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Item 8. Financial Statements and Supplementary Data

2023-03-31 compared with 2022-03-31 · 357 added, 396 removed, 496 unchanged (60% of the section changed)

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We have audited the accompanying consolidated balance sheets of NRX Pharmaceuticals, Inc.

and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years then ended, in conformity with U.S.

and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with U.S.

generally accepted accounting principles.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses and net cash outflows from operations that raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of the fair value of the convertible note

As discussed in Notes 7 and 11 to the consolidated financial statements, the Company completed a convertible note offering during the year ended December 31, 2022.

The Company received net proceeds of $10.0 million from the offering and elected to account for this convertible note at fair value under the fair value option.

The estimated fair value of the convertible note as of December 31, 2022 is $10.5 million.

The Company used a Monte Carlo simulation model to estimate the fair value of the convertible note.

We identified the assessment of the measurement of fair value of the convertible note as of December 31, 2022 as a critical audit matter.

This matter required the involvement of valuation professionals with specialized skills and knowledge to assess the Company’s model used to value the convertible note.

The following is the primary procedure we performed to address this critical audit matter.

We involved valuation professionals with specialized skills and knowledge who assisted by independently developing a range of fair values of the convertible note using a discounted cash flow model and comparing it to the amount recorded by the Company.

We have served as the Company’s auditor since 2018.

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Current assets:

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

Cash and cash equivalents

Prepaid expenses and other current assets

Total current assets

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Earnout Cash liability

Convertible note payable and accrued interest - short term

Warrant liabilities

Notes payable and accrued interest

Accrued settlement expense

Note payable and accrued interest

Total current liabilities

Notes payable and accrued interest

Convertible note payable and accrued interest - long term

Total liabilities

Stockholders’ equity (deficit):

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

0 shares issued and outstanding at December 31, 2021 and 2020, respectively

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

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

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Accumulated deficit

Total stockholders’ equity (deficit)

Total liabilities and stockholders' equity (deficit)

Total stockholders’ equity

Total liabilities and stockholders' equity

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

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Gain on extinguishment of debt

Interest income

Interest expense

Change in fair value of warrant liability

Change in fair value of convertible note payable

Change in fair value of warrant liabilities

Change in fair value of Earnout Cash liability

Change in fair value of embedded put

Loss on conversion of convertible notes payable

Total other (income) expenses

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Provision for income taxes

Deemed dividend - warrants

Deemed dividend - Earnout Shares

Deemed dividend

Net loss attributable to common stockholders

Net loss per share:

Basic and diluted

Net loss per share attributable to common stockholders:

Basic and diluted

Weighted average common shares outstanding:

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NRX PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

Preferred Stock

Stockholders’

Equity (Deficit)

Balance - December 31, 2019 (as previously reported)

Retroactive application of reverse recapitalization (Note 4)

( 1,000,000 )

( 1,050,695 )

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

Common stock issued

Series B-2 convertible preferred stock issued

Common stock issued to settle note conversion

Common stock issued to settle accounts payable

Warrants issued as compensation for services

Stock-based compensation

Balance - December 31, 2020

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Balance December 31, 2021

Common stock and warrants issued in private placement, net of issuance costs of $ 2,283

Common stock issued for consulting services

Common stock issued for exercise of stock options

Restricted stock awards granted

Retired Earnout Shares

( 1,247,930 )

Stock-based compensation

Balance - December 31, 2022

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

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(in thousands)

Year ended December 31,

Years Ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Stock-based compensation

Warrant expense

Gain on extinguishment of debt

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Change in fair value of earnout cash liability

Change in fair value of embedded put

Amortization of debt discount

Change in fair value of convertible promissory note

Non-cash interest expense

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Non-cash consulting expense

Loss on common stock issued to settle accounts payable

Loss on conversion for notes payable

Changes in operating assets and liabilities:

Accounts receivable

Account receivable

Prepaid expenses and other assets

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CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from notes payable

Proceeds from issuance of series B-2 preferred stock

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

Proceeds from convertible notes payable, net of discount

Proceeds from stock option exercise

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

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

Effect of Merger, PIPE financing, net of transaction costs

Repayment of notes payable assumed in Merger

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Net cash provided by financing activities

Net increase in cash

Cash at beginning of period

Cash at end of period

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

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Extinguishment of Paycheck Protection Program Loan

Conversion of notes payable into common stock

Common stock issued to settle accounts payable

Issuance of common stock for consulting services

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

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and, where appropriate, its subsidiaries.

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

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

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

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

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

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

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

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

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

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

After investigating the manufacturing requirements of the vaccine, the expected regulatory path for approval in Israel and the EU, the commercial opportunity, and the financial commitment required for development of the vaccine, the Company decided not to continue with the project.

We plan to effect a transition in consultation with the IIBR.

This decision was communicated to the IIBR in a letter dated March 20, 2022 .

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.

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

As of December 31, 2022, the Company had $ 20.1 million in cash.

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

The Company issued 3,830,586 shares of common stock pursuant to warrants and Unit Purchase Options exercised during the year ended December 31, 2021, and received gross proceeds from the warrant exercise of $ 16.7 million.

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

The aggregate gross proceeds to the Company were approximately $ 25.0 million, before deducting placement agent fees and other offering expenses.

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

The Company is dependent upon obtaining necessary equity and/or debt financing to continue operating.

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.

COVID-19 Outbreak

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

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

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

Except as otherwise discussed in the preceding sentence and otherwise in this annual report, there have been no material changes or impact of COVID-19 on our business.

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

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

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

On November 4, 2022, the Company entered into a Securities Purchase Agreement (“SPA”) with Streeterville Capital, LLC, a Utah limited liability company (“Lender”), and, pursuant to the SPA, issued to the Lender an unsecured promissory note with a face amount of approximately $11.0 million (the “Note”) before an original issue discount of $1.0 million, which was deducted from the proceeds of the Note.

The Note carries a 9% interest rate, has a term of 18 months from the issuance date (the “Maturity Date”) and is redeemable as described below.

Any time after the issuance date, the Company has the right to prepay all or any portion of the outstanding balance of the Note.

If the Company exercises its right to prepay the Note, the Company will make payment to the Lender of an amount in cash equal to 110% multiplied by the portion of the outstanding balance the Company elects to pay.

Beginning on the date that is six (6) months after the issuance date of the applicable Note, the Lender has the right to redeem up to $1.0 million (“Maximum Monthly Redemption Amount”) of the outstanding balance of such Note per month.

Payments may be made by the Company, at the Company’s option, (a) in cash with a 10% premium for the amount redeemed, (b) 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 (c) a combination of cash and shares of Common Stock.

The “Redemption Conversion Price” shall equal 85% multiplied by the average of the two lowest daily volume weighted average prices per share of the Common Stock during the 15 trading days immediately preceding the date that the Lender delivers notice electing to redeem a portion of the Note.

The Company’s right to satisfy the redemption amount in shares of Common Stock is subject to certain limitations, including

(i) there not being any Equity Conditions Failure (as defined in the Note) and (ii) the Lender not owning more than 9.99% of the outstanding shares of Common Stock.

If the Company elects to prepay the Note prior to the Maturity Date or elects to pay a portion or all of the Maximum Monthly Redemption Amount in cash, it must pay a premium of 10%, subject to certain exceptions.

As of the date hereof, the Company did not meet the conditions to repay the Note by the delivery of shares of common stock.

The Company has the right to make the required payments for the above Note in common stock subject to certain conditions including ownership and trading volume limitations.

If the Company is not able to make the required payments for the above Note in common stock and must use cash for these payments, management believes that the Company does not have sufficient liquidity to support operations, which are subject to change.

On March 8, 2023, NRx Pharmaceuticals entered into a securities purchase agreement (the “Securities Purchase Agreement”) with accredited investors (the “Investors”), providing for the issuance and sale of 3,866,666 shares of the Company’s common stock (“Common Stock”) and warrants to purchase up to 3,866,666 shares of Common Stock (the “Investor Warrants”) in a registered direct offering priced at-the-market under Nasdaq rules for a purchase price of $0.75 per share (the “Offering”).

The Investors have agreed not to transfer the Common Stock for six months following the date hereof.

The Investor Warrants will have an exercise price of $0.75 per share, will be initially exercisable beginning six months following the date of issuance (the “Initial Exercise Date”) and will expire 5 years from the Initial Exercise Date.

The aggregate gross proceeds to the Company from the Offering are expected to be approximately $2.9 million.

The Company intends to use the net proceeds from such offering for working capital and general corporate purposes.

The closing of the sale of these securities occurred on March 9, 2023.

The Company plans to pursue additional financing opportunities in 2023 to strengthen its balance sheet similar to the transaction completed in March 2023.

In addition, as we execute our business plan over the next 12 months, we will continue to carefully monitor the impact of our continuing operations on our working capital needs and cash balances relative to the availability of cost-effective debt and equity financing.

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

The Company may raise substantial additional funds, and if it does so, it may do so through one or more of the following:

issuance of additional debt or equity and/or the completion of a licensing or other commercial transaction for one of the Company’s product candidates.

The Company cannot make any assurances that additional financing will be available to it and, if available, on acceptable terms or at all which could negatively impact the Company’s business and operations and could also lead to a reduction in the Company’s operations.

As such, t he Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least twelve months from the date of issuance of these consolidated financial statements.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary if the Company is unable to continue as a going concern.

Summary of Significant Accounting Policies

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

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

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

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

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

The most significant estimates in the Company’s financial statements relate to the valuation of common and preferred stock, stock options, warrants, and Earnout Cash liability.

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

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

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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, compliance with regulatory requirements, and overall geopolitical, economic and pandemic risks.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents.

As of December 31, 2021 and 2020, the Company does not have any cash equivalents.

Fair Value of Financial Instruments

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(Refer to Note 11)

Foreign Currency

The Company’s functional currency is the U.S.

The functional currency of our foreign operation is the respective local currency.

Assets and liabilities of foreign operation denominated in local currencies are translated at the spot rate in effect at the applicable reporting date.

The consolidated statements of operations are translated at the weighted average rate of exchange during the applicable period.

The resulting unrealized cumulative translation adjustment is not material to the financial statements.

Accounts Receivable

Accounts receivable consist of balances due from collaborative partners.

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

Concentration of Credit Risk and Off-Balance Sheet Risk

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

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

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

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

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

Cash equivalents are occasionally invested in certificates of deposit.

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

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

Cash and Cash Equivalents

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

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

federally insured limits.

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

Research and Development Costs

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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.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to interest rate, market, or foreign currency risks.

The Company evaluates all of its financial instruments, to determine if such instruments contain features that qualify as embedded derivatives.

Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met.

The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract.

Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the statement of operations each period.

Bifurcated embedded derivatives are classified with the related host contract in the Company’s balance sheet.

Convertible Note Payable

As permitted under Financial Accounting Standards Board ("FASB”) Accounting Standards Codification ("ASC”) Topic 825, Financial Instruments ("ASC 825”), the Company elects to account for its convertible promissory note, which meets the required criteria, at fair value at inception and at each subsequent reporting date.

Subsequent changes in fair value are recorded as a component of non-operating loss in the consolidated statements of operations.

As a result of electing the fair value option, direct costs and fees related to the convertible promissory notes are expensed as incurred.

The Company estimates the fair value of the convertible note payable using a Monte Carlo simulation model, which uses as inputs the fair value of our common stock and estimates for the equity volatility and volume volatility of our common stock, the time to expiration of the convertible note, the risk-free interest rate for a period that approximates the time to expiration, and probability of default.

Therefore, we estimate our expected future volatility based on the actual volatility of our common stock and historical volatility of our common stock utilizing a lookback period consistent with the time to expiration.

The time to expiration is based on the contractual maturity date, giving consideration to the mandatory and potential accelerated redemptions beginning six months from the issuance date.

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

Treasury yield curve in effect at the time of measurement for time periods approximately equal to the time to expiration.

Probability of default is estimated using Bloomberg's Default Risk function which uses our financial information to calculate a default risk specific to the Company.

Stock-Based Compensation

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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 reasonable estimates and involve inherent uncertainties and the application of management’s judgment.

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

The Company 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.

Modification of stock options and warrants

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

Incremental stock-based compensation cost is measured as the excess, if any, of the fair value of the modified option/warrant over the fair value of the original option/warrant immediately before its terms are modified, measured based on the fair value of

the ordinary shares and other pertinent factors at the modification date.

For 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.

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

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

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

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

The fair value of the Placement Warrants was estimated using a Black-Scholes valuation approach (see Notes 10 and 12).

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

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

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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 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.

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

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

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

The following outstanding shares of common stock equivalents were excluded from the computation of the diluted net 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.

Year Ended December 31,

Stock options

Restricted stock awards

Common stock warrants

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Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes:

Simplifying the Accounting for Income Taxes .

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

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

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

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

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

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

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

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

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

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

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

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

Early adoption is permitted.

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

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 year ended December 31, 2022, there were no new accounting pronouncements that management believes materially affect the Company’s present or future results of operations, overall financial condition, liquidity or disclosures.

Reverse Recapitalization

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

At the effective time of the Merger (the “Effective Time”), and subject to the terms and conditions of the Merger

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

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

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

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

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

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

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

The Earnout Shares Milestone was recognized in equity and, upon closing of the Merger, the estimated fair value of the Earnout Shares was $ 253.1 million with such amount recognized as a deemed dividend (see Note 12).

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

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

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.

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

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).

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 had the contingent right to receive their pro rata portion of (i) an aggregate of 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 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”).

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 was remeasured at fair value each period end thereafter until 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 Shares and Earnout Cash 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.

As of December 31, 2022, the Earnout Shares Milestone and Earnout Cash Milestone were not achieved, and the Earnout Cash liability was relieved and the Earnout Shares issued under stock options, warrants, and restricted common stock for stock option exercises were cancelled.

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.

As neither the Earnout Shares Milestone nor the Earnout Cash Milestone occurred, each Substitute Option and Substitute Warrant was adjusted based on the Exchange Ratio.

For the Substitute Options and Substitute Warrants that were exercised prior to December 31, 2022, NRx Pharmaceuticals retained any shares forfeited by the option or warrant holders in connection with the adjustment.

In connection with the Merger, a number of subscribers (each, a “Subscriber”) purchased from the Company an aggregate of 1,000,000 shares of Common Stock (the “PIPE”), for a purchase price of $ 10.00 per share and an aggregate purchase price of $ 10.0 million (the “PIPE Shares”), pursuant to separate subscription agreements (each, a “Subscription Agreement”) entered into prior to the Closing Date.

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Effect of Merger, net of redemptions and transaction costs

The following table details the number of shares of common stock issued immediately following the consummation of the Merger (in thousands):

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

Number of Shares

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Prepaid insurance

Prepaid manufacturing expenses

Prepaid clinical development expenses

Other prepaid expenses

Other current assets

Prepaid legal expenses

Other current receivables

Prepaid manufacturing expenses

Total prepaid expenses and other current assets

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Accrued and other current liabilities:

Other accrued expenses

Accrued research and development expenses

Professional services

Accrued employee expenses

Other accrued expenses

Accrued insurance expenses

Professional services

Total accrued and other current liabilities

Convertible Notes Payable

On February 12, 2020, a Qualified Financing Event occurred when the Company received cumulative investment proceeds in excess of $ 10.0 million from the sale and issuance of common shares.

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

The 2017 Notes (as defined below) and the 2018 Notes (as defined below) in the aggregate principal amount of $ 2.8 million were converted into 1,005,458 common shares (at the discounted price of $ 2.78 per share), and the related unpaid and accrued interest totaling $ 0.4 million were also converted into 132,739 common shares of the Company (at the discounted price of $ 2.78 per share).

Additionally, the Company recognized a loss on extinguishment for the difference between the carrying value of the convertible notes, unamortized debt discount, and the value of the embedded put option and the fair value of the common shares of $ 0.3 million during the year ended December 31, 2020.

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

2017 Convertible Notes Payable

On November 16, 2017 and November 19, 2017, the Company issued convertible notes (“2017 Notes”), as amended for aggregate gross proceeds of $ 2.5 million.

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

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

Upon closing of either a sale of the Company’s shares for at least $ 10.0 million or a public offering of the Company’s securities (“Qualified Financing Event”), the outstanding principal balance will be converted into the number of such securities sold at a conversion price equal to 80% of the securities negotiated share price .

2018 Convertible Notes Payable

On January 5, 2018 and April 25, 2018, the Company issued convertible notes (“2018 Notes”), as amended for aggregate gross proceeds of $ 0.3 million.

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

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

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

The January 5, 2018 note for $ 0.1 million was not amended and interest was unpaid, as such, the January 5, 2018 note and related accrued interest were classified as current liabilities.

The April 25, 2018 note for $ 0.2 million was amended similar to the 2017 Notes to accrue interest and to be paid at maturity with the principal.

Notes Payable

Relief Therapeutics Loan

On April 6, 2020, the Company entered into a loan agreement with Relief (the “Relief Therapeutics Loan”) in the amount of $ 0.5 million.

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

Paycheck Protection Program Loan

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

Small Business Administration (“SBA”).

The term of the PPP Loan is two years .

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

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

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

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

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

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

Note Payable -- Vendor

On July 1, 2019, the Company converted certain accounts payable into a loan (the “Note Payable — Vendor”) with a vendor in the amount of $ 0.2 million.

The loan matured on July 1, 2020.

As of December 31, 2021, the note payable was paid in full.

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

Paycheck Protection Program loan

Note payable - vendor

Carrying value of notes payable

Accrued interest

Notes payable and accrued interest, current

Notes payable and accrued interest, non-current

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.

Convertible Note

On November 4, 2022, the Company entered into a Securities Purchase Agreement (“SPA”) with Streeterville Capital, LLC, a Utah limited liability company (“Lender”), and, pursuant to the SPA, issued to the Lender an unsecured promissory note with a face amount of approximately $ 11.0 million (the “Note”) before an original issue discount of $ 1.0 million, which was deducted from the proceeds of the Note.

The Note carries a 9 % interest rate, has a term of 18 months from the issuance date (the “Maturity Date”) and is redeemable as described below.

Any time after the issuance date, the Company has the right to prepay all or any portion of the outstanding balance of the Note.

If the Company exercises its right to prepay the Note, the Company will make payment to the Lender of an amount in cash equal to 110 % multiplied by the portion of the outstanding balance the Company elects to pay.

The Company’s right to satisfy the redemption amount in shares of Common Stock is subject to certain limitations, including (i) there not being any Equity Conditions Failure (as defined in the Note) and (ii) the Lender not owning more than 4.99% of the outstanding shares of Common Stock.

At any time, if market capitalization is less than $25.0 million, the 4.99% ownership limitation shall be increased to 9.99%.

On March 30, 2023, the Company amended the Note to increase the ownership limitation to 9.99%.

The Company has the right to make the required payments for the above Note in common stock subject to certain conditions including ownership and trading volume limitations.

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 (as defined in the Note), then the 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 $1.0 million solely by payment by Common Stock, subject to maximum percentage (4.99%) and other ownership limitations under the SPA and the Note.

The Note contains certain Trigger Events (as defined in the Note) that generally, if uncured within five (5) trading days, may result in an event of default in accordance with the terms of the Notes (such event, an “Event of Default”).

Upon an Event of a Default, the Lender may consider the Note immediately due and payable.

Upon an Event of Default, the interest rate may also be increased to the lesser of 18% per annum or the maximum rate permitted under applicable law.

Due to these embedded features within the Note, the Company elected to account for the Note at fair value at inception.

Subsequent changes in fair value are recorded as a component of other income (loss) in the Consolidated Statements of Operations.

The time to expiration is based on the contractual maturity date, giving consideration to the mandatory and potential accelerated redemptions beginning six months from the issuance date.

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

Treasury yield curve in effect at the time of measurement for time periods approximately equal to the time to expiration.

Probability of default is estimated using Bloomberg's Default Risk function which uses our financial information to calculate a default risk specific to the Company.

The discount to the principal amount is included in the carrying value of the Note.

During 2022, the Company recorded a debt discount of approximately $1.0 million upon issuance of the Note for the original issue discount of $1.0 million.

As a result of electing the fair value option, any direct costs and fees related to the Note was expensed as incurred.

For the year ended December 31, 2022, the Company recorded a change in fair value of approximately $0.5 million related to the change in fair value of the Note which was recognized in other income (expense) on the Consolidated Statement of Operations as a result of the Company’s election of the fair value option.

The following table presents the Note as of December 31, 2022:

December 31, 2022

Par value of the Note

Debt discount, net

Carrying value of the Note

Change in fair value of Note

Total carrying value of Note

Convertible note payable - current portion

Convertible note payable, net of current portion

Commitments and Contingencies

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

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

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

During the year ended December 31, 2021, NRx Pharmaceuticals paid NJ Health $ 0.3 million of the total committed amount.

ZYESAMI Manufacturing, Production, Supply and Distribution Agreements

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

Nephron will serve as the primary supplier of the product for both clinical and commercial purposes.

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

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

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

and Puerto Rico.

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

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

The Company has agreed to purchase a total of $ 5.3 million worth of product and services, of which $ 3.3 million had not been paid as of December 31, 2021.

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

Pill Tracker Ltd.

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

On July 1, 2021, NRx Pharmaceuticals and BriLife LLC signed an agreement for a Phase II Inhaled clinical trial of Aviptadil in the nation of Georgia with a total cost of approximately $ 7.4 million.

The contract is cancelable with 60 days’ notice.

The Company intends to cancel this contract and not to proceed with a Phase II Inhaled clinical trial of Aviptadil in the nation of Georgia.

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 December 31, 2022, the Company has paid NJ Health the total committed amount.

Relief Therapeutics Collaboration Agreement

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

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

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

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

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

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

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 breached and repudiated the collaboration agreement.

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

However, the parties to the lawsuits agreed to engage in an effort to amicably resolve the litigation, held a mediation meeting on February 22, 2022, and plan to hold an additional mediation meeting in the coming months.

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

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.

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, 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.

Under the APA, the Company transferred 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

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.

Legal Proceedings

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

Except as otherwise disclosed, as of December 31, 2021, there was no material litigation against the Company.

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.

NeuroRx 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 expired 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.

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.

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requirements to issue registered shares.

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

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 $ 7.5 million.

The GEM Warrant was 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.

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

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

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

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

On July 27, 2021, GEM exercised the remaining GEM Warrant for the purchase of 1,833,596 shares (adjusted for the Merger, discussed in Note 10) for gross proceeds to the Company of $ 9.2 million and the GEM Warrant was extinguished.

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

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 $ 39.5 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”).

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$ 15.0 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.

500,000,000 shares of common stock with a par value $ 0.001 .

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

The Company sold 7,824,727 shares of common stock during the year ended December 31, 2022, generating gross proceeds of $ 22.7 million.

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.

The Company issued 49,605 shares of common stock resulting from options that were exercised which generated proceeds of less than $ 0.1 million.

The Company issued 4,834,045 shares of common stock for consulting services during the year ended December 31, 2021, and recognized non-cash consulting expense in general and administrative expenses of $ 53.8 million.

The Company sold 556,043 shares of common stock during the year ended December 30, 2020, and received gross proceeds of $ 2.6 million.

The Company issued 1,138,199 shares of common stock to settle the conversion of notes payable during the year ended December 31, 2020, and recorded a loss of $ 0.3 million.

The Company issued 30,020 shares of common stock with a fair value of $ 0.1 million in settlement of accounts payable worth $ 0.1 million and recognized a loss of less than $ 0.1 million in general and administrative expenses for the difference during the year ended December 31, 2020.

The Company sold 3,642,727 shares of common stock during the year ended December 30, 2021, generating gross proceeds of $ 37.0 million.

Of the 565,630 shares of common stock issued for the exercise of stock options, 203,477 shares of common stock were 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 were contingently issuable Earnout Shares and are excluded from the weighted average shares outstanding for computing EPS until the contingent conditions are satisfied.

As of December 31, 2022, these shares were cancelled as the earnout milestones were not achieved.

Pursuant to the Merger Agreement, BRPA and EarlyBirdCapital, Inc., the representative of the underwriters of BRPA’s initial public offering (“EBC”), entered into an amendment (“BCMA Amendment Agreement”) to the Business Combination Marketing Agreement, dated as of November 20, 2017 (“BCMA”), by and between BRPA and EBC.

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However, after investigating the manufacturing requirements of the vaccine, the expected regulatory path for approval in Israel and the EU, the commercial opportunity, and the financial commitment required for development of the vaccine, the Company decided not to continue with the project.

We plan to effect a transition in consultation with the IIBR.

This decision was communicated to the IIBR in a letter dated March 20, 2022.

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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.

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

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Common Stock Warrants

On July 6, 2020, the Company issued 4,000 fully vested common stock warrants, exercisable at a per share price of $ 15.25 until they expire on July 5, 2023 , to a vendor for financial advisory services provided in connection with the sale of the Company’s common stock.

The fair value on the date of issuance was $ 7.63 per warrant for a total fair value of less than $ 0.1 million.

On July 15, 2020, the Company issued 279,291 fully vested common stock warrants, exercisable at a per share price of $ 15.25 until they expire on July 14, 2025 , to a board member.

The fair value on the date of issuance was $ 9.63 per warrant for a total fair value of $ 2.7 million.

On October 23, 2020, the Company issued 139,645 fully vested common stock warrants, exercisable at a per share price of $ 15.25 until they expire on October 22, 2025 , to a board member, respectively.

The fair value on the date of issuance was $ 9.64 per warrant for a total fair value of $ 2.7 million.

On March 28, 2021, NeuroRx issued 3,329,812 fully vested common stock warrants, exercisable at a per share price of $ 3.19 until they expire on March 27, 2024 to GEM (See Note 9).

The fair value on the date of issuance was $ 60.9 million.

Upon issuance, 1,496,216 warrants were immediately exercised generating gross proceeds of $ 7.5 million.

On July 27, 2021, GEM exercised the remaining GEM Warrant for the purchase of 1,833,596 shares for gross proceeds of $ 9.2 million and the GEM Warrant was extinguished.

Substitute Warrants

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

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 incremental shares above the Exchange Ratio (of 3.16 ) upon exercise were held back pending the outcome of the contingencies and were not released as the contingencies were not 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, the outstanding and unexercised NeuroRx warrants became warrants to purchase an aggregate 4,909,066 shares of the Company’s common stock with an average exercise price of $ 2.45 per share.

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

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

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

As neither the Earnout Shares Milestone nor the Earnout Cash Milestone occurred prior to December 31, 2022, each Substitute Warrant was adjusted based on the Exchange Ratio ( 3.16 :1) and the portion of the Substitute Warrants related to the Earnout Shares were cancelled.

For the Substitute Warrants that were exercised prior to December 31, 2022, NRx Pharmaceuticals retained and retired the outstanding shares forfeited by the warrant holders in connection with the adjustment.

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 was not met on December 31, 2022.

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.

As of December 31, 2022, the earnout milestones were not achieved, therefore the Company will not recognize any unamortized incremental compensation cost during the period.

The Company recognized incremental compensation on the modification date totaling $ 2.3 million which was recognized in general and administrative in the Consolidated Statements of Operations for the year ended December 31, 2021.

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 were 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 loss on the change in fair value of the Substitute Warrants for the years ended December 31, 2022 and 2021 of less than $ 0.1 million and $ 0.4 million, respectively.

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

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

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

Original Warrants

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Dividend yield

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

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

The Company determined it was not probable that the Earnout Cash Milestone or Earnout Shares Milestone would be met on the Effective Date and at December 31, 2021.

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.

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

With respect to the remaining outstanding warrants, the incremental fair value of the Substitute Warrants of $ 2.7 million was recognized as a deemed dividend as the Company concluded there is a transfer of value from the common shareholders to the holders of the Substitute Warrants as the change in the number of underlying shares and the decreased exercise price would result in the common shareholders becoming more diluted if and when the Substitute Warrants are converted.

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

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

Assumed Public Warrants

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

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

Each Public Warrant entitles the holder to purchase one share of Common Stock at an exercise price of $ 11.50 per share.

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

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

The Company may redeem the Public Warrants:

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

During the year ended December 31, 2022 no Public Warrants were exercised.

During the year ended December 31, 2021, 1,144 Public Warrants were exercised for gross proceeds of less than $ 0.1 million.

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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 $ 1.7 million for the year ended December 31, 2021 and did no t record any gain or loss for the year ended December 31, 2020.

The Company recognized a gain on the change in fair value of the Placement Warrants for the years ended December 31, 2022 and 2021 of $ 0.3 million and $ 1.7 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.

(in thousands)

Intrinsic Value

Total Warrants

Exercise Price

Intrinsic Value

(in thousands)

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

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Outstanding as of December 31, 2021

Assumed Unit Purchase Options

Prior to the Merger, the Company had outstanding options to purchase up to 600,000 Units exercisable at $ 10.00 per Unit (or an aggregate exercise price of $ 6.0 million) commencing at the Effective Time.

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

Conversion of Rights

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

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

No fractional shares were issued upon conversion of the rights.

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

August 2021 Private Placement

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

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

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

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

( 1,036,830 )

Outstanding as of December 31, 2022

Preferred Investment Options (included in above warrants table)

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

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

The form of the Preferred Investment Option is a warrant.

The measurement of fair value was determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $ 13.78 , exercise price of $ 12.00 , term of three years , volatility of 85.9 %, risk-free rate of 0.43 %, and expected dividend rate of 0 %).

The grant date fair value of these Preferred Investment Options was estimated to be $ 21.7 million on August 23, 2021 and is reflected within additional paid-in capital as of December 31, 2021.

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

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

The grant date fair value of these Preferred Investment Options was estimated to be $ 15.5 million on February 2, 2022 and is reflected within additional paid-in capital as of 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 the date of issuance (i.e., share price of $ 13.78 , exercise price of $ 13.75 , term of three years , volatility of 85.9 %, risk-free rate of 0.43 %, and expected dividend rate of 0 %).

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

Stock-Based Compensation

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

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

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

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

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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 incremental shares above the Exchange Ratio (of 3.16 ) upon exercise were held back pending the outcome of the contingencies and were not released as such contingencies were not 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.

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.

As neither the Earnout Shares Milestone nor the Earnout Cash Milestone were achieved prior to December 31, 2022, each Substitute Option was adjusted based on the Exchange Ratio and the portion of the Substitute Options related to Earnout Shares were cancelled.

For the Substitute Options that were exercised prior to December 31, 2022, NRx Pharmaceuticals retained and retired the outstanding shares forfeited by the option holders in connection with the adjustment.

As stated in the Merger Agreement, for the Substitute Options which were exercised prior to December 31, 2022, NRx Pharmaceuticals retained the shares forfeited by the option holders in connection with the adjustment.

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.

Company accounted for the Substitute Options as a modification of the existing options.

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.

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

The Company determined it was not probable that the Earnout Cash Milestone or Earnout Shares Milestone would be met on the Effective Date and at December 31, 2021.

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

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

For vested Substitute Options, the Company recognized incremental compensation on the modification date totaling $ 1.0 million of which $ 1.0 million and less than $ 0.1 million was recognized in general and administrative and research and development, respectively, in the Consolidated Statements of Operations for the year ended December 31, 2021.

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

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

2021 Omnibus Incentive Plan

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

As of December 31, 2021, 5,373,049 shares of Common Stock are authorized for issuance pursuant to awards under the 2021 Plan, inclusive of any shares of Common Stock subject to stock options, restricted stock awards or other awards that were assumed in the Merger and terminate as a result of being unexercised or are forfeited or repurchased by the Company, with the maximum number of shares to be added to the 2021 Plan equal to 5,373,049 shares of Common Stock.

As of December 31, 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.

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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 and implied volatility as well as historical volatility of a publicly traded set of peer companies.

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.

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1.80 %- 4.36 %

0.69 %- 1.45 %

Expected term (years)

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94.9 %- 147.8 %

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:

(in thousands)

exercise price

(in thousands)

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

Retroactive application of reverse recapitalization

Outstanding as of December 31, 2020, effect of Merger

Retroactive application of reverse recapitalization (Note 4)

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

Options granted

Outstanding as of December 31, 2021

Options granted

Outstanding as of December 31, 2022

Options vested and exercisable as of December 31, 2022

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

The weighted average grant date fair value per share for employee stock and non-employee option grants during the years ended December 31, 2022 and 2021, were $ 1.12 and $ 16.57 respectively.

At December 31, 2021, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted, including unrecognized compensation costs related to Substitute Options of $ 25.9 million, was $ 31.1 million of which the Company expects to recognize $ 6.6 million over a weighted-average period of approximately 1.07 years.

At December 31, 2022, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted, was $ 2.2 million, of which the Company expects to recognize over a weighted-average period of approximately 1.6 years.

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

Year ended December 31,

Years Ended December 31,

Stock-based compensation expense

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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 December 31, 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 December 31, 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 2.5 years.

Stock-based compensation expense related to RSAs was less than $ 0.1 million during the year ended December 31, 2022.

Fair Value Measurements

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

The estimated fair value of our long-term debt approximates its carrying value, as the interest rate is in line with the market interest rates for this type of debt (see Note 7 – Debt for additional information).

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

The fair value of the convertible note payable was estimated utilizing a Monte Carlo simulation during the year ended December 31, 2022.

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 liabilities that are measured at fair value on a recurring basis at December 31, 2021 and 2020, 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 December 31, 2022 and 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value (in thousands):

Money Market Account

Warrant liabilities (Note 10)

Earnout Cash liability (Note 4)

Convertible note payable (Note 7)

Convertible Note Payable

The following table sets forth a summary of the changes in the fair value of the Company’s convertible note payable categorized within Level 3 of the fair value hierarchy:

December 31, 2022

Par value of the Note

Debt discount, net

Carrying value of the Note

Change in fair value of Note

Total carrying value of Note

Convertible note payable - current portion

Convertible note payable, net of current portion

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

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

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

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

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

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

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

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:

December 31, 2022

At Effective Time

December 31, 2021

Stock price on valuation date

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Balance as of December 31, 2021

Gain upon re-measurement

Balance as of December 31, 2022

Earnout Cash liability

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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 we believe market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed, considering the uncertainties associated with the obligations.

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.

As of December 31, 2022, (i) the ZYESAMI NIH Phase III trial was stopped due to futility, and (ii) NRX-101 Phase III trial has not yet started, the earnout milestones were not achieved and the Earnout Cash liability was reduced to zero.

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

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Balance as of December 31, 2021

Fair Value on a Non-Recurring Basis

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

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

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

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

Upon closing of the Merger, the estimated fair value of the contingent Earnout Shares was $ 253.1 million with such amount recognized as a deemed dividend.

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

Gain upon re-measurement

Balance as of December 31, 2022

The Company maintains a full valuation allowance on its net deferred tax asset due to the uncertainty of future taxable income.

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and amounts used for income tax purposes.

The temporary differences that give rise to deferred tax assets and liabilities are as follows (in thousands):

The temporary differences that give rise to deferred tax assets and liabilities are as follows:

As of December 31,

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Foreign net operating loss carryforwards

Founder share options

174 capitalization

Stock-based compensation

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After consideration of all of the evidence, the Company has recorded a valuation allowance against its deferred tax assets at December 31, 2022 and 2021 because management has determined that it is more likely than not that the Company will not recognize the benefits of its federal and state deferred tax assets, primarily due to its history of cumulative net losses incurred since inception and its lack of commercialization of products or generation of revenue from product sales since inception.

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

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

The CARES Act did not have a material impact on the Company’s consolidated financial statements for the year ended December 31, 2021.

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

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

The Company recorded approximately $ 0.5 million as a reduction of the deferred tax asset due to uncertain tax positions that if recognized would reduce Federal and state net operating loss carryforwards and R&D credit carryforwards.

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

The Company accrued total penalties and interest of less than $ 0.1 million during the years ended December 31, 2021 and 2020 and in total, as of December 31, 2021 and 2020 has not recognized penalties and interest.

The Company accrued total penalties and interest of $ 0.0 million during the years ended December 31, 2022 and 2021 and in total, as of December 31, 2022 and 2021 has recognized penalties and interest of $ 0.0 million.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which they operate.

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

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

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

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

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

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

The former CEO of the Company, Dr.

Jonathan Javitt, is a major shareholder in the Company.

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

He served the company on a full-time basis and had an employment agreement with the Company and received compensation of $ 0.4 million and $ 0.5 million during the years ended December 31, 2021 and 2020, respectively.

Javitt retired on March 8, 2022.

Upon his retirement, his employment agreement terminated and Dr.

Javitt accepted a new role as a consultant to the Company.

See Note 15 – Subsequent Events.

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

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.

On November 6, 2022 the Glytech Agreement was amended whereby Glytech agreed to transfer and assign the remainder of the Licensed Technology and the Excluded Technology to NRx Pharmaceuticals for no additional consideration at any time upon receipt of written notice from the Company if, on or prior to January 31, 2023, (i) the value of the Glytech equity holdings in NRx Pharmaceuticals (the “Glytech Equity”) has an aggregate liquidity value of at least $50 million for twenty (20) consecutive trading days immediately preceding any given date and (ii) there are no legal or contractual restrictions on selling all of the securities represented by the Glytech Equity then applicable to Glytech (or reasonably foreseeable to be applicable to Glytech within the following twenty trading days).

On January 31, 2023, the Glytech Agreement was further amended to extend the period to meet these conditions until March 31, 2023.

The Company is working with Glytech to futher extend this period.

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 $ 0.9 million and $ 0.4 million during the years ended December 31, 2022 and 2021, respectively.

These services are ongoing (See Section 14 - Subsequent Events for further information).

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 $ 0.1 million and $ 0.1 million during the years ended December 31, 2022 and 2021, respectively.

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

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

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.

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

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

Under this SOW, PillTracker provides support for the inhaled ZYESAMI Phase II/III clinical trials by monitoring Sp02 and Heart Rate in patients in a sub-study of the AVICOVID-2 clinical trial in the U.S.

to determine the physiological effects of ZYESAMI vs.

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

The total cost under the SOW is $ 0.2 million.

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

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

1, under the MSA.

The additional work under the STO focuses on study preparation and custom, software

interface buildout of a connected medication adherence and patient-monitoring platform to support participants of the AVICOVID-2 clinical trial of inhaled ZYESAMI in the U.S., and future studies of ZYESAMI with compatible protocol designs.

The expected cost of the STO is $ 0.4 million.

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

NRx paid PillTracker $ 1.0 million and $ 0.3 million, during the years ended December 31, 2021 and 2020, respectively.

Included in accounts payable were $ 0.1 million and $ 0.1 million due to the above related parties as of December 31, 2021 and 2020, respectively.

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 $ 0.2 million and $ 1.0 million, during the years ended December 31, 2022 and 2021, respectively.

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

Subsequent Events

Securities Class Action Suit

On January 18, 2022, a federal securities class action complaint was filed against the Company, its then current Chief Executive Officer, Jonathan Javitt, and its former Chief Financial Officer, William Fricker, by purported stockholder Cristian Dal Bosco (the “Dal Bosco Complaint”).

The Dal Bosco Complaint alleges that the Company made false or misleading statements or otherwise failed to disclose that the Company’s EUA application contained insufficient data regarding the potential benefits and risks of ZYESAMI and, accordingly, the FDA was unlikely to approve it.

The Company believes the Dal Bosco Complaint is baseless and without merit and intends to defend itself vigorously.

There can be no assurance, however, that the Company will be successful.

The Dal Bosco Complaint has not been served on the Company, but its filing has led to the filing, and threatened filing, of almost verbatim class action complaints.

Private Placement

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

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

The aggregate gross proceeds to the Company were approximately $ 25.0 million, before deducting placement agent fees and other offering expenses.

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

The Company’s registration statement on Form S-1 to register the Securities has not been filed as of the date of this annual report.

Retirement of Dr.

Jonathan Javitt

On March 8, 2022, Dr.

Jonathan Javitt announced his retirement from his position as Chief Executive Officer of the Company, effective immediately.

As part of the transition, Dr.

Javitt has agreed to serve as Chief Scientist and remain on the Company’s Board.

Executive Officer Appointments

On March 8, 2022, the Board appointed Mr.

Robert Besthof to serve as Interim Chief Executive Officer of the Company during the transition.

Besthof has served as the Company’s Head of Operations and Chief Commercial Officer for the Company and its predecessor since 2016 where he was responsible for managing the Company’s operations, partnerships, and therapeutics pipeline.

On March 15, 2022, the Board appointed Mr.

Ira Strassberg to serve as Chief Financial Officer (CFO) and Treasurer of the Company effective immediately.

Strassberg has been serving as a financial consultant to the Company since August 2021.

BriLife Vaccine.

On March 20, 2022, the Company informed the Israel Institute for Biological Research ("IIBR”) that the Company would not enter into any license agreement for the development of the BriLife TM vaccine as contemplated by the Memorandum of Understanding, dated July 11, 2021.

On March 8, 2023, NRx Pharmaceuticals entered into a securities purchase agreement with accredited investors (the “Investors”), providing for the issuance and sale of 3,866,666 shares of the Company’s common stock (“Common Stock”) and warrants to purchase up to 3,866,666 shares of Common Stock (the “Investor Warrants”) in a registered direct offering priced at-the-market under Nasdaq rules for a purchase price of $ 0.75 per share (the “Offering”).

The Investors have agreed not to transfer the Common Stock for six months following the date hereof.

The Investor Warrants will have an exercise price of $ 0.75 per share, will be initially exercisable beginning six months following the date of issuance (the “Initial Exercise Date”) and will expire 5 years from the Initial Exercise Date.

The aggregate gross proceeds to the Company from the Offering are expected to be approximately $ 2.9 million.

The Company intends to use the net proceeds from such offering for working capital and general corporate purposes.

The closing of the sale of these securities occurred on March 9, 2023.

Amendment to Convertible Note Payable

On March 30, 2023, the Company amended the Note to increase the ownership limitation to 9.99%.

Material Contract Amendment

On March 29, 2023, the Consulting Agreement dated March 8, 2022 (the “Javitt Consulting Agreement”) between the Company and Dr.

Jonathan Javitt was amended to extend the term of the Agreement until March 8, 2024 with automatic annual renewals thereafter unless one party or the other provides notice of non-renewal.

The amendment also provided for payment at the rate of $ 575,000 per year, payable monthly (i.e., $ 47,916.67 per month), and a performance-based annual bonus with a minimum target of $ 250,000 , at the discretion of the Board and upon satisfactory performance of the services.

The annual bonus for 2023, if any, is payable in March 2024, will be pro-rated from the start of the extension period and is subject to Dr.

Javitt’s continued engagement by the Company.

The amendment also provides, subject to the approval of the Board of Directors, for a grant of 500,000 shares of restricted stock of the Company under the Company’s 2021 Omnibus Incentive Plan.

The restrictions are performance based, and half of the restricted shares ( 250,000 ) shall have the restrictions removed on the New Drug Application Date (as defined below) and the remaining half ( 250,000 ) will have the restrictions removed on the New Drug Approval Date (as defined below).

The term “New Drug Application Date” means the date upon which the Food and Drug Administration (“FDA”) files the Company’s new drug application for the Antidepressant Drug Regimen (as defined below) for review.

The term “New Drug Approval Date” means date upon which the FDA has both approved the Company’s Antidepressant Drug Regimen and listed the Company’s Antidepressant Drug Regimen in the FDA’s “Orange Book”.The term “Antidepressant Drug Regimen” means NRX-101, a proprietary fixed-dose combination capsule of d-cycloserine and Lurasidone, administered for sequential weeks of daily oral treatment following patient stabilization using a single infusion of NRX-100 (ketamine) or another standard of care therapy.

The foregoing description of the amendment does not purport to be complete and is qualified in its entirety by the full text of the amendment attached hereto as Exhibit 10.53.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data