NRX Pharmaceuticals, Inc. 10-Q

ITEM 1. Financial Statements. NRX PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ ​ December 31, 2021 ​ ​ (Unaudited) ​ ​ ​ ASSETS ​ ​ Current assets: ​ ​ ​ Cash and cash equivalents ​ $ 24,548 ​ $ 27,605 Prepaid expenses and other current assets ​ 7,866 ​ 5,109 Total current assets ​ 32,414 ​ 32,714 Other assets ​ 19 ​ 15 Total assets ​ $ 32,433 ​ $ 32,729 LIABILITIES AND STOCKHOLDERS’ EQUITY ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 3,078 ​ $ 3,687 Accrued and other current liabilities ​ 3,326 ​ 2,375 Accrued clinical site costs ​ 658 ​ 469 Earnout Cash liability ​ ​ — ​ ​ 4,582 Warrant liabilities ​ ​ 19 ​ ​ 292 Note payable and accrued interest ​ — ​ 518 Total liabilities ​ $ 7,081 ​ $ 11,923 ​ ​ ​ ​ ​ ​ ​ Preferred stock, $ 0.001 par value, 50,000,000 shares authorized; 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 June 30, 2022 and December 31, 2021, respectively ​ 67 ​ 59 Additional paid-in capital ​ 228,958 ​ 203,990 Accumulated deficit ​ ( 203,673 ) ​ ( 183,243 ) Total stockholders’ equity ​ 25,352 ​ 20,806 Total liabilities and stockholders' equity ​ $ 32,433 ​ $ 32,729 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 3 Table of Contents NRX PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except share and per share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended Six months ended ​ ​ June 30, June 30, ​ 2022 2021 2022 2021 Operating expenses: ​ ​ ​ ​ ​ Research and development ​ $ 2,958 ​ $ 4,659 ​ $ 8,441 ​ $ 7,568 General and administrative ​ 6,642 ​ 12,458 ​ 16,864 ​ 14,558 Settlement expense ​ — ​ — ​ — ​ 21,366 Reimbursement of expenses from Relief Therapeutics ​ — ​ — ​ — ​ ( 771 ) Total operating expenses ​ 9,600 ​ 17,117 ​ 25,305 ​ 42,721 Loss from operations ​ ( 9,600 ) ​ ( 17,117 ) ​ ( 25,305 ) ​ ( 42,721 ) Other (income) expenses: ​ ​ ​ ​ ​ ​ ​ Gain on extinguishment of debt ​ — ​ — ​ — ​ ( 121 ) Interest income ​ ​ ( 23 ) ​ — ​ ( 23 ) ​ — Interest expense ​ — ​ 5 ​ 3 ​ 10 Change in fair value of warrant liabilities ​ ( 116 ) ​ ( 17,359 ) ​ ( 273 ) ​ ( 17,359 ) Change in fair value of Earnout Cash liability ​ ( 2,479 ) ​ 355 ​ ( 4,582 ) ​ 355 Total other (income) expenses ​ ( 2,618 ) ​ ( 16,999 ) ​ ( 4,875 ) ​ ( 17,115 ) Net loss ​ ​ ( 6,982 ) ​ ​ ( 118 ) ​ ( 20,430 ) ​ ( 25,606 ) Deemed dividend ​ ​ — ​ ​ ( 255,822 ) ​ ​ — ​ ​ ( 255,822 ) Net loss attributable to common stockholders ​ $ ( 6,982 ) ​ $ ( 255,940 ) ​ $ ( 20,430 ) ​ $ ( 281,428 ) Net loss per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ ( 0.11 ) ​ $ — ​ $ ( 0.32 ) ​ $ ( 0.66 ) Diluted ​ $ ( 0.11 ) ​ $ ( 0.41 ) ​ $ ( 0.32 ) ​ $ ( 1.10 ) Net loss per share attributable to common stockholders: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ ( 0.11 ) ​ $ ( 6.13 ) ​ $ ( 0.32 ) ​ $ ( 7.27 ) Diluted ​ $ ( 0.11 ) ​ $ ( 6.43 ) ​ $ ( 0.32 ) ​ $ ( 7.63 ) Weighted average common shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 65,732,343 ​ ​ 41,727,480 ​ ​ 64,348,966 ​ ​ 38,709,614 Diluted ​ ​ 65,732,343 ​ ​ 42,494,386 ​ ​ 64,348,966 ​ ​ 39,140,261 ​ ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ ​ 4 Table of Contents NRX PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (in thousands, except share data) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Total ​ Common Stock ​ Paid-in- ​ Accumulated ​ Stockholders’ ​ Shares ​ Amount ​ Capital ​ Deficit ​ Equity Balance December 31, 2021 58,810,550 ​ $ 59 ​ $ 203,990 ​ $ ( 183,243 ) ​ $ 20,806 Common stock and warrants issued in private placement, net of issuance costs of $ 2,020 7,824,727 ​ ​ 8 ​ ​ 22,972 ​ ​ — ​ ​ 22,980 Common stock issued for consulting services 6,037 ​ ​ — ​ ​ 17 ​ ​ — ​ ​ 17 Stock-based compensation — ​ ​ — ​ ​ 1,334 ​ ​ — ​ ​ 1,334 Net loss — ​ ​ — ​ ​ — ​ ​ ( 13,448 ) ​ ​ ( 13,448 ) Balance - March 31, 2022 66,641,314 ​ $ 67 ​ $ 228,313 ​ $ ( 196,691 ) ​ $ 31,689 Additional issuance costs in connection with Private Placement — ​ ​ — ​ ​ ( 342 ) ​ ​ — ​ ​ ( 342 ) Stock-based compensation — ​ ​ — ​ ​ 987 ​ ​ — ​ ​ 987 Net loss — ​ ​ — ​ ​ — ​ ​ ( 6,982 ) ​ ​ ( 6,982 ) Balance - June 30, 2022 66,641,314 ​ $ 67 ​ $ 228,958 ​ $ ( 203,673 ) ​ $ 25,352 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Total ​ Common Stock ​ Paid-in- ​ Accumulated ​ Stockholders’ ​ Shares Amount Capital Deficit Equity (Deficit) Balance - December 31, 2020 42,973,462 ​ $ 43 ​ $ 46,366 ​ $ ( 90,180 ) ​ $ ( 43,771 ) Common stock issued 333,121 ​ — ​ 6,927 ​ — ​ 6,927 Proceeds from issuance of common stock for exercise of warrant 1,496,216 ​ 1 ​ 7,499 ​ — ​ 7,500 Reclassification of settlement liability upon issuance of warrant — ​ — ​ 60,852 ​ — ​ 60,852 Stock-based compensation — ​ — ​ 372 ​ — ​ 372 Net loss — ​ ​ — ​ ​ — ​ ​ ( 25,489 ) ​ ​ ( 25,489 ) Balance - March 31, 2021 44,802,799 ​ $ 44 ​ $ 122,016 ​ $ ( 115,669 ) ​ $ 6,391 Common stock issued 71,056 ​ ​ — ​ ​ 1,562 ​ ​ — ​ ​ 1,562 Effect of Merger and recapitalization, net of redemptions and issuance costs of $ 1,413 2,529,730 ​ ​ 4 ​ ​ ( 64,840 ) ​ ​ — ​ ​ ( 64,836 ) Common stock issued pursuant to PIPE financing, net of issuance costs of $ 1,900 1,000,000 ​ ​ 1 ​ ​ 8,099 ​ ​ — ​ ​ 8,100 Common stock issued for advisor services 200,000 ​ ​ — ​ ​ 4,850 ​ ​ — ​ ​ 4,850 Modification of option awards pursuant to Merger — ​ ​ — ​ ​ 1,014 ​ ​ — ​ ​ 1,014 Modification of warrants pursuant to Merger — ​ ​ — ​ ​ 2,331 ​ ​ — ​ ​ 2,331 Stock-based compensation — ​ ​ — ​ ​ 938 ​ ​ — ​ ​ 938 Net loss — ​ ​ — ​ ​ — ​ ​ (117) ​ ​ (117) Balance - June 30, 2021 48,603,585 ​ $ 49 ​ $ 75,970 ​ $ ( 115,786 ) ​ $ ( 39,767 ) ​ ​ ​ ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ ​ 5 Table of Contents NRX PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six months ended June 30, ​ 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ Net loss ​ $ ( 20,430 ) ​ $ ( 25,606 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ Depreciation expense ​ 2 ​ 1 Stock-based compensation ​ 2,321 ​ 4,655 Gain on extinguishment of debt ​ — ​ ( 121 ) Change in fair value of warrant liabilities ​ ​ ( 273 ) ​ ​ ( 17,359 ) Change in fair value of earnout cash liability ​ ​ ( 4,582 ) ​ ​ 355 Non-cash interest expense ​ — ​ 10 Non-cash settlement expense ​ — ​ 21,366 Non-cash consulting expense ​ — ​ 4,850 Changes in operating assets and liabilities: ​ ​ ​ ​ Account receivable ​ — ​ 831 Prepaid expenses and other assets ​ ( 2,757 ) ​ ( 4,849 ) Accounts payable ​ ( 609 ) ​ 2,563 Accrued expenses and other liabilities ​ 1,157 ​ ( 1,105 ) Net cash used in operating activities ​ ​ ( 25,171 ) ​ ​ ( 14,409 ) CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ ​ ​ ​ Purchase of computer equipment ​ ​ ( 6 ) ​ ​ ( 3 ) Net cash used in investing activities ​ ​ ( 6 ) ​ ​ ( 3 ) CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ ​ ​ ​ Proceeds from issuance of common stock, net of transaction costs ​ — ​ ​ 8,489 Proceeds from issuance of common stock for exercise of warrant ​ ​ — ​ ​ 7,500 Effect of Merger, net of transaction costs ​ ​ — ​ ​ 11,050 Repayment of note payable ​ ​ ( 518 ) ​ ​ — Proceeds from issuance of common stock and warrants issued in private placement, net of issuance costs ​ ​ 22,638 ​ ​ — Repayment of notes payable assumed in Merger ​ ​ — ​ ​ ( 1,100 ) Net cash provided by financing activities ​ 22,120 ​ ​ 25,939 ​ ​ ​ ​ ​ ​ ​ Net increase in cash and cash equivalents ​ ( 3,057 ) ​ ​ 11,527 Cash and cash equivalents at beginning of period ​ 27,605 ​ ​ 1,859 Cash and cash equivalents at end of period ​ $ 24,548 ​ $ 13,386 Supplemental disclosure of cash flow information: ​ ​ ​ ​ Non-cash investing and financing activities ​ ​ ​ ​ Reclassification of settlement liability upon issuance of warrant ​ $ — ​ $ 60,852 Reclassification of legacy NeuroRx warrants to warrant liabilities ​ $ — ​ $ 38,220 Issuance of common stock warrants as offering costs ​ $ 726 ​ $ — Extinguishment of Paycheck Protection Program Loan ​ $ — ​ $ 121 Issuance of common stock for settlement of accrued liability ​ $ 17 ​ $ — ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ ​ 6 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. Organization The Business On May 24, 2021 (“Effective Time”), we consummated the business combination (“Merger”) contemplated by the Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated December 13, 2020, by and among our company (formerly known as Big Rock Partners Acquisition Corp. (“BRPA”)), NeuroRx, Inc., a Delaware corporation (“NeuroRx”), and Big Rock Merger Corp., a Delaware corporation and wholly-owned, direct subsidiary of BRPA (“Merger Sub”), pursuant to which Merger Sub was merged with and into NeuroRx, with NeuroRx surviving the Merger. As a result of the Merger, and upon consummation of the Merger and other transactions contemplated by the Merger Agreement, NeuroRx became a wholly-owned, direct subsidiary of BRPA. Upon the closing of the Merger, we changed our name to NRX Pharmaceuticals, Inc., with the stockholders of NeuroRx becoming stockholders of NRX Pharmaceuticals, Inc. Unless the context suggests otherwise, references to “NRx Pharmaceuticals,” “NeuroRx”, “NRXP,” “we,” or the “Company” refer to NRX Pharmaceuticals, Inc. and, where appropriate, its subsidiaries. The Company is a clinical-stage pharmaceutical company 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”). NRX-101 is covered by multiple U.S. and foreign patents, including a Composition of Matter patent (U.S. Patent No. 10,583,138) that was transferred to NRx Pharmaceuticals by Glytech, LLC. 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. 2. Liquidity 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. The Company has no revenues and expects to continue to incur operating losses for the foreseeable future, and may never become profitable. The Company is dependent on its ability to continue to raise equity and/or debt financing to continue operations. On August 23, 2021, the Company completed a private placement and issued 2,727,273 shares of common stock and preferred investment options to purchase up to an aggregate of 2,727,273 shares of common stock. The purchase price for one share of common stock and one preferred investment option was $ 11.00 . The preferred investment options have an exercise price of $ 12.00 . The net proceeds to the Company from the Private Placement were approximately $ 27.4 million. On February 2, 2022, the Company completed a private placement and issued 7,824,727 shares of common stock and preferred investment options to purchase up to an aggregate of 7,824,727 shares of common stock. The purchase price for one share of common stock and one preferred investment option was $ 3.195 . The preferred investment options have an exercise price of $ 3.07 per share. The net proceeds to the Company were approximately $ 22.6 million. The Company believes that it currently has sufficient funds and, if necessary, the ability to reduce expenditures, to support operations through at least the next twelve months from the date the condensed consolidated financial statements are issued. The Company cannot make any assurances that additional financing will be available to it and, if available, on acceptable terms or at all. This could negatively impact the Company’s business and operations and could also lead to the reduction of the Company’s operations. 7 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 3. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the balance sheet, statements of operations and cash flows for the interim periods presented. The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period. The Merger was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”). Under this method of accounting, BRPA is treated as the “acquired” company and NeuroRx is treated as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of NeuroRx issuing stock for the net assets of BRPA, accompanied by a recapitalization. The net assets of BRPA are stated at historical cost, with no goodwill or other intangible assets recorded. The consolidated results of operations prior to the Reverse Recapitalization are those of NeuroRx. The shares and corresponding capital amounts and losses per share, prior to the Merger, have been retroactively restated based on shares reflecting the exchange ratio established in the Merger. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in its financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s financial statements relate to the Earnout Cash liability, valuation of common and preferred stock, stock options, warrants, and the valuation allowance of deferred tax assets resulting from net operating losses. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected. Certain Risks and Uncertainties The Company’s activities are subject to significant risks and uncertainties including the risk of failure to secure additional funding to properly execute the Company’s business plan. The Company is subject to risks that are common to companies in the pharmaceutical industry, including, but not limited to, development by the Company or its competitors of new technological innovations, dependence on key personnel, reliance on third party manufacturers, protection of proprietary technology, and compliance with regulatory requirements. Fair Value of Financial Instruments ASC 820, Fair Value Measurements , provides guidance on the development and disclosure of fair value measurements. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. 8 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace. Level 3: Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation. (Refer to Note 11) Concentration of Credit Risk and Off-Balance Sheet Risk 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 ​ The Company’s research and development expenses consist primarily of costs associated with the Company’s clinical trials, salaries, payroll taxes, employee benefits, and stock-based compensation charges for those individuals involved in ongoing research and development efforts. Research and development costs are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received. Stock-Based Compensation The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards. The Company accounts for forfeitures as they occur. Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. 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. 9 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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. Warrants The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be 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 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 Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes any interest and penalties accrued related to unrecognized tax benefits as income tax expense. 10 Table of Contents 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 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 Numerator: ​ ​ ​ ​ ​ ​ Net income (loss) - basic ​ $ ( 118 ) $ ( 25,606 ) Effect of liability - classified warrants under the treasury stock method ​ ​ ( 17,359 ) ​ ​ ( 17,359 ) Net income (loss) - diluted ​ $ ( 17,477 ) ​ $ ( 42,965 ) ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to common stockholders - basic ​ $ ( 255,940 ) ​ $ (281,429) Effect of liability - classified warrants under the treasury stock method ​ ​ ( 17,359 ) ​ ​ ( 17,359 ) Net income (loss) attributable to common stock - diluted ​ $ ( 273,299 ) ​ $ ( 298,788 ) Denominator: ​ ​ ​ ​ ​ ​ Weighted average shares - basic ​ ​ 41,727,480 ​ ​ 38,709,614 Incremental effect of liability - classified warrants under the treasury stock method ​ ​ 766,906 ​ ​ 430,647 Effect of other dilutive securities ​ ​ — ​ ​ — Weighted average shares - diluted ​ ​ 42,494,386 ​ ​ 39,140,261 ​ ​ ​ ​ ​ ​ ​ Basic earnings (loss) per share ​ $ — ​ $ ( 0.66 ) Diluted earnings (loss) per share ​ $ ( 0.41 ) ​ $ ( 1.10 ) ​ ​ ​ ​ ​ ​ ​ Basic earnings (loss) per share attributable to common stockholders ​ $ ( 6.13 ) ​ $ ( 7.27 ) Diluted earnings (loss) per share attributable to common stockholders ​ $ ( 6.43 ) ​ $ ( 7.63 ) ​ 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 June 30, ​ Six Months Ended June 30, ​ ​ 2022 2021 2022 2021 Stock options ​ 2,706,115 2,919,493 2,706,115 2,919,493 Common stock warrants ​ 17,521,753 6,220,562 17,521,753 6,220,562 Common stock issuable pursuant to UPOs ​ — ​ 600,000 ​ — ​ 600,000 Common stock warrants pursuant to UPOs ​ — ​ 300,000 ​ — ​ 300,000 Public Rights pursuant to UPOs ​ — ​ 60,000 ​ — ​ 60,000 Earnout Shares ​ 22,209,280 ​ 22,209,280 ​ 22,209,280 ​ 22,209,280 Earnout Shares from exercised Substitute Options and Substitute Warrants ​ 1,229,925 ​ — ​ 1,229,925 ​ — ​ 11 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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. 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 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. ​ 4. Reverse Recapitalization As discussed in Note 1, on May 24, 2021 (the “Closing Date”), BRPA and Merger Sub closed the Merger with NeuroRx, as a result of which NeuroRx became a wholly-owned subsidiary of BRPA. While BRPA was the legal acquirer of NeuroRx in the Merger, for accounting purposes, the Merger is treated as a Reverse Recapitalization whereby NeuroRx is deemed to be the accounting acquirer and the historical financial statements of NeuroRx became the historical financial statements of BRPA (renamed NRX Pharmaceuticals, Inc.) upon the closing of the Merger. Under this method of accounting, BRPA is treated as the “acquired” company and NeuroRx is treated as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the Merger was treated as the equivalent of NeuroRx issuing stock for the net assets of BRPA, accompanied by a recapitalization. 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 consisted 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 shares (the “Exchange Ratio”). 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 12 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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 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. If any Substitute Options or Substitute Warrants 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 in escrow pending the applicable adjustment to such Substitute Options or Substitute Warrants. 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 ​ $ 4,363 Cash - PIPE financing, net of transaction costs ​ 8,100 Less: transaction costs and advisory fees allocated to NRXP equity ​ ( 1,413 ) Effect of Merger, net of redemptions and transaction costs ​ $ 11,050 13 Table of Contents 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 ​ $ 4,363 Non-cash net working capital assumed from BRPA ​ ( 962 ) Less: notes payable assumed from BRPA ​ ( 1,100 ) Less: fair value of assumed Placement Warrants ​ ( 1,984 ) Less: fair value of legacy NeuroRx Warrants ​ ​ ( 38,220 ) Less: fair value of Earnout Cash ​ ( 25,520 ) Less: transaction costs and advisory fees allocated to NRXP equity ​ ( 1,413 ) Effect of Merger, net of redemptions and transaction costs ​ $ ( 64,836 ) ​ 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 552,412 Less: redemption of BRPA shares ( 216 ) Common stock of BRPA 552,196 BRPA Founder and private shares, net of forfeited shares of 875,216 1,260,284 Shares issued in PIPE Financing 1,000,000 Shares issued for services 200,000 Shares issued pursuant to conversion of Public and Private Rights 717,250 Merger and PIPE financing shares - common stock 3,729,730 NeuroRx shares - common stock (1) 44,873,855 Total shares of common stock immediately after Merger 48,603,585 ​ (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. ​ 14 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following at the dates indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ December 31, 2021 ​ ​ (Unaudited) ​ ​ ​ Prepaid expenses and other current assets: ​ ​ Prepaid insurance ​ $ 6,523 ​ $ 3,224 Receivable due from manufacturer ​ ​ 554 ​ ​ — Other prepaid expenses ​ ​ 434 ​ ​ 345 Prepaid legal expenses ​ 255 ​ — Prepaid clinical development expenses ​ ​ 100 ​ ​ 512 Prepaid manufacturing expenses ​ — ​ 1,028 Total prepaid expenses and other current assets ​ $ 7,866 ​ $ 5,109 ​ ​ 6. Accrued and Other Current Liabilities Accrued and other current liabilities consisted of the following at the dates indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ December 31, 2021 ​ ​ (Unaudited) ​ ​ ​ Accrued and other current liabilities: ​ ​ ​ ​ ​ ​ Accrued research and development expenses ​ $ 300 ​ $ 1,055 Accrued employee expenses ​ 288 ​ 456 Professional services ​ ​ 180 ​ ​ 743 Other accrued expenses ​ ​ 2,558 ​ ​ 121 Total accrued and other current liabilities ​ $ 3,326 ​ $ 2,375 ​ ​ 7. Notes Payable Relief Therapeutics Loan On April 6, 2020, the Company entered into a loan agreement (the “Relief Therapeutics Loan”) with Relief Therapeutics Holding S.A. (“Relief Therapeutics”) in the amount of $ 0.5 million. The Relief Therapeutics Loan matured on April 6, 2022 and 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. ​ 8. Commitments and Contingencies Operating Lease The Company leases office space on a month-to-month basis. 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 15 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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 On September 18, 2020, the Company entered into a collaboration agreement (the “Collaboration Agreement”) with Relief Therapeutics for the clinical development and, if approved, the sale of Aviptadil. The Collaboration Agreement provides for funding by Relief Therapeutics of certain clinical trials, formulation and manufacturing of Aviptadil, as well as establishing specified sales territories for each party and share of the profits in those territories for “Product” as defined in the Collaboration Agreement. Relief Therapeutics reimbursed the Company $ 10.9 million but has subsequently declined to reimburse the Company for additional costs of research and development. The Company advised Relief Therapeutics that the Company is funding those costs with other capital. On October 6, 2021, Relief Therapeutics filed a lawsuit against the Company and its former CEO claiming that the Company failed to honor its obligations under the Collaboration Agreement. Relief Therapeutics’ complaint seeks several remedies, including damages for alleged breaches of the terms of the Collaboration Agreement. The Company believes the lawsuit is baseless and without merit. 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. 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 From time to time the Company is involved in litigation, claims, and other proceedings arising in the ordinary course of business. Litigation and other disputes are inherently unpredictable and subject to substantial uncertainties and unfavorable resolutions could occur. Share Subscription Facility Agreement — GEM NeuroRx previously entered into a share subscription facility agreement (“GEM Agreement”) with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, referred to as “GEM”) with a three-year term 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. 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 16 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS three years from the date NeuroRx’s stock is listed for trading on a national securities exchange or consummation of a reverse merger transaction of the type contemplated by the Merger Agreement. 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. ​ ​ 9. Equity Common Stock 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 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 Upon closing of the Merger, pursuant to the terms of the Second Amended and Restated Certificate of Incorporation, the Company authorized 50,000,000 shares of preferred stock with a par value $ 0.001 . The Company has no shares of preferred stock outstanding. 17 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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. The incremental shares above the Exchange Ratio (of 3.16 ) upon exercise would be held back pending the outcome of the contingencies and only released if such are achieved. The percentage of total shares of Common Stock subject to each Substitute Warrant that is vested immediately following the Effective Time will equal the percentage of total shares of NeuroRx common stock subject to each NeuroRx warrant 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 Warrant will be adjusted such that the number of shares of Common Stock subject to each adjusted Substitute Warrant, the exercise price per share of each adjusted Substitute Warrant and the aggregate intrinsic value of each adjusted 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 Substitute Warrant had the conversion of NeuroRx warrants into the Substitute Warrants been applied using the Exchange Ratio ( 3.16 :1) 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 Warrant will be adjusted based on the Exchange Ratio. If any Substitute Warrants 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 Warrants. 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, 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. 18 Table of Contents 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 Substitute Warrants Strike price ​ ​ $ 7.58 -$ 15.84 ​ ​ $ 1.53 -$ 3.19 ​ Volatility rate ​ 80.0 % ​ 80.0 % ​ Risk-free rate ​ 0.03 %- 0.32 % ​ 0.03 %- 0.32 % ​ Expected term ​ 0.57 - 3.69 ​ 0.57 - 3.69 ​ Dividend yield ​ — ​ — ​ ​ Assumed Public Warrants Prior to the Merger, the Company had 3,450,000 Public Warrants outstanding. Each Public Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $ 11.50 per share. The Public Warrants became exercisable at the Effective Time and expire five years after the Effective Time or earlier upon their redemption or liquidation of the Company. The Company may redeem the Public Warrants: ● in whole and not in part; ● at a price of $ 0.01 per warrant; ● at any time during the exercise period; ● upon a minimum of 30 days ’ prior written notice of redemption; 19 Table of Contents 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; and ● if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants. Certain of the above conditions have not been met to redeem the Public Warrants. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. During the three and six months ended June 30, 2022, no Public Warrants were exercised. Assumed Placement Warrants Prior to the Merger, the Company had outstanding 136,250 Placement Warrants. The Placement Warrants are identical to the Public Warrants except that the Placement Warrants (i) are not redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchaser or any of its permitted transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. 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 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. 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. The following table provides the activity for all warrants for the respective periods. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ Average ​ Weighted ​ Aggregate ​ ​ ​ Remaining ​ Average ​ Intrinsic Value ​ Total Warrants ​ Term ​ Exercise Price ​ (in thousands) Outstanding as of December 31, 2021 9,305,790 ​ 3.92 ​ $ 9.09 ​ $ 4,942 Issued 8,215,963 ​ 5.50 ​ ​ 3.11 ​ ​ — Outstanding as of June 30, 2022 17,521,753 ​ 4.04 ​ $ 6.29 ​ $ — ​ ​ 20 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Preferred Investment Options (included in above warrants table) On February 2, 2022, the Company completed a private placement and issued 7,824,727 shares of common stock and Preferred Investment Options to purchase up to an aggregate of 7,824,727 shares of common stock. The Preferred Investment Options have an exercise price of $ 3.07 per share and may be exercised any time on or after August 2, 2022. The form of the Preferred Investment Option is a warrant. The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at 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 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 . As these Preferred Investment Options were issued for services provided in facilitating the private placement, the Company recorded the fair value of such Preferred Investment Options as a cost of capital on the issuance date. The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at February 2, 2022, the date of issuance (i.e., share price of $ 2.94 , exercise price of $ 3.99 , term of five years beginning August 2, 2022, volatility of 82.8 %, risk-free rate of 1.60 %, and expected dividend rate of 0 %). ​ 10. Stock-Based Compensation 2016 Omnibus Incentive Plan Prior to the Merger, NeuroRx maintained its 2016 Omnibus Incentive Plan (the “2016 Plan”), under which NeuroRx granted incentive stock options, restricted stock awards, other stock-based awards, or other cash-based awards to employees, directors, and non-employee consultants. The maximum aggregate shares of common stock that were subject to awards and issuable under the 2016 Plan was 3,472,000 . In connection with the Merger, each option of NeuroRx that was outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) was assumed by BRPA and converted into an option to acquire an adjusted number of shares of Common Stock at an adjusted exercise price per share (the “Substitute Options”), based on the Option Exchange Ratio (of 4.96 ), and will continue to be governed by substantially the same terms and conditions, including vesting, as were applicable to the former option. Each Substitute Option 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 option multiplied by the Option Exchange Ratio, and the per share exercise price of such Substitute Option 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. The incremental shares above the Exchange Ratio (of 3.16 ) upon exercise would be held back pending the outcome of the contingencies and only released if such are achieved. The percentage of total shares of Common Stock subject to each Substitute Option that is vested immediately following the Effective Time will equal the percentage of total shares of NeuroRx common stock subject to each NeuroRx option that is vested immediately prior to the Effective Time. 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. 21 Table of Contents 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. Following the determination of that adjustment, NRx Pharmaceuticals will retain any shares forfeited by the option holder in connection with the adjustment and return any remaining shares to the option holder. Upon the closing of the Merger, the outstanding and unexercised NeuroRx stock options became options to purchase an aggregate 2,895,423 shares of the Company’s Common Stock at an average exercise price of $ 5.10 per share. The Company accounted for the Substitute Options as a modification of the existing options. Incremental compensation costs, measured as the excess, if any, of the fair value of the modified options over the fair value of the original options 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 options and Substitute Options was determined using the Black-Scholes option-pricing model with the following assumptions for each: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Original Options Substitute Options ​ Strike price ​ ​ $ 1.00 -$ 72.30 ​ ​ $ 0.20 -$ 14.58 ​ Volatility rate ​ 80.0 % ​ 80.0 % ​ Risk-free rate ​ 0.07 %- 0.79 % ​ 0.07 %- 0.79 % ​ Expected term ​ 0.18 - 5.99 ​ 0.18 - 5.99 ​ Dividend yield ​ — ​ — ​ ​ 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 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. 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. For unvested Substitute Options, the Company will recognize incremental compensation over the remaining requisite service period, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification date, taking into consideration the probability of the achievement of the Earnout Cash Milestone and/or Earnout Shares Milestone. Incremental compensation costs related to unvested Substitute Options as of the modification date was $ 25.9 million. 2021 Omnibus Incentive Plan At the Effective Time, the Company adopted the 2021 Omnibus Incentive Plan (the “2021 Plan”). 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 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. 22 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Option Awards The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company is a public company and has limited company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the limited company-specific historical volatility and implied volatility as well as historical volatility of a publicly traded set of peer companies. The expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Additionally, certain options granted contain terms that require all unvested options to immediately vest a) upon the approval of a New Drug Application (NDA) by the FDA for NRX-101, or b) immediately preceding a change in control of the Company, whichever occurs first. The grant date fair value of employee and non-employee stock option awards is determined using the Black Scholes option-pricing model. The following assumptions were used during the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ December 31, 2021 ​ (Unaudited) ​ ​ Exercise price ​ $ 0.51 -$ 3.10 ​ ​ $ 6.44 -$ 23.41 Risk-free rate of interest ​ 1.80 %- 3.61 % ​ 0.69 %- 1.45 % Expected term (years) ​ 5.5 - 6.5 ​ 5.25 - 6.5 Expected stock price volatility ​ 94.9%-104.1% ​ 80.0 %-85.9% Dividend yield ​ — ​ — ​ The following table summarizes the Company’s employee and non-employee stock option activity under the Plan for the following periods: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Aggregate ​ ​ ​ ​ Weighted ​ average ​ intrinsic ​ ​ Number of ​ average ​ remaining ​ value ​ shares exercise price term (years) (in thousands) Outstanding as of December 31, 2021 2,400,315 ​ $ 6.28 7.8 ​ $ 4,224 Granted 552,000 ​ ​ 3.00 10.0 ​ ​ — Forfeited ( 45,367 ) ​ ​ ( 14.05 ) (9.1) ​ ​ — Outstanding as of March 31, 2022 ​ 2,906,948 ​ $ 5.54 ​ 8.0 ​ $ 1,006 Granted ​ 350,000 ​ ​ 0.52 ​ 10.0 ​ ​ — Forfeited ​ ( 550,833 ) ​ ​ ( 3.76 ) ​ — ​ ​ — Outstanding as of June 30, 2022 ​ 2,706,115 ​ $ 5.20 ​ 7.7 ​ $ 174 Options vested and exercisable as of June 30, 2022 ​ 1,361,446 ​ $ 4.83 ​ 6.4 ​ $ 145 ​ 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): 23 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended June 30, ​ Six months ended June 30, ​ 2022 2021 2022 2021 Stock-based compensation expense ​ ​ ​ ​ General and administrative ​ $ 768 ​ $ 4,095 ​ $ 1,884 ​ $ 4,439 Research and development ​ 219 ​ 188 ​ 437 ​ 216 Total stock-based compensation expense ​ $ 987 ​ $ 4,283 ​ $ 2,321 ​ $ 4,655 ​ ​ 11. 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 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 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. Fair Value on a Recurring Basis 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 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30 ​ December 31 Description Level 2022 ​ 2021 ​ ​ ​ ​ (Unaudited) ​ ​ ​ Assets: ​ ​ ​ ​ ​ ​ ​ ​ Money Market Account ​ 1 ​ $ 23,500 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ ​ ​ Warrant liabilities (Note 10) ​ 3 ​ $ 19 ​ $ 292 Earnout Cash liability (Note 4) 3 ​ $ — ​ $ 4,582 ​ Warrant liabilities 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 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. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero. 24 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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 ​ $ 0.60 ​ Exercise price per share ​ $ 11.50 ​ Expected life ​ 3.90 ​ Volatility ​ 104.1 % ​ Risk-free rate ​ 3.00 % ​ Dividend yield ​ 0.00 % ​ Fair value of warrants ​ $ 0.13 ​ ​ A reconciliation of warrant liabilities is included below (in thousands): ​ ​ ​ ​ ​ Fair Value Balance as of December 31, 2021 ​ $ 292 Gain upon re-measurement ​ ​ ( 157 ) Balance as of March 31, 2022 ​ $ 135 Gain upon re-measurement ​ ( 116 ) Balance as of June 30, 2022 ​ $ 19 ​ 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) if the Company files an NDA, that the FDA approves the Company’s NDA for ZYESAMI and/or NRX-101, (b) if such approval is granted, whether such approval will be received on or before December 31, 2022, and (c) if such approval is granted, whether ZYESAMI and/or NRX-101 will be listed in the FDA’s Orange Book on or before December 31, 2022. The DCFs incorporate Level 3 inputs including estimated discount rates that the Company believes market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed, considering the uncertainties associated with the obligations. 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): ​ ​ ​ ​ ​ June 30, 2022 Balance as of December 31, 2021 ​ $ 4,582 Gain upon re-measurement ​ ​ ( 2,103 ) Balance as of March 31, 2022 ​ $ 2,479 Gain upon re-measurement ​ ( 2,479 ) Balance as of June 30, 2022 ​ $ — ​ ​ 12. Income Taxes The Company recorded no provision or benefit for income tax expense for the three and six months ended June 30, 2022 and 2021, respectively. 25 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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 June 30, 2022. 13. Related Party Transactions The Company licenses patents that are owned by Glytech, LLC (“Glytech”), pursuant to a license agreement (the “Glytech Agreement”). Glytech is owned by a co-founder and former director of the Company. 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 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. The Fourth Amendment to the Glytech Agreement, effective as of December 31, 2020, includes an equity value-triggered transfer of Excluded Technology from Glytech to NRx Pharmaceuticals. The Excluded Technology is defined in the Glytech Agreement as any technology, and any know-how related thereto, covered in the licensed patents that do not recite either D-cycloserine or lurasidone individually or jointly. 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 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. Jonathan Javitt, is a major shareholder in the Company and a member of the Board of Directors. Therefore, his services are deemed to be a related party transaction. He 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. Zachary Javitt is the son of Dr. Jonathan Javitt. Zachary Javitt provides services related to website, IT, and marketing support under the supervision of the Company’s 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 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. 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. 26 Table of Contents NRX PHARMACEUTICALS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ​ 14. 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. ​ ​ 27 Table of Contents