phase II clinical studies demonstrate a significant decline in symptoms of depression and suicidality following administration of DCS.

(“NRx Pharmaceuticals” or the “Company”).

NRx Pharmaceuticals is a clinical stage pharmaceutical company that is developing, through its wholly-owned operating subsidiary, NeuroRx, NRX-100 and NRX-101, the first oral therapeutic for the treatment of Bipolar Depression in patients with Acute Suicidal Ideation and Behavior (ASIB) and Sub-Acute Suicidal Ideation and Behavior (“SSIB”), and ZYESAMI ® (aviptadil), an intravenous and inhaled drug to treat respiratory failure in COVID-19 and potentially other respiratory disorders.

NRX-100 and NRX-101 were developed based upon 30 years of basic science and clinical expertise contributed by Dr.

Daniel Javitt, MD, PhD, related to the role of the brain’s N-methyl-D-aspartate (“NMDA”) receptor in regulating human thought processes in general and in regulating depression and suicidality.

The NRX-100 and NRX-101 therapy begins with a single dose of ketamine (NRX-100), a Food & Drug Administration (“FDA”) approved anesthetic, followed by approximately six weeks of daily oral NRX-101.

NRX-101 is being developed as a rapid-onset and sustained treatment for bipolar depression with ASIB and SSIB.

NRX-101 combines d-Cycloserine, a NMDA receptor modulator, and lurasidone, a 5-HT2a receptor antagonist.

NRX-101 has been awarded Fast Track designation, Breakthrough Therapy designation, a Biomarker Letter of Support, and a Special Protocol Agreement by the FDA.

Peer-reviewed and published results from Phase II clinical studies demonstrate a significant decline and stabilization in symptoms of depression and suicidality following administration of DCS.

Findings from one of these studies found that bipolar patients who were already receiving a 5-HT2a antagonist demonstrated more than a 50% reduction in symptoms of depression and a 75% reduction in suicidal ideation when ketamine and DCS were added to their treatment regimen.

Side effects for patients in a Phase 2a combination study of DCS and 5HT2a included mild sedation, headaches and hypomania.

Breakthrough Therapy designation was awarded based on the STABIL-B study ( www.clinicaltrials.gov NCT02974010) that demonstrated a statistically significant advantage of NRX-101 vs.

Side effects for patients in a P2a combination study of DCS and 5HT2a included mild sedation, headaches and hypomania.

Breakthrough Therapy designation was awarded based on data from the STABIL-B study (NCT02974010) that demonstrated a statistically significant advantage of NRX-101 vs.

lurasidone (the current standard of care) in maintaining remission from depression and suicidality following a single stabilizing dose of ketamine.

In March 2020, the Company initiated development of RLF-100 ZYESAMI in partnership with Relief Therapeutics through a collaboration agreement (“Relief Agreement”).

ZYESAMI is based on 50 years of research, pioneered by Professor Sami Said, on the role of Vasoactive Intestinal Peptide in preventing and treating acute lung injury by protecting the Type II cell in the lung.

The rights to Dr.

Said’s scientific work are licensed by the Company from the Research Foundation of the State University of New York.

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 approximately $10.9 million for expenses but has subsequently declined to reimburse the Company for additional costs of the IV clinical trial, the inhaled use trial, formulation and manufacture of ZYESAMI, statistical analysis, and regulatory

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.

See Contractual Obligations and Commitments below.

NRx Pharmaceuticals initiated a Phase II SSIB clinical study in the second quarter of 2022 for which enrollment has begun.

The Company plans to initiate a Phase III registrational ASIB study in the second half of 2022.

In March 2020, NRx Pharmaceuticals initiated development of RLF-100 (aviptadil acetate) (now reformulated as ZYESAMI by NRx Pharmaceuticals) in partnership with Relief Therapeutics Holding AG (“Relief Therapeutics”).

ZYESAMI is based on 50 years of research, pioneered by Professor Sami Said, on the role of Vasoactive Intestinal Peptide/Aviptadil in preventing and treating acute lung injury by protecting the Type II cell in the lung.

The rights to Professor Said’s scientific work are licensed by the Company from the Research Foundation for the State University of New York.

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

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

defined in the Collaboration Agreement.

Relief Therapeutics has reimbursed the Company approximately $10.9 million but has subsequently declined to reimburse the Company for additional costs.

On October 6, 2021, Relief Therapeutics filed a complaint in New York State Court, 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 that the claims are baseless and without merit.

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 lawsuits 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.

In an open-label, single center trial at Houston Methodist Hospital, ZYESAMI demonstrated a statistically significant 9-fold advantage in probability of survival and recovery from respiratory failure compared to the standard of care among patients with COVID-19 respiratory failure.

On June 1, 2021, NRx Pharmaceuticals reported phase IIb/III study results of ZYESAMI in patients with respiratory failure due to critical COVID-19.

The study failed to meet its primary endpoint of being alive and free of respiratory failure at day 60 without controlling for ventilation status or site of care (i.e.

tertiary care hospital vs.

community hospital), but did demonstrate a statistically significant increase in the likelihood that patients treated with ZYESAMI would be alive and free of respiratory failure at 60 days, compared to those treated with placebo when controlling for ventilation status and site of care.

The clinical study did demonstrate a 2-fold, statistically-significant increased odds of surviving COVID-19 respiratory failture across all patients and sites of care when controlling for baseline severity of COVID-19 in each patient.

This survival endpoint was a declared secondary endpoint of the clinical trial.

In November 2021, the FDA declined the Company’s application for Emergency Use Authorization for ZYESAMI.

The Company continues to provide the FDA with new data from ongoing trials as such data become available and the FDA has stated that it remains committed to working with the Company on the development of ZYESAMI.

The Company expects to file a new drug application (NDA) based on the recently completed Phase 2b/3 clinical trial and additional clinical trials currently underway, including the National Institutes of Health ACTIV3b/TESICO trial (NCT 04843761).

The Company plans to file for accelerated approval of ZYESAMI based on the IL-6 and RDR data in the two clinical studies.

If granted approval, ZYESAMI would be the first medicine in the United States indicated specifically for patients suffering from critical COVID-19 with respiratory failure.

In July 2021, the nation of Georgia issued an emergency use authorization (EUA) for intravenous ZYESAMI (Aviptadil) for the treatment of critical COVID-19.

Pursuant to this EUA, the Company has sent a team of physicians to Georgia to train local doctors to appropriately administer ZYESAMI and the effects of the medicine.

The supply of intravenous doses by the Company is being discussed with the Georgia Ministry of Health and with the Ministries of Health of other nations in the Caucasus region.

On March 29, 2021, NRx Pharmaceuticals reported top-line Phase IIb/III study results of ZYESAMI in patients with respiratory failure due to Critical COVID-19.

Though it did not meet statistical significance for the pre-specified primary endpoint of “alive and free of respiratory failure” (P=.08), the study identified a two-fold statistically significant odds of survival at day 60 (P=.03), and significant advantages on secondary endpoints, for those treated with ZYESAMI compared to those treated with placebo.

On the basis of these results, the National Institute for Allergy and Infectious Diseases selected NRx Pharmaceuticals as an industry partner for participation in the ACTIV3b/TESICO trial (NCT 04843761) in which patients with Critical COVID-19 are randomized to aviptadil, remdesivir, and placebo.

NRx Pharmaceuticals provides doses of aviptadil as the industry partner and the U.S.

Government funds all other costs of research.

As of March 2022, approximately 465 patients with Critical COVID-19 were enrolled and treated with either aviptadil or placebo.

The endpoint of the trial is superiority on an ordinal scale that includes survival and recovery from respiratory failure at 90 days.

As of the February 25, 2022 the Data Safety and Monitoring Board (“DSMB”) meeting, no unexpected adverse events were identified in association with ZYESAMI and the trial was cleared to continue enrolling.

To date, the DSMB has not declared futility of the aviptadil arm of the ACTIV-3b trial, although futility has been declared for all other investigational products selected in the ACTIV-3b trial studying Critical COVID-19 patients.

The DSMB is scheduled to review the data again on May 25, 2022.

A previously targeted DSMB meeting for end of April was moved to this new date to allow for the vast majority of enrolled patients to have reached 90 days.

NRx Pharmaceuticals applied for FDA Emergency Use Authorization (“EUA”) on May 31, 2021.

In November 2021, the FDA notified us that it was unable to issue the EUA at that time due to insufficient data regarding the known and potential benefits of ZYESAMI and the known and potential risks of ZYESAMI in patients suffering from critical COVID-19 with respiratory failure.

In November 2021, the FDA also declined a request for Breakthrough Therapy designation, mentioning in its reply that the request did not adequately compare the safety and efficacy of aviptadil to existing therapies in Critical COVID-19 patients, such as remdesivir.

In response, in February 2022, the Company filed a new request for EUA in patients with COVID-19 respiratory failure who are at immediate risk of death despite treatment with remdesivir and other approved therapies.

This new request is based on a post-hoc analysis of the approximately 70% of patients in the randomized study that were also treated with remdesivir and included safety data on approximately 750 patients treated with ZYESAMI in our clinical trials, our Expanded Access Programs, our Right To Try Program and the ACTIV-3b trial.

On April 20, 2022, the Company submitted a new Breakthrough Therapy designation request focused on this narrower population of patients that are at immediate risk of death despite treatment with remdesivir.

As of the date hereof, these requests are still pending.

Should an EUA be granted, this would provide NRx Pharmaceuticals with a one-year period during which ZYESAMI could be marketed for the treatment of COVID-19 in the United States in advance of the filing a new drug application (“NDA”) with the FDA for formal approval of ZYESAMI for the treatment of COVID-19.

If authorized for use, we believe ZYESAMI would fill a high unmet need for COVID-19 patients who are critically ill with respiratory failure, as current options have only limited applicability in this patient segment.

Manufacturing and scalability of ZYESAMI are a major focus of the Company.

Working with its manufacturing partners, the Company has the capability to produce batch sizes of 1.5kg and potentially larger of the active pharmaceutical ingredient (API) of ZYESAMI.

In addition to producing ZYESAMI API at a scale suitable for commercial quantities, the Company has gained insights into how to address the chemical basis for the instability of the formulated drug product ZYESAMI in solution.

The Company has now demonstrated a formulation of ZYESAMI with refrigerated stability of up to 8 months and expected multi-year frozen stability (-20°C).

In January 2022, the Company filed a Composition of Matter patent application that describes this extended stability form of aviptadil.

In the process, the Company has identified specific aspects of the manufacturing process that it believes are key to preserving the stability of aviptadil for stockpiling and commercial supply chain purposes.

On October 8, 2021, the Company submitted an updated manufacturing module to its FDA Investigational New Drug file documenting this change in manufacture and stability.

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In October 2021, the Company announced that a European Qualified Person audit was conducted, and no major deficiencies were identified, thus clearing ZYESAMI’s use in EU investigational programs.

Although the initial focus has been on the use of intravenous ZYESAMI, the Company has received permission from the FDA to test inhaled ZYESAMI in a phase 2/3 clinical trial for patients with early COVID-19 disease.

The Company believes that the inhaled medicine will be more convenient for patients to self-administer than the intravenous drug, provided patients are still able to inhale normally and do not have inflammatory debris clogging the alveoli.

This clinical trial commenced in January 2021 and is expected to conclude in the first half of 2022.

On July 11, 2021, the Company signed a Memorandum of Understanding (MoU) with the Government of Israel.

The MoU allows for the Company to hold an exclusive, worldwide license to develop the BriLife TM vaccine, a novel COVID-19 vaccine developed by the Israel Institute for Biological Research (IIBR).

The vaccine is a self-propagating live virus vaccine based on World Health Organization sponsored research that resulted in the development of a successful vaccine against Ebola.

The vaccine has demonstrated a statistically significant increase in COVID-neutralizing antibody (a sign of immunity to SARS-CoV-2) compared to placebo in phase 2a trials conducted in Israel.

The vaccine has further shown indications of neutralizing antibody against variants of concern, including the Delta variant of the SARS-CoV-2 virus in

early human and preclinical studies.

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

The IIBR will provide technical assistance for the clinical trial.

The Company has contracted with a GMP Viral Vector manufacturing partner to scale up the vaccine manufacturing.

If the BriLife clinical trials are successful, and subject to the negotiation of definitive licensing agreements with the IIBR, the Company would have an exclusive license to commercialize the vaccine in exchange for agreed upon milestone and royalty payments.

Since inception, NRx Pharmaceuticals has incurred significant operating losses.

For the three months ended September 30, 2021 and 2020, NRx Pharmaceuticals’ net loss was $20,773,099 and $5,161,712, respectively.

For the nine months ended September 30, 2021 and 2020, NRx Pharmaceuticals’ net loss was $62,269,946 and $6,649,481, respectively.

As of September 30, 2021, NRx Pharmaceuticals had an accumulated deficit of $152,449,666.

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.

For the three months ended March 31, 2022 and 2021, NRx Pharmaceuticals’ net loss was $13.4 million and $25.5 million, respectively.

As of March 31, 2022, NRx Pharmaceuticals had an accumulated deficit of $196.7 million.

Components of Results of Operations

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Reimbursement of expenses from Relief Therapeutics

Reimbursement of expenses from Relief consists primarily of reimbursable expenses as part of the Relief Agreement.

Results of operations for the three months ended September 30, 2021 and 2020

The following table sets forth NRx Pharmaceuticals’ selected statements of operations data for the following periods:

Three months ended September 30,

Operating expenses:

Research and development

General and administrative

Reimbursement of expenses from Relief Therapeutics

Total operating expenses

Loss from operations

Other (income) expenses:

Interest expense

Change in fair value of warrant liability

Change in fair value of Earnout Cash liability

Total other (income) expenses

Loss before tax

Operating expenses

Research and development expenses

For the three months ended September 30, 2021, NRx Pharmaceuticals recorded $6,275,911 of research and development expenses compared to $4,331,709 for the three months ended September 30, 2020.

The increase of $1,944,202 related primarily to an increase of $1,278,166 in clinical trials and development expenses related to ZYESAMI (Aviptadil), an increase of $569,804 in other regulatory and process development expenses in, and an increase of $93,656 in stock-based compensation expense.

The $6,275,911 and $4,331,709 of research and development expenses for the three months ended September 30, 2021 and 2020, respectively, include $219,802 and $126,146, respectively, of non-cash stock-based compensation.

General and administrative expenses

For the three months ended September 30, 2021, NRx Pharmaceuticals recorded $13,823,240 of general and administrative expenses compared to $3,753,704 for the three months ended September 30, 2020.

The increase of $10,069,536 related primarily to $8,619,077 of consultant fees of which $7,925,511 relates to non-cash consulting fees paid in common stock, an increase of $1,275,419 in stock-based compensation expense, an increase of $1,618,271 in insurance expense, and an increase of $891,301 in other general and administrative expenses.

The increase is partially offset by a decrease of $2,689,684 for warrant expense for warrants issued to board members for services.

The $13,823,240 and $3,753,704 of general and administrative expenses for the three months ended September 30, 2021 and 2020, respectively, include $9,265,534 and $2,754,288, respectively, of non-cash stock based compensation, consulting fees and warrant expense.

Reimbursement of expenses from Relief Therapeutics

For the three months ended September 30, 2021, NRx Pharmaceuticals recorded $0 of reimbursement of expenses from Relief compared to $2,936,214 of reimbursement of expenses from Relief for the three months ended September 30, 2020.

Other (income) expenses

Interest expense

For the three months ended September 30, 2021, NRx Pharmaceuticals recorded $5,368 of interest expense compared to $12,513 for the three months ended September 30, 2020.

The decrease of $7,145 related primarily to the accrued interest for outstanding notes during the period.

Change in fair value of warrant liability

For the three months ended September 30, 2021, NRx Pharmaceuticals recorded a loss of $260,238 related to the change in fair value of the warrant liability compared to $0 for the three months ended September 30, 2020.

The decrease of $260,238 related to the increase in the fair value of the Placement Warrants assumed pursuant to the Merger Agreement.

Change in fair value of Earnout Cash liability

For the three months ended September 30, 2021, NRx Pharmaceuticals recorded a loss of $408,342 related to the change in fair value of the Earnout Cash liability compared to $0 for the three months ended September 30, 2020.

The loss related to the increase in the fair value of the Earnout Cash liability pursuant to the Merger Agreement.

Results of operations for the nine months ended September 30, 2021 and 2020

The following table sets forth NRx Pharmaceuticals' selected statements of operations data for the following periods:

Nine months ended September 30,

Reimbursement of expenses from Relief Therapeutics consists of reimbursable expenses as part of the Collaboration Agreement.

See Note 8 “Commitments and Contingencies – Relief Therapeutics Collaboration Agreement” of the notes to the Company’s unaudited condensed consolidated financial statements included elsewhere in this report for further information.

Results of operations for the three months ended March 31, 2022 and 2021

The following table sets forth NRx Pharmaceuticals’ selected statements of operations data for the following periods (in thousands):

Three months ended March 31,

Operating expenses:

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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

Operating expenses

Research and development expenses

For the nine months ended September 30, 2021, NRx Pharmaceuticals recorded $13,843,895 of research and development expenses compared to $6,326,416 for the nine months ended September 30, 2020.

The increase of $7,517,479 related primarily to an increase of $5,847,974 in clinical trials and development expenses related to ZYESAMI (Aviptadil), an increase of $1,405,167 in regulatory and process development expenses, and an increase of $245,302 in stock-based compensation expense.

The $13,843,895 and $6,326,416 of research and development expenses for the nine months ended September 30, 2021 and 2020, respectively, include $436,247 and $190,945, respectively, of non-cash stock-based compensation.

For the three months ended March 31, 2022, NRx Pharmaceuticals recorded $5.5 million of research and development expenses compared to $2.9 million for the three months ended March 31, 2021.

The increase of $2.6 million related primarily to an increase of $2.1 million in clinical trials and development expenses related to ZYESAMI, an increase of $0.2 million in stock-based compensation expense, and an increase of $0.3 million in other regulatory and process development expenses.

The $5.5 million and $2.9 million of research and development expenses for the three months ended March 31, 2022 and 2021, respectively, include $0.2 million and less than $0.1 million, respectively, of non-cash stock-based compensation.

General and administrative expenses

For the nine months ended September 30, 2021, NRx Pharmaceuticals recorded $28,382,177 of general and administrative expenses compared to $4,895,092 for the nine months ended September 30, 2020.

The increase of $23,487,085 related primarily to increases of $14,541,460 for consultant fees of which $12,775,511 relates to non-cash consulting fees paid in common stock, an increase of $5,596,533 in stock-based compensation expense of which $3,345,212 relates to modification of stock options and warrants pursuant to the Merger, an increase of $2,390,615 for insurance expense, an increase of $1,343,432 for legal and professional services, an increase of $1,130,578 for payroll expenses, and an increase $1,174,149 in other general and administrative expenses.

The increase is partially offset by a decrease of $2,689,684 for warrant expense for warrants issued to board members for services.

The $28,382,177 and $4,895,092 of general and administrative expenses for the nine months ended September 30, 2021 and 2020, respectively, include $18,554,117 and $2,871,757, respectively, of non-cash stock-based compensation, consulting fees and warrant expense.

Settlement expense

For the nine months ended September 30, 2021, NRx Pharmaceuticals recorded $21,365,641 of settlement expense related to the GEM Warrant reflecting the incremental value through the date of issuance compared to $0 of settlement expense for the nine months ended September 30, 2020.

Settlement expense is a non-cash expense.

For the three months ended March 31, 2022, NRx Pharmaceuticals recorded $10.2 million of general and administrative expenses compared to $2.1 million for the three months ended March 31, 2021.

The increase of $8.1 million was primarily, related to an increase of $4.4 million in legal, professional and accounting fees, an increase of $2.2 million in insurance expense, an increase of $0.8 million in stock-based compensation expense, and an increase of $0.7 million in other general and administrative expense.

The $10.2 million and $2.1 million of general and administrative expenses for the three months ended March 31, 2022 and 2021, respectively, include $1.1 million and $0.3 million, respectively, of non-cash stock-based compensation.

Reimbursement of expenses from Relief Therapeutics

For the nine months ended September 30, 2021, NRx Pharmaceuticals recorded $771,244 of reimbursement of expenses from Relief compared to $4,957,145 of reimbursement of expenses from Relief for the nine months ended September 30, 2020.

NRx Pharmaceuticals has received $10,904,065 in total from Relief in accordance with the Relief Agreement.

For the three months ended March 31, 2022, NRx Pharmaceuticals recorded no reimbursement of expenses from Relief Therapeutics compared to $0.8 million of reimbursement of expenses from Relief Therapeutics for the three months ended March 31, 2021.

Other (income) expenses

Gain on extinguishment of debt

For the nine months ended September 30, 2021, NRx Pharmaceuticals recorded $120,810 of gain on extinguishment of debt compared to $0 for the nine months ended September 30, 2020.

The increase of $120,810 related to the forgiveness of the PPP Loan which resulted in a gain on extinguishment for the outstanding principal and accrued and unpaid interest.

Interest expense

For the nine months ended September 30, 2021, NRx Pharmaceuticals recorded $15,656 of interest expense compared to $51,317 for the nine months ended September 30, 2020.

The decrease of $35,661 related primarily to the conversion of convertible notes payable in 2020.

For the three months ended March 31, 2022, NRx Pharmaceuticals recorded no gain on extinguishment of debt compared to $0.1 million for the three months ended March 31, 2021.

The decrease of $0.1 million related to the forgiveness of the PPP Loan which resulted in a gain on extinguishment for the outstanding principal and accrued and unpaid interest for the three months ended March 31, 2021.

Change in fair value of warrant liability

For the nine months ended September 30, 2021, NRx Pharmaceuticals recorded a gain of $1,208,412 related to the change in fair value of the warrant liability compared to $0 for the nine months ended September 30, 2020.

The increase of $1,208,412 related to the decrease in the fair value of the Placement Warrants assumed pursuant to the Merger Agreement.

For the three months ended March 31, 2022, NRx Pharmaceuticals recorded a gain of $0.2 million related to the change in fair value of the warrant liability.

The gain of $0.2 million related to the decrease in the fair value of the Placement Warrants assumed pursuant to the Merger Agreement.

Change in fair value of Earnout Cash liability

For the nine months ended September 30, 2021, NRx Pharmaceuticals recorded a loss of $763,043 of change in fair value of the Earnout Cash liability compared to $0 for the nine months ended September 30, 2020.

The loss related to the increase in the fair value of the Earnout Cash liability pursuant to the Merger Agreement.

Change in fair value of embedded put

For the nine months ended September 30, 2021, NRx Pharmaceuticals recorded $0 of change in fair value of embedded put compared to $27,160 for the nine months ended September 30, 2020.

The decrease of $27,160 related primarily to the conversion of convertible notes payable in 2020.

Loss on conversion of convertible notes payable

For the nine months ended September 30, 2021, NRx Pharmaceuticals recorded $0 of loss on conversion of convertible notes payable compared to $306,641 for the nine months ended September 30, 2020.

The decrease of $306,641 related to the loss on extinguishment which was recorded upon the conversion of the convertible notes payable in 2020 for the difference between the carrying value of the convertible notes, unamortized debt discount, and the fair value of the embedded put option, and the fair value of common shares issued.

For the three months ended March 31, 2022, NRx Pharmaceuticals recorded a gain of $2.1 million related to the change in fair value of the Earnout Cash liability.

The gain related to the decrease in the fair value of the Earnout Cash liability pursuant to the Merger Agreement.

Liquidity and Capital Resources

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This could negatively impact NRx Pharmaceuticals' business and operations and could also lead to the reduction of NRx Pharmaceuticals' operations.

NRx Pharmaceuticals 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 hereof.

NRx Pharmaceuticals is dependent upon obtaining necessary equity and/or debt financing to continue operating.

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

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

Private Placement

On February 2, 2022, the Company sold 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, and received net proceeds of $23.0 million.

Reverse Recapitalization Merger and Subsequent Equity Issuances

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”) if, prior to December 31, 2022, the NeuroRx COVID-19 Drug (i.e., ZYESAMI) receives emergency use authorization by the Food and Drug Administration (“FDA”) and NeuroRx submits and the FDA files for review a new drug application for the NeuroRx COVID-19 Drug (i.e., ZYESAMI) (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 NeuroRx COVID-19 Drug (i.e., ZYESAMI) and the listing of the NeuroRx 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”).

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”) if, prior to December 31, 2022, the NeuroRx COVID-19 Drug (i.e., ZYESAMI) receives emergency use authorization by the Food and Drug Administration (“FDA”) and NeuroRx submits and the FDA files for review a new drug application for the NeuroRx COVID-19 Drug (i.e., ZYESAMI) (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 NeuroRx COVID-19 Drug (i.e., ZYESAMI) and the listing of the NeuroRx 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.

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.

At September 30, 2021, the fair value of the Earnout Cash liability has been estimated to be $26,283,238.

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.

At March 31, 2022, the fair value of the Earnout Cash liability has been

estimated to be $2.5 million.

Upon closing of the Merger, the estimated fair value of the Earnout Shares was $253.1 million 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 benefit of the contingent right to receive Earnout Cash for option and warrant holders occurs through the Option Exchange Ratio and therefore the amount of Earnout Cash for common stockholders is approximately $88,837,121.

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 Company received $8,100,000 in net proceeds after transaction costs.

NRx Pharmaceuticals expects to continue to incur operating losses and net cash outflows until such time as it generates a level of revenue from sale or licensing of drug products to support its cost structure.

There is no assurance that NRx Pharmaceuticals will achieve profitable operations and if achieved, whether it will be sustained on a continued basis.

NRx Pharmaceuticals intends to fund ongoing activities by raising additional capital through equity or debt financings.

There can be no assurance that NRx Pharmaceuticals will be successful in raising that additional capital or that such capital, if available, will be on terms that are acceptable to NRx Pharmaceuticals.

If NRx Pharmaceuticals is unable to raise

sufficient additional capital, NRx Pharmaceuticals may be compelled to reduce the scope of its operations and planned capital expenditures.

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.

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, respectively.

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, 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.

Cash Flow Summary for the nine months ended September 30, 2021 and 2020

The following table shows a summary of NRx Pharmaceuticals' cash flows for each of the periods shown below:

Nine months ended September 30,

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 $10.0 million (the “PIPE Shares”), pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into prior to the Closing Date.

The Company received $8.1 million in net proceeds after transaction costs from the sale of PIPE Shares.

The following table presents selected financial information and statistics for each of the periods shown below:

March 31, 2022

December 31, 2021

Balance Sheet Data:

Earnout cash liability

Total liabilities

Total stockholders' equity (deficit)

Statement of Cash Flow Data:

Net cash used in operating activities

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Net cash provided by financing activities

Net increase (decrease) in cash

Net increase in cash

Operating activities

During the nine months ended September 30, 2021, operating activities used $26,423,097 of cash, primarily resulting from a net loss of $62,269,946, reduced by non-cash charges of $39,789,826, including $21,365,641 of non-cash settlement expense related to the GEM Warrant, $12,775,511 of non-cash consulting fees paid in common stock, $6,214,853 of stock-based compensation expense and $763,043 change in fair value of earn out liability, partially offset by $1,208,412 of gain from the change in fair value of warrant liability, $120,810 of gain on the extinguishment of debt;

and a decrease in operating assets and liabilities of $3,960,237.

During the nine months ended September 30, 2020, operating activities used $1,858,294 of cash, primarily resulting from a net loss of $6,649,481, reduced by non-cash charges of $3,449,286, including $2,689,684 of warrant expense for warrants issued to board members for services, $306,641 of loss on conversion of notes payable, $373,018 of stock-based compensation expense, $35,198 of non-cash interest expense, and $16,475 of amortization of debt discount.

Investing activities

During the nine months ended September 30, 2021, investing activities used $6,612 of cash, primarily resulting from the purchase of computer equipment.

There were no investing activities for the nine months ended September 30, 2020.

During the three months ended March 31, 2022, operating activities used $10.4 million of cash, primarily resulting from a net loss of $13.4 million, increased by net non-cash gains of $1.0 million, including $2.1 million of gain from the change in fair value of earn out liability and $0.2 million of gain from the changes in fair value of warrant liability, partially offset by $1.3 million of stock-based compensation expense, and an increase in net operating assets of $4.0 million.

During the three months ended March 31, 2021, operating activities used $3.0 million of cash, primarily resulting from a net loss of $25.5 million, reduced by non-cash charges of $21.6 million, including $21.4 million of non-cash settlement expense related to the GEM Warrant, $0.4 million of stock-based compensation expense, partially offset by a gain on extinguishment of debt of $0.1 million;

and an increase in net operating assets of $0.9 million.

Financing activities

During the nine months ended September 30, 2021, financing activities provided $63,454,765 of cash, primarily resulting from $27,358,223 from the issuance of common stock and preferred investment options in private placement, $16,699,489 from the issuance of common stock for the exercise of the GEM Warrants, and $11,049,628 for the effect of the Merger, net of transaction costs, and $9,623,899 from the issuance of shares of NRx Pharmaceuticals common stock, partially

offset by a $1,100,000 repayment of notes payable assumed in the Merger and a $176,474 repayment of a note payable plus accrued and unpaid interest with a related party.

During the nine months ended September 30, 2020, financing activities provided $2,268,630 of cash, primarily resulting from $1,589,103 of proceeds from the issuance of shares of NRx Pharmaceuticals common and preferred stock and $629,523 of proceeds from notes payable.

During the three months ended March 31, 2022, financing activities provided $23.0 million of cash resulting from the net proceeds received by the Company from the issuance of common stock and preferred investment options in a private placement.

During the three months ended March 31, 2021, financing activities provided $14.4 million of cash, primarily resulting from $6.9 million of proceeds from the issuance of shares of NeuroRx common stock and $7.5 million of the issuance of NeuroRx common stock for the exercise of the GEM Warrants.

Contractual Obligations and Commitments

See Note 9, Commitments and Contingencies, of the notes to NRx Pharmaceuticals’ unaudited condensed consolidated financial statements as of and for the three months ended and nine months ended September 30, 2021 included elsewhere in this report for further discussion of NRx Pharmaceuticals' commitments and contingencies.

See Note 8, Commitments and Contingencies, of the notes to NRx Pharmaceuticals’ unaudited condensed consolidated financial statements as of and for the three months ended months ended March 31, 2022 included elsewhere in this report for further discussion of NRx Pharmaceuticals' commitments and contingencies.

Milestone Payments

Pursuant to the legal settlement with Sarah Herzog Memorial Hospital Ezrat Nashim (“SHMH”) in September 2018, which included the license of intellectual property rights from SHMH, an ongoing royalty of 1% to 2.5% of NRX-101 gross sales shall be due to SHMH, together with milestone payments of $250,000, upon completion of phase 3 trials and commercial sale of NRX-101.

The milestone payments for developmental and commercial milestones range from $100,000 to $750,000.

Annual maintenance fees range up to $150,000.

Pursuant to the legal settlement with Sarah Herzog Memorial Hospital Ezrat Nashim (“SHMH”) in September 2018, which included the license of intellectual property rights from SHMH, an ongoing royalty of 1% to 2.5% of NRX-101 gross sales is due to SHMH, together with milestone payments of $0.3 million, upon completion of phase 3 trials and commercial sale of NRX-101.

The milestone payments for developmental and commercial milestones range from $0.1 million to $0.8 million.

Annual maintenance fees are up to $0.2 million.

Off-Balance Sheet Arrangements

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In accordance with GAAP, NRx Pharmaceuticals evaluates its estimates and judgments on an ongoing basis.

The most significant estimates relate to the valuation of conversion features of convertible notes and common stock, the valuation of stock options and warrants and the valuation allowance of deferred tax assets resulting from net operating losses.

The most significant estimates relate to the Earnout Cash Liability, stock-based compensation, and the valuation of warrants.

NRx Pharmaceuticals bases its estimates and assumptions on current facts, historical experiences, and various other factors that NRx Pharmaceuticals believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

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While its significant accounting policies are more fully described in Note 2 to its financial statements, NRx Pharmaceuticals believes the following are the critical accounting policies used in the preparation of its financial statements that require significant estimates and judgments.

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

The most significant inputs include whether (a) the FDA approves the Company’s NDAs 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 we believe market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed in consideration of the uncertainties associated with the obligations.

Changes in the estimated fair value of the Earnout Cash Liability are recognized as a gain or loss in the statements of operations.

Fair value of common and preferred stock

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Subsequent to the Merger, the Board determines the fair value of the Common Stock based on the closing market price on the date of grant.

Share-based compensation

Our stock-based awards are classified as equity (stock options and warrants).

We recognize related share-based compensation expense based on the grant date fair value of the awards.

We estimate the fair value of all stock-based awards using the Black-Scholes-Merton valuation model which requires the use of subjective assumptions that could materially impact the estimation of fair value and related compensation expense to be recognized.

One of these assumptions include the expected volatility of our stock price.

Developing this assumption requires the use of judgment.

The Company, both prior to and after the Merger, 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.

We also estimate the fair value of our common stock based on third party sales of our common stock

Stock-based compensation

We measure stock option awards granted to employees and directors based on the fair value of the award on the date of the grant and recognize compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award.

The straight-line method of expense recognition is applied to awards with service-only conditions.

We account for forfeitures as they occur.

We estimate the fair value of each stock option award using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock-based awards, the risk-free interest rate for a period that approximates the expected term of our stock-based

awards, and our expected dividend yield.

Therefore, we estimate our expected volatility based on the implied volatility of publicly traded warrants on our common stock and historical volatility of a set of our publicly traded peer companies.

We estimate the expected term of our options using the "simplified"

method for awards that qualify as "plain-vanilla"

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

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Expected dividend yield is based on the fact that we have never paid cash dividends on common stock and do not expect to pay any cash dividends in the foreseeable future.

The assumptions used in determining the fair value of stock-based awards represent reasonable estimates, but the estimates involve inherent uncertainties and the application of our judgment.

As a result, if factors change and we use significantly different assumptions or estimates, our stock-based compensation expense could be materially different in the future.

Warrant liability

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The fair value of the Placement Warrants was estimated using a Black Scholes valuation approach.

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 probability of achievement, and thus 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.

This liability is most sensitive to change based on progress of clinical trials, results of such trials, ability to complete the patent application process, assessment of likelihood of approval from the FDA and United States Patent Office, and remaining time to December 31, 2022.

Quantitative and Qualitative Disclosures About Market Risk.

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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 2. Management’s Discussion and Analysis