What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 151 added, 158 removed, 534 unchanged (37% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

June 30, 2022

September 30, 2022

December 31, 2021

13 unchanged sentences

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

0 shares issued and outstanding at September 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

67,641,314 and 58,810,550 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

7 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Operating expenses:

17 unchanged sentences

Weighted average common shares outstanding:

Basic and diluted

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

11 unchanged sentences

Balance - June 30, 2022

Additional issuance costs in connection with Private Placement

Restricted stock awards granted

Stock-based compensation

Balance - September 30, 2022

NRX PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share data)

Stockholders’

14 unchanged sentences

Balance - June 30, 2021

Common stock issued

Common stock and warrants issued in private placement, net of issuance costs of $ 3,669

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

Common stock issued for consulting services

Stock-based compensation

Balance - September 30, 2021

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

2 unchanged sentences

(in thousands)

Six months ended June 30,

Nine months ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

18 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of common stock, net of transaction costs

Proceeds from issuance of common stock for exercise of warrant

Effect of Merger, net of transaction costs

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

Repayment of note payable

1 unchanged sentence

Repayment of notes payable assumed in Merger

Repayment of notes payable - related party

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

4 unchanged sentences

Reclassification of legacy NeuroRx warrants to warrant liabilities

Reclassification of warrant liability upon exercise of warrant

Issuance of common stock warrants as offering costs

2 unchanged sentences

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

10 unchanged sentences

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.

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

As of September 30, 2022, the Company had $ 18.2 million in cash.

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

1 unchanged sentence

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.

On November 4, 2022, the Company issued an 9 % redeemable promissory note (the “Note”) to Streeterville Capital, LLC, a Utah limited liability company, for an aggregate principal amount of $ 11,020,000 .

The Company intends to use the proceeds from such issuance for general corporate purposes.

The Note matures 18 months from the date of issuance subject to certain acceleration provisions as noted below.

The Note carries an original issue discount of $ 1,000,000 which was deducted from the principal balance of the Note.

The net proceeds from the issuance of the Note was $ 10,000,000 after transaction costs including the original issue discount, legal and other fees are included.

The Company has the option to prepay the Note during the term by paying an amount equal to 110 % of the principal, interest, and fees owed as of the prepayment date.

The noteholder has the right to redeem up to $ 1,000,000 of the outstanding balance of the Note per month starting on the six-month anniversary of the issue date.

Upon any redemption, the Company may make payments at its option in:

(i) in cash, (ii) by paying the redemption amount in the form of shares of Common Stock with the number of redemption shares being equal to the portion of the applicable redemption amount divided by the Redemption Conversion Price (as defined below), or (iii) a combination of cash and shares of common stock.

The “Redemption Conversion Price” on any given redemption date equals 85 % multiplied by the average of the two lowest daily volume weighted average prices per share of the common stock during the ten trading days immediately preceding the date that the noteholder delivers notice electing to redeem a portion of the Note.

Beginning May 1, 2023, in the event (a) the daily dollar trading volume of the common stock of the Company on any given trading day is at least fifty percent ( 50 %) greater than the lower of (i) the median daily dollar trading volume over the previous ten (10) trading days or (ii) the daily dollar trading volume on the trading day immediately preceding the date of measurement or (b) if the closing trade price on any given trading day is at least thirty percent ( 30 %) greater than the Nasdaq Minimum Price, then lender will be entitled to redeem over the following ten (10) trading days an amount of indebtedness then outstanding under the Note equal to twice ( 2x ) the monthly redemption amount of $ 1,000,000 solely by payment by stock, if permitted under the agreement, subject to maximum percentage and other ownership limitations.

The Company’s ongoing clinical activities continue to generate losses and net cash outflows from operations.

Accordingly, the Company issued the above Note to continue to fund its research activities.

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.

1 unchanged sentence

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies

22 unchanged sentences

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

22 unchanged sentences

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.

For restricted stock awards, the grant date fair value is the fair market value per share as of the grant date based on the closing trading price for the Company’s stock.

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.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Modification of stock options and warrants

20 unchanged sentences

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

1 unchanged sentence

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Stock options

Restricted stock awards

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

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.

There are 1,000,000 unvested restricted stock awards which are excluded from the weighted average shares outstanding for computing EPS until such shares become vested.

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.

For the nine-months ended September 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

9 unchanged sentences

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

Shares Milestone.

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

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

7 unchanged sentences

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):

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

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

Recapitalization

3 unchanged sentences

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):

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

Recapitalization

21 unchanged sentences

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):

June 30, 2022

September 30, 2022

December 31, 2021

1 unchanged sentence

Prepaid insurance

Receivable due from manufacturer

Other prepaid expenses

Prepaid legal expenses

Receivable due from manufacturer

Prepaid clinical development expenses

Prepaid legal expenses

Prepaid manufacturing expenses

2 unchanged sentences

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

June 30, 2022

September 30, 2022

December 31, 2021

14 unchanged sentences

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.

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

of SARS-CoV-2 in alveolar type II cells in vitro (the “Study”).

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 upon finalization of the work.

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

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

Relief Therapeutics Collaboration Agreement

1 unchanged sentence

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.

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, which was followed by a counter claim from the Company for breach and repudiation of the Collaboration Agreement by Relief Therapeutics.

On November 12, 2022, the Company and Relief Therapeutics entered into a Settlement Agreement and an Asset Purchase Agreement (“APA”), which are intended to resolve the parties’ claims.

The parties have thirty (30) days to implement the terms of the Settlement Agreement and APA and achieve closing.

Upon closing, the parties will dismiss their respective claims.

Please See Section 14 - Subsequent Events for a description of the settlement arrangements.

Legal Proceedings

2 unchanged sentences

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.

8 unchanged sentences

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

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.

The GEM Warrant will be valid for a period of 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.

Specifically, as the amount was deemed probable and estimable at December 31, 2020, NeuroRx recorded a liability and settlement expense of $ 39.5 million 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 $ 21.4 million 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”).

6 unchanged sentences

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.

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$15.0 million (approximately US$1.9 million 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.

1 unchanged sentence

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.

The Company sold 3,238,338 shares of common stock during the three months ended September 30, 2021, and received gross proceeds of $ 31.1 million.

The Company sold 7,824,727 and 3,642,515 shares of common stock during the nine months ended September 30, 2022 and 2021, respectively, and received gross proceeds of $ 23.0 million and $ 39.6 million, respectively.

The Company issued 2,334,370 and 3,830,586 shares of common stock pursuant to warrants and Unit Purchase Options exercised during the three and nine months ended September 30, 2021, and received gross proceeds from the warrant exercise of $ 9.2 million and from the Unit Purchase Option exercise of $ 16.7 million, respectively.

The Company issued 634,045 and 834,045 shares of common stock for consulting services during the three and nine months ended September 30, 2021, and recognized non-cash consulting expense in general and administrative expenses of $ 7.9 million and $ 12.8 million, respectively.

Preferred Stock

1 unchanged sentence

The Company has no shares of preferred stock outstanding.

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.

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.

14 unchanged sentences

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.

$ 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 loss on the change in fair value of the Substitute Warrants for the three months ended September 30, 2022 of less than $ 0.1 million and a gain on the change in fair value of the Substitute Warrants for the nine months ended September 30, 2022 of $ 0.1 million.

The Company recognized a loss on the change in fair value of the Substitute Warrants for the three and nine months ended September 30, 2021 of $ 16.3 million and $ 0.4 million, respectively.

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

20 unchanged sentences

● 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;

2 unchanged sentences

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.

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.

During the three and nine months ended September 30, 2022, no Public Warrants were exercised.

Assumed Placement Warrants

3 unchanged sentences

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 classifies the Placement Warrants as derivative liabilities in its Unaudited Condensed Consolidated Balance Sheet as of September 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.

The Company recognized a gain on the change in fair value of the Placement Warrants for the three months ended September 30, 2022 and a loss on the change in fair value of the Placement Warrants for the three months ended September 30, 2021 of less than $ 0.1 million and $ 0.3 million, respectively.

The Company recognized a gain on the change in fair value of the Placement Warrants for the nine months ended September 30, 2022 and 2021 of $ 0.2 million and $ 1.2 million, respectively.

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

5 unchanged sentences

Outstanding as of December 31, 2021

Outstanding as of June 30, 2022

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Outstanding as of September 30, 2022

Preferred Investment Options (included in above warrants table)

18 unchanged sentences

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.

15 unchanged sentences

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.

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

4 unchanged sentences

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 September 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.

As of September 30, 2022, 4,821,754 shares have been awarded and 1,227,424 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:

June 30, 2022

September 30, 2022

December 31, 2021

7 unchanged sentences

Expected stock price volatility

94.9 %- 147.8 %

80.0 %- 85.9 %

Dividend yield

5 unchanged sentences

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.

Outstanding as of September 30, 2022

Options vested and exercisable as of September 30, 2022

The weighted average grant date fair value per share for employee stock and non-employee option grants during the three and nine months ended September 30, 2022, was $ 0.64 and $ 1.55 .

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

At September 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 $ 27.5 million, of which the Company expects to recognize $ 3.0 million over a weighted-average period of approximately 1.7 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

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Stock-based compensation expense

2 unchanged sentences

Total stock-based compensation expense

Restricted Stock Awards

The following table presents the Company’s Restricted Stock Activity:

Weighted Average Grant Date Fair Value

Balance as of December 31, 2021

Unvested Balance as of September 30, 2022

On July 12, 2022, the Board granted an award of 1,000,000 restricted shares of the Company (“Restricted Stock”) as an inducement to the newly appointed CEO, 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 grant date, subject to continued service through the applicable vesting date.

As of September 30, 2022, total unrecognized compensation expense related to unvested RSAs granted was approximately $ 0.5 million, which is expected to be recognized over a weighted-average period of approximately 2.8 years.

Stock-based compensation expense related to RSAs was less than $ 0.1 million during the three and nine months ended September 30, 2022.

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.

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the nine months ended September 30, 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 fair value of warrants issued for settlement and services are estimated based on the Black-Scholes model during the nine months ended September 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.

3 unchanged sentences

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):

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 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

11 unchanged sentences

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The significant 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

September 30, 2022

Stock price on valuation date

10 unchanged sentences

Balance as of June 30, 2022

Loss upon re-measurement

Balance as of September 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.

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 September 30, 2022 of achieving the required milestones for payment of the Earnout Cash to be de minimis and therefore, the September 30, 2022 Earnout Cash liability was reduced to zero.

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

June 30, 2022

September 30, 2022

Balance as of December 31, 2021

3 unchanged sentences

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

Balance as of September 30, 2022

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

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

Related Party Transactions

2 unchanged sentences

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.

During the three months ended September 30, 2022 the Company paid a co-founder $ 0.1 million, and during the nine months ended September 30, 2022 and 2021, $ 0.2 million and $ 0.1 million, respectively, for continuing technology support services and reimbursed expenses.

These support services are ongoing.

6 unchanged sentences

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.

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 $0.2 million and $ 0.1 million during the three months ended September 30, 2022 and 2021, respectively, and $ 0.7 million and $ 0.4 million during the nine months ended September 30, 2022 and 2021, respectively.

These services are ongoing.

2 unchanged sentences

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.

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 September 30, 2022 and 2021, respectively, and $ 0.1 million and $ 0.1 million during the nine months ended September 30, 2022 and 2021, respectively.

These services are ongoing.

3 unchanged sentences

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 $ 0.3 million during the three months ended September 30, 2021, and $ 0.2 million and $ 0.7 million during the nine months ended September 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 September 30, 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.

The Company intends to use the proceeds from such issuance for general corporate purposes.

The Note matures 18 months from the date of issuance.

The Note carries an original issue discount of $ 1,000,000 which was deducted from the principal balance of the Note.

The net proceeds from the issuance of the Note was $ 10,000,000 after transaction costs including the original issue discount, legal and other fees are included.

The Company has the option to prepay the Note during the term by paying an amount equal to 110 % of the principal, interest, and fees owed as of the prepayment date.

The noteholder has the right to redeem up to $ 1,000,000 of the outstanding balance of the Note per month starting on the six-month anniversary of the issue date.

Payments may be made by the Company at its option in:

(i) in cash, (ii) by paying the redemption amount in the form of shares of Common Stock with the number of redemption shares being equal to the portion of the applicable redemption amount divided by the Redemption Conversion Price, or (iii) a combination of cash and shares of common stock.

Settlement of Litigation

On November 12, 2022, NRx Pharmaceuticals, Inc.

(“NRx” or the “Company”) entered into a Settlement Agreement and Asset Purchase Agreement (“APA”) with Relief Therapeutics Holding AG and Relief Therapeutics International (the “Relief Parties”) to settle the outstanding lawsuit with respect to the Collaboration Agreement dated September 18, 2020 between the Company and the Relief Parties (the “Collaboration Agreement”).

Under the APA, the Company has agreed to transfer to the Relief Parties all of the Company’s interest in ZYESAMI (or the “Product” as such term is defined in the Collaboration Agreement), including intellectual property, FDA applications, clinical trial data, drug and API inventory and certain contractual rights.

The Company has agreed to refrain from developing any product for any indication that uses or otherwise exploits the Product without the Relief Parties’ consent.

The Relief Parties have agreed to use commercially reasonable efforts to develop, market, and commercialize the Product, but has sole discretion to select the indications for which it will seek to develop the Product.

Although the Company intends to monitor the progress of the Relief Parties under the APA and enforce the Company’s rights thereunder, there can be no assurances that the Relief Parties will be successful at commercializing the Product.

Upon commercial launch of the Product by the Relief Parties or any of their affiliates, licensees or sublicensees (or upon authorization of use for any indication of the Product other than COVID-19), the Company is entitled to receive milestone payments in stages up to an aggregate amount of $13.0 million.

The Relief Parties have also agreed to pay royalties to NRx on aggregate net sales of all Products, subject to a cap on royalty payments of $30.0 million in the aggregate.

In addition, Relief is obligated to use commercially reasonable efforts to continue NRx’s existing Right to Try Program for at least two (2) years after the closing of the APA.

Mutual indemnity provisions in the APA will protect each party from any breaches of the settlement arrangements by the other party, provided, that the Company’s indemnity obligations will not start until the Relief Parties have begun making royalty or milestone payments to NRx, subject to certain exceptions.

With respect to the Company, there is an indemnity threshold such that the Company will not be liable for any indemnity claims until such claims are in excess of $0.5 million (and then only for the amount above $0.5 million).

The Company’s indemnity obligation is capped at $2.0 million with respect to breaches of representations and warranties and $3.0 million with respects to breaches of covenants or other agreements.

Additionally, subject to certain exceptions, the Company’s indemnity obligations cannot exceed the amount

that the Relief Parties actually pay to the Company for milestone and royalty payments.

The parties have 30 days to implement the agreed actions and achieve closing under the APA, at which time all claims and counterclaims between the Company and the Relief Parties will be dismissed with prejudice.

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