What changed in this filing

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Item 1. Financial Statements

2022-08-15 compared with 2022-05-16 · 266 added, 180 removed, 426 unchanged (51% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

March 31, 2022

June 30, 2022

December 31, 2021

Current assets:

Cash and cash equivalents

Prepaid expenses and other current assets

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Total liabilities

Stockholders’ equity:

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

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

0 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

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

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

66,641,314 and 58,810,550 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

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Three months ended

Six months ended

Operating expenses:

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Gain on extinguishment of debt

Interest income

Interest expense

Change in fair value of warrant liability

Change in fair value of warrant liabilities

Change in fair value of Earnout Cash liability

Total other (income) expenses

Deemed dividend

Net loss attributable to common stockholders

Net loss per share:

Basic and diluted

Net loss per share attributable to common stockholders:

Weighted average common shares outstanding:

Basic and diluted

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

NRX PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share data)

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Balance - March 31, 2022

Additional issuance costs in connection with Private Placement

Stock-based compensation

Balance - June 30, 2022

Stockholders’

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Balance - March 31, 2021

Common stock issued

Effect of Merger and recapitalization, net of redemptions and issuance costs of $ 1,413

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

Common stock issued for advisor services

Modification of option awards pursuant to Merger

Modification of warrants pursuant to Merger

Stock-based compensation

Balance - June 30, 2021

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

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(in thousands)

Three months ended March 31,

Six months ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Non-cash settlement expense

Non-cash consulting expense

Changes in operating assets and liabilities:

Accounts receivable

Account receivable

Prepaid expenses and other assets

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Proceeds from issuance of common stock for exercise of warrant

Effect of Merger, net of transaction costs

Repayment of note payable

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

Repayment of notes payable assumed in Merger

Net cash provided by financing activities

Net increase in cash

Cash at beginning of period

Cash at end of period

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

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Reclassification of settlement liability upon issuance of warrant

Reclassification of legacy NeuroRx warrants to warrant liabilities

Issuance of common stock warrants as offering costs

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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 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.

The Company is a clinical-stage pharmaceutical company which applies innovative science to known molecules to develop life-saving medicines through its wholly-owned operating subsidiary, NeuroRx.

The Company's foundation product, NRX-101 (D-cylcoserine/Lurasidone), for the treatment of bipolar depression in patients with suicidality, 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”).

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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.

The Company is re-evaluating its respiratory franchise after a National Institute of Health (NIH) Phase III study of the Company’s product for the treatment of acute respiratory distress in Critical COVID-19 patients, ZYESAMI, was stopped due to futility.

As of June 30, 2022, the Company had $ 24.5 million in cash.

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

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Concentration of Credit Risk and Off-Balance Sheet Risk

Cash is the only financial instrument that is potentially subject to concentrations of credit risk.

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

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.

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents.

Cash equivalents are occasionally invested in certificates of deposit.

The Company maintains each of its cash balances with high-quality and accredited financial institutions and accordingly, such funds are not exposed to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company maintains a portion of its cash and cash equivalent balances in the form of a money market account with a financial institution that management believes to be creditworthy.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the time of initial purchase to be cash equivalents, including balances held in the Company’s money market accounts.

The Company maintains its cash and cash equivalents with financial institutions, in which balances from time to time may exceed the U.S.

federally insured limits.

The objectives of the Company’s cash management policy are to safeguard and preserve funds to maintain liquidity sufficient to meet the Company’s cash flow requirements, and to attain a market rate of return.

Research and Development Costs

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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.

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.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

For a Type 1 (probable-to-probable) 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 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.

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, and each balance sheet date thereafter.

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

The fair value of the Placement Warrants was estimated using a Black Scholes valuation approach (see Notes 9 and 11).

The fair value of the Placement Warrants was estimated using a Black Scholes valuation approach and the fair value of the Substitute Warrants was estimated using a modified Black Scholes valuation approach which applies a probability factor based on the probabilities of achieving Earnout Cash Milestone and/or Earnout Shares Milestone at each reporting period (see Notes 9 and 11).

Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach.

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Diluted earnings per share excludes, when applicable, the potential impact of stock options, common stock warrant shares, and other dilutive instruments when their effect would be anti-dilutive in the respective periods.

Basic and diluted loss per share for the current year periods was the same.

The following table summarizes the basic and diluted loss per share calculations for dilution for the three and six months ended June 30, 2021 (in thousands, except share and per share amounts):

June 30, 2021

Three Months Ended

Six Months Ended

Net income (loss) - basic

Effect of liability - classified warrants under the treasury stock method

Net income (loss) - diluted

Net income (loss) attributable to common stockholders - basic

Effect of liability - classified warrants under the treasury stock method

Net income (loss) attributable to common stock - diluted

Weighted average shares - basic

Incremental effect of liability - classified warrants under the treasury stock method

Effect of other dilutive securities

Weighted average shares - diluted

Basic earnings (loss) per share

Diluted earnings (loss) per share

Basic earnings (loss) per share attributable to common stockholders

Diluted earnings (loss) per share attributable to common stockholders

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,

Three Months Ended June 30,

Six Months Ended June 30,

Stock options

Common stock warrants

Common stock issuable pursuant to UPOs

Common stock warrants pursuant to UPOs

Public Rights pursuant to UPOs

Earnout Shares

Earnout Shares from exercised Substitute Options and Substitute Warrants

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

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.

For the six-months ended June 30, 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

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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 (“Common Stock”).

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.

In addition, the securityholders of NeuroRx (including option holders and warrant holders) who own NeuroRx securities immediately prior to the Effective Time received the contingent right to receive the Earnout Shares and Earnout Cash (each as defined below).

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 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

Pursuant to the Merger Agreement, the aggregate consideration payable to stockholders of NeuroRx at the Closing Date consisted of 50,000,000 shares (“Closing Consideration”) of BRPA common stock (“Common Stock”).

In addition, the stockholders of NeuroRx who owned NeuroRx securities immediately prior to the Effective Time received the contingent right to receive the Earnout Shares and Earnout Cash (each as defined below).

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 was converted into the right to receive a pro rata portion of the contingent right to receive a pro rata portion of the Earnout Shares and Earnout Cash after consideration of the Substitute Options and Substitute Warrants (as further discussed below).

Pursuant to the terms of the Merger Agreement, NeuroRx’s stockholders who owned NeuroRx securities immediately prior to the Effective Time would have the contingent right to receive their pro rata portion of (i) an aggregate of up to 25,000,000 shares of Common Stock (“Earnout Shares”), less 935,608 and 1,920,492 , respectively, which are subject to the terms and conditions of the Substitute Options and Substitute Warrants (each as defined below), 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 Milestone is achieved, the Earnout Shares will be issued within five ( 5 ) Business Days after the occurrence of the Earnout

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 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.

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 $ 88.8 million.

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).

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

The Earnout Shares Milestone was recognized as a deemed dividend at the Closing date and was classified within equity (see Note 11).

The benefit of the contingent right to receive Earnout Cash and Earnout Shares for option and warrant holders occurs through the Option Exchange Ratio (as defined below) and therefore the amount of Earnout Shares and Earnout Cash for common stockholders is approximately 22,209,280 shares and $ 88.8 million, respectively.

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 would continue to be governed by substantially the same terms and conditions, including vesting, as were applicable to the original instruments.

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 automatically adjusted based on the Merger Agreement 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 such 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).

If neither the Earnout Shares Milestone nor the Earnout Cash Milestone occurs, each Substitute Option and Substitute Warrant will be adjusted based on the Exchange Ratio.

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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 six months ended June 30, 2021 (in thousands):

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

Effect of Merger, net of redemptions and transaction costs

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table reconciles the elements of the Merger to the Unaudited Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the six months ended June 30, 2021 (in thousands):

Recapitalization

Cash - BRPA trust and cash, net of redemptions

Non-cash net working capital assumed from BRPA

notes payable assumed from BRPA

fair value of assumed Placement Warrants

fair value of legacy NeuroRx Warrants

fair value of Earnout Cash

transaction costs and advisory fees allocated to NRXP equity

Effect of Merger, net of redemptions and transaction costs

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.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Prepaid Expenses and Other Current Assets

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

March 31, 2022

June 30, 2022

December 31, 2021

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Prepaid insurance

Prepaid manufacturing expenses

Prepaid clinical development expenses

Receivable due from manufacturer

Other prepaid expenses

Prepaid legal expenses

Prepaid clinical development expenses

Prepaid manufacturing expenses

Total prepaid expenses and other current assets

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

March 31, 2022

June 30, 2022

December 31, 2021

Accrued and other current liabilities:

Professional services

Accrued research and development expenses

Accrued employee expenses

Professional services

Other accrued expenses

Total accrued and other current liabilities

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Notes Payable

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(“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 $ 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 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 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

Carrying value of note payable

Accrued interest

Note payable and accrued interest, current

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

The Relief Therapeutics Loan principal and accrued interest were paid in full on April 6, 2022 in the amount of $ 0.5 million and less than $ 0.1 million, respectively.

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 March 31, 2022 and 2021 was $ 0.1 million and $ 0.1 million, respectively.

The rent expense for the three months ended June 30, 2022 and 2021 was less than $ 0.1 million and less than $ 0.1 million, respectively, and for the six months ended June 30, 2022 and 2021 was less than $ 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, 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.

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

NRX PHARMACEUTICALS, INC.

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.

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 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 $ 5.3 million worth of product and services, of which $ 2.4 million has not been paid for as of March 31, 2022.

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 upon finalization of the work.

As of June 30, 2022, the Company has paid NJ Health $ 0.3 million of the total committed amount.

Relief Therapeutics Collaboration Agreement

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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.

Efforts to resolve the litigation through mediation have not been successful, but the parties continue to seek a mutually acceptable resolution to the claims.

If such a resolution cannot be found, the Company intends to defend itself vigorously and to prosecute its claims against Relief Therapeutics.

Legal Proceedings

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Share Subscription Facility Agreement — GEM

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.

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 which expires in October 2022.

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.

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

requirements to issue registered shares thus preventing its usage.

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.

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.

The warrant was 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 will be valid for a period of

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 $ 39.5 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.

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.

As of December 31, 2020, the Company recognized a contingent liability for its obligation to issue to GEM certain equity instruments at a discounted per share price.

Specifically, as the amount was deemed probable and estimable at December 31, 2020, NeuroRx recorded a liability and settlement expense of $ 39,486,139 to reflect the fair value of the expected GEM Warrant to be issued.

On March 28, 2021, when the GEM Warrant was issued, the Company recorded an additional charge of $ 21,365,641 to reflect the increased fair value of the GEM Warrant on its grant date.

Upon issuance, the GEM Warrant was equity classified and was determined to be within the scope of ASC 718, Share-Based Payments (“ASC 718”).

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 Big Rock 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.

The GEM Warrants that were not exercised as of the Merger were modified and became Substitute Warrants ( 1,833,596 shares, adjusted for the Merger as discussed in Note 11).

These Substitute Warrants were liability classified (see Note 9).

The changes in fair value of these Substitute Warrants were recognized as a gain or loss in the statement of operations until these Substitute Warrants were exercised in July 2021, at which time they were reclassified to additional paid-in capital.

On August 12, 2022, the Company received a demand for arbitration (the “Demand”) from GEM.

The Demand claims that the Company’s subsidiary, NeuroRx, failed to satisfy its obligation to pay GEM a commitment fee in the amount of HK$15,000,000 (approximately US$1,914,087 at current exchange rates) pursuant to the GEM Agreement.

NeuroRx expects to vigorously defend its position that payment of the commitment fee is neither due nor owing under the terms of the Agreement.

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 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.

The Company sold 65,526 shares of common stock during the three months ended June 30, 2021, and received gross proceeds of $ 1.4 million.

The Company sold 7,824,727 and 1,894,863 shares of common stock during the six months ended June 30, 2022 and 2021, respectively, and received gross proceeds of $23.0 million and $16.0 million, respectively.

Preferred Stock

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The Company has no shares of preferred stock outstanding.

Common Stock Warrants

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.

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.

Common Stock Warrants

Substitute Warrants

As discussed in Note 4, 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.

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

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

Upon the closing of the Merger, the outstanding and unexercised NeuroRx warrants became warrants to purchase an aggregate 4,909,066 shares of the Company’s common stock with an average exercise price of $ 2.45 per share.

The Company accounted for the Substitute Warrants as a modification of the existing warrants.

Incremental fair value, measured as the excess, if any, of the fair value of the modified warrants over the fair value of the original warrants immediately before its terms are modified, is measured based on the fair value of the underlying shares and other pertinent factors at the modification date.

The fair value of the original NeuroRx warrants and Substitute Warrants was determined using the Black-Scholes option-pricing model with the following assumptions for each:

Upon the closing of the Merger, all outstanding and unexercised NeuroRx warrants became warrants to purchase an aggregate 4,909,066 shares of the Company’s common stock with an average exercise price of $ 2.45 per share.

With respect to warrants held by certain members of our Board of Directors, the Substitute Warrants were determined to be within the scope of ASC 718.

For the portion of the warrants subject to the base Exchange Ratio ( 3.16 :1), the warrants were fully vested and therefore the incremental fair value of these Substitute Warrants at the date of the modification date was immediately recognized as compensation expense.

For the incremental portion of the warrants with a 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 June 30, 2022 and therefore no expense has been recognized for this portion.

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 Unaudited Condensed Consolidated Statement of Operations.

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For any remaining outstanding warrants, as the warrant holders were no longer providing services at the date of the modification, in accordance with ASC 815, the Company concluded that the provisions in the Merger Agreement related to the Earnout Shares Milestone and the Earnout Cash Milestone and the contingent right to receive additional shares for these provisions precluded these Substitute Warrants from being accounted for as components of equity.

As these Substitute Warrants meet the definition of a derivative as contemplated in ASC 815, the Substitute Warrants should be recorded as derivative liabilities on the balance sheet and measured at fair value at inception (on the date of the Merger) and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the Statements of Operations in the period of change.

On May 24, 2021, the Company recorded a warrant liability of $53.3 million for the Substitute Warrants, reclassified out of additional-paid in capital $38.2 million representing the fair value of these NeuroRx warrants immediately before the modification as a result of the Merger, and recognized a loss of $15.1 million for the incremental fair value of these Substitute Warrants which is recorded in the Change in fair value of warrant liabilities on the Condensed Consolidated Statement of Operations.

The Company recognized a gain on the change in fair value of the Substitute Warrants for the three and six months ended June 30, 2022 and $0.1 million and $0.2 million, respectively.

The Company recognized a gain on the change in fair value of the Substitute Warrants for the three and six months ended June 30, 2021 of $15.9 million.

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

As discussed above the GEM Substitute Warrants were exercised in July 2021, and changes in the fair value of the warrant liability through the date of exercise were recognized in the statement of operations and upon exercise any remaining instruments were reclassified to additional paid-in capital and includes associated escrow shares for the contingent earnouts.

The fair value of the original NeuroRx warrants and Substitute Warrants as of the Merger Date was determined using the Black-Scholes option-pricing model with the following assumptions for each:

Original Warrants

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Dividend yield

With respect to warrants held by certain members of our Board of Directors, the Substitute Warrants were determined to be within the scope of ASC 718 and were fully vested at the Effective Date.

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 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.

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

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

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● upon a minimum of 30 days ’ prior written notice of redemption;

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

● if, and only if, the last sale price of the Company’s common stock equals or exceeds $ 21.00 per share for any 20 trading days within a 30 -trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders;

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

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

During the three and six months ended June 30, 2022, no Public Warrants were exercised.

Assumed 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 March 31, 2022.

The Company classifies the Placement Warrants as derivative liabilities in its Unaudited Condensed Consolidated Balance Sheet as of June 30, 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.

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.

The Company recognized a gain on the change in fair value of the Placement Warrants for the three months ended June 30, 2022 and 2021 of $ 0.1 million and $ 1.5 million, respectively.

The Company recognized a gain on the change in fair value of the Placement Warrants for the six months ended June 30, 2022 and 2021 of $ 0.1 million and $ 1.5 million, respectively.

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

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Total Warrants

Term (in years)

Exercise Price

1 unchanged sentence

Outstanding as of December 31, 2021

Outstanding as of March 31, 2022

Outstanding as of June 30, 2022

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Preferred Investment Options (included in above warrants table)

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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.

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 June 30, 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 .

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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

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.

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.

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.

If neither the Earnout Shares Milestone nor the Earnout Cash Milestone occurs, each Substitute Option will be adjusted based on the Exchange Ratio.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As stated in the Merger Agreement, if any Substitute Options are exercised prior to the earlier of (i) the date that both the Earnout Shares Milestone and Earnout Cash Milestone occur and (ii) December 31, 2022, a sufficient number of shares of Common Stock will be held back pending the applicable adjustment to such Substitute Options.

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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.

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 June 30, 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.

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

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.

As of June 30, 2022, 6,049,178 shares of Common Stock are authorized for issuance pursuant to awards under the 2021 Plan.

As of January 1, 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 March 31, 2022, 5,154,123 shares have been awarded and 895,055 shares remain available for issuance under the 2021 Plan.

As of June 30, 2022, 4,953,290 shares have been awarded and 1,095,888 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.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Option Awards

9 unchanged sentences

The following assumptions were used during the following periods:

March 31, 2022

June 30, 2022

December 31, 2021

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Expected stock price volatility

80.0 %- 85.9 %

Dividend yield

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Outstanding as of March 31, 2022

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

Outstanding as of June 30, 2022

Options vested and exercisable as of June 30, 2022

The weighted average grant date fair value per share for employee stock and non-employee option grants during the three and six months ended June 30, 2022, was $ 1.55 and $ 0.16 , respectively.

The weighted average grant date fair value per share for employee stock and non-employee option grants during the three months ended and six months ended June 30, 2021, was $ 14.31 and $ 18.37 , respectively.

At June 30, 2022, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted, including unrecognized compensation costs related to Substitute Options of $ 25.9 million, was $ 28.5 million, of which the Company expects to recognize $ 4.0 million over a weighted-average period of approximately 1.8 years.

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

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,

Three months ended June 30,

Six months ended June 30,

Stock-based compensation expense

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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 three months ended March 31, 2022 and the year ended December 31, 2021.

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the six months ended June 30, 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 three months ended March 31, 2022 and the year ended December 31, 2021.

The fair value of warrants issued for settlement and services are estimated based on the Black-Scholes model during the six months ended June 30, 2022 and the year ended December 31, 2021.

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

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The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The estimated fair value of the money market account represents a Level 1 measurement.

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 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):

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 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):

Money Market Account

Warrant liabilities (Note 10)

2 unchanged sentences

The Company utilizes a Black-Scholes model approach to value the Placement Warrants at each reporting period, with changes in fair value recognized in the statement of operations.

The Company uses a modified Black-Scholes model approach for the Substitute Warrants which applies a probability factor based on the probabilities of achievement of the Earnout Cash Milestone and/or Earnout Shares Milestone at each reporting period, with changes in fair value recognized in the statement of operations.

The estimated fair value of the warrant liabilities is determined using Level 3 inputs.

Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield.

The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants.

Inherent in a Black Scholes options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield.

The Company estimates the volatility of its common stock based on historical and peer company volatility that matches the expected remaining life of the warrants.

The risk-free interest rate is based on the U.S.

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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:

March 31, 2022

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

June 30, 2022

Stock price on valuation date

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

March 31, 2022

Balance as of December 31, 2021

1 unchanged sentence

Balance as of March 31, 2022

Gain upon re-measurement

Balance as of June 30, 2022

Earnout Cash liability

2 unchanged sentences

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.

Because (i) ZYESAMI NIH Phase III trial was stopped due to futility, and (ii) NRX-101 Phase III trial has not yet started, management estimated the probability as of June 30, 2022 of achieving the required milestones for payment of the Earnout Cash to be de minimis and therefore, the June 30, 2022 Earnout Cash liability was reduced to zero.

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

March 31, 2022

June 30, 2022

Balance as of December 31, 2021

1 unchanged sentence

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.

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

Gain upon re-measurement

Balance as of June 30, 2022

The Company recorded no provision or benefit for income tax expense for the three and six months ended June 30, 2022 and 2021, respectively.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

The Company has no open tax audits with any taxing authority as of June 30, 2022.

Related Party Transactions

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

During the three months ended June 30, 2022 and 2021 the Company paid a co-founder $ 0.1 million and $ 0.1 million, respectively, and during the six months ended June 30, 2022 and 2021, $ 0.1 million and $ 0.1 million, respectively, 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 $ 50.0 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 Company had the right to acquire the Excluded Technology for no additional consideration if certain conditions were satisfied prior to August 6, 2022, but the conditions were not satisfied and the Company is currently in discussions with Glytech to extend its right to acquire the Excluded Technology.

The Chief Scientist of the Company, Dr.

1 unchanged sentence

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

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.

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 $ 0.1 million and $ 0.1 million during the three months ended June 30, 2022 and 2021, respectively, and $ 0.4 million and $ 0.3 million during the six months ended June 30, 2022 and 2021, respectively.

These services are ongoing.

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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.

Zachary Javitt provides services related to website, IT, and marketing support under the supervision of the Company’s 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 less than $ 0.1 million and less than $ 0.1 million during the three months ended June 30, 2022 and 2021, respectively, and $ 0.1 million and less than $ 0.1 million during the six months ended June 30, 2022 and 2021, respectively.

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.

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

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

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”).

Under this SOW, PillTracker provides support for the inhaled ZYESAMI Phase 2/3 clinical trials by monitoring SP02 and Heart Rate in patients in a sub-study of the AVICOVID-2 clinical trial in the U.S.

to determine the physiological effects of ZYESAMI vs.

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

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.

The Master Service Agreement dated April 1, 2020 (“MSA”), and all work orders thereunder, have been suspended by mutual agreement pending the Company’s re-evaluation of its respiratory franchise.

NRx Pharmaceuticals paid PillTracker $ 0.0 million and $ 0.3 million during the three months ended June 30, 2022 and 2021, respectively, and $ 0.2 million and $ 0.4 million during the six months ended June 30, 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 June 30, 2022 and December 31, 2021, respectively.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

Subsequent Events

Appointment of Stephen Willard as Chief Executive Officer and Director

On July 12, 2022, the Board of Directors of the Company (the “Board”) appointed Stephen Willard, 61, to serve as the Chief Executive Officer of the Company with immediate effect.

At the same time, the Board appointed Mr.

Willard as a Class III director to fill the vacancy created by the resignation of H.R.

McMaster in May 2022.

Pursuant to the terms of the employment agreement, Mr.

Willard was granted an award of 1,000,000 restricted shares of the Company (“Restricted Stock”) pursuant to a separate Restricted Stock Award Agreement (the “RSA”).

The Restricted Stock will vest in approximately equal installments over three (3) years from the Effective Date, subject generally to Mr.

Willard’s continued service through the applicable vesting date.

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