What changed in this filing

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Item 1. Financial Statements

2023-05-15 compared with 2022-11-14 · 303 added, 378 removed, 307 unchanged (69% of the section changed)

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(in thousands, except share and per share data)

September 30, 2022

March 31, 2023

December 31, 2022

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Total current assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY

Current liabilities:

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Accrued clinical site costs

Earnout Cash liability

Convertible note payable and accrued interest - short term

Warrant liabilities

Note payable and accrued interest

Total current liabilities

Convertible note payable and accrued interest - long term

Total liabilities

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

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

0 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

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

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

70,309,655 and 66,442,989 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated other comprehensive income

Accumulated deficit

Total stockholders’ equity

Total liabilities and stockholders' equity

Total stockholders’ (deficit) equity

Total liabilities and stockholders' (deficit) equity

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

NRX PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share data)

Three months ended

Nine months ended

September 30,

Operating expenses:

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General and administrative

Settlement expense

Reimbursement of expenses from Relief Therapeutics

Total operating expenses

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Other (income) expenses:

Gain on extinguishment of debt

Interest income

Interest expense

Change in fair value of convertible note payable

Change in fair value of warrant liabilities

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Total other (income) expenses

Deemed dividend

Net loss attributable to common stockholders

Change in fair value of convertible note attributed to credit risk

Other comprehensive income

Comprehensive loss

Net loss per share:

Net loss per share attributable to common stockholders:

Basic and diluted

Weighted average common shares outstanding:

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NRX PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT) EQUITY

(in thousands, except share data)

Accumulated Other

Comprehensive

Stockholders’

(Deficit) Equity

Balance December 31, 2022

Common stock and warrants issued in private placement, net of issuance costs of $ 2,020

Common stock issued for consulting services

Common stock and warrants issued, net of issuance costs $ 351

Change in fair value of convertible note attributed to credit risk

Stock-based compensation

Balance - March 31, 2023

Additional issuance costs in connection with Private Placement

Stock-based compensation

Balance - June 30, 2022

Additional issuance costs in connection with Private Placement

Restricted stock awards granted

Stock-based compensation

Balance - September 30, 2022

NRX PHARMACEUTICALS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share data)

Stockholders’

Equity (Deficit)

Balance - December 31, 2021

Common stock issued

Proceeds from issuance of common stock for exercise of warrant

Reclassification of settlement liability upon issuance of warrant

Stock-based compensation

Balance - March 31, 2021

Common stock issued

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

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

Common stock issued for advisor services

Modification of option awards pursuant to Merger

Modification of warrants pursuant to Merger

Stock-based compensation

Balance - June 30, 2021

Common stock issued

Common stock and warrants issued in private placement, net of issuance costs of $ 2,020

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

Common stock issued for consulting services

Stock-based compensation

Balance - September 30, 2021

Balance - March 31, 2022

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

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(in thousands)

Nine months ended September 30,

Three months ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Stock-based compensation

Gain on extinguishment of debt

Change in fair value of warrant liabilities

Change in fair value of earnout cash liability

Change in fair value of convertible promissory note

Non-cash interest expense

Non-cash settlement expense

Non-cash consulting expense

Changes in operating assets and liabilities:

Account receivable

Prepaid expenses and other assets

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CASH FLOWS FROM FINANCING ACTIVITIES

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

Repayment of notes payable assumed in Merger

Repayment of notes payable - related party

Net cash provided by financing activities

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Non-cash investing and financing activities

Reclassification of settlement liability upon issuance of warrant

Reclassification of legacy NeuroRx warrants to warrant liabilities

Reclassification of warrant liability upon exercise of warrant

Issuance of common stock warrants as offering costs

Extinguishment of Paycheck Protection Program Loan

Issuance of common stock for settlement of accrued liability

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On May 24, 2021 (“Effective Time”), we consummated the business combination (“Merger”) contemplated by the Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated December 13, 2020, by and among our company (formerly known as Big Rock Partners Acquisition Corp.

(“BRPA”)), NeuroRx, Inc., a Delaware corporation (“NeuroRx”), and Big Rock Merger Corp., a Delaware corporation and wholly owned, direct subsidiary of BRPA (“Merger Sub”), pursuant to which Merger Sub was merged with and into NeuroRx, with NeuroRx surviving the Merger.

(“BRPA”)), NeuroRx, Inc., a Delaware corporation (“NeuroRx”), Big Rock Merger Corp., a Delaware corporation and wholly-owned, direct subsidiary of BRPA (“Merger Sub”), pursuant to which Merger Sub was merged with and into NeuroRx, with NeuroRx surviving the Merger.

As a result of the Merger, and upon consummation of the Merger and other transactions contemplated by the Merger Agreement, NeuroRx became a wholly-owned, direct subsidiary of BRPA.

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

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

The Company is engaged in the development of NRX-101, a fixed dose combination of D-cycloserine and lurasidone for the treatment of suicidal bipolar depression and potentially for other future indications.

NRX-101 has been granted Fast Track Designation, Breakthrough Therapy Designation, a Special Protocol Agreement, and a Biomarker Letter of Support by the US Food and Drug Administration (FDA).

In January 2023 the Company met with the FDA and was guided to expand its intended use of NRX-101 from the original population of patients with acute suicidality who might be treated in the hospital environment to the broader population of patients with subacute suicidal ideation (now described by the Company as Treatment-Resistant Bipolar Depression) who are treated in the outpatient setting.

This broader population of patients are the current target population of the ongoing clinical trial.

Based on the guidance of FDA and the Company’s completion of manufacturing for phase 3/commercial stage investigational product, the Company upgraded the ongoing clinical trial to a phase 2b/3 trial, the results of which have the potential to be used for registrational filings.

The Company is engaged in that ongoing clinical trial of NRX-101 vs.

lurasidone in patients with treatment-resistant bipolar depression with the objective of demonstrating a decreased in depression scores and scores of suicidal ideation in patients treated with NRX-101 compared to those treated with lurasidone alone.

The clinical trial was originally begun as an exploratory study in Q2 2022.

In Q1 2023 the study’s independent Data Safety Monitoring Board (DSMB) reviewed both safety and unblinded efficacy data for the first 50 patients in the clinical trial and advised the Company that no safety concerns were identified.

Moreover, the DSMB did not identify a futility signal, suggesting that the trial has potential to demonstrate a statistically significant outcome with additional enrollment.

On this basis, the DSMB advised management to continue enrolling study participants.

During the first quarter of 2023, the Company refined its ability to validate the psychometric ratings that are used to assess the efficacy endpoints for the clinical trial.

The Company relies upon a team of veteran raters who both train independent

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

site rates and monitor the technical quality of each rating.

A standard was set of 90% or better concordance between the Company’s veteran rating team and site raters.

This standard was met for all study participants whose ratings were obtained in their primary language and management believes that this standard can be maintained for the duration of the trial.

In April 2023, the Company contracted with 1nHealth to initiate a recruitment campaign that may cover up to 45 states in the US to recruit sufficient participants for this enlarged trial.

The Company has similarly broadened its relationship with Science 37, a contract research organization that conducts decentralized clinical trials, to enroll participants identified by the 1nHealth recruitment initiative and randomize them to be treated within the broadened clinical trial.

1nHealth has additionally engaged “The Mighty,” a voice-of-the-patient organization with national reach to publicize the clinical trial to the 800,000+ subscribers who have indicated a focus on bipolar depression and suicidality.

In Q1 2023, the Company announced the participation of Prof.

Andrew Nierenberg, M.D., Head of the Massachusetts General Hospital (MGH) Dauton Family Center for Bipolar Treatment Innovation as the Principal Investigator of the clinical trial.

The Company has now initiated clinical trial sites at Northwestern University (Chicago) and University of Texas, Austin, in addition to commercial research sites.

The Company has continued to engage in a strategic conversation focused on funding the drug approval and commercialization.

In parallel, the Company has established an ongoing dialogue with Streeterville Capital LLC, the Company’s current debt lender, to configure the Company’s current debt facility to best support the ongoing needs of the clinical trial.

The Company has now completed manufacture of all clinical supplies required for its ongoing clinical trials.

This initiative is expected to yield stability data sufficient to support a shelf life in excess of two years at time of potential drug launch (should the clinical trials be successful).

The completion of this manufacturing milestone may allow the Company to decrease ongoing expenditure associated with manufacturing and development of chemical manufacturing controls.

As of March 31, 2023, the Company had $ 16.5 million in cash.

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

The Company has no revenues and expects to continue to incur operating losses for the foreseeable future and may never become profitable.

The Company believes that it has the funds necessary to support its ongoing clinical trial, which is expected to be completed in the fourth quarter of 2023.

The Company’s ability to support its ongoing capital needs is dependent on its ability to continue to raise equity and/or debt financing to continue operations.

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

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

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

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

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

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

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

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

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

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

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

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

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 Investor Warrants have an exercise price of $0.75 per share, are exercisable beginning on September 8, 2023 (the “Initial Exercise Date”) and will expire 5 years from the Initial Exercise Date.

The aggregate gross proceeds to the Company from the Offering were 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.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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.

The Company plans to pursue additional equity or debt financing or refinancing opportunities in 2023 to fund ongoing clinical activities, to meet obligations under its current debt arrangements and for the general corporate purposes of the Company.

Such arrangements may take the form of loans, equity offerings, strategic agreements, licensing agreements, joint ventures or other agreements.

The sale of equity could result in additional dilution to the Company’s existing shareholders.

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

We will continue to carefully monitor the impact of our continuing operations on our working capital needs and debt repayment obligations.

As such, the 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 unaudited condensed consolidated financial statements.

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 accompanying unaudited condensed consolidated 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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The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

The Merger was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”).

Under this method of accounting, BRPA is treated as the “acquired” company and NeuroRx is treated as the acquirer for financial reporting purposes.

Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of NeuroRx issuing stock for the net assets of BRPA, accompanied by a recapitalization.

The net assets of BRPA are stated at historical cost, with no goodwill or other intangible assets recorded.

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

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

Use of Estimates

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

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

The most significant estimates in the Company’s financial statements relate to the convertible note payable, Earnout Cash liability, 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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To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Certain Risks and Uncertainties

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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.

Deposits in financial institutions may, from time to time, exceed federally insured limits.

The Company has not experienced any losses on its deposits of cash.

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.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

The portion of total changes in fair value of the convertible note attributable to changes in instrument-specific credit risk are determined through specific measurement of periodic changes in the discount rate assumption exclusive of base market changes and are presented as a component of comprehensive income in the accompanying Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.

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.

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

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.

For a Type 1 (probable-to-probable) modification, incremental stock-based compensation cost is measured as the excess, if any, of the fair value of the modified option/warrant over the fair value of the original option/warrant immediately before its terms are modified, measured based on the fair value of the shares and other pertinent factors at the modification date.

For vested stock options and warrants to board members, we recognize incremental compensation cost in the period the modification occurs.

For unvested stock options, we recognize over the remaining requisite service period, the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original award on the modification date.

If the fair value of the modified option is lower than the fair value of the original option immediately before modification, the minimum compensation cost we recognize is the cost of the original award.

The accounting for incremental fair value of warrants is based on the specific facts and circumstances related to the modification which may result in a reduction of additional paid-in capital, recognition of costs for services rendered, or recognized as a deemed dividend.

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”).

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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 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.

For issued or modified warrants that do not meet all

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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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 when their effect would be anti-dilutive in the respective periods.

Diluted loss per share reflects the potential dilution that could occur if stock options, restricted stock awards and warrants were to vest and be exercised.

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.

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Stock options

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Earnout Shares from exercised Substitute Options and Substitute Warrants

Since the closing of the Merger, of the 516,025 shares of common stock issued for the exercise of stock options, 185,472 shares of common stock are contingently issuable Earnout Shares and are excluded from the weighted average shares outstanding for computing EPS until the contingent conditions are satisfied.

There are 1,044,453 shares of common stock issued pursuant to the GEM warrants which are contingently issuable Earnout Shares and are excluded from the weighted average shares outstanding for computing EPS until the contingent conditions are satisfied.

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are adopted by the Company as of the specified effective date.

For the nine-months ended September 30, 2022, there were no new accounting pronouncements or updates to recently issued accounting pronouncements disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, that management believes materially affect the Company’s present or future results of operations, overall financial condition, liquidity or disclosures.

Reverse Recapitalization

As discussed in Note 1, on May 24, 2021 (the “Closing Date”), BRPA and Merger Sub closed the Merger with NeuroRx, as a result of which NeuroRx became a wholly owned subsidiary of BRPA.

While BRPA was the legal acquirer of NeuroRx in the Merger, for accounting purposes, the Merger is treated as a Reverse Recapitalization whereby NeuroRx is deemed to be the accounting acquirer and the historical financial statements of NeuroRx became the historical financial statements of BRPA (renamed NRX Pharmaceuticals, Inc.) upon the closing of the Merger.

Under this method of accounting, BRPA is treated as the “acquired” company and NeuroRx is treated as the acquirer for financial reporting purposes.

Accordingly, for accounting purposes, the Merger was treated as the equivalent of NeuroRx issuing stock for the net assets of BRPA, accompanied by a recapitalization.

The net assets of BRPA were stated at historical cost, with no goodwill or other intangible assets recorded.

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

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

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

At the Effective Time, each outstanding share of NeuroRx common stock, including shares of NeuroRx common stock resulting from the conversion of outstanding shares of NeuroRx preferred stock was converted into the right to receive a pro rata portion of the contingent right to receive a pro rata portion of the Earnout Shares and Earnout Cash after consideration of the Substitute Options and Substitute Warrants (as further discussed below).

Pursuant to the terms of the Merger Agreement, NeuroRx’s stockholders who owned NeuroRx securities immediately prior to the Effective Time would have the contingent right to receive their pro rata portion of (i) an aggregate of up to 25,000,000 shares of Common Stock (“Earnout Shares”), less 935,608 and 1,920,492 , respectively, which are subject to the terms and conditions of the Substitute Options and Substitute Warrants (each as defined below), if, prior to December 31, 2022, the NRX COVID-19 Drug (as defined in the Merger Agreement) receives emergency use authorization by the FDA and NeuroRx submits and the FDA files for review a new drug application for the NRX COVID-19 Drug (the occurrence of the foregoing, the “Earnout Shares Milestone”), and (ii) an aggregate of $ 100.0 million in cash (“Earnout Cash”) upon the earlier to occur of (x) FDA approval of the NRX COVID-19 Drug and the listing of the NRX COVID-19 Drug in the FDA’s “Orange Book” and (y) FDA approval of the NeuroRx Antidepressant Drug Regimen (i.e., NRX-100/101) and the listing of the NeuroRx Antidepressant Drug Regimen (i.e., NRX-100/101) in the FDA’s “Orange Book,” in each case prior to December 31, 2022 (the occurrence of either of clauses (x) or (y), the “Earnout Cash Milestone”).

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

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

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

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

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

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

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

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

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

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

In connection with the Merger, a number of subscribers (each, a “Subscriber”) purchased from the Company an aggregate of 1,000,000 shares of Common Stock (the “PIPE”), for a purchase price of $ 10.00 per share and an aggregate purchase

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

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

Recapitalization

Cash - BRPA trust and cash, net of redemptions

Cash - PIPE financing, net of transaction costs

transaction costs and advisory fees allocated to NRXP equity

Effect of Merger, net of redemptions and transaction costs

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

Recapitalization

Cash - BRPA trust and cash, net of redemptions

Non-cash net working capital assumed from BRPA

notes payable assumed from BRPA

fair value of assumed Placement Warrants

fair value of legacy NeuroRx Warrants

fair value of Earnout Cash

transaction costs and advisory fees allocated to NRXP equity

Effect of Merger, net of redemptions and transaction costs

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

Number of Shares

Common stock, outstanding prior to Merger

redemption of BRPA shares

Common stock of BRPA

BRPA Founder and private shares, net of forfeited shares of 875,216

Shares issued in PIPE Financing

Shares issued for services

Shares issued pursuant to conversion of Public and Private Rights

Merger and PIPE financing shares - common stock

NeuroRx shares - common stock (1)

Total shares of common stock immediately after Merger

(1) The number of NeuroRx common stock was determined from the 14,200,586 shares of NeuroRx common stock outstanding immediately prior to the closing of the Merger converted at the Exchange Ratio.

All fractional shares were rounded down.

For the three-months ended March 31, 2023, there were no new accounting pronouncements or updates to recently issued accounting pronouncements disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, that management believes materially affect the Company’s present or future results of operations, overall financial condition, liquidity or disclosures.

Prepaid Expenses and Other Current Assets

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

September 30, 2022

March 31, 2023

December 31, 2022

Prepaid expenses and other current assets:

Prepaid clinical development expenses

Prepaid insurance

Other prepaid expenses

Receivable due from manufacturer

Prepaid clinical development expenses

Prepaid legal expenses

Prepaid manufacturing expenses

Other current receivables

Total prepaid expenses and other current assets

1 unchanged sentence

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

September 30, 2022

March 31, 2023

December 31, 2022

Accrued and other current liabilities:

Accrued research and development expenses

Other accrued expenses

Accrued employee expenses

Accrued research and development expenses

Professional services

Other accrued expenses

Total accrued and other current liabilities

Notes Payable

Relief Therapeutics Loan

On April 6, 2020, the Company entered into a loan agreement (the “Relief Therapeutics Loan”) with Relief Therapeutics Holding S.A.

(“Relief Therapeutics”) in the amount of $ 0.5 million.

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

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

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 May 4, 2023, 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 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%.

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.

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.

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 (9.99%) 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.

As of March 31, 2023, the Company was in compliance with the Note terms and there were no Events of Default.

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 three months ended March 31, 2023, the Company recorded a change in fair value of approximately $1.8 million related to the change in fair value of the Note which was recognized in other income (expense) on the Unaudited Condensed 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 March 31, 2023 (in thousands):

March 31, 2023

December 31, 2022

Par value of the Note

Debt discount

Carrying value of the Note before current period change in fair value

Fair value adjustment through earnings

Fair value adjustment through accumulated other comprehensive income

Total carrying value of Note

Convertible note payable - current portion

Convertible note payable, net of current portion

Commitments and Contingencies

1 unchanged sentence

The Company leases office space on a month-to-month basis.

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

The rent expense for the three months ended March 31, 2023 and 2022 was less than $ 0.1 million and $ 0.1 million, respectively.

Sponsored Research Agreement with National Jewish Health

2 unchanged sentences

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

As of March 31, 2023, the Company has fully paid NJ Health the total committed amount under this agreement.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Relief Therapeutics Collaboration Agreement

2 unchanged sentences

On October 6, 2021, Relief Therapeutics filed a lawsuit against the Company and its former CEO claiming that the Company failed to honor its obligations under the Collaboration Agreement, which was followed by a counter claim from the Company for breach and repudiation of the Collaboration Agreement by Relief Therapeutics.

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

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

Upon closing, the parties will dismiss their respective claims.

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

On November 12, 2022, 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 the Company 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 the Company’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 the Company, subject to certain exceptions.

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

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

Additionally, subject to certain exceptions, the Company’s indemnity obligations cannot exceed the amount that the Relief Parties actually pay to the Company for milestone and royalty payments.

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

Legal Proceedings

1 unchanged sentence

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Share Subscription Facility Agreement - GEM

NeuroRx previously entered into a share subscription facility agreement (“GEM Agreement”) with GEM Global Yield LLC SCS and GEM Yield Bahamas Limited (collectively, referred to as “GEM”) with a three-year term which 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.

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 granted NeuroRx an option to require GEM to subscribe for shares from the Company for up to an aggregate value of approximately $95.6 million.

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

requirements to issue registered shares thus preventing its usage.

If NeuroRx was listed or completes a private transaction which results in a change of control of the Company, NeuroRx would issue GEM a warrant and pay a commitment fee of $ 1.9 million.

If NeuroRx was listed or completed a private transaction which results in a change of control of the Company, NeuroRx would issue GEM a warrant and pay a commitment fee of $1.9 million.

Absent a listing of NeuroRx shares or a private transaction with a change of control during the three-year term, NeuroRx would have no obligations under the agreement.

The reverse merger contemplated by the Merger Agreement would not have resulted in a listing of NeuroRx shares or a change in control.

The Merger contemplated by the Merger Agreement would not have resulted in a listing of NeuroRx shares or a change in control.

In November 2020, GEM introduced NeuroRx to BRPA.

8 unchanged sentences

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

NeuroRx was required to register the Initial Exercised Shares on (a) the same registration statement on Form S-4 (or such other registration statement, if changed) in connection with the Merger, or (b) such other registration statement in connection with any other transaction which results in a public listing of NeuroRx.

In addition, no later than 90 days following the consummation of the Big Rock merger, the Company was required to file with the SEC a registration statement to register under the Securities Act the resale by GEM of all shares issuable under the GEM Warrant other than the Initial Exercised Shares, which was filed with the Company's S-1 in July 2021.

The GEM Warrant also includes “piggyback” registration rights.

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

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

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

1 unchanged sentence

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.

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 $ 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.

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

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

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

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

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

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

On March 8, 2023, the Company entered into a securities purchase agreement with certain 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 have an exercise price of $0.75 per share, are initially exercisable beginning six months following the date of issuance (the “Initial Exercise Date”) and expire 5 years from the Initial Exercise Date.

The aggregate gross proceeds to the Company from the Offering were $2.9 million.

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

The securities are being issued pursuant to the Company’s registration statement on Form S-3 filed with the SEC on June 9, 2022 (File No.

333-265492) and became effective on June 21, 2022.

The net proceeds after deducting debt issuance costs from this transaction were $2.5 million.

On February 8, 2023, the Company entered into a letter agreement with H.C.

Wainwright & Co., LLC.

Although they are not acting as the placement agent with respect to this offering, they are to be paid a cash fee equal to 3.0% of the amount raised, or approximately $ 0.1 million, in this offering pursuant to such agreement.

The Company sold 7,824,727 shares of common stock during the three months ended March 31, 2022, generating net proceeds of $ 23.0 million.

Preferred Stock

Upon closing of the Merger, pursuant to the terms of the Second Amended and Restated Certificate of Incorporation, the Company authorized 50,000,000 shares of preferred stock with a par value $ 0.001 .

Pursuant to the terms of the Second Amended and Restated Certificate of Incorporation, the Company has authorized 50,000,000 shares of preferred stock with a par value of $ 0.001 .

The Company has no shares of preferred stock outstanding.

1 unchanged sentence

Substitute Warrants

As discussed in Note 4, in connection with the Merger, each warrant of NeuroRx that was outstanding and unexercised immediately prior to the Effective Time (whether vested or unvested) was assumed by BRPA and converted into the Substitute Warrants, based on the Option Exchange Ratio (of 4.96 ), and will continue to be governed by substantially the

same terms and conditions, including vesting, as were applicable to the former warrant.

Each Substitute Warrant will be exercisable for a number of whole shares of Common Stock equal to the product of the number of shares of NeuroRx common stock underlying such NeuroRx warrant multiplied by the Option Exchange Ratio, and the per share exercise price of such Substitute Warrant will be equal to the quotient determined by dividing the exercise price per share of NeuroRx common stock by the Option Exchange Ratio.

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

The incremental shares above the Exchange Ratio (of 3.16 ) upon exercise would be held back pending the outcome of the contingencies and only released if such are achieved.

The percentage of total shares of Common Stock subject to each Substitute Warrant that is vested immediately following the Effective Time will equal the percentage of total shares of NeuroRx common stock subject to each NeuroRx warrant that is vested immediately prior to the Effective Time.

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

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

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

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

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

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

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

For the incremental portion of the warrants with a performance-based vesting conditions (i.e., the achievement of the Earnout Cash Milestone and/or Earnout Shares Milestone), the Company determined it was not probable that the Earnout Cash Milestone or Earnout Shares Milestone would be met on the Effective Date and at June 30, 2022 and therefore no expense has been recognized for this portion.

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

The Company will reevaluate the probability of the Earnout Cash Milestone and/or Earnout Shares Milestone being met and recognize any unamortized incremental compensation cost accordingly in the period during which it becomes probable the milestones will be met.

The Company recognized incremental compensation in the second quarter of 2021 on the modification date totaling $ 2.3 million which was recognized in general and administrative in the Unaudited Condensed Consolidated Statement of Operations.

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

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

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

On May 24, 2021, the Company recorded a warrant liability of $ 53.3 million for the Substitute Warrants, reclassified out of additional-paid in capital $ 38.2 million representing the fair value of these NeuroRx warrants immediately before the modification as a result of the Merger, and recognized a loss of

$ 15.1 million for the incremental fair value of these Substitute Warrants which is recorded in the Change in fair value of warrant liabilities on the Condensed Consolidated Statement of Operations.

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

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

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 a warrant, based on the Exchange Ratio (of 3.16 ), that will continue to be governed by substantially the same terms and conditions, including vesting, as were applicable to the former warrant (the Substitute Warrants).

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.

The Company recognized a gain on the change in fair value of the Substitute Warrants for the three months ended March 31, 2023 and 2022, of less than $ 0.1 million and $ 0.1 million, respectively.

Refer to Note 10 for further discussion of fair value measurement of the warrant liabilities.

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

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

Original Warrants

Substitute Warrants

$ 7.58 -$ 15.84

$ 1.53 -$ 3.19

Volatility rate

Risk-free rate

0.03 %- 0.32 %

Expected term

Dividend yield

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Assumed Public Warrants

1 unchanged sentence

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

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

The Company may redeem the Public Warrants:

● in whole and not in part;

● at a price of $ 0.01 per warrant;

● at any time during the exercise period;

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

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

● if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants.

Certain of the above conditions have not been met to redeem the Public Warrants.

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or

consolidation.

However, the warrants will not be adjusted for issuance of common stock at a price below its exercise price.

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

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

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

During the three months ended March 31, 2023 and 2022 no Public Warrants were exercised.

Assumed Placement Warrants

Prior to the Merger, the Company had outstanding 136,250 Placement Warrants.

The Placement Warrants are identical to the Public Warrants except that the Placement Warrants (i) are not redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, so long as they are held by the initial purchaser or any of its permitted transferees.

If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

Prior to the Merger, the Company had outstanding 136,250 Placement Warrants (the “Placement Warrants”).

The Placement Warrants are not indexed to the Company’s common shares in the manner contemplated by ASC 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares.

The Company classifies the Placement Warrants as derivative liabilities in its Unaudited Condensed Consolidated Balance Sheet as of September 30, 2022.

The Company measures the fair value of the warrants at the end of each reporting period and recognizes changes in the fair value from the prior period in the Company’s operating results for the current period.

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

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

The Company classifies the Placement Warrants as derivative liabilities in its Unaudited Condensed Consolidated Balance Sheet as of March 31, 2023.

The Company measures the fair value of the Placement Warrants at the end of each reporting period and recognizes changes in the fair value from the prior period in the Company’s statements of operations for the current period.

The Company recognized a gain on the change in fair value of the Placement Warrants for the three months ended March 31, 2023 and 2022 of less than $ 0.1 million and less than $ 0.1 million, respectively.

Refer to Note 10 for discussion of fair value measurement of the warrant liabilities.

Investor Warrants

On March 8, 2023 the Company issued 3,866,666 Warrants which were classified in stockholder’s equity.

The measurement of fair value of the Warrants were determined utilizing a Black-Scholes model considering all relevant assumptions current at the date of issuance (i.e., share price of $0.72, exercise price of $0.75, term of five years, volatility of 123.6%, risk-free rate of 4.34%, and expected dividend rate of 0%).

The grant date fair value of these Warrants was estimated to be $2.4 million on March 8, 2023 and is reflected within additional paid-in capital as of March 31, 2023.

The following table provides the activity for all warrants for the respective periods.

4 unchanged sentences

Outstanding as of December 31, 2022

Outstanding as of September 30, 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 February 2, 2022, the date of issuance (i.e., share price of $ 2.94 , exercise price of $ 3.07 , term of five years beginning August 2, 2022, volatility of 82.8 %, risk-free rate of 1.60 %, and expected dividend rate of 0 %).

The grant date fair value of these Preferred Investment Options was estimated to be $ 15.5 million on February 2, 2022 and is reflected within additional paid-in capital as of June 30, 2022.

In addition, on February 2, 2022, the Company issued fully vested Preferred Investment Options to the placement agent with an exercise price of $ 3.99 .

As these Preferred Investment Options were issued for services provided in facilitating the private placement, the Company recorded the fair value of such Preferred Investment Options as a cost of capital on the issuance date.

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

Outstanding as of March 31, 2023

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

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

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

Each Substitute Option will be exercisable for a number of whole shares of Common Stock equal to the product of the number of shares of NeuroRx common stock underlying such NeuroRx option multiplied by the Option Exchange Ratio, and the per share exercise price of such Substitute Option will be equal to the quotient determined by dividing the exercise price per share of NeuroRx common stock by the Option Exchange Ratio.

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

The incremental shares above the Exchange Ratio (of 3.16 ) upon exercise would be held back pending the outcome of the contingencies and only released if such are achieved.

The percentage of total shares of Common Stock subject to each Substitute Option that is vested immediately following the Effective Time will equal the percentage of total shares of NeuroRx common stock subject to each NeuroRx option that is vested immediately prior to the Effective Time.

In the event that either the Earnout Shares Milestone or the Earnout Cash Milestone does not occur prior to December 31, 2022, each Substitute Option will be adjusted such that the number of shares of Common Stock subject to each adjusted Substitute Option, the exercise price per share of each adjusted Substitute Option and the aggregate intrinsic value of each adjusted Substitute Option will equal the respective number of shares, exercise price per share and aggregate intrinsic value that would have resulted following the adjustment of the applicable underlying Substitute Option had the conversion of NeuroRx options into the Substitute Options been applied using the Exchange Ratio as adjusted accordingly to reflect the impact of the respective milestone not being met.

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

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

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

Upon the closing of the Merger, the outstanding and unexercised NeuroRx stock options became options to purchase an aggregate 2,895,423 shares of the Company’s Common Stock at an average exercise price of $ 5.10 per share.

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

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

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

Original Options

Substitute Options

$ 1.00 -$ 72.30

$ 0.20 -$ 14.58

Volatility rate

Risk-free rate

0.07 %- 0.79 %

Expected term

Dividend yield

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

The Company determined it was not probable that the Earnout Cash Milestone or Earnout Shares Milestone would be met on the Effective Date and at September 30, 2022.

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

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

As of March 31, 2023, 6,713,608 shares of Common Stock are authorized for issuance pursuant to awards under the 2021 Plan.

As of January 1, 2023, 664,430 shares were added to the 2021 Plan under an evergreen feature that automatically increases the reserve with additional shares of Common Stock for future issuance under the Incentive Plan each calendar year, beginning January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (A) 1 % of the shares of Common Stock outstanding on the final day of the immediately preceding calendar year or (B) a smaller number of shares determined by the Board.

The Substitute Options do not reduce the number of shares authorized for grant under the 2021 Plan.

As of September 30, 2022, 4,821,754 shares have been awarded and 1,227,424 shares remain available for issuance under the 2021 Plan.

As of March 31, 2023, 5,749,394 shares have been awarded and 964,214 shares remain available for issuance under the 2021 Plan.

The 2021 Plan permits the granting of incentive stock options, restricted stock awards, other stock-based award or other cash-based awards to employees, directors, and non-employee consultants.

9 unchanged sentences

The grant date fair value of employee and non-employee stock option awards is determined using the Black Scholes option-pricing model.

The following assumptions were used during the following periods:

September 30, 2022

The Company did not grant any stock options during the three months ended March 31, 2023.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following assumptions were used for the year ended December 31, 2022:

December 31, 2022

1 unchanged sentence

$ 0.51 - $ 3.10

$ 6.44 -$ 23.41

Risk-free rate of interest

1.8 % - 4.36 %

0.69 %- 1.45 %

Expected term (years)

1 unchanged sentence

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:

Number of shares

Weighted average

exercise price

(in thousands)

Weighted average remaining contractual life (in years)

Aggregate intrinsic value (in thousands)

Outstanding as of December 31, 2022

Outstanding as of March 31, 2023

Outstanding as of June 30, 2022

Outstanding as of September 30, 2022

Options vested and exercisable as of September 30, 2022

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

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

At September 30, 2022, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted, including unrecognized compensation costs related to Substitute Options of $ 25.9 million, was $ 27.5 million, of which the Company expects to recognize $ 3.0 million over a weighted-average period of approximately 1.7 years.

Options vested and exercisable as of March 31, 2023

The weighted average grant date fair value per share for employee stock and non-employee option grants during the three months ended March 31, 2022 was $ 2.27 .

At March 31, 2023, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted, was $ 1.6 million, of which the Company expects to recognize over a weighted-average period of approximately 1.2 years.

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

Three months ended September 30,

Nine months ended September 30,

Three months ended March 31,

Stock-based compensation expense

2 unchanged sentences

Total stock-based compensation expense

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Restricted Stock Awards

2 unchanged sentences

Balance as of December 31, 2022

Unvested Balance as of September 30, 2022

On July 12, 2022, the Board granted an award of 1,000,000 restricted shares of the Company (“Restricted Stock”) as an inducement to the newly appointed CEO, pursuant to a separate Restricted Stock Award Agreement (the “RSA”).

The Restricted Stock will vest in approximately equal installments over three (3) years from the grant date, subject to continued service through the applicable vesting date.

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

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

Unvested Balance as of March 31, 2023

As of March 31, 2023, total unrecognized compensation expense related to unvested RSAs granted was approximately $ 0.4 million, which is expected to be recognized over a weighted-average period of approximately 2.3 years.

Stock-based compensation expense related to RSAs was less than $ 0.1 million during the three months ended March 31, 2023.

Fair Value Measurements

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

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the three months ended March 31, 2023 and year ended December 31, 2022.

The carrying amount of accounts payable approximated fair value as they are short term in nature.

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

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

The fair value of warrants issued for services are estimated based on the Black-Scholes model during the three months ended March 31, 2023 and year ended December 31, 2022.

The fair value of the convertible note payable was estimated utilizing a Monte Carlo simulation during the three months ended March 31, 2023 and the year ended December 31, 2022.

Fair Value on a Recurring Basis

2 unchanged sentences

The estimated fair value of the warrant liabilities and Earnout Cash contingent consideration represent Level 3 measurements.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at September 30, 2022 and December 31, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value (in thousands):

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2023 and year ended December 31, 2022, 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 6)

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Convertible Note Payable

The significant inputs used in the Monte Carlo simulation to measure the convertible note liability that is categorized within Level 3 of the fair value hierarchy are as follows:

March 31, 2023

Stock price on valuation date

Time to expiration

Note market interest rate

Equity volatility

Volume volatility

Risk-free rate

Probability of default

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 (in thousands):

March 31, 2023

December 31, 2022

Par value of the Note

Debt discount

Carrying value of the Note before current period change in fair value

Fair value adjustment through earnings

Fair value adjustment through accumulated other comprehensive income

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 Company utilizes a Black-Scholes model approach to value the Placement Warrants and Substitute Warrants 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.

4 unchanged sentences

The expected life of the warrants is assumed to be equivalent to their remaining contractual term.

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

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

September 30, 2022

March 31, 2023

Stock price on valuation date

1 unchanged sentence

Expected life

55.0 - 123.6 %

Risk-free rate

3.79 - 4.77 %

Dividend yield

1 unchanged sentence

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

Balance as of December 31, 2021

Gain upon re-measurement

Balance as of March 31, 2022

Gain upon re-measurement

Balance as of June 30, 2022

Loss upon re-measurement

Balance as of September 30, 2022

Earnout Cash liability

The fair value of the Earnout Cash liability has been estimated using probability-weighted discounted cash flow models (DCFs) with significant inputs that are not observable in the market and thus represents a Level 3 fair value measurement as defined in ASC 820.

The most significant inputs include whether (a) if the Company files an NDA, that the FDA approves the Company’s NDA for ZYESAMI and/or NRX-101, (b) if such approval is granted, whether such approval will be received on or before December 31, 2022, and (c) if such approval is granted, whether ZYESAMI and/or NRX-101 will be listed in the FDA’s Orange Book on or before December 31, 2022.

The DCFs incorporate Level 3 inputs including estimated discount rates that the Company believes market participants would consider relevant in pricing and the projected timing and amount of cash flows, which are estimated and developed, considering the uncertainties associated with the obligations.

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

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

September 30, 2022

March 31, 2023

Balance as of December 31, 2022

1 unchanged sentence

Balance as of March 31, 2023

Gain upon re-measurement

Balance as of June 30, 2022

Balance as of September 30, 2022

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

The Company recorded no provision or benefit for income tax expense for the three months ended March 31, 2023 and 2022, respectively.

For all periods presented, the pretax losses incurred by the Company received no corresponding tax benefit because the Company concluded that it is more likely than not that the Company will be unable to realize the value of any resulting deferred tax assets.

The Company will continue to assess its position in future periods to determine if it is appropriate to reduce a portion of its valuation allowance in the future.

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

The Company has no open tax audits with any taxing authority as of March 31, 2023.

Related Party Transactions

2 unchanged sentences

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

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

During the three months ended March 31, 2023 and 2022, the Company paid Glytech $ 0.1 million and $ 0.1 million, respectively, for continuing technology support services and reimbursed expenses.

These support services are ongoing.

2 unchanged sentences

This definition would cover pharmaceutical formulations, including some that NRx Pharmaceuticals considers “pipeline” or “future product” opportunities, that contain a combination of pharmaceutical components different from those contained in NRX-100 and NRX-101.

The Company had the right to acquire the Excluded Technology for no additional consideration if certain conditions were satisfied prior to August 6, 2022, but the conditions were not satisfied and the Company is currently in discussions with Glytech to extend its right to acquire the Excluded Technology.

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

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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).

The Glytech Agreement was amended to extend the period to meet these conditions until May 15, 2023.

The Company and Glytech may seek to extend this period beyond May 15, 2023 if additional time is needed to consummate a transaction.

The Chief Scientist of the Company, Dr.

1 unchanged sentence

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

He served the Company on a full-time basis as CEO under an employment agreement with the Company until March 8, 2022 and currently serves under a Consulting Agreement with the Company as Chief Scientist thereafter and received compensation of $0.2 million and $ 0.1 million during the three months ended September 30, 2022 and 2021, respectively, and $ 0.7 million and $ 0.4 million during the nine months ended September 30, 2022 and 2021, respectively.

These services are ongoing.

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 $0.3 million and $ 0.4 million during the three months ended March 31, 2023 and 2022, respectively.

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 $0.6 million per year, payable monthly (i.e., less than $0.1 million per month), and a performance-based annual bonus with a minimum target of $0.3 million, 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).

As of March 31, 2023, the Board of Directors have not approved the grant of restricted stock.

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.

Zachary Javitt is the son of Dr.

1 unchanged sentence

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

The Company paid this family member a total of less than $ 0.1 million and less than $ 0.1 million during the three months ended September 30, 2022 and 2021, respectively, and $ 0.1 million and $ 0.1 million during the nine months ended September 30, 2022 and 2021, respectively.

The Company paid this family member a total of less than $ 0.1 million and $ 0.1 million during the three months ended March 31, 2023 and 2022, respectively.

These services are ongoing.

3 unchanged sentences

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

NRx Pharmaceuticals paid PillTracker $ 0.3 million during the three months ended September 30, 2021, and $ 0.2 million and $ 0.7 million during the nine months ended September 30, 2022 and 2021, respectively.

Included in accounts payable were less than $ 0.1 million and $ 0.1 million due to the above related parties as of September 30, 2022 and December 31, 2021, respectively.

NRx Pharmaceuticals paid PillTracker $ 0.2 million during the three months ended March 31, 2022.

NRX PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Included in accounts payable were less than $ 0.1 million and less than $ 0.1 million due to the above related parties as of March 31, 2023 and December 31, 2022, respectively.

Subsequent Events

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

The Note matures 18 months from the date of issuance.

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

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

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

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

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

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

Settlement of Litigation

On November 12, 2022, NRx Pharmaceuticals, Inc.

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

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

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

The Relief Parties have 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.

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

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

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

The Company evaluated subsequent events through the date of issuance of the unaudited condensed consolidated financial statements included herein.

There have been no subsequent events that occurred during such period that would require disclosure in this Form 10-Q or would be required to be recognized in the unaudited condensed consolidated financial statements as of March 31, 2023 and for the three months ended March 31, 2023.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements